NDIRITU MURIITHI: How Government Can Reduce Fuel Cost Without Losing Revenue

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[00:00:00]former Iikipia uh governor and currently the chairman of the Kenya Revenue Authority. Honorable Duo Muriti is here with us to discuss the impact of the global shocks uh on the Kenyan economy and what the options are really for us.

[00:00:13]And uh last hour we've spoken about uh manufacturing. We've spoken a little bit of uh you know what we can do as far as the counties um can can put their need their foot forward. And there's someone who's asked a question here. Let me just aska what became this is Dansson Kenya Dansson is asking what became of Mount Kenya economic block was there such a thing >> yes that's uh the central economic block >> al so it's the same thing >> um and dansson cereb is still there >> yes >> uh albeit we haven't made as much progress >> um as one would have preferred as we said in last hour cereb did attempt to come up with an economic IC blueprint both in our time as well as in the current time and we haven't succeeded.

[00:01:02]CT was asking why and we were debating the the the the divide the economic thought political >> politics. Yes.

[00:01:12]Um you see for us to make progress and we and and now you can see the linkage with the issue of global shocks.

[00:01:26]Fuel prices are going up.

[00:01:28]>> Why? Because there's oil in the Middle East fact.

[00:01:32]>> Is there something that can be done by both levels of government? Of course there is.

[00:01:39]For example, national government can deal with the issues of taxation related to fuel and I'm quite certain they doing that.

[00:01:47]But county governments can stimulate economic activity, can buy down the rising cost of energy in order to increase economic activity within those counties. And that is what uh say you know a block like central economic uh block or lake basin or pani >> you know or frontier counties right >> that's what these regional economic blocks can do for you to get there. It's a mental journey. You have to move beyond blaming the other politicians for the economic issues >> and looking for first of all understanding the the what the issues are.

[00:02:28]>> Yes.

[00:02:29]>> And then looking for actual solutions uh that you you you know but I think maybe as politicians we are too lazy. It's so easy to just say and once you do that then it's an easy sort of cop out and and then >> you know >> something similar happened during the first and the second world war when Jews were blamed for some of the problems that uh the economic problems that you know Germany was facing and then they found themselves in uh the kind of situation they found themselves in >> you know Paul history history history is interesting >> u that's before revisionists >> begin to should you say add their input.

[00:03:15]>> But it tells you a great deal. You see when you look at nations that have sought to do what it is that they state they want to do it is not difficult to see >> China set out to pull their people out of poverty. You don't need to be a clairvoyant to see what they have done.

[00:03:36]It's you can see it >> and the steps they followed are also very clear. You can see what they've done. Countries like Cambodia, uh, countries like Vietnam, which were at war for so long, one didn't think they would ever rise up.

[00:03:48]>> Yes.

[00:03:49]>> But the economic, uh, giants now, they >> they have moved from whatever it was they were to something new. Korea, South Korea, >> which was a third world country like us, >> just because of the way they think, the question was asked.

[00:04:08]You would simply say these people are patriotic in a way that we are not. They have cultural norms >> that influence the ethos of how they do things and how they work. Then they have economic structures or structures that are intended to safeguard and protect the economies. M >> all these things I'm speaking of we have we have had the big businesses that you find in this country Japan whether it is China whether it is Korea >> even that Korea yes >> the government has an input in it >> okay >> okay it's what we call paratles here when we are told that these people some of these people came to look at what we were doing if you are young and you born in the 21st century you'll think it's a fairy tale if You're born in the later part of the 20th century think. It is not. We were there. We all these things. No. All these things you hear these people doing, there's a thought process. We had a structure to support it. We have had them. It's not that we didn't have them.

[00:05:10]Okay.

[00:05:11]>> But back to the thinking that his excellence was talking about. You see, for some reason, we decided to adopt a certain mindset and an ethos that stopped us from being patriots in our own country that we can critique ourselves. No, we don't actually that the the past time is to critique the government. That we can critique the government loudly and we're allowed to do so >> is the past time we have allowed.

[00:05:37]>> But we don't give ourselves allowance of appreciating and praising the things that we actually do well.

[00:05:43]>> Okay. the visible ones is in is athletics or when the seventh team plays rugby >> but even economically we do not pat ourselves on the back for the things that we actually do we don't even pat ourselves in the back for the things that we do that influence this entire region >> and we do despite the handicaps that we have created >> you know a movie yes >> the friend of mine um I hope you'll excuse me for talking about him on air >> we He he you are and you can even mention his name if you wish.

[00:06:17]>> Yeah, that's him I'm saying. I hope you'll excuse me. His name is Bob Kime.

[00:06:19]He's an engineer in Yawuru, >> right?

[00:06:22]>> In the 70s. He was an expatriate in Singapore.

[00:06:25]>> The 70s.

[00:06:26]>> Yes.

[00:06:27]>> Wow.

[00:06:28]>> Taken there by I think the British Commonwealth or paid for as an expert.

[00:06:33]He is an engineer. He's a Kenyan. He lives in Yuru.

[00:06:35]>> Okay.

[00:06:38]>> Bob KMIA.

[00:06:42]years later as a young assistant minister we were sent to Singapore knows this story. We were sent to Singapore uh by Kbak and Mudawa and I went with Julius Muya.

