Connect with us

Politics

Jubinomics in an Era of Austerity: Will the New VAT on Fuel Lead to an Economic Crisis?

11 min read. The increased taxation of fuel is making life harder for Kenyans and is neither good politics nor wise leadership. By DAUTI KAHURA

Published

on

JUBINOMICS IN AN ERA OF AUSTERITY: Will the new VAT on fuel lead to an economic crisis?
Download PDFPrint Article

Three weeks ago, at the Karen bus stop opposite the Karen Police Station, there was a face-off that pitted passengers against matatu crews and their surrogates, the freelance touts that hang around such stops soliciting for passengers. The 33-seater matatus headed to Ngong town, 10km from Karen, were charging Sh80. Just a couple of weeks ago, the standard fare was Sh30. Occasionally, if the demand outstripped supply, which happens from time to time in the matatu industry, the fare would go up by Sh10. Any increase in fare exceeding Sh40 for the 10km ride, whatever the circumstance, would be considered exorbitant. The passengers won this round, but the lingering problem of arbitrary and surreptitious increases in transport fare had not been solved.

The Nairobi-Karen-Ngong route is a microcosm of the looming confrontation between passengers and matatus. And Karen town could be the flashpoint. The route is a very lucrative one, especially during peak hours. Most of the matatu passengers on this route work in the many church institutions, mega malls, restaurants, schools and universities and a big hospital that are located in Karen. Some work for the wealthy Kenyans who have homes there. There are also a lot of casual labourers working in Karen for whom every penny counts.

The tension that had been building between the passengers and the matatu crews had been palpable: “Hawa wathii siku moja watachoma hizi matatu, hii hasira yao ni mbaya sana,” (“These passengers will torch these matatus one of these days, their anger is real”) said a matatu driver. Wary of the people’s wrath, the matatu crews wait for the people to board the matatu, then ambush and cajole them with the ridiculous fare increase. But a fortnight ago, the people refused to enter the matatus, until the crew members publicly announced the fare they were charging. After a 30-minute stalemate, the matatu crew eventually lowered the fare to Sh100. “Lakini bado hawa wathii wananung’unika, sasa sijui wanataka tufanye nini.” (“Even after giving them a fairer price, the people are still grumbling, I don’t know what they expect us to do.”)

Since September 1, 2018, when the new 16 per cent VAT (value added tax) on fuel took effect, there has been a commotion in the public transport industry. The Karen-Ngong town driver who said that angry passengers may one of these days burn down matatus to protest against what they consider to be unfair matatu fares, was voicing a concern that has in the past few weeks put matatu crews on edge. “Wathii wanateta sana, wengine wanataka tu guoko na sisi…si kupoa,” said a matatu driver operating on the Nairobi-Limuru town route. (“Passengers are really complaining, some are picking fights with us…it is not a good sign.”)

Since September 1, 2018, when the new 16 per cent VAT (value added tax) on fuel took effect, there has been a commotion in the public transport industry. The Karen-Ngong town driver who said that angry passengers may one of these days burn down matatus to protest against what they consider to be unfair matatu fares, was voicing a concern that has in the past few weeks put matatu crews on edge.

The Karen-Ngong driver who was edgy about passengers’ uneasiness with the hiked fares said that he was struggling to remit the Sh8,000 his boss demands at the end of each day. “On several instances, we’ve had to forego our own pay. At Sh115 a litre, the diesel has become way too expensive. We asked the matatu owner to stabilize his profit to Sh7,000, with the hope of balancing the books, at the end of every day but it is not working. I think some people have cut their reliance on matatus. This has a direct relation with frequency of the roundtrips we make – the fewer the roundtrips, the lesser the money we make.”

The matatu cooperatives (Saccos) in Nairobi are in a quandary: they have been mulling (even before the fuel tax increase) over how to “rationalise their increasing costs of operations without being seen as gleeful and uncaring,” said a top brass at the Matatu Owners Association (MOA). “The business is really hurting, but so are our customers, yet, somebody has to carry the load and feel the pain. Unfortunately, it has always to be the consumer.”

But the Saccos have been hesitant: They are afraid of pushing too hard lest their customers rebel and spark off a wave of street demonstrations. Conversely, the industry is undergoing one of its most trying times in recent times – dwindling fortunes occasioned by a gloomy economic outlook. “How long can they hold on like this? That is the Saccos’ bosses’ question,” said the MOA official.

In a bizarre incident on September 16, a matatu stopped at Corporation stage (that is before Uthiru on the Nairobi-Nakuru highway) to pick passengers to Nairobi. Before the driver could know what was going on, a chap grabbed the matatu keys, scaled the dividing wall of the dual carriageway and ran off with keys. The people milling around the stage seemed unperturbed by the incident and the passengers inside and outside the matatu did not seem to mind the ordeal. Afterwards, when I asked one of the freelance touts why the fellow (who is very well known around the area), was risking his life snatching keys from a matatu, his answer was: “Hizi mathree zinaumiza watu sana.” (“These matatus are squeezing people financially.”)

The matatus operating along long distances are not faring any better. My driver friend who operates a Nairobi-Nyahururu shuttle has been mourning since VAT on fuel was introduced. “I’m now spending Sh5,000 on fuel to and from Nyahururu, up from Sh3,200. Nyahururu is exactly 200km from Nairobi city centre. I used to charge my passengers Sh350 one way from Nairobi to Nyahururu before the fuel increase and I’d still take home between Sh3,200 and Sh3,500. It was reasonable.”

After September 1, he increased the fare to Sh400, but this has not helped. “Ndiraruta wira wa kuhura mai na ndiri.” (“I’ve resorted to pounding water in a mortar – in short, I’m doing zero work.”) Even after increasing the fare by Sh50 per person, the best he can take home at the end of the day, he told me, was Sh3,400, after deducting his expenses. As it is, his transport business was running on a Sh1,800 deficit every day – courtesy of the fuel tax. “I can’t dare push the fare more than Sh400: I know my customers, they are also suffering, we’ve to wait and hope President Uhuru will lower the prices,” said the driver nonchalantly.

The journey to Nyahururu is usually a one-way trip: A shuttle leaves Nairobi for Nyahururu in the morning at around 9.00am. The 200km trip usually takes about four hours. If the shuttle is lucky, it will make the return trip to Nairobi by between 5.00pm and 6.00pm, arriving in Nairobi at around 10.00pm. There are between 240 and 260 14-seater shuttles on the Nairobi-Nyahururu route. “If you make the round trip,” said my driver friend, “you count yourself lucky.”

