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Jubinomics and Kenya’s debt crisis: A private sector view

Five years ago, the Jubilee administration embarked on a dangerous economic course of deficit financing, profligate spending and punitive taxation. Legitimate government suppliers in the private sector were crowded out in favour of tenderpreneurs and briefcase companies. Mysteriously, government agencies with expanded budgets were unable to pay suppliers. The result today: banks are staring at ballooning non-performing loans, tax revenues have fallen steeply and the private sector is dying a slow, painful death. By P. GITAU GITHONGO.

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Jubinomics and Kenya’s debt crisis: A private sector view

The March 9, 2018 handshake between Uhuru Kenyatta and Raila Odinga, silenced many of the critical voices accusing the Jubilee coalition of divisive politics, ethnic bigotry and the disenfranchisement of at least half of Kenya’s population.  In fact, for a brief moment it seemed that the bitter grievances of the disputed August 2017 election, the acrimonious exchanges between political rivals, the threats to the judiciary, the unsolved murder of IEBC’s Chris Msando, and the police killings in the post-election crisis, had been forgotten following the very-closed-door meetings between Uhuru and Raila. As a writer with the Daily Nation gushingly wrote a week later: ‘In the name of that handshake, the shilling has stabilised overnight with the outlook by players in tourism already promising what some experts have christened as the ‘peace dividend’ after an inordinately protracted electioneering period. The stock market is also recovering’. Despite the ceasefire of the handshake, its promised benefits have not cleared the dark clouds hanging over the Kenyan economy, which is now headed into serious difficulties. In fact, at a practical level there appears to be no change in the way the national government runs its day-to-day affairs.

Since coming to power in 2013, the Jubilee administration has been dogged by accusations of profligacy and patronage – most notably in the award of tenders. Policy-making, with senior public officials apparently motivated more by personal interests than by public service, and even outright nepotism and tribalism, spurious contracting in the implementation of policy initiatives in the key sectors of health, agriculture and infrastructure.

Perhaps it is no coincidence that the Jubilee administration has also presided over a massive debt-fuelled increase in annual public spending – KSh 1.2 Trillion to over KSh 2.5 Trillion in 6 years, complemented by a budget deficit approaching Ksh 750 billion (see Table 1). Notably, this growth in spending is at a rate beyond the GDP growth rate and, as far as many critics are concerned, has been partly motivated by the need to accommodate corrupt patronage practices. Spending on infrastructure programmes in particular, seamlessly lends itself to patronage and has been a dominant feature of Jubilee’s tenure, with a range of big-ticket projects in the transport, energy and health sectors. Recurring elements of these projects include secretive feasibility studies, procurement and financing arrangements, as well as questionable labour deployment and land acquisitions – all of which embody the controversial SGR Railway project which has taken up the lion’s share of this spending binge.

Spending on infrastructure programmes in particular, seamlessly lends itself to patronage and has been a dominant feature of Jubilee’s tenure, with a range of big-ticket projects in the transport, energy and health sectors. Recurring elements of these projects include secretive feasibility studies, procurement and financing arrangements, as well as questionable labour deployment and land acquisitions.

Table 1.

Jubilee’s Treasury team however, has maintained that the increase in public spending was and remains necessary to spur economic growth. Treasury has systematically played down the risks from the widening budget deficit in the process. This surge in spending – financed mostly with (Chinese) debt – has also taken centre stage in the cooling relations between the government and development partners, notably the IMF and World Bank. Critical to debate on this spending surge and the risks from a widening budget deficit is its impact on the performance of the Kenyan economy.

In particular, why have key sectors of the economy registered such diminished performance over the past half-decade in the face of this increased spending? Why does so much anecdotal evidence point to growing job-layoffs (an estimated 7,000 formal sector jobs have been lost in the past three years alone)? Even the normally bullish real estate market has shown signs of glut and slowdown over the past three years. The Nairobi Securities Exchange has seen its NSE 20 index climb from slightly over 4,000 in 2013 to a high of 5,400 in 2015, before falling to about 3,400 today. The Stock Exchange, without a single IPO listing since 2014, has seen more than half of all listed companies declare reduced earnings or losses in each of the past two years.

Why have key sectors of the economy registered such diminished performance over the past half-decade in the face of this increased spending? Why does so much anecdotal evidence point to growing job-layoffs (an estimated 7,000 formal sector jobs have been lost in the past three years alone)?

Table 2 below shows Average GDP Growth rates (RHS Scale) over the past 8 years and actual GDP (Using Constant 2009 Prices LHS Scale).

Whereas average GDP growth rates have averaged 5.8 percent over the period shown, the downward trend since 2010 has persisted despite the huge increase in spending – and this is despite GDP-rebasing in 2013 which enhanced the growth rate that year by at least 1%. Both 2013 and 2017 were election years and unsurprisingly, registered the lowest growth rates; but the increased government spending – albeit on long-term projects – appears to have actually had a dampening impact on GDP growth over the period. There are several reasons for this, but three key issues are highlighted here.

1. An unremunerated Private Sector.

Accusations of partisanship and gravy-train policy-making in the award of public tenders and contracts, are not just the grumblings of out-of-favour business-people that lost out on lucrative government business to well-connected or favourably-related individuals. There is a constituency of ordinary hard-working entrepreneurs, professionals and manufacturers increasingly unable to compete against the empowered cartels of tenderpreneurs, influence peddlers and brief-case businessmen. These rogue players currently dominate government contracting – not to mention annual auditor-general reports – making a mockery of procurement guidelines. In some instances they even approach qualified bidders, offering to be embedded in bidding teams (despite the lack of relevant competencies) with a promise of tender success at inflated bids. This patronage-based ‘crowding out’ doesn’t end there. This well-connected class of tenderpreneurs also has perfected the dark art of jumping bureaucratic payment queues, often receiving payments before delivery of goods and services – or even before contracts are signed.