[00:06:57]>> Okay. I went with Victor Cole um and Steven Kerogo the late chair of the public service commission >> and we went to look at you know you know in what it is that had made this country successful >> the institutional architecture is exactly what city is explaining whether it is a pension fund >> yes >> you know uh the the housing all of the the the the the insurance the health insurance the institutional architecture was exactly the Kenyan institutional architecture there's nothing that they were doing differently >> in terms of institutions what they were doing differently is that they had a different attitude >> they had a completely different attitude >> just that >> just that >> an attitude of less blame game >> an attitude of of and and discipline Yeah. A dis a discipline and a positive attitude about what they were trying to do with their nation.

[00:08:07]>> Okay.

[00:08:08]>> You see, you know, so even today if I look at Kenya, you see snipers of that.

[00:08:13]Again, let's go back to city's county of Kisumu.

[00:08:16]>> Right now, you'll see Kisumu has uh the lakefront development cooperation. Mhm.

[00:08:23]>> is a county >> partoh.

[00:08:27]>> They're not here toying around. You hear them with Africa Development Bank discussing how they are changing that that they that Kisumu >> Yeah.

[00:08:38]>> You know the historical development of Kisumu is like Kisumu is facing away from the lake and they want Kisumu to face the lake. So they want to redevelop the the lake >> and they off you know because of that kind of thinking that's why you see you know like I don't know smart cities of the world >> right >> coming to Kisumu to do an international conference about how cities should finance themselves >> so you see snipets of this all over and you can see if only we can reach critical mass of thinkers of a certain kind or leaders of a certain kind um and in and pushing forward. Um now and you know to um to move to high income >> to move to high income >> I personally believe strongly that is possible for Kenya to move to high income.

[00:09:40]>> Where is my evidence? I think movie I've told you before. If you take the distance we have traveled >> from in the last 20 years or 23 years the level of income has increased seven times.

[00:09:58]>> Yeah.

[00:09:58]>> Okay.

[00:09:59]>> And I'm not saying we are all rich.

[00:10:01]That's not what I'm saying at all.

[00:10:02]>> I'm not saying that right now we are doing well. That's not really what I'm telling you. But the level of income >> has increased >> seven times >> from around $350 to now 2700 $2,700 per person per year.

[00:10:19]>> That number or you know per capita it hides a lot of issues because of of of income inequality.

[00:10:27]>> Mhm.

[00:10:28]>> And those are issues that need to be resolved.

[00:10:30]>> Do we factor in inflation there?

[00:10:32]>> Uh that's after you've removed inflation.

[00:10:34]>> Okay.

[00:10:37]Um so it's we're talking about real income or real per capita GDP.

[00:10:42]>> Yes.

[00:10:43]>> And again I want to share here very clearly so that our listeners don't misunderstand us.

[00:10:49]>> Of course we all know uh per capita or the average hides a lot of disparity because you're taking the richest and the poorest all together in that average. But it's a way of estimate of of measuring. It's a way of knowing where you are. We are seven times where we were >> 20 22 years ago.

[00:11:11]>> It stands to reason even with the way we are we can be will be seven times ahead in the next 15 20 years.

[00:11:22]>> We can be a high income country.

[00:11:25]>> Okay.

[00:11:26]>> But we do need a little bit of discipline.

[00:11:30]Of course, we have to make uh choices in terms of policies that we are pursuing >> which takes us back to what you're saying, global shocks and what we can do about them.

[00:11:45]>> Because even these other small economies like us, they suffer the same global shocks >> because the price of oil is not high just for Kenya. It is also high for Sea Shells, but Sea Shells is a high income country. It's also high for Costa Rica and Costa Rica has just achieved a high income status the other day. So it is possible but we do have to make certain choices. The number one choice frankly is is to reorient the way we do I mean this I you know political action visa v >> yes >> economic thought you know because political action today remains stuck in the past of blaming individual politicians blaming our ethnicities blaming instead of saying okay what is the practical way in which you can shield a manufacturer from the rising from rising global energy prices >> and it's possible to take action even at a county level.

[00:12:48]>> Yeah.

[00:12:49]>> Yeah.

[00:12:50]>> Because if you if you look at those particular shocks and you've actually even just mentioned one that I wanted to talk about which we have been frankly speaking for uh about in the last couple of minutes energy. energy is a big deal and it is the same thing that is making Kenyans go to the streets and also Bolivians also um just the other day were in the streets over the same. So you can you can see there's like a trend of the countries that are suffering or rather at the very least uh that are you know taking citizen action is because either we do not have the right information or politic politicians are are um um interrupting the process um at which government can actually do something about the situation but also there's a trust deficit um you know and especially here in Kenya we know Kenyans will question everything and anything coming from government. So at what point do we realize as a citizenry that um there's a time for bickering, politicking and actually taking actions because I believe even we as citizens can take action at our level as we wait for uh government to do its thing. Well, you know, the the if I take for instance the young people in 2024, it's clear that Gen Z um or young people have the capacity to reimagine this thing and to act differently.

[00:14:15]>> There is no doubt in my mind that all political formations today are salivating wondering >> who who who legend support, >> right?

[00:14:27]So if I was a young people, a young person today, I would be arguing with my colleagues that we need to deepen our own view as to what the solutions are and say it out loud >> what we believe the solutions are and I suspect you will see politicians trooping in that direction because you know politicians are looking for votes.

[00:14:52]Oh, >> if they see you are in this corner, that's the corner they will they will come to.

[00:14:57]>> Yes.

[00:14:58]>> Uh so my view is and and I think you as as radio station and other other institutions are doing a great job of saying hey guys let's debate the real issues. Let's peel the onion of of these economic problems >> and determine what actual wellthoughtout solutions would look like and then uh look out for leaders who uh I a to conceptualize the problem >> or problems and b able to conceptualize the right solutions that that that we as young people would agree Um and I think there's an opportunity given where we are in the political cycle for young people to do that very very strongly.

