Economic revival: Fan the fire of fledgling economic recovery

 There is an economic revival in the country after almost three bad years. Between 2016 to 2018, the economy was comatose, with disastrous results for businesses and Kenyans.

This year has seen the beginnings of an economic turnaround. When businesses start reporting increased economic activity, then that is the time one can state that the economy is truly on the mend.

The Stanbic Bank Purchasing Managers Index (PMI) for July 2019 presented a refreshingly vibrant picture.  According to the report, business outlook was overwhelmingly positive, as business confidence returned. Output and new orders increased sharply, while employment growth rate hit a 30-month high. 

The directive by President Uhuru Kenyatta to the national and county governments to clear all eligible pending bills to suppliers has boosted positive sentiment among businesses. Positive sentiment among businesspeople is a big driver of economic activity, as it feeds on itself.

It is of paramount importance in Kenya today that this fledgling economic  flame is fanned into a big fire. The focus by government must now be on this one thing alone — fanning the fire. 

What needs to be done? First, all pending bills must be cleared as directed by the President. After the initial rush to comply, there has been a hiccup, and the process has stalled. Both the national and county governments must work together to find a way to continue these payments even as the stalemate over the Division of Revenue Bill continues. The  government must institute deadlines within which all supplier bills must be paid.

Secondly, all high-octane politics must be stilled. Especially critical is to douse out the divisive, jingoistic, rhetoric of the antagonistic Tanga Tanga and Kieleweke camps of the ruling Jubilee Party that have kept the country on the edge. 

Business abhors anxiety ad uncertainty. It is no accident that the economic turnaround is in tandem with the toning down by these two groups in recent months.

The President needs to “talk up” the economy. When the President becomes the champion of the economy, it responds. He should personally “supervise” the rebound, continue private sector consultations, and push through the necessary measures to keep the economy on a growth trajectory. 

There is still a lot of ground to cover before full recovery, seeing that the economy took a big knock from the shenanigans of 2017 electoral politics by the Opposition.

The battle against corruption must be strengthened to detoxify and sanitise the business environment. Graft has completely poisoned the business environment in Kenya. A sanitised environment boosts the confidence of entrepreneurs, which, in turn, boosts investment. 

There are many local and international investors who want to put money in Kenya, but balk at the thought of having to circumnavigate a horde of greedy public officials, and a bureaucracy created purely to extract tolls.

And finally, boost credit to the private sector. Banks have refused to lend to businesses. The truth is that they are holding Kenya at ransom because they are making enough money from a government hungry for cash.

The government must drastically cut down on its domestic borrowing. Treasury Bill rates should fall below 5 per cent. This will push banks to look elsewhere.

The VAT refunds by the Kenya Revenue Authority (KRA) to businesses is critical in easing their cashflows. KRA made refunds amounting to Sh14 billion last month, a huge boost to businesses. 

KRA must make the refunds within a specified time period, just as it does not countenance delays in remitting the same VAT payments by businesses.

And lastly, freeze all tax increments for a five-year period to allow the economy to recover. The government needs to cut down on wastage and extravagance. In other words, it needs to live within its means, otherwise whatever gains the economy makes will be a nullity, dissipated within the gaping holes of government extravagance. — gathukara@gmail.com