Devolution At 3: Discontent, Despair?

 (First published on savicltd.wordpress.com)

It is three years down the line since the inception and operationalization of the aspect of devolution following the promulgation of the New Constitution in 2010. Devolution is the most notable tenet that is anchored in the Kenyan Constitution since it presents a new frontier for socio-economic and political growth and development through the 47 county governments. It was within the principle of creating and promoting equality in the distribution of national resources(The National Cake) that devolution was enshrined in the Constitution.

This week the third devolution conference was held at Meru the home county of the current chairperson of the Council of Governors, Peter Munya. The main objective of this annual event is to evaluate the progress made as far as devolution is concerned and at the same time reflect on the challenges encountered by the county governments and if possible provide workable solutions to the challenges.

Majority of Kenyans are discontented with the pace of devolution. They cite corruption within the systems of the county governments as the root cause of their pessimism amid other challenges. Others are just negative in their opinions because it seems that they are masters of the status quo that centres and borders on centrality of government.

I believe that devolution is working and it will continue to work. Look at counties which were eternally marginalized before the promulgation of the new constitutional dispensation for instance, Turkana, Mandera, Wajir, West Pokot and others. At the moment, the residents of these counties can be able to witness infrastructural development as well as the development of social amenities which in the medium-term and long-term will improve the socio-economic conditions of the residents. Holistically, devolution has led to the construction of roads in regions that had no single kilometer of tarmac roads for five decades since attaining independence. In addition to the roads, health centres have been developed albeit the challenge posed by the industrial strikes by health workers.

The problem with some of the Kenyans is that they are always negative and pessimistic. What occasions devolution to appear as if it is a failure if not a disaster is the impatience exhibited by such individuals. Many had the expectations that once operationalized, the face of Kenya would instantly change due to the percolation of resources from the national government to the county governments.

This is not the case with economic development. The expectation of an economic miracle due to devolution could not have happened for one single reason. There were no systems and structures in place to warrant any momentous build-up of the necessary economic firepower that could trigger instant socio-economic transmogrification. One may present an argument basing on the now defunct local authorities/governments as having set a foundation for the county governments but the mechanisms on which the two operate are totally different.

In fact it may take another seventeen years before the ‘real’ effect of devolution becomes not just tangible but absolutely significant as well. This implies the period of time from 2022 going forward. I am pretty sure that devolution will trigger an economic spurt that will catapult Kenya’s economic trajectory from one based on a vicious cycle to one that is anchored on a virtuous cycle. Patience is therefore important.

In my opinion, however, the most evident bottlenecks that are dragging devolution include the threats posed by the scourge of corruption, the bureaucratic fiscal procedures in the transfer of allocated funds from the national government to the county governments, political bickering pitting the county chief executives and other elected leaders and the structural and budgetary miscalculation made by the Governors.

There is no doubt that corruption poses a very great risk to the foreseen economic take-off orchestrated by devolution. Corruption in Kenya is intrinsic as well as systemic. The governance situation which perhaps the policy makers did not clearly envisage is the devolution of corruption. Effective systems were not established to check on the possible trickling of corruption to the counties. Even the county governments themselves have no pristine measures and mechanisms to ward off corruption. This poses a great risk on the future of the state.

The transfer of the allocated funds from the central government to the respective county governments has been inefficient to a larger extent. This has been as a result of the financial red tapes that are extant. These bureaucratic procedures have stifled some of the devolved programs. The delay in the disbursement of funds has contributed to the frequent industrial disputes between the health workers and the county administrators. Other administrative activities have also been affected by the shortage of funds created by the fiscal bureaucracy.

The endless politicking pitting the county chiefs and other elected political leaders is also a threat to the smooth operation and running of the county governments. The governors have been embroiled in constant political battles with the Senators, Members of the National Assembly, Members of the County Assemblies and sometimes even the Executive of the national government. These leaders have often accused the Governors of propagating maladministration and allowing malfeasance to persist within the county governments. Some of the accusations may be true but also some of the criticism is out of the need to gain political mileage and political capital. This is outrightly true considering the declarations made especially by majority of the Senators to vie for the gubernatorial seats. 

