NOTES FROM NAIROBI
Staring slowdown in the face
Posted Mon, 03 Apr 2006
During the calendar year January to December 2005, the Central Bank of Kenya says the countyï¿½s economy grew by an estimated 5 percent. This is in comparison to a GDP growth rate of 4,3 percent registered in 2004.
This year the Ministry of Finance has forecast a growth rate of 6 percent. However, economic analysts agree that the upswing in Kenyaï¿½s economic growth will be slowed down by one of the worst droughts in the country in more than a decade.
The Nairobi Stock Exchange and Old Mutual Asset Mangers believe that a growth rate of 5 percent is achievable in 2006 but AIG Global Investment Limited is painting a grim picture of 4 percent. Analysts at AIG add that this could deteriorate to 3,2 percent if the April rains fail.
As the Ugandan and Tanzanian economies are expected to grow at 6 percent and 7 percent respectively this year, the Kenyan government says it needs up to 29 billion shillings to provide emergency relief food to drought victims.
This could possibly be the beginning of an economic slowdown because Finance Minister, David Mwiraria, says that one of the ways of funding famine relief efforts without resorting to domestic borrowing beyond the budgeted amount is to slash the budget of ministries.
In the meantime, monies from development partners and the private sector which would have been invested in wealth creation are now being spent to supplement government efforts to combat the ravages of famine in the country. Up to 2,7 million people in Kenya are in need of food aid.
Starting March, everyone in the country who consumes electricity will be forced to dig deeper into their pockets by as much as 40 percent or four shillings per kilowatt hours if they want to enjoy the same amount of the resource that they use currently.
Currently, domestic consumers pay between a shilling and 55 cents and 13 shillings and 80 cents per kilowatt hours besides a fixed monthly charge of 75 shillings. The largest commercial and industrial companies pay a fixed charge of between 600 shillings and 7,500 shillings besides paying between three and six shillings per kilowatt Hour.
The extra cost of electricity being levied on consumers will be used to finance emergency power generation because of the low water levels in power generation dams. The estimated cost of generation of an additional 180 Megawatts is 6,9 billion shillings. In the event of a delay in commissioning emergency power generation, there might be a need for power rationing.
Whereas all these measures are an acceptable means of dealing with a calamity of the magnitude facing Kenya at the moment, what is baffling is that this has become a cycle which is repeated once every few years.
It is indeed time that we put in place measures which will ensure food sustainability once and for all, come rain, come sunshine. The long and surefire route starts with a spirited and sustained public education on several wide-ranging issues.
The first of these issues is diversifying the staple food basket. Kenyans predominantly survive on green vegetables and maize flour (ugali) yet currently the country does not even produce enough maize to satisfy domestic consumption.
The second objective of the public education campaign should be based on the premise that traditional farming practices are no longer capable of meeting Kenyaï¿½s maize production requirements.
Consequently, the widespread application of scientific methods is essential. The farming community has to be educated on how to evaluate the potential of the land under cultivation and the essential crop husbandry measures necessary to achieve the maximum possible maize yields without compromising the landï¿½s productive sustainability.
Estimates for Kenyaï¿½s 2004/05 maize production is at 2,1 million tons, down 400 000 tons or 16 percent from the previous year. The decrease in production is largely due to below-average rainfall during the long-rains season.
Thirdly, there is an urgent need to invest in sources of water. While agriculture contributes a quarter of the countryï¿½s GDP, only about 17 percent of the country is suitable for rain-fed crop production.
This calls for the construction of dams around the abundant rivers in the country so that irrigation can be carried out all year round. Sinking boreholes is equally important in rearing livestock which is a key economic activity in the areas which are hardest hit by the current famine. During long rains a lot of water goes to waste and even wreak havoc whereas this can he harvested and harnessed for productive use.
Apart from public education, it is time that the practice of distribution of resources in a lopsided manner is addressed. This demands allocating money in an equitable manner.
Equity refers to giving more resources to those who have more needs to be addressed and less to those who are relatively more developed. In 2003, the new government implemented the Constituency Development Fund (CDF) which allocates funds to constituencies on the basis of equity.
With more transparent and accountable management of the CDF, this is a good starting point for the equitable allocation of resources across the country.
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