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Between the Hammer of the Markets and the Anvil of Politics: Mr Kenyatta, in Debt Distress

8 min read.

Recently released Treasury figures paint a frightening picture: not only is the government broke and struggling with declining revenues, it is now spending the equivalent of 90 percent of the wage bill on interest repayments and in July, failed to remit any monies to the Counties. Interest payments on debt are eating into recurrent expenditure, threatening to grind daily government operations to a halt. The low-down: big projects – including Uhuru Kenyatta’s legacy projects, the ‘Big Four’ Agenda and the Standard Gauge Railway – are off the table. And for Jubilee, the prospect of collapse is very real. By DAVID NDII.  

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Between the Hammer of the Markets and the Anvil of Politics: Mr Kenyatta, in Debt Distress
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A few weeks ago the CS Treasury was kind enough to publish and gazette the government’s income and expenditure statement for July, the first month of the current financial year.  They are only a few numbers, but they are quite revealing.

The government opened the year with KSh 102.8 billion in the bank. It raised KSh 99 billion from taxes, and borrowed KSh 30 billion locally, that is, total inflows of KSh 129 billion during the month. How was the money spent? Debt took KSh 68 billion, just under 70 percent of the tax raised.  The counties and development budget got no money at all. The Treasury closed the month with KSh 110.7 billion, KSh 8 billion more than the opening balance.  Why did the Treasury hoard money when the counties and development projects were starved of cash? I will come back to that question shortly.

It is tempting to think that this was only the first month of the financial year, and things will look up. Not quite. Treasury puts revenue for the full financial year at KSh 1.34 trillion which translated to a KSh 112 billion monthly average, so the July revenue figure is low but not far off the mark.  The debt service budget for the year is KSh 870 billion, which works out to KSh 72.5 billion per month so the July figure of KSh 68bn is also consistent. The domestic borrowing target for the year in the budget is KSh 270 billion, which works out to KSh 23 billion per month, so the July borrowing of KSh 30 billion is well above target. 

In essence, the July statement is a good snapshot of the state of government finances. Unless revenue increases dramatically, the only way the government will be able to stay afloat is by excessive domestic borrowing.  Borrowing more than it is doing already will put paid to any chances of recovery of credit to the private sector, which stalled three years go.  And one does not have to be an economist or finance expert to appreciate that a person, business or government spending 70 percent of income to service debt is distressed.

How did we get here? Binge borrowing.

 

 

 

As at end of June 2018, our total public debt was KSh 5.2 trillion, up from KSh 1.8 trillion five years ago, an increase of KSh 3.3 trillion. Jubilee has borrowed close to double the debt it inherited. The debt has increased more or less equally between domestic and foreign borrowing.  The second is cost of debt.

Unless revenue increases dramatically, the only way the government will be able to stay afloat is by excessive domestic borrowing.  Borrowing more than it is doing already will put paid to any chances of recovery of credit to the private sector, which stalled three years go.  And one does not have to be an economist or finance expert to appreciate that a person, business or government spending 70 percent of income to service debt is distressed.

The stock of debt has increased 187 percent but debt service outlays are up 230 percent, from KSh 264 billion to KSh 870 billion. The standout figure here is foreign interest, which has increased sevenfold from KSh 14 billion to KSh 114 billion. This in turn, is explained by two factors, foreign commercial and China debt.  Five years ago, foreign commercial debt was inconsequential— we owed only one syndicated loan and that was an exception. We were not in the habit of taking on foreign commercial debt. Five years on, commercial debt is the single largest item on foreign debt accounting for 36 percent of it.  We owed China KSh 63 billion accounting for seven percent of foreign debt. Debt to China is now up to KSh 550 billion accounting for close to 30 percent.  Commercial debt and China combined account for 80 percent of the increase in foreign debt.

We, of course, expect commercial debt to be more expensive than the soft loans from bilateral and multilateral development institutions. But Chinese debt is not cheap either.  Last year’s debt service figures show that we owed China 21 percent of foreign debt, but we paid them 32 percent of the interest. Multilateral lenders account for 33 percent of the debt but only 15 percent of the interest payments (See chart). The interest rates implied by these payments, although only a rough approximation, show that China’s debt is the most expensive at 4.8 percent, followed by commercial debt at 3.9 percent, other bilateral lenders at 2.4 percent and multilateral lenders are the cheapest at 1.4 percent. But as I said, these are implied rates, not the actual ones, as they do not reflect the debt movements within the year.

