REBUILDING KENYA’S POST-COVID19 ECONOMY

Kenya has had its fair share of challenges over the last several years, many of which are home grown and self-inflicted not the least of which are corruption and the resultant economic hardship that is ravaging communities across the country. The global COVID-19 pandemic has exacerbated the problem and exposed an even deeper underbelly of a country on the brink of total collapse. The government’s mismanagement of the pandemic and stealing of donor funds meant to alleviate the suffering wrought by the pandemic has placed the Jubilee regime at cross-hairs with the donor community, many of whom have either pulled out their funding or in the process of doing so. To say the Kenyatta government has performed dismally is an understatement, it is under severe indictment from both within and outside Kenya, it is under pressure to account for its conduct – rightly so. President Uhuru Kenyatta’s legacy items are obviously on the back-banner notwithstanding his posturing. His response to this pandemic in will have far reaching make or break consequences for most of his remaining days in office and it is for this reason that, to redeem himself, he must be necessarily razor focused on the one issue that he has control over, ECONOMIC RECOVERY! This COVID pandemic might in fact be a blessing in disguise for this president, as a politician it affords him some breathing space and a scapegoat opportunity for the government’s failure to live up to its promises. More importantly it affords the president to hit a reset button and reposition his priorities taking into account the fluidity of the environment he now finds himself in. He cannot afford any more missteps or squander the opportunities that COVID-19 has presented Kenya, if he himself sees and capitalizes on them. Here is what this means:

US-KENYA FREE TRADE AGREEMENT: DIASPORA ANGLE

The recently initiated Kenya-USA Free Trade talks present an immediate opportunity to turn Kenya’s fortunes around, the country is at the crossroads. She is on a perilous path of decline and yet has an excellent opportunity to pull herself out of decline and become an economic model of Africa in the form of the proposed US-Kenya Free Trade Agreement (FTA); it gives Kenya a lifeline that the country must grasp at and change her fortunes provided they know what to do. The country is in a unique position to enter into this one of a kind free trade agreement with the United States. Kenyatta deserves plenty of credit of fostering the kind of relationship that has gotten us here and yet going by past experience, never underestimate this government’s ability to screw things up. There is a confluence of events working in Kenya’s favor on this great opportunity: The world is divesting from China, Kenya is a key strategic ally of the United States with a great relationship and Kenya has literally hundreds of thousands of trade ambassadors already in the United States, what could possibly go wrong?? Right? Wrong! As it stands now the talks have commenced in earnest but in secrecy it seems, at arms’ length. The US government has an army of negotiators meticulously putting together a trade package that serves the best interest of the United States, Kenya on the other hand, seems to be twiddling her thumbs and unsure how to proceed or what to do, her main negotiators are in in Nairobi and exchanging discovery notes.  Kenya cannot afford the mistakes of AGOA where the free trade treaty was established without any input to put in place the mechanism to fully take advantage of the gift from America to sub-Sahara Africa. As a result Kenya and most of the countries were flying blind and failed to fully benefit from AGOA. There was no mechanism put in place to guide the conduct of trade under AGOA, no framework, no facilitators or intermediaries to effect it. AGOA, scheduled to expire in 2025 means Kenya must learn from its pitfalls and get an improved FTA. To that end the Kenyatta government needs to leverage the expertise of very able and qualified Diaspora Kenyans in the United States as intermediaries to advance Kenya’s welfare at the FTA negotiations, the government must officially second us to the negotiation table at the talks in Washington, DC to maximize our input and optimize the outcome of the talks. The Diaspora is a ket spoke in the trade wheel, involving us at the inception of the talks ensures a seamless process from talks to implementation and my hope is that Kenyatta will heed this call.

