RAMOGI: Excess campaign spending unhealthy for the economy

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It is estimated that Kenya will use about 100 billion shillings in this election.

This is the highest amount of money ever spent in an election in the country. It is also the highest in the region.

Presidential campaign spending will consume about Sh15 billion, the gubernatorial races will use another Sh15 billion, Senate and Woman Rep about Sh5 billion, parliamentary races Sh10 billion.

The race for Members of County Assembly will consume another Sh4 billion.

In total, the campaigns alone will cost Sh50 billion.

On the other hand, the National Treasury allocated a total of Sh50 billion for election spending, split between the current and the last financial years.

In addition, government has allocated about Sh33 billion to beef up the security institutions to be ready to secure the election.

NGOs receive about Sh90 billion a year, a figure that expands by about Sh20 billion in an election year.

The money is meant for election monitoring, independent opinion polling, advocacy and civil education.

In essence, therefore, the election spend this year is about Sh150 billion ($1.5 billion). That is about two per cent of GDP.

In principle, this is not a problem if the money were to be used in productive activities that create employment and improve the economy.

Unfortunately, this is not the case. However, most politicians print their merchandise in China.

This, after importing the four-wheel vehicles from Japan and the helicopters from South Africa and Europe.

Additionally, it is common knowledge that the electoral commission is printing its ballot papers in Dubai, after importing microcomputer gadgets.

As such, only a small percentage of it’s spend will be circulated in Kenya.

That is why, while the budgetary allocation is high, the economy is not feeling the money.

Economists are grappling with the reality of a dry election, while the Central Bank is working on overdrive.

The biggest spend today in Kenya is for workers, agents and media adverts.

The bulk of the money that could be used in multifaceted productive activities that spur growth end up in other countries while the rest of the money is given as handouts to voters by the candidates, pushing higher inflationary pressures.

This is the very definition of bad inflation.

The Election Financing Act that came into force in December last year was expected to put limits on campaign spending and discourage voter bribery.

The electoral had successfully put the limits on the different positions.

However, the Judiciary quashed the IEBC directive, leaving the field unregulated.

In 2007, at the height of political campaigns in Kenya, the economic indicators revealed a healthy economy that saw a 7.1 per cent growth.

By the time of voting in December of that year, Kenya’s inflation stood at 5.7 per cent.

However, the post-election violence combined with the drought and global economic recession led to a truly dark patch economically.

The country registered a paltry growth of 1.7 per cent in 2008.

Inflation rose to double digits, rising to 19.54 per cent in November of that year.

Strictly speaking, the economy has not been restored to its 2007 growth levels 10 years later notwithstanding an economic stimulus programme, annual significant investment in infrastructure, political reforms that ensured strengthening of key institutions of governance and diligent diplomatic efforts to attract foreign direct investment.

If this trend is anything to go by, then the real problems lie ahead.

Political rhetoric notwithstanding, the country has made some progress in the past five years.

There is need to invest in infrastructure if we are to attract key investments. The projects are not ill-timed.

Key reforms have been made to enhance ease of doing business in Kenya.

Energy exploration is ongoing and should result in lower fuel charges.

However, this progress is at risk given the liberal unregulated spending by politicians in this election coupled with poor governance.

In 2016, Tanzania attracted about $2.1 billion of foreign direct investment.

Uganda received $1.2 billion, Ethiopia $3.1 billion and Rwanda $400 million. On the other hand, Kenya received only $394 million.

All factors constant, Tanzania and Uganda would comfortably overtake Kenya in five years.

The growth figures seem to support this assertion.

Uganda did 4.8 per cent in 2016 and Tanzania 7.2 per cent on the strength of governance reforms by President John Magufuli.

Rwanda grew by 5.9 per cent and Ethiopia by 8 per cent.

Recently, I was asked if we in Kenya are worried about the real possibility of being overtaken by these countries economically.

I mumbled a bold answer to the effect that smaller economies tend to grow faster.

However, deep down, I know that our economy is under threat from excess spending in this election season.

Odhiambo is the CEO of Elim Capital @Odhiamboramogi