Creamy capitalism at the top and scraps for the many below

Less than two months into the 2025/26 fiscal year, the 2026/27 budget process has already begun. The process kicked off last Monday with the launch of Sector Working Groups, which should really be the first venues for public participation in a transparent budget cycle.

Indeed, proper participation should follow our 3-in-1 public finance management, and not simply budget preparation, cycle – participating in future 2026/27 budget preparation, tracking implementation of the current 2025/26 budget and following up audit (and evaluation) of the past 2024/25 budget.

Sadly, we haven’t marshalled the needed official and public bandwidth for this level of engagement.

As part of Monday’s launch, both Treasury CS John Mbadi and PS Chris Kiptoo spoke to a positive economic growth outlook for 2025, which is projected at 5.3 per cent, in comparison to 4.7 per cent in 2024. Mr Mbadi even referred to Q1 (first quarter) growth of 4.9 per cent as a sign of economic rebound, even though this was the same growth rate for Q1 of 2024; below the five-year Q1 growth peak of 5.9 per cent in 2022. On Treasury’s annual growth projection, expert forecasts, including our Bretton Woods friends, are as large as half a percentage point lower.

And don’t forget that most, if not all, of these forecasts were made before the June/July protests.

The tone of the launch appeared targeted at an external, not domestic, audience, with Treasury officials bullish on manufacturing, mining, services and our “diversified economy”. There was time to celebrate an improved current account riding on a falling trade deficit and diaspora remittances, a stable shilling and solid forex reserves, and, domestically, falling interest rates tracking reduced inflation, hoping for more credit to private sector and lower interest costs in the budget to free up social and development spending as the stock market embarks on a raging bull run.  The only thing missing was the joy of our recent credit rating upgrade by S&P.

To be fair, there was some mention of ongoing and emerging risks and challenges, both to the economy at large and the fiscus in particular. But it is the message of turnaround that prevails. Yet, as the meme goes, “if the economy was doing great, you wouldn’t need to tell us every day; we would know!” In other words, the people are asking, where’s the growth we cannot feel or eat?

Let’s pursue two angles, beginning with a thought experiment for boomers to Gen Z. Which were your best economic times? Jomo’s 15 years when GDP growth averaged 7.1 per cent, at per capita income growth of 3.4 per cent? Moi’s 24 years of 3.2 per cent average GDP and zero per capita growth? Kibaki’s 10 years at 4.9 per cent GDP and 2 per cent per capita? Uhuru’s 10 years at 4.5 and 2.1 per cent respectively? Ruto’s 2 years so far at 5.2 and 3.3 per cent? By the way, between 1963 and 2024, GDP growth averaged 4.8 per cent; per capita growth 1.6 per cent.

Different look

We could also look at the same data differently. 8.2 per cent GDP growth and 4.6 per cent per capita income growth between 1963 and 1973. A slowdown to 5.4 per cent and 1.3 per cent between 1974 and 1979. A further slowdown in the 1980s to 4.2 per cent and 0.4 per cent.  A final slide in the 1990s to 2.2 per cent and negative 0.8 per cent.  A recovery in the 2000s to 3.6 per cent and 0.8 per cent.  An acceleration in the 2010s to 5 per cent and 2.4 per cent. A slight dip to 4.5 per cent while staying at 2.4 per cent across 2020 to 2024 (including Covid 19 impacts).

These broad growth figures tell us half the story. On paper so far (and there is a dip on the way), Ruto has outperformed everyone except Jomo. He is still riding on Uhuru’s mega-infrastructure but jobless spending spree, while trying to clear the debt mountain he inherited. As said before, Moi left us with a stagnant economy, Uhuru left us with an unstable one. That’s the difference.

So it is reasonable to assume that Kibaki times were better than today simply because he unlocked the stagnation.  It doesn’t take an econometric genius to discern that people were happier then because average wage growth (money in our pockets) grew faster than the cost of living (inflation), and the situation is reversed today. Our problem today isn’t cost of living, it’s income.

