A couple of days ago, I met a young man who is an acquaintance. Until recently, he worked in one of the leading local banks where I am a customer. This was our first encounter outside the bank premises and I felt it proper to compliment the casual wear he had donned as I had always seen him in business suits.
The young man acknowledged the gesture, but went ahead to inform me that he was laid-off a few weeks ago and is now looking for a job.
I gathered from the gentleman that the past few months have seen significant lay-offs and retrenchments across the banking sector in Kenya. And the lay-offs are not in the banking sector alone. The other day, a leading chain of supermarkets announced that they would lay-off hundreds of workers because the current status of the Kenyan economy cannot sustain the business.
Economists tell you that when employers start laying-off workers in such significant numbers, then this is a perfect indication of an economy in a recession.
The question, therefore, is—what is the true status of the Kenyan economy? Are we really being honest with ourselves? My take is that there are huge problems with our economy than we as a nation are willing to admit. This means that we have chosen to be the proverbial ostrich that buried its head in the sand.
First and foremost, reports of massive corruption where public resources have been looted by people entrusted with them is bad news for the economy. We must, therefore, admit that corruption and the lethargic manner in which the government has responded to it has diminished the status of our economy— no investor in his right mind will invest in a country where he knows that the proceeds of his sweat are likely to be stolen through well-crafted and deeply entrenched white collar crimes in government. Without investment, no wealth is created.
Corruption is not unique to Kenya. However, what sets Kenya apart from other societies is the manner in which we respond to the vice. In Kenya, we have perfected the art of turning corruption into a circus by trivialising it and, thereby, making it look like a normal joke that does not need to be fought with the seriousness it deserves. The well-choreographed finger-pointing witnessed following revelations of theft of public funds through fraudulent procurement schemes at the National Youth Service is an example of trivialising corruption with the aim of painting everyone as corrupt, hence giving us the excuse not to hold anybody accountable.
Then there is the huge borrowing by the government. The National Assembly recently raised the government’s borrowing capacity, meaning that we expect more public debt going forward. The question is—where is the prudence in this borrowing? Top officials at the National Treasury have told us that we are borrowing because out credit ratings are good. But even if our credit ratings are good, is that good reason to borrow recklessly?
An economist friend of mine cautioned that if Kenyans don’t demand proper accountability and honest disclosure from the government with regard to the ongoing borrowing, then they should not be shocked when it turns out one of these days that Treasury has been running some sort of Ponzi scheme.
Also know as a Pyramid scheme, a Ponzi scheme is an accounting fraud where a business entity that is technically insolvent gives the public a false appearance of profitability in order to attract new investors. Ponzi scheme organisers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. With little or no legitimate earnings, Ponzi schemes require a consistent flow of money from new investors to continue. Ponzi schemes tend to create a bubble and end up collapsing when it becomes difficult to recruit new investors or when a large number of investors ask to cash out.
Given that our economy is technically in a recession, meaning that we are not creating new wealth yet we keep on borrowing, should anybody be worried that Treasury could be involved in a Ponzi scheme by borrowing from Paul to pay Peter? Just thinking aloud!
The writer is the deputy secretary general of the Supreme Council of Kenya Muslims.