 Good morning and welcome to IEDP webinar. We are glad you can join us. My name is Sharon Brown. I'm a second year master's student of public policy at the Ford School of Public Policy. I would like to thank the International Policy Center in the African Studies Center at the University of Michigan for their supporting our International Economic Development Program. Had it not been for the current global pandemic, our group of us would be in faculty, would be traveling to Kenya during the spring break. We're happy that Kenya is willing to come to us virtually. I'm now going to introduce other members of the IEDP team. First, we have Rebecca Ackerman. Rebecca Ackerman is a second year MPP student at Ford, where she focuses on how technology, law, and politics impact policy implementation. Previously, she has worked on policy analysis, immigrant rights, and government technology. Rebecca is charge of logistics and IEDP. Secondly, we have Victor Rating is a second year MPP student at the Ford School where his studies focus on international policy. Before Ford, he worked as a public affairs researcher in his home country, Kenya, and the East African region. Rating is an IEDP president. My good friend is also Kenya's public policy expert. Lastly, Fanta. Fanta is a first year MPP student at the Ford School with a broad social policy interest. Prior to Ford, Fanta worked as a development and education coordinator in Bronx, New York, where she focused on foreign raising curricular visioning, cooperative ownership, and economic democracy. Fanta will be today's moderator. Thank you for that introduction, Charon. I am so happy to be here and so happy to have you all joining us today. Thank you for your patience as we started this webinar. I'm very proud and grateful to have Mr. Kwame Owino with us today. Mr. Kwame Owino is the CEO of the Institute of Economic Affairs in Kenya. Mr. Owino has been instrumental in leading IEA Kenya's strategic intervention to become the go-to think tank for sub-Saharan Africa and the region. Mr. Owino has led research and policy dialogue in economic regulation and competition policy. He has diverse interests in economic regulation, employment economics, and public sector reform. He oversees research in IEA Kenya's key policy areas on public expenditure and revenue analysis. International trade, economic regulation, devolution, and the use of futures methodologies to inform public affairs in Kenya. The theme of our webinars this year is Africa 2021. Where do we go from here? If you are interested in leaving a question during the Q&A section, be sure to leave your name, organization, and location. So whether you're joining us from Kenya, the US or elsewhere, please put that beside your question. And now I will turn it over to Mr. Kwame Owino to lead us through. Thank you so much for being here today. Thank you very much, everyone. My apologies to the audience, my dark side is, I mean, much darker than it should be, but sorry. So thanks a lot for the kind introduction, Fanta. And thank you very much to you and your colleagues for this invite for me to speak to you. As you can tell, your theme is basically where does Africa go from here? I think I just start with a small debate as point, which is that yes, as we think about where Africa goes from here, remember that it's 53 countries, 44 in sub-Saharan Africa, if you think those are more, I mean, usually associated with Africa, with the sub-Saharan part of the African continent. So really, it will not necessarily be where Africa goes. I think many of them will take different trajectories and perhaps that's one of the things I'd like to emphasize at the beginning. I have a presentation and we have a PowerPoint presentation, I mean a presentation. So basically the way to start is just to ask, because I'm based in Kenya, because I'm based in Kenya, most of my presentation will be about what I see within the Eastern African part of the continent. And one of the things that I have a public presentation which will be shared later, but one of the things that you note about the East African continent is even before the, in the last 10 years, the Eastern Africa part of the continent has been the fastest growing. And so we had three countries in East Africa. So that's Kenya, Tanzania, Uganda, Rwanda, all appeared in the top 12 fastest growing countries in the world, made Africa, I mean, East Africa look peculiar. For some reasons, of course, those interact now with the pressure of COVID-19, starting last year. And among the things that you'll see is that based on the policy choices that each of the governments took, some of those governments took the prospects for each of those countries will vary substantially in my view. Now, there's a chart about Kenya and among the things you see that Kenya has had in the last 20 years growth rates, the trajectory has been upward and forward. But one of the things that you see is that African countries, I think you could take this roundly for many African countries, growth rates above global growth rates, or even if they start from a very low base. So obviously 6% growth in Kenya is substantial, but off a base of $1,800 per year, it's okay, but one year's growth rate doesn't tell you anything much. So what it means for public welfare is basically the ability to sustain high rates of growth is something that many African countries and East African countries in particular would need to sustain for a generation before these economies would not just double, but pass up triple in size. So that's the development challenge. The development challenge for most Eastern African countries, I'm speaking Rwanda, Kenya, Uganda, Tanzania, Somalia is in a different grouping obviously because of the political difficulties that it's had, South Sudan as well. But many of these Eastern African countries have had and have shown that they're capable of high rates of growth, GDP growth rates. Their problem has been the ability to sustain those growth rates. So you see quite a lot of shocks and some of those shocks are weather shocks, political shocks in the case of Kenya as well. And those shocks tend to make those growth rates fluctuate quite a bit. So in the last 20 years, for instance, okay, thanks, finally got it wrong. In the last 20 years, for instance, you can see that this is not just typical of Kenya, but basically fairly high growth rates coming from 2%, going all the way back to 7%, 8% of growth and the fluctuations are quite a bit. I mean, showing you that fluctuation and that's a problem in itself because the inability to stabilize growth means that they're very big shocks for people's incomes and for the citizens' incomes. That's an important thing to bear in mind as we think about what will COVID-19 mean? Because COVID-19, as you can see towards Kenya, I mean, towards the end of your chart, COVID-19 and the emergency measures that the government of Kenya needed to take, I think many of them were prudent, led to both supply side and a demand side shock, meaning that for the first time in 20 years, Kenya's growth rates are probably going to be negative. I think the