His prayer about President Uhuru rescinding the implementation of VAT on the fuel sounded half-hearted and without conviction – like a person who already knows it is impossible but hopes for the unexpected to happen. “The truth of the matter,” he opined, “is that even if the fuel levy was dropped entirely, there certainly would be some relief, but life as it is, is already tough. Too much money had been stolen under President Uhuru’s watch and that is the price we’ve to pay for the profligacy.” But it has become increasingly difficult to hold a discussion on President Uhuru Kenyatta’s performance, especially with Jubilee supporters, like my driver friend. “Nitutigane na uhoro ucio.” (“Let’s just leave that topic alone.”)

President Kenyatta’s recent fulmination against matatu owners increasing fares, lest their licenses are revoked by National Transport and Safety Authority (NTSA) was rebutted by MOA, which argued the threat had no basis in law. “The President,” said a Jubilee Party MP, “will soon realise that nobody will be taking his threats any more seriously. He is a lame duck president who is doing his final term and holds no sway whatsoever on the politics of the future.”

The imposition of VAT on fuel has had an inflationary effect on practically every commodity that must be transported from point A to point B. In effect, this means that soon almost every household item will become more expensive.

On 20 September, the controversial Finance Bill, 2018 was passed by MPs. And without wasting any time, the President assented to the Bill the following day. The Bill’s vote in Parliament had been preceded by a little-nested game between the MPs and the President. The Parliamentarians had already threatened to shoot down Uhuru’s proposal to halve the VAT to 8 per cent, maintaining that there should be none placed on fuel and defying party chief whips.

The imposition of VAT on fuel has had an inflationary effect on practically every commodity that must be transported from point A to point B. In effect, this means that soon almost every household item will become more expensive.

“I’m afraid to tell you that even with that seeming reprieve, nothing much will move immediately,” said an oilman who imports oil products and runs several petrol stations in Kenya, Rwanda and Uganda. “These are the reasons: VAT is charged at the point of sale and is calculated as 16 per cent on all other costs of the product, over and above the other taxes and levies other than VAT. No importer will agree to sell at a loss simply because politics have been at play. So, even if the Finance Bill 2018 becomes law, with the President’s incorporation of the eight per cent VAT proposal, oil importers will not agree to lower their prices. We must first empty all the fuel bought within the time the VAT on fuel was imposed till we bring in new consignments. And this will take some time. If the people are thinking they are going to enjoy the VAT reprieve immediately, they are deluded.”

The oil tycoon told me that such a situation presents a perfect scenario for the industry to play market games. “If, for example, some oil importers, for whatever reason (most obviously, it would be for a quick super profit), choose to create an artificial oil shortage by hoarding their product, the price must necessarily shoot upwards, momentarily disrupting the official levy on fuel products.”

Apart from the matatu price jolts, the effects of the VAT on fuel has been heavily felt by the long-distance transport trucks that move all manner of goods from source to different markets. Businessmen who transport goats and sheep from Isiolo, Laisamis, Loiyangalani, Mandera, Maralal, Marsabit, Moyale, Turbi, Sololo and southern Ethiopia to Kiamaiko abattoirs in Huruma, Nairobi, told me that their fuel costs had gone by up by between Sh10,000 and Sh12,000 per trip. These animals are carried for up to 14 hours by 10-wheel Mitsubishi Fuso trucks on some of the roughest roads and in the most bandit-prone territories. “Already the wear and tear of the trucks has been staring down at us, but with this new tax on fuel, it has complicated our business,” said one of the transporters.

“The increase in the fuel costs means that they have to also pass down the burden to us butcher-men,” said Francis Kimani, a butcher, who goes to Kiamaiko every day to buy meat products, including goats’ heads, offal for making mutura (sausage-like delicacies) and hoofs for boiling soup. Until recently. Kimani was buying up to 100 goat heads every day at Kiamaiko to sell to his staunchly loyal customers at his outlet at the central bus station in Nairobi. “I arrive at Kiamaiko by 6.00am, pick my stuff and quickly head back to my base, because my customers want to find me ready by latest 11.00am.”

Kimani hires a boda-boda (motorcycle taxi) to transport his meat products in a box-like container. “I was paying the driver Sh250 per trip to the bus station, but after the VAT increase, he doubled the amount,” he said. But that is not the only burden he has to bear: already the prices of his meat products have gone up by more than 30 per cent. “I’ll confess I was doing a roaring business until this VAT thing came. My customers have dwindled, partly because I am buying less goat heads and partly because they are also feeling the pinch.” From selling 100 heads by the end of the day, Kimani is now barely selling 30. He said that if nothing improves, he will consider relocating to either Isiolo or Rumuruti in Laikipia County. The business was proving too difficult to sustain. “I was born in Rumuruti, I know there isn’t much there, but home is home.” “Nairobi tuokire gwetha ido na muturiri.” (“Nairobi’s not home, we just came here to look for money and a living.”) He said that in Isiolo he could look for work as a truck driver.

The VAT on petroleum products was first mooted in 2013, just after President Uhuru Kenyatta and his deputy, William Ruto, formed the Jubilee coalition government. The VAT Act 2013, as it came to be known, was not implemented immediately; it was shelved for three years till 2016. When it came for review in September 2016, Treasury mandarins, through the drafting of the Financial Act 2016, postponed its introduction. But in March 2018, the Treasury Principal Secretary, Kamau Thugge, finally signalled the fact that beginning this September, the 16 per cent VAT on fuel would certainly be effected. This would mean that for every litre of fuel sold at a petrol station, Sh18 would be added on top of the original cost: a 14 per cent increase per litre.

Thugge was candid: The government had no option but to swallow the International Monetary Fund (IMF)’s bitter pill. Since 2016, the IMF has wanted the government to levy VAT on fuel as a way for it to collect extra revenue domestically. However, it is important to note that although petroleum products were previously exempt from VAT, they are still one of the most taxed commodities in Kenya.

This time last year, the Jubilee government was reeling from two shambolic elections – both conducted within two-and-half-months. The government was broke and was looking for credit facilities, so it turned to the IMF. The VAT on fuel, therefore, is part of the stringent conditions that the IMF has imposed on the Jubilee government in exchange for access to a standby credit facility – a fallback plan for Kenya’s Exchequer in case the economy finds itself in the ICU and needs quick resuscitation.

