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CRONY CAPITALISM AND STATE CAPTURE: The Kenyatta Family story

With business interests in the heart of the Kenyan economy, how has Uhuru Kenyatta’s presidency benefited The Family? Has Kenya benefited from the Kenyattas? DAVID NDII looks at the numbers.

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CRONY CAPITALISM AND STATE CAPTURE: The Kenyatta Family story
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Nothing is more dangerous than the influence of private interests in public affairs, and the abuse of the laws by the government is a less evil than the corruption of the legislator, which is the inevitable sequel to a particular standpoint. In such a case, the State being altered in substance, all reformation becomes impossible. ~ Jean Jacques Rousseau

In November 2013, seven months into Uhuru Kenyatta’s presidency, one of the dailies carried a story profiling what it termed as the Kenyatta family business “expansion drive”. “Uhuru Kenyatta’s presidency” it averred, “has injected fresh energy into his family’s commercial empire, putting a number of units on an expansion mode that is expected to consolidate its position as one of the largest business dynasties in Kenya.” The paper listed interests in hospitality, dairy healthcare, media, banking and construction. The feature went unremarked in public debate. Conflict of interest is not part of Kenya’s political lexicon.

At the time, Brookside Dairy, the family’s flagship business, was completing an acquisition spree that has swallowed up all the large private milk processors leaving only the state supported and erstwhile processing monopoly, Kenya Cooperative Creameries (KCC), and the farmer-owned Githunguri Dairies (owner of the “Fresha” brand) as serious competitors.

The pay-off has been remarkable. During Uhuru Kenyatta’s first term the consumer price of milk increased 67 percent (from KSh 36 to KSh 60 per half-litre packet), while producer prices remained unchanged at KSh 35 per litre), effectively increasing processors’ gross margin by 130 percent (from KSh 37 to KSh 85 per litre). Given the industry’s 400m litre annual throughput and Kenyatta family’s market share, which stands at 45 percent, the consumer squeeze translates to an increase of the Kenyatta Family’s turnover from KSh 13 billion to KSh 22 billion, and gross margin from KSh 6.7 billion to KSh 15 billion a year.

Two years ago, it emerged that the president’s sister and cousin (or niece) had abused procurement reserved for disadvantaged women and youth to supply the health ministry. The company involved was registered after Kenyatta assumed office. The website, which has since been taken down, listed their business as supplying healthcare products, building materials, construction equipment, dry foods and supplementary foods to “government entities, parastatal entities, non-governmental organizations, corporates and counties”. It also advertised investment consultancy and “facilitation” services, also known as influence peddling. The business was set up specifically to profit from Kenyatta’s presidency.

During Uhuru Kenyatta’s first term the consumer price of milk increased 67 percent (from KSh 36 to KSh 60 per half-litre packet), while producer prices remained unchanged at KSh 35 per litre), effectively increasing producers’ gross margin by 130 percent (from KSh 37 to KSh 85 per litre). Given the industry’s 400m litre annual throughput and Kenyatta family’s market share, which stands at 45 percent, the consumer squeeze translates to an increase of the Kenyatta Family’s turnover from KSh 13 billion to KSh 22 billion, and gross margin from KSh 6.7 billion to KSh 15 billion a year.

Koto Housing, associated with Uhuru’s sister and specialising in expanded polysterene (EPS) modular construction technology was cashing in on police housing. No sleuthing is required to establish this— it’s on the company’s website. Since then, the family has established an even bigger EPS building company C-MAX, which also showcases police housing on its website. Instructively, the website also markets “affordable housing” as one of the product lines. Affordable housing is one of Kenyatta’s “big four” agenda.

That the Kenyatta family would set up businesses to trade with the government during his tenure, and have no qualms showcasing government business on their websites, is astounding. But nothing brings home the family’s obliviousness to conflict of interest than its entanglement with the Rai family, the timber and sugar merchants now embroiled in the contaminated sugar import scandal. Parallels have been drawn between Kenyatta’s engagement with Rai and the South African Gupta state capture saga.

Two years ago, it emerged that the president’s sister and cousin (or niece) had abused procurement reserved for disadvantaged women and youth to supply the health ministry. The company involved was registered after Kenyatta assumed office. The website, which has since been taken down, listed their business as supplying healthcare products, building materials, construction equipment, dry foods and supplementary foods to “government entities, parastatal entities, non-governmental organizations, corporates and counties”. It also advertised investment consultancy and “facilitation” services, also known as influence peddling. The business was set up specifically to profit from Kenyatta’s presidency.

Sometime in the early 90s, the Rai siblings sued one of their brothers, Jaswant Rai, alleging that he had secretly been siphoning money from the family business and investing it on his own. They alleged that the money was invested in two Kenyatta Family businesses: Timsales, a timber merchant, and the Commercial Bank of Africa.

Raiply, the Rai family’s flagship plywood manufacturing business came to prominence for what appeared to be a carte blanche license to log public forests during Moi’s tenure. The case confirmed what the public had long suspected: that Moi had a stake in the business. Kabarak Limited, a name synonymous with Moi, had a 1.4 percent stake in Raiply. Moi banned logging of hardwoods from indigenous forests in 1986. According to the task force the Jubilee administration appointed recently, the Kenya Forestry service has continued to give Raiply licenses to log these invaluable forests for plywood.

Sometime in the early 90s, the Rai siblings sued one of their brothers, Jaswant Rai, alleging that he had secretly been siphoning money from the family business and investing it on his own. They alleged that the money was invested in two Kenyatta Family businesses: Timsales, a timber merchant, and the Commercial Bank of Africa.

Rai’s clout in the Jubilee administration became apparent during the disposal of the bankrupt Pan Paper Mills, Kenya’s lone pulp paper mill and a monument to failed import substitution industrialisation. Established in 1971 as a joint venture between the Government and an Indian investor, Pan Paper’s claim to fame is that it has never made a profit, even though during the pre-liberalization era, the Indian investors paid themselves handsomely through transfer pricing, management fees and royalties. Pan Paper collapsed in 2009, was bailed out and reopened by the government in 2010, but it closed down again a year later. A second revival failed.

