Why Kenya does not need a post-Covid Marshall Plan - Beaking Kenya News

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Sunday, 5 July 2020

Why Kenya does not need a post-Covid Marshall Plan

EU Ambassador Simon Mordue signs a contract withTradeMark East Africa CEO Frank Matsaert for a €5 million grant for Safetrade grant on June 16.

I have been asked by this paper, given the substantial support that the EU and Team Europe has given to Kenya during the Covid-19 crisis, to speculate on Kenya's prospects for a swift economic recovery after the crisis, and on Kenya’s need for a 'Marshall Plan'.

I will start with a spoiler.  On the prospects for a swift economic recovery in Kenya, ‘yes, they are good’. On whether Kenya needs a ‘Marshall Plan, it is both a ‘no‘ and ‘yes’.

Kenya may need further financial support that is genuinely concessional, coupled with sound financial management and debt consolidation. However, what it needs most is a homegrown economic recovery plan that builds on Kenya’s strengths.

From the outset, I must confess that whilst there is much to admire about the original Marshall Plan, not least the support it lent indirectly to European unity, I am not a fan of the more recent use of the term. It has been wheeled out indiscriminately in response to various circumstances.

A 'Marshall Plan' is what some Iraqi leaders called for after the Islamic State of Iraq and the Levant (ISIL) was defeated, ignoring the fact that Iraq is a very well-resourced country.

A 'Marshall Plan'was the supposed answer to Bosnia and Hercegovina’s woes post-1995. This is also why I am not a fan of the term in the context of the EU’s post-Covid-19 recovery. These calls ignore the very different underlying conditions that each of these countries faced, and that Kenya and the EU face today, compared with the situation in Europe after World War II.

For a start, whilst Kenya has been economically very badly hit by Covid-19, like all economies around the globe, it is not emerging from a war that has destroyed its means of production and transport.

Kenya has not lost its external markets, in particular its significant ones in the EU, which are picking up after a four-month hiatus. Nor has it lost markets in neighbouring countries, with the EU having played an important role in supporting trade flows in East Africa during this period. More crucially, Kenya’s workforce, much of it highly skilled, has not been wiped out in armed combat. Many Kenyans have lost considerable amounts of income and some are in a precarious situation, so Kenyans are raring to go back to work.

This is not to underestimate the soul-searching that the Covid-19 pandemic has triggered in Kenya, the EU and across the globe, and the questions it has raised: What positives can we draw from the crisis?

Should the crisis spur us into making painful adjustments that were overdue anyway, such as a more rapid transition to greener and more circular economies, and an upgrading in digital and other technologies?

The EU is still looking into the answers, but whilst Marshall Plan type interventions might help, they do not on their own provide a satisfactory answer, neither in Kenya, nor the EU. Financial support needs to be underpinned by a transformative vision of economies and their governance, much like the economically and politically transformative creation of the European Communities. These concepts far outstrip the relative simplicity of the 1948 Marshall Plan.

What this could mean for Kenya, in my view, is an assessment of how the present situation can be used to achieve the objectives that the Kenyan people and their government have set themselves long before. Just as Covid-19 will not wipe out Kenya’s infrastructure or the work force, unfortunately the old enemies of debt and corruption have not gone away either.

Kenya needs to build on the positive agenda of the Big Four to move its economy forward. The good news is that just in these past four months, Kenya has made progress on the manufacturing and healthcare front in response to Covid-19, finding ways to produce its own PPE and boosting its healthcare capacities with remarkable speed and adaptability. This illustrates that Kenya is more than capable of making transformative changes when the pressure is on.

Kenya entered the crisis with a relatively high debt burden. Whilst it may be inevitable that Kenya engages in further borrowing of genuinely concessional loans in order to fill its financing gap — including such that the European Investment Bank (EIB), the EU Bank, may be able to provide — or that it rolls over it debt obligations, more emphasis needs to be put on growing the productive part of the economy, unleashing the economic power of Kenya’s youthful, digitally connected population, sustainably harnessing Kenya’s natural capital, and attracting more private investments, to make it all happen.

Kenya can further boost its labour force’s skills building on its successful TVET programme and in doing so set the right enabling conditions to allow growth and ingenuity to prosper. Such an approach needs to tackle the high rates of inequality in Kenya.

‘Leaving no one behind and assisting the most vulnerable first’ needs to be the watchword of a social contract that must benefit all Kenyans. In this way, Kenya will reap the benefits of the future continental free trade area even more.

The EU can and is already supporting Kenya in these endeavours. The EU’s ‘plans’ are called the 'EU-Africa Alliance for Sustainable Development', the 'ommunication on a Strategy with Africa' of April this year and the December 2019 'Green Deal'.

These are based on a philosophy of partnership, not the old donor-recipient relationship, and are about finding ways to support home-grown investment, manufacturing, and job creation in Kenya and across the continent. These can be supported by external injections of grants and highly concessional, non-commercial loans, or a blending of the two, from the EU, from EU member states or Kenya’s other partners.

Some quick gains will certainly be made in the tourism sector, drawing on Kenya’s status as a unique tourist destination, not least for European tourists. However, ultimately any support that is provided will only have a lasting effect if Kenya has a clear, cost-effective, sustainable and public-benefit oriented economic plan, preferably one that is focused on recovering better and greener.

The EU and the EU member states, together with the European Investment Bank and the European development finance institutions active in Kenya — Team Europe — have been a friend in need to Kenya during the Covid-19 crisis and will continue to be here as the repercussions hit and beyond.

The EU is Kenya’s biggest export market, its biggest source of foreign direct investment and home to a bulk of Kenya’s tourists. We are hoping to deepen the strategic relationship with your government further for the benefit of Kenyans.

Komesha korona, but not with a 'Marshall Plan'. Kenya and the EU can do much better!

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