Thursday, 20 October 2016

The “Oromia Question” A Reflection of Ethiopia’s Misgovernance

A photo showing members of the Oromo ethnic community protesting
Image: Courtesy

In recent months, one of the world’s fastest growing economies, Ethiopia, has witnessed an intensified series of protests mainly planned and staged by the members of the Oromo community. The Oromo ethnic group is the largest in Ethiopia with its population making up 34.4% of the country’s 100 million plus people. Other ethnic communities as a percentage of Ethiopia’s total population include: the Amhara at 27%, Somali 6.2%, the Tigray 6.1% and the others making up 26.3%.

The Oromo are found in the Oromia State which covers 284,538 square kilometers. The state of Oromia is rich in natural resources and fertile agricultural land and it contributes about 60% of Ethiopia’s economic resources. The country’s capital city, Addis Ababa, is located in the Oromia State.

Causes of Anti-Government Protests
There are two main factors that have led to the wave of the anti-government protests in Ethiopia. The explicit factor was the formulation and attempted implementation of the Addis Ababa Master Plan. The implicit factor is the continued marginalization and mistreatment of the community by the elitist club that runs the government.

The Addis Ababa Integrated Master Plan is a development blueprint whose main objective was to expand the city of Addis Ababa. The intended expansion of the city would have consequently led to the displacement of the members of the Oromo ethnic community from the land that they possess. With majority of the Oromo people being farmers, this would have eventually cut off the main source of livelihood for the community.

Though the implementation of the plan was later on halted, the initial attempt by the government to forcefully implement it is a pointer of the lack of consultation by the government and subsequently public participation by the affected community.

For the last 25 years since the fall of the Derg, the country has been under the rule of the Ethiopian People’s Revolutionary Democratic Front (EPRDF) which is a coalition of four parties namely: the Oromo People’s Democratic Organization (OPDO), the Amhara National Democratic Movement (ANDM), the Southern Ethiopian People’s Democratic Movement (SEPDM) and the Tigrayan People’s Liberation Front (TPLF).

The TPLF has been politically dominant among the four and as a matter of fact, the Tigrayan ethnic community that is 6.1% of the total population controls the country’s economy. This has subjected the Oromo and partly the Amhara, to seclusion by the successive governments in the state.

This disenfranchisement has been simmering for over twenty years but has occasionally flared up. However, as from November 2015, the frustrations have eventually turned out into consistent protests against the government of the day.

Historical Nexus of the Misgovernance
For centuries, Ethiopia has never had democratic institutions of governance. Before the inception of the Mengistu-led government in 1974, Ethiopia was under the monarchical rule of Haile Selassie and his dynasty. The Derg government under the leadership of Mengistu Haile Mariam was in power from 1974 up to 1991 when the EPRDF took over the reins by ousting the military regime.

Right from Haile Selassie’s era, through Mengistu’s junta system of government to the current regime led by EPRDF, only few segments of Ethiopia’s populace have significantly benefited from the state. In short, the country has not experienced inclusive growth even at the moment when it continues to register one of the highest GDP rates in the world.

A key concern to this has been the deliberate efforts by the successive governments and regimes not to embrace the principle of political/institutional inclusivity. It has been common for many years in Ethiopia to witness the disregard for the rule of law which forms the basis of the fundamental human rights. The governments that have been in existence in Ethiopia have been known to be non-tolerant to dissent.

Students from the Oromo community leading one of the anti-government protests.
Image: Courtesy

A notable feature is that the honchos are still nursing communist hangovers and collectivist hallucinations. This implies that the state is the main actor economically, socially and politically hence limiting the economic and political freedom of the citizens.

Historically, it is well documented that EPRDF’s foundation is anchored on Marxism and communism whose prevalent characteristic has always been the establishment of an authoritarian government. The post-Derg era has resorted to revisionism of this system and structure of governance.

Mechanisms of Marginalization & Oppression
In discussing this part of the text, I’ll make reference to specific excerpts of the ‘Road to Serfdom’, a book written by Friedrich A. Hayek (1899-1992), one of the world’s remarkable economists.

  • ·    Advancement within a totalitarian group or party depends largely on a willingness to do immoral things. The principle that the end justifies the means, which in individualist ethics is regarded as the denial of all morals, in collectivist ethics becomes necessarily the supreme rule.
  • ·         …From the collectivist standpoint intolerance and brutal oppression of dissent, deception and spying, the complete disregard of the life and happiness of the individual are essential and unavoidable.
  • ·         ‘Collective freedom’ is not the freedom of the members of the society, but the unlimited freedom of the planner to do with society that which he pleases. This is the confusion of freedom with power carried to the extreme.

The leaders of the Ethiopian regime being revisionists of the communist system have not distanced themselves from adhering to the principles of this form of governance. Since the state is the main economic actor in the country, its actions remain unquestionable hence the limited political freedom.
Any form of opposition towards the government’s allocation and distribution of resources has been utterly suppressed through brutal means. And on this, the attempts by the Oromo to question the regime’s methodology in resource allocation have resulted in their imprisonment, death, injuries and loss of property.

