2012 ELECTIONS

The 2012 elections are a round the corner, and politicians as usual, have come out with promises of free lunch. If Imay go back to the time when former President Moi relingushed power to President Kibaki, the later had campaigned maily on making kenya a corrupt free country, create 500000 jobs per year, and do away with roadside declarations. He promised us that he will take us to the promised land, thus comparing himself to the Biblical Moses, who took the children of  Israel out of Egyptian bondage. The common man was happy that at least things like unemplyment were going to b ethings of the past. However, immediately the man occupied the house on the hill, things were not rosy as he had thought. When spectators watch say soccer game, they will always blame a player who misses a chance to score. Given a chance to enter the filed to play, one will not see the mistake. This is what is like in leadership. To cut the story short, we have ended seeing more road declarations like creating of more districts some for nothing. The jobs promised are not there, even some advanced countries economically like south Africa are not able to create such jobs we were promised.
        On the 13th November 2011, the Standard Newspaper reported that a group of youthful MPs affliated to PNU have formed a new political party associated to Uhuru Kenyatta. The party formed is "UDFP", which is a party of progress( one wonders whether PNU was anti-progress). The people behind this new party promises among other things that it will triple the GDP from $40 billion to $120 billion, and raise per capita income from the current level of $3000 to $10000. one of the promotors of this party is an Assistant Minister Hon . Nderitu Muriithi, who happens to be President Kibaki's nephew. The tactics they are using are the same tactics used to promise us jobs. How the party is going to triple GDP and raise per capita more than threefold is what they are not telling us. According to " World  Development Indicators data base" which has listed all countries' per capita income, kenya is ranked number 183, with aper capita income of $1610, while the "2011 CIA world factbook and other sources" shows that the per capita income for Kenya is $1600(http://www.theodora.com/wfbcurrent/kenya/kenya_economy.html). Where does Muriithi's party get the figures of $3000? Kenyans this time must be vigilant, and question all potential candidates who want to be voted in on what they promise the voters, and they must be ready to defend whatever they promise, an dgive a time frame  when such promises will be honoured, and if they will require financing, how will they finance them. Let us not accept free lunches this time, and be told that" haya tutafanya".

AUSTERITY MEASURES

The current  financial crisis in Europe has been caused because the residents of those countries were promised free lunches. This is according to many observers. When nations give their people welfare entitlements, it comes at a time when those entitlements  hits a wall, and the state is not able to meet them. Who is to blame now ? The politicians will always be blamed. Take a case of our parliamentarians-they have said that if they pay tax, then they will not pass bills in parliament. Here, the executive was held at ransom-why? The president had promised them free lunch-not to pay taxes, instead, they will be exempted-but the law does not exempt them. The politicians fought to the last to preserve their free lunch(they are still fighting), no matter the cost to the country. Now my question is: Will this crisis of the welfare state spill over to our country? Swaziland is unable to pay salaries to its employees, our government recently delayed to pay salaries to the teachers, and now, there are strikes in our state universities, and  in one of the biggest referral hospital in East and Central Africa; Kenyatta National Hospital employees are on strike because they were promised free lunch, which is not forthcoming. University lecturers are on strike, who knows who is next? This can be contagious as everybody now feels the pinch. The road from Rome may lead to Paris, Madrid and other European countries, and who knows whether it will cross the Sahara desert and come down to what  is referred as "Africa South of the Sahara"  countries where we are? Do you see these things happening? State employees have until recently been enjoying free pensions-(they have not been contributing), and I can bet that most pensions are broke. This is a free lunch promised to them by the powers that be. As life expectancy is expected to extend beyond 70 years  to some or more pensioners, they will draw their pensions on monthly basis, but where will that pension come from? I am seeing a situation whereby state employees who are promised free lunches is going to hit a wall, and the employees are not going to accept it, but fight to the end to preserve their free lunches. What about free education? This is a type of free lunch which unless sources to finance it are identified, it may hit the wall. 20% of the total population are the ones who pay the taxes-will they manage to shoulder 80% of the population? It is high time the government  and employers address this free lunch entitlements, and start reforming or dismantling  the entitlements. Any  thoughts?

Inflation in Kenya.

The current inflation rate in Kenya which is approximately 19% is worrying. Our politicians are not telling the common person what this means, and how will it affect them. The common person does not even know what inflation is, a part from that term, which many are not able to explain what it really means. The rate at which inflation grows is not the same rate incomes are growing. Economists usually use the rule of 70 to estimate how long it will take a country's growth to double. For example, if a country's economy is growing at say 5% per a num, it will take 14 years(70/14) for that country's growth to reach 10%, assuming it is growing at the same rate. In finance, they use the rule of 72 to estimate  how long it will take to double your money in any investment, and is also used to to figure out the cost of living, since inflation grows at a compound rate.
     For example, to find the number of years required to double one's retirement nest egg or any money at a given interest rate, divide the interest by 72. An example- if one has shs. 100000/= in the bank, an dthe bank pays interest at 8%, this money will double(200000/=) in about nine(9) years , while at an interest rate of 10%, it will take approximately seven(7) years. Now if two people buy a house for say shs. 500000/= each, and after two years, one sells the house and after five years, another sells his or hers for shs. 1000000/= each. Both have made a profit of shs. 500000/=. By applying the rule of 72, both houses appreciated at different rates. The one who sold after two years, the house appreciated at 36%(72/2), while the one who sold after five years, the rate was 14%.
    Now let us come to our case in Kenya where inflation now is about 19%.This rate is too high, and people are not going to manage life with this kind of inflation.The cost of living is going to double at a very short period(72/19)- after every 3.7 years.Will incomes grow at this rate?Most countries' inflation rates are not more than 5%, whereas ours is 19%.A country whose inflation rate is 5% will have its cost of living double in about 15 years. Translated in really world terms, a person who is living in Kenya, whose income now is say shs.50000/=, will require shs. 100000/= in 2015 to buy the same goods and services he or she is buying now with shs.50000/=.Are our incomes/salaries growing at that rate? NO. Our incomes have never gone up, and that is why workers are striking all over. It is high time people know how inflation affects their incomes.

David  Machoka, MBA, MCIPS(UK).