Inequality, political and policy choice killing Kenyans

Dollar sack

Over two million Kenyans are forced into poverty each year by just having to pay to access healthcare.

Photo credit: Shutterstock

Every year, Oxfam, a global movement of people working together to end the injustice of poverty, publishes an Inequality Report around the time of the World Economic Forum’s annual meeting in Davos, Switzerland.

And this year’s inequality report is out, and mind boggling. In just two years of the Covid-19 pandemic, 10 richest men in the world doubled their wealth from US$ 700 billion to US$1.5 trillion. In the same pandemic period, the income of 99 per cent of people worldwide fell and 160 million people sunk into poverty.

Closer home, the data isn’t impressive either. The wealth of the richest Kenyans increased during the pandemic. The richest Kenyan, Sameer Meralis’ net worth is at least Sh89.5 billion (US$ 790 million). The top two richest Kenyans, Sameer and Bhimji Depar Shah, own more than what 16.5 million Kenyans possess, with a combined net worth of Sh174.5 billion (US$ 1.54 billion).

Jaswinder Singh Bedis, Uhuru Kenyatta, and Mahendra Rambhai Patels complete the top five richest Kenyans with a net worth of Sh77.1 billion (US$ 980.5 million), Sh60.1 billion (US$ 530 million) and Sh48.7 billion (US$ 439.8 million) respectively.

Acute poverty

All these happening at the backdrop of acute poverty worsened by the pandemic and public health response measures, whose brunt only the poorest Kenyans have borne. The World Bank’s Kenya Economic Update estimates that two million people fell into poverty because of the pandemic.

This adds to the 21 million Kenyans, representing 38.9 per cent of its population, living in multidimensional poverty according to the Kenya National Bureau of Statistics, 2021, SDGs gender fact sheet.

Even on extreme ends, 75.6 per cent of Kenyans are food insecure, based on the Food Insecurity Experience Scale.

The obscenity of the increasing extreme economic inequality is that it is leaving many people behind. One million primary school-aged children, especially from the poorest households are reported to be out of school.

Out of pocket health expenditure is not only making Kenya’s healthcare inaccessible to millions; but increasing poverty too to detrimental levels.  Over two million Kenyans are forced into poverty each year by just having to pay to access healthcare.

Successive Kenyan governments, through economic and legislative reforms of recent years, have been presiding over this wealth concentration, hampering poverty eradication, and increasing inequality.

Regressive tax regimes including excise duties introduced in the Finance Act 2021 on petroleum products, which increases prices of basic commodities, place a disproportionate tax burden on the poor.

The increasing informality of the job market means an overwhelming majority of workers are not covered by existing labour rights which include formal contracts, minimum wage and paid sick leave. This precarious employment is aggravating poverty and inequality beyond measure.

Social services

The rising mountain of public debt, made worse by the pandemic, is adding fuel to the inferno. Between 2013 and 2021, public debt rose from 44 per cent of GDP to an estimated 69.7 per cent at the end of 2021 according to the IMF Data Mapper, 2021. Debt servicing is taking a huge chunk of government revenue, constraining government expenditure in social services like health.

 In the first three months of 2021, Kenya spent Sh242.1 billion, 67 per cent of tax revenues, equivalent to 57 per cent of total revenue, to service public debt. This is more than double the amount allocated to the health sector in the Financial Year 2021/22 

Blatant theft, mismanagement of public funds, corruption and political capture by the elite is denying millions of Kenyans and the government what is rightful theirs. This is also undermining our democratic institutions. Each year, Kenya loses a third of its annual budget to corruption.

Approaching development from a human development perspective as opposed to the economic measure of GDP offers a useful alternative to government policy. Taxing the rich proportionately more will raise public funds to invest in sectors known to reduce inequality like free public health services, free or affordable public education, and social protection.

An annual progressive wealth tax at a rate of 2 per cent and 3 per cent for the wealth above $5 million, $50 million would raise Sh100 billion a year, enough to reduce households’ out of pocket health expenditure by 85 per cent, according to calculations done by Oxfam, Institute of Policy Studies, Fight Inequality Alliance and the Patriotic Millionaires based on the wealth of multimillionaires from Wealth X.

Reduce poverty

Progressive tax regimes including reduction of regressive consumption and sale taxes while increasing the tax for the rich can reduce the burden on the poorest, reduce poverty and close the inequality gap. Tackling legal and illegal financial flows, including reversing Double Taxation Avoidance Agreements, and removing harmful tax incentives and tax exemptions; can increase government revenue needed to invest in pro-poor sectors.

Prudent debt management through fiscal consolidation should be done in a way that prioritises investment in public services and curbs illicit financial flows through corruption and white elephant projects.  

Extreme inequality is obscene, unethical, and an indefensible socioeconomic violence. It hinders eradication of poverty and inclusive economic growth. And it births and fosters conflicts.

It is however not inevitable as it is a political and policy choice. Governments must commit in word and deed to fighting inequality through a shift in social and economic policy. Kenyans must demand that governments work for everyone, and not privilege and work for a few elites at the top of the wealth index.

Dr John Kitui is the Country Director with Oxfam in Kenya.