Two weeks ago, Uhuru Kenyatta called the country to order to make what I gather was anticipated to be a very consequential address to the nation. When a country is in as much political and economic turmoil as Kenya is, it is understandable that a rare formal presidential address to the nation would be highly anticipated.
It is difficult to say whether it met expectations. It certainly did not overwhelm. I don’t get the sense that the country came out of it with a clearer sense of direction of either politics or economics.
The political highlight was without doubt the dismissal of agriculture Cabinet Secretary Mwangi Kiunjuri. Kiunjuri promptly called a press conference at which he intimated that he’d endured a fair amount of humiliation, and had been pretty much prepared for the dismissal. A master of Gīkūyū orature, he shrugged off the sacking by saying mumagari nī wa njũa igīrī (when you leave home it is wise to carry a spare garment), meaning in politics you need to have a “plan b”. Figuratively, it’s the equivalent of a middle finger.
But the main talking point of the speech was Kenyatta’s directive asking the national Treasury to release Sh500 million to the New Kenya Co-operative Creameries (New KCC) to purchase milk from farmers, and another Sh575 million to revamp two of its processing plants in Kenyatta’s central Kenya political base. This was one of a raft of financial bailouts of various troubled agriculture sub-sectors that Kenyatta said were his plan to put money in people’s pockets.
Kenyatta’s family enterprise, Brookside Dairies is the largest milk processor in Kenya. It achieved this through a string of acquisitions executed since Kenyatta became finance minister and subsequently president. The reason why Kenyatta’s directive is a talking point is because, since he assumed power, Brookside has been taking money out of people’s pockets. When he took office, processors bought milk from farmers at between Sh30 and Sh35, and sold it to consumers at between Sh60 and Sh65, obtaining a margin of about the same, i.e. Sh30 to Sh35. By the end of Kenyatta’s first term, the consumer price had increased to between Sh110 and Sh120 (i.e by Sh55 to Sh60 per half-litre packet), while the producer price remained unchanged, raising the processors’ margin to the Sh75-Sh90 range.
Over the last two years, the squeeze has shifted from consumers to producers. In August last year Brookside reduced the purchase price of milk from Sh30 to Sh25 per kilo. By December, the media reported that farm-gate prices had fallen to Sh20, and to as low as Sh17 in some places.
The dairy farmers’ woes are blamed on milk imports from Uganda. It has been alleged that some of this milk is sourced from elsewhere and passed off as Ugandan. Kenya and Uganda being part of the East African common market, there is little Kenya can do to protect its market from Ugandan products, but transhipment would violate rules of origin and give Kenya reason to restrict Ugandan imports. In response to these allegations, the Kenyan government dispatched a fact-finding mission to establish whether Uganda had the capacity to export that much milk to Kenya. The trade Principal Secretary was quoted saying that not only did the delegation not find any evidence of transhipment, it had established that Uganda’s milk production has increased significantly in recent years.
The reason why Kenyatta’s directive is a talking point is because, since he assumed power, Brookside has been taking money out of people’s pockets
There’s plenty of information in the public domain on Uganda’s growing dairy export industry. A paper published by the Economic Policy Research Centre (EPRC) shows that Uganda’s dairy exports have grown steadily from virtually zero a decade ago to $79m in 2017. We did not need to go to Uganda to know this. According to the EPRC paper, the Kenyatta-owned Brookside Dairies is the third-largest milk processor in the country in terms of installed capacity at 500,000 litres/day (19 per cent) but second in terms of production at 450,000 litres/day (29 per cent). Still, the allegations have degenerated into a trade row. Last week the Ugandan government sent a formal protest note objecting to what it termed illegal seizures of Ugandan milk, and demanding immediate release.
More fundamentally, why the Kenyan market is attracting Ugandan milk has little to do with Uganda’s demand-supply balance, and everything to do with Kenya’s consumer price. As observed earlier, the retail price of processed milk has doubled from Sh65 to Sh120. In Uganda, a litre of processed milk retails at between USh2,800 and USh3,000 which translates to an average of Sh80, i.e. Sh40 per half-litre packet, compared to Sh60 in Kenya. Ugandan producers are not obliged to satisfy their domestic market when a more profitable market is available across the border. If consumer prices had increased at the rate of inflation faced by Kenyan manufacturers, as measured by the producer price index (2.5 per cent per year), the retail price in Kenya today would be in the Sh70-75 range, which is well below the Uganda retail price.
In a competitive market, Uganda should sell milk to Kenya until the profits for producers in both markets are equal. But the consumer prices in Kenya are not a reflection of market forces. They are a reflection of the market power exercised by Brookside. Why Brookside? Why not New KCC and Githunguri Dairy, or collusion between the three? The answer is simple enough. New KCC and Githunguri Dairy are public entities, the former a state corporation, the latter farmer-owned. They have nothing to gain from a fat bottom line as their mandates are to maximise farmers’ earnings. Whether they pay a decent producer price or distribute dividends, the money ends up with farmers.
Why the Kenyan market is attracting Ugandan milk has little to do with Uganda’s demand-supply balance, and everything to do with Kenya’s consumer price
But even if in the place of New KCC and Githunguri Dairy we had purely capitalist enterprises in the same market position, Brookside, as the market leader, would still be the culprit. In the economics of industrial organisation, the branch that informs competition policy, we call a market dominated by a few players an oligopoly. In an oligopoly, the market leader is the price maker. When the market leader raises prices, the weaker players benefit also. You don’t need a conspiracy to get a cartel. Each of the players acting in their self-interest can result in cartel-like behaviour. We call this non-cooperative collusion.
In essence then, the problem of the milk industry is not an agricultural policy one. It is not a trade policy one either. It is a problem of competition policy. Having sanctioned the Brookside acquisitions, the Competition Authority was obliged to keep an eye on the market to ensure that cartelisation did not occur. As noted, normal prices should be in the order of Sh75 a litre, Sh80 at most, compared to Sh120 today. This is prima facie evidence of abuse of dominance.
I am frequently asked, including by people close to Kenyatta, what it is that he, Kenyatta should do to turn around the economy. My answer is invariably is that there is a world of difference between what can be done, and what Kenyatta can do. The reasons are clear. Kenyatta is so severely enmeshed in the conflict between his family’s business and the public interest that there is hardly a sector of the economy in which the required reforms do not conflict with his personal interests.
