While massive and spectacular infrastructure projects seem to point that East Africa’s largest and most vibrant economy remains in the right direction, increasing state debt, soaring fuel and commodity prices and high unemployment threaten to water down the economic footprint of Kenya’s fourth president Kenyatta.
- Analysts believe the economic footprint is a mixed bag nine years later, as Kenyatta prepares to relinquish power.
- The country’s increasing public debt has hampered Kenya’s social safety net.
- In his second term, Kenyatta established the Big 4 Agenda.
A ‘mixed bag’ economic footprint
Uhuru Kenyatta took office as Kenya’s president in 2013. Then, he vowed to address insecurity, generate employment, enhance food security, combat corruption and revitalise the private sector.
Analysts believe the economic footprint is a mixed bag nine years later, as Kenyatta prepares to relinquish power to his deputy-turned-rival William Ruto, named president-elect on 15th August after beating Kenyatta-backed veteran Raila Odinga.
While massive and spectacular infrastructure projects seem to point that East Africa’s largest and most vibrant economy remains in the right direction, increasing state debt, soaring fuel and commodity prices and high unemployment threaten to water down the economic footprint of Kenya’s fourth president.
In a blunt evaluation of Kenyatta’s economic performance, several economic experts have labelled Kenyatta’s footprint as a legacy of mis-prioritization and misinterpretation of the Kenyan economy’s economic woes.
Some claim that Kenyatta’s most significant and lasting economic legacy is public debt. When Kenyatta took office, the national debt stood at around $17.95 billion. After nine years, it has grown to roughly $72 billion, with foreign lenders accounting for slightly more than half of the total.
Meanwhile, the excessive dependence on domestic and international loans has led public debt as a percentage of GDP to almost double since 2013, to roughly 69%, putting the exchequer under duress. Kenya’s obligations to China alone would cost more than $620 million this year.
Consequently, the International Monetary Fund has classed Kenya at high risk of financial disaster. Furthermore, a recent Bloomberg Economics evaluation of 50 emerging economies put Kenya sixth in terms of vulnerability to a debt crisis.
A spending spree in the infrastructural sector
Kenyatta’s infrastructure investment frenzy remains a major central highlight. The Nairobi Expressway, reducing rush-hour travel to the airport from almost two hours to 25 minutes – for those who can afford it, caps the spending. Kenyatta believes the expressway, being the first of its kind in Africa, would encourage long-term economic development.
However, not everyone stands persuaded. Many call it a legacy of treating symptoms rather than the underlying cause. The expressway addresses a traffic issue caused by everyone relocating to Nairobi due to collapse and the lack of upward economic progression of rural economies.
Other notable projects include a Chinese-built Standard Gauge Railway connecting Nairobi and Mombasa, 2,000 new dams, and hundreds of kilometres of tarmacked roads. Electricity connectivity has increased dramatically; when Kenyatta took office, just 30% of Kenyans had access to electricity. Now, three-quarters of the population stands connected.
According to economist Fredrick Ogola, who directs the MBA program at Nairobi’s Strathmore University, Kenyatta has built the groundwork for long-term prosperity.
“The economics of the infrastructural ecosystem stands established; now someone needs to accomplish socioeconomic change,” he says. “How does this serve people, and how can ports and roads help?” If Kenyatta’s successor does not capitalise on his accomplishments, Kenya will end up with a massive stockpile of national assets and a poor return on those assets, according to Ogola.
Ogola adds that Kenya’s debt-to-GDP ratio is far lower than that of other nations, ranging from Japan (257%) to Sudan (210%) to Greece (207%).
Burgeoning public debt and tight fiscal policy highlight Uhuru’s economic footprint
The country’s increasing public debt has hampered Kenya’s social safety net. In healthcare, for example, funding has hardly increased in recent years, and poor medical equipment and personnel shortages have harmed results. However, Kenyatta’s government has constructed multiple hospitals, so all is not lost.
Kenya’s frail balance sheet, which includes a high current account deficit, indicates that the economy remains especially exposed to a period of capital flight.
According to analysts, the macro picture is concerning. According to Capital Economics, Kenya’s current account deficit would likely increase to 6.3% of GDP this year. Meanwhile, Kenya’s trade imbalance has reached a new high of $6 billion in the last five months.
