Dawn of the Russia-Africa Summit and a Dimmer Future for Africa

By Sitati Wasilwa

The first ever Russia-Africa Summit was held on October 23rd and 24th, 2019 in the city of Sochi. This was Moscow’s outward projection intending to be a major player in global geopolitics.

The primary goal of the Summit is to counter the influence of the United States of America, China, the European Union, Japan and other foreign powers in Africa through partnerships touted to promote social, economic and political development.

However, it is important to consider that the partnership for development between the Russian Federation and African states is underpinned on the latter’s resources and its potency as a captive market and a polity with visible fault lines that could be exploited for the former’s benefit.

According to the Declaration of the First Russia-Africa Summit, the Russian Federation and African states seek to enhance political cooperation; security cooperation; trade and economic cooperation; legal cooperation; scientific, technical, humanitarian, and information cooperation; and cooperation in environmental protection.

Brief History of Russia’s Interest & Involvement in Africa

Arnaud Kalika documents that Moscow’s interest in Africa has its origins in the late nineteenth century following the Congress of Berlin held in 1885 when European powers divided Africa into colonial combs. With Russia’s exclusion from the annexation process, Moscow never colonized any African territory.

Following the establishment of the United Soviets Socialist Republics (USSR) in 1922 and the convention of the fourth Congress of the Communist International, Kalika notes that Moscow set grounds to wrestle with the capitalist world with discussions on three fundamental issues: “the African question”, slavery, and the responsibility of the United States of America. This marked Moscow’s formal intentions to be a major player in global geopolitics.

During the Cold War, Moscow forged alliances with a number of African states based on both hard power and soft power. Hard power entails the use of military means to spread an entity’s influence. As documented by Jack Griffiths, the Soviet Union increased its supply of arms in countries around the world including Africa. In particular, countries that the Soviet Union supplied arms include Ethiopia, Angola, Algeria, present day Democratic Republic of Congo (DRC), Mozambique, Morocco and South Africa.

Guinea and Egypt were also beneficiaries of the Soviet Union’s foreign policy during the Cold War. Newly independent Guinea (then under the leadership of Sekou Toure) in particular had pronounced relations with the Soviet Union as noted by History.com:

“More troubling for U.S. officials, however, was Guinea’s open courting of Soviet aid and money and signing of a military assistance agreement with the Soviet Union. By 1960, nearly half of Guinea’s exports were going to eastern bloc nations and the Soviets had committed millions of dollars of aid to the African republic. Toure was also intrigued by Mao’s communist experiments in China…”

Moscow’s global ambitions and footprints in Africa were also advanced through soft power. This was primarily done through the People’s Friendship University of Russia located in Moscow. An article titled “History of Russia-Africa links” indicates that the goal of the Friendship University was to educate young people from Africa, Asia and Latin America with some of Africa’s former presidents such as Thabo Mbeki and Jose Eduardo dos Santos having studied at the institution.

Post-Cold War Russia-Africa Relations

The end of the Cold War and disintegration of the Soviet Union into fifteen states including Russia thawed Moscow’s relations with Africa. Collapse of the Russian economy was marked by massive GDP contraction, huge budget deficits, food scarcity, a dysfunctional tax system, a totally weakened currency, and over-the-roof corruption.

Collapse of the Russian economy between 1991 and 1999 affected Moscow’s geopolitical ambitions in Africa. It is documented that the Russian government closed down nine embassies and three consulates, massively cut down the number staff in the Russian Ministry of Foreign Affairs and also did away with aid programmes.

Russia’s economic recovery from 2000 with Vladmir Putin as president renewed her global geopolitical interests. Jakob Hedenskog notes that since 2000, Russia has played an integral role regarding UN peacekeeping operations in Africa by sending troops, expertise and military observers. Russia’s economic recovery post-2000 is also characterized by an increase in the volume of arms and military equipment exported to Africa.

Moscow’s post-Cold War relations with Africa lean toward military support and arms trade. Analysis by the Stockholm International Peace Research Institute (SIPRI) indicates that between 2014 and 2018, Russia accounted for 49% of arms imports to North Africa and 28% to Sub-Saharan Africa. These figures for the two regions were higher than that for the United States of America and China.

For instance, USA arms imports to North Africa between 2014 and 2018 was 15% and 7.1% for Sub-Saharan Africa. China’s arms imports over the same period of time was 10% for North Africa and 24% for Sub-Saharan Africa.

Key Considerations

Russia’s foray into Africa is underpinned on fundamental interests ranging from natural resources to military strategy among others. Such interests inform key considerations for the future or success and/or failure of Russia’s renewed interest in Africa.

Natural Resources

A report by the Swedish Defence Research Agency indicates that Russia has a shortage of natural resources such as titanium, chrome, mercury and manganese and coltan among others. The report cites Russia’s presence in Democratic Republic of Congo (DRC) where it is involved in extraction of coltan, cobalt, gold and diamonds. Russia is also present in Central African Republic (CAR) busy extracting uranium and diamonds. Russia also benefits from Africa’s agricultural produce with one-third of its African imports being agricultural mainly cocoa, coffee, potatoes and fruits. Regarding natural resources, Russia largely benefits and is set to benefit more from its relations with Africa.

Trade

It is estimated that trade between Russia and Africa amounted to about $20 billion in 2018. Of this, Africa imported products estimated to be worth $17.4 billion while it exported commodities worth approximately $3 billion with Russia benefiting to a tune of $14.5 billion. However, analysis by BBC indicates that Russia’s trading relationship with Africa is dwarfed by Africa’s volume of trade with China, India, USA, Japan and the European Union.

Military Cooperation and Strategic Interests

Johan Burger’s article details crucial information in relation to Russia’s military and strategic interests in Africa. Russia has established or intends to establish military bases in Sudan along the Red Sea Coast, Somaliland, and Egypt. Another publication highlights Russia’s military bases in Madagascar, Mozambique, and Guinea. Lately, the Central African Republic intends to host a Russian military base.

Russia’s strategic interests also include establishment (completed or planned) of nuclear plants in Sudan, Ethiopia, and most recently Rwanda.

Debt Burden

Africa was greatly affected by the debt crisis of the 1980s and 90s. Currently, concerns have been raised about China’s debt-trap diplomacy (read here, here and here). Russia could avoid similar criticism by fashioning deals that do not overburden African countries with debts. The Russian government may also learn from Africa’s recent economic relations with the Chinese government. African governments could also avoid loans from Russia due to unpopular opinion among Africans against external borrowing. During the Russia-Africa Summit, the Russian government wrote-off more than $20 billion in debt accumulated by African countries in the Soviet era.

Shrinking Democratic Space?

Moscow has made clear its intentions in Africa; to be of economic and military in nature. However, Russia could as well jeopardize the growth and development of democratic institutions in Africa. Though its post-Cold War relations with Africa are not hinged on communism, certainly Russia could negatively influence Africa’s elections or engender political stability.

Sitati Wasilwa is a political economist and an analyst/commentator on public policy, governance, geopolitics and geoeconomics.

It’s Not Just the Data. It’s Politics

By Sitati Wasilwa

Data has always influenced government operations and in the process used as a tool to score political goals. History indicates that invention of statistical procedures has often been instrumental in redistribution of economic resources and economic planning.

Ideally, national budgets should be formulated based on data collected by government. The accuracy or inaccuracy of the data may lead to attainment or lack thereof of expected policy outcomes. A blog article published by the Center for Global Development (CDG) highlights why bad data is synonymous with African governments. The authors highlight that the political economy of bad data arises from factors such as lack of effective checks and balances on financial and reputational rewards associated with data, political interference and inadequate and inconsistent funding of statistical agencies.

