THE PUBLIC DEBATE ON THE BUDGET CAN BE IMPROVED!
We are having the wrong debate. The politicians have succeeded (by strategy or ignorance) in playing decoy. This forces a compromise instead of demanding better policies. Questions should be on direct incentivization and targeted expansion of our manufacturing for job creation, NOT, 16% VAT on bread. Lowering the production costs, especially the cost of power, NOT, vehicle circulation tax. Activation of the factors of production not taxation of consumption without investing in production.
The problem with a government that does not have any long-term strategy is that it overwhelms citizens with the burden of opposition. This maims creativity. There is a difference between being offered alternatives and being subjected to a bad deal. When I offered you two shirts, one blue and the other one white, all new and of good quality but you can only take one versus when I offer you two rotten fish. See, the first option leaves you with a shirt as the least option. You can even negotiate and get me to change the offer and you'll get two shirts. Even when they don’t fit, you might gift them to someone with dignity. In contrast, what do you do with the rotten fish? Don't only reject the fish, ask for a better offer. The idea of a lose-lose budgeting process will stagnate the country. A budgeting process needs to have winners. Progressively, there should be consistent winners. What do I mean?
There was a time when Kenya wanted to improve the capital markets. The traders and investors were exempt from capital gains tax. Our NSE grew and gained momentum until when this tax was reintroduced. In the early 2000s, Kenya went for zero-rating of computers. Fast forward, we can see how the digital deepening accelerated. The previous administration had a focus on infrastructure to move from infrastructure deficit to infrastructure surplus. That is evident - done and prolonged over a long time. Yes, we do have Vision 2030. Can we isolate the immediate pain points of Kenyans and anchor a solution on Vision 2030? Can we hear of 100B set aside for incentives? Can this be done consistently for another 5 – 10 years?
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A glaring pain is unemployment. We have lost focus. As posited earlier, affordable housing cannot cure the unemployment problem. Exporting labor to the Middle East and the West will not solve the local problems. The solution can only be found in production. Our manufacturing sector is limping. We have the infrastructure; rural areas have electricity. It is time to reap! Why can't we focus on enabling this sector for the next 10 years? We should be stubborn, strategic, and persistent.
We need to isolate some key value chains where we have a full chain from raw material to export. Apparel has been a key driver for the EPZ. Unfortunately, we do not fully feed the raw materials. If we can isolate specific products, provide education to the sectors, and subsidize their cost of production, then the employment problem is half solved. Strategically, these should be the high-employing sectors. Our Special Economic Zones (SEZ) have a good framework but who ensures that the incentives are realized? Have we funded the authority? If we focus on empowering manufacturers and service providers, they will mature faster to produce competitively. The cost of power incentives in SEZ can be accelerated. In 8 to 10 years, we shall find the competitive products and take them global. That would be a better conversation than bread at 16%. This is a low-level debate for a serious country.
The reality is that currently; we have resulted in protectionism measures by taxing imports knowing so well that the local production is in deficit. All this while pushing for EAC and AfCFTA – contradictory. Are we slow walking the integration? Reintroducing import substitution without addressing the production costs in the local market is a defeatist strategy from a politician. Costs will escalate! Are we being guided to derail China? This hurts the consumers. It is the Mwananchi who suffers from such ineptitude. Fortunately for the politician, these details are so hidden in their domino effect that they get away while leaving the country in a state of deceleration.