Taking stock of Kenya’s macroeconomic environment: A situational analysis

By Dominic Atika & Sitati Wasilwa

It’s been an unbridled 2017 for Kenya, and the vagaries of the economic scene could never be more prevalent. As the year draws to a close, we figured it would be prudent to sit back and conduct a diagnosis of Kenya’s economic health, stacking our arguments against assertions and reassurances by The National Treasury bureaucrats and the Jubilee administration that our economy remains as resilient as ever.

Quite unforgettably, on the 8th of November this year, the Cabinet Secretary in charge of The National Treasury, Henry Rotich, pompously remarked that “Kenya’s economy remains strong and stable, all economic fundamentals are solid. Kenya is moving forward.” But how true is that? To try and find out, we delve into a detailed analysis of six economic determinants: the national debt, interest rates, corruption, food security, unemployment and elections.

One might want to forgive CS Rotich for having made such an unfortunate statement, especially bearing in mind he has an almost religious obligation to defend the economic agenda of the Jubilee administration, but the numerous economic missteps and mistakes so far made by the Jubilee regime only serve to make that impossible.

One of Kenya’s economic fundamentals that is not only running out of control, but that also seems to be out of place is the country’s level of national debt. According to data by the Central Bank of Kenya last updated September 2017, the total national debt now stands at KSh4.482T ($44.82B).

After the end of the first financial year 2013/2014 presided over by the Jubilee administration, the total national debt amounted to KSh2.422T/$24.22B (47.9 percent of GDP) in comparison with KSh1.894T/$18.94B (42 percent of GDP) for the previous financial year 2012/2013 under the Kibaki- and Raila-led Grand Coalition Government. These figures and data are highlighted in the Annual Public Debt Report 2013-2014prepared by The National Treasury.

Since its inception, the Jubilee Administration has borrowed a record KSh2.588T ($25.88B), an amount far exceeding the country’s level of total national debt from 1963 to 2013. That’s right! Those are fifty good years. Well, the economic fundamentals really are solid!

The sustainability of Kenya’s national debt is now highly doubtful. As documented in the 2017 Budget Review and Outlook Paper published by The National Treasury, the public debt to GDP ratio will be in the region of 59 percent by the end of the 2017/2018 financial year, contrary to the 51.8 percent figure projected in the 2017/2018 Budget Policy Statement.

Even as The National Treasury bureaucrats and the Jubilee administration choose to remain defiant over the country’s national debt situation, the controversial and contradictory statements made by CS Rotich point to an administration living in denial.

For instance, in January 2017, during the release of the Annual Public Debt Management Report 2016/2017, Mr. Rotich stated that the public debt to GDP ratio was projected to stand at 50.7 percent by June 2017. However, the Kenya Economic Report 2017 prepared and published by the Kenya Institute of Public Policy Research & Analysis (KIPPRA) towards the end of May 2017 reveals that by mid-2017, the public debt to GDP ratio stood at 52 percent.

An expected economic growth rate of 4.9 percent for the year 2017, coupled with a total debt of about KSh4.5 trillion ($45B), would ordinarily mean that on an approximate scale, Kenya’s debt to GDP ratio by the end of the year will be slightly above 60 percent.

With available information indicating an increasing level of public debt to GDP ratio, it should be taken into account that there are two fundamentally important fiscal benchmarks that stipulate the ideal level of public debt to GDP ratio.

Apparently, both fiscal frameworks highlight the need to maintain the public debt to GDP ratio at 50 percent or lower. One of these frameworks is the Protocol on the Establishment of the East African Community Monetary Union under the macroeconomic convergence criteria, and Kenya’s Public Finance Management Act.

Possible consequential effects of the high level of public debt that Kenyans must be prepared to face include an increase in the level of taxation informed by the need to shore up revenue for purposes of debt repayment, and the crowding out of private investment as lenders opt to advance credit/loans to the government at relatively higher interest rates, as opposed to lending to private entities at lower rates.

The second economic fundamental that defies and negates Mr. Rotich’s cosmetic sentimental remarks of “solid economic fundamentals” is the nuanced effect of the interest rate cap. With the procedural approval of the Banking Amendment Act of 2016, there have been two schools of thought whose arguments on the cap teeter on the two extreme ends of the continuum.

One argues that for a long time, interest rates in Kenya have been exorbitantly high, while the other premises its argument on the negative effects of the usury laws.

There’s a general consensus among members of the public, perhaps with the exception of the owners of commercial banks, on the need to have lower interest rates that are affordable to the Small- and Medium-Scale Enterprises (SMEs) which play a crucial role in Kenya’s economy, as well as for the low-end borrowers whose financial inclusion in the economy is absolutely important.

From the outset, following the drafting of the Banking Amendment Bill 2016 by Kiambu Town MP Jude Njomo (an ‘evangelical’ propagator of warped economic thought), CS Henry Rotich and the Governor of the Central Bank of Kenya (CBK), Dr. Patrick Njoroge opposed the proposed amendments.

According to the Kenya Economic Update Report by the World Bank released in December 2017, the interest rate cap has had a largely negative impact on the country’s economy. Among the consequences highlighted by the World Bank include:

  • A shift in lending by banks from small borrowers and SMEs to corporate clients.
  • A decrease in the proportion of new borrowers from 13 percent in March 2016 to around 6 percent after the operationalization of the Banking Amendment Act of 2016.
  • Re-allocation of credit from the private sector to the public sector – in 2017, the amount of credit advanced to the government has expanded by 15 percent, compared to 3 percent for the private sector.

Having realized the deleterious effects of the interest rate cap, Dr. Njoroge recently made clear the CBK’s intentions to repeal the cap. Meanwhile, CS Rotich continues to maintain a taciturn approach.

Although he was opposed to the same law in its formative stages, he is on record stating it would only be a short-term measure, even as The National Treasury mulled plans to organize a forum to deliberate on the aftermath of the interest rate cap.

In addition, Mr. Uhuru Kenyatta, in his State of the Nation address in March 2017, acknowledged the “unintended effects” of the cap and promised to review the skewed policy.

In light of these arguments, the sanctioning and enactment of the legislation to cap interest rates makes for a campaign tool meant to win the hearts of the uninformed Kenyan citizenry. It qualifies as a populist economic policy that bears no resonance with Kenya’s economic realities.

The predatory behavior of commercial banks has always been blamed for the perniciously high interest rates in Kenya. But who really needs to take responsibility for the high rates?

Blame it all on the government. It has consistently chosen to run massive budgetary deficits that have now sparked a borrowing spree. And of course the laxity and complacency of the CBK in promoting fiscal discipline among banks, especially before the appointment of Dr. Patrick Njoroge as Governor, is a major factor.

Going into 2018, the interest rate cap must be repealed. Failure to do so will see banks continuing to react to the law and extending as much credit as possible only to the government and other well established entities. SMEs account for the largest proportion of employment opportunities in Kenya, and their limited access to credit due to the rate cap will only exacerbate the unemployment problem.

And of course an analysis of Kenya’s economic well-being would never be complete without an in-depth examination of the venomous effects of corruption. Now, corruption really is the bane of Kenya’s existence. From an exasperated Uhuru Kenyatta bellowing “What do you want me to do?” at a 2016 State House Summit, to a straight-shooting Barack Obama reiterating that “… the fact is, too often, here in Kenya … corruption is tolerated because that’s how things have always been done.”, Kenyans have seen and heard it all.

The statistics paint an even grimmer picture. According to the PwC 2016 Global Economic Crime Survey, Kenya reported a 47 percent incidence of bribery and corruption, the third highest incidence globally. Stack that against a global average of 24 percent, and you have what it makes for an alarming statistic.

In 2016, the Ethics and Anti-Corruption Commission (EACC) reported that Kenya loses KSh600M ($6B) – a third of its state budget – to corruption every year. While CS Rotich disputed that estimate, Mr. Kenyatta went so far as to declare corruption a threat to national security.

Here’s some perspective: The average Kenyan forks out a bribe at least twice in every three encounters with a public official. Corruption in Kenya takes many forms, with asset misappropriation, procurement fraud, accounting fraud, bribery, tax fraud, recruitment and payroll fraud, money laundering, intellectual property infringement, insider dealing, mortgage fraud, espionage and anti-trust law infringement being the most common.

As we wade into 2018, corruption will continue toasting to the most notorious of scandals to rock the Jubilee Administration – the National Youth Service (NYS) scandal of November 2015 – which cost taxpayers KSh1.9B ($19M).

But it’s not the only one. There’s the KSh215B ($2.15B) Eurobond Scandal of 2016. And the Mafia-style heist at the Ministry of Health towards the end of the same year that robbed Kenyans of another KSh5.5B ($55M). And the KSh53B ($530,000) Laptop Tendering scandal. And the KSh50M ($500,000) Chickengate Scandal. Indeed, 2016 was, by every measure, the greatest year for corruption in Kenya.