RESTORE CONFIDENCE IN KENYA

Prosecute Corruption – Unfortunately corruption in Kenya is the norm, it is a pervasive culture perpetrated at the highest levels of government. Powerful folks in high offices have unfettered access to public funds, literary keys to state vaults and they have perfected the art of stealing. The recent revelations of COVID-19 pandemic heists where government officials stole Billions of shillings meant to help the country’s poor and most vulnerable populations deal with the pandemic, as tragic as it was, is all too common. Corruption in Kenya is the real pandemic that has brought the economy to its knees, it is government led and sponsored. And because it is practiced by all and sundry in government it is extremely difficult to prosecute and yet if the country is to advance, this president must prosecute corruption from the top to bottom. Priority must be given to the most recent corruption cases and ranked from highest to lowest losses. It will be critically important that purveyors of corruption, beneficiaries, sponsors, collaborators and their lords in government are SWIFTLY and URGENTLY arrested, arraigned and prosecuted in full glare of the public. This includes the deputy president William Samoei Ruto who, among other charges, has the dubious distinction as the most corrupt government official in Kenya. All and any unexplained wealth “owned” or registered in suspects’ names, including in the names of proxies, friends, children and other family members MUST be seized and forfeited to the state so they can be restored to their rightful owners i.e. the people and put to its intended proper use. Perpetrators must be convicted and sentenced to long stretches in prison as both punishment and deterrent against would be thieves. This will go a long way in restoring confidence in the country’s institutions.

End Political Campaigns – President Kenyatta’s 4 points agenda has been hijacked and completely obliterated by premature 2022 campaigns. His Deputy William Ruto has openly defied the president’s pleas to cease early campaigns. The double talking Ruto is on full throttle campaign mode, has been since 2017 but has ratcheted it up. Kenyatta’s inability to stop Ruto has emboldened Ruto that he’s openly campaigning even in the face of the global COVID-19 pandemic. If you didn’t know better you would think elections are weeks from today but in reality elections are two years out, in 2022. Kenyatta’s campaign promises have remained a mirage, he seems administratively paralyzed and as his term in office wanes, it will be even that much difficult to not only tame his Deputy Ruto but also get any meaningful agenda fulfilled. Time for President Kenyatta to act is NOW. He has to use tools at his disposal to steer the country’s agenda otherwise as declared by Ruto’s followers, he will be defined by Ruto. It is an unfortunate and sad footnote in history for a sitting president’s legacy to be defined by the conduct of his deputy as opposed to his own. Truth is Kenyatta made an indelible error in judgment when he enlisted Ruto as his running mate in 2012, they packaged their détente as a unity pact between the warring Kikuyu and Kalenjin tribes but clearly that hasn’t worked out. It was a ruse, a superficial mend to a deeply rooted problem. The animus between the groups has actually gotten worse, nothing healed between the communities. The Kikuyus and Kisiis who were displaced from Rift Valley never returned to their homes nor has anyone been jailed or held accountable for the murders they perpetrated on each other including the most egregious of all, the KIAMBAA church burnings where Kikuyus were burned alive. Needless to say, President Kenyatta needs to retool himself and redeem what is left of his term; END premature politics at once before they completely consume the country himself included.

Overhaul Education – Kenya has a great bright brain-trust, innovators and extremely literate people. The problem is that the education curriculum is outdated and hasn’t kept up with a fast changing world. As a result most of Kenya’s graduates are ill-equipped to compete for opportunities in a global economy. We need innovators, practical solutions, we need graduates who build things, creators, fabricators, and solution oriented talent that will attract investors to set shop in Kenya. This has to be part of the country’s strategic plan to grow.

Stop Evictions & Demolitions – This is perhaps the most inexplicable self-defeating paradox of Kenyatta’s government. While one of Kenyatta’s Big 4 Agenda items is affordable housing, his government has gone on a demolition spree of housing and commercial buildings it claims were illegally built despite the fact that the buildings were properly licensed and permitted in the first place. The government came up with preposterous excuses including that the buildings were on built on riparian lands. The Kenyatta government demolished Billions of shillings worth of buildings and in the process severely undermined one of their own stated agenda items. No investors worth their salt will invest in a country that arbitrarily demolishes properly permitted buildings, just doesn’t make sense. Even in the middle of the COVID-19 pandemic the Kenyatta government, in the most inhumane and callous manner, evicted thousands of people, mainly women and children from their informal settlements in the middle of the night. There cannot be an excuse or justification for that kind of conduct, it erodes confidence in the country, it drives investors away. My point is Kenyatta’s focus should be on building, not demolishing. Put a moratorium on demolitions and evictions, restore sanity in the construction industry. Honor government issued permits.