third quarter, which ended in October last year, in September last year, suggested that growth was already looking up, but it is still possible at the end of this year for the first time in 20 years, income growth or rather GDP growth will be about one and a half percent, which is below the population growth rate. And what that means is basically, incomes will actually just basically be stagnated for the population. Going out to the next slide, I'm just trying to think about what it means for, yes, thanks, what this means for Kenya's, again, I'm focusing on Kenya, but we can speak generally. So if you look at the growth at constant prices, I'm trying to situate here what the size of the Kenyan economy is considering, and remember I've mentioned that the growth rates look to be high compared to, in comparison to global growth rates, but the base in terms of the size of the Kenyan economy for a population of 47, 48 million people, GDP at market prices came from $57 billion in 2015 to $89 billion like, so they're not very big economies compared to the rest of the world. The amount of value added as well, which is that difference between one year's GDP and the other is still less than 10 billion. 2017 was an outlier of sorts, but all that. So we see small or rather high growth rates creating value and affecting public welfare and incomes. And when these collides with the shocks that we see, obviously there's a reason for us to ask ourselves, what will Africa and what will Kenya, and this is typical of many African countries and Eastern African countries as well. Now, we know that one of the things that is clear, global growth rates have been affected. So let me ask ourselves, what does it mean for the shock that came with COVID-19 for Kenya? In the next slide, we'll be talking about what economic growth rates in the medium term would be based on the fact that the reality of the shock that Kenya suffered. And one of the things that you see here is, I and one of my colleagues a simulation about what it means for a kind of, the kind of rebound that he expected. And our students of development, you all know, and public affairs, you all know that while GDP growth is not everything, but for countries of low incomes, the average income in Kenya is about $1,800 per year, which is about $150 a month. So growth rates and being able to sustain growth rates matters for people's jobs, but it also matters for incomes at the same time, because it also matters for the kind of revenues that government is able to invest in public goods and to provide public services. So what we have here are three lines where the blue line suggests what was the forecast growth without the effects of COVID-19. What was the expectation? The second one is, if Kenya was to experience a quick rebound, remember for almost two quarters, which is half of the year, there were severe restrictions which affected both supply sides and demand sides of the market supply side. But that I mean that for instance, one of the bigger sectors in Kenya is tourism in terms of employment numbers, close to about 9% of GDP. Because global travel could not take place, obviously hospitality centers, many of the major hotels at Kenya's costs and in the major urban areas and all of these other places were closed for most of the year, they're still closed until, I mean, right after this moment. So obviously the contribution of tourism to global, I mean to Kenya's growth, definitely would be severely affected. So the orange line, which is the center line, is our expectation about what would happen if a quick rebound was to take place. And then obviously pushing it forward for the next three years. And then the final one, which is a slow rebound, an expectation that Kenya would start from 1%, I mean 1% economic growth rate in 2020, then go to 2.5, 3.4 and 5.2. Now, what I'm trying to illustrate here is through this simulation to show that irrespective of what the causes are and how fast Kenya recovers, and the expectation is actually the, it could be somewhere between the slow rebound and the quick rebound position. At the end of this year, Kenya will have grown by just about one and a half, one to one and a half percentage points, suggesting that being able to pull and actually cover the ground between what would be the fastest growth rates or the anticipated growth rates without the virus. There's quite a lot of welfare loss and it's unlikely to be recovered. So obviously the momentum will have to be rebuilt once again before the push forward. So that's what you see by this graph. This is more or less the same picture. I think many African countries and especially within East Africa, some talking here of Rwanda, high growth rates as well, Uganda, Tanzania had very high growth rates, but the effects of COVID-19 in its interaction with local domestic economic conditions would probably mean that the best expectation would actually just be a quick rebound or somewhere between the quick rebound and the slow rebound. But what I'm trying to show is that the effects of this virus in as much as it has not had severe deaths, I mean, mortality as has happened in other parts of the world has actually taken away from many African countries and East African countries as well, a portion of growth, which is substantial. And obviously the recovery would be much slower than it would have been. I mean, that's probably saying the obvious. But let me now go down to the next slide in which we're trying to compare coming out from East Africa. So what's next? Now, we're looking here at trends in GDP per capita between the year 2009 and 2019, picking up comparing Africa to other comparators and of course data sources are from the World Bank. And as you can see from the left page which is about a decade ago, what the basic incomes in current US dollars were in Malaysia, Brazil, South African. And you can see Kenya's was about $500, $600. And obviously 10 years later, it's grown to 1817, all on account of the fact that there was substantial growth, obviously with the fluctuations but that growth was taken over time, telling us why preserving GDP growth rates is a development imperative for many countries in Africa. I mean, Kenya is one of the biggest economies in Africa, not in GDP per capita terms, but in raw, not only in GDP per capita terms, but also in just the nominal size of the economy. And as you can tell, many of the countries that you see, Kenya, Tanzania, Uganda, Rwanda, Egypt, and Burundi on the eastern side of the continent. And then the 2019 picture tells you again some substantial growth, but obviously one of the things that you see is Kenya and African countries in as much as the growth is taking place and also really catching up with some of the other growth partners in Asia, obviously in Latin America, but I think the only country that seems to be holding its own is South Africa, which has a very complex economy compared to the rest of the African countries. Many of these African countries that we talk about, Kenya and all that are still agrarian societies, subsistence agriculture is a major one and therefore susceptible