The fact that Kenya is still grappling with runaway corruption 54 years after independence is perhaps the biggest indictment of every administration since. Now, you might think how to curb corruption in Kenya is the proverbial $64,000 question, but it really isn’t. The doctor’s prescription has always been, and will always be, the same: We’ve got to find the will to demand accountability and integrity amongst ourselves, both as leaders and as a people.

Fast forward to yet another macroeconomic fundamental – food security, or the lack thereof. In 2010, Kenya set out to eliminate food poverty by the year 2020. And yet today, just three years shy of that deadline, at least 40 percent of the country’s population remains food-insecure.

On the 16th of May this year, the government announced a Ksh6B ($60M) subsidy on maize imports to help lower the cost of maize flour. Authorities blamed the shortfall on drought, but evidence suggests it was yet another stark reminder of our government’s endemic failure to plan.

Since independence, we’ve consistently blamed our food insecurity glitches on the same culprits: frequent droughts, exorbitant costs of food production (especially due to high costs of inputs such as fertilizers), steep global food prices and low purchasing power due to poverty.

Following the termination of the maize-subsidy program at the end of October, the government has done well to increase its budgetary allocation toward the purchase of maize from farmers. Its decision to increase fertilizer subsidies to farmers is also laudable, especially given it will most likely help raise maize yields on the back of lower input prices.

However, these are only short-term fixes. The government needs to stare further down the hallway and plan with foresight. We’ve got to start with land reform and redistribution in order to ensure efficacy in food supply and distribution throughout the country.

There’s also a veritable need to embrace policies aimed at bolstering rural investment, promote innovation and invention in the agricultural sector through technology transfer and advisory services, improve food storage facilities and augment irrigation and rainwater management endeavors.

Kenya’s irrigation potential is estimated at around 540,000 hectares, of which only about 105,000 hectares is exploited. It should be emphasized that major crop and livestock production can be tripled by using modern technologies. By developing the Tana and Athi basins and the Lake Victoria shoreline, Kenya can extend the area of land under irrigation by 1 million hectares.

The government’s decision to develop the Galana-Kulalu Food Security Project (touted the largest irrigation project in the country) in Kilifi and Tana River counties to supplement food production from the traditional food basket regions of the North Rift is a good place to start. But until we implement all these strategies, food security will remain a mirage for many Kenyans.

Time to look at unemployment. According to the United Nations Human Development Index (HDI) 2017 report, Kenya’s unemployment rate stands at an ominous 39.1 percent. To put that into perspective, four in every ten Kenyans of working age can’t find meaningful economic engagements.

As our ability to create new jobs tends to lag behind population growth, the shadows of income inequality, dependency, crime and violence continue to loom large, and this on a pro rata basis. As a matter of fact, at 33.1 percent, Kenya’s income inequality rate remains among the highest in the world.

So, what needs to be done to address the unemployment menace in Kenya? Well, our approach has to be multidimensional. As a country, we need to invest in high-quality education, laying particular emphasis on the need to nurture an entrepreneurial culture among the youth.

Sure, we’ve made strides making it easier to do business in Kenya, rising 12 places in the World Bank’s 2017 Ease of Doing Business Index, but we still have more to do. The government needs to take further steps towards lowering the cost of doing business, especially considering 80 percent of jobs created over the past decade have been in the informal sector.

We will now sign out with a cursory look at the effect of elections on Kenya’s economy. Kenya’s election cycle has always been synonymous with political and economic uncertainty. And uncertainty is never good for business, especially for a country whose tourism sector accounts for about 10 percent of her GDP, employing well over 1 million people.

Following election violence in 2007 and 2008, Kenya’s visitor numbers dropped by a third. Most recently, in anticipation of uncertainty following the Supreme Court’s nullification of the August 8, 2017 presidential election, Capital Economics predicted Kenya’s tourism sector would suffer a three percent growth slump. The wait-and-see attitude adopted by investors only serves to make things worse.

These recurring distractions inform the need for electoral justice, full-fledged democracy, adoption of a Parliamentary system of government and an end to the culture of impunity in Kenya.

So, here’s the $64,000 question: Are Kenya’s economic fundamentals as solid as CS Rotich would have us believe? You be the judge.

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The Libyan Slave Market in Perspective

By Sitati Wasilwa

“Slavery as an institution that degraded man to a thing has never died out. In some periods of history it has flourished: many civilizations have climbed to power and glory on the backs of slaves. In other times slaves have dwindled in number and economic importance. But never has slavery disappeared.” – Milton Meltzer

The recent revelation by CNN about slavery in Libya is an affirmation that this inhumane act is inherently embedded in humanity.

Across civilizations, slavery has transcended different generations with its form and nature varying from crude, to subtle and more nuanced ways of human oppression.

From the ancient civilizations to modern times, slavery has been used as a mechanism to enrich the oppressor and impoverish the oppressed. The oppressed – the slaves – are subjected to forced labour used for the production of goods or offering services to enrich the lives of the oppressor – the slave masters.

In ancient civilizations, slavery was less of a commercial affair with slaves mainly captured to render domestic services to the royalty and political leadership of the kingdom, chiefdom, fiefdom, aristocracy or any other form of headship or socio-political organization that was in existence.

With increased realization of the benefits from trade and trade related activities, the trajectory of slavery shifted and incorporated the commercial aspects that led to the exchange of human beings in markets with monetary value attached to them.

Presence of various forms of social discrimination such as slavery, racism, xenophobia and tribalism in modern times can only be understood from a historical perspective. It is through historical account of events that the foundations of these social processes can be uncovered.

Emergence and re-emergence of the afore-mentioned forms of discrimination is not an event but a process.

Existence of vestigial structures from the previous social, economic and political institutions that promoted and encouraged these negative social processes guarantee their re-occurrence based on the historical cycle and existence of social fault lines.

The historical cycle, in simple terms, refers to the act of history repeating itself which was well stated by the intellectually gifted German, Karl Marx that “history repeats itself first as tragedy and second as farce.”

Therefore, to understand the social and economic basis of the current Libyan slave trade, it is fundamentally important to revisit the pre-colonial and post-colonial social and economic organization as well as institutions in Libya.

Pre-Colonial and Post-Colonial Libya

During the pre-colonial period in Libya, slavery existed in the North African country. Additionally, Libya was also used as a major transit route to ship the slaves captured from Africa’s interior into other parts of the world especially the Middle East and the Far East.

Slave trade that involved the major Libyan cities and towns was aided by the Indian Ocean slave trade and the Trans-Saharan slave trade.

Historical records indicate that slave markets for slaves sold during the Indian Ocean trade were in Persia, and the cities of Medina and Mecca.

The case was the same with slaves traded during the Trans-Saharan trade who were mostly sold in the Middle-East, in the Arabian sphere of the world.

Historians collectively refer to the trade in slaves during both the Indian Ocean trade and the Trans-Saharan trade as the Arab slave trade due to the nature of the trade and destination of the slaves.

Tripoli, Libya’s capital city, was a major slave trade route and one of the largest slave markets in Northern Africa during the pre-colonial period. In this period, the slaves were sold in public a situation similar to the recent account of slavery events as documented by CNN.

Post-colonial Libya has been characterized by two major political events that have shaped the country’s economic, social and political landscape. The hallmark of both political events was regime change.

The first event was the bloodless coup d’état under the leadership of Colonel Muammar Qaddafi that toppled the monarchy led by King Idris I. The revolution and leadership of Qaddafi culminated in the establishment of the Great Socialist People’s Libyan Arab Jamahiriya that lasted from 1977 to 2011.

Libya’s second political event was the Libyan civil war that began in 2011 after the invasion by the NATO forces led by USA, United Kingdom and France that led to the murder of Qaddafi and subsequent regime change through the establishment of the National Transitional Council.

Qaddafi’s administration and the Jamahiriya government presided over a period of social and economic prosperity.

Since the 2011 civil war that was driven and fueled by sinister motives of the NATO states, Libya’s social, economic and political systems have collapsed.

Geographically, Libya borders Chad, Niger and Sudan to the south. Libya’s southern population especially in the Fezzan region has a significant composition of black people. A good proportion of Libya’s black population in the south is made up of migrants whose main countries of origin (before the NATO sponsored rebellion in 2011) were Niger and Chad.

In terms of development, the Fezzan region lags behind other regions in Libya though more developed than Niger and Chad.

Being more developed than Chad and Niger, this acted as a pull factor that occasioned the immigration of Africans from Niger and Chad into southern Libya.

With the outbreak of the civil war instigated by the USA and her allies, Fezzan region and other parts of Libya have become ungovernable with rampant incidences of lawlessness.

A stable Fezzan region under Qaddafi guaranteed sustainable livelihood at least for a significant number of Africans in the northern side of Niger and Chad.

Collapse of the economic, social and political systems in the Fezzan region and largely Libya has led to a state of economic desperation and destitution for the populations of Niger and Chad that depended on and reaped from the economic prosperity and socio-political stability of Libya under Qaddafi.

The consequence of the collapse of the social, political and economic order in Libya and the Fezzan region is the massive number of migrants seeking to get to Europe via Italy.