In 2014, Pan Paper’s receiver managers resigned abruptly, protesting that a powerful hidden hand was manipulating the transaction to ensure that Pan Paper’s assets were sold cheaply to Rai. A new receiver was promptly appointed and the assets, reportedly worth KSh 18 billion were sold to Rai, for KSh 900 million – even less than the Ksh 1 billion the government had injected in the failed revival.

Kenya’s current sugar production according to Kenya National Bureau of Statistics data is in the order of 600,000 tons a year, against a consumption of 830,000 metric tonnes, making for an annual deficit of 230,000 tons. Kenya has been accorded safeguards to protect the domestic sugar industry by COMESA trading partners, but these safeguards dictate that Kenya imports the deficit from COMESA countries. Also, it was the practice, as I remember it, that preference was given to the domestic millers in proportion to their market share.

It has now come to light that mid last year, in the run-up to the election, the government, citing drought, opened the floodgates and allowed all and sundry to import sugar duty free. The KNBS data shows 990,000 tons imported during the year—more than a year’s consumption. To be sure, 376,000 tons, the volume of domestic production, was well below normal, but this translates to a deficit in the order of 450,000 tons – less than half of what was imported. Moreover, it is unclear why duty was waived—sugar withdrawal symptoms are not fatal.

Sugar importation was the Moi era’s default election financing racket. In those days, the racket was a closed shop controlled by a small cabal of Moi’s associates known as the “sugar barons”, not the feeding frenzy we are witnessing today. Jubilee’s dynamic duo may be Moi’s political children but one among the many things they did not learn from him was disciplined corruption. Little wonder that Moi once described them as “ndume hawajakomaa”.

Domestic sugar industry protection in these parts borders on the irrational. Sugar is classified as a “sensitive item” under the EAC’s Common External Tariff, which means it attracts punitive import duties, set at 100% or US$460 a ton, whichever is higher. With sugar currently trading at U$265 a ton on the world market, the applicable rate is US$460, which is effectively an import duty rate of 170 percent. Regular goods are taxed at 0,10 and 25 percent while rates for other sensitive items range from 35 to 60 percent.

Sugar importation was the Moi era’s default election financing racket. In those days, the racket was a closed shop controlled by a small cabal of Moi’s associates known as the “sugar barons”, not the feeding frenzy we are witnessing today. Jubilee’s dynamic duo may be Moi’s political children but one among the many things they did not learn from him was disciplined corruption. Little wonder that Moi once described them as “ndume hawajakomaa”.

But even with the punitive import duty, the landed cost still works out to between KSh 80-85 a kilo, which allowing for distribution costs and trade margins, would still have put sugar on the shelf in the KSh 110 to Ksh 120 range at which it has been selling. In effect, the foregone duty has been pocketed by the importers. For 960,000 tons, we are talking US$ 455 million (KSh 45.5 billion). If the importation had been done by the sugar millers, and at the right quantity, a duty waiver would have translated to revenue in the order of KSh 20 billion – enough, if properly managed, to turn the struggling mills around. Instead, when they most needed the financial cushion, the government let the dogs out.

When the contaminated sugar scandal first broke with a raid on a backstreet operation in Eastleigh (Nairobi’s “Somali Quarter”), with the culprits caught packing the contraband as “Kabras” sugar, it created the impression that this was a crackdown on the Somalia-Kenya border smuggling racket. Kabras is the brand name of the Rai-owned West Kenya Sugar Company. Then, Aden Duale, Jubilee’s motor-mouthed Parliamentary majority leader turned the guns on Rai. This immediately elicited a stern, sanctimonious public statement from West Kenya Sugar. It admitted to importing sugar, but did not disclose how much. It was not long before sugar hoardings popped up in various Rai establishments up and down the country, including Pan Paper.

It has been reported that Rai imported 189,000 tons of sugar, close to a fifth of the total duty free imports last year. The tax benefit to Rai, and loss to the public, for this amount of sugar is in the order of US$86 million (KSh 8.6 billion). We are talking here of the annual budget of an entire county. The sugar itself is worth upwards of US$50 million (KSh 5 billion). Businesses seldom have this kind of cash lying around, so it is most likely that the transaction was bank financed. If so, it would be interesting to know which bank this is.

It is western Kenya’s misfortune that the region was the hub of both the sugar industry and Pan Paper, Kenya’s most disastrous import substitution industries. The people of Webuye, and the larger Western region, have nothing to show for it. A log of wood typically converts to 8000 sheets of A4 paper worth Ksh. 60,000 (US$600). This is about the same as the value of raw timber. The same log converted into furniture will have a final value twenty times that amount (e.g. three dining tables worth KSh 40,000 each) or higher depending on quality. The furniture industry is a relatively low capital requirement, labour intensive industry that would have utilized Webuye’s forest resources for a locally-owned job and wealth-creating industry.

In its lifetime, Pan Paper has consumed 25,000 hectares of public forests — about 600 hectares per year. Pan Paper at its peak employed 1,500 people. A timber-furniture industry cluster utilising the same resource would have created ten times as many jobs, injecting more than Ksh 100 billion a year into the region’s economy.

In a previous column, I posed the question as to what made the leaders of the East Asian Tigers pursue export-led industrialisation going against the dominant development paradigm of the day. I postulated that they did not set out to perform economic miracles, but rather to improve the lot of their people, which led them to the realisation that capital intensive import substitution industries would not create jobs for the masses.

Half a century on, Uhuru Kenyatta, who claims to be inspired by Lee Kuan Yew, is taking the country back to crony capitalist import substitution. In recent months, import tariffs have been raised on timber, vegetable oils and paper products, in all of which the Kenyattas and Rais are players. It was rumored that the Rai purchase of Pan Paper was a Trojan Horse to access public forests for their timber business. The rumour was all but confirmed by the recent appointment of Jaswant Rai to the board of the Kenya Forestry Service. As I opined, “when East Asian leaders were asking prospective investors what they needed to do for them, ours were asking what was in it for them”. Nothing has changed. The “big four” manufacturing pillar is also about profits for Kenyatta & Co. – not about jobs. The president’s bread is buttered on the side of capital, not labour.

