Op-Eds
Brexit, Little Britain and the Empire Politics of the End
12 min read.Why has the UK establishment so farcically mismanaged Brexit? The answer has eluded her politicians because it lies deep within a political system no longer fit for current purpose.
The decade-long death march of Western capitalism continues to reap yet more victims. The latest is the British political establishment and the remnants of the Empire that created it.
The problem for the key actors, dwarfed as they are by a venerable political system they inherited from the time of their great-great grandparents when it yielded exclusionary benefits, is their inability to grasp that Brexit, the current crisis with which it is grappling, does not signal a change. It is an ending. Misreading the situation, the said actors continue to dream up remedies and strategies based on the vain assumption that the economic crisis will somehow be resolved by political initiatives.
The lone survivor may well end up being Jeremy Corbyn, leader of the official opposition Labour Party, and then only because he never believed in the virtues of western capitalism to begin with. He sees his mission more in terms of how to cater to the needs of all capitalism’s damaged survivors.
The problem for the key actors, dwarfed as they are by a venerable political system they inherited from the time of their great-great grandparents when it yielded exclusionary benefits, is their inability to grasp that Brexit does not signal a change. It is an ending.
The vast majority of British people are not wealthy. They merely live within a rich economy that provides them access to credit. For at least 350 years, the British economy expanded through the ruthless exploitation of resources and people from many parts of the world. The big question then, as now, was: who benefits, and how?
In his 1964 book, The Sins of the Fathers, James Pope-Hennessey explains that:
“Shipbuilding in Liverpool was gloriously stimulated by the slave trade, and so was every other ancillary industry connected with ships…… People used to say that ‘several of the principal streets of Liverpool had been marked out by the chains, and the walls of the houses cemented by the blood of the African slaves.’ The Customs House sported carvings of Negroes’ heads…”
The most contentious question at the core of British politics has always been the question of the domestic distribution of the proceeds of that global trade.
In particular the history of the social democratic movement in the UK, which culminates in the formation in 1900 of the Labour Party, has been the history of developing more efficient ways of systematically redistributing Empire’s wealth as it comes in. These initiatives culminate in the establishment of the provision of mass housing (1935), education (1944) and health (1946) as a clear statutory requirement, after the 1939-1945 war, and the economic crisis that preceded it. These three policies alone immeasurably changed the quality of life for ordinary British people, and are now the site of the ideological battleground between the main parties, regarding how best to “fix” the country’s crisis.
For at least 350 years, the British economy expanded through the ruthless exploitation of resources and people from many parts of the world. The big question then, as now, was: who benefits, and how?
Since the failure to recover from the 2008 economic crash, politics seems to have become an exercise in which everyone questions the legitimacy and role of every other participant. Empire’s redistributive template is being challenged from all angles: ordinary citizens challenge the corporate world regarding the rates of tax it pays to keep public services running; the corporate world in turn challenges the logic of ordinary people continuing to expect that such services should be provided for free and on demand; indigenous people begin to question why immigrants have the right to move in and partake of such services; the provincial regions begin to question why major infrastructural development tends to be focused on the major urban centres, and so on.
The history of the social democratic movement in the UK, which culminates in the formation in 1900 of the Labour Party, has been the history of developing more efficient ways of systematically redistributing Empire’s wealth as it comes in.
The latest development in these establishment contestations is the resignation of seven MPs from the Labour Party, and declaring themselves “independent”. They were soon joined by an eighth Labour MP, and then by four members of the ruling Conservative Party. There is every indication that there will be more resignations from both parties; some of these MPs will likely join the new group. This attempted re-alignment of Britain’s 150-year-old effectively two-party system may amount to little in itself, but will in the long-term, prove to be hugely significant.
Empire’s redistributive template is being challenged from all angles: ordinary citizens challenge the corporate world regarding the rates of tax it pays to keep public services running; the corporate world in turn challenges the logic of ordinary people continuing to expect that such services should be provided for free and on demand; indigenous people begin to question why immigrants have the right to move in and partake of such services…
This is in fact a debate about the future, paralysed by the past.
Britain sidestepped an obligation to undertake a principled and genuine retreat from Empire. Such a retreat would have entailed a costly reckoning with history. Empire’s unravellng came with huge costs: there was the risk of being forced into making material reparations to the colonies and descendants of those enslaved in the Trans-Atlantic trade; downsizing and restructuring her global corporate reach would have meant a significant reduction in income; and weaning her domestic population off the proceeds of Empire’s profits could have led to sharp political disruptions. Instead, Britain embarked on a series of pretend “withdrawals” and resorted to all manner of skullduggery so as to maintain back-channel influence and continue profiteering.