For the last four years, the economy has suffered the consequences of ill-advised populist interest rate regulation. Kenyatta expressed reservations about the law, but he went ahead and signed it anyway. The banking industry vigorously opposed the law, and as a bank owner, Kenyatta may not have wanted to be seen to be on the side on which his bread is buttered. If Kenyatta had no personal interest, he would have been in a much stronger position to argue against, and veto the law.
Consumer prices in Kenya are not a reflection of market forces; they are a reflection of the market power exercised by Brookside
Two years ago, a sugar import scandal of monumental proportions unfolded. Initial reports pointed to traders of Somali ethnicity who were reportedly repackaging contaminated contraband sugar and passing it off as “Kabras Sugar”, a local brand owned by West Kenya Sugar Company. The government was threatening damnation. So much so that the CEO of the Kenya Bureau of Standards (KEBS) was slapped with an attempted murder charge for allowing the contaminated sugar, said to be laced with copper and mercury, to enter the country. But soon, mountains of sugar, way beyond the capacity of the contraband traders, was discovered in warehouses associated with the owners of the West Kenya Sugar Company, who also happen to be Kenyatta family business associates. It turned out that just before the elections the Government had opened the floodgates and allowed in 990,000 tonnes of duty free-sugar. West Kenya Sugar imported a quarter of it. As soon as this was exposed, the matter died.
The convergence of family and state is best exemplified by Stawi, a mobile phone-based lending platform owned by NCBA Bank—another Kenyatta family enterprise—that is being passed off as a national policy initiative to provide affordable credit to small businesses. Kenyatta himself first spoke of it in his 2019 State of the Nation address, and again in his Mombasa address two weeks ago:
“Measures to enable MSMEs access affordable credit include the recently launched Stawi. This will provide unsecured credit to MSMEs, which, because of their informal nature and lack of collateral securities, had been locked out of the formal credit market. Five commercial banks have set aside 10 billion shillings to be lent to MSMEs at an interest rate of 9 percent per annum, in loan amounts ranging between 30,000 to 250,000 shillings.”
This is sleight of hand, also known in trade lingo as mis-selling. First, the Stawi platform belongs to NCBA, the other four banks are agents. Second, the interest rate of 9 per cent per year, while true, amounts to mis-selling. The true cost of credit is given by the Annual Percentage Rate (APR) which combines both interest and other fees. In addition to the 9 per cent per year interest, there is a facility fee of 4 per cent of the loan amount, a 20 per cent excise duty on the facility fee and a 0.7 percent insurance fee. All in all, these add up to an APR of 14.5 per cent for a one-year loan, 20 per cent for a six-month loan, 31 per cent for a three-month loan and 75 per cent for a one-month loan.
"We’re pleased to see the new scheme, Stawi, under which loans will be made available to SME's at 9%. Our young people and our small scale traders hard work and innovation deserve our support; with the Stawi loans, they’ll get it." ~ @KanzeDena pic.twitter.com/VcoqGMBG20
— State House Kenya (@StateHouseKenya) June 18, 2019
Kenyatta has spoken out against conflict of interest on a number of occasions, including quite recently when he made a big hullabaloo about lawyers who are also senators representing county governors in court. The conflict of interest here is actually tenuous, since all that would be required to avoid it is for the lawyers to recuse themselves if their client’s case comes before the Senate. It remains a profound mystery whether Kenyatta is unaware how egregiously conflicted he is, or it is impunity, or perhaps he suffers from multiple personality disorder. Remarkably, throughout his presidency, no journalist has found it fit to ask Kenyatta this question. It needs to be asked.
Whatever the case, Kenyatta cannot have been unaware that personally wading into the dairy industry was inviting scrutiny of Brookside’s role in the dairy industry mess. That he did so suggests that he may be finally waking up from whatever reverie led him to wonder aloud not too long ago why Kenyans are broke. He may even be finally making the connection between the economic despondency in the country, and the popularity his deputy and now nemesis is enjoying in his central Kenya backyard.
Having sanctioned the Brookside acquisitions, the Competition Authority was obliged to keep an eye on the market to ensure that cartelisation did not occur
And of course, that his administration’s borrowing binge has the government in financial dire straits can no longer be denied. Mr Kenyatta has little to show for the debt. The SGR railway, his flagship project, has become a bugbear that is bleeding the country dry. It costs more and is less efficient than road haulage. The only reason it is running is because importers are forced to use it, gutting the Mombasa economy in the process. Even then, it cannot cover the management fees we are paying the Chinese to run it, let alone service its debt. It is bleeding taxpayers, consumers, importers, business and Mombasa—the only beneficiaries are China and whoever was bribed to build it.
A legacy of economic delinquency is one that Kenyatta cannot be relishing. We can expect him to be increasingly preoccupied with salvaging what he can. He has his work cut out. The government is in negotiations with the World Bank and the IMF for a financial bailout. If that goes through, Kenyatta is likely to spend the rest of his term hemmed in between an IMF straightjacket and his myriad conflicting interests, amidst a brutal vacuous power struggle between his deputy and Raila Odinga, neither of whom, if truth be told, inspire confidence in terms of economic stewardship.
Gakīīhotora nīko koī ūria karīina (one does not adorn for dance without knowing how they will dance) which is to say, as you make your bed, so you must lie on it.
Erased: Get Over It Vanessa, It’s a White Man’s World
8 min read. Instead of seeking fame by association with white people, Nakate must run her campaign from the continent of Africa and create a groundswell of African climate activists who can challenge the orthodoxy that Africans are not capable of addressing issues that affect them.
When an insensitive photo editor at the Associated Press (AP) erased the image of a Ugandan climate activist from a photo that included the Swedish climate star Greta Thunberg, it created a stir and led to accusations of racism against the news organisation.
It all started when Vanessa Nakate posted a tearful video of herself where she lamented the fact that she, unlike the white activists attending the, had not been recognised for her efforts on account of her skin colour. By removing her from the photo (the cropped version of which showed Thunberg with three other young white activists), she said on Twitter, AP had not only erased a person, but the entire African continent.
