After a successful first term, Kenya’s President Uhuru Kenyatta has hit the ground running as his second and final term unfolds. The President is keen to transform the country’s economy, better the living standards and improve the overall well-being of every Kenyan as he seeks to leave a lasting legacy.
To write his “History Book”, President Kenyatta has outlined four key areas of focus coined as the “Big Four”. These are areas the Jubilee government will be focusing on in the next five years.
They are MANUFACTURING-where the government is keen to raise the sector’s contribution to the Gross Domestic Product to 15% by 2022 from the current 11%. AFFORDABLE HOUSING– providing at least 500,000 affordable homes in all major cities by 2022, consequently improving the living conditions for Kenyans. UNIVERSAL HEALTHCARE and FOOD SECURITY.
However, this ambitious plan could be derailed by a number of factors, audit firm-PKF has warned.
Below are the obstacles to the implementation of the Big Four:-
Even President Kenyatta himself has declared corruption as an enemy to his ambitious plan Corruption threat to my “Big Four Agenda” President Kenyatta warns. The country has continued to witness repeated corruption-related cases both in government and the private sector. The most recent ones include the Ksh9 billion (US$89.2 million) scandal at the National Youth Service (NYS) and the Ksh1.9 billion (US$18.8 million) maize scandal at the National Cereals and Produce Board.
Though corruption is a worldwide problem, it is rife in Kenya and this could affect the implementation of the Big Four. To fight corruption, experts at PKF have suggested that Kenya works with other countries such as America and Britain in fighting the vice. PKF Kenya Consulting managing director David Kabeberi suggest that apart from fighting corruption in the country, Kenya should also increase efforts in combating cross border corruption, examine root causes and not just address the symptoms.
There is also a need to take significant steps to address corruption through legislation and technology and continuously strengthen legislation because corruption evolves. Failure to do this, Kenya may not see the Big Four come to a realization.
- POLITICAL INSTABILITY
A lack of political stability will greatly affect the President’s good intentions. It is expected that the famous “Handshake” between the President and Raila Odinga (who bitterly lost to Kenyatta in the recent Presidential elections) will unite the country.
There is a need for the country to build on the political institutions, enable and empower Kenyan citizens to own a stake in the country and its economy, offer accessible housing to the majority of Kenyans through innovative construction and financing methods and address spiralling land prices.
The government must make housing developments symbiotic to productive economic activities such as manufacturing, significant ownership of other assets such as businesses, tax wealth to enhance equitable distribution and expand capital gains tax.
- SERVICE DELIVERY
There is a need for cohesion between government arms. County Governments need to play the role of key service delivery. “Paradigm shift is needed”.
Counties, according to PKF need to align levies and charges to services provided rather than collecting revenue such as business permits with little being done to support investments. There is also a need to reduce speculation on idle land. Failure to deliver services could affect the private sector’s contribution to the Big Four.
- INVESTMENT CLIMATE
The government needs to improve investor confidence and attractiveness. There is a need to make public-private partnership (PPP) more practical and effective to encourage infrastructure development.
Kenya needs to take advantage of increased interest by investors in the health and education sectors. There is also a need to embrace the African Common Market and let it cascade throughout the economy. Increased efficiency and productivity yield and income of the informal sector including small scale agriculture is also vital. Failure to this, implementation of the Big Four could stumble.
- TAXATION MEASURES
Punitive taxes will scare away investors and this could affect the manufacturing arm of the Big Four plan.
Looking at the proposed Income Tax Bill 2018 by Treasury CS Henry Rotich, the ground is set for a major tussle with large corporations that many feel are not getting value for the taxes they pay. The entities are still grasping with high power bills, poor infrastructure in some parts of the country and business environments choked by garbage just to name a few.
Treasury has proposed to introduce a 35% upper rate of tax for both corporates and individuals which will only serve to make Kenya a less popular destination for investment against the backdrop of reducing tax rates in other countries. Treasury is also keen on the ‘Thin capitalisation’ concept that taxes foreign-controlled companies which are financed with a bigger proportion of loans as opposed to equity. The Bill proposes to change the current debt to equity ratio of 3:1 to 2:1.
These are some of the key areas that require a review according to PKF, failure which, could derail the Big Four. This is because the move will reduce the headroom for foreign borrowing thus directly impeding foreign financing by related parties. This is expected to slow economic growth and make Kenya unattractive for foreign investments.
A leader’s legacy is a by-product of the historical decisions one makes. A good heritage is something most managers, company presidents and Chief Executive always yearn for to leave the company headed in the right direction with tremendous growth achieved during their tenure. Political leaders as well have similar dreams though very few achieve this.
Whether President Uhuru Kenyatta will get it right is a wait and see but the renewed efforts to fight corruption could set the right tempo for achieving his big plan.