Something is stirring in Ethiopia. It began with the abrupt resignation of former Prime Minister Hailemariam Desalegn on February 15. After weeks of backroom dealmaking the EPRDF coalition which has governed Ethiopia with an iron fist since ousting the Derg, Mengistu Haire Mariam’s Marxist dictatorship in 1991, elevated youthful Abiy Ahmed Ali as prime minister. The new prime minister hit the ground running with a raft of political reforms.
Three years ago, students in the town of Ambo started a protest to oppose a metropolitan development plan that would have incorporated their town and seven others into the capital, Addis Ababa. Ambo is 120 kilometres west of Addis in the Oromia region. They accused the federal government of a top-down land grab that would deprive them of livelihoods and destabilize their communities and culture.
After the overthrow of the Derg, Ethiopia adopted an ethno-federalist constitution that even provides for orderly secession. But the EPRDF has sought to run a command-and-control developmental state. The Addis Ababa expansion plan was a head-on-collision between the two—the constitution’s federalist ethno-regional political bargain and the centralizing ideology and power politics of the EPDRF. While the EPRDF is a consociational coalition, it’s the late strongman Meles Zenawi’s Tigrayan People’s Liberation Front (TPLF), which led the liberation war, that wields most of the power in the coalition (and gets most of the spoils). The Tigrayans are a relatively small tribe (six percent of the population) from the north of the country.
The Addis expansion plan, which affected the Oromo and Amhara regions, ignited discontent whose depth the EPDRF clearly underestimated. The Oromo are the largest ethnic group in Ethiopia, accounting for a third of Ethiopia’s 100 million-strong population, with strong grievances of historic marginalization. The Amhara, who constitute just over a quarter of the population, are the erstwhile politically dominant ethnic group. Both Emperor Haile Selassie and Mengistu were Amhara (his father, originally Oromo, was adopted by an Amhara nobleman). Repression, including massacres, mass incarcerations and a state of emergency, a feature of both Emperor Selassie’s late rule and Mengistu’s Red Terror, returned under a beleaguered EPRDF.
Though unexpected, Desalegn’s resignation was preceded by a softening of the regime, including the release of political prisoners, which Desalegn said was meant to “foster national reconciliation”. The new prime minister is Oromo. His elevation was no doubt intended as an olive branch to the restive region.
The Addis Expansion Plan, which affected the Oromo and Amhara regions, ignited discontent whose depth the EPDRF had clearly underestimated…Repression, including massacres, mass incarcerations and a state of emergency, a feature of both Emperor Selassie’s late rule and Mengistu’s Red Terror, returned under a beleaguered EPRDF.
Hot on the heels of the tectonic shift in the politics have come equally momentous economic pronouncements. State owned Ethiopian Airlines and telecommunications and power utilities and other state corporations are to be partially privatized.
What exactly is cooking in Addis?
In his pronouncement speech, the Prime Minister Abiy spoke of a hard currency crisis. He is quoted in the media castigating his audience, Ethiopian businesspeople, for keeping their hard currency in Dubai and China and asking for their cooperation to resolve the crisis while also threatening unspecified actions on the hoarders of foreign exchange. Instructively, he also disclosed that the political crisis has dented diaspora remittances. Diaspora remittances are Ethiopia’s single largest source of foreign exchange, bringing in US$ 5.5 billion last year, almost double the country’s US$ 3 billion dollar export earnings.
The foreign exchange crisis is not new. In October last year, Ethiopia devalued the currency by 15 percent. While the recent government data shows foreign currency reserves equivalent to 2.3 months import requirements in December 2017, precarious but not dire (3-4 months requirements is the norm), some analysts say the reserves could have fallen below one month’s requirement, which is dire. Last week, the government announced that it had secured a US$1 billion foreign currency lifeline from the United Arab Emirates (UAE), part of a US$3billion aid and investment package. The UAE deal looks like a quid pro quo for Prime Minister Abiy’s de-escalation of tensions with Egypt over Ethiopia’s damming of the Blue Nile. The UAE is a strong ally of Egypt. This sequence of events begins to suggest that the foreign currency crunch is behind the softening of the EPDRF regime.
Prime Minister Abiy spoke of a hard currency crisis. [He castigated] his audience, Ethiopian businesspeople, for keeping their hard currency in Dubai and China and asked for their cooperation to resolve the crisis while also threatening unspecified actions on the hoarders of foreign exchange. Instructively, he also disclosed that the political crisis has dented diaspora remittances. Diaspora remittances are Ethiopia’s single largest source of foreign exchange, bringing in US$ 5.5 billion last year, almost double the country’s US$ 3 billion dollar export earnings.
Ethiopia has run into an old, mostly forgotten, economic development problem: the foreign exchange constraint. In the old days, it was caused by import substitution industrialisation. Import substitution industrialisation, the dominant development strategy for many sub-Saharan African states until the mid-seventies, entailed setting up industries to produce finished goods the country was importing, and protecting them from import competition with trade barriers, import and foreign exchange controls.
The new import substituting industries imported virtually everything from machinery, intermediate inputs, spare parts, technology and even management. The import substituting industry’s foreign exchange requirements ended up exceeding what the country was using to import the finished goods. Most of the import substitution industrializers relied on a few primary commodity exports. They soon found that their export earnings were insufficient to finance the industries.
Foreign exchange became scarce, and self-reinforcing. To circumvent foreign exchange rationing, businesses would hoard foreign exchange abroad through transfer pricing (over-invoicing imports and under-invoicing exports), compounding the primary motive for transfer pricing— tax evasion. One such scheme came to light not too long ago during the unravelling of the Nairobi Securities Exchange-listed corporate icon, CMC, which has since been delisted. It was revealed that the company had maintained a secret account in Jersey to which proceeds of over-invoicing were deposited and paid to its directors offshore. Remarkably, many of the beneficiaries of the scheme were the same bureaucrats who were responsible for enforcing foreign exchange controls.
