Why we should bank on the private sector for economic growth and resilience

BY BENARD AYIEKO The burden of economic growth and development in the modern world has squarely been put on the shoulders of the private sector, which is that part of the national economy that is not under direct control of government and encompasses all for-profit businesses that are not owned or operated by the government. There are three ‘economies’ within the main economy; public, private and voluntary sectors. Public sector comprises of companies and corporations that are run by government officials referred to as civil servants. In this sector, all the operations are regulated and dictated by the government. The voluntary sector constitutes charities and non-profit organizations. The private sector remains a key engine that drives economic growth and development in most economies across the globe. In a broad sense, a country’s private sector is that subset of the national economy that is owned, controlled and managed by private individuals or enterprises. The main objective of the private sector is to create wealth for the enterprise-owners by making money. The private sector achieves its objective of creating wealth by assembling inputs that are used in the production of goods and services in order to make economic profits. The main factors of production are; land, labour, capital and entrepreneurship.  The reward for land is rent, labour is wages /salaries, capital is interest and entrepreneurship is profit. Therefore, the role of the private sector in economic growth and development of a country cannot be gainsaid in the current global economic order. Infact, a vibrant private sector is widely acknowledged to be an essential component in the alleviation of poverty as a means of providing bountiful economic opportunities. In an election year when most economic indicators are expected to be bearish, there is need to review the role played by the private sector in the economy and relate it to its impact in fighting poverty and creating jobs. Besides promoting economic growth and helping in poverty alleviation, private enterprises contribute immensely to job creation especially for the youth and women who form the bulk of the unemployed. Private enterprises are also a source of household incomes that help to better the standards of living. Therefore, supporting the private sector to thrive through provision of conducive business environment and increased entrepreneurial capacity building is a major stride towards achievement of sustainable growth. Kenya Private Sector Alliance (KEPSA) is the private sector apex and umbrella body set up in 2003 which brings together business community in a single voice to engage and influence public policy for an enabling business environment. With over 100,000 members, KEPSA continues to champion the interest of Kenyan business community in trade, investment and industrial relations. Since its formation, KEPSA has been the collective voice of the private sector serving as a bridge between the business community and government in creating and enhancing a conducive business environment. In East Africa, Kenya’s private sector has distinguished itself as the most vibrant, competitive and innovative organization taking up a central role in promoting sustainable and inclusive economic growth towards the realization of Vision 2030. At a time when the country is facing high unemployment rate, the private sector body has been advocating for business and other economic reforms that will foster job creation to absorb the ever-increasing number of jobless graduates. According to the Economic Survey 2016 published by the Kenya National Bureau of Statistics, the share of private sector employment in the modern sector employment was 71% in 2015 representing a slight growth from 70.4% recorded in 2014. At the same time, the private sector registered a growth of 5.4% in employment levels compared to 4.4% in 2014. Aggregately, private sector created 902,000 new wage employments to 696,000. This is why a dynamic private sector will always be the panacea to the most economic challenges facing any country. For the private sector to play its rightful role in economic transformation agenda, there is need for urgent reforms aimed at improving business environment, reducing the cost of doing business by reviewing obsolete laws and business procedures, improve access to credit, increase participation of marginalized groups in the formal sector, establishment of trade facilitation and investment centres at the county and national levels, among others. A strong private sector stimulates entrepreneurship and investment growth, increases productivity through greater competition and innovation, harnessing international linkages through trade and investment, strengthening market access and functioning, reduces risk, uncertainty and vulnerability. This is the surest way our economy can consolidate and entrench past and present economic gains so as to cause meaningful economic transformation for mwananchi.

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