Connect with us

Op-Eds

Jubinomics and Kenya’s Debt Crisis: A Private Sector View

11 min read.

Five years ago, the Jubilee administration embarked on a dangerous economic course of deficit financing, profligate spending and punitive taxation. Legitimate government suppliers in the private sector were crowded out in favour of tenderpreneurs and briefcase companies. Mysteriously, government agencies with expanded budgets were unable to pay suppliers. The result today: banks are staring at ballooning non-performing loans, tax revenues have fallen steeply and the private sector is dying a slow, painful death. By P. GITAU GITHONGO.

Published

on

Jubinomics and Kenya’s Debt Crisis: A Private Sector View
Download PDFPrint Article

The March 9, 2018 handshake between Uhuru Kenyatta and Raila Odinga, silenced many of the critical voices accusing the Jubilee coalition of divisive politics, ethnic bigotry and the disenfranchisement of at least half of Kenya’s population.  In fact, for a brief moment it seemed that the bitter grievances of the disputed August 2017 election, the acrimonious exchanges between political rivals, the threats to the judiciary, the unsolved murder of IEBC’s Chris Msando, and the police killings in the post-election crisis, had been forgotten following the very-closed-door meetings between Uhuru and Raila. As a writer with the Daily Nation gushingly wrote a week later: ‘In the name of that handshake, the shilling has stabilised overnight with the outlook by players in tourism already promising what some experts have christened as the ‘peace dividend’ after an inordinately protracted electioneering period. The stock market is also recovering’. Despite the ceasefire of the handshake, its promised benefits have not cleared the dark clouds hanging over the Kenyan economy, which is now headed into serious difficulties. In fact, at a practical level there appears to be no change in the way the national government runs its day-to-day affairs.

Since coming to power in 2013, the Jubilee administration has been dogged by accusations of profligacy and patronage – most notably in the award of tenders. Policy-making, with senior public officials apparently motivated more by personal interests than by public service, and even outright nepotism and tribalism, spurious contracting in the implementation of policy initiatives in the key sectors of health, agriculture and infrastructure.

Perhaps it is no coincidence that the Jubilee administration has also presided over a massive debt-fuelled increase in annual public spending – KSh 1.2 Trillion to over KSh 2.5 Trillion in 6 years, complemented by a budget deficit approaching Ksh 750 billion (see Table 1). Notably, this growth in spending is at a rate beyond the GDP growth rate and, as far as many critics are concerned, has been partly motivated by the need to accommodate corrupt patronage practices. Spending on infrastructure programmes in particular, seamlessly lends itself to patronage and has been a dominant feature of Jubilee’s tenure, with a range of big-ticket projects in the transport, energy and health sectors. Recurring elements of these projects include secretive feasibility studies, procurement and financing arrangements, as well as questionable labour deployment and land acquisitions – all of which embody the controversial SGR Railway project which has taken up the lion’s share of this spending binge.

Spending on infrastructure programmes in particular, seamlessly lends itself to patronage and has been a dominant feature of Jubilee’s tenure, with a range of big-ticket projects in the transport, energy and health sectors. Recurring elements of these projects include secretive feasibility studies, procurement and financing arrangements, as well as questionable labour deployment and land acquisitions.

Table 1.

Jubilee’s Treasury team however, has maintained that the increase in public spending was and remains necessary to spur economic growth. Treasury has systematically played down the risks from the widening budget deficit in the process. This surge in spending – financed mostly with (Chinese) debt – has also taken centre stage in the cooling relations between the government and development partners, notably the IMF and World Bank. Critical to debate on this spending surge and the risks from a widening budget deficit is its impact on the performance of the Kenyan economy.

In particular, why have key sectors of the economy registered such diminished performance over the past half-decade in the face of this increased spending? Why does so much anecdotal evidence point to growing job-layoffs (an estimated 7,000 formal sector jobs have been lost in the past three years alone)? Even the normally bullish real estate market has shown signs of glut and slowdown over the past three years. The Nairobi Securities Exchange has seen its NSE 20 index climb from slightly over 4,000 in 2013 to a high of 5,400 in 2015, before falling to about 3,400 today. The Stock Exchange, without a single IPO listing since 2014, has seen more than half of all listed companies declare reduced earnings or losses in each of the past two years.

Why have key sectors of the economy registered such diminished performance over the past half-decade in the face of this increased spending? Why does so much anecdotal evidence point to growing job-layoffs (an estimated 7,000 formal sector jobs have been lost in the past three years alone)?

Table 2 below shows Average GDP Growth rates (RHS Scale) over the past 8 years and actual GDP (Using Constant 2009 Prices LHS Scale).

