What Kenyan protests tell us about economic management and the politics of reforms in African states

I: (Young) Africans are rightfully disillusioned with formal/institutionalized politics in the region

In a recent piece over at Good Authority I highlighted two important trends that should inform our understanding of ongoing youth-led protests in Kenya. First, over the last 20 years the share of Kenyans reporting an affiliation with political parties has declined from almost 70% to about half. Second, the reported decline in party affiliation has been faster among young people (35 and under) than older people. The share of non-affiliated young people has increased from just over 30% to over 50%. The decline in party affiliation was also reflected in electoral participation, with the 2022 election witnessing a significant decline in youth registration and voting.

Young Kenyans’ exit from formal politics — borne out of rightful frustration with a complacent political class — should worry anyone interested in political stability and economic development in African states. This is especially because youth under-participation in formal politics will not necessarily amount to a total exit or loyal acceptance of the woefully suboptimal status quo. As demonstrated over the last month, young Kenyans will likely continue to engage in extra-institutional political action, including through protests.

So far official reaction to the Kenyan protests vividly illustrates African elites’ unreadiness to honestly confront the challenges facing the region. Kenya is facing a very serious fiscal crisis. Yet for almost two years President Ruto has treated the problem like it is the IMF’s to solve, while presiding over an incompetent and wasteful administration that has shredded Kenya’s fiscal pact. And when things got to a head, Ruto could have viewed widespread protests against his administration as an opportunity to modernize economic management in Kenya. Instead, he let the crisis go to waste and entered into an elite pact with opposition politicians that is guaranteed to double down on the same bad habits that occasioned the current fiscal crisis. Consequently, Kenya is staring at a prolonged period of mediocre growth and lackluster job creation as it struggles with the high cost debt servicing and the specter of a sovereign default.

Kenya’s economic and political problems travel beyond its borders. According to Afrobarometer data, since around 2017/2018 a majority of Africans are more likely to report being non-affiliated to any political party (see graph). This trend fits with the general decline in satisfaction with electoralism/democracy in the region. Another regional pattern is that, amidst widespread disillusionment with formal/institutionalized politics, African leaders are more keen on brutally repressing any forms of extra-institutional political action than actually addressing the underlying economic drivers. At the moment protests are bubbling in Nigeria and Uganda, with the possibility of violent government response.

Herein lies the problem. African political elites’ unrivaled complacency and tendency to respond to emerging crises using old tactics — like repression, departicipation, divide and rule, or ethnicity-based elite pacts — will only make things worse.

A lot has changed since the 1980s when the region last faced protracted economic stagnation/decline. Population growth, ongoing rapid urbanization, the decline of agriculture, higher rates of education attainment, and fundamental shifts in individual-level aspirations, attitudes, and consumption habits mean that ever more Africans must work in non-agricultural sectors to live. Under these circumstances, it is hard to see how African countries will remain stable without adopting modern forms of economic management that enable job creation at scale. 10 million young Africans enter the job market each year to fight for 3 million positions. This cannot go on for much longer. Repression alone will not work.

II: On the urgent need to modernize economic management in African countries

The case for modernizing economic management is straightforward. Given that global economic cyclicality is a given, African economies need to be able to maximize growth rates during upswings and minimize the negative impacts of global downturns. It is impossible to do either without a serious approach to economic policy. To understand this dynamic once need only look at how Nigeria missed out on the most recent spike in oil prices, or how the Democratic Republic of Congo and others are missing out on the ongoing boom in critical minerals.

Regular readers know my views on the atrociously poor state of policymaking in African states. Too many governments in the region operate like mere implementation arms of others’ agendas. From agriculture, to education, to energy/climate, to health, to social protection, many African co simply aren’t bothered to craft policies informed by their objective realities. When the region’s governments aren’t copy-pasting ill-suited “best practice” programs, they typically outsource whole sectors to uncoordinated (foreign) non-governmental actors. Garbage in, garbage out.

