Kenya grapples with crises

August 17, 2009
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, NAIROBI, Kenya, Aug 17 – Kenya is facing an unprecedented crisis. From water to food to power, none of these essential commodities are available in adequate supplies and this poses serious threats to the social and economic growth targets of the country as well as its Vision 2030 objectives.

The Gross Domestic Product (GDP) rate is particularly vulnerable and many experts concur that the economic growth might slow down due to these constraints.

The Convener of the Association of Professional Societies in East Africa Felix Okatch projects that the country’s GDP will grow at between two and 2.5 percent down from the three percent target.

“When you are projecting growth, you assume that the changes will not be much. When the three percent projections were made, they never thought they would be water problems or the rationing and food shortages. But since they have come up, it means that the government is putting in adequate measures to address these problems,” he says.

With the prices of commodities going up he says demand and consequently the country’s production capacity as well as investments are likely to decline.

 These challenges are compounded by the failure of the Kenya Revenue Authority (KRA) to meet its revenue projections. The tax collector missed by Sh12 billion its target for the 2008/2009 financial year and has consequently not performed as it has hoped in the first two quarters of 2009/2010.

“However, the main problem will arise from reduced production capacity and shedding of employment as well as increased inflation from higher utility bills and food prices,” concedes economist Peter Gakunu.

Dr Gakunu fears that any stimulus that the government might inject into the economy under these circumstances would end up stoking inflation expectations.
 
He adds that while the government and by extension the whole country is involved in its own internal survival tactics, it is missing the greater picture.

He warns that continued wage adjustments and untargeted fiscal stimulus without commensurate adjustments in the productivity and efficiency, will provoke an economic catastrophe.

“It is encouraging of course to make the people have a feel-good factor but this depends on what they finally take home to their families,” he says.

Dr Gakunu adds that the government should tackle the food security issue and ensure the competitiveness of the manufacturing and services sectors remain competitive with the same zeal that it is handling the infrastructure development with.

But yet another expert says the country should starting focusing on the services sector as the key pillar to economic growth.

Dr Wahome Gakuru says its time the country stopped being dependent on agriculture as the mainstay of the economy as it is vulnerable to the vagaries of weather.

“Few Americans work on the farm, yet their country’s economy is doing well because they have gone into offering services,” he argues adding that farmers should be given better seed, fertilisers and chemicals that can help add value to agriculture.

Instead, he says Kenya should take advantage of its position as a regional hub and increase its services in consultancy, ICT, financial and the Business Process Outsourcing industries where it’s more competitive.

While all these experts have different suggestions on how to ensure the growth of the economy, they all are in agreement that immediate and long term solutions need to be worked out now to get the country out of the quagmire that its in now.

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