Recently, the Kenyan government presided over a week-long national population census with fundamental concerns raised about personal data security and credibility of the exercise. A few days before the onset of the national population census, Uhuru Kenyatta assented the Statistics Amendment Bill into law (Statistics Act 2019) arguably to counter opposition to credibility of the process and outcome.

Need to Worry

A new clause in the Statistics Act 2019 allows for the cancellation, revision or adjustment of data deemed to be inaccurate. Well, this may quickly address the anomalies of bad data but considering the big brother role of government, there is need to worry about the eventuality of data manipulation. Manipulation of data (data on population, food security, Gross Domestic Product, inflation, affirmative action, public debt, wage bill, education etc.) will lead to formulation of distorted policies or lack of accountability from the national government.

Kenya’s rising public debt and consistent failure of the Jubilee administration to deliver on its big promises set stage for manipulation of data to gain political capital. Latest statistical information from the Central Bank of Kenya indicates that the total public debt amounted to Kshs.5.809 trillion as at June 2019.

It will not be a surprise in case the national government, the Executive in particular, resorts to present manipulated data to indicate that all is well in regards to the level of public debt. This would involve understating or misreporting the actual amount of public debt.

Why public debt? It is spiraling upwards at an alarming rate and the performance of the economy is not sufficient to offset it, and politicians serving in the corrupt Jubilee administration would want to score political goals as far as borrowing is concerned with the 2022 general elections fast approaching.

GDP statistics may also be doctored by the regime ostensibly to paint a rosy picture to current and prospective ‘development partners’. ‘Development partners are religiously obsessed with fanciful GDP growth rates and the Executive would easily manipulate GDP data either to borrow more or not to scare the Chinese government and other debtors, on Kenya’s inability to meet its debt obligations. Lorenzo Fioramonti documents in his book, “Gross Domestic Problem”, that GDP is “an extremely powerful political tool” and “also a powerful propaganda tool”.

Assuring the Chinese that the debt mill is not running out of steam would be important for guarding Kenya’s sovereignty as Beijing may want to take hold of the latter’s resources such as the port of Mombasa or the oil in Turkana among others. China took over Malaysia’s key infrastructural project after Malaysia failed to service Chinese loans.

Last year, concerns were raised about the possibility of the Chinese government taking over the port of Mombasa and the then Auditor General Edward Ouko weighed in on the matter pointing out the possibility of Beijing annexing the infrastructural facility.

Kenyans have to be more worried about their privacy considering failed political projects like the Huduma Number. Huduma Number is undemocratic. The move by the Executive to force people to register for a dubious project even with a court order stating that the registration should be voluntary negates the rights and freedoms of the masses.

Dim Future?

In a world where data mining is a cash cow, Kenyans risk having their personal information misused. Cambridge Analytica demonstrated how to profit from data in the era of fast-paced technological advancement. Never mind that the firm was hired by the Jubilee administration to exploit Kenya’s socio-political fault lines in the lead up to the 2017 general elections.

The 2022 general elections may witness an intensified approach in reference to the use of big data as a political strategy. But who cares? The big brother government? Certainly not. Parliament no longer advocates for the goodwill of the masses. Although the Huduma Bill promises to protect personal data, the government cannot be trusted. Selfish interests trample collective interests. And government mandarins are without doubt more selfish.

Having the right data and good intentions would help the government and its agencies plan efficiently especially on food security, education and healthcare. Planning is a political process and data is an effective political and propaganda tool which could easily sabotage democracy. Kenya could as well be a statistic of politicizing data.

The writer is a political economist and consultant on governance and public policy. He blogs at sitatiwasilwa.home.blog and savicltd.wordpress.com (sitatiwasilwa13@gmail.com).

On Kenya’s Political Economy of Inequality, Class Struggle and the Deep State

By Sitati Wasilwa

Karl Marx, branded as The Angry Oracle, writes in The Communist Manifesto that “the history of all hitherto existing society is the history of class struggles.” This is absolutely true considering that human societies in the course of time have had distinct power relations based on socioeconomic inequality; the rich or wealthy individuals dominating the low-income individuals.

As much as Marx is vilified by the dreaded capitalists, rogue capitalists doubling up as notorious neoliberals for that matter, his contributions to understanding the economic, social and political organization of man is highly regarded. Case in point is an article about Marx’s relevance published by the mainstream The Economist magazine in 2018 while marking the bicentenary of his birth.

The eventual rise of neoliberalism in 1970s and 80s, and thereafter its spread around the world by the Bretton Woods missionaries castigated any policies hinged on Marx’s ideas. The omniscient policy missionaries of the World Bank, the International Monetary Fund (IMF) including the United States’ Treasury Department proclaimed a new age of prosperity by advocating policies such as austerity (cutting government spending and increasing taxes), deregulation, trade liberalization and privatization with market fundamentalism serving as the common denominator.

Kenya is just but one of the states forced to embrace the ideals of neoliberalism by the hawk-eyed and hard-nosed policy merchants shuttling globally to proclaim economic salvation on the surface but imperialistic adventures underneath.

Manufacturing people’s consent is one of the surest ways to exert an entity’s dominance. The neoliberals succeeded in promoting inequality by preaching the relevance of their policy maxim by identifying the ‘Chicago School’ as the benchmark for economics curricula around the world. The outcome was the inebriate adoption of the ‘Chicago School’ curricula in the teaching of economics that religiously emphasizes free markets, a gravely utopian notion.

And sadly that is the kind of economics taught at Kenyan and African learning institutions. Dedicated faithful gloriously teaching neoliberal economics without any mark for critical thinking intentionally avoid teaching students about the relevance of the so called heretics such as Karl Marx, Thomas Sankara, Frantz Fanon and others who would help promote the understanding of class differences and the subject matter of inequality.

Noam Chomsky in his book “Who Rules the World?” writes on inequality while making reference to the exclusion of the low-income individuals and non-political class from the political system. According to Chomsky, the tiny sector at the apex of a political system largely determines the policy choices pursued by governments. Certainly, whoever controls the political system controls the mechanisms for wealth creation, and ultimately the functioning of an economy.

If Chomsky’s account of power relations is anything to go by, then Kenya is a typical example of a country reeling on inequality. According to Oxfam International, 0.1% of Kenya’s population (approximately 8,300 people) owns more wealth than the bottom 99% (over 44 million people).

Of course Kenya’s case demonstrates that prosperity after all is not a trickle-down affair, where excesses of the tiny top in terms of wealth accumulation does not guarantee collective socioeconomic success. Doubts cast on the relevance of the Gross Domestic Product (GDP) as a measure of prosperity by a significant number of Kenyans underline why the country’s much touted economic prosperity is more of a fairy tale on one hand and political rhetoric on the other.

Lorenzo Fioramonti, in his book “Gross Domestic Problem”, notes that GDP is more than just a number since it also serves as a powerful political tool. All states, Kenya included, often use GDP figures to paint a rosy picture of how the ruling parties or administrations (regimes) are working so hard to improve the economic well-being of the masses.

Additionally, a 2009 report by the Beyond GDP Commission indicates that GDP should be considered as a measure of market production and not as a measure of economic well-being of which governments have embraced the latter. The report cautions that interchanging the two measures in view of GDP would lead to wrong policy decisions due to distorted information about people’s economic well-being.

