The Cabinet will shortly be convening its third retreat to reflect on and take stock of what the administration has achieved—and what it has not—on the economic front since taking office in September 2022.
This is how the Secretary to the Cabinet, Mercy Wanjau, described the objective of what has been dubbed the third national executive retreat in an op-ed published in the local dailies this week.
"The question of the moment will be: What difference have our efforts made in the lives of Kenyans, and where should our efforts be recast to enhance delivery?"
I thought it worthwhile to highlight some of the key issues that should be on the agenda of this retreat—especially while the administration remains focused on economic matters and as President William Ruto approaches the midpoint of his first term.
First, let us discuss and debate the issue of State capacity. The administrative machinery has badly deteriorated, and this is reflected in the civil service's diminished capacity to roll out projects at speed and scale. The government must urgently strengthen its effectiveness.
What you observe across the State apparatus is an administration that has gradually degenerated into a patrimonial system. The civil service bureaucracy, along with the CEOs and directors of parastatals, is top-heavy with cronies of powerful elites from the Jubilee era.
All the building blocks for bureaucratic discipline and a non-partisan civil service appear to have collapsed. The public service is populated by advisers handpicked by Cabinet Secretaries—cadres and officeholders who have yet to embrace the esprit de corps essential to civil service professionalism.
As the administration approaches its midterm, President Ruto must return to the project of constructing an efficient and non-partisan civil service.
Today, there is far too much complacency about the deeper economic challenges facing this country. Most of our leaders are preoccupied with celebratory talk—proclaiming robust growth and stable macroeconomic conditions—even when the real economy tells a different, more worrisome story.
When will we start accepting the reality that the economy is grappling with major problems around the profitability of businesses?
Large, debt-financed public spending allowed us to maintain high levels of infrastructure investment. But where is the corresponding recovery in private sector investment? What must be done to stimulate private sector profitability?
When you analyse official statistics, you struggle to see the true extent of the private sector’s sluggish performance. The numbers simply do not capture or reflect the anaemic growth being experienced by businesses.
What should we make of the growing number of listed companies issuing profit warnings, or the wave of retrenchments across the private sector? Why does the Kenya Revenue Authority continually struggle to meet targets set by the Treasury?
While private sector credit uptake is recovering, it remains at historically low levels. And although foreign exchange reserves at the Central Bank of Kenya have reached a record $10 billion, this has little bearing on the volume of export and import activity.
Granted, the large commercial banks are posting handsome profits. But a significant number of smaller banks are in financial distress, evidenced by many operating below minimum capital and liquidity requirements—and by rising levels of non-performing loans.
As it enters its midterm phase, the administration must unveil a comprehensive plan—a Marshall Plan, if you will—for dealing with the declining profitability of private companies.
We have reached a point where the country urgently needs a well-thought-out industrial policy. We have uncritically embraced the World Bank prescription that promotes uniform, non-discriminatory investment incentives and frameworks.
We forget that successful industrial policy requires targeted and selective incentives for industries that a country deliberately wants to develop.
To revitalise private sector activity and manufacturing, we must be willing to discriminate in favour of our emerging champions—such as Safaricom, Kenya Commercial Bank, Equity Bank, and Co-operative Bank—who already have a growing regional footprint and the potential to become world-class players.
When South Korea was developing its car industry in the early 1970s, the average Korean had only one choice: to buy a locally manufactured car. In contrast, Kenya abandoned the infant industry argument under pressure from the World Bank to adopt an export-led growth model.
As it enters the midterm zone, President Ruto’s administration should throw its full weight behind the Special Economic Zones (SEZs) programme.
The SEZ model—and the broader concept of industrial clusters—is what underpinned industrial growth in economies like Singapore, Taiwan, Malaysia, and South Korea.
The writer is a former Managing Editor for The EastAfrican.
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