to shocks of weather, specifically other political shocks because they're not very developed democracies. So the development challenge becomes very evident in the picture that you saw here. So as you see, even while the sample average of these countries that we have here in 2019 is $3,000, only one African country is above it and obviously that's South Africa. So the gap between African countries notwithstanding their fast growth and the rest is important and this is an important foundation for what happens to the African continent and African countries specifically as we go forth. Now, all this interacts with the facts. So next slide please. All this interacts with the fact that when you come to Kenya and I think this is a shared work, even before the last shock, as I told you, African countries are susceptible to shocks. Speaking here of East Africa specifically, you can see the figures that we show here is basically Kenya spending. So the green charts these, the green charts, I mean the green bars, the dark green bars at the top represent public spending as a share of GDP. The blue ones, the light blue next to the green bars basically what's the revenue collections and the difference between the green bars and the lighter blue and the ones at the bottom represent what the public deficit is every year. Now you see a very light one which talks about the target. That's the medium term debt management strategy target for Kenya, which is 3% of GDP and in all the last nine years it's been at least double that. Now, what does this mean? Even before COVID-19, Kenya was already facing opposition, a situation of public debt stress. Distress rather in the sense that a carryover of very high deficits over time. Because remember deficit financing for Kenya is mostly like most countries has often been in the form of public debt. So what you see here is that this country through policy decisions are consistently carried forward huge or substantial public debt, I mean deficits over time. And so they were beginning to tell and these combined with the COVID-19 situation which nobody could foresee but sitting back here at the Institute of Economic Affairs I mean right up to four years ago we were really concerned about very huge deficit targets. What was a growth model that Kenya took? The deficits were justified on the basis that look because we had a momentum of growth many African countries went about and started to borrow money to build infrastructure. The idea was that Africa had a huge and Kenya specifically the huge infrastructure deficit and which was necessary to fund through borrowing both domestically and externally. Some of it was Chinese, not exclusively Chinese, certainly but some of it was Chinese money in Kenya's case infrastructure projects were built. Some roads but most of it was a railway line, a railway line which whose construction between Mombasa, the port of Kenya I mean the major port in Kenya to Nairobi which is a capital city where the seat of government is was equivalent to 5% of GDP, a single investment that's the single biggest investment that Kenya has made in its life. I mean since independence in 1963. That story tells is generalizable to many parts of Africa and many parts of the East African countries. There was a real, real investment in infrastructure based on public borrowing. And remember while people attribute African public borrowing to Chinese easy loans it's not really true. In Kenya's case for instance, Kenya actually took about three loans, commercial loans which is basically commercial borrowing from international banks, some based in the US and a few other consortiums of banks. So remember we have on the one side the COVID-19 stress which could not be, I mean COVID-19 emergency which could not be foretold and at least largely so. And then these are policy choices. So what I'm trying to show is how things or policy choices that governments make collide with other factors and create a challenge which I think is Africa's challenge and Kenya's challenge for the next five years or perhaps even a full decade. So let's go to the next slide. As we see in that period as well because you've seen the carryover of consistent their budget deficits over time. In some cases it was about just 8% of GDP. There's a huge deficit, I mean for a country of these sides. And what we're trying to show here in this chart on your left are basically the, I am making the argument that the choice to advance debt is a policy choice. And so what do you see here is a 20 year, close to 20 year trend line showing you that in those 20 years Kenya has had three different regimes, basically administrations. So the kind of administration ended its rule in 2003. And what you can see on the left is that greenish page. I mean that greenish portion shows that at that point Kenya's debt to GDP was about 63 to 64% of GDP. The next administration which took over in 2003 to 2013 for 10 years because this was reelected. I mean this administration was, the president was reelected decisively decided to bring back debt portion as a share of GDP. So GDP was growing and the portion of debt obviously was also brought down as a policy choice. Then the next administration took over the red patch. Red is not for any reason, it's just the numbers that I mean the colors that are available to us based on our choice, I mean on the menu. And so this started to go back up. And obviously right now it's closer to 70% of GDP which is something that is unprecedented in the last 20, 25 years or so. So it's a new, new area. And then of course what you see in the other part is just basically what it meant in terms of debt as a share of total income. I mean splitting total debt by GDP per capita. So again, you can see that in 2020 debt as a share of GDP per capita is about 130%. Sorry, sorry. The vertical cycle shows what the debt on a per capita basis is. And obviously these are years. So what you can see is that by 2020 which is the end of last year, the average Kenyan owed about $1,200 worth of debt which is again is the highest that it's been ever, ever, ever before in really terms. In the next slide, public debt on its owner, I think as students of the international development you all know that public debt on its own is not a problem. So what is Kenya's problem? Kenya's problem is two-fold. One, the quantum of debt as a share of GDP is at its highest in 20, 25 to 30 years. So that's a fast. But the second thing is that the maturity of debt which is basically the tenure, the aging, the aging summary of Kenya's debt is a problem. So Kenya has all the Republic through policy made decisions, the administration made decisions to expand Kenya's debt. And what you can see here is that while the debt is substantial, most of it is very short-term debt. In the sense that their debts which have to be paid within a year or so, and as you can see here, 80% of the, 80% in net present value, 80% of all the debt that Kenya, the public sector debt in Kenya has to be paid within four years or less. If you take five years, it's a little bit higher. Now, what that, five years or less rather. So what