AP responded by explaining that Nakate was cropped from the photo because the building behind her was a distraction. As an amateur photographer myself, I can see why a photo editor would want to use a perfect background of the Swiss Alps and not an unsightly building in an image. Maybe racism had nothing to do with the decision to remove her; it was merely an aesthetic choice. However, even the AP’s editors had to finally concede that they had made a journalistic error.
Nakate is still young, so probably she doesn’t know yet that being a woman of colour means being constantly erased, ignored, ridiculed, humiliated, harassed or ghosted by those in power – usually white men. She should have known that black people, and especially black women, rarely get the credit for the work they do, even when it has global impact. She might want to recall that the #MeToo movement was started by Tarana Burke, an African-American woman, but only gained momentum when white Hollywood actresses started using the hashtag and started talking about their own experiences of sexual harassment and abuse. White people not only steal non-white people’s ideas, they appropriate them, make them their own, and then take the credit.
Being a woman of colour means being constantly erased, ignored, ridiculed, humiliated, harassed or ghosted by those in power – usually white men
Nakate may have heard that the civil rights movement in the United States only gained credence when white presidents like John F. Kennedy embraced it, and that Nelson Mandela gained “saintly” status only after he forgave his white tormentors.
Nakate made the mistake of naively believing that she is an equal partner in the fight for the climate; she thought that she would not only be recognised for her efforts, but would be rewarded as well. I applaud her for her optimism and faith, but as she gets older (and more cynical) she will realise that black and brown women – or what we now call women of colour – rarely get to sit at the high table unless they are “anointed” by the white Western world.
Often black people don’t get recognised even in their own countries until a white person or institution endorses them. The Kenyan environmentalist Wangari Maathai, for instance, was considered an irritating busybody by the Kenyan government and its leaders until she won the Nobel Peace Prize, after which she was accorded star status.
You see, this is the problem with us black and coloured folk. We are so desperate for white people’s approval and attention that when they reject or erase us, we are crushed. For many people in Asia, Africa and Latin America, recognition from one white person means more than a million accolades from our own people. It is the kind of self-hatred that makes us use skin bleaching creams and adopt foreign (usually British or American) accents. Nobody criticises French people for speaking with a French accent (which many consider “sexy”) or speaking English badly. But if as an African you appear at a public forum with a heavy Luo accent to explain your brilliant new scientific invention, you will be dismissed as an idiot not just by white people but your own people as well.
Nakate was desperate to be seen as a climate activist in the mould of Thunberg, but she failed to see that Thunberg has many advantages that she might never have.
For one, being a white European, Thunberg doesn’t need a visa to enter most countries around the world, a privilege that Nakate does not have. This means that the Swedish climate activist can go to another country and hold a protest rally at the drop of a hat. This gives her enormous social capital internationally. To get a visa to a Western country, Nakate would have to jump over many, many hurdles and prove beyond doubt that she has no intention of overstaying her visa. As she is a young single African woman, most countries in the West will view Nakate as a risk – as someone who will not return home after her visit and who will become part of the growing group of illegal immigrants in the West. Her activism credentials will be doubted, and her age, gender and skin colour will be held against her.
Nakate was desperate to be seen as a climate activist in the mould of Thunberg, but she failed to see that Thunberg has many advantages that she might never have
This is not to say that Thunberg does not endure ridicule. The world’s most powerful president, Donald Trump, has dismissed her as a young woman with “an anger management problem”. Climate change deniers will no doubt paint her as a pessimist out to destroy the world’s economy. Because of her age and gender, she will face a backlash from the old male establishment. However, Thunberg doesn’t have to face the kind of racism that people like Nakate have to face whenever they confront the white Western world.
Nakate will have to work twice as hard as a white woman to gain a place on the international stage. But even if she does, she will probably be a side show, not the main event. And if her views are considered too radical, she might never be invited again.
Some of us (and I include myself) have come to understand how little our views or opinions matter when we attend conferences where all the leading “experts” on a panel are white or male or both. Sometimes, for the sake of “diversity” or “representation”, a few African scholars or analysts may be included in a collection of essays or in panel discussions. However, in my experience, only those scholars or analysts who do not deviate too far from the traditional narrative about Africa (poverty, war, refugees, failed states, and the like) are invited to contribute; in other words, they gain visibility through conformity. Radical thinkers, or those who actively reject racist of distorted representations of African, are rarely invited. They are also denied jobs. I have been denied many jobs due to my gender, skin colour, nationality, ethnicity or age (yes, ageism is real). Shouting “Racism!” rarely has the desired effect. White people begin to actively shun you or describe you as over-sensitive or paranoid.
In her book Why I’m No Longer Talking to White People About Race, the black British writer Reni Eddo-Lodge explains that she stopped having conversations about race with white people because most white people don’t even recognise that racism exists. “I cannot continue to emotionally exhaust myself trying to get this message across, while also toeing a very precarious line that tries not to implicate any one white person in their role in perpetuating structural racism, lest they character assassinate me”, she writes.
Eddo-Lodge says that white people often silence people of colour by pretending that the problem lies with the latter, and not with the former, or by accusing the non-white person of being overly sensitive about race. “They’ve never had to think about what it means, in power terms, to be white, so any time they’re vaguely reminded of this fact, they interpret it as an affront”, she says.
“I can no longer have this conversation, because we’re often coming at it from completely different places”, she adds.
If they cannot silence you by ignoring you, or by claiming that you are over-reacting, they co-opt you. For instance, the Kenyan writer Binyavanga Wainaina was actively wooed by the Western literary establishment after his satirical essay How to Write About Africa went viral. He lapped up the attention – but it came at a price. Never again would he write so passionately about how Africa has been misrepresented in the Western media, though it must be said that the essay profoundly impacted how Western journalists reported on Africa. After his essay went viral, the narrative on Africa changed from “The Hopeless Continent” to “Africa Rising”. Although people on the continent rejoiced, they failed to understand that neither of these narratives accurately depicts the complexities and nuances of Africa; on the contrary, they reinforce the “single story” narrative that Nigerian author Chimamanda Adichie spoke so eloquently about in a TED talk.
However, while Adichie can talk to the West about the danger of “a single story”, she would not be a literary star today if the West had not embraced her and given her a platform to showcase her work. The white Western establishment knows that her criticisms can only go so far – they cannot topple the power relations between Africa and the West. In fact, her success reinforces the reality that in order to succeed as an African in this world, one must have the support of the West – the very West that is the subject of one’s criticism.
