Is the economy growing and creating jobs?

Over the past few months, financial crises at the National Youth Service, “Chicken gate” and the IEBC and political bickering have dominated media headlines, suffocating the space for objective analysis and public debate on emerging economic trends.

An important issue that really should be at the centre stage is how to deal with the concerns and fears of the Kenyan youths, who are the majority and the future of Kenya. In recent public surveys, they said they were mostly distressed about lack of jobs and opportunities to lead a decent future.

So, on the basis of this primary concern, we should, ask ourselves – is the economy creating jobs and if so, how many, and if not, why and what needs to be done? And since successes and failures are attributed to the leadership, it’s fair comment to ask if President Uhuru Kenyatta and his deputy, William Ruto, are steering the Jubilee administration to deliver on the promises they made when the people elected them to office in March 2013.

This is the fundamental issue that Mr Henry Rotich, the Cabinet Secretary for the National Treasury, tackled during the opening session of the inter-ministerial public forum, which focused, in a holistic way, on a mid-term review of the Jubilee Government’s achievements.

Rotich’s message was that the economy created 800,000 jobs a year in 2014 and 2015.These jobs could well be attributed to the expansion of the economy, from 5.3 percent in 2014 to 5.6 percent in 2015.

The achievements need to be seen in the context of the positive influences on growth, such as the benefits of low global petroleum prices on the cost of living, as well as the difficult national, regional and global economic environment, which is seen foremost in China’s economic downturn and the marked impact of terrorism on international trade and exchange.

In a simplistic economic model, jobs are created when the economy is growing, so the expectation is that as the growth rate improves towards 6 percent, new jobs will inch towards one million a year. However, the big story isn’t that Kenya is an emerging middle income economy.

Growth is not a sufficient condition to meet the expectations of the youth and the people of Kenya. The pace of job creation is just one important component of the whole mix of ingredients in the bowl of economic prosperity. There are more hard issues to consider, such as the quality of jobs, the sustainability of job creation, distribution of opportunities and indeed, the impact of growth and jobs on sustainable economic development.

The ability of the economy to continue growing and create jobs depends very much on all the other things that the Government is doing, with financing from the funds mobilized and allocated by the Treasury. But, the focus shouldn’t be on the billions being spent on public sector projects.

The issue really is how the programs being funded are touching the people and transforming their lives by increasing their economic opportunities, reducing poverty and assuring them that they, or least their offspring, will enjoy better prospects in a more equitable society.

What Kenyans are really interested in, is the transformative impact of the billions of shillings being spent each year on public development programs across the country. In this respect, outcomes from the massive spending on infrastructure projects have perhaps been the most spectacular. A few of these clearly stand out, in both quality of implementation and their impact on the people and improving the cost of doing business:

• Accelerated investment in geothermal and other green energy sources has reduced electricity bills by 30 percent and also contributed to a cleaner environment.
• More than 4.3 million Kenyans (53 percent of potential consumers) are now connected to electricity, from only 2.3 million in 2013, and the rapid scaling up of the connectivity is on target to reach 70 percent of Kenyans by 2017.
• In a similar way, large spending on roads projects has contributed to economic efficiency through faster movement of people and goods. Cargo transit time from Mombasa to Malaba on the Kenya-Uganda border has fallen from over two weeks to only four days on average, and one-stop border posts are facilitating faster border crossings throughout East Africa. Increased efficiency and lower transport costs translate into lower prices of goods and services.

Other sectors can boast of their own achievements in equal measure. Innovation and financial inclusion have put Kenya on the world map of the most promising new emerging economies for young entrepreneurs. Every adult Kenyan has a mobile phone, critical government services are available on technology platforms and over 70 percent of Kenyans have access to modern financial services. Who queues any more at Kenya Revenue Authority to pay taxes or at county licensing offices to secure business licenses? These phenomenal achievements have been made possible by the substantial public and private investments in Information Technology enabled services.

Kenyans have also benefitted from the considerable scaling up of social development programs especially in education, health and social protection. These include the following:

• The cost of public education at primary and secondary levels is heavily subsidized. This has enabled millions of children to receive education without interruption and has also taken the burden off the shoulders of their parents. The disposable incomes now the parents have are being used to finance other household needs, thus improving their quality of life.
• The national social protection programs for vulnerable Kenyans including orphans, elderly and those with disabilities, started on a pilot basis with monthly cash transfers to less than 100,000 households has rapidly been scaled up to over 700,,000 households, greatly improving the livelihoods of millions of the poor in arid and semi-arid areas, and also in urban slums. It is on course to reaching one million households this year.
• Transfers to counties, which are 30-40 percent of the audited annual revenue or double the 15 percent stipulated by the Constitution, have expanded health, rural roads networks and other services at local levels. Taking critical services such as ambulances, clinics and children immunization closer the people has successfully reduced child and maternal deaths. These achievements should also be seen in a broader context. A healthy community is not just a function of better health services. Investing more in water and sanitation, agriculture and infrastructure has contributed to better health outcomes for the people.

Of course, these achievements don’t mean that Kenya isn’t experiencing challenges of development. The economy continues to suffer from internal and external shocks, which constrain its ability to grow at a faster rate (8-10 percent) and create millions of quality jobs each year. The million dollar question is whether the outlook is positive or negative. On balance, there is a deeper sense of optimism than pessimism. Implementation of devolution has posed challenges in the past two years, but opportunities for making it work for the people are enormous. In essence, the prevailing challenges can be turned into opportunities for better development outcomes.

Amidst the political noises, which are really the hallmarks of a mature democracy and freedom of expression, there is increasing confidence that the Jubilee government has laid a strong foundation for economic prosperity. And, it continues to do so through projects such as the Standard Gauge Railway (SGR) and the Digital literacy program or the so called schools laptop project.

Confidence is measured in terms of how investors are positioning themselves for the future. Foreign direct investments inflows increased from US$ 597 million in 2012/13 to US$ 868.4 million in 2013/14, reflecting a growth rate of 45.5 percent. Moreover, monthly remittances by Kenyans in the Diaspora increased by 19.9 percent, from Sh.114.5billion in January 2015 to Sh.137.5 billion in January 2016. On average, these Kenyans send home over Sh.1.57 trillion a year, making a greater contribution to development than official development assistance. Tourism is making an encouraging recovery, supported by improved security and the major international conferences Kenya is hosting regularly.

These are clear signs of a more prosperous Kenya.

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