Home ECONOMY Ambitious Agendas Not Enough to Spur Kenya’s Economic Growth

Ambitious Agendas Not Enough to Spur Kenya’s Economic Growth

by biasharadigest

Treasury is on overdrive seeking ways
and means to plug budget holes plaguing the country’s fiscal standing and
prospects.

In September last year, Treasury CS pledged
to cut down expenditure in government offices to create savings for
development. It sounded like a good move but the cuts were not sufficient and
so the government has gone further to cut development spending with the funds
diverted to plug a Ksh 161 billion deficit.

The move will hurt job creation and stymie upgrading of infrastructure projects.

Read: Hope for Kenya’s Small Businesses and The Role of Technology

But, experts have ways and means of
fixing Kenya’s ailing economy if fiscal discipline was entrenched.

Rising Economic Markets in the World

The Kenya Association of
Manufacturers CEO Phyllis Wakiaga says that the business community in Kenya can
easily revitalise the economy if given the opportunity in an enabling
environment.

“I was recently in a networking forum where a participant asked how we can fix our economy. The question is dominant in the minds of many running businesses in this country. Revitalizing our economy need not be a long and complicated task, it is quite easily achievable if we prioritize lowering the cost of doing business and driving the competitiveness of local industries,” says Wakiaga.

She says that Vietnam, one of the
rising economic markets in the world, was considered one of the poorest
economies following a 20-year old war that ended in 1975.

“Ranked position 67th in the 2019
World Bank’s Global Competitive Index, Vietnam continues to improve the most
globally. Its economic growth of 6% – 7% rivals China’s whilst its exports are
worth as much as its total value of GDP,” she notes.

Trade liberalization, domestic reforms such as deregulation and lower cost of doing business aimed at complementing trade liberalization and investments in human capital and infrastructure are the three key factors propelling Vietnam’s economy.

Also see: Slow Economy Pins Central Bank to The Wall

“Whilst Kenya continues to make headway in trade
liberalization and human capital development, the high cost of doing business
remains a huge challenge for industrialists and businesses. How then do we
manage this?”

Consumers
Purchasing Power

Wakiaga says that the country needs a streamlined
regulatory environment that encourages investments into the manufacturing
sector, in turn, creating new jobs.

“The sector continues to face numerous regulations and
over-taxation – this does nothing for our competitiveness. Manufacturing SMEs
tend to face bigger challenges with regards to compliance, especially in an
unpredictable regulatory environment. Hence, well-structured regulatory
frameworks and tax policies will spur industrial growth and innovation,” she adds.

She says that the effect of this regulatory framework, if
implemented, also has an impact on the purchasing power of consumers due to
increased sustainable jobs, which in turn increases their demand for goods and
services. It also encourages more industries to leverage export markets.

“Second is a prompt payment-driven economy. Late payments
by the government (occurring when the supply of goods and services to the
government go unpaid or delays in tax refunds arise) and the private sector
have contributed to cash flow constraints in the country. Delayed payments
create a vicious cycle that sets off a chain reaction causing delays and
instability in the economy.”

Combating
Corruption

Wakiaga says that to address this, Kenya needs an
all-encompassing solution to promote prompt payment across all sectors of the
economy.

“Prompt payment is critical to a business’ performance and
operations since it ensures necessary cash flows and smooth operations,” she
notes.

The third is combating corruption.

“Corruption is an obstacle to economic and social
development. Not only does it threaten sustainable development in the country,
but also increases the cost of doing business and limits our global
competitiveness. The increased cost of business attributed to fraudulent
practices and malfeasance result in investors moving to more lucrative markets
that have stronger governance structures and institutions.

They are attracted to the strong establishment of structures that oversee the execution of seamless and predictable policies and regulations. Transparency and adherence to the rule of law is most critical in addressing this vice,” adds Wakiaga.

Also, read about Kenya’s Wealthiest Families Calling the Shots in Politics

She adds that the fourth is establishing suitable value
addition policies and mechanisms. Agriculture and industry have a symbiotic
relationship. The agricultural sector provides raw materials such as tea,
coffee, milk, fresh fruits, hides and skins, which the industrial sector
incorporates in its processes, and in turn, supports the growth of the former
sector.

“Agro-based manufacturing will open up the country to
immense emerging opportunities such as organic products, fair trade,
sustainable and niche products including purple tea. However, the government
needs to develop policies and mechanisms to optimize the market environment
that favours the interests of all sector players.”

She says that at a basic level, it should guarantee their
sustainable income. It also entails establishing economic linkages between
consumer preferences and value addition practices. This means factoring in the
propensity of consumers to spend on value-added products.

“2020 presents us with a huge opportunity to address the
competitiveness of local industries. Progressive changes towards a competitive
industry will see us reinvigorate our economy, create wealth and jobs for all
in the country,” Wakiaga concludes.

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