Jubilee has borrowed close to double the debt it inherited. The debt has increased more or less equally between domestic and foreign borrowing. The stock of debt has increased 187 percent but debt service outlays are up 230 percent, from KSh 264 billion to KSh 870 billion. The standout figure here is foreign interest, which has increased seven fold from KSh 14 billion to KSh 114 billion. This in turn, is explained by two factors, foreign commercial and China debt.

Different components of debt affect the budget differently. Interest comes out of the recurrent budget, and in effect from revenue. Working with a realistic figure of KSh 1.4 trillion revenue, the interest burden this year takes 29 percent of revenue up from 14 percent five years ago. In fact, interest cost is now equivalent to 90 percent of the wage bill as compared to 40 percent five years ago.  Interest on debt is crowding out the Operations and Maintenance (O&M) budget. O&M is what makes government work. It is the money that enables the police to move around, and health facilities to treat patients, government laboratories to test food and drugs and so on.

On this trajectory, it will not take long for the recurrent budget to consist of only salaries and interest

The foreign debt consists of market debt (the Eurobonds), syndicated loans and term loans.

Eurobonds and syndicated loans are similar. The key difference is that syndicated loans are short-term notes, typically sold in two-year cycles, which banks typically hold to maturity. Amortization of bonds and syndicated loans (i.e. repayment of principal) is financed by new market debt, and is known as re-financing. The principal on bank debt has to be repaid. The key concern with market debt is the refinancing risk. The government has to be able to sell new bonds as old ones mature.  The market conditions can change, or the investors risk-perceptions can change to the extent that the government is unable to sell enough bonds in which case it defaults. Alternately, it may have to offer such high returns that sooner or later, it cannot afford the interest, which amounts to the same thing— default.

Which brings me to the  KSh102 billion shilling cash hoard— the money that government had but did not spend in July. This is half the money that the government raised in the second Eurobond six months ago. It was not spent because it was raised to refinance the maturing debt, KSh 250 billion this year.  The balance has to be raised. 

The key concern with market debt is the refinancing risk. The government has to be able to sell new bonds as old ones mature.  The market conditions can change, or the investors risk-perceptions can change to the extent that the government is unable to sell enough bonds in which case it defaults. Alternately, it may have to offer such high returns that sooner or later, it cannot afford the interest, which amounts to the same thing— default.

The preferred option is to float another Eurobond, preferably a long dated one that does not come up for refinancing soon. The alternative is more syndicated loans which will cost more and come up for refinancing in two years. The market environment that they will be doing this is not favourable.  When we raised the first Eurobond in 2014, the market was awash with “Quantitative Easing” (QE) money the US Federal Reserve and European Central Bank were “printing” in order to shore up their banking systems following the 2007 financial crisis, as well as “petrodollars” accumulated by oil exporters—recall that oil was selling at over $100 a barrel). The returns on financial assets in advanced markets were close to zero or negative.

Money managers were looking for higher returns wherever they could find them. Emerging markets were growing fast, and news out of Africa was dominated by the “Africa Rising” story.

Zambia was one of the first countries to jump onto the Eurobond bandwagon.  Zambia floated a debut bond, looking to borrow US$500 million. It was heavily oversubscribed, attracting offers in excess of US$ 12 billion. Zambia accepted $750 million.  Kenya’s stated objective was to issue a US$500 million “benchmarking” bond and use the proceeds to offset a syndicated loan that was due. How this turned to a US$ 2.8 billion is a story for another day— where it went is already the stuff of legend.

Our political class seems not to have understood the paradigm shift that becoming a sovereign borrower in international markets entails. Going to the market is analogous to a business going public. When a company is private, its affairs are dealt with behind closed doors. The only way unhappy investors can express their views is with their voices, or voting out directors during the annual general meetings, and this is usually quite difficult as typically, the insiders usually have more shares than outsiders. When a company gets listed on the stock exchange, investors don’t have to wait for AGMs. They communicate with the company every day by either buying or dumping the stock. Facebook’s share price fell 11 percent (US$134 billion) in the wake of the Cambridge Analytica scandal—and that’s all the shareholders needed to say.   

