Kenya Faces Risks That Led to Europe Recession [OPINION]

Like in the case of the global financial crisis of 2008, irresponsibility will be the downfall of Kenya’s economy.

  President Uhuru Kenyatta with his deputy, Mr William Ruto (left), when he launched the Ethics and Anti-Corruption Commission Strategic Plan of 2013-2018 in Nairobi recently. FILE

President Uhuru Kenyatta with his deputy, Mr William Ruto (left), when he launched the Ethics and Anti-Corruption Commission Strategic Plan of 2013-2018 in Nairobi recently. FILE

Kenyans watched in 2008 as the world’s most advanced economies were brought to their knees by a quick series of events.

The domino effect of what started in the US mortgage sector ended in a catastrophic global financial and economic meltdown. Investments, jobs, savings and homes worth trillions of dollars were lost.

Memories of 2008 may have faded by now, but a keen look at what went wrong and crashed some of the world’s strongest economies returns the verdict that it was all the product of irresponsibility and greed.

Likewise, there is no need to use any other terms to describe what is going on in Kenya today.

All rational citizens know that our economy faces immense risk in the huge national wage bill, the wastage of State resources and rampant theft and corruption.

It may appear as an over exaggeration, comparing a massive global event to our local situation. Perhaps not, if you really think about it properly.

The very elements that lead to the global financial and economic crisis, are here; recklessness, greed, fraud, irrational thinking, lack of government regulation and lack of accountability.

Prior to the global financial crisis of 2008, things could not have been better. Everyone in the developed part of the world was under the illusion that the good days of spending sprees would last forever.

Both households and government alike spend more than they made and borrowed the balance on the basis of wrong fundamentals. They borrowed and spent on a misrepresentation that was peddled to them by clever bankers.

When cracks began to appear, those who knew the whole truth cashed out early and emerged unimaginably rich. The majority were not so fortunate.

Millions of people were ravaged by the ensuing crisis as homes and jobs were lost. The bankers who had set up the platform enriched themselves and cashed out at the earliest opportunity.

In the end, very few were brought to account and all they got was a slap on the wrist. Millions of citizens, who were the victims of the scam in the first place, were left to shoulder the aftermath by suffering pay cuts and other forms of government austerity.

In Kenya, the government has to deal with its gigantic wage bill, filling the holes left behind by systemic graft and absorbing the accompanying wastage.

If it does not take steps to curb the recurrent expenditure and stop the theft and wastage of taxpayers’ money, it must prepare for the hard run.

The State will soon find that it is completely unable to run its affairs or honour its debt obligations without taxing the citizens more and charging more for public services.

Punitive taxation and fees will make it impossible for ordinary citizens to save, invest or do business raising the spectre of massive shutdowns and capital flight that culminate in loss of jobs and a worsening of the unemployment situation.

That is not all, that sequence of events leads to an even more desperate situation for the government whose tax revenues are bound to dip significantly forcing upon the country austerity measures.

Experience with austerity throughout the world shows that its most notable impact is to widen the gap between the rich and the poor setting the stage for social disharmony.

Like in the case of the global financial crisis of 2008, irresponsibility will be the downfall of Kenya’s economy.

So far, it has become clear that the government is wanting in regulation and control just like it happened in the USA over a different matter.

There is also absolute ignorance in many quarters of what Kenya really faces in its current predicament much like was the case with the citizens of the US at the time.

As it were with the global financial crisis, there are those who caused it, and are aware of what is going on, but are bent on defrauding the nation and cash out before it’s all over and there is nothing left to take.

Greed is the biggest common denominator in both situations. When it all falls apart, in both cases very few are ever brought to account for plundering the economy. It is the citizens who are left to pick up the pieces.

Perhaps President Uhuru Kenyatta should take a very honest look at things and make a firm decision to plug the holes that are bleeding the economy dry. A cut off his pay is well-intentioned, but is it a stitch in time?

Every time someone raids the national till earning an inflated pay, pockets an underserved allowance, the multiplier effect draws us closer to the edge.

Whatever needs to be done must be done now. Time is of the essence. The global financial crisis sparked off in one weekend and spread like wild fire.

When Kenya situation explodes, let’s not imagine for a second that we’ll have time to stop and pick up our belongings. It will be much like a tsunami.

The crisis we are facing may not bear the ability to bring down the rest of the world, but it can certainly re-write Kenya’s economic story and wipe out what the country has achieved 50 + 1 years on.

As responsible citizens, we need to borrow lessons from the mistakes of others no matter how far-fetched they appear. Though Kenya’s drawing of inferences from the global crisis may amount to over preparing, it is not necessarily a bad thing.

Ms Mugo is a Mombasa-based finance professional. E-mail:cmugo1@gmail.com

– Business Daily