Recently, the Kenya National Bureau of Statistics (KNBS) released the 2019 Economic Survey which indicates that the country’s economy expanded by 6.3% in 2018. It is best to consider the figure as growth recorded in view of market production and not an improvement in the economic well-being of Kenyans.

Notably, a significant number of Kenyans casted doubts on the importance of the ‘6.3% expansion of the GDP’ when the cost of living is currently high, and they are right.

Prevalence of growing inequality and an intense class struggle in Kenya are hardly reflected in the ‘impressive’ GDP growth rates the country has realized in the last decade. Rampant embezzlement of the public’s resources, money laundering, the gambling and betting craze serve as indications of a country defined by class struggle and inequality.

High rates of unemployment and underemployment are pointers of an economy that only works for the few and negates the ‘beautiful’ statistical data cherished by the regime’s mandarins especially on the significance of GDP expansion.

Difficulties by the commons in accessing high quality education, better healthcare, clean water and humane sanitation, and improved food security and nutrition justify Kenya’s GDP growth as merely political rhetoric.

Various reports indicate that Kenya is a hot-bed of money laundering and illicit financial flows. A 2017 report by the African Development Bank indicates that a total of US$10.6 billion had been stashed in foreign banks as from 1970 to 2010. In 2018, one of the leading local dailies uncovered the operations of an international money laundering syndicate based in Kenya.

Another local daily also published an account of money laundering activities while primarily referring to the content of a report published by the Bureau for International Narcotics and Law Enforcement Affairs on International Narcotics Control Strategy.

Weeks ago, a leading Kenyan think-tank released a report implicating Kenya and Uganda as conduits for illicit financial flows fueling South Sudan’s war economy.

Incidences of tax evasion in Kenya by foreign entities and local entities associated with politicians and political wheeler-dealers, and tax increases by the national and county governments serve to widen the inequality gap by enriching few individuals at the expense of the commons.

Addressing inequality should be at the centre of social and economic policies pursued by the national and county governments. If not, the power of the people should fervently advocate for an all-progressive, all-inclusive economic system.

But can this happen? The voting patterns of Kenya’s electorate tell it all. Furthermore, the reality of state capture with invisible hands determining the outcome of elections and who ought to ‘benefit’ from the government would obviously derail any course dedicated to addressing inequality.

Hope cannot change the Republic’s fortunes in view of inequality, class struggle and the actions of the deep state but a resilient and focused public keen on cementing its authority as provided by the Constitution: “We, the people of Kenya…”

Sitati Wasilwa is a political economist, a consultant with Savic Consultants, and a youth leader at Kenya YMCA. (sitatiwasilwa13@gmail.com).

Governing by Lying: On the Death Cards of Drought, Deceit & Delinquency

By Sitati Wasilwa

“Everyone is entitled to his opinion, but not to his own facts.” – Daniel Patrick Moynihan

Kenya’s current administration is without doubt an archetype of incompetence and delinquency based on the high levels of misgovernance witnessed over the last six years.

A legendary distinction of the Jubilee administration in comparison with the country’s past administrations is governing not just by lying, but by repeatedly doing so even when Kenyans are dying and suffering because of drought.

In an assemblage of what may be termed as “a grand presentation and sanctification of alternative, erroneous and disturbing facts”, the administration’s purported “machinists” denied any deaths resulting from drought that has largely affected Turkana and Baringo counties as well as counties in the Northern Frontier region.

Contrary to the “facts” presented by the “machinists”, there is undeniable evidence that Kenyans are dying because of the ravaging effects of drought.

Development Agenda

Featured twice on Jubilee’s agenda for the much touted but hardly evident development is creation of a food secure state; first through its manifesto, “Agenda for Kenya 2013-2017” harmonized with the second medium-term plan (2013-2017) of Vision 2030; and secondly, through its 2017 manifesto integrated with the third medium-term plan (2018-2022) commonly known as the “Big Four Agenda.”

A vague and totally empty campaign promise that now offers comic relief to politically conscious citizens regards the expected miraculous productivity of the Galana-Kulalu Food Security Project, the regime’s much acclaimed signature programme.

While launching Jubilee Party’s election manifesto in 2017, its deputy party leader William Ruto, in a utopic frenzy, remarked that the Galana-Kulalu Food Security Project would produce 30,000 bags of maize each month beginning July 2018. This remains a politically fat and equally irrelevant statement.

The Galana-Kulalu Food Security Project is one of the regime’s cash cow, a soon-to-be white elephant. A recent article revealed the irrigation project as Jubilee’s equivalent of the infamous Goldenberg Scandal, a fact confirmed by an unnamed wheeler-dealer of the administration.

Unsurprisingly, the irrigation project has been dogged by corruption. The Auditor General has raised fundamental questions about the usage of finances allocated to the project. Green Arava, an Israeli firm contracted to develop a model farm at the irrigation scheme, threatened to abandon its operations this year after not being paid as per the contractual agreement.

Additionally, the regime’s intention to construct dams with the aim of enhancing food production in regions perennially affected by drought and famine has turned out to be a scandalous affair. Ridiculously and unintelligently, the Cabinet Secretary in charge of Agriculture claims that thirty one dams will be constructed before the onset of the long rains. Are Kenyans – politically conscious Kenyans – that stupid to be lied to?

Deceitful PR: Of Food Relief Pilgrimages

To be a gallant politician one must be a master opportunist, a firm believer in propaganda and a “saviour” of the poor, needy and desperate masses.

Close to six decades since the British imperialists ceded political power to Kenyans, ordinary folks are still economically impoverished because of the invisible hand of the tiny elite that has strangulated the country’s economy by plundering resources.

The politico-economic tyranny occasioned by the tiny elite has dominated Kenya’s post-colonial history, a true indication of lack of economic and political independence for ordinary Kenyans. The success of this tiny elite is through the creation of a kleptocratic political monopoly that oversupplies short-term solutions and undersupplies long-term solutions.

We’ve got to remember that the yearly food relief pilgrimages are consequences of short-termism fashioned by Kenya’s tyrannical tiny elite.

Such short-termism keeps the masses in a perpetual state of dependence on the tiny elite and acts as fodder for gaining political capital. Acts of benevolence especially by politicians in helping desperate and poor citizens qualify as deceitful public relations exercises, and such is the case with the food relief distribution activities in the affected counties.

Voting & Political ‘Misleadership’

A country’s economic well-being or lack thereof depends on the nature of its political leadership. But the nature of the political leadership is an outcome of the voting patterns of the majority, and a reflection of the thought processes of a significant number of citizens.

High affinity to short-term solutions meant to address perennial challenges such as drought and famine would be avoidable only if the republic’s politics was based on relevant political ideologies. But as Bryan Caplan notes in his book, The Myth of the Rational Voter, “in real-world political settings, the price of ideological loyalty is close to zero…” No wonder ideologically deficient politics is the order of the day in Kenya.

A handful of Jubilee administration supporters who voted twice in 2017 to endorse the regime’s corruption and misgovernance have suddenly turned into its critics. This is pretence and ignorance.

In fact, Caplan further notes in his book that “voter ignorance opens the door to severe government failure”, and Kenya would have avoided such a failed government if only voters made right decisions at the ballot by not ignoring the terrible record of most of the politicians. 

County governments especially in the regions affected by drought need to prioritize agriculture which is a devolved function.

The only way forward for Kenya to avoid embarrassing situations like deaths resulting from drought, and food relief pilgrimages is to collectively root out the corrupt, tyrannical and imperialistic tiny elite that promotes state capture hence political ‘misleadership.’ Is this possible? Only if the misled significant majority embraces progressive thinking.