By postponing this decision, Britain now faces a stark question: how does she retain her economic pre-eminence? Is it by cleaving unto an ever-tighter embrace with the European Union, or independently returning to her own stall in the global marketplace, which first gave her pre-eminence?
Britain sidestepped an obligation to undertake a principled and genuine retreat from Empire. Such a retreat would have entailed a costly reckoning with history.
This is the dilemma expressing itself as the Brexit crisis, essentially the failure by the entire political leadership to manage the consequences of the 2016 referendum, in which UK citizens — by a small margin, it should be noted — voted to end their country’s 45-year membership of the European Union.
That referendum itself only came about as a consequence of then UK Prime Minister David Cameron’s bungling attempts to end dissent in his ruling Conservative Party. He sought to outflank growing voices from the Tory right wing insistent that a new type of Conservative Party was necessary to make Britain “great” again, not least by severing its links with the European Union, which they characterized as the source of unwanted immigrants, and a drain on the UK’s “hard-earned” Empire wealth. Cameron, shocked by the unexpected referendum result, resigned immediately, leaving the problem to his successor, current PM Theresa May.
The referendum itself only came about as a consequence of then UK Prime Minister David Cameron’s bungling attempts to end dissent in his ruling Conservative Party. He sought to outflank growing voices from the Tory right wing insistent that a new type of Conservative Party was necessary to make Britain “great” again…
The referendum result has had an equally damaging impact on the opposition Labour Party, already adrift from its ideological moorings, following its many years in opposition after its 1979 defeat by the Conservatives under Margaret Thatcher. Originally, Labour was committed to the goals of a form of socialism: nationalisation of key sectors of the economy; widespread provision of social services and amenities as well as a safety net; and protection of workers’ rights to organize, assemble and agitate. Following a second defeat to Thatcher in 1983, a number of reformist party leaders like Neil Kinnock, began to reshape the party’s orientation while still in opposition. “Socialist” policies were progressively abandoned over the following decade and a half, as they became increasingly unsellable to the electorate, not least because of the pernicious influence of a corporate media hostile both to the Party and its policies, and the victory of Thatcherite neoliberalism as the dominant policy mantra across the political establishment. This paved the way for Tony Blair to emerge as a new type of Labour leader, and lead the reformed party — now freed of its previous ideological commitments and Trade Union obligations — back into power in 1997.
The referendum result has had an equally damaging impact on the opposition Labour Party, already adrift from its ideological moorings, following its many years in opposition after its 1979 defeat by the Conservatives under Margaret Thatcher.
Despite this, the ideological debate within Labour never completely ended. Many radicals blamed the party’s inability to recover quickly from the loss of the 1979 election on the narrow defeat of the radical Tony Wedgewood Benn in the deputy party leadership vote, in 1981. With the collapse of neoliberal economics after 2008, some of the old “socialist” ideas have experienced a resurgence. It is this that has brought current leader Jeremy Corbyn, a veteran of the futile 1980s battles to keep the party “socialist”, to the leadership. In fact, a number of the key actors in Corbyn’s camp — including Corbyn himself — were active pro-Tony Benn youth wingers back then.
Despite all those struggles, such “progressive” politics, directed from this “distributionist” framework never quite explained where the wealth to be distributed would come from, especially if Empire’s global resources were no longer available.
With the collapse of neoliberal economics after 2008, some of the old “socialist” ideas have experienced a popular resurgence. It is this revival that brought Jeremy Corbyn, a veteran of the futile 1980s battles to keep the party “socialist”, to Party leadership.
In a UK Guardian article of September 22, 2011, British Admiral Lord Alan West was quoted criticising proposed cuts to the UK defence budget:
“We are probably, depending on what figures you use, the fifth or sixth wealthiest nation in the world. We have the largest percentage of our GDP on exports … we run world shipping from the UK, we are the largest European investor in south Asia, south-east Asia [and] the Pacific Rim, so our money and our wealth depends on this global scene.”
This is why retaining a presence in the European Union is important to the UK establishment, which believes it would offset any contraction of the Empire economy as it tries to deliver on its redistributive “socialist” ideals. Even this may not work, as it is a strategy still premised, however indirectly, on the wealth generated by Empire.
Progressive politics, which operate from within this “distributionist” framework never quite explained where the wealth to be distributed would come from, especially if Empire’s global resources were no longer available.
Leaving or remaining in the European Union is therefore an argument represented by factions within each of the dominant political parties, not just the Conservatives. Whichever party finds itself in power in this period will simply implode, as is happening to the Conservative Party at the moment.