The major hindrance towards the prosperity of devolution is undoubtedly the structural and budgetary misstep made by the county chiefs during the inception of the county governments. All the Governors blundered by employing many individuals the result which has been the allocation of more budgetary resources towards financing the recurrent expenditure and relatively lesser amounts towards the capital expenditure. In my opinion, there ought to have been the institutionalization of a budgetary capping for the county governments so that thresholds for the capital expenditure and recurrent expenditure are stipulated. This would have laid emphasis on economic development other than on reckless if not haphazard spending.

Devolution is supposed to be a frontier for the promotion of inclusion, that is, economic inclusion, social inclusion, political inclusion and spatial inclusion. The citizenry need to question how the funds are used implying that transparency and accountability are primordial. Most of the challenges that are facing county governments apart from the delayed funding by the national government can be dealt with by the Governors. This can only happen if they shun rewarding their cronies, relatives and other associates with strategic positions and administrative portfolios. They need to focus on getting on board effective and efficient policy makers to help them stick to the fundamentals of economic growth and development. But as Kenyans we ought to be optimistic about devolution and relentlessly question about the use and misuse of funds as this is one of the surest ways that we can be able to hold the county chiefs accountable.

Comprehending Botswana’s Economic Success

 (First published on savicltd.wordpress.com)

Botswana has for a long period of time been regarded as one of the successful African countries in terms of the economic growth and economic development. Despite some arguments brought forth by some scholars that its structural transformation has been slow, I find it necessary to term it as one of the African economic success stories in view of the other African countries especially in Sub-Saharan Africa, whose economies have been rocked by various challenges that seem to be unsolvable. This does not in way imply that Botswana’s economic trajectory is smooth because it is also faced with several challenges.

Amid the challenges which Afro-pessimists derive pleasure in highlighting them when debating about the African narrative, it is very important that the positives from the continent should also be noted down. Conversations focusing on the African narrative should seek to single out the positives and build on them so as to engender prosperity from an African perspective without any special comparison whatsoever with states that experienced economic take-off in the 19^th or early 20^th Centuries. The reason as to why I am championing for matters to be viewed from an African perspective is to relieve the African countries from the pressure that comes from comparisons made between them and the developed countries. Hence, there is need for relative comparison other than absolute comparison.

Though aspects of various economies tend to be universal in terms of the similarities, there is a lot of dynamism as the development or growth of one economy by following a certain pattern doesn’t imply that perhaps other economies will realize prosperity by sticking to the same pattern of growth. The economic trajectories of some may be lineal while for others it may be cyclical. To illustrate this, the economic growth and development pattern of the Western European nations and the North American ones is different from that of the Asian Tigers. Therefore, the pattern for economic growth and development for the African countries should also be relatively different.

Botswana is a landlocked country located in southern Africa with her size being nearly the same as Kenya’s. Only 4% of the land is suitable for arable farming with the remaining swaths of land being totally arid largely due to the presence of the Kalahari Desert. In 1966, after attaining her independence, Botswana was among the poorest states in the world whose budget largely relied on foreign funding and agriculture was the dominant sector. In fact, during the formal years after independence, 60% of the national budget comprised purely of funds from foreign sources. The agricultural sector being the largest at that particular time largely involved cattle ranching which produced beef for export. Agriculture contributed about 40% of the Gross Domestic Product(GDP). At the moment, agriculture contributes approximately less than 3% to the GDP while external financing of the budget is pegged at around 4%. 

From 1970 to 1999, Botswana recorded an economic growth rate of around 9%, the highest in the world during this period of time. Her economic growth rate slowed from the year 2000 to 2005 but soon began to be on an upward trend. The country currently has a per capita income of about $8,000 compared to $70 at the time of her independence. From the 1960s up to 2014, Botswana’s GDP averaged $4.11 billion. Botswana’s economic growth has largely been fueled by the revenues generated from the commercial sale of diamonds. It has been established that the discovery of diamonds led to the economic take-off that has been witnessed in this particular country. As a matter of fact, the mining sector’s contribution to the GDP is the largest in comparison to the other sectors.