Whereas average GDP growth rates have averaged 5.8 percent over the period shown, the downward trend since 2010 has persisted despite the huge increase in spending – and this is despite GDP-rebasing in 2013 which enhanced the growth rate that year by at least 1%. Both 2013 and 2017 were election years and unsurprisingly, registered the lowest growth rates; but the increased government spending – albeit on long-term projects – appears to have actually had a dampening impact on GDP growth over the period. There are several reasons for this, but three key issues are highlighted here.

1. An unremunerated Private Sector.

Accusations of partisanship and gravy-train policy-making in the award of public tenders and contracts, are not just the grumblings of out-of-favour business-people that lost out on lucrative government business to well-connected or favourably-related individuals. There is a constituency of ordinary hard-working entrepreneurs, professionals and manufacturers increasingly unable to compete against the empowered cartels of tenderpreneurs, influence peddlers and brief-case businessmen. These rogue players currently dominate government contracting – not to mention annual auditor-general reports – making a mockery of procurement guidelines. In some instances they even approach qualified bidders, offering to be embedded in bidding teams (despite the lack of relevant competencies) with a promise of tender success at inflated bids. This patronage-based ‘crowding out’ doesn’t end there. This well-connected class of tenderpreneurs also has perfected the dark art of jumping bureaucratic payment queues, often receiving payments before delivery of goods and services – or even before contracts are signed.

Not by coincidence, legitimate suppliers, service providers, and even farmers, have been experiencing debilitating delays in the settlement of payments and have accumulated massive debts on their credit arrangements and tax obligations. The paradox is that while government department budgets were being ramped up, delays in contract awards and settlement of payments to legitimate suppliers were worsening. This has created a unique set of economic challenges that seems to have been lost in all the discussions on political handshakes.

According to the Central Bank of Kenya, Non-Performing Loans (NPLs) as a proportion of total lending by commercial banks doubled from 6.1 percent in 2015 to 12.4 percent (or about KSh 265 billion) by April 2018 (see Table 3 below). The Table shows Gross Lending by Commercial Banks as well as the stock of Non-Performing Loans, as well as the stock of Non-Performing Loans expressed as a percentage of Gross Lending by Commercial Banks. Even this 12.4 percent figure could be an under-statement if banks have not been adequately disclosing and providing for non-performing loans – as suggested by the sagas of the collapsed Imperial and Chase Banks.

Table 3

CBK Governor Patrick Njoroge attributes a significant factor in this growth in bad loans to delayed payments owed to the private sector by the national government, government departments and devolved units. CBK data suggests that up to KSh 200 Billion was owed to SME businesses by the national government by the end of the 2017/2018 Financial Year, with as much as KSh 25 Billion worth of those pending bills directly contributing to non-performing loans.

Following an increase in imported grains last year (amid accusations of pre-election giveaways), the National Cereals and Produce Board (NCPB) owed farmers as much as KSh 3.5 Billion by the end 2017 for produce already delivered. In a hard-hitting editorial on 7th August 2018, the Daily Nation averred, ‘The Jubilee government is wallowing, not just in foreign debt, but also in the money it owes local businesses, which it has either crippled or is in the process of ruining’.

According to the Central Bank of Kenya, Non-Performing Loans (NPLs) as a proportion of total lending by commercial banks doubled from 6.1 percent in 2015 to 12.4 percent (or about KSh 265 billion) by April 2018. The Table shows Gross Lending by Commercial Banks as well as the stock of Non-Performing Loans, as well as the stock of Non-Performing Loans expressed as a percentage of Gross Lending by Commercial Banks. Even this 12.4 percent figure could be an under-statement if banks have not been adequately disclosing and providing for non-performing loans.

The Daily Nation’s particular beef was that the Government Advertising Agency (GAA), owed media houses close to KSh 3 billion by the end of FY 2017/2018. About half of the KSh 404 Million paid out by GAA during the year, went to the big publishing houses – Nation Media Group, Standard Newspapers, Royal Media Services, The Star and Media Max Network. Against the KSh 3 billion owed, the distribution of payments to media houses was sufficiently skewed to warrant an investigation by the Office of the Public Prosecutor.

Worryingly as well, the increase in bad loans in the banking sector has come despite the implementation of August 2016 of lending rates ‘caps’, which limit the cost of existing loans to 4 percent of the Central Bank’s Recommended Rate. (See Table 4)


2. A Stifled Private Sector

This environment of pending government bills is also linked to worsening Kenya Revenue Authority (KRA) tax collection performance. This creates a vicious cycle in which the private sector is defaulting on its obligations on account of money owed by the same government. The government has long complained about KRA’s inability to meet its collection targets, complaining instead about ‘revenue leakages’ facilitated by corrupt tax officials. But it fails to acknowledge that its pursuit of tax defaulters is a consequence of the fact that they themselves are owed millions by national and county governments.