REFINANCE KENYA’S DEBT

The COVID pandemic has jolted and brought about a new world order. Western Countries, China and Bretton wood institutions recognize the burden the pandemic has wrought on the world’s poor countries especially Africa. Consequently, to cushion them from further decline, they implemented debt relief measures and temporarily suspended repayment of debt obligations until the pandemic passes. Kenya should leverage this opportunity and correct its past mistakes of borrowing from commercial institutions and China at exorbitant interest rates. Of course most of these deals were done corruptly to enrich a few, the SGR, the multiple EUROBONDs, etc. were all products of corruption and incompetence and now the country is stuck with unsustainable debt burden that has turned the country into servitude. All of Kenya’s foreign debt is denominated in dollars which further compounds the country’s debt burden due to Foreign Exchange risks, the repayments are made in dollars and it means that as the value of the dollar rises vis a vis the Kenya Shilling, we have to dig that much deeper to meet that obligation. The Eurobond is a perfect example, at the time the country borrowed the exchange rate was about KSH 80.00 to $1.00, now the exchange rate is around KSH. 105.00 to $1.00 and so the same loan must be repaid with an additional KSH.25.00 or 31% more than originally planned. This is a real problem because the forex risk induced additional cost erodes our capacity to provide meet domestic development agenda. Here is a suggestion, Kenyatta should refinance Kenya’s debt and get it out of commercial lenders and into more favorable arrangements with World-Bank and IMF whose terms are 10 times better than China and the markets. The savings from these arrangements will be reinvested in the economy in other revenue generating capital projects, revive manufacturing and agricultural production such as the sugar industry.

NATIONAL ECONOMIC COUNCIL

The world is divesting from China and major economies are looking for alternative hubs to move their production and services. Africa presents the best option to these countries. Kenya is strategically positioned to reap big from this reorganization if it can properly organize itself. Historically Kenya’s economic decisions are made haphazardly on an ad-hoc basis. There doesn’t seem to be a clear rhyme or reason to the methodology. There doesn’t seem to be a coherent or strategic economic game plan and a big reason for an uncoordinated sub-optimal economic output and outcomes. Kenyatta can change that by establishing a formal set of ECONOMIC COUNCIL(S) to retool the economy. The Council will be charged with the role of establishing a sound economic development and growth framework geared toward economic recovery, targeting critical high value segments of the economy that are most likely to stimulate the economy at accelerated pace. It is one thing for the President to have a Four-Pillar economic agenda but without a solid team to effect or implement it, it is hollow and meaningless. Unfortunately for the President evidence bares that out. In the last three years since Kenyatta declared his second term agenda, very little has been done to move the needle, thus far it has been empty rhetoric more than anything else. The President’s Four point agenda urgently needs Economic Advisory Council to shepherd it, to establish measurable parameters and milestones upon which recovery can be built. Specifically, the Council should focus on the following:

Trade Scouts – Establish a Business Development Division comprised of Trade Scouts whose mission and purpose is to lure business investments from outside Kenya. Again, the developed world is divesting from China and we need to compete and bring those businesses to Kenya, especially manufacturing. We should have feelers out busy luring companies to set up production and service shops in Kenya. Reliance on often ill-informed and ill-equipped “trade attaches” at embassies doesn’t and will not get the job done; we need foot soldiers to develop trade partnerships with companies and investors, not governments. To promote Kenya as a Tourist, Sports and Conventions destination. Let’s leverage Kenya’s good reputation in this areas.

Cut Taxes and Government Red tape – President Kenyatta’s tax cuts in response to COVID19 was simply not useful or helpful, cutting taxes on a closed economy is not exactly a good policy measure because it didn’t spur or stimulate much economy. Tax cuts must be meaningful and targeted to stimulate the economy. Impose a moratorium on VAT taxes on sustenance products, property taxes and land transaction fees such as stamp duties, construction permitting fees, etc. Suspend the onerous regulations that delay and stifle businesses such as the so-called environmental studies on projects. We need jobs to expand the tax base, not regulations. End the punitive import tariffs on Diaspora imports, they drive the cost of doing business up.