This high number of migrants who have fallen victim to slavery depended on Libya’s economic prosperity under Qaddafi. Economic prosperity in Libya during Qaddafi’s era trickled-down to Niger and Chad and this managed to keep low the number of migrants from these countries.

Current Situation

Currently, Libya has no substantive government in place with the leading political entities being the UN-backed Government of National Accord (GNA) led by Prime Minister Faiez Serraj with its base in Tripoli and the Libyan National Army (LNA) under the leadership of General Khalifa Haftar.

Besides these two political groupings, there are other political formations that are factions of the leading political units as indicated by a report published by Al Jazeera.

At the moment, there are at least 700,000 migrants in Libya as estimated by the International Organization for Migration (IOM). A larger proportion of these migrants are on their way to Europe and they mostly originate from Niger, Chad, and Sudan among other West African countries such as Nigeria and Cameroon.

With lawlessness prevailing in Libya due to socio-political and economic instability, the various political groups ranging from the UN-backed and “internationally recognized” GNA to other militia organizations have resorted to illicit economic activities for survival.

Among the illicit economic activities include smuggling/trafficking of people, smuggling of fuel and the illegal mining of gold.

According to a report by the International Crisis Group, smuggling/trafficking of people in Libya generates annual revenues ranging between $1 billion and $1.5 billion. The same report documents that smuggling of fuel across Libya generates about $2 billion per year with fuel being sold at $0.02 in the black market lower than the official price set at $0.12.

It is the over $1 billion worth economic activity of smuggling/trafficking migrants across Libya that is the genesis of the slave trade.

Smuggling and trafficking of people in Libya has been taking place since 2012 with no substantive government in place. The smuggling has since degenerated into slave trade with the captured migrants being treated savagely.

Emergence of slave trade in Libya can also be partly attributed to legal and policy measures adopted by the European Union and the acclaimed Government of National Accord to intercept the migrants on their journey to Europe.

The resultant effect has been the retention of the migrants in Libya by the smugglers and traffickers of people. With a massive supply and glut of migrants in their retention facilities, the human smugglers and traffickers in Libya have resorted to sell them through public auctions.

A fundamental concern in the wake of slave trade in Libya is whether the ‘Africa Rising’ narrative is more of a myth than reality of which the former holds.

If Africa is indeed rising, then the benefits from the social, political and economic development generated by ‘Africa Rising’ ought to be witnessed in all African countries with the lives of the economically vulnerable Africans improving significantly.

‘Africa Rising’ is mythical as well as a misrepresentation and misstatement of facts since it is only a few African countries and a certain cadre of African people that are on the rise. If Africa was rising collectively, then economic conditions in Niger and Chad would be very conducive such that there would be no or extremely few migrants crossing Libya seeking to get to Europe.

Way Forward

Repatriation of the migrants to their countries of origin is only a temporary measure. The African Union must take responsibility and ensure that countries where immigrants originate from have stable and functioning economies that work for all.

Foreign non-African institutional entities such as the European Union, the International Organization for Migration and extensively the United Nations must show full commitment by working with governments where migrants originate from to address the ‘push’ factors.

The UN must stamp its authority on countries like the USA that promote foreign invasion and subjugate the territorial integrity of other states which is a violation of the UN Charter. The unnecessary civil wars and civil unrests have done more harm than good and the crises facing humanity at the moment could be avoided if the self-anointed “world prefects” such as USA chose to prioritize and pursue peaceful means to solve conflicts.

Slavery and smuggling/trafficking of people should be highly criminalized with very high costs of punishment attached to the promoters of this vice.

Dealing with slave trade in Libya calls for a multi-pronged approach including an end to the nonsensical foreign invasions and promotion of tangible socio-economic development in countries such as Niger, Chad among others.

Slavery must be condemned and it must fall including human trafficking!

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Privatization won’t solve Kenya’s sugar industry woes

By Sitati Wasilwa

In the first week of November, the High Court declined to stop the privatization of the five state-owned sugar firms. This implies that the government will proceed with the sale of Nzoia Sugar Company, Sony Sugar, Chemelil, Miwani and Muhoroni sugar companies.

As highlighted in the privatization plan of the afore-mentioned sugar firms, the government through the Privatization Commission will sell 51% of the total stake of these companies to strategic investors, 24% to farmers and employees and the remaining 25% will be sold later through an initial public offering (IPO) when these firms begin to make profits.

The privatization policy is one of the pillars of the Washington Consensus edifice of which the latter is premised on the neoliberalism ideology. The two, the Washington Consensus and neoliberalism, are tenets and sub-sets of the free market economic dispensation.

Advocates of the free market ideology, who are also known as market fundamentalists, argue that state-owned enterprises (SOEs) are inefficient and that the government should not play an active role in the economy apart from the provision of security and the institutionalization of property rights.

Their arguments are anchored on the economic ideas of Adam Smith through his analogy of the “invisible hand”. Market fundamentalists hence frown upon the “visible hand” of the government in the economy.

The neoliberalism frenzy and craze is associated with the presidency of Ronald Reaganand the premiership of Margaret Thatcher. The free market is a utopic notion since governments will always play a critical and active role in the economy.

Washington-based institutions such as the World Bank and the International Monetary Fund (IMF) have always recommended countries to adopt the Washington Consensus policy package as “shock therapy” to their economic woes.

This occasioned developing countries especially in Africa and Latin America to fashion this policy prescription in the 1980s and the 1990s with most of them still flirting with the same economic policies (privatization, deregulation and trade liberalization) at the moment.

Reasons for Privatization of Sugar Firms

Privatization of the five state-owned sugar firms is geared towards revitalizing the sugar industry especially in the wake of the COMESA free trade agreement that will lead to the total collapse of the sugar industry as a result of the importation of cheap sugar.

Under the COMESA free trade agreement, the Kenyan economy is open to other COMESA member states which have ratified this trade protocol. These states are hence guaranteed to access the Kenyan market without being subjected to any form or kind of duty requirements or quota (s).

It is on the basis of this trade protocol that Kenya has been consistently seeking for sugar safeguards from COMESA since 2003. The sugar safeguard granted to Kenya in February 2017 was extended by two years after it expired.

The COMESA sugar safeguard granted to Kenya is expected to insulate the farmers against the effects of cheap imported sugar and upon the expiry of the safeguard, it is expected that the five state-owned sugar enterprises would have been privatized.

Many (including government officials) believe that privatization of the sugar firms will lead to the production of relatively cheap sugar and of course increase the total amount of sugar that is locally produced.

Currently, Kenya’s average annual total sugar production stands at 600,000 metric tonnes against the country’s total annual demand for sugar averaging 800,000 metric tonnes. This leaves a deficit of 200,000 metric tonnes that is addressed through the importation of sugar.

There is talk that the high cost of producing sugar in Kenya has been a major factor that has led to the dwindling fortunes of the country’s sugar industry. When compared to other sugar producing countries that are signatories to the COMESA free trade agreement, it is pretty clear that the cost of producing sugar in Kenya is quite high.

For instance, the Kenya Sugar Directorate notes that it costs an average of $146 (at current exchange rate) to produce a tonne of sugar in Uganda, Tanzania, Sudan, Egypt, Malawi, Swaziland and Zambia. In Kenya, production of a tonne of sugar costs an average of $442 at current exchange rates.

The high cost of producing sugar in Kenya eventually makes the processed commodity to be highly priced domestically and externally hence Kenyan sugar cannot favorably compete in the external markets especially in the COMESA member states.

But will privatization of the five state-owned sugar enterprises lead to relatively lower costs of production and production of relatively cheaper sugar?

Key Observations & Crucial Lessons

Privatizing the sugar firms without drawing lessons from similar past practices is an exercise in futility. There is need to interrogate the successes and failures of firms that were initially state-owned enterprises and later on privatized.

Specifically, in the case of the sugar industry, comprehensive analysis following the privatization of Mumias Sugar Company has to be carried out to establish how effective and efficient this company has operated since its transition from a state enterprise to a public company in 2001.

In the last three financial years, Mumias Sugar Company has recorded losses amounting to Kshs.15.24 billion. This is in contrast with the Kshs.3.1 billion channeled to the company for the last two years to bail it out from the financial challenges that it is facing.

The situation is similar with other public companies listed on the Nairobi Securities Exchange that were previously state-owned enterprises. They include Uchumi Supermarket, National Bank of Kenya, Kenya Airways and Kenya Power whose privatization has been characterized by financial woes.

It should be noted, however, that the government still possesses significant ownership in these companies, including Mumias Sugar hence forming a basis for the bailout programmes by The National Treasury.

At this juncture, it is critically important to put forth fundamental questions in a bid to question the essence of privatizing the state corporations: should the government retain some ownership in the privatized firms? By the government having a certain percentage of ownership in the privatized firms, does this serve as a loophole for embezzlement of finances from these entities? Is full privatization of state-owned enterprises a guarantee for better efficiency in their operations?

The ‘Mumias Experiment’ indicates that privatization may not guarantee efficiency in terms of production of sugar including lowering the cost of producing the same commodity. Minimal presence of government and majority of ownership by private individuals and entities has led to the near collapse of the country’s largest sugar miller.