As a consequence, the new president’s honeymoon period may be brief. The next leader must address Kenya’s debts quickly via budgetary consolidation.
The ‘not so convincing’ economic footprint
In his second term, Kenyatta established the Big 4 Agenda. The agenda represented an exceedingly optimistic 2030 economic strategy built on four pillars. The four pillars included food security, affordable housing, universal healthcare, manufacturing, and job creation. In each of these cases, his legacy is not entirely compelling.
Kenya has seen a rise in steel, cement, and automobile exports. However, weak industrial infrastructure, slow currency performance, and insufficient energy-generating capacity have hampered manufacturing production.
External circumstances such as the epidemic and the conflict in Ukraine have added to the difficulties. Pharmaceutical manufacturing is one of several sub-sectors that has achieved inadequate development. Manufacturing contributed 13% to Kenyan GDP in 2010 but fell to 7.2% last year.
On the agricultural front, Kenya’s critical economic engine, a lack of mechanisation in food production and inadequate food stockpiles, as well as a horrific drought and a coronavirus epidemic, have left four million people in need of food help. The Covid-19 outbreak devastated farmland by disrupting worldwide supply networks. Experts believe Kenyan farmers should focus on value-added exports, such as juicing fruits.
In addition to the Covid-19-related shock, the nation has seen a locust invasion, a lengthy drought, and, most recently, the effect of the Ukraine crisis. The overall result of these shocks is that the industry will decrease by 0.2% in 2021, compared to a 5.2% increase in 2020.
Kenyatta has labelled corruption a national security concern. However, the country still ranks 128th out of 180 in Transparency International’s corruption perception index.
Kenya to remain on the right track
Kenya’s election result is clearly a reaction by sections of the electorate to Kenyatta’s administration. Youth unemployment is about 40%, and the crisis in Ukraine has caused basic commodity costs to rise. As a net importer of petroleum, wheat, and fertiliser, Kenya stands exposed to swings in global commodity prices. Inflation is now about 7.1%.
According to a recent analysis of the effect of the Ukraine conflict on the Kenyan economy by the International Food Policy Research Institute, the crisis might take 0.8% off Kenya’s GDP in 2022. Commodity price increases will also limit consumption among low-income Kenyans, potentially pushing over a million below the poverty line.
There are reasons to be cheerful. Kenya’s GDP has more than doubled since Kenyatta assumed office. For most of Kenyatta’s term, the Kenyan economy grew steadily. The growth averaged 4.7% GDP growth per year between 2015 and 2019. Consequently, the growth resulted in considerable reductions in poverty, which decreased to 34.4% at $1.90 per day in 2019. According to the World Bank, Kenya’s economy will grow by a solid 5.5% this year.
Furthermore, Mr Kenyatta has presided over the development of a robust Kenyan tech industry. The nation is now home to major corporations. Microsoft, Visa, Facebook, Google, and General Electric made Nairobi, East Africa’s most affluent metropolis, their regional centre. Because of the country’s stability, the United Nations has chosen Kenya as its African headquarters.
Regional diplomacy and political stability
Kenyatta also deserves applause for his regional diplomacy. His diplomatic qualities have seen him resolve conflicts in South Sudan, Ethiopia, Rwanda, and the Democratic Republic of the Congo. Kenya has evolved into an economic, political, and diplomatic powerhouse under Kenyatta’s leadership. Consequently, Kenya’s economic growth depends on a tranquil and stable East Africa.
Some observers previously believed that Kenyatta’s choice to defuse tensions and align himself with opposition leader Odinga represented a once-in-a-lifetime chance for investment-friendly political stability.
The IEBC declared William Ruto president-elect on August 15, 2022. The declaration shocked the political establishment. Two weeks later, Kenyatta has yet to speak publicly or recognise the outcome, while Odinga is contesting it in court.
The excellent components of Kenyatta’s economic legacy are not in jeopardy under the next government. Nevertheless, investors who value political stability have adopted a wait-and-see stance during the tense post-election period. And Kenyatta’s finest legacy-building chance — steering Kenya through a succession of economic crises while departing the nation with more excellent political stability than when he arrived – might still be lost.