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Tuesday, November 01, 2011

Kenya in 2012

These are just my thoughts/opinions. I am not going to link articles or stats but please do comment or correct me if I have made errors... Or if you disagree with me!

Kenya is not an island. We import everything from aeroplanes to zit creams. In between, we also import water (*SMH*) and all sorts of items. The most important being Petroleum products.

Kenya's primary exports are to East Africa, Europe & the Middle East. The rest of the World is important but less so. Therein lies one of the problems.

Kenya's primary exports are Tea, Horticultural products (Flowers, Fruits & Vegetables) & Textiles.

An interesting but growing part of the Export Market comprises Intermediate Goods which includes chemicals, plastic products, building materials, etc. These are products Kenya imports as Raw Materials (or components) then re-exports as finished goods primarily to East Africa.

Finally, Kenya has significant forex income through Tourism, Remittances & export of Services.

2011 has seen high oil prices that sucked the air out of Kenya's forex outflows. According to the WB, the Petroleum Imports were higher than net exports. And the Kenya Shilling (KES) paid the price.

The confluence of high oil prices, failure of rains & global economic turmoil resulted in a rapid increase in inflation which has placed Kenya on the edge of a knife going into 2012. Not all is doom & gloom but care must be taken.

At some point Kenyans need to stop and think what needs to be done. Yes, the politicians in Kenya have generally failed Kenyans but they are a microcosm of Kenyan society. After all most politician were (fairly) elected by Kenyans. I am not going to comment on the 2007 elections except there were no political losers.

Kenya has to look and adopt policies that have succeeded in other countries. I am not suggesting wholesale adoption but selected adoption of what has driven Asian countries forward.

  • Singapore - Few natural resources but a great harbor which they have fully exploited. Kenya has Mombasa/Kilindini which can be expanded & improved. And privatized despite political meddling by a bunch of corrupt politicians.
  • India - As 3rd world as it gets. Yet 1st world in many respects. India has technology Kenya can implement due to the 'price' factor. India's technology in many areas may not be high-tech but ideal for Kenya especially in Agriculture & small-scale manufacturing.
  • China - Kenya needs to learn how to build from the Chinese. They work on building roads in Kenya day & night which means more is done in less time!
  • Pakistan - It may not be as glamorous as its neighbour, India, but it faces similar problems as Kenya does. Nevertheless, it has managed to churn out some decent firms as well as innovate in various sectors in including farming. 
  • Rwanda - OK, not an Asian country but what a country. Discipline, Transparency & Efficiency. Kenya needs to adopt "UMUGANDA" which is community service once a month by ALL able-bodied citizens. No exceptions except for the ill or disabled. President to Peasant.
I am of a Libertarian bent which means I am a Fiscal Conservative & a Social Liberal. I don't care what you do in your private life as long as you don't expect or have me pay for it!

The Bugbear is 2012's General Elections. Kenyans will pay a heavy price as the country comes to a standstill. Kenyans love elections. I think it is stupid for a country to be paralyzed just because we have elections. Folks in the USA work on on the even of Election Day, on Election Day and the day after. In Kenya, Election Day is often a holiday and often the day after.

If Kenya does not;
  • get sufficient rains in 2012
  • maintain peace in the major agricultural regions
  • maintain a stable economic environment
  • get the Fiscal Policy on track
  • maintain a tight Monetary Policy
  • keep al-shabaab & friends in check
then 2012 is going to be very difficult for Kenyans. Whoever becomes the President will have a tough time getting Kenya back on its feet in 2013.

Do I sound pessimistic? Yes.