If at all privatization was to be the answer and elixir to the problems of inefficiency associated with state-owned enterprises then all of them would be generating high returns and making profits while minimizing their costs of operation.

From the preceding statement, a pertinent issue that arises centres and borders on the nature of the so-called strategic private investors who own the largest stake in these commercial entities once they are privatized. Who are they? Do they conspire, connive and act in cahoots with corrupt politicians to squeeze financial life out of these formerly state-owned enterprises?

With politics, progressive or retrogressive, determining the economic trajectory of a country or region/county, it cannot be disputed that the wanton nature of Kenya’s politics is largely responsible for the financial problems facing the privatized Mumias Sugar Company.

Even with the privatization of Mumias Sugar, the political hawks and white collar conmen have not been deterred from denting and wrecking the operations of this firm.

The bailout programmes by The National Treasury can only be termed as ‘cosmetic economics’. Acting on directions from the powers that be, The National Treasury bureaucrats have decided to play politics with the revitalization of Mumias Sugar Company.

On one hand, money is disbursed to help the ailing Mumias Sugar Company but on the other hand, politicians go behind the scenes to demand for money channeled to this firm!

In addition, the resuscitation of Mumias Sugar Company has degenerated into a political chess game with the sugar firm equated to a pawn!

The failed ‘Mumias Experiment’ is likely to be the state of affairs with the five state-owned sugar enterprises earmarked for privatization.

Way Forward for the Sugar Industry

As the privatization of the state-owned sugar enterprises gains momentum, attention must be paid to certain fundamentals of which failure to address them will lead to the total collapse of the sugar industry.

One of the foremost issues that must be addressed is the subsidization of the activities related with the production of sugar. The ‘Mumias Experiment’ reveals that since its privatization, there have been weak subsidization programmes to significantly cut down on the cost of producing sugar.

Unless privatization of the sugar industry is accompanied by subsidization schemes, Kenyan sugar will still be highly priced in markets within the COMESA region and beyond.

The second fundamental issue that must be addressed is the political wretchedness that has clouded the sugar industry.

Going forward, four scenarios play out with specific reference to Kenya’s collapsing sugar industry. Firstly, a privatization programme in which the government still has a stake in the sugar companies is bound to create more economic misery and lead to total failure of the sugar industry.

Secondly, the national government may go on with the privatization plan but cede its stake in these enterprises to the county governments based on two reasons. One, agriculture is a devolved function and two, the previous privatization ‘experiments’ in which the national government has a percentage of ownership have been characterized by unending political interests, a genesis for embezzlement of financial resources.

The third scenario, as proposed by a few people, is the abandonment of sugar-cane farming. It may be fruitful to shift from sugar-cane farming to other agricultural activities but this will negatively affect Kenya’s balance of payment position because the volume of sugar imports will rise.

Fourthly, the national government can still own the sugar enterprises but focus on subsidization and elimination of cartels and the political interests.

If the national government is truly committed in resuscitating the sugar industry that is wallowing and sinking with a debt burden of Kshs.50 billion, then it has to totally clear this debt and stop playing cheap and petty politics.

In the event that county governments are incorporated in the management of these sugar processing enterprises, they must pursue subsidization policies with two main objectives at hand: increased production of sugar with enough surpluses for exportation, and production of cheaper sugar.

Otherwise, blatant, blunt and hell bent privatization without addressing the requisite fundamentals is all but an economic charade and worst of all, an economic bluff!

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The Resistance Movement must Birth the Third Liberation

By Sitati Wasilwa

Regarded as an enigma in Kenya’s politics, former Prime Minister Raila Odinga’s contribution to the political and economic liberation of the country cannot be understated.

Loved and loathed by many, and whose brand of politics cultivates the Raila mania frenzy and elicits the passionate hatred that is Raila phobia, the scion of Kenya’s first Vice President was instrumental in birthing the Republic’s Second Liberation.

The hallmarks of the Second Liberation were the re-introduction of multi-party politics in 1991, after the landmark repealing of the famous Section 2A, and the promulgation of the current progressive constitutional dispensation 19 years later in 2010.

Unfortunately, the full implementation of the Republic’s progressive Constitution has been hijacked by political forces nursing the Moi-era hangovers and keen on promoting the status quo.

In his quest to ascend to the presidency, Mr. Odinga’s political journey has been episodic.

These episodes range from his own political mistakes, rigged presidential elections, re-uniting with erstwhile political nemeses and making unexpected political declarations like the historical “Kibaki Tosha” not forgetting the detentions he was subjected to by Kenya’s second president, Daniel Arap Moi, a corrupt oligarch.

Having fervently championed for the realization of the Kenyan Dream through various political vehicles from the Forum for the Restoration of Democracy (FORD) to the National Super Alliance (NASA), Mr. Odinga’s political career takes a homestretch but the 72 year old firebrand politician seems not to be giving up on his dream for a better Kenya.

This follows his latest political move to transform the NASA coalition into a ‘National Resistance Movement’.

Kenya’s Liberations

The tenets that informed the struggle for the First and Second Liberation were solely anchored on the need for political and economic emancipation of the oppressed Kenyans.

With the first struggle being the fight for the Republic’s independence, it was envisaged that the life for the common man – the average Kenyan; the hoi polloi – would reflect the political and economic liberation that was granted by the British imperialists 54 years ago in 1963.

After independence, however, it quickly turned out that Jomo Kenyatta’s administration was in fact a disgraced institutional set up, a colonial relic for that matter, whose mission was the promotion of crony capitalism through corruption and illegal acquisition of public resources.

Ever wondered why Jomo Kenyatta became wealthy and other heroes of the First Liberation such as Bildad Kaggia, General Baimunge among others died while struggling to unchain themselves from the manacles of poverty? Jomo Kenyatta and his cronies were the enemies within.

Initiatives and activities intended to spur economic growth and development during Jomo Kenyatta’s era were largely based on political affiliation with the regime’s sycophants and loyalists rewarded with a number of ‘projects’.

Jomo Kenyatta’s crackdown on political dissenters such as the Jaramogi Oginga Odinga, and the assassination of fiery revolutionaries such as Pio Gama Pinto and J. M. Kariuki as well as gallant politicians like Tom Mboya and Ronald Ngala was an affirmation of the existence of an imperialist under a Black man’s skin.

In a nutshell, Jomo Kenyatta’s presidency was characterized by political and economic exclusion that resulted in a few illicitly wealthy demagogues, millions of economically destitute patriots and deeply disillusioned political leaders whose aspirations for a politically and economically liberated Kenya were thwarted.

Moi’s presidency was an assortment of a political pantomime and despotism largely due to the inferiority complex and paranoia that Kenya’s longest serving president suffered from.

Arap Moi religiously followed Jomo Kenyatta’s footsteps coining the dubious philosophy dubbed as the “Nyayo Philosophy” meant to promote peace, love and unity. However, it turned out that the ideological maxim of Nyayoism actually propagated economic mismanagement and political exclusion with the old man’s paranoia concentrated on fixing the dissenting voices and amassing illicit wealth.

It was during his presidency in the 1980s and early 1990s that the struggle for the Second Liberation took shape. The Forum for the Restoration of Democracy (FORD) – originally founded by the Jaramogi Oginga Odinga, Phillip Gachoka, Masinde Muliro, Martin Shikuku, George Nthenge, and Ahmed Bamahriz – exerted pressure on Moi to institute political and economic reforms.

One of the critical junctures of the Second Liberation was in 1991 when Daniel arap Moi bowed to pressure and repealed Section 2A of the Constitution that led to the re-introduction of the multi-party political system. However, 26 years later, the Republic is littered with political parties that are not founded on definite ideologies and whose lifespan is directly depended on its founder/leader.

The second critical juncture of the Second Liberation was the political obliteration of KANU in 2002 that culminated in the formation of the NARC government with Mwai Kibaki as president.

Despite reviving the country’s moribund economy, Kibaki failed to deliver a progressive constitution to Kenyans as promised, fashioned tribalism and of course allowed corruption to blossom.

This led to the 2007/08 post-election violence in which the presidential election was rigged in favor of Mr. Kibaki. This event was the third crunch time after the dawn of the Second Liberation whose eventuality was the formation of the Grand Coalition government with Kibaki as president and Raila Odinga as Prime Minister.

An outstanding achievement of the Kibaki and Raila led coalition government was the promulgation of the current Constitution in 2010. The Republic’s Constitution is wholly progressive but its key component is devolution, a politico-economic concept advocated for by Mr. Odinga.

A politically progressive doctrine that was to be included in our national Constitution but was quashed by Mwai Kibaki’s camp and William Ruto during the constitution making process is the Parliamentary system of government.

Such a system would be ideal for the Republic in view of the tribal political formations that compete for the presidency in the case of the current Presidential system.

Four and a half years under the Jubilee administration, corruption has been rife with no tangible effort made to tackle this vice despite the existence of a number of governance institutions as stipulated by the Constitution.