“Playing good politics,” and presumably exhibiting “poor leadership”, President Uhuru seemingly chastised MPs for initially rejecting his proposal halve the VAT on fuel to 8 per cent. The truth of the matter is that the President himself, in regard to the “problematic” taxation issues, is neither playing good politics nor exhibiting wise leadership.

This time last year, the Jubilee government was reeling from two shambolic elections – both conducted within two-and-half-months. The government was broke and was looking for credit facilities, so it turned to the IMF. The VAT on fuel, therefore, is part of the stringent conditions that the IMF has imposed on the Jubilee government in exchange for access to a standby credit facility – a fallback plan for the Kenya’s Exchequer in case the economy finds itself in the ICU and needs quick resuscitation.

“The Bill according to the Budget highlights by the Cabinet Secretary for the National Treasury and Planning is intended is to raise an additional KSh27.5billion to finance 2018/19 fiscal budget year,” observes the Department Committee on Finance and National Planning: Report on the Consideration of the Finance Bill 2018. The report says, “total projected expenditure and net lending for 2018/19 estimates amounted to KSh2.533 trillion to be financed through ordinary revenue (KSh1.743 trillion) and AIA (Annual-in-Advance) (KSh179.95 billion). Expected external grants will amount to KSh47.037 billion, bringing the revenue to KSh1.970 trillion. This leaves a fiscal deficit of KSh562.748 billion to be financed through debt. The proportion of revenue estimates to GDP for 2018/19 is 19.6 percent which is equivalent to that of the 2017/18 budget.”

The Kenya Association of Manufacturers (KAM), one of the lobby groups that presented its resolutions to the committee, argues in the report that, “(the) local manufacturer was losing competition vs major foreign player. The local industries are manufacturing basic products with low gross margin compared to most foreign players, who can support the duty costs. Local players had to increase their prices around (five percent) and it’s the final consumer that will pay for the final bill. This, in turn, was jeopardising local employment.”

A Kenyan industrialist who had intended to contract some local companies to manufacture carton boxes for packaging consumer goods, such as milk, in the Democratic Republic of Congo (DRC), told me he took his business to Uganda after he was hit with a prohibitive tax levy. “The Kenyan companies were charging me $0.7 per carton box – that is exclusive of transport logistics and documentation charges,” said the entrepreneur. “Yet in Kampala, I was being charged $0.42 – inclusive of transport and documentation costs, what they refer to as free on board (FOB).”

On September 18, 2018, President Uhuru Kenyatta rejected the Bill passed by MPs a fortnight before, citing his reasons in a memorandum that sought to overturn some of the proposals shot down by the MPs – chief among them, the 16 per cent VAT on petroleum products and the National Housing Fund, a new tax where the government hopes to impose a tax of 1.5 per cent of income on employees and their employers, ostensibly to fund a home ownership and social housing programme. According to the memorandum, the 16 per cent VAT on fuel has been scaled down to 8 percent in order to raise Sh17.5 billion in the current financial year.

A Kenyan industrialist who had intended to contract some local companies to manufacture carton boxes for packaging consumer goods, such as milk, in the Democratic Republic of Congo (DRC), told me he took his business to Uganda after he was hit with a prohibitive tax levy.

Another proposal contained in the President’s memorandum was to tax betting companies 15 per cent, down from 35 per cent as the case is now. This proposal, instead, hopes to raid the lottery winners’ cash by taxing it 20 per cent. The President is looking to raise between Sh25 and Sh30 billion accrued from the sports gaming taxes. The total computation of President Uhuru’s memorandum proposal was collecting Sh100 billion in this financial year.

Gitau Githongo, writing in the E Review, succinctly observed that “over the past five years, several tax measures have been introduced, including: 12 per cent Rental Income Tax on landlords from 2015, successive excise duty and fuel levy increases in 2015, 2016 and 2018; VAT on bottled water and juices, VAT on food served by restaurants, as well as, piped water; successive increases in excise duties on spirits, cigarettes and mobile telephony; and 50 per cent Gaming Tax on lotteries and bookmakers in 2017, among a host of others.”

Gitau’s article touched on the real reasons why President Kenyatta returned Kenya into the arms of hard-nosed IMF economists: “The parlous state of Kenya’s national accounts – most notably the KSh 5 trillion stock of public debt and ballooning budget deficit…suggests that the slew of tax measures proposed in Budget 2018 was purely about desperately seeking to finance reckless government spending and not about providing incentives for private sector economic growth.”

Avatar
By

Mr Kahura is a senior writer for The Elephant.

Politics

The Real Story Behind the Dams Scam

7 min read. President Uhuru Kenyatta’s decision to cancel the tender for the construction of the Kimwarer dam but to allow for the Arror dam project to proceed at half the original cost has been viewed as a commendable action in the fight against graft. However, ALESSANDRO DA ROLD and LORENZO BAGNOLI suggest that there could more than meets the eye in what is known as the “dams scam”.

Published

on

The Real Story Behind the Dams Scam
Download PDFPrint Article

Since the 1970s, Kenya has been considered by convicted Italian criminals as a safe haven – a place to hide from justice. A recent tide has, however, occurred and now some of these criminals have been extradited after spending years enjoying the “good vibes” of the Kenyan sea shores, especially in their stronghold Malindi. It seems to be the end of an era marked by impunity as Kenyan authorities have started pursuing alleged felonies committed by Italians living in Kenya. The authorities are not just going after individuals, but companies as well.

On the 29th of July this year, the Milimani Chief Magistrate’s court in Nairobi allowed Kenya’s Director of Public Prosecutions (DPP), Noordin Haji, to issue an arrest warrant for the Italian citizen Paolo Porcelli, the CEO of CMC (Cooperativa Muratori e Cementisti) from Ravenna. Porcelli is charged with abuse of office, bid-rigging and misuse of public funds and could face jail time if he returns to Kenya. With him on the list of the indicted there is also the Italian joint venture between the Italian companies Itinera (Gavio Group) and CMC.

Porcelli declined to appear in court twice. “Porcelli is a fugitive. Despite being given the opportunity, he hasn’t presented himself in court for a second time,” DPP Special Prosecutor Taib Ali Taib told the court. “The Italians think they can break the law and get away with it contemptuously. They believe nothing will come out of it.  Don’t allow it, your honour”.