Prior to “listing” in the international sovereign bond market, our financial affairs were discussed behind closed doors between the government and its external financiers led by the IMF, and enforced through “conditionalities.” Sanctions for non-performance were flexible and negotiable, and influenced by political considerations. We call this programme discipline.  After “listing”, the bond yields work the same way as share price, punishing or rewarding the country for good or bad economic management as the case maybe. We call this market discipline. The IMF continues to have a role, but a different one— providing a form of credit enhancement to the markets.

Our political class seems not to have understood the paradigm shift that becoming a sovereign borrower in international markets entails. Going to the market is analogous to a business going public. When a company is private, its affairs are dealt with behind closed doors…When a company gets listed on the stock exchange, investors don’t have to wait for AGMs. They communicate with the company every day by either buying or dumping the stock.

But Zambia’s government does not seem to have gotten that memo. Sometime ago it organized national prayers for the Kwacha, hardly a confidence building measure.  A quarrelsome negotiation with the IMF broke down in February. Last week, the government kicked the IMF out of the country for “spreading negative talk”.  The markets responded accordingly. Zambia’s bonds are trading at a bigger discount than Mozambique which has already defaulted.

As of last week, Zambia’s bonds were trading at a yield of 15 percent.  An increase in the yield corresponds to a decline in value of a bond, and vice versa. Zambia’s debut Eurobond carries a coupon of 5.375%, and was issued at a yield at 5.625%, meaning that investors paid $93.50 for $100 of face value.  A yield of 15 percent means that the bond is now trading at $36, a 60 percent fall in value.  As summed up by an investor in Zambian Eurobonds: “It’s not a place that investors would rush into even if emerging markets become popular again. People will be cautious about Zambia until it produces better numbers or gets an IMF deal.”

Why our Treasury mandarins have been bending over backwards for a deal with the IMF is now readily apparent.  IMF deal or no-deal, the government will have to produce better numbers. Healthy foreign exchange reserves are good, but reserves don’t service debt; revenues do. The markets want to see fiscal consolidation. The markets do not send missions. They dump your bonds. 

The low-down: Mega projects are off the table, as is the “Big Four.”  The SGR is not going past Naivasha anytime soon. The only order of business is crisis management – that is, if the government survives. Looking around, the odds are not good.  The Greek crisis consumed five governments. Argentina went through five presidents in two weeks following imposition of the “corralito” (small enclosure) austerity measures in December 2001. The EPRDF autocracy in Ethiopia, erstwhile poster child of Africa’s new breed of authoritarian developmental regimes, did not run out of bullets or prisons. It ran out of money, and unravelled. Sri Lanka, Pakistan and Malaysia have ejected the mega-project mega-corruption governments that corralled them into China’s debt trap. Earlier this week Sudan’s President Omar al Bashir dissolved his government and appointed a new prime minister tasked to form a leaner government “as part of austerity measures to tackle economic difficulties.”

Mega projects are off the table, as is the “Big Four.”  The SGR is not going past Naivasha anytime soon. The only order of business is crisis management – that is, if the government survives. Looking around, the odds are not good.  The Greek crisis consumed five governments. Argentina went through five presidents in two weeks following the imposition of austerity measures in December 2001. The EPRDF autocracy in Ethiopia, erstwhile poster child of Africa’s new breed of authoritarian developmental regimes, did not run out of bullets or prisons. It ran out of money, and unravelled…It is fair to say that Mr. Kenyatta is now caught between the hammer of the markets, and the anvil of politics.

It is fair to say that Mr. Kenyatta is now caught between the hammer of the markets, and the anvil of politics. That comes with the territory.

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David Ndii is a leading Kenyan economist and public intellectual.

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The Second Sex: Women’s Liberation and Media in Post-Independence Tanzania

Fatma Alloo (of the Tanzania Media Women’s Association) on how women used the media and cultural spaces to organize and challenge gender norms.

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The Second Sex: Women’s Liberation and Media in Post-Independence Tanzania
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Fatma Alloo’s activism grew in the decades following Tanzania’s independence in 1961, when she worked as a journalist under Julius Nyerere, or Mwalimu, the first president of Tanzania; co-founded the feminist advocacy group Tanzania Media Women’s Association (TAMWA) in 1987; and co-founded the vibrant Zanzibar International Film Festival (ZIFF) in 1997. Here, she unpacks how women used the media and cultural spaces for social mobilization and shifting patriarchal norms, particularly in periods where they were marginalized from state power. In the “Reclaiming Africa’s Early Post-Independence History” series, and the Post-Colonialisms Today project more broadly, we’re learning from African activists and policy makers from the early post-independence era, to understand how their experience of a unique period of economic, societal, cultural, and regional transformation can aid us in the present day, when questions of decolonization and liberation are more pressing than ever.

