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Debt, Austerity and Economic Hit Squads: How China and the West Hoodwinked Kenya

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China has learnt from the West’s weaponisation of sovereign debt as a tool for securing the sovereign assets and acquiescence of poorer countries. By DARIUS OKOLLA

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DEBT, AUSTERITY AND ECONOMIC HIT SQUADS: How China and the West hoodwinked Kenya
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The Christian scriptures state that a good man leaves an inheritance to his children’s children. This provides a key entry point into the question of intergenerational mobility of wealth, income and opportunity.

We’ve got to admit that meritocracy is often a myth. Hard work, single-minded focus, and determination are good but are not guarantees to success. The top predictor of a child’s socio-economic class is not his personality, education, IQ, talent, or exposure: it is the parent’s socio-economic status. Researchers Amy Traub and Tatjana Meschede once demonstrated that for African-Americans, and increasingly for non-white races around the globe, going to college doesn’t close the wealth gap; neither do two-parent household set-ups, family spending cuts, or working full time. If a child is poor/middle class/rich, there is a high chance that the parents are poor/middle class /rich, respectively.

Poor people usually have roughly a 10 to 20 per cent chance of ever ending up rich in their lifetime. In fact, the common ratios tend to be between 7 and 15 per cent. In most societies, upper middle class people have a 20 per cent or so chance of ending up rich. In fact, nearly 60 per cent of all people live and die within the social class that they were in in their 20s.

Let’s admit it: the rags-to-riches story tends to be anything but. Yes, there is always a tycoon who started on the streets and became a billionaire but that is the exception, not the rule. A huge proportion of those born into poverty will live and die poor. Contrary to what you keep hearing, education is great but it is not an equaliser; rich kids with low IQs graduate in higher numbers than poor kids with high IQs. It is family incomes, not merit, that primarily determines university enrolment, graduation, and future incomes.

The ability to generate a transformative kind of wealth within one’s lifetime is possible but neither normal nor possible for the majority of the population; usually, it takes about three to four generations of industrious heirs to achieve it. That’s the reason the good book instructs us that a good man leaves an inheritance for his children and his children’s children. The forces at play are referred to as the principles of inherited (dis)advantages.

Ethnicity of capital

Intergenerational mobility tends to be stubbornly calcified, which is a key reason why the deity prioritises the need for one to leave an inheritance for one’s progeny. Wealth is known to stay within certain families for between 500 and 800 years, as studies have demonstrated in Florence, England and ancient China. Capital is quite loyal to filial ties but most importantly, it manifests certain logic and sensibilities, including developing its nature from the demographic, geographic, intellectual, historical and political contexts within which it is employed. Notably, Amy Traub and Lara Sullivan’s study of racial inequality has demonstrated that barring any historical disruptions, capital tends to remain familial, and by extension, stays ethnic.

It is the Euro-American/Christian/White capital in the West whose hegemony has driven modern civilisation since the Renaissance – that’s the bane of global capitalism. This capital is decidedly white, decidedly male, decidedly Christian, decidedly elitist, and notably racist in its sensibilities, a persona it picked from its most famous brawling pioneers like Adam Smith, the rogue Commodore Vanderbilt, and the choleric John Rockefeller. Capitalism, as an initially Western logic, therefore, ought to be examined within the context of its interaction with global economic history, especially the rise of nation-states and slavery.

In Workers of the World: Essays Toward a Global Labor History, economic historians Kenneth Pomeranz and Marcel van der Linden have shown that, viewed from a global perspective, capitalism is notably discovered to have grown on the backs of slavery. The 18th century global oppressive structures that birthed racism and slavery were also central to the invention of the Industrial Revolution, especially the spectacular American capitalism.

It is the Euro-American/Christian/White capital in the West whose hegemony has driven modern civilisation since the Renaissance – that’s the bane of global capitalism. This capital is decidedly white, decidedly male, decidedly Christian, decidedly elitist, and notably racist in its sensibilities…

The American capitalistic experiment took shape in the 1820s just as one of its would-be patriarchs, Cornelius “Commodore” Vanderbilt, turned 26 and for the next 150 years it delivered a year-on-year wage rise, including surviving the infamous American Civil War of 1861-1865. However as the economy entered the 1960s, the rise of automation, women pouring into the workplace after the sexual revolution, the rise of immigration, and employers moving production abroad stalled this capitalist experiment.

The combination of technology and outsourcing production abroad gave American capital a velocity and agility that gave rise to the possibility of accelerated capital flight, as happened in the 1997 Asian financial crisis. In the 60s, Euro-American capital also learned that it could use debt as a tool for diplomacy and coercion on the global stage.

Of jackals and hit men

John Perkins, who authored the famous book Confessions of an Economic Hit Man, begins his narration in Quito, Ecuador. He then journeys us through half a dozen countries, painting tragic pictures of once thriving metropoles turned into volatile and crumbling credit-opoles by the vultures from Washington. He writes:

“Despite the fact that the money is returned almost immediately to corporations that are members of the corporatocracy (the creditor), the recipient country is required to pay it all back, principal plus interest. If an economic hit man (EHM) is completely successful, the loans are so large that the debtor is forced to default on its payments after a few years. When this happens, then like the Mafia we demand our pound of flesh. This often includes one or more of the following: control over United Nations votes, the installation of military bases, or access to precious resources such as oil or the Panama Canal. Of course, the debtor still owes us the money—and another country is added to our global empire.”

Weaponisation of sovereign debt as a tool for oppression emerges as an almost accidental discovery borne of the post-World War I world as the gold standard drew to a close, having dominated global commerce in late 19th and early 20th century. The increasing societal complexity occasioned by industrialist Henry Ford’s assembly line, the World War I military economy and the stock market boom exposed the limited monetary policy options that the gold standard could avail to 20th century governments. Under the gold standard, Central Banks often could only respond to economic downturns with spending cuts and raising interest rates, hoping that labour wage and commodity prices would drop low enough for the economy to self-correct.

