CHAPTER TWO

FOSTERING PROSPERITY AND ERADICATING POVERTY

The Challenges:

The wealth of the nation lies in the skills of its people and their ability to work together, in the stock of public and private investment it has accumulated, the natural resources within its territory and the quality of its natural and built environment. Sound economic management harnesses those resources, reinvesting as they are depleted,renewing skills for each new generation, caring for and maintaining those resources which are non-renewable.

In an open, increasingly global economy there are limits to what any government can do on its own to manage its domestic economy. But there are a number of ways in which active government can improve its competitive position.

Kenya’s economic decline has been halted. The annual growth figures of 6-7% are good,but we need to double them if we are to eradicate poverty. Under President Kibaki the rich have grown richer and the poor poorer. The top 10% of Kenya’s population continues to control nearly half our nation’s wealth. That means that for every 1 shilling earned by a poor Kenyan, the rich earned 56 shillings.This inequality has not altered even though the Kibaki Government trumpets its positive economic record.The growth is not inclusive and is exclusive only to the rich.The richest 10% now earn 42% of the national cake as opposed to 36% five years ago. This demonstrates that the Kibaki Government is a government of the rich,by the rich and for the rich.The poor are, at best, bystanders.

Kenya’s economic landscape is of stark contrasts between rich and poor, rural and urban, poor rural and desperately poor arid rural.

Solid economic growth is crucial for eradicating poverty, but getting economic growth to percolate or trickle down to assist the poor is a perennial challenge. How many children and adults have to die before the fruit of economic growth reaches them?

We in the ODM are determined to fight this inequality head on.We are a party that is responsive to people’s most basic needs.We remain determined to redress the balance between the satisfied and the hungry in our nation.

The Blair Commission for Africa recognised cash transfers as a key tool in tackling extreme poverty in Sub-Saharan Africa and recognises its potential impact on poverty and inequality as well as its contribution to promoting and distributing growth. The children from the households receiving cash transfers have an opportunity to break the inter- generational cycle of poverty.

The Kenyan Government has been generously assisted by various development partners in providing assistance to the very poor, such as, the Orphans & Vulnerable Children Cash Transfer Programme and the Hunger Safety Net Programme delivering guaranteed cash transfers to chronically food-insecure households.We appreciate with these programmes and pledge to scale-up the efforts of our key development partners by extending the programmes so that social protection investment contributes to overall economic growth.

Our Commitments:

We will achieve stable economic growth averaging not less than 10 percent annually.

We will pursue policies for equitable distribution of income,wealth and resources.

We will maintain a healthy balance of trade and payments position.

We will maintain macro-economic stability of employment, interest rates and prices in line with an ever growing economy.

We will optimize the collection of VAT, Customs & Excise Corporation and PAYE through efficient administration.

We will introduce a social protection programme for the very poor households by providing monthly cash transfers. This will reduce current poverty and inequality by providing a minimum level of income for extremely poor families and break the

inter-generational transmission of poverty.This will be ODM Government’s flagship poverty reduction programme,called,the “Usawa Programme”.

We will craft policies that protect and promote the livelihoods and welfare of the poorest and most vulnerable people.The objective of our social cash transfer scheme is to contribute to national efforts to reduce poverty and hunger in ultra poor households, increase school enrolment and attendance and improve the health, nutrition, protection and well- being of orphaned and vulnerable children and the very old.

We will create a new Ministry of Social Development in the Office of the President which will be the programme’s policy and supervision agency. It will establish basic programme architecture, learning from other countries,such as,Brazil,South Africa and Malawi that have successfully implemented cash transfer programmes.The new Ministry will focus on “how we get the right people”into the programme (targeting) as well as monitoring, oversight and evaluation.It will ensure graduation from poverty.

We have identified a large amount of savings through budget cleansing and streamlining operations which will fund our pledges in this manifesto.

Your ODM Government will:

• Ensure economic stability remains a platform for growth with low-inflation.

• Ensure that the government spends wisely and taxes fairly to raise living standards and achieves high and sustainable levels of employment.

• Encourage savings and investments.

• Review external debt commitments and initiate an effective debt relief management strategy.

• Improve the outreach of micro-credit programmes and monitor all credit operations to ensure their efficiency and effectiveness by operationalising the Microfinance Act.

• Formulate policy for issuing benchmark Sovereign Bonds for Infrastructure development.

• Immediately undertake a budget cleansing exercise covering all Ministries in the Central Government to look for overall national savings.This will help to identify questionable debt,especially the commercial ones.It will also help in elimination of wastage that currently occurs through procurement, duplication in allocations,and questionable allocations.

• Concurrently, with the above action, undertake budget cleansing exercise to review budgets of state corporations that receive budgetary subventions and finally the budgets of local authorities.

• Ensure through a cost benchmarking exercise that the government pays a competitive rate for goods and services at guaranteed quality.

• Increase efficiency in government by streamlining them ministries and spending units to between 18 and 25. The savings will go towards growth enhancing and priority reduction activities. The non-priority programmes will be terminated in the process.

• Commercialise all non-core government or quasi-governmental operations.

• Eliminate first class travel for public servants except for designated categories of public officials.

• Streamline the operation of devolved funds, such as, CDF, LATF and Road Maintenance Levy to avoid duplication in project implementation and restrict them to prioritised development activities as identified and designed by devolved levels of government.

• Encourage Public-Private Partnerships in infrastructure development through frameworks such as Build Operate and Transfer (BOT).

• Introduce a Government of Kenya Investment Agency that will use funds wisely to invest in the region and the continent in growth sectors. The agency will be modelled after the Dubai’s investment agency.

• Ensure a taxation regime that expands the tax base while lowering the tax rate and encouraging savings and investments.

• Expand Kenya’s double tax treaty network.

• Deal with high tax evasion in the highly taxed industries, such as, alcohol, sugar and petroleum products.

• Provide for open limit for refund of VAT claims.

• Reduce refund time for VAT to 30 days maximum.

• Review personal income tax brackets and personal relief to cater for inflation and increase purchasing power.This is the only real tax benefit that positively affects employees’ disposable income.

• Ensure that domestic borrowing is to be used strictly for infrastructure development.

• Drive towards stronger financial services and banking regimes with a capacity to finance large investments in the country.

• Establish a framework for credit referencing to lower rate of default on loans and enhance stability of the banking system.

• Review the banking sector regulations to lower the intermediation costs so that lending rates can be reduced.

• Ensure that there is speedy resolution of commercial disputes by the judiciary.

• Encourage consolidation and increase the capital base of insurance companies.This will be in tandem with encouraging life insurance business which is very low in Kenya and the EAC region.

• Tighten regulations of the capital markets to ensure transparent trading.

• Drive to increase the number of listed companies at the Nairobi Stock Exchange.

• Enhance the role of Co-operatives in savings mobilisation and small credit provision.

• Enhance the role of Micro-finance services to increase access to credit particularly in rural areas.