Debt or development: what is Uhuru Kenyatta’s true legacy?

0

Uhuru Kenyatta took over Kenya’s presidency in 2013 promising to fight insecurity, create jobs, improve food security, tackle the corruption that has plagued the country since independence, and reinvigorate the private sector.

Nine years on, as Kenyatta prepares to hand over power to his deputy-turned-rival William Ruto, who was declared president-elect this week after defeating Kenyatta-backed veteran Raila Odinga, analysts say the economic legacy of son of Kenya’s first president, liberation hero Jomo Kenyatta, is a mixed bag.

While large and impressive infrastructure projects appear to symbolize a positive development path for East Africa’s largest and most dynamic economy, soaring public debt, rising prices and the high unemployment rate could drag it down.

“It is a legacy of poor prioritization and misdiagnosis of the economic problems facing the Kenyan economy,” Reginald Kadzutu, managing director of Amana Capital in Nairobi, says in a stark assessment of the economic record of Kenya. Kenyatta.

Some argue that public debt is Kenyatta’s most enduring economic legacy. When he took office, the public debt stood at around $17.95 billion. Nine years later, it has grown to around $72 billion, of which just over 50% comes from foreign lenders. Meanwhile, the overreliance on loans – domestic and foreign – has caused public debt to GDP to almost double since 2013 to around 69%, which has weighed on the treasury. This year, servicing Kenya’s debts to China alone will cost more than $620 million.

As a result, Kenya is classified as at high risk of distress by the International Monetary Fund. Additionally, a Bloomberg Economics assessment of 50 developing economies recently ranked Kenya as the sixth most vulnerable country to a debt crisis.

Infrastructure spending spree

At the heart of the problem is Kenyatta’s infrastructure spending spree, crowned by the Nairobi Expressway, which cuts a peak-hour journey to the airport from more than two hours to 25 minutes – for those who can allow it. The first of its kind in Africa, Kenyatta says the highway will boost long-term economic growth.

Not everyone is convinced. “It’s a legacy of treating the symptoms, not the problem,” Kadzutu said. “The highway addresses a traffic problem created by everyone moving around Nairobi due to the death of the rural economy and a lack of upward mobility in the rural economy.”

Other big projects include a Chinese-built standard gauge railway linking the capital to Mombasa, 2,000 new dams and thousands of miles of paved roads. Access to electricity has seen impressive gains; when Kenyatta came to power, only 30% of Kenyans had access to electricity, today three quarters of the population are connected.

In a speech to mark 59 years of independence from Britain, Kenyatta said: “Infrastructure has a knack for turning swamps into cities, dead spaces into valuable properties and shopping malls from villages to huge shopping malls. Without infrastructure, there is no way to find new possibilities.

Economist Fredrick Ogola, who heads the MBA program at Strathmore University in Nairobi, says Kenyatta has laid the foundations for long-term growth.

“The economic infrastructure ecosystem has been built, now someone has to do the socio-economic transformation,” he adds. “How does this benefit people, how do roads and ports help?” If Kenyatta’s successor does not build on his success, Ogola says, Kenya will end up with a high inventory of domestic assets with a low return on those assets.

Ogola adds that Kenya’s debt-to-GDP ratio is much lower than other countries, from Japan (257%) and Sudan (210%) to Greece (207%).

Yet soaring public debt has prevented any action on Kenya’s social safety net, for example in health, where spending has barely increased in recent years and where inadequate medical equipment and staff shortages hurt results, even though Kenyatta’s administration built several hospitals.

Analysts say the macroeconomic situation is worrying. Kenya’s current account deficit is expected to widen to 6.3% of GDP this year, according to Capital Economics. Meanwhile, Kenya’s trade deficit has hit a record $6 billion in the past five months.

“A key point in all of this is that Kenya’s fragile balance sheet – including a large current account deficit – means the economy is particularly vulnerable to a period of capital flight,” says Virag Forizs, Africa economist at Capital Economics. .

As a result, Ruto’s honeymoon might be short-lived. The 55-year-old president-elect must tackle Kenya’s debt load immediately if elections are held and he takes office next month. He said he plans to do this through fiscal consolidation.

The “not quite convincing” legacy

During his second term, Kenyatta crafted a wildly optimistic economic vision for 2030 dubbed the Big 4 Agenda which rests on four pillars: food security, affordable housing, universal healthcare, and manufacturing and job creation. . In either case, his legacy is not entirely compelling.