The EPRDF government has engaged in deception and spying against the opposing voices. The governments have over the years spread propaganda with the main goal of portraying the Oromo and the Amhara as enemies. This is a divide and rule mechanism through which the Oromo have been consistently branded as narrow-minded and secessionists while the Amhara have been tagged as chauvinists with intentions of restoring the old feudal order.

An image showing a bus that was burnt during one of the protests.
Image: Courtesy

It is apparently clear that the EPRDF regime under the late Meles Zenawi and the current Prime Minister, Hailemariam Desalegn, has perfected the principle of the end justifying the means. The authoritarian EPRDF regime has pursued economic development at all costs without regarding the concerns of the Ethiopian citizens especially the Oromo. The exploitation of resources and land grabbing in the Oromia State by the EPRDF-led government and a small club of elites, notably the Tigrayan elites justifies the operationalization of this principle.

This is the problem of the state advancing the art and act of ‘collective freedom.’

The Road Ahead: Safeguarding & Sustaining the Economy’s Momentum
Ethiopia is expected to be Eastern Africa’s largest economy by GDP estimates by the end of this year. Forecasts by the International Monetary Fund (IMF) show that Ethiopia is expected to record a GDP of $69.21 billion compared to Kenya’s expected $69.17 billion. However, Kenya’s living standards and overall GDP per capita still remain twice as high that of Ethiopia.

To ensure that the strides the state has made on the economic front are safeguarded, the respect for human rights ought to be prioritized. Currently, Parliament is made up of 100% of the members of the EPRDF hence no effective system of checks and balances. The media which is supposed to be instrumental in revealing the government’s wrong-doing, has always been subjected to strict government control with well known cases of incarceration of journalists.

If at all the government is carrying out genuine development projects, then it must allow for scrutiny. But historically, an economy that is largely driven by the state hardly gives room for criticism and this has often led to the disregard of human rights. This is the growth and development model that China has a penchant for.

Going forward, the Ethiopian government seeks to have a vibrant private sector in the economy but to actualize this, the rule of law must be adhered to. From economics, it is a well-known fact that an economy largely controlled by the government may lead to government failure thus the importance of the private sector. The Ethiopian state should thus be committed to observing the rule of law and fundamental human rights.

The Prime Minister has acknowledged that indeed the country has to make improvements to the governance institutions and instruments of government to allow democracy to flourish. This is a positive sign which if embraced will steer Ethiopia into one of the largest economies in Africa. But at the moment, commitment to the implementation of this promise is unknown bearing in mind the recent declaration of the state of emergency in Oromia State for six months.

Several foreign states like Germany and USA have expressed their concern in relation to the anti-government protests but I don’t expect USA to be really tough on Ethiopia as they are strong allies in the anti-terrorism ‘war.’ China, the largest investor in Ethiopia cannot criticize and condemn the government’s action against the protestors because of her history in relation to violation of human rights and the rule of law.

Ethiopia’s growth and development trajectory can be termed as not inclusive due to the plight of the Oromo, the Amhara and other ethnic groups which have been excluded/marginalized by the successive governments. Perhaps, only a few individuals and groups have benefited from the growth which casts doubts on the country’s economic future. The anti-government protests offer a critical juncture that the state can use to change its system of governance.

This article was first published on

Wednesday, 19 October 2016

Of Cartelism, Mandevilleanism and the Era of Robber Barons

Image: Courtesy
It is turning out that the vice of corruption and its associated elements are being perceived as normal within the Kenyan state. The concerned authorities and even a large pool of the Kenyan citizens are no longer taken aback by the incidences and instances of social, political as well as economic venality witnessed and experienced on a daily basis.

Kenya’s system of societal and state organization that is capitalism has morphed into a system of cartelism, after undergoing a systemic and synthesized evolution since the attainment of our independence up to the current period of time. But are we really reaping the fruits of our independence? Not at all because true independence lies in all the three planes of the state board. This implies that independence is a three-dimensional aspect, that is, it bears social independence, political independence and most importantly economic independence. Majority of Kenyans are not economically, socially and politically independent due to the fact that corruption is thriving in the country.

Just to be clear enough, corruption has in fact turned out to be a vibrant independent and inter-dependent sector of the economy just like any other sector such as agriculture, manufacturing and others. Its peppiness within the Kenyan economy continues to intensify through its own creation of the forward and backward linkages with the other sectors and sub-sectors of the economy; it is deeply entrenched in the country’s economic, social and political systems.

With the country ranking among the bottom thirty on the corruption perception index, according to Transparency International, it implies to a greater extent that our moral standards are highly questionable, largely depraved and unequivocally putrescent. But of course not all Kenyans have stinking morals.

Image: Courtesy

Corruption is a case of morality versus immorality and in Kenya’s case, the reigning of cartels and its system of cartelism has deprived majority of the Kenyans the right and privilege of accessing and utilizing the basic facilities and resources. The initiators of the cartels and subsequently the propagators of cartelism are the robber barons and so mind you, we are in the era/age of barony and happily or sadly living during the time of the robber barons.