Heba M. Khalil: You have lived through so many changes in so many different political systems, from the Sultanate, colonialism, the Nyerere years; you’ve seen the dawning of liberalism and neoliberalism.

Fatma Alloo: As you say, I’ve been through a lot of “-isms” in Tanzania. The other day I was reflecting that although I grew up under colonialism in Zanzibar, as a child I was not aware that it was colonialism, I was not aware there was a Sultanate. We used to run and wave to the Sultan because he was the only one with a shiny, red car and we used to love that car, a red Rolls Royce. But as I reflect now, I realized that these were the years Mwalimu was struggling for independence in Tanganyika.

Then, of course, as you grow, life takes you on a journey, and I ended up at the University of Dar es Salaam in the 1970s, where the Dar es Salaam debates were taking place. Tanzania hosted liberation movements, and that is where socialism, communism, Marxism, Leninism, Trotskyism, Maoism, and feminism were being debated, and that’s where my consciousness grew, because I was in the midst of it. As the progressive, international community at the university was ideologically fired up by Mwalimu’s socialism, I began to understand that even my feminism had come from the West. Nobody had taught me that women lived feminism on the continent. This realization came when, as a student, I participated in an adult literacy program launched by Mwalimu. As students, we were sent to a rural and urban factory to teach literacy, but I emerged from those communities having been taught instead!

Heba M. Khalil: What do you think the role of women was in Tanzania in particular, but also on the continent, in defining the parameters, the choices and the imagination of post-independence Africa?

Fatma Alloo: Women had always been part and parcel of the independence movement in Africa. In Southern Africa and Tanzania they stood side-by-side with the men to fight, so they were very much part of it. The unique thing about Tanzania was that Mwalimu established a party called the Tanganyika African National Union (TANU), which had five wings with women being one of them. The others were youth, peasants, and workers, so as to mobilize society as a whole.

Post-independence is another story, one that very often has been narrated by men in power. There was a struggle for the visibility of women. I remember the debates in South Africa, where the African National Congress was arguing about the women’s wing wanting to discuss power relations. And there was resistance to this, the party leaders would argue first let’s just get independence, let’s not waste our time, women’s liberation will come later. It was a very bitter struggle, and of course after independence, women lost out quite a bit.

Heba M. Khalil: Why were post-independence power structures and ideologies defeated and replaced at some point by new ideologies of liberalism and, eventually, neoliberalism?

Fatma Alloo: The western media portrays Mwalimu as a failure. He has not failed, from my point of view. The whole issue of national unity is important. Tanzania has been a relatively peaceful country. Why? It did not happen by accident, it had to do with Mwalimu’s policies—he realized he had to deal with profound divisions, and he understood the role of education. Administratively, the nation had been inherited after decades of divide and rule policies. It was divided on racial and religious bases, as Tanzania is half Christian and half Muslim. We could have had a civil war, like in Lebanon, or a tribal-oriented conflict, like in Kenya or Libya. Mwalimu really understood this from the very beginning. I remember when we started TAMWA, when the women came together, we had no idea who belonged to what tribe. He was that successful.

We had free medicine, free education, but of course, all that went away with neoliberalism. My generation remembers this, and I think we have to make sure that the younger generation knows the history of the country, knows the literature that emerged from the continent. In my opinion, of all the contributions of Mwalimu, the most important was the peace and unity—amani, in Kiswahili.

Because Mwalimu was so successful, the West, especially Scandinavian countries, made him their darling. As you know, Scandinavian countries had not colonized Africa much, so people also trusted them and accepted their development aid. Very sadly, it did eat away at the success of Mwalimu with his people, and eventually made us dependent on that development aid, which continues to date. Without development aid we don’t seem to be able to move on anything. We have stopped relying on ourselves.

Heba M. Khalil: What was your experience of organizing during the rapid growth of the mass media sector in Tanzania?