The reality is that National Government revenue shortfalls have averaged KSh 90 Billion annually over the past 4 years, despite improved tax collection efficiencies at the KRA. (See Tables 5 & 6 below.) The World Bank estimated that in the 2016/2017 financial year, tax revenue as a proportion of GDP fell to under 17%, the lowest in a decade – with the growth in nominal Tax Revenues outpaced by nominal GDP growth.

Table 5

This reduced growth rate of revenue collection by KRA is at first glance paradoxical considering that over the past 5 years, an unprecedented number of Kenyans have been brought into the tax bracket. A similarly unprecedented range of products and services have been subjected to various new direct and indirect taxes. Over the past five years, several tax measures have been introduced including: 12 percent Rental Income tax for 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 spirts, cigarettes and mobile telephony; and 50 percent Gaming tax on lotteries and book makers in 2017, among  a host of others. The 16 percent VAT on fuels and fuel oils first awarded in 2013 but deferred over the subsequent years with the exemption set to expire on 1st September 2018, adds a controversial element to this expanded tax net aimed at bringing the growth in VAT collections closer to that of direct taxes such as PAYE and Income Taxes (see Table 6).

Table 6

In his June 2018 Budget statement, Finance CS, Henry Rotich, laid out several new and controversial ‘Robin Hood Tax’ proposals which he declared necessary to fund programmes that are part of Jubilee’s ‘Big 4’ agenda. Prominent among the proposals purportedly designed to protect low-income earners, is a monthly contribution to a nebulous National Housing Development Fund by every employee and employer of 0.5% (capped at KSh 5,000) of the employee’s gross pay. This contribution would be funnelled to the Housing Fund whose mandate will be to build low-cost housing units. Another ‘Robin Hood Tax’ proposal was the levying of 0.05% excise duty on all remittances of KSh 500,000 or more, transferred through banks and other financial institutions; as well as an increase in the excise duty charged on money transfer services by mobile phone providers from 10 percent to 12 percent, all geared to financing Universal Health Care – another Big 4 pillar.

Several of these proposals have been rightly criticised as being unjust and inordinately detrimental to low-income earners. With more than a third of all Kenyans living on less than Ksh 100 per day, a projected VAT-inclusive paraffin price of KSh 105 per litre is simply unreasonable. The curb on logging has already raised the cost of the popular-sized sack of Charcoal to more than Ksh 3,000 in parts of Nairobi, with the 4-kg tin costing more than KSh 150. With electricity prices also being ramped up as the monopoly power distributor Kenya Power struggles to maintain solvency following years of mismanagement, low and middle income earners are clearly big losers. The situation is no better for businesses, notably manufacturers and other high energy consumers. Early this month, the Kenya Association of Manufacturers registered strong objections to the revised energy tariffs which entailed a 36 percent increase in the energy base-cost – before the envisaged 16 percent VAT increase – which KAM argued would have a detrimental effect on the cost of doing business in the country.

With more than a third of all Kenyans living on less than Ksh 100 per day, a projected VAT-inclusive paraffin price of KSh 105 per litre is simply unreasonable. The curb on logging has already raised the cost of the popular-sized sack of Charcoal to more than Ksh 3,000 in parts of Nairobi, with the 4-kg tin costing more than KSh 150. With electricity prices also being ramped up as the monopoly power distributor Kenya Power struggles to maintain solvency following years of mismanagement, low and middle income earners are clearly big losers.

A recurring complaint from the private sector over the past half-decade has consistently been that consumer purchasing power has contracted considerably and that this is being exacerbated by recent and proposed tax measures. The decline in tax revenues despite the increases in tax rates, tax measures and collection efficiencies by KRA (notably year-on-year growth in taxpayers registered on KRA’s I-Tax platform), all but confirms a sharp drop in formal economic activity over the period.

Arthur Laffer who was an adviser to the Nixon/Ford Administration in the mid-1970’s mainstreamed the simple mathematical tautology that there is a point beyond which any increases in tax rates will always result in declining tax revenues. Laffer’s analysis of the US economy at the time recommended a decrease in federal tax rates to boost tax revenues. Rotich’s proposed tax measures risk the same results by further dampening of economic activity as well as greater tax evasion.

3. A Crowded-out Private Sector

The aforementioned slump in tax revenue growth was also partially influenced by the slowdown in bank profitability – which in turn was due to the twin influences of growing bad loans and reduced access to credit by the private sector. These factors are inexorably linked to diminished private sector performance. However, reduced access to credit by the private sector in Kenya is not a new phenomenon; nor are its fundamental causes. Its disruptive influences however, are significant.   Commercial credit to the private sector has contracted from about 24 percent in 2013 to 18 percent by end of December 2015, to about 2.5 percent in June 2018. This is despite the implementation of interest caps in August 2016, disabusing the suggestion that enhanced credit to the private sector was the intended beneficiary of the interest rate caps. In contrast, during the same period annual growth in lending to government averaged 14%.