The 1973 oil-shock and declining primary commodity prices in the ‘70s compounded the external imbalance that import substitution industrialization started. By the early ‘80s, most import substituting countries were on their knees. In some, Tanzania for example, manufacturing ground to a halt.
Ethiopia’s external imbalance and attendant foreign exchange crises emanate from over-investment in infrastructure. Ethiopia adopted an infrastructure-led growth strategy known as the Growth and Transformation Plan (GTP) in 2010. It has since doubled electricity generation from 1800 to 4200 MW, against peak power requirement of 2000 MW. There is close to 7,000MW of new power projects under construction. The Ethiopia Grand Renaissance dam alone has a capacity of 6450 MW. When these are completed, Ethiopia’s generation capacity will be more than four times domestic demand. The road network has been expanded two-and-a-half fold, from 44 km to 110 km of road per 1000 square kilometres. And there is of course the 670-km Addis-Djibouti railway, and a light rail system for Addis Ababa, operational since late 2015 .
The infrastructure building boom, described in a recent World Bank report as “one of the highest rates of public investment in the world”, turbocharged Ethiopia’s economic growth rate from a respectable 5-6 percent to an exceptional 10 percent per year. But close to a decade on, the anticipated private investment that would enable Ethiopia to pay for it has not materialised. Ethiopia was banking on export processing zones investment, and has built several industrial parks around the country.
Besides failing to attract investment, building booms of this magnitude have the effect of shifting incentives against “tradable” sectors of the economy. This phenomenon is more commonly associated with natural resource booms that economists call Dutch Disease. This is reflected in the decline of Ethiopia’s export to GDP ratio, from 17 percent to eight percent of GDP compared to Sub-Saharan average of 27 percent. Its export to GDP ratio is now the second lowest on the sub-continent after Burundi (6.2%).
Ethiopia has compounded its infrastructure-driven external imbalance with classic import substitution—a massive state-drivend sugar industry expansion. The state-owned Ethiopia Sugar Corporation is currently developing ten large-scale sugar projects that will put a million acres of land under sugarcane production. A capital intensive, low value product with distorted markets and a permanent global glut floating in the high seas, sugar is as bad as import substitution industries get. Yet there is no shortage of export-oriented agriculture investments Ethiopia could have chosen. Oilseeds are Ethiopia’s second largest export earner after coffee. It has a promising livestock and leather apparel industry. Maize even.
The Bretton Woods institutions spent the ‘80s and ‘90s preaching the free market economic orthodoxy known as the Washington Consensus. Ethiopia has done the complete opposite. But the World Bank has been nothing but effusive. In a 2016 report, Ethiopia’s Great Run: The Growth Acceleration and How to Pace it, the World Bank asserts confidently that Ethiopia was on course to become a middle income country by 2025. Astoundingly the World Bank goes ahead to give a thumbs up to the policy regime that its structural adjustment programmes (SAPs) dismantled:
“Heterodox financing arrangements supported one of the highest public investment rates in the world. Three less conventional mechanisms stand out: first, a model of financial repression that kept interest rates low and directed the bulk of credit towards public infrastructure. Second, an overvalued exchange rate that cheapened public capital imports. Third, monetary expansion, including direct Central Bank budget financing, which earned the government seignorage revenues.”
Ethiopia has compounded its infrastructure-driven external imbalance with classic import substitution—a massive state-driven sugar industry expansion. The state-owned Ethiopia Sugar Corporation is currently developing ten large-scale sugar projects that will put a million acres of land under sugarcane production. A capital intensive, low value product with distorted markets and a permanent global glut floating in the high seas, sugar is as bad as import substitution industries get.
Heterodox means unorthodox or unconventional. In plain English, it means distorting credit markets, overvaluing the currency and printing money.
After all the cheerleading, the Bretton Woods sisters now find themselves in an awkward situation. In its most recent debt sustainability report, the IMF acknowledges that Ethiopia is now staring at a debt crisis. It has no advice to give. Ethiopia’s hopes, it writes, now rest on exporting electricity. The IMF posits that Ethiopia has the potential to earn US$ 1 billion a year from selling electricity.
In reality, Ethiopia is selling a little power to Sudan and Djibouti, and has signed power purchase agreements with Kenya and Tanzania. But these countries are ramping up their own generation capacity. Kenya’s installed capacity is presently 35 percent above peak generation requirements excluding the 340 MW Turkana wind power which is awaiting completion of a transmission line, 55 percent when it is included. There are several other projects underway, and Kenya’s government seems dead set on proceeding with a controversial 1000MW coal plant in Lamu. Ditto Tanzania.
After all the cheerleading, the Bretton Woods sisters now find themselves in an awkward situation. In its most recent debt sustainability report, the IMF acknowledges that Ethiopia is now staring at a debt crisis. It has no advice to give. Ethiopia’s hopes, it writes, now rest on exporting electricity. The IMF posits that Ethiopia has the potential to earn US$ 1 billion a year from selling electricity.
Ethiopia’s biggest electricity customer potentially is Egypt. This may begin to explain the reason for the olive branch. Prime Minister Abiy also made a quick visit to Somalia last week. He might be hoping to sell some electricity there. To flog a billion dollars worth of power, Ethiopia will need to make peace with all her neighbours, and then some. If truth be told, the electricity export bonanza is a fig leaf.
There is a cold reality that the Ethiopian government seems to be still in denial about. Its heterodox macroeconomic regime is now untenable Investors do not like putting their money in places where it is difficult to get out. And now that people know how precarious the situation is, hard currency hoarding and capital flight will get worse, not better.
The competing destinations for the export processing investment that Ethiopia is building industrial parks for do not have exchange controls. And Ethiopia has many disadvantages to overcome, not least, being landlocked, not to mention its byzantine bureaucracy and anti-capitalist instinct. Financial liberalisation is inevitable, a matter of when and how, not if. The Prime Minister talked of the foreign exchange problem being a long term problem. He is dead wrong. He has eighteen months—best case scenario. His options boil down to whether to do big bang or gradual – rather like choosing whether to do your root canals all at once or every other week.
