Kenya Kwanza Administration: A Saga of Unfulfilled Promises and Economic Struggles
The Kenyan public has been closely observing the Kenya Kwanza administration, particularly due to the multitude of pledges made both during their time in opposition and government. This scrutiny intensified during the lead-up to the 2022 General Election and has persisted since then.
During the fervor of the election period in July 2022, President Ruto made assurances to rectify the economy and reduce the cost of living within a 100-day timeframe. Despite winning the election and assuming office, the economy continued to decline. Consequently, both President Ruto and his Deputy, Rigathi Gachagua, requested an extension of two years to stabilize the economy.
Among these commitments was the pledge to achieve economic stability within the first 100 days of assuming office. However, nearly two years later, the expected improvements have yet to materialize.
Economic Promises and Reality:
President Ruto, both before and after his election, made it clear that a key goal of his administration was to ensure that business credit became more accessible and affordable for small-scale traders, who had previously been vulnerable to exploitation by loan sharks.
However, the current situation shows that the government’s heavy borrowing from local markets is squeezing out these same small-time traders. This situation is exacerbated by the Central Bank of Kenya (CBK), which has set the Central Bank Rate (CBR) at 13 percent, indicating that loans will become more expensive. Consequently, small-time traders are finding themselves marginalized.
Initially, the “Hustler Government” promised a somewhat unrealistic utopia to “hustlers” – a future where loans would be interest-free, essentially free money. However, as time passed, leaders within the Kenya Kwanza movement reconsidered, retracting the promise of interest-free money and informing the hustlers accordingly.
They then introduced the concept of a “Hustler Fund” which would provide money at low interest rates to support businesses. However, there was a catch – initially, only a small amount, Ksh.500, would be accessible. Furthermore, individuals would need to establish credibility over time to access larger amounts. Despite this, a significant number of Kenyans, totaling 22,788,294, have joined the Hustler Fund.
However, the Hustler Fund is now experiencing a high default rate, surpassing banks, microfinance banks, and Saccos, with defaults reaching 29 percent. It appears that many of the hustlers who received funds may have used them for immediate consumption rather than investing in businesses.
Affirmative Action and Taxation:
President Ruto assured last March that a bill on affirmative action was nearing completion and had garnered strong support from most members of parliament. He projected its processing within the next one to one and a half years, emphasizing its potential to facilitate greater female representation in leadership roles, particularly in parliament. However, as time has passed, there has been no progress on this front, leaving expectations unmet.
Similarly, in March of the previous year, President Ruto pledged relief to ordinary Kenyans burdened by taxes and inflation, specifically announcing the removal of the 8% tax on cooking gas starting from June 2023, aiming to make it more affordable. Although the VAT on cooking gas was indeed eliminated in April 2024 through the enactment of the Statute Law (Miscellaneous Amendments) Bill 2024, the promised reduction in gas prices from approximately Ksh.2800 to Ksh.500 or Ksh.300 by June 2023 has not materialized, leaving many disillusioned.
Prompted by concerns over illegal cooking gas filling operations, the government took action, directing them to cease operations. However, recent memories are marred by a tragic gas explosion in the Mradi area of Embakasi in February of this year, resulting in numerous fatalities and severe injuries to hundreds. Despite promises of sector-wide reforms to enhance safety, the gas industry remains inadequately regulated.
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The National Treasury’s announcement on May 11 indicated plans to remove bread from the list of tax-exempt commodities, proposing a 16% VAT levy on it, triggering widespread outcry among Kenyans, particularly on social media platforms and in public demonstrations. Additionally, the government has proposed increased VAT charges on banking transactions, mobile money transfers, airtime, and data, further exacerbating the financial strain on struggling citizens.
Bread, a staple food in Kenya, faces potential taxation despite its significance in local diets. The government’s rationale, hinted by MP Kuria Kimani linking bread consumption to rising diabetes rates, raises questions about undisclosed public health concerns. Meanwhile, fuel prices have soared, with kerosene prices jumping from Ksh.127.94 to Ksh.203.06 per liter in January, though they have since slightly decreased to Ksh.168.76.
The surge in fuel prices can be attributed to the Kenya Kwanza Administration’s decision to abolish fuel subsidies and raise VAT charges from 8% to 16%, exacerbated by global market dynamics, leading to record-high prices exceeding Ksh.217 in October 2023. This spike in fuel costs has contributed to increased transportation expenses and inflation, prompting the government to reintroduce subsidy programs to mitigate consumer hardships at the pump.
Despite urging citizens to endure tax hikes as necessary for economic stability, the government’s actions appear inconsistent with its stated objectives, raising concerns among the populace about the efficacy and fairness of fiscal policies.
Government Spending and Public Reaction:
Despite advocating for austerity measures, the administration has increased budget allocations to high-ranking offices and maintained substantial costs for sustaining advisory units and Chief Administrative Officers.
A notable instance of this is the recent escalation in budgetary allocations to the offices of the President, the Deputy President, and the Prime Cabinet Secretary. The combined allocation has surged from an initial Ksh.810.29 million to a staggering Ksh.2 billion.
Deputy President Rigathi Gachagua has raised concerns about the neglect and need for refurbishment of his official residences in Nairobi and Mombasa.
Observers are questioning whether these refurbishments take precedence over essential programs like the school feeding initiative, which the National Treasury has removed from state funding. This is particularly pertinent for an administration that promised to prioritize the welfare of the marginalized “hustlers” in society.
In March of this year, Kenyans realized that it would cost around Ksh.10 million to maintain a Chief Administrative Officer (CAS) in office. Many of these appointees are perceived as political appointees who aligned themselves with the winning side of the 2022 general election.
A CAS’s monthly salary is capped at Ksh.780,000, but this is supplemented by various allowances including those for travel, medical coverage, pension, group personal accident cover, car loans, mortgages, and daily subsistence allowances for out-of-town journeys. Over a five-year term, these allowances accumulate to Kshs.46.8 million. This has led many Kenyans to question the value of money in such expenditures.
Taxation and Public Trust:
President Ruto articulated his vision during a recent address to Harvard University students at State House Nairobi, expressing his intention to increase Kenya’s current tax rate to a range of 20 to 22 percent by the conclusion of his term.
In his remarks, President Ruto pointed out a common perception among Kenyans regarding their tax burden, juxtaposing it with empirical data indicating that as of last year (2023), the tax-to-revenue ratio stood at 14 percent.
The comments of U.S. Ambassador Meg Whitman echoed the sentiment that the government’s focus on escalating taxation levels from 14 to 22 percent by 2027 might be misplaced. Whitman emphasized the importance of policy consistency for economic stability and advocated for broadening the tax base rather than disproportionately burdening formal sector employees. She also suggested government support for job creation to enhance economic productivity.
MP Kuria Kimani, chair of the parliamentary budget committee, highlighted the disparity in tax contribution, with 20% of Kenyans shouldering the tax burden for 80% of the population. Kimani emphasized the collective responsibility of tax payment for societal well-being, suggesting that increased tax compliance would benefit all citizens.
President Ruto’s assertive taxation policies have led to comparisons with the biblical figure Zacchaeus, earning him the moniker “Zakayo.” While Ruto defends the necessity of tax collection to finance government operations and alleviate debt, experts caution that transparency and accountability in government spending are crucial for fostering public trust and compliance.
Kenya Kwanza Administration: A Saga of Unfulfilled Promises and Economic Struggles