Table 7

The Banking Amendment Act 2016 proposed by MP Jude Njomo was signed into law by President Uhuru Kenyatta with the same hollow promise of cheaper and more private sector lending by banks that a similar bill by then MP Joe Donde had made in the year 2000. The backgrounds shared notable similarities however – most notably heavy government borrowing. Domestic borrowing was indeed high in the late 1990s – evidenced by the 91-day Treasury Bill on offer with a 21% return in June 1999. By 2000, domestic borrowing was attracting Ksh 22 Billion in annual interest payments.  The stock of domestic debt by June 2000 stood at KSh 164 Billion with new issues representing 17.5 percent of government revenue. By June 2007, with short term Treasury Bill rates down to less than 8 percent, the stock of domestic debt had only risen modestly to KSh 405 Billion representing 22.1 percent of GDP, and attracting interest payments of KSh 37 Billion in FY 2006/2007. By March 2016 however, the stock of domestic debt had jumped to KSh 1.65 Trillion representing close to 27 percent of GDP and was attracting a massive 30 percent of total government revenue in debt service. And that’s not even taking into account external debt which had grown at a similar rate. The stock of domestic debt in March 2018 had reached KSh 2.3 Trillion, attracting more than KSh 350 Billion in annual debt payments.

Arthur Laffer who was an adviser to the Nixon/Ford Administration in the mid-1970’s mainstreamed the simple mathematical tautology that there is a point beyond which any increases in tax rates will always result in declining tax revenues…Rotich’s proposed tax measures risk the same results by further dampening of economic activity as well as greater tax evasion.

In August 2000, Commercial bank lending rates averaged close to 21 percent and deposit rates about 7 percent, providing obvious justification for the Njomo Bill’s popular support. The stock of non-performing loans (NPLs) at the time, was an eye-popping KSh 122 Billion in April 2001, (40 percent of total lending). In June 2018 and despite interest rate caps in place, NPLs represent 12.4 percent of commercial lending with an estimated Ksh 303 Billion in this category.

Table 8

The Parlous state of Kenya’s national accounts – most notably the KSh 5 Trillion stock of public debt and ballooning budget deficit – but also poor performance of the real economy with stagnant exports and tax revenues, suggests that the government cannot afford to be adding to the burden borne by the private sector. It also 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. Critically, it also confirms that the interest caps were always really about government access to cheaper domestic borrowing and not about promoting private sector economic activity, which the government appears to be doing its best to stifle.

Avatar
By

Gitau Githongo is a financial consultant based in Nairobi.

Op-Eds

Seeds of Neo-Colonialism: Why GMO’s Create African Dependency on Global Markets

Rather than addressing food scarcity, genetically modified crops may render African farmers and scientists more, not less, reliant on global markets.

Published

on

Seeds of Neo-Colonialism: Why GMO’s Create African Dependency on Global Markets
Download PDFPrint Article

As COVID-19 continues to lay bare the deficiencies in the global food system, imagining new food futures is more urgent than ever. Recently, some have suggested that seeds that are genetically modified to include pest, drought, and herbicide resistance (GMOs) provide an avenue for African countries to become more self-sufficient in food production and less reliant on global food chains. Although we share the desire to build more just food systems, if history is any indicator, genetically-modified (GM) crops may actually render African farmers and scientists more, not less, reliant on global actors and markets.

In a paper we recently published in African Affairs, we trace a nearly 30-year history of collaborations among the agribusiness industry, US government agencies, philanthropic organizations, and African research councils to develop GMOs for African farmers. We found that these alliances, though impressive in scope, have so far resulted in few GMOs reaching African farmers and markets. Why, we ask, have efforts to bring GMOs to Africa yielded so little?

One reason, of course, is organized activism. Widespread distrust of the technology and its developers has animated local and transnational social movements that have raised important questions about the ownership, control, and safety of GM crops. But another issue has to do with the complex character of the public-private partnerships (PPPs) that donors have created to develop GM crops for the continent. Since 1991, beginning with an early partnership between the US Agency for International Development (USAID), the Kenyan Agricultural Research Institute, and Monsanto to develop a virus resistant sweet potato (which never materialized), PPPs have become a hallmark of GMO efforts in Africa. This is mainly so for two reasons. The first is that GM technology is largely owned and patented by a handful of multinational corporations, and, thus, is inaccessible to African scientists and small to mid-sized African seed companies without a partnership agreement. The second is that both donors and agricultural biotechnology companies believe that partnering with African scientists will help quell public distrust of their involvement and instead create a public image of goodwill and collaboration. However, we found that this multiplicity of partners has created significant roadblocks to integrating GMOs into farming on the continent.