The announced fire sale of family silver will not do it either. Deregulation should precede privatisation otherwise it substitutes public monopolies for private ones. In the case of the telecom monopoly in particular, deregulation will kill a whole flock of birds with one stone—bring in hard currency from license fees, investment, access (at 40% Ethiopia’s mobile penetration is the lowest in the region) and quality of services. The sugar factories I would sell right away on an “as-is-where-is” basis. A stitch in time saves nine.
Ethiopia is by no means the only country floundering on infrastructure-led growth. It is a foolish idea. Monuments, delusions of grandeur, cargo cults—this columnist has all but run out of metaphors. Last year, Zambia’s President called a national day of prayer for the Kwacha. Last week he suspended borrowing and instituted an austerity programme that includes freezing projects that are less than 80 percent complete. Kenya is surviving on speculative capital inflows and juggling debt as it negotiates an IMF bailout.
Ethiopia’s unravelling is a reflection of its macroeconomic policy regime. When demand and supply don’t balance, something must give. In a liberal regime it is prices that adjust (exchange rate, interest, and inflation). If prices are controlled then demand or supply must give, in this case, the supply of foreign exchange. Still, the crisis has provided an opportunity for transformational political and economic change. To quote economist Paul Romer, a crisis is a terrible thing to waste.
An Injustice in Kenya’s History: The TJRC Report Six Years On
Six years later, writes GABRIELLE LYNCH, little progress has been made on Kenya’s Truth Justice and Reconciliation Commission (TJRC) despite on the gross injustices and abuses that the report outlines.
On 21 May 2013, Kenya’s Truth Justice and Reconciliation Commission (TJRC) handed over a four-volume report to President Uhuru Kenyatta. The report outlines a range of injustices and abuses that occurred in the country between December 1963 and the end of the post-election violence in 2008, and provides a range of recommendations and a clear implementation plan. Six years later, little progress has been made on its dissemination or the implementation of its recommendations.
The TJRC Commission collected over 40,000 statements – the largest number of any truth commission to date – and 1,000 memoranda. The Commission also held public and women’s hearings in 35 locations across the country, as well as a series of adversely mentioned person (AMP) and thematic hearings
This is unsurprising given the fate of previous commissions of inquiry, the credibility crisis that surrounded the TJRC’s chairman, and the limited media coverage that the Commission’s work enjoyed. Nevertheless, I find this depressing.
The reason is that, while many paid the TJRC little attention, a significant number of Kenyans opted to relay their stories, pain and fears. This is evident from the numbers; the Commission collected over 40,000 statements – the largest number of any truth commission to date – and 1,000 memoranda. The Commission also held public and women’s hearings in 35 locations across the country, as well as a series of adversely mentioned person (AMP) and thematic hearings.
To be fair, the TJRC’s founders were aware of the inadequacies of speaking, which is why they included “justice” in the title and gave the Commission powers to recommend further investigations, prosecutions, lustration (or a ban from holding public office), reparations, institutional and constitutional reforms, and a limited amnesty.
It is also evident from my own observations; in 2011 and 2012 I spent months following the TJRC around the country attending hearings, speaking to victims, alleged perpetrators and interested parties. From these interactions it was clear that, while many who came before the Commission welcomed the chance to speak, the majority submitted statements or memoranda or provided testimony in the hope that they would be heard and that some action would be taken. As one woman explained to me after a women’s hearing in Nakuru, she was glad that she had spoken as now the Commission would “come in and help”.
To be fair, the TJRC’s founders were aware of the inadequacies of speaking, which is why they included “justice” in the title and gave the Commission powers to recommend further investigations, prosecutions, lustration (or a ban from holding public office), reparations, institutional and constitutional reforms, and a limited amnesty. However, on the question of whether recommendations would be implemented, the Commission rather naively relied on the TJRC Act (2008), which stipulated “recommendations shall be implemented”. However, such legal provisions proved insufficient; in December 2013, parliament amended the Act to ensure that the report would first be considered by the National Assembly, something that is yet to happen.
But how did the TJRC come about and what was its mandate?
The Commission was informed by the belief that, while the post-election violence of 2007/8 was triggered by a disputed election, it was fuelled by more deep-rooted problems.
The establishment of a TJRC was first considered in 2002 at a moment of great optimism and hope after Mwai Kibaki and the National Rainbow Coalition (NARC) ousted President Moi and Kanu from power. However, a task force recommendation that a TJRC be established was ignored by the Kibaki government. The idea was later revived following the post-election violence of 2007/8 and the formation of a coalition government.
The TJRC was established by an Act of Parliament in 2008, began its work in 2009 and submitted a final report in 2013. The Commission was informed by the belief that, while the post-election violence of 2007/8 was triggered by a disputed election, it was fuelled by more deep-rooted problems. It was thus mandated to investigate a wide range of injustices – from perceptions of economic marginalisation and periods of ethnic clashes to state repression and torture – from Kenya’s independence in December 1963 to the end of the post-election violence in February 2008. As a result, while some insights into colonial rule were provided as context for post-colonial realities, the report is silent on Kibaki’s second term in office and Uhuru Kenyatta’s presidency.
In addition to documenting the past, the Commission was able to offer various recommendations including further investigations and prosecutions, reparations, institutional reform and amnesty for non-gross human rights violations. The aim was to contribute to truth, justice, reconciliation, and sustainable peace.
The Commission’s task was thus impossibly large and it also faced additional challenges including a credibility crisis around the Commission’s Chairman and limited media coverage. It was also upstaged by parallel proceedings at the International Criminal Court and was working in a context in which there had been no real transition.
Given these challenges, the report is actually pretty impressive.
Critically, it does not pretend to be exhaustive and recognises how – over four years and in a single report – it could not provide a “definitive history of the broad range of violations committed and suffered” over the course of 45 years (TJRC vol. 1 2013: v).
