I missed a part of the most significant intellectual battle in Nairobi when Dr David Ndii emerged from anonymity of X, formerly Twitter, to face his equally formidable peers.

I found myself needing to be in two places simultaneously, but fortunately, thanks to Kenya's industriousness, the event was broadcasted live and became part of the extensive volume of content that the country contributes to the industrial data economy.

This achievement was made possible through the foresight of President Mwai Kibaki's government, which connected Kenya to the world through an undersea cable, enabling the nation to establish its digital prowess and tap into emerging economic opportunities like business process outsourcing and offshoring, both of which are major industries in numerous high-growth developing countries.

Ndii sets stage for State of the Nation address

Even though I wasn't physically present, the atmosphere and anticipation surrounding the event were unmistakable. According to NCBA Economic Forum event organizers, more than a thousand people requested to attend, but only 300 could be accommodated. Participants included members of civil society, religious leaders, government representatives, private sector stakeholders, members of the diplomatic community, and journalists, all eager to hear the state's ideologue provide hope amidst the chaos that Kenya has experienced over the past year. Thousands more watched the event on YouTube.

This event set the stage for Thursday's State of the Nation address by President William Ruto, offering Kenyans the hope of a brighter future.

NCBA Managing Director and CEO John Gachora began the event with a light-hearted note, possibly recognizing Dr Ndii's current stance and perhaps even sympathizing with him, as the room prepared to dissect his transformation from a civil society advocate to a voice justifying harsh International Monetary Fund (IMF) reforms and mocking the social costs borne by the country.

Gachora introduced a Wall Street analogy, adapting it to Kenyan context: "Why does the growth in Upperhill (akin to Wall Street) averaging five percent annually not translate to improvements in the homes in estates (akin to Main Street)?"

In contrast to Dr Nancy Koech, the CBK Deputy Governor, who presented confusing numbers to evade the audience's scrutiny, Dr Ndii went straight to the heart of the matter, launching a 'shock and awe attack' on those who still held out hope that he would mince words in person.

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Cost of entry to the casino

Dr Ndii plainly stated that the government had essentially maxed out the nation's credit card, with more than a half of the salary now devoted to servicing debt, leaving no viable way out. Over the past decade, Kenya had borrowed extensively from China, the Eurobond market, and syndicated banks under the false assumption that it would be automatic to refinance.

However, the US raised interest rates and subsequently the cost of entry to the casino had surged, and Kenya was locked out. According to Dr Ndii, Kenya had already defaulted on its debt and was under an IMF bailout program which means Washington is the only game in town. Private sector opposition and lobby groups who have been hoping to influence government policy should now know who pays the piper.

He offered businesses a simple piece of advice, echoing the counsel he had provided to a company that survived the structural adjustments of 1997 to 2002: "Thriving in good times is easy, but surviving the difficult times defines a business."

Dr Ndii asserted that the government had run out of funds that had fueled tenderpreneurship, and the tap had been turned off. The construction companies that would survive the end of infrastructure projects might find opportunities in the housing sector, once it picked up.

Dr Ndii reiterated the World Bank's latest Country Economic Memorandum report, stating that Kenya's economy lacked dynamism, following President Kibaki's model of service-oriented growth and business process offshoring, while ignoring agro-based industrialization.

For now, all hopes rested on agriculture, primarily because it was the one sector where the government did not need to invest to generate growth, thus preventing the country from sliding into recession.

Some stubborn facts

"Agriculture right now can lead in recovery precisely because it does not need new investment. I am not saying we invest in agriculture, I am saying it is a low-hanging fruit that can lead our recovery because we do not have the capital or time to wait for investments to mature; we can harvest existing (coffee, tea) trees," Dr Ndii remarked.

This strategy effectively knocked the wind out of the crowd who were hoping for some optimism. So much that some stubborn facts were left unsaid. The impact of the state fertilizer subsidy may have been overstated. An increase in acreage under crops naturally followed a prolonged drought, the worst in four decades. If this goodwill isn't rewarded and prices collapse, it may not be repeated.

Furthermore, while the fertilizer subsidy reduced input costs, IMF-imposed fuel taxes increased other input costs, like transport and fuel for farm machinery, effectively erasing the subsidy's benefits. Farmers, having suffered high cost of production have come to the market filled by a deluge of harvests and imports which meant they will be forced to sell at a loss. With the El Niño coming into the picture, farmers will be desperate to sell, further depressing prices.

When farmers hoped the National Cereals and Produce Board would stabilize the market by setting a price of Kes5,500 per bag, the government offered only Kes4,000 and planned to purchase just one million out of the expected 44 million harvest. Middlemen are offering farmers Kes200 more to bypass the government's small purchase.

Manage excess grain

The agricultural outlook is also clouded by the unravelling El Niño, which could destroy crops or exacerbate post-harvest losses, given the government's limited provision of only 100 dryers as a strategy to manage excess rain.

In the midst of this, the Institute of Economic Affairs, headed by Kwame Owino, pointed out shortcomings in the agriculture miracle, noting that the new government should have focused on the majority of Kenyans rather than just a few farmers. Mr Owino questioned why no one had considered boosting incomes for the broader economy, which had lost spending power due to COVID and inflationary shocks from energy prices and supply chain disruptions.

Moreover, the new government increased its reliance on taxes, fees, and deductions, which further eroded spending power. Dr Ndii's response was that they had put money back into people's pockets by ensuring affordable Ugali, a staple meal in every household. Even if the value of that money is washed away by inflation and currency depreciation.

Unlike President Kibaki, who connected Kenya to global business processing, and President Kenyatta, who sought to stimulate spending through cash transfers and Kazi Kwa Vijana, President Ruto's government seemed to place its bet on agriculture, hoping it would yield returns without substantial investment.

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