Thursday, June 10, 2010

UHURU THE LAST BARON

(Uhuru receiving a prize from Kibaki in 1979)

Some 32 years ago, Uhuru Kenyatta, in school uniform, walked to then Vice-President and Finance minister Mwai Kibaki to receive an award as the top “A” level history student at the Catholic-run St Mary’s School in Nairobi.

And on Thursday he walked again into the annals of history as he delivered the first Sh1 trillion budget — the most ambitious yet — and possibly the last under the current Constitution and Kibaki wasn't there to cheer him up.

Mr Kenyatta will also be the last powerful Finance minister if the proposed Constitution passes on the August 4 referendum, since it whittles down Treasury powers and gives parliament an oversight role.

The proposed constitution also creates the office of the budget controller with the authority to supervise the implementation of budgets in national and county governments.

Unlike in 1979 when he was watched by his student peers at St Mary’s school as received the history prize, the minister  gave a speech in a House that had five former Finance ministers — George Saitoti, Chris Obure, Chris Okemo, Musalia Mudavadi, and Amos Kimunya.

A man who emerged with an ‘O’ Level Division 1 with a distinction in English, Mr Kenyatta  walked a tight rope this time round on the back of a simple supplementary budget error last year that almost cost him his position at the Treasury.

How the minister will finance the budget at a time the country is trying to speed up growth in a difficult environment and when the Kenya Revenue Authority is not meeting its targets is the Sh1 trillion question, given that he might not have much leeway with raising taxes.

He may have to rely much more on external funding to finance the government operations.

The Finance docket is crucial to Uhuru’s political career and last year he went down in history as the Finance minister who ended the “wabenzi” culture by putting a 1,800 cc cap on the type of vehicles allocated to Cabinet ministers, permanent secretaries and other senior officials.

Attempts by Mr Simeon Nyachae to seize the fuel guzzlers in 1998 soon foundered in a sea of political hostility.

But Mr Kenyatta managed to take away the vehicles, 99 of which were auctioned on Wednesday with Sh250 million expected in proceeds, suggesting enough political to walk the talk on the austerity gospel. But it hasn’t always been easy for Mr Kenyatta.

A rugby player in his school days, the minister has not had a smooth run at the Treasury and his austerity measures –including the purchase of Volkswagen Passats for Cabinet ministers in place of the bigger engines saw him subjected to interrogation by a parliamentary committee under a cloud of allegations of irregularity in the tendering.

But the once reluctant politician wriggled out and steadied his political balance, perhaps borrowing a leaf from the days he acted in the Comic Opera “The Mikado” as Father with Child in November 1977.

But he did not  act on Thursday but did a delicate balancing act.

He had hoped to borrow Sh103 billion from donors — Sh68 billion in loans and Sh35 billion in grants— in last year’s Sh791 billion budget,

This did not materialise as Treasury only managed to get Sh25 billion from donors leaving the government to borrow Sh100 billion from the domestic market.

Unlike his predecessors, excess liquidity in the money market means Mr Kenyatta will not bear the burden of ensuring domestic borrowing does not suffocate the private sector by nudging interest rates upwards.

According to analysts, this has had more to do with sluggish demand for credit from the private sector, which the minister will seek to stimulate.

Stable interest rates at low levels, the dream of any finance minister, were last enjoyed by President Kibaki in the 1970s, helped by the Coffee boom and a controlled regime, that somewhat cushioned the economy from the oil crisis.

The others – apart from Mr Kimunya who left the donor funding component out during the 2008/9 fiscal year – had to heavily rely on reluctant donors to fill the deficit hole.

Mr Kenyatta  gave his speech at a time when the economy is showing signs of recovery after experiencing a severe decline from 7.1 per cent in 2007 to 1.7 per cent in 2008 – hurt by the post-election violence and the effects of the global meltdown.

President Kibaki is determined to upgrade the Kazi kwa Vijana initiative into a longer term job creation vehicle and the minister is almost under no obligation to provide more for the devolved funds, including the women and youth funds.

While the minister might take credit for the jobs creation scheme, the idea was first floated by Tom Mboya in 1962 but was shot down in Parliament by the then finance minister, K.W. Mackenzie.

Mr Kenyatta allocated Sh105 million per constituency for infrastructure development last year.

The Amherst College (the class of 85) graduate also allocated Sh20 million to each constituency for construction and equipment of a health centre; Sh30 million for construction of a secondary school as a centre of excellence per constituency and Sh10 million for each constituency for the building of a fresh produce and wholesale markets.

He also allocated 2.5 million per constituency to construct jua kali sheds and a further Sh1 million for each constituency for youth employment.

The man who chose Amherst College since his cousin, Ngengi Muigai, had graduated from the same school in June 1969 will however have to ponder solutions to the red tape that meant only 56 per cent of the funds were disbursed.

The budget and the political progress of the minister, a former soccer and hockey representative at school, will be keenly followed at Amherst College where the class of 1981 produced two heads of state - Prince Albert of Monaco and former Salvadoran president Francisco Flores.

As Kenyans prepares to vote for a constitution whose tenet is devolved government, it is not lost on historians that it was his father, Jomo Kenyatta and Kibaki as Parliamentary secretary to the Treasury (1963-1965), who sabotaged regional governments that were the hallmark of the 1963 Constitution by choking their finances.

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