[00:15:48]>> True.

[00:15:49]>> Even in terms of uh if we look at what we have survived through we had shocks during COVID 19. Strangely enough we came out of that unscathed.

[00:15:59]>> Uh okay. I want to report but let me let you finish your sentence.

[00:16:05]>> I believe we came out of that particular situation stronger. You remember despite the fact that people lost jobs, businesses uh were shut down, um fuel prices went up. Strangely enough, even after that, people still survived. Yes, we had our own issues after that. People had mental health issues, but we what I I believe we survived what was a very very very bad situation >> that we did. Although I wouldn't quite agree with you, that we came out unscathed.

[00:16:35]>> Okay. We we came out with a number of serious cars >> some of which are affecting us >> today >> today.

[00:16:44]But in terms of government response, >> many African governments, Kenya in particular, I think the response was superb >> at both national and county level.

[00:16:56]Closing when we needed to close, including shutting down completely when we needed to shut down completely in order to um >> contain >> to contain uh the spread of this infection. Mhm.

[00:17:09]>> Um government both national and a few county governments >> immediately went into stimulus mode >> which helped businesses to recover.

[00:17:21]>> But the COVID shutdown and disruption in in supply chains set in motion >> uh um a decline in real wages.

[00:17:36]>> Mhm. Because what happened now? How do you usually stimulate economy as globally?

[00:17:42]>> Yes.

[00:17:43]>> It's government spending.

[00:17:46]>> Mhm.

[00:17:48]>> Um including increased borrowing by government in order to find money to spend.

[00:17:52]>> All right.

[00:17:52]>> And that happened across the globe. That meant inflation globally.

[00:17:57]>> Yes.

[00:17:57]>> And in Kenya in particular, >> but globally inflation started going up.

[00:18:03]But governments had to do to stimulate the economy because you have shut down the economy. What do you how do you it's like jump starting the car, >> right?

[00:18:12]>> So or priming the pump.

[00:18:16]>> So accelerated borrowing by governments around the world drives um uh inflation up.

[00:18:24]>> Okay. because inflation is is rising faster than the increases in wages, the purchasing power of people is eroding.

[00:18:35]>> Okay?

[00:18:36]>> And that is exactly what I've been getting. So as we come to 2022, we were already in our third or fourth year of a declining real wage, >> right?

[00:18:48]>> Because in 2019, in 2020, in 2021, >> inflation is higher.

[00:18:55]than the increases in wages.

[00:18:59]>> So from a real income point of view, you are once off. You're on off. You're on off. We were already in our third uh either third third year >> or third three and a half years of eroding purchasing power.

[00:19:13]>> Yes.

[00:19:14]which as an economist certainly most of us believe is how the the the framing of the Hustla dynasty narrative.

[00:19:26]>> So that is where it was manufactured for lack of a better word.

[00:19:30]>> It found it found uh fatile ground.

[00:19:34]>> It found a ready economy ecosystem to >> Yes. to for it to push its agenda.

[00:19:42]>> Yes. And it thrived >> and it thrived because of course you know when you observe Nairobi for instance you can see all kinds of construction going on. So you're wondering how come are there two economies? An economy for some people who I don't know >> who are the ones putting up all these buildings and my economy.

[00:20:08]So now it took until the late 2023. It took a further year and a half >> to contain inflation.

[00:20:21]And you will see if you look back at the data, a very aggressive, tight monetary policy >> and interest rates continue to rise until inflation is finally tamed. M >> so towards the end of 2023 into 2024 um into 2024 >> yes >> the the um inflation is is coming under control >> um and it's only after that right >> by late 2024 into early last year >> that you begin to see real wages >> uh you like we have bottomed out, we about to come back.

[00:21:08]>> Right?

[00:21:10]>> For many economists like me, we were worried that the window >> the window was not going to be very >> wide enough >> wide enough.

[00:21:19]>> And unfortunately, we were proven right uh that um the the you know um uh the wars particularly in the Middle East, >> yes, >> kicked in. And because of that um prices and and and inflation >> are again uh beginning to rise >> to rise.

[00:21:42]>> So what is the answer? What are the options?

[00:21:47]>> Um you know my my own personal view um is that we should be aiming for a more balanced budget.

[00:22:00]>> Okay. Okay. Some people call it fiscal consolidation, what have you. But I think the answer lies in a more balanced budget.

[00:22:08]>> Okay.

[00:22:09]>> Um unfortunately, there's no there's no fiscal consolidation.

[00:22:16]>> There's no political constituency for it.

[00:22:18]>> Yeah.

[00:22:19]>> You won't hear any MP saying, "Okay, yeah, you can postpone my road. I know we are not in a good place.

[00:22:26]>> You can postpone my road to next year."

[00:22:29]>> Why? because citizens want mind delay and they want it now.

[00:22:34]>> Um yeah.

[00:22:35]>> Okay. No, no, I I get but you see now this is where I also bring the argument.

[00:22:39]Do we usually have national conversations where we can actually have that kind of reality where we say look we had said we will do this road and I'm picking the road because you've chosen the road. So we we had said we'll do this but should we do this or should we focus on perhaps having that consolidation that you're talking about. Why is it so difficult for us to have that kind of conversation?

[00:23:04]>> And perhaps I'll go back to that issue of trust deficit but over to you.

[00:23:09]>> Well I don't know whether it is really just an issue of trust deficit. It's as I said economic thought and political action.

