Thursday, 26 July 2007

Kenya 2007:Uneven spoils of economic revival

Kenya 2007
Uneven spoils of economic revival
By Barney Jopson

Published: June 13 2007 10:41 | Last updated: June 13 2007 10:41

From the unconventional platform of a wheelchair, where he sat with one leg in plaster, President Mwai Kibaki roused Kenyans four-and-a-half years ago with a pledge to rebuild a country ravaged by mismanagement and corruption.

He had won a crushing election victory over the protégé of his predecessor, Daniel arap Moi, a few weeks after being injured in a car crash.

“You have asked me to lead this nation out of the present wilderness and malaise to the promised land.” Mr Kibaki told hundreds of thousands of people squeezed into Nairobi’s Uhuru park. “And I shall.”

The end of Mr Moi’s venal regime, which had sapped the country’s spirit, released a wave of euphoria. Expectations were sky-high. This year comes the reckoning. Before the end of 2007, and most probably in December, Kenyans will vote in another presidential election in which the 75-year old incumbent is expected to stand once more. If the fractious opposition unites behind a single candidate, he is likely to face a tight race.

The record of the Kibaki administration is mixed – and judged wildly differently depending on where you are in the social strata and whether you live in the country’s parched semi-desert north, its lush central highlands or the muggy coast. To its critics it has failed to deliver on key issues such as corruption and crime.The ruling coalition has often appeared paralysed by division, while Mr Kibaki’s grip on the tiller has been a matter for debate amid persistent worries about his health.

For the private sector, however, the Kibaki era has helped to advance one significant change: a gradual delinking of business from the melodrama and intrigue of politics. In the lean years of the 1990s many Kenyan businesses had to restructure and spread beyond national boundaries to survive. With a more laissez-faire administration in power, some are now beginning to thrive.

Titus Naikuni, chief executive of Kenya Airways, the country’s flagship carrier, says: “I think we’ve sort of separated the politicians, who are making noise, from those of us who want to make money. Because the politicians realise that without this money we won’t have development.” Of the election, he says: “It’s time people realised Kenya has become very mature, in the sense that the business community couldn’t care less about what happens. I don’t put our business plans in place based on whether we’re going to elect Kibaki or someone else.”

Such attitudes go some way to explaining why Kenya’s economy, dominated by agriculture, light manufacturing and tourism, is looking sprightly compared with its wretched performance in the 1990s. From a paltry 0.6 per cent in the final year of Mr Moi’s rule, annual gross domestic product growth has risen steadily and last year hit 6.1 per cent.

Kenya’s young stock market has also been buoyed. The Nairobi stock exchange’s main index soared 432 per cent in a four-year period that kicked off just after the 2002 election and, following an abrupt correction this year, has stabilised.

While industry battens down the hatches in many African countries ahead of polls, business confidence in Kenya appears to be growing. Yet it is a moot point whether economic growth, promoted by the president as the best in 30 years, has come in spite of, or because, of the government. The Kibaki administration has not launched any sweeping reforms. But the peaceful transition to a different regime inspired a fresh optimism in the country.

Three things, broadly, have created a better environment for business. The first is a decline in political interference in company affairs. Second, the government has begun to tackle a mass of rules and regulations that are stifling productivity and innovation, most notably a thicket of 1,325 business licences required for all manner of things. Dozens have been cut or simplified already and Amos Kimunya, the finance minister, says he wants no more than 400 to remain.

Nicholas Nesbitt, chief executive of KenCall, a call centre group, says: “The government has said: ‘We have to create an environment for business and get out of the way.’ But it does take a while to get out the way because some politicians think differently.”

Third is macroeconomic stability. Though the government is probably claiming credit for the results of some measures put in place during the Moi era, underlying inflation, interest rates and the value of the shilling have steadied. The risk of nasty economic shocks has thus fallen, giving industrialists more confidence to plan and invest for the future.

Some of the more basic foundations for growth, however, are part of the country’s fabric. Beyond its sunshine-and-safari image, Kenya has long had a more developed industrial base than its neighbours.

