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September 25, 2018

With Minimal Corruption Anything Is Possible

This week, David Ndii published an article in the Nation, ‘Why you’re still struggling to make ends meet’, in which he argued that this would even be the case if the economy were growing by seven per cent or 10 per cent.

 He recalls how he and his colleagues in the task force writing the Economic Recovery Strategy (ERS). The focus was going to be employment and wealth creation rather than what he calls ‘poverty business’ – something that he accuses the Moi government of:

‘We strongly advised Narc against going in for a big aid funded programme too early, as these had the habit of unraveling and destabilizing the budget and the economy. We argued that a “governance dividend” of reducing corruption, inefficiency and wastage would be sufficient to finance the recovery.’

But then, he notes, the government quickly caved in and pursued aid financing (aid is nice: go to Washington/London/Paris/Berlin and collect millions.

Less work than fixing local revenue collection – although, admittedly, Kenya was probably a bit more successful at that than some of the neighbouring governments).

Donors committed significant funding, encouraged by Kenya’s supposedly fresh political start and the NARC government’s reassurances that corruption would no longer be a way of life.

 In the end, the excitement over massive aid promises was short lived: AngloLeasing hit the headlines and dampened donor enthusiasm.

Then, following the referendum, Mr Kibaki threw out the progressives, Ndii says, and the GoK reverted to a ‘complete triumph of capital fundamentalism, in the name of Vision 2030: growth above all else, fuelled by mega infrastructure projects.’

 Good times for corporate profits, but the poor were hit by rising prices: During the first Kibaki administration, the low income group’s cost of living rose by 70 per cent, in contrast to 40 per cent for the higher income groups. Ndii argues that the government should have invested in productive capacity rather than the large infrastructure projects.

 I don’t entirely agree with his conclusions: For starters, it’s difficult to grow investments in productive capacity if you don’t have the infrastructure to bring products to markets. never mind that it’s an illusion that Kibaki’s tenure was so very successful in terms of infrastructure development.

Yes, if you come from a potholed, single lane, then Thika Highway is fantastic. But it’s not a super highway, just a biggish road and really not that long either. If anything, Kenya needs more, not less of it.

 Regarding the creation of productive capacity, he also places a lot of emphasis on agriculture: not surprising, since it’s one of Kenya’s largest contributors to the economy, has serious backward and forward linkages in the economy, and creates an economy for the vast majority of Kenyans.

But again: growing the sector, making it more productive, is of course important. But at the same time, this can’t be an either-or: Kenya should most certainly strive to expand into other sectors as well.

 I think the point that Ndii made earlier, the governance dividend of reducing corruption, inefficiency and wastage, is one that he does not spend enough attention on.

Corruption bloats infrastructure spending while leading to substandard results. Corruption also means that any efforts by government to create more productive capacities would be of limited use, and waste a lot of money.

Government involvement and ownership needn’t necessary be bad, former KCB CEO Terry Davidson reminded me: but KCB’s turnaround was made possible because government no longer meddled.

Ndii rightfully highlights that the gains from the growth of the past years have been unevenly distributed: Corruption reduces funding available for the most vulnerable citizens, and ruins the quality of those limited services provided for them.

 With a technically competent and minimally corrupt government, almost anything would be possible – because Kenya has so much going for it.

Not so with ‘our turn to eat’ business as usual. And I kinda doubt the commitment to meritocracy and technical capacity of anyone who appoints a stone-throwing politician to a parastatal. Or anything else.

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