Kenyatta’s presidency has increased the profits of his family’s conglomerate by at least Ksh 10 billion a year, and that is not including the side lines of family members’ “tenderprises” such as the sister’s health ministry tenders and the uncle’s NYS fuel supplies. The best-run businesses in competitive markets typically make profits in the order of five percent of turnover. In effect, the presidency translates for the Kenyatta conglomerate the equivalent of a KSh 200 billion turnover business —a business the size of Safaricom (whose hefty earnings are due to inordinate market power).

When East Asian leaders were asking prospective investors what they needed to do for them, ours were asking what was in it for them. Nothing has changed. The “big four” manufacturing pillar is also about profits for Kenyatta & Co. – not about jobs. The president’s bread is buttered on the side of capital, not labour.

It should not surprise then that no expense has been spared, no price has been too high not only to keep Uhuru Kenyatta in power, but also to roll back the constitutional dispensation and restore to the presidency the unfettered power on which the family fortune rests.

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David Ndii

David Ndii is one of Kenya's leading economists and public intellectuals.

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Beyond Smoke and Mirrors: Why Kenyans Need to Pay Closer Attention to the IEBC, Census 2019 and Building the Bridges Initiative

If both Parliament and these nascent movements fail to forestall the efforts of the ‘system’, it is certain to use the Chebukati report, the boundary demarcation process, the population census and the Building Bridges Initiative to entrench itself and it will be interesting to see how the ‘hustlers’ respond to this direct challenge to their ‘turn to eat’.

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Beyond Smokes and Mirrors: Why Kenyans Need to Pay Closer Attention to the IEBC, Census 2019 and Building the Bridges Initiative
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Even as the state-controlled media holds us in thrall to the charade that is the war on corruption, preparations are underway to fundamentally change Kenya’s political system. The weekly reports of corruption are overwhelming and it is a challenge to keep track of who has said what and who has allegedly been grilled by investigators. What is clear is that a game of politics is being played, a game that is likely to go on until it is time to hold elections or a referendum to entrench vested interests. This is why I will instead focus on the self-congratulatory post-election evaluation report issued by the Independent Electoral and Boundaries Commission (IEBC), the preparations for the population census and demarcation of electoral boundaries, and what the so-called Building Bridges Initiative has up its sleeve. These three issues will have a more profound effect on our lives beyond the game of smoke and mirrors that is the war on corruption.

Even as the state-controlled media holds us in thrall to the charade that is the war on corruption, preparations are underway to fundamentally change Kenya’s political system

Let us turn to IEBC Chairman Wafula Chebukati’s 280-page report. If you have the patience to read through the 186 pages (the rest are annexes), you will be struck by how tone-deaf and dry it is. It describes an election process that was almost flawless and fails to capture the toll, both financial and emotional, that it took on the Kenyan people. Reading the report alongside that of the Parliamentary Accounts Committee (PAC), which basically indicts the entire IEBC leadership, is astounding. It reads even more bizarrely in the light of the end of assignment report submitted by former Commissioner Roselyn Akombe upon her resignation from the IEBC.

One would have expected that, during an election year in which election officials were murdered, the Chairman would pay tribute to his staff. The Chebukati report makes no reference to the murder of Chris Msando, a senior IEBC manager, or to any of the staff killed or injured, particularly in the period preceding the 26 October 2017 repeat presidential election. It is as though the murder, intimidation and threats against staff, including against the Chairman himself, did not take place.

Reading the report alongside that of the Parliamentary Accounts Committee (PAC), which basically indicts the entire IEBC leadership, is astounding. It reads even more bizarrely in the light of the end of assignment report submitted by former Commissioner Roselyn Akombe upon her resignation from the IEBC.

In a chapter dedicated to electoral security, there is no reference to the threats and intimidation visited upon IEBC staff by both Jubilee and NASA. The report instead dwells on details of a project funded by the United Nations (UN) to support police deployment, the very forces accused of violence against voters. The IEBC postponed and eventually never held presidential polls in Homa Bay, Migori, Kisumu and Siaya counties, citing insecurity. There were numerous reports of polling officials in these counties having been threatened and even seriously injured.

If the Commission can sweep under the carpet issues of safety and security, why should we believe anything else it says in the report?

The report’s section on the use of information technology is even more disturbing. The Commission paints a picture of full compliance with the law in this area and identifies only two challenges: “inadequate time to procure, install, test, and commission technology due to late enactment of laws by parliament” and “lack of regulations to govern the scrutiny of election technology during petition proceedings.” The PAC report is much more detailed and transparent in its evaluation of the Commission’s performance on ICT. It shows, as does former Commissioner Akombe’s report, the intrigues behind the procurement of the Kenya Integrated Elections Management System (KIEMS). The technology was deliberately sabotaged to benefit one party with the full knowledge and connivance of the IEBC and the selection of OT-Morpho to supply the technology was orchestrated by powerful state actors while some of the consultants provided by the UN to work with OT-Morpho were affiliated to the Jubilee Party. The murder of Chris Msando was pre-meditated and it had the desired effect. That the Chebukati report completely avoids reference to these issues – among many others – while presenting the IEBC as the victim, only serves to remind us of the wrongs committed by the IEBC against this country.

The Commission paints a picture of full compliance with the law in this area and identifies only two challenges: “inadequate time to procure, install, test, and commission technology due to late enactment of laws by parliament” and “lack of regulations to govern the scrutiny of election technology during petition proceedings

The forward by the Chairman is even more revealing of the inability of the Commission to honestly reflect upon its failures. The Chairman describes the 8 August 2017 election thus: “the Commission eventually conducted the August 8th General Election within the prescribed legal framework.” This is despite the fact that the Supreme Court annulled the presidential result, which Chebukati describes as “a season of mixed fortunes.”

It is difficult to comprehend how a person qualified to serve as a judge of the Supreme Court could refer to a historic annulment of a presidential vote as “mixed fortunes.” This is the same person who agonised over the release of the election results after informing the press that he could neither confirm nor deny reports that IEBC servers had been hacked. The entire report reads in the same flat manner, mechanically detailing tasks undertaken by each directorate and – with the exception of legal reforms – putting forward underwhelming recommendations.