In 1946, the political economist John Maynard Keynes resolved that both the headquarters of the World Bank and the International Monetary Fund, which he had helped found, shouldn’t be on American soil. His reservations over the location of the two institutions got torpedoed, as Washington had already secured a dozen allies to sway the vote on the matter in its favour. His death six weeks later set the Bretton Woods institutions firmly on US soil, inevitably rendering the two organisations and their nearly one dozen financial arms as American appendages rather than the global institutions that Keynes has envisaged.

Two years earlier, at the Bretton Woods Conference of July 1944, Keynes’s squabbles with US Treasury official Harry Dexter White had ended in surprising mutual agreement regarding the creation of new post-war institutions for regulating international flow of capital, prohibiting arbitrary currency alterations, stabilising exchange rates, and facilitating international financial cooperation.

Together they built a closely monitored international financial system with post-war reconstruction institutions for capital and currency regulations that replaced the uncoordinated system of the pre-1930s, actions that globally centered the US financial system, laying the groundwork for the rise of economic hit men and the debt tentacles.

By the time journalist Water Isaacson and historian Evans Thomas published their famous book The Wise Men: Six Friends and the World They Made in 1986, the two institutions’ debt arrangement with Kenya – predicated on structural adjustments – was already six years in the making and was creating negative economic effects in Nairobi. The “wise men” comprised six shadowy foreign policy wonks in Harry Truman’s government beginning in 1945 just as the Cold War was reshaping the global hegemonies and reorienting geostrategic loyalties. The six, in typical wise men lore, brought forth hegemonic gifts, not in the strain of gold, myrrh, and frankincense but NATO the Marshall Plan and, alongside Dexter and Maynard, the World Bank. The modern-day pragmatic internationalism, non-partisanship, and America’s aversion to ideology exemplified in catch-phrases such as “for the greater good” reflect some of the hallmarks of their beliefs. The legacy of the six men, namely, Dean Acheson, George Kenna, John McCloy, Robert Lovett, Averell Harriman, and Charles Bholen, played the handmaiden to capitalism’s inherent need for eternal global expansion.

From Kenya, with love

Perkins-esque economic hitmanship in Kenya started in 1980 with a $55 million Structural Adjustment Credit (SAC) by the World Bank, which rose to a $130.9 million loan in 1983. The next six years dragged in three sectoral adjustment loans (SECAL): 1986 Agriculture ($60 million), 1988 Industry ($165.7 million), and 1989 Finance ($231.3 million) to complement the two previous structural adjustment programs (SAPs).

While Kenya didn’t cede any particular strategic assets to the Western oligarchs, the 1971-1972 oil prices shocks had created the perfect opportunity for the West to rope in Kenya into its sphere, away from Soviet influence. SAPs constitute a raft of policy decisions, including market liberalisation, price decontrols, and budget cuts. SAC is the monetary incentive granted to a government to implement SAPs. Sectoral adjustment loans is a credit facility extended to a specific sector of the economy and pegged on the government agreeing to implement SAPs in that particular industry or sector.

These were followed by three more SECALs in the 1990s: 1991 Export Development ($149.1 million), 1991 Agriculture II ($75 million), and 1992 Education ($100 million). The disastrous 1996 SAC I ($126.8 million) drew the most anger from the Kenyan public, having been incorrectly tied to some of the economic tailspins unleashed by Kamlesh Pattni’s Goldenberg scandal. SAPs’ drastic economic impact skyrocketed interest on debt payment from 8.3 per cent between 1964 and 1969 to 23 per cent in 1995/96 and 25 per cent in 1997/98, the debt having grown by 362 per cent, from $36.7 billion in 1990 to $169 billion in 1998.

Curiously, the most famous studies on Kenyan SAPs by Ikiara (1990), Swamy (1994), and Ihonvbere (1996) on the effects of the economic hit jobs notoriously ignored the social effects that SAPs had unleashed. The neoliberal cuts in welfare spending, price decontrols, market liberalisation, and budget cuts strangled the health, education and social services sectors, which led to a significant decline in the quality of basic services available to ordinary wananchi. Three decades later, Kenya is yet to fully recover from the debilitating effects of SAPs.

Enter the Red Brigade

French political economist Eric Toussaint, in his report, “Debt as an Instrument of the Colonial Conquest of Egypt, aptly observed that “in the case of Egypt and Tunisia, the European powers used debt as their most powerful weapon for ensuring domination, leading to the total submission of previously independent states”. China, a rising economic power throughout the 1990s and 2000s, would learn and perfect the West’s weaponisation of debt through economic hitmanship.

As of 2007, the People’s Republic of China had a massive financial muscle of $1.4 trillion in currency reserves and a $200 billion sovereign wealth fund, which grew to $3.44 trillion and $810 billion, respectively, by 2013. This financial war chest would come in handy in China’s Belt and Road Initiative.

French political economist Eric Toussaint…aptly observed that “in the case of Egypt and Tunisia, the European powers used debt as their most powerful weapon for ensuring domination, leading to the total submission of previously independent states”. China, a rising economic power throughout the 1990s and 2000s, would learn and perfect the West’s weaponisation of debt through economic hitmanship.

The Belt and Road Initiative encompasses an overland route through Eastern Europe as well as the ports of Quanzhou in eastern China, Kuala Lumpur, Colombo, Gwadar in the Middle East, Mombasa, Djibouti, the Suez Canal, Piraeus, and ends in Venice. In a typical Merchant of Venice fashion, Beijing lends money for unviable infrastructure projects that inevitably precipitate a default. And like Shakespeare’s Tubal, it comes to claim its pound of flesh structured as 60-90-year port leases, as has happened to the port of Djibouti and Hambantota port in Sri Lanka.