Why are we so eager for the West to embrace and accept us? Why do we want them to like us? Why do we get so excited when Afro-pessimism is replaced with Afro-optimism? Maybe it’s because, as Franz Fanon says in Black Skin, White Masks, black people have been made to feel inferior for so long that they “want to prove to white men, at all costs, the richness of their thought, the equal value of their intellect”. We expend much energy trying to prove our worth to white people, believing that once we have proved our worth, we will be accepted as equals. This is rarely the case because racism is so ingrained in Western culture that it may take many more centuries to eradicate it. We must remember that European powers justified slavery and colonialism by claiming that Africans were not really human beings, that they were an inferior species that needed to be subjugated for their own good.
We expend much energy trying to prove our worth to white people, believing that once we have proved our worth, we will be accepted as equals
The late Toni Morrison said that the main function of racism is distraction – to keep black people so busy explaining themselves to white people that they would not have time for anything else:
It [racism] keeps you from doing your work. It keeps you explaining, over and over again, your reason for being. Somebody says you have no language and you spend 20 years proving that you do. Somebody says your head isn’t shaped properly so you have scientists working on the fact that it is. Somebody says you have no art, so you dredge that up. Somebody says you have no kingdoms, so you dredge that up. None of this is necessary.
My advice to Vanessa Nakate would be to stop seeking the approval of the white Western world and to not be too bothered if the white Western establishment doesn’t give her the recognition she deserves. She must not seek fame by association with white people. She must run her campaign from the continent of Africa with fellow Africans and for the benefit of future generations of Africans. Climate change in Africa is real, and will have devastating consequences because Africa is least prepared for it. Nakate must forge relationships with like-minded African organisations to create a groundswell of African climate activists who can challenge the orthodoxy that Africans are not capable of addressing issues that affect them.
Nakate must run her campaign from the continent of Africa with fellow Africans and for the benefit of future generations of Africans
Vanessa Nakata gains nothing by being photographed in Davos at a conference where the very people who caused the climate change crisis in the first place meet every year. Their acceptance of her means little. If she is going to bring about a climate revolution in Africa, she must look to her own culture, history, environment and people to find solutions. No one can save Africans except Africans themselves.
So Vanessa, please understand this: White people will constantly erase you. Stop asking them to put you back in the picture. You do not need their endorsement.
Kenya Security Council Bid: David Fighting Goliath, Says Djibouti
9 min read. Although endorsed by the African Union, Kenya’s candidacy for one of the non-permanent United Nations Security Council seats reserved for Africa has been challenged by Djibouti and there are no guarantees that the country will get the votes of two-thirds of the Council members in the forthcoming June elections. With both countries arguing that they are the voice of Africa, Kenya will need to defend its track record on matters of international peace and security and address concerns about its reliability as an ally, among other grievances against it. Otherwise, Nairobi may be in for a surprise come June.
The next five months are critical for Kenya in its bid to play a central role in matters of international peace and security. In June, the United Nations General Assembly will vote to decide which of Djibouti or Kenya will take up one of the non-permanent Security Council seats for Africa. Whichever country will be elected will serve for two years (2021-2022). It will be the second time for Djibouti to sit on the Council (1993-1994) and the third for Kenya, which previously served in 1973-74 and 1997-98.
African member states have established themselves as one of the most organised groups in the handling of the rotation of the three non-permanent seats allotted to them. The African Group ensures that each of its five sub-regions (East, West, Central, North and South) has a chance at representation in a rotational arrangement. For instance, in 2019, South Africa replaced Ethiopia which had represented East Africa. In 2021-2022, the seat reverts to an East African country. The Executive Council, the second most powerful organ of the African Union (AU), has the responsibility of vetting candidates for the seats and is advised in these functions by a sub-set of ministers who sit on the Ministerial Committee on Candidatures.
Member states interested in Security Council seats inform the chair or dean of their respective sub-regional group. In case a sub-region submits more than one candidate, the AU Commission requests the chair or dean of the sub-region to hold consultations and present a single country. In most cases, the sub-region agrees to either consider the other candidate for upcoming vacancies in other UN or AU organs including the Peace and Security Council or offers them the slot at the next opportunity. Once consensus is reached, the chair of the sub-region submits its candidate to the AU Commission for consideration by the Ministerial Committee on Candidatures, which meets twice a year (January and June).
When the vacancy for the Eastern African sub-region was announced in 2019, the African Union Commission received the candidacies of both Djibouti and Kenya from the dean of the sub-region, Djibouti. Diplomats based in Addis Ababa with knowledge of the deliberations, argue that this was a conflict of interest on the part of Djibouti; given that its candidacy had made it impossible for Djibouti to play its role of finding a consensus candidate, it should have recused itself and handed over the role of dean temporarily to another country. It did not help that the countries of the sub-region were split between Djibouti and Kenya, with neither enjoying overwhelming support from its neighbours. Therefore, instead of the sub-region trying to find a solution, it kicked the can down the road to the Ministerial Committee.
The Ministerial Committee and the Executive Council were unable to agree on a consensus candidate from either of the two countries during the AU Summit that took place in Niamey, Niger in July 2019. The Executive Council mandated the Permanent Representatives to the African Union (the Permanent Representative Committee) to resolve the matter under Egypt’s leadership as the AU Chair but Egypt was unable to resolve the matter through consensus. It therefore resorted to voting, an unprecedented move on matters of candidacy. In a move that should worry Nairobi and which is not accurately reported in the Kenyan media, it took seven rounds of votes for Kenya to garner the two-thirds majority required to be endorsed. On the first occasion, there were four rounds of votes with neither candidate garnering the two-thirds majority. The second occasion had three rounds of votes where on the third round, Kenya garnered the required two-thirds majority by bagging 37 votes to Djibouti’s 13.
There was expectation that Djibouti would bow out of the race after the August 2019 vote. Instead, Djibouti announced that it was still in the race. Diplomatic efforts to have Djibouti stand down in favour of the African Union-endorsed candidate have faltered. President Abdel Fattah el-Sissi of Egypt brought together President Uhuru Kenyatta and President Ismail Omar Guelleh of Djibouti to discuss the matter at the margins of the United Nations General Assembly in September 2019 but this high-level diplomatic attempt failed. Djibouti has gone ahead and received the endorsement of the Organization of Islamic Conference (OIC) and that of the Organisation Internationale de la Francophonie (OIF).
