Economy and its growing pains

Two years ago, a photo of a young woman standing at an intersection holding a placard went viral. Her placard contained her qualifications, contacts and a passionate appeal for a job. Claudia Jematia, 27, had come back from abroad hoping that, with her qualifications, she would easily get a job in Kenya. She had two master’s degrees – one in cybersecurity and the other in security and digital forensics – but could not get a job.

This is the story of many qualified Kenyans desperately looking for jobs despite having great qualifications. We are at a point where the economy is not creating as many jobs as we would want or expect.

CBK Governor Patrick Njoroge painted this grim picture recently when he faulted the structure of the country’s economy for delivering economic growth without jobs and a rise in personal growth and income, which is telling, and a wakeup call as well.

His comments come at a time when corporate Kenya has witnessed reduced profitability, leading to job cuts, a freeze in hiring and near-stagnant wages in the race to protect profit margins amid a 5.6 per cent economic growth in the second quarter to June.

Unfortunately, the difference in the macroeconomic numbers that indicate a growing economy is sharply contrasted by painful job losses.

But what could be the challenges?

Kenya has taken a path that has involved improving and expanding infrastructure that has cost the country billions of dollars. The roads, railway, irrigation, power lines, etc, are aimed at stimulating growth to transform Kenya into a middle-income economy.

But this may not make sense to the common Kenyan who wants to see food on his table as a priority. The downside to this, unfortunately, is Kenya missing lots of job creation chances in the same multibillion-shilling projects it has been implementing in five years, with deals entered into without factoring the country’s interests.

If these projects were properly used to promote local industries in supplying raw materials alone, then the country would, perhaps, have ended up with a longer benefit. However, money from such has ended up going back in material purchases, loan repayment and in some cases, labour costs.

The standard gauge railway, for example, presented an immense job creation and industrialisation opportunity for the country but this was missed at the negotiation table where Kenya signed for a loan compelling it to source portions of the labour and raw materials from China. The result has seen failing cement companies, which would have reaped heavy benefits from the mega project that sourced cement from China.

With the country’s debt now standing at approximately Sh5.8 trillion or about 56.4 per cent of the country’s gross domestic product (Sh3 trillion is external while Sh2.8 trillion is domestic), clearly, a fast-growing economy does not seem sufficient for improving citizens’ quality of life. This domestic debt alone has crowded out SMEs, leaving them minimal credit and stifling the SME market. This is itself tragic to Kenyans, most of whom depend on this sector.

We must come up with a working solution for a country whose economic growth contradicts its job market. This can partly be blamed on years of policy miscalculations, corruption and poor planning, which have driven Kenya’s job situation from bad to worse.

Secondly, Kenya’s tax net is still too low. One of the core challenges for the KRA is the persistent focus on the same set of taxpayers, mainly through PAYE and corporates. Thirdly, availability of food and the lengthening of its value chain will create jobs and solve a recurring cycle of shortages that pushes Kenya to import, leading to further outflow of cash.

On the one hand, Kenya must understand that investment in infrastructure is necessary to safeguard and sustain future growth in a world and region that is becoming more competitive. On the other, priority must be on farming, manufacturing and SMEs at policy level to spur growth and benefit more Kenyans directly.