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HOUSE OF CARDS: Using Smoke and Mirrors to Fight Graft

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HOUSE OF CARDS: Using Smoke and Mirrors to Fight Graft
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On the evening of the day that saw twenty National Youth Service (NYS) officials arraigned in court to answer charges of institutional corruption, I went to see one of the lawyers who had been in court and who spoke to me on the condition that I would not disclose her identity. She was nonplussed about all the hullabaloo surrounding the NYS scandals and the subsequent parading of some senior government officials in the corridors of justice. “The courts have seen these kinds of court dramas before: nothing new and nothing out of the ordinary. It’s their season. They will come and go and the courts will go back to their usual routines. Take it from me, the courts are not in a mood to execute the Executive’s factional wars in the name of fighting state corruption,” she stated.

The advocate described the ensuing drama as a big, noisy circus. “I’m a trial lawyer,” she said. “If there will be any prosecutions, I will be glad for another day. What I’m saying is this: NYS 1 was juicier than this NYS 2 farce – were there any prosecutions? I hear it is the ‘Imperial’ legacy term. Please get me correctly: there will be no prosecutions, this is a circus show and NYS 3 is yet to come up.” (The lawyer was referring to the two multi-billion-shilling corruption scandals at the NYS, dubbed NYS Season 1 and NYS Season 2, within a short period of just three years.)

“Fish begins to rot from the head”

The fight against institutional corruption is not about fixing a certain cadre of people who don’t have the political connections and wherewithal and who will most likely be innocent victims or pawns in the political chess games of corrupt and powerful individuals, said the advocate. “It is immoral to harass and punish civil servants who are used as conduits of corruption by powerful state officials and politicians and when the crunch time comes, instead of the hammer falling at the right place, they are used as scapegoats. The NYS 1 corruption scandal involved powerful state officials who owned up to money getting lost. Some of them were even hauled in the courts of law – were there any convictions? Some of the NYS1 culprits are even more powerful today and presiding over bigger budgets. Let him [President Uhuru Kenyatta] fool no one that he is fighting corruption. Fish begins to rot from the head.” The lawyer acknowledged that the civil servants were also corrupt and the reason they were being hounded is because they had exposed their greed, hence were found culpable.

A Treasury official told me that the fish had been rotting for a long, long time. “What you’re seeing is the whirlwind before the calm. Everything about this razzmatazz sting operation stinks to high heaven. The biggest amount of money in the government is usually stolen just before the government closes its financial year and reads its budget. This year’s budget was read on June 14, so that means the 2018/2019 financial begins on July 1. It is not, in my view, a coincidence or for nothing that the government allegedly decided to release the dossier on NYS weeks before the national budget day. The coffers will be emptied before they are refilled again.”

The official said that in the two weeks before the budget is read, those who have the authority to incur expenses (AIEs), accountants and procurement personnel scheme to pilfer government money. Since the government is expected to close its books, all the monies that have been allocated for whatever use have to either be returned or expended. “This is the time when fictitious payments are paid out by accountants and AIE holders, who include directors, heads of department and permanent secretaries. The two weeks before the budget is read are always very busy as procurement officers invent ways of disbursing government money to dubious and hollow companies as they collude with the accountants and AIE holders to defraud the government,” said the Treasury official. “It is ridiculous for the President to talk about using polygraphs to gauge whether civil servants will be corrupt or not. Corruption is solely an ethical issue – it is not about whether you can master a truth test. If the government is interested to know, for example, who among the civil servants are corrupt, it should begin by conducting a lifestyle audit among AIE holders, accountants and procurement officers.

“The biggest amount of money in the government is usually stolen just before the government closes its financial year and reads its budget.”

The officer told me that the NYS report on the said scandals was ostensibly leaked by the National Intelligence Service (NIS) to media houses to create the impression that the media had simultaneously and suddenly stumbled on a massive corruption scandal. “These NYS scandals have always been there, they are not fresh scandals,” said the civil servant. “The impression one gets from government is that the corruption being exposed now could have happened just recently. Suffice it to say, they are a smokescreen of a much bigger scam that could be on its way. They are a farcical high drama of up-round-and-merry-go-round shows and Kenyans love street shows for their cathartic effects.”

“This is no longer corruption but outright theft”

But for Babra Singh, an elderly shopkeeper in Nairobi, the NYS scandals are like the street dramas he has witnessed in the city for many years – except that these scandals are not entertaining but truly tragic. “This is no longer corruption but outright theft,” said Babra in his tiny office on Kirinyaga Street. “I witnessed Jomo Kenyatta’s corruption, then Moi’s, which, sad to say, was assisted by some of our crooked Asian brothers. Then came Mwai Kibaki’s corruption with the Chinese, which was also massive. But Uhuru’s corruption has spiralled out of control; it is no longer corruption, it is purely mega theft, looting of unprecedented proportions, criminally driven by people who simply don’t care about the country.”

Babra was 18-years-old when he first set up his bicycle duka on the dusty Grogan Road in 1954, two years after President Uhuru Kenyatta’s father, Jomo, was detained by the British colonial government and a state of emergency was declared. Grogan (now known as Kirinyaga) Road was named after the rabidly racist Briton, Ewart Grogan, who later emigrated to apartheid South Africa in 1961 after he swore that he would never be ruled by a black leader (Kenyatta had been released from detention in 1959 and was poised to be Kenya’s first Prime Minister.)

“Since 2015, I’ve been laying off my workers one by one; what you see here is just skeletal staff. The cost of production exacerbated by unwieldy importation tax on spare parts, hefty bribes demanded by the customs officials and theft of spare parts by the very same customs officials had become unmanageable,” said Babra, who is a devout Sikh. “I’ve seen my workers – some of them have been with me for 40-plus years – become poorer and poorer by the day. I’m 82-years-old now. Much of my energy has been sapped out of me. I’m no longer as strong as I used to be and I’ve been keeping the company running, not because of me, but because of my workers.”

A. Gikandi, an aspiring politician from Kiambu County, told me that Kiambu residents, who happen to be the bastion of Uhuru’s ethnic support base, are poorer today than when Uhuru became president in 2013. Gikandi, who did not want his full name revealed said, “They’d very much like to explain their increasing levels of poverty by blaming other forces and not President Uhuru’s government, maybe because that makes them feel better, but the truth of the matter is they just can’t: his government has not helped them in any way. These spurious NYS scandals have not made them angry because they are fast becoming immune to anger. They are simply bamboozled that so much money, running into billions, can be stolen to enrich a few well-connected cabals while they can’t afford the daily necessities of life.”

A. Gikandi, an aspiring politician from Kiambu County, told me that Kiambu residents, who happen to be the bastion of Uhuru’s ethnic support base, are poorer today than when Uhuru became president in 2013.