Of the Chinese Fish, Imbalanced Trade, Debt & Market Captivity

By Sitati Wasilwa

“Debt is a cleverly managed reconquest of Africa.” – Thomas Sankara.

“He who feeds you, controls you.” – Thomas Sankara.

While acknowledging the importance of borrowing as a measure aimed at financing key projects and economic activities for a country, the primary concern remains the sustainability of debt, and how debt financing affects the overall economic performance.

With a number of debt analysts, for instance the Jubilee Debt Campaign, pointing out to an impending debt crisis for African countries, it would be fundamental to first consider the politics and economics of external debt, and secondly, the conditionalities attached to it.

In regards to the politics and economics of external debt, the late Thomas Sankara aptly summarizes it in terms of the reconquest of Africa. Essentially, loans advanced by various entities are repaid with interest, and this generates income for the creditors. As such, more Chinese debt for the African countries means more income for China, a similar case with the World Bank and other creditors.

Politically, geopolitical ambitions fuel the need for the formation and adoption of the so-called mutual trading partnerships. Elementally, such partnerships largely benefit the foreign entities that issue out loans to the developing economies.

Africa is a card shuffled by foreigners for ages resulting in dehumanizing statements such as “whoever controls Africa controls the world.” From the Arab slave trade, the Trans-Atlantic trade, colonialism and currently the neo-colonialism era, foreigners dictate the pace of Africa’s game at the global stage.

Part of the foreigners’ games of strategy include foreign aid whose failures override its successes. Advancing foreign aid in form of loans and grants comes attached with conditionalities. The World Bank and the Western states especially in the 1980s and 90s often offered foreign aid with calls for adoption of democratic institutions and market-oriented economic policies. This changed following China’s increased presence in Africa with African countries preferring to partner with the Dragon on the account of issuing loans without conditionalities.

The perception that the Chinese loans come with no conditionalities is a lie! It is commonsense economics that there is no free lunch and there must be a trade-off between cooperating entities. Therefore, for China, issuing loans to African countries is not enough. Access to African markets is a condition inherently pegged on the Chinese loans.

Recently, Uhuru Kenyatta banned the importation of fish from China arguing that the local fish market was on a free-fall. In response to the supposed ban, China, through her ambassador to Kenya Li Xuhang termed it as a trade war while threatening to impose trade sanctions including cutting funding for the economically unviable standard gauge railway line. However, the threats by the Dragon never took effect following the suspension of the ban by the Kenyan government.

Back to the moral sentiments of the indefatigable Thomas Sankara, whoever feeds you controls you. Signing of economic partnerships between African countries and foreign entities involves so many underhand deals that are never disclosed to the public. Such covert deals, in the case of China, seek to create markets for the Chinese goods, and employment for the Chinese people. The government’s suspension of the ban on Chinese fish and China’s threats exemplify the Sankarist view on foreign aid, and dispel the notion that China’s loans are free from conditionalities.

Ordinarily, trade relationships between two countries need to be a win-win affair but the so-called economic partnerships propagated by China can best be classified as highly parasitic and imbalanced.

Take a look at the trade statistics between Kenya and China and notice how it is highly imbalanced. According to the July-September 2018 issue of the Policy Monitor magazine published by the Kenya Institute of Public Policy Research and Analysis (KIPPRA), Kenya imported Chinese goods worth Kshs.390 billion in 2017 and exported commodities worth Kshs.9.9 billion to China in the same year.

An anachronistic plan hatched by China in 2016 to lure the East African Community member states to signing a free trade agreement with her indicates an aggressive ambition by the Asian nation to capture and control the markets of the region.

Luckily, the Kenyan government rejected the trade arrangement which would have led to the death of the Kenyan industries especially the medium and small microenterprises. In as much as this move may be termed as protectionist, it is necessary that the Kenyan government adopt highly protectionist policies to promote the growth and development of the manufacturing sector, key in creating a high number of employment opportunities.  

Free trade favors advanced economies and leaves the poor, developing countries worse off. China’s intentions to convince the East African Community member states to sign the free trade agreement ignores the global economic history of development. China and the Asian Tigers realized faster economic growth and development on the basis of policies protecting the infant industries, the same case with the now classified developed economies like the USA, Germany, Britain and others.

Going back to the reaction by the Chinese ambassador to Kenya, he bluffed that Kenya’s ban on imported Chinese fish was against “the principle of free trade, the rule of law, adherence to bilateral agreements and the rules of the World Trade Organization (WTO).” All these aforementioned trade doctrines will never work in favor of developing countries including Kenya because of their skewed nature working to the advantage of the advanced economies.

Fast forward, was the ban on the imported Chinese fish doomed to fail? Possibly yes. In June this year, the not-so-competent Cabinet Secretary in charge of the Ministry of Agriculture, Mwangi Kiunjuri, came to the defense of the importation of the Chinese fish stating that the supply in the local market never met the demand. Quite logical.

But there are fundamental issues which if addressed would ward off the importation of fish from China. The first issue is to incentivize the production of fish especially in geographical areas where fishing is one of the main economic activities. Additionally, fish farming has to be encouraged but this should be among communities familiar with fishing.

As matter-of-factly, the Kshs.60 million fish processing factory built in Nyeri County in 2015, following the introduction of fish farming in the region as part of the 2009/2010 Economic Stimulus Programme (ESP), is now considered to be a white elephant with its location among a community not accustomed to eating fish heavily influencing its collapse.

Lack of initiative by the Jubilee administration to address the root cause of the increased importation of fish from China is deliberate. Kenya is China’s captive market and with the Chinese loans and/or debts, the Mandarins will dictate what they want in exchange for their financial and technical assistance.

Failure of Kenya and other African countries to learn from history is the bane for their economic floundering. Western powers considered African countries to be captive markets during the colonial era and thereafter in the post-colonial period. The same script is being played by China; on advancing ‘cheap’ loans and controlling the markets. This is neo-colonialism and lack of economic independence.

Therefore, increase in the importation of Chinese fish has got more to do with Kenya being a captive market as a consequence of borrowing finances from China than the purported high demand and lower supply in the local fish market.

When Austerity Measures Become the Answer: On Statements of Convenience

By Sitati Wasilwa

“…But we still face a financing gap. This measure will not suffice to balance our budget, as required by law. It is my responsibility to put Kenyans first. I must balance between short-term pain and long-term gain.” – Uhuru Kenyatta.

“We must grow the economy, and we can only do this through additional taxes, so Kenyans must dig deeper into their pockets for this to happen.” – Henry Rotich.

When desperate situations dictate that desperate measures be adopted, then wobbly, wanton statements of convenience such as the above two become common.

I still find it ridiculous that members of the general public are up in arms against the proposed taxation measures contained in the Finance Bill 2018 signed into law by Uhuru Kenyatta.

Any sober Kenyan ought not to be surprised by the Executive’s desperate attempts to clutch at a straw considering that the Jubilee administration has a record of being in favour of contorted economic policies, a clear demonstration of its incompetence.

Economic mismanagement under the Jubilee administration is no longer news with the undemocratic process of passing the Finance Bill in the National Assembly sending a signal of a broke government managed by masters of “brick and mortar development.”

“Brick and mortar development” in this case refers to the development narrative fashioned by the current administration that hugely focuses on very costly infrastructural projects with lower returns on investment than say agriculture whose potential in terms of reducing poverty levels is quite high.

Kenya’s public finance is faced with the problem of unnecessary spending which the Executive is running around like headless chicken to curb.