that means is that the bills for payment are actually coming up much, much faster. Revenues have not grown as fast, I mean as quickly, at the same pace rather, sorry, revenues have grown at the same pace, but the debt and the repayment periods for debt have shrunk, meaning that Kenya needs to be paying more debts, the public sector needs to be paying more debts. And this has two implications. One, it has implications for the fact that the amount of debt that Kenya needs to pay is high, but the revenues are not, have not grown at the same pace as debt. So if you put those all those together, even the amount of money that's available for the emergency response was really tame. In fact, what the government of Kenya did was because it did not have sufficient money to actually invest in a stimulus equivalent to 10% of GDP in the US, few parts in Europe, South Africa had seven, 8% of GDP, which is to provide a fiscal stimulus to get the economy going because of the problem of the restrictions that had to be put in place because of the COVID-19 and the spread. In Kenya, it was a very, very small fiscal deficit, I mean fiscal stimulus. Instead, what government did was attempt a fiscal stimulus through tax cuts, which worked. Something like 80% of the tax cuts, I mean something like 80% of the fiscal stimulus that Kenya came from tax cuts, income tax cuts that came in last year. And I think that helped quite a bit because by the end of the third quarter of the year, it appeared also aided by the fact that mortality rates were not very high. It appeared that economic recovery was happening. But this maturity table or other chart emphasizes the fact that the debt quantum has grown substantially in eight or nine years, but the debt maturity, which is basically the amount of time that's available to pay for that debt is not. So in other words, government or Kenya borrowed money on short-term basis, commercial loans, spent that money in constructing infrastructure, which is expected to pay over long-term. The infrastructure has not paid. Some of it is actually white elephants, will not probably pay. And when the emergency came, it was totally unprepared because it did not have fiscal space to be able to spend either on the health side or even in terms of ensuring that the public stimulus, rather the government would find a stimulus to keep the economy going. So that's essentially one of the things. Now, I come to the other question. So basically, if you look at it, the recovery in Kenya would be slower than it would have been nevertheless. I suspect that will also be true of East African countries. So let me tell you why. As to the south of Kenya is Tanzania. The government of Tanzania made an early decision that it would not go into the equivalent of lockdowns. Now Kenya did not have lockdowns, but there were severe restrictions, half-use in terms of movement restrictions and a few other things about closure of borders temporarily. The government of Tanzania did not make that decision. In their view, at the domestic level, they did not have a significant problem with the virus infection and the spread. I think the truth is somewhere more complicated than that because there's evidence in Kenya of people crossing from Tanzania and some of them went well. I think there are also certain leaders who've passed on and while it was not declared as COVID, there's that. So all I'm trying to show you as students of policies, how governments make different policy choices, which have implications for the political, which might be politically expedient, but which have implications for development over the longer term. I think the government that has done much best in coming on the African continent, among those that is cited is definitely the government of Rwanda, took to early testing, mass testing, or at least as much as is possible, testing and tracing, that did a much better job and that's acknowledged, brought the virus and the spread and the control has not fully opened, but obviously government is observing that. The government of Uganda as well to Kenya's west, undertaken a lockdown or a equivalent. This interacted with the elections period and obviously because of the elections, I think there was a constraint on the campaign activity that the opposition and the president himself could carry. So all these questions of a global pandemic interacted differently with the policy choice, I mean, interacted differently with the domestic conditions and the political choices were taken would have different implications. So yes, however, none of these African countries have yet started any vaccination. Kenya expects to start vaccination supply in March, even then it will go on for at least a year. So it expects to reach 60% or half of the population vaccinated by the same time next year, which obviously will have implications for growth and full resumption of economic activity. I guess that's pretty much what will happen for the rest of the continent as well, but mostly within the Eastern African period. So basically what we've seen so far is the domestic conditions and in Kenya's case, interact with the fact that the East African part of the continent and also globally had most of the fastest growing countries in GDP per capita. I mean, GDP, annual GDP growth rates. Most of the growth was above population growth rates. Obviously there was meaningful growth, but which was insufficient and needed to be kept for at least a generation. My fear is that the effect of this is that there will be a bit of a lag for many of these countries. So they'll not be a V shape, they'll be a U shape and we hope that there's no second flowback or other spread, which might mean that most region measures would have to be taken. I was asked to look at Kenya's future and the place of productivity growth, R&D and foreign direct investment. Now, foreign direct investment, most African countries have the development challenge of most of the exports for many African countries come from agriculture or natural resources. East Africa is not very highly endowed with natural resources in the form of oil. Door Tanzania of course has some gold, which is substantial. There's a discovery of gas deposits, which have not been exploited yet, but basically would be that would substantially change the nature of that economy, even the politics. I think in Kenya, Kenya among the East African countries is the only one that has a substantial exports of manufacturing goods or manufactured goods. Some of these go into right up to the U.S. and other parts of the world, but mostly many African countries are still dependent on agriculture. I was asked a question about the possibility that African or African countries could leapfrog, development technology leapfrog agreement. Again, it's a bit of a mixed picture. I actually think that many people who comment on the Africa's capability or rather the possibility of leapfrog are reading from the successful transition that many sub-Saharan African countries made with mobile telephony. I mean, Africa had very low connection rates in terms of mobile telephony because the rest of