Fixation with a free-market economy won’t get us anywhere

 

BY PETER WANYONYI

Development is a function of policy; its execution, enlightened policies, coupled with effective and efficient execution, are the reason countries like Singapore have turned into developed countries from what were malarial swamps just a few decades ago. 

In development discourse, two approximate paths are easily discernible: There is the strong, firmly-controlled and centrally-planned mode of development favoured in South East Asia – Singapore, Malaysia, Taiwan, South Korea, and Hong Kong – and now in Rwanda. This model prioritises large national champions, calls for heavy investment in national infrastructure and in national industrial champions, and is very top-heavy. The results are usually that massive industries are set up, manufacturing becomes a cornerstone of the economy, and manufactured exports take a place of pride in the economy. Today, the most famous example of this model is China, which is using heavy manufacturing to create hundreds of millions of “hard” jobs –in manufacturing, telecoms equipment research, development and sales, in being the world’s factory, effectively. In East Africa, the two countries most resembling China in this centralised planning and execution are Ethiopia and Rwanda. The latter is hampered by a lack of natural resources and a small land area, however, and without a natural port through which to export manufactured goods, has to resort to “soft” jobs in the services sector.

There is another model, however, centred on providing the soft services that add value to manufactured items. It is commonest in democracies, in places where regulatory red tape makes it difficult to make the sort of big decisions needed to facilitate large-scale manufacturing. In organised, well-run places, this model is capable of delivering jobs, though not to the same extent as the centrally-planned model. Additionally, the jobs created using this model  pay handsomely but are relatively few. In information technology, these jobs involve software development, the creation of apps for mobile devices, and the creation of application systems to automate office and similar administrative tasks in such professions as accounting, banking, and so on. The most famous example of this model is, undoubtedly, India. This model of development is most at home in noisy democracies, where the relatively low level of investment needed to spur growth of add-on services is easy to find, and the regulatory hurdles few and far between. Perhaps the best example of such a service is M-Pesa, Safaricom’s famous money transfer platform that was developed with little regulatory oversight and which has grown into a massive industry.

Kenya has struggled to get into manufacturing, whether in technology or other sectors. Sugar factories in Kenya are failing, one after the other. Cotton factories all crumbled a long time ago. We had chemical and paper manufacturing, which also died. We even had computer assembly plants that were crippled within months of being set up – most investors fled to South Africa, or folded. A comparison between India and China on almost any parameters shows that it pays better to adopt China’s approach, especially in technology. When the Jubilee government wanted to execute its promise to give each Class One child a laptop, the initial bid was won by an Indian company which, it turned out, was relying on a Chinese firm for the actual manufacture of the devices. Unfortunately, Kenya seems set on the India path. This path is marked by several policy characteristics.

First, there is an astonishing level of corruption in the public sector. This, in turn, translates into gross inefficiency and ineffectiveness in public infrastructure facilities. Kenya, for example, has had an electricity generating company since about 1904, but barely 20 per cent of the population is connected to the grid, and those that have it are subjected to unreliable supply, too unreliable to be used as a base for any serious manufacturing industry. 

Without technology infrastructure, like good, reliable electricity and excellent telecommunications, there cannot be a real technology sector, save for services. We cannot manufacture computers, assemble mobile phones, or even put together good old telephones. The few services that we can slap onto manufactured items from elsewhere – such as modifying the software that runs them – are all reliant on highly-educated, highly-paid programmers, who tend to be very few and whose overall economic impact is almost zero.

And so Kenya muddles on in IT policy, stuck in a rut in out of which it cannot lift itself. The government ICT board is little more than a group of salary-chasing mandarins, many owing their positions more to cronyism and tribal favours than to actual expertise in information technology policy midwifery. The implication is that we will be able to provide the sort of ICT services that are the result largely of individual enterprise – like apps development – but we will never get to the point where ICT provides the job numbers that it can, given the opportunity, enable it to go into ICT manufacturing. Kenya, almost invariably, has turned into a noisy talk shop in which policy is discussed and formulated but never implemented, in which government plans are rolled out with much fanfare but never actualised, in which life is all about show and never about execution. We have, in other words, become the region’s India to Ethiopia’s China. In 20 years, Kenyans will be trooping to work in Ethiopian factories.

 

…Unless there is a massive policy change.

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