The people are exasperated, he said. They are disengaged. Many of the “tenderpreneurs” mentioned in the scandals are millennials (he himself is one) “and, in fact, one of the people mentioned is a friend. To be honest, I was surprised when I saw his name mentioned. I called him up.” He added that his friend told him that connections to powerful state mandarins had got his name expunged from the final list of tenderpreneurs.

“It is absurd that you can pretend to prosecute a Principal Secretary and other senior civil servants and leave out the Cabinet Secretary,” said Gikandi. “Nothing happens in the ministries without full authorisation of the CS. Is it a miracle that the responsible CS is off the hook? She is properly wired.”

“Only a revolution will save this country”

Only a revolution will save this country, said the political aspirant. “The conditions are not ripe yet – but we’re headed there. After the national budget pronouncements, life will become even harder. We are headed for tougher times because austerity measures are here with us.” The crux of the matter, said Gikandi, is that it is the Kikuyu people who are suffering the most, but they cannot vocalise their disenchantment because they have been made to believe they have a collective duty not to be seen to be critising one of their own. “Don’t be surprised if the revolution begins with them,” he added.

A day after President Uhuru Kenyatta presided over the June 1st Madaraka celebrations this year in Meru town, 250km north of Nairobi, I went to see my friend Dennis Kimani, who is a second-hand clothes seller. “Did you listen to Uhuru yesterday?” he asked me. “I was so disappointed by Uhuru, talking about some gadgets to detect lying civil servants. I asked my wife whether what I was hearing was real. The people are crying, the people are suffering, the people are down, and all what Uhuru is talking about is importing lie detectors.”

Dennis told me he voted for Uhuru in the 2017 elections. “We Kikuyus are in a bind. When it comes to politics, we exhibit a herd mentality that has become so difficult to extricate ourselves from. On October 26 [the day of the repeat presidential elections], I had to be seen to have gone to vote – by my relatives and business friends – lest I’m branded bad names such as I’m a traitor, betrayer to the cause, NASA sympathiser, a Luo, or worst of all, have my Kikuyu identity questioned.”

For Jayne Rose Wairimu, a mother of three and a bookseller in Thika in Kiambu County, 40 km northeast of Nairobi, the decision not to participate in electoral politics was precisely because of “what we are now reading in the press on the orchestrated NYS scandals”. She said she did not vote in 2017 because elections had become pointless and futile. “The NYS saga is a racket by the two most powerful politicians in the country, President Uhuru and his deputy William Ruto. These monies that are being flung right, left and centre have been stolen on their behalf. You cannot convince me otherwise. It is so immoral to parade non-entities and hapless civil servants to hoodwink Kenyans that the state is now fighting corruption. NYS is Uhuru’s eating machine. Kibaki had his, the roads built by the Chinese. Moi’s was the Goldenberg scandal and such is life.”

Wairimu said that in this country you can engage in all manner of state corruption as long you have two cardinal things: tonnes of money and political influence. “Remember Kabura? She even confessed to carrying sacks of money. On whose behalf was she ferrying the money?”

Josephine Kabura was believed to be the hairdresser of the former influential and powerful Devolution Ministry Cabinet Secretary, Ann Waiguru. In her affidavit, Kabura named Waiguru as the focal point of the first Sh1.6 billion heist at NYS. The scam led the embattled Waiguru to resign in November 2016, but not before President Uhuru had defended her as a hardworking CS. Of particular interest was that in one year, the NYS budget had jumped from Sh13 billion to Sh25 billion. “Trust me, I smell a rat…There’s huge corruption coming… And then, as usual, the government will spin another yarn – ng’ano cia marimo (ogre tales). Uhuru is not fighting corruption, he’s engaging in a political circus,” said the bookseller.

“Remember Kabura? She even confessed to carrying sacks of money. On whose behalf was she ferrying the money?”

In Kikuyu town, Kiambu County, Amos Gatina, a businessman, told me that the NYS missing monies have just not gone missing now. “These are old corruption networks, some of which, I believe, were used to finance the second presidential election on October 26. All these funny people who are now being lined up for show were just conveyer belts. These NYS scandals are a melodrama created by Uhuru and his people to fool people that in his second term he’s going to be a no-nonsense President.” That the corruption scandals were being revealed this time told a much bigger story than just the government being interested in chasing corrupt state officials, he observed.

Gatina told me that the country was being run by political and financial mafia. “The Central Bank of Kenya governor, Patrick Njoroge, has a lot of explaining to do. How can all these financial shenanigans be going on around him, yet he is sitting pretty? Second-tier banks were used as conduits to transfer and withdraw humongous amounts of money, flagrantly breaking all the banking rules and you want to tell me we’ve not ceded the country to criminal gangs?”

“It is Ruto who is being fought”

A public policy analyst who worked with Uhuru Kenyatta in 2003 when the latter was the leader of the opposition, told me that the President is all talk and nothing more. “These fulminations about the NYS scandals by Uhuru are just that – fulminations. His railing against the pervasive corruption is nothing more than ensuring that [William] Ruto doesn’t succeed him. The scandals have been released to the public, not because the government has suddenly stumbled on runaway corruption, but because the Deputy President must be stopped from becoming President in 2022. It is Ruto who is being fought. Period.” The policy analyst said that he had advised Uhuru, who chaired the Parliamentary Accounts Committee on financial and economic matters, regarding his lead role in checking Kibaki’s government. “He never did anything. His was to fulminate and exhibit great annoyance, but it was all for public show.”

In January 2009, Uhuru Kenyatta was appointed by President Mwai Kibaki as one of two Deputy Prime Ministers and as Minister of Finance. In May of that year, he was involved in a Sh9.2 billion scam at the Treasury. “Do you remember how Uhuru explained away the scandal?” the policy analyst asked me: “He casually termed it as a computer glitch.” The issue of an extra Sh9.2billion being added to the Supplementary Budget had been raised by Imenti Central MP, Gitobu Imanyara. On May 11, Uhuru, accompanied by his Permanent Secretary, Joseph Kinyua, told the Parliamentary Budget Committee that, “yes, there may be a typing error, but that to me may not be a major cause of alarm.” (The committee exonerated Uhuru.)

A senior civil servant at the Ministry of Health told me he was unimpressed by Uhuru’s supposedly tough talk on the NYS scandals. “The president’s unconvincing assurances that money stolen from NYS will be recovered, and the subsequent threats that all those involved in the scandals should carry their own cross and will be punished, is just blowing hot air.” The bureaucrat said that one of the biggest scams to be unearthed during President Uhuru’s first term was in the health ministry. “We all know some of the people involved in forming dubious companies to swindle the ministry of hundreds of millions of shillings. A scandal doesn’t stop being a scandal because it was schemed by close relatives of the president and, therefore, conveniently swept under the carpet and ignored.”

