David Kamau on his farm in Nyeri County, Central Kenya. Although he now grows carrots for sale in addition to maize, he says his efforts are yet to pay off. Credit: Miriam Gathigah/IPS

By Miriam Gathigah
NAIROBI, Dec 17 2014 (IPS)

David Kamau is a small-scale maize farmer in Nyeri, Central Kenya, some 153 kms from the capital Nairobi. He recently diversified into carrot farming but is still not making a profit.

He says that inputs cost too much and if this trend continues he will sub-divide and sell his five hectares.

This is the story of many small-scale farmers in this East African nation, where agriculture accounts for about one-quarter of the Gross Domestic Product (GDP). But small-scale farmers – accounting for about 75 percent of total agricultural produce – barely break even.

“A 150 kg bag of carrot is now going for about 27 dollars, up from 22 dollars, but as prices go up, so does the cost of inputs,” says Kamau.“The growth of both urban and rural slums is an indication that more people are falling on hard times” – Dinah Mukami of the Bunge la Mwananchi pro-poor social movement

According to the Ministry of Agriculture, an estimated five million out of about eight million Kenyan households depend directly on agriculture for their livelihoods. Yet agriculture fails to provide an adequate return to farmers because their sector is significantly underfunded, explains Jason Braganza, an economic analyst based in Nairobi.

The percentage of the budget for the agricultural sector is 2.4 percent, down 0.6 percent from the 3 percent in the 2012/2013 budget and well below the threshold of the 2003 African Union Maputo Declaration on Agriculture and Food Security, which mandated that at least 10 percent the national budget should be allocated to agriculture.

The result, says Kamau, is that “farmers are slowly moving out of the farms and trying other economic ventures, Central Kenya used to be a breadbasket but farmlands are being replaced by residential and commercial complexes.”

Farming is not the only sector feeling an economic downslide. Small businesses in Kenya are faced with a lack of essential business support services, especially financial services. Two-thirds of Kenyans do not have access to basic financial services such as banking accounts.

“The growth of both urban and rural slums is an indication that more people are falling on hard times,” according to Dinah Mukami of the Bunge la Mwananchi [People’s Parliament] pro-poor social movement.

She says that the group is planning to hold the government responsible regarding the use of the information in the ‘Socio-Economic Atlas of Kenya’ which the government released last month. The report exposes significant disparities in poverty levels across the country.

“The Atlas is a powerful tool, but whether the government will use the information to change lives and improve living standards remains to be seen,” she says.

Felix Omondi, a resident of Kibera, a division of Nairobi considered the largest slum in Africa, and a member of the Unga Revolution, a local activist group, is one of those who believes that the Atlas is doing some good.

He told IPS that that a programme is under way to upgrade slums and said that this is “one of the ways that the government is using the Atlas to improve the lives of people in the slums.”

In the last three months, the government has been working with residents of the slums to establish income-generating projects and provide basic amenities such as toilets, lighting and drainage.

At least 3,000 youths in Kibera will benefit from these projects. Omondi, a beneficiary, says that he is running one of the posho (corn meal) mills set up by the government to generate income.

Kenya now officially a “middle-income country”

Meanwhile, in autumn the news came out that Kenya had seen its economy grow 25 percent after statistical revision and is now officially a “middle-income country”. A few months ago, a similar type of revision brought Nigeria’s economy to the top of African countries in terms of the size of the economy, surpassing South Africa for the first time.

A growing middle class population is an important driver of this growth, but what does that middle class look like? The recently revised Kenyan figures indicate that the Gross National Income (GNI) per capita is 1,160 dollars against the World Bank’s “middle income” threshold of 1,036 dollars.

The latest income-distribution indicators for Kenya (which date back to 2005) show the following:

• 45.9 percent of the population was at the national poverty line;
• The income share held by the top 10 percent was 38 percent.

This out-of-date, official information excludes the informal economy, observes Africa Arino, professor of strategic management at the IESE Business School in Spain.

“A taxi driver makes KES 15,000 a month (about 178 dollars or 132 euro), and pays KES 3,500 (close to 25 percent of his income) to rent a room where he lives with his wife and two children,” Arino explains.

“They don’t have a kitchen or a bathroom: these are facilities shared with others in the same building lot. His income is pretty much the average salary of a driver, according to the Kenya Economic Survey 2014. Is he middle class?”

According to Braganza, one of the main challenges facing Kenya is that while the country’s economic growth is real and sustainable, the structure of the economy has remained unchanged. Resources have not shifted into the most productive sectors of the economy which would increase overall productivity and an increase in remunerative employment.

