The Main Obstacles to Economic Development in Kenya

The term development is familiar to many people. However, it is rather difficult to give a conclusive definition of the term development. Chambers simply defines development as “good change.[1]” Generally, development can be viewed as an increase in Gross National Product (GNP). Development relates to economic growth and improving the quality of lives and living standards of people. The focal point of development is more on human welfare (like education, health, and housing) than human wealth.

There are various obstacles to economic development among them; geography and climate, poverty, over-population, poor education and healthcare, international policies, inflation, war, meagre (natural) resources and migration.

Like any other developing country, Kenya is facing myriad of challenges in achieving economic development. Among them:

1.   Government Debt

Recently, Kenya has witnessed major (infrastructure) projects financed by both national and international sources. The interest rates and terms of the loans mainly favor the foreign donors. Latest data by the Central Bank of Kenya records the government’s domestic debt at Shs. 2.44 Trillion as at May 2018, while the external debt account for Shs. 2.51 trillion in March 2018[2]. Today, our public debt is about $44 billion or perhaps more if we consider guaranteed loans and borrowings of state agencies. Predictably, the economy will struggle mainly because the financed projects (like the SGR) are unsustainable in the fullness of time.

Government debts also expose the country to economic leakages. For instance, the multi-million projects financed by the Chinese enable them to repatriate the profits to their country.

2. Poverty & Inequality

Kenya is a country of extreme contrasts. The gap between the rich and the poor is unforgiving. Less than 0.1% own more wealth than the rest of the population combined. Low per capita income translates to low voluntary savings extending the vicious circle of poverty.

Forty six per cent (46%) of the 46 Million population of Kenya is estimated to live under the poverty line[3]. Many Kenyans (33%) believe their income is insufficient to cater for their basic needs[4].

Majority of the rural population are poor due to policies that have deprived them of factors of production (like land, fisheries, hunting ranges and forests).

3. Population

Scarce capital is shared in supplying a large quantity of tools over a large population without raising per capita productivity. The rapidly growing labor force cannot find jobs in the rural areas hence their movement to urban areas. As time passes, open and disguised unemployment is rife. Increased unemployment means increased crimes and insecurity.

4. Over-reliance on Agriculture

Domestic resources are insufficient. Kenya heavily relies on rain fed agriculture. However, more than 80% of the country is non-arable. Severe droughts, poor government policies, deforestation and other human-induced factors have rebuffed Kenya’s agricultural sector the opportunity to prosper. Population increase and high food prices coupled with lack of arable land is a problem to many Kenyans. Hence, the country allocates plenty resources in improving nourishment instead of investments.

5. BOP and Foreign Exchange Gap

Foreign exchange enables countries to import capital goods. Unstable microeconomics affects investor confidence. Most developed countries have employed various protectionist policies that make difficult for Kenya to freely export her goods.

6. Insecurity & Political Instability

Businesses have not been performing well because of insecurity and political unrest in recent years. For example tourism sector is struggling despite being the second largest source of foreign exchange in Kenya[5].

A vicious circle of political instability is observed every three (3) to four (4) years. Usually, economic activities slug the year preceding and succeeding the general elections. Investors become hesitant. Investments are posed and withdrawn from the economy. A total of about two (2) years is wasted in economic redundancy around the electioneering period.

7.  Poor Education & Human Capital Constraint

Majority of the population is not well educated/trained. The most affected are women and the rural population. Gender inequality is prevalent. Unlike men, women are less educated and less empowered economically. Women have little or no control over most of the factors of production. Less than 10% of women hold titles to land in Kenya[6].

Poor education translates to poor entrepreneurial skills, human resource constraints and poor production techniques.

Children from the rural areas often have to travel long distances to access schools. Despite primary and day secondary education being free the schools are usually understaffed and under-resourced. Most households cannot forego the opportunity cost of children working and earning to supplement the household income.

Majority of women and the illiterate population are not economically active. According to Trading Economics, by the end of 2017 women labor force in Kenya was estimated at 48.7%.

8. Healthcare

Regular access to basic quality healthcare is often a luxury to most Kenyans. The Adult Mortality rate in Kenya was was estimated at 37.46% in 2015[7]. Productive labor force is not healthy enough to work seamlessly.

Less than 6% of Kenya’s 2018/2019 fiscal budget is appropriated to healthcare, in a country where healthcare facilities are overstretched and maternal death rate is considerably high!

9. Poor Taxation

Several microeconomics factors and tax evasion and noncompliance are undermining Kenya’s revenue base. The country loses more than $1 Billion annually to tax exemptions and incentives – in a country that struggles with numerous socio-economic challenges. Tax exemptions and incentives cause price increase in order to cover for the revenue shortfalls.

The sprawling informal sector is not properly taxed either. Turnover taxation has been ineffective. Considering that the informal sector constitutes more than 90% of Kenya’s businesses and employment tax evasion heavily undermines our revenue base.

10. Corruption & Poor Governance

Political leaders have no interest in the welfare of Kenyans. That is a given! Unethical officials misuse their authority for their own selfish interests. Industrialists join politics to secure their industries while the nobles are interested in status, power and money!

Regular economic crimes and scandals hinder development. Corruption, favoritism and nepotism befoul every post-colonial regime. Poor governance and poor performance is rampant in parastatals and no one takes responsibility.

Apparently, Kenya will take longer to develop without addressing corruption decisively. The country ranks 143 out of 180 countries on the Corruption Perceptions Index 2017 published by Transparency International (TI).

There is significant economic progress in Kenya. However, a lot still needs to be done to accelerate our economic growth, among others:

1. modern technologies and innovations;
2. self-reliance economic policies;
3. proper revenue collection mechanisms;
4. raise sufficient free financing,
5. implement simple legislations to reform the fiscal system.

We can overcome the challenges. It is difficult but possible!

REFERENCES:

1.    H. W. Singer (1953), Journal Articale: Obstacles to Economic Development, The Johns Hopkins University Press

2.  Michael L. Wachter & Wharton School (1984), Removing Obstacles to Economic Growth, University of Pennslyvania Press

3.  Said Ahmad Shah (1969), Structural Obstacles to Economic Development: A Political Economy of India, People’s Publishing House

4.  Kenya’s 2018 Budget Statement

[1] Thomas, 2000 pg. 23

[2] https://www.centralbank.go.ke/public-debt/, accessed on June 20, 2018

[3] https://www.unicef.org/kenya/overview_4616.html, accessed on June 18, 2018

[4] 'Money Matters: Kenyans’ opinions and experiences of poverty and financial inclusion' – a report by Twaweza, February 28, 2018

[5] de Blij, Harm. The World Today: Concepts and Regions in Geography 4th edition. Wiley Publishing: Hoboken, NJ

[6] https://www.oxfam.org/en/even-it/kenya-extreme-inequality-numbers, accessed June 20, 2018

[7] https://knoema.com/atlas/Kenya/topics/Demographics/Mortality/Adult-mortality-rate, accessed on June 20, 2018