Although exports of steel, cement and auto parts have increased, manufacturing output has been hampered by poor infrastructure in industrial zones, weak monetary performance and insufficient power generation capacity , which is far behind emerging economies such as South Africa. External events such as the pandemic and the war in Ukraine created more challenges. Ogola says pharmaceutical manufacturing is one of many subsectors where insufficient progress has been made. Manufacturing accounted for 13% of Kenya’s GDP in 2010, but fell to 7.2% last year.

On the agriculture front, Kenya’s main economic driver, the lack of mechanization of food production and insufficient food reserves – along with appalling drought and the coronavirus pandemic – mean that four million people depend on food aid. The Covid-19 pandemic has hit the agricultural sector by shutting down international supply chains. Experts say Kenyan farmers need to push towards value-added exports, such as processing fruit into juice.

“In addition to the Covid-19 shock, the country has also experienced an invasion of locusts, a prolonged drought and, more recently, the impact of the Ukrainian crisis,” says a spokesperson for the Alliance for a Revolution. green in Africa, which watches for the continent’s farmers. “The net effect of all these shocks is that the sector contracted by 0.2% in 2021, compared to growth of 5.2% in 2020.”

Kenyatta also said corruption is a threat to national security, but Kenya still ranks 128e out of 180 countries in Transparency’s Corruption Perceptions Index.

Ruto advances

Ruto’s win, if it stands, is a statement on Kenyatta’s record. The vice president has launched a ‘hustler nation’ campaign vowing to tear down Kenya’s ‘dynasties’ – represented by his opponent, five-time presidential candidate and former prime minister Odinga – and uplift the country’s ‘hustlers’.

His victory in the bitter and close election, with 50.5% amid chaotic scenes, is undeniably a response from part of the electorate to Kenyatta’s tenure. Youth unemployment hovers around 40%, while the war in Ukraine has sent commodity prices soaring. Kenya is vulnerable to fluctuations in world commodity markets as a net importer of fuel, wheat and fertilizer. Inflation is around 9%.

A recent study by the International Food Policy Research Institute on the impact of the war in Ukraine on the Kenyan economy suggested that the resulting crisis could reduce Kenya’s GDP by 0.8% in 2022. Rising commodity prices will also reduce the consumption of low-wage earners and could push more than one million Kenyans below the poverty line.

“I really want us to know that the expectations of the Kenyan people are huge. We don’t have the luxury of wasting time,” Ruto said in a speech this week.

Voters interviewed by African Affairs massively raised the economy as the most important issue for them.

“William Ruto will provide jobs for young people,” said Sammy Chege, a self-proclaimed “con man” in the arid county of Turkana.

There are reasons to be positive. For much of Kenyatta’s tenure, Kenya’s economy achieved decent growth, with average GDP growth of 4.7% per year between 2015 and 2019, resulting in a significant reduction in poverty, which fell to 34.4% to $1.90 per day in 2019. Kenya’s economy has doubled in size since Kenyatta took office. The incumbent president has had no control over the coronavirus pandemic, which has hit Kenya’s economy hard, including cutting tourism, a vital industry. The World Bank expects Kenya’s economy to grow by a respectable 5.5% this year.

Furthermore, he oversaw the growth of a thriving tech sector in Kenya and the country is now home to major corporations such as Microsoft, Visa, Facebook, Google and General Electric, all of which have made Nairobi – the world’s fastest growing city. rich East Africa – their regional centers. The stability has seen the United Nations choose Kenya as its African hub.

Kenyatta also deserves credit for his regional diplomacy, which has seen him mediate disputes in South Sudan, Ethiopia and more recently between Rwanda and the Democratic Republic of Congo. Under his leadership, Kenya became an economic, political and diplomatic powerhouse. And a calm and stable East Africa is important to Kenya’s economic success.

Some analysts have previously argued that Kenyatta’s decision to ease tensions and ally himself with opposition leader Odinga provides a rare opportunity for political stability to boost investment.

However, a week after Ruto was declared president-elect, after shocking the political establishment, Kenyatta has yet to speak publicly or acknowledge the outcome, while Odinga is challenge it in court.

While the positive aspects of Kenyatta’s economic legacy are not in imminent danger under a Ruto presidency, investors who value political stability should adopt a wait-and-see approach in the tense post-election period. And Kenyatta’s best legacy-creating opportunity – guiding Kenya through a series of economic shocks and leaving the country with more political stability than when he found it – may yet be wasted.

Share.

About Author

Comments are closed.