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November 13, 2018

The road to economic progress has been slow, but can be hastened

As Kenya marked yet another Madaraka Day, it is time to reflect and sober up on the achievements made this far. We also cannot ignore the failures, because they form tangible lessons for the future. True, progress has been made, both economically and in quality of life, even if it has been slower than we would have liked. It is now on the present generation to build from where the previous generation left off. 

The country has made large economic strides that position it as the largest economy in the East Africa. In fact the potential to be one of Africa’s great success stories is not in doubt. In 2014, the country joined the club of middle income countries, demonstrating its capacity for economic independence and greater economic progress.    

 A look at the wealth of the nation at independence as measured by the Gross Domestic Product in 1964 is telling. At independence, the GDP per capita, calculated by taking the total wealth of the nation and divide by the total population was $1,000 when adjusted for purchasing power parity (PPP) - ability to buy. This was the same as that for India, and higher than that for China, who’s GDP per capita PPP in the same terms was about $600.   

Fast forward to 2012, the last readily available comparatives. The GDP per capita PPP for Kenya is $1,500. We have made a 50 per cent improvement since independence.  On the other hand, GDP per capita PPP for India is $4,500 and for China $10,500.  We would like to be optimistic about our progress, but it is clear it pales in comparison with that of India and China. That aside, if others have made bigger strides, so can we. However, to do so we must evaluate what led them to where they are as well as what led to where we are and see what lessons we can learn to increase the pace of growth. 

As clearly articulated in the Presidential speech; “On that first Madaraka Day, we assumed moral, legal and political responsibility for our destiny as a nation. On that day we proclaimed that we would be totally responsible for our destiny” .

Where we are today is primarily a result of both past decisions made in response to deep structural changes both within and outside our borders. Where we will be in future will be a result of the decisions we made in the past and those that we will make in the present. We are where we today as a result of the sum total of our decisions in response to globalisation, technological progress, institutional change in the labour market, population trends andpolitical decisions.  For instance at independence, the population was 10 million, today we are over 44 million. The requirements of the 10 million citizens are more than those of 44 million even in terms of basic needs such as food, shelter, education and employment. However, this need not be a problem if progress is made in tandem with the population growth rate. It becomes a crisis the moment progress has stagnated over the years and the population has continued to grow. 

Regardless, it is never too late. As demonstrated by China, with the right policies in place, progress can be achieved in a remarkably short period.  Most of the progress in China has been made in the past 20 years only.  Within this period, China’s GDP per capita PPP has grown from $2,500 to over $10,500, more than four times over. Today, China prides itself as the largest economy in the world, although second in terms of per capita income.   

Perhaps the starting point is setting own agenda and relentlessly pursuing it. Almost all countries that have achieved development have done so by cultivating a strong sense of self determination and taking responsibility for own destiny. Granted, the challenges are many but not insurmountable. Poverty, inequality, poor governance and low productivity are some of the hurdles that need addressing to achieve sustained growth and transformation of the lives of ordinary citizens. More importantly, we have to address our own problems with the view that the solutions are largely within. 

Take the manufacturing sector for instance, probably the most critical sector after agriculture. Kenya is the most industrially developed country in East Africa, but manufacturing still accounts for only 14 per cent of the GDP. This is only a slight increase since independence. Once a promising sector and recording rapid growth after independence, it stagnated in 1980s and is yet to recover.  Shortages in hydroelectric power, high energy costs, dilapidated transport infrastructure, and the dumping of cheap imports have all conspired to chock the sector. 

True, progress towards upgrading of transport infrastructure has taken a turn for the better, but it is not clear this upgrade is being pursued in tandem with creating jobs for the engineering graduates that our institutions of higher learning are churning every year. This inconsistency is a paradox, because as of necessity, infrastructure expenditure goes hand in hand with job creation. Any other scenario is a sign of value leakage which would need addressing. In any case, infrastructure projects do not come in the cheap and apart from the direct benefit of having a road or port in place, they must provide a base for local skill development as the springboard for future development for full investment value to be realised.  

At the end of the day, the attainment of independence is a starting point for pursuit of independence in decision making with the welfare of the country being the first priority. No doubt more can be attained with the growing, youthful and well educated population and a dynamic private sector with policies that have economic growth and welfare of the citizens as the priority.  It all starts and ends with us, we are now independent. 

 

Karen Kandie is a financial and risk consultant with First Trident Capital and a PhD candidate in finance at Catholic University of Eastern Africa.  [email protected]

 

 

 

 

 

 

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