[00:23:17]>> Let me let me take you back to to history.

[00:23:21]And I hope city will jump in here. You see, like us when we were growing up, when we were when we were in high school, >> Yes.

[00:23:30]>> there uh in in North America, >> um there was a president called Ronald Reagan.

[00:23:38]And he used to say it like this. You know, government is not the solution.

[00:23:44]Government is the problem.

[00:23:47]>> Mhm.

[00:23:48]It was the Republicans's way of saying um the deficit was the problem.

[00:23:56]Why is deficit a problem? Deficit is usually a problem because there's a finite amount of credit in the economy. It's like if you think about this studio, there's a finite amount of air inside here. It's not infinite.

[00:24:14]>> Okay. Mhm.

[00:24:15]>> So imagine a circumstance, you know, where one of us is becoming a bigger and bigger creature.

[00:24:25]>> Yes.

[00:24:26]>> And therefore taking more and more oxygen.

[00:24:28]>> I will suffocate you all.

[00:24:30]>> Yes.

[00:24:31]>> It's like that.

[00:24:32]>> Yes.

[00:24:32]>> Credit in the economy, there are three groups competing for it.

[00:24:38]>> Government, private companies, and households. So individuals or households >> these three groups households often borrow to consume just like government borrows to spend. Yeah.

[00:24:54]You take a mortgage movie or or you you get a car loan. Yes. You get a credit card. All of those you you get credit and you're consuming >> because you're consuming it is creating demand for city and sons who are making the mobile phone or something else. Mhm.

[00:25:13]>> Um, you know, companies borrow in order to build the factory.

[00:25:19]>> Yes.

[00:25:19]>> To make those mobile phones, >> right?

[00:25:21]>> And government borrows often hopefully to build roads and other things, not just for eating.

[00:25:27]>> Yeah. Now, when this three are out of balance, that's why we talk about crowding >> out.

[00:25:36]>> Okay.

[00:25:37]that if government is borrowing too strongly particularly in the domestic market, >> it takes a much bigger portion that ought actually to be going to the private companies >> and the private households and that's what we call the crowding out effect.

[00:26:00]Now when that happens, how how would you reset?

[00:26:07]>> How do you reset? You would have to pause the borrowing a bit, the government borrowing. You pause it for a bit >> in order to let the private sector >> uh and private households to recover.

[00:26:20]>> Yes.

[00:26:21]>> Okay.

[00:26:23]>> Now, I know it may sound very complicated economics. Can it be done?

[00:26:27]Of course, it can be done. Has it been a Yes. where in this very country.

[00:26:31]>> Yes.

[00:26:33]>> I want to take you back to the year 2002.

[00:26:36]>> Mhm. When we elected President Kbaki, >> as we elected President Kbaki, >> the debt to GDP ratio was 70%.

[00:26:45]Which is slightly higher than it is now.

[00:26:47]>> Okay.

[00:26:48]>> Debt >> to GDP ratio.

[00:26:50]>> GDP ratio.

[00:26:53]was that debt was short-term.

[00:26:57]It was 90day treasury bills, >> 180day treasury bills, one year >> uh paper. The bulk of it, like 70% of it was >> was shortterm.

[00:27:09]>> Okay. What did the Knack administration do?

[00:27:12]>> Mhm.

[00:27:12]>> They balanced the budget in 2003 and 2004. In fact, in 2004, they had a budget surplus of 1 billion.

[00:27:22]after >> what does a budget surplus mean?

[00:27:26]>> Um the total total revenues >> against >> against total expenditure.

[00:27:34]>> So the amount of taxes we collected in 2004 >> was more >> was higher by 1 billion shillings >> than the expense >> than the amount that the Kbaki government spent that year.

[00:27:49]That's what it means. Yeah.

[00:27:52]And because of that, again, City was saying, I know the Gen Z may find it like it is fiction. Because of that, banks were out on the street, by the way, >> hawking money on Kinatvenue. They were putting on the sidewalk. You are putting tents.

[00:28:19]>> Interest rates tumbled. Treasury bill went to 1% that year.

[00:28:24]>> No way.

[00:28:26]>> Everywhere.

[00:28:27]>> So it wasn't an attractive investment.

[00:28:29]>> Treasury bonds went to 1% that year. Okay. I had just been employed in IFC. I was quite a young fellow >> and um I remember our colleagues from Nigeria and West Africa were coming to see because because of that even what we call the h the investment return curve >> you know the yield curve was actually now sitting in the correct way >> and and people are coming to see this incred and because of that it unleashed a major sprout of growth Yes.

[00:29:06]>> From the private sector.

[00:29:08]>> So where did uh did the rain start beating us? Because this story of 2002 >> it can be repeated >> and we recovered in two years. You said by that by 2004.

[00:29:18]>> Yeah. Yeah. We could borrow again.

[00:29:20]>> More money than we could spend >> in Yeah. By by in 20 in 204 we had more money than >> we had a balanced budget.

[00:29:27]>> Yeah.

[00:29:28]>> Um by now 205 into 206. You see the government now um you know um shall I say I'm lacking the word but loosening you can call but you see the government now moving back towards the credit market >> and picking up a bit of debt >> because so it's not that you should never ever borrow >> but you can pause the borrowing >> you can pause the borrowing >> we have been saying that here city >> you can pause the borrowing so personally I hold the view very strongly >> that In our time we need to pose borrowing for between 12 and 18 months >> and if it has been done before >> it can be done again.