Take the case of Ghana. In the mid-2000s, country officials embarked on an impressive mission to become a regional leader in biotechnology. While Burkina Faso had been growing genetically modified cotton for years, Ghana sought to be the first West African country to produce GM food crops. In 2013, Ghanaian regulators thus approved field trials of six GM crops, including sweet potato, rice, cowpea, and cotton, to take place within the country’s scientific institutes.

However, what began as an exciting undertaking quickly ran into the trouble. Funding for the sweet potato project was exhausted soon after it began. Meanwhile, cotton research was put on indefinite hold in 2016 after Monsanto, which had been supplying both funding and the Bt cotton seed, withdrew from its partnership with the Ghanaian state scientific council. Describing its decision, a Monsanto official said that without an intellectual property rights law in place—a law that has been debated in Ghanaian parliament and opposed by Ghanaian activists since 2013—the firm could not see the “light at the end of the tunnel.”

Monsanto was also embroiled in legal matters in Burkina Faso, where their Bt cotton had unexpectedly begun producing inferior lint quality. Meanwhile, Ghanaian researchers working on two varieties of GM rice had their funding reduced by USAID, the main project donor. This left them with insufficient resources, forcing the team to suspend one of the projects. The deferment of both the cotton and one of the rice projects dealt a blow to the Ghanaian scientists who were just a year or two away from finalizing their research.

In many ways, the difficulties presented here from both Ghana and Burkina Faso suggest that efforts to bring agricultural biotechnology to Africa are a house of cards: the partnerships that seem sturdy and impressive from the outside, including collaborations between some of the world’s largest philanthropies and industry actors, are actually highly unstable. But what about the situation in other countries?

Both Nigeria and Kenya have made headlines recently for their approval of GM crops. The news out of Nigeria is especially impressive, where officials recently approved a flurry of GMO applications, including Bt cotton and Bt cowpea, beating Ghana to permit the first genetically modified food crop in West Africa. Kenya also approved the commercial production of Bt cotton, an impressive feat considering the country has technically banned GMOs since 2011. Both countries, which have turned to an India-based Monsanto subsidiary for their GM seed supply, hope that Bt cotton will help revitalize their struggling cotton sectors. While biotech proponents have applauded Nigeria and Kenya for their efforts, it will take several growing seasons and more empirical research to know how these technologies will perform.

As the cases described here demonstrate, moving GMOs from pipeline to field is not simply a matter of goodwill or scientific discovery; rather, it depends on a multitude of factors, including donor support, industry partnerships, research outcomes, policy change, and societal acceptance. This complex choreography, we argue, is embedded in the DNA of most biotechnology projects in Africa, and is often ignored by proponents of the technology who tend to offer linear narratives about biotech’s potential to bolster yields and protection against pests and disease. As such, we suggest the need to exercise caution; not because we wish to see the technology fail, but rather because we are apprehensive about multi-million dollar collaborations that seemingly favor the concerns of donors and industry over those of African scientists and farmers.

The notion of public-private partnerships may sound good, but they cannot dispel the underlying interests of participating parties or the history and collective memory of previous efforts to “improve” African agriculture.

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.

Continue Reading

Op-Eds

The Chira of Christopher Msando Will Haunt His Murderers Until Justice for His Family Is Served

Those who contributed in any way to the abduction, torture and assassination of Christopher Msando will eventually face justice because if there is something that history has confirmed to us time and again, it is that justice is always served, no matter how long it takes.

Published

on

The Chira of Christopher Msando Will Haunt His Murderers Until Justice for His Family Is Served
Download PDFPrint Article

Lately, I have been thinking a lot about chira. In Luo language and culture, the closest translation of chira is “curse”. It results from an infraction of the kwer (taboos) and can befall an individual, a clan, a community or even a nation. In some cases, ritual cleansing can take away the chira. However, the chira arising from killing a person cannot be removed through rituals. It remains with you, your clan and your community. I am convinced that a chira from the kidnap, torture and brutal assassination of Christopher Msando haunts Kenya to date. The dire state of the economy, socio-economic inequalities, political polarisation, corruption, and state capture, all seem to have gotten worse in the last three years.

To refresh our memories, Christopher Msando was the Information Communications Technology (ICT) manager at the Independent Electoral and Boundaries Commission (IEBC). Msando oversaw key ICT processes, including the audit of the register of voters and the data centre project. Crucially, he was the project manager for the electronic transmission of results for the 2017 presidential elections. Msando was one of the few Africans who had access to the highly sensitive results transmission system set up by the French company Safran/OT Morpho (now renamed IDEMIA). Safran had been single-sourced by the IEBC to deliver the Kenya Integrated Election Management System (KIEMS), in a contract worth close to Sh6b. The deal was so scandalous that even the state-captured Kenya National Assembly’s Parliamentary Accounts Committee on 24 April 2019 banned Safran/OT Morpho/IDEMIA from operating in Kenya for ten years.

