By Patrick Smith
Kenya's prime minister Raila Odinga and Amos Kimunya, finance minister, talk to Emerging Markets about the prospects for Kenya's economy after it recovers from post-election trauma
The success of Kenya’s expensive and elaborate power-sharing experiment will depend largely on one man – the former opposition leader Raila Odinga, who emerged as prime minister of the new government in April. His appointment followed prolonged horse-trading over the choice of leader after post-election disputes over the poll which claimed the lives of 1,500 and where 300,000 were chased from the homes.
It may seem unfair to place the responsibility for the success of the new order on Odinga but neither his erstwhile supporters nor his opponents are inclined to be generous towards him. Many of Odinga’s supporters who turned out in their millions to vote him into the presidency in last December’s disputed elections are deeply sceptical about the power-sharing deal cabinet he agreed with the president, Mwai Kibaki in mid-April.
There is an even bigger issue at stake. Can the formula of power-sharing governments composed of deadly adversaries be made to work in Africa? Why should politicians who stood by while their supporters hacked each other to death suddenly find the will to work on a common political programme?
Yes we can, Odinga tells Emerging Markets in Nairobi. “If you are working in government, it is not a love affair. Politics make strange bedfellows. If Mandela could work with de Klerk, who represented the system that had kept him in prison for 28 years, then there is nothing to prevent Raila Odinga to work with Mwai Kibaki. The differences between us are not personal. I have even a liking for Kibaki.”
And when the two men appear smiling together, it’s possible to believe Odinga’s comments about Kibaki. But the critical issue is whose policies will prevail in the new coalition. “I have no problem at all in a grand coalition, under Kibaki, but I want a proper power-sharing agreement, with him as head of state and me as head of government,” says Odinga. “I think we can work things out this way.”
Odinga will be working against the odds. His programme for a new political dispensation Kenya, a new constitution with devolution of power and a more equitable distribution of land will be tested against the policy imperatives of Kibaki’s established team.
The boast of the Kibaki team is that they have delivered the highest rates of GDP growth since the 1960s – average rates of more than 5% since 2002 – and that, they say, must be the driving force of any sustainable social change in Kenya. This economic boom was fuelled without significant foreign aid and much of the Kibaki government’s social spending was financed through higher tax revenues.
Yet most of the benefits from the Kibaki boom were restricted to Nairobi and Central Province, where Kibaki’s Kikuyu people predominate. In one of the world’s most unequal societies, Odinga’s call for land and jobs for the wananchi (the common people) and a fight against state corruption resonated across the country.
For people from the Coast Province, for the Kalenjin and Maasai in the Rift Valley and for Odinga’s Luo people and the Luhya of western Kenya, the opposition’s calls for reform opened up the prospect of a second liberation.
It was also going to be a major generational shift: Kibaki and many of his key advisers are in their 70s — many of them were junior officials in the first post-independence government in 1963.
Odinga is 64 but most of his colleagues are in their 40s and 50s and served their political apprenticeship as activists campaigning against the single party regime of Daniel arap Moi, the former president.
Odinga and his Orange Democratic Movement face a crisis of expectations but they do not control the levers of power in the new grand coalition.
The size and cost of the new government has come under attack from oppositionists and civic activists, who argue that running the new bloated administration could take up to 80% of the government budget. The deal stitched together by Kibaki and Odinga settled on a cabinet of 94, consisting of 42 ministers and 52 assistant ministers. Kibaki’s side had wanted to increase the number of ministers to 44, while Odinga’s negotiators wanted the team cut to a maximum of 34.
With 94 out of 222 MPs now nominated as ministers on higher salaries than their US or UK counterparts, this government ranks as Kenya’s most expensive ever. Odinga gave way on both the size and the composition of the ministerial team.
As premier, he may be head of government but Kibaki’s team control the key portfolios: Amos Kimunya in finance; the fiery Martha Karua at justice; the veteran but ambitious George Saitoti at internal security; and Yusuf Haji at defence. Kibaki’s long-time ally Francis Mathaura, who has publicly dismissed Odinga’s policy-making role, stays on as head of the civil service.
Disillusioned opposition activists now ask how Odinga, whom they regard as cheated of victory in crooked elections organized by Kibaki’s Party of National Unity, could have agreed to forgo both the presidency and settle for the role of prime minister in a government in which opposition colleagues control neither the purse strings nor the armed forces and police. The more generous oppositionists believe that Odinga has been set up to fail; others are already labelling him a sell-out.
None of this has dimmed Odinga’s optimism about political possibilities: “We will ensure that power, wealth and opportunity are in the hands of many not of the few,” he announced after being sworn in as premier in mid-April. “Kenya will never again have a ruling class ... the rulers will be the people of Kenya.” Kibaki and his ministers reject such radical platitudes.
Amos Kimunya, Kibaki’s finance minister, tells Emerging Markets that the way forward for Kenya is to pursue pro-market economic policies, sell off state assets, to balance the budget and boost domestic investment. With a higher tax base, the government would then be able to sustain its ambitious programme of investment in education: “...that is the way to develop Kenya,” Kimunya insists. The Kibaki government’s introduction of free universal primary education after 2002 was one of its most popular moves, and it remains committed to providing free secondary education for all – despite questions about teaching standards and the state’s capacity to provide the necessary books and buildings.
Although Kenya’s economy lost more than $1 billion during the post-election unrest in January and February, Kimunya is confident that it will quickly revert to being one of Africa’s most successful – and least aid-dependent – economies. Kimunya concedes the government’s target for 7% GDP growth this year isn’t attainable but estimates growth of about 6%. The IMF and World Bank fear it will be closer to 4% this year.
In the short term, Kimunya says his approach will be to cut taxes and boost public works programmes, geared particularly to help those displaced by this year’s political unrest. But he faces huge constraints: tax revenues have slumped with the economic slowdown and much will depend on how much emergency support the government can bring in from outside.
Another of Kimunya’s priorities will be to heel inflation back under the 5% a year target after it surged to 21% in March.
Kenya’s key economic drivers – tourism, agriculture, light manufacturing and services – will take the rest of the year to recover. Kimunya hopes that in the post-crisis period that economic growth will be brisk but there will be heavy pressure on Kenya’s foreign earnings. Even before this year’s political crisis, Kenya’s current account was under pressure.
In 2007, Kenya’s current account deficit doubled to $1.15 billion (4.2% of GDP), which was caused by a 23% surge in imports to almost $9 billion; exports grew just 16.5% to $4.1 billion, propelled by horticulture and manufacturing. However, last year the gap was financed by capital and financial inflows, with a strong contribution from short-term inflows such as quick-yielding government securities.
After Kenya’s worst political crisis since independence and a global credit crisis, Nairobi’s new grand coalition will find it much harder to bring in cash to staunch the balance of payments gap – at least until it can prove that it can run a credible government.