June 30, 2022

Why local manufacturing should matter to political candidates » Capital News

Election fever is already palpable as more government officials resign to join politics.

Exorbitant taxes, soaring cost of living, poor transport infrastructure, late payments and lack of jobs are some of the issues that Kenyans continue to raise. Now is the most ideal time for us to engage political candidates to influence their political decisions, based on the real issues facing citizens.

As the Kenya Manufacturers Association (KAM), we have a unique insight into the issues derived from years of experience in the market and engagement with stakeholders. Our ideas positively add to the conversation based on a real and measurable contribution to the economy, made over the past 60 years, as proof of our ability, commitment and tenacity. This is why KAM engages in policy development, and during the election period, with political parties and actors.

As a starting point, we see three fundamental issues on which we should discuss and engage the political class – the role of government, productivity and regulation.

We need a clearer picture of the role government plays, primarily to help us determine its size and structure. This is the origin of the much-discussed issue of government borrowing and debt. Inherently, the government borrowed to cover budget deficits. We need to seriously discuss What we spend money and How many we can spend.

There is a lot of waste in public spending. In addition to corruption, we have glaring challenges around parastatals that constantly lose money, duplicity between national and county governments, a culture of entitlement to luxuries high within government and, perhaps worst of all, is ribbon disease – the compulsion to open new buildings and infrastructure, even if inefficient or uncompetitive.

All of this is underpinned by the mistaken view that “government has money,” a mistake that ignores the fact that the only money government has is what it collects from its citizens in the form of taxes.

Alongside this question is the role that the public sector plays in the economy and where can it bring efficiency and benefits as opposed to bureaucracy, costs and waste. While the government has an important role to play in education, health and policy-making, it is unclear why we have state-owned enterprises, such as butcher shops, transport services, financial loans and the manufacturing, most of which perform poorly.

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This brings us to the second key area that applies to all economies around the world: productivity. Our political jargon often speaks of “sharing the national pie”, but productivity is about baking the pie. Growing the economy requires sustainably baking a bigger, better pie, using fewer resources. A fairer form of sharing the pie will make long-term growth more sustainable by creating a real and deep middle class, but that cannot happen until there is output to share.

Productivity asks the simple question: how much output do you get for each unit of input? For example, in agriculture, we focus exclusively on the price of a bag of corn or a liter of milk. The productivity question would be how many bags per acre? Liters per cow? Our lack of attention to productivity has led to decreased prolificacy in many industries, eroding our potential for growth and our ability to create wealth. This is especially critical in a globalized economy, from which we derive many benefits, but in which we cannot participate if we are unproductive and uncompetitive. Any political movement that does not seriously address the issue of improving productivity is not committed to the fundamental growth of our economy.

The third issue of regulating our economy and public space can be linked to the two previous questions. The number, size and complexity of the regulatory structure all reflect the cost of regulation and its impact on productivity. When we have several regulators, each is tempted to raise resources to finance its existence. This creates costs for citizens who produce and reduces productivity, and even worse, a disincentive to invest. This then leads to brutal enforcement of regulations and adversarial relationships between the public and regulators that are not conducive to improving productivity. Ideally, we should have collaborative, progressive and developmental relationships between all players to raise standards and productivity at the same time for the benefit of the entire economy.

These are the fundamental economic issues that underpin our collective future. The ideas and choices around them will determine the success or failure of any incoming government.

The author is the President of the Manufacturers Association of Kenya and can be contacted through [email protected]