Msando had been unanimously nominated by the Wafula Chebukati-led Commission to lead key ICT processes. He was hard working, had superb technical skills, a strong team spirit and excellent communication skills. Msando was an honest man, who at times seemed quite naïve in the trust he placed in his bosses to do the right thing. He was transparent in sharing the loopholes in the ICT system and revealed how some “external” actors had already gained access to it, months before the August 2017 election. He explained complex processes to the Commissioners in layman’s language, without making them feel insecure due to their lack of ICT knowledge. This is probably the singular reason the Commission chose him over his then boss, James Muhati, to be responsible for the ICT operations for the 2017 election. Unlike Muhati, Msando did not show the Commissioners disdain for their ignorance or incompetence.

One of the few defiant actions taken by the Chebukati Commission was to suspend Muhati in May 2017, allegedly for failing to cooperate with an internal audit. But as press reports indicated at the time, there was more to the story than the Commission revealed. The suspension took Muhati’s close friend, then Chief Executive Officer, Ezra Chiloba, by surprise. Chiloba made several attempts to block the suspension from being executed, prompting a reprimand from the Commissioners. Msando was unanimously appointed the officer-in-charge of the ICT directorate.

Within a month of being in charge of the ICT directorate, Msando finalised the register of voters, secured a new data centre, developed the workflow for the electronic transmission of presidential results and sealed some technical loopholes in the KIEMS gadgets that would have enabled “dead voters” to vote. It is probably these measures that he had put in place that gave Msando the confidence to say to John-Allan Namu in an interview in June 2017 that “no dead voters will rise under my watch”. And indeed, with his assassination, potentially, many “dead voters” voted.

Reports indicate that the intention of the Commission had been to keep Muhati suspended until the end of the 2017 elections. However, former Commission staff say that Chebukati received a “dossier” from the Jubilee Secretary-General, Raphael Tuju, falsely claiming that Msando was working for the opposition coalition, NASA. Incidentally, death threats against Msando intensified during this period. He spoke openly about them, showed friends and colleagues the chilling text messages, and with his typical hearty laughter, brushed them off as he went on with his work almost unperturbed. Despite making official reports, no measures were taken to address his concerns. Msando was not even provided with a Commission vehicle and security, which he was entitled to by dint of his functions.

In the meantime, the pressure to reinstate Muhati intensified. There are reports that Deputy President William Ruto and his wife Rachel Ruto called almost all the Commissioners to demand the reinstatement of Muhati, who is a close friend from their University days. Those who did not get a direct call from the Deputy President or his wife, had the message delivered by his Chief of Staff, Ambassador Ken Osinde. Despite protests from two of the Commissioners, Muhati quietly returned from his suspension on 1 June 2017, and from then on, Msando’s days on earth were numbered.

The reports of Msando’s disappearance on 29 July shocked but did not surprise many at the Commission. The threats had been there for many months including on the lives of Chebukati and former Commissioner Roselyn Akombe. One would say that the manner in which these threats were handled by the Commission made the environment conducive for Msando to be assassinated. The silence emboldened his assassins to go ahead with their plan. For their silence, the chira from Msando’s murder will forever remain with Chebukati, Akombe and the other Commissioners.

On that fateful day on 29 July 2017, it is alleged that Chiloba and Muhati asked Msando not to go home after his KTN interview at 7 pm. It is reported that Msando and a friend decided to have drinks at a joint near the Commission’s Anniversary Towers office, as they waited for further instructions from Chiloba and Muhati. Details of what exactly happened to Msando from that Friday night until his bruised body was identified at the City Mortuary on 31 July 2017 will eventually come out. It is clear that there are many colleagues of Msando’s who have more information than they have revealed in public. To many them, chira for their silence will forever hang over them.

But of course, the harshest chira is reserved for those who ordered, aided and executed Msando’s abduction, torture and assassination. If there is something that history has confirmed to us on many occasions, it is that justice is always served, no matter how long it takes. Just this year, we have seen the fugitive Félicien Kabuga, an alleged leader and financier of the 1994 Rwandan genocide arrested. Monuments in honour of those who perpetuated grave injustices including racism, slavery and colonialism for more than 400 years have been brought down in the United States and Europe. And just last month in Germany, 94-year-old Reinhold Hanning was convicted of being “an accessory” to the murder of thousands of Jews while he worked as a guard at the Auschwitz Death Camp. It took 77 years to convict him for crimes he committed at the age of 17, but justice was eventually served.

