An overview on Kenya: economy, taxes and services.
September 20, 2018
According to experts, Kenya’s GDP will increase at a rate of 6% each year. This would be an extremely positive trend, if it was not accompanied by a higher increase in inflation – around 8% – and by an unstoppable births’ growth (fertility rate is very high – about 4.6 – but Mali, for example, has a fertility rate of 7.3).
In this situation, population’s buying power risks remaining the same or collapsing.
If we used the world’s wealth pyramid to show data about Kenya, only 161,000 adults being more than 19 years old would be rich, with an income of 198,000 dollars a year. The second group would include all those people earning 17,000 dollars a year. They are 1.6 million adult people – the famous middle class. The third group would still have a sustainable income – about 1,800 dollars a year – and it would be made up of 4.3 million people (private teachers, waiters, small informal entrepreneurs, small retailers). Finally, there would be the forth group, that is those people below poverty line, surviving with 178 dollars a year, 0.50 dollars a day – which become 2 dollars thanks to informal economy: 23 million people – 73% of adult population – would stand on this last social step.
With this kind of poverty, it is difficult to imagine a taxation system which could improve the state’s services.
Maybe before doing something at this level, it would be necessary to take these people – 73% of the population – away from that extreme poverty’s step. This is not an easy undertaking, even for the rest of Africa.
In 2017, Kenya’s GDP was about 69 billion dollars, while the state budget implied incomes for 16 billion dollars and expenses for 20 billion dollars. A deficit of 4 billion dollars a year, affecting public debt, which is about 4% of GDP. To make a comparison with our Belpaese, Italy has a public debt exceeding 130% of its GDP. Therefore, Kenyan debt is not so terrible.
Looking at incomes, we can notice that taxes affect them for 75%: 12 in 16 billion come from taxation – two thirds from people and one third from companies.
We can know something more about this country just looking at its expenses. Salaries and transfers to counties together reach 5 billion dollars. There is little interest in sustaining retirement pensions, which collect only 60 million dollars – to make a comparison again, in Italy government spends 216 billion for pensions and our population is only 20% more than its. In general, transfers to counties, public salaries, interests’ expenses, a little bit of defence, few pensions and few medical assistance are worth 14 in 20 billion dollars.
This overview shows us a taxation which is not enough to provide for state’s expenses and a public expense which is not at citizens’ service. Poor health services, few retirement pensions, an unstable assistance, insufficient infrastructure. Figures, instead, show us a state which is in debt, pays for salaries of so many people being dependants of the state and depending on it and which transfers a lot of money to counties – which are again counties’ employees’ salaries.
This situation makes us think about a crony lobby, being created for political aims. This is a weak and unsustainable government, prisoner of a vicious circle which is a characteristic of most Africa.