Not by coincidence, legitimate suppliers, service providers, and even farmers, have been experiencing debilitating delays in the settlement of payments and have accumulated massive debts on their credit arrangements and tax obligations. The paradox is that while government department budgets were being ramped up, delays in contract awards and settlement of payments to legitimate suppliers were worsening. This has created a unique set of economic challenges that seems to have been lost in all the discussions on political handshakes.

According to the Central Bank of Kenya, Non-Performing Loans (NPLs) as a proportion of total lending by commercial banks doubled from 6.1 percent in 2015 to 12.4 percent (or about KSh 265 billion) by April 2018 (see Table 3 below). The Table shows Gross Lending by Commercial Banks as well as the stock of Non-Performing Loans, as well as the stock of Non-Performing Loans expressed as a percentage of Gross Lending by Commercial Banks. Even this 12.4 percent figure could be an under-statement if banks have not been adequately disclosing and providing for non-performing loans – as suggested by the sagas of the collapsed Imperial and Chase Banks.

Table 3

CBK Governor Patrick Njoroge attributes a significant factor in this growth in bad loans to delayed payments owed to the private sector by the national government, government departments and devolved units. CBK data suggests that up to KSh 200 Billion was owed to SME businesses by the national government by the end of the 2017/2018 Financial Year, with as much as KSh 25 Billion worth of those pending bills directly contributing to non-performing loans.

Following an increase in imported grains last year (amid accusations of pre-election giveaways), the National Cereals and Produce Board (NCPB) owed farmers as much as KSh 3.5 Billion by the end 2017 for produce already delivered. In a hard-hitting editorial on 7th August 2018, the Daily Nation averred, ‘The Jubilee government is wallowing, not just in foreign debt, but also in the money it owes local businesses, which it has either crippled or is in the process of ruining’.

According to the Central Bank of Kenya, Non-Performing Loans (NPLs) as a proportion of total lending by commercial banks doubled from 6.1 percent in 2015 to 12.4 percent (or about KSh 265 billion) by April 2018. The Table shows Gross Lending by Commercial Banks as well as the stock of Non-Performing Loans, as well as the stock of Non-Performing Loans expressed as a percentage of Gross Lending by Commercial Banks. Even this 12.4 percent figure could be an under-statement if banks have not been adequately disclosing and providing for non-performing loans.

The Daily Nation’s particular beef was that the Government Advertising Agency (GAA), owed media houses close to KSh 3 billion by the end of FY 2017/2018. About half of the KSh 404 Million paid out by GAA during the year, went to the big publishing houses – Nation Media Group, Standard Newspapers, Royal Media Services, The Star and Media Max Network. Against the KSh 3 billion owed, the distribution of payments to media houses was sufficiently skewed to warrant an investigation by the Office of the Public Prosecutor.

Worryingly as well, the increase in bad loans in the banking sector has come despite the implementation of August 2016 of lending rates ‘caps’, which limit the cost of existing loans to 4 percent of the Central Bank’s Recommended Rate. (See Table 4)

2. A Stifled Private Sector

This environment of pending government bills is also linked to worsening Kenya Revenue Authority (KRA) tax collection performance. This creates a vicious cycle in which the private sector is defaulting on its obligations on account of money owed by the same government. The government has long complained about KRA’s inability to meet its collection targets, complaining instead about ‘revenue leakages’ facilitated by corrupt tax officials. But it fails to acknowledge that its pursuit of tax defaulters is a consequence of the fact that they themselves are owed millions by national and county governments.

The reality is that National Government revenue shortfalls have averaged KSh 90 Billion annually over the past 4 years, despite improved tax collection efficiencies at the KRA. (See Tables 5 & 6 below.) The World Bank estimated that in the 2016/2017 financial year, tax revenue as a proportion of GDP fell to under 17%, the lowest in a decade – with the growth in nominal Tax Revenues outpaced by nominal GDP growth.

Table 5

This reduced growth rate of revenue collection by KRA is at first glance paradoxical considering that over the past 5 years, an unprecedented number of Kenyans have been brought into the tax bracket. A similarly unprecedented range of products and services have been subjected to various new direct and indirect taxes. Over the past five years, several tax measures have been introduced including: 12 percent Rental Income tax for landlords from 2015; successive excise duty and fuel levy increases in 2015, 2016 and 2018; VAT on bottled water and juices; VAT on food served by restaurants as well as piped water; successive increases in excise duties on spirts, cigarettes and mobile telephony; and 50 percent Gaming tax on lotteries and book makers in 2017, among  a host of others. The 16 percent VAT on fuels and fuel oils first awarded in 2013 but deferred over the subsequent years with the exemption set to expire on 1st September 2018, adds a controversial element to this expanded tax net aimed at bringing the growth in VAT collections closer to that of direct taxes such as PAYE and Income Taxes (see Table 6).

Table 6

In his June 2018 Budget statement, Finance CS, Henry Rotich, laid out several new and controversial ‘Robin Hood Tax’ proposals which he declared necessary to fund programmes that are part of Jubilee’s ‘Big 4’ agenda. Prominent among the proposals purportedly designed to protect low-income earners, is a monthly contribution to a nebulous National Housing Development Fund by every employee and employer of 0.5% (capped at KSh 5,000) of the employee’s gross pay. This contribution would be funnelled to the Housing Fund whose mandate will be to build low-cost housing units. Another ‘Robin Hood Tax’ proposal was the levying of 0.05% excise duty on all remittances of KSh 500,000 or more, transferred through banks and other financial institutions; as well as an increase in the excise duty charged on money transfer services by mobile phone providers from 10 percent to 12 percent, all geared to financing Universal Health Care – another Big 4 pillar.