The central question, that is, the question concerning a long-term post-Empire economic strategy, goes back over 30 years, and has never been settled. It was only temporarily resolved by the rule of Margaret Thatcher. Faced with an EU demand then for greater economic integration against a growing domestic chorus to double-down and go it completely alone, the British, being British, attempted to do both. This left the UK with a somewhat hybridized EU membership. Unlike the rest of the Union for example, Britain kept her own currency.
Leaving or remaining in the European Union is therefore an argument represented by factions within each of the dominant political parties, not just the Conservatives. Whichever party finds itself in power in this period will simply implode.
Now the matter has returned to centre stage, not least due to the economic hardships bedevilling the EU’s 500 million citizens. The crisis has arrived at a time when politics in Britain is being managed by a generation of people dwarfed by their own legacy. Since at least the time of Gladstone in the 1860s, the British political system has been premised on managing the proceeds of an empire-based economy. The crisis therefore, goes to the heart of how British economics, and therefore politics, is constituted.
The end of Empire has been a prolonged period of discomfort, and left a wrong political fit. Those days, and the formations they spawned, are now over. The whole construct and edifice — the buildings, institutions, traditions, imperatives — are not fit for current purpose. So, the government system, which includes the official Opposition, is obsolete. Those were Empire-level political initiatives to keep the masses happy with their share of the spoils.
The current leaders on all sides seem incapable of understanding the full meaning of the weight of all that history, and so what is happening in the UK parliament is a splintering of the old order, but one which carries the misconceptions of that old order into the new.
In particular, Empire’s racial politics that played out in the colonies and was previously viewed with a certain metropolitan hauteur from London, became increasingly domesticated after decolonisation. At home, racial politics spawned a new lexicon, and new hitherto unfamiliar actors, both of which ended up in Empire’s parliament pursuing identity politics as a new dimension to the aforementioned politics of redistribution.
But real change will not come through thinking and speaking from the platform of Empire’s institutions. It cannot be re-ordered, or have its wrongs put right, from those pedestals.
The truth is that the 2016 referendum was not a decisive outcome. For a matter of that magnitude, a nearly 50/50 result cannot be said to be a clear “rejection” of anything. By the same token, neither can it be said to be an acceptance of the status quo.
The logical thing on paper would be to hold another referendum. However, given the polarized nature of the debate, as well as the real economic pain ordinary British people are experiencing, this would likely split both main parties internally. There is a strong suspicion that step three for the recently resigned MPs will be an attempt to create a new party, that would move to displace the current official opposition, in anticipation of the looming internal splits.
The truth is that the 2016 referendum was not a decisive outcome. For a matter of that magnitude, a nearly 50/50 result cannot be said to be a clear “rejection” of anything.
This, however, is to still miss the point.
What was important was the spread of the result. England, by far the most populous of the three national regions, voted most clearly to leave the EU. But again, this was outside the main urban concentrations (where a lot of non-indigenous minorities are to be found). While Wales voted alongside England, Scotland voted solidly to remain.
Instead of dealing with the implications of the result, all the other political factions appear strangely to have perceived their immediate task as being to prevent a Corbyn-led Labour Party from taking power. Corbyn espouses a fundamentally different agenda than the conventional mainstream: he wants a redistribution of the wealth of the country among a much wider demographic, through nationalization, and the massive expansion of social services. For Corbyn therefore, the issue of Brexit is secondary. He intends to pursue his programme regardless of whether Britain remains in the EU or not. But such economic plans are inimical to the now 40-year orthodoxy established by Margaret Thatcher, and injected into the Labour party by Neil Kinnock and Tony Blair.
Instead of dealing with the implications of the result, all the other political factions appear strangely to have perceived their immediate task as being to prevent a Corbyn-led Labour Party from taking power.
The fault line in this political quagmire is both factions of the Conservative Party, plus the Tony Blair remnants (and they are many) in the Labour party being on one ideological side, against Jeremy Corbyn’s faction of the party.
This will be a battle huge and distracting in equal measure.
First, it will keep British politics bogged down in a debate about the best distribution of Admiral West’s Empire proceeds, a lot of which is backstopped through the European Union’s “Economic Partnership Agreements” signed with much of the so-called “developing” world – that is, the old colonial world of Africa, the Caribbean, the Pacific and Asia. The EPAs are basically the modern form of the unfair trade treaties of the last five centuries. Their most disruptive feature was ‘conditionality’: the overweening donor influence on where and how ‘aid’ is spent, and a heavy focus on private sector participation in ‘development’.
On the domestic political front, the threat of Corbyn implementing his redistribution agenda after the UK exits the EU,, would profoundly disrupt established corporate interests.