It does not matter how long it will take, justice for Chris Msando will be served. Msando’s children Allan, Alvin, Alama and Alison deserve to know why their daddy was murdered. His widow Eva has several unanswered questions. Mama Maria needs to know why her last-born son could not have been jailed if he had done something wrong, rather than wake up every morning to his grave in Lifunga. Msando’s siblings deserve closure. But three years on, the investigators have no answers to offer nor have they shown any interest in the case. Politicians like Moses Kuria, Kimani Ngunjiri and Oscar Sudi continue to recklessly play politics with such a painful issue. But Msando’s friends are quietly pursuing the leads. Quietly documenting the facts. For, eventually, Kenya will have to reckon with its history of political assassinations.

In the meantime, over to juok, to continue raining chira on those who contributed in any way to the abduction, torture and assassination of Msando.

Continue Reading

Op-Eds

Quest for a More Equitable Nation Undermined: CRA’s Mission Aborted

In 2010 Kenya adopted a constitution that promised to address the daunting problem of ethno-regional economic discrimination. The Commission for Revenue Allocation was created to safeguard this intention and put an end to the exclusion of many ethnic communities in Kenya, a legacy of colonial rule and a decades-long centralised, ethicised, and personalised presidential system.

Published

on

Quest for a More Equitable Nation Undermined: CRA’s Mission Aborted
Download PDFPrint Article

The current contentious debate in the Senate on the horizontal revenue allocation formula between counties, reveals a lack of political goodwill to end legal, systemic and institutionalised marginalisation in Kenya. The fact is that this formula does not exist or emerge in a vacuum, but is rooted in the political machinations and ideologies of those who control the dominant knowledge system that has informed economic policies responsible for sustaining regional privilege.

The proposals on the new revenue sharing formula are a clear sign that although regional discrimination might have been legally terminated, structural, social and systemic discrimination still thrives in Kenya. This is because the dominant philosophy of public policy continues to mirror the same exclusivity and discrimination that were legally institutionalised by Sessional Paper No. 10 of April 1965 authored by Tom Mboya and a cabal of bureaucrats at the post-independence national treasury and planning ministry.

Kenyans must be reminded that the idea of the Commission on Revenue Allocation (CRA) as an independent Commission emerged in response to the (traditionally) skewed allocation of revenue in Kenya. The constitution provides for Commissions and Independent Offices as an avenue to better cushion Kenya’s national interest against transient executive policy choices. Until the enactment of the 2010 constitution, all revenue allocations were centralised under the national government. Because of the pervasive absence of a culture of nationhood in Kenya and the extent of fragmentation in the society, most distribution of national resources has been based on ethnic, regional or political interests.

The exclusion of many ethnic communities in Kenya is the legacy of colonial rule and a decades-long centralised, ethicised, and personalised presidential system. Concerned by the entrenched economic inequalities, the constitution devised the counties to disburse a minimum of 15 per cent of the nationally generated fiscal revenue to the 47 subnational units. Additionally, it sought to ensure that equity was the overriding consideration in sharing revenue among the 47 counties.

The CRA was created to safeguard this intention and mandated to develop a sharing formula every five years. In conceptualising its mandate, the CRA must thus bear in mind this twisted legacy of our economic history and adopt a holistic and not just a positivist approach. Such an approach will integrate an appreciation of historically skewed allocations in favour of some regions the net effect of which has been to render these regions more attractive to diverse economic activities. Factoring in an amortised perspective of an investment in roads in 1960 would provide clarity in what the present value of such an investment could have accrued to a beneficiary region.

To fully understand the institutionalised discrimination patent in the proposed formula, it is important to recognise that, whereas 70 per cent of Kenya’s revenue remains with the national government, the formula does not take this into consideration, yet we know the degree of political expediency that underpins the national government’s distribution of this revenue across various counties through infrastructural and social development programmes. Then, on the basis of only the 30 per cent allotted to counties, the Commission has designed the formula presently before the Senate, where again it proceeds to attach much weight to population and disregards its responsibility to assign equal weight to regional economic disparities and the need for affirmative action in favour of disadvantaged regions.

Why did the formula turn a blind eye on inter-governmental fiscal transfers over and above the amount allocated to county governments as their equitable share of the revenue raised nationally under Article 202(1)? Is it proper for the formula to fail to factor in the impact of five other types of transfers to counties by the national government, namely, conditional and unconditional grants, loans, the equalisation fund, and constituency development funds?

The formula and the range of reactions in its defense reveal gaps in the way marginalisation in Kenya is understood, defined and addressed. In other words those individuals who designed the formula are conditioning Kenyans to only consider the slices of cake and ignore the way the national cake is divided. Under a purposive and holistic interpretation of article 203 (1) (f) (g) and (h), the revenue allocation should consider the distribution of national government projects.