Porcelli’s lawyers have a different opinion on his judicial status in Kenya: they explained that the indictment has charges only against the Kenyan top officials involved in the case. “It is not clear, and it is not explained [by the investigators] why Mr Porcelli and the joint venture CMC-Itinera could be indicted for the only charges they have, namely cashing in the deposit on the construction as it was agreed upon the contracts.”

The arrest warrant issued to the Italian manager is the latest development in a long saga reported in the international media as the “dams scam”. This story has many facets: the alleged criminal conduct of the Italian company in Kenya (CMC declines any involvement, claiming its innocence); the blatant lies and unfulfilled promises to the local population living around the proposed dams area; and the way local politicians turned Kenya’s natural assets into a personal gold mine.

The CMC’s long nightmare

CMC is a giant company in the field of construction globally. Wherever there is an important tender, the company is among the bidders. However, the glorious history of the company didn’t guarantee CMC’s success – construction is a competitive sector around the world. Sometimes to be awarded a tender, managers have to cross the line between lobbying and corruption.

In 2014, CMC signed a consultancy contract with Primo Greganti, a businessman and former politician who was arrested for alleged corruption: he would have helped some companies to be granted tenders for the construction of the site of Expo Milan 2015, the world food exhibition hosted in the Italian city.  The trial ended in a plea: in the Italian judiciary system, it means there is no verdict on the culpability of the defendant.

This story has many facets: the alleged criminal conduct of the Italian company in Kenya; the blatant lies and unfulfilled promises to the local population living around the proposed dams area; and the way local politicians turned Kenya’s natural assets into a personal gold mine.

The company was effectively granted a six million euro tender for the recovery of the land of the so called “plate”, the foundation for the exhibition facilities. At the end of the work, the final cost skyrocketed to 30 million euros because of differences caused by unexpected changes in the project. These extra costs were heavily criticised by the Expo 2015 board members because there were no grounds for justifying them. But because time for the construction at the site was running out, nobody within the board could reject the CMC’s requests. CMC was also awarded the tender for the construction of one of the French pavilions at the exhibition.

In May 2018, the company issued a press release on its financial situation. Under “total turnover” it reads: “Decreased from €289.0 million to €258.2 million. In particular, construction revenue decreased from €278.0 million to €236.7 million, due to a €23.0 million reduction overseas and an €18.3 million reduction in Italy. A significant increase is expected from certain projects achieving full production stage and from the start of the new project secured in recent quarters.”

In another press release issued in November last year, the company stated: “The Board unanimously concurred that, in a market context that was already structurally problematic, for reasons that arose spontaneously without any predictability, linked to non-receipts of orders and/or the state of progress of work, the Company is facing a moment of cash-flow tension.”

The main “non-receipts of order” at that time was Anas, the Italian company partially controlled by the state and in charge of maintaining and managing Italian highways. With the Kenya dams tender, it seemed that the cash flow problem might be solved. Kenya and Nepal were at that point considered as possible anchors that could recover the company’s accounts. One of the primary goals of the managers, therefore, was to immediately cash in on the advances made on work yet to be carried out. And this is when new problems arose.

The masterminds targeted by the investigation

CMC in Kenya has been granted contracts worth almost 800 million euros for the construction of the dams at Arror and Kimwarer. The awarding of the tender was officially presented during a meeting between the former Italian Prime Minister, Matteo Renzi, and President Uhuru Kenyatta. Both projects were expected to provide water to the population of the Rift Valley. According to the 2017 annual budget of CMC, Kenya was among the list of countries that contributed to expand the productivity of the company. Two years later, the situation is totally different.

In Italy, the authors of this article have since March been investigating the Kenyan dams case for La Verità, a right wing newspaper. The newspaper discovered a contract signed in 2013 between CMC and Stansha Limited, the company associated with the Lamu West MP, Stanley Muthama who was arrested on 28th June for tax evasion. It is a consultancy contract granting Muthama a fixed fee of 3 per cent in case CMC signs a contract with local development authorities in Kenya.

CMC in Kenya has been granted contracts worth almost 800 million euros for the construction of the dams at Arror and Kimwarer. The awarding of the tender was officially presented during a meeting between the former Italian Prime Minister, Matteo Renzi, and President Uhuru Kenyatta.

In that case, it was the Itare dam, another project to supply water in the Rift Valley, which apparently is not included in the current investigation. The investigation went silent until 22nd July when 28 other people were arrested on a different charge: international corruption. Among them was the Italian CEO, Paolo Porcelli, and Kenya’s Treasury Cabinet Secretary, Henry Rotich. The Italian prosecutor Lucia Lotti is handling the case in Rome, with the option to file a new investigation in Italy as well.

As is everything in Kenya now, this case could be framed as the battle between Uhuru and his number 2 in the 2022 election campaign, William Ruto. It has been suggested that Ruto could be using the Italian company for political support. Ruto’s daughter, June Chepchirchir, holds a senior position as the second counselor at the Kenyan embassy in Rome, Italy.

A key moment in diplomatic relations

The investigation on CMC Itinera is happening at a sensitive moment. Kenya and Italy are trying to collaborate on the Silvia Romano kidnapping. The 23-year-old Italian volunteer, who worked for the Italian charity Africa Milele, was abducted on 20th November last year from Chakama village in Kilifi County. But since then there has been no substantial information on her situation, apart from the trial of Gababa Wariu and Moses Lwari Chende, who confessed to aiding Romano’s abduction. But the investigation so far has not resulted in finding her.

In Italy the absence of updates on Silvia Romano’s health conditions are considered very alarming. At the same time, there is a new ongoing effort in Italy to have Romano released. The Kenyan head of public prosecutions, Noordin Haji, and Italian prosecutors in Rome are discussing a common strategy on the issue. If no positive results are achieved, the predictable outcome could be the cooling down of business and diplomatic relations between the two countries, at least in the initial stages.

The investigation on CMC Itinera is happening at a sensitive moment. Kenya and Italy are trying to collaborate on the Silvia Romano kidnapping. The 23-year-old Italian volunteer, who worked for the Italian charity Africa Milele, was kidnapped on 20th November last year from Chakama village in Kilifi County.