Third, given the historical economic pressure created by the emergence of other global economic players, it is inevitable that the UK will see her share of the spoils progressively decline. The reality of this permanent decline will then be used to drag the likes of Corbyn into a jingoistic debate about British “greatness” (which, incidentally, is built on a fallacious premise: what right does the UK have to global pre-eminence, and how is that pre-eminence to be kept in place anyway?).
Many of the current round of EPAs (negotiated for twenty-year periods), are due to expire between 2020 and 2025. Would a Corbyn government design their renegotiation to better reflect the principles of fair trade, a condition of staying in the EU? If so, would the EU want the UK back as a member?
Being in the EU has failed to suppress the UK establishment’s nostalgic fantasies of the return of Empire. Understanding this is to recognise that the nature of Britain’s current politics has no answers for the future. To confront the future would first require a recognition that the global Empire economy, which the EU also feeds off of, must be restructured in favour of a global fair trade regime, whether the UK in all or in part remains inside the EU.
Whether within the EU or out of it, Britain remains the fifth richest country in the world due to a legacy of malfeasance. Britain’s current political order is being dismantled by the force of this legacy; the current leaders know neither how to maintain their global advantage, nor how to make an orderly withdrawal from it.
To confront the future would require a recognition that the global Empire economy, which the EU also feeds off of, must be restructured in favour of a global fair trade regime, whether the UK in all or in part remains inside the EU.
This essentially means that the 2016 referendum produced three or four outcomes, not one.
For the British people then to be able to speak, the creation of an ENGLISH parliament is imperative. This is a call that comes up from time to time, but is then ridiculed and silenced.
However, before England became “the first, and the most deeply penetrated of all the British colonies” to quote Oscar Wilde, England’s Kingdoms did often have their own parliaments, such as the Anglo-Saxon Witangemot that operated between the 7th and 11th centuries.
Only after this democratisation process can Britain have a meaningful referendum in which each region decides for itself and negotiates to stay or go independently of the others.
Whether Britain were to have become a full member of the EU, or to have completely broken away from it, a central truth remains: this is actually the end of an epoch. The unravelling of the UK’s political system is part of it.
Only after Britain democratises her politics can she have a meaningful referendum in which each region decides for itself and negotiates to stay or go independently of the others.
THIS is ending.
The world will go on.
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Op-Eds
How Bureaucracy Is Locking Kenya Out of Transshipment Business
But for the bureaucracy bedevilling Kenya’s shipping sector, Indian Ocean Island nations could look to Lamu for transhipment while Mombasa has the capacity to attract major shipping lines in order to tap into this emerging business.
The transshipment business, which involves the handling of cargo for other ports, is now an area of keen focus for many ports the world over. However, administrative bottlenecks created by the Kenya Revenue Authority (KRA) have stymied Kenya’s transshipment business even as the Mombasa and Lamu ports face increasing competition from the other regional ports that are modernizing their operations even as new ones emerge.
But the tide is set to change if the new Managing Director of Kenya Ports Authority (KPA) Captain William Ruto makes real his promise to confront the issues that have made it difficult for the port to tap into an emerging business line that has led to the growth of other successful ports.
Ruto has indicated that he will impress upon the KRA to simplify their procedures by adopting industry standards practiced elsewhere—such as at the Tangier Med port in Morocco, where 85 per cent of the cargo handled is for other ports, translating to 7.17 million Twenty-Foot Equivalent Units (TEUs).
In an ideal situation, according to the new MD, the KRA is only supposed to approve the ship manifests once the shipping lines lodges them online, which in not the case in Kenya where the KPA is required to physically handle the transshipment containers that are landed at the ports. According to global standards, however, shipping lines, are only required to give notification of the ships that will carry the transshipment containers from the ports to the final destination. Simplified procedures have seen ports such as Singapore and Salalah in Oman handle over 90 per cent of their cargo as transshipment.
The port of Mombasa handled 1.43 million TEUs in 2021 compared with 1.35 million TEUs handled in the same period in 2020, representing an increase of 75,986 TEUs or 5.6 per cent. However, the KPA’s transshipment traffic was at an abysmal level, recording only 220,489 TEUs in 2021, a slight increase compared to the 175,827 TEUs recorded in 2020.
Lamu Port has the potential to become the biggest competitor to Salalah Port in Oman and the Port of Durban in South Africa in the transshipment business. Mombasa is also better placed than Durban to handle transshipments from Europe, China, and Singapore, all major world exporting countries; smaller vessels can be used to move cargo from the port of Mombasa to others on the Southern African coast.
Lamu Port could attract transshipment cargo for Tanzania, Mombasa, Somalia, and the Indian Oceans Islands of Comoros, Madagascar, Seychelles, and South Africa.
