 |
| Maize flour on the shelves of a supermarket. Photo: Courtesy |
For
the common folk and the underclass of Kenya’s populace, their lives have
literally been thrown into chaos following the on-going increase in prices of
some of the commodities that are largely consumed by the households. The continuous
rise in the prices of such commodities is said to be as a result of a number of
factors depending on which side of the political divide you associate with and
how knowledgeable you are as far as understanding the Kenyan economy is
concerned.
Of
course most of the supporters of the current regime and the not-so-insightful
individuals relate the price increases to the perceived ‘natural’ forces of
demand and supply backing up their arguments with explanations of how the
market is adjusting itself naturally to the prevailing economic conditions. On
the other hand, the associates of the other side of the political divide and a
good number of Kenyans hold the view that perhaps the upward spiral of prices
is the outcome of the activities propelled by the robber barons and a systemic
failure of the current administration to fulfill its promise of lowering the
cost of living for the majority of the Kenyans.
As
to whether both political camps are correct or not, is for you to figure out as
each is in the business of justifying its rhetoric with ‘facts’ with the end
being to gain political mileage. The political class is part of the economic
chaos and this will be evident later on in this article. With economic insight,
it cannot be disputed whatsoever that the forces of demand and supply are
responsible for the current increase in prices of some of the basic
commodities. The crux of the matter, however, is the exact nature of these
perceived forces of demand and supply in view of the continuous rise in the
prices of commodities. Are the forces truly natural as posited by one school of
thought as highlighted in the previous paragraph? Or are the forces largely
artificial?
With
the acknowledgement that depressed rainfall levels in 2016 led to a significant
decline in the total yield of maize, sugarcane, rice and wheat, economic wisdom
dictates and extensively reveals that the current situation is largely a
creation of the proprietors and rent-seekers of the underworld economy. These are
the robber barons and the cartels that are alive in the country. In the world,
the activities and operations of any society, polity or economy are under the
control of the cartels and the interest groups irrespective of whether an
entity cherishes and embraces the ideals of capitalism, the values of socialism
or a hodge-podge of the two systems.
In
his book, Naked Economics, Charles
Wheelan an economist and public policy analyst likens the operations of the
cartels and interest groups in an economy to the tail wagging the dog. Yes, the
tail wagging the dog and not the dog wagging the tail. This illustrates just
how powerful the cartels are and such is the case in Kenya. The presence and
vibrancy of the cartels in the economy is a strong indication of market failure
which calls for government intervention in the economy especially in the
production and distribution of the basic commodities including food.
A
holistic look at the Kenyan price conundrum leaves a lot to be desired in the
general management of the economy and most importantly the implementation of
the relevant and existing economic and/or agricultural policies. Reflecting on
the maize and sugar “shortage” in the country, a number of fundamental
questions and concerns need to be posed and raised at the same time: how
effectively and efficiently are the existing agricultural policies being
implemented? Is it possible that the political leadership in Kenya tends to
ignore the advice given by government agencies as part of the mitigation
measures? How efficient is the absorption of funds set aside for the food
security programmes and projects? In what way do the cartels outsmart the political
leadership? Or is the political leadership in Kenya a conduit for the cartels?
 |
| The ship with the maize imported from S.Africa. Photo: Courtesy |
At
the inception of the Jubilee administration in March 2013, promises were firmly
made on how Kenya would be the foremost food secure country not just in the
Eastern African region but the entire continent of Africa. It was at the
backdrop of these promises that the idea of irrigating one million acres of
arable land was mooted and conceptualized with the outcome being the Galana-Kulalu
Food Security Project. Over Kshs.10 billion have been allocated to this project
over the last four years but the trickle-down effect is yet to be witnessed by
majority of the Kenyans. From my perspective, the below par performance of the
Galana-Kulalu Food Security Project is majorly due to two main factors: there
is a high possibility that the feasibility studies conducted to ascertain the
viability of the Galana-Kulalu project were poorly done at the expense of
gaining political capital; secondly, the funds allocated each financial year
towards the financing of the project are poorly absorbed due to financial
bureaucracy and corruption.
Kenya
prides herself in being the most advanced economy in the Eastern Africa region
but in a country where affordability of the basic commodities is a preserve of the
haves illustrates just how cards are being shuffled under the table. Maize is
Kenya’s staple food and any right-thinking citizen would expect that the
political leadership would rise to the occasion to cushion the average Kenyan
against any shortage that might be experienced. Towards the end of 2016, the
National Drought Management Authority (NDMA) issued early warnings on the La Nina effects responsible for the depressed
rainfall experienced in most parts of the country. The Executive and Parliament
responded by stating that the necessary measures have been put in place to
ensure that there is a constant supply of maize. This is hence a situation that
the political leadership was well aware of not now but last year.
It
is from such information from the NDMA and other agencies that the cartels
began positioning themselves strategically; they hatched schemes to create an
artificial shortage of maize. In fact, having known that last year’s total
production of maize fell in the country from 43 million bags to around 37
million bags, the cartels were smiling all the way as opportunities to import
maize were in the offing. It should be