Given this impossibility, I am keenly aware of how my attempt to summarise a report that runs to over two thousand pages involves further simplification and omission – for which I apologise. Despite this, I think it is worth marking the six-year anniversary of the report’s submission – and recognising all those who engaged with the process – by saying something about the Commission’s findings.
First, it was clear that each regime – from the colonial period through the Kenyatta, Moi and Kibaki eras – had overseen widespread abuses through acts of commission and omission and that Kenyans had suffered (and many continue to suffer) as a consequence.
The establishment of a TJRC was first considered in 2002 at a moment of great optimism and hope after Mwai Kibaki and the National Rainbow Coalition (NARC) ousted President Moi and Kanu from power. However, a task force recommendation that a TJRC be established was ignored by the Kibaki government.
The commission found that all three post-colonial regimes had been responsible for gross human rights violations and concluded that state security forces had been “the main perpetrators of bodily integrity violations of human rights in Kenya including massacres, enforced disappearances, torture and ill-treatment, and sexual violence” with northern Kenya standing at the “epicenter of gross violations of human rights by state security agencies” (TJRC vol. 1 2013: vii).
More specifically, the report outlined how the Kenyatta regime (1963–1978) was responsible for the largest number of political assassinations, and how the repression of dissent reached its apex under the one-party rule of Daniel arap Moi (1978–2002). In turn, while the commission recognised the reforms initiated by the first Kibaki regime (2002–2007), it also drew attention to ongoing corruption, ethnic favouritism and inter-communal violence, and to the collapse of the NARC coalition and the increase in extra-judicial killings, problems which, in its opinion, prepared “fertile ground (…) for the eruption of violence” in 2007–8 (TJRC vol. 2A 2013: 28–29).
The TJRC also highlighted the socio-economic effects of gross human rights violations. These included, for example, the challenges faced by former political detainees in finishing their education, securing employment and caring for their children. At the same time, the report sketches out some of the ways in which socio-economic factors impacted upon bodily integrity rights at a more general level through, for example, the relative vulnerability of marginalised people during conflict.
In terms of inter-communal conflict, the commission blamed the emergence of “negative ethnicity” on colonial rule and Britain’s adoption of a divide and rule strategy and alienation of large tracts of land, with historical grievances over land cited as the “single most important driver of conflicts and ethnic tension” (TJRC vol. 1 2013: vii).
However, all the post-colonial regimes were blamed for the perpetuation of such politics as, rather than provide redress, successive administrations “alienated more land from already affected communities for the benefit of politically privileged ethnic communities and the political elite” (TJRC vol. 1 2013: xiv) and favoured members of their own ethnic groups in employment and appointment processes (TJRC vol. 1 2013: x). According to the commission, a sense of ethnic competition was then exacerbated by multi-party politics, as “ethnicity became an even more potent tool for political [organisation] and access to state resources” (TJRC vol. 1 2013: ix–x). This combination of factors then led to “a volatile environment in which violence had been normalised and ethnic relations had become poisoned” (TJRC vol. 2A 2013: 29).
The commission also emphasised the “pervasiveness of socio-economic violations” across the country (TJRC vol. 1 2013: xv). More specifically, it found that – in addition to the socio-economic impacts of gross human rights violations – the “government’s exclusionary economic policies and practices in the distribution of public jobs and services inflicted suffering on huge sections of society at different historical moments” (TJRC vol. 1 2013: xv), with corruption in turn linked to everything from violent state security forces to poor health and education services.
In terms of spatial inequalities, the commission found that northern Kenya – taken to consist of former North Eastern, Upper Eastern and North Rift Valley provinces – together with former Coast, Nyanza and Western provinces suffered particularly harsh economic marginalisation as a result of biased or indifferent state policies. However, the commission also recognised how even residents of regions that were not identified as economically marginalised – namely, former Central, Nairobi, South Rift Valley, and Lower Eastern provinces – considered “themselves marginalised at one time or another” (TJRC vol. 1 2013: xv). The implication was that no single province had escaped economic marginalisation, with hardships often passed on to subsequent generations through a cycle of limited education and employment opportunities.
Women, minority groups and indigenous people were also found to have suffered state-sanctioned discrimination. In summary, minority and indigenous peoples were found to “have suffered gross violations of human rights on account of their membership in these communities” (TJRC vol. 2C 2013: 281). Women were found to have “suffered unspeakable and terrible atrocities … in the majority of cases … for no other reason than that they are of the female gender” (TJRC vol. 2C 2013: 151) and children were found to have been “subjected to untold and unspeakable atrocities” (TJRC vol. 4 2013: vii).
However, while the Commission suggested that most (if not all) Kenyans are victims of some injustice, it did not suggest that all Kenyans suffered, or continue to suffer, equally. On the contrary, some individuals were deemed to have suffered more severe harm or multiple injustices, while some groups were presented as having suffered more than others. For example, a minority were found to have suffered direct bodily integrity violations at the hands of state operatives, while, overall, women were said to have suffered more than men, and some regions or ethnic groups to have suffered more than others.
The Commission was “not just interested in what happened…. [but] in why things happened the way they did, what was their impact and who was responsible” (TJRC vol. 1 2013: 43). Regarding the why and the impact, the report is of mixed quality, but it is in establishing the who that the TJRC had the least success. Instead, the report details how the Commission met a wall of silence, denial and justifications. At the same time, the Commission found that the state had historically “covered-up or downplayed violations committed against its own citizens, especially those committed by state security agencies” and had “demonstrated no genuine commitment to investigate and punish atrocities and violations committed by its agents against innocent citizens” (TJRC vol. 4 2013: 10).
The commission concluded that the underlying causes of violations and contributing factors were complex and included centralised power, a culture of impunity, inter-ethnic competition, uneven development, under-employment and patriarchy.
These findings informed wide-ranging recommendations that included further investigations, lustration and prosecution of those allegedly involved in assassinations, massacres, land grabs and so forth. It also included specific apologies by the head of state for various atrocities suffered – from the torture and unlawful detention of political dissidents to acts of sexual violence committed by state security agencies during operations and periods of violence, and the state’s sanction of discrimination against women.