This fundamental weakness extends to the important task of economic management. It is true that some elements of economic policymaking have improved substantially over the last 30 years — including on important metrics like Central Bank independence, currency valuation, price controls, and the role of parastatals in the economy. However, the current “fiscal squeeze” in several countries is a reminder that the quest to modernize economic management in the region — especially with regard to pro-growth policies — is far from complete. This includes countries like Ethiopia, Ghana, Kenya, and Zambia that in the recent past have been considered as potential candidates for economic takeoff. Many African countries are no longer in the world of “permanent crisis,” but they aren’t completely out of the woods yet.

What would modernization of economic management entail? The most important first step would be to clearly articulate the desired end state as it affects real people in the real world. What is the object of economic policy? What does it mean for the modal household that makes a living from rain-fed agriculture? And what does it mean for firms? Second, the underlying motivation would be transformative and not merely an exercise in isomorphic mimicry of what supposed “model” states do. Finally, the focus would be on both the intensification of “inward conquest” (i.e., effective public service delivery) and constant improvement of the tools of modern economic management (e.g., optimal taxation, fiscal policy, monetary policy, regulations, data collection and analysis, policy analysis, policy communication, mobilization of pro-growth coalitions, etc).

So what exactly are the barriers to modern economic management in African states these days, and what can be done to overcome them? Below I discuss four barriers that I consider to be important: ideas about leadership and public policy, inability to capture the gains from reforms, private sector weakness, and political incentives.

1) Ideas matter in two important ways. First, ideas shape what elites view to be the predominant objective of holding public office. Second, ideas define the set of policy choices believed to be feasible by both elites and the general public. I should note that African elites aren’t uniquely bad at governing — all political leaders face competing objectives, including hogging power, amassing personal wealth, implementing preferred policies, and championing specific interests. The challenge for the Continent is that a variety of historical factors have led to a situation whereby the latter two objectives have almost been completely swamped by the former two. A survey of incumbent leaders across the region reveals a sad absence of self-aware ambition beyond holding power and rudimentary personal enrichment.

Relatedly, public policy is seldom viewed as a credible currency in politics — whether among elites or between elites and the general public. Favored elites get rewarded with prebends and not pro-growth policy concessions (this suppresses demand for good policies, even among regime insiders). The public receive targeted spot payments during elections, not credible promises of programmatic policies. Since policy isn’t a credible medium of exchange in politics, most African governments don’t have an incentive to modernize economic management and public service delivery. For example, the old problem of policymaking without facts is still prevalent in the region.

The net result is the dearth of big ideas (and related debates) on how to engineer economic takeoff in the region; and the settling for the groundhog day game of constant “reforms” and faddist “projects” that everyone knows will never yield real economic transformation.

2) Unable to capture the gains from reforms, African elites face little incentive to improve the quality of economic management in the region. In this regard I have a lot of sympathy for African economic and political elites. Stuck in the periphery of global economics and politics for centuries, they have little chance to amass wealth at scale in their own countries. Doing so would require unlearning a lot of policy orthodoxy and dislodging established networks that dominate global markets and which have an array of institutional and extra-institutional mechanisms of enforcing the status quo.

To make matters worse, most African states are too weak and disorganized to credibly protect private property rights (including for incumbent elites) for any would-be risk takers. Consequently, most of region’s elites are nothing but brokers/compradors who are often forced to hide their wealth in foreign jurisdictions or engage in economically inefficient partnerships with foreign investors who flee at the first hint of trouble. It is not a surprise that despite the region’s famed national resources, there are no (public) resource-sector billionaires outside of Nigeria and South Africa. Under the current circumstances, modernizing reforms would expose African elites (and economies) to even more rapacious exploitation by foreign economic agents.

