Opinion / Commentaries
Wednesday, 18 Oct 2017 11:59 EATceo@kam.co.ke
The growing pains we are experiencing as a young democracy are not to be viewed as isolated events that threaten to throw everything into disarray, but rather as part of bigger picture towards building a more cohesive nation with a greater appreciation for the rule of law. In other words, at this point, we have to consider that the whole, which is our national vision for a strong democracy, is greater than the sum of its parts. I say this because, though it is true that we are in a dire economic situation that can be attributed to our current transitional period, and further exacerbated by the limbo in which we find ourselves, the far-reaching goal is to set a firm foundation for responsive and open governance for future generations. As our electoral processes become more robust and democratic institutions are strengthened, the result will be a more vibrant electorate that demands higher levels of accountability. This will see more citizens involved in decisions making that affects economic and social policy at national and county level.
In fact, even the economic decline we are experiencing should most certainly not be viewed as a stand-alone occurrence caused by one variable; the elections. Looking back at the end of 2016 and beginning of 2017, the country faced one of the worst drought periods in years. Not only did it leave about 2.6 million people in a food security crisis, but it also fuelled inflation to a startling 9.21 per cent in June of this year. In the meanwhile, these challenges coupled with poor harvests from 2016 directly impacted the consumables contained in the 'bread basket'-owing to low production and supply of food and other domestic utilities. The cost of living in general went up as the competitiveness of local businesses took a hard hit. But what if we were able to build resilience for businesses to withstand eventualities, both global and local, creating a buffer for our economy and allowing for the process of democratization to take place without the fear of a looming irreversible economic catastrophe?
Japan is also currently in an election cycle with voting scheduled to take place on the 22nd of October 2017 after the Prime Minister Shinzo Abe called for the election a year early. There is, of course, the usual uncertainties on the continuation (or lack) of the country’s long-term plans and possible destabilization of the economic progress from a 12 year slump made through policies introduced by the Prime Minister now termed as ‘Abenomics’. However, in the intermediate term, economists have observed that the backdrop has been fairly temperate, signalling that investor confidence remains intact. In fact, since the announcement for the elections in September, according to Japan Times, the Topix Index of Japanese stocks are trading at a ‘two-year high’ went up 2.3 per cent.
Unfortunately, the same cannot be said for most of Africa where a change in administration is one of the most potent sources of volatility in markets and presents a critical test for business resilience. In Kenya, the Stock Market started on a 6.9 per cent decline in January with investors citing jitters about the August 8 elections. After the Supreme Court announcement the Kenya shilling weakened at 0.44 per cent before gaining some ground thereafter. As for local Industry, KAM’s Manufacturing Barometer released this week, depicts that despite there being a marginal surge in optimism, from 13 per cent last quarter to 14 per cent presently, 64 per cent of manufacturers forecast zero or negative growth revenue for the next 6 months and 56 per cent of them predict a decline in new orders for their businesses for the same period. Overall the manufacturing sector registered only 2.3 per cent growth rate in the second quarter of 2017, compared to a 5.3 per cent growth same quarter in 2016.
So how do we move from this point, to being at the same level with Japan when it comes to economic certainty during election period? Increasing local businesses competitiveness through providing a predictable and nurturing regulatory environment is one sure way to get there. If by the time we are getting to the ballot, local industries are already faltering under the weight of multiple levies and taxation that affect competitiveness such as the Railways Development Levy and Import Declaration fees, or encumbered with additional taxing administrative processes brought on by sudden shifts in Government policies, then we are definitely bound to crack when faced with the uncertainties of an election, not to mention a protracted one.
Fiscal and economic policies should be developed with the aim to achieving a sustainable economy to withstand expected and unforeseen pressures from the markets. Legislation and Regulation should look at elevating the output of industry, catalyzing their productivity and enabling them to expand so that they can guarantee productive and secure employment. Making our local businesses competitive enhances their ability to be resilient, guaranteeing undisrupted circulation of money in the economy during an election period. This way, we are free to go about our democratization process without the fear that we are, at the same time, sabotaging our lives and retrogressing on our national vision on socio-economic development.
The writer is the CEO of Kenya Association of Manufacturers and the UN Global Compact Network Representative for Kenya.