Although the KPA has striven to market Mombasa as a transshipment hub, reforms to tap into the business have been painstakingly slow even though the increased infrastructure at the port of Mombasa—dredging of the channel, rehabilitation of the berths, and the construction of the second container terminal—has increased the potential of the Mombasa port to handle more transshipment cargo.
Over seven years ago, a joint task force of the KPA and the KRA created a working template to increase the transshipment volume after collecting views from all the stakeholders involved in this trade and recommended a major transformation that, once fully implemented, would have seen more shipping lines find Mombasa port attractive for transshipment cargo.
In 2015, the joint task force visited three ports in Europe, Asia, and Africa that were close to Mombasa in size—and which have recorded significant growth in transshipment—to gather guiding lessons for the Mombasa port transshipment initiative. The selected ports were Tangier Med in MorrocoMorocco, Colombo in Sri Lanka, and Malta’s Freeport.
According to the team’s report, one of the major factors for the success of these ports is the manner in which they have simplified the processing of transshipment cargo, a vital lesson that Kenya, which has been associated with lengthy processes, could embrace. When the team visited the three ports iIn 2015, the transshipment process in Malta took less than 24 hours to approve, Colombo and Tangier Med both took less than 12 hours, whereas at the port of Mombasa it took 8 to 10 days.
“The shipping business is a complex affair that rides on predictable trends,” said Captain Ruto, a member of the delegation.
In all the ports visited, the transshipment business has been simplified through the use of Electronic Data Interchange (EDI) for faster clearance and approvals. Shipping lines in the three ports are only required to lodge manifests with customs for approval whereas in Kenya nine steps are involved, causing delays, with the ships earmarked to deliver cargo departing without loading the containers.
“The shipping business is a complex affair that rides on predictable trends.”
Delaying a ship is very costly and the daily average additional vessel operating costs incurred by shipping lines can range between US$20,000 and US$35,000 depending on vessel size, a demonstration of how crucial it is for lines to save time in the shipping industry.
Kenya has made significant strides following the fact-finding mission to the three ports. Vessel processing at Mombasa port went paperless when the Single Maritime Window System went live in June 2021, allowing shipping lines to lodge documents online and thus significantly improving clearing and turnaround times.
KenTrade, which runs the online cargo clearing system, worked with the Kenya Maritime Authority (KMA) to implement the system that facilitates ship clearance procedures by providing a single online portal for the sharing of information on the arrival, stay and departure of ships between the shipping lines/agents and the approving government agencies involved.
Since 8 April 2019, it is a mandatory requirement for national governments to introduce electronic information exchange between ships and ports. The objective is to make cross-border trade simpler and the logistics chain more efficient for the over 10 billion tons of goods that are traded by sea annually across the globe.
The requirement is part of a package of amendments in the revised Annex to the International Maritime Organization’s Convention on Facilitation of International Maritime Traffic (FAL Convention) adopted in 2016. It is intended to reduce or eliminate the manual, decentralized, duplicated, and unnecessarily lengthy processes in the maritime sector, which are affecting ships’ turnaround times and increasing costs at the port of Mombasa.
The FAL Convention recommends the use of the “single window” concept whereby the agencies and authorities involved exchange data via a single point of contact.
Another advantage of Mombasa as a transshipment hub is its capacity to attract major shipping lines. There are over 20 shipping lines currently using the port at Mombasa, the majority of which handle containers.
But what should concern Kenya most is the growing competition that is coming with the development of other regional ports and the emergencemergencee of new ones. Tanzania is inching closer to realizing several plans and strategies that have been initiated over the years to enhance its potential as a maritime country.
There are over 20 shipping lines currently using the port at Mombasa, the majority of which handle containers.
The country has direct access to the Indian Ocean, with a long coastline of about 1,424km at the centre of the east coast of Africa. It has the potential to become the least-cost trade and logistics facilitation hub of the Great Lakes region.
There is the planned expansion and modernization of Dar es Salaam port under the Dar es Salaam Maritime Gateway Project (DMGP). The DMGP will increase Dar es Salaam port’s capacity from the current 15 million metric tonnes annually to 28 million tonnes.
The improvement of maritime hard infrastructure has gone hand in hand with the overhauling of the soft infrastructure. The Tanzanian government has already introduced electronic systems that have made cargo processing and clearing easier. These systems include the electronic single window, which has reduced paperwork and has also removed the need to physically visit multiple government agencies and regulatory bodies to lodge documents as all this can be done digitally through the Tanzania Customs Integrated System (Tancis).