Several factors have been attributed to Botswana’s economic growth. As put forth by economic historians and development economists Daron Acemoglu, Simon Johnson and James A. Robinson, the economic success of Botswana is hinged on the effective and efficient institutions of private property that were established in this state. These particular institutions have been able to protect the property rights of the investors, they have ensured political stability and they have constrained the political elite from carrying out expropriation of public resources. In other words, these institutions are inclusive and not extractive.

The inclusivity of such institutions has enabled Botswana to have a committed political leadership and sound economic policies. The political leadership has put in place measures to streamline the country’s economic governance. This involves the mechanisms that have been established to be able to deal with corruption and as a result Botswana remains to be the least corrupt country in Africa. For this southern African state, corruption is not endemic when compared to other African states. It is because of the nature of the institutions that seem to highly disregard the risks and subsequent problems that emanate as a result of expropriation, that have enabled the levels of corruption to be very low.

Scholars also greatly attribute Botswana’s economic success to the pre-independence conditions were fundamental to the establishment of the inclusive institutions of private property. For instance, Botswana’s colonial experience was pacified in nature, involving no battles with the British but instead lots of pleading and dialogue by the traditional chiefs for the Britons not to destroy the existing indigenous institutions. As a result, the British never imposed their own rule on the Tswana which if imposed would have led to the establishment of completely new and different institutions that would negatively re-organize the way of life of the people. The lack of interference of the indigenous system of governance limited the room for extractive institutions to thrive. Comparatively, countries where the colonialists did away with the traditional system of governance reeled from the effects of expropriation as extractive institutions were established to carry out forced labour and impose heavy taxation.

The pre-colonial institutions also allowed for discussions, deliberations and dialogue to take place between the chiefs and the community members. Such institutions were referred to as the kgotla and any major decision was therefore made with the involvement of the entire community. This hence injected the aspect of accountability on the part of the traditional political leadership.

There is no doubt that the traditional political leadership set a firm foundation for the post-independence political leadership of Botswana right from the founding president Seretse Khama, to Quett Masire, Festus Mogae through to the current president General Khama Ian Khama. President Seretse Khama in particular pursued a political leadership and system that embraced accountability, contingency planning and responsible fiscal policies among other positives. For example, just immediately after gaining independence, diamonds were discovered in a geographic region largely inhabited by Seretse’s ethnic community known as the Bamangwato. 

Instead of him allowing for expropriation by his own tribesmen, President Seretse pushed for the enactment of the Mines and Minerals Act of 1967 which vested the mineral rights in the national government instead of the tribes. This averted the possible conflicts that were to occur in case the mineral rights were to be given to the ethnic communities. This particular legal framework largely contributed to political stability which has been elusive for majority of the African states that have minerals such as the Democratic Republic of Congo, Nigeria among others. 

Most importantly, the political leadership has ensured that the revenues obtained from the sale of diamonds have been invested in public goods including infrastructure, education and health, rather than being embezzled. This seems to be quite unusual in Africa where many political leaders use such opportunities as mechanisms to amass wealth and impoverishing the masses. The Government of Botswana pursued effective fiscal saving policies so as to save part of the rents accrued from the commercial sale of the diamonds.

The fiscal savings have been able to cushion Botswana’s economy against the crowding out effect and have also been instrumental in maintaining stable rates of inflation. Furthermore, some of the savings from the government have been invested in offshore financial centres and this has helped to reduce the effects of the exchange rate depreciation in addition to securing the country’s future foreign exchange rate revenues. These measures have also played an integral role in ensuring that the public debt remains at a very low level. Domestic savings level is at 40% of the GDP while investments are at 35% of the GDP. This is significant in sustaining the economic growth trajectory as more savings denote more investments, ceteris paribus.

Some of the challenges facing Botswana’s economy include the diversification of the economy, the high economic disparities, the HIV/AIDS scourge, the relatively high rate of unemployment, limited freedom of expression and unchecked presidential powers. According to various geologists, the diamond mines are expected to be exhausted beginning from 2016 to 2029 hence the need to heavily invest in the manufacturing sector and the services sector to ward off any sort of economic meltdown. The income inequality should be checked being among the highest in the upper-middle income countries with a Gini co-efficient of around 0.5.