While Italy is grappling with the dams scandal and the search for Silvia Romano, France is trying to find a foothold in East Africa by signing new contracts with the Kenyan government. Rivalry in bilateral relationships in Africa is always a hot issue within the European Union (EU) member states, who have been unable to come up with a single comprehensive strategy for how EU member states should deal with African governments.

A possible read on the dams case is that William Ruto was the guarantor for the Italians and he can’t assure them anymore because he is currently dealing with bigger challenges related to his re-election campaign, which has been marred by corruption scandals implicating individuals from his political camp.

 

Editorial note:

For additional information on the Arrow and Kimwarer Dams saga see links below.

Contract Agreement between KVDA and CMC di Ravenna – Itinera Joint Venture for Kimwarer Dam
A contract agreement (KVDA/RPF/39/2014-15) between Kerio Valley Development Authority and CMC di Ravenna – Itinera Joint Venture signed on 5th April 2017 for works on the Kimwarer Multipurpose Dam Development Project on River Kimwarer.

Contract Agreement between KVDA and CMC di Ravenna – Itinera Joint Venture for Arror Dam
A contract agreement (KVDA/RPF/36/2014-15) between Kerio Valley Development Authority and CMC di Ravenna – Itinera Joint Venture signed on 5th April 2017 for works on the Arror Multipurpose Dam Development Project on River Arror.

A consultancy agreement between C.M.C. di Ravenna South Africa Branch and Stansha Limited (a company registered in Kenya) for the general purposes to provide consultancy services for the Itare Dam and Ruiru II Dam project under Athi Water Service Board.

DPP’s press statement on investigations concerning KVDA and Rift Valley Water Services Board
Following complaints to the Government of Kenya has been exposed to the loss of billions of shillings arising out of manipulation of the tendering process of several dam projects including the Arrow dam, Kimwarer dam, Itare dam, Embobut multi-purpose dam, Lower Turkwell irrigation scheme et.al the DPP’s office constituted a team of prosecutors to ensure the investigations of the aforementioned projects were carried out.

Continue Reading

Politics

Freedom Fighter or Ruthless Dictator? Unravelling the Tragedy that was Robert Gabriel Mugabe

8 min read. Admired by Pan-Africanists for his anti-imperialist rhetoric but loathed at home for his authoritarian tendencies, Robert Mugabe was a man full of contradictions. TINASHE L. CHIMEDZA reflects on the controversial life of Zimbabwe’s longest-serving leader.

Published

on

Freedom Fighter or Ruthless Dictator? Unravelling the Tragedy that was Robert Gabriel Mugabe
Download PDFPrint Article

Robert Gabriel Mugabe, Zimbabwe’s leader for nearly four decades. died on the 6th of September 2019 in a hospital in Singapore. Mugabe’s death, like his life, has generated animated debate, the very first irony being that after nearly four decades in office he died in a foreign hospital. Some have praised Mugabe for being a “liberation icon”, and a “great Pan-Africanist”. Former South African president Thabo Mbeki called him “a fellow combatant”. Others have charged Mugabe with being a “tyrant” who collapsed his country and fanned “genocidal” ethnic divisions.

However, in order to fully understand this complex character, we have to put Mugabe into a broader historical purview. Mugabe was educated by Jesuit Catholics. Initially trained as a teacher, he would remain deeply religious his entire life. It was in the maelstrom of liberation contests that Mugabe’s oratory skills came to the fore and he became the target of the vicious Rhodesian state that threw him and other nationalists, into detention.

Mugabe used his time in jail to get qualifications in law and economics. With his release from the Rhodesian jail, after almost eleven years, he headed straight to the liberation war front by escaping the country and crossing into Mozambique. There he became the voice on Radio Zimbabwe, and fronted media engagements. His star was shining as he became the forceful voice leading liberation delegations first at the failed Geneva Conference of 1976 and then at the Lancaster House settlement in 1979 in London.

When Mugabe was prime minister and then president, there were geopolitical factors that worked against the success of Zimbabwe. South of the Limpopo, apartheid South Africa destabilised the whole region. Importantly, the Rhodesian political economy was constructed for a few white settlers and the black majority government that Mugabe led had inherited an economy that was stable but very parochial.

The 1980s, considered by some as the happy years, were also full of contradictions. Education and health were expanded but in the western part of the country, Mugabe’s comrades were brutalising a whole region into subservience. Young men labelled “dissidents” were tortured, murdered in cold blood, and buried in mass graves. The violence was so macabre it brought nationalist leader Joshua Nkomo to near tears. He escaped to London and wrote The Story of My Life (1984). This was only settled in Mugabe’s favour when they signed the Unity Agreement of 1987.

That sordid part of Zimbabwe’s post-colonial history provided a script into the 1990s and 2000s. But what most political biographers of Zimbabwe leave out is that the Rhodesian settler-state inherited by the nationalist movement was a war machinery built to defend white settler interests. Ken Flower, who was the first director of the vicious Central Intelligence Organisation (CIO), wrote about the “exploits” of the white-security state apparatus in a book titled Serving Secretly. The 1980 Lancaster House Constitution at Zimbabwe’s independence left this state-security apparatus unreformed and years later Mugabe would boast that “he had degrees in violence” and that the “gun was mightier than the pen”.

The 1980s, considered by some as the happy years, were also full of contradictions. Education and health were expanded but in the western part of the country, Mugabe’s comrades were brutalising a whole region into subservience.

The ruling political class dealt with opponents ruthlessly and Mugabe’s rise and demise as leader was tightly linked to the military. Professor Jonathan Moyo argued that Mugabe was the victim of Zimbabwe’s “militarists”’. It was a military declaration in 1975 called the Mgagao Declaration that put Mugabe at the apex of the liberation movement in Mozambique. It was the military that kept him in power and that took him out of power via the putsch of November 2017. He was replaced with a man chosen by the military – Emerson Mnangagwa aka the crocodile, a name bequeathed to him because of his ruthlessness.

Scattered ideological orientations

Mugabe blundered from one political ideology to another but at the core of the project was power retention at any cost. In the 1970s Mugabe preached socialism and dabbled in some incoherent half-understood Marxist-Leninism. But when young guerillas attempted to build a Marxist political movement, they were thwarted and thrown into prison.