Fatma Alloo: I was very active, first as a journalist in the 1980s and early 1990s, and it was extremely different. We were very influenced by Mwalimu’s ideology and ready to play our role to change the world. Mwalimu had refused to introduce television because, he argued at that time, we did not have our own images to portray, to empower our younger generations. He said if we introduce television the images shown will be of the West and the imperialist ideology will continue. In Zanzibar, however, we already had the oldest television on the continent, and it was in color. When Abeid Karume attained power in Zanzibar in 1964, after a bloody overthrow of the sultanate in power, the first thing he did was to introduce not only television, but community media, so every village in Zanzibar already had these images. But television didn’t come to Tanganyika until 1992 (Mwalimu stepped down in 1986), when it was introduced by a local businessman who established his own station. Until then the state had controlled the media, so history began to change as businesses were allowed to establish media.

I remember I was then in TAMWA and we had to encourage a lot of production of plays and other visuals, for which there was no market before. The radio had been powerful; when the peasants went to the countryside, they would take the radio and listen as they ploughed the land. So, the radio was the main tool that was used to mobilize society during Mwalimu’s era.

The press gave women journalists little chance to cover issues of importance to women. We were given health or children to cover as our issues. Before, Tanzania had one English paper, one Kiswahili, Uhuru, and one party paper. By 1986, there were 21 newspapers, and it became easier for us to really influence the press, and TAMWA began talking about issues like sexual harassment at work. But it was a double-edged sword, because the television stations recruited pretty girls to do the news reading, and the girls also wanted to be seen on television as it was a novelty. So, while we were expanding the conversation on the portrayal of women, here was television, where women were used as sex objects. The struggle continues, a luta continua.

Heba M. Khalil: How are movements trying to achieve change on the continent, particularly youth movements or younger generations, by utilizing media and cultural spaces?

Fatma Alloo: The youth need to develop tools of empowerment at an educational level and at an organizational level. Africa is a young continent, and our hope is the youth. Many youth are very active at a cultural level, they may not be in universities but at a cultural level they are extremely visible, in music, dance, and street theater.

At the moment, you see the pan-African dream has sort of lost the luster it had during independence. Even if you look at the literature of that time, it was a collective dream for Africa to unite—Bob Marley had a song “Africa Unite,” we used to dance to it and we used to really identify with it, and the literature—Franz Fanon, Ngũgĩ wa Thiong’o, Sembène Ousmane, Miriam Ba, Nawal al Saadawi—and also the films that came out. In fact, Egypt was the first country to produce amazing films; when we established the Zanzibar International Film Festival (ZIFF), in our first year we showed a film from Egypt, The Destiny by Youssef Chahine.

Zanzibar International Film Festival was born because we asked the question, “If we in Africa do not tell our stories, who will?” We ask that question particularly to train and stimulate the production of films on the continent, including in Kiswahili, because while West Africa has many films, East Africa lags behind. The festival has been in existence for 21 years. This part of the world has more than 120 million people who speak Kiswahili, so the market is there. We also encourage a lot of young producers and we encourage putting a camera in children’s hands, because from my own experience, children get so excited when they can create their own images. Twenty-one years later, these children are now adults, and they are the directors and the producers in this region. So, one has to play a role in impacting change and liberating consciousness on our vibrant and rich continent.

This article is part of the series “Reclaiming Africa’s Early Post-Independence History” from Post-Colonialisms Today (PCT), a research and advocacy project of activist-intellectuals on the continent working to recapture progressive thought and policies from post-independence Africa to address contemporary development challenges. Sign up for updates here.

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The State of Judicial Independence in Kenya: A Persistent Concern

Judicial independence is Kenya’s last buffer line, stopping the country from degenerating into absolute tyranny. Judicial independence is a collective national good. It will be protected as such. So long as we may have an independent Judiciary, the great interests of the people will be safe.

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On Thursday 22 July 2021, Justice Aggrey Muchelule and Justice Said Juma Chitembwe were subjects of arbitrary search, intimidation, and interrogation by the Directorate of Criminal Investigations (DCI) on the basis of unfounded allegations of corruption.

The arrest, coming in the wake of constant and relentless attacks on the judiciary by the Executive and politicians, left a very sour taste in the mouths of many, bearing in mind that nothing was found to implicate the judges upon searching their respective chambers. Let it be clear that NOBODY is above the law  (nemo est supra legis)! Not even the President of the Republic, let alone the judges.