In his book, The Robber Barons published in 1934, Matthew Josephson endeavored to document at length on how some of the American capitalists were “milking dry” the citizenry and in due course enriching themselves. Certainly, the situation is not in any way different from the “state of corruption” in Kenya at the moment.

Perhaps, the culture of cartelism and barony in the country can be related to Bernard Mandeville’s (1670-1733) intellectual and philosophical heresy of virtue being vice and vice being virtue. The satirical political economist documented in his book, ‘The Fable of the Bees: Or, Private Vices, Public Benefits’ that, ”the profligate expenditure of the sinful rich gave work to the poor, while the stingy rectitude of the virtuous penny pincher did not, hence, private immorality may redound to the public welfare, whereas private uprightness may be a social burden.”

The Mandevilleanism doctrine has been fully embraced in the Republic of Kenya. Being corrupt or extensively mentioned in cases of corruption creates a figure and perception of heroism. By not engaging in corruption, one is branded as being naïve and even classified as a villain! Reflecting on this statement by Mandeville, does the public benefit? Not holistically but the cronies and those closer to the “backbone” are the beneficiaries. So, the immorality occasioned by some Kenyan somewhere to loot improves the welfare of the beneficiaries.

Cartelism, Mandevilleanism and barony have taken root in various spheres of the Kenyan state. The situation is catastrophic especially to the majority of the public coffers whose coins are plundered by an uncaring lot, a minority whose voracious appetite for public resources is well known.

In the corporate sector, we have seen and continue to witness the collapse of several entities because of the acts of avarice. Revisit the situation at Kenya Airways which is now the biggest ‘Shame of Africa’ and no longer the ‘Pride of Africa’. How can a firm make losses of Kshs.25 billion then Kshs.26 billion? In the finance industry we have the super-normal/abnormal profits but in KQ’s case, these can be termed as abnormal losses. The situation at Uchumi Supermarket was not different before the management was changed. The events at Mumias Sugar Company were not in any way different. Refer to the collapse of some of the banks in the country. Dubai Bank and the Imperial Bank collapsed because of the insatiable appetite of some corrupt individuals.

The housing sector has also been taken over by the cartels especially in Kenya’s capital, Nairobi. How many cases relating to collapsed buildings have we seen? Criminals, white collar criminals, have staged a coup in the sector by masquerading as real estate investors. These criminals of course engage in connivance with the responsible authorities to risk the lives of Kenyans who contribute dutifully to the economic growth and development of Kenya’s economy.

The health sector hasn’t been left behind. The invisible hands of the cartels that execute visible criminal acts have penetrated into this sector that plays a fundamental role in treating the populace and in due course maintaining a healthy labour force for the economy. Have we not heard of some of the medical doctors referring patients to India and some of their privately-owned medical clinics out of collusion? Have we not heard of the ‘shortages’ in medical supplies artificially created by these individuals who only think about making an extra immoral shilling from the public resources?

Our education system has been taken hostage by these cartels, invisible as they seem to be. Over the years the national examinations for the primary, secondary and tertiary institutions have been leaked because of these criminals. In fact, the acts by Dr. Fred Matiang’i the Cabinet Secretary for Education to sanitize the system especially the administration of the national exams have been subjected to resistance by these disciples of Mandeville.

Let’s not forget that our political system is largely dominated by these barons. Who owns political parties and systems in Kenya? A secluded class of elitist capitalists who of course use political power to cement their “investment” deals. Political parties are neither agenda-driven nor are they people-centred in the Kenyan state. They are tools used to orchestrate the economic manipulation of the whole and because the economy forms the basis for socio-political organization, then the thoughts of economic, social and political independence are consequently and consistently watered down.

The preying culture is also ingrained in the petroleum industry. At a time when oil prices are at their lowest globally, locally we have not fully benefited from the slump in the prices because some fellows somewhere are controlling the gears. I’m meant to believe that the current prices of petroleum products are supposed to be relatively cheaper by Kshs.20 or thereabout. What if we start drilling the recently discovered oil in some parts of Kenya? I have a feeling that we might not be significantly better off with the discoveries and the subsequent drilling of the “Texas Tea.” Right now the barons are conspiring to grab the land on which the Kenya Petroleum Refinery Limited is situated.

I still don’t have a clear comprehension of why some bottled “mineral water” is more expensive than petroleum in this country. Most of these water bottling firms have in fact admitted to filling the so called “mineral water” with ordinary tap water. Water is supposed to be a basic right and basic commodity freely provided by the state and its agencies. In my opinion, all towns, centres and market centres are supposed to have a constant flow of cool and clean water freely available to all people. But because we allowed water, one of the basic rights to humankind, to be corruptly commercialized then such an act only remains a reverie. Cartels have taken over the water industry that we end up experiencing artificial shortages for them to reap big. Recall the closure of several water bottling plants in Kenya sometime back by the Kenya Bureau of Standards (KEBS).

