• Why is the expansive public spending not spurring productivity and accelerated wealth creation?
• Benefits of public spending boom have gone to the corrupt elite.
Image: REUTERS
Kenya’s GDP grew by about 6.3 per cent in 2018. This growth is buoyed by sustained public spending as evidenced by runaway public debt and an unprecedented expansion of the national budget. The public sector has ballooned, thanks to our unwieldy model of devolution.
Compared to 2012-13 budget estimates, the 2019-20 budget represents a whopping 108 per cent increase. In contrast, per capita GDP has expanded by a modest 51 per cent in the same period. Clearly, Public spending, mostly through deficit, is sucking the wind from the lungs of the economy. Moreover, profligate domestic borrowing is starving the private sector, especially small businesses, of credit.
While the economy has grown by more than five per cent over the last decade, job growth has been stagnant. In a sense, we are in a period of jobless GDP expansion. The economy expanded by 6.3 per cent in 2018 but formal sector jobs grew at a miserable rate of just 2.4 per cent. The question on everybody’s mind, and especially the youth is, where are the jobs?
GDP growth is laudable but where are the jobs? Similarly, why is the expansive public spending not spurring productivity and accelerated wealth creation? I don’t want to wade into the murky waters of the distribution of the country’s growth over the last decade but suffice it to say that the benefits of public spending boom have gone to the corrupt elite.
To the youth of this country, it is BYOJ or bring your own job. It is especially arrogant and even disingenuous when salaried government bureaucrats and politicians tell the youth to be entrepreneurial and create employment.
The last 15 years of expanded public spending has not yielded commensurate expansion of jobs in the formal wage sector. Consistently in the last two decades, the informal sector creates over 80 per cent of all new jobs in the economy.
For example, the informal sector accounted for 90.6 per cent of the 840,600 jobs created in 2018. Only 78,400 jobs, which represents a 43 per cent decline from the 2013 job numbers, were created in the formal sector. Keep in mind the national budget grew by 108 per cent in the same period. Where are the jobs?
The slow pace of growth of jobs in the formal sector has led many to believe that somehow young people who complete, primary, secondary or tertiary education should create their own jobs.
To the youth of this country, it is BYOJ or bring your own job. It is especially arrogant and even disingenuous when salaried government bureaucrats and politicians tell the youth to be entrepreneurial and create employment.
The structural problems in the economy must be solved. Manufacturing accounts for just 7.7 per cent of total gross domestic product. The most rapid expansion in employment is in wholesale, retail trade and repairs, which are the cardinal drivers of informal sector job growth.
Kenya will unlikely follow the classical path of growth – from agriculture to manufacturing fuelled by rapid urbanisation and a sophisticated service sector.
Exhorting youth to create their own jobs is not a job creation strategy. How do we intend to provide jobs for the millions of youth pounding the pavement in search of work?