However, there are reasons why there are arguments for special procedures when arresting or dealing with criminal allegations against a sitting judge: the need to preserve the sanctity of the office and the need to manage perceptions with regard to the judicial office. The Supreme Court of India in the case of  Delhi Judicial Service Association v. State of Gujarat  AIR 1991 SC 2176, (1991) 4 SCC 406 recognized the fact that whereas judges were not above the law, certain guidelines had to be in place to guide the conduct of arrest  “in view of the paramount necessity of preserving the independence of judiciary and at the same time ensuring that infractions of law are properly investigated”. The concept of judicial independence, it must be recalled, recognizes not only realities but also perceptions that attach to the judicial office.

Chief Justice Howland in the Canadian Supreme Court case of  R v. Valente  [1985] 2 SCR 673 stated as follows with regards to perception as an ingredient of judicial independence: “it is most important that the judiciary be independent and be so perceived by the public. The judges must not have cause to fear that they will be prejudiced by their decisions or that the public would reasonably apprehend this to be the case.’ There is therefore the need to guard and jealously so, the image of the judiciary such as to manage how the judiciary is perceived by the public.

The unsubstantiated claims of corruption, and knee jerk searches without an iota of evidence does not bode well for the perception of the judiciary as a whole, and specifically, for the individual judges involved whose reputations are dragged through the mud, and needlessly so. There are germane reasons why the arrest of a judge should not be a trivial matter. The deference and respect to a judicial office informs the caution exercised in the conduct of arresting a judge. The judicial office fuses with the person of the holder and therefore it becomes necessary to err on the side of caution.

Indeed, Courts elsewhere have endeavoured to engage cautiously in this exercise of delicate funambulism. The Supreme Court of India in the case of  K. Veeraswami v Union of India and others,  1991 SCR (3) 189  found that a sitting judge can only be undertaken with permission from the Chief Justice or if it is the Chief Justice who is sought to be prosecuted, from the President.

Equally, the Court of Appeal of the Federal Republic of Nigeria in the case of Hon. Justice Hyeladzira Ajiya Nganjiwa V. Federal Republic of Nigeria  (2017) LPELR-43391(CA) held that a sitting judge cannot be prosecuted for offences that would have otherwise been a ground for removal from office.

It is important to note that the grounds for the removal of any judge from office are captured in article 168 of the Constitution of Kenya and they include a breach of the code of conduct and gross misconduct or misbehaviour.

Noteworthy it is to remark that the High Court of Kenya, in laying a principle of constitutional law in the case of Philomena Mbete Mwilu v Director of Public Prosecutions & 3 others; Stanley Muluvi Kiima (Interested Party); International Commission of Jurists Kenya Chapter (Amicus Curiae)  [2019] eKLR ably stated that, “While the DCI is not precluded from investigating criminal misconduct of judges, there is a specific constitutional and legal framework for dealing with misconduct and/or removal of judges.

Consequently, cases of misconduct with a criminal element committed in the course of official judicial functions, or which are so inextricably connected with the office or status of a judge, shall be referred to the JSC in the first  instance.” The cumulative conclusion was that the gang-ho recklessness meted on Justices Muchelule and Chitembwe by an increasingly overzealous Department of Criminal Investigations (DCI) was an affront to judicial independence in its functional sense and also in terms of perception. It was a careless move.

If there is any evidence linking any of the judges to any conduct unbecoming, then out of constitutional edict and commonsensical pragmatism, the first point of call should be the Judicial Service Commission (JSC). The Office of the Chief Justice must also be subject of focus during this unfortunate debacle.

The statement emanating from that office in the aftermath of the unfortunate events of 22nd  July 2021, was at best timid and disjointed. The statement did not appear to reinforce the constitutional principle that judges cannot be arrested over matters that really ought to be addressed by the Judicial Service Commission. The office of the Chief Justice should have done better.

In summary, let it be proclaimed boldly that judicial independence is too precious a public good that it will be protected at all costs. Let it be lucid that incessant interference with judicial independence will not be tolerated from any quarters.

Judicial independence is Kenya’s last buffer line, stopping the country from degenerating into absolute tyranny. Judicial independence is a collective national good. It will be protected as such! And in the words of John Rutledge, a scholar, jurist and the second Chief Justice of the United States of America; “So long as we may have an independent Judiciary, the great interests of the people will be safe.”

This article was initially published at THE PLATFORM For Law, Justice and Society Magazine

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Land Title and Evictions in the Supreme Court of Kenya

Violent evictions of families from their homes are not exceptional events. They go to the heart of Kenya’s political economy and its long history of valorising the rights of those who hold private title.

