Thanks to political instability, water shortages, impending power rationing and now Swine Flu, Kenya’s economy will experience negative growth for the first time in almost a decade.
A collapsing economy will further add to the woes of a shaky coalition government in a country where the redistribution of national resources has become a catchy slogan.
The closure of the Masinga Hydro Electric Dam last week highlighted the effects of a two-year drought on electricity production. The Kenya Electricity Generating Company (KenGen) has said that it will close a second dam by September if rains don’t fall soon. Unfortunately, the next rainy season in that particular part of Kenya is expected in October, meaning that more dams might close.
Kenya’s industrial and domestic electricity users, face two unpalatable choices: either continue paying for electricity at current rates but experience rationing, or: pay higher prices for oil-fired generators in order to have a steady electricity supply. Neither choice appeals to an economy still suffering the effects of post election violence.
Kengen and the Kenya Power & Lighting Company (KPLC) have been criticized for poor planning in national electricity production. The current drought was predicted months ago and both companies should have taken contingency measures. Instead, Kenya will be forced to rely on so-called “emergency generators,” some of which have been in “emergency use” for the past 10 years! Needless to say, there is lots of money to be made by oil suppliers at the expense of impoverished Kenyans.
Kengen and KPLC do not have a monopoly in poor planning, though. The country’s water providers have literally been caught napping by the ongoing drought. The city of Nairobi is likely to experience a disease outbreak as water supplies become scarcer. The main dam at Ndakaini will dry up in the next few months unless a miracle brings forth torrential rains. The city’s second dam at Sasumua collapsed in 2002 and is only now getting repaired.
Water supplies in other cities are in a sorry state. Kisumu, which lies on Lake Victoria, has not had a fresh water supply for decades and cholera outbreaks are common. The water crisis in Kisumu is so bad that most industries left the lakeside city long ago. Mombasa still relies on the colonial-era Mzima Springs project for much of its supply. Meanwhile, deforestation and land degradation have squeezed the life out of the country’s rivers, with most reduced to seasonal streams.
And just when the tourism industry thought that it had weathered the effects of post election violence, along comes SWINE FLU! Truly, the job of marketing Kenya to overseas tourists must be a terribly frustrating experience! The post election violence of 2008 brought the tourism industry to its knees, as travellers fled a near civil war. Today, tourist numbers are nowhere close to pre-2007 levels and the Swine Flu outbreak will further discourage visitors.
Back in the year 2000, massive power rationing and water shortages resulted in two consecutive years of negative economic growth. Industries closed and the ensuing retrenchments reduced overall consumer spending. The shrinking economy of the closing years of Daniel arap Moi’s presidency contributed a lot to the loss of KANU in the 2002 General Elections. Incidentally, the tourism industry was also depressed in the year 2000 due to political violence surrounding the 1997 elections. (Do you see a recurring trend here …?)
This time, the economic situation will be worsened by the highest government expenditure in Kenya’s history. President Mwai Kibaki has created hundreds of districts for political reasons, each requiring administrators, offices and staff. The gigantic cabinet of 42 is straining the economy, what with astronomic salaries, bodyguards and fuel guzzling SUVs.
As political temperatures rise towards the 2012 elections, Kibaki will be under pressure to embark on massive development spending to boost economic growth. Nobody knows where the money will come from. The only source of funds currently open to the government is taxation but any increases in taxes will alienate industrialists and the professional classes.
A shrinking economy will cause greater hardships for the average Kenyan. It will spark political instability as elements of the ruling elite fight it out for diminishing national resources needed to buy support. Industries will relocate from Kenya or close all-together. Job losses are inevitable, and the stability of the country will be tested once more.
Filed under: Analysis, The Economy | Tagged: drought, economy, Kengen, kenya, kenya power and lighting company, masinga dam, mwai kibaki, nairobi, post election violence, power rationing, raila odinga, swine flu, water shortages |