Ten days after the President had hosted the Anti-Corruption, Governance and Accountability Summit – a public relations breakfast meeting ostensibly to carry out a corruption reality check and to have a “frank” discussion on how to curb runaway corruption – at State House in October 2016, his sister, Nyokabi Kenyatta Muthama, was named as one of the people who, in September 2013, barely five months into Uhuru’s first term, had already formed a company to supply goods to the ministry. Nyokabi, with their cousin Kathleen Kihanya, had registered Sundales International Company Limited on September 12, 2013. On October 29, 2016, The Star reported that the company, had been awarded five tenders worth Sh270 million by the Kenya Medical Supplies Authority (KEMSA).

The senior civil servant at the health ministry told me that the media’s exposé of the scandal, so soon after Uhuru’s breakfast meeting, was a calculated move by the Deputy President to embarrass the President. Why? Because, he said, the Ruto camp had interpreted the summit as a charade whose upshot was that state corruption was being perpetrated by the Deputy President and his henchmen. “No sooner had the debate on corruption at State House been over than his [Ruto’s] people were all over at the ministry looking for the ‘Nyokabi files’. What I am saying is the Ruto people leaked that scandal to the media within days as a way of fighting back the mantra that ‘It is William Ruto who’s corrupt and not the President’. These factional fights between the Uhuru and Ruto camps did not start now.”

The senior civil servant at the health ministry told me that the media’s exposé of the scandal, so soon after Uhuru’s breakfast meeting, was a calculated move by the Deputy President to embarrass the President.

Seemingly frustrated by the unceasing corruption in his government, President Kenyatta, while talking down to, among others, the then Attorney General, Prof. Githu Muigai, the Auditor General, Edward Ouko, and the President of the Court of Appeal, Justice Paul Kihara (who succeeded Githu as the new Attorney General in 2018), moaned loudly: “Do you expect me to go set up a firing squad at Uhuru Park so that people can be happy?” Earlier on, the President, in a speech, had said that “corruption is just being used as a political circus.”

State House mandarins had invited two of the most vocal voices on state corruption, John Githongo and the economist David Ndii, to the breakfast meeting. The two declined the offer, which they interpreted as a ruse by State House officials to dupe Kenyans into believing that the President was serious about fighting corruption.

Indeed, a political stalwart of the former Party of National Unity (PNU), which ushered in Mwai Kibaki’s controversial second term and who is still very close to the former President, said, “There’s nothing new in these supposed corruption exposés. These are old corruption perpetrated by the state itself. Let’s cut to the chase: it is William Ruto who’s being fought here. This is about succession politics for 2022. He [Ruto] now needs to know who’s really in charge and what they are doing is cutting him to size.”

This former PNU official observed that Ruto showed his hand too early in wanting to succeed Uhuru. “He was abrasive, cocky and openly disrespectful to President Uhuru. You may be indeed intelligent and smarter than your boss, but in politics, you never undermine or seem to undermine the President. It is a cardinal rule anywhere in the world. Of all the things that Ruto learnt from [former president] Daniel arap Moi, he didn’t take home the most important lessons – humility and quietly biding your time.”

A bromance gone sour

In the days and weeks after assuming power in 2013, Uhuru and Ruto were inseparable, the “bromance” kept alive by sometimes dressing alike – matching white shirts and red ties, high-fives and always appearing in public with broad smiles and easy laughs. Then Uhuru would not have dared to describe his deputy as a reckless young man because it was a co-presidency. However, after a short five years, the bromance is fast fading. The pretence of co-presidency is gone and the exposure of corruption are signs of a factional fight over “brotherly love” gone sour.

“Uhuru couldn’t act between 2013 and 2017 because he needed a second term,” said a former Nairobi city councillor. “Now that he has crossed the bridge, he must wield the sword.” For the former councillor, “wielding the sword” means calling Ruto’s bluff. “Most of the corruption in the government is committed by Ruto and his henchmen, so he must be tamed. Between now and 2022, Ruto will not do anything else other than engage in presidential campaigns. Where do you think the money he is dishing out in harambee after harambee countrywide is coming from? The state resource taps must be shut tight to deny him any funds.”

The former councillor was, however, despondent about revelations about the looting: “Matikiire muno. Thirikari eno ya Uhuru ni iire muno.” (They’ve stolen too much, this Uhuru administration is stealing too much money.) “I pity our children and grandchildren. The country is sliding very fast into a bottomless pit and I don’t see a future at this rate.”

“Uhuru couldn’t act between 2013 and 2017 because he needed a second term,” said a former Nairobi city councillor. “Now that he has crossed the bridge, he must wield the sword.” For the former councillor, “wielding the sword” means calling Ruto’s bluff.

On May 30, 2018, while presiding over the issuance of title deeds in Embakasi East constituency in Nairobi County, President Uhuru Kenyatta, apparently unprovoked, described his deputy thus: “Hii kijana anaitwa Ruto unajua kila wikendi ana tanga tanga kila pahali. Atakuwa anapitia hizi machorochoro akiona kuna kitu inaenda kona kona mumwambie, si namna hiyo? Si namna hiyo? Tuhakikishe kazi ya wananchi imefanyika…tumekumbaliana? Ni wa ngapi wamesema tuwache siasa twende kazi? Twende kazi….” (This young man called Ruto is loitering everywhere every weekend. He has taken to roaming everywhere. He will be passing by and, if he sees things are not working as they ought to be, you report to him, is that okay? Is that okay? Let’s ensure the ordinary people’s work is done…are we agreed? How many of you concur that we stop politicking so that we work? Let’s get to work.)

The PNU official told me that the President’s use of the word “kutangatanga” (loitering) was a warning to Ruto. His remarks were intended to let his deputy know that “we are aware the slush funds you’re using every weekend to campaign are gotten from the state coffers”. Bottom line: the NYS corruption scandals have been unearthed supposedly to seal the loopholes. “So, take it from me, nobody’s going to jail, but Ruto must feel the full force of the state machinery and perhaps for the first time, must realise who’s in charge.”

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Mr Kahura is a senior writer for The Elephant.

Politics

Fire and Chaos: Mathare’s Chang’aa Problem and the Optics of Policing

In the 1980s and 1990s parts of Mathare gradually became the epicenter of the large scale production and distribution in Nairobi of chang’aa and a booming local economy emerged that has since become a major source of contestation between the police and the residents.