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Land Title and Evictions in the Supreme Court of Kenya
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The Supreme Court of Kenya published its judgment in William Musembi v The Moi Educational Centre Co. Ltd. on the 16th July 2021. The case arose after fourteen families — the residents of two informal settlements, City Cotton and Upendo village in Nairobi — petitioned the High court following their evictions in 2013. They had lived on the land since 1968 when it was public land. The first respondent claimed that they had legitimately acquired title to the land by letters of allotment and that the land was therefore private land. According to Amnesty Kenya, the evictions began in the early morning, without warning. Groups of young men burst into homes. Four hundred homes were demolished and personal possessions were destroyed. Crowbars and sledgehammers were used. The police were present. They fired live ammunition and used teargas canisters during the operation.

In the High Court, Judge Mumbi Ngugi held that the petitioners’ rights to dignity, security, and adequate housing had been infringed. There had been a violation of the rights of children and elderly persons under the constitution. She awarded damages. At the Court of Appeal this judgment was partially set aside. While accepting that there had indeed been violations of the rights to dignity and security, the Court of Appeal nonetheless set aside the order of damages arguing that “there was no material before the court on the basis of which the orders for compensation were made” and that, because it was unable to work out how the damages had been quantified, “the only relief that should have commended itself to the trial Court was a declaration that the forced eviction and demolition of their houses without a Court order is a violation of their right to human dignity and security.” Following this, the petitioners appealed to the Supreme Court.

Importance of the Supreme Court judgment

The importance of this case is, as Gautum Bhatia has written, that it raised the question whether “the right to accessible and adequate housing could be applied inter se between private parties”. It can thus be distinguished from the same Supreme Court’s Mitu-Bell Welfare Society v The Kenya Airports Authority, which ruled on evictions from public land.

Amongst several issues for determination, the petitioners in the present case asked the court to reach a determination of the question whether the letter of allotment held by the first respondent, the Moi Educational Centre, was issued lawfully or legally. Because that question had not been conclusively determined at the High Court or at the Court of Appeal, the petitioners sought “a declaration that the acquisition of the suit property was illegal and unlawful.”

The Supreme Court declined to do this. Arguing that in the High Court Judge Mumbi Ngugi had been right in holding that the question of the propriety of the first respondent’s title was a matter for the National Land Commission and that it is the Land and Environment Court that properly has jurisdiction over this question, the Supreme Court held in William Musembi that “the title of the first respondent remains unimpeached”. Instead, it held, the only question it ought to determine was whether, in evicting the petitioners, the respondents violated the petitioners’ rights to human dignity and security, as well as the rights to housing and health.

It is on the basis of the “unimpeached” title of the first respondent that the court goes on to make its landmark finding. For determination by the court was the question whether the first respondent, being a private party, could nonetheless be responsible for the violation of constitutional rights. Recognising that “the mandate to ensure the realization and protection of social and economic rights does not extend to the first respondent” because it is a private entity which is not under any obligation to ensure the progressive or immediate realisation of those rights, the court found that private parties do nonetheless have a “negative obligation to ensure that it does not violate the rights of the petitioners.”

For Bhatia, the judgment’s significance lies partly in its finding that “a negative obligation not to interfere with socio-economic rights (such as the right to housing), …applies to both public and private parties” although he argues persuasively that “the distinction between negative and positive obligations is doing a lot of work” and that the concrete practice of evictions significantly blurs the boundary between public and private actors. He rightly notes that “evictions invariably involve concert of action between State forces and private landowners, with the latter relying upon the former (either directly, or through forbearance) to accomplish physically removing people from land.”

Public and private

If the distinction between negative and positive obligations is somewhat artificial, I also want to suggest that Kenya’s history of land grabbing shows that so too is the distinction between the state and private landowners. More than just state forces doing the bidding of private landowners, wielding batons and using bullets to break into homes in the early morning, in Kenya the state/private distinction is a mirage. In William Musembi, the court does not elaborate on the important history of letters of allotment in Kenya and the process by which they enabled public land to morph into private land. Instead, it affirms the first respondent’s title – and proceeds to make an important ruling on the obligations of private actors. However, the history of land grabbing and the murky past of letters of allotment is a critical one to keep at the front of our minds.

For determination by the court was the question whether the first respondent, being a private party, could nonetheless be responsible for the violation of constitutional rights.