One may wonder why we should pay attention to the Chebukati report but it is precisely because of its links to the population census/electoral boundary demarcations exercise and the Building Bridges Initiative that we should.

The Chairman describes the 8 August 2017 election thus: “the Commission eventually conducted the August 8th General Election within the prescribed legal framework.” This is despite the fact that the Supreme Court annulled the presidential result, which Chebukati describes as “a season of mixed fortunes.”

Despite the questions raised regarding the legitimacy of the Commission (only three of the requisite seven members remain and it is without gender parity, a constitutional requirement), it is business as usual over at the IEBC. The report is an affirmation that the ‘system’ is intact and ready to move on, that the IEBC has evaluated itself and found itself worthy of undertaking any major task placed before it. Chebukati says that the “Commission will also engrain the successes of the 8th August General Election and the 26th October Fresh Presidential Election.” The Commission seems to exist in a different universe where it alone could consider the 2017 General Election to have been successful. The Commission has signaled that it is ready to bury the past, together with all the questions that remain unanswered, and develop “concrete strategies that will assuage, if not cure, the missteps that may have been evident in the grand match towards a widely accepted election outcome.” This means that the Commission can now tackle the next item on the electoral calendar, the border demarcation process.

The game of politics has many tricks the most common of which is gerrymandering, the act of manipulating boundaries to benefit a political party or politician. Chebukati is now perceived as the safe pair of hands that can handle the gerrymandering. If he ever did have a moral compass, he lost it when he presided over the 26 October 2017 presidential election. He and his team are now fully initiated members of the system. Once an outsider, he has now joined the camp of Commissioners Molu Boya and Abdi Yakub Guliye and as one official who has witnessed the contempt with which both Guliye and Boya previously held Chebukati remarked, “they seem to have found a formula which works for them.”

The formula in question is the willingness to serve the system and the whims of those in power. The boundary demarcation exercise will predictably be used as another tool to manage the new bogeyman, the Deputy President. With the population census fully in the hands of the three Commissioners, we should expect the return of the ‘tyranny of numbers’ narrative. We should expect that those parts of the country with a historically low birth rate will experience miraculous increases in their population while others will magically have higher death rates and lower numbers of new births since the last census. The ‘system’ will work closely with the Chebukati team to manipulate the boundaries to benefit those who have a vested interest in maintaining their political and economic hold on the country.

The second significance of the Chebukati report lies in the ongoing debate on constitutional and legal reforms. Anybody who has followed political processes in Africa knows that these documents come in handy when one wants to change the constitution. Chebukati has served his masters well once again by providing in his report arguments which could be used to amend certain laws. The report is likely to be used as a source of inspiration by the Building Bridges Initiative. The report even provides a timeline for legal reforms which “… should be carried out at least two years to the election”, meaning that those planning a referendum need to hold it now or next year at the very latest.

The legal reforms proposed by the Commission go beyond electoral law amendments to include constitutional issues such as the electoral cycle. The report attempts to disingenuously insinuate itself into the debate on whether there are too many electoral positions without providing sufficient argument or data. It suggests that the electoral law should be amended to allow the holding of county and national elections on different dates, without providing any explanations beyond citing the fatigue of poll workers.

There are initiatives by members of parliament which could scuttle the processes set up so far by the ‘system’ but it is unclear if there is sufficient parliamentary momentum for their success.

All these are deliberate ploys by the Commission to anchor the report of the Building Bridges Initiative team to this “broadly consulted” post-election review. There are reports that the Building Bridges Initiative team is also finalising consultations. We have all too often seen predetermined recommendations emerge from purported view seeking exercises among Kenyans. At any rate, Rt. Hon. Raila Odinga has already outlined the key elements to be expected in that report, as a precursor to the referendum. The ground is being prepared for the dynasties to protect their economic and political interests and for the hustlers to defend their loot.

The big question is what the rest of the population will do. Will we tug along and play victim later? Will we try to avoid treading on the path laid out before us by ‘the men from the shadows’ as John Githongo calls them? This is still unclear.

There are initiatives by members of parliament which could scuttle the processes set up so far by the ‘system’ but it is unclear if there is sufficient parliamentary momentum for their success. Hon. Peter Kaluma has proposed reverting to the 1997 Inter-Parties Parliamentary Group (IPPG) model where political parties nominate Commissioners. This would mean changing the current composition of the IEBC, potentially delaying a referendum or even the boundary demarcation exercise if the selection process is protracted. Senate Majority Leader Kipchumba Murkomen is proposing changes to the Elections Act where parliament, rather than the IEBC, would have the final say on boundaries. Meanwhile, the cross-party PAC report recommends the immediate departure and prosecution of the current Commissioners.

However, all these processes would require parliamentary approval, not an easy task in the current political climate. With the Jubilee Party infighting, it is not clear if it will be possible to marshal enough votes and the situation is no clearer in the NASA camp although it is difficult to imagine ODM party members defying Rt. Hon. Raila Odinga, lest they face his wrath as Malindi Member of Parliament, Hon. Aisha Jumwa recently did. As one friend remarked, “Baba is confident that Chebukati will deliver the referendum and presidential election for him.” It is also unlikely that the cross-party PAC report will have its day in parliament unless, of course, those at the helm of the Building Bridges Initiative determine that it is in their interest to implement the recommended changes.

The solution could be found away from parliament. There are media reports of civilians organising themselves around the Red Vests Revolution, Beyond Zero Corruption and Kenya Tuitakayo movements. Many of these groups appear to have been inspired by the French Yellow Vests protests and the ongoing protests in Algeria and Sudan. These faceless movements, if they are to have any impact, need to organise differently and focus on the issues that will galvanise the population. There is the likelihood that the State will find a way to silence these voices, but this should only serve to strengthen the resolve of those involved.

If both Parliament and these nascent movements fail to forestall the efforts of the ‘system’, it is certain to use the Chebukati report, the boundary demarcation process, the population census and the Building Bridges Initiative to entrench itself and it will be interesting to see how the ‘hustlers’ respond to this direct challenge to their ‘turn to eat’. Until then we can only expect another post-election or post-referendum report that glosses over issues and presents the illusion of a flawless electoral process that is unrecognisable to the country’s citizens.

