Time For Kenya To Go Big On Exports

Export trade begins when a country has produced more goods and services than its domestic demand. It is penetration into new markets away from home. This does not come without challenges as many trade agreements need to be entered before goods and money is allowed to flow from source to a foreign market. It is therefore a game of industrial development, building of trade relationships with other countries and creation of sound policies to regulate cross – border trade. The starting point is production of goods and services at surplus amounts. At the production stage, a country needs to tap into areas of strength in order to maximize output. Since international trade is competitive, focus in producing goods for exports should be on industries that give the country a competitive advantage over its competitors. In this column, I hold the view that Kenya is performing below average in producing goods for export.

Kenya’s prominence in the community of nations is ever rising with outstanding performances in sports and regional influence. The country also boosts of rich cultures, phenomenal wildlife, epic scenes of the rift valley, great lakes and sandy beaches along the Indian Ocean which attract tourists in significantly large numbers. This prominence can be utilized in promoting “Made in Kenya” brands if they existed. Sadly enough, so little in supermarket and retail shop shelves is made in Kenya. Today Kenya imports almost everything including sugar, maize, chicken, eggs, fish and pineapples. For decades, Kenya has enjoyed balance of trade surplus with its leading trading partners in the region except for the recent increase in imports from Uganda and Tanzania without reciprocating the same in exports.

According to world integrated trade solution (WITS) website, Kenya’s imports are majorly consumer goods at 63.43% of total imports whereas capital goods and raw materials only account for 5.47% and 19.60% of total imports respectively. Kenya holds potential in exporting already processed agricultural produce, refined minerals and services including education, health and financial services. With the ongoing efforts to set-up a manufacturing factory for Covid-19 vaccines, Kenya opens another chapter of producing pharmaceutical drugs for local and export markets. The country’s strategic location in the Eastern Africa region can be tapped in increasing export sales. This will be facilitated by the ongoing infrastructural developments such as LAPSSET linking Kenya with its neighbors. Kenya needs to draw lessons from Dubai which has successfully diversified its export revenue and has now mobilized the world to trade with her.

Inflation Is The Remedy For Unemployment

Jimnah Mbaru, a renowned investment banker working with Dyer and Blair provoked a discussion this month on twitter when he tweeted, “The Central Bank of Kenya should reduce the current cash ratio from 4.5% to 0%.” He argued that this measure will result into increased liquidity within banks with a reduced cost of credit. In Jimnah Mbaru’s view, banks would increase lending to private sector at lower interest rates. The investment banker is of the opinion that the existent threat of inflation with such a fiscal policy is not a concern at the moment.

I find Jimnah Mbaru’s opinion to be good for a country that is grappling with a high rate of unemployment. When the mission is to fix unemployment of both people and resources, inflation becomes of less concern. The Philips Curve in economics proves this by displaying inflation and unemployment as indirectly proportional variables when placed on the Cartesian plane. However, the educated opinion of Jimnah Mbaru received sufficient criticism from other scholars and public intellectuals in Kenya. Of top concern is whether commercial banks will utilize available cash to lend to the private sector. This question is raised in the backdrop of a trend where commercial banks in Kenya lend largely to the government of Kenya. To lend to the national government would not be inappropriate if government utilized the funds in capital resources other than repayment of external debts that have fallen due.

Dr. David Ndii in response to Jimnah Mbaru’s opinion posed a rhetoric, “a monetary stimulus over and above an 8% of GDP budget deficit or a stimulus running for close to a decade?” While Jimnah Mbaru applies theory of the Philip’s Curve in economics to solve the unemployment question, it remains a paradox how structural productivity problems, external shocks related to Covid-19, crowding out, debt overhang and political uncertainty will be solved by increasing supply of money in the economy through lowering central bank’s current ratio from 4.5% to 0%. A balance between inflation and unemployment needs to be sought where measures taken to reduce unemployment do not adversely affect inflation. The buck stops with the Central Bank Governor, Dr. Patrick Njoroge who also chairs the Monetary Policy Committee.

Rick Okinda                                          

The writer is a Certified Accountant working with small business owners to deliver business plans that serve their management and financial needs. | rickokinda@gmail.com


Why Aid to the Poor Should Aim At Freeing Them from Poverty

What does it mean to be a Kenyan? And not just any other Kenyan but a poor Kenyan. What chance does a poor person have in life?  Born into poverty, hungry from birth, angry and confused. About 35.5% of Kenyan citizens live below the poverty line. If you are constantly struggling financially, you are not middle class, you are poor. The middle class is not a living condition, not a profession, it is the amount of disposable income, not the income you had before you paid your rent, mortgage, and other utility bills.

Poverty makes one gullible, it robs one of the free wills to make independent choices. It prompts one to make irrational and extreme decisions which may have not been the case if the circumstances were different.  Because of this gullibility, the poor are often used as scapegoats by greedy politicians and corporates to foster their sinister agenda. What if we abandon the habits of reducing the poor into scapegoats and we take our time to find out, which kind of help they need. What if we try to understand their lives, complexity and richness? Is there not an alternative way to approaching poverty without necessarily creating class differences?

The rich play to win, the poor play to survive. The rich amass more wealth by investing more, the poor on the other hand sees surplus as an opportunity for consumption rather than investing. It is not enough to mobilize funds for the poor, we need an economic mindset that emancipates the poor from the mindset that surplus is all about consumption.

We need to find better approaches to solving poverty. Taxing the rich isn’t a solution either, we cannot afford to penalize parts of the society for their efforts in the economic playfield. A tax system cannot be structured around the concept of wealth redistribution alone.

We ought to move from an end in itself to a means to an end. If you want to help a poor person, give him the means to be able to help himself next time without necessarily running to you. ‘Those who come with wheat, millet, corn are not helping us. Those who want to help us should give us plows, tractors, fertilizers, insecticides, watering cans, drills, and dams’  that is how Thomas Sankara defines food aid.  He who feeds you controls you, let’s give the poor their freedom by offering true aid.

Daisy Tum

Writer is an economics student at Kenyatta University | daisytum7991@gmail.com