The report of the Commission of Inquiry into the Illegal/ Irregular Allocation of Public Land established in 2003 set out in forensic detail the illegal and irregular land awards made over the years using the mechanism of the letter of allotment. Awards of land were made to the families of Presidents Kenyatta and Moi, numerous former ministers, members of parliament and civil servants, as well as to individuals in the military and the judiciary. The report sets out how out of proximity to the state, private property owners were created. Public land – land set aside for the building of public health clinics or schools for example – mysteriously turned into private land on which malls, private residences, and diplomatic headquarters appeared. No doubt some individuals acquired perfectly legitimate letters of allotment. But from the 1970s onwards, a thriving market in improper letters of allotment developed. They came to be treated as tradable land documents. Widely but mistakenly used as land titles (with the collusion of lawyers), they changed hands quickly in sales of grabbed land. This was done in order to get the benefit of the principle that an innocent third party for value without notice takes good title. The full extent of this practice is unknown: the Ndung’u Commission warned that its report provided only a snapshot of the illegal/irregular land allocations that had taken place over the years.

I have written elsewhere that land grabbing is sedimented in Kenya’s political economy such that we can describe it as a “grabbed state”. The “normal” economy is founded on accumulation by dispossession. It is not possible to understand Kenya’s political economy without an understanding of how the normal and the supposedly abnormal are pervasively linked. Far from land grabbing being an aberrant phenomenon that can be sharply distinguished from normal business practice, the illegal and irregular appropriation of land structures Kenya’s economy.

Widely but mistakenly used as land titles (with the collusion of lawyers), they changed hands quickly in sales of grabbed land.

There is no operative distinction between the public and the private in Kenya. This makes the judgment in the present case even more consequential: given the history of these murky conversions in title, the judgment’s finding that negative constitutional obligations can attach to private actors is likely to cover a great many potential eviction scenarios. Indeed, I would argue that given the history of land described above, the court should have gone further. Grounding its reasoning in Kenya’s history of land grabbing and the dispossession and discrimination that resulted, it could have held that positive socio-economic obligations (such as providing alternative accommodation) should extend to private parties. Or it might have held that given the extent of land grabbing — which is a matter of public record — the state should not agree to enforce a court order for eviction until it is satisfied that alternative accommodation has been provided.

Entrenching private property

Welcoming the Supreme Court’s judgment, Bhatia has noted that it “continues the welcome trend of judicial scepticism towards entrenched property rights.” The court demonstrated this scepticism by extending negative constitutional obligations to private actors. However, to do so, the Supreme Court moved to confirm the respondent’s title. That title it described as “unimpeached”. The court used this as the basis for setting out the first respondent’s obligations as a private owner. The extension of constitutional obligations to private actors is to be welcomed. But it is important to recognise also that by refusing jurisdiction to question the first respondent’s title – and ruling that this is a matter for another forum – the Supreme Court effectively sanctioned the enclosure of what the appellants claimed was unalienated public land and potentially legitimated the grabbing of public land.

The court does not elaborate on the important history of letters of allotment in Kenya and the process by which they enabled public land to morph into private land.

Instead, the Supreme Court might have used Art. 23 which provides for the authority of courts to uphold and enforce the Bill of Rights, to try to fashion a remedy. It could have expressly referred the question of the integrity of the first respondent’s title to the National Land Commission rather than state as unequivocally as it did that it is unimpeached. At the very least, given the importance of a letter of allotment and the question of title in the case, the court should have rehearsed Kenya’s history of land grabbing and corruption as revealed by the Ndung’u report so as to give it judicial notice and provide a starting point for the wider task of challenging ill-gotten titles by those who might seek to do so.

Reinstating Judge Mumbi Ngugi judgment in the High Court and in particular her finding that damages should be paid to those evicted, the Supreme Court ordered the first respondents, the Moi Educational Centre, to pay fourteen families KSh150,000 (just over 1000 euros) each in damages. The government will also pay each family KSh100,000. In return, unless the National Land Commission or the Land and Environment Court are asked to rule on the propriety of the first respondent’s title and find against them, the Moi Educational Centre now hold unimpeached title to very valuable land in Nairobi. That is quite a windfall.

Violent evictions of families from their homes are not episodic and exceptional events. They go to the heart of Kenya’s political economy and its long history of valorising the rights of those who hold private title, however acquired. How far can the courts be relied upon to undo accumulation by dispossession?

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