In March of 2018, the think tank Centre for Global Development (CGD), in a report titled “Examining the Debt Implications of the Belt and Road Initiative from a Policy Perspective, determined that eight countries (Montenegro, Laos, Mongolia, Pakistan, Kyrgyzstan, Tajikistan, Mongolia, and Djibouti) were likely to default on their debt obligations to China. Tellingly, all these countries lie on the Belt and Road Initiative’s route.

The IMF’s Wenjie Chen and Roger Nord articulated this in their ominous report “China and Africa: Crouching Lion, Retreating Dragon?that showed that in just a few years Beijing has become, by far, the largest source of (bilateral) loans, lending over $96 billion to sub-Saharan African countries (excluding South Africa).

Today, China controls 72 per cent of Kenya’s bilateral debt or 10 per cent of its total debt. Interestingly, the nearly Sh450 billion Standard Gauge Railway (SGR) loan accounts for a majority of the credit facility that’s maddeningly accompanied by exorbitant interest rates.

All this is happening against a backdrop of increasing economic hardship across the country. A June study estimated the number of starving Nairobi residents to be 900,000 out of a total population of 4 million, while in March 2018 Kenya got ranked as having one of the highest numbers of extremely poor people at – 6th in Africa and 8th in the world. Compound this with the World Bank’s latest report that estimated the number of starving Kenyans to be 17.4 million and the Kenya National Bureau of Statistics (KNBS) figure of 16.4 million starving Kenyans out of an estimated population of 49 million people, and you have an economically strained population. The infrastructure binge hasn’t translated to a notable rise in personal incomes for the struggling majority.

In 2013, Kenya owed China about $630 million, a figure that had risen to $5.57 billion (Sh.557 billion) by May 2018. Meanwhile, the country paid back Sh435.7 billion in the 2016/17 financial year, followed by another Sh870 billion, or over 60 per cent of its tax revenue, in the 2017/18 period – a figure that’s expected to reach Sh1 trillion in the 2018/19 period.

Meanwhile, the best case scenario for revenue collection stands at Sh1.3 trillion. The Treasury has just revealed that the government expects to collect Sh2.3 trillion by 2022, an unrealistic and highly optimistic figure, given that the country will be borrowing at least a trillion shillings a year from 2019 through 2024 to compensate for falling revenues occasioned by capital flight and the collapse of over 2.2 million small and medium enterprises (SMEs) between 2012 and 2016 alone. The 2016 National Micro, Small and Medium Enterprises (MSME) Survey found that half a million MSMEs die every year in Kenya due to high operating costs, declining incomes and losses incurred by business, which suggests that the Kenyan economy is not doing well at all.

A struggling economy and a debt estimate of between Sh9 trillion and Sh10 trillion by 2022 – equivalent to 120 per cent of the current 8.65 trillion GDP – is the more likely scenario. There’s no doubt that servicing this debt will be a headache for the government and defaults aren’t a far-fetched possibility.

Meanwhile, the best case scenario for revenue collection stands at Sh1.3 trillion. The Treasury has just revealed that the government expects to collect Sh2.3 trillion by 2022, an unrealistic and highly optimistic figure, given that the country will be borrowing at least a trillion shillings a year from 2019 through 2024 to compensate for falling revenues occasioned by capital flight and the collapse of over 2.2 million SMEs between 2012 and 2016 alone.

And China, just like it did in Djibouti, Zambia and Hambantota, will seek to extort a lease for strategic assets as a trade-off, key among them being the port of Mombasa that lies on the Silk Belt and Road route.

For a deeply religious country, we overlooked one of the core verses in Proverbs 13:22 about generational wealth. We have auctioned our children’s and their children’s coastal (and strategically important) inheritance for a worthless piece of rail. Future generations will pay dearly for this mistake.

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Darius Okolla is a researcher based in Nairobi.

Politics

A Dictator’s Guide: How Museveni Wins Elections and Reproduces Power in Uganda

Caricatures aside, how do President Yoweri Museveni and the National Revolutionary Movement state reproduce power? It’s been 31 years.

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Recent weeks have seen increased global media attention to Uganda following the incidents surrounding the arrest of popular musician and legislator, Bobi Wine; emblematic events that have marked the shrinking democratic space in Uganda and the growing popular struggles for political change in the country.

The spotlight is also informed by wider trends across the continent over the past few years—particularly the unanticipated fall of veteran autocrats Muammar Gaddafi in Libya, Hosni Mubarak in Egypt, Yaya Jammeh in Gambia, and most recently Robert Mugabe in Zimbabwe—which led to speculation about whether Yoweri Museveni, in power in Uganda since 1986, might be the next to exit this shrinking club of Africa’s strongmen.

Yet the Museveni state, and the immense presidential power that is its defining characteristic, has received far less attention, thus obscuring some of the issues at hand. Comprehending its dynamics requires paying attention to at-least three turning points in the National Resistance Movement’s history, which resulted in a gradual weeding-out of Museveni’s contemporaries and potential opponents from the NRM, then the mobilisation of military conflict to shore up regime legitimacy, and the policing of urban spaces to contain the increasingly frequent signals of potential revolution. Together, these dynamics crystallised presidential power in Uganda, run down key state institutions, and set the stage for the recent tensions and likely many more to come.

The purge

From the late 1990s, there has been a gradual weeding out the old guard in the NRM, which through an informal “succession queue,” had posed an internal challenge to the continuity of Museveni’s rule. It all started amidst the heated debates in the late 1990s over the reform of the then decaying Movement system; debates that pitted a younger club of reformists against an older group. The resultant split led to the exit of many critical voices from the NRM’s ranks, and began to bolster Museveni’s grip on power in a manner that was unprecedented. It also opened the lid on official corruption and the abuse of public offices.

Over the years, the purge also got rid of many political and military elites—the so-called “historicals”—many of whom shared Museveni’s sense of entitlement to political office rooted in their contribution to the 1980-1985 liberation war, and some of whom probably had an eye on his seat.

