Year in review: Hits and misses

Prof joseph Kieyah

As cannot be repeated too often, the peaceful promulgation of the Constitution 2010 was a major milestone. It symbolised both an end to something and a renewal. The 68 per cent ratification vote embodied Kenyans’ audacious act of self-determination, and their desire to replace a colonially imposed order with a revolutionary, people-centered constitutional democracy.

This momentous decree came as a great beacon light of optimism to millions of Kenyans who were zealously determined to change the course of history. The need to change was hastened by the traumatic post election violence of 2007 that almost tore us apart. It was on this basis that in the first general election under the Constitution, the majority of Kenyans voted in leaders of the post-independence generation to steer the constitutional implementation process.

Keenly aware of citizens’ great expectation, the Jubilee government exemplified youthfulness and a commitment to navigate Kenya to prosperity. Retrospectively, three years later, the road to prosperity has turned out to be circuitous and bumpy. Nonetheless progress has been made, and the future should be bright.    

Just as the head of a cathedral, the Constitution is the bedrock of any state, and it reigns supreme over any other laws and policies. Analogously overhauling any Constitutional order as we did in 2010 is like rebuilding the foundation of the cathedral. Such reconstruction process entails meticulously replacing the old pillars with new ones while exercising utmost care to minimise probable collapse.

The ongoing implementation process of the Constitution must therefore embody the art of moulding new pillars through pragmatic constitutional interpretation, enactment as well enforcement of new laws by Parliament, Executive and Judiciary, all of which must be guided by Kenya’s aspirations and fears as reflected in the Constitution. Incontrovertibly, implementation has become the policy issue that will determine and shape the future planning trajectory of Kenya’s development from economic, governance and social perspective.

Good economic performance is the consequence of a well-functioning market system, which is an embodiment of a game of exchange of goods and services between buyers and sellers. Since the game is contractual in nature, whether implicit or explicit, there must be enforceable rules to ensure credible exchanges to take place. Such rules emanate from a stable legal foundation that espouses the principles of free market. Therefore economic performance is predicated  upon legal foundations that support market system.

Kenya’s market dominated economy has been, since independence, operating on a constitutional order of unpredictable legal rules that varies from one government to another. The unpredictably and variability of the governance institutions interfered with market performance that resulted in subsequent bad economic performance. In fact, it is this poor economic performance that would later trigger the public protestation that gave birth to a new progressive constitution.

Economy

While Kenya’s economic growth rate under remains respectable, it is nowhere close to the 10 per cent threshold envisaged in Vision 2030. Inferably, this below-par performance embodies, on one hand, the overestimation of policy makers on Kenya’s economic strength, to support an explosive economic take off. On the other hand, the policy makers grossly underestimated the cost of meeting constitution imperatives like the devolution. Understandably, such miscalculation was driven by the zeal of a country in hurry make up for the wasted years of mismanagement of resources.

Since 2013, Kenya’s economy has been growing at a decreasing rate of above 5 pc on average. The first and second quarters confirm of 2014/15 confirm this trend. This deceleration continues to attract vocal distortive commentaries that overshadow the macroeconomic stability evidenced by the statistics.

The trend notwithstanding, a rigorous scrutiny of the economic growth statistics and other parameters reveal a silver lining.  The aggregate demand indicators that consist of consumption, investment, government expenditures and trade show a bullish outlook, with the exception of a mixed performance of fiscal policy.

Kenya’s economy registered a 13pc increase of public and private consumption, from Sh4.486 trillion in 2013 to Sh5.030 trillion in 2014. The 2014 total consumption value translates to 93pc of the Gross Domestic Product – value of goods of services produced in 2014. Expectably, the 2015 consumption index will increase owing to massive public spending on infrastructure and energy projects and, as well as the surge in the country’s middle class.

Notably, private sector borrowing from commercial banks grew significantly than had been projected. Specifically, by June 2014, credit had grown by 26pc to 9.5pc in the year ending June 2013 and above projected target of 18.3pc. The surge in private borrowing Inferably increases private investment. Private investment decisions are primarily driven by the expectation of future economic growth.