Image: Courtesy

Cartels have even gone to an extent of stealing and looting relief food and items. What a shame! What an embarrassment! These are the effects of cartelism, a mutated form of capitalism. Is it that capitalism has failed to generate social, economic and political independence? Maybe…Joseph Alois Schumpeter (1883-1950), one of the greatest and brilliant economists and political scientists in the world, attested to the fact that economically capitalism had succeeded but sociologically capitalism had failed.

The political leadership, at the national and county levels MUST be committed in the fight against corruption. What happened to the Economic Crimes Act of 2003? Parliamentarians should make amendments to this legislation and make corruption very expensive. But I doubt most of these “honorable” members of the august House because they have never been concerned about scrutinizing the national budgets that we have had for the last three years or so. Theirs is to keep strategizing on how they will be re-elected and globe-trotting by making silly benchmarking tours on policy-making when similar policies are gathering dust on shelves of various ministries. What is the role of the Executive in this republic? Resign to cartels and corruption?

Sadly enough, the justice system hasn’t been spared by the cartels and the robber barons. The institutions mandated to fight corruption are indeed waging their own unending battles against corruption itself. The Ethics & Anti-Corruption Commission (EACC), the Attorney General’s office, the Judiciary, the office of the Director of Public Prosecutions and the various police units are all faced with corruption.

The national teams have mercilessly fallen in the fishing nets of the cartels. Teams which have fallen victim to these economic robbers include the athletics team, Harambee Stars, the men’s rugby team (Shujaa), Malkia Strikers (Women’s volleyball team) among others. Where did our African values disappear to? Is cartelism African?

Well, let’s change our conduct or forget altogether about the bright unforeseen future of Vision 2030 and beyond if we are not going to be ANGRY ENOUGH about corruption.

This post was first published on

Thursday, 6 October 2016

The Divergence & Sustainability Doubts of Africa’s Economic Growth

The October issue of the Africa Pulse report, a publication of the World Bank that highlights the state of economic growth in Sub-Saharan Africa (SSA), reveals that the region’s rate of economic growth for 2016 will be 1.6%. This is the lowest rate of economic growth that SSA would have registered for the last two decades and it is in fact lower than the previously forecasted 3% expansion of the real Gross Domestic Product (GDP) for 2016.

In addition, the 1.6% rate of economic growth is lower than that of the Emerging Markets & Developing Economies (EMDEs) which is projected to be 3.5% and the global growth rate of 2.3%. It marginally surpasses that of the advanced economies by a mere +0.1. However, it is expected that SSA’s economic growth rate will pick up in 2017 heading into the medium term. The World Bank analysts forecast that SSA will register an economic growth rate of 2.9% in 2017 and 3.6% in 2018.

Several factors have been identified as the causes of the slump in the economic growth for SSA in 2016. They include the incidence of low commodity prices in the global market, tight financial conditions in USA and the Euro Area that have occasioned a reduction of capital flows into the region, policy uncertainty in the domestic economies, droughts, political and security threats and the slowing down of the growth of China’s economy.

One startling fact documented in the report is the nature of economic growth exhibited by the respective economies of the states that make up SSA; some of the economies are registering relatively high rates of economic growth, a few are growing a bit slowly and others are experiencing a continuous contraction of their GDP.

The economies of Ethiopia, Rwanda, Tanzania, Cote d’Ivoire and Senegal are projected to register economic growth rates of above 6%. The performance of these economies has been attributed to several factors key among them; good monetary and fiscal policies, better business regulating environments, the diverse structure of the commodities exported and more effective public institutions.

On a general scale, this has an implication that the other countries’ economies that are playing catch-up with the aforementioned ones, and those whose economic performance is dwindling are operating in the middle or at the extreme end of the continuum that is an aggregation of the stated metrics. This is in fact where the divergence stems from and paints a picture of a continent fantasizing with the aspect of Africa Rising.

Primary Causes of the Economic Slump

Considering the general economic performance of SSA, there are more doubts than hopes in light of the envisaged economic resurgence of the region in the second decade of the 21st century. Externally, the continued internationalization of capital and the global integration of different regional economies cannot be disregarded or disputed for that matter. The global financial crisis of 2008 and the Eurozone Crisis thereafter are deeply interlinked to the decline in the economic growth rate of SSA. As a direct result of this, the financial resources funneled to the SSA region have significantly decreased and this is especially with regards to the flow of capital to the region. The aftermath of the crises has resulted in the crafting and drafting of stricter monetary and fiscal policies in the USA and in Europe. The USA and the Euro Area are still gravitating towards the equilibrium hence the effects of the adjustments.

One of the primary causes of this decline in the economic growth of SSA has been the decreasing commodity prices in the global market. This has greatly affected the commodities from SSA that are exported to Europe, the Americas and Asia.  The commodities that have largely been affected are oil and the minerals. The increase in the supply of oil has resulted in low prices of the product and this has seriously dented the African economies that are dependent on it. The economies dependent on the minerals have also experienced the economic misfortunes in the world market.

To a larger extent, Nigeria and South Africa which make up 50% of the GDP of SSA, experienced near-recession situations in their respective second quarters. Nigeria chiefly depends on oil while South Africa’s economy is largely fueled by the revenues realized from the minerals. Other countries such as Botswana, Angola, Chad, and the Democratic Republic of Congo among others have suffered from this.