By 2005 the purge was at its peak; that year the constitutional amendment that removed presidential term limits—passed after a bribe to every legislator—saw almost all insiders that were opposed to it, summarily dismissed. As many of them joined the ranks of the opposition, Museveni’s inner circle was left with mainly sycophants whose loyalty was more hinged on patronage than anything else. Questioning the president or harboring presidential ambitions within the NRM had become tantamount to a crime.

By 2011 the process was almost complete, with the dismissal of Vice President Gilbert Bukenya, whose growing popularity among rural farmers was interpreted as a nascent presidential bid, resulting in his firing.

One man remained standing, Museveni’s long-time friend Amama Mbabazi. His friendship with Museveni had long fueled rumors that he would succeed “the big man” at some point. In 2015, however, his attempt to run against Museveni in the ruling party primaries also earned him an expulsion from both the secretary general position of the ruling party as well as the prime ministerial office.

The departure of Mbabazi marked the end of any pretensions to a succession plan within the NRM. He was unpopular, with a record tainted by corruption scandals and complicity in Museveni’s authoritarianism, but his status as a “president-in-waiting” had given the NRM at least the semblance of an institution that could survive beyond Museveni’s tenure, which his firing effectively ended.

What is left now is perhaps only the “Muhoozi project,” a supposed plan by Museveni to have his son Muhoozi Kainerugaba succeed him. Lately it has been given credence by the son’s rapid rise to commanding positions in elite sections of the Ugandan military. But with an increasingly insecure Museveni heavily reliant on familial relationships and patronage networks, even the Muhoozi project appears very unlikely. What is clear, though, is that the over time, the presidency has essentially become Museveni’s property.

Exporting peace?

Fundamental to Museveni’s personalisation of power also has been the role of military conflict, both local and regional. First was the rebellion by Joseph Kony’s Lord’s Resistance Army in northern Uganda, which over its two-decade span enabled a continuation of the military ethos of the NRM. The war’s dynamics were indeed complex, and rooted in a longer history that predated even the NRM government, but undoubtedly it provided a ready excuse for the various shades of authoritarianism that came to define Museveni’s rule.

With war ongoing in the north, any challenge to Museveni’s rule was easily constructed as a threat to the peace already secured in the rest of the country, providing an absurd logic for clamping down on political opposition. More importantly, the emergency state born of it, frequently provided a justification for the president to side-step democratic institutions and processes, while at the same time rationalising the government’s disproportionate expenditure on the military. It also fed into Museveni’s self-perception as a “freedom fighter,” buttressed the personality cult around him, and empowered him to further undermine any checks on his power.

By the late 2000s the LRA war was coming to an end—but another war had taken over its function just in time. From the early 2000s, Uganda’s participation in a regional security project in the context of the War on Terror, particularly in the Somalian conflict, rehabilitated the regime’s international image and provided cover for the narrowing political space at home, as well as facilitating a further entrenchment of Museveni’s rule.

As post-9/11 Western foreign policy began to prioritise stability over political reform, Museveni increasingly postured as the regional peacemaker, endearing himself to donors while further sweeping the calls for democratic change at home under the carpet—and earning big from it.

It is easy to overlook the impact of these military engagements, but the point is that together they accentuated the role of the military in Ugandan politics and further entrenched Museveni’s power to degrees that perhaps even the NRM’s own roots in a guerrilla movement could never have reached.

Policing protest

The expulsion of powerful elites from the ruling circles and the politicisation of military conflict had just started to cement Musevenism, when a new threat emerged on the horizon. It involved not the usual antagonists—gun-toting rebels or ruling party elites—but ordinary protesters. And they were challenging the NRM on an unfamiliar battleground—not in the jungles, but on the streets: the 2011 “Walk-to-Work” protests, rejecting the rising fuel and food prices, were unprecedented.

But there is another reason the protests constituted a new threat. For long the NRM had mastered the art of winning elections. The majority constituencies were rural, and allegedly strongholds of the regime. The electoral commission itself was largely answerable to Museveni. With rural constituencies in one hand and the electoral body in the other, the NRM could safely ignore the minority opposition-dominated urban constituencies. Electoral defeat thus never constituted a threat to the NRM, at least at parliamentary and presidential levels.

But now the protesters had turned the tables, and were challenging the regime immediately after one of its landslide victories. The streets could not be rigged. In a moment, they had shifted the locus of Ugandan politics from the rural to the urban, and from institutional to informal spaces. And they were picking lessons from a strange source: North Africa. There, where Museveni’s old friend Gaddafi, among others, was facing a sudden exit under pressure from similar struggles. Things could quickly get out of hand. A strategic response was urgent.

The regime went into overdrive. The 2011 protests were snuffed out, and from then, the policing of urban spaces became central to the logic and working of the Museveni state. Draconian laws on public assembly and free speech came into effect, enacted by a rubber-stamp parliament that was already firmly in Museveni’s hands. Police partnered with criminal gangs, notably the Boda Boda 2010, to curb what was called “public disorder”—really the official name for peaceful protest. As police’s mandate expanded to include the pursuit of regime critics, its budget ballooned, and its chief, General Kale Kayihura, became the most powerful person after Museveni—before his recent dismissal.

For a while, the regime seemed triumphant. Organising and protest became virtually impossible, as urban areas came under 24/7 surveillance. Moreover, key state institutions—the parliament, electoral commission, judiciary, military and now the police—were all in the service of the NRM, and all voices of dissent had been effectively silenced. In time, the constitution would be amended again, by the NRM-dominated house, this time to remove the presidential age limit—the last obstacle to Museveni’s life presidency—followed by a new tax on social media, to curb “gossip.” Museveni was now truly invincible. Or so it seemed.

But the dreams of “walk-to-work”—the nightmare for the Museveni state—had never really disappeared, and behind the tightly-patrolled streets always lay the simmering quest for change. That is how we arrived at the present moment, with a popstar representing the widespread aspiration for better government, and a seemingly all-powerful president suddenly struggling for legitimacy. Whatever direction the current popular struggles ultimately take, what is certain is that they are learning well from history, and are a harbinger of many more to come.