The report also called for the implementation of recommendations from previous commissions of inquiry, the fast-tracking of ongoing reforms of state institutions, such as the security services and judiciary, and the enactment of key pieces of legislation.
It also set out extensive guidelines for individual, collective and symbolic reparations. These included a framework for individual compensation, development policies to address the historic marginalisation of certain regions, and the establishment of public memorials to commemorate particular places, events and people.
Finally, the commission recognised how the recommendations of earlier truth commissions and commissions of inquiry had largely been ignored, stressed the mandatory nature of the commission’s recommendations, and set out a clear timeline for their implementation together with detailed guidelines for an implementation and monitoring mechanism.
The report and recommendations are thus wide-ranging, and their dissemination and implementation was always going to be a problem. However, the collective decision of members of parliament to change the Act in 2013 and their failure to discuss the report to date is – at least to me – a further injustice that marks Kenya’s history.
A full copy of the TJRC report as well as transcripts of many of the hearings can be found online courtesy of Prof. Ron Slye – one of the TJRC commissioners. Parts of this article draw directly from Gabrielle Lynch’s book, Performances of Injustice: The politics of truth, justice and reconciliation in Kenya (Cambridge University Press, 2018). Gabrielle is a Professor of Comparative Politics at the University of Warwick in the UK.
Memo to Political Busybodies: There Is No Value Addition in Processing Coffee. It Is a Cockroach Idea
As long as cartels and cockroach ideas rule the roost, coffee farmers will continue to vote with their feet. Because farmers owe themselves an income, be it from bananas or avocados, it does not matter.
Paul Krugman, 2008 economics Nobel Laureate and prolific New York Times columnist narrates how as a young man he went to work for Government and an old hand, presumably a senior government economist, explained to him that their job was mostly about fighting bad ideas. The bad ideas, the old hand went on to explain, are like cockroaches, “No matter how many times you flushed them down the toilet, they keep coming back.”
The idea of value addition is closely related to the concept of agricultural value chains. But many people who talk very forcefully about value addition do not actually understand what a value chain is.
One such cockroach idea is that we are losing money by selling our coffee raw, and we could add a whole lot of value by processing it domestically. I first wrote an Op-Ed on this idea fifteen years ago, I read sometime back that a venturesome cooperative in either Nyeri or Kirinyaga had set up a coffee processing operation but couldn’t sell the product. Someone forgot to tell them that it is at the business end – market entry, product launch marketing, distribution and all that – that the rubber hits the road. Still, hope springs eternal. I have learned that Moses Kuria, the mouthy MP for Gatundu South, has drafted a bill intended to make domestic processing of coffee mandatory.
A supply chain analysis starts with the procurement of raw materials and ends with the delivery of the product to the shelf where the final consumer picks it. A value chain starts at the other end – with the value proposition to the customer – and traces how and where that value is created along the chain all the way back to the raw material
The idea of value addition is closely related to the concept of agricultural value chains. But many people who talk very forcefully about value addition do not actually understand what a value chain is. If they did, they would not be so cocky. More often than not, they are talking about a supply chain. A value chain captures the production-to-market linkages that generate value for the customer. A supply chain captures the processes that transform raw materials or commodities into products.
A supply chain analysis starts with the procurement of raw materials and ends with the delivery of the product to the shelf where the final consumer picks it from. A value chain starts at the other end – with the value proposition to the customer – and traces how and where that value is created along the chain all the way back to the raw material. Value proposition means the characteristics that a consumer likes or prefers about a particular product that makes them choose that product, and even pay a premium over similar or competing products. The value proposition can be price, taste, appearance, durability, convenience, image, or all of these attributes and more.
Consider sneakers. A supply chain view of sneakers will seek to understand the sourcing of raw materials that go into manufacturing sneakers, the logistics of getting these materials to the sweatshops in Asia and elsewhere, volumes, sizes, styles and colours, production cycles, inventory, distribution channels and such like. A value chain analysis will start with why customers are willing to pay three or four times more for their Air Jordans than for generic products or cheaper brands, and work through the chain to see how and where the value is created.
The most expensive coffee in the world is an Indonesian coffee called Kopi Luwak, also known as Cat Poop Coffee. Kopi is coffee, Luwak is the local name for the Asian civet cat. Kopi Luwak is retrieved from the poop of the civets, which eat the cherry but do not digest the beans. A cup of this coffee will set you back anything from $35 to $100 (Sh3,500 to Sh10,000) and $200 to $1,200 (Sh20,000 to Sh120,000) per kilo of beans, about 20 times the price of other premium coffees. If exactly the same coffee bean was processed by human beings as opposed to being pooped by a civet, it would not fetch more than $40 a kilo. In effect, at least 80 per cent of the value of Kopi Luwak is generated by civets.
The Espresso & Coffee Guide lists its top ten coffees of 2019 – in no particular order – as Tanzania Peaberry, Hawaii Kona, Nicaraguan coffee, Sumatra Mandheling, Sulawesi Toraja, Mocha Java, Ethiopian Harrar, Ethiopian Yirgacheffe, Guatemalan Antigua and Kenya AA. Jamaica Blue Mountain gets an honorable mention and Kopi Luwak a dishonorable one. Most other coffee reviews have more or less the same list. The reason that Jamaica Blue Mountain does not make the list is because it is expensive, costing according to the website, double the price of Kona and four times the price of Kenya AA. But the review does acknowledge that Jamaica Blue Mountain is consistently rated as the best coffee in the world. Kopi Luwak gets a thumbs down for the ridiculous price, lack of traceability (i.e. authenticity certification) and animal cruelty reputation issues.