Several of these proposals have been rightly criticised as being unjust and inordinately detrimental to low-income earners. With more than a third of all Kenyans living on less than Ksh 100 per day, a projected VAT-inclusive paraffin price of KSh 105 per litre is simply unreasonable. The curb on logging has already raised the cost of the popular-sized sack of Charcoal to more than Ksh 3,000 in parts of Nairobi, with the 4-kg tin costing more than KSh 150. With electricity prices also being ramped up as the monopoly power distributor Kenya Power struggles to maintain solvency following years of mismanagement, low and middle income earners are clearly big losers. The situation is no better for businesses, notably manufacturers and other high energy consumers. Early this month, the Kenya Association of Manufacturers registered strong objections to the revised energy tariffs which entailed a 36 percent increase in the energy base-cost – before the envisaged 16 percent VAT increase – which KAM argued would have a detrimental effect on the cost of doing business in the country.

With more than a third of all Kenyans living on less than Ksh 100 per day, a projected VAT-inclusive paraffin price of KSh 105 per litre is simply unreasonable. The curb on logging has already raised the cost of the popular-sized sack of Charcoal to more than Ksh 3,000 in parts of Nairobi, with the 4-kg tin costing more than KSh 150. With electricity prices also being ramped up as the monopoly power distributor Kenya Power struggles to maintain solvency following years of mismanagement, low and middle income earners are clearly big losers.

A recurring complaint from the private sector over the past half-decade has consistently been that consumer purchasing power has contracted considerably and that this is being exacerbated by recent and proposed tax measures. The decline in tax revenues despite the increases in tax rates, tax measures and collection efficiencies by KRA (notably year-on-year growth in taxpayers registered on KRA’s I-Tax platform), all but confirms a sharp drop in formal economic activity over the period.

Arthur Laffer who was an adviser to the Nixon/Ford Administration in the mid-1970’s mainstreamed the simple mathematical tautology that there is a point beyond which any increases in tax rates will always result in declining tax revenues. Laffer’s analysis of the US economy at the time recommended a decrease in federal tax rates to boost tax revenues. Rotich’s proposed tax measures risk the same results by further dampening of economic activity as well as greater tax evasion.

3. A Crowded-out Private Sector

The aforementioned slump in tax revenue growth was also partially influenced by the slowdown in bank profitability – which in turn was due to the twin influences of growing bad loans and reduced access to credit by the private sector. These factors are inexorably linked to diminished private sector performance. However, reduced access to credit by the private sector in Kenya is not a new phenomenon; nor are its fundamental causes. Its disruptive influences however, are significant.   Commercial credit to the private sector has contracted from about 24 percent in 2013 to 18 percent by end of December 2015, to about 2.5 percent in June 2018. This is despite the implementation of interest caps in August 2016, disabusing the suggestion that enhanced credit to the private sector was the intended beneficiary of the interest rate caps. In contrast, during the same period annual growth in lending to government averaged 14%.

Table 7

The Banking Amendment Act 2016 proposed by MP Jude Njomo was signed into law by President Uhuru Kenyatta with the same hollow promise of cheaper and more private sector lending by banks that a similar bill by then MP Joe Donde had made in the year 2000. The backgrounds shared notable similarities however – most notably heavy government borrowing. Domestic borrowing was indeed high in the late 1990s – evidenced by the 91-day Treasury Bill on offer with a 21% return in June 1999. By 2000, domestic borrowing was attracting Ksh 22 Billion in annual interest payments.  The stock of domestic debt by June 2000 stood at KSh 164 Billion with new issues representing 17.5 percent of government revenue. By June 2007, with short term Treasury Bill rates down to less than 8 percent, the stock of domestic debt had only risen modestly to KSh 405 Billion representing 22.1 percent of GDP, and attracting interest payments of KSh 37 Billion in FY 2006/2007. By March 2016 however, the stock of domestic debt had jumped to KSh 1.65 Trillion representing close to 27 percent of GDP and was attracting a massive 30 percent of total government revenue in debt service. And that’s not even taking into account external debt which had grown at a similar rate. The stock of domestic debt in March 2018 had reached KSh 2.3 Trillion, attracting more than KSh 350 Billion in annual debt payments.

Arthur Laffer who was an adviser to the Nixon/Ford Administration in the mid-1970’s mainstreamed the simple mathematical tautology that there is a point beyond which any increases in tax rates will always result in declining tax revenues…Rotich’s proposed tax measures risk the same results by further dampening of economic activity as well as greater tax evasion.

In August 2000, Commercial bank lending rates averaged close to 21 percent and deposit rates about 7 percent, providing obvious justification for the Njomo Bill’s popular support. The stock of non-performing loans (NPLs) at the time, was an eye-popping KSh 122 Billion in April 2001, (40 percent of total lending). In June 2018 and despite interest rate caps in place, NPLs represent 12.4 percent of commercial lending with an estimated Ksh 303 Billion in this category.

Table 8

The Parlous state of Kenya’s national accounts – most notably the KSh 5 Trillion stock of public debt and ballooning budget deficit – but also poor performance of the real economy with stagnant exports and tax revenues, suggests that the government cannot afford to be adding to the burden borne by the private sector. It also suggests that the slew of tax measures proposed in Budget 2018 was purely about desperately seeking to finance reckless government spending and not about providing incentives for private sector economic growth. Critically, it also confirms that the interest caps were always really about government access to cheaper domestic borrowing and not about promoting private sector economic activity, which the government appears to be doing its best to stifle.

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Gitau Githongo is a financial consultant based in Nairobi.

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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

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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Brexit, Little Britain and the Empire Politics of the End

Why has the UK establishment so farcically mismanaged Brexit? The answer has eluded her politicians because it lies deep within a political system no longer fit for current purpose.

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Brexit, Little Britain and the Empire Politics of the End

The decade-long death march of Western capitalism continues to reap yet more victims. The latest is the British political establishment and the remnants of the Empire that created it.

