Ruto’s ‘Singapore of Africa’ push meets Kenya’s money woes

• For Kenya’s Ruto, ‘Singapore of Africa’ dream has taken centre stage with the Cabinet approving a massive $38.77 (KES5 trillion) roadmap to realise this goal in our lifetime.
• Singapore’s growth to first world was however made possible by a number of unique factors, such as its small population, strategic trade position, unified political vision under good governance, and historical events that are near impossible for Kenya to duplicate.
• Critics warn that Ruto’s National Infrastructure Fund illegally removes constitutional safeguards and places use of those funds in the hands of one individual opening avenues for unbriddled looting and kickbacks.

On Monday, Kenya’s Cabinet approved an ambitious $38.77 billion (KES5 trillion) development roadmap that seeks to turn the East African country into a “first-world economy” borrowing heavily on Singapore’s economic model.

According to President William Ruto’s administration, the plan’s main drivers are two important institutions, the National Infrastructure Fund (NIF) and the Sovereign Wealth Fund (SWF), which are expected to attract financing for the country’s key investments to transition into first world economy.

Together, these vehicles are meant to get the citizens to use their own money even as the economy attracts both private and long-term institutional capital to fund big public investments in infrastructure, energy, agriculture, and logistics.

The government says that if the National Infrastructure Fund is run well, every Kenyan shilling put in will bring in up to 10 more shillings from investors both inside and outside the country.

“Approved as a limited liability company, the National Infrastructure Fund will serve as the central engine for aligning the administration’s financial resources with national development priorities,” a Cabinet brief released on Monday states.

“Through innovative mobilisation of domestic resources, strategic monetisation of mature public assets, democratisation of ownership through capital markets and the deployment of national savings, the Government will unlock large-scale private sector capital to finance priority investments while reducing reliance on borrowing and taxation,” President Ruto’s top decision making organ added.

“Together, the Sovereign Wealth Fund and the National Infrastructure Fund will finance Kenya’s transformation agenda focused on strengthening food security and positioning Kenya as a net-exporting economy, expanding modern transport and logistics to drive productivity and trade, and scaling up energy generation to power industrialisation and the digital economy.”

Kenya’s plan is big and forward-thinking. But it also raises fundamental questions: Is it possible for Kenya to follow in the footsteps of Singapore’s path to a modern, first-world economy? And do Kenya’s endemic problems with governance, such as corruption, high youth unemployment, a budget that doesn’t match up, and weak institutions, make this goal harder to reach?

Critics tear Ruto’s National Infrastructure Fund path to ‘Singapore of Africa’ status

Already, critics are faulting President Ruto’s ‘Singapore of Africa’ blueprint. Lawyer Willis Otieno states on X, “This [National Infrastructure Fund] is an election-funding vehicle. Nothing else explains the urgency, scale, opacity and centralisation of control. KSh5 trillion is not a development tool; it is a war chest.”

He adds: “By the time elections arrive, the money will already be “committed”, “in projects”, or “contracted”. That is how campaign financing is laundered through public works. There is no constitutional lacuna that an Infrastructure Fund is curing. Further, where private capital is required, the PPP (Public-Private Partnership) Act already supplies a lawful, transparent and tested mechanism for infrastructure financing without violating constitutional safeguards.”

In yet another counter, Senior Counsel Paul Muite, a key figure in the run up to Kenya’s multiparty democracy cautions, “National Infrastructure Fund illegally removes constitutional safeguards and places use of those funds in the hands of one individual. Expect unbriddled looting and kickbacks. The debt burden being casually tossed onto Kenyans.”

According to the Cabinet, the National Infrastructure Fund “will be overseen by a competitively appointed Board and CEO, while the Sovereign Wealth Fund will operate under a robust policy framework to ensure prudent investment, fiscal discipline and inter-generational equity.”

Singapore Path to First World Economic Model–a Brief

Globally, politicians often use Singapore’s rise from a developing port city to a global economic powerhouse as an example of how to be successful in a country’s development. Today, Singapore has one of the highest per capita incomes in the world, strong institutions, and a reputation for running the government well and having low levels of corruption. According to World Bank Open Data, Singapore’s GDP per capita was more than $90,000 last year, demonstrating that the country has a lot of industries and high-value-added sectors.

However, Singapore’s growth to first world was made possible by a number of unique factors, such as its small population, its strategic trade position, its unified political vision under good governance, and historical events that are near impossible to duplicate. It is, therefore, important to be cautious when trying to use this model in Kenya, which has more than 57 million in population and very different social and economic conditions compared to the Asian country.

Kenya’s Hard Economic Realities

Kenya’s economy has been growing steadily over the past 10 years, with real GDP expanding by about 4.8–5 per cent each year in recent years according to the World Bank statistics. While this growth is good for the East African country, it doesn’t meet the standards for high-income countries that define first-world status. Also, Kenya’s persistent structural constraints mean that growth has not led to widespread prosperity.

Some of the key challenges in Kenya’s economy include:—

Weaknesses in the job market: Even though some jobs are created every year, most of them are informal and frankly, they don’t pay well. About 85 per cent of all new work opportunities are in the informal industry, which shows that there aren’t many new formal jobs being established.

Stagnant Wages and Under-employment: Real wages in Kenya have stayed the same, especially for young workers. This makes it harder for most workers to enjoy better living conditions even as massive statutory deductions leave employees with thinning take homes.

Poverty and Inequality: A large part of Kenya’s population still lives below the international poverty line. Currently, about 38.4 per cent of Kenyans make less than $2.15 per day according to Statista.