The limited freedom of expression and unchecked presidential powers are attributed to the dominance of a single party, the Botswana Democratic Party. This leads to another discussion of whether African states should pursue development first then democracy later or the other way round. May be democracy is a Westernized political mechanism and perhaps African countries need clean governments that are focused on economic prosperity. As long as tyrants aren’t at the helm of the political leadership then such a system can be considered. Botswana’s elections have hardly been affected with fraud and the presidents have always honored the term limits. The dominance of the ruling party should not be castigated because it has engendered economic prosperity, political stability and the opposition parties have been given room to also ascend to power. In conclusion, being an upper-middle income economy, Botswana still remains a model of economic success in Africa.

Of ‘Political Capitalists’ & Blurred Political Ideologies

It is a fact that Kenyan political parties are not driven by any political ideology, something which can only be challenged by the hireling ruffians seeking to propagate their self-interests and those of their political gods. Political parties in Kenya are outfits pegged on ethnic orientations and inclinations which suppresses the tenets of patriotism and nationalism as outlined in the Nationalist Covenant.

These political parties are conglomerates and amalgams of ethnic barons who seek to champion for their individual prospects at the expense of promoting national unity. These are the ‘political capitalists’ who have hijacked the political ideals of the Founding Fathers of our republic. They have held Kenya at ransom and continue to do so and this outrightly endangers the would-be prosperity of our posterity.

For the political parties that are extant, none conforms and affirms to any definite political ideology but are instead driven by individualistic agenda shared only by their very close associates. Due to this, the coalitions that are formed in the pretence of depicting and promoting national unity even worsen the situation as they are political marriages of convenience, to wrestle power and if possible retain it through the political recycling of failed political leaders.

One may however argue that the main aim of political competition is to attain power by forming the government but I instead put forth the argument that the attainment of political power should be on the basis of the presentation of well-defined political ideologies among the political competitors. This is because definite political ideologies tie the masses to the political leadership which is key in not just enhancing national unity but achieving it as well.

This is what has eluded Kenya for close to fifty decades since the attainment of our independence. The first republic took-off on a good note with the independence party, Kenya African National Union(KANU), premising its political activities and operations on a definite ideology. This was not to last for long as some of the ‘nationalists’ transformed into ‘political capitalists’. They discovered that being in power was the perfect time to amass wealth and this greed for public resources shifted the focus from political ideologies to selfishness. The 1980s saw a weakened economic trajectory largely occasioned by some of the KANU stalwarts who perfected the art and act of kleptocracy.

The emergence of the Forum for the Restoration of Democracy(FORD) was a critical juncture that reinvigorated the foundation of political movements and political parties on solid ideologies for the collective good of the Kenyan state, then reeling from the political and economic misdeeds of the cockerel party. FORD itself was driven by a political ideology anchored on the fundamental ideals of social democracy. This was touted as the moment in which Kenya’s political history would be re-written which only turned out to be a pipe dream.

The disintegration of FORD into several factions justified the existence of the ‘political capitalists’ keen to promote their personal ambitions. The ideology of social democracy that had flamed up certainly flickered out and worst of all the re-introduction of multi-partyism gave room for the ethnic barons to be able to thrive and survive in equal measure.

The dawn of coalition-based politics has proven not to be the solution to the challenges posed by negative ethnicity. In my opinion, these coalitions are not the ultimate answer in our quest to attain absolute national unity because these entities are agglomerations of ethnic political units.

Let’s face the reality here. What will happen to the political parties in CORD if the coalition breaks up? Similarly, what will be the exact turn of events in case the Jubilee coalition disintegrates that is if the Jubilee Party of Kenya isn’t formed? The respective parties will retreat to their ethnic bases as they ponder their next political moves.

The formation of these two coalitions wasn’t just coincidental but accidental as well. In as much as there are no permanent friends or enemies in politics, sometimes it’s accidental for some politicians to pretend to unite in the name of forming political coalitions. I term such events as political accidents because normally, the carving out of a political union must be underpinned by similarity in the political ideologies. So what is the precise ideology that led to the uniting of Orange Democratic Movement, FORD-Kenya and the Wiper Democratic Party? What is the ideology that binds The National Alliance and the United Republican Party? Or what ideology informed the formation of the now defunct Amani Coalition by the United Democratic Front and KANU? No ideology at all.