One young military commander from then, Wilfred Mhanda, wrote about the experience in his memoir Dzino: Memories of a Freedom Fighter (20011 – Weaver Press). In the early 1980s, Mugabe articulated variant forms of socialism and Marxism but only to court allies, given the global geopolitical contests of the Cold War era. The ZANU-PF manifestos of the 1980s discussed socialism in theory but there was no attempt to build a socialist economy and by the end of the 1980s any pretence to building socialism was abandoned – the road to socialism was closed off. In another memoir, Re-living the Second Chimurenga: Memories from Zimbabwe’s Liberation Struggle (2006), Fay Chung would state that Mugabe was a devoted Roman Catholic and it’s possible that this closed off any concrete inclination towards Marxism or Maoism.

In the 1990s Mugabe walked into neoliberalism, embraced structural adjustment programmes (SAPs), and took loans from the International Monetary Fund (IMF). But the policy move was disastrous. Social and public services collapsed, informality set it and the industrial base melted away, provoking resistance from the labour, women and student movements. The crisis of falling incomes, unemployment, inflation, adventure into the DRC war and the increased debt levels knocked the economy down. This was made more acute by the seizure of white-owned farms, which led to the collapse of the agriculture sector.

Mugabe then veered into a radical indigenisation programme. To keep all these threads from exploding, he entrenched a political system of shredding the Constitution and making himself an imperial, almost feudal-aristocratic president. Zimbabweans mass migrated into the region and a passport, to escape anywhere, became a prized possession in a country that has become what Dambudzo Marechera called “The House of Hunger”.

The 2017 coup and the militarists

When Zimbabwe’s generals staged a coup in 2017, they pointed out that ZANU-PF was corrupt and needed to be rescued from itself. The whirlwind that consumed Mugabe was in the seeds that he had sown. When the Movement for Democratic Change (MDC) emerged in 1999, he had allowed the chief of defence forces to say “the presidency was a straightjacket” and in 2008 he had allowed the military to take over the running of the election under the Joint Operations Command (JOC) – a relic of the Rhodesian military state.

The political nose that Mugabe had used to strangle the opposition and to brutalise civil society into subjugation was now turned on his neck. Professor Jonathan Moyo, now in exile, has argued that Mugabe was a mere “spokesperson” of the military system that harbours, in his words, the “repugnant ideology” that the “gun commands politics”. To claim that Mugabe, after almost half a century at the helm of the nationalist movement, was a mere “mouth” of the military is the grandest of revisionism.

In the 1990s Mugabe walked into neoliberalism, embraced structural adjustment programmes (SAPs), and took loans from the International Monetary Fund (IMF). But the policy move was disastrous. Social and public services collapsed, informality set it and the industrial base melted away, provoking resistance from the labour, women and student movements.

But Mugabe also went beyond violence as a means of political rule. Using his oratory skills, he presented himself as a Pan-African liberation fighter, and often riled against imperialism and stirred the ideological support of nationalist movements. In Zimbabwe, the political system became dominated by what Professor Ranger called “patriotic history”. In a way the system of political rule was a complex combination of authoritarianism, ideological narrative and patronage networks. Jonathan Fisher and Nic Cheeseman have pointed out more clearly that “authoritarian regimes rely on ideas, not just guns”:

“The more resilient of Africa’s authoritarian regimes, for example, have bought support from powerful local elites, soldiers, particular ethnic groups or political influencers through building them into extensive patronage structures where state resources are cascaded down chains of patron-client links. In so doing, they may assemble a large, and often diverse, group of communities who rely on the regime’s survival for their prosperity.” (Mail and Guardian, 6 November 2019)

In dealing with his opponents within and outside his party, Mugabe was scheming and coldly ruthless, but he also built ideological narratives and patronage networks, and controlled the public memory to place himself – not other nationalists – at the centre of history. Mugabe compared the nationalist leader Joshua Nkomo to “a snake whose head must be crushed”.

In the 1990s, when his former comrade Edgar Tekere opposed the “one-party state”, he was thrown out of the party and his supporters were accusing of “courting death”. Years after that the famed guerilla leader, Rex Nhongo, Zimbabwe’s first army general, died in a suspicious fire. Rex Nhongo was suspected of first supporting Simba Makoni and then his wife Joyce Mujuru to challenge Mugabe. A few years later, Emerson Mnangagwa was kicked out as Mugabe played one political faction against the other in Machiavellian style. Nearly all of Zimbabwe’s opposition leaders were charged of “subversion”. (Morgan Tsvangirai has written about his trials and tribulations is his memoir At the Deep End.)

When Mugabe was president, the opulence of his and his family’s lifestyle was on display at their home called “The Blue Roof”. Nepotism and cronyism were rife. Those networked with the Mugabes worked their way into economy. In Mazowe, just outside Harare, poor farmers who had been allocated land were kicked out and some were only saved by High Court orders. Nephews, nieces, uncles, children and the president’s immediate family amassed vast amounts of wealth. Mining claims, multiple farms, fuel cartels and contracts with the government is how this wealth was amassed. One of Mugabe’s nephews boasted “if you want to be rich join ZANU PF”. Public enterprises were looted with reckless abandon. Before being deposed, the Mugabes were going to build a Robert Mugabe University to the tune of US$1billion. Even in death Mugabe will be buried in a mausoleum possibility costing millions.

Of Kwame Nkrumah, Mwalimu Nyerere and Nelson Mandela 

Robert Mugabe left no condensed publication of his thoughts, which means his intellectual footprint is only found in speeches and scattered interviews. For a president whose education varied from law, economics and education, this is rather disappointing.

In dealing with his opponents within and outside his party, Mugabe was scheming and coldly ruthless, but he also built ideological narratives and patronage networks, and controlled the public memory to place himself – not other nationalists – at the centre of history.

It was at continental and global forums that Mugabe attracted the affinity of Black Africa, and where he mesmerised the Global Pan-African movements and other social and political forces. He went to United Nations General Assembly meetings religiously. There he made scathing comments about racism, demanded equality at the UN Security Council, railed against economic exploitation of Africa and raised his voice to throw spears at imperialism. An articulate black president from a small former African colony who repossessed land, who was placed under sanctions, and who made stinging statements against inequitable global power relations is what the Pan-Africanist movement was lacking and some sections praised Mugabe for this.

