The Kenyan Budget 2017/2018 statement was delivered to the National Assembly on 30th March, 2017 by Mr. Henry K. Rotich, Cabinet Secretary (CS) for the National Treasury, Republic of Kenya. This was the first time the budget statement was made in the month of March breaking the June tradition. The budget was structured to present the current governments’ achievements since it came to power in 2013.
The theme of the budget was “creating jobs, delivering a better life for all Kenyans” focusing on the government infrastructure development agenda while seeking to consolidate the perceived gains of the current dispensation. While highlighting the budget policy and revenue raising measures for fiscal year 2017/18, the CS projected that the economy would expand by 5.9 percent in 2017 above the sub-Saharan Africa average of 2.8%. This come even after President Uhuru Kenyatta gave the 2017 state of the Nation address where he admitted that these statistical growth and expansion of the economy under the current government has not been felt by the common Kenyans.
The projected budgeted expenditure is KES 2.27 trillion which includes a total county allocation of KES 356.9 Billion. This results in a budget deficit of a whopping KES 523.7 which is equivalent to 6.0 percent of Kenya gross Domestic Product (GDP). Many local economists view the increasing debt as a dangerous development while the government views this as necessary to achieve the development the country needs. The National treasury expects to bridge this deficit through net external borrowing and domestic borrowing. The net external financing will amount to KES 256.0 billion and will be mainly on concessional terms. Domestic financing of the budget will comprise of KES 268.6 billion equivalent. The treasury expects the Kenya Revenue Authority to collect KES 1.7 trillion in revenues.
Transport and Infrastructure
The Road Transport budget has kept on rising getting KES 134.9 billion in absolute terms. The narrative under the State Department of Infrastructure indicates that the government plans to construct a wide range of roads across the country. According to Treasury, this amount is also due to “revised donor commitments”.
Construction of the Outering road in Nairobi and the dualling of Ngong Road are progressing well according to the roads agencies handling them. To further enhance movement of Kenyans, ease transportation of goods, and reduce congestion on Kenyan roads, the budget provided KES 134.9 billion, which includes KES 63.6 billion for on-going road construction; KES 44.3 billion for foreign financed roads; and KES 27 billion for low volume seal roads. There was an allocation of KES 49.3 billion for road maintenance from the Road Maintenance Levy.
The Standard Gauge Railway (SGR) has also got an allocation in the 2017/18 budget. The first phase from Mombasa to Nairobi is close to completion and is set to begin operations before the August elections. It has received KES 75.6 billion, of which KES 15.5 billion will go to the completion of Phase I, KES 59.7 billion to the construction of Phase II, and KES 0.4 billion for the relocation of people along railway lines.
The national government is determined to continue developing several commercial ports including the Lamu Port, Kisumu Port as well as other smaller ports along the coastline. In the budget, KES 10 billion has been allocated for the Lamu Port-South Sudan-Ethiopia-Transport (LAPSSET) Project; KES 3.6 billion from our development partners for the Mombasa Port Development Project; and KES 0.2 billion for the maintenance of ferries. To bolster the on-going airports expansion and modernization, the treasury allocated KES 2.6 billion for the upgrading of Malindi, Isiolo and Lokichogio Airports, and Suneka Airstrip
The Power Transmission and Distribution program has the second highest priority and increase in absolute amounts. What are the priorities under this program? The ministry narrative discusses generation, distribution, and power connections. KES 16.4 billion has been set aside to support exploitation of geothermal, wind and solar resources that Kenya is endowed with. These resources are expected to increase the clean energy mix cementing Kenya’s position as a world leader in renewable energy.
To support electricity transmission and connection in the country, the budget allocated KES 9.7 billion for Last Mile Connectivity; KES 7.3 billion for electrification of public facilities; KES 3 billion for installation of transformers in constituencies; KES 3.1 billion for the national street lightning programme; KES 1.3 billion for Connectivity Subsidy; and KES 1.53 billion for installation of solar lanterns.