Under the presidency of Uhuru Kenyatta there have been several attempts to drag the country to the dark days of Moi and Jomo Kenyatta. His administration has effectively put into use large doses of propaganda (the PR we’ve witnessed) that is confusingly and annoyingly packaged as “development record”. This effective use of propaganda mimics the classical Communist propaganda.

But it isn’t a surprise since the Jubilee Party has been closely benchmarking with the Chinese Communist Party. This is the genesis of the propaganda lately escalated by the involvement of international PR firm, Cambridge Analytica.

Jubilee Party’s propaganda bears semblance with similar “PR” schemes engineered by Daniel Moi who even went to an extent of publishing the Kenya Times newspaper to religiously brainwash the citizens with political garbage.

Fast forward, following the flawed repeat presidential election presided over by the broken and rotten Independent Electoral & Boundaries Commission (IEBC), the country remains deeply divided with nearly half of the electorate disillusioned by the electoral body.

It is a stinking shame to have the ignominious IEBC with its crooked commissioners presiding over an election even after the chairman, Wafula Chebukati, laid bare the intrigues and machinations within the commission.

With electoral malpractice and political hubris having transformed the NASA coalition into a ‘National Resistance Movement’, the country awaits with bated breath to see ‘what next’. This is certainly the political zero hour to birth the Republic’s Third Liberation.

The Third Liberation

Since the ‘Uhuru Park Declaration’ whose prime highlight was the formation of the ‘National Resistance Movement’, Jubilee propagandists have framed the movement as a “rebel movement” keen on pursuing its political agenda by instigating violence. This is absolutely a warped view and a figment of imaginations of the hell-bent Jubilee Party surrogates.

Apart from Raila Odinga pursuing his own political interests, it is true to state that the Republic urgently needs social, political and economic reforms in line with the national Constitution and through a referendum.

There is need for the broken healthcare system to be fixed. The argument that county governments are responsible for healthcare is fundamentally flawed and utter nonsense.

As long as we don’t have a responsible national government keen on instituting a healthcare system for all, even the devolution of health services will fail fantastically.

By the way, Rwanda is on course to fully implementing the universal healthcare system while East Africa’s ‘most progressive’ state is grappling with endless strikes by health workers. The Republic’s third estate is subjected to poor health incommensurate with the taxes they pay to the national government.

In addition, the Third Liberation must institutionalize the Parliamentary system of government which effectively works with Kenya’s national political architecture that is purely based on shuffling the tribal cards.

The Third Liberation should be a movement out to liberate the country from the yoke of corruption both at the national government and the 47 county governments. Why should we have people running governments yet they allow corruption to flourish under their watch?

This is sanctioning cronyism and theft of public resources, a clear violation of the social contract that binds the relation between the governor and the governed. Kenyans must certainly be angry enough about corruption.

Corruption’s twin problem, that is the existence of the ‘permanent government’ often referred to as the cartels must be annihilated with the Third Liberation. The crony culture propagated by the cartels must be zealously fought if the Republic is to progress socially, economically and politically.

Furthermore, the Third Liberation must bring to an end the culture of defective electoral processes and systems that perpetuate political exclusion. The electoral body’s affairs must be managed by morally upright Kenyans.

Just like the IEBC, all public institutions have a chronic deficiency of people with unrivalled integrity which is a malady that must be rectified by the Third Liberation. This will be made possible by religiously sticking to the provisions of Chapter 6 of the Republic’s Constitution on Leadership and Integrity.

But who will make the Third Liberation a reality? Will it be the politicians or the people’s power?

Politicians or the People’s Power?

With the ‘National Resistance Movement’ being the brainchild of Raila Odinga, he is expected to naturally provide leadership to the cause of this political movement.

Of keen interest, however, is whether his co-principals – Kalonzo Musyoka, Musalia Mudavadi and Moses Wetang’ula – will fully embrace Odinga’s latest political strategy. The three senior politicians never fought for the Second Liberation and hence are ‘strangers’ with the former Premier’s revolutionary ideologies.

In the 1980s and 1990s, Kalonzo Musyoka, Musalia Mudavadi and Moses Wetang’ula were dining with the corrupt despot, Daniel Moi. Wetang’ula’s flirtation with the oligarch came after he represented some of the orchestrators of the failed 1982 coup in court.

Even as I highly doubt the commitment of the three to lead the way to the Third Liberation, all the forward-thinking Kenyans must come forth and seize the moment to liberate the Republic through non-violence means.

Peaceful revolutionary messages cannot be effective if at all there is no critical mass. I come across majority of the common folks lamenting about poor governance and all the malfeasance rampant in the national government and the county governments but who end up voting along tribal lines or whose ballot decision is artificially wrecked.

Fermentation of the Third Liberation calls for a new generation of leaders. Perhaps more youthful leaders need to take a pivotal role by clearly pointing out the socio-political and economic ills and endlessly agitate for transformation of the Republic.

Disappointments, however, are bound to occur since a significant number of Kenyan youth are ethnic fundamentalists. Informal education acquired through the primary socialization process is a breeding mechanism for highly spirited tribalists. No wonder formal learning institutions are ethnic enclaves.

All in all, talking we must at this moment but the embers of the Third Liberation should not be allowed to flicker out. The oppressed majority must seek for political and economic emancipation through peaceful means.

Viva Troisieme Liberation! Viva Mouvement des Personnes!

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Of the secession talk & confronting the Republic’s realities

By Sitati Wasilwa

The Republic of Kenya, a sovereign state in the East African region, is a colonial construct and a confederation of ethnic nations. Kenya is a typical manifestation of the consequences resulting from the imperialistic tendencies of the colonialists that were characterized by drawing up of the artificial boundaries.

These artificial boundaries were effectively used to implement the divide and rule strategy fashioned by the colonialists. The boundaries served to determine the geographical map of a country (determine identity of a country) and for proper internal governance by creating administrative units such as districts and provinces based on ethnic identity.

During the era of the struggle for independence, the emancipation for political, economic and social liberty was first driven by tribal interests before the eventual synergization of efforts by the genuine independence heroes/heroines and turn-coats labeled as founding fathers.

Since the dawn of independence, each critical juncture in the Republic’s history has been characterized by negative ethnic interests that have proved to be destructive. From Jomo Kenyatta’s administration to the Uhuru Kenyatta-led administration through Moi’s and Kibaki’s governments, the challenges have centred on political exclusion and economic marginalization of ethnic communities.

Origins of political exclusion and economic marginalization are fundamentally informed by the struggle for the coveted crown of the presidency and the need to protect it. The attainance of political power in Kenya is inherently an epochal moment to perfectly execute the “our time to eat” mantra.

The “our time to eat” syndrome has occasioned Kenya’s four presidents to gladly embrace tribalism with the formation of governments that are not ethnically inclusive. It is this disease and unparalleled stupidity that has fuelled the thoughts and acts of self-determination with calls for secession.

Historical Analysis

The aspirations of secessionism are not new in Kenya. Between 1963 and 1967, the Shifta War was a consequence of the calls for secession by the inhabitants of the then Northern Frontier District that covered the present Wajir, Mandera, Garissa, Moyale, Isiolo and Marsabit counties.

This act of self-determination was championed by the Northern Province People’s Progressive Party and executed by the militant Northern Frontier District Liberation Movement. The people of the Northern Frontier nation, being ethnically homogeneous, desired to re-unite with the then Somali Republic following the nationalist aspiration of forming a Greater Somalia.

Creation of the Northern Frontier District was an effect of colonialism with this region carved out for the British (British Somaliland) while the rest was recognized as Italian Somaliland.

Jomo Kenyatta’s administration did not hesitate to suppress the insurgents. What followed was the heightened suspicion of the region’s inhabitants in government quarters with various strategies mooted to check on any incident that would have triggered another uprising.

It was during Daniel arap Moi’s regime that the government’s harbored suspicions generated into genocidal attempts with massacres at Turbi, Malka Marri, and Garissa with the worst of them all being the horrific Wagalla Massacre. Attempts by the people of Northern Kenya to secede prompted the government to segregate them politically and economically until a glimmer of hope was presented by devolution.

In 1998, the then Official Leader of the Opposition and head of the Democratic Party (DP) Mwai Kibaki, and MPs Kihika Kimani of Molo Constituency and David Mwenje of Embakasi advocated for the secession of the Gikuyu-Embu-Meru nation.

They alleged that the members of the Agikuyu ethnic community were being targeted by the state in what they termed as ethnic cleansing. They rallied for the creation of a state that would comprise of Nakuru, Laikipia, Embu, Meru, Nyeri, Kirinyaga, Kiambu, Murang’a and Nairobi counties.

The dissenting voices of Mwai Kibaki and majority of the Agikuyu were based on the prevailing emotions of the time and was also the apogee of the frustrations they harbored following the ascendancy of Arap Moi to the presidency in 1978, the attempted coup of 1982 and the re-introduction of multi-party politics in 1991.