The problem for the key actors, dwarfed as they are by a venerable political system they inherited from the time of their great-great grandparents when it yielded exclusionary benefits, is their inability to grasp that Brexit, the current crisis with which it is grappling, does not signal a change. It is an ending. Misreading the situation, the said actors continue to dream up remedies and strategies based on the vain assumption that the economic crisis will somehow be resolved by political initiatives.

The lone survivor may well end up being Jeremy Corbyn, leader of the official opposition Labour Party, and then only because he never believed in the virtues of western capitalism to begin with. He sees his mission more in terms of how to cater to the needs of all capitalism’s damaged survivors.

The problem for the key actors, dwarfed as they are by a venerable political system they inherited from the time of their great-great grandparents when it yielded exclusionary benefits, is their inability to grasp that Brexit does not signal a change. It is an ending.

The vast majority of British people are not wealthy. They merely live within a rich economy that provides them access to credit. For at least 350 years, the British economy expanded through the ruthless exploitation of resources and people from many parts of the world. The big question then, as now, was: who benefits, and how?

In his 1964 book, The Sins of the Fathers, James Pope-Hennessey explains that:

“Shipbuilding in Liverpool was gloriously stimulated by the slave trade, and so was every other ancillary industry connected with ships…… People used to say that ‘several of the principal streets of Liverpool had been marked out by the chains, and the walls of the houses cemented by the blood of the African slaves.’ The Customs House sported carvings of Negroes’ heads…”

The most contentious question at the core of British politics has always been the question of the domestic distribution of the proceeds of that global trade.

In particular the history of the social democratic movement in the UK, which culminates in the formation in 1900 of the Labour Party, has been the history of developing more efficient ways of systematically redistributing Empire’s wealth as it comes in. These initiatives culminate in the establishment of the provision of mass housing (1935), education (1944) and health (1946) as a clear statutory requirement, after the 1939-1945 war, and the economic crisis that preceded it. These three policies alone immeasurably changed the quality of life for ordinary British people, and are now the site of the ideological battleground between the main parties, regarding how best to “fix” the country’s crisis.

For at least 350 years, the British economy expanded through the ruthless exploitation of resources and people from many parts of the world. The big question then, as now, was: who benefits, and how?

Since the failure to recover from the 2008 economic crash, politics seems to have become an exercise in which everyone questions the legitimacy and role of every other participant. Empire’s redistributive template is being challenged from all angles: ordinary citizens challenge the corporate world regarding the rates of tax it pays to keep public services running; the corporate world in turn challenges the logic of ordinary people continuing to expect that such services should be provided for free and on demand; indigenous people begin to question why immigrants have the right to move in and partake of such services; the provincial regions begin to question why major infrastructural development tends to be focused on the major urban centres, and so on.

The history of the social democratic movement in the UK, which culminates in the formation in 1900 of the Labour Party, has been the history of developing more efficient ways of systematically redistributing Empire’s wealth as it comes in.

The latest development in these establishment contestations is the resignation of seven MPs from the Labour Party, and declaring themselves “independent”. They were soon joined by an eighth Labour MP, and then by four members of the ruling Conservative Party. There is every indication that there will be more resignations from both parties; some of these MPs will likely join the new group. This attempted re-alignment of Britain’s 150-year-old effectively two-party system may amount to little in itself, but will in the long-term, prove to be hugely significant.

Empire’s redistributive template is being challenged from all angles: ordinary citizens challenge the corporate world regarding the rates of tax it pays to keep public services running; the corporate world in turn challenges the logic of ordinary people continuing to expect that such services should be provided for free and on demand; indigenous people begin to question why immigrants have the right to move in and partake of such services…

This is in fact a debate about the future, paralysed by the past.

Britain sidestepped an obligation to undertake a principled and genuine retreat from Empire. Such a retreat would have entailed a costly reckoning with history. Empire’s unravellng came with huge costs: there was the risk of being forced into making material reparations to the colonies and descendants of those enslaved in the Trans-Atlantic trade; downsizing and restructuring her global corporate reach would have meant a significant reduction in income; and weaning her domestic population off the proceeds of Empire’s profits could have led to sharp political disruptions. Instead, Britain embarked on a series of pretend “withdrawals” and resorted to all manner of skullduggery so as to maintain back-channel influence and continue profiteering.

By postponing this decision, Britain now faces a stark question: how does she retain her economic pre-eminence? Is it by cleaving unto an ever-tighter embrace with the European Union, or independently returning to her own stall in the global marketplace, which first gave her pre-eminence?

Britain sidestepped an obligation to undertake a principled and genuine retreat from Empire. Such a retreat would have entailed a costly reckoning with history.

This is the dilemma expressing itself as the Brexit crisis, essentially the failure by the entire political leadership to manage the consequences of the 2016 referendum, in which UK citizens — by a small margin, it should be noted — voted to end their country’s 45-year membership of the European Union.

That referendum itself only came about as a consequence of then UK Prime Minister David Cameron’s bungling attempts to end dissent in his ruling Conservative Party. He sought to outflank growing voices from the Tory right wing insistent that a new type of Conservative Party was necessary to make Britain “great” again, not least by severing its links with the European Union, which they characterized as the source of unwanted immigrants, and a drain on the UK’s “hard-earned” Empire wealth. Cameron, shocked by the unexpected referendum result, resigned immediately, leaving the problem to his successor, current PM Theresa May.

The referendum itself only came about as a consequence of then UK Prime Minister David Cameron’s bungling attempts to end dissent in his ruling Conservative Party. He sought to outflank growing voices from the Tory right wing insistent that a new type of Conservative Party was necessary to make Britain “great” again…

The referendum result has had an equally damaging impact on the opposition Labour Party, already adrift from its ideological moorings, following its many years in opposition after its 1979 defeat by the Conservatives under Margaret Thatcher. Originally, Labour was committed to the goals of a form of socialism: nationalisation of key sectors of the economy; widespread provision of social services and amenities as well as a safety net; and protection of workers’ rights to organize, assemble and agitate. Following a second defeat to Thatcher in 1983, a number of reformist party leaders like Neil Kinnock, began to reshape the party’s orientation while still in opposition. “Socialist” policies were progressively abandoned over the following decade and a half, as they became increasingly unsellable to the electorate, not least because of the pernicious influence of a corporate media hostile both to the Party and its policies, and the victory of Thatcherite neoliberalism as the dominant policy mantra across the political establishment. This paved the way for Tony Blair to emerge as a new type of Labour leader, and lead the reformed party — now freed of its previous ideological commitments and Trade Union obligations — back into power in 1997.