Braganza says that for people to feel the trickledown effect of the economic growth, there must also be structural transformation. “There is a need for more investment in the more productive sectors, as well as investment in emerging sectors. This will contribute towards a reduction in unemployment and poverty.”

(Edited by Phil Harris)

By Judith Niehues
COLOGNE, Sep 20 2014 (IPS)

Thomas Piketty, a French economist who works on wealth and income inequality, has triggered a debate on the distribution of income and wealth in many countries. This is no small issue because views on income inequality and concomitant redistributive preferences are crucial to the design of tax and transfer systems.

Particularly in many European countries, society is concerned about distributional issues, reflected in recurring debates on redistributive policies. However, a study presenting international survey data on subjective perceptions of inequality and redistributive preferences reveals that perceived and actual inequality diverge quite substantially in many of these countries.

Dr Judith Niehues

According to the 2009 Social Inequality Module of the International Social Survey Programme (ISSP), more than 50 percent of Germans strongly agree that differences in income are too large.

Correspondingly, a similar portion of Germans thinks that it is “the responsibility of the government to reduce the differences in income between people with high incomes and those with low incomes” – a questionnaire item which is commonly used to capture subjective preferences for redistribution.

Regarding this majority of critical views on inequality, social justice and redistribution are topics for debate that continually feature on the political agenda in Germany – reflected in the current introduction of redistributive policies, such as a minimum wage and additional pension benefits for mothers.

On the other hand, in the United States – which is characterised by a far higher degree of actual income inequality – people are less concerned about income differences, and they do not see any reason for redistributive state intervention. There is virtually no empirical relationship between the actual size of inequality within a country and how critical people view these income differences to be.

The missing link between inequality and its assessment is not specific to these two countries. In a sample of 23 European countries and the United States, there is virtually no empirical relationship between the actual size of inequality within a country and how critical people view these income differences to be.

Obviously, there might be a range of individual and national factors which may explain cross-country differences in critical views on income differences and related redistributive preferences.

For example, in line with the argument of the “American exceptionalism”, people in the United States might just accept certain inequalities as incentives because they believe in the chance of upward mobility.

On the other hand, Germans may be more convinced that income positions arise from luck or other exogenous circumstances, thus regarding inequality as more unfair, and therefore they might demand more state redistribution.

However, current research on mobility reveals that there is a tendency for countries with higher inequality to also be associated with less income mobility.

Looking instead at how types of societies are perceived – a questionnaire item also included by the ISSP – gives some clues: 54.2 percent of Germans believe that the bulk of the German population lives rather at the bottom of society.

To what extent does this perceived type of society match with actual income distribution in Germany? Although there are different ways of demarcating society into a “bottom”, a “middle” and a “top”, studies generally reveal that the middle class represents by far the largest group in German society.

In particular, independently from the chosen definition of income groups, people on middle incomes are far more numerous than those at the bottom of the income distribution scale. This rather pessimistic view on income equality is typical of the European countries studied.

In most countries, the population significantly overestimates the degree of inequality. This is particularly true for former socialist countries such as Hungary, Slovenia as well as the Czech and Slovak republics.

In Hungary, for example, 56.6 percent of the population views Hungarian society as “a small elite at the top, very few people in the middle and the great mass of people at the bottom”, although the country is characterised by one of the lowest income inequalities in the European Union.

Thus, it is not that former socialist countries view already small income differences as much more critical, but that the population is just not aware of the small level of income inequality.

The situation is different in the Scandinavian countries. Here the various populations are much more realistic about the low levels of inequality and truly identify their societies as “typical middle class models”.

In contrast to the European countries, the United States reveals a completely different picture: U.S. citizens substantially underestimate the extent of inequality in their country. The lower income group in the United States is considerably larger than Americans suppose

This varnished view on inequality in the United States is not new – but it is rather new that in European countries it tends to be the other way round.

These results provide an explanation of why redistributive policies find more support in some countries than in others.

Although results from previous ISSP surveys suggest that cross-country differences in views on inequalities and redistributive preferences tend to change slowly, it would nevertheless be interesting to see if critical views on income differences and redistributive preferences would change if citizens were aware of the actual degree of inequality in their countries.

Interestingly, the overestimation of inequality is adversely related to the absolute level of living standards in corresponding countries. Thus, it might also be the case that the perceived structuring of the society is more associated with absolute levels of living standards than commonly suggested.

(Edited by Phil Harris)

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