What sort of policies would help achieve the growth rates outlined by the Kenya Vision 2030?
JAMES MWANGI: It is imperative that all capital expenditures for the Vision 2030 should focus around three strategic areas. Firstly, investment must go principally into infrastructure – including roads, rail, harbours and airports. In this way, the private sector will be able to make the country more competitive in terms of the cost and availability of key inputs.
Indeed, making Kenya competitive represents the most important goal of the Vision 2030. In order to accomplish this, it is essential for Kenya to provide infrastructure that meets a suitably high standard. Secondly, from a policy perspective, the Vision 2030 must focus on reforms in governance. Such reforms will be essential to facilitate the targeted growth rate, and can lay the groundwork for good business practices.
The quality of governance has improved through the new constitution, which created independent commissions to maintain the functional transparency of the entire public sector. This ensures that the governance of the country is not placed within the hands of individuals, but instead is entrusted to institutions.
Lastly, we must focus on investment in education and the quality of our human capital. This process must begin with our educational institutions, but includes health, housing and sanitation, so that we are improving the overall living standards of our population. It is with all this in mind that we are adjusting the economy to focus on sectors with a competitive advantage.
How difficult will it be to finance the necessary flagship projects under the Vision 2030?
MWANGI: While it is very clear that financing is a major challenge, it is also important to add that the debt-to-GDP ratio is only around 50%. By contrast, in most of the developed world this figure is over 70%. There is still some space for the country to borrow, but not quite enough for the country to finance these projects independently. For that reason, Kenya developed the Public-Private Partnership Act so that the financing of public projects would not be completely dependent on government resources. Through various devices such as the sovereign bond, we are not limiting ourselves to domestic borrowing, but reaching out into global capital markets to finance this level of infrastructure over the long term. However, the ultimate hope for Kenya in terms of financing depends on how quickly the country can reach GDP growth of 10-12% and start generating sufficient resources on its own.
Kenya has an excellent track record. In 2003, it was only able to generate KSh200bn ($2.28trn) worth of tax revenue. Ten years later, the country is targeting KSh1.6trn ($18.24bn). If tax policies continue to be shaped appropriately, by increasing the bracket and making it more transparent, then it is possible that Kenya will not have a big challenge in the end. In addition, if Kenya puts into use its revenue from oil extraction as Qatar and the UAE are already doing, we could observe very positive results for all industries.
What are most important priorities relating to education and employment in the Vision 2030?
MWANGI: In 2003 we decided to make primary education both compulsory and free, so that the next generation of Kenyans will have achieved eight years of schooling, which will transform our country. We have also managed to achieve a 77% transition rate from primary to secondary school, adding another four years. Further to this, we have increased the total number of public universities from seven to 22 within the same period. While access has increased, we are still improving the quality of education and it is certainly a challenge to maintain quality alongside growth. Faculty levels cannot grow as fast as student bodies. Given that 6.3% of the total budget is spent on education alone, this means that other sectors are receiving lower amounts. However, for the Vision 2030, we made the decision that the aspects relating to software were ultimately of greater importance than the hardware.
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