It took seven rounds of votes for Kenya to garner the two-thirds majority required to be endorsed
As it ramps up its diplomatic charm and campaigns for the seat, Djibouti has sought to present itself as the underdog, David fighting Goliath. Djibouti argues that it was the first to declare its candidacy in 2016 and that Kenya has violated the spirit of sovereign equality of states and the practice of rotation of seats. It argues that for its small size, it has deployed more peacekeepers per capita and that it seeks the seat, not for “self-aggrandisement” but rather to serve Africa. In an underhand attack of the perceived transactional nature of Kenya’s diplomacy, Djibouti presents itself as a “reliable partner” which has a record of working with “UN Member States, large and small, permanent and non-permanent members of the Security Council on ways to advance our common priorities”.
On its part, Kenya has presented a ten-point agenda which it aims to fulfil during its tenure. The first is “Building Bridges”, which seems to be a very politically loaded title to use given the ongoing divisive “Building Bridges Initiative’ at the domestic level. Nairobi argues that it is well positioned to bridge differences between the African Union and the Security Council and to be a promoter of the rule-based international system. It touts its role in peacekeeping with over 40,000 troops deployed over the years. Nairobi argues that it is a regional powerhouse on matters of peace and security and a leader in the fight against terrorism and the prevention of violent extremism. The country hopes to promote the women, peace and security agenda as well as the empowerment of young people. It boasts of its role in humanitarian affairs especially in providing refuge to those fleeing war in South Sudan and Somalia. It also includes justice, human rights and democracy in its agenda. And in a nod to the UN Environment Programme hosted in Nairobi, Kenya lists climate change as one of its areas of focus as well as the achievement of the sustainable development goals.
With both countries arguing that they are the voice of Africa, the positions they take on key international issues in the next few months will be critical for their campaigns. Diplomatic sources intimate that although Kenya has the backing of the African Union, it would be naïve to bank on the support of all the African countries. They argue that the same talking points that Kenya used to rally the support of some members of the African Group may backfire when used in the broader United Nations General Assembly membership. For instance, one African country which changed its mind in the last round of the African Union vote to support Kenya, did so because they were persuaded that it would not be a good idea for Africa to be represented at the Security Council by three countries with an Islamic and French-speaking background. Niger and Tunisia are the current members representing West Africa and North Africa, respectively.
Diplomatic sources intimate that although Kenya has the backing of the African Union, it would be naïve to bank on the support of all the African countries
Djibouti may very well turn round the talking points of the Kenyan diplomats and use them to rally a large section of the 57 members of the Organization of Islamic Conference—which has officially endorsed it—to support its bid. Djibouti has a strong record of support to the Question of Palestine and other Middle East issues. It will certainly continue to play up the maritime dispute between Kenya and Somalia to rally Arab and Muslim countries to its side. Djibouti could also play the victim of an anti-Francophone bias to seek the sympathy votes of the 54 French-speaking countries. Of course Kenya has its share of friends in both the OIC and OIF membership, but it cannot afford to lose any Member State.
Kenya’s waning international standing will further complicate its candidacy. Within the African continent, Kenya is no longer at the centre of political or diplomatic initiatives. This has shifted over the years to Addis Ababa. There was a time when you could not speak of a single African political or peace process without it being hosted in Kenya or mediated by a Kenyan. Presidents Mwai Kibaki and Uhuru Kenyatta decided to take a back seat in these efforts which has denied the country the platform it could have used to campaign for the seat. It is worth noting that Ethiopia’s third bid for the Council seat in 2016 (to serve in 2017-2018) was uncontested. That Nairobi’s standing in the region is on the wane was evident in 2017 when Cabinet Secretary Amina Mohammed failed to get elected as the Chairperson of the African Union Commission, losing to Chad. The recent election of Sudan to chair IGAD, instead of the highly anticipated switch to Kenya, should make Nairobi worried about the long-term implications to its foreign policy agenda, if it has one.
Nairobi is also perceived as running a transactional foreign policy. It does not hold principled positions on issues of international peace and security. Many diplomats are quick to note that, with a few exceptions, Nairobi’s position on any issue is based on the price of the highest bidder. As one diplomat put it, “unpredictability is not good in diplomacy. They will say yes today and tomorrow they will take a different position.” There are many countries who worry that Kenya will continue its transactional approach to Security Council issues at the expense of the interests of Africa”.
Within the African continent, Kenya is no longer at the centre of political or diplomatic initiatives
To be fair to Nairobi, although the elected members ostensibly represent Africa, they hold these seats in their national capacities. They definitely put their national interests first, including economic ones, before the positions of the continent. This is especially so in an era when President Donald Trump openly declares that countries that do not do its bidding will have their foreign aid cut. In Africa, there are many countries which have sanctioned their envoys for jeopardising financial aid by taking principled positions on issues. The most dramatic was in 2002 when Ambassador Jagdish Koonjul of Mauritius was recalled in the midst of a Security Council meeting for not openly supporting a United States resolution on Iraq.
Informal discussions with several diplomats indicate that so far, Kenya is a front-runner for the Security Council seat, boosted by the endorsement from the AU, which will probably be confirmed by the Heads of State at its February Summit. However, the endorsement is non-binding and African countries may choose to vote for Djibouti, abstain or be absent on voting day. Kenya’s squabbling with Somalia, its cozy relations with Ethiopia no longer, the mistrust with Tanzania, the on/off relations with Uganda—including the competition to host the UN Global Service Center among other regional rivalries—means that Nairobi goes into the race without any guarantee of receiving votes from its bloc.
In another sign of the waning support for Kenya within its sub-regional bloc, attempts to present a candidate for the position of Assistant Secretary-General at the 9th African, Caribbean and Pacific (ACP) Heads of State and Government meeting in Nairobi last year were met with strong opposition. Diplomats argue that Kenya’s un-strategic move to seek positions in other bodies during its bid for the Security Council only strengthens Djibouti’s contention that Nairobi is only interested in “self-aggrandisement”. Nairobi could learn lessons from the common Swahili adage, mtaka vyote, hukosa vyote, or from the fable of the greedy hyena.
