Poor Human Capital Holds Back Growth Dividend

On a scale of one to 10, how best is Kenya putting its population to economic use? In other words, how does the country score in human capital index? The index assesses the performance of an economy in mobilising and enabling its citizens to realise their full social, economic and professional potential.

One way of gauging this is by looking at levels of investment in quality education; the other is healthcare.

In the World Bank’s human capital index, nations are awarded scores between zero (0) and one (1), with one indicating maximum potential reached by citizens.

Kenya scores 0.52, meaning the country’s human resource is realising just slightly over half of its potential on average. It shows just how much capital the country is losing in unrealised potential for not putting in place enabling structures and policies.

The Covid-19 crisis has worsened the situation, crippling learning and knocking the economy and piling pressure on hospitals. In such a tough economic climate where businesses have taken a hit and jobs lost, social mobility by citizens up the income ladder is on ice. This is set to widen inequalities, with those at the bottom of the social pyramid expected to slide further into extreme poverty.

Compared to global nations, many factors stand in the way of Kenyans being able to achieve their dreams and reach self-actualisation. From wobbly education institutions to public healthcare facilities starved of resources as a result of runaway corruption and lack of political goodwill, the hurdles are all around.

Yet achieving sustained growth through productivity and shared prosperity cannot happen without quality education and universal healthcare in the mix. By high quality education, I mean relevant curricula in lockstep with changing times and one that allows learners to fully explore their abilities, talents and natural inclinations.

It also has to be joined at the hip with entrepreneurship and innovation-led training to meet societal needs and address challenges. All this is not possible without an empowered, skilled base of teachers and decent facilities.

Equally, for a population to have better welfare, access to universal healthcare should be guaranteed.

After all health is wealth. To get the most out of its population in terms of churning out continuous stream of innovative products, generating wealth and offering solutions in dark times, the government is better off investing more in its people.

People should be treated as assets, never as a liability in order to keep the growth engine running. But that can only happen when they are offered the right climate to thrive.

To this end, there is need for increased investment in high-quality education for human capital accumulation as well as youth training programmes to boost entrepreneurship.

To transition to an upper middle-income economy, Kenya needs innovation-led growth strategy. Otherwise it might find itself stuck in the lower middle-income trap, allowing its neighbours to race from behind and play catch-up.

The human capital index sets out to measure the chances of a child born today clocking 18 years and being prepared for adulthood roles, based on prevailing levels of education and healthcare.

It highlights how improvements in current health and education could shape the productivity of the next generation of workers. Kenya is experiencing a youth bulge, with 60 percent of the population being under the age of 25. But the country has failed to fully reap the labour dividend from this youthful demographic, with millions of them out of job due to lack of opportunities.

This has seen dependency levels remain high, leading to lack of savings among the few family members with an income source and denying them a chance to invest and accumulate wealth. The cycle then repeats with the next generation in the absence of opportunities.

As we redefine the future of work and consumption, new opportunities will come up that need to be tapped so as to capture the possible dividends. These will include emergence of new ways and technologies in areas such as e-commerce; remote schooling/learning, working and shopping practices. Government and private sector need to come up with mechanism of introducing an enabling environment to catalyse such technologies.

Mobilising resources around manpower training alongside research and development will always reward an economy with an attractive return on investment, if combined with the right set of policies and good governance.

Kenya suffers an economic paradox in the sense that its economy has been growing rather impressively but the jobs creation machinery has slowed – highlighting a skewed distribution in the wealth created. With thousands of graduates flooding the labour market every year amid a shrinking pool of opportunities, many have resorted to less productive activities to survive while others waste away their youthful years.

As a result, the country continues to lose out on demographic dividend in terms of unrealised productivity, innovation and consumer market growth.

For a society to be well prepared for present and future challenges, it needs to have sound education and healthcare systems, not just good infrastructure.

This article was originally published by the Business Daily.