The referendum result has had an equally damaging impact on the opposition Labour Party, already adrift from its ideological moorings, following its many years in opposition after its 1979 defeat by the Conservatives under Margaret Thatcher.

Despite this, the ideological debate within Labour never completely ended. Many radicals blamed the party’s inability to recover quickly from the loss of the 1979 election on the narrow defeat of the radical Tony Wedgewood Benn in the deputy party leadership vote, in 1981. With the collapse of neoliberal economics after 2008, some of the old “socialist” ideas have experienced a resurgence. It is this that has brought current leader Jeremy Corbyn, a veteran of the futile 1980s battles to keep the party “socialist”, to the leadership. In fact, a number of the key actors in Corbyn’s camp — including Corbyn himself — were active pro-Tony Benn youth wingers back then.

Despite all those struggles, such “progressive” politics, directed from this “distributionist” framework never quite explained where the wealth to be distributed would come from, especially if Empire’s global resources were no longer available.

With the collapse of neoliberal economics after 2008, some of the old “socialist” ideas have experienced a popular resurgence. It is this revival that brought Jeremy Corbyn, a veteran of the futile 1980s battles to keep the party “socialist”, to Party leadership.

In a UK Guardian article of September 22, 2011, British Admiral Lord Alan West was quoted criticising proposed cuts to the UK defence budget:

“We are probably, depending on what figures you use, the fifth or sixth wealthiest nation in the world. We have the largest percentage of our GDP on exports … we run world shipping from the UK, we are the largest European investor in south Asia, south-east Asia [and] the Pacific Rim, so our money and our wealth depends on this global scene.”

This is why retaining a presence in the European Union is important to the UK establishment, which believes it would offset any contraction of the Empire economy as it tries to deliver on its redistributive “socialist” ideals. Even this may not work, as it is a strategy still premised, however indirectly, on the wealth generated by Empire.

Progressive politics, which operate from within this “distributionist” framework never quite explained where the wealth to be distributed would come from, especially if Empire’s global resources were no longer available.

Leaving or remaining in the European Union is therefore an argument represented by factions within each of the dominant political parties, not just the Conservatives. Whichever party finds itself in power in this period will simply implode, as is happening to the Conservative Party at the moment.

The central question, that is, the question concerning a long-term post-Empire economic strategy, goes back over 30 years, and has never been settled. It was only temporarily resolved by the rule of Margaret Thatcher. Faced with an EU demand then for greater economic integration against a growing domestic chorus to double-down and go it completely alone, the British, being British, attempted to do both. This left the UK with a somewhat hybridized EU membership. Unlike the rest of the Union for example, Britain kept her own currency.

Leaving or remaining in the European Union is therefore an argument represented by factions within each of the dominant political parties, not just the Conservatives. Whichever party finds itself in power in this period will simply implode.

Now the matter has returned to centre stage, not least due to the economic hardships bedevilling the EU’s 500 million citizens. The crisis has arrived at a time when politics in Britain is being managed by a generation of people dwarfed by their own legacy. Since at least the time of Gladstone in the 1860s, the British political system has been premised on managing the proceeds of an empire-based economy. The crisis therefore, goes to the heart of how British economics, and therefore politics, is constituted.

The end of Empire has been a prolonged period of discomfort, and left a wrong political fit. Those days, and the formations they spawned, are now over. The whole construct and edifice — the buildings, institutions, traditions, imperatives — are not fit for current purpose. So, the government system, which includes the official Opposition, is obsolete. Those were Empire-level political initiatives to keep the masses happy with their share of the spoils.

The current leaders on all sides seem incapable of understanding the full meaning of the weight of all that history, and so what is happening in the UK parliament is a splintering of the old order, but one which carries the misconceptions of that old order into the new.

In particular, Empire’s racial politics that played out in the colonies and was previously viewed with a certain metropolitan hauteur from London, became increasingly domesticated after decolonisation. At home, racial politics spawned a new lexicon, and new hitherto unfamiliar actors, both of which ended up in Empire’s parliament pursuing identity politics as a new dimension to the aforementioned politics of redistribution.

But real change will not come through thinking and speaking from the platform of Empire’s institutions. It cannot be re-ordered, or have its wrongs put right, from those pedestals.

The truth is that the 2016 referendum was not a decisive outcome. For a matter of that magnitude, a nearly 50/50 result cannot be said to be a clear “rejection” of anything. By the same token, neither can it be said to be an acceptance of the status quo.

The logical thing on paper would be to hold another referendum. However, given the polarized nature of the debate, as well as the real economic pain ordinary British people are experiencing, this would likely split both main parties internally. There is a strong suspicion that step three for the recently resigned MPs will be an attempt to create a new party, that would move to displace the current official opposition, in anticipation of the looming internal splits.

The truth is that the 2016 referendum was not a decisive outcome. For a matter of that magnitude, a nearly 50/50 result cannot be said to be a clear “rejection” of anything.

This, however, is to still miss the point.

What was important was the spread of the result. England, by far the most populous of the three national regions, voted most clearly to leave the EU. But again, this was outside the main urban concentrations (where a lot of non-indigenous minorities are to be found). While Wales voted alongside England, Scotland voted solidly to remain.