Prior to 1978, a series of campaigns and initiatives were launched to prevent Moi from succeeding Kenyatta. In 1982, Charles Njonjo was apparently organizing for a parallel coup which forced Moi to re-organize his Kitchen Cabinet and government. Just before and after the re-introduction of multi-partyism, most of the Agikuyu leaders resigned from Moi’s administration and joined other political parties with Jomo Kenyatta’s administration oligarchs coalescing around the Kibaki-led Democratic Party.

These events prompted Arap Moi to keep the Agikuyu community on the fringes of political power whose finality elicited the calls for self-determination. However, the secessionist voices flickered out.

Come 2003, the then KANU orphans largely drawn from the Kalenjin community and led by one William Ruto (Deputy President) called for the creation of the Rift Valley state. Their secessionism aspirations were anchored on the operations of the Kibaki-led administration which intended to reclaim all the public property that KANU and Moi had looted.

Ruto and his orphaned comrades alleged that President Kibaki hounded out members of the Kalenjin community from government. There might be an element of truth in these allegations bearing in mind Moi’s political machinations against the leading figures of the Agikuyu community during his presidency until the formation of the government of national unity in 2005 when Kibaki appointed some KANU MPs as Cabinet ministers.

From 2005 to 2008, the activities of the dreaded Sabaot Land Defence Forces (SLDF) leaned towards the creation of an independent state far from its main objective of fighting for land rights and injustice. SLDF was a well-organized militia group that operated in Mount Elgon region but sought to capture, control and claim swaths of land in Bungoma and Trans Nzoia counties.

2007 after the disputed and rigged presidential elections, Najib Balala (currently Cabinet Secretary in charge of Tourism) then member of ODM’s Pentagon and Coastal region point man called for secession.

In 2012, the Mombasa Republican Council (MRC) famed for its slogan Pwani Si Kenya, pushed for the secession of the Coastal region due to economic and political marginalization of the region since independence. The case was dismissed by the court.

2017 Secession Calls

The current debate on whether Kenya should disintegrate into two or more states is healthy and welcome. The secession talk ostensibly triggered by the straight-shooting economist and indefatigable public intellectual Dr. David Ndii is a perfect opportunity to have constructive conversations on Kenya’s political system.

As usual, cheap talk, blunt banter, hubris and emotionally-charged discussions edging on animus have taken centre-stage. For a prosperous Kenya, the dissenting voices resulting from the disenchantment, dissatisfaction and disappointment with the electoral process and political marginalization should not be ignored.

In one of his articles published in March 2016 by the Daily Nation, Ndii proposed the divorce of Project Kenya which he termed as a cruel marriage. Recently, he drafted a petition seeking to raise 15 million signatures to push for a secession referendum. The fundamental issues that the petition is based include a culture of rigged elections, economic marginalization and extra-judicial killings.

As to whether the presidential election was free, fair and credible is a matter to be determined by the Supreme Court. But the underlying factor fueling the calls for secession is the dominance of the presidency by the Agikuyu and Kalenjin ethnic communities since independence. This is a fundamental issue that needs to be addressed and solved by a nuanced approach involving constitutional amendments.

Viable Options

Structurally, Kenya’s politics is based on ethnic numbers. To solve this and to possibly eliminate the cases of political exclusion and the doctrine of the tyranny of numbers, hallmark changes need to made to the Constitution. For eternal political prosperity, the Republic should adopt a political system that is not highly polarizing and one whose effects on the economy are not pronounced.

We need to re-consider the adoption of a Parliamentary system of government. This involves the selection of the head of government basing on the Parliamentary majority of political parties. This system will strengthen the political parties, do away with the periodical ethnic censuses in form of elections and significantly reduce the pressure on the economy common in electioneering periods.

Another option is to consider the institutionalization of a rotational presidency. This ought to factor in all the communities basing on the former provinces. Most critically, we should also think around the Electoral College model as recently proposed by Okiya Omtata.

Secessionism, in Kenya’s case, will be a very costly exercise and experience both economically and emotionally. This is the moment for political redemption and salvation by making changes to the Constitution.

Any attempt to thwart constitutional changes will generate frustrations in the near future in case the tyranny of numbers shifts to other formidable, ethnic-based political formations. Short-termism must be avoided in the secessionism discourse but debate on the issue should neither be suppressed nor dismissed.

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Of the Wagging Tail & Kenya’s Food Politics

By Sitati Wasilwa

For the common folk and the underclass of Kenya’s populace, their lives have literally been thrown into chaos following the on-going increase in prices of some of the commodities that are largely consumed by the households.

The continuous rise in the prices of such commodities is said to be as a result of a number of factors depending on which side of the political divide you associate with and how knowledgeable you are as far as understanding the Kenyan economy is concerned.

Of course most of the supporters of the current regime and the not-so-insightful individuals relate the price increases to the perceived ‘natural’ forces of demand and supply backing up their arguments with explanations of how the market is adjusting itself naturally to the prevailing economic conditions.

On the other hand, the associates of the other side of the political divide and a good number of Kenyans hold the view that perhaps the upward spiral of prices is the outcome of the activities propelled by the robber barons and a systemic failure of the current administration to fulfill its promise of lowering the cost of living for the majority of the Kenyans.

As to whether both political camps are correct or not, is for you to figure out as each is in the business of justifying its rhetoric with ‘facts’ with the end being to gain political mileage. The political class is part of the economic chaos and this will be evident later on in this article. With economic insight, it cannot be disputed whatsoever that the forces of demand and supply are responsible for the current increase in prices of some of the basic commodities.

The crux of the matter, however, is the exact nature of these perceived forces of demand and supply in view of the continuous rise in the prices of commodities. Are the forces truly natural as posited by one school of thought as highlighted in the previous paragraph? Or are the forces largely artificial?

With the acknowledgement that depressed rainfall levels in 2016 led to a significant decline in the total yield of maize, sugarcane, rice and wheat, economic wisdom dictates and extensively reveals that the current situation is largely a creation of the proprietors and rent-seekers of the underworld economy. These are the robber barons and the cartels that are alive in the country.

In the world, the activities and operations of any society, polity or economy are under the control of the cartels and the interest groups irrespective of whether an entity cherishes and embraces the ideals of capitalism, the values of socialism or a hodge-podge of the two systems.

In his book, Naked Economics, Charles Wheelan an economist and public policy analyst likens the operations of the cartels and interest groups in an economy to the tail wagging the dog. Yes, the tail wagging the dog and not the dog wagging the tail. This illustrates just how powerful the cartels are and such is the case in Kenya.

The presence and vibrancy of the cartels in the economy is a strong indication of market failure which calls for government intervention in the economy especially in the production and distribution of the basic commodities including food.

A holistic look at the Kenyan price conundrum leaves a lot to be desired in the general management of the economy and most importantly the implementation of the relevant and existing economic and/or agricultural policies.

Reflecting on the maize and sugar “shortage” in the country, a number of fundamental questions and concerns need to be posed and raised at the same time: how effectively and efficiently are the existing agricultural policies being implemented? Is it possible that the political leadership in Kenya tends to ignore the advice given by government agencies as part of the mitigation measures? How efficient is the absorption of funds set aside for the food security programmes and projects? In what way do the cartels outsmart the political leadership? Or is the political leadership in Kenya a conduit for the cartels?

At the inception of the Jubilee administration in March 2013, promises were firmly made on how Kenya would be the foremost food secure country not just in the Eastern African region but the entire continent of Africa.

It was on the basis of these promises that the idea of irrigating one million acres of arable land was mooted and conceptualized with the outcome being the Galana-Kulalu Food Security Project. Over Kshs.10 billion have been allocated to this project over the last four years but the trickle-down effect is yet to be witnessed by majority of the Kenyans.

The below par performance of the Galana-Kulalu Food Security Project is majorly due to two main factors: there is a high possibility that the feasibility studies conducted to ascertain the viability of the Galana-Kulalu project were poorly done at the expense of gaining political capital; secondly, the funds allocated each financial year towards the financing of the project are poorly absorbed due to financial bureaucracy and corruption.

Kenya prides herself in being the most advanced economy in the Eastern Africa region but in a country where affordability of the basic commodities is a preserve of the haves illustrates just how cards are being shuffled under the table.

Maize is Kenya’s staple food and any right-thinking citizen would expect that the political leadership would rise to the occasion to cushion the average Kenyan against any shortage that might be experienced.

Towards the end of 2016, the National Drought Management Authority (NDMA) issued early warnings on the La Nina effects responsible for the depressed rainfall experienced in most parts of the country. The Executive and Parliament responded by stating that the necessary measures have been put in place to ensure that there is a constant supply of maize. This is hence a situation that the political leadership was well aware of not now but last year.

It is from such information from the NDMA and other agencies that the cartels began positioning themselves strategically; they hatched schemes to create an artificial shortage of maize.

In fact, having known that last year’s total production of maize fell in the country from 43 million bags to around 37 million bags, the cartels were smiling all the way as opportunities to import maize were in the offing.

It should be noted that Kenya has over the years been importing maize and maize flour from countries such as Uganda, Tanzania and even at one time from Malawi. Acknowledging the principle and concept of comparative advantage in trade between nations, it is comical for a country like Kenya that has a high agricultural potential to be importing a food crop like maize.