It is on record that the Jubilee administration has adopted the liking for huge budgets with massive deficits. Financing these massive deficits necessitated increased borrowing in the name of prioritizing flagship mega projects none of which seems to have yielded any returns or promising to do so in the long-term.

Good examples of such projects include the standard gauge railway line and the Galana-Kulalu food security project whose dismal performances raise serious doubts on whether feasibility studies were conducted before being commissioned.

Just like business enterprises or organizations which collapse majorly due to poor cash flow management, the case is not different for countries which are brought down because of poor management of public finances.

Each spending ought to be accounted for but owing to Kenya’s disturbing public finance history then the misses in regards to spending are highly visible. It is well known that a third of the country’s budget is never accounted for, a fact ignored by the Executive and Parliament, and leads to billions of shillings being lost.

Big budgets have no merit at all if the process of accountability is not taken seriously. In as much as the Jubilee administration would want to pretend to be keen on driving the development agenda, the truth of the matter is that development cannot be achieved by failing to take into account the fundamentals that occasion socio-economic progress.

Fundamentals such as allocating financial resources to sectors where the poor eke out their living like the informal sector in addition to running a clean, mean and lean government are prerequisites for moving all people up the escalator.

One of the unnecessary narratives sold at the moment by the Jubilee administration is the legacy of one Uhuru Kenyatta premised on the 2022 succession politics. I believe his legacy was framed during his first term in office and there is nothing much he can convincingly do to be in the right books of Kenya’s politico-economic history.

With the austerity measures targeting to cut spending by Kshs.52 billion, there are grave concerns on how Treasury will plug the Kshs.600 billion deficit for the current financial year. The country’s economic woes in regards to raising revenue and spending primarily stem from the borrowing which the Jubilee administration has used as a tool to pursue its development agenda hinged on mega projects.

Economically speaking, the most suitable way to address an economic challenge is to identify its root-cause. For the current situation, the root-cause lies first in the administration’s big budgets with huge deficits and secondly, the excessive borrowing.

Fronting austerity measures would not be the ideal policy prescription to curb the budgetary constraints. Rather, the most viable policy at this time would be to heavily cut on borrowing though it is a policy that can’t be used in isolation. It can best be used by combining it with significant cuts on spending. 

Governments facing financial crises have always turned to austerity policy measures as shock therapy to address their economic difficulties. Austerity measures hardly lead to economic progress since people’s levels of income in the economy do not rise in line with the tax increases. In fact, considering the tax increases that lead to a rise in the cost of living, people’s level of income actually falls.

Historically, when governments are suddenly compelled to pursue austerity policies there is no doubt that they are staring at economic crises.

Good politics, as they say, is bad economics. This has highly been exemplified by the Jubilee administration. Amid concerns that the debt level was spiraling upwards at an alarming rate due to excessive borrowing, the issue turned political with the administration defending itself on the basis of various globally approved metrics.

Firstly, the administration’s top guns and ignorant supporters would state that the World Bank’s threshold for public debt to GDP ratio for developing economies is 74%. Kenya’s current debt to GDP ratio is 60%. Secondly, unintelligent comparisons of the country’s public debt with that of other developed or strong emerging economies would be put up.

There is a fundamental problem when a country spends half of its revenue on debt repayment. Such is Kenya’s case with Treasury having allocated Kshs.870 billion towards repayment of debt against targeted revenue of Kshs.1.8 trillion for the 2018/2019 financial year.

Elementally, the World Bank’s metric on debt to GDP ratio ignores the fact that the 74% has to be considered in the context of an economy’s productivity. Kenya’s debt repayment taking half of the revenue is a sign of the economy’s low productivity.

Drawing comparisons between Kenya’s debt level with those of advanced economies misses the mark. More developed economies are highly productive and repay their debts at lower interest rates unlike Kenya.

As a matter of fact, comparing the debt situation with say USA (105% of GDP) or Japan (253%) or any other advanced economy is a statement of convenience. Folks fond of propagating this argument would never want to mention some of the African countries whose economic fortunes faltered with relatively high debt levels.

Ghana, for instance, experienced financial problems when its debt to GDP ratio hit above 65%. Mozambique’s ratio was 115% as at 2017 with the country’s economy grinding to a halt forcing government officials to endlessly knock the doors of the International Monetary Fund (IMF). Zambia’s debt to GDP ratio in 2017 was 62% yet the country is experiencing economic difficulties due to debt distress. These are examples of what the supporters of the regime failed/fail to mention.

Reality of the austerity measures has suddenly enraged the administration’s supporters to regret their voting decision. This is pretence. Jubilee has messed up the economy from 2013 and it has nothing new to offer Kenyans except presiding over more economic misery.

Uhuru Kenyatta definitely lied about short-term pain and long-term gain. Kenyans should instead prepare for long-term pain with the gain not in any way in sight.

Rotich bears the tag of Kenya’s most incompetent Treasury chief since 1963. Additional taxes cannot grow the economy, instead they are bound to increase inequality and make the society worse off.

But even as Kenyans complain loudly about Jubilee’s incompetence it should serve as a reminder on why elections are moments to evaluate those in power and vote them out for their failures. Let the administration increase taxes the way it wants after all it is the government of the so-called majority that voted without serious thinking.

Sometimes enduring moments of pain does not necessarily lead to making a gain, and that is the case when administering shock therapy (austerity policy prescriptions) to a mismanaged economy.

On IMF’s Visible Hand: A Look into the Outcry on the Fuel Prices, Policy Missteps & the Dishonesty about It.

By Sitati Wasilwa

It’s a herculean task to be a Kenyan, a situation exacerbated by the policy missteps and misgovernance of the Jubilee administration.

From the plundering of trillions of money, the implementation of cost-ineffective projects, the dominance of two ethnic communities in government, a dejected and highly unemployed youth, hoarding of maize, consumption of poisonous food products, wanton increase in taxes and many others, it requires the common Kenyan some world-class grit to go through all these necessary evils.

But considering the concerns raised by the Kenyan public in regards to the aforementioned issues, one should not forget the dishonesty that is conveniently sidestepped while debating on these policy matters.

A good example is the debate on the recent increase in prices of petroleum products which has to be revisited while drawing out the facts and fallacies, the faults and dishonesty about it.

General Understanding

A general understanding of the visible hand of the International Monetary Fund (IMF) in view of Kenya’s situation is elemental bearing in mind that this debate is full of misinformation.

To begin with, it would be important to look at the primary role (s) of the IMF for the benefit of the general public and the pseudo-economists.

IMF has three main functions: monitoring of economic and financial developments and offering policy advice to prevent economic/financial crises; offering loans to countries facing balance of payments difficulties; and provision of technical assistance and training in line with its scope of work.

As matter-of-factly, the institution’s Stand-By Arrangement (SBA) and Standby Credit Facility (SCF) are primarily lending frameworks that are intended to help countries facing the balance of payments difficulties.

Essentially, the balance of payments difficulties refer to a situation whereby a country is importing more goods, services and capital than what it is exporting. Thus, the SBA is a lending framework that allows the IMF to provide financial assistance mostly to the middle-income and advanced economies in the event of a financial crisis. On the other hand, the SCF is a framework that allows the IMF to provide financial assistance to low-income countries with the goal of correcting the short-term balance of payments problems.

Kenya’s agreement with IMF comprises of an SBA of $989.9 million and SCF of approximately $494.9 million.

Fundamentally, access to the SBA and SCF is based on the criteria determined by the IMF and at its minimum, the consenting countries are expected to implement conditionalities fronted by the Fund and pursue policies aimed at correcting the balance of payment problems.