Instead of dealing with the implications of the result, all the other political factions appear strangely to have perceived their immediate task as being to prevent a Corbyn-led Labour Party from taking power. Corbyn espouses a fundamentally different agenda than the conventional mainstream: he wants a redistribution of the wealth of the country among a much wider demographic, through nationalization, and the massive expansion of social services. For Corbyn therefore, the issue of Brexit is secondary. He intends to pursue his programme regardless of whether Britain remains in the EU or not. But such economic plans are inimical to the now 40-year orthodoxy established by Margaret Thatcher, and injected into the Labour party by Neil Kinnock and Tony Blair.

Instead of dealing with the implications of the result, all the other political factions appear strangely to have perceived their immediate task as being to prevent a Corbyn-led Labour Party from taking power.

The fault line in this political quagmire is both factions of the Conservative Party, plus the Tony Blair remnants (and they are many) in the Labour party being on one ideological side, against Jeremy Corbyn’s faction of the party.

This will be a battle huge and distracting in equal measure.

First, it will keep British politics bogged down in a debate about the best distribution of Admiral West’s Empire proceeds, a lot of which is backstopped through the European Union’s “Economic Partnership Agreements” signed with much of the so-called “developing” world – that is, the old colonial world of Africa, the Caribbean, the Pacific and Asia. The EPAs are basically the modern form of the unfair trade treaties of the last five centuries. Their most disruptive feature was ‘conditionality’: the overweening donor influence on where and how ‘aid’ is spent, and a heavy focus on private sector participation in ‘development’.

On the domestic political front, the threat of Corbyn implementing his redistribution agenda after the UK exits the EU,, would profoundly disrupt established corporate interests.

Third, given the historical economic pressure created by the emergence of other global economic players, it is inevitable that the UK will see her share of the spoils progressively decline. The reality of this permanent decline will then be used to drag the likes of Corbyn into a jingoistic debate about British “greatness” (which, incidentally, is built on a fallacious premise: what right does the UK have to global pre-eminence, and how is that pre-eminence to be kept in place anyway?).

Many of the current round of EPAs (negotiated for twenty-year periods), are due to expire between 2020 and 2025. Would a Corbyn government design their renegotiation to better reflect the principles of fair trade, a condition of staying in the EU? If so, would the EU want the UK back as a member?

Being in the EU has failed to suppress the UK establishment’s nostalgic fantasies of the return of Empire. Understanding this is to recognise that the nature of Britain’s current politics has no answers for the future. To confront the future would first require a recognition that the global Empire economy, which the EU also feeds off of, must be restructured in favour of a global fair trade regime, whether the UK in all or in part remains inside the EU.

Whether within the EU or out of it, Britain remains the fifth richest country in the world due to a legacy of malfeasance. Britain’s current political order is being dismantled by the force of this legacy; the current leaders know neither how to maintain their global advantage, nor how to make an orderly withdrawal from it.

To confront the future would require a recognition that the global Empire economy, which the EU also feeds off of, must be restructured in favour of a global fair trade regime, whether the UK in all or in part remains inside the EU.

This essentially means that the 2016 referendum produced three or four outcomes, not one.

For the British people then to be able to speak, the creation of an ENGLISH parliament is imperative. This is a call that comes up from time to time, but is then ridiculed and silenced.

However, before England became “the first, and the most deeply penetrated of all the British colonies” to quote Oscar Wilde, England’s Kingdoms did often have their own parliaments, such as the Anglo-Saxon Witangemot that operated between the 7th and 11th centuries.

Only after this democratisation process can Britain have a meaningful referendum in which each region decides for itself and negotiates to stay or go independently of the others.

Whether Britain were to have become a full member of the EU, or to have completely broken away from it, a central truth remains: this is actually the end of an epoch. The unravelling of the UK’s political system is part of it.

Only after Britain democratises her politics can she have a meaningful referendum in which each region decides for itself and negotiates to stay or go independently of the others.

THIS is ending.

The world will go on.

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Education, Social Mobility and the Enclave Economy: Revisiting the Kenya Scenarios Project

Two decades ago, a group of eighty Kenyans spent the better part of two years thinking about where the country was headed. The product of this effort was Kenya at the Crossroads: Scenarios for our Future. Where is the country now and where is it headed?

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Education, Social Mobility and the Enclave Economy: Revisiting the Kenya Scenarios Project

The year was 1998, just after the second multiparty elections that, like the first, was marred by ethnicized political violence and allegations of massive fraud. The horizon was ominous. Moi would be coming to his two-term limit in the subsequent election, and there was already talk of a constitutional amendment to remove the term limit as was happening in Zambia and elsewhere at the time. The economy was in free fall. The big imponderable then was whether Moi would go when the time came, and whether the country could survive a conflagration if he sought to cling to power by hook or crook.

The departure point of Scenarios was that Kenya’s business model had reached the end of the road: “Kenya had reached the limits of its chosen political and economic models.” This prognosis was captured by an analogy of an umbrella. We inherited at independence a dualism of the colonial era which created a “modern” enclave sector occupied by Europeans and their Asian and African auxiliaries, and a “native sector” occupied by the excluded African masses. The modern enclave, which I prefer to call the privilege sector, comprised the State, a small corporatized economy with superior social amenities especially education facilities and urban residencies. Colonial Europeans had the exclusive Duke of York, Prince of Wales and other exclusive schools, Asians had their own — the Duke of Gloucester, Allidina Visram, Racecourse Secondary — and the lucky few Africans had Alliance, Maseno, Mang’u and a few others. Even though African schools and urban residencies were below those enjoyed by Europeans they were way above the life of the ordinary native. Once you got into one of these schools, you had made it.

The departure point of Scenarios was that Kenya’s business model had reached the end of the road: “Kenya had reached the limits of its chosen political and economic models.”

Now think of the enclave economy, the privilege sector if you like, as an umbrella. People under the umbrella are protected from the elements, but how well protected you are depends on your position inside the umbrella. People at the centre are completely protected and warm, while those at the periphery are less protected, but they are better than those outside. The trick is to get deeper into the umbrella until you are the guy actually holding it.