Fire and Chaos: Mathare’s Chang’aa Problem and the Optics of Policing
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On Tuesday 2 April 2019, social workers, youth group members, activists and friends, all residents of Mathare in Nairobi, hurdled together on the top floor of the Macharia building near the Olympic petrol station at Juja road as they watched in horror, as two schools were set alight by police. Thick, black smoke circled up and soon blanketed the entire valley. Alongside the two schools, another thirty or so houses quickly burned down to ashes in the raging fire. People raced to quell the fire with buckets of water, but were blocked by police in their tracks. Furious shouts filled the air as licking flames destroyed what residents had built over decades; businesses, schools and homes, all gone in minutes.

This criminal act of arson by police of a part of a Nairobi neighborhood took place on the third day of a raid against the local alcohol economy, spearheaded by the notorious ‘killer cop’ Rashid. This police officer gained notoriety after being filmed executing two teenagers on a busy street in Eastleigh in broad daylight on 31 March 2017. Ironically, the raid against the local alcohol economy in Mathare under his command started exactly two years later, on Sunday 31 March 2019. In between, Rashid has killed, maimed and harassed many people, especially young and poor men, in Mathare and beyond, and with absolute impunity.

Subsequently, Rashid was free to walk into Mathare on the aforementioned Sunday while guiding a troop of police officers down the valley where they barged into homes and bars to destroy alcohol and other belongings of local business owners and their employees. Shockingly, the Pangani OCS (Officer Commanding Police Station) and the Area Chief both claimed to ‘have had nothing to do with the raid’, despite eyewitnesses who stated that regular police and AP officers and equipment (such as a well-known land rover used by AP) were employed during the raid. Residents wondered how a full-blown war be waged on residents for days by police without the police officers in charge ‘having nothing to do with it’?

As early as 1930s, women who settled in abandoned parts of the quarry that later came to be known as Mathare earned money through sex work and selling home-brewed alcohol such as busaa and chang’aa

That first Sunday night of fear chaos and gunshots transpired without dead bodies, but many had lost weeks of work and earnings, and others nursed bruises and deep cuts from trying to defend homes and properties from the pillaging police. One of us found his grandmother crying on Monday morning; a woman who has distilled and sold alcohol for more than four decades and has raised her children, grandchildren and great grandchildren while doing so. The police had poured her kangara, the distilling mixture, which had been almost ready for cooking. She lost 4000 shillings, her monthly earnings, and was left in deep debt. Thousands of small business owners and their employees and tens of thousands of their dependents suffered the same fate. On Monday, all the jiko’s (‘kitchens’) near the river remained closed; no one could work while the police patrolled in search of alcohol and production tools to destroy. This went on for yet another day and night, until on Tuesday tensions between angry residents and police culminated into protests by alcohol distillers.

History of the local alcohol economy

To understand the impact of this crackdown on people living and working in Mathare, a brief insight into the history of the alcohol economy is crucial. As early as 1930s, women who settled in abandoned parts of the quarry that later came to be known as Mathare earned money through sex work and selling home-brewed alcohol such as busaa and chang’aa. This area was wedged in by several military and police bases, and the influx of soldiers during the war period (1940-45) attracted a growing number of women in search of work. These women were among the many young people who were forced to leave their homesteads in the colonial confinements of people called ‘Native Reserves’ in the rural areas following soil erosion, population pressures and the demand for ‘hut tax’ (which had to be paid in cash to the colonial government). Even if women comprised the majority of residents in Mathare from the onset, men increasingly migrated to live here—often after being chased from colonial settler farms when mechanization of farm work took hold during the late 1930s. Following these and other developments, Mathare became the nexus of urban resistance against the colonial government and formed an important node in the Kenya Land and Freedom Armies (KLFAs)—also known as ‘Mau Mau’.

After independence in 1963, alcohol production and distribution remained a home-based economy, and houses often doubled as bars where alcohol and sexual services were sold. It was not until the 1980s and 1990s that parts of Mathare (especially the following villages: Bondeni, Shantit and Mabatani) gradually became the epicenter of the largescale production and distribution in Nairobi of chang’aa. According to several bar owners we spoke with, the influx of rural-urban migrants during this period boosted the selling of chang’aa to unprecedented levels. Also, they soon found that the profit margins for chang’aa were much higher than for instance busaa, and soon multiple cooking sites emerged along the banks of the Mathare river. Profit margins have fallen significantly since the 1990s, following a convergence of rising food prices (especially a type of molasses called ngutu) and increasing demands for police bribes since the 2000s. Still, the local alcohol economy sustains thousands of people in Mathare directly and is fundamental to most other economic activities located here.

For example, a major shortage of firewood often plagues adjacent neighborhoods, but every other small business on Mau Mau Avenue in Bondeni, a neighborhood in Mathare, sells large quantities of this wood. These firewood sellers have arrangements with construction companies for frequent early morning deliveries. Old wood from scaffolding at construction sites is transported to the area in trucks so large they can barely enter the ghetto. Every day, these trucks drop off mountains of firewood intended to fuel the widespread and constant distillation of alcohol at the sites near the river. At the same time, young men in search of work hang around these businesses from sunrise to midday to help offload the bulks of firewood and chop them into smaller pieces in return for a small stipend. Suffice to say that thousands more depend indirectly on the alcohol economy in Mathare. All this provides some insight into the abrupt devastation to the livelihoods of thousands and thousands of people caused by frequent crackdowns on the local alcohol economy by police.

After independence in 1963, alcohol production and distribution remained a home-based economy, and houses often doubled as bars where alcohol and sexual services were sold. It was not until the 1980s and 1990s that parts of Mathare (especially the following villages: Bondeni, Shantit and Mabatani) gradually became the epicenter of the largescale production and distribution in Nairobi of chang’aa

After days without work and consequently food, alcohol distillers took to Juja road on Tuesday morning, 2 April 2019, to protest the illegal and violent raid by police. The few media outlets describing the protests squarely blamed ‘angry youth’ for starting the fire. Nothing could be further from the truth. We have spoken to many eyewitnesses who saw police officers deliberately setting the houses and schools alight. The so called ‘angry youth’ were alcohol distillers who had not earned a living for three days. These (mostly) men who make on a good day, Kshs 300 for 10 hours of backbreaking work, barely enough to provide for a family of four. These families do not have any savings to rely on when work is disrupted by state violence, and the illegal raid by police had left hundreds of families hungry for days. This provoked husbands, fathers and brothers to take to street and fight for their families, and they burned tires on the road to underscore their demand to work by blocking traffic.

As has been witnessed by several people, during the ensuing fracas one officer carelessly threw one of the burning tires into a row of make-shift houses and carpentry workshops along Juja road, all constructed of highly flammable materials. Other eyewitnesses saw police officers violently dispersed people trying to stop the fire from reaching the labyrinth of homes, businesses and schools down the street leading into Mabatini, thus effectively enabling the fire to destroy several houses and properties. Teargas was lobbed at the crowds of people who had gathered with buckets of water trying to rescue their homes and belongings. The teargas canisters further ignited the fire as residents watched their schools and homes burn to the ground.

