Posted by Samora
in Wednesday, September 30, 2009
When one looks at the vision 2030 strategy papers and feels the current sentiment of the policy makers and implementers in Kenya, one realises that there is a strong focus on ICT investments and a dream to make Kenya a high-tech Nation that will be well placed to be a trend-setter in the ICT industry in Africa. This in turn, they hope, will lead to improvements in internet banking, internet shopping, Business Process Outsourcing and other IT related benefits. The scene set is very appealing especially to a young Kenyan like myself, when I think of the myriad of ways I can make money due to the impending IT boom. However, upon closer inspection I have realised that we can't be more misinformed about the focus of our vision 2030. They say that you must learn to crawl before you can walk, the vision 2030 program with its focus on the IT sector wants Kenya to run a marathon and we are not yet even born.
The models and poster boys of sustained economic development are the East Asian Tiger economies. Their platform for growth as they obtained independence and transformed into capitalist societies was focused on labour intensive industries. China through Deng Xiaoping reformed the agricultural industry by removing the state controls that were recently set by Chairman Mao. These reforms under Mao, especially the Great Leap Forward led to droughts and mass starvation. Under the reforms, Deng Xiaoping introduced capitalist incentives as farmers were allowed to sell their produce privately and keep the profits, of course after giving the government its share. This led to companies like Nestle moving into the country to buy milk from the farmers. Most farmers bought extra cows and of course saw their incomes rise.
The same platform was achieved in other countries like Malaysia, Thailand and Singapore. From a strong agricultural base through good government support, these countries were able to raise their average incomes for the greater population. From this, the increased incomes lead to demand for manufactured goods which then lead to the growth of the manufacturing industries in these countries. A chain reaction then occurred as rising incomes lead to the diversification of their economies. China these days produces cars, laptops and other high-tech equipment. Hong Kong used to produce plastic toys, tyres and other basic goods in the 70's, but now they produce high-tech medical equipment and other sophisticated goods. On another note the advertising bill for companies in China is second only to that of the USA, reflecting both a diversification of the economy and an increase in incomes.
Conversely, India decided to take the route of improving technological infrastructure without greatly investing in Agriculture. This has lead to a stagnation of the economy and is evident from the statistics, India has one of the largest gini coefficients at 36.8%, the gini coefficient is a measure of income inequality. Furthermore, the richest 10% of the country earn 31% of GDP while the poorest 10% earn a paltry 3.6%. With the booming IT sector, it is a sad fact that only 1% of the population is working in this sector. The GDP per capita stands at $2,300 and is lower than that of Djibouti and Swaziland. Furthermore, India has one of the toughest regulatory mechanisms in the world. These ubiquitous controls have earned the nickname of "license raj". The situation is eerily similar to that one in Kenya and its why I have decided to write this. If an economy is to prosper, the majority of the population should be earning respectable incomes, it is usually a standard that the poorest should be earning at least 2$ a day.
These facts lead me to my beloved country and its fascination with running the marathon while we are still embryos. Kenya's agricultural sector contributes towards 80% of the employment in the country, it contributes to about 27% of GDP and yet it only receives 5% of the budget allocation. Furthemore of this 5% a great deal about 68% is used as recurrent expenditure, these are mostly administrative expenditures. Proper estimates by the ministry of agriculture put recurrent expenditure at 17 billion shillings and development expenditure at 8 billion shillings. This under allocation to agriculture is akin to a businessman underpaying his best salesman while he overpays his worst salesman. If he continues in this way, it is more likely that the good salesman will become disillusioned and probably not work as hard as he can because there is no incentive to do so.
The government needs to support the agricultural sector and commit itself to this aim. The infrastructure system in terms of irrigation, roads, water, sanitation and even aviation need to be thoroughly upgraded. Most farmers in Kenya find it very expensive and inefficient to transport their produce to the market, this often leads to waste and a loss of money on the farmers side. It is evident from the weekly commodity prices that transport is a big impediment for farmers. The theory of arbitrage suggests that when there is good information and mobility of factors, prices for a similar product within an economy will level out and be the same. What this means is that if District A is selling fish at 50 shillings per kilo and District B is selling at 70, profiteering merchants will buy from district A and sell to district B, the resulting supply and demand situations will lead to a leveling of prices at say 60 shillings per kilo. From the weekly price list, a 90kg bag of maize in Bungoma sells for 1,600 shillings while the same bag sells for 2,700 shillings in Busia. Clearly merchants would rather not buy from Bungoma and sell to Busia because the transport costs will wipe out all their potential gains.
The tax system also needs to be addressed so as to benefit farmers, the 2009 Economic Review of Agriculture and the medium term strategy paper for Agriculture both produced by the ministry of Agriculture define the multiplicity and complexity of the tax system as major impediments to agricultural productivity within the country. Farmers are faced with expensive fertilisers, farm inputs and fuel expenses therefore making it very expensive to farm. These factors have led to many of them sub dividing their farms and selling them to property developers. Government should in form of either tax cuts or direct subsidies make it extremely cheap for these farmers to benefit from their farms. . The case of Malawi, which has become a net exporter of food is a good example of what a country can achieve if it subsidises its farmers. Andrew Daudi from the Malawian ministry of agriculture says that it is a long term trend in sub-saharan Africa that urban dwellers are prioritised over rural dwellers, he goes on to say that we need to reverse this trend if we are to achieve growth.
There are many other issues including land reform, scientific research and others that can improve the agricultural sector. However, the main aim of this article is to stress its importance as the bedrock for economic growth in Kenya, it is a lesson that is to be learnt throughout the world. Peter Hartman the director general of the International Institute of Tropical Agriculture in Nigeria neatly says that the "continent's intellectuals thought that agriculture was just a phase that they could skip on their way to industrialisation" referring to the poor state of agriculture in the continent. The continent's intellectuals as it turned out were and are not so smart after all. The "intellectuals" in Kenya responsible for the vision 2030 are also in my view extremely misinformed.
In conclusion, the only way that we can achieve sustainable growth and prosperity both as a continent and as a Nation is to greatly invest in Agriculture as it is where the majority of people work. This in my view will lead to a substantial economic chain reaction akin to an economic atomic bomb, a benevolent one at that. If we continue to invest in the ICT sector and disregard agriculture, we will be in a situation analogous to that one of a teenager who after being told to clean his room, decides to sweep everything under the bed. When the mother comes in to inspect the place it will look nice and clean, however upon closer inspection, the room will still be the rotten mess that it was. Let us take the East Asian Tiger model rather than the Indian Elephant model. Please leave your comments and opinions on this matter.
