The four factors of production
In economics, there are four key factors of production namely: land, labour, capital and entrepreneurship. If we were to have a hierarchy of these factors, land would come up on top. This is because almost every economic activity is in a way anchored on land.
However much we embrace digital operations, it is impossible to do away with brick and mortar. Even when we work at home, we still need premises either owned or rented. Given its importance, land should be optimally utilised for productive purposes and not hoarded for speculation and enrichment of a few.
Inadequate access to premises hampering entrepreneurship
On several occasions, I have visited various estates in Nairobi to familiarise with the business environment. An increasingly serious concern is the rising number of people operating all manner of enterprises by the roadside using unsightly temporary structures.
In some cases, people are doing business on the streets in such a precarious manner that it is difficult to tell where the road begins and where it ends. Property owners have to contend with structures irregularly erected next to their buildings. Shop owners are under siege from hawkers who even block the entrance to their premises.
Finding your way into a supermarket in the central business district is turning into a real challenge. You have to dangerously navigate through public service vehicles packed bumper to bumper, then squeeze yourself between hawkers and their merchandise, before finally wrestling through a sea of human traffic.
A recent Micro Small and Medium Enterprises (MSMEs) survey released by the Kenya National Bureau of Statistics found out that the sector engaged about 14.9 million persons in 2015 and therefore, arguably provides the highest employment opportunities in Kenya.The survey further established that there were about 1.56 million MSMEs licensed by the county governments while the unlicensed businesses identified from the households were 5.85 million.
The above findings indicate the reasons why every available space is under pressure from those seeking to eke an honest living. The formal employment sector has stagnated and offers little hope. It is therefore incumbent upon the authorities to ensure that those who want to do business have a decent and befitting environment to do so.
The county governments need to urgently invest in modern markets. The population is growing fast while these critical amenities have been neglected. It is difficult to think of any recently established markets in the city. The end result if nothing is done will be congestion, chaos and conflicts. These are not the ingredients for a city that aspires to world class status.
Construction of physical infrastructure from which entrepreneurs can operate is one of the ways of encouraging job creation. The many micro enterprises operating by our roadsides are a testament to the sheer determination of Kenyans and their desire to earn an honest livelihood. No one would prefer doing business under these punishing circumstances.
Scarcity mentality needs to be checked
One of the misconceptions used to hype land prices is the fallacy that land is constant while population is rising and therefore a scarcity exists. This scarcity mentality creates an unnecessary urgency to hoard land.
As a country, we are nowhere near land scarcity distress. Kenya has a land size of 581,309 km2 and a population of about 45 million. Compare that with Japan’s land size of 377,944 km2 and a population of 127 million or even Rwanda with a land size of 26,338 km2 and a population of 12 million.
As a matter of fact, Japan’s land size is equal to that of 11 counties namely : Turkana, Marsabit, Wajir, Garissa, Tana River, Mandera, Isiolo, Kitui, Kajiado, Homabay and Tharaka Nithi with a combined land size amounting to 377,833km2. Rwanda’s land size is equal to Mandera and Vihiga counties which have a total of 26,329km2. Even the United Kingdom with 242,495 km2 is equal to just 5 Kenyan counties namely: Turkana, Marsabit, Wajir, Garissa and Kericho which total to 242,536km2.
Our population can double or triple without causing land scarcity. People need to spread out and engage in intellectually intensive economic activities which depend less on land.
Settlement diversification is an urgent priority
Through proper settlement patterns and optimal land tenure systems, the above countries have a GDP may times greater than ours and better quality of life for their citizens. As a country, we need to outgrow our obsession with Nairobi. We need to find a way of diversifying settlements by creating alternative engines of economic development.
Majority of the population is residing just a tens of kilometres from the Nairobi-Malaba railway line or what is popularly known as the Northern Corridor. Most of the country’s land mass is scarcely inhabited and underutilized.
This is the reason, the investments we are making are producing little value for money and low returns. What is the point of constructing the proposed dual carriage highway from Mombasa to Kisumu on top of the Standard Gauge Railway and the old railway line? This money should be used to open up the northern part of our country which remains neglected despite its tremendous potential.
Furthermore, concentrating on this corridor will result in overcrowding and dangerous competition for resources. This is why vicious land grabbers are on the rise. Besides, there are serious concentration risks. If a major earthquake were to hit Nairobi, we would be left with nothing to fall back to. We would instantly turn into economic refugees. Diversification is a key risk management concept.
The more we invest on the Northern Corridor, the more we will attract people to settle along it. This will pile pressure on the infrastructure and the ensuing congestion will result in depressed living standards. More resources should be on the Lamu Port-South Sudan-Ethiopia- Transport (LAPSSET) Corridor. This will open up the country, diversify settlement and reduce land speculation while uplifting living standards.
The LAPSSET Corridor development plans need to include anchor industries. It is does not make sense to invest in infrastructure without accompanying it with supporting economic activities. Large infrastructure projects are billed to attract investments, but that will not happen automatically.
Deliberate efforts must be made to attract such investments by setting aside sufficient land for large scale agricultural and industrial purposes. The entire process should be properly synchronized so that we do not find ourselves with infrastructure for which we have no sufficient use of.
We need to rethink devolution architecture
While counties can achieve these goals, the current devolution system is not effective. Counties are insufficiently funded and poorly managed. There should have been a transition phase towards full devolution in which counties should have been empowered to attain capacity for financial independence. Resources from the national government will never be enough especially with the excessive number of counties.
We are almost four years into the devolved government system and there is little evidence that this has lowered pressure on land in Nairobi and its environs. People will only move into the counties when there are enough economic opportunities and amenities to support high living standards.
Land speculation is a dangerous game
The concept of hoarding land for speculation purposes is very dangerous. This denies the country the economic use of such land especially if it has been left idle. It is important that those who own idle land are penalized through taxes in order to curb such selfish practices.
Land has become an extremely toxic asset. The land sector is degenerating into a criminal enterprise. It is the first port of call for those who want to hide and launder illicitly acquired money. High demand for land has resulted in corrupt practices such as multiple allocations, forgeries and all manner of fraud. Deadly confrontations are commonplace.
While capital is another important factor of production, the power of land to act as collateral for purposes of securing funds is being eroded by the inefficiencies above. Financial institutions end up dragged in endless court battles when they seek to liquidate the collateral in the event of default. Digitised land maps and a fool proof registration system are key to resolving these challenges.
Speculation has created artificial demand for land. This has made prices to hit the roof. Consequently, many Kenyans can only dream of owning land even when they have concrete economic plans. We must not be reduced to strangers in our own country.
We have enough land for all our needs but not even a single acre for anyone’s greed. The government and the citizenry need to ensure that the available land is put into maximum economic use. Land should be used for production not speculation.
The writer is an entrepreneurship, management and marketing consultant
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