This post is from a new partnership between Africa Is a Country and The Elephant. We will be publishing a series of posts from their site once a week.

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The Enduring Blind Spots of America’s Africa Policy

America should move way from making the military the face of its engagement with Africa and instead invest in deepening democracy as a principled approach rather than a convenient choice.

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The Enduring Blind Spots of America's Africa Policy
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While Donald Trump’s administration completely neglected America-Africa relations, the blind spots bedeviling America’s Africa policy preceded his 2016 election. Correcting the systemic flaws of the past 30 years will require a complete rethink after the controversial President’s departure.

To remedy America’s Africa policy, President Joseph Biden’s administration should pivot away from counterterrorism to supporting democratic governance as a principal rather than as mere convenience, and cooperate with China on climate change, peace, and security on the continent.

America’s Africa policy 

America’s post-Cold War Africa policy has had three distinct and discernible phases. The first phase was an expansionist outlook undergirded by humanitarian intervention. The second was nonintervention, a stance triggered by the experience of the first phase. The third is the use of “smart” military interventions using military allies.  

The turning point for the first phase was in 1989 when a victorious America pursued an expansive foreign policy approach predicated on humanitarian intervention. Somalia became the first African test case of this policy when, in 1992, America sent almost 30,000 troops to support Operation Restore Hope’s humanitarian mission which took place against the background of the collapse of the Somalia government in 1991.

On 3-4 October 1993, during the Battle of Mogadishu, 18 US servicemen were killed in a fight with warlords who controlled Mogadishu then, and the bodies of the marines dragged through the streets of Mogadishu. The media coverage increased pressure on the politicians and six months later America withdrew from Somalia — a case of the New World Order meeting the harsh reality of civil conflict.

The chastening experience resulted in America scaling back its involvement in internal conflicts in far-flung places. The result was the emergence of the second phase — non-engagement when Rwanda’s Genocide erupted in 1994 and almost a million people died in 100 days revealed the limitations of over-correcting the Somalia experience. This “non-interference” phase lasted until the twin Nairobi and Dar es Salaam US embassy bombings by Al Qaeda in 1998.

This gave way to the third phase with the realisation that the new threat to America was no longer primarily from state actors, but from transnational non-state actors using failing states as safe havens. The 2002 National Security Strategy states: “the events of September 11, 2001, taught us that weak states . . . can pose as a great danger to our national interests as strong states.”

Counterterrorism training and equipping of African militaries is the central plank of this new security policy. As a result, counterterrorism funding has skyrocketed as has America’s military footprint in Africa. As a result, Africa has become the theatre in which the Global forever War on Terror is fought.

The counterterrorism traps 

The reflexive reaction to the events of September 11 2001 spawned an interlocking web of covert and overt military and non-military operations. These efforts, initially deemed necessary and temporary, have since morphed into a self-sustaining system complete with agencies, institutions and a specialised lingo that pervades every realm of America’s engagement with Africa.

The United States Africa Command (Africom) is the vehicle of America’s engagement with the continent. Counterterrorism blurred the line between security, development, and humanitarian assistance with a host of implications including unrelenting militarisation which America’s policy establishment embraced uncritically as the sine qua non of America’s diplomacy, their obvious flaws notwithstanding. The securitisation of problems became self-fulfilling and self-sustaining.

The embrace of counterterrorism could not have come at a worse time for Africa’s efforts at democratization. In many African countries, political and military elites have now developed a predictable rule-based compact governing accession to power via elections rather than the coups of the past.

“Smart” African leaders exploited the securitised approach in two main ways: closing the political space and criminalising dissent as “terrorism” and as a source of free money. In Ethiopia, Yonatan Tesfaye, a former spokesman of the Semayawi (Blue) Party, was detained in December 2015 on charges under Article 4 of Ethiopia’s Anti-Terrorism Proclamation ((EATP), arguably one of the the country’s most severe pieces of legislation. But Ethiopia has received millions of dollars from the United States.

The Department of Defense hardly says anything in public but gives out plenty of money without asking questions about human rights and good governance. Being a counterterrorism hub has become insurance policy against any form of criticism regardless of state malfeasance.

Egypt is one such hub. According to the Congressional Research Service, for the 2021 financial year, the Trump Administration has requested a total of US$1.4 billion in bilateral assistance for Egypt, which Congress approved in 2018 and 2019. Nearly all US funding for Egypt comes from the Foreign Military Finance (FMF) account and is in turn used to purchase military equipment of US origin, spare parts, training, and maintenance from US firms.

Another country that is a counterterrorism hub in the Horn of Africa is Ethiopia. For the few months they were in charge, the Union of Islamic Courts (ICU) brought order and stability to the country.  Although they were linked to only a few of Mogadishu’s local courts, on 24 December 2006, Ethiopia’s military intervened in Somalia to contain the rise of Al Shabaab’s political and military influence.

The ouster of the ICU by Ethiopia aggravated the deep historical enmity between Somalia and Ethiopia, something Al Shabaab — initially the youth wing of the ICU — subsequently exploited through a mix of Somali nationalism, Islamist ideology, and Western anti-imperialism. Al Shabaab presented themselves as the vanguard against Ethiopia and other external aggressors, providing the group with an opportunity to translate their rhetoric into action.

Ethiopia’s intervention in Somalia could not have taken place without America’s blessing. The intervention took place three weeks after General John Abizaid, the commander of US forces from the Middle East to Afghanistan, met with the then Ethiopian Prime Minister Meles Zenawi.  The intervention generated a vicious self-sustaining loop. Ethiopians are in Somalia because of Al Shabaab, and Al Shabaab says they will continue fighting as long as foreign troops are inside Somalia.

America has rewarded Ethiopia handsomely for its role as the Horn of Africa’s policeman. In both Ethiopia’s and Egypt’s case, on the score of human rights and good governance, the net losers are the citizens.

