Ethiopia's fast growth is no danger to Kenya – Daily Nation (blog)

by Zelalem

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Somebody sought my view on a series of business articles showing that Ethiopia’s economy, measured by Gross Domestic Product (GDP), would soon surpass Kenya’s.

Based on the different growth rates, it is expected that Ethiopia’s GDP could match and surpass Kenya’s in the time period between 2018 and 2021.

In the mind of my questioner, this is one more reason to panic, apparently because Kenya is losing hegemonic status on the Eastern Africa seaboard.

Yet the fact that Ethiopia is growing and that its Gross Domestic Product (GDP) may surpass Kenya’s is not a legitimate reason for hand-wringing and gnashing of teeth.

To start with, Ethiopia has a population that is 2.3 times the size of Kenya’s own population which was 44 million in 2015. What this means is that even if the countries were to grow at the same pace starting at the same level of development, the Ethiopian economy, measured by GDP, would be at least 2.3 times as large as Kenya’s.

Ethiopia’s gains today just mean that it is catching up, making its people better and overcoming constraints that have hindered its growth before. That was inevitable, and this catching up should be lauded by everyone who cares for the welfare of people, irrespective of the country in which they live.

There is no reason for Kenyans to be concerned about it, especially because most determinants of a nation’s growth are largely in that nation’s hands. The pitiable reaction that has been recorded in this country and the concerns about Ethiopia’s growth suggest to me that some would prefer that Kenya remain the slightly taller child among stunted children.

Kenyans should celebrate Ethiopia’s prosperity, because it means greater scope for expanded trade and also greater economic competition and variety to any products that may emerge from our neighbour.

It is also a good signal, because another fast-growing economy of Kenya’s size in the neighbourhood would crowd in investments from elsewhere, being a signal of improving purchasing power by both nations.

From a geopolitical perspective, it is a good signal for Ethiopia to continue to grow, not only because real economic growth is good for Kenya but also because genuinely verdant economies are also peaceful and more stable.

In the last three years, Kenyan police have arrested dozens of Ethiopian and Eritrean refugees who were in transit to South Africa and other nations. It is unlikely that this exodus, and the burdens that it places on Kenya and other countries on the transit routes, will end unless material conditions in Ethiopia and Eritrea improve dramatically.

In a word, a growing and prosperous society is also a safer one that strengthens regional stability. As a country that has recently reworked its foreign policy and taken to regional policing, it should be encouraging for Kenya that another neighbour has resources that could be dedicated to peace.

For the unreformed jingoist, this argument, that Ethiopia’s growth is no worry for Kenyans, will not wash. So why Kenya is not growing at the same level as Ethiopia, stuck in the five per cent range while Ethiopia’s growth is at least 7.5 per cent each year?

A good part of the explanation is that Ethiopia has undertaken many reforms in agriculture and also built enabling infrastructure to modernise its economy. Kenya may argue that it is doing the same but it is evident that Ethiopia has spent money more efficiently and made better choices in infrastructure expansion.

Ethiopia is the more disciplined spender, even if it too has assumed substantial debt.  

For instance, in the last 10 years, Kenya has hardly undertaken meaningful reforms in agricultural sectors as sugar and coffee. Instead, it has used massive debt write-offs that achieve little except maintain the status quo.

This is not to say Ethiopia’s Agriculture Transformation Agency has achieved perfect results, but it is apparent that it has driven more meaningful reform than Kenya has.  And who needs to mention how Ethiopia deftly negotiated a fantastic deal for a new dual railway line running across more difficult terrain, with better technology, than Kenya did?

Comparing the relative costs of both pieces of infrastructure, one could bravely state that Kenya got a “fossil on a rail track”, for twice the price. Who’s smarter now?

Assuming available knowledge and technology were equally accessible, it is inevitable that Ethiopia’s GDP would be higher than Kenya’s, owing to population differences.

Despite the challenges of democratic consolidation, which may be greater for Ethiopia today, it seems to have the far smarter and comparatively cleaner public sector. And yes, that’s something to be envied for.      

Kwame Owino is the chief executive officer of the Institute of Economic Affairs (IEA-Kenya), a public policy think tank based in Nairobi. Twitter: @IEAKwame

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