If you keep turning around, after a while you don’t know where you are
Turn-around strategies seem to be the new flavour of the moment. It has become the norm for government-owned entities and government agencies to announce a new turn-around strategy every few years. In extreme cases, there is a turn-around strategy almost every year.
Now I am just wondering – if you have to turn around a large organisation every so often, where was it going in the first place? And if you have to turn it around again and again, is there any responsible person in that organisation who actually knows where they are going?
Of course, the same question applies to the new budget. Here there are two relevant questions. First, has the Minister of Finance finally succeeding in turning the economy around, and second, what does this turn-around hold for our future.
After a week of digesting a myriad of budget opinions, a few notions have managed to separate themselves from the usual post-budget noise. Throwing in my own analysis on top of that, I think I can safely say 2017 was a watershed year albeit a somewhat distorted one.
Despite a contracting economy, I do not get the impression that the government’s finances went haywire. On the contrary, the figures tell me that for the government at least, 2017 has already been a turnaround point in many respects, and that what we see going forward, will most likely be positive although fairly static.
Take for instance the expectations over the Medium Term Expenditure Framework for both revenue and expenditure. Both are rather flat and uninspiring. It is only in 2020 that some sort of slight revival is pencilled in, but then still very subdued. It also shows that projections are more or less in line with the awful 2016 revised budget, and that these base values have most probably served for this year’s estimates, and for the 2019 and 2020 projections.
Personally I believe the economy will rebound much sooner and faster than anyone expects at this point. In earlier commentaries I have stated my views why I think the turning point was already in May last year, but I have to admit that it was hard to substantiate my view in the glaring absence of supportive data.
This is where the minister became a shining beacon last week. When he indicated that the contraction for 2017 is estimated at only 0.4%, I immediately knew that he had access to the 4th quarter GDP figures and to the preliminary outcomes for the full year. That he has access and privilege to data that we ordinary folks only see later, I can live with but only grudgingly. For six months I have been drooling over the quarterly GDP estimates and adjustments, only to be disappointed time and again.
Making running calculations as the statistics became available, is not hard. So the fact that the recessionary year will probably see only a 0.4% contraction showed me the fourth quarter must have been convincingly positive. I wish I were the minister, if only for the access to the data. What he said last week, the rest of us will only know for sure at the end of this month.
Overall, the budget is extremely disappointing simply because it is so static. The minor adjustments are cosmetic, erring on the conservative side, while the underlying fundamental problems remain unaddressed. For as long as we do not tackle the factors that have brought us close to the precipice in the first place, for so long the budget will be uninspiring and not a tool of growth.
The budget is the single most powerful tool for the government to effect and achieve our noble development strategies. Policy-wise we do not need any turn-around. What is set before us in Vision 2030, in the national development plans, and lately in the fresh flavour of Harambee, are all attainable provided we stop wasting money to prop up inefficient parastatals and agencies, and provided we address the real issues.
On these my views are clear, having been stated numerous times in public. The number one killer is the government’s wagebill closely followed by its enormous direct participation in the economy. Both these metrices are totally out of line with most other countries on a similar development curve as us. Unless, of course, if you compare us to Russia or China, where it is worse. The question is, how far communist do you want to go with the state’s resources?
Until we fix those two underlying causes, we will have no room to manoeuvre and future budgets will continue to be static and flat. By implication, the deficit will remain a headache, ushering in all sorts of secondary troubles like more downgrades.
I hope that this year turns out much better than we expect. If we have to carry on another three years on this dreary plateau, eventually all confidence in the budget as a development tool will be destroyed.
