The argument by the Organisation for Economic Cooperation and Development (OECD) that tightening South Africa’s wealth tax regime would rebalance ... generational inequality has a fundamental flaw: it targets a “flighty” base, says an expert from the African Tax Institute.
While the vetting process for some of the Cabinet Secretary (CS) appointees seemed difficult, the work awaiting them is undoubtedly daunting.
The Africa Report delves into the government’s goals in five key areas, which could either make or break Ruto’s economic success.
The national treasury will be headed by Njuguna Ndung’u, an ex-governor of the Central Bank of Kenya (CBK) who was instrumental during President Mwai Kibaki’s era.
Ndung’u will be walking a tightrope as he tries to implement the pro-poor economic model the president promised. Ndung’u will also tackle mounting debt and the high cost of living.
Appropriate fiscal policies will be at the heart of these tasks, especially those pertaining to increasing tax revenues and cutting government spending.
Monetary tightening under current CBK governor Patrick Njoroge means a clash of ideas awaits the two economists, who together shape Kenya’s economic direction.
Experts say the two leaders will have to work symbiotically to fast-track the economic recovery of the East African nation.
Trade, investment and industry
Trade is at the heart of Ruto’s economic revival plan. His government targets revamping the current privatisation law to woo investors, boost capital access, and cure the funding headache among small businesses.
The trade CS, Moses Kuria, says he will be swift to seize the available opportunities in the larger African market, hopefully, to help Kenya bridge its wide trade gap.“We will open commercial agencies in 50 countries,” he says.
Kenya’s trade relationship with its main export market Uganda has hit a rough patch, dipping by Sh46.8bn (nearly $385.2m) across six months to last June.
Kuria will also lead Nairobi-Washington negotiations on the Africa Growth and Opportunity Act (AGOA) pact before the 2025 expiry.
In the domestic market, the controversial trade in counterfeits and tax evasion pose stern challenges.
Restructuring the energy sector and lowering the cost of fuel and electricity are among the top decisions awaiting Energy CS Davis Chirchir.
Investors will be looking keenly at how policies play out regarding the future of Turkana oil fields and fresh negotiation with Independent Power Producers (IPPs), which has flopped severally.
Ruto’s Kenya Kwanza political coalition promised to reduce the cost of input in key sectors like agriculture and manufacturing to tame inflation.
The Kenyan economy is diesel-dependent, and any price increase has a ripple effect on the prices of end products. For every Sh100 a Kenyan earns, Sh57 goes to food, transport, and energy costs.
“The cost of power and energy needs to be solved urgently and this is something he (Chirchir) cannot do alone. Taxation has a huge impact on petroleum prices,” says Joe Gakuo, Energy expert and CEO at Upstream Oil and Gas Ltd.
The senate already wants IPPs to be investigated over the expensive power sold to state utility firm Kenya Power. There is also a proposal for a review of pump prices during disruptions, such as the pandemic, and implementing a cap on wholesale fuel prices.
EAC and regional development
After a long stay in the energy sector, Rebecca Miano, one of the few technocrats in Ruto’s cabinet, will be playing a different ballgame as the CS for East African Community (EAC) and Regional Development.
She takes over after the EAC bagged the Democratic Republic of Congo (DRC) into its expansive membership drive. Her focus could be on who will join next as African countries continue to explore closer ties.
The bloc members are easing border restrictions to facilitate trade through expanded markets. But a frosty relationship between some members, which has led to reactionary taxes and injunctions, is a hot topic that needs to be addressed.
For instance, last September, Tanzania froze maize imports bound for grain-deprived Kenya, seemingly a response to the latter’s decision to ban Tanzania’s cooking gas at the Namanga border over taxes. A similar tiff has also been witnessed between both neighbouring countries over chicken products and feed.
Miano will be part of the team tasked with deepening the integration of Kenya’s business community as conflicts in certain states threaten intra-regional trade.
Back home, the former managing director and CEO of KenGen will be overseeing the development of the country’s drought-hit areas, which bear big potential yet suffer inequality.
Transport and infrastructure projects
Numerous infrastructure projects under the previous government either stopped or never took off due to funding gaps, including the Nairobi Railway City project and Mau Summit highway.
This, plus bringing the national carrier Kenya Airways (KQ) back to profitability, will be among the plans that will push Ruto’s administration to seek strategic private investors.
With Kenya facing a sizable budget deficit, the government cannot afford to bail out KQ repeatedly. Led by Kipchumba Murkomen, the government is planning a fresh restructuring of KQ into subsidiaries and activating more Public-Private Partnerships (PPP).
Raising capital in the local market is daunting and the new government might be forced to consider the external market after Ruto hinted at negotiating with bilateral lenders.
Massive infrastructure projects through Chinese lenders remain the hallmark of Kenya’s burgeoning debt brought by the last government.
President Ruto has been a big critic of these projects, noting during his campaigns that people “don’t eat roads” while referring to what he described as the former regime’s misplaced priorities.
Now, how his administration will continue with key projects without burdening taxpayers is a juggle to watch.
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