[00:30:12]>> Well yes and even if we're borrowing the question I would ask >> the excellenc is >> what percentage of our total uh budget or expenditure were we borrowing and and if we were borrowing >> what was the focus of that borrowing? I know it's for development as we say >> but did it do the job? Well, yes. If if if in fact, let me answer a question I was asking. If you're borrowing only 5% of what it is that you need, five, >> it it is not a burden.

[00:30:42]>> Actually, you're right. It isn't.

[00:30:43]>> It is filling a very necessary gap that you can see >> with the understanding that that will also spur growth >> and that is a debt that is easy to pay.

[00:30:52]>> Well, yes, if it is utilized properly, it will. Yes. But you do have to remember city and movie that uh you know infrastructure >> development there's a slight time lag for you to realize the economic benefit.

[00:31:08]So you build a road or you put up a power line or a power station.

[00:31:13]>> Mhm.

[00:31:14]>> The returns are not instant.

[00:31:15]>> No, they're not.

[00:31:16]>> Yeah. You need several years to to recover. Like for example that period you're saying the the the towards towards 2007 the big borrowing was for thicker road.

[00:31:28]>> Yeah.

[00:31:28]>> Yeah. Of course you know if you look at it now you can say you know we've probably recouped but it takes time to get the >> actually that that that that actually is the reality of infrastructure.

[00:31:43]>> Yeah.

[00:31:43]>> Yes.

[00:31:44]>> Yes. It it it it it brings about change which you can witness within a fairly short term but the benefits do not come immediately.

[00:31:54]>> Yeah. But at least they can happen within say the lifetime in which the loan was borrowed for someone like yourself or me.

[00:32:01]>> Oh yeah yeah yeah >> it can it can it can it can >> I don't know was it last night or when was it? Um, someone said that I don't know which which country borrowed money and they they had a 70-year period to pay that to pay that particular loan for that particular infrastructure. And I also think that's a fairly good time because at the end of the day anyway, governments exist um you know to serve the people regardless of who is in power.

[00:32:26]>> Look uh movie if you look at the debt register >> I know people usually say it's not it's actually there. You can just go to the treasury national treasury website >> right >> and you ramage through there you'll find >> the debt register okay the quality maybe can improve but it is there >> okay >> you will find there loan from 1972 >> I I learned that we have loans that old and I was we still paying them today >> yeah although I think it's we are at the tail end of but there's a credit there from the world bank >> from 1972 >> okay >> as far as disruptions in trade are concerned >> which is like 54 years ago.

[00:33:05]>> Yeah, that's a that's quite a time and we are almost done with that particular city but government should follow long term.

[00:33:14]>> Why am I laughing?

[00:33:14]>> Why you Yeah, >> cuz in 1972 I was in for one >> that's why I'm laughing.

[00:33:19]>> It's like good for you.

[00:33:31]disruptions in trade, you know, the exports and the imports, >> has it really affected? Because I'm not in that bashara, so I'd be lying to say that I know these details, but >> have there been significant trades?

[00:33:43]Okay, let me put it this way. Since 19 did we recover and the situation that we are currently facing in the state of Hormuz, has it made the situation worse?

[00:33:53]Okay, it has for sure.

[00:33:55]>> Yeah. Okay. In very broad strokes, >> of course. out. You see covid-19 disruption is that every economy is shut down.

[00:34:03]>> Yes.

[00:34:06]>> Covid delays >> you've turned the lights on.

[00:34:10]>> Okay. So people are trying to reestablish uh you know >> connections >> connections >> and and trade routes and what have you.

[00:34:20]M >> as they do that, >> Russia >> does it >> steps into Ukraine, >> right?

[00:34:28]>> Which now creates a big disruption for example for us because uh you know a lot of our wheat >> came from comes from Ukraine.

[00:34:39]>> So it creates certain disruptions for us >> and that's how we we go for into into 2022.

[00:34:48]>> Yeah.

[00:34:49]Um, Kogo, President Trump is back in office.

[00:34:54]>> Mhm.

[00:34:55]>> And remember when he first came into office, he had started the same disruption that no, you know, this free trade is not working for us. Let's bring the tariffs >> up >> up particularly against China and and other Asian countries. So he comes back and and starts the tariff war uh you know uh on the har. Now that creates a whole bunch of other disruptions.

[00:35:23]>> Yes.

[00:35:25]>> In the meantime um um war in the West Bank.

[00:35:34]>> Mhm.

[00:35:34]>> The Gaza.

[00:35:35]>> Gaza. M >> now okay that doesn't create as much disruption but there is some disruption >> okay >> then Kogo war with Iran and therefore the state of >> Homus >> which really you know is a gigantic disruption >> right >> um in terms of energy and therefore it is a cross and I don't think there's any country in the world >> that is not feeling that disruption.

[00:36:10]>> Okay.

[00:36:12]>> So it affects trade in in in three ways.

[00:36:17]Firstly, the cost of moving things about is rising rapidly.

[00:36:21]>> Mhm.

[00:36:24]>> Of course uh all producers rely on that energy ourselves. Mhm.

[00:36:31]>> Uh but if you think about China and they I mean they really rely on that energy.

[00:36:36]So the cost of the goods they are trying to sell us is also rising.

[00:36:40]>> Going up. Yes.

[00:36:41]>> Yeah. So uh and of course then there are secondary effects once stuff gets here because the prices of at the pump jump up dramatically.