your lines were difficult to set up and were badly run because they were running the private sector, I mean the running the public sector. There's a change. I think Kenya is cited often with MPSA, a big farm called Zafari Khan, which now comprises 62% of the value in the securities exchange, whether that's a good thing or a bad thing is a different matter altogether, but the technology space and especially mobile telephony has been a boon for many African countries. In many cases, it also helped with the response to COVID-19 because governments distributed part of some money that was meant to like some welfare benefit or payments for cushioning families through mobile money transfers. Many countries throughout the continent all the way from Ghana, back in the fast as well and coming down to Kenya too, that did happen. What I think will not happen with the technology argument is that if you look at the basic things that are African countries and I'm speaking about Kenya as well, need. So let's talk about the fact that technology requires certain infrastructure. So for instance, vaccination, you all know that there are all these four or five options of vaccines. Many of the ones that are available require keeping a core chain to ensure that the vaccine's life is maintained and its effectiveness. Many African countries have not developed that and there's no possibility of leapfrog as happened with mobile telephony because terrestrial lines did not have to. So I think we have to be circumspect in the argument that technology leapfrogging is possible. So for instance, in many African countries, Nairobi included, the quality of power in terms of the amount of power that is available but also the quality in terms of the consistency of supply is still at a question even within the city itself. So the quality of that power and all that and there's no leapfrog. If you need an electricity grid, you have to establish an electricity grid. There's no leapfrog technology that allows for that to happen. So many of the things at Africa's level of development still suggests that the brick and mortar, it could be done through more modern technologies. The quality of the grid could also be improved but the brick and mortar that is required to establish a foundational base for manufacturing or even for service exports still does not exist. And I think it needs to be established. One of those is to invest in human productivity and labor productivity. All those things present very difficult policy choices where they interact with political expediency but there are no alternatives. There are things that need to be done. So technologies, yes means it is possible to shorten the pace but at the same time, it's one of the things that many African countries continues to. So I'll give an example. So for instance, RAD expenditure by Kenya which is still among the highest in East Africa is less than 1% of GDP. So it's basically 0.8% of GDP nine years ago for which I could find the latest data. Share of manufactured exports for Kenya is 3.6% which is again the largest. Most of Kenya's neighborhood has it at less than 2% of their total exports. So they're still starting from a very low base. So technology exports of course as a share of manufactured exports for Kenya is 3.6% and obviously that's not too much. I mean, especially considering Kenya's exports about nearly five times as much of that. And high-tech exports for Kenya and an economy of $10 billion, rather $100 billion. High-tech exports for Kenya last year was $55 million. So obviously there's still quite some space to make. And I used a proxy of scientific publishing, so STEM articles in global journals. And in last year Kenya had about 1,700 articles. You shouldn't compare that to China or any other country. So it's still very low. So investment in R&D is something that African countries need to do, probably double it. I think Kenya's intention is to bring it to double of that in the next 10 years. So the manufacturing and the transition, the structural transformation that's required of African economies of which Kenya, if you appear Uganda, Tanzania and Rwanda need still will require establishing the foundational work which requires good infrastructure, whether it's for water, whether it's for electricity, good transport, competitive markets. And that's the challenge of African development. Thank you very much. Thank you so much, Mr. Lino, for that comprehensive overview. We'll be moving to the Q&A session now. So if folks that are attending have any questions, please please send them in the chat and we will ask them. And with that, I can just start with a leading question to get us started. Mr. Lino, you cited the manufacturing sector as well as research and development of some of the potential primary drivers of Kenya's economy. Do you think that those sectors will be supportive for the path of recovery or do you see any potential other sectors as drivers to recovery from COVID-19? All right, thanks. I see that, okay, so I think one of the reasons why many African countries will recover quicker is the fact that if, say for instance, in Kenya, agriculture represents close to 30% of GDP with gross domestic product. And that's where 65 to 70% of the working population are based in farms. So what that means is because most of the farms or rather most of the work takes place in farms and farms are very aerated. So the possibility of transmission was much, much lower. So many people who work in farms were not as affected by the restrictions that are required to keep a healthy population than would happen in a sedentary workplace like in the offices. So obviously that was useful. I think as well that there's dependence on the ability for export globally. So many African countries still export whether it's tea, coffee, and petroleum, for instance, not as much for petroleum, not as much for East African countries with the exception of South Sudan. But if you think about it, what it means is that if demand recovers in the US, in Europe and other parts of the world, then obviously the possibility of raising, purchasing upwards, export demand to ensure recovery will take place. Manufacturing has had a problem because even for Kenya where manufacturing is close to 8% of GDP, the intention for Kenya is actually to double it to 15% before in the next three years. One of the things that's a problem is that in state many African countries actually suffered what was called premature deindustrialization. My hope is that the reason I am fearful is that, okay, I have two options. The reason I am fearful is that the effect of COVID-19 globally has actually led to strengthening domestic protectionist voices, which means African manufacturers might have a problem going on to other parts of the world because it's not just the US, many countries in the world have decided to localize value chains, which are important for manufacturing exports. The second thing that is a good view is that Africa also concluded what is an African continental free trade area, which started formally in the first of January this year. So the possibility of exports