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“We Have Nothing to Eat”: Further Reflections on the Famine in Turkana and the Government’s Food Security Policies

Famine in Turkana and other Kenyan counties may not have yet caught the attention of the international media, but domestic dissatisfaction with the famine response may force the government to alter its food security policies. The more likely scenario, however, is that this government will, like most Kenyans, pray for the rains, and hope that the food crisis will go away all on its own.

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“We Have Nothing to Eat”: Further Reflections on the Famine in Turkana and the Government’s Food Security Policies
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Images in the Kenyan media of starving people in Turkana County have left many rich and middle class urban Kenyans as shocked as they were in 2011 when a declaration of famine prompted individuals and corporates such as Safaricom and the Kenya Commercial Bank to raise a whopping Sh700 million ($7 million) towards the famine relief effort in Kenya’s arid and semi-arid northern territories. Led by media and corporate celebrities, the Kenyans for Kenya campaign was touted as a sterling example of Kenyans’ self-help (harambee) spirit that did not rely on foreign aid to fix internal problems. (How the funds raised were used, and whether they were successful in averting future famines is debateable, and perhaps the subject of further investigation.)

Images in the Kenyan media of starving people in Turkana County have left many rich and middle class urban Kenyans as shocked as they were in 2011 when a declaration of famine prompted individuals and corporates such as Safaricom and the Kenya Commercial Bank to raise a whopping Sh700 million ($7 million) towards the famine relief effort in Kenya’s arid and semi-arid northern territories.

However, unlike in 2011, there has been no outpouring of largesse from ordinary Kenyans towards the relief effort. Moreover, government officials have been reluctant to declare a disaster, with politicians citing various reasons for the deaths reported in Turkana, ranging from sickness to climate change. When deaths were reported in Baringo County, the deputy president said they were “fake news”. Meanwhile, the head of state has not said a word about the looming catastrophe.

The recognition by some government officials that hundreds of thousands of people in the country might not have enough food has laid bare the gross inequalities that have defined the Kenyan state since independence – devolution notwithstanding – and has brought to the fore the fact that Kenya is still a deeply divided country economically and socially, a fact that Jubilee mandarins are reluctant to acknowledge

The current famine in Turkana and in several other Kenyan counties is perplexing at various levels. Firstly, it is happening at a time when the Jubilee government is congratulating itself for taking Kenya into the digital 21st century and for carrying out a very expensive Sh400 billion ($4 billion) Big Four agenda that includes improving food security.

Secondly, the recognition by some government officials that hundreds of thousands of people in the country might not have enough food has laid bare the gross inequalities that have defined the Kenyan state since independence – devolution notwithstanding – and has brought to the fore the fact that Kenya is still a deeply divided country economically and socially, a fact that Jubilee mandarins are reluctant to acknowledge. It is not lost on many people that while granaries in some parts of the country are overflowing with maize, other parts have no food to eat.

The famine has underscored the fact that there are many parts of this country where people are eking out a hand-to-mouth existence in regions where lack of infrastructure and basic services have exiled communities that are difficult to reach during a crisis

Thirdly, the famine has become evidence of yet another embarrassing scorecard of failed national and county government projects, including non-performing irrigation schemes, non-existent dams and gross neglect of the agriculture sector – all the result of theft or mismanagement of project funds.

Fourthly, the famine has underscored the fact that there are many parts of this country where people are eking out a hand-to-mouth existence in regions where lack of infrastructure and basic services have exiled communities that are difficult to reach during a crisis. After all, droughts do not automatically lead to famine; the recent droughts in the west coast of the United States, for example, did not result in people dying due to hunger. Famine usually means that people cannot afford to buy food, that the food they rely on for sustenance is not available or that the food cannot adequately reach the starving.

The government’s ambivalence towards the food insecurity situation is understandable. Declaring a famine is no easy choice for a government. It is deeply embarrassing for any government to announce a famine because it is an acknowledgement that the government has failed to make the country food secure. Essentially it says that the government not only failed to prevent the famine, but also did not prepare for it, suggesting a lack of leadership in disaster preparedness. Secondly, a declaration of famine in a poor country usually unleashes an international famine relief effort – and no self-respecting government would like to admit that foreign donors and NGOs should do what it should be doing, i.e. making sure that all its citizens have enough food to eat.

Misguided policies and poor governance

I do not know much about Turkana, having never visited the area. To me, it has always seemed like a remote part of the country that is difficult to access. Stories of three-day trips on very bad roads and scary rides to Lodwar on very tiny planes put me off visiting a place that has attracted more humanitarian workers and NGOs than government officials, thanks to the Kakuma refugee camp bordering strife-torn southern Sudan and the Lokichoggio Airport (popularly known as “Loki” among the international NGO and foreign correspondent set) that served as a logistics hub for organisations that used to support rebel movements in Sudan.

The fact that Turkana County attracted the second largest share of devolved funds (after Nairobi) in 2015/2016 has not increased its fortunes. The discovery of oil in the region and images of a stunningly beautiful Lake Turkana have also not made the region more attractive to the vast majority of Kenyans. For people like me, Turkana will for a long time remain the Great Unknown – like north-eastern Kenya and other parts of the country that have remained so marginalised that most Kenyans see the pastoralist people and communities living there as aliens. Our outpouring of sympathy during famines in Turkana is akin to the compassion a Londoner might feel for the emaciated African child he sees in TV commercials by organisations such as Save the Children – shock followed by a small donation. It is embarrassing to think that others might be starving while we gorge ourselves on Kentucky Fried Chicken and pizzas. Forget the fact that most famines are man-made and the result of bad politics and poor governance, not food scarcity.

Alex de Waal, author of Famine Crimes: Politics and the Disaster Relief Industry in Africa, shows that in every known case of famine across the world, a breakdown of democratic institutions and lack of freedoms – particularly the right to criticise, publish and vote – have been key reasons for large-scale deaths during a famine.

Deliberate government neglect of a region, censorship of the press and misguided policies have also exacerbated food crises. The 1958 famine in China, for instance, was the direct result of Chairman Mao’s “Great Leap Forward” that resulted in the collectivisation of agriculture. The large death toll during the 1943 famine in Bengal, India, was the direct result of the British colonial government’s reluctance to take responsibility for famine relief in its most prized colony. The recurrent famines in Somalia can also be attributed to the breakdown of governance structures and the collapse of farming communities, many of which were massacred or forcibly removed by militias during the country’s civil war.