3) Private sector weakness dampens demand for modern economic management. Engaging in reforms without anchoring beneficiaries (i.e., interest groups) is a waste of time (this is a terribly under-appreciated insight among reformists). Typical firm-focused policies in African countries take the form of “make your industrial regulations look like Berlin’s in order to replicate Germany’s success with mid-sized manufacturing firms.” This, of course, is totally crazy (to put it mildly). Successful reforms in the region will only work if built around specific firms or sectors that states want to see succeed. The process will be long, iterative, and full of (hopefully teachable) failures. There are no shortcuts. With this in mind, it becomes clear why the weakness/absence of African firms that can serve as interested drivers of the modernization of economic management is a key impediment to the region’s economic takeoff.

Few African countries have firms (or Chambers of commerce) that are strong enough to influence policy towards greater efficiency. This is reflected in how African governments mistreat their domestic firms (from big corporations to fledgling SMEs), in contrast to the generous “brokerage” services offered to elusive foreign investors. Anyone can attract FDI with the right time horizons and potential returns. But it takes serious effort to create the conditions that allow for job-creating domestic firms to thrive.

4) Political incentives continue to be biased against strategic thinking in the region. African elites are yet to master electoral politics and constitutionalism as a technologies of governance. The reason for this is straightforward. Unlike most of their counterparts elsewhere, African elites for the most part did not democratize on their own terms and stand to lose from open electoral politics. Their inherent weakness leaves them playing constant catch up in the face of new demands from their publics and intensifying intra-elite competition over access to the spoils of brokerage. These tactics invariably undermine both political and economic institutions. The focus on everyday politics of survival leaves little room for strategic economic management. Importantly, the fact that electoral outcomes can radically alter the distribution of property rights creates strong disincentives against long-term strategic thinking.

What can be done to remedy this situation? I don’t have all the answers, but would wish to see more discussions and debates about how African economies (and especially elites) can 1) appreciably improve their capacity to capture the gains from reforms, and 2) cultivate pro-growth political constituencies among both elites and the general public. In order to capture the gains from modernizing economic management, the region will require investments in stronger state capacity to protect (elite’s) property rights as well as faster growth in size and number of successful private firms. The emergence of pro-growth political constituencies will require an increase in the salience and credibility of economic policy as a currency in both intra-elite and mass politics.

I would argue that a shift from supply-driven to demand-driven reforms towards modern economic management is likely to yield better outcomes than we have seen in the past.

III: Conclusion

There is reason to believe that the type of protests we have seen in Kenya over the last month will spread to other African countries. Uganda and Nigeria have already witnessed stirrings. Too many (young) Africans are out of work and without much hope of an economically rewarding future. Inflation is eating into household’s meager earnings. The conventional safety valves — agriculture and high levels of informality — are no longer able to make up for successive governments’ macroeconomic mismanagement. Meanwhile, most African governments remain completely at sea as far as contextually-relevant development policies go. Instead, the region’s political elites prioritize diurnal survival tactics over long-term strategic thinking. Two decades later, Nicolas van de Walle’s observation regarding the complete lack of elite-level coherence towards policymaking still holds:

Unlike Latin American [or East Asian] leaders who have at one time or another seriously believed in the possibility of a heterodox program of stabilization and adjustment, in Africa, no coherent alternative to IFI-inspired adjustment has emerged that politicians can rally around. [Orthodox] policies are the “only game in town,” but when leaders compute the relative cost/benefit ratios of serious reform and the current muddling through, they increasingly opt for the latter.1

This addiction to merely muddling through must stop. There is no option but to modernize economic management with a view of promoting growth and mass job creation. Otherwise, the region’s states will remain vulnerable to systemic instability and social unrest. As I have argued above, the much-needed modernization effort will only succeed if it is demand-driven (especially from the perspective of political and economic elites). To this end, reformers should aggressively battle in the domain of ideas, redouble efforts to strengthen state capacity, appreciate the important role of (large) private firms, and mobilize pro-growth political coalitions.