The Port of Mombasa on March 28, 2023.
Business
Premium
Ruto flips back to Uhuru footsteps as bitter economic reality sinks in
By now, the adage, “The more things change, the more they stay the same,” must have sunk in for President William Ruto who has been increasingly re-enacting his predecessor Uhuru Kenyatta’s script since he rose to power a year ago.
President Ruto’s Kenya Kwanza administration has been forced to regurgitate a lot of retired Kenyatta’s projects and policies, which they opposed while on the campaign trail-- pointing to a new economic reality that confronted them once they took over the reins.
Some of the policies and projects that the Kenya Kwanza administration opposed—and which they are either implementing or plan to roll out—include the plan to lease the assets and management of five critical sea ports including Mombasa and Lamu, reinject fuel subsidy and deploy the Kenya Defence Force(KDF) to implement public projects.
The Ruto administration had opposed a plan by Mr Kenyatta’s regime to lease out assets at the Mombasa port amid claims that they had been secretly sold to Dubai Port World FZE..
“Uhuru has agreed to a rip-off that will see a foreign privately registered entity – Dubai Port World FZE – take over these key national infrastructural assets. An accountable government should confide in Kenyans why national strategic and security assets are being handed over to a foreign entity,” said the then ANC leader Musalia Mudavadi in a statement.
Now, the Kwanza administration is targeting to lese out sections of Kilindini Harbour, Dongo Kundu Port, Lamu Port, Kisumu Port and Shimoni fisheries Port
The State projects to raise Sh1.4 trillion through the PPP exercise. Further, the government is seeking up to Sh42.1 billion ($304 million) worth of private investment into the Port of Lamu, with a big chunk of the money being used to develop the port’s agribulk and liquid bulk terminals..
Kenya Ports Authority(KPA) Managing Director disclosed that lack of funds had forced the State to lease out Lamu and Mombasa port assets for 25 years.
“The Mombasa Port, for instance, the four berths require more than Sh30billion to operate at maximmum capacity and the government cannot fund it. This is why were are inviting private companies to come and do the business” he said.
Apart from the port leases, President Ruto’s team was previously opposed aged by what they reckoned was themto the former regime’s penchant for increasing taxes and fiercely opposed introduction of the 16 per cent value-added tax (VAT) on petroleum products.
"Mine would be to ask the National Treasury to reconsider that provision or defer its implementation to allow.... commercial production of oil. When the prices come down, we can charge VAT on petroleum fuel," said Kimani Ichung'wah in 2021.
President Kenyatta, whose government agreed with the International Monetary Fund (IMF), to reduce debt vulnerabilities by increasing tax revenues compromised by putting the VAT, a consumption tax, at eight per cent.
However, in his first budget, President Ruto increased VAT on fuel to the standard 16 per cent, despite public outcry over the implication of the measure on the cost of living.
"The eight per cent will give us Sh50 billion to deal with roads across the country," Ruto said during an interview with major TV stations days after assenting to the bill.
He explained that because of the differential rates, eight per cent instead of 16 per cent, was used by some people as a loophole to manipulate numbers.
“The advice I got was that we must eliminate this loophole people are exploiting," added the Head of State.
Following the record increase in pump prices to over Sh200 per litre in the September/October period, Davis Chirchir, the Cabinet Secretary in charge of Energy and Petroleum, said the government could not reduce taxes on fuel as that was part of the agreement that Kenya had with the IMF.
“The pain is heavy, but there is nothing we can do,” said Chirchir.
Earlier, the government was forced to apply a fuel subsidy—which it insists is fuel stabilisation fund—to arrest the runaway retail price of a litre of fuel from crossing the Sh200 mark.
Among the first things that Ruto did when he came to power was to scrap the blanket subsidies on all fuels and maize introduced by his predecessor, and instead introduced subsidies on the diesel and fertiliser.
"In addition to being very costly, consumption subsidy interventions are prone to abuse, they distort markets and create uncertainty, including artificial shortages of the very products being subsidised," Dr Ruto said in his inauguration speech.
In his first public speech after being nominated as the Defence Cabinet Secretary, Aden Duale said the Kenya Kwanza administration would employ the military in civilian duties.
“I think it was wrong to bring Kenyan Defence Forces generals to run Nairobi, a devolved function. You cannot just wake up and remove a general from the barracks,” said Duale when he was sworn in.
Besides appointing a military person, Lt. General Mohamed Badi, to run the Nairobi Metropolitan Services (NMS), Kenyatta also enlisted the military to run the cash-strapped Kenya Meat Commission and to refurbish old railway lines.
This ‘militarisation’ of the public services was opposed by the Ruto team.
But it looks like Ruto’s government is retreating from this position, and has recently been using the military for various civilian roles.
The government deployed the military to aid in refurbishing the Kenyatta International Convention Centre (KICC) ahead of the Africa Climate Summit held in Nairobi in September 2023.
KDF were also been enlisted to refurbish both the Nyayo Stadium and Moi International Sports Centre, Kasarani, as part of the country’s preparations to host the 2027 Africa Cup of Nations tournament.
President Ruto has also come up with his own version of Huduma Namba, a system that sought to consolidate all primary data on Kenyans into a single database.
Last week, the government unveiled Maisha Namba, a digital ID, on Friday in Nakuru by President Ruto.
Maisha Namba, which government officials insist will not be compulsory, mirrors Uhuru Kenyatta’s Huduma Namba.
President Ruto’s government first signaled the end of the National Integrated Identity Management System (NIIMS), well known as Huduma Namba, with a deep budget cut of Sh574 million.
In the mini-budget for financial year 2022/23 this was a reduction of 84 per cent from the allocation of Sh680 million for the previous regime's controversial system. Huduma Namba cost taxpayers Sh10 billion.
“We are all aware that there was another phantom project called Huduma Namba that was a complete fraud. We lost Sh15 billion and got very little out of it,” said Ruto.
The current administration insists there are differences between Maisha Namba and Huduma Namba.
