Inequality in Kenya is a Ticking Time Bomb

The 2024 World Economic Forum Global Risks Report identified inequality as one of the top ten most severe risks in the short and long-term. This recognition underscores the urgent need to address a crisis that is tearing at the fabric of societies worldwide—and Kenya is no exception. 

Today, Kenyans are poorer than they were a decade ago. The COVID-19 pandemic exacerbated this crisis. Between 2020 and 2021, poverty rates surged, and while there has been some recovery, extreme poverty remains higher in 2023 than pre-pandemic levels. The numbers do not lie: poverty rates increased from 36.1% in 2015/16 to 39.8 per cent in 2022. In fact, according to the World Bank Macro Poverty Outlook for Kenya (April 2024) Kenya today has a higher poverty rate than it did in 2015 across all different international poverty lines.

Meanwhile, wealth concentration continues to grow which presents a stark contrast to the lived realities of millions of Kenyans who are living in abject poverty. Kenya is now ranked among Africa’s top countries with the highest number of millionaires, trailing only South Africa, Egypt, and Nigeria. The 2024 Africa Wealth Report estimates that Kenya is home to 7,200 high-net-worth individuals, with 4,400 residing in Nairobi alone.

Kenya’s public debt obligations are stifling investments in public services and hindering economic growth

Alarmingly, in the 2023/24 fiscal year, a staggering 68.3% of the country’s tax revenue was allocated to servicing this debt—a sharp rise from 58.8% in the previous year. This unsustainable burden is forcing the government to impose higher taxes on its people, diminishing income and exacerbating financial strain on households and businesses alike. As a result, resources are being consumed by mounting debt repayments rather than being directed toward development and public welfare. In addition, IMF listed Kenya as one of the countries at a high risk of debt distress.

The government is raising taxes mainly to pay off debt, at the expense of essential public services. As a result, taxpayers are not able to access the services they pay for and are forced to spend their own money or turn to private providers, which are often too expensive or out of reach for most Kenyans, particularly the poor. Worse, people’s incomes are shrinking due to high taxation, while access to essential public services isn’t improving in terms of availability, affordability, or quality. 

Investing in public services is not just a perfunctory role of Governments; it is critical to reducing inequality and the country’s long-term economic development and prosperity

Kenya is required to fulfil its international obligations under the African Charter on Public Service and Administration which it ratified to commit the Government to ensure that public services are delivered in the most effective, efficient and economical manner, consistent with the highest possible standards. In addition, the Government’s budgeting frameworks and processes must reflect its priorities towards its people by allocating adequate resources to the most critical public services. 

The Government’s Bottom-Up Economic Transformation Agenda (BETA), aimed at addressing inequality and uplifting those at the "bottom" of the socioeconomic pyramid, lacks sufficient resources and targeted strategies to effectively tackle Kenya’s high levels of economic inequality. Without a clear focus on reducing inequality, the transformative potential of BETA remains limited, risking the perpetuation of economic disparities that hinder inclusive and sustainable development.

Worse still, the Government has been reducing its investments in essential public services which threatens the attainment of the BETA and threatens the livelihoods of people particularly the poor who rely on public services. For example, the government’s health sector budget as a proportion of its overall budget has reduced overtime and remained below Abuja Declaration Requirement of 15%. The health budget as a proportion of the overall budget has progressively reduced from 8.79 per cent in 2020/21 to 6.79 per cent in 2023/24.  In addition, with the exception of the fiscal year 2020/21 when the budget allocated to the education sector was 15.36 per cent, budget for education has remained below the recommended threshold of 15 per cent.

Lack of investment in the key public services that support human capital development (primarily health and education) risks widening the gap between high and low-income individuals. Inadequate access to public services by people living in poverty restricts their ability to attain the social mobility necessary to escape poverty.  Inequality in access to public services is a driver of economic inequality itself. Unequal or lack of access to basic public services can create new pockets of poverty, exacerbate poverty or even entrench cycles of poverty. On the other hand, improved and equal access to public services is a key foundation for reducing inequality and enabling economic empowerment. 

Solutions for Bridging the Economic Divide to Create an Equal Future for All. These include the basic “ingredients” for addressing inequality:

  1. Robust Tax Administration: Close tax loopholes that undermine the integrity of the tax system and conduct a comprehensive review of incentives, waivers, and exemptions to ensure they align with national revenue goals.
  2. Inclusive Budgeting: Direct budgetary allocations toward sectors that reduce inequality and promote social mobility, such as healthcare, education, and social protection.
  3. Prudent Public Finance and Borrowing Practices: The government must take decisive action to curb wasteful spending, penalize the misuse of public funds, and ensure that resources are allocated strictly for their intended purposes. It is critical to prioritize transparency in debt management and direct public funds toward the sectors that need them most
  4. Access to Public Services for All: To achieve universal healthcare, the government must urgently strengthen the public healthcare system by addressing administrative inefficiencies and streamlining service delivery. Simultaneously, significant investments must be made in the education sector to ensure quality learning opportunities for all. 

The Government must step up its investments in public services to reduce inequality and bolster social mobility through access to opportunities. 

Investments in public services are the core function of the state, and form part of the social contract between a government and its citizens. For people to escape poverty and for Kenya to achieve economic growth, the government must resolutely invest in improved quality, availability and accessibility of public services. The reality of a shrinking middle class only reinforces the reality of being trapped at either the bottom or at the top of the socioeconomic pyramid. The Government risks the Bottom / Up Agenda becoming a reality that stays true to its name.