Compared to the other towering intellectuals, theorists and revolutionaries of Pan-Africanism, Robert Mugabe’s legacy withers. Kwame Nkrumah was a thinker and an intellectual who penned treatises that dealt with the African condition. Mwalimu Nyerere was a nation-state builder who forged the disparate social groups of Tanzania into a cohesive stable polity and who retired into a modest life. Nelson Mandela pulled the strands of a nation traumatised by the violence of apartheid into a “Rainbow Nation”. Having had a “long walk to freedom”, Nelson Mandela subjected the country to constitutional democracy. Thomas Sankara forged an everlasting revolutionary legacy. He placed women at the centre of politics and development, tackled illiteracy, and invested in health. The young captain lived a modest life, shunned decadent opulence and boldly set into motion the belief that the “future can be invented”.

Broad strokes of history

They say history is written in broad strokes. Mugabe’s anti-colonial credentials will shine; he stayed in prison for over a decade, the radical land repossession will also burn bright but this will be blighted by the brutality, the ruthlessness, the corruption and the repugnant politics of polarity authored by Mugabe. Of Mugabe’s politics, the Pan-Africanist Tajudeen Abdul-Raheem had this to say:

“Zimbabwe and President Mugabe are a situation we cannot in all good conscience continue to pussyfoot about anymore. It is indefensible that one man, no matter his contribution to the country, should be holding the people to ransom…Mugabe is no longer the part of the problem of Zimbabwe: he is now the problem (Speaking Truth to Power: Selected Pan-African Postcards, 2010)

Mugabe built a surveillance state of Stalinist proportions that was littered with impunity, arrogance of power, extrajudicial killings, a rapacious propaganda system, and a personality cult that exacted worship and fear from the man and woman on the street. The long motorcade, ambulance in tow, imported cavalcade of cars, gun-toting soldiers, loud police sirens, police motorbikes, traffic cleared from the road and armoured cars that ferried Mugabe have died down. The putsch of 2017 ushered in the country’s militarists who remain in control of a vicious perpetuum mobile ­­– a kleptocratic military class that has melted away any respect for the constitutional edicts of the country.

We from Zimbabwe will remember Mugabe for a dream that could have been possible but instead was collapsed into what Professor Sabelo Gatsheni-Ndlovu called “grotesque nationalism”.

Continue Reading

Politics

Why South Africa Should Not Do a Zimbabwe: Demerits of the Proposed Land Expropriation Law

8 min read. A law to allow the seizure of white-owned land could have a profoundly negative impact that goes well beyond the violation of fundamental human rights. Its consequences could be catastrophic on the industrial, agricultural, and banking sectors in South Africa.

Published

on

Why South Africa Should Not Do a Zimbabwe: Demerits of the Proposed Land Expropriation Law
Download PDFPrint Article

Some time has passed since South African President Cyril Ramaphosa’s highly controversial announcement of a new land reform law that would allow for the expropriation of land without compensation. Accused by some of racism, and by others of populism, the president is trying to address the pressing requests of the vast majority of blacks who still feel oppressed after white minority rule ended in 1994. According to a recently released parliamentary media statement, this bold move should fix “the historical wrongs caused by arbitrary dispossession of land, and in so doing ensure equitable access to land and further empower the majority of South Africans to be productive participants in ownership, food security, and agricultural reform programmes.”

Apparently, in a country where the white minority account for just over 9 per cent of the population but which owns over 70 per cent of the land, such a law seems to be a fair way to balance the scales of social justice. However, on the other side of the barricade, there are thousands of white Afrikaners descended from Europeans who colonised South Africa who claim that they worked hard to obtain that land. These people are human beings as well, and many of them are only paying the price of a segregation regime imposed by their fathers and grandfathers.

This bitter battle between these two sides is rooted in apartheid, a terrible word that does more than just bring back bad memories. It is an ugly concept that speaks to us of racial segregation, and inhumane treatment. And even if now the faces (and colours) of the protagonists may have swapped, the dehumanising cruelty behind it has probably not.

The controversial amendment to section 25 of the Constitution

To date, the African National Congress (ANC), the country’s leading political party since the end of apartheid, has redistributed land following a “willing seller, willing buyer” model. In a nutshell, the government buys white-owned farms and then redistributes them to black farmers. The idea was to return at least 30 per cent of the land that was expropriated from black farmers to their legitimate owners by 2014. However, today less than 10 per cent of commercial farmland has been redistributed. Exponents of the South African Homeless People’s Association claim that the “willing seller, willing buyer” model only widened the social divide, bringing more poverty to the masses.

The law proposed by Ramaphosa aims at amending section 25 of the Constitution to make the expropriation of land without compensation an explicitly legitimate option. In other words, the government could take this land away from white hands without paying them anything, as long as the reform doesn’t cause any damage to the nation’s economy, agricultural production, and food security.

This law was supported by a small radical party led by Julius Malema, the newly-created Economic Freedom Fighters (EFF). However, not all the white owners got their land by means of coercion during the previous century. Many claim they legitimately bought it through the hard work of their ancestors and defined this law as grossly immoral and inhumane. Some threatened to wage war to defend their farms, bringing back the sad memories of the recent land expropriation policies enforced in Zimbabwe. Some other “softer” reforms have been proposed, such as paying “just and equitable” compensation that is well below market price to landowners, or banning foreigners from buying agricultural lands.

Racism: the legacy of a century of apartheid in South Africa

Unlike other countries where racism is a tremendous plague that crawls hidden in the very fabric of society, in South Africa racism and discrimination against blacks were explicit laws. During the last century, European colonialists simply institutionalised them as part of the nation’s legal infrastructure. Similar to the racial laws that forced Jews to lose their jobs just because of their heritage, during apartheid in South Africa, a series of laws were put in place to enforce white dominance. It was the Parliament itself that decided that black people had to be inferior human beings and had, therefore, limited access to rights.

In 1913, the South African’s colonialist administration passed the Natives Land Act, a law which stripped nearly all black people of their right to own land. Although 72 per cent of the population consisted of black people, this law limited land ownership among blacks to a mere 8 per cent of the country. White South Africans literally gave land to themselves, a capital offence that created a terrible precedent as many black people were forcefully evicted from their farms.

The law proposed by Ramaphosa aims at amending section 25 of the Constitution to make the expropriation of land without compensation an explicitly legitimate option. In other words, the government could take this land away from white hands without paying them anything, as long as the reform doesn’t cause any damage to the nation’s economy, agricultural production, and food security.