Drone attacks 

In keeping with the War on Terror being for forever, and despite departing Somalia in 1993, America outsourced a massive chunk of the fight against Al Shabaab to Ethiopia primarily, and later, to AMISOM. America is still engaged in Somalia where it has approximately 800 troops, including special forces that help train Somalia’s army to fight against Al Shabaab.

America carried out its first drone strike in Somalia in 2011 during President Barack Obama’s tenure. Under the Trump administration, however, the US has dramatically increased the frequency of drone attacks and loosened the oversight required to approve strike targets in Somalia. In March 2017, President Trump secretly designated parts of Somalia “areas of active hostilities”, meaning that the high-level inter-agency vetting of proposed strikes and the need to demonstrate with near certainty that civilians would not be injured or killed no longer applied. Last year, the US acknowledged conducting 63 airstrikes in the country, and in late August last year, the US admitted that it had carried out 46 strikes in 2020.

A lack of transparency regarding civilian casualties and the absence of empirical evidence that the strikes lead to a reduction in terrorism in Somalia suggest that expanding to Kenya would be ill-advised. The US has only acknowledged having caused civilian casualties in Somalia three times. Between 2016 and 2019, AFRICOM failed to conduct a single interview with civilian witnesses of its airstrikes in Somalia.

Despite this level of engagement, defeating Al Shabaab remains a remote possibility.

Containing the Chinese takeover 

The Trump Administration did not have an Africa policy. The closest approximation of a policy during Trump’s tenure was stated in a speech delivered by John Bolton at a Conservative think tank decrying  China’s nefarious activities in Africa.  Even with a policy, where the counterterrorism framework views Africa as a problem to be solved by military means, the containing China policy views African countries as lacking the agency to act in their own interests. The problem with this argument is that it is patronising; Africans cannot decide what is right for them.

Over the last decades, while America was busy creating the interlocking counterterrorism infrastructure in Africa, China was building large-scale infrastructure across the continent. Where America sees Africa as a problem to be solved, China sees Africa as an opportunity to be seized.

Almost two years into the Trump administration, there were no US ambassadors deployed in 20 of Africa’s 54 countries even while America was maintaining a network of 29 military bases.  By comparison China, has 50 embassies spread across Africa.

For three consecutive years America’s administration has proposed deep and disproportionate cuts to diplomacy and development while China has doubled its foreign affairs budget since 2011. In 2018, China increased its funding for diplomacy by nearly 16 per cent and its funding for foreign aid by almost 7 per cent.

As a show of how engagement with Africa is low on the list of US priorities, Trump appointed a luxury handbag designer as America’s ambassador to South Africa on 14 November 2018. Kenya’s ambassador is a political appointee who, when he is not sparring with Kenyans on Twitter, is supporting a discredited coal mining project.

The US anti-China arguments emphasize that China does not believe in human rights and good governance, and that China’s funding of large infrastructure projects is essentially debt-trap diplomacy. The anti-China rhetoric coming from American officials is not driven by altruism but by the realisation that they have fallen behind China in Africa.

By the middle of this century Africa’s population is expected to double to roughly two billion. Nigeria will become the second most populous country globally by 2100, behind only India. The 24-country African Continental Free Trade Agreement (AfCFTA) entered into force on 30 May 2019. AfCFTA will ultimately bring together all 55 member states of the African Union covering a market of more than 1.2 billion people — including a growing middle class — and a combined gross domestic product (GDP) of more than US$3.4 trillion.

While Chinese infrastructure projects grab the headlines, China has moved into diversifying its engagement with Africa. The country has increased its investments in Africa by more than 520 per cent over the last 15 years, surpassing the US as the largest trading partner for Africa in 2009 and becoming the top exporter to 19 out of 48 countries in sub-Saharan Africa.

Some of the legacy Chinese investments have come at a steep environmental price and with an unsustainable debt. Kenya’s Standard Gauge Railway is bleeding money and is economically unviable.

A fresh start

Supporting democratic governance and learning to cooperate with China are two areas that will make America part of Africa’s future rather than its past.

America should pivot way from making the military the most visible face of its engagement with Africa and instead invest in deepening democracy as a principled approach rather than a convenient choice.

Despite the elegy about its retreat in Africa, democracy enjoys tremendous support. According to an Afro barometer poll, almost 70 per cent of Africans say democracy is their preferred form of government. Large majorities also reject alternative authoritarian regimes such as presidential dictatorships, military rule, and one-party governments. Democracy, while still fledgling, remains a positive trend; since 2015, there have been 34 peaceful transfers of power.

However, such positive metrics go hand in hand with a worrying inclination by presidents to change constitutions to extend their terms in office. Since 2015, leaders of 13 countries have evaded or overseen the weakening of term limit restrictions that had been in place. Democracy might be less sexy, but ignoring it is perilous. There are no apps or switches to flip to arrest this slide. It requires hard work that America is well equipped to support but has chosen not to in a range of countries in recent years There is a difference between interfering in the internal affairs of a country and complete abdication or (in some cases) supporting leaders who engage in activities that are inimical to deepening democracy.

The damage wrought by the Trump presidency and neo-liberal counterterrorism policies will take time to undo, but symbolic efforts can go a long way to bridging the gap.

America must also contend with China being an indispensable player in Africa and learn to cooperate rather than compete in order to achieve optimal outcomes.

China has 2,458 military and police personnel serving in eight missions around the globe, far more than the combined contribution of personnel by the other four permanent members of the UN Security Council, Russia, the US, France and Britain. China had more than 2,400 Chinese troops take part in seven UN peacekeeping missions across the continent — most notably in Mali and South Sudan. Of the 14 current UN peacekeeping missions, seven are in Africa, consuming two-thirds of the budget.

Climate change and conflict resolution provide opportunities for cooperation. Disproportionate reliance on rain-fed agriculture and low adaptation to the adverse impact of climate change make Africa vulnerable to the damaging effects of climate change, the consequences of which will transcend Africa. Through a combination of research, development, technological transfer and multilateral investment, America and China could stave off the impact of climate change in Africa.