In May 2016, global port mega-operator DP World agreed to develop Berbera Port in Somaliland and manage the facility for 30 years, a move that is set to make it the most modern port in the Horn of Africa. Ethiopia has acquired a 19 per cent stake in the project, the other partners being DP World, with a 51 per cent share, and Somaliland with a 30 per cent share. The total investment of the two-phased project will reach US$442 million. DP World will also create an economic free zone in the surrounding area, targeting a range of companies in sectors from logistics to manufacturing, and a road-based economic corridor connecting Berbera with Ethiopia.
Port Berbera is now the closest sea route to landlocked Ethiopia, a journey of 11 hours by road. It has opened the route needed for growth in the import and export of livestock and agricultural produce.
Djibouti has undertaken significant developments in all its ports. The Djibouti International Free Trade Zone (DIFTZ) was officially inaugurated in July 2018. The initial phase, a 240-hectare zone, is the result of a US$370 million investment and consists of three functional blocks located close to all of Djibouti’s major ports.
The project has also created major business opportunities for Djibouti and East Africa as the region’s export manufacturing and processing capacity is expanded in key sectors such as food, automotive parts, textiles and packaging.
The Djibouti ports of Doraleh Multipurpose, Ghoubet and Tadjourah have all been completed in recent years. Doraleh Port is particularly strategically located, connecting Asia, Africa, and Europe. It can handle two and six million tonnes of cargo a year at its bulk terminal and breakbulk terminal, respectively.
Port Berbera is now the closest sea route to landlocked Ethiopia, a journey of 11 hours by road.
Another key milestone for the Djibouti ports is the standard gauge railway (SGR). A 750-kilometer SGR line connecting Addis Ababa with the ports in Djibouti has been constructed, cutting a three-day journey down to 12 hours.
Djibouti has also received global attention due to its strategic location. Virtually, all of the sea trade between Asia and Europe passes through the Red Sea on its way to or from the Suez Canal. As a result, Gulf and Middle Eastern powers, China, the United States, and France have developed great interest in this route and the country today hosts 5 military bases.
Having made significant gains in automating cargo clearing procedures and also expanded the port of Mombasa by constructing a second container terminal and a new port in Lamu, there is great need for the KRA to work with the other industry players to simplify transhipment cargo procedures. The capacity of Lamu Port—which is ideal for transhipment cargo owing to its deeper channel that can receive bigger vessels—has been under-utilised. In spite of its strategic location as a transshipment hub, the port has received less than 20 vessels since the three berths were commissioned in May 2021.
Op-Eds
The Perfect Tax: Land Value Taxation and the Housing Crisis in Kenya
The Kenyan government has proposed a compulsory housing levy from workers salaries to support contractors to build affordable homes for the working class. As incomes are squeezed and living standards collapse, Ambreena Manji and Jill Cottrell Ghai argue that the case for asking workers to bear the cost of housing development has not been made.
The proposal in section 76 of Kenya’s Finance Bill 2023 to amend the Employment Act 2007 so that employers will compulsorily deduct 3% from workers’ salaries and send that, plus a further 3% contributed by the employer, to the National Housing Development Fund has met with widespread consternation.
The levy is expected to raise around £460 million a year for the National Housing Corporation that administers the fund. Following legal action, earlier proposals for a housing levy under the previous regime had been made voluntary and set at a lower rate of 1.5%. Now, the 3% levy will begin with civil servants before being extended to other parts of the formal and non-formal sectors.
The money will be used both to support developers and building contractors to build 200,000 affordable units and to subsidise mortgages for low- and middle-income households who would be offered an interest rate of 7%, half the market rate. By some calculations, affected employees’ net monthly salaries will be cut by about 52% when all statutory deductions including tax, the National Health Insurance Fund and the National Social Security Fund, as well as this new deduction, are taken into account.
Trade unions have spoken out against the levy, arguing that a variation in employment law cannot be imposed without consultations. The Kenya Constitution of 2010, Article 118, says that Parliament must facilitate public participation in its legislative work.
According to the 2022 Kenya Economic Survey, there were 2,907,300 employed in the formal sector and an annual rate of affordable home construction by the national government of around 500 units a year. It is not clear under the Constitution that the national government has this responsibility, as opposed to the devolved government at county level.
Kenya’s skewed land ownership
Whilst there is manifestly a need to address Kenya’s dire shortage of affordable homes, it is important to diagnose fully the reasons for this. Land shortages and the high costs of building materials are important causes as Steve Biko Wafula has argued. Kenya’s skewed land ownership is attributable to long-term land grabbing, going back to the colonial period. Importantly, one constitutional provision designed to address this – which calls for the development of minimum and maximum land ceiling laws – has been studiously ignored, especially the setting of a maximum holding. The housing levy will not address this problem: it cannot increase the supply of land for housing.