It has a stronger banking sector, a reasonably deep well of management and labour skills, and multinationals such as Barclays, Unilever and Diageo have had big operations in the country for years. It is east Africa’s biggest economy and a pivotal trade hub. It has been largely free of the big ethnic conflicts that have beset most of its neighbours, and it is not endowed with the mineral wealth that has been a curse as much as a blessing to others.

Nevertheless Kenya is no business paradise. Far from it. For a start, corruption remains endemic, sapping profits, preventing reform, and perverting the circulation of capital. Mr Kibaki was elected on an anti-graft ticket as much as an anti-Moi ticket, but has failed to rein in both petty and grand corruption.

A stigma that was not previously attached to bribes and kick-backs has developed. But no top officials have been prosecuted and thegovernment has become embroiled in a scandal of its own, the Anglo-Leasing saga.

Kim Howells, a UK foreign office minister, said last November: “People can be bought, right from the person who works at the docks in Mombasa up to the government.” Yet while corruption remains a near-obsession for international donors, many Kenyans view it with a weary sense of resignation.

It is something else – Kenya’s abysmal infrastructure – that inspires the angry passion of business people. Roads are crumbling, the railway is a relic of the colonial era, the port is bunged up, and the electricity supply keeps cutting out. Crime and insecurity are also enervating sources of fear, stoked this year by a spate of deadly carjackings in the capital and a series of beheadings by a criminal sect known as Mungiki.

For any business seeking to compete globally, the conditions are not auspicious. Yet while ministers say they want Kenya to join the same economic league as Asian countries that were its peers 35 years ago – Malaysia, Indonesia and Thailand – little has been done to upgrade its run-down infrastructure.

If the neglect continues, the chances of Kenya’s economy expanding by more than 6 per cent a year are slim. Equally important, a dark side of the revival will persist. For all the hyperbole, growth is not reaching a large number of Kenyans whose lives are entirely isolated from the goings-on of the business world. The country is one of the most unequal in Africa and the divisions between rich and poor are not narrowing. There is even talk about the risk of “two countries” developing within one.

According to a government survey released last month, 46 per cent of the population – or 16.5m people – are below the officially-defined poverty line, which equates to living on roughly $1 a day.

The figure was down from 52 per cent 10 years ago, but regional disparities were striking. In Nairobi, 30 per cent of people – primarily the residents of the sprawling slums Kibera and Mathare – are living below the poverty line. In the arid north-western Turkana province, where nomadic pastoralists roam a desolate wasteland, the figure is 95 per cent.

Many say more than economic forces are at work. Ethnicity is rarely far from the surface in Kenyan politics and the Kibaki administration has been accused of favouring one ethnic group over the 40-plus others.

The president is a Kikuyu – the biggest ethnic group, the richest, and the one that predominates in Central province and Nairobi. The spoils of growth, critics say, have accrued to its members.

“When you hear about economic growth, look at the ownership,” says Kwamchetsi Makokha, a columnist with the Daily Nation newspaper. “The companies are either foreign-owned or owned by people from the president’s areas,” he says. “There’s a feeling a lot of people are being locked out of the centre. Kibaki has unleashed anti-Kikuyu resentment, which is exactly what he shouldn’t have done.”

True, the government has introduced some policies delivering widespread, if not universal, benefits. Primary school education is now free (though there are too few teachers and textbooks); the number of testing centres for HIV/Aids has been expanded and the stigma associated with the illness reduced; and a Constituency Development Fund has been set up to seed community-based development projects (though it has also been abused). The press has grown more rumbustious and democratic space has opened up across society, encouraging more openness, debate and candour in the streets.

But the uneven spoils of the economic revival point to another set of dashed hopes for many Kenyan voters. They had looked forward, on inauguration day, to a new mode of politics in which the iron triangle of patronage, ethnicity and corruption would be replaced by consensus, inclusiveness and fairness. It has not arrived.

Mr Makokha predicts that the nascent election campaign will boil down to two things: “The government says ‘growth’ and the opposition says ‘Kikuyu clique’.” Barring accidents, the president will be championing his message on two feet, his broken leg long since fixed. But in four-and-a-half years he has nothealed Kenya.

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