Other laws, such as the Reservation of Separate Amenities Act of 1953 and the Group Areas Development Act of 1955, further reinforced these policies of segregation. Blacks were forced into unproductive land and underdeveloped regions, which excluded them from amenities such as parks, schools, and hospitals that only whites could access. Blacks could not obtain formal training for skilled jobs, which denied them the right to study, and barred them from equal employment and development opportunities. Together with many other racial laws, apartheid drove the black community into poverty, prevented them from expressing their opinions freely, and stripped them of their properties.

When the apartheid formally saw its end in 1994, many who suffered from these disparities imposed by this regime rejoiced, hoping for reforms that would bring back some justice in their lives. However, as often happens in politics, many of these promises of equity and equality quickly turned into empty words and vain declarations. The resources that the South African government allocated for land reform were vastly insufficient, never exceeding a mere 1 per cent of the national budget. Even today, land reform doesn’t look like a priority, with the amount allocated to it being just 0.4 per cent of the national budget. Racial inequalities persist in many sectors, including in the mining and industrial sectors, which constitute the backbone of the nation’s economy. The majority of the most profitable companies remain controlled and managed by whites, and the whole labour market still suffers from substantial polarisation.

Growing inequalities

The snowball effect of nearly 400 years of colonialism left the black community in dire poverty, ripe with nearly-illiterate individuals who had no chances to become competitive in the upcoming century of globalisation. According to the World Bank, 25 years after the end of apartheid, South Africa is still one of the most unequal countries in the world. In 2017, the unemployment rate was still high and growing at 27 per cent, with many people lacking tangible prospects for a better life. Race still has a tremendous impact on an individual’s chances of finding a job, as well as on the wages received once employed. A bitter divide between white Afrikaners and black people has kept growing and has become the core of all social or political debate in this tormented country.

Despite the country’s huge potential for growth, the economy kept stagnating during the nine years of Jacob Zuma’s presidency. Characterised by rampant corruption and continuous scandals, Zuma’s administration came under pressure as the masses started asking for policies that would address unemployment, disparities, and poverty.

The resources that the South African government allocated for land reform were vastly insufficient, never exceeding a mere 1 per cent of the national budget. Even today, land reform doesn’t look like a priority, with the amount allocated to it being just 0.4 per cent of the national budget.

Eventually, after an extremely unpopular cabinet reshuffle, Zuma was forced to resign and was replaced by Cyril Ramaphosa in February 2018. The new president cracked down on corruption and kicked out many inept ministers while Zuma was indicted for money laundering and racketeering. However, the damage that Zuma inflicted to the party’s credibility was so severe that it had to rely on radical parties such as the EFF to gain some traction.

The ANC lost so many voters in the 2016 local elections that the 2019 ones may be in jeopardy. Some argue that Ramaphosa is simply pushing the Land Expropriation Act as a populist ploy aimed at recovering a significant portion of the voters’ trust. The nation’s poor, in fact, make up the majority of the electorate, and addressing their plight will certainly provide him with the political stability his government needs so much.

The human, social, and economic consequences

ANC’s and EFF’s new land reform tastes like nothing but a bloody policy of revenge inspired by populism and driven by a desperate need to win the elections. But blood always calls for blood, and may easily throw South Africa into a new civil war, no matter how justified this law may seem. The French Revolution, the recent Zimbabwe land expropriation laws, and even the Communist Revolution all teach us a fundamental lesson – that legislation that allows a state to violate property rights only creates new privileged elites rather than equalising the social fabric.

A law to allow the seizure of land has a profoundly negative impact that goes well beyond the violation of fundamental human rights. Its consequences can be catastrophic on the industrial, agricultural, and banking sectors as well, and neighbouring Zimbabwe is a prime example. Just like Venezuela, another country where land was redistributed from the rich to the poor, today Zimbabwe needs to import nearly all the food it needs rather than producing most of it, as it did 20 years ago.

Distributing land “fairly and equally” to all people means creating a large number of smallholder farmers who will have to face tremendous costs to grow and be competitive. An entire nation of small farmers will have a really hard time competing with the larger players of globalised agriculture unless they have access to the latest methods and technologies. Yet, once again, has the government thought and planned a strategy to provide these future landowners with the necessary means to survive in such a harshly competitive environment? Worst case scenario: this may lead to large-scale deforestation by owners who will start selling their wood cheaply to foreign companies – a process that has already devastated Kenya, Uganda, and Ethiopia.

However, we may have a very different scenario – one where land is handed down to a smaller amount of black people who will quickly become rich at the expenses of others. A new handful of privileged individuals who will simply substitute former white owners with other newer sons and daughters of uncontrolled capitalism. Their faces may change, but the inequality will bring the country to its knees in the same exact way. Whether their skin tone is darker won’t make them any better than their colonialist predecessors, nor will make the whole act of seizing land be more just or justifiable by any means.

On top of all that, a scenario of harsh social tensions and violent clashes is a bomb that is about to explode. Following some cases of brutal and murderous attacks of white farmer that got the attention of the media, some Afrikaners called out for international aid, claiming there was a “white genocide” going on. And while smart people may easily understand that the numbers are no way as high as to justify the choice of this vastly exaggerated terminology, this alarmist rhetoric is bound to have serious global consequences.

Distributing land “fairly and equally” to all people means creating a large number of smallholder farmers who will have to face tremendous costs to grow and be competitive. An entire nation of small farmers will have a really hard time competing with the larger players of globalised agriculture…

In an era where the rise of neo-fascism, fake news, gross misinformation, and distorted nationalisms represent a serious threat to all societies, this may be a spark that would ignite an uncontrollable chain reaction. Black people around the world are often unjustly identified as enemies by organisations and parties who willfully manipulate information. Knowing there’s a country where a murderous government justifies their violent persecution will only fuel a hate that is certainly more detrimental than beneficial to the black cause.

Conclusion

History cannot be corrected by doing the wrong thing, and the ANC’s policy means nothing but repeating the same mistake over and over again. South Africans deserve having the right to cultivate their lands once again, they deserve to live in a fair country, they deserve peace. It is totally understandable that poverty must be fought with all means, and that the current situation is all but just or fair.

But enforcing the rights of black people with violence won’t restore the justice and equality this country so desperately needs. It will only open a gaping wound across the nation that will widen the divide even more. It may reach the point of breaking any bridge built so far between all those human beings whose sole difference is the colour of their skin and the heredity of their ancestors.

Continue Reading

Trending