Fast forward, the ‘shortage’ of maize apparently forced the government to import maize and this came after the tax exemptions on maize and wheat imports as per the Budget Policy Statement presented by the Cabinet Secretary of The National Treasury in the National Assembly in March this year.

Conflicting reports have been issued by some of the senior government officials on just who is importing the maize and the point of origin of the imported maize. Initially, reports issued by the government stated that maize was to be imported from Mexico with the importing entity solely being the government.

Later on, it emerged that the maize was to be imported from South Africa by three private companies. Conflicting information and communication is a strong indicator that perhaps things are not adding up and it is from such that you can be able to detect the machinations of the cartels. As a matter of fact, the consignment of maize that has just been imported was apparently ordered late last year by the importing firms.

Turning to sugar, savage politics and economics shaped by the cartels continue to haunt this industry. At the moment, a 2 kg packet of sugar retails at approximately Kshs.400. Still there are some people who believe that the natural forces of demand and supply are fully responsible for the current shortage!

The discipline of Economics, however, gives leverage to individuals to present different arguments and belong to different schools of thought hence the commonality of the phrase “on the other hand…” In August 2015, there was a heated debate around the country following the deal signed between the current administration and the Ugandan government to import sugar from Uganda.

Kenya’s demand for sugar exceeds the local supply and this necessitates the importation of sugar but the supply deficit has never been chronic.  How then is it possible that most of the sugar companies excluding Butali Sugar Mills and West Kenya have been closed for regular maintenance? If so, then what informs such action that is devoid of any form or kind of strategic thinking? Let’s forget about the regular maintenance stuff because it has been happening year in year out. This is the strong hand of the cartels busy at controlling the economy.

The poor performance of the sugar-milling factories seems to be more of a political issue than an economic issue. The sugar industry has been politicized resulting in vague resuscitation programmes such as the common bail-outs from the national government. The sugar industry is under the manacles of the cartels and the latter strongly dictate which sugar-milling company is to be bailed out or not.

Fundamentally, the current economic chaos that is yet to morph into an economic crisis is as a result of an inconsistent political leadership. A consistent political leadership, both at the National Assembly and the Executive, would ensure that the formulated agricultural/economic policies such as the Agricultural Sector Development Strategy and Vision 2030 are implemented as expected and would also viciously fight the cartels.

Politicians and other experts should not be talking about seeking for long-term solutions because there are existing economic blueprints whose implementation is erratic and inconsistent. The cartels in the Kenyan economy fashion the vicious circle of poverty and are sworn enemies of the ideal virtuous circle of prosperity. The tail (cartels) has successfully wagged the dog (Kenya).

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Kenya’s Policy Dilemma in Perspective

By Sitati Wasilwa

If nearly all the socio-economic policies that have been formulated in Kenya since 1963 were to be fully implemented, there is no doubt that this country’s economy would feature among the newly industrialized economies not just in Africa but in the whole world.

The implementation of these policies would have translated to low levels of poverty in the country, enough food for all Kenyans, a vibrant manufacturing sector, a high number of formal job opportunities, a better healthcare system, a highly developed transport system, proper access to clean water among other positives that are associated with an economy that is undergoing structural transformation.

In evaluating and reviewing a good number of these policies, there is a consistent feature that clearly defines the policy process/cycle in the country; the aspect of policy dilemma. The policy process involves several stages with the most pronounced phases being policy formulation and policy implementation. The formulation of socio-economic and/or public policies involves the input of the various stakeholders and the implementation phase largely depends on the rate of efficiency of the government- ministries, agencies, state departments and institutions.

Policy dilemma, in this case, refers to how magnificent policies are formulated but implemented in a flawed and inconsistent manner. This has led to the recurrence of the socio-economic challenges/problems that bedevil the country creating a developmental scenario of making three steps ahead and five steps backwards. With reference to this, it is not a surprise that some of the challenges that faced the nation in the 70s, 80s and 90s have never been amicably solved.

Take for instance Kenya’s first comprehensive development blueprint, Sessional Paper No.10 of 1965: African Socialism and its Application to Planning in Kenya. This policy document highlighted the course of action that was to be followed to steer the country’s nascent economy with the public sector and the private sector playing an important role in its implementation. Three challenges were to be solved by this policy; poverty, disease and ignorance implying on a large-scale that all Kenyans were to have access to affordable healthcare and education as well as better living standards. Several gains were made but its implementation was thwarted along the way by both internal and external forces.

Women fetching water from a river in Kenya.Photo: Courtesy

The current water shortage problem experienced in the country would be non-existent if most of the water policies that have been formulated over time were effectively implemented. The most notable policy initiative to solve the problem of access to clean and available water can be traced to 1974. During this year, there was the formulation and subsequent launch of the National Water Master Plan Initiative whose slogan was: Water for All by the Year 2000. The implementation of this policy never came to fruition.

In 1986, another policy paper was drafted; Sessional Paper No.1 of 1986 on Economic Management for Renewed Growth. This policy paper incorporated the Structural Adjustment Programmes (SAPs) and it was formulated following the conditions issued by the Bretton Woods institutions (World Bank & IMF) on the supposed economic restructuring the government was to adopt in return for financial assistance from these institutions.

This policy document addressed the following: market liberalization, reduced role of the state in the economy, deregulation and privatization of some of the state-owned enterprises. Since this policy was recommended by the Bretton Woods institutions, the government implemented nearly every bit of it and the outcomes were not pleasing at all; it did more harm than good. This was because its recommendations were based on the model of the USA economy and not on the local conditions that were prevalent in Kenya’s economy.

A Sessional Paper on the Micro and Small-scale Enterprises (MSEs) was formulated in 1992. The objective of this policy document was to transform the MSEs by institutionalizing a high degree of formality in them as a larger percentage were operating informally in the agricultural sector. The agricultural sector at that time contributed approximately 30% of the country’s Gross Domestic Product (GDP) and most of the Kenyans depended directly and indirectly on the sector for their source of livelihood.

What could be the scenario in case the Sessional Paper on the MSEs was fully implemented? A strong foundation for the manufacturing sector would be created as a result of the establishment of the agro-based industries, food production would have certainly increased hence making the country to be food secure, a high number of formal employment opportunities would have been created among many others.

A policy framework for achieving industrialization by the year 2020 was developed in 1996 specifically known as Sessional Paper No.2 of 1996; Industrial Transformation to the Year 2020. The overarching objective of this policy paper was to develop a vibrant manufacturing sector in the country that would have enabled Kenya to be a newly industrializing economy.

The entrance to Kenya’s Export Processing Zone at Athi River.Photo: Courtesy

The implementation of this policy framework was flawed largely due to the inherent institutional weaknesses and structural inconsistencies which some are in-built in the policy itself and others being explicit to the policy. Its total implementation, with the rectification of its weaknesses, would have steered the economy’s trajectory to be defined in terms of the structural transformation.

With the institutionalization of the NARC administration in 2003, great attention was paid in reviving the country’s economy. To actualize this, a policy paper was formulated; the Economic Recovery Strategy for Wealth and Employment Creation (ERS) for the period 2003 to 2007. This policy document envisaged an economic growth rate of 7% upon the completion of the five year period in which it was to be implemented. In 2007, the country’s economy grew by 7% a clear indication that this policy framework was effectively implemented.

As the period of time for the implementation of the ERS was elapsing, the Sessional Paper No.10 of 2012 on Kenya’s Vision 2030 was designed. The main objective of the Vision 2030 is to transform the country into a middle-income economy by largely investing in the manufacturing sector and key infrastructural projects. The implementation of the Vision 2030 was to occur in phases denoted as the Medium-Term Plans (MTPs). The first MTP covered the period from 2008 to 2012, the second MTP from 2013 to 2017 and so on.

In as much as some significant progress is taking place especially in the construction of infrastructural projects, certain fundamentals have been ignored, for instance, the government hasn’t been largely committed to heavily invest in the manufacturing sector. Achieving the objectives of Vision 2030 remains a mirage considering how its implementation process is being executed.

Inconsistent & Flawed Implementation

Both internal and external forces have contributed to the failure of the holistic implementation of the policy frameworks formulated since independence. The major cause of the failure to fully implement these policy documents is the lack of a committed political leadership. The country’s political leadership has always focused on enriching itself at the expense of steering the country’s economy. Politics plays a crucial role in the implementation of the policy frameworks. All the administrations that have existed in Kenya starting from Jomo Kenyatta’s era have been rocked with massive corruption. However, Kibaki’s administration was more serious when it came to the implementation of national development blueprints compared to the others.

The urge to implement the policy proposals advocated by the World Bank and International Monetary Fund without subjecting them to scrutiny has in one way led to the flawed implementation of such policies. Normally, the policies championed by the Bretton Woods institutions are ignorant of the prevailing circumstances in the developing economies and they are formulated in accordance with the model of the economy of the United States of America. These are two different and primarily distinct economic models. The challenge is the readiness to embrace the policy proposals of the Bretton Woods institutions and disregard the locally formulated ones.