The current modes of chang’aa production in Mathare may occur without a license and may not adhere to regulations, but that does not warrant such a violent and criminal crackdown by police

Distraught, many slept outdoors in the cold on Tuesday night. The fire also destroyed the electricity supply line and the ensuing blackout increased insecurity. One resident recounted that, “For nights, gun shots have become our ringtone.” Another lamented, “We live in a war(zone), but nobody cares.” As Mathare endured this terror for three days and nights, residents watched in disbelief as the evening news headlines either ignored their plight and the criminal acts by police or apportioned the blame decidedly on them using the pejorative ‘angry youth’ frame. Mathare residents were profiled as criminals and the local alcohol economy as illicit and dangerous. Indeed, misconceptions about Mathare and local industries persist. For example, chang’aa was legalized in September 2010 and is not an ‘illicit brew’. The current modes of chang’aa production in Mathare may occur without a license and may not adhere to regulations, but that does not warrant such a violent and criminal crackdown by police. If the production is not up to standard, why not encourage or enable owners, distillers and sellers to obtain licenses and invest in improved production? The answer is simple: too many people high-up in police and government ‘eat’ from the industry as it is.

The Culture of Policing In Mathare

Everyone living and working in Mathare is familiar with the daily routine of police visiting the distilling sites and bars where alcohol is produced and sold to solicit bribes. For each drum of kangara, the police receive at least 200 KES. Let us assume that there are seven distilling sites (we don’t disclose any specific details for security reasons) which have the capacity to process seven drums simultaneously, meaning there are 7 fires operative at each site at all times. Each drum takes three rounds to cook and each round takes 1 hour (45 minutes to distill and 15 minutes to cool). So seven sites and seven fires operating for 24 hours can process 392 drums of distilling mixture per day. For each drum, police receive Kshs 200 and the figure adds up to an average of kshs 70 000 per day and in excess of Kshs 2 million per month. This is a conservative estimate since it does not include the bribes police take from bars and alcohol distributors, and it does not include police officers who run their own alcohol operations. And the number of drums along the riverside also vary immensely. Sometimes, a jiko can have 15 or 20 fires operating at once, while at other times only three or four. The above calculations, though based on thorough research, only serve to give an indication of police involvement and investment in the alcohol industry in Mathare. Considering this, why then does the police initiate a raid to clamp down on the very industry that ‘feeds’ them?

A first part of the answer pertains to internal divisions within police. Police does not entail a homogenous entity, and rumors have it that Rashid and his team were eventually stopped by other police officers in the course of the week because they saw their avenues to ‘easy money’ destroyed. That, at least to some measure, explains why on Thursday the raid was abruptly halted. What’s more, crackdowns on the alcohol economy are not uncommon, despite the entanglement of police in this business. In July 2015, Mathare residents lived through a similar period of police terror which left two people dead and thousands people without work for weeks. Many believe that such attacks are often triggered by a desire of particular police units or individual officers to show, as one resident put it to us, “the ‘higher ups’ that they are doing their ‘job’ and/or deserve promotion”. This time too, many residents believe the notorious Rashid went out of his way to impress in the incoming Inspector General Mutyambai. A resident shared with us that in his view Rashid demonstrated his exceptional cruelty during the course of the raid by forcing a customer of a local bar to drink bleach while he compared bleach to chang’aa. The young punter barely survived this ordeal.

The police officer mentioned here is not the only one. Similar notorious policemen who are known to execute and torture mainly young and poor men frequently patrol most informal urban settlements in Nairobi. According to several of our fellow activists, these plain cloth police officers, called ‘killer cops’ or maspiff by some, are not part of regular police units that are locally known to be connected to specific police stations and which patrol Mathare and surrounding neighborhoods on a daily basis. They told us that these police officers operate under the direct command of the County Criminal Investigations Officer (CCIO). Several (non-state) security groups in Mathare that work together with these police officers revealed to us that several of them also enjoy substantial support by influential business owners, for instance in Eastleigh. The exact operational and support structures of these ‘killer cops’ and how they collaborate with regular police units remain somewhat opaque to local activists and residents, but all agreed that these plain cloth police officers enjoy considerable power and are able to kill with impunity through their powerful back-up.

When considering the relative opacity of their operations, the public visibility of these police officers in Mathare (and other urban settlements) is indeed rather astounding. They are also not a recent phenomenon. Most Mathare residents above 25 years old can easily recall the cruel reign of different ‘killer cops’ as far back as the late 1990s, such as the ruthless Habel Mwareria a.k.a. ‘Tyson’ in early 2000s who was also popularly dubbed ‘the Ghost’ because he often seemed to materialize out of thin air when- and wherever problems occurred. He killed suspects without asking questions, in front of people and in broad daylight and would vanish as rapidly as he had appeared. He was later promoted to the ATPU ( Anti Terrorism Police Unit).

Nevertheless, the ‘killer cops’ gained new strength in popular discourse when in April and May 2017 alleged police officers calling themselves ‘Hessy’ became rapidly infamous by posting pictures on different Facebook pages, under this name, of suspected ‘thugs’ before and after they purportedly shot them. Speculations continue to the date about who or what ‘Hessy’ really is. Some people claim it started with an actual police officer who was shot in the leg and while he was recovering home in the month of April 2017 he started this network of ‘Hessy’s’ on Facebook. This is substantiated to some extent by the fact that there is an infamous police officer who is nicknamed Hessy and who is known to kill mostly young male crime suspects in Kayole. Others say that one officer or a group of police officers from different police stations in Eastlands chose this name because of the reputation of this particular police officer. Others state that the different ‘Hessy’ and adjacent pages on Facebook were not created by one or more police officers, but by a team of bloggers working in collaboration with specific ‘killer cops’. The ‘Hessy’ and adjacent pages (such as Nairobi Crime Free and Dandora Crime Free) soon gained a massive following online and continue to be a topic of intense debate offline, for instance among residents in Mathare.

Local Dynamics and the Future of Chang’aa

Police violence in Mathare, such as extra-judicial killings and illegal raids on people’s livelihoods, are enabled by a combination of factors. In contrast to the knee-jerk homogenization and criminalization of ghetto residents, for instance in mainstream media in Kenya, people inside Mathare are equally divided about the use of (criminal) violence by police. Police use such local divisions inside this neighborhood to push their own agenda. For instance, they work together with residents, popularly dubbed informers or watihaji, who are paid by police for information on people, business activities and other developments locally. This explains how police were able to find the entrance to the jiko’s at the river or the places where bars are located.