Djibouti and Kenya seem not to have managed to convince any of the veto-wielding council members (China, France, Russia, United Kingdom and United States) to throw their weight behind their candidacies. Both countries are close allies to the major powers. China has been quick to clarify statements from its officials perceived to be supporting either country. Both candidates have constantly reminded those who care to listen of their unique geo-political significance. However, Djibouti’s location by the Red Sea, which straddles both the Middle East and Africa, cannot be underestimated. By being one of the few countries hosting American, Chinese and French military bases, it has a slight advantage with regards to these three veto-holding Security Council members. Kenya, on the other hand, could argue that as a regional economic powerhouse, it would be the better candidate. But one could argue that having a less economically powerful country on the Council would be more convenient for those interested in buying the country’s influence. A cheaper puppet is certainly better than a costly one.
Many diplomats are quick to note that, with a few exceptions, Nairobi’s position on any issue is based on the price of the highest bidder
As the campaign reaches a critical point, Kenya seems to be scoring an own goal. The decision to move Ambassador Monica Juma from the foreign affairs docket in the midst of the campaign was ill-advised. Lobbying for the Security Council seat very much depends on personal relationships built over time, which the new Cabinet Secretary, Ambassador Rachel Omamo, certainly does not have. It does not help that rather than have a dedicated Permanent Representative in New York, Nairobi decided to copy Djibouti and double-hat its affable and experienced Ambassador Lazarus Amayo to cover both New York and Washington DC. This means that there is insufficient political coverage in both these cities which have a central role to play in the June election. Nairobi will have to rely heavily on its highly respected Ambassador Tom Amollo to pick up the baton.
Nairobi will also need to widen its talking points beyond its ten broad themes. There are still many unanswered questions about its track record on matters of international peace and security. What foreign policy gains can be attributed to Nairobi during its term at the African Union Peace and Security Council? What does the country have to show for its five years as the holder of the Executive Secretary post at the International Conference for the Great Lakes Region (ICGLR)? How has it handled peace and security issues as one of the Deputy Executive Secretaries of the East African Community? What does the country have to show for the 11 years of Ambassador Mahboub Maalim tenure as Executive Secretary of IGAD, apart from Ethiopia’s dominance of the organisation?
Failure to effectively counter these questions and address the concerns about reliability as an ally, among other grievances against it, Nairobi may be in for a surprise come June. This is especially because victory requires a vote by two-thirds of the member states. Djibouti’s task will be to embarrass Nairobi into many rounds of votes, with the possibility of neither one receiving the required number of votes. There have been precedents of inconclusive votes the most recent of which was in 2016 when neither Italy nor the Netherlands was able to muster enough votes. They eventually agreed to split the term. Kenya may end up seeking a compromise of splitting the term with Djibouti, if the latter maintains its current stance. Nairobi still has five months to change tack, otherwise it may continue with its streak of faltering bids for international posts.
Turnover Tax: Days of Extortion, Days of Revolt
11 min read. Informal micro and small businesses are being unfairly targeted by a new tax that is considered by many as extortionist and punitive. How can the government morally justify a tax on a sector it has done little to assist? Will the new tax force these businesses to close down or to revolt?
Our government has decided to extort money from the smallest businesses and is trying to make a virtue of it. Imposing the 3 per cent turnover tax (TOT) on informal micro and small businesses is monstrous, and an insult to poor Kenyans. Though legal, TOT is IMMORAL. I echo the prophetic declaration: “Woe to those who make unjust laws, to those who issue oppressive decrees, to deprive the poor of their right and withhold justice…” (Isaiah 10:1 NIV)
The micro and small-scale businesses, which include kiosks, small grocery stores, hair salons and small market traders (generally those at the bottom tier of the informal sector) now have to pay TOT. TOT is a new tax demanded of any resident person whose turnover from business does not exceed or is not expected to exceed Sh5,000,000 ($50,000) during any year of income. It will be payable from 1st January 2020. This tax rate is on the gross sales/turnover and is a final tax.
Mrs. Elizabeth Meyo, the Commissioner of Domestic Taxes at the Kenya Revenue Authority (KRA), states that “from January 2020, if one operates a salon, butchery, or grocery store, you will be required to declare your sales online and pay the taxes on the 20th of each month.” And for one to get a business licence from one’s county government, one will have to pay an extra 15 per cent of the permit fees to KRA as presumptive tax. In complying to these new demands, Mrs. Meyo further claims, “the business owners will have fulfilled their patriotic duty for a better Kenya”.
Various economic findings acknowledge the substantial contribution of the informal sector to GDP in most developing countries. The informal sector is one of the biggest employers in Kenya, and accounts for over 80 per cent of employment opportunities. It is a shame that attention is turning to this sector only for their moolah, and to bridge the gap resulting from dwindling revenue from the formal sector. According to a Kenya National Bureau of Statistics survey published in 2016, the monthly expenditure on salaries and wages for unlicenced micro small and medium enterprises (MSMEs) was Sh9 billion, which translates to 25 per cent of total outlays a piece.
The neglected informal sector
The colonial market design continues to define the contours of our economy, which conditions us to think of the informal sector as inferior to the formal sector. We still perceive it as “traditional”, marginal or peripheral, having no links to the formal economy and making no contribution to modern industrial development. We have therefore neglected this sector.
Some economists have argued that the informal sector is a dead-end for a pool of labour comprising workers who could not gain entry into the preferred formal sector. Others, like Jeffery Sachs, have even gone to pronounce the informal sector’s obituary, stating that it would cease to exist once Kenya achieves sufficient levels of economic growth and industrialisation.
The informal sector is one of the biggest employers in Kenya, and accounts for over 80 per cent of employment opportunities. It is a shame that attention is turning to this sector only for their moolah, and to bridge the gap resulting from dwindling revenue from the formal sector.
Others see the potential of the informal sector’s small businesses. In his book, The Mystery of Capital (2001), the Peruvian economist Hernando de Soto views these informal businesses as a sign of entrepreneurial dynamism, a real force in the market. They could also be useful in an industrial take-off due to their resilience and ability to withstand market shocks over the long haul, as Shem Watako observed in his doctoral studies of micro and small businesses in Kariobangi.