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Hijacking Kenya’s Health Spending: Companies Linked to Powerful MP Received Suspicious Procurement Contracts

Two obscure companies linked to Kitui South MP Rachael Kaki Nyamai were paid at least KSh24.2 million to deliver medical supplies under single-source agreements at the time the MP was chair of the National Assembly’s Health Committee.

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Hijacking Kenya’s Health Spending: Companies Linked to Powerful MP Received Suspicious Procurement Contracts
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Two obscure companies linked to Kitui South MP Rachael Kaki Nyamai were paid at least KSh24.2 million to deliver medical supplies under single-source agreements at the time the MP was chair of the National Assembly’s Health Committee, an investigation by Africa Uncensored and The Elephant has uncovered.

One of the companies was also awarded a mysterious Ksh 4.3 billion agreement to supply 8 million bottles of hand sanitizer, according to the government’s procurement system.

The contracts were awarded in 2015 as authorities moved to contain the threat from the Ebola outbreak that was ravaging West Africa and threatening to spread across the continent as well as from flooding related to the El-Nino weather phenomenon.

The investigation found that between 2014 and 2016, the Ministry of Health handed out hundreds of questionable non-compete tenders related to impending disasters, with a total value of KSh176 billion including three no-bid contracts to two firms, Tira Southshore Holdings Limited and Ameken Minewest Company Limited, linked to Mrs Nyamai, whose committee oversaw the ministry’s funding – a clear conflict of interest.

Number of Suppliers Allocated BPAAlthough authorities have since scrutinized some of the suspicious contracts and misappropriated health funds, the investigation revealed a handful of contracts that were not made public, nor questioned by the health committee.

Mrs Nyamai declined to comment for the story.

Nyamai has been accused by fellow members of parliament of thwarting an investigation of a separate alleged fraud. In 2016, a leaked internal audit report accused the Ministry of Health — colloquially referred to for its location at Afya House — of misappropriating funds in excess of nearly $60 million during the 2015/2016 financial year. Media stories described unauthorized suppliers, fraudulent transactions, and duplicate payments, citing the leaked document.

Members of the National Assembly’s Health Committee threatened to investigate by bringing the suppliers in for questioning, and then accused Nyamai, the committee chairperson, of blocking their probe. Members of the committee signed a petition calling for the removal of Nyamai and her deputy, but the petition reportedly went missing. Nyamai now heads the National Assembly’s Committee on Lands.

Transactions for companies owned by Mrs Nyamai’s relatives were among 25,727 leaked procurement records reviewed by reporters from Africa Uncensored, Finance Uncovered, The Elephant, and OCCRP. The data includes transactions by eight government agencies between August 2014 and January 2018, and reveals both questionable contracts as well as problems that continue to plague the government’s accounting tool, IFMIS.

The Integrated Financial Management Information System was adopted to improve efficiency and accountability. Instead, it has been used to fast-track corruption.

Hand sanitizer was an important tool in fighting transmission of Ebola, according to a WHO health expert. In one transaction, the Ministry of Health paid Sh5.4 million for “the supply of Ebola reagents for hand sanitizer” to a company owned by a niece of the MP who chaired the parliamentary health committee. However, it’s unclear what Ebola reagents, which are meant for Ebola testing, have to do with hand sanitizer. Kenya’s Ministry of Health made 84 other transactions to various vendors during this period, earmarked specifically for Ebola-related spending. These included:

  • Public awareness campaigns and adverts paid to print, radio and tv media platforms, totalling at least KSh122 million.
  • Printed materials totalling at least KSh214 million for Ebola prevention and information posters, contact tracing forms, technical guideline and point-of-entry forms, brochures and decision charts, etc. Most of the payments were made to six obscure companies.
  • Ebola-related pharmaceutical and non-pharmaceutical supplies, including hand sanitizer
  • Ebola-related conferences, catering, and travel expenses
  • At least KSh15 millions paid to a single vendor for isolation beds

Hacking the System

Tira Southshore Holdings Limited and Ameken Minewest Company Limited, appear to have no history of dealing in hygiene or medical supplies. Yet they were awarded three blanket purchase agreements, which are usually reserved for trusted vendors who provide recurring supplies such as newspapers and tea, or services such as office cleaning.

“A blanket agreement is something which should be exceptional, in my view,” says former Auditor-General, Edward Ouko.

But the leaked data show more than 2,000 such agreements, marked as approved by the heads of procurement in various ministries. About KSh176 billion (about $1.7 billion) was committed under such contracts over 42 months.

“Any other method of procurement, there must be competition. And in this one there is no competition,” explained a procurement officer, who spoke generally about blanket purchase agreements on background. “You have avoided sourcing.”

The Ministry of Health did not respond to detailed questions, while Mrs Nyamai declined to comment on the contracts in question.

Procurement experts say blanket purchase agreements are used in Kenya to short-circuit the competitive process. A ministry’s head of procurement can request authority from the National Treasury to create blanket agreements for certain vendors. Those companies can then be asked by procurement employees to deliver supplies and services without competing for a tender.

Once in the system, these single-source contracts are prone to corruption, as orders and payments can simply be made without the detailed documentation required under standard procurements. With limited time and resources, government auditors say they struggle especially with reconciling purchases made under blanket agreements.

The agreements were almost always followed by standard purchase orders that indicated the same vendor and the same amount which is unusual and raises fears of duplication. Some of these transactions were generated days or weeks after the blanket agreements, many with missing or mismatched explanations. It’s unclear whether any of these actually constituted duplicate payments.

For example, the leaked data show two transactions for Ameken Minewest for Sh6.9 million each — a blanket purchase order for El Nino mitigation supplies and a standard order for the supply of chlorine tablets eight days later. Tira Southshore also had two transactions of Sh12 million each — a blanket purchase for the “supply of lab reagents for cholera,” and six days later a standard order for the supply of chlorine powder.