Sustainability of the Growth Momentum

Before the economic slump that began in 2015, SSA had registered an average economic growth rate of approximately 5% per year for over ten years. The paradox from the sustained economic growth rate was the failure to cut on the levels of poverty and unemployment in the region. This is perhaps a pointer that the growth was not anchored on feasible policy frameworks.

The sustainability of the economic growth of SSA is a mirage basing on the prevailing form and nature of the economic model of the region. An interesting fact is the growth and expansion of the service sector compared to the manufacturing sector whose growth is relatively slower. The other regions of the world, in the course of their economic growth and subsequent structural transformation, the manufacturing sectors were developed into the largest contributors of their GDPs. This should trigger economic curiosity in light of the different nature of SSA’s growth trajectory.

Logically, a thriving manufacturing sector creates the economic momentum through the backward and forward linkages with the other sectors within the economy. The failure to heavily invest in the manufacturing sector has led to the failure to diversify the exported commodities.

The doubts in the sustainability of the growth momentum of SSA can be traced to the peripheral role played by the agricultural sector. The sector contributes 30% of the region’s GDP and 2/3 (67%) of the region’s labour force but its total factor productivity is very low compared to the other regions of the world. To effectively reduce the poverty and unemployment levels in SSA, special attention must be paid to the agricultural sector. Its development through the establishment of agro-based industries will further create other external industrial linkages which will set up a stronger foundation for the manufacturing sector and a vibrant service sector.

Back On Track: Fundamental Policy Prescriptions

The future of SSA is bright but the formulated policies need to reflect the current situation and address the reality on the ground. The economies of SSA have to diversify the commodities that they export. This entails value addition of the products and even diversification of the markets in which the commodities are exported to. This will reduce the uncertainties associated with the fluctuations of the commodity prices.

The development of the agricultural sector should be prioritized given its contribution to the region’s GDP and the labour force in the sector. The policies formulated ought to focus on the sector’s commercialization, leveraging on technology and special programmes tailor-made to harness the productivity of the smallholder farmers.

More investments should be made in the manufacturing sector. The investments in this sector should mirror the on-going investments in infrastructure.

Above all, the SSA countries must create friendly business environments that encourage, promote and attract investors both domestically and externally. Intertwined to this is the need to ensure that there is a lot of efficiency in the public sector such as a reduction in the red tapes and the levels of corruption.

Addressing uniformly the challenge of economic growth divergence is a challenge in itself as different SSA states have a lot of dynamism as far as economic management is concerned. But the divergence is a cause to worry about as it may lead to cases of immigration which often precipitate the xenophobic effects. This is why the growth trajectory of SSA ought to be consistent and in due course sustainable.

Saturday, 17 September 2016

After the Grand Merger; What Are the Stakes & Possibilities?

The dissolution of the affiliate parties that made up the Jubilee coalition to form a single entity in the name of Jubilee Party of Kenya is undoubtedly a critical juncture in the country’s political history. What remains to be seen largely is if and how the newly formed party will be able to survive and thrive in the long-term. The survival of the new kid on the block is pegged on a number of factors and of course its formation might also politically emasculate the other parties which have positioned themselves as outright competitors for political power.

One of the pitfalls that the Jubilee Party needs to strategically circumvent is the sharing of the party positions. The sharing of the party positions on interim basis, as initially perceived, would be done in such a manner so as to accommodate at least all the parties that were dissolved en route to the grand merger. But word has it that the then officials of the now defunct Jubilee Alliance Party (JAP) are touted to take over the administration of the party secretariat on an interim basis. The probability that the Jubilee Party will conduct party elections before the forthcoming general election is very minimal and may not even happen because of the likelihood of the emergence of political faults and rifts within the party.

This implies that a well crafted road map is needed so as to accommodate the possible dissenting voices. But a point to ponder is if the former members of the smaller parties should be able to get an almost equal share of the party positions with the likes of the defunct United Republican Party (URP) and The National Alliance (TNA). This certainly cannot happen. So what is the probable leverage to counter this? My hunch is that the former members of the dissolved smaller parties will be promised lucrative positions in government in the event that President Kenyatta is re-elected. Therefore, as at now, the issue of sharing the party positions isn’t a Herculean task as such.

Another hurdle that lays ahead of Jubilee Party’s path to seamless political operations is the aspect of party primaries. Nominations have always been a thorn in the flesh of political parties in Kenya and how the President’s new party will deal with this particular challenge will largely determine its existence in the medium-term to the long-term. The foremost strategy that has been hatched to ward off this challenge is the intention of having the Independent Electoral and Boundaries Commission (IEBC) conduct the party nominations.

The perception that is shared among the party’s stalwarts and political faithful is that the conduction of the party’s primaries by the state’s electoral body guarantees transparency in the nomination process. But will this move be able to counter the machine politics within the party? Seeking for political favors from the party’s honchos will aggressively take place considering the fact that the nomination process is expected to be a battle of its own kind. The reality that certain candidates might be favored by the party’s ‘who and who’ cannot be dispensed whatsoever and hence how this weighty political matter will be handled is an absolute fundamental question.

