Excerpt : Poor governance is the bane of our bad economy

Monday, September 27, 2021

In recent months, many Kenyans have expressed concern about the state of our economy, in particular the increased joblessness, high cost of living, declining incomes, high taxes and huge public debt. Ordinary Kenyans across the country as well as the elite have all focused discussions on the performance of the economy. The political leaders too have all tended to mainstream economics as their campaign platform, or so it seems. Discussions have even moved onto what types of economic models are relevant to revive the economy.

The state of economy is a function of  good political governance or the lack of it. We cannot discuss about economic governance in isolation. Many Kenyans know about the Nyayo era adage ‘siasa mbaya, maisha mbaya’. There are leaders who give accolades to the Government on political governance, law and order, public policy, leadership or even development record. But the same leaders cite serious concerns on matters of the economy. It’s a fallacy, an appeal to ignorance.

In developed countries, the reverse of ‘siasa mbaya, maisha mbaya’ is also true. The economy is a major factor that shape how people vote.  Electoral campaigns are predicated on the soundness of economic policies pursued by various parties. Often, the failure to realize these policies affect the political survival of the administration. 

In recent months, one would think next year’s general election platform is all about the economy, with every leader pledging to give us rivers of milk and honey. In most however, there is little depth on policy or strategy yet, just plain rhetoric. It’s all politics.  As Thomas Sowell said “ the first lesson of economics is scarcity; there is never enough of resources to fully satisfy all those who want. The first lesson of politics is to disregard the first lesson of economics”.

The Constitution remains the most pivotal tool in governance, and fidelity to its proper implementation or the lack of it, has significant impact on our governance, and consequently the economy. For instance, its rationalization of public service is a key factor in optimization and efficiency of service delivery. It limits number of ministries and sets limits to independent offices and commissions. It sets out what functions are to be devolved to counties to avoid duplication, and sets out checks and balances necessary to enhance accountability in public service.

We all know most of these provisions are either ignored, or are circumvented ad nauseum. The consequences are bloated public service, duplication of roles, wastage, inefficiencies and lack of accountability. Sometimes, the very institutions charged with oversight are culpable in this regard. 

The Constitution gives the National Assembly a key role in the budget process which is critical in planned development and allocation of resources, and in checking the omissions or excesses of the Executive in the implementation of the Constitution. It also gives them immense powers in approving appointments to all key state officers that run the government, and powers to fire them. Quite often, the exercise of these powers has been misapplied, or is absent, and the consequences are all too obvious. Courts have in recent past halted many Government projects, appointments and laws or faulted them as unconstitutional, and the list is growing by the day.

One of the issues often raised by the Executive has been that it is the Constitution which created a huge government, leading to economic burden and financial crunch. The contrary would have been true if there is fidelity to the Constitution by all institutions of Government. The irony is that the same leaders also find it appropriate to expand Government in order to accommodate ‘their people’. We have seen delegations to the State House or visits by the President to a region as an opportunity to lobby for more government projects and state jobs. It matters little to these leaders that this would result in financial burden to the economy. In effect, it is back to roadside declarations and political patronage, with huge economic consequences, borne through higher taxes and more loans.

Another major drain on resources are state corporations, nearly 300 in number, wholly lacking in good corporate governance and some long past their sell-by dates. Others play no useful role except sentimental value and to provide jobs to state cronies. Billions in budgetary allocations annually, and huge loans to finance phantom projects, all guaranteed by the State. In June 2021, IMF reported that 18 of them will need $3.5 billion to survive, including KQ, KR, EAPC, KBC, KWS, KPLC, NHIF and the list is growing. Hitherto healthy ones such as KAA, KPC are wallowing in debt.

The annual audit report by the Auditor General is quite revealing on how resources are being mismanaged, either through bad policies, misplaced  priorities or misappropriation. We have borrowed expensive loans for legacy development projects but there are no returns from the investments years later. In spite of our higher GDP, our revenues to GDP ratio has been falling steadily in the past 8 years. According to the Controller of Budget, development and commercial loans have been used to service debt, and for consumption. Binge spending has characterized this administration, with consequent unsustainable fiscal deficits every year.

Every penny spent by government is from taxpayers pockets. Government does not print money. There is no such thing as aid; it’s a loan that has to be repaid using taxpayers money. Hence, it makes no sense to suggest that it is appropriate to expand government or undertaken all manner of projects without adverse consequences on the taxpayers pockets. Leaders should not be surprised by high taxes on fuel or huge loans to service debt. It is the consequences of bad governance, unchecked excesses by the Executive and lack of accountability. 

As long as we continue to cheer unconstitutional order and impunity by those entrusted to run the country, economic misgovernance is the heavy dividend we shall earn.

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