Countries that successfully deal with a potential famine or food security crises often do so to avert a political crisis. The rising cost of food and other commodities has been the reason for protests in many countries (including in Sudan recently) and many governments respond quickly to the mounting crises in case they lead to full-blown rebellion. Keeping the cost of food low to keep citizens happy is also the reason why European countries and the United States heavily subsidise their farmers.

De Waal shows how in 1985, when the Kenyan government was facing a huge national food deficit, President Daniel arap Moi made a decision to import food commercially, reversing a 1983 policy, and thereby averting a food crisis. Although foreign donors were contributing to the relief effort, Moi took no chances; he knew that a food crisis could provoke dissent against his repressive regime, and he was not willing to risk that happening. Food insecurity is often an indicator of poor governance and can often lead to riots and political unrest. Keeping citizens fed is, after all, a primary responsibility of governments; those that fail to do so risk being overthrown, a fact that Moi was acutely aware of.

Moi then turned the crisis into an opportunity by installing a network of political patronage linked to food supply and distribution. The National Cereals and Produce Board (NCPD) became highly politicised and was used to break the power of farmers’ associations and cooperatives, especially in opposition strongholds.

“Senior government officials benefitted both politically and commercially from the monopolistic position of the NCPD,” says de Waal. Cartels in the NCPD and lack of adequate distribution networks made food distribution and supply more politicised. When people died in a famine, the government attributed it to the “backwardness” of local communities, not to the fact that food distribution had become a goody that depended on the whims of Moi’s lackeys on the board.

Moi also used the food shortage crisis as an excuse to postpone critical reforms in the agriculture sector. In his paper, “Markets, Civil Society and Democracy in Kenya”, published in 1992 by the Nordic Africa Institute, Peter Gibbon explains how Moi’s system of ethnicised politics and political patronage worked (and, sadly, continues to work to this day):

“The grain crises…were used as an excuse for appointing a large number of inefficient cooperatives in Luyha areas as agents for the NCPD to the benefit of certain Luhya populist politicians. It was also used to break the power of the Kenyan Farmers’ Association, the main base of the politicians in the Rift Valley independent of Moi. It was thirdly used to consolidate the bases of Moi’s ‘home area’ allies in Nandi by tripling the number of NCPD employees there and increasing farmgate prices to uneconomic levels. Finally, the cost of this predation was transferred to the coffee and dairy farmers in Kikuyu areas, who were forced to transfer the savings accounts of their cooperatives to the Cooperative Bank, which had run up large losses in covering the NCPD’s grain purchases.”

The Mwai Kibaki government that succeeded Moi’s did try to reverse the damage Moi had inflicted on the agriculture sector, but the sector has still not fully recovered from short-sighted policies that sacrificed productivity at the altar of loyalty to the government in power.

To their credit, all Kenyan governments have tried to avoid going the international food aid route to address food insecurity.

The internationalisation of famine relief

To their credit, all Kenyan governments have tried to avoid going the international food aid route to address food insecurity. Though foreign aid is welcomed, the country has generally been reluctant to be part of massive international campaigns that have accompanied famine in places like Ethiopia and Somalia – perhaps because Kenya likes to view itself as the economic powerhouse of the region, not a basket case dependent on foreign aid.

This is a good policy because when international humanitarian agencies come in to provide food to starving people, bad governments are let off the hook, and are allowed to continue with their bad policies that can lead to more famines in the future. “Internationalising” the responsibility of food security to UN institutions, international NGOs and foreign governments makes practically everyone across the globe a stakeholder in famine relief.

“The process of internationalisation is the key to the appropriation of power by international institutions and the retreat from domestic accountability in famine-vulnerable countries,” says de Waal. He says that reliance on international humanitarian organisations has led to the “internationalisation” of famine relief. Governments of poor countries are thus no longer solely responsible for the food security of their citizens; this task has been appropriated by what he calls the “disaster industry” or “humanitarianism international”.

The appropriation of what should ideally be a government’s key responsibility makes governments of aid-receiving countries less accountable to their own citizens. Moreover, when a famine strikes and large numbers of people die, governments can easily blame the lack of foreign aid for the deaths, not poor governance on their part or their failure to put in place systems and programmes that could have prevented the famine in the first place.

Officials of international and local NGOs and UN agencies, like their government counterparts, are also not immune to corruption. “Somebody always gets rich off a famine,” Michael Maren, a former food aid monitor in Somalia, told Might Magazine in 1997. When he was in charge of monitoring food aid donated by the US government to refugees fleeing the Ogaden war of 1977/78, he found that about two-thirds of the food went missing. Trucks would arrive at the Mogadishu port, collect the food and disappear, never to be found again. Even when food arrived at the refugee camps, much of it would be stolen. (Given the track record of Jubilee government officials, it is likely that some of the food donated by the government to Turkana’s starving will also disappear.)

Food aid thus becomes a profitable source of income for criminal elements. Maren believes that international aid not only sustained Siad Barre’s dictatorial regime but also facilitated the dismantling of Somali society. In his book, The Road to Hell: The Ravaging Effects of Foreign Aid and International Charity, he quotes a former civil servant working for Somalia’s National Refugee Commission who told him that traditionally Somalis never relied on food aid, even during droughts. There was a credit system: the nomads would come to urban areas and take loans that they would pay back when times were good. Nomads and agriculturalists also shared natural resources. Aid essentially destroyed a centuries-old system that built resilience and sustained communities during periods of hardship. The former civil servant blamed foreign aid for the distortions in Somali society, not the Somalis who responded to the distortions.

Moreover, the international response to famine is more often than not technical, rather than political, with a whole range of experts, from nutritionists to statisticians, brought in to assess the scale of the famine and to offer solutions. Yet, recurrent famines often require a long-term political solution, which is much harder to achieve.

As de Waal emphasises, famine is both a technical and political challenge. Effective prevention and relief measures require a long-term vision, sound planning (based on sound data and research) and good management devoid of corruption, all of which are key elements of good economic policies, which are sorely lacking in the current Kenyan government.