These indicators suggest that Kenya is growing, but the benefits are not yet showing a clear trend toward the structural change that is typical of high-income economies. In the first world economies, inclusive progress is defined by productivity gains, formal employment, rising wages, and growth in value-added industries.

Governance and Corruption Pose Structural Weaknesses

The quality of governance is one of the biggest problems that Kenya faces in its efforts to shift into ‘Singapore of Africa’ status. Corruption and a lack of accountability in institutions have long been problems in public administration, making people less likely to trust the system and continuous wasting of public resources.

State institutions that are in charge of procurement, turning assets into cash, and keeping an eye on strategic investments—like the ones that are now being suggested to oversee the National Infrastructure Fund and the Sovereign Wealth Fund—must be very open and have strong checks and balances to avoid governance failures that have historically wasted public funds.

International experience demonstrates that sovereign wealth and infrastructure funds are susceptible to corruption, mismanagement, and political interference in the absence of strong governance frameworks, states The Carnegie Endowment in an update.

Kenya’s own record is far from perfect.  Although there are laws in place, their enforcement is still not consistent, and problems with procurement integrity and public financial management often get in the way of development. These weaknesses make people rightfully worried about whether Kenya can use these new funds in a way that really reduces corruption and makes people more responsible.

Problems with money: debt, taxes, and priorities that are at odds with each other

Kenya’s public debt has been a worry for the country’s leaders. Fiscal space is limited because public debt is more than 65 per cent of GDP and interest payments take up a large part of government revenue, the latest update by the World Bank shows.

“We have borrowed close to Sh4 trillion already [Since President Ruto came into office]. Before setting up another trillion-shilling fund, those in government must face Kenyans and explain what they have done with the money already borrowed,” cautioned Kiharu MP Ndindi Nyoro, who fell out with the President about a year ago. He added, “The government is selling grandiose ideas while cutting capitation for schools. How do you talk about trillion-shilling plans when essentials like education are being underfunded?”

One way to avoid having to borrow more money is for the government to set aside money from privatizations, such as future stake sales in important public companies, for infrastructure and capital investment.

But for asset sales to be a good way to pay for long-term productivity growth, they need to be done at fair prices, with a lot of private sector participation, and with money being reinvested in a way that helps the economy grow instead of just giving people short-term tax breaks.

Kenya has also had to deal with political and social opposition to tax reforms that people thought were too much work, which led to protests and changes in policy, an anlysis from the World Bank notes.

In the long run, the fiscal strategy needs to be both sustainable and fair. To do this, it needs to balance progressive revenue mobilization with incentives for private investment.

Youth Unemployment and Social Frustration

In Kenya, youth unemployment and underemployment poses one of the biggest social problems.  Demographic trends show that every year, just over one million young people are entering the job market, which makes it even more important to create good jobs. Economic growth could be more harmful than helpful if it doesn’t lead to more jobs, especially in modern sectors.

The growth of the informal sector and the lack of good jobs in the formal sector show that the economy’s structure doesn’t match the needs of Kenya’s growing youth population. Also, long-term unemployment is linked to bigger social problems, like protests and political unrest over taxes, government, and economic inequality.

Kenya’s Strategic Mismatches

Kenya’s focus on big infrastructure projects such dams, transport corridors, and expanding energy capacity is a classic example of state-led development.  Infrastructure is a necessary part of economic growth, but it is not enough on its own. A private sector that is free to work and compete is just as important because it drives innovation, productivity, and a wider range of exports, the World Bank counsels.

The World Bank’s analysis stresses that making the business environment better, increasing competition, and removing regulatory roadblocks are all necessary to encourage private investment and create long-lasting jobs.

Ruto’s Singapore of Africa envisions the construction of 50 mega dams, 200 mini-dams and over 1,000 micro-dams, bringing an additional 2.5 million acres into production.

The Bretton Woods institution notes that investments in infrastructure could end up being wasted or cost the government too much money without leading to major changes in the structure.

 What Kenya Can Learn from Singapore and What Rhetoric Can’t Do

Singapore’s development story, which includes strict macroeconomic management, low levels of corruption, a lot of skilled workers, and industries that focus on exports, can teach policymakers in Kenya a lot.  However, borrowing and mapping such a model in the East African country calls for significantly more than aspirational planning documents and substantial financial investments.

It needs ongoing changes to institutions, more money spent on people, stronger ways for the government to be held accountable, and a continued focus on the private sector’s ability to drive growth at scale.

Singapore’s GDP per person is tens of thousands of dollars, while Kenya’s is only about $2,400. This shows how far behind Kenya is compared to the first-world standard that politicians often use.

Kenya’s ambitious and visionary push to set up a National Infrastructure Fund and a Sovereign Wealth Fund is a brave attempt to change the country’s development path.  And while this plan could open up new ways to get money and build important assets if it is carried out with professionalism, governance problems that won’t go away, structural fiscal pressures, problems in the youth labor market, and a need for more private sector reforms are all big problems.

The country risks making the same mistakes with ambitious plans that don’t lead to widespread prosperity if it doesn’t find reliable ways to deal with its deep-seated economic and structural problems.

A sustainable transition to “Singapore of Africa” will need a lot more than big projects and grand speeches. It will need deep structural changes that give power to citizens, make institutions stronger, and open up economic opportunities for all players in Kenya.

Read also: Why Africa waits while Asia builds: A wake-up call for the continent’s leadership