Before independence Europeans were at the centre, followed by Asians, and Africans at the periphery. After independence, many Europeans and some Asians left making more room for Africans to move deeper into the umbrella, and a few more to move into the shelter.

A fresh graduate was guaranteed a position previously occupied by a European, and a high school leaver, a position previously occupied by an Asian. Even though there was a whiff of tribalism, with Kikuyus getting the prime jobs, all Africans with university education got on the gravy train. Those with post-graduate degrees went straight to the top of the public service.

We inherited at independence a dualism of the colonial era which created a “modern” enclave sector occupied by Europeans and their Asian and African auxiliaries, and a “native sector” occupied by the excluded African masses.

By the mid-seventies the privilege sector was already feeling the strain of the numbers of people. Up until then anybody with an O-Level Div. 3 was assured a good clerical job in the private sector while A Levels who did not proceed to university or diploma courses joined as management trainees.

By the end of the `80s, the economy was struggling to absorb 2000 university graduates a year.

The problem was about to get a whole lot worse.

In 1990, the labour force was in the order of four million people, of which one million, a quarter that is, were in the “privilege sector” (i.e. public and private sector formal wage jobs). The other three quarters were in the informal non-agricultural and smallholder agriculture. Unemployment was relatively low, since smallholder agriculture and informal sector was absorbing those who did not get into the privilege sector.

Three decades on, the Kenya National Bureau of Statistics estimated the economically active population (15-64 year-olds) at 25 million, and the actual labour force (i..e excluding students and others inactive) at 19 million — a five-fold increase. Formal wage employment is estimated at 2.7 million and non-farm informal employment at 14 million, leaving one million unemployed, and implying that there are just about two million smallholder farmers and pastoralists. Out of the increase of 16 million, the privilege sector has absorbed 1.7 million, only 10 percent, and its contribution to employment is down to 8.5 percent from 25 percent three decades ago.

In the meantime, university enrolment has increased to 500,000 which works out to 125,000 graduates a year, or 63 times the rate three decades ago, while the privilege sector is absorbing just over 100,000 a year. Even if they took up all the jobs, the privilege sector simply cannot absorb the annual throughput of university graduates.

In 1990, the labour force was in the order of four million people, of which one million, a quarter that is, were in the “privilege sector”… Three decades on, the economically active population (15-64 year-olds) is at 25 million, and the actual labour forceS at 19 million — a five-fold increase.

This encapsulates what the scenarios team meant by the end of the road: “Radical changes to revive the economy, a comprehensive reorganization of Kenya’s primary institutions, models of governance and relationships between citizenry and the government are all required.” Would it happen?

Two transformational imperatives were self evident, political and economic, making for four possible scenarios. The first is the No Reform scenario, that is, the continuation of the trajectory that the country was on at the time. We called this the El Nino scenario. The second is the economic reform-only scenario. We called this scenario Maendeleo. The third is political reform-only scenario. We called this the Katiba scenario. Initially, these were the only scenarios developed. But when presented to the project trustees, they argued that the presented scenarios were all too pessimistic and insisted that the team develop a fourth scenario with both political and economic reform. The team obliged, even as it felt this was not a viable prospect. We called this the Flying Geese scenario (See ‘Kenya Scenarios Project’ box).

Kenya’s politics for the better part of the last two decades can be characterized as a struggle between the Maendeleo and Katiba scenarios.

University enrolment has increased to 500,000 which works out to 125,000 graduates a year, or 63 times the rate three decades ago.

In 2003, the National Rainbow Coalition (NARC) rode to power on a Katiba platform. For a short while, the cross-ethnic unity of purpose displayed by erstwhile bitter political rivals, reminiscent of the Flying Geese scenario, made Kenyans the most optimistic people in the world. It did not last. On assuming office the old order coalesced around Kibaki, sabotaged the constitution-making process, and proclaimed a Maendeleo agenda. Instead of a constitution, we got Vision 2030. Katiba-Maendeleo was not just a battle between politics and economics but it played out in the economic arena, between NARC’s bottom-up-inclusive growth and the trickle-down economics of the privilege economy. A good number of the experts I mobilized to work on NARC’s Economic Recovery Strategy (ERS), Betty Maina, Sam Mwale, Gem Kodhek, Wachira Maina, Richard Ayah, John Kashangaki, Joslyn Ogai among others, were members of the scenarios team, as was Prof. Anyang’ Nyong’o, the minister in charge of the ERS. After the 2005 referendum, the transformative political and economic agenda was abandoned. Instead of a new constitution and the economic empowerment agenda that NARC had promised, we got the trickle-down infrastructure-led Vision 2030.

Kenya’s politics for the better part of the last two decades can be characterized as a struggle between the Maendeleo and Katiba

It took the 2007/8 post-election violence to jolt maendeleoism back to reality, and create the impetus for the 2010 Constitution. It is our great misfortune that we put the constitution in abeyance for two years instead of going to election immediately after promulgation as is the norm. This gave time for the old order to regroup behind the anti-ICC narrative. The rest, as they say, is history.

For the 2017 general election, we once again united the opposition around the Katiba platform. NASA was crafted straight out of the 2003 NARC playbook. Those who paid attention to the manifestos may have noted that the NASA manifesto led with the political reform agenda, followed by social and economic priorities in that order, while the Jubilee one led with an economic agenda; social and political reforms were treated almost as an afterthought.

It is our great misfortune that we put the constitution in abeyance for two years instead of going to election immediately after promulgation as is the norm.

The Jubilee government’s plunder and incompetence has no doubt contributed to the economic implosion that is now unfolding. Perhaps distracted by the melodrama of the plunder and blunders, the clawback of the privilege sector has gone, if not unnoticed, then unremarked. Recently, a Principal Secretary gloated on social media that they have secured US$26 billion in pledges from investors for the housing pillar of the so called Big Four Agenda, whose claim to bigness no one seems to know. Twenty-six billion dollars is a lot of money. It is equivalent to the GDP of Uganda. The idea that a government of a country that cannot feed itself can contemplate investing that kind of money in urban middle class housing, let alone shout about it, is astounding. The question I posed to him: what will the houses produce?