The levy is designed to encourage developers to enter the affordable housing market by offering them lower land and construction costs and providing tax exemptions, as well as guaranteeing contracts with the government. However, Wafula has also pointed out that the administration of the housing fund is not clear because it relies ‘on a complex system of collection, allocation, and disbursement of funds that could be prone to errors, delays, and fraud’.
Moreover, Kenyans have seen funds such as the National Housing Development Fund used as a revenue kitty. The 2005 Ndung’u report on Illegal and Irregular Allocation of Public Land detailed how state corporations were in effect forced into buying grabbed land, as ‘captive buyers of land from politically connected allottees’. The primary state corporation targeted to purchase land was the Kenyan workers’ pension scheme, the National Social Security Fund (NSSF). It spent Ksh30 billion (£175 million) between 1990 and 1995 on the purchase of illegally acquired property.
At a time when the government is desperate to increase its resources through raising taxes, Kenyans are also understandably suspicious that some of this money, at least, will end up in general government coffers rather than in the fund for which it is statutorily earmarked – other than that which ends up in party or private pockets, of course.
Household incomes
Whilst some prospective home-owners may be lured by the offer of lower interest rates and longer repayment plans, the proposed fund is also being seen as an unwelcome compulsory saving scheme. Funding can be drawn down after seven years or at retirement whichever is the sooner. But with standards of living being severely squeezed by inflation and with longstanding constraints on wages, as well as existing deductions which yield little benefit, many households will struggle to take a further cut to their take home pay.
Indeed, government workers were not paid their salaries earlier this year due to cash flow problems caused by the country’s mounting debt. It is ironic then that the proposal is in effect asking Kenyans formally to agree to defer a portion of their wages. Furthermore, because contributions are payable from income that has already been taxed and are taxed again when the funds are drawn down, workers are exposed to double taxation.
Workers are being asked to stake their long-term security on the success of a housing fund about which many have unanswered questions. If the promised housing materialises, how can we be sure that it will not be developers and landlords who benefit rather than the intended beneficiaries? There are real prospects that the housing units will be taken up by landlords and that Kenyan workers – having already accepted lower wages because of the housing levy deduction – could still find they have to pay high rents to access housing. What guarantees will there be that the housing will not be financialised in such a way as to put the notion of housing – as shelter and personal security – at grave risk?
Building on Serap Saritas Oran’s work on the financialisation of pensions in Turkey which theorises pensions from a political economy perspective and argues that pensions are fundamental to working class standards of living, we can see how the housing levy proposal similarly financialises a right to housing. Housing is a critical factor in social reproduction, that is, in how life is maintained and labour power reproduced. Turning housing from what Oran calls ‘a social right’ into an individualised personal investment, the levy creates opportunities for speculation and extraction. In this schema, there is a real risk that some who should be the beneficiaries of affordable housing will find that because of interest rates or the accrual of high rent arrears, they in fact become debtors.
Progressive taxes
We recognise that providing affordable housing is an important goal but we believe other, much fairer ways of raising much needed revenue for housing should be considered.
Might the time have come to have a well-informed national conversation about Land Value Taxation? Given Kenya’s worsening gini coefficient which demonstrates how skewed the country’s wealth is, why should workers bear the brunt of the government’s house building programme?
Land Value Taxation is a progressive tax which ensures that the tax burden is instead borne by landowners who can well afford it. Because land ownership generally correlates with wealth and income, it is much fairer to require those already advantaged to fund the needs of those who do not yet have homes.
Land Value Capture should also be considered. This taxation can be used for example if a road is built or other infrastructure such as a park is improved, causing a rise in the value of neighbouring properties. The principle is that these property owners should share some of their unearned gain with the public.
Elsewhere in the world, funds raised in this way have been used to build lower-cost housing. In addition, the money raised could also be used to fund ongoing operational costs such as maintenance of local roads, schools, and parks. Wouldn’t that be a fair and – given the infrastructure boom of recent years which has bestowed windfall gains on many property owners – very effective way to tackle the shortfall in affordable housing?
A raid on wages
Speaking on Kenya’s NTV news channel Mercy Nabwire, Kenya Medical Pharmacy and Dentistry Practitioners Union National Treasurer, recently described the proposed housing levy as ‘a raid on workers’ wages.’ The economy is in bad shape and public services are threadbare, but the case for asking workers to bear the cost of righting this – especially when their incomes are squeezed and their standard of living plummeting – has not been made. Still less the case for compelling them to surrender their already precarious wages for some nebulous future promise.
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This article was first published by ROAPE.