to the region is actually higher, but it comes with a caveat because African countries for all the rhetoric globally tend to have even higher tariffs and non-tariff barriers against other African countries than you find globally. So I think again, their choices are going to be made. The terrain is complicated, as I said, but yes, there's the good things that would actually expand that possibility, but I'm very worried that if the world goes into a more protectionist mode, then African countries might have a bigger steep, I mean a steeper hill to climb in terms of manufactured exports than we've had before. Thank you, Mr. Rino. Following on that, what do you think the role of institutions that are specific to Kenya and outside of the country, the critical roles of institutions are in facilitating this recovery process, just in a broader sense for Kenya and also the East Africa region, as far as your opinion is considering. Okay, well, I think the, okay, let me tell you how I understood your question. You're asking about how the COVID-19 emergency and it's the coincidence of COVID-19 on one side and the death distress which many African countries are actually facing will affect the recovery process. One of the things that it's done is that at the global level in terms of the provision of vaccines, it is clear that pandemics have called us back, have allotted all of us globally to the fact that multilateralism is still the best way to resolve certain global problems. So for instance, I was reading today and I found out that many African countries are right at the back of the queue in terms of the acquisition of vaccines, partly because they're dependent on global cooperation and many of them are not prepared to go into direct contracts directly with the manufacturers. Now, the reason that's a challenge for everybody and not only African countries is because for as long as the vaccine continues to leave and could spread and could mutate in any population in the world, it's a risk for all of us. So what that means is that the impetus for multilateralism and institutions to work across borders and to work at global levels. The WHO did not acquit itself well but obviously it's still the best institution that we have. So if you're thinking about it in terms of multilateral institutions, I think there's some reform for that that could be that's necessary. It's a good thing as well that the US is coming back or at least the president administration of the US has mentioned its intention to resume membership, I mean, to come back with membership and support for the WHO. But I think it allows us to the fact that investment by national governments, by irrespective of sovereignty, all countries need to understand that they are global commons in which developing policy at the global levels and executing them through coordination at the global levels would still be a superior method for solving some of these global problems. I think Kenya understands that as well. It's African countries understand that too. But what it also says is that African countries need to put in a little bit more in order to get influence at the global levels. I think as well that a couple of days back it was announced that an African lady, extremely competent in my view, will be taking forward the WTO's leadership at the director general level. That should alert African countries to the need for multilateralism. Just at the time when everybody is using COVID-19 as both an excuse and in some cases it's politically expedient because blaming the foreigner is a useful way to build domestic clout in politics on this continent. It's a lot in us to the fact that look, these windows are still open. And my view as a conclusion is that African countries do not have the luxury of stating that you can block ourselves from other parts of the world. I think investment for indirect investment is necessary to provide investment for experts and at the same time to open up opportunities for employment on the African continent, all of which are needed for a quicker recovery from these shocks. Thank you for that response. We have an audience question from Michael Henry Lerner. The question is, you mentioned that whether shocks have been important drivers of economic variability in East Africa. In light of the increasing frequency of weather shocks due to climate change, could you comment further on the steps that governments are taking to reduce the impact of future shocks on their economies? Well, okay. Again, I think weather shocks and the effects of global warming. I mean, I see it in Africa. I don't think, well, depending on who you listen to it is the argument that global warming is not real. I am passively persuaded that the evidence suggests it is, though I do not agree with the idea that we should, especially the African continent should suspend use of carbon energy in advance of other nations that have used it for 200 years. So carbon intensive engines need to be replaced. The opportunity cost of their replacement in Africa would be much higher than it would be for people in the US. So I think what African countries need to do is both domestically and globally to actually take responsibilities at a pace that is consistent with the development levels of African countries. Now, that's not a denialist argument. That's a realist argument based on what the opportunity cost of rushing in with expensive technologies which African countries cannot afford would be. For instance, in Kenya, only half of the households are actually covered by electricity and it's a very expensive thing to provide. Kenya tends to have much cleaner sources of energy than others. But when it comes to public transportation, a good number of Kenyan people who work in Nairobi city for instance, work to work because public transportation modes are still very expensive. So the idea that you can replace transport solutions in Kenya with non-carbon solutions should be at the most a medium-term goal. It is not something that could happen. You can do that in Sweden, you can do that through a carbon tax in other places. Carbon tax could be improved, I mean, could be introducing Kenya and other parts of Africa, but at a pace that's a little different. I think that's a difficult political problem but it has to be admitted to. So working at global levels again, giving credit to the new administration in the US which has renewed the fact that global cooperation again about this is necessary even if its effects would actually be more advanced to countries in sub-Saharan Africa that perhaps in South Asia than other parts of the world. So it gained just to re-emphasize it that the choices of policies will depend on what can be solved at national domestic policy level, the reforms that African countries need to make and they obviously I think open up to the fact that African countries can with boldness bring more effective solutions at the global levels as well. Because global warming has to be solved at all those levels. Taking account of the relative contributions of different countries and I have to say this that I'm not an environmental nationalist