Auditors say both the amounts and the timing of such payments are suspicious because blanket agreements should be paid in installments.

“It could well be a duplicate, using the same information, to get through the process. Because you make a blanket [agreement], then the intention is to do duplicates, so that it can pass through the cash payee phase several times without delivering more,” said Ouko upon reviewing some of the transactions for Tira Southshore. This weakness makes the IFMIS system prone to abuse, he added.

In addition, a KSh4 billion contract for hand sanitizer between the Health Ministry’s Preventive and Promotive Health Department and Tira Southshore was approved as a blanket purchase agreement in April 2015. The following month, a standard purchase order was generated for the same amount but without a description of services — this transaction is marked in the system as incomplete. A third transaction — this one for 0 shillings — was generated 10 days later by the same procurement employee, using the original order description: “please supply hand sanitizers 5oomls as per contract Moh/dpphs/dsru/008/14-15-MTC/17/14-15(min.no.6).

Reporters were unable to confirm whether KSh4 billion was paid by the ministry. The leaked data doesn’t include payment disbursement details, and the MOH has not responded to requests for information.

“I can assure you there’s no 4 billion, not even 1 billion. Not even 10 million that I have ever done, that has ever gone through Tira’s account, through that bank account,” said the co-owner of the company, Abigael Mukeli. She insisted that Tira Southshore never had a contract to deliver hand sanitizer, but declined to answer specific questions. It is unclear how a company without a contract would appear as a vendor in IFMIS, alongside contract details.

It is possible that payments could end up in bank accounts other than the ones associated with the supplier. That is because IFMIS also allowed for the creation of duplicate suppliers, according to a 2016 audit of the procurement system. That audit found almost 50 cases of duplication of the same vendor.

“Presence of active duplicate supplier master records increases the possibility of potential duplicate payments, misuse of bank account information, [and] reconciliation issues,” the auditors warned.

They also found such blatant security vulnerabilities as ghost and duplicate login IDs, deactivated requirements for password resets, and remote access for some procurement employees.

Credit: Edin Pasovic/OCCRP

Credit: Edin Pasovic/OCCRP

IFMIS was promoted as a solution for a faster procurement process and more transparent management of public funds. But the way the system was installed and used in Kenya compromised its extolled safeguards, according to auditors.

“There is a human element in the system,” said Ouko. “So if the human element is also not working as expected then the system cannot be perfect.”

The former head of the internal audit unit at the health ministry, Bernard Muchere, confirmed in an interview that IFMIS can be manipulated.

Masking the Setup

Ms Mukeli, the co-owner of Tira Southshore and Ameken Minewest, is the niece of Mrs Nyamai, according to local sources and social media investigation, although she denied the relationship to reporters. According to her LinkedIn profile, Ms Mukeli works at Kenya Medical Supplies Agency, a medical logistics agency under the Ministry of Health, now embroiled in a COVID procurement scandal.

Ms Mukeli’s mother, who is the MP’s elder sister, co-owns Icpher Consultants Company Ltd., which shares a post office box with Tira Southshore and Mematira Holdings Limited, which was opened in 2018, is co-owned by Mrs Nyamai’s husband and daughter, and is currently the majority shareholder of Ameken Minewest. Documents also show that a company called Icpher Consultants was originally registered to the MP, who was listed as the beneficial owner.

Co-owner of Tira Southshore Holdings Limited, Abigael Mukeli, described the company to reporters as a health consulting firm. However Tira Southshore also holds an active exploration license for the industrial mining in a 27-square-kilometer area in Kitui County, including in the restricted South Kitui National Reserve. According to government records, the application for mining limestone in Mutomo sub-county — Nyamai’s hometown — was initiated in 2015 and granted in 2018.

Mukeli is also a minority owner of Ameken Minewest Company Limited, which also holds an active mining license in Mutomo sub-county of Kitui, in an area covering 135.5 square kilometers. Government records show that the application for the mining of limestone, magnesite, and manganese was initiated in 2015 and granted in 2018. Two weeks after the license was granted, Mematira Holdings Limited was incorporated, with Nyamai’s husband and daughter as directors. Today, Mematira Holdings is the majority shareholder of Ameken Minewest, which is now in the process of obtaining another mining license in Kitui County.

According to public documents, Ameken also dabbles in road works and the transport of liquefied petroleum gas. And it’s been named by the Directorate of Criminal Investigations in a fuel fraud scheme.

Yet another company, Wet Blue Proprietors Logistics Ltd., shares a phone number with Tira Southshore and another post office box with Icpher Consultants Company Ltd., according to a Kenya National Highway Authority list of pre-qualified vendors.

Family LinksMrs Nyamai and her husband co-own Wet Blue. The consulting company was opened in 2010, the same year that the lawmaker completed her PhD work in HIV/AIDS education in Denmark.

Wet Blue was licenced in 2014 as a dam contractor and supplier of water, sewerage, irrigation and electromechanical works. It’s also listed by KENHA as a vetted consultant for HIV/AIDS mitigation services, together with Icpher Consultants.

It is unclear why these companies are qualified to deliver all these services simultaneously.

“Shell companies receiving contracts in the public sector in Kenya have enabled corruption, fraud and tax evasion in the country. They are literally special purpose vehicles to conduct ‘heists’ and with no track record to deliver the public goods, works or services procured,” said Sheila Masinde, executive director of Transparency International-Kenya.

Both MOH and Ms Mukeli refused to confirm whether the ordered supplies were delivered.

Mrs Nyamai also co-owns Ameken Petroleum Limited together with Alfred Agoi Masadia and Allan Sila Kithome.

Mr Agoi is an ANC Party MP for Sabatia Constituency in Vihiga County, and was on the same Health Committee as Mrs Nyamai, a Jubilee Party legislator. Mr Sila is a philanthropist who is campaigning for the Kitui County senate seat in the 2022 election.

Juliet Atellah at The Elephant and Finance Uncovered in the UK contributed reporting.

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