This local business’ optimism as reflected by the increased demand for credit is supported by the evidence in 2013 of a remarkable turnaround in foreign direct investment (FDI). Thus an upward trajectory of private borrowing and foreign direct investment (FDI) is a reliable precursor of a providential future. The FDI surge to $ 1 billion in 2014 epitomises the unprecedented global attention as evidenced by high profile visit by global leaders, including US President Barack Obama the Pope.

Kenya continues to pursue an expansionary fiscal policy to achieve the 10pc economic growth rate. To meet constitutional imperatives like devolution, government has been running on a fiscal deficit that had accumulated to Sh2.9 trillion of public debt by August 2015. These constitute 52.2pc and 47.8pc of foreign and domestic debt respectively, which translate to 54.8pc of GDP.

The surge in public debt as GDP percentage above the recommend threshold of 50pc is major policy concern. However, the increase is attributable to increasing cost of foreign borrowing that is exogenously driven by the unexpected strengthening of US economy.  Fortunately the deficit spending is hugely investment-driven whose returns are likely to outweigh the cost of borrowing, both domestically and internationally.

On trade, the current account balance remains in negative territory although it eased in September, 2014.  Specifically, the current account deficit narrowed from $5,650 (Sh577,000) in September 2014 to $4,611 (Sh471,000) as at September 2015, which translates to an annual decline of 18.4pc. The improvement in the account balance reflects a slight reduction in our oil import bill, which reduced by 33.8pc.

However, it is noted that the imports by the public sector have increased by about 185pc between September 2013 and September 2015. In contrast, the exports have remained sticky over this period. It is therefore important to address both the demand and supply issues in solving the wide gap between imports and exports. Revitalising the dwindling manufacturing sector is one clear option towards solving the current account deficit problem while economising on public expenditure is another policy option.

Kenya’s monetary policy has consistently managed to tame inflation with notable success. However, the achievement of this policy have in the past come with enormous costs of systematic credit starvation of the private sector. This is changing now with the easing of credit attributable to the government’s efforts in bringing down interest rates.

Unforeseeably, the implementation of constitution has triggered vicious territorial wars among the three arms of the government. Such wrangling has weakened the institution of the presidency and created room for political bickering. Equally these territorial wars have incited some of the disgruntled citizens to call for constitutional amendment through referendum as a solution.

Governance

The constitutional judicial independence gives judges’ tenure of security and does not tie their remuneration with performance. This internationally recognised attribute gives the Judiciary a comparative advantage over the Executive and Legislature as a better custodian of the law. The Judges’ convictions embodied in their legal interpretation are expected to continue paving the path toward liberty and prosperity. These convictions must emanate from their life experiences, judicial philosophies and a profound understanding of the political struggles toward constitutional democracy.

Judicial independence presupposes some level of accountability to ensure that judges’ decisions incorporate social policy to control judicial opportunism and activism. Unfortunately, judicial performance has been more attentive to independence and the need to protect their own. The lack of judicial accountability is blamed for recent alleged corruption that is eroding the credibility of the institution.

The Legislature, and especially the National Assembly, has been exercising its legislative authority imperialistically. A superiority complex characterises the 11th parliament over the other branches of government undermines the constitutional pillar of the doctrine of separation of powers. Replacing a unicameral system with a bicameral one tremendously increased the membership of Parliament. Whereas a bicameral system increased representation, it came with an astronomical legislative burden of operational and administrative costs ,as well as transactional costs of legislation. For instance, the new bicameral framework increased the ratio of representation of citizens from 1: 170000 to 1:90,000. With the benefit of hindsight, there is no evidence that increased representation has improved the quality of representation as evidenced by the indifferent voting pattern of the National Assembly of affirming issues contrary to public opinions.