but it is clear that you cannot ask Kenya to take the same burden as you'd be asking Sweden for instance or Denmark to take. I mean, that would be equitable and that would be the result would be it would be difficult to actually get a global compact that everybody would comply with for the medium term for the long term. Thank you Mr. Uino. Reminder folks that are just joining us if you have any questions specific for specific questions for Mr. Uino please add them into the question and answer chat box. Moving on briefly, we have so a little bit of time with Mr. Uino. So we'll take advantage of all that. You briefly touched upon the point of Africa's middle class narrative. Can you expound on that point a little bit just providing more context for those that are maybe not familiar as familiar with that point? Could you come again Fanta? Oh yes, apologies. The point about regarding Africa's middle class narrative that you briefly touched upon can you just expound on that point a little bit for folks that are not familiar with this idea? Okay. Well, one of the things that happened in the last 10 years and I think it's going to change partly with the debt distress and obviously the reality of growth is that there was a growth in the African middle class in many countries including Kenya and other parts of this continent. And there's an assumption therefore that middle class growth was sufficient. But the truth is African countries were growing from very low income levels. And so while there's a middle class, it's not that large and it was a very fragile middle class because a shock such as the one we have in Kenya today for instance. The example is the government of Kenya announced restrictions and closures. I think on the 16th of March last year when it became obvious that globally I think there was a big problem that governments needed to think more clearly about. So there was closures restrictions obviously on global travel, restrictions on curfews in Kenya and public health measures. Now in that first quarter alone between March and June the number of jobs lost in Kenya was 1.7 million, 1.8 million which is equivalent to the creation which is equivalent to job creation for two years. Among those who've probably lost jobs are basically people who were in the middle class. Why? Because if you have farms that did not have that were supplying globally or working in industries that are globally sensitive such as export markets in flowers, some of them, I mean in horticulture or in the hospitality industry the Kenyan hotel industry in the coast of Kenya then people lost jobs. So the fragility of that and the fact that it's not a very large middle class, 65% of Kenyan working people in rural areas but also working farming and most of that farming is substance farming. So it tells you that the Africa growing narrative was real but the idea that Africa had a sufficiently large middle class to pull up everything else was definitely misinformed. Thank you. Moving forward briefly, the previous question about weather shocks, we've had a clarification today so if you wouldn't mind just retouching on that question. Here's the follow-up to clarify in my question was asking about the steps that Kenya's government is are taking to adapt to the impact of climate change not necessarily to mitigate the carbon emissions but what have been some of the primary steps that the government is taking? Okay, well first Kenya has a, I mean I'm a climate change policy basically with some plans which have been split by not only a national plan but actually been regionally tested in the sense that some laws have been passed about what the response mitigation responses would be. Government is finding some research around trying to understand what the sensitivities are in specific places and to try and give people options for recovery I mean for responses. So part of it is basically research-based others of what government could do which is expanding the availability of, I mean rather reforestation. So for instance, government has identified specific measures that government will be responsible for. It's tried to provide incentive for Kenyan people individuals or corporations to engage in some mitigation measures. So it's bisector and it's gone bisector. So obviously we know for instance that under manufacturing the government of Kenya has provided even tax cuts or some tax arrangements that allow for use or to try to incentivize the use of cleaner energy sources. And because most of the energy plants and the largest transmission company in Kenya is actually partly owned by the government of Kenya they've made a commitment to transfer so that close to 80% of Kenya's energy sources for electricity are actually from clean energy sources I think 70 from clean energy sources which is basically hydro. The government of Kenya has an investment company that also that I mean sorry there's Kenyan which is a Kenyan electricity generating company which is responsible for hydro sources but also through geothermal sources in which Kenya is a global leader and is actually trying to advance that technology or through drilling of geothermal sources trying to expand its use around the East African region in Ethiopia specifically and Djibouti and other parts of this continent. So yes, sorry I don't have more specifics but I know because I've looked at it it's a monthly of things across but it's sector-based which is under agriculture climate smart agriculture practice in energy work and government do from the private sector incentives but also from governments on investment choices and policy incentives. And then obviously the others are basically for the station and stuff like that. So it's sector-based approach a diagnostic a global I mean a national diagnostic then obviously policy choices based on every sector I mean based on sector needs. I hope that helps. Yes, so the participant has said that that was a very informative answer. Thank you very much and just briefly based on your own personal experiences and sort of your experience on the ground during this work in Kenya. What are your opinions on the current relationship between Western and Kenyan or East African academics for research and building research infrastructure research and development? And how do you think that that relationship may or may not be transforming in the next few years? Well, I think again it's a mixed picture to be honest. I'm very glad that the Ford School has asked me to speak about this, right? I don't have a PhD, but it's a good thing. I mean I've worked in politics for 16 years. So one of the things that I think this is a good example for instance, because for this part the fact that there are think tanks in Africa and there are researchers and the academies in Africa are full. I mean I have capable professionals, many of them trained at the best universities in the US and other parts of the world. Most of the publications regarding Africa and this is not criticism. I mean, you can even see it in development practice. So two years ago, of course, the Nobel Prize in Economics was awarded to scholars who worked