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 Manuel F. Montes
GENEVA, Nov 12 2014 (IPS)

As the international community wades into the political discussions regarding the alternatives to the Millennium Development Goals (MDGs) after 2015 and the design of the Sustainable Development Goals (SDGs) as mandated by the Rio+20 conference, it is timely to consider the question of whether development is a matter mostly of individual effort on the part of nation-states or whether there are elements in the international economic system that could serve as significant obstacles to national development efforts.

If there are obstacles in the international economic system, it is important that the post-2015 development agenda and the SDGs address the question of the elimination or the reduction of these obstacles.

Manuel F. Montes

The limited number of successfully developing countries since the 1950s has provoked a debate over whether the success of these countries required their success in eluding international obstacles to development.

The question is to evaluate features of the international system on the basis of how these features are conducive to enabling long-term investment toward economic diversification.

Terminologies of previous development orthodoxies litter the development literature – import substitution, industrialisation, basic needs, structural adjustment, Washington Consensus and Millennium Development Goals (MDGs).

Each of these orthodoxies tended to be a reaction to perceived weaknesses or missing elements from the immediately previous one. The most recent orthodoxy, as exemplified by the MDGs, is that development is about poverty eradication.

But poverty eradication is an overly narrow, possibly misleading, perspective on development.“Poverty eradication is a desired outcome of development but its achievement is permanent only with the movement of a significant proportion of the population from traditional, subsistence jobs to productive, modern employment”

Poverty eradication is a desired outcome of development but its achievement is permanent only with the movement of a significant proportion of the population from traditional, subsistence jobs to productive, modern employment.

The association of development with poverty reduction created for the donor community the pride of place in economic policy in developing countries.

But this place can be at the cost of reducing the responsibility of donor countries in helping to maintain an enabling international environment for development in trade, finance, human resource development and technology.

In the MDGs, these issues are crammed into “MDG-8”, the so-called global partnership for development, with a very selective and poorly defined set of targets.

Development requires not just higher levels of income, nutrition, education, and health outcomes but in the first place involves higher levels of productivity and capabilities.

Higher levels of productivity and capabilities are possible only with structural transformation of the economy.

In turn, in most societies, according to a report by the Secretary-General of the U.N. Conference on Trade and Development (UNCTAD), such a structural transformation has been “associated with a shift of the population from rural to urban areas and a constant reallocation of labour within the urban economy to higher-productivity activities.”

Structural transformation is only possible with substantial and sustained investment over decades in new activities and products, not just in anti-poverty programmes.

Where the international economic system is hostile to investment in new, productivity enhancing economic activities is where its elements create obstacles to development.

One example of an externally based obstacle is aid volatility which has been shown to have highly negative impacts on macroeconomic performance and domestic investment.

Capital and technological investments are required to overcome the enormous productivity gap between developing and developed countries which characterises the world economy.

In 2008, a ratio of the average Gross National Income (GNI) per worker in the countries of the Organisation for Economic Cooperation and Development (OECD) versus those in the least developed countries (LDCs) was 22:1 in favour of the OECD countries.

This imbalance has worsened by a factor of five in comparison to the earliest days of capitalist development. In the nineteenth century, taking the Netherlands and the United Kingdom as the richest countries and Finland and Japan as the poorest, the productivity gap was only between 2 to 1 and 4 to 1.

The international economic system is lacking crucial mechanisms for delivering long-term, stable resources required by developing countries to upgrade their capabilities.

Dependence on commodity exports sustains the productivity gap between developed and developing countries.

Abundant global liquidity and growing trade imbalances fuelled a commodity boom in the 2000s which benefited many developing countries, including many LDCs.

All previous global liquidity booms had ended with serious economic crises in developing countries. The more recent commodity price boom did not introduce an enduring improvement in macroeconomic balances, especially for low-income countries (LICs).

While in the 2000s LDCs experienced the strongest growth rates since 1970s, according to UNCTAD, more than one-quarter of LDCs actually saw GDP per capita decline or grow slowly in the 2002-2007 global boom.

Even the middle income region of Latin America presents evidence of insignificant structural improvement in fiscal and current account balances.

Previous commodity boom periods had similarly not been an occasion for structural change in LDCs. UNCTAD suggests that between the 1970s and 1997, manufacturing as a proportion of GDP increased by less than two percentage points in LDCs as a group, a period which saw various episodes of commodity and global liquidity booms.

When considering LDCs from Africa alone and including Haiti, manufacturing fell from 11 to 8 percent during the same period.

Developing countries had extensively liberalised their trade regimes in the 1980s. In the aftermath, UNCTAD finds that some LDCs have more open trade regimes than other developing countries, and others are more open than even developed countries.

These policies had been intended to facilitate economic diversification. Instead of the expected outcome, greater trade liberalisation has been accompanied by greater concentration in the structure of exports.

The international economic system labours under the constraint that the highest decision-making bodies in key institutions, such as the International Monetary Fund (IMF), do not provide sufficient voting weight and policy influence to countries most affected by their operations.

One effort under way but under enormous political obstruction is to update voting weights in line with the changed economic structure. Even the G20, where important developing countries sit, has been unable to advance progress. (END/IPS COLUMNIST SERVICE)

(Edited by Phil Harris)

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

*  Click here for the Research Paper on which this column is based.

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