Kenya's deepening wealth divide exposes leadership failures

Just days after President Ruto shared a glamorous picture of the economy that he has delivered in his first three years in office, the chilling contrast of reality has come from the most unlikely quarters. The Oxfam wealth inequality data published this week paints an image of a sinking ship at the household level amidst a rising ocean at the macroeconomic level.

While the President and his allies continually brand those who critique his administration’s failure to drive meaning socio-economic impacts at the household level as doomsayers, the Oxfam evidence confirms of this systemic failure. The report exposes the duality that the Kenyan economy is.

On one extreme of the continuum are 125 ultra-wealth individuals that the report highlights as controlling more wealth than 77 per cent (or Sh42.6 million) of the population. This is the side of the economy that the President not only represents, but also the one that he visualizes when he tells the nation of the Singapore dream. From the street palace, he would be among the top five of this economy.

A key limitation of the Oxfam data is that it does not disaggregate for us from which sectors of the economy the 125 high net worth individuals have created their wealth from. However, the grapevine has sustainably provided hints that some of the well-known wealthy individuals have traceable connections to direct or indirect state power over successive regimes. The leafy suburbs across the country are predominantly home not top public officials as opposed to industrialists, sports giants and artists like is the case in most functional economies.    

It is tragic that this depressing inequality data is competing for a slot in prime time news with official reports pointing that the highest office in land has almost exhausted its entire annual budget barely five months into the financial year. Other reports from the Auditor General indicate that about sh.300 billion of borrowed money from 2017 cannot be accurately traced or accounted for.

That not notwithstanding, the Central Bank Governor informed Parliament in the same week that while our public debt remains within sustainability levels, the country is at a high risk of debt distress. As a result, the economy is going through a liquidity crisis with revenues collected first swallowed by debt repayments as opposed to service provision. The Oxfam report indicates that for every sh.100 collected from taxes in 2024, sh.68 went towards debt repayment.

A deeper dive

Beyond the 125 wealthy individuals vs the rest of us that has captured the headlines in mainstream media, the Oxfam wealth inequality data presents much more details that confirms systemic policy failures of successive regimes, maybe traceable even from the colonial era. The report confirms existing economic literature on the dangers of extreme wealth inequality in the country.

For instance, the report indicates that while the economy has experienced a solid economic growth since 2015 as measured by the Gross Domestic Product (GDP), an additional seven million people have fallen into extreme poverty (an increase of about 37 per cent) over the same period. On the metric of food security, the report points that the number of Kenyans facing severe and moderate food insecurity rose by 17 million for the period between 2014 -2024. The cost of food as at 2024 was at least 50 per cent higher than it was in 2020.

The economic pain for households becomes more real when the data is disaggregated to the micro level. For example, while the average national inflation appears to be on a downward trend, the Oxfam report finds that in Nairobi, inflation rate for low-income earners was 27 per cent higher than that of upper-income earners between 2020 – 2024. This seems to seal the fate for the majority who constitute low income earners into a perpetual poverty.

When extrapolated into the impact on basic public services towards education and health services, the poor sink deeper into the hole. The recent university funding model and contributions towards Social Health Insurance Fund (SHIF) impact negatively the poor more than the rich. For instance, the report finds that the current government spending on education per learner today is worth about 18 per cent of what it was in 2003, when the Free Primary Education programme was introduced.

On health, the report finds not only chronic underfunding for healthcare in the country, but also a highly fragmented system, and thus undermining the aspirations of an effective universal healthcare system. Despite the government bragging about enrolling at least 27 million people into SHIF, the Oxfam report indicates that only about four million people are actively contributing into the system. This is due to extreme informality of the economy (at 85 per cent informal) with a net outcome of increased out-of-pocket spending towards healthcare.

Further, the informality of the economy means high unemployment rates and poor quality jobs even for those who can find one. The tax burden falls more heavily on the poor, especially since the economy leans more on regressive taxes like Value Added Tax, Excise duty and levies. Things are getting thicker for this low income class populace due to the crowding out of available funds on account of high public debt burden. In 2024, debt repayment was twice the education budget for the year and at least fifteen times more than the health budget.

Consequences

With this facts on our hands, it is easy to wonder of what practical relevance are they in the daily lives for folks across the country?

First, as the Oxfam researchers ably presents, their findings demolishes everything that the Kenya Kwanza government has been bragging about. The growing inequality is easily explained by the shrinking fiscal space, unsustainable debt levels, high inflation, high cost of living, high unemployment, growing poverty and declining quality of public services like education, health and insecurity.

Second, this inequality speaks of the different realities for those that we elect into office and the rest of us. In a twisted sense of irony, President Ruto might have been right all along about his Singapore dream. You see, when these leaders are hobnobbing with their powerful royalties and business friends in Dubai, where they easily get gifts of luxury private jets to travel on State functions, how can they understand the struggles of an aged couple that has not eaten anything for two days in a village deep in Turkana, Mandera or in the remote village of my ancestors in lower Eastern?

Thirdly, the growing wealth inequality not only exposes the limitation of GDP growth rates but also opens a lid to the dangers of highly extractive political institutions. One of the outcomes of highly kleptocratic government regimes is wealth inequality due to distortions in allocation of capital in the economy.

In such environments, merit is relegated to the back stage and proximity to political power grants unlimited access to state resources and massive wealth accumulation without corresponding known enterprise. This is not to say that the top 125 Kenyans are all culpable. Indeed, there would be a few who have grown their wealth out of honest work and have offered decent economic opportunities to thousands of fellow Kenyans.

What is undeniable, however, is that there is a significant number of folks who hoard a lot of wealth without any known industries, innovations and legitimate businesses behind them. Even where such businesses exist, they remain tender-prenuership entities designed to siphon funds from public coffers in the name of business!