7 October 2008
editorial
Nairobi — President Kibaki has responded to the cry of the people, and to big industry's spirited lobbying, when he announced a plan to reduce tax on electricity as a way of making it cheaper.
But while this is welcome, it will only succeed if it is pursued as part of a package to make Kenya an attractive investment destination.
Kenya's electricity bill has become steeper following a 20 per cent increase in July.
And the overall prognosis has been worsened by a similar upswing in the price of fuel, which is responsible for a huge fraction of the electricity bills after Kenya resorted to thermal generation to plug a widening national deficit.
Egypt, which has traditionally been Kenya's biggest competing economy in the Comesa bloc, pegs its electricity at 4 US cents per kilowatt hour against Kenya's 21!
Still, as we tweak with the electricity equation to see what can give, our eyes must remain trained on the bigger picture. Electricity is just a small variable. Several factors are to blame for the bigger tragedy -- Kenya's deepening loss in overall competitiveness.
According to a World Bank report on competitiveness, Kenya slipped 10 places from the 82nd slot it occupied last year on the back of business licensing reforms. Significantly, it was nowhere among the top 10 reformers this year.
With most African economies fast gaining ground, Kenya runs the real risk of losing its industries. Advances in technology and transportation mean it is now quite easy to move a factory from Mombasa to Alexandria.
Also, we have no known natural resources of the type that has made emergent African economies like Angola, Mozambique, Chad and Equatorial Guinea top magnets for foreign direct investment, despite their relatively poor operating environments.
In fact, it is quite telling that most of the impressive $728 million foreign investment that made it to Kenya last year was through divestiture and liberalisation deals.
That is why, in the rush to fix electricity costs and enact "flavour of the month" measures, we must take a long-term view, in which key variables like port operations, water, roads and tax policy must not be forgotten. Infrastructure is the key.
Copyright © 2008 The Nation. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.
AllAfrica aggregates and indexes content from over 125 African news organizations, plus more than 200 other sources, who are responsible for their own reporting and views. Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica.
Read comments. Write your own.