Genesis of the Current Situation

In 2013, the Executive through The National Treasury and the Central Bank outlined a raft of policy measures meant to improve revenue collection and general economic performance of the country.

On 28th of March 2013, through a letter signed by the Treasury Cabinet Secretary Henry Rotich and then Central Bank Governor Njuguna Ndung’u, the Executive was committed to full implementation of the proposed changes to value-added tax (VAT).

Among the proposed changes to the country’s VAT structure was to do away with VAT exemption on petroleum. Parliament’s intervention saved face as the VAT proposals were put on hold for three years till 2016.

Amendments to the Finance Act 2016 on August 31st 2016 extended the exemption of the VAT on petroleum products for two years with the exemption coming to an end on September 1st 2018.

Subsequent extensions by Parliament to postpone the implementation of VAT on petroleum products among others can only be termed as symptomatic responses to the hazy economic policies pursued by the Jubilee administration.

Ascending to power following the highly divisive 2013 general elections, the Jubilee administration was out of favour with half of the Kenyan citizenry and the West. Therefore, it was out to mend fences by embarking on ambitious infrastructural projects which would ordinarily require to be highly financed either through borrowing or revenue collected.

Institutionalization of various infrastructural projects was intended to improve the administration’s political fortunes. With the desire to increase the collected revenue, the Executive engineered the move to restructure the VAT system.

Being in good books with the IMF would aid the Jubilee administration just in case Kenya’s economy was to be hit by a crisis. We should not forget that IMF and extensively the West have proved to be the chief lenders of last resort when economies of poor countries experience economic crises.

In any case, if the Kenyan economy was to be hit by an economic crisis under a Jubilee administration not in good terms with IMF, then regime change – a common foreign policy tool fashioned by the West – would possibly be sanctioned.

With the country’s public debt level running into headwinds, Kenyans are left with no choice but to pay high taxes to finance the costly mega-projects which make little economic sense, though politically sensible to the current administration.

Rationale of VAT on Petroleum Products

No rocket science is required to know whether the government is broke or not. Levying VAT on petroleum products is meant to raise more revenue for a Republic whose Executive and Legislature have failed in view of essentials of public finance.

Details captured in an IMF Country Report dated March 2018 indicate the commitment of the Kenyan government in implementing a number of policies.

Key among these policies include cutting expenditure, increasing revenue and the removal or significant modification of the interest rate caps. In regards to cutting expenditure, lower-priority capital projects are not to be financed.

Few weeks ago, Uhuru Kenyatta apparently issued an order stopping any new projects from being sanctioned with majority of Kenyans thinking it is a move meant to curb corruption. Essentially, the order is rooted in the administration’s commitment with the agreement reached by IMF.

Levying of the VAT on petroleum products is expected to generate Kshs.71 billion in revenue. Considering, however, the amount of finances lost through corruption, tax evasion and unnecessary tax holidays, then Treasury is clearly missing the boat.

Treasury expects that the revenue to be collected this financial year would amount to Kshs.1.92 trillion. At the beginning of the last financial year (2017/2018), Treasury targeted to collect Kshs.1.7 trillion in revenue before revising the estimates to Kshs.1.4 trillion. For the last five financial years, Kenya Revenue Authority (KRA) has never been able to achieve its targets in regards to revenue and the current financial year won’t be an exception.

Rotich’s bravado not to concede to the public’s outcry on the increase in prices of petroleum products is an indication of how Treasury is desperate to raise funds bearing in mind that grave concerns have been raised on the administration’s zeal for borrowing.

Dishonesty

Inherently, the current uproar on the fuel prices and the administration’s hell-bent nature to effect the VAT on petroleum products is a game of absolute dishonesty.

Firstly, the Executive is dishonest on this policy issue. Was it not aware about this policy that would occasion a rise in the cost of living? This is incompetency at its best.

Secondly, the Treasury chiefs are a bunch of dishonest bureaucrats. For the last five years, the country’s budgets have been characterized with massive deficits. Though revenue collected has significantly increased, it is the nature of KRA to continually miss targets, and this has raised concerns on Treasury’s fiscal approach and KRA’s inefficiency.

A 2015 joint report by the African Union and the Economic Commission for Africa pointed out that Kenya loses over Kshs.600 billion as a result of tax evasion. In six months leading to August 2018 tax evasion at the port of Mombasa, as reported, amounted to Kshs.100 billion. In a report published by Oxfam in January 2017, it is estimated that Kenya loses over Kshs.100 billion annually due to tax exemptions given to global corporations.

One should also consider that a third of the national budget is never accounted for then think about the billions of shillings lost. So, who is fooling who? The government should be busy sealing all these loopholes that lead to trillions of money being lost instead of pursuing policies that will ultimately generate unintended consequences. Treasury’s ineptness certainly means that looking at the bigger picture is a mirage.

Parliament as usual is full of dishonest individuals who are starkly corrupt and lack any intellectual capacity to prioritize weighty policy issues. Did Parliamentarians not foresee the impending rise in prices of petroleum products? Some have come out making claims on how the Treasury duped them to passing the VAT Act 2013 on the account that the country was expected to produce oil which would stabilize domestic petroleum prices.

Lack of Parliament’s independence is a factor that has incapacitated the institution from representing citizens in a dignified manner. Parliament operates under the wings of the Executive particularly for the ruling party, the Jubilee Party. Rigorous debates cannot take place under such conditions.

Voters are also to be blamed in regards to this game of dishonesty. It was pretty clear that the economic policies of the Jubilee administration were deeply flawed but this hardly convinced a significant number of voters to vote otherwise.

Elections need to be a matter of assessing policies aimed at improving the lives of the citizens. In the event that policies pursued by the ruling political formation lead to more misery than prosperity, then morally such an entity does not deserve to be voted in.

The IMF is dishonest about the austerity policies that it recommends for countries. Historically, IMF has fashioned this policy misstep which ignores the fortunes of residents of countries that they push to adopt policies that cut spending and raise taxes.

Spending may be reduced especially for the case of Kenya where public funds are largely wasted. Increasing taxes raises the cost of living but the IMF seems to be hell-bent in fronting this policy recommendation.

Implications & the Future

An increase in the prices of petroleum products is bound to trigger ripple effects across other sectors of the economy and social structure. Prices of other products will definitely go up as a result of the increase in the transportation costs. With the income earned by Kenya’s residents expected to be fairly stagnant then inflation will certainly occasion a rise in the cost of living, a diabolical economic and social outcome.

Furtherly, postponement of levying VAT on petroleum products would definitely lead to a catch-22 situation. In the event that Uhuru Kenyatta assents to the Finance Bill 2018, it would just be two years before we voice out our disappointment at the economically imprudent Jubilee administration.

Failure to implement the VAT on petroleum products, in CS Rotich’s words, will occasion difficulties in financing the country’s budget thus necessitating more borrowing or increasing the VAT rate on other products from 16% to 18%.

Either way, my hunch is that VAT will soon be levied on other non-VATable products as the Treasury desperately seeks to raise finances through taxation with the room for further borrowing fast contracting.

Politically, there will be no consequences going by the nature of majority of Kenyans who forget rather quickly. If a significant majority of the Republic’s voters would be voting on the basis of policy proposals and performance of the incumbents, perhaps the noises being made would only be grave wishes.

Voting is not enough. Constitutionally, citizens are empowered to air their concerns on issues affecting them. I long for the day when Kenyans will march on the streets en masse to demonstrate against nefarious policies pursued by government institutions.