[00:36:54]>> Yes. and government is scrambling to use a petroleum subsidy, do whatever it can to try and >> bring it down >> and contain that increase. And even with the subsidy and a bunch of other stuff that has been done there, you are still seeing major increases in >> in cost in the in cost at the pump. What options do we have at the moment? Um, by the way, people people some countries have had fairly dramatic kind of >> uh options including reducing the working week including asking people to to use more public transport >> around the world >> instead of working 5 days a week. You're told >> to work three or work from home.

[00:37:41]>> This is like co you know.

[00:37:44]>> Uh so there are those kinds of options >> right. um more long-term is to think about reducing the dependence on oil. So perhaps we need to emulate >> what um Ethiopia has done um which is to try and accelerate the adoption >> of electric >> uh solutions electric mobility as a way of moving forward. Will that solve instantly? It won't. Um but uh for instance the measure that was announced about 100,000 the first 100,000 vehicles >> yes >> you know I think that could could uh >> could have some immediate or or or near immediate effect u because of course China is a gigantic supplier if you want 100,000 cars from China I'm sure they can bring them here in a week.

[00:38:37]>> Oh they can.

[00:38:38]>> Yeah. So it can be a fairly >> one ship for them is enough.

[00:38:42]>> Yeah. So like that.

[00:38:45]>> What is not a solution is yelling at each other and calling each other names.

[00:38:50]>> For sure.

[00:38:50]>> You mentioned Ethiopia. Remembered the great Renaissance dam.

[00:38:54]>> They they have great power as far as that dam is concerned. Mhm.

[00:38:59]>> Do do if we had similar power um do you think that would >> help us and and reduce our dependency especially on diesel powered generators?

[00:39:10]>> Indeed it can. Um I must say at the moment the diesels are not that um I think if I recall and I'm doing recollection here.

[00:39:20]>> Yes.

[00:39:21]>> I I think it is something like 5% of the energy mix.

[00:39:25]>> We have quite a bit of wind. Uh we have quite a bit of solar. We are importing from Ethiopia >> from that grant.

[00:39:33]>> Yes.

[00:39:34]>> Um uh but can we do we have one site called High Grand Falls >> that we have spoke about spoken about since CT was from before CT was in >> Nazary.

[00:39:49]>> Yeah. I once saw a report in the basement of the Ministry of Agriculture >> about High Grand Falls. Mhm.

[00:39:56]>> Uh that report was from 1967.

[00:39:59]>> Yeah.

[00:40:00]>> Here >> here in the basement of the ministry of >> Yeah.

[00:40:04]>> of agriculture. So high ground falls >> is is one big site that uh that has a potential. Of course I think we can do a lot more solar.

[00:40:13]>> Okay.

[00:40:14]>> Um and we can do a little bit more uh wind. Um and of course industries and are now doing captive power. M uh so there there's quite a bit of potential there.

[00:40:28]>> None of those things are instant.

[00:40:31]>> Yeah.

[00:40:31]>> Cuz energy development takes time.

[00:40:35]>> Um you know switching even mode of transport takes time.

[00:40:40]>> What we can do is a kind of temporary relief that is now ongoing.

[00:40:46]>> Yes. and unleashing uh that trajectory like now let's switch to more electric cars and so on.

[00:40:55]>> Those things u so you do both a combination of short-term support measures as are being done >> but also >> um um um unleashing the longerterm or immediate term measures >> so that because you know >> you know you can't stop the next war.

[00:41:13]>> Yeah.

[00:41:15]So what you need is to reduce the dependency on this scene >> and and then we have the capacity to to do so >> and I like the fact that globally actually everyone is talking about it they're like maybe they have realized that indeed reliance on oil is a big problem and like you have said if another war breaks out and perhaps even a global one then um let me use the word I like using we are properly cooked >> but consider for a single second >> that some of these shocks need to be absorbed absorbed perhaps in the short term, medium-term and long term. I mean like if you look at the uh the 2019 Petetroleum Act. Okay.

[00:41:55]>> Mhm.

[00:41:57]>> One of the the portions of it that look to what we are discussing >> is the creation of reserves.

[00:42:08]>> Now Rwanda has reserves.

[00:42:12]We have a law that enables us to actually >> have reserves.

[00:42:20]Now we don't have reserves that we can speak of.

[00:42:25]>> We have something like a 21 day cycle of fuel >> where if there's a problem we need to solve it within that particular period.

[00:42:32]>> Yes.

[00:42:34]>> The will to ensure that we have protective measures.

[00:42:38]>> Yeah. It is not longlasting but it gives you breathing space to think >> cuz if you had the reserves 3 months down the line you'd be start saying okay we've got five more months here but let's see what we can do and plus it would have offered a stable cost of whatever petroleum product that we use.

[00:42:56]M >> so it takes us back to when we think of our country and the things we need to do for our country and the priority of ensuring that the citizenry are protected from such things. Many of the things that need doing are actually within our grasp. It is not that we cannot do them.

[00:43:12]No I suppose city one one thing to to point out is management theory is like fashion. Yes, >> it does change.

[00:43:26]Like now as into the '90s, early 2000s as you were going to graduate school, we used to talk about just in time manufacturing which which suggested that in fact you keep less talk in the chain.

[00:43:42]Um you have uh supply chains that are so streamlined. Mhm. In fact, uh I remember my late friend Ken Buer and I talking about when he was running the HP operation in East Africa.

[00:43:58]>> And um at that time HP had like a distribution hub in Dubai.

[00:44:05]>> This is Howlet Park. Yeah. The >> Hlet Computer company.

[00:44:08]>> The computer company.

[00:44:09]>> All right.