The information on how the national government projects are allocated to the various counties is easily accessible to the Commission and the public through the Presidential Service Delivery Website. Furthermore, the CRA needed to have conducted a structural audit assessment of various counties. Such an audit would assess the kilometres of paved roads, the hospitals, the bridges, power connection, water connection, accessibility to mobile telephony and internet infrastructure, number and quality of schools, among others. Take for example the two counties of Kiambu and Kakamega with a population of approximately 1.6 and 1.9 million people and a landmass of 2,500 km and 3,225 kilometres respectively. Kiambu has 1,145 km of bitumen roads against a mere 700 km for the entire Western Province which has five counties. Kiambu County has 1,145 primary schools against 460 for Kakamega, and a 7/1000 infant mortality rate in Kiambu compared to 65/1000 in Kakamega.

A good formula that accounts for the above reality must involve the conscious use of the normative system called the “Presidential Service Delivery” to examine the extent to which national government programmes comport with the notion of equitable economic development. The lack of conscious use of the process of developing the revenue sharing formula by the CRA to narrow the poverty and marginalisation gap undermines its possible instrumentality to secure a more equitable and just nation. It undermines the use of Independent offices and commissions in promoting checks and balances in the developmental process in Kenya. It is up to the Senate and CRA to consider using the revenue allocation formula not as a ritualistic policy obligation to be undertaken every five years but to deploy it in furthering the entrenchment of economic justice, equality and inclusion in the country.

The argument advanced by those supporting the formula that counties that generate more revenue should benefit from higher allocation is pretentious as it conceals the fact that their present economic advantages flow from the relative deprivation of other regions historically. The justifications mobilised by proponents of the formula as they seek to protect their privileged economic status is a type of absolution (to help them sleep at night) and is aptly captured by Albert Memmi, the Tunisian Jewish writer and one of the most influential theorists to emerge out of the post-World War II African decolonisation movement:

The fact remains that we have discovered a fundamental mechanism, common to all marginalization and oppression reactions: the injustice of an oppressor toward the oppressed, the formers permanent aggression or the aggressive act he is getting ready to commit, must be justified. And isn’t privilege one of the forms of permanent aggression, inflicted on a dominated man or group by a dominating man or group? How can any excuse be found for such disorder (source of so many advantages), if not by overwhelming the victim? Underneath its masks, oppression is the oppressors’ way of giving himself absolution.

In other words, to justify the formula is to totally disregard the important reports on historical marginalisation like the Truth, Justice and Reconciliation Report, that clearly pointed out those who are at the center and at the margin or periphery of national development.

The CRA’s mischief in the current stalemate regarding the formula to be used as the basis for sharing revenue among counties is a continuation of the disdain towards marginalised counties reflected in its recommendations to parliament with respect to the Second Policy on the Criteria for Identifying Marginalised Areas and Sharing of the Equalisation Fund in accordance with its mandate under Article 216(4) of the Constitution. The fund is a constitutional earmark of 0.5 per cent of annual revenue to be used to “provide basic services including; water, roads, health facilities and electricity to “marginalised areas”, as urged by article 204(2).

Under the second policy, the CRA departs from the first policy that had identified 14 counties in northern Kenya as marginalised areas and thus deserving of benefitting from the equalisation fund and instead identifies 1,424 administrative divisions across the 47 counties as “marginalised areas”. The policy choices in the CRA’s approach to the equalisation fund unravel when one realises that a good number of the administrative divisions identified are within the geographical limits of fairly well developed counties. Moreover, the choice of administrative units privileges national government structures and weakens the role of counties in the process. Worse, the choice shifts focus from the 14 historically marginalised counties whose economic exclusion the fund was intended to ameliorate. It assumes that parity in development has been achieved between the 14 counties and the rest of Kenya, a wildly fallacious assumption. Had the equalisation fund mechanism been implemented as envisioned in the constitution—with beneficiary counties managing the allocations—it could have assisted in cushioning marginalised counties in the event a formula favouring population as the overarching basis for revenue sharing is enacted.

In 2010, Kenya adopted a constitution that promised to address the daunting problem of ethno-regional economic discrimination. Its egalitarian tenets are evident in the quiet embrace of the principle of Ubuntu via Article 10 which holds “sharing” and “social justice” as defining values of our statehood.

As such, those at the CRA who developed the contentious formula must review their empirically unsupportable position that Kenya has made substantial progress in addressing marginalisation. We are persuaded by Malcom X’s assertion in his attack on race relations policies in the United States thus, “If you stick a knife nine inches into my back and pull it out three inches, that is not progress. Even if you pull it all the way out, that is not progress”. Progress is thus about healing the wound, and Kenya hasn’t even begun to pull out the knife of inequality. The CRA must stand up to its mission or disband.

Continue Reading

Trending