On how not to manage the economy, CS Rotich and the Presidency offer crucial lessons for historical purposes. Running an economy depends on getting the fundamentals right. Trading-off an economy’s cost of living with poor, inefficient and punctured policies is a validation of getting it wrong on the fundamentals. The goose is cooked!

On Kenya’s Oligarchy, Twisted Democracy & Dashed Hopes of the Third Liberation

By Sitati Wasilwa

A year after Kenyans took to the polls, a number of political events have occurred, and have shaped the country’s political landscape in some respects.

From nullification of the outcome of the presidential election, the repeat presidential election boycotted by Raila Odinga, the historical swearing-in of Odinga as the people’s president, the muzzling of dissenting voices by the administration of the day to the unexpected handshake, it’s been a political melodrama of sorts.

Reflecting on the pre-election and post-election happenings, Kenya comes out as a flourishing oligarchy and a failing democracy, a twisted one for that matter.

Fundamentally, a democracy is a political system characterized by a free, fair and credible electoral process. On the other hand, the electoral process in an oligarchy comes out as fraudulent, fake and crooked.

Basing on the credibility of the electoral process in the lead up to the 2018 general elections, it is correct to assert that Kenya’s trajectory towards a vibrant democracy is twisted.

Historically, Kenya’s political system, and extensively the economic system, only benefit few individuals who control the means of production and the balance of power. This is an explicit manifestation of an oligarchy.

Kenya’s pre-supposed democratic tendencies, to say the least, are far-fetched and illusionary. Politically and economically, the majority, whom democracy accords the right to call the shots, have never had their way in the country with the exception of the formation of the NARC administration and the institutionalization of the current constitutional dispensation.

An honest rumination in view of Kenya’s political and electoral malfeasance wouldn’t take place without weighty consideration of the compromised Independent Electoral and Boundaries Commission (IEBC), the role and influence of the Western states – the so-called masters and defenders of democratic ideals, the excessively irrational average voter, the highly deceptive public relations (PR) and political consultancy firms, and the Third Liberation whose conceptualization is fast waning.

Basically, an institution is as good or bad as the people charged with the mandate to steer it. From the family – the basic unit of social organization, a school, an organization, a football team and a government, competence is a tenet necessary for the success or failure of an entity.

In the run up to the 2018 general elections IEBC’s senior officers proved to be partisan and compromised thus jeopardizing the independence of the electoral body.

Independence of an electoral body is the foremost step in having a free, fair and credible electoral process. The independence of the IEBC is interfered with right from the appointments of the commissioners and other senior officers of the country’s electoral body.

The embattled chair of IEBC Wafula Chebukati has proven to be quite incompetent but this is not a surprise anyway given his subpar performance while being vetted by Parliament for the hot seat. He was not the best out of the other candidates and being appointed to chair the IEBC fixed him in a corner.

Other commissioners were clearly partisan and their political intentions well known. We can’t have a clean electoral process with such poisoned minds running an exercise that determines the fate of Kenyans economically, socially and politically.

Western states – the masters of impunity and double-standards – supported a corrupt regime out of geo-political and geo-economic interests. Led by the American government, they pronounced the legitimacy of an administration which they were not in favour of in 2013.

Who offers support and confers legitimacy to a regime whose rogue police officers killed and injured innocent Kenyans including harmless children?

Setting the record straight, political correctness is the language preferred by the governments of the Western states. Kenya’s case and other immoral governments across Africa being cheered on by the West is largely informed by their (Western states) intentions to counter China’s influence on the continent.

If the likes of the American, British, French and other Western governments are champions and crusaders of democracy, then it would make sense if they were not funding undemocratic regimes and toppling legitimate governments around the world.

As matter-of-factly, Western governments have never condemned the rogue and undemocratic regime in Saudi Arabia. They wreaked havoc in Afghanistan, Libya, Yemen, Syria and other nations but only as a divide and rule scheme driven by paranoia and economic interests.

Apart from the political relief offered by the West, the deception and destruction caused by the global political consultancy firms such as Cambridge Analytica should never be forgotten going forward.

The political consultancy firms are in pursuit of profits, economic capital and economic power as the political parties and formations are hell-bent in pursuit of political capital and political power. But to what extent is the price to be paid for the trade-off between business profits and political power?

Apparently, the price is costly and takes the form of a disintegrated country. These firms pursue their profits by optimizing on the structural weaknesses of a country.

For instance, in Kenya, Cambridge Analytica which was responsible for running the Jubilee Party’s political campaign ostensibly capitalized on the ethnic fault lines that are highly visible in the Kenyan society.

So far no serious step has been made in banning such firms from operating in Kenya especially in running political campaigns. This country is a joke. Pressure from various entities eventually forced Cambridge Analytica to shut down its operations.

In South Africa, PR firm Bell Pottinger, known to work for despots, was chased from the country after running racially charged campaigns especially on economic reform and the prevalent socio-economic inequalities in the country.

But unlike in Kenya where the public never protested about Cambridge Analytica’s divisive campaign, the publics in Britain and South Africa were vocal on the firms’ PR gimmicks.

Involvement of these firms in Kenya’s political space with the intention of driving narratives that are misleading and dangerous casts the country as a twisted democracy.

Embers of the Third Liberation that flamed up following the flawed electoral process flickered out as soon as the ‘handshake’ between Raila Odinga and Uhuru Kenyatta came to the fore.

Doubts have been cast on the supposed Building Bridges Initiative and yours truly is among the doubters. Judging from Kenya’s political history the ‘handshake’ is as good as any other political deal and its abandonment would not be a surprise.

Political (electoral) justice and economic justice should be the key drivers of the Third Liberation. But with political interests taking centre stage the hopes for a new Kenya are dashed.

Failure to address injustices committed in recent times and long before that will not actualize building bridges on the social, political and economic issues that divide Kenyans. Ignoring the implementation of the recommendations put forth by the Truth Justice and Reconciliation Commission (TJRC) only sets the country on a path for intensified calls for secession, massive socioeconomic inequality and electoral skullduggery in the near future.

In view of the aforementioned weighty issues, where does the Kenyan public stand? There is no hope for a better Kenya considering the dubious electoral and political decisions made by majority of members of the public.

Can the Kenyan public dislodge the oligarchs that have patronized the country’s politics and economy since the dawn of independence? This is a question of fundamental importance. But with a significant number of Kenyans voting in an unintelligent fashion and being unapologetic about their ethnic political ideologies there is no hope of Kenya transitioning to a nation.

Kenya has never been a nation. All the episodic moments of nationhood – independence, the Second Liberation, dethronement of the rogue and despotic KANU regime and promulgation of the current Constitution – involved elements of disenchantment with individuals at the centre of the government preferring to subscribe to the ideals of an oligarchy.

Let’s not pretend to pursue national unity in the spirit of the ‘handshake’ and the doctrine of accepting and moving on while escaping from addressing the country’s problems. That is not how a nation is built.

For the many? A look into the 2018/2019 Budget Policy Statement

By Sitati Wasilwa

The 2018/2019 Budget Policy Statement (BPS) that was recently presented in the National Assembly seeks to promote prosperity among Kenyans of all walks of life. The would-be large-scale prosperity is aptly captured by the budget’s theme: “Creating Jobs, Transforming Lives and Sharing Prosperity.”

There is no doubt that socio-economic inclusion is a fundamental tenet that promotes robust economic growth in the long-run, and consequently, structural transformation. Hence, the need for the Executive, through The National Treasury, to align its policy agenda with development blueprints such as the national Vision 2030, East Africa’s Vision 2050, Africa’s Agenda 2063 and the global 2030 Agenda for Sustainable Development.