However, the incentives of informers to tell on their neighbors often go beyond merely monetary motivations or concerns about crime. Local competition or revenge plays a big role as well. Police also depend too much on such secondary and often faulty intelligence because the local turnover of police, following frequent transfers, is quite high thus limiting the time police have to understand local dynamics. As a result, local informer-networks have some power to manipulate police behavior towards their own agendas. To illustrate, sometimes ‘killer cops’ like Rashid parade a suspect throughout Mathare and when they receive calls from as little as three informers confirming the identity of the suspect, the suspect is taken to a backstreet and executed. Our fellow activists have documented several cases that follow this pattern.

Crackdowns briefly slow production but do not alter the make-up of this industry in any way, yet the Mathare residents who have for generations depend on this economy bear the brunt for the simple reality that they cannot afford to miss a day of work.

The recent raid in Mathare on the local alcohol economy stopped as suddenly as it had started and without any outcome other than destroyed livelihoods, schools and homes and injured people. Slowly, alcohol distillers went back to work on Friday and gradually the local economy picked up again. Such crackdowns have never stopped the local alcohol industry and never will. If the government wants to make the local alcohol industry safer and bring it in line with regulations, it needs to work together with business owners and their employees to develop ways to improve production standards. If alcohol consumption is the problem, why not invest in rehabilitation programs and explore underlying factors that contribute to widespread cheap alcohol consumption, such as vast unemployment and extreme stress? If the government wants people to stop working in this industry all together why not develop alternatives together with them?

Crackdowns briefly slow production but do not alter the make-up of this industry in any way, yet the Mathare residents who have for generations depend on this economy bear the brunt for the simple reality that they cannot afford to miss a day of work.

On Thursday 4 April 2019, one resident asked us: “Who is Rashid? How can he do all this, kill our young men for years, then come to destroy our work, huh? Who is he?”

“Why are there no people coming from Red Cross, or our government leaders, like when Dusit happens or Westgate? Are we not human beings?”

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Liberty for Whom? D-Day’s African Ghosts

Africa tends to be swept under the carpet in the memorials for the two World Wars, which are always couched in terms of, again to borrow a phrase from Trump’s speech, “the ferocious eternal struggle between good and evil” – the Germans being branded as the ultimate evil and the Allies being the forces of good.

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Three-quarters of a century ago, hundreds of thousands of Allied troops stormed the beaches of Normandy in what was the start of a war to save Western Europe from Nazi occupation. American and European leaders gathered at the scene last week to memorialise and honour those who fell, including on the German side. The US President, Donald Trump, began his tribute to them thus: “On this day 75 years ago, 10,000 men shed their blood and thousands sacrificed their lives for their brothers, for their countries, and for the survival of liberty.”

Undoubtedly, much of that is true. From the perspective of those in occupied Europe, it was the beginning of their liberation and the defeat of fascist tyranny. It would inaugurate, for many, an era of democratic freedom and economic prosperity that was at the time unparalleled in history.

Africa tends to be swept under the carpet in the memorials for the two World Wars, which are always couched in terms of, again to borrow a phrase from Trump’s speech, “the ferocious eternal struggle between good and evil” – the Germans being branded as the ultimate evil and the Allies being the forces of good.

President Trump went on to state that “the GIs who boarded the landing craft that morning knew that they carried on their shoulders not just the pack of a soldier but the fate of the world.” This may be true, but the world is not just Western Europe; from the perspective of those on the African continent, the GIs were not there to shore up liberty and democracy, but rather to free countries that were themselves engaged in colonial plunder and occupation.

Africa tends to be swept under the carpet in the memorials for the two World Wars, which are always couched in terms of, again to borrow a phrase from Trump’s speech, “the ferocious eternal struggle between good and evil” – the Germans being branded as the ultimate evil and the Allies being the forces of good.

But there was little that was “good” about what these same countries were doing and would continue to do to the people in Africa whose land and resources they were continuing to steal and whose people they not only oppressed but also press-ganged into their wars. More than a million Africans fought in World War II – hundreds of thousands of them were sent to the front in Europe, others to India, Burma and the Pacific islands. Few understood why they were fighting, let alone why they volunteered to do it. Many died and survivors today receive nothing of the recognition and adulation bestowed on their European and American counterparts.

Now it is probably true that a world governed by the Nazis would have been much worse for Africans than the present one, so in that sense their defeat was good for the continent. But in that case, it could also be argued that the two World Wars, which exhausted the European powers and shattered the myth of white invincibility for the returning African veterans, were also good in that they paved the way for the end of colonialism. In either case, the uncontested fact would be that these were not wars to free all people but rather to determine who would be their overlords – despite the rhetoric, they were fought less for global liberation than for global domination.

David Frum, in his brilliant piece for The Atlantic, “The Ghosts of D-Day”, notes how the memory of D-Day and the liberation of Europe have been distorted in French and American imaginations. In truth, it is not just American memories that have “become more triumphalist and self-aggrandizing”. The memorials at Normandy are not so much about remembering history but rather spinning it. And within that spin, the tale of the Africans has no place – it muddies the moral waters to admit that the liberation the Allies sought did not include that of the black and brown peoples they were oppressing; that those on this continent had, and to a large extent still have, little share in the freedom that was heralded on that day.

However, what is today undeniable is that the Allies were guilty of committing, and would go on to commit, many of the same crimes that qualified the Nazis as evil – from implementing a racist occupation, to genocides, to interring entire communities in concentration camps, to jailing homosexuals, to looting cultural artefacts and art.

For Africans, the irony is that the tools for making concrete the memory of what the European nations were actually doing – the records and documents that tell the story of the occupation and the crimes that were committed against Africans – are, for the most part, either deliberately destroyed or safely hidden away in European vaults. Many were stolen at the end of the colonial occupation in an effort to maintain the fiction of its benevolence.

However, what is today undeniable is that the Allies were guilty of committing, and would go on to commit, many of the same crimes that qualified the Nazis as evil – from implementing a racist occupation, to genocides, to interring entire communities in concentration camps, to jailing homosexuals, to looting cultural artefacts and art. Yet, unlike the Germans, who have owned up to “the unforgettable rupture of civilization that [they] provoked in Europe” and to the fact that “the fallen German soldiers are resting in foreign soil not because they came as liberators to this country but as occupiers”, there has been no such admission from the Europeans with regard to their occupation of Africa. Today, they still repeat the lie that colonialism was about bringing civilization and the benefits of modernity to the primitive peoples of the continent rather than implementing a system of extraction that continues to bleed the continent to this very day.