Famine in Turkana and other Kenyan counties may not have yet caught the attention of the international media, but domestic dissatisfaction with the famine response may force the government to alter its food security policies. The more likely scenario, however, is that this government will, like most Kenyans, pray for the rains, and hope that the food crisis will go away all on its own.

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The Dam Has Broken. Time to Call Jubilee Plunder What It Is

To budget anything from a quarter to a third of the country’s annual GDP for stealing — to then borrow it, steal it, feign outrage, compromise parliament, and diffuse public anger with ineffectual corruption investigations, again and again and again – defies corruption. It is a crime against humanity.

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The Dam Has Broken. Time to Call Jubilee Plunder What It Is
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The debut of this column in the E Review grappled with the Jubilee administration’s profligate spending. As it happens, dams were one of the big red flags that popped up. Records show that during its first term, the Jubilee administration spent upwards of KSh 160 billion on water and irrigation projects. These Arror and Kimwarer dams are costed at KSh 51 billion — let us say KSh 26 billion on average. The KSh 160 billion spent works out to at least six of these dams completed, or alternatively at least double that number under construction. And KSh 26 billion is a huge amount of money for a dam. Thika Dam, commonly known as Ndaka-ini, our biggest reservoir for drinking water to date, cost US$80 million in the early `90s, equivalent of US$140m (i.e. adjusted for dollar inflation) or KSh 14 billion today. These dam budgets are telling us that the cost of building dams has doubled in dollar terms, or that we are building infinitely grander dams. Neither is the case.

We now know for sure that there were no dams built. This mindless plunder is replicated in virtually every sector. The budget records show KSh 280 billion on power transmission lines, enough for 6,000 kilometres of 400 Kv lines (based on the cost of Marsabit-Suswa line), but information posted by KETRACO, the agency responsible for building them, shows only 2800 km of lines under construction, whose total cost is at most KSh 100 billion. We are talking KSh 180 billion missing, an amount, I should add, of the same order of magnitude as the Eurobond money that the Auditor General could not find.

Overall, records show that KSh 2.5 trillion went through the development budget during Jubilee’s first term. The biggest ticket item here is the SGR railway which cost KSh 350 billion. The remaining KSh 2.15 trillion works out to KSh 45 billion worth of development projects per county. The money available to county governments over the same period would have enabled expenditure on average of KSh 6 billion on development projects. In effect, we should be seeing six times more national government development projects in each county as county government ones.

We now know for sure that there were no dams built. This mindless plunder is replicated in virtually every sector. The budget records show KSh 280 billion on power transmission lines, enough for 6,000 kilometres of 400 Kv lines …but information posted by KETRACO, the agency responsible for building them, shows only 2800 km of lines under construction, whose total cost is KSh 100 billion. We are talking KSh 180 billion missing, an amount, of the same order of magnitude as the Eurobond money that the Auditor General could not find.

Makueni county built a 200-bed Mother and Child hospital for a princely sum of Ksh. 135m. Kibra MP Ken Okoth built and equipped a girl’s secondary school that’s been all the rage for Ksh. 48m. A hospital like Makueni’s in every county is KSh 6.4 billion; a girls school like Kibra’s in every constituency, KSh 14 billion. Both combined add up to just over KSh 20 billion — about the money that has already been spent on the ghost dam projects. If national government has spent KSh 45 billion per county on development projects these two projects would not be the talk of the country. There would be the equivalent of 300 Mother and Child hospitals in every county or alternately, 150 Kibra girls schools in every constituency.

Galana-Kulalu Irrigation project is on its death-bed. It is not yet known how much money has gone down that drain. One senior Jubilee official said to me that it is their Goldenberg, to which I quipped that the competition for that dubious appellation would be strong. The last mile connectivity project was one of Jubilees flagship projects: over 800,000 connections are dormant. The connected households have never switched on the power. This should not surprise. Most of these households cannot afford electrical appliances other than a few lightbulbs that they would use only for three or four hours a day. It would have been infinitely more sensible and cost effective to mandate the Rural Electrification Authority to serve these rural hamlets with micro-grids and stand-alone domestic solar installations. The Kenya Power and Lighting Company (KPLC) is now weighed down with the costs of maintaining these loss-making connections. These costs have to be passed on to consumers. And this is over and above the costs of carrying the excess generation capacity courtesy of the equally hare-brained if-we-build-it-they will come 5000 MW drive that has now been abandoned. It has been a long climb for KPLC to recover from the plunder of the Moi regime.

Makueni County built a 200-bed Mother and Child hospital for the princely sum of KSh 135 million. Kibra MP Ken Okoth built and equipped a girl’s secondary school that’s been all the rage for KSh 48 million. A hospital like Makueni’s in every county is KSh 6.4 billion; a girls school like Kibra’s in every constituency, KSh 14 billion. Both combined add up to just over KSh 20 billion — about the money that has already been spent on the ghost dam projects.

This week, we have been entertained by the mysterious disappearance of 51 million litres of aviation fuel worth KSh 5 billion from the tanks of the Kenya Pipeline Company. This follows from a report that KPC lost 23 million litres worth Ksh 2.3 billion in 15 months. Even for the KPC, historically one of the most profitable and cash-rich public enterprises, a KSh 7 billion hole is a crippling loss. When Jubilee took over, the project on the table was to upgrade the 14-inch pipeline with a 16-inch one at a cost of KSh 16 billion. Jubilee scaled this up to a 20-inch one at a cost of KSh 48 billion, three times the mooted cost. The pipeline was to be completed in 18 months — by 2016 that is. Costs have escalated, and it is still not complete. It has been reported that the corruption investigation in KPC covers 27 projects worth KSh 95 billion. Most of this money is expensive foreign commercial loans. It’s hard to see how KPC can remain solvent. We are looking at another black hole here of the same order of magnitude as Kenya Airways, if not bigger.

The mother of all Jubilee financial blackholes is indisputably the SGR. According to Compass International, an engineering and construction consultancy, the benchmark cost for a new single-track high speed rail at between US$997,000 and US$ 1.13m per km, plus cost of signaling infrastructure at between US$154,700 and US$189,000 for a total of US$1.15 million to US$1.3 million The SGR is not an electrified high-speed rail, but we paid $6.7m per km, five times the high end of the benchmarking cost.