The focus of the government has not changed much from previous budgets. The Government continues to support the exploration and distribution of oil and gas in the country. KES 3.84 billion has been allocated for the exploration and distribution of oil and gas. There is a drive for early export of oil from the Turkana oilfields through the use of trucks following the collapse of the Kenya Uganda oil pipeline project.
Manufacturing and Industry
The leather industrial park and textile industry development initiatives got a total allocation of KES 1.6 billion for their continued development. To support the revival of industries, the Cabinet Secretary set aside, KES 450 million for modernization of RIVATEX. To further equip RIVATEX. India Exim Bank has also provided a line of credit to IDB for onward lending to SMEs activities. The treasury further provided KES 250 million for the modernization of new KCC, to make it a strategic milk processor.
The Government in close engagement with stakeholders has vowed to complete the development of a Comprehensive Automotive Industry Development Policy for Kenya and finalize an actionable 10-year Automotive Industry Development Plan. This development follows the entry into the Kenya market two European automotive giants Peugeot and Volkswagen in 2016. With these interventions, the Government seeks to set the automobile industry on a firm footing. This is hopped will enable the industry grow and create the much needed employment opportunities for the youth in Kenya and the region at large. Volkswagen has so far set an assembly plant in Thika Town of Kiambu County to take advantage of the favorable legislations obtained by manufacturers of motor vehicles who choose to carry out their operations in Kenya.
The current dispensation has been actively shifting resources toward infrastructure development, water services and governance, while reducing resources for education and public administration. The Energy, Infrastructure and ICT sector’s share of the budget has increased by 4 percentage points, growing from 26.9 percent to 30.4 percent, the largest increase for any sector. This is besides the government missing its own mark of providing 5000MW of installed capacity by 2017. The Environment Protection, Water and Natural Resources sector is also rising by 1.4 percentage points, but this is mainly driven by the reorganization of government: the irrigation program has been moved here from Agriculture. Irrigation has been receiving staunch government support besides the slow returns it’s been giving and the controversies around the projects. The maize from Galana- Kulalu irrigation scheme that has taken billions has not made a dent toward relieving the maize shortage in the country forcing the government to resort to importing maize.
The irrigation projects in the country got a total of KES 6.3 billion. This includes KES 0.9 billion towards Bura Irrigation Project, KES 2.1 billion for the Mwea Irrigation Project, KES 0.6 billion for Galana – Kulalu; KES 2.2 billion for the National Expanded Irrigation Programme; KES 0.2 billion for smallholder irrigation programme; and KES 0.3 billion for community based irrigation projects. To enable mechanization of Agriculture the CS provided KES 0.1 billion.
The mining sector will also get a boost of KES 200 million for geological mapping and mineral exploitation, KES 150 million for geological databank, KES 103 million for mineral certification laboratory and KES 140 million for mineral audit support and a further KES 140 million for acquisition of survey equipment. The treasury also indicated that a further KES 6 billion support from China for Geo mapping is expected once discussions are concluded on the matter.
The budget statement also indicated that a total of KES 36.7 billion for Water Resource Management; Water and Sewerage Infrastructure Development; Dam Construction; National Water Harvesting and Ground Water Exploitation; and KES 0.5 billion for Water for Schools. Technical and vocational training also got a share of the national budget. The CS allocated KES 6.0 billion for technical, vocational education and training in the 2017/18 budget.
The CS is also counting on Public Private Partnerships (PPPs) as well as donors to help to bridge the existing infrastructure funding gap in energy generation, road expansion and construction of hostels for various training institutions as well as affordable housing in urban centres and the management of solid waste. The PPP model of financing and operating infrastructure might see the cost passed to ordinary Kenyans who use the projects. This can be seen in recent proposals to have investors finance and operate roads that would then have toll stations.