This hubris in the informal sector has got the taxman’s attention. But the challenge is in how they will implement the TOT. Mrs Meyo identifies this difficulty while responding to why Kenya resorted to TOT for small businesses. She explained that “lack of formal structures and a tax framework that suits the [informal] sector have been major drawbacks in the taxman’s quest to tap revenue from this sector”.
The ethical reasoning of those calling for micro and small-scale businesses to pay taxes as demanded is implausible because it does not raise the second order question. Is it moral to make these demands on the poorest of Kenyan businesses? Is it moral to treat the poor with partiality when the new tax regime would disenfranchise them?
A turnover tax is like a sales tax or a value-added tax (VAT), with the difference being that it taxes intermediate and capital goods. It is on an ad valorem basis (based on the value of the good in question, rather than being flat taxes), applicable to a production process or stage. TOT makes the poor pay another indirect tax, while those whose turnover exceeds Sh5 million pay direct tax, which is a better tax plan for their businesses.
Let us consider a hypothetical case of Nyamulu Beauty Salon, a business run by Achieng’ in Kariobangi, a low-income area of Nairobi, to illustrate this point. With her revenue turnover of Sh100,000 for January 2020, she would enlist for TOT.
NYAMULU BEAUTY SALON, KARIOBANGI TRADER SCENARIO
|ITEM||REVENUE/COST||GOVT TAXES &LEVIES|
|Revenue 100 clients @ 1000||100,000|
|Supplies (oils, hair pieces, etc.)||(30,000)||VAT @16%||(4,800)|
|Rent for stall||(12,000)||Rent Tax @10% Incl||(1,091)|
|Casual workers 2 @500 a day||(30,000)|
|County license||(1,250)||county license||(1,250)|
|Operating Trade Profit||15,900||Total Taxes & Levies||(8,042)|
VAT is standard rated for all goods and services
|SCENARIO 1 -TOT|
|Operating trade profit||15,900|
|Less Turnover Tax||(3,000)||Total Taxes & Levies||(11,042)|
|SCENARIO 2- Personal Income Tax (PIT)|
|PIT -After Relief||(362)||Total Taxes & Levies||(8,404)|
|Net Profit||15,538||Effective Tax Rate||8.4%|
|SCENARIO 3 Personal Income Tax and VAT Registered (PIT + VAT registered)|
|Operating Trade Profit||15,900|
|Add-Input VAT recovered|
|Net Profit/Taxable Income||21,364|
|PIT – After Relief||(1,182)||Total Taxes & Levies||(3,760)|
|Net Profit||20,182||Effective Tax Rate||3.76%|
Scenario 3 encourages small traders to register for VAT, which is passed through to consumers; the net effect is increased transparency and increased VAT collection for KRA.
|TOT||PIT||PIT +VAT Reg|
An alternative tax plan to TOT would give a different result. If the above scenario described her business, then under scenario one, where she paid TOT, her profit would be Sh12,900. Under scenario two, where she pays personal income tax, her profit would be Sh15,538. And if she were registered for VAT and also pays PIT, she would have made profit of Sh20,182.
The individual tax plan would, therefore, be more favourable to the poor income business groups than the TOT. Notice also that her business has contributed indirectly to the government’s revenue by more than Sh8, 042. Then, if subjected to the TOT of Sh3,000, she would have contributed Sh11,042 to the government coffers.
Is it moral for a tax regime to erode the business capital of the poor?
The start-up capital of small businesses usually comes from family resources. This tends to limit the size of the businesses, the number of workers they hire, and the level of profits they generate. So they have a limited amount available to reinvest.
In 2016, the Kenya National Bureau of Statistics found that licenced micro establishments reported spending 45.3 per cent of their net income on investments, either as reinvestment or investing in new businesses and investment in agriculture, while expenditure on household and family needs accounted for 44.5 pervcent. In 2016, small and medium establishments spent a significantly large part of their net income on investment, at 63.4 per cent and 69.7 per cent, respectively.
The erosion of capital from small business via the TOT will delay their growth. Rather, by allowing them to grow capital we would help debunk the notion held by some, including the International Labour Organisation (ILO), that these businesses are doomed to remain small. Yet a significant number of entrepreneurs in the informal sector earn more, on average, than low-skilled workers in the formal sector, according to some studies.
It is immoral to deny the poor a fair chance to compete in the market by imposing a tax on their businesses.
Governments have used taxes to shut out a section of the economy. N. Cheeseman and R. Griffiths (2005) point out that turnover taxes can also be punitive when designed to create a disincentive for buying particular products. They say that environmental regulations sometimes encourage this practice.
Despite the expansive nature of the informal sector, aiming at the bottom end of the pyramid is suspect. We must keep in mind that the current regime is struggling with a debt burden that is uncreative and evil. TOT could be an attempt to cut off informal sector traders from the market. There are 1.3 million micro and small enterprises in Kenya, which, according to a government survey, employed about 2.4 million people – 17 per cent of the total workforce in Kenya – in 2009. They were engaged in the following: close to two-thirds (64.1 per cent) of all enterprises were in the trade sector; retailing made up 62 per cent of all trading in Kenya; manufacturing comprised 13 per cent, while services accounted for 15 per cent.
It is immoral for the government to burden the poor.
In a liberal democracy, argues Prof. Nicholas Wolterstorff of Yale Divinity School, the state should act impartially when distributing burdens and benefits to its citizens. Our government is absent in the lives of poor citizens because of skewed development priorities. The poor live in squalour with children attending overcrowded schools. They have dismal access to healthcare and are the main users of public transport on what is left of roads.
But the government now finds it expedient to tax these businesses operating on the margins of our nation, either in the slums of our cities and towns or in the rural areas. Yet it is through their businesses that low-income households have managed to improve their lot, not through any government subsidies or incentives.
There are 1.3 million micro and small enterprises in Kenya, which, according to a government survey, employed about 2.4 million people – 17 per cent of the total workforce in Kenya – in 2009.
We can use taxes for the public good, to even out the inequalities in society and to provide essential services to all citizens. Eric Nelson, a Harvard professor, explains the idea that the state should coercively maintain an egalitarian distribution of property because it is the business of the state to engage in the redistribution of wealth through taxation, thus ensuring the welfare of the poor; this idea is the genesis of welfare states in many European countries.