Why is Jamaica Blue Mountain so much more expensive than other comparable coffees? The simple answer is, it’s a matter of taste. Like wine grapes, different climates and soils produce different coffee flavours. Jamaica Blue Mountain is distinctly mellow, East African coffees are more intense, and Asian ones are more spicy but, in the end, the brand premium reflects Jamaica’s success in positioning and marketing its national brand
Homegrounds.co – a coffee e-commerce website whose top ten coffees also overlap with those on the Espresso & Coffee Guide – has Jamaica Blue Mountain as the most expensive, with several offerings retailing at between $50 and $100 a pound (Sh11,000 – Sh22,000 a kilo) and a Central American Geisha from Costa Rica and Panama in the same range at $70 a pound (Sh15,400 a kilo). All the rest, are priced between $18 and $24 (Sh4,000 and Sh5,300) a kilo. Kenya AA is priced at US$20 a pound (Sh4,400 a kilo)
Why is Jamaica Blue Mountain so much more expensive than other comparable coffees? The simple answer is, it’s a matter of taste. Like wine grapes, different climates and soils produce different coffee flavours. Jamaica Blue Mountain is distinctly mellow, East African coffees are more intense, and Asian ones are more spicy but, in the end, the brand premium reflects Jamaica’s success in positioning and marketing its national brand.
What these price differentials are not about is processing. There is no amount of domestic processing of Kenyan coffee that can increase its value from $20 to $50 a pound. Beans and ground coffee generally cost the same. A decent kitchen grinder costs Sh3,000 at the supermarket, cheap ones half that. Moreover, roasting brings shelf life issues into play; raw beans will last well over a year, although they begin deteriorating after six months. Once roasted, coffee is best consumed within 24 hours. Once ground, it loses its freshness within half an hour. Discerning coffee drinkers don’t want stale coffee, and will pay more for coffee roasted as they wait, or for green beans for that delectable treat of serving your dinner guests fresh coffee, roasted right before their eyes. It is of course possible to preserve some freshness by vacuum packing, but supermarket coffee buyers are price not value customers. The import of Moses Kuria’s “value addition” bill is to lock Kenyan coffee out of the value market.
We are then left with the question that, if Kenyan coffee can fetch well over Sh4,000 a kilo, how much of that is the farmer getting? The February 2019 market report from the Nairobi auction – the most recent on the Nairobi Coffee Exchange website – gives prices of $70 and $320 for the low “T” grade and the top grade AA, respectively, and an average of $220 per 50 kg bag. These prices translate respectively to $1.40 (Sh. 140), $6.40 (Sh640) and $4.40 (Sh440) per kilo of clean coffee, meaning that the farmer is getting no more than 10 per cent of the shelf price. It is of course the case that not all Kenyan coffee ends up in the premium market; some ends up in supermarket roast and ground blends – but that does not mean that it is of less value.
I cannot emphasise enough that there is no value addition to speak of that happens between the Kenyan AA bought at the auction at Sh640 a kilo and the Sh4,400 shelf price in the destination market. But even locally, the retail price is on average three times the auction price, The coffee trade has all manner of commercial and technical explanations, but it is hard to see them as anything but self-serving seeing as it is the trade itself that appropriates the premium. The simple answer is: middlemen – a powerful ruthless global cartel politely known as “the trade” (“the craft” would be more apt).
Let’s start with the national brand Kenya AA. You will have noticed that most coffees are named for their geographical origin. Jamaica Blue Mountain is grown on the Blue Mountains range that dominates the Jamaican landscape. Ethiopia has two coffees in our top ten list, Yirgacheffe and Harrar and Indonesia has three: Sumatra, Sulawesi and Java.
But the crux of the problem is the fact that the law denies farmers control over their product. Converting coffee cherries (the ripe fruit that farmers pick) to coffee beans that you can roast at home is a simple process that can be done on the farm manually, even on a small scale.
So, why Kenya AA and not Mt. Kenya Peaberry or Aberdare Ruiru 11? AA refers to bean size, known as screen size. AA are the largest beans.The next size is AB, which in the February market report averaged $4.40 (Sh450) a kilo. In effect, coffee from the same bush can end up having a 30 per cent price difference on account of a one millimeter difference in the size of the bean. The reason for sorting out coffee beans by screen size is roast evenness, that is, to ensure that when beans are roasted, some are not undercooked and others overcooked. Once roasted, the AA beans and the AB beans sold at a discount can be re-mixed, packaged and sold as Kenya AA. These are the “trade secrets.”
But the crux of the problem is the fact that the law denies farmers control over their product. Converting coffee cherries (the ripe fruit that farmers pick) to coffee beans that you can roast at home is a simple process that can be done on the farm manually, even on a small scale. Yet farmers are compelled by law to sell their coffee through the auction, or to appoint members of the trade as marketing agents. Cooperative members lose control of their coffee as soon as they deliver the cherry to their local pulping factory, while those with their own pulping plants lose control after milling (milling entails removing the beans from the husk, and is not very different from hulling maize).
The $100-a-pound Jamaica Blue Mountain offerings come with names like Wallenford, Clifton Mount Estate and such like. These are coffee growers, and such coffees are known as single origin coffees. This is how value is added to coffee – by market segmentation, and positioning single origin brands in different niche markets. Jamaica produces only 8,000 tonnes, and sells 80-90 per cent of it to Japan. Kopi Luwak production is between 500 and 1,000 tonnes a year. The more distinct the coffee and more niche the market, the higher value. The difference between the price of green and roasted beans of a certified single origin Blue Mountain coffee is immaterial.
Fifteen years ago, my colleague Githuku Mwangi, myself and the late Julius Mimano (the man at the helm of Kenya Railways when trains ran on time) who was then chairperson of the Kenya Coffee Growers Association – and coffee farmer par excellence – developed a plan to give control of coffee to the farmers so as to enable them to sell single origin coffees. We did all the homework, including mapping all the growing regions, developing a brand book, and securing the support of the Specialty Coffee Association to implement the specialty coffee certification system. We got many stakeholders behind the initiative but the trade cartel wore us down. A decade and a half later, so called coffee reforms are still going round in circles.