REINVEST IN KENYANS

Kenya is a struggling economy, we all get that but it also has one of the most repressive tax and spend regimes known to man. The government raises enough revenues that gets wasted and stolen when it should be ploughed back to help Kenyans particularly in hard times such as this and to encourage entrepreneurism. The country should have contingent plans and an emergency reserve kitty for a rainy day such as the pandemic. Governments around the world came up rescue plans to help their populations deal with the COVID-19 pandemic, in the United States for example, pandemic related benefits included a one-time $1,200.00 stimulus check and at least $2,400.00 of unemployment benefits. This was a significant safety-net for unemployed Americans and a boost to the economy itself. By contrast, Kenya not only doesn’t have such safety net measures in place but the government stole money meant to ease the ravages of the pandemic, just tragic and this must change. The government should establish a funding mechanism that reinvests in Kenyans to stimulate economic growth. It needs to be modeled after the United States’ wildly successful Small Business Administration (SBA) that revolutionized America’s economy by providing funding to businesses in the form of grants and loans. Thousands of major brand businesses in America today such as Tesla, Amazon and many more trace their roots to funding from the US government through the SBA. An organized business funding mechanism for businesses will go a long way in growing the economy.

Diaspora Kenyans – Kenyans in the Diaspora are perhaps the most critical and consequential generator of economic activity in Kenya and yet the most marginalized of any community. We have no say so of any kind whatsoever at the policy, political and/or administrative table about anything and yet collectively the community’s annual economic impact on Kenya’s economy is in trillions of shillings, more than Agriculture and Tourism combined. They remit an estimated base amount of 300 Billion Shillings annually, considering a conservative multiplier effect of 5;  i.e. the number of times the a shilling circulates in the economy in a year, the impact is at the minimum 1.5 Trillion shillings. At the baseline the Diaspora contributes an estimated 51 Billion Shillings in tax revenue to the exchequer simply calculated as 17% in VAT of the 300 Billion shillings in remittances and transaction fees accruing to the government at Point of Sale when remittances arrive in Kenya. Overall, the Diaspora is responsible for about 250 Billion shillings in tax revenue to the Kenyan government and yet we are the most scorned at, most marginalized, most despised group of people. The government has miserably failed to court the Diaspora, to reinvest in the most industrious among the community. Besides improving services to the Diaspora community, the government needs to incentivize Diaspora entrepreneurs with business tax breaks, sovereign guarantees to drive investment capital flows to the country. Kenya should emulate world powers such as Israel, India, China, etc. who have successfully harnessed the economic power of their diaspora with amazing results. They set up programs and structures specifically for their Diaspora, set up cabinet level departments/ministries to cater for their Diaspora and the results speak for themselves. Kenya on the other hand, unfortunately, only pays lip service to this critical constituency, there is not even a single department set up to cater for Diaspora needs, we are literally on our own. We saw that during the COVID pandemic, stranded Kenyans in the Diaspora were left to fend for themselves. Meanwhile there exists ministries in government whose role are unclear and in some cases just to make Kenyans’ lives even that much miserable. My point is all these things need to and MUST change. The country stands to benefit exponentially if the government works with its diaspora collaboratively, not by edicts. Let’s try that.

UTILIZE THE MILITARY FOR INFRASTRUCTURE DEVELOPMENT

This is one of the low-hanging fruits that should have been implemented long time ago. Kenya is a relatively peaceful country and at peace with her neighbors except of course, Somalia. It has a sizable underutilized military that should be put to work during peacetime, it is a “NO-BRAINER”. It makes no sense to have battalions of military personnel in barracks idling around waiting to wage war while paying trillions to contractors to build public infrastructure. Makes no sense whatsoever. Developed countries figured this long time ago, the United States deploys a significant part of its military such as the Army core of Engineers to build and sustain critical public infrastructure including bridges, dams, airports, etc. These folks earn useful lifetime transferrable skills that they use in civilian life once they leave the military and the country gains tremendously from their workmanship at NO additional labor costs. Kenya has a strong creative talent in her military and there is absolutely no reason taxpayers should spend more to hire private contractors to do what the military can do, especially at this time when the country is saddled with insurmountable debt.