In pursuit of shared prosperity among the many – the country’s hoi polloi – Cabinet Secretary (CS) Henry Rotich presented a Kshs.3.07 trillion budget to the National Assembly. However, there is discrepancy between the actual amount of the budget and the amount that Mr. Rotich read out in the National Assembly.

Why the Discrepancy?

Playing “safe politics” is the root cause of Mr. Rotich’s lie that the national budget amounts to Kshs.2.556 trillion. The actual amount of the budget is Kshs.3.07 trillion and this implies that there is a difference of about Kshs.514 billion that the CS didn’t offer an explicit explanation about it.

It should be noted that the difference is what constitutes the principal debt amortization and rollovers which in essence refer to the repayment of both the domestic debt and the external debt.

Primary Concerns

With the 2018/2019 Budget Policy Statement being the largest ever in the country’s history, concerns have been raised in regards to raising finances to fund the expenditure, and the chain effect triggered by the financing plans outlined by CS Rotich.

For instance, with a deficit of Kshs.558.9 billion, it is certain that the government will borrow to plug the deficit. It is expected that the government will borrow Kshs.287 billion from external sources and Kshs.271.9 from domestic entities.

Borrowing will automatically impact on the national debt which, according to the debt statistics by the Central Bank of Kenya, stands at Kshs.4.88 trillion. With basic reasoning, it is therefore true to assert that the public debt will be over Kshs.5 trillion in the 2018/2019 financial year.

Treasury has resigned itself to defensive play in view of the rising public debt which it considers to be safe. The regime’s sympathizers have also joined the bandwagon of defending the excessive borrowing and branding the critics of the sky-rocketing debt as “unnecessary alarmists, cynics and irritants.”

One particular line of defence put up by the Treasury and the Executive is that even developed countries have extremely high debts to GDP ratio some to the tune of over 150% and 200% compared to Kenya’s currently at 60%. This is misleading.

A major way of analyzing economic policy is sizing up economic issues and dissecting them as per the given context. Developed countries are able to easily sustain their debt levels because of high economic productivity and the low interest rate repayments pegged on the borrowed finances.

Considering the African context, Ghana courted a debt crisis in 2016 as a result of irresponsible borrowing. Recently in the month of March, Mozambique defaulted on its debt with the public debt to GDP ratio at 128%. This month, the Zambian government has adopted austerity measures in light of the country’s worsening debt crisis.

A stale argument advanced by the Treasury is that in the medium-term and eventually in the long-term, Kenya’s public debt will significantly decrease. But if previous public finance data are to be scrutinized, it seems as if the medium-term and the long-term periods will never materialize as the debt keeps on accumulating and this is the genesis of a debt trap and crisis.

Financing the so-called and much-touted ‘Big Four Agenda’ was a major highlight of the BPS. It is expected that this policy agenda will be financed to a tune of Kshs.460 billion, but a closer look at the budget reveals otherwise; only Kshs.73.75 billion has been allocated to the ‘Big Four’ while the rest is to be expended on the enablers of the ‘Big Four’.

Contents of the Big Four – a vibrant manufacturing sector, food security, universal health coverage, and affordable and descent housing – are not new policy propositions in the country. By the way, these items featured on the policy agenda of the Jubilee administration between 2013 and 2018 that was tainted by plundering.

Expenditure for food security is ridiculous considering the propositions of key benchmarks such as the Malabo Declaration which requires that African governments allocate at least 10% of the public expenditure towards financing the agricultural sector. The Jubilee administration, for the sixth year running, has consistently allocated not more than 5% of the budget for financing agricultural activities.

What is Kenya planning to export and how will it establish a vibrant manufacturing sector if the budgetary allocations for the agricultural sector are lower? Kenya has the capacity and advantage of producing huge amounts of agricultural products and facilitating value addition on them and this can act as a basis for establishing a strong manufacturing sector.

Taxation measures proposed by the Treasury are majorly intended to raise revenue critical in financing the budget. Of great concern, however, is whether the Kenya Revenue Authority will be able to meet the targeted revenue of Kshs.1.74 trillion.

To hit the targeted revenue, Treasury has proposed a series of changes in relation to the country’s tax structure which are highlighted in the Finance Bill set to be presented in Parliament for approval.

In as much as these changes are intended to redistribute income, prevent environmental degradation, protect local industries among other goals, the overarching objective is financing the administration’s over-ambitious budget and servicing the ballooning public debt. This in fact informs the need to expand the tax bracket with the informal sector, betting and gambling activities as well as mobile money transactions being targeted.

Repealing the Banking Amendment Act (2016) that introduced interest rate caps is welcome. The cap on the interest rates is an economic policy that has failed to achieve its intended objective; increasing access to credit through lower interest rates.

However, the proposed measures to protect consumers from predatory and reckless lending by the credit providers as contained in the Financial Markets Conduct Bill, emasculates to some extent the mandate of the Central Bank of Kenya.

The Bill seeks to establish the Financial Markets Conduct Authority (FMCA) which CS Rotich claims that “it will only be limited to protecting consumers in the areas that have not been covered by existing regulators including the Central Bank.” Why not strengthen the existing regulators? Why would public funds and other resources be wasted in setting up the FMCA? FMCA is unnecessary.

Having the budget is one thing while seamless implementation of it is a different issue. Challenges such as corruption and failure to collect the targeted revenue are pitfalls that will deny the many average Kenyans the benefits envisaged in the 2018/2019 BPS; shared prosperity, employment opportunities to be created and transformed lives.

Public Finance History

Three fundamental issues characterize Kenya’s public finance history and trajectory; corruption, low absorption rate of development expenditure, and the failure by Kenya Revenue Authority (KRA) to meet the targeted revenue.

Kenya loses one-third of its budget every year due to corruption. If this is the case, then about Kshs.1 trillion of the 2018/2019 budget will be directed from the public purse to private pockets. Accountability of the spending is a big challenge considering that Parliament itself goes to bed with the Executive thus jeopardizing the independence of the former.

Unimportant allocations and expenditures are pursued with the aim of wealth accumulation at the expense of initiating development projects. What worsens the situation is the looting that takes place in various government agencies and institutions. The Office of the Auditor General attempts to raise queries on the unaccounted for spending but Parliament and the Executive have failed spectacularly in providing the necessary political will.

Revenue collection is characterized by unrealistic targets that KRA is expected to attain. This stems from the massive deficits that Treasury has presided for the last five financial years. For instance, in the 2016/2017 financial year, the shortfall in revenue amounted to Kshs.66.64 billion.

For the current fiscal year 2017/2018, the situation will be similar bearing in mind that as by December 2017, as documented in the Post-Election Economic and Fiscal Report, there was a shortfall in the total cumulative revenue by Kshs.68.3 billion. The 2018/2019 financial year will not be different in any way.

Absorption rate of the development expenditure is poor with finances allocated for various development projects embezzled. Stalled infrastructural projects are an indication of the poor absorption rate of the finances set aside for development. With Kshs.671.6 billion allocated for development expenditure, perhaps only 50% of it will be utilized.

Regular and annual commentaries on the Budget Policy Statements should take into consideration the hits and misses of the spending of previous financial years.

The recently read budget will not be effective; the public debt is set to increase, various taxes are set to go up and of course shortfalls in revenue are expected. This is not a budget for the many considering the high and exaggerated expenditure. And since a huge chunk of it will be looted, then there is nothing to smile about.

Powered by WordPress.com.

Up ↑

Create your website at WordPress.com
Get started