[00:44:10]And uh and Ken used to tell me how it was working that you see if you if your hard drive was something went wrong.

[00:44:17]>> Ah you have a Yeah. If something went wrong with your and you ask for a part >> Mhm.

[00:44:22]>> if you ask for it before midday >> Mhm. M um by the following morning it is here because that order is transmitted like to to their Dubai center and the part is put on KQ overnight and by the following morning you have it's it's at the airport. No, in fact at that time the issue he was raising with me was I wasn't in K but uh I was in government he was raising with me was the efficiency of clearing that the turnaround from when the customer orders to when a partner arrives at Joo Kinata airport was like 24 hours then it was taking them sometimes even seven days to clear you know and we were saying look solve this thing and we did solve We did it.

[00:45:15]So now all I'm saying is management theory at that time was for just in time, >> right?

[00:45:24]>> Um but not to excuse why can't we have some reserves >> that that can can help sort us out. that has led to debate around can you bring private investment into for example you know large scale >> fuel depots and I know that in our time we did end up with one at Konza by I think Petrol city one of the >> oil companies has a large scale depot >> in Konza I am >> actually let me >> and another one in fact is much smaller.

[00:46:10]>> Yeah. um two comments from two different people but on the same issue of uh fuel fuel fuel reserves for example various places is asking >> um is there actual national planning in Kenya as far as the fuel is concerned because again ro tata I'm ama China has got over two years of fuel reserves I don't know how true that is but is it possible to have two years of fuel reserve >> as I well I don't know about two years but >> as we uh explaining >> we do have some limited capacity >> okay >> including by private oil companies >> one that I know of is Konza another one is Nuki >> uh of course whatever now two you know that also comes at a cost because when you're holding stocks when you're holding >> I mean stock costs money yes so it does come at a cost >> okay >> um one would like to She maybe that argument fleshed out into into shillings >> to see what is the investment case.

[00:47:19]>> Okay.

[00:47:20]>> For for reserves uh or how can reserves be uh be uh financed >> uh but the desiraability the idea of reserves is a good idea.

[00:47:33]>> Mhm.

[00:47:34]>> Certainly at at face value but we need to go deeper into the investment case for it. uh to to see but I would I would urge Kenyans this thing is not there's no magic wand >> to this problem. It will require a multiplicity of issues.

[00:47:51]>> Part of it could be more reserves.

[00:47:53]>> Yes.

[00:47:54]>> As we expect to manage future future shocks.

[00:47:57]>> Yeah.

[00:47:58]>> Uh the other is this change of our reliance on on these force of wheels >> like that. Uh including of course continuing to develop our own force of wheels that we have. So it's a multiplicity of issues.

[00:48:10]>> Okay. Lastly, uh we have about 2 minutes >> on the issue of remittances. Do we has this affected the way Kenyans are remitting um from the diaspora, giving us uh money to more or less use in our economy?

[00:48:27]>> Oh goodness. I don't I haven't looked at that number for a while.

[00:48:31]>> Okay.

[00:48:31]>> I would be surprised if it hasn't.

[00:48:35]>> I would be quite surprised if it hasn't.

[00:48:36]>> Yeah. Do you think it would would have gone up or down?

[00:48:39]>> I would expect it has gone down.

[00:48:41]>> Okay.

[00:48:41]>> Or or not grown as much as it was growing.

[00:48:45]>> Yeah.

[00:48:45]>> Okay.

[00:48:45]>> I I would expect a slow down, but frankly, I haven't looked at that number >> in a number of months now. So, I'm not sure where it is at.

[00:48:53]>> All right.

[00:48:54]>> Um for foreign direct investments, that's a conversation that has also been um in the conversation in the tongues of government as well.

[00:49:03]>> The direction that is taken. Are we on course to despite this whole uh straightforward moose situation?

[00:49:10]>> Um well you know the the you you I think we are quite we are on course and again >> you know government is never really helpless as such >> um >> and you have seen for instance like this Kenya French summit here just the other day. Uh-huh.

[00:49:32]>> You have seen this year also the Kenya International Investment Conference >> on the leather sector. I remember because I was part of it a very very strong interest from Italians and and Chinese.

[00:49:44]>> Yes.

[00:49:45]>> Um so the answer is is that um you know the efforts to attract have been fairly strong this year. I expect the number could have been better if there were no global crisis.

[00:50:01]>> Okay.

[00:50:02]>> But I still expect a fairly strong number >> in FDI this year.

[00:50:06]>> Okay.

[00:50:07]>> Um the thing though that you must ask yourself movies is like this.

[00:50:11]>> How is it that foreigners >> have confidence to invest in this republic >> and we ourselves >> are really you know bickering >> from morning to night. I would say what what is it that they are seeing that we are not >> perhaps they have deeper pockets than us and they seeing the opportunities that we >> actually no the Kenyans we are looking at in this discussion are the wrong Kenyans >> which ones should we be looking at >> I'm going to tell you in a sentence >> yes >> this mama boa who wakes up every day to sell those wares that person is an investor you just don't think of it but they are >> this person who smells sells these things you people call >> yes >> that's an investor >> these people who sell just on the on the road just down here, >> right?

[00:50:55]>> Anyone who takes their money to go into business, they are investing.

[00:51:00]>> Okay? And there are very many people in the Jacali industry are in are investors. Some are even entrepreneurs.

[00:51:07]>> We are looking at this nebulous middle class. These ones who are one salary away from poverty in Kenya. They're the ones who seem to we focus our discussion on. That's the wrong group to look at.