The level of aggressiveness in terms of the machine politics will determine the rate of the pre-nominations turnover. In this case, the stakes are generally high for the party’s primaries and those who might not be in good terms with the high and mighty risk a bleak political future because this is a black and white matter that even the IEBC by overseeing the party’s nominations cannot control.
So, what is the possibility in view of this scenario? Defections might take place long before the end of the window stipulated by the respective piece of legislation. This may be a tricky affair for the Jubilee Party especially if the defectors appear to be very popular on the ground. In the event that such defectors win political seats, it would as well have worked against the party’s wish to have an unmatched majority in Parliament.

Heading towards the 2017 general election, the strategists of the Jubilee Party cannot ignore the fact that the presence of the Chama Cha Mashinani (CCM) and the Kenya African National Union (KANU) especially in the Rift Valley region portend a treacherous political path for the party. The possibility that KANU will collaborate with Isaac Ruto’s CCM is relatively high as the two seek to position themselves strategically as alternative political havens for the Rift Valley residents bearing in mind that URP has been dissolved. That whether KANU and CCM will give the Jubilee Party a run for its money or if the latter will totally enfeeble the two remains to be witnessed but from my perspective, it is still early to make definite conclusions on this issue.

What makes the political drift in the Rift region to be interesting is the Moi-Ruto (Deputy President) factor of just who owes who and what? On one hand DP Ruto claims that Gideon Moi should support him because he religiously supported Toroitich Moi. But a disclaimer on this political hot potato is the bitterness within the elderly Moi on how the Deputy President wrestled the kingpin status away from him as he had strategically groomed his son, Gideon Moi, to take over. Therefore, the Baringo Senator is charged with the mandate of re-claiming the status of the region’s kingpin from DP Ruto and this moment being the sunset years of the former second president, then the political battle might as well intensify.

The possibility that the Jubilee Party is on course to being Kenya’s largest political party is relatively high, basing though on the primary vagueness of the current state of affairs. However, to ensure that it delivers a political sucker punch to its competitors, the Jubilee Party has created a window for forming pre-election and post-election pacts and coalitions with other willing political parties. This really maximizes its chances of securing a majority in both Houses.

Ultimately, the vibrancy of the Jubilee Party is furtherly pegged on the organization of the political parties on the other side of the political divide. The organization of the opposition political parties will irrefutably determine and affect the modus operandi of the Jubilee party; a disjointed opposition will guarantee a not-so-difficult sail through for the Jubilee party whereas a properly oiled opposition will certainly create a vicious electoral battle.

Presciently, the Jubilee strategists are well prepared to counter Raila Odinga and largely CORD. Whether Odinga will vie for the presidency or not, his political moves cannot be ignored whatsoever.  So what if the much rumored ‘Super Alliance’ the possible coalition of the Orange party, Wiper, Ford Kenya, Amani National Congress and KANU takes shape? This would highly counter Jubilee’s moves especially when a partnership involving Gideon Moi plus either Kalonzo or Mudavadi is fronted for the presidency. However, at the moment, this is largely an expected scenario and perhaps a political illusion.

At the end of it all, the bottom line is whether the Jubilee Party will stand against the test of time and usher in a new political era as it has been envisaged, different from the other past junctures. Only time will tell.

Thursday, 1 September 2016

Of the Current Scramble for Africa: Is the Continent’s Future Mortgaged?

What were the imaginations and visions of the African leaders about the continent’s outlook and progress during the dawn of independence? Of course they envisaged a continent that is highly prosperous and absolutely independent from the neo-colonial tendencies of their former colonial masters and free from the hegemonic socio-economic and political practices of the foreign states.

It is unfortunate and disappointing at the same time that such aspirations of a truly independent Africa have been dealt a huge blow forthrightly by a cocktail of factors; both internal and external factors. Internally, it is well known that majority of the African leaders are the real enemies of the continent’s progress as they have perfected and sharpened the act and art of siphoning the resources that are meant to be tapped for the benefit of the African citizens. Externally, the imperialistic tendencies of some of the well-known Western states, the advances by some of the Asian economies and other emerging economies of the world continue to hinder the progress of Africa.

Unlike the first scramble for Africa which largely involved coercion, the current scramble for the continent entails the application of non-coercive practices. The first scramble for Africa involved the signing of treaties and agreements which is still the case with the current scramble. Some of these treaties are in good faith and for the common good but systemically, they are somewhat skewed in favour of the foreign nations so that at the end of the day Africa suffers from the haemorrhage of her economic resources and this isn’t different from the treaties signed in the pre-colonial and colonial period.

Most critically, the first scramble for the continent was informed by the need to fuel the economic well-being of the imperialist states of the time and hence, the desire to cheaply obtain economic resources from Africa. Similarly, the on-going scramble for Africa is anchored on the aspirations of the advanced and advancing economies to position themselves strategically in the world’s geo-political flux of gaining the status of a superpower state. And so this necessitates the sapping of economic resources from Africa.

