Kenya’s economy: Running out of puff?

Goodwill still persists

While Kenyatta’s decision to cut back on salaries to the public sector, especially parliamentarians and ministers, has been generally welcomed, there are many who say that the cuts do not go deep enough and that legislators have to clearly demonstrate justification for their inflated incomes. 

But while inflated public sector incomes may be draining government resources that should go towards development projects, they cannot be held solely responsible for the lacklustre performance of the economy.

According to KMPG, other factors that have worked against Kenyatta’s economic plans include the high costs of doing business, weak infrastructure and dependence on European markets for both tourism and agriculture exports. 

However, it is significant that Kenyatta is operating in an environment different from that of his predecessors. The country’s new constitution, promulgated in 2010, ushered in a new administrative structure of 47 counties, administered by elected governors, in place of the former eight provinces; and the erstwhile unfettered power of the Presidency has now been devolved to
other offices. 

These counties are expected to spur development at the grassroots level and reduce political pressure on Nairobi, owing to the economic leverage that they command. Since coming into being one year ago, the 47 county governors have been a mixed bag in terms of delivery and on more than one occasion have had run-ins with the Kenyatta government. 

While many have performed below par, a few notable examples have stood out. For example, Dr Alfred Mutua, the governor of Machakos, has overshadowed all his colleagues in the Council of Governors, because of the development initiatives that he has launched in his county. 

Mutua has criticised the government’s austerity measures and blamed it for inaction on corruption. “We should not preach austerity. We need to exercise it ourselves,” Mutua says. “In Machakos we are making sure we get value for money and that is how I managed to invest in so many things at the same time.”

While both Kenyatta and Ruto have made strong statements on insecurity and corruption, little action has matched their words. 

But Kenyatta’s government still commands a lot of goodwill both domestically and internationally. “Kenya’s political risk profile was not negatively impacted by the terror attack on an up-market shopping mall in September 2013 because the possibility of such a major attack has been part of our assessment of overall risk since Kenya deployed troops into Somalia two years ago,” the audit advisory firm KPMG says. “The Al Shabaab attack had a short-term impact on tourism but not a significant one. We do not anticipate any major impact on Kenya’s political stability rating in the short to medium term, irrespective of what Al Shabaab may instigate,” it adds.

Standard and Poor’s, as well as Fitch’s, sovereign credit rating for Kenya still stands at B+ Stable, while that of Moody’s is also a stable B1. 

“Kenya remains a vibrant and promising economy in East Africa, one that is resilient and has the ability to bounce back after the political shocks such as the 2007–2008 election violence and the Westgate terrorist attack in Nairobi,” Professor Mwangi Kimenyi, the director of African Growth Initiative at Brookings Institute, says. “There are challenges that the country still needs to address, above all, poverty, inequality and access to health services. The recent discovery of resources such as oil, base titanium, coal and underground water augur well for the country’s future economic performance.” 

Kenyatta’s one year in office has been anything but a shining success. Perhaps far too much was expected, especially given the massive adjustments that were made to the political system and the devolution of power. Despite all its current problems, Kenya remains the most attractive investment destination in Eastern Africa and the general consensus seems to be that Kenyatta deserves to be given more time to assert his own brand of governance on a nation that is politically a very different creature from the one he inherited.