These reforms would have enabled the coffees from the different growing regions to distinguish themselves and find the consumers who have the taste and are willing to pay good money for their coffee. Mt. Kenya coffee might make a name for itself in California, Kisii Highlands coffee in Sweden or somewhere else. If the farmers were to get 70 per cent of the consumer price, the additional cost and risk of roasting, packing and marketing would not be worth taking. On the other hand, as long as the middlemen are in control, processing coffee locally makes no difference for the farmer. Whatever benefits might accrue will still end up with the middleman.
At the peak in the late 80s Kenya produced 130,000 tonnes of coffee. By 2003 when we got involved, production was down to 50,000 tonnes. With our reforms, we estimated we could get it back up to 80,000 in three years, and to 150,000 in a decade, averaging $10 a kilo, which at $1.5 billion in export earnings (Sh150 billion) would have catapulted coffee back to the country’s top foreign exchange earner. We are now down to 40,000 tonnes, earning about 15 per cent of that (Ksh. 23 billion last year).
As long as cartels and cockroach ideas rule the roost, coffee farmers will continue to vote with their feet. Because farmers owe themselves an income, be it from bananas or avocados, it does not matter. They do not owe trade cartels or the Government coffee.
Cloak-And-Dagger Intrigues: An Insider’s Account of Why the TJRC Report Was Delayed
In his book, The Kenyan TJRC: An Outsider’s View from the Inside, Prof. Ronald C. Slye reveals the intrigues that intensified near the date of the TJRC report release in May 2013 and how various top State House mandarins sought to influence the contents of the report.
Sometime in June 2012, I got a call from the Kenyan Truth, Justice and Reconciliation Commission (TJRC) asking if I would be willing to edit the commission’s report, which the caller said was around 1,000 pages long and needed to be edited within a tight deadline of ten days. I told the caller that an important report of that size and significance would require a minimum of one month to edit, if not two months, and that it was impossible for me to edit it in under two weeks. (For those who may not know, editing is not simply a matter of correcting spelling and grammar; it often involves consultation with the author(s) to ensure logic and consistency, and in some cases, to verify facts.) I did not think I could do a professional editing job in such a short period, so I declined the offer.
A few days later, I happened to be in Mombasa when two members of the TJRC’s staff approached me and pleaded with me to take on the editing assignment. I told them that I would, but only on the condition that another editor work with me on the report. They agreed and so I was quickly booked into the Serena Hotel in Mombasa where the TJRC team was temporarily based to put the final touches to the commission’s report.
Upon arrival at the hotel, I was immediately struck by how youthful the TJRC staff were. The majority were born and raised during the Daniel arap Moi era, and I remember wondering if they had the experience and knowledge to understand the extent of the horrors of the injustices and human rights violations that had occurred in Kenya during both Jomo Kenyatta’s and Moi’s regimes.
But what became obvious to me within the first days of my arrival was the cloak-and-dagger atmosphere of the commission. It was clear that many of the commissioners who were staying at the Serena were not comfortable in each other’s presence, and while there was a shared camaraderie between the staff of the commission, there was an air of suspicion about who could or could not be trusted. For example, I was told that every document that I would edit would be password-protected and that I should not leave my computer without logging out as even the waiters and the cleaners in the hotel could not be trusted.
At first I thought that the tense atmosphere was the result of the controversy surrounding the chair of the TJRC, Ambassador Bethuel Kiplagat, who refused to resign despite questions being raised about whether he could be an impartial chairman given that he had been a witness to some of the human rights violations committed during the Moi regime, in which he had held important positions in various capacities. His failure to withdraw from the commission had even led one of the commissioners, Betty Murungi, to resign.
Prof. Slye’s book shows that the request for an extension was not so much due to the staff needing more time to finish the report, but because the political establishment did not want the findings of the report to influence the outcome of the March 2013 presidential elections
However, having read Prof. Ronald C. Slye’s book, The Kenyan TJRC: An Outsider’s View from the Inside, it is now clear to me that something much more sinister was afoot. I had entered the commission at precisely the time when a plot was being hatched to not release the report in 2012, as per the TJRC’s mandate, but the following year – after the 2013 elections to be precise. Indeed, during my stay at the Serena, I was told that what I and my co-editor were editing may not be the final report after all, as the commission would be asking for an extension to complete it. At the time, I thought that asking for a delay in the release of the report was probably a good idea; while many sections of the report were well written, some chapters clearly needed more work, and probably needed to be redrafted.
Prof. Slye’s book shows that the request for an extension was not so much due to the staff needing more time to finish the report, but because the political establishment did not want the findings of the report to influence the outcome of the March 2013 presidential elections. Given the nature of the TJRC report – which sought to gather evidence and make public all the human rights violations and historical injustices committed by Kenya’s ruling elite since independence – it was understandable that many prominent people would not be happy with its contents, and would prefer that the report not be made public. For instance, Uhuru Kenyatta, whose father has been associated with various land-related injustices, would not want such a report to influence his chances of becoming president in 2013, particularly and especially because he was at that time also indicted by the International Criminal Court (ICC) for crimes against humanity committed after the disputed 2007 election.
However, that commissioners appointed to the TJRC (all of whom have impeccable professional credentials) would succumb to political pressure and agree to delete some sections of the report that adversely mentioned the Kenyatta family is something that I did not expect. Slye – a professor of law at Seattle University and one of three foreign commissioners at the TJRC – shows in his book that by the time the commission was finalising its report, several commissioners had already been compromised or had been coerced into taking political sides, and that by the time the report was released in May 2013, chances of the report’s recommendations being implemented were virtually nil. In addition, some of the commissioners were actively colluding with the new government of Uhuru Kenyatta to delay the release of the report.