One fundamental question that Africans need to keep asking is why the world’s leading economies are running to Africa to sign the so called “development partnerships” and “development agreements”. I presume that forward-thinking and patriotic Africans are constantly asking this pertinent question.

A few days ago, the sixth Tokyo International Conference of Africa’s Development (TICAD) took place in Kenya’s capital, Nairobi. A number of deals concerning and related to development were signed by the African heads of states as well as the heads of governments and the Japanese government. This is just one of the many events that are used by the leading economies to lure the African leadership into signing agreements that are largely in favour of the former.

Objectively, some of the agreements as noted before, play a big role in propelling the continent’s economic engine and it is a fact that cannot be disputed. But it is high time that Africa’s leadership carries out an evaluation of these agreements from those ones signed or entered to from the 1960s up to now to clearly establish their costs and the benefits. This is a basic exercise that the African Union (AU) needs to be regularly doing. We ought to know by way of comparison, qualitatively and quantitatively, the ultimate benefits realized by the African countries against those ones by the foreign states.

TICAD is similar to other existing development initiatives by the world’s leading economies to shop for economic resources in Africa. Other development initiatives include: the Forum on China-Africa Cooperation (FOCAC), the USA-Africa Partnership, the Africa-European Union Partnership, the Africa-India Cooperation Agreement, the Korea-Africa Forum, and the Africa-Turkey Partnership among others.

In taking stock of these agreements and partnerships which in general are supposed to enhance the economic well-being of the concerned parties and entities, focus should be directed towards the ratio, rate and level of the exports and imports to and from the foreign states. It is common knowledge that the amount of Africa’s exports to other continents and countries of the world is seriously dwarfed by the level of imports from these units to Africa.

One may argue that the exports from Africa are largely primary products that are highly deficient of value addition which is an undisputable fact. But is it not economically freakish that a significant proportion of Africa’s imports leave the continent as exports in their primary form?

As much as we appreciate the efforts by the foreign nations through their multi-national corporations to promote value addition, a lot still needs to be done. This includes the following: Firstly, there is urgent need to assess the operations of the multi-national corporations especially on matters relating to capital flight from the continent through sinister and covetous economic activities such as tax evasion. Secondly, the so-called trading partners and the multi-lateral institutions should show strong commitment to curb the drain of economic resources from Africa.

In dissecting the current scramble for Africa, it is vitally important that we gain a thorough and clear understanding of the strands of dynamism that underpin this matter of continental and international interest and concern as well. After the dawn of independence, the Bretton Woods institutions saw it ideologically fit to build and develop the economic capacity of African countries by funneling financial resources in form of financial aid to them. Practically and realistically, foreign aid has remarkably failed to catapult the continent’s economic potential contrary to the initial expectations.

A closer look at the decision by these institutions to advance financial assistance to Africa needs to be made. The Bretton Woods institutions are controlled by the Western nations and so by them giving the financial assistance to Africa implies that they must get something in return. In short, they operate on a quid pro quo basis… there are no free things in this world that is highly enmeshed in capitalism. To an extent, the Bretton Woods institution could have been providing financial assistance to Africa with hidden intentions; to find a way to exploit the continent’s economic resources.

The emergence of China and other economies has necessitated a paradigm shift in terms of financial assistance and foreign aid to the African countries. The current foreign aid dispensation especially from the East doesn’t front for conditionalities, which is diametric from the old order championed by the Western nations. As a matter of fact, this policy of non-interference has also been fantastically dangerous for Africa as it has promoted the siphoning of economic resources from the continent.

The change in dynamics with respect to financial assistance in terms of embracing the mantra of Foreign Direct Investment (FDI) is fundamental for the economic growth and development of Africa. But unless there is a degree of near-proportionality and equality in the trade partnerships then our resources will be forever subjected to the predatory nature of the leading economies of the world. It is thus a great responsibility of Africa’s leadership to seize the moment and exercise bold leadership other than mortgaging the future of the world’s resource-rich continent through the talk shops.

Saturday, 6 August 2016

Capping of Interest Rates Is a Parlous Policy

After going through all the legislative stages, the Banking Amendment Bill 2015 now awaits President Kenyatta’s assent or dissent. Many economists, policy analysts and concerned citizens have expressed their varying opinions on this serious policy matter, either in the affirmative or negative.

There is no doubt that the institutionalization of the usury laws or simply the capping/controlling of interest rates within the economy elicits emotions and passions. The subjection of interest rates to legal control(s) is a controversial issue, always debated either with doses of naïveté or with the showmanship of great scholarly discourse on the other side of the continuum.

Two schools of thought are prevalent in this particular economic disquisition. The first school of thought advocates for the capping of the interest rates in order to enable the borrowers to access credit/loans at affordable and reasonable interest rates. The second school of thought is largely diametric to the first one and it argues that controlling interest rates significantly reduces the availability of credit in the market.