In 2017, Bruce Gilley, a professor of political science at Portland State University, published the article, “The Case for Colonialism” (withdrawn after a public uproar and death threats), in which he argued that Western colonialism was both “objectively beneficial and subjectively legitimate”. He further advocated for “colonial modes of governance; by recolonizing some areas; and by creating new Western colonies from scratch”. While much of this has been debunked, he is hardly the only one to go public with such views. In the same year, the former leader of South Africa’s Democratic Alliance, Helen Zille, was removed from her leadership roles after she put out a series of tweets touting the benefits of colonialism.

Rather than the selective and hagiographic portrayals we are treated to today, a better memorial for D-Day would be to return the colonial archives and to acknowledge the truth – the whole, unvarnished truth – about what was being defended on that day. For it surely was not the ideal of liberty for all. Importantly, this would include an acknowledgement and compensation for the Africans who were forced to fight and die in the wars that were not of their making.

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Another False Messiah: The Rise and Rise of Fin-tech in Africa

The rise of a global technology industry to support financial services, known as fin-tech, has grown enormously in Africa in the last decade. Across the continent, many commentators have proclaimed fin-tech as the solution to poverty and development. Examining the case of Kenya’s celebrated fin-tech model, M-Pesa, Milford Bateman, Maren Duvendack and Nicholas Loubere reveal a flawed system that is not an answer to poverty, despite the wild claims of some academic commentators. Quite the contrary, fin-tech offers Africa a further case study of how contemporary capitalism continues to under-develop Africa.

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Another False Messiah: The Rise and Rise of Fin-tech in Africa
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In both the global investment community and the international development community one of the most talked-about issues today is fin-tech (financial technology). Defined as ‘computer programs and other technology used to support or enable banking and financial services’, the last decade or so has seen the rise of a new global fin-tech industry, a development that is widely regarded to be positively changing the world in a variety of ways. Thanks to almost daily reports of major new investments, especially in Africa, many investment professionals are of the opinion that something akin to a new ‘gold rush’ is clearly underway. At the same time, the fin-tech model is also touted as an innovation that will greatly benefit the global poor, with enthusiastic supporters claiming that a new golden age of ‘inclusive capitalism’ is upon us.

By far the most well-known example of the fin-tech model to date is Kenya’s M-Pesa – the agent-assisted, mobile-phone-based, person-to-person payment and money transfer system. M-Pesa is widely seen as the first fin-tech institution to conclusively demonstrate that it is possible to make a profit while also very meaningfully improving the lives of the poor. Taking inspiration from M-Pesa, many in the international development community now regard the fin-tech model as a potentially game-changing private sector-funded driver of development and poverty reduction in the Global South.

In both the global investment community and the international development community one of the most talked-about issues today is fin-tech (financial technology)

In the academic community the apparent combination of poverty reduction with profit generation proved to be a very seductive pro-capitalist narrative that many mainstream economists were only too willing to engage with. The most well-known academic economists examining the impact of M-Pesa are Tavneet Suri, based at MIT, and William Jack, based at Georgetown University. With extensive funding from Financial Sector Deepening (FSD) Kenya and the Gates Foundation, since 2010 Suri and Jack have produced a series of outputs extolling the benefits of M-Pesa. Suri and Jack’s generally positive findings have resulted in mainstream media attention and large numbers of citations. This has played an important part in galvanising the international development community into supporting the fin-tech model as a development and poverty reduction intervention.

In particular, their 2016 article published in the prestigious journal Science, entitled ‘The Long-run Poverty and Gender Impacts of Mobile Money’ has played a considerable role in sparking the imagination of the international development community. This is mainly because of its sensational claim that ‘access to the Kenyan mobile money system M-PESA increased per capita consumption levels and lifted 194,000 households, or 2% of Kenyan households, out of poverty.’ According to this article, M-Pesa was not just making profits, but the evidence seemed to show it was also making an astonishing ‘bottom-up’ development and poverty reduction contribution. This poverty reduction claim, often cited in full in media articles, quickly became the centrepiece of the evidence used by many in the international development community to justify its increasingly strong support for, and investment in, the fin-tech model.

M-Pesa is widely seen as the first fin-tech institution to conclusively demonstrate that it is possible to make a profit while also very meaningfully improving the lives of the poor.

Unfortunately, all that glitters is not gold. As we write in a Briefing just published in the ROAPE Suri and Jack’s hugely influential signature article actually contains a surprising number of errors, omissions, poor logic, and methodological flaws. Crucial labour market evaluation parameters, such as business failure (exit) and the impact of new businesses on existing ones (displacement), were entirely over-looked. The core issue of individual over-indebtedness, which in Kenya is now approaching crisis levels and which has a clear and direct link to the operation of M-Pesa, was not even mentioned as a possible downside of the fin-tech development model. For such an important and well-financed project, the methodology was also weak, diverging from many of the standard ‘best practices’ in the impact evaluation field. The important issue of causation was also raised, but in a way that we found to be questionable at best. In many ways, therefore, Suri and Jack’s analysis appears to misrepresent and vastly over-state the development impact of M-Pesa. 

Fin-tech represents a new form of resource extractivism

One of the most disturbing aspects of Suri and Jack’s flawed analysis, however, is that they completely bypass the crucial equity and distributional issues that arise from the operation of M-Pesa and other similar fin-tech corporations. This is inexcusable because there are clear warning signs today that the fin-tech model possesses the potential to extract immense value from the poorest communities in the Global South, with potentially calamitous long-term consequences. Like the gambling, sub-prime mortgage and payday loan industries in the United States and UK that before and after the financial crisis of 2008 were able to grow rich by expertly extracting massive amounts of value from the communities of the poor, one might argue that Kenya’s poorest communities are also being drained of much of their needed collective wealth.

M-Pesa has essentially perfected a form of ‘digital mining’ that captures and extracts a small tribute from each and every one of the growing number of tiny financial transactions made by the poor through the platform (which has become ubiquitous and very difficult to avoid). This includes microloans, money transfers, grant disbursement, credit card usage, pension payments, and so on. One simply cannot escape from the fin-tech ‘net’ that is gradually being lowered on to the poor. As more and more governments and elites are brought in as allies by the fin-tech industry, this value extraction process is only likely to speed up and intensify, with cash transactions being increasingly jettisoned and ever more transactions being mediated by fin-tech organisations.

M-Pesa has essentially perfected a form of ‘digital mining’ that captures and extracts a small tribute from each and every one of the growing number of tiny financial transactions made by the poor through the platform

By the same token, given the profit motive at play, it is inevitable that a range of services and products will end up being pushed on to the poor even though they largely do not need them, are not able to productively use them, or do not have any means to repay debt associated with them. The value realised through such ‘digital mining’ techniques is then extracted from the local community and deposited into the hands of the fin-tech entity’s owner(s). However, with so many fin-tech entities backed by foreign capital from the Global North, the chances are that a large proportion of this ‘digitally mined’ value will head abroad to the world’s leading investment locations.

