Virus Could Scupper Kenyatta’s Big Four Agenda for Kenya

NAIROBI (Capital Markets in Africa) — Halfway through Kenyan President Uhuru Kenyatta’s second term his pledge of transforming the economy through manufacturing, farming, health care, and low-cost housing has been slow to show results, and the coronavirus pandemic could now reduce that too little more than an election promise.

The virus is hitting revenue collection as key drivers such as agriculture, tourism, and diaspora remittances decline, and debt costs rise for East Africa’s biggest economy. Funding to support Kenyatta’s so-called Big Four projects has been slashed to 127.3 billion shillings ($1.2 billion) in the fiscal year starting July 1 from 450.9 billion shillings in the current period.

Spending to fight the virus will force the government to divert resources from the projects, according to Vincent Phiri, an economist at Paarl-based NKC African Economics.

“Inevitable economic weakness domestically and global financial uncertainty due to the virus will reduce foreign direct investment inflows significantly at the expense of these Big Four projects, given most of these projects are private-public partnerships,” said Phiri by email.

Kenyatta’s spokesperson Kanze Dena didn’t respond to an email seeking comment

Headwinds
Various parts of the Big Four agenda have run into headwinds.

Kenyatta’s plan to deliver 500,000 units of affordable houses has been slowed by employers and workers opposing a 1.5% income-tax levy toward a housing fund. Legal challenges on the fund and lengthy processes of acquiring land have hampered the delivery, according to the State Department for Housing and Urban Development. The first phase of 1,370 units is underway in the capital, Nairobi.

A plan to improve farmers’ access to fertilizer and seeds through the use of an e-voucher subsidy system that was due to begin this year has been postponed to 2021 because of the virus, according to Jacob Mutua, head of the National Accelerated Agricultural Inputs Access Programme.

A national rollout of a universal health-care program that’s currently piloted in four counties was planned for the year starting July. But lawmakers questioned the initial outcomes and hesitated to approve funds to scale the program, according to Moses Kuria, a member of the National Assembly’s Budget and Appropriations committee. Allocation to health is 114 billion shillings compared with 109 billion shillings this year, according to the Parliamentary Budget Office.

The “Big Four is dead as a dodo” due to budget constraints, Kuria said by text message.

Debt Sustainability
Kenyatta’s five-year term is due to end in 2022, and a push to complete the Big Four projects could see the government again turning to external borrowing which will pose a significant risk to debt sustainability, said Phiri. Kenya’s debt-servicing costs will jump 18% to 904 billion shillings in 2020-21.

While a Chinese-funded railway project stands out during Kenyatta’s tenure as the government’s biggest investment in decades, it’s been clouded by questions about the efficiency and viability. Beijing didn’t approve further funding, leaving it halfway complete.

Kenyatta’s presidency is now set to be judged less on the Big Four and more on what happens politically over the next 15 months, according to Louw Nel, a political analyst at NKC.

The ruling Jubilee Party on Monday made key changes in the Senate that further sidelined Deputy President William Ruto, who is seeking to replace his boss at the 2022 election, after announcing it will form a coalition with the Kenya African National Union. This will boost the number of Kenyatta supporters in the nation’s parliament, enabling him to more easily deliver on his development agenda, said Dismas Mokua, a Nairobi-based independent political analyst.

However, it also deepens a fissure within Jubilee. That, and not delivering on the Big Four, could dent the reputation of Kenyatta, whose father was the country’s first president and who is expected to play a role in Kenyan politics beyond the end of his term.

“In Covid-19 and the Jubilee infighting, Kenyatta has ready-made excuses should his administration fall short in achieving its lofty goals,” Nel said.

Source: Bloomberg Business News