A new World Bank report has pointed to why the late President Mwai Kibaki was Kenya’s best chief executive yet after his economic policies did the most to cut poverty rates — especially among rural households — in the period between 2005 and 2015.
The report, which was unveiled on Thursday, noted that the massive reduction in poverty during this period also coincided with a period when Gross Domestic Product (GDP) per capita grew faster with private consumption playing a bigger role.
The pace of reduction in the poverty rate, the multilateral lender noted, has since slowed down with the share of Kenyans falling below the poverty rate increasing in 2020 due to the negative effects of Covid-19 pandemic.
“The decline (in poverty rate) was particularly impressive between 2005 and 2015, with a 10.6 percentage-point decline from 46.7 to 36.1 percent, translating into an average annual reduction of 1.1 percentage points,” said the World Bank in the Kenya Poverty and Equity Assessment 2023 report.
The report that collates data from the Kenya National Bureau of Statistics (KNBS) shows the number of poor individuals in the Kibaki regime also declined from 16.5 million to 15.8 million even as the population grew.
According to the report assessing the country’s poverty and equity, the rate of poverty reduction has slowed down since 2019 despite what has been the transformation of the economy away from the traditional and mainstay agriculture sector.
The study documents recent progress in poverty reduction in Kenya and identifies priority policy areas of a strategy to make growth more inclusive, accelerate poverty reduction, and boost equity. The World Bank noted the poverty reduction coincided with a period of robust GDP per capita growth, along with a strong growth in private consumption, an indicator that businesses and households had a conducive environment to invest.
“The pace of progress slowed between 2015 and 2019, with an average annual reduction of 0.6 of a percentage point,” the World Bank said.
Mr Kibaki, who died in April last year, was Kenya’s President between 2003 and 2013 having inherited a run-down economy from Daniel Arap Moi who was was in charge for 24 years.
Although Kibaki was replaced by Uhuru Kenyatta in 2013, his policies continued to affect the economy up to 2015, with the urban poor and farmers in rural Kenya benefiting the most.
“Poorer rural households benefited more from growth during this period. In rural areas, the consumption of the bottom 40 percent grew at an annualized rate of 2.5 percent per year between 2005/06 and 2015/16, compared with 1.3 percent per year for the total population and 0.7 percent per year in urban areas,” says the report.
Wahoro Ndoho, an economist, attributed the substantial reduction in poverty rates during the Kibaki years to “economic philosophy” more than “economic policy,” noting that the Rainbow Coalition led by the country’s third head of State took over when the country was at a low economic ebb.
“It is also because we were coming off a very low base…having suffered the better part of 15 years of decline,” he said.
“But then also, the secret ingredient is not so much economic policy but economic philosophy,” added Ndoho, explaining the economic philosophy entailed mostly getting the government of citizen’s lives in every way.
The move by the government to get out citizen’s lives, including by staying out of the domestic debt market, the economist noted, had a major impact on Kenyans at the bottom of the pyramid, including those in rural areas.
“Growth came from…much more efficient government and an economic philosophy of getting government out of the way of the private sector.”
It was also in the Kibaki era that the stock market had a long bull run with the Nairobi Securities Exchange-20, an index of blue chip companies listed on the bourse , touching a peak of 6,161.46 in January 2007.
The William Ruto administration, which has made no secret that it would like to emulate the late President, has also prioritised empowering Kenyans at the bottom of the pyramid.
Despite the correlation between growth and poverty reduction, the World Bank notes the relationship has weakened amid the creation of low-quality jobs in the informal sector.
“Economic transformation has resulted in the services sector increasingly becoming the engine of growth, but the poor have not reaped the benefits because they tend to be in low-productivity informal work in the services sector, largely in self-employment or informal wage employment,” the report notes.
Economic benefits including wages for skilled workers in the services sector have been relatively higher in contrast to low-skilled workers, resulting in the weakening relationship to poverty reduction.
The share of the gross domestic product (GDP) of traditional sectors such as agriculture and manufacturing has been declining while sectors such as transport and storage, accommodation and food services have been on the rise in recent years.
Data from the KNBS, for instance, shows the share of agriculture to GDP has declined from 22.7 percent in 2020 to 21.2 percent last year while the contribution of transportation and storage has grown to 12.4 percent as of 2022 from 11.6 percent in 2021.
Jobs creation in the period has nevertheless remained concentrated in the informal sector, revealing difficulties of creating formal/modern jobs.
The 2023 Economic Survey shows that wage employment in the formal sector increased by a mere 109,000 last year against a jump of 703,000 jobs created in the informal sector in the same period.“The youth and women, particularly in arid areas, participate less in the labour market than other groups, driven by a lack of suitable jobs in the area linked to low non-farm diversification, while for women, family responsibilities are associated with low labour force participation,” the World Bank report adds.
The World Bank has called for the transformation of agriculture and services as a cure to the slack in poverty reduction, noting that the poor’s productive capacity is mainly deployed in the two sectors.
