BUDGET ANALYSIS

Agriculture, ICT and health sectors need increased budgets

Funding for sectors that sustained economy despite Covid-19 hit need to be increased

In Summary

•The ICT sector is riding a wave of digital advancement that has cut across all industries and spheres of the globe.

•Agriculture is a key to the Kenya’s economy, contributing 27% to 33% of GDP and another 27% of GDP indirectly through linkages with other sectors

Kenya's economy has not escaped the wrath of the Covid-19 pandemic whose effects are being felt globally with tourism and hospitality sectors some of the hardest hit.

Despite experts painting a gloomy picture of the economy in the current financial year, businesses and entrepreneurs alike are hopeful that the partial re-opening of the economy will bring with it some good tidings.

It is noteworthy that some sectors have kept afloat despite the slow recovery or decline experienced in other sectors. These sectors have evidently navigated the turbulence through demonstration of resilience, innovations, swift adoption and implementation of crisis management strategies.

The agriculture and information communication and technology (ICT) sectors are two of the sectors that have not been adversely affected by the pandemic. The ICT sector in fact seems to have grown with most businesses shifting their activities online through the use of technology.

On the other hand, the health sector, despite its challenges to a certain extent  managed to stay afloat. The government should therefore support these three sectors through deliberate budgetary allocations since they have the capacity to keep the country running amidst the Covid-19 pandemic.

Agriculture is a key to the Kenya’s economy, contributing 27%-33% of GDP and another 27% of GDP indirectly through linkages with other sectors. The sector plays a great role in reducing the employment gap by absorbing more than 40% of the total population and more than 70% of Kenya's rural residents

The improved performance of the agriculture sector during the pandemic was mainly attributed to sustained rainfall, increased demand for food and the swift adoption of technology in the production and distribution of the agricultural produce. The sector however experienced challenges such as high costs of inputs such as fertilisers, poor infrastructure and attack by pests and diseases. The government needs to allocate adequate resources to address these pain points. It is not in doubt that a strong agriculture sector directly feeds into the food and nutrition pillar of the Governments’ Big Four agenda.

The ICT sector has also performed well in the face of the global pandemic. The sector is riding a wave of digital advancement that has cut across all industries and spheres of the globe. Business and learning institutions that were able to take up some of the digital platforms were able to continue with their operations and learning albeit with some teething problems.

Online businesses and transactions, eLearning, webinars, video conferencing and other forms of online interactions have spiked the demand for digital tools during the pandemic. Access to a stable telecommunications network remains critical to full economic participation amidst the pandemic. The Kenyan government therefore needs to support the sector by allocating adequate resources that will spur innovations and technological advancements required to keep pace with the rapid growth of the digital economy.

Lastly, the Covid-19 pandemic has evidently exposed the historical underfunding of Kenya’s heath sector. Despite the health sector not being crippled by the pandemic as was initially expected at the onset of the pandemic, there is still a lot that the Government can do to boost the sector. Sadly, we have witnessed cases of health workers striking during the pandemic and alleged cases of misappropriation of funds and materials meant for fighting the pandemic.

Cases of under equipped facilities and lack of medicines in some Government hospitals is commonplace. Brain drain has also been a major problem in the health sector. While it’s debatable whether the funds currently being allocated to the health sector are being put into proper use, it is clear that additional investment needs to be directed towards the sector.

The human resource problem in the sector needs to be addressed once and for all. The government should channel more funds towards the purchase of quality medical equipment and sourcing of drugs in order to ensure that a large number of government facilities have basic equipment and medicine needed in a hospital.

Measured steps by the Government to ensure that the agriculture, ICT and health sectors are adequately supported and funded may sustain the Kenyan economy through another Covid-19 wave. However, the allocation of funds to these sectors is only a tip of the iceberg. Proper management and accountability for these funds is key in ensuring that there is no leakage or theft of funds and as a result these sectors will continue to supporting the economy.

Janet Mutura is a Tax assistant manager and Marceline Ochola is a tax associate at EY. The views expressed herein are not necessarily those of EY.