Having blurred political ideologies has often led to party hopping and the subsequent formation of many political parties. If politicians had the same or similar ideologies, they would have opted to be members of parties that they share their vision and mission. Such has not been the case because of the agenda of ‘political capitalism’ that fashions individualistic gains instead of nationalistic ideals.

It is the lack of definite political ideologies by the parties that have translated into a not-so-clear ideology on nationalism and a punctured and patched-up national economic ideology. Someone might mention the Vision 2030 as a justification to counter the latter statement but it has already been hijacked and trampled on by the chief priests of corruption as well as the lords of poverty and their voracious angels and agents who are the ‘political capitalists’.

Until our politics will be defined by workable political ideologies we should only dream about national unity. The concept of having many political parties has been overtaken by events based on negative ethnicity. Parties have turned out to be avenues and mechanisms for ethnic barons and patrons. This is what is ailing Kenya and the young people should be able to confront the challenges head-on and chart a new path that this beautiful country should take.

The Panama Papers Syndicate

In what has gone down as the largest data revelations in modern times, the Panama Papers is perhaps an event and not just an activity of any sort. The Panama Papers data leaks involve a total of 11.5 million documents in form of emails, pdf files, photo files and excerpts from the database of an international law firm, Mossack Fonseca, situated in Panama Island and whose associates are Jorgen Mossack and Ramon Fonseca. The data on Panama Papers is touted to be 2.6 terabytes in size, dwarfing the total combination of other data leaks that have occurred in recent times such as the famous Wiki Leaks which was 1.7GB and occurred in 2010, the Offshore Leaks 260GB in 2013, the Luxembourg Leaks 4GB in 2014 and the Swiss Leaks 3.3GB in 2015.

The Panama Papers showcase on how corruption networks and systems function globally, with indications on how the global financial system and the global tax system are manipulated to benefit a few individuals and to impoverish the masses. The aforementioned syndicate has revealed on how ‘dirty’ money has ostensibly been hidden for several years in one of the world’s most sought after tax havens or offshore financial centres. A tax haven or an offshore financial centre refers to a geographical region(s) in the world in which the taxes levied on the financial transactions carried out within that particular region are either very low or non-existent. These tax havens also highly regard and prioritize a high level of secrecy in their banking operations.

These tax havens are normally islands and they include, among them, the Panama Island, the Bahamas, the British Virgin Islands, the Macao among others. Due to the very low taxes charged on the financial transactions and the guaranteed secrecy on banking transactions and operations, these offshore financial centres are deemed as the ideal places where money that has been acquired through fraudulent means is hidden. This can be the financial proceeds obtained from activities such as drug-dealing and corruption. In so doing, these tax havens act as mechanisms for the perpetuation of tax evasion and money laundering.

Fast forward, the Panama Papers data leaks came into being after the information was provided to one of the leading newspapers in Germany, Suddeutsche Zeitung, by a source which remains unnamed. This particular scandal orchestrated by Mossack Fonseca involves about 215,000 non-existent companies and 14,153 clients. These companies that are non-existent are usually referred to as shell companies.  A shell company is a firm that outwardly appears to be a legitimate business entity but it is just empty, a shell for that matter, tasked with the management of the money and/or wealth received without revealing who the real owners are.

Mossack Fonseca is claimed to have aided in the setting up of several shell companies and various offshore accounts for individuals who are believed to be influential either globally or in the geographical regions where they hail from. These individuals include politicians, officials of the football world governing body FIFA, drug barons, athletes and even celebrities among other high profile individuals. 

Some of the individuals who have been named in the Panama Papers include the immediate former Prime Minister of Iceland Sigmundur David Gunnlaugsson, President Mauricio Macri of Argentina, President Petro Poroshenko of Ukraine, Prime Minister Nawaz Sharif of Pakistan, King Salman of Saudi Arabia, Hamad bin Khalifa al-Thani a former Emir of Qatar, former Prime Minister of Qatar Hamad bin Jaber al-Thani, world’s soccer superstar Lionel Messi, the current FIFA President and former UEFA Secretary General Gianni Infantino, Sergei Roldugin who is a very close ally to the Russian leader Vladimir Putin, Gonzalo Delaveau Swett the President of Transparency Chile which is a branch of Transparency International. 