What we have here, therefore, is a value extraction process that contains the potential to progressively undermine the development process in local communities in the Global South. It does this in two important ways: first, it denies the local community an extremely valuable aggregate amount of local spending power, which is instead appropriated by wealthy individuals and institutions, many of which are located abroad. This renders an important endogenous growth trajectory inactive, since it is rising local demand that often provides the initial impetus for local enterprises to emerge in order to meet this demand. Second, fin-tech institutions also starve the local (re)investment cycle by siphoning value out of the community, and thus make it more difficult for local businesses to access the meaningful amounts of capital needed to establish sustainable commercial operations. Experiences in Asia with local banking from 1945 onwards, for example, show that reinvesting/recycling the bulk of locally-generated value back into the local economy has significant potential to kick-start economic growth.

Fin-tech could, therefore, be seen as a revised version of the natural resource extraction paradigm that was largely responsible for under-developing Africa and other colonised countries over the last four centuries. The ‘resource’ increasingly being extracted from Africa today might no longer be a physical one – such as diamonds, gold, platinum, or silver -and the process might not require slavery, the employment of ultra-exploitative waged labour, or involve horrendous working conditions, but the eventual negative outcomes of ‘digital mining’ could very well be the extension and continuation of under-development.

M-Pesa thus provides us with a valuable case study of how contemporary platform capitalism operates in neoliberal Africa and how ‘digital mining’ might actually affect Kenya’s potential growth and development. In recent years, Safaricom (M-Pesa’s parent company) has become far and away Kenya’s largest company, now accounting for a massive 40% of the total stock market valuation on the Nairobi securities exchange. Safaricom is also famous for its spectacular profits. In 2019 it set a record by registering profits of around US$620 million, which would be an impressive result in even the richest countries of the Global North. To put this into perspective, this figure is slightly more than the Kenyan government spends on the entire healthcare system in the country. However, along with an additional bonus paid out in 2019 to shareholders amounting to around US$240 million, a large percentage of this US$620 million in profit was paid out as dividends to foreign shareholders. The main beneficiary was the majority shareholder (at 40%) of Safaricom, the UK multinational corporation Vodafone. Other beneficiaries are a variety of mainly foreign investors located in ‘tax-efficient’ locations (the Caribbean mainly) and who hold a 25% stake. The Kenyan government also holds a further 35% stake in Safaricom.

Fin-tech could, therefore, be seen as a revised version of the natural resource extraction paradigm that was largely responsible for under-developing Africa and other colonised countries over the last four centuries.

This demonstrates that significant value is being created by M-Pesa based on the tiny transactions of the poor, but most of it is spirited abroad via dividend payments to foreign shareholders. This helps explain why M-Pesa has become a beacon for global investors and financial institutions all seeking their own spectacular fortunes in Africa while framing their thirst for profits as altruism. Indeed, by embedding the fin-tech model in Kenya, the international development community is complicit in the establishment of a high-tech extractivist infrastructure similar to colonial-era equivalents.

‘Digital mining’ in Kenya and the foreign appropriation of the wealth generated by those languishing at the bottom of the pyramid is a less directly brutal undertaking than the value extraction process carried out in colonial times.  However, the extractivist logic, the wealth transfer, and the determination to accumulate on the back of the poor have a similar character to colonial-era economic regimes, and similar potential to seriously damage socioeconomic development in the long-term.

Furthermore, as in colonial times, a local elite has been allowed significant freedom to manage this ‘digital mining’ on behalf of the foreign owners. As with Capitec Bank in South Africa, it is no secret that the CEO and senior management at Safaricom have been able to use the company as a vehicle through which to extract fantastic rewards for themselves, enjoying Wall Street-style levels of remuneration in recent years and with several becoming multi-millionaires as a result. However, this also provides the obvious incentive to grow Safaricom as fast as possible because in that way the personal rewards attributable to those at the top are maximised. As a result, Safaricom’s CEO and other senior management have pushed growth to the limits and are now encountering problems in several areas on account of reckless over-expansion, including with regard to the company’s wilful engagement with gambling. In addition, in the early stages of M-Pesa’s growth, certain still unidentified members of the local Kenyan elite were able to secure for themselves a sizeable shareholding in Safaricom, which they later sold off for massive capital gains. Pointedly, the impact on inequality in Kenya arising from these narrow elite enrichment mechanisms has been very significant.

Despite the benefit that some individuals in poverty undoubtedly enjoy as a result of M-Pesa’s services, universal financial inclusion has come at a very high longer-term price for Kenya’s poor overall.

In short, an effective value extraction process involving ‘digital mining’ has been established in Kenya, which has been misleadingly framed by many in the international development community as contributing to ‘bottom-up’ development. This process has ensured the stratospheric enrichment of a narrow group of foreign investors, Safaricom’s own senior managers, and a section of the Kenyan elite. However, this value has effectively been appropriated from M-Pesa’s overwhelmingly poor clients via their growing bundle of tiny fin-tech-mediated financial transactions.

Despite the benefit that some individuals in poverty undoubtedly enjoy as a result of M-Pesa’s services, universal financial inclusion has come at a very high longer-term price for Kenya’s poor overall. Safaricom appears to have become a classic example of the ‘cathedral in the desert’ syndrome – a vastly profitable entity that exists only by ignoring the impoverishment it is helping to create in its wake. As fin-tech spreads across Africa, it is likely we will see similar deleterious extractionist scenarios emerging.

Might we not then consider M-Pesa to be the canary in the coalmine?

Parallels with the failed microfinance revolution?

Our analysis of Suri and Jack’s hugely influential 2016 article shows that it simply does not stand up to scrutiny. One might conjecture that this has something to do with the fact that much of the funding for their work over the past decade has come from FSD Kenya and the Gates Foundation, two of the world’s leading advocates for the fin-tech model.

In this context, it is interesting to recall how the now largely discredited microfinance movement got a game-changing boost back in the 1990s thanks to a study by two high-profile World Bank economists – Mark Pitt and Shahidur Khandker – claiming that microfinance in Bangladesh was generating major poverty reduction benefits for women Pitt and Khandker’s work was much later shown to contain many serious errors and its conclusions were unsound. Nevertheless, Pitt and Khandker’s work more than served its immediate purpose, which was to galvanise support within and around the international development community for an intervention that the World Bank desperately wanted to see go forward on ideological grounds. We might therefore pose the obvious question here with regard to the misrepresentation of M-Pesa’s impact: are Suri and Jack the new Pitt and Khandker?

 

Editors Note: This article was first posted in the Review of African Political Economy (ROAPE)

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