(Partial) Solutions
  • Privatize but TRANSPARENTLY. Let me repeat. TRANSPARENTLY. No matter what politicians say, the Business of Government is not Business.
  • Support agriculture development. Not by providing subsidies but better roads from farms to towns, easier market access by simplifying licensing of agro-producers, introduce new & better crops. I would even venture many of these roads should be Public-Private Ventures.
  • Kenya has to encourage its local manufacturing firms to stay put. Expand when & where possible. No subsidies but a better environment including easier access to financing & better courts dedicated to business matters.
  • Export, export, export. Kenya cannot compete against China or India in many markets but East Africa (esp the hinterland) is Kenya's oyster. The hinterland extends all the way to DRC, Sudan & Ethiopia.
  • Reforms - Judiciary, Civil Service, Education. I believe Education should be privatized though heavily supervised/policed to keep out charlatans. Citizens should get vouchers they can use to shop around. Misuse or fraud should be severely punished.
  • Re-negotiate Trade treaties - Many countries subsidize their industries directly & indirectly. This has to be countered or we will kill off local industries. Egypt is a notorious COMESA partner which exports to Kenya what they import!
  • Security - Not a cheap endeavor but a safe country means more citizens will be out & about everywhere. No-one should feel unsafe not matter what ethnicity anywhere. Transporters should work 24/7 to improve utilization rates of infrastructure. Shops, hotels, airports, ports, offices can all run 24/7 for those who need the services. Rwanda is an attractive destination since it is considered 'safe' especially Kigali when compared to Nairobi.
The above solutions are  relatively easy to attain but they require an engaged citizenry not the current 'tunaomba serikali' nonsense!

2012 will be a tough year but if Kenya starts down the path of sustainable development, folks will sit up & take notice. They will choose to invest in Kenya which is a small but important step going into 2013.

Your thoughts?


Mwirigi said...

Great post!
One thing you should add, energy.

We need to reduce the cost of power. Thats the main reason local manufacurers leave and small/medium sized ones don't get set up.

To have a vibrant manufacturing sector we need a bigger number of smaller "cottage" industries. They're the engine behind any sustainable growth.

JazzMaster said...

Interesting article. I see some borrowings from the Singapore model. What do you have against government subsidies though? Sustainability? I stand corrected, but some European governments seem to have developed industries through significant subsidy policies.

mmnjug said...

In other words, we must get our politics right....and get rid of what Ahmednassir Abdullahi called Kibaki's voodoo-economics!

Nikhil Hira said...

Good post. Kenya has a lot going for it but is squandering the opportunities. Every time we have elections we see a GDP dip and wildly fluctuating currency. Why? After all we have been independent for almost 50 years.
Infrastructure, infrastructure, infrastructure......need one say more? All successful economies start with it.
BPO - we can be the next centre because we have the right calibre of people and can give India and other parts of the world a run for their money. Let's go for it

Saldanha said...

Given that Kenyans are not about to be enlightened hence shun tribalism any time soon, to wish for a mature political scene in the country is akin to barking at the moon! Yes, I am a pessimist! So what is the way forward? I still believe that Kibaki's unbridled investment on infrastructure was the way to go! I can I say is, let the government spend but let it spend in productive sectors - roads, cheap and sustainable energy generating projects, communication infrastructure, schools, hospitals, railway, ... Put up roads and development will follow it.
And with the new Constitutional institutions, there is a glimmer at the other side of the tunnel!

Anonymous said...

Great one. I especially like the port/infrastructurea aspect. Even with tax holidays and cheap labour, manufacturers who set up base here end up leaving because usually the roads are bad, port not efficient and energy so expensive. You absolutely need to have a generator, fuel is expensive and a pollutant. I heard somewhere that within the next 10 or so years, the E.African region will be self sufficient energy-wise (oil in UG and RSS, ---and Somalia?), so am optimisitic we can be middle-income by 2030. There needs to be other electricity distributors lakini.

I however disagree on privatizing educucation. As much I will pay for private education for my kids, it is for lack of the better option. Can't believe I pay so much in taxes and will still pay so much for educating the little ones. I think subsidizing education with our tax money is the way to educate our nation. FPE funds have shown that we indeed can (only 10% came from donors). As it is, most parents pay as much for nursery school per year as they pay for government- and religious institutions-backed secondary schools, for the kids to make the cut to these very secondary schools (Alliance et al). In the end, kids from private primary schools end up in these great public secondary schools and public universities,so it's not really on merit but social background. Private schools should exist since people are paying, but that shouldn't be the first option for anyone.

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