Forcing a blanket tax without considering the business conditions of payees is reminiscent of the colonial administration’s hut and poll tax of the 1920s. Then, local leaders and community representatives defended their people against the colonial extortion. Responding to the tax demands, Luo leaders in Nyanza consulted and convened a a general meeting at Lundha in Gem on 23 December 1921. About 9,000 people attended from all parts of Nyanza to discuss the hut tax. During the meeting, Chief Ogada Odera of Gem in Central Nyanza lamented: “As regards our taxes, they used to be 3 shillings. Mr John Ainsworth [the Nyanza Provincial Commissioner in Kisumu from 1906] told us that the amount would be increased to 5 shillings. We agreed. The government then increased it to 8 shillings. It is very heavy. Besides, we do not want our women taxed.”
Forcing a blanket tax without considering the business conditions of payees is reminiscent of the colonial administration’s hut and poll tax of the 1920s.
Chief Ogada made a perceptive comment: “As regards the word colony, the government came here and found us occupying the land and now it calls us ‘wasumbni’ [their slaves].”
Most commentators on TOT have sided with the government’s position and made a virtue of the extortion of poor businesses by calling the tax fair, patriotic, and easy to compute and complete. I think they are misguided. Kamotho Waiganjo reflected this distorted thinking when he commented in the Standard: “But the government was getting no tax benefit from these businesses…those who operate in the formal sector, and who are therefore in the taxman’s spotlight…cough up 30 per cent of annual profits as tax…businesses in the informal sector means that many of the operators in this expansive sector escape the taxman’s dragnet. Not anymore.”
This assumption – that the poor in the informal sector churn out a considerable volume of revenue but do not contribute to the tax pool – is erroneous. TOT is an indirect tax on businesses and not a tax based on income from business profits. Informal sector businesses already pay other indirect taxes that are levied on fuel, electricity, VAT on their goods and rent taxes collected from rental income. Shouldn’t their cost of goods, business expenses, and other costs also be considered, as they are with formal businesses?
Most commentators on TOT have sided with the government’s position and made a virtue of the extortion of poor businesses by calling the tax fair, patriotic, and easy to compute and complete. I think they are misguided.
Some argue that the cost of compliance is low and that all that these small businesses need to do is record their sales. Those paying turnover tax will not need to worry about tracking their expenses; their tax is only on turnover. They say keeping proper business records will benefits business owners because proper records would help them evaluate their business performance, monitor purchases and sales, and make crucial business decisions.
However, the consequences of eviscerating small businesses would be catastrophic owing to sector’s significance in the economy. It may arouse two major reactions from the poor:
First, if the small businesses sense extortion, they may disappear into thin air. These businesses are supersensitive to extortion by the authorities and would hibernate, adjusting their operations till conditions change. The damage in the wake of their disappearance could be devastating. Mr. Francis Atwoli, the Secretary-General of the Central Organisation of Trade Unions (COTU), warned that further taxation on small and medium businesses will not only destroy the fastest growing sector of the economy but also render many Kenyans jobless.
The 2016 Kenya National Bureau of Statistics survey shows that approximately 400,000 micro, small and medium enterprises do not celebrate their second birthday. Few reach their fifth birthday, leading to concerns about the sustainability of this vital sector.
Second, if poor business owners interpret this tax as oppression, they will revolt. Implementation of TOT will conjure up the pain of the colonial era. The colonial hut and poll taxes became a heavy burden on the people of Kenya in the 1920s. B A Ogot (2009:772) observes that it was made worse by the method of collection, which was ruthless and arbitrary. In Nyanza, the colonial regime collected the hut tax from all huts in a kraal, including the cattle sheds. When many people refused to pay these taxes, the colonial authorities, including chiefs and tax clerks, resorted to brutal methods of collection, ordering policemen, chiefs and sub-chiefs to raid villages, set houses on fire, and confiscate property or food stuff such as grains, bananas and cassava.
Since TOT will eat into the livelihood of these business owners, they will revolt. But the authorities will crush their revolt due to their lack the organisational capacity, unlike the UK’s anti-poll tax groups of 1990. Introducing an unpopular “poll tax” is credited for forcing Mrs. Margaret Thatcher out of office in November 1990. The Green Paper of 1986, Paying for Local Government, proposed the poll tax, which charged a fixed tax per adult resident for the services provided in their community, hence the term poll tax. It was a change from payment based on the worth of one’s house to a resident individual. The tax was, therefore, criticised as being unfair, and needlessly burdensome on those who were less well-off. What followed were protests and riots that prompted the abolishing of the tax following the change of government in November 1990.
What should KRA do with poorer businesses?
The government and the KRA, the implementing tax collection authority, can act morally and avoid hurting small-scale businesses. They can make it a priority to rationalise the informal sector rather than wipe it out through harsh tax policies.
Turnover tax, as currently enacted, is elective. Therefore, qualifying small businesses can opt to register for the standard tax system. This move would allow them to be recognised like other businesses. And with sound records, they may take advantage of comprehensive inclusion rules and a reduction process that requires maintaining proof of expenditure. We should make efforts in aiding small-scale businesses to maintain proper business records and wean them into an alternative tax regime.
The government and the KRA, the implementing tax collection authority, can act morally and avoid hurting small-scale businesses. They can make it a priority to rationalise the informal sector rather than wipe it out through harsh tax policies.
This government should heed the words of Hubert Humphrey, the former US Vice President, who on November 1, 1977, said: “The moral test of government is how that government treats those who are in the dawn of life, the children; those who are in the twilight of life, the elderly; those who are in the shadows of life, the sick, the needy and the handicapped.”
The tinders are there waiting for something to ignite them. If the poor interpret TOT as extortion, we may as well have ushered in days of revolt.
 Trader uses Mshwari for working capital, interests at 7.5% per month.
 Allow Voluntary registration for traders who are below the threshold for compulsory VAT registration.
 Cheeseman, N., & Griffiths, R. (2005). Increasing Tax Revenue in Sub-Saharan Africa: The Case of Kenya. Oxford Council on Good Governance, Economy Analysis, 6.
 Ogot BA. 2009: A History of the Luo speaking people of Eastern Africa. Kisumu Kenya Anyange press ltd.
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