Op-Eds
America’s Failure in Africa
It is evident that only an investment of this type – in capital, in human resources and in qualified training – can allow the United States to leave a real mark of progress in Africa, following a counterpoint strategy to that of China.
Gone are the days when Melania Trump traveled to Africa in tropical colonial clothes, showing the complete lack of interest of the United States, led by her husband, in the continent. Since then, official American policy has changed significantly.
Africa is, once again, a continent disputed by the great powers. This dispute results from the new race for raw materials and markets, the search for influence in the world chess, namely African votes in the United Nations, and also the presentation of a social laboratory to show the world which recipe for prosperity works best. : the developmental authoritarian Asian or the liberal western.
All of this, in the context of the new competitive dispute with China, led the United States to once again focus its attention on Africa and place it at the forefront of its foreign policy priorities.
In recent months, American initiatives related to Africa and the trips of high dignitaries have been constant. Vice President Kamala Harris, Secretary of the Treasury Janet Yellen, First Lady Jill Biden, to mention just the most important recent trips (Harris, March 2023; Yellen, January 2023; Biden , February 2023). Only Joe Biden’s tour is missing to culminate this high-level political-diplomatic offensive.
However, the impression that remains from these trips is that, apart from beautiful speeches, splendid photographic opportunities and some circumstantial financial support, they add nothing to the resolution of African problems and, above all, they do not diminish the supposed Chinese influence, nor do they oppose it.
The problem is in the model adopted by the Americans. It is a model that is not very interactive and does not address African structural problems. Essentially, US leaders distribute smiles and marketing, warn of the Chinese danger, announce small foreign aid and refer the big questions to the International Monetary Fund (IMF), talking with greater or lesser intensity about good governance. Janet Yellen’s visit to Zambia was emblematic of this failure. When Hichilema was elected, he became a sort of poster boy for American good intentions.
However, what is certain is that Zambia has a serious foreign debt problem and has defaulted, finding itself in an endless labyrinth between China and the IMF, which ends up greatly harming the population. It is not enough to say that China is to blame and order the IMF to move forward, which in turn makes everything depend on agreements with China, which is waiting for the country to agree with the other creditors, getting into a tailspin – prolonged pong.
This kind of attitude will only lead to the US being criticized for talking but doing nothing.
The truth is that China’s entry into Africa from the 2000s onwards was not due to any historical relationship, practically irrelevant, but to a void, a void left by the West. Now, it is this void that persists, despite the new rhetoric and the countless initiatives, trips and forums held in the American capital or in Europe.
Africa does not need economists with their Harvard and MIT textbooks, which apply recipes from developed market economies unable to serve African populations and leading to their impoverishment. The manual to be applied must be the previous one, that of the very creation and structuring of economies and markets. Bringing consultants, economists, managers and people of intentions ashore doesn’t help – it only complicates things.
Obviously, to be successful, the North American perspective has to be different, resembling what was done in Europe after the Second World War (1939-1945). In other words, launching their money helicopters over Africa, while creating domestic markets on the continent.
Very simply put, the US will only compete with the Chinese in Africa if it replaces them, if it spends money. Arriving in Africa empty-handed or with promises of future private investment, which may or may not materialize, is no use.
Strictly speaking, if they really want to help Africa, the Americans should start by swapping the Chinese debt, that is, lending financial funds to African governments at lower interest rates and higher maturities, so that governments pay China. In this way it would certainly be possible to introduce competition into the African debt market and remove the monopoly from China.
In the same vein is the financial support for structural projects on the continent, from the massification of electricity and basic sanitation to digitization.
It is clear that the American people may disagree with this option and politicians may not want to embrace it, but the only realistic path is this and not another — this is how the US has gained influence in the past.
Furthermore, in addition to real capital, Africa needs specialists: not economists or consultants, which are in abundance, but professionals in essential areas, such as doctors, nurses, engineers, IT professionals, teachers, etc.
It is necessary to recover the initial spirit of the Peace Corps, idealized by President Kennedy, and massively send to Africa “men and women from the United States qualified for service abroad and available to serve, if necessary under difficult conditions, to help people in areas that help countries meet their needs” (Peace Corps Goals).
Finally, good governance should not focus on the constitutional apparatus, but on something simpler and more fundamental: public administration.
What is essential is to prepare public administrations in African countries to function efficiently and effectively, even if governments do not meet their objectives. Shifting the focus of good governance from the executive to the administration is a structuring element of any functioning society, overcoming disagreements and fears of political interference.
It is evident that only an investment of this type – in capital, in human resources and in qualified training – can allow the United States to leave a real mark of progress in Africa, following a counterpoint strategy to that of China. Otherwise, good intentions will be just that: good intentions without results.
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