According to the National Housing Survey conducted by the KNBS five years ago, 60 percent of Kenyans live in their own houses (88 percent of rural. No surprises there — Kenya is still a predominantly agrarian society — 60 percent of Kenyans are rural and 88 percent live on land they own. Urban home ownership stood at 30 percent but this understates actual home ownership, as many urban residents also own rural homes, and actually see their sojourns into cities and towns as temporary.

Recently, a Principal Secretary gloated on social media that the government has secured US$26 billion in pledges from investors for the housing pillar of the so called Big Four Agenda. Twenty-six billion dollars is the equivalent to the GDP of Uganda. That a government of a country that cannot feed itself can contemplate investing that kind of money in urban middle class housing…is astounding.

More significant perhaps is that over 70 percent paid monthly rents under Sh. 6,000, and 90 percent under Sh.10,000. Realistically, only about 10 percent of urban residents, less than three percent of Kenyans, are in the potential home ownership bracket. It’s hard to see what kind of logic would lead the government to the conclusion that urban middle class home ownership is one of the country’s top four development priorities. But this is the logic of the privilege society.

In the old days, entitlement was rationalized with the graduates being the creme de la creme of society, a merited reward for scaling the heights to reach the pinnacle of academic achievement. Many students did the minimum necessary to graduate. Those who seemed to be “overworking” were often frowned upon. The former were right in a sense. Education replaced Race as a ticket to the top of the social ladder. Not what you do, but who you are, a graduate. Graduates were the new whites. Times and circumstances have changed, but culture dies hard. It is in the rubric of this culture that prioritizing residential housing over enterprises in a country with a monumental unemployment crisis can look perfectly normal.

With Maendeleo imploding, and Katiba proving too potent a threat to privilege, what we see now is a political class in self-preservation mode, laying the groundwork for what I’ve called an eat-and-let-eat grand ethnic coalition—KANU 3.0. In the meantime, the demographic clock ticks, at the rate of 150,000 university graduates a year. Frustrations rise.

Education replaced Race as a ticket to the top of the social ladder…Graduates were the new whites.

Where does the political class think it is going with this? No political reforms, no economic reforms. That would be El Nino:

“The state is captured by a small elite that employs it as an agent of its own private enterprise. On the other hand, the economy is characterized by low productivity which makes it impossible for the population to realize upward economic mobility. Thus, the construction of both the economic and political spaces generates tension and conflict. The result is an implosion.”

The Kenya at the Crossroads Scenarios proved prescient 20 years ago. It may well be yet again.

El Nino: “The state is captured by a small elite that employs it as an agent of its own private enterprise. On the other hand, the economy is characterized by low productivity which makes it impossible for the population to realize upward economic mobility. Thus, the construction of both the economic and political spaces generates tension and conflict. The result is an implosion.”

The Kenya at the Crossroads Scenarios


No Political Reforms, No Economic Reforms: El Nino

In the El Niño scenario, neither the reform of the state nor the restructuring of the economy takes place. It is a story in which the state remains predominantly patron-client based and therefore partisan, subjective and ineffective in the manner in which it performs its functions. The state is captured by a small elite that employs it as an agent of its own private enterprise. On the other hand, the economy is characterized by low productivity which makes it impossible for the population to realize upward economic mobility. Thus, the construction of both the economic and political spaces generates tension and conflict. The result is an implosion.

Economic Reforms with Minimal Political Reforms: Maendeleo

This scenario explores a technocratic attempt to reform the economy with a view to using economic gains as a means of pre-empting or forestalling demands for political reform. The major assumption in this scenarios is that if the economy is growing steadily, there will be little or reduced demand for political reform. Whilst this model is initially successful, as the limits of the system are reached and economic growth slows down, the demands for political reform pick up once again and the system is faced with two basic choices: to be repressive (and perpetuate the economic decline) or negotiate political reforms (and kick-start the economy again). Though this strategy leads to short-term gains, it breeds a lot of inequality. Without addressing the deeper political and structural questions with regard to Kenya’s problems, this success cannot be maintained for a long period. Sooner or later, one has to address these structural questions.

Political Reforms with Minimum Economic Reforms: Katiba

The Katiba scenario presupposes a successful political negotiation that sees the country adopt a new constitution which recognizes the diversity of the peoples of Kenya and puts in place a mechanism of checks and balances which ensure that the centre is not in a position to dominate over any of the regions of the country.nsuccessful, the outcome for the country can only be bleak. The Katiba story is a story of an inclusive long-drawn out but successful political negotiation process which leads to the reform of and creation of key national institutions. This process takes place in an environment in which there is little or no economic growth. It is the story of a stormy, painful, but decidedly successful attempt by Kenyans to resolve the inconsistencies in their political processes and key institutions of public life that have led to domination, marginalization and fostered corruption. The new institutions reflect the diversity of the country, increase the accountability of leadership at all levels and allow a greater role for the citizen in shaping and managing those activities that affect their day-to-day lives.

Simultaneous Economic and Political Reforms: Flying Geese

This is a scenario of inclusive growth and fundamental institutional reorganization. The team is persuaded that with decisive action and a keen interest in redressing the past and capturing the future, sufficient resolve could be brought to bear and this scenario launched. The Flying Geese story explores the renaissance of Kenya through a determined effort to reform the social, cultural, economic and political models in force. This effort is spearheaded by a new leadership which is armed with a vision and the conviction that Kenya deserves better and can be more than it presently is. For simultaneous reforms on both the economic and political fronts to succeed, a huge reservoir of goodwill is required. There is also a need to for there to be a body (or bodies) that can act as guarantors to the process.

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