@BusinessDaily

It’s time to rethink our expenditure plans

1 months ago, 18 Sep 17:08

By: Jenny Lues

Kenya finds itself at a crossroads. It needs a better future, in terms of health and education, and lives lived. But in our modern world that depends on money, and money is made by business.

Businesses that are handicapped by transport woes certainly don’t perform so well. Add weak capital markets, an absence of credit facilities, expensive energy, difficult planning approvals, confused ownership titles, and frequent fraud, and the survivors in our local economic world are often few.

But we need some order in fixing this array of challenges. And the current hurtle into big-time infrastructure has taken us to the brink. With a fuel tax, our economic growth will become more challenged still and our tax base more afflicted. Without it, we have a deficit that just cannot be bridged.

Thus the new plan is for some government austerity. We have no track record of delivery on austerity, which for the uninitiated means government departments spending less.

We have also turned away borrowing because we cannot meet its terms. And at the heart of it all sit a row of roads and ports that we are bankrupting ourselves over. The answer is neither to tax more, or cut more, but to hold on the big projects until our economy can regain the steam of growth.

It’s time for a moment of consolidation, and rethinking. For ports can be built by private sector companies as investments of their own. So can roads, and railways. Which makes it time to unshackle our public sector and the private sector too from this spending binge.

The economists call it financial discipline. But the historians will call it clever, to now take a hold and rethink those projects.For, right now, we are suffering from a ‘missing middle’. In his announcement last week, our President Uhuru Kenyatta spoke of balancing short-term pain with long-term gain, and that has been the same agenda throughout this particular dash for growth.

How much can we strain our young economy, with its young companies and limited set of home-grown multinationals, to fund those roads and railways and bridges? Yet, imagine if we had poured that scale of public investment into our directly productive economy instead?

What if that mega-spend had gone into free fertiliser for every smallholder we have? Or slashed energy prices? Or new business credit funds and markets?The extra revenues from extra products would have generated more tax. As it is, I have long felt sorry for those who run the Kenya Revenue Authority – facing ailing businesses in every direction.

But our own economy is cash dry and illiquid. We need some oxygen. So how do we proceed now on fuel tax? Let it be a moment of epiphany. Whether we now settle on eight per cent or zero tax on fuel, this policy move has taken us to a place we have all known in our lives. The step too far. The big red flag on a wrong path.

The resistance that finally alerts us to the need for a rethink. We have simply ...
Read More


Category: business news markets economy lifestyle opinion corporate

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@BusinessDaily

It’s time to rethink our expenditure plans

1 months ago, 18 Sep 17:08

By: Jenny Lues

Kenya finds itself at a crossroads. It needs a better future, in terms of health and education, and lives lived. But in our modern world that depends on money, and money is made by business.

Businesses that are handicapped by transport woes certainly don’t perform so well. Add weak capital markets, an absence of credit facilities, expensive energy, difficult planning approvals, confused ownership titles, and frequent fraud, and the survivors in our local economic world are often few.

But we need some order in fixing this array of challenges. And the current hurtle into big-time infrastructure has taken us to the brink. With a fuel tax, our economic growth will become more challenged still and our tax base more afflicted. Without it, we have a deficit that just cannot be bridged.

Thus the new plan is for some government austerity. We have no track record of delivery on austerity, which for the uninitiated means government departments spending less.

We have also turned away borrowing because we cannot meet its terms. And at the heart of it all sit a row of roads and ports that we are bankrupting ourselves over. The answer is neither to tax more, or cut more, but to hold on the big projects until our economy can regain the steam of growth.

It’s time for a moment of consolidation, and rethinking. For ports can be built by private sector companies as investments of their own. So can roads, and railways. Which makes it time to unshackle our public sector and the private sector too from this spending binge.

The economists call it financial discipline. But the historians will call it clever, to now take a hold and rethink those projects.For, right now, we are suffering from a ‘missing middle’. In his announcement last week, our President Uhuru Kenyatta spoke of balancing short-term pain with long-term gain, and that has been the same agenda throughout this particular dash for growth.

How much can we strain our young economy, with its young companies and limited set of home-grown multinationals, to fund those roads and railways and bridges? Yet, imagine if we had poured that scale of public investment into our directly productive economy instead?

What if that mega-spend had gone into free fertiliser for every smallholder we have? Or slashed energy prices? Or new business credit funds and markets?The extra revenues from extra products would have generated more tax. As it is, I have long felt sorry for those who run the Kenya Revenue Authority – facing ailing businesses in every direction.

But our own economy is cash dry and illiquid. We need some oxygen. So how do we proceed now on fuel tax? Let it be a moment of epiphany. Whether we now settle on eight per cent or zero tax on fuel, this policy move has taken us to a place we have all known in our lives. The step too far. The big red flag on a wrong path.

The resistance that finally alerts us to the need for a rethink. We have simply ...
Read More

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