on the use of randomized controlled trials, a lot of which were done in Africa. And people asked themselves, so are Africans doing this? I mean, the nature of the relationship is something that many people question. The political economy of research on African development is something that needs to be openly discussed. So I personally have no problem with anybody living, I mean, Ford School, for instance, whether they're Kenyan, Senegalese or wherever they come from to come and study Kenyan. But when Kenyan researchers merely reduced to data collectors or basically just providing a sitting space for somebody to come in for six months as they collect the data to publish it, that tends to raise political tensions because people ask, well, what kind of knowledge is passing in terms of practice and everything else? Now, so it's a mixed picture in certain places, like we at the Institute of Economic Affairs have counterparts. Think tanks based in the UK, I mean, I'll mention, I mean, the US, I'll mention other institutes working with us on a couple of things. That tends to be it. And I think that balance need to be restored and it needs to be tipped in many ways to be brought to an acceptable balance. Now, the point is not to ask to push African voices with irrespective of whether they're capable of not. But the idea that African based research and African questions are not being addressed enough by Africans is a resource question as well. And so in a way it also reflects where resources are available so that it's easier for an American academic to write a proposal to come and study Africa. And if an African academic brought one, it would probably not be successful. Whether it's capacity, sometimes capacity is the issue but sometimes we feel that it just reflects the proximity of scholars in other parts of the world to the places where research is funded. So there are two things. Funding domestic research is a useful one but actually also I think people need to talk the talk which is if you're going to open up for African voices to be part of the discussions on global development and I'm not talking only about African, global development then it's important to address whatever those gaps are in a very sincere way as opposed to the assumption that Africans are not capable of it or that they're not sufficiently interested. It's complicated. I think that was a wonderful answer. Thank you so much for your time and for spending this time with us and just sharing your own thoughts, experiences and your work with us. Just bringing us to a close. Do you have any final remarks on the way forward for Africa, the East African region, Kenya specifically just given that that is the theme of the series that we're doing. What are your sort of final thoughts on what the way forward for the continent more broadly is. Thank you. Okay. Just about the time I was starting my, I started to work on policing. We all understand that depressing the depressing title rather, yes title or feature that was done by the economies I think sometimes it's 2001 or 2002. No, a little early, I think it 2000. We talked about the, was it the lost continent or hopeless continent? Five years after that, obviously African countries began to grow based on significant reforms that many African countries took by necessity in many cases. And then obviously six years after, I mean, five years after that it was basically about middle class Africa or a growing continent or whatever. I think there's a lot of, I am largely and so basically the debate regarding Africa tends to be Afro pessimism versus Afro optimism. I think I am making a trite point but to simply treat 54 countries or 44 countries in sub-Saharan Africa is one is completely true. If you look at what even within East Africa it's half. I think many African countries that the crisis has shown the savvy, the policy savvy of different African governments in terms of the ability to respond very, very quickly and to get the best knowledge and actually use it to craft policing. And they all took many different policy choices. So it's suggesting to you that all of them will absorb different things. What I'm most fearful about is that the African continent seems to be pulling back in the assumption that perfectionism is the way something that many of them tried for many opinions. I think it will fail again with disastrous consequences for people, for African people, not all African countries but it's basically, it's actually become very seductive again to talk about capturing global value chains. We also have it in Kenya where people say buy Kenya, build Kenya, trying to avoid global competition. I think that's a bad signal. So to answer your question, I think some African countries will do well. They'll maintain the trajectory. Many African countries will struggle both because African countries do not want to make the decision to liberalize the politics basically more open politics and competitive politics and the economy at the same time. So there might rise again in Africa the quest or the attractiveness of strongman politics because the belief is the developmental state and those cliches that we've gone through before. So I'm very pessimistic about some five, six African countries. Maybe if you invite me again I can speak about why and them. But many African countries will actually continue to mark time because the nature of African reforms have never been that people are prepared to take the reforms all the way. What we do is that reforms are taken when it is necessary as a crisis. The debt crisis is going to affect many African countries and reforms will become necessary. Blame the World Bank and the IMF for it. And then as soon as it begins to look up again the arrogance and hubris comes back and people start to talk about, look let's think about an African model of development. Their reason, the model of development works for all human beings. Let's pick the best models that work. Open markets. Largely open markets competition and developing the value of its human capital are indispensable for its growth. So yes, there are some countries that will do spectacularly well. But when you know that a few others will wallow again when we have the rising prices of petroleum and natural resources and they will forget about political and economic reforms. That's the tragedy. Thank you. Thank you. That was certainly a balanced answer. So that's what you were going for. Thank you. Hit the nail. Well, thank you again so much, Mr. Pomeo. We know for your time, it's really beautiful to have you here with us today despite not being able to actually physically be in Kenya and participate in the full IEDP experience. We're immensely grateful for all of you that have joined us today and that have stuck with us throughout this webinar. We hope that it was informative and I'm supportive for your thoughts. And we just wanna sincerely thank you again, Mr. Alino. So with that, we will wrap up and we hope that those of you that joined us today will look out for the future IEDP Kenya webinars that we will be having over the next few weeks. Thank you all. Thank you.