Galana-Kulalu Irrigation project is on its death-bed. It is not yet known how much money has gone down that drain. One senior Jubilee official said to me that it is their Goldenberg, to which I quipped that the competition for that dubious appellation would be strong.

After years of denial, a government task force has established that the SGR is not viable. The SGR was sold on bringing down the cost, and improving the efficiency, of freight. According to the said task force, the SGR has increased the cost of transporting a 20-foot container by 118 percent, from $650 (Ksh. 65,000) by road, to US$1,420 (Ksh. 142,000) and by 149 percent for a 40-foot container from $850 (Ksh. 85,000) to US $2,120 (Ksh. 212,000).

There are two components in this cost escalation. First, the SGR tariff is set to try and repay the loans. Even then, the SGR is yet to cover operating costs, let alone generate an operating surplus that can service debt. Secondly, the SGR has introduced additional costs notably “last mile” cost of transporting containers from the railway terminal to the owners premises, as opposed to trucking which is port-to-door, as well as additional container handling logistics. These challenges of integrating rail and seaport are universal, and are part of the reason why the rail share of freight in the EU has declined from over 40 percent in the 70s to less than 20 percent today.

Even for the Kenya Pipeline Company, one of the most profitable and cash-rich public enterprises, a KSh 7 billion hole is a crippling loss. When Jubilee took over, the project…to upgrade the 14-inch pipeline with a 16-inch one at a cost of KSh 16 billion. Jubilee scaled this up to a 20-inch one at a cost of KSh 48 billion, three times the mooted cost. The pipeline was to be completed in 18 months – by 2016 that is. Costs have escalated, and it is still not complete.

The long and short of it is that SGR is increasingly demonstrating what this columnist and others have maintained from the outset— that it is a white elephant. Without being forced, people would not use it. And if it were to charge a competitive tariff, it is doubtful that it would keep the trains running, let alone service its debt. I have opined before that the least costly option may be to mothball it, seeing as the debt will be paid by the taxpayer, we should not be made to pay four times namely, the debt, operational subsidy, higher freight cost and trucking industry jobs and incomes. The next best thing is to take over the debt, cancel the Chinese management contract and leave it to swim or sink in the market place under the management of Kenya Railways. The only beneficiary of this project is China. It is doubtful that the Jubilee administration can muster the resolve to bite the bullet on this one. So we will continue to bleed.

After years of denial, a government task force has established that the SGR is not viable. The SGR was sold on bringing down the cost, and improving the efficiency, of freight. According to the said task force, the SGR has increased the cost of transporting a 20-foot container by 118 percent, from $650 (Ksh. 65,000) by road, to US$1,420 (Ksh. 142,000) and by 149 percent for a 40-foot container from $850 (Ksh. 85,000) to US $2,120 (Ksh. 212,000).

This is Uhuru Kenyatta’s legacy as it now stands. Mindless plunder and worthless vanity projects—a US$ 25 billion (Sh. 2.5 trillion) hole in the economy and counting, and contingent liabilities, financial booby traps if you like, Kenya Airways, Kenya Pipeline, Kenya Power and others we don’t know of yet, that could go off at any minute.

This is Uhuru Kenyatta’s legacy as it now stands. Mindless plunder and worthless vanity projects—a US$ 25 billion (Sh. 2.5 trillion) hole in the economy and counting.

The penny is beginning to drop, and sections of the regime are now beginning to talk about a turn-around strategy that can salvage the President something of an economic legacy. They have their work cut out. Economic crises of this nature are not solved by the same people who created them. Ethiopia’s EPDRF government came to this realisation about a year ago. Ethiopia was headed for a revolution such as unfolding next door in Sudan. Former Prime Minister Hailemariam Desalegn has recently intimated that he resigned to make it easier for the regime to reform. So far, the bet on a leadership change is paying off, even though the new Prime Minister’s magic touch is yet to be tested on the inevitable painful economic reforms. The political honeymoon also appears to be ending.

The penny is beginning to drop, and sections of the regime are now beginning to talk about a turn-around strategy that can salvage the President something of an economic legacy. They have their work cut out. Economic crises of this nature are not solved by the same people who created them.

The rapprochement between Kenyatta and Raila Odinga a year ago, popularly known as the “handshake” offered an opportunity to engineer something similar. But as soon as they pledged to build bridges, Kenyatta set off to burn them. A year later, no-one seems to know where it is headed, other than hazy talk of a referendum, and holding the political ground as Kenyatta prosecutes yet another hypocritical and inept anti-corruption war, as opportunistic as it is ineffectual. With toxic succession politics in full throttle, it is difficult to see how resolve and focus on radical economic reform can be mustered.

Amidst the entire dam hullabaloo, there was a small event last week that did not attract much attention. The cornered Treasury CS took time out from his daily commute to the Directorate of Criminal Investigations to launch a private external audit of the Eurobond funds commissioned by the Treasury. No prizes for guessing that the audit sees no evil. External audit is an exclusive constitutional mandate of the Auditor General. We all witnessed the President staring down the Auditor General on his special audit ordered by parliament. It has yet to see the light of day. The national government’s audit for the year remains qualified. There is no country where questions can be raised about two billion dollars of public money, and the president of the country acts about it as nonchalantly as Kenyatta has, unless there is direct complicity with the thieves. Malaysia’s 1MDB and Mozambique’s Tuna sovereign bond frauds have unravelled. This one will too, in the fullness of time. Kenyatta has plenty of reason to want to extend his influence beyond his term of office.

To plunder the way the Jubilee administration has, it has had to raze the public financial management system to the ground. Without public financial accountability, there is no government, no economy, no country. To budget anything from a quarter to a third of the country’s annual GDP for stealing — to then borrow it, steal it, feign outrage, compromise parliament, and diffuse public anger with ineffectual corruption investigations, again and again and again – defies corruption. It is a crime against humanity.

Yes, the economy is crumbling, but its turnaround is not the priority. Getting rid of this monster called Jubilee is.

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