analysisBy Simon Mutinda
We recently asked 301 CEOs in 22 countries in Africa, including 31 CEOs in Kenya, if they plan to increase their company's investment in development. We also asked them to identify which among these development areas should be government priorities.
Among CEOs in Kenya, 87 percent say that their development investments are focused on building a skilled workforce. Sixty-seven percent prioritise workforce health and 58pc are working to reduce poverty and inequality. They say that government's top three priorities should be improving infrastructure (87pc agree), reducing poverty and inequality (81pc) and ensuring financial sector stability (45pc).
Comparing the results of these two questions helps us to gauge whether the public and private sectors are aligned on development priorities. In my view, there are a number of things that Kenya could do to improve alignment.
Operating environments conducive to growth
First, the private sector needs customers to grow their businesses and so government can facilitate an environment that enhances the purchasing power of citizens and stimulate aggregate demand for goods and services. We can also ask if there are blockages that stop consumers from buying goods and services. Are customers in survival mode - just spending enough on basics like education, health and shelter? As much as companies might want to grow their customer base, they may find that some consumers simply cannot afford their goods and services.
The cost of finished goods might be very expensive due to poor transport networks, the high cost of energy or weak enforcement of anti-counterfeit policies. We can look at what the government is doing to improve infrastructure and access to energy or prevent counterfeiting and evaluate these activities against their impact on consumers. According to our survey, many CEOs are investing substantially in telecommunications and Internet infrastructure, recognising the impact on their ability to realise growth opportunities. Here, too, government can facilitate deeper penetration of broadband Internet access, for example in rural areas, or by allowing tax-free investments in telecommunications infrastructure.
Attracting deeper investment
Second, county governments can provide incentives to attract new investors to their counties. A cheap labour force is no longer enough of an incentive; counties can differentiate themselves more effectively by investing in training programmes to build a skilled workforce that is attractive to manufacturers or technology companies, for example. Governments can offer incentives by setting aside economic zones for specific investors; it can provide power and water and other infrastructure in these zones to facilitate investors' ability to grow and expand profitably. Value addition for local primary products will enhance the economic productivity of the counties and ensure increased household income.
Developing agriculture and social sectors
Third, government and the private sector can work better together on social sectors like healthcare and education. Oftentimes, the cost of employer-sponsored healthcare is passed on to employees in the form of reduced cash compensation. If government was investing more substantially in healthcare, consumers would have more expendable income to buy goods.
Fourth, government can facilitate deeper alignment on agribusiness development. So much of our population in Kenya is reliant on agriculture and we need to ask what the government can do to streamline our agriculture industry, improve efficiency and create linkages to markets. If a Kenyan farmer wants to export tomatoes to the US, the government can facilitate access to the best extension services, seeds and inputs. Enhanced extension services and technology platforms can contribute to this effort by providing analysis and information about the best seed varieties for different environments, which inputs are required, where farmers will earn the best market prices and the best routes to market--improving the whole value chain of activities contributing to a more productive agriculture sector.
Another area where government can improve alignment on development priorities is information management. High unemployment is a real problem in Kenya. Improved information management on employment would allow the government to reduce unemployment by identifying who is unemployed, what skills they have and which skills are needed in the marketplace. In my view, counties are integral to the information collection effort whereas the national government can provide the framework and the imperative for collecting information.
The design of incentives like these should not happen in a vacuum; alignment should empower communities. With more money in their pockets, consumers can move beyond subsistence-level consumption. Improving the ease of doing business creates employment opportunities, investments in growth and innovation and more choices for consumers.
On-going dialogue between government and the private sector should inform not just incentives but also efforts to address blockages. A common understanding of these issues is the first step towards implementing a programme of action to address them progressively.
Simon Mutinda is a Partner with PwC Kenya's finance and accounting consulting practice and a public sector specialist. More information about PwC's CEO Survey is available at http://www.pwc.com/ke/en/africa-business-agenda/index.jhtml