[00:51:18]These are the group who are the majority and who need that uplifting so that they can get into the middle class with their business acument are the ones we are looking at. This is where we should focus.

[00:51:27]>> That's my view.

[00:51:29]>> All right. Um Bryce is saying great discussion with the former governor um his very important crucial and informed points with wisdom and experience. But there's one major who's asking OMG cry my beloved country. How do we end up voting such bright minds out? I guess in very many very many words he's asking are you are you going to be going back um to the governorship of Lyubia?

[00:51:53]>> I hope to do so.

[00:51:55]>> Um I hope to do so.

[00:51:57]>> Yes.

[00:51:58]>> Um you know I have a great um love and passion for like and what we can do >> as a as a county.

[00:52:08]Um I know that um uh you know the political winds are what they are.

[00:52:19]>> Um you know incidentally you know I think people people we so easily forget >> yes >> um I'm in government now I'm in broad-based government.

[00:52:31]>> Yes you are.

[00:52:32]>> I didn't start there. I think I'm in broadbased government courtesy of Gen Z.

[00:52:38]>> Uh after the Gen Z revolution, government was reconstituted and quite a number of people from the opposition from Azimo >> uh were asked to >> join >> to join government.

[00:52:52]So uh yeah I I have I have every intention inshallah >> uh to and hope pray I'll persuade the citizens >> ofia. All right >> the thing I can tell you again we back to the same point movie that >> the economic thought >> to political action.

[00:53:17]If you look at the prevailing economic winds >> Mhm.

[00:53:23]>> in the Mount Kenya region >> right >> today, >> it has nothing to do with what is a light economic policy.

[00:53:31]It has nothing to do with what will really get us >> out of these difficulties and everything to do with who do we like and who don't we >> like. like >> so you know and uh and unfortunately unfortunately colleagues we are also in an era where >> Mhm.

[00:53:55]>> Um the argument that wins >> is not always the economic argument or even the reality argument.

[00:54:05]>> Yes.

[00:54:06]>> I give you one example uh and I know because I'm involved. I give you the example.

[00:54:13]the president went somewhere uh some years like a year ago I don't know when I think in northern Kenya >> and he spoke about a road and he spoke in a very dramatic fashion and he could remember the names of the towns the Gen Z.

[00:54:44]>> Yes.

[00:54:45]>> Responded with incredible memes, most of which were sort of mocking the >> uh the presentation.

[00:54:56]It made many Kenyans think like it was a story you know this story is a jaba >> the reality colleagues is that that corridor >> is under very rapid development >> okay >> I know so because I as dto mor the chair of >> I have been to Ethiopia I've been chair of K one and a half years >> I've been to Ethiopia twice um on both occasion leading or being part of leadership of a government delegation >> negotiating with our colleagues from Ethiopia >> right >> about where we are building two bridges one within Mandera town the space is called Sufu and one in Ramu building bridges across Livawa which is the boundary between Kenya >> and Ethiopia >> and Ethiopia at Mandera or in Mandera County.

[00:55:56]So those two bridges are at the tip of this 750 km road >> beginning is yolo and entering into um into Ethiopia.

[00:56:10]>> Right.

[00:56:11]>> K is involved because we are building one stop border posts.

[00:56:17]We are also involved because we are building uh track stops >> what we call trade facilitation centers like longd distance tracks where can they stop >> and and rest for the overnight or whatever we involved in building four of them and then these two onetop border post that's how we why we know about this thing >> so we are in this era where fact can really recede into the background >> right >> um in the face of of uh well uh issues that are not factual.

[00:56:52]>> Okay.

[00:56:53]>> Uh perhaps it goes to the trust issue you have raised.

[00:56:57]>> So unfortunately we will go into this cycle with a lot of that.

[00:57:03]>> Okay.

[00:57:04]Um and unfortunately a lot of that it may it may be politically exciting at the political podium but it does not solve problems >> because many Kenyans don't believe that corridor is under development. Many Kenyans are not even looking at the economic opportunity presented by that >> by that corridor which is a very sad thing indeed because it is opening up such a gigantic space of Kenya.

[00:57:36]>> Mhm.

[00:57:37]>> But because propaganda and lack of trust has overtaken reality, >> many Kenyans would not even consider that area >> Yes.

[00:57:49]>> as part of where they are thinking about investment. Mhm.

[00:57:52]>> Yet you know uh uh that is where you can actually get perhaps more higher returns because it has less capital than say Nairobi.

[00:58:05]>> Okay.

[00:58:06]>> Is a sad thing because those belief systems or those issues affect our behavior, our actions. So very very disconnect between real economic thought >> and political action.

[00:58:22]>> Okay.

[00:58:25]>> You you you the issues related for example to why real wages have been declining.

[00:58:33]>> Mhm.

[00:58:37]>> Are go way beyond any one particular administration.

[00:58:42]>> Okay. The solutions also go way beyond one particular um administration.

[00:58:50]>> Excellency, take home message for you.

[00:58:52]The >> psychological perspective.

[00:58:54]>> Yes.

[00:58:56]>> Human reactions tend to be more emotional than rational.

[00:58:59]>> True.

[00:59:00]>> Where our logic comes in is to justify our emotional reactions.

[00:59:04]>> Yes, >> I agree. Which is why >> politicians they sell three things.

[00:59:11]fear, anger >> and hope.

[00:59:16]Um, your excellency, we wish you all the best as far as concerned how we can increase tax base and perhaps the plans that Kerry has on that.

[00:59:29]>> I'll be very happy to come and do so.

[00:59:31]>> All right. Thank you.