And this is why Ruto and his noise making acolytes need to get that the everyday Kenyan’s ask is threefold. Jobs.  Incomes. Wealth. The first two are GDP things, the third is a dignity matter. And the truth of this matter is we don’t “eat GDP”, we want better lives, living and livelihoods.

Put simply, GDP is at best a measure of activity stretched to output, not outcome as wellbeing.

To cut to the chase, our very recent GDP numbers are mostly physical capital, with some human capital and next to nothing productivity gain. This keeps us at the bottom of the global middle income band. In everyday language, we have spent the last decade “building things, not people”.

Of course, Kenya’s long-term economic issue rests in an enclave economy driven by crony capital. Ruto’s “bottom-up economic transformation agenda” (BETA) is very correctly supposed to overturn this. But it won’t happen when – in the eyes and ears of Kenyans and the world – State House policy adventure is in a battle of wits with primitive accumulation. Think PA versus PA!

What would a thriving Kenyan economy look like? The first place to start is always job creation. Without jobs and livelihood or income opportunities, there is no income, and no basis for wealth creation. Good economic management requires a “balance sheet” approach where resources are well harnessed and transformed into wealth for the long term.

Our “profit and loss account” GDP approach simply doesn’t cut it when we measure disasters and accidents as production, which also includes wild spending in a largely unproductive public sector in value-added terms. But it’s also more than this. A booming economy is the result of an attractive investment climate not just for foreigners, but domestic investors. It is a climate that impugns the sort of crony capitalism and state capture that Kenya perennially suffers. Think about the cost, not just ease, of doing business, including a low-tax, nil-harassment, zero-bureaucrat regime. We are not there.

Our economic picture is cute. Casino/bandits at the top. A middle class bubble. The rest of us.

Consider what Kenya might look like as a values-based economic proposition, not a corruption-laden place to do all kinds of shady business. We seem to miss this point, that our excellent, world-friendly physical climate must be matched by an equally attractive business and investment climate. None of this will ever happen if our top politicians are also our top business people.

There’s another sign we need to look for in a booming economy – innovation. Or as Schumpeter better put it, “creative destruction”. Kenya is by many measures, including those by the World Bank, the superior human resource talent on the African continent. But we are simply unable to unleash this potential locally, even though we excel internationally. Intriguingly, we score very well on modern requirements for economic take-off, but fail miserably on basics, like governance.

Actually, think of four “I’s” to a “good” economy – institutions, investment, innovation, inclusion. Better still, think Kenya Vision 2030, which called for “adherence to the rule of law applicable to a modern, market-based economy in a human rights-respecting state”. Are we there yet?

Which brings us to a second, more challenging angle highlighted by the UNDP a generation ago. In its 1996 Human Development report it identified five growth paths that countries must avoid.

Five growth paths

First, “jobless growth”. That is, economic growth that only rewards owners of capital without new jobs, or, as I prefer, income and livelihood opportunities. That’s where we are post-Kibaki.

Second, “ruthless growth” as growth that benefits the rich, while the poor wallow in poverty. Before you ask, the answer is yes. Our crony-driven economic model is designed to be ruthless.

Third, “voiceless growth”.  As in growth that is not the result of public participation, or peoples’ empowerment. The simpler way to put this is – “dear government, please get out of the way!”

Fourth, “rootless growth”. Think about our “winner takes all” colonial model of pure extraction.  Partly, this speaks to a failure to embrace and celebrate our cultural diversity, and the economics therein. Then again, we “financialised” our economy before we “industrialised” when we hadn’t even “agriculturalised”. What’s our true economy without Mpesa, banks and “wash wash”?

It isn’t just that we think the government is the economy, we also figure GDP is the same as cash!

Finally, “futureless growth” as growth driven by the present generation squandering resources that future generations will need. Yes, that’s our current debt mountain; a decade of Uhuru’s infrastructure-led borrowing binge disrupting Kibaki’s initial human capital growth moment.

Indeed, the World Bank, in their recent Public Finance Review, offered suggestions to get back to our 2010’s Kibaki pathway that would only bear fruit ten years from today.  As another meme goes, “we need to stop measuring the economy by how well rich people are doing”.  Enough said.