Those ones whose names have been mentioned in the leaks and hail from Africa include Khulubuse Zuma who is a nephew to Jacob Zuma, Kenya’s Deputy Chief Justice Kalpana Rawal, Ian Kirby who heads Botswana’s Court of Appeal, Jaynet Desiree Kabila a twin sister to DRC’s President Joseph Kabila, Angola’s oil minister Jose Maria Botelho de Vasconcelos, Mamadie Toure a widow to former Guinean President Lansana Conte, Kojo Annan a son to Koffi Annan, John Addo Kufour a son to John Kufour a former president of Ghana and Mounir Majadi the personal secretary to King Muhammed the Sixth of Morocco.

How Mossack Fonseca Operates

Mossack Fonseca carries out its operations by providing a number of offshore firms located in different parts of the world. This Panamanian law firm usually establishes shell firms in some of the world’s famous cities and disposes them to clients at negotiable prices. Normally, the shell companies are sold at US$1000 but the client can pay extra amounts of money so that Mossack Fonseca can be able to provide a fake director(s) and this hides the identity of the true owner of the firm and the subsequent business activity that the firm carries out. 

Implications

Following the revelations of the Panama Papers syndicate, several resignations have taken place including the one by the Prime Minister of Iceland Sigmundur David Gunnlaugsson and the resignation by the President of Transparency Chile Gonzalo Delaveau Swett. I foresee many more resignations happening with regards to this event especially in countries whose laws on corruption are strict. 

On the account that the world’s football governing body FIFA and Europe’s football body UEFA have been mentioned in this particular scandal leaves a lot to be desired. Last year, the then president of FIFA Sepp Blatter and UEFA’s boss Michel Platini resigned due to allegations of corruption that are believed to have originated from the activities mentioned in the Panama Papers. The involvement of the Qatari Prime Minister and a former Emir of Qatar, FIFA and Sepp Blatter in this scam is an absolute coincidence that the awarding of the 2022 world cup hosting bid to Qatar might have happened under conditions fuelled by corruption. Of course, the 2022 world cup hosting bid has been shrouded with a lot of controversies. And don’t forget the 2018 world cup hosting bid that was awarded to Russia. The Panama Papers document the involvement of Russian power players in great length and breadth and I have a conviction that the Russian heavyweights might have bought their way to hosting this global event. This conjecturing of coincidences cannot be whisked away.

Global Governance Going Forward

The Panama Papers reveal the existence of an intricate and intrinsic web of corruption in the world. The tax havens or the offshore financial centres have led to the development, complication and sophistication of the global corruption networks and the manipulation of the global tax systems and financial systems. 

The offshore financial centres are not illegal in the first place but the major challenge that they pose is the hiding of the identity of the owners of the various firms and accounts that are found in these tax havens. This act of concealing the identity of the shareholders of the companies and the accounts is what has largely contributed to the breakdown of the global governance system by propagating the acts and activities that involve money laundering, looting of public resources and drug-dealing. 

As a result, such activities have led to the increase in the incidences of tax avoidance or evasion. As a matter of fact, it is highly possible that some of the multinational corporations, especially those involved in mining activities, could be engaging in such vices which have led to massive capital flight from the developing countries and this has consequentially starved them of the necessary capital required for investments in order to engender rapid economic growth and development.

The Panama Papers is just one of the many unknown global syndicates that exist in the various tax havens that are located around the world. I’m pretty sure that other similar networks actively operate in the other offshore financial centres. Such networks only seek to worsen the inequality gap in the world and even undermine the gains of democracy if not to annihilate democracy itself and its related aspects. A research carried out by the Tax Justice Network in 2012 estimated that these tax havens hide wealth amounting to between $21 trillion and $32 trillion, a clear indication on how they enhance and worsen the global inequality rates.

It is high time that laws meant to deal with the offshore financial centres are formulated through multilateral institutions such as the United Nations Organization. Who knows that may be even these tax havens provide a fertile ground for terrorism to thrive? Sanitizing the financial transactions and banking operations of these tax havens will definitely reduce the intensity of some of the global challenges. But as for now the emergence of a global spring on global governance is imminent, to specifically champion for the formulation of legal frameworks to combat these offshore financial centres.