Kenyans’ financial situation is worse off compared to their economic wellbeing during former President Mwai Kibaki’s regime, according to the latest Prosperity Index.
The index, set to be launched today by the Legatum Institute, a London-based think-tank, gives Kenya a score of 37.5 compared to 39.3 in 2009 on economic quality—which measures the strength of the economy in generating wealth for its workforce.
Kenya was pulled down by mounting public debt and reduced savings among its workforce plagued by job cuts, stagnant wages in a business environment where companies have ushered in austerity measures to protect profits.
This has hurt cash flow, translating to lower demand for goods in corporate Kenya and reduced savings, which is captured by bank accounts having more than Sh100,000 dropping for the first time in 13 years.
Legatum ranks Kenya at position 135 among 167 countries on economic quality compared to 101 in 2009, but places the country at position 113 on the ranks of the world’s most prosperous nations based on the Prosperity Index.
The index ranks nations on 12 key indicators, including wealth, health, education and personal freedom.
Kenya’s prosperity score stood at 50.5 this year, up from 47.1 in 2009, suggesting that the current regime has done better on other indicators outside economic wellbeing Legatum says it is trying to encourage the consideration of factors such as health, freedom, security and political governance as keys to prosperity, rather than material wealth alone.
By using a 10-year score, Legatum’s research, which is backed by data from the World Bank, the International Monetary Fund (IMF) and the International Labour Organisation, captures year two of the second terms of both the Kibaki and President Uhuru Kenyatta regimes.
The Kenyatta regime had better scores on health, education, personal freedom and investments environment.
Kenya’s health score increased to 64.5 this year compared to 55.7 on increased coverage of health facilities and increased focus on preventative measures such as immunisation.
Education’s score improved to 51.9 from 49.7 due to enhanced digital skills following the introduction of the laptops for schools plan, high post-secondary school enrolment and women staying longer in learning institutions.
Despite a drop in financial situations, Kenyans’ living conditions improved to 49.3 from 42.1, says Legatum while citing increased access to electricity, piped water, digital payments and clean fuel like cooking gas.
The Kenyatta regime also scored big on boosting the business environment, earning a score of 59.2 compared to 50.3 in 2009.
Kenya improved its scores in the areas of connecting a business to electricity, registering property, securing business permits as well as contract enforcements and investor protection via new laws and a strengthened Judiciary.
Investors, who have been piling into Kenya in recent years, drawn by growing consumers and a fairly robust economic expansion, complain about the high costs of doing business and red tape. But the improved business environment has not added outsized jobs to the economy.
The number of formal jobs generated by the economy fell to a six-year low in 2018, worsening the plight of school leavers in the year that the Jubilee Administration recorded its best economic performance with growth at 6.3 percent.
The drop in new jobs and stagnant wages raises queries over equitable distribution of the growth dividend among Kenyans considering the economic growth expansion witnessed recently.
While Kenya’s economy expanded 6.3 percent last year from 4.8 percent in 2017, private sector activity—which translates to jobs and higher pay– has remained muted.
“If you look at employment index (in the PMI) since the beginning of 2017, it’s been quite neutral meaning it’s not like there has been improvement in new jobs,” said Jibran Qureishi, regional economist for East Africa at Stanbic Bank—which tracks company performance monthly through the Purchasing Managers’ Index (PMI).
According to the Economic Survey 2019 data, 78,400 new formal jobs were created in the economy in 2018 compared to 114,400 in 2017.
This is the slowest pace of formal job growth since 2012 when the economy churned out 75,000 formal jobs, adding to the crisis of youth unemployment. The data does not capture job cuts and net employment.
Companies are struggling with reduced sales and profits in the soft economy. More than 15 of the 62 companies listed on the Nairobi Securities Exchange reported net profit drops by at least 25 percent last year compared with 2017.
Legatum ranked Kenya at 140 out of the 167 countries on fiscal suitability compared to 104 in 2009 egged on by mounting debt and government’s unbalanced budget.
The public debt crossed the Sh6 trillion mark in July, up from Sh1.89 trillion in June 2013, a growth that has sparked concerns that the ballooning loans risk hurting the economy on huge debt repayment burden.
Denmark is the most prosperous country, says Legatum, followed by Norway, Switzerland and Sweden while South Sudan, Yemen, the Central African Republic and Chad trailed at the bottom end of the table.
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