Kenya’s Gen Z concerns still largely unresolved

Economic policymaking in Kenya has become more politically constrained as the the government can no longer assume that tax measures will be accepted, writes XN Iraki, business professor at the University of Nairobi, in The Conversation. This comes after Kenya’s Gen Z-led protests of 2024 linked to tax increases drew global headlines. The government, he says, is far more careful about introducing new taxes or increasing existing ones. ‘Several proposed tax measures have been dropped or watered down, reflecting a greater sensitivity to the political risks of being seen to increase the cost of living. Instead, policymakers have pursued two alternative approaches.’ The first, he says, has been to widen the tax base, particularly by targeting Kenya’s vast informal sector, which accounts for eight in 10 jobs (over 18 m employees). ‘Government officials argue that the tax burden is currently carried by registered taxpayers (only 40% out of 22m taxpayers), and that everyone should contribute. But taxing the informal economy remains difficult because many businesses in this sector operate without formal records and survive on thin margins.’

The second approach, Iraki notes in The Conversation, has been a gradual shift from direct taxes towards levies, fees and charges on services. ‘These include digital payment charges. They are often less politically controversial, but they still raise the cost of doing business. The protests have also influenced spending priorities. The last two national budgets have included more programmes targeting young people, including internships, enterprise support and procurement opportunities reserved for youth. Yet youth unemployment remains high, at about 67% (ages 15-34). This suggests the scale of the challenge exceeds the resources being devoted to it.’ He believes that the biggest fiscal consequence has been on borrowing. ‘There are still budget deficits, so borrowing bridge the gap. ‘Domestic borrowing may be politically easier than raising taxes. A major concern is that government spending has remained high. Many Kenyans expected the protests to trigger a serious effort to reduce waste and lower spending. That is work in progress.’ Iraki points out that the Kenyan government is caught between competing pressures. ‘Citizens want lower taxes and a lower cost of living. The state needs revenue to fund services and repay debt. And politicians are reluctant to cut spending ahead of the 2027 general election.'

'The biggest policy success has been the government’s recognition that young people need to be more deliberately included in economic policy. The misses, however, he  states in The Conversation are more significant. ‘One is the attempt to expand taxation into parts of the digital and gig economy, where many young Kenyans have sought opportunities. Taxing these sectors risks discouraging innovation and entrepreneurship. Another is the gap between expectations and delivery. The government’s promise to create overseas employment opportunities for young people has generated publicity, but the numbers remain small relative to the scale of youth unemployment. Perhaps the most important policy failure is that young people are still viewed primarily as a political challenge rather than an economic opportunity or asset.’

Around the world, countries are grappling with ageing populations and shrinking workforces, he says, but notes that Kenya has the opposite advantage: a large, educated and technologically savvy young population. ‘Yet corruption and limited economic opportunities mean many young people feel their talents are undervalued and underutilised. This can create frustration. The issues that brought young people onto the streets in 2024 have not disappeared. Youth unemployment remains high. Slower economic growth intensifies these frustrations. Corruption remains another powerful mobilising issue. Many young Kenyans believe public resources are still being mismanaged while essential services remain inadequate.’ Iraki concludes in The Conversation analysis that as as Kenya approaches the 2027 elections, the greatest risk for policymakers is assuming that the protests were solely about the Finance Bill. ‘The Bill was merely the trigger. The deeper concerns – jobs, corruption, inequality, accountability and economic opportunity – remain largely unresolved. Those issues are likely to continue shaping political mobilisation, even beyond 2027.’