EconomyIssue 04 - 2024MAGAZINE
GBO_ Nairobi's debt crisis

Nairobi’s debt crisis fuels youth discontent

The majority of people who live in Nairobi's slums still cannot afford permanent homes or healthcare

Young Kenyans have staged many anti-government protests in the capital city of Nairobi during the summer of 2024. The adoption of an unpopular financial measure in mid-June set off the unrest that became known as the “Gen Z” rallies. The measure was pulled a month later, but protests continued, and the police crackdown that followed claimed the lives of at least 50 protesters.

However, Kenyans’ discontent with the country’s economic situation dates back to mid-2023, when the first rallies occurred. Although the budget bill’s numerous tax increases may have served as the impetus for these most recent protests, young Kenyans’ issues go much beyond that.

Angela R. Pashayan, Professor, School of International Service, American University, said, “I have spent over ten years interviewing low-income Nairobi locals and researching the city’s slums. Since 2010, when some Gen Zers were as little as 5 years old, I have observed them mature. Kenya enacted a new constitution that same year, ensuring everyone’s rights to equality, clean water, cheap housing, healthcare, freedom of assembly, freedom from violence, and basic education for children. To put it succinctly, Gen Zers were offered a path to a respectable life.”

The longstanding grievances of Kenya’s impoverished population, highlighted by major protests this summer, stem from the government’s failure to deliver on its promises.

Suffering and assurances

Nairobi, where 70% of people live in impoverished, unofficial settlements known as “slums,” is the focal point of the current protests. They barely make ends meet. Their lives have become miserable due to the rising cost of living, thereby undermining the promise of the 2010 constitution, especially with such small salaries.

Although there are many reasons why Kenyan governments have fallen short of expectations, institutional and economic ones predominate. Amounts allocated for housing and healthcare reform led to the construction of new dwellings throughout the city and an expansion of the National Health Insurance Fund.
However, the majority of people who live in Nairobi’s slums still cannot afford permanent homes or healthcare. Funding for clean drinking water has increased public taps, but not by enough to reduce the average slum dwellers’ daily walks. In the meantime, modest improvements in Kenyan sanitation have occurred, and more access to textbooks does not assist those who cannot purchase them.
In 2022, new President William Ruto pledged to lower living expenses. But his inability to do so has only made the current demonstrations more angry. Since 2021, inflation has ranged between approximately 6% and nearly 8%. Even without rent, the average monthly cost has grown to $533, or around $6,000 annually. However, in 2023, the average yearly income per person was a mere $2,110.

In October 2023 and May 2024, Kenya experienced its worst floods since 1997 due to heavy rainfall. The flooding destroyed 168,000 acres of crops, resulted in the loss of over 11,000 cattle, and displaced nearly 278,380 people, in addition to causing almost 300 fatalities.

For security considerations, the government demolished the 40,000 surviving slums within 30 metres (approximately 100 feet) of the Nairobi River. However, many remained homeless as there was no provision for temporary accommodation.

Who is voicing their objections?

An environmental tragedy on top of years of economic hardship meant that dissatisfaction was already building before the summer. Subsequently, the government unveiled the budget, which included new tax increases (including a 6% tax on bread, a 25% tax on cooking oil, and levies on necessities for the home, including feminine hygiene items and diapers for women). With a median age of about 20, Kenya is a young nation. The bulk of Nairobi’s 5.5 million residents are between the ages of 19 and 22.

These are the Nairobi youth that spearheaded the protests, breaking into the National Assembly on June 25 while the politicians sought safety in a subterranean tunnel. William Ruto retracted the suggested tax increases on June 26. However, Gen Z persisted in their protests and remained dissatisfied.

“Even though the tax bill was withdrawn, nothing was promised to address the long-standing social and economic problems that young, impoverished Kenyans had confided in me over the years,” Angela R. Pashayan noted.

“Funds meant to alleviate poverty in the slum are frequently, if not always, misappropriated. In 2020, a Mukuru slum resident informed me, [It is either] stolen or, due to corruption, there is only little left available for use to serve the community. Another said that governments are passing along our difficulties to one another. They show up during elections to solicit votes; they then leave without ever returning to enquire about any significant developments,” she added.

Maintaining international loans

The national debt has increased under William Ruto to over $80 billion, or almost 75% of Kenya’s GDP. The country is in a high-risk category for debt default because of this huge amount. A default might have even more negative effects on Kenya’s economy given the already enormous strain of servicing this national debt.

Fears of a default led to the planned tax increase. However, the new tax policy would have caused significant financial hardship for households in all income brackets if it had passed. Kenyans with higher income levels would have been required to pay a combined rate of 40% yearly. Additionally, other regressive taxes would have disproportionately affected Kenya’s poorest citizens, like value-added and sales taxes. For instance, the fuel levy was to increase from 8% to 16%.

Reversing the tax bill hasn’t made Kenya’s issues disappear, and the country’s new finance minister announced on August 19 that part of the proposed levies would be implemented to pay off its foreign debt.

However, the discussion over how to pay off foreign debt does little to improve the situation of Gen Zers living in Nairobi’s shantytowns.

“Modern housing, manufacturing companies to employ people, health programmes, upgraded roads, education, training for skills, greater security and higher food production is what they want, according to a teenage slum resident I spoke with in 2020,” Pashayan wrote.

Kenya’s amended constitution made all of those promises to them fourteen years ago, but it appears that the country’s administration stole them as it tried to balance the budget and pay off the nation’s growing and unmanageable foreign debt.

The future of Nairobi’s youth

William Ruto has made a compromise now by announcing the formation of a broad-based administration, but the opposition coalition rejected the proposal on August 20 and demanded a constitutional convention in its place.

Ruto’s office also scheduled “multi-sectoral” discussions in the month of August, but there was no indication that these had started. Most of the key activists behind the demonstrations have turned down the offer and instead demanded swift action on problems like corruption.

In reaction to attempts to outlaw demonstrations, activist Boniface Mwangi posted on social media site X, saying, “(The police and president William Ruto) have no jurisdiction to suspend rights provided by the constitution.”

An advisory agency called the Communications Authority of Kenya (CA) has advised the media not to “perpetuate” violence in their reporting of the demonstrations, as this “may potentially spark widespread civil unrest in the country.”

The protests in Nairobi reflect the deep-seated issues faced by the city’s young, impoverished population. The dissatisfaction goes beyond the recently retracted tax bill, as the root causes lie in the government’s failure to fulfil promises made in the 2010 constitution. Mismanagement of funds meant for poverty alleviation, coupled with the burden of a growing national debt, has worsened the economic hardships faced by the people. While the retraction of the tax bill was a start, it is clear that much more needs to be done to address the long-standing social and economic problems faced by the young Kenyans in Nairobi’s slums.

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