Corruption

Admittedly, corruption has mutated from fairly timid manifestation of isolated abuse of public offices to a bold and ravenous plague that’s thwarting the effort of rebuilding Kenya again. It has indiscriminately entrenched virtually all our institutions and continues to hold our national psyche hostage. Its prevalence in type, intensity and brazenness recently attracted the President’s gutsy admission of its threat. The admission specifically summoned the commitment of every Kenyan to break the vicious cycle of corruption for a better future. Such attention has sparked an avalanche of public outcry that raises the policy question of the question of “how”.

Unfortunately, the public discourse on corruption has been mainly on its consequences with little attention on its causation. This observation is supported by the supply of law enforcement legislative agenda, which is pursued in a policy vacuum. Furthermore, the policy failure to equally attend to the demand of side of corruption has resulted to a misdiagnosis view that categorises the impact of corruption as homogenous.

Corruption is a crime that imposes a high cost on society both in terms of harm done to property and the cost of preventing crime and punishing offenders. The trade-off embedded in the aforementioned assertion underscores the critical role of economics in the formulation of effective strategies to deter corruption.

Theoretically, one decides to engage in corruption if such engagement yields monetary gain or benefit. The cost of a corrupt deal is the expected criminal sanction, which is equal to the probability of apprehension, multiplied by the actual punishment. The actual penance may consist of fine or imprisonment or both. Therefore any individual will engage in corruption as long as the gain exceeds the expected cost.

The optimal deterrence policy is to increase the expected cost of the criminal sanction. Policy changes in variables like fine and imprisonment are restrictive because they require a legislative action. Therefore, manipulation of probability of apprehension becomes a better option since it driven by the government’s commitment in form of budgetary allocation to prosecute and convict perpetrators of corruption. This strategy is consistent with the President Kenyatta’s audacious action of firing members of the cabinet who were implicated in corruption. Undoubtedly such action will increase the probability of prosecution but whether it leads to more convictions, is unknown. More work is needed.

Security

Some corruption activities are a complex web of networks with international dimensions that falls outside our legal jurisdiction. For this reason, the just signed collaborative commitment between US and Kenya to combat corruption is reassuring.

In brief, the success or failure of the war against corruption rests in every Kenyan citizens’ hands. Every one has to stand up and say enough is enough. To heap the burden of fight corruption on President’s shoulder is completely unjust and selfish. We must forever conduct ourselves on the plane of high ethical and moral standards that we are asking our representatives to uphold. There is no shortcut.

The whirlwind of widespread domestically and internationally driven insecurity imposes significant costs on Kenya, in terms of the harm committed to persons and property and the cost of preventing crimes and punishing the offenders. The government’s acknowledgement of these costs earned the security agenda recognition in the national development blueprint, Vision 2030, as a critical foundational pillar of Kenya’s economic transformation. The role of the pillar has been amplified by the unforeseen exponential growth of insecurities from its diverse sources notwithstanding enormous government’s allocation toward security.

Kenya’s active regional role in the global war on terror has pushed it to the epicentre of a new phenomenon of global terrorism. The domestic terror attacks are been perpetrated by foreign nationals affiliated to Al-Qaeda terror group networks. These affiliates, popularly known as Al Shabaab, continue to take advantage of Kenya’s strategic geographical position with its porous boundaries and its inadequate and ineffective law enforcement capacity.

To mitigate the effect of  such insecurity, the government has taken several initiatives. Following several terrorist attacks in 2014, the government proposed sweeping amendments of security laws, whose constitutionality was contested in court by the Opposition and civil society.

In conclusion, although the economic growth momentum has slowed down, the growth rate nevertheless remains respectable. Moreover, further scrutiny of domestic economic data reveals a silver lining that supported by credible projections of respected institutions like World Bank and the International Monetary Fund (IMF). This global confidence in Kenya’s development trajectory has manifested into competition between the East and West. Policy makers therefore have duty to enhance local investors’ confidence to mitigate domestic cynicism that emanates from insecurity, corruption and wrangling between the arms of government.^

Prof Kieyah is principal policy analyst at Kenya Institute for Public Policy Research and Analysis (Kippra)