Kenya has an acute problem of joblessness. Thousands are graduating from secondary schools, colleges and universities and finding no work in the marketplace. The Jubilee government has attempted to remedy this problem by investing in publicly funded capital-intensive projects.
It hoped that doing this would create direct jobs in the form of labour employed by the contractors, plus the trickle-down effect. Further, it is hoped these publicly funded projects would attract the private sector, hence create jobs for the youths.
However noble the intentions, the government has not achieved its goals for three reasons.
First, direct jobs created by the contractors undertaking these publicly funded capital-intensive projects are too few vis-a-vis the capital employed. The Nairobi Expressway, for example, has used about Sh80 billion. Admittedly though, it has a private sector outlay. However, the project has created only 3,000 direct jobs. Second, the trickle-down job-creating effect takes time. Such projects often take five years to complete.
Thereafter, more time is needed for an investor to see the good infrastructure, spot an opportunity, mobilise capital and open business and create sufficient jobs. Finally, public debt has grown exponentially to finance this approach. Since Kenya’s public debt has been acquired from external sources, it is to be paid along with interest in foreign exchange. Valuable foreign exchange will thus be flown out. Inflationary pressures on the economy will mount.
This leads to an outflow of wealth to the foreign countries. The government has to borrow afresh to repay the old loans. There is also the capital displacement effect. When the government borrows, there is diversion of society’s limited capital from the productive private sector to the public sector. The shortage of capital in the private sector will push up bank interest rates through the 'crowding out' effect .There will be less private sector investments and hence fewer jobs .
The Kenya National Bureau of Statistics publishes official joblessness data annually which show good rates of employment. This information is often greeted with scepticism. Objective signs of joblessness exist everywhere in Kenya. They include mass emigration by Kenyan youth into risky labour-deficit destinations such as Saudi Arabia and Qatar, which do not uphold human rights.
I am not opposed to these projects. Indeed they will yield fruits in the long term. But the government should also focus on better job-creating sectors as well.
Elections offer an opportunity for Kenyans to evaluate politicians' policies on how to handle unemployment. In my humble view, the best remedy for unemployment has been made by Dr William Ruto. He has championed two key interventions. He proposes to focus on public housing. It is possible to raise private capital to finance public housing, hence there will be no additional taxes and public debt. Second, jobs created by public housing projects will be many.
Sh80 billion in privately obtained capital can establish 80,000 housing units, each employing 10 persons directly, hence totalling 800,000 direct jobs. These housing projects will be spread across the entire country, assuaging complaints of skewed regional development.
This policy has another set of 'hidden' but most impactful benefits. It will hasten urbanisation. Urban areas in developed countries host an average of 80 per cent of their citizenry.
It is not a coincidence that the latest economic data published by the Finance Cabinet Secretary shows that counties with the greatest GDP are urban. Public housing, being a strong feature of urbanisation, helps congregate people. This makes the cost of providing public services to fall, including water and electricity. Public money saved thus will be used to undertake other job-creating works.
Dr Ruto has also proposed that the government should cut domestic borrowing and consider borrowing from the National Social Security Fund (NSSF). The fund has mobilised public money and is currently at liberty to invest as its actuaries deem fit, of course whilst adhering to the legal limitations.
This has made the NSSF an avenue of corruption as players jostle to direct NSSF investments. Meanwhile, government domestic borrowing has crowded out private sector capital, causing unemployment.
But if government was to legally give NSSF pre-emptive and preferential rights to purchase its bonds, this twin problem would stand solved.
Ideally, pension assets should be more than 100 per cent of a country’s GDP.
Dr Kang’ata teaches law at Catholic University of Eastern Africa. He is the Murang’a senator and a former Chief Whip of the Senate.