An in-built weakness could also be responsible for the flawed implementation of the policy frameworks. It is highly possible that the formulation phase is executed with so many assumptions and errors. Definitely, the problem of insufficient data comes into play causing the data collection phase to majorly rely on guesswork creating a situation that is different from the reality on the ground. This ultimately leads to a disconnect between the formulation and implementation phases of the policy frameworks.

The implementation phase of the policy process is crucial and the failure to effectively execute it will not create the desired socio-economic transformation. Politics plays a significant role in this phase hence the need to have a visionary political leadership in place. Kenya’s lack of a visionary leadership coupled with the challenges of inadequate data and the pressure from the Bretton Woods institutions have collectively hindered the country from fully implementing the various policy frameworks, some of which I have highlighted in this article. With proper implementation of the policies there is no doubt that most of the recurring problems in the country will be fully solved.

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What of The Northern Frontier and The ASALs?

Fifty one years after Kenya attained her independence, the inequality gap is widening at an alarming rate. These inequality is manifested in various facets which including income inequality, gender inequality and even regional inequality. This article reflects on the arid and semi-arid lands (ASALs), an analysis of the country’s regional inequality.

The ASALs cover a very wide geographical area cutting across Turkana County through West Pokot County, Baringo, Isiolo, Marsabit, Samburu, Wajir, Mandera, Garissa, Tana River and parts of Kitui and Taita Taveta Counties. All these counties face the same or similar challenges

A distinct geographical map, aggregating all these counties can be curved out from the map of Kenya.

Immediately after independence, the Jomo Kenyatta administration was faced with the secession challenge in the Northern Frontier region. The secession was propagated by Somalis seeking to reunite with Somalia. A consequential effect was the Shifta War that began in 1963 and eventually suppressed in 1967.

The Kenyatta and Moi administrations hardly initiated tangible efforts that would lead to the socio-economic transformation of the Northern Frontier region. Perhaps they were probably meting out some form of punishment to the daring secessionists.

There is no doubt that the region is backward in terms of infrastructural development. For instance, it was until 2014 that the first ever tarmac road was constructed in Mandera County.

Notably so, the ASALs face a number of challenges such as:

· Insecurity incidences such as banditry.

· Inadequate health facilities.

· Poor and dilapidated infrastructure.

· Very low levels and rates of school attendance.

· High incidences of hunger and famine.

Sessional Paper Number 10 of 1965, African Socialism and Its Application to Planning in Kenya, envisioned an equal Kenyan society irrespective of ethnic or regional orientation.

The Moi and Kenyatta regimes failed to promote holistic development and were instead driven by politics of greed.

Low population has played a significant role in the economic backwardness of the ASALs. The politics of numbers has not been favourable to the residents of such areas hence the neglect by politicians.

Therefore, reformation of the political institutions is imperative and devolution is a good example.

However, the national government should still take the lead in promoting regional balanced development initiatives.

In conclusion, the realization of the overall socio-economic growth and development for Kenya will remain a pipe-dream unless the challenges of the ASALs are fully addressed. Devolution should be the launch pad for addressing the challenges in the ASALs.

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Moving Africa Forward: Understanding the Challenges From Within

By Sitati Wasilwa

The 21st century has been touted as the century in which Africa is expected to register resounding growth politically, socially and economically.

Africa progress generally depends on how its overall growth and development would be transformative and inclusive. Moving Africa forward calls for revisiting the available opportunities in the continent, reviewing the existential challenges as well as threats.

Africa is undoubtedly well-endowed with natural resources. But majority of Africans are yet to benefit from the immense resource endowment.

Fundamentally, Africa is yet to fully maximize her cultural diversity. Instead, most Africans use the continent’s cultural diversity to fuel negative thoughts, beliefs and attitudes. A good example of this is negative ethnicity common among many African nations and states.

Wrong institutions and/or weak institutions are a major impediment towards Africa’s prosperity. Strong institutions would go a long way in furthering the continent’s long-term prosperity. Common challenges in Africa such famine, hunger, diseases, negative ethnicity, poor governance, poor infrastructure and many others would be effectively addressed with strong institutions in place.

Though significant progress has been made in regards to good governance in Africa, more needs to be done.

To improve the state of governance in Africa, the following should be adhered to: public participation especially in decision-making; application of the rule of law; transparency in governance processes and institutions; responsiveness whereby existing institutions serve people within a reasonable time frame; consensus building; equity; effectiveness and efficiency in achieving results aided by the institutions; accountability; a strategic vision on promotion of good governance and human development.

African governments ought to largely invest in both physical and social infrastructure: good roads, airports, efficient sea ports, electricity generation and distribution, properly built and well equipped health facilities, a reliable education sector among others.

Cases of famine and hunger simply imply that Africa still faces the challenge of food insecurity. A country that cannot adequately feed its people cannot effectively develop. Assurance of food security will help to cut off reliance on food aid which has often times jeopardized running of the affairs of most African governments.

Nevertheless, terrorist groups in some parts of Africa are a major hindrance in realization of notable development. In West Africa, especially in Nigeria and now Cameroon, the Boko Haram threat is evident. In the Horn of Africa, the Al Shabaab threat is still present. In the Democratic Republic of Congo, the dangers posed by the several rebel groups can clearly be seen. To move Africa forward such groups need to be decapitated to allow for normalcy and stability. A comprehensive security approach ought to be put in place to address the  security threats occasioned by the terrorist and rebel groups.

In conclusion, the bottlenecks limiting Africa to consistently move forward are basically poor governance, insecurity, low infrastructural investment and food insecurity. To move Africa forward, understanding the problems and the challenges from within is very crucial to institutionalize effective mitigation measures.

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Contextualizing Kenya’s Agricultural Sector Development Strategy

By Sitati Wasilwa

Over the years, the agricultural sector has been the leading sector in Kenya’s economy. Several agricultural policies have been formulated accelerate growth in the sector. Some of the noticeable policies include the Strategy for Revitalizing Agriculture of 2004 and Vision 2030. The Agricultural Sector Development Strategy was formulated to cover the period 2010 to 2020.

The main objective of Vision 2030 is to enable Kenya attain the middle-income status. In this particular development blueprint, the manufacturing sector is anticipated to be the leading sector. However, it is impossible to have a strong manufacturing and industrial base if a strong foundation for the agricultural sector is not established. It should be noted that agriculture contributes directly 26% of the Gross Domestic Product and about 25% of GDP indirectly. It also accounts for 65% of Kenya’s total exports and more than 70% of employment opportunities in rural areas.

In promoting robust growth in the agricultural sector, the government of the day and the would be successive governments need to pay attention to certain fundamental aspects. The starting point is by ensuring that budgetary allocation for the sector is increased not marginally but substantially. Kenya’s allocation to the agricultural sector in the national budget can be termed as meager considering that it is below 10% of the total national budget.

Budgetary allocations to the sector have to be aligned with the Maputo Declaration on Agriculture and Food Security of 2003 formulated under the auspices of the African Union. This declaration sought to compel the African governments to at least have 10% of their total national budgets going towards the agricultural sector.

To establish a vibrant manufacturing sector in Kenya, it is vital to develop agro-based industries. Agro-based industries will create linkages necessary for growth and development of other modern industries.

Effective training, research and development programmes are necessary for a vibrant agricultural sector. This can be done by thoroughly equipping the existing agricultural institutions in view of the curricula and programmes, and the usage of the latest but appropriate technology in training manpower. It is common nowadays to find some regions lacking field officers attending to the needs of the farmers. This situation has created a gap that has consequently led to low production and poor quality agricultural produce.

In addition, genetically modified and engineered organisms need to be introduced if we are yearning to increase levels of production and enhance food security. Genetically modified crops mature faster and have high yields thus leading to food security and high surplus.

Injecting efficiency in the agricultural state corporations is a key aspect towards achieving goals outlined of the Agricultural Sector Development Strategy. Most of these corporations have been affected by the maladministration. A general and thorough audit of these firms needs to be carried out to determine the various strategies to be used to resuscitate them.

To increase market surplus, small holder farmers need to access agricultural credit very easily and cheaply. Banks and other financial institutions need to reduce their conditionalities on loans and other inputs they offer farmers. This will increase the capital base of the farmers and with proper management there will be high yields. A lot of emphasis should be laid on the small holder farmers as they form the largest proportion of farmers nationwide.

Furthermore, reducing reliance on rain-fed agriculture is another vital aspect which the policy document under review addresses. This implies that a lot of irrigation needs to be done. The present government has made a significant step towards allocating some funds towards several irrigation projects notably the A Million Acre Scheme in order to promote food security. However, the government needs to be at the fore-front to ensure that the aquifers in Turkana County are drilled for water for irrigation to be easily available. Also other arid and semi-arid lands(ASALs) should also be effectively utilized in agricultural terms through the practical use of technology and irrigation.

The bottom line for actualization of the Agricultural Sector Development Strategy would be to focus on increasing  the budgetary allocation towards the sector. Without having enough finances, then implementing all the other strategies put in place to improve the sector would remain a pipe dream.

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