For proper understanding, it is vitally important that one is aware of the different interest rate capping regimes. The first regime is known as the interest rate controls where the central bank is tasked with the mandate of instituting a ceiling of the interest rates in the economy. The second regime is known as the usury laws whereby a specific organ of the government is supposed to control the interest rates. In most cases, the organ that normally plays this role is Parliament through the formulation of the respective pieces of legislation. The third regime is known as the de facto ceiling in which the controls are put in place by way of agreement, that is, without formal legislation. This regime is usually as a result of pressure from the civil society or through political pressure.

Kenya’s case, therefore, can be classified as falling under the usury laws regime. Fast forward, the rationale for capping of the interest rates ought to be examined. The rationale, however, is kindred to the two schools of thought. The general agreement is that the interest rate controls are necessary for the following main reasons: protect consumers from excessive interest rates, increase access to finance, make loans to be more affordable.

The key precept underlying the enactment of this policy is to keep in check the financial institutions that charge very high interest rates to the borrowers. In due course, there is a general consensus that capping of interest rates should be based on the advent and prevalence of market failure in the whole economy or within certain sectors of the economy.

The credit market just like any other market (commodity market) can experience market failure. Market failure, in simple terms, is an economic state in which the forces of demand and supply are skewed; in other words, the forces are distorted. Market failure in the credit market implies that the market is unable to “freely” lower the level of the interest rates. The Kenyan credit market has been unable to effectively bring down the interest rates and to an extent, this can be deemed as a form of market failure.

But does the Banking Amendment Bill 2015 take into consideration the fundamentals that have contributed to the relatively higher interest rates in the state? In my opinion it doesn’t because it overrides the two main objectives of controlling interest rates at least according to the global best practice; targeting a definite sector or industry of the economy and being a short-term policy intervention.

This legislation seeking to curb the interest rates is amorphous because it doesn’t target a specific sector/industry of the economy and furthermore it is vague in terms of the time span in which the capping will be effected. It would have been economically sound if the capping of the interest rates would have targeted, for instance, to improve the accessibility of loans for people involved in agricultural activities or even the jua kali sector because they are the largest contributors of employment in the economy.

The problem with majority of the Members of Parliament is that they don’t subject most of the legislative discussions and legislations to logic and rationality. This leads to the passage of populist legislations in the name of protecting the citizens.

Primary Causes of High Interest Rates in Kenya
There are two main causes of the high interest rates in the state; the first one is the oligopolistic nature of the credit market and the second reason is the voracious appetite for borrowing fashioned by the current administration. Kenya’s credit market is perceived as competitive, but just how competitive is it? Out of the forty two commercial banks in the economy, six of them (deemed to be the largest) control 52.4% of the credit market. This implies that the remaining thirty six banks control the remaining 47.6%, with an average share of 1.32% per bank. This is utterly ridiculous. The situation is not rosy for the microfinance institutions. According to statistics by the Central Bank of Kenya, three microfinance institutions control about 93% of the respective market share.

The determination of the interest rates in the market, in view of the above cases, will be subject to the behavior of the dominant financial institutions. The habit of the ruling administration to engage in wanton borrowing is also a significant cause because the government can borrow at any level of interest rate.

Effects of Interest Rate Controls
If the Banking Amendment Bill 2015 will be assented by the president, then the following effects are likely to be witnessed, or otherwise experienced in the economy. First, the access to financial resources by a certain segment of borrowers will be limited as the financial institutions may: establish rigid credit terms, raise the minimum size of the loans, increase and even add other non-interest fees and charges. The borrowers who will be highly affected include the first time borrowers and low-income borrowers. All these measures will be put in place by the financial institutions because of the need to maintain similar profit margins.

Secondly, the overall cost of credit (loans) for all the potential borrowers will go up owing to the expected terms to be instituted by the financial institutions. Thirdly, capping of the interest rates may occasion some of the financial institutions to withdraw from advancing credit to certain areas or sectors due to the imminent high operation costs. Another effect will be reduced investments in new markets by these entities. The other consequence will be the rise of more informal lenders (Shylocks) with the intention of filling the financial vacuum created.

The bottom line, irrespective of the individual effects, will slacken the pace and rate of financial inclusion in Kenya’s economy.

Policy Prescriptions
To address the matter of effectively lowering the interest rates, other policies other than capping of interest rates should be formulated and implemented. The first policy must obviously address the issue of competition. Kenya’s credit market needs healthy competition and this can be made possible through the amalgamation and consolidation of the small banks and the other financial institutions. We can have very few but very competitive financial institutions. The Central Bank of Kenya under the stewardship of Dr. Patrick Njoroge is putting in place measures to facilitate healthy competition and it may take a number of years.

The government should also significantly reduce on the rate at which it has been borrowing from the domestic market. There is need therefore for the Treasury chiefs to effect fiscal policies anchored on absolute austerity so as to create a conducive economic environment with regards to the level of interest rates.

Formulation of laws to control interest rates in the whole economy is illogical because such capping is supposed to spur growth and development in a certain sector/industry. In Kenya’s case, the Banking Amendment Bill 2015 doesn’t address any specific sector and President Kenyatta needs to dissent it. I believe that if Kenya’s credit market will be very competitive and free from control by a few large banks then relatively low interest rates will definitely be a reality in addition to the implementation fiscal measures that promote low levels of government borrowing.