Prof. Slye says that when he asked some of the other commissioners why they had asked for such a long extension, even though the report was nearly complete by mid-2012, he was told that it was not the commissioners who wanted an extension, but the government of Mwai Kibaki, presumably so that the report would not be released before the 2013 election (which suggests that Kibaki and his cronies did not want the report’s contents to influence that election). Slye believed that this would be counterproductive because “if our report had been released in a timely manner before the [presidential] debates, it would have provided an opportunity for the voices of the thousands of Kenyans we had heard throughout the country to be included in this important national discussion”. In other words, if Kenyans had had a chance to debate and discuss the contents of the report prior to the 2013 election, they might not have been so eager to support an Uhuru presidency.
The government of Jomo Kenyatta’s son, Uhuru, used his powers to cajole, bribe and threaten commissioners and senior staff of the TJRC to have this and other references to his father’s land grabbing removed from the report, including the testimony of Toza
In his book, which was published last year, the law professor reveals the intrigues that intensified near the date of the report’s release in May 2013 and how various top State House mandarins sought to influence the contents of the report, in particular, references to land grabs by Kenya’s first president, Jomo Kenyatta. The Office of the President seemed particularly perturbed by the testimony of a man from Kwale named Toza who claimed that he and his community had lost 250 acres of prime beach land to President Jomo Kenyatta. “The owners of the land were offered the equivalent of US$84 per acre of land, far below the then market value,” writes Slye. “Toza’s father refused the payment and, with other dispossessed residents, unsuccessfully fought to keep the land in the hands of the local community.”
According to Slye, “The government of Jomo Kenyatta’s son, Uhuru, used his powers to cajole, bribe and threaten commissioners and senior staff of the TJRC to have this and other references to his father’s land grabbing removed from the report, including the testimony of Toza.”
Why would Uhuru Kenyatta’s government go to such extraordinary lengths to doctor the report? After all, it is common knowledge that the Kenyatta family became the richest family in the country within just one generation because the patriarch Jomo went on a land-grabbing spree shortly after independence and used his enormous political influence to dispossess people of their land. This narrative is well-documented in various reports, inquiries, books and articles, and as our recent history has shown, has had little impact on the Kenyan electorate, which went on to elect Jomo’s son in the controversial 2013 and 2017 elections, even though the latter was at that time facing charges at the ICC. So why fear the obvious?
Alliance of the Accused
Slye’s book suggests that while the delay in the report’s release probably had to do with the fact that Kibaki did not want the report’s contents to influence the 2013 election, the behind-the-scenes machinations to change the report after Uhuru became president were motivated by a desire to whitewash the new Kenyan presidency. The combined “Alliance of the Accused” between the two ICC indictees, Uhuru Kenyatta and William Ruto, was viewed as “a shift away from accountability and a further entrenchment of impunity in Kenyan politics”. Both Uhuru and Ruto portrayed the election as a “referendum against the ICC”, and so probably did not want the report’s findings and recommendations to influence the ICC’s case against them. (Both cases eventually collapsed due to various reasons.)
This shift in accountability, whereby the electorate voted for candidates not despite the fact that they were indicted by the ICC, but because they were indicted, dramatically changed the political landscape in Kenya. Slye believes that it had a direct effect on the final days of the commission:
“My first indication that something was seriously amiss occurred on May 6  when I happened to visit our printer’s office to check on the status of the production of the report. When I arrived, I found commissioners [Margaret] Shava and [Ahmed Sheikh] Farah standing over our staff and directing which parts of the report to remove concerning the Kenyatta family. When I asked them under what authority they were changing the content of the report, they replied that we had to remove references to Kenyatta, as the matters were considered sub judice.”
This assertion was clearly false as none of the testimonies referring to Kenyatta were before a Kenyan court. In fact, few, if any, of the over 40,000 statements and testimonies gathered by the TJRC, including from families of the victims of the Wagalla massacre and those who were tortured by the state’s security forces, were cases that were being tried by Kenya’s justice system.
All three of the foreign commissioners – Ronald C. Slye from the USA, Berhanu Dinka (now deceased) from Ethiopia, and Gertrude Chawatama from Zambia – then signed a dissent opinion on the land chapter of the 2,000-plus pages of the final report. Part of the dissent statement reads: “With much regret, and after many tireless days of trying to reach a reasonable compromise, we are obligated by our conscience and the oath we took when we joined this Commission, to dissent completely from the amendments made after 3 May 2013 to this chapter in this Volume devoted to Land – Chapter 2 of this Volume B.”
The TJRC website, which carried the final edition of the report, has since been dismantled. The only available online version of the report, including the dissent and other related documents, can be found on Seattle University’s website.
Neither Prof. Slye nor most of the other seven commissioners were present when Ambassador Kiplagat handed over the report to President Uhuru Kenyatta on 21 May 2013. The ceremony was a hurried, low-key affair, which was surprising given that much time and many resources had gone into the commission and its work.
In March 2015, nearly two years after the TJRC report was published, President Uhuru Kenyatta, in his State of the Nation address, made a public apology to all those who had suffered human rights violations and injustices under previous regimes, and promised to establish a 10-billion-shilling fund for those affected. To date it is not clear if these funds have been disbursed to victims or their families.
Meanwhile, the TJRC website, which carried the final edition of the report, has since been dismantled. The only available online version of the report, including the dissent and other related documents, can be found on Seattle University’s website.
As part of his legacy, Uhuru Kenyatta must claim the TJRC report on behalf of all Kenyans, and ensure that its recommendations are fully implemented.
Which goes to show that this government would prefer to erase the report and its findings not just from Kenyans’ memories, but from the public domain as well. This is unfortunate because it was lack of acknowledgement of the atrocities committed by various regimes that had led to the bloodletting of 2007 and 2008. The recognition that historical injustices needed to be addressed eventually resulted in the establishment of the TJRC. By suppressing the TJRC report, and failing to implement its recommendations, the Uhuru Kenyatta government may be laying the foundations for similar violence in the future.
Wounds may heal, but painful memories and resentments can simmer for generations. As part of his legacy, Uhuru Kenyatta must claim the TJRC report on behalf of all Kenyans, and ensure that its recommendations are fully implemented.