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Kenya’s economic disconnect: why progress isn’t felt

Teresiah Ngio by Teresiah Ngio
November 18, 2024
in News
Reading Time: 2 mins read

On a Thursday evening, a lively Twitter Space hosted by Sharp Daily, and Edwin Dande delved into a critical question: Why aren’t Kenyans feeling the positive economic indicators? Despite economic metrics suggesting progress, many participants in the Space shared lived realities that painted a different picture.

Stella, an economic analyst, pointed out, “We’re seeing green shoots in government securities and inflation rates, but for the ordinary Kenyan, prices aren’t declining. They’re just rising more slowly.” She added that inflation at 2.7%, while lower than previous months, doesn’t mean goods are cheaper—just that their prices are climbing at a slower pace.

Edwin, explained the backlash to his optimistic take on economic indicators. “When I tweeted that things seem to be improving, many people responded saying they don’t feel it. The disconnect is real.”

One of the most heated points of discussion was the tax burden on Kenyans. Francis, a public policy advisor, criticized the government’s approach, saying, “The deductions on pay slips make them look like supermarket receipts. When you deduct NSSF, NHIF, the Housing Levy, and more, what’s left for Kenyans to live on?”

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254 for Life, representing a manufacturing perspective, highlighted how these taxes are squeezing businesses: “Manufacturers are being pushed out of Kenya because it’s cheaper to produce goods elsewhere, even after factoring in import duties.” He cited the recent announcement by Beiersdorf, the makers of Nivea, to exit the Kenyan market as a telling sign.

The discussion also touched on agriculture, a sector often hailed as Kenya’s economic backbone. Francis noted the plight of small-scale farmers: “Why is the government buying maize and setting prices? Farmers sell at losses while the cost of production—fueled by expensive inputs like fuel—remains high.”

Edwin conceded that while agricultural production has increased due to better rainfall and fertilizer subsidies, the benefits have not been equitably distributed. “Yes, the cost of maize flour has dropped, but this is a fleeting relief unless we process and add value to our produce.”

The manufacturing sector’s struggles emerged as a recurring theme. Stella observed, “Banks prefer lending to the government over businesses because of higher and safer returns. This is crowding out the private sector.” The result, she noted, is stagnation in job creation and reduced access to affordable credit for businesses.

Adding to this, Nderi, a corporate governance expert, criticized the government’s overreach: “Taxes have eroded margins to the point where some businesses are operating on negative unit economics. You can’t tax your way to growth.”

A key takeaway from the Space was the frustration over where government revenue is being spent. Edwin criticized, “It’s going to big government projects, per diems, and corruption. There’s no focus on creating an enabling environment for businesses or stimulating the economy.”

This sentiment was echoed by Will Joe, a participant who said, “GDP growth means nothing to me. Kenyans feel debt, corruption, and unemployment, not economic indicators. We need an economy where we can afford essentials, not one that’s only about the numbers.”

The Twitter Space ended with a consensus that Kenya needs a shift in approach. Participants emphasized the importance of reducing the tax burden, encouraging private sector investment, and fostering predictable economic policies.

Stella summed it up: “We’re creating too many self-inflicted problems. Without job creation or economic growth, taxes will eventually yield diminishing returns. At some point, the government will be pouring from an empty cup.”

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