16 June 2018

Kenya: Big Four Agenda at Core of Kenya Spending, to Spur Economic Growth

Kenya's draft budget has placed emphasis on the government's Big Four Agenda, meant to spur growth.

It entails boosting manufacturing activities, achieving universal health coverage, enhancing food and nutrition security and supporting the construction of at least 500,000 affordable houses by 2022.

To achieve these targets, National Treasury Cabinet Secretary Henry Rotich allocated Ksh460 billion ($4.59 billion) and elaborated strong monetary and fiscal policies to fund the agenda.

"We have curtailed resources going to lower-priority areas following the zero-based budgeting approach that we have adopted which has enabled us to redirect these savings towards 'The Big Four' and their enablers, while continuing with pro-poor expenditures in health, education and protecting the vulnerable," said Mr Rotich when he read this years budget.

The Big Four agenda is projected to result into an economic growth of at least seven per cent per year.

To achieve affordable housing, the government will give private sectors incentives to construct low cost housing as well as reduce corporate tax rates to 15 per cent for developers who construct at least 100 units per year.

Treasury CS is also seeking to have the Employment Act amended to make employers contribute to a National Housing Development Fund 0.5 per cent of the gross monthly pay, while the employee contributes 0.5 per cent of their monthly gross earnings subject to a maximum of Ksh5,000 ($498).

The Kenya Mortgage Refinance Company has also been formed, owned jointly by the government, private sector and select development partners. It is expected to make it easier for banks to access long-term finance for home loans.

The CS said government is banking on the manufacturing sector to provide jobs. He proposed establishing of leather parks and textile industries, reviving industries such as the blue economy and manufacturing of construction materials.

Textile and footware industry has been closing down due to secondhand clothing and shoes which Mr Rotich said will be tackled through a new import duty of $5 per unit or 35 per cent whichever is higher.

The government plans to increase contribution to the manufacturing sector to GDP to 15 per cent by 2022, by adding between $2 billion to $3 billion to the country's GDP which will create more than 800,000 jobs.

Investors ready to put money in specific areas will get tailor-made incentives like the Special Economic Zones where they will get cheap geothermal power generated and also benefit from Standard Gauge Railway.

Mr Rotich said the government would also invest in post-harvest handling as well as develop agro parks or hubs to serve as a link to farmers and markets.

Government has also placed a total of 700,000 acres through public private partnership to plant maize, potato, rice and feeds production and expanded irrigation schemes.

On health, government plans to roll out universal health coverage to all households by 2022, by reconfiguring the National Hospital Insurance Fund and reforming the governance of private insurance companies to align them to the universal health coverage.

A total of Ksh2 billion ($20 million) has been allocated to Free Primary Healthcare, Ksh0.8 billion ($7.9million) for Health Insurance Subsidy for the elderly and disabled and Ksh2.5 billion ($25 million) for the rollout of the pilot on the universal health coverage.

A comprehensive NHIF medical scheme for secondary school students intended to ease the financial burden on parents.

The free maternity programme, launched by the Kenya's First Lady in 2013, is also set to be expanded from the current public hospitals to mission hospitals and private hospitals and also have community health volunteers to help in service provision at the grassroots level.

According to an analysis by PwC, the implementation of the Big Four Agenda will require the government to support technology innovation as well as deal decisively with corruption.

"Implementation will require a different approach and commitment including an improved and targeted regulatory and legal environment, increased public sector efficiency as well as the adoption of modern business procedures," states the analysis.

The state also folded five kitties -- Kenya Industrial Estates, Development Bank of Kenya, Industrial Development Bank of Kenya, Uwezo Fund, Youth Enterprise Development Fund and Women Enterprise Development Fund, to form Biashara Kenya Fund, which will give loans to special groups for as low as six per cent interest.

Money borrowed from Biashara Fund will be used for business only, with applicants expected to prove they have established enterprises.

Other priority areas like education, though not under the Big Four has been allocated Ksh444.1 billion ($4.39 billion) with the government prioritising expansion of technical vocational education training infrastructure, hiring of training instructors, school feeding programmes, and ICT.

The CS apportioned Ksh59.4 billion ($0.6 billion) towards free day secondary education in a bid to sustain the 100 per cent transition policy initiated by the government in January.

Free Primary Education programme will take up Ksh13.4 billion ($132.5million) while Ksh4 billion ($39.6 million) will be spent on examination fee waiver for all Standard Eight and Form Four candidates.

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