The total expenditure and net lending in this budget are projected at KES 2,287.9 billion. Of this, recurrent expenditure will amount to KES 1,347.3 billion, while development expenditure is projected at KES 640.3 billion. In addition, KES 5.0 billion has been set aside as contingency to cater for unseen expenditures. While in this budget no significant policy or allocation change has been proposed by the treasury it remains to be see if it will live up to its aspiration to create jobs, and deliver a better life for all Kenyans.
When Lee Kuan Yew of Singapore conceived his Vision in 1965 for the development of his country, he had three clear-cut goals. To make his country completely self-reliant, totally corruption -free, and take Singapore from third-world to first-world country in his own generation. And he achieved all the three goals much before he died recently in 2015.
When Mwai Kibaki launched Kenya VISION 2030 in 2007/08, modeled on the Malaysian experience and drafted by McKinsey International, he only had a few materialistic goals—to transform Kenya into a newly industrializing “middle income country providing high quality life to all its citizens by the year 2030”, and to increase an average GDP growth of 6% in 2006 to 10% by 2012. The Vision 2030 is also based on three “pillars”: the economic, the social and the political, and implementation of six or seven “flagship” projects within the next few years.
Almost eight years down the line the country is still struggling to have a GDP growth of about 5.5%, lower than what it was in 2006. The foundations on which the three “pillars” were built are somewhat shaky, or even crumbling. And out of the six or seven “flagship” projects, only the controversial SG Railways Project between Mombasa and Nairobi, funded, designed and procured by the Chinese Government is under construction. All other flagship projects have not even taken off the ground, except cutting of ribbons.
The main reason why Kenya has failed to realize its VISION 2030 is because we come up with grandiose plans, copied from others, with unrealistic growth scenario, and without any clear-cut goals or core values. If one was to borrow Lee Kuan Yew’s three core values, then Kenya would fail miserably on all three of them. The country has still not learnt the value of self-reliance. It is one of the most corrupt countries in the world. And it is a highly unequal society thriving on political patronage and tribal affiliations. Let us discuss some of these issues briefly.
Kenya, as a country lacks the spirit of self reliance as we are always begging or borrowing from multinationals or bilateral institutions to finance, design and construct all our infrastructure projects, without building our own human resources to undertake such projects on our own. And unlike other emerging markets, Kenya (and most of Sub-Sahara Africa), has not yet developed its entrepreneurship and technical skills to take up industrial growth itself. This is the reason why we are always inviting foreign countries from the East to come and set up industries in Kenya and we simply become sleeping partners.
And the culture of dependency is even worse at the grass root level, with a large number of them either living on handouts dished out by politicians and richer relatives, or on NGO’s, teaching them how to take care of their basic needs, including keeping their home environment clean.
With regard to corruption, it is across the board, especially at the top level, where the elites only know three things—trading, ‘tenderpreneurship’ and ‘cutting deals’. And some of the mega infrastructure projects are making the matters even worse in perpetuating mega corruption, both in private as well as public sectors, and sucking in several foreign countries in the scam.
And it must be realized that the seeds of mega corruption are sown at the top level, when the new institutions are created or existing ones merged to suit vested interests, new appointments are made on political basis, new projects are created out of thin air, deals are cut on an ad hoc basis, and tenders awarded to the chosen few.
And finally with regard to the third core value of Kenya becoming a wealthy nation. Yes, the top 5% of the total population (the upper middle class, including 0.5% tycoons), enjoy the incomes, amenities and living standards of the rich countries. However the rest (15% middle class and 35% lower middle class), can barely meet their ends meet, with another 45% living below the poverty line. It should be remembered that the top 0.5% have the same wealth, probably even more, than the bottom 50%. And it is only the upper middle class, the top 5%, who can afford to buy their own property. The rest 95% are either living in a hut in a rural area, or a shack in the slums, or a rented accommodation in the low-cost housing estates. That is why Kenya is still considered a highly unequal and a polarized society.
So far, VISION 2030 has failed the country. Perhaps we should go back to the drawing board and revise our VISION based on some fundamental core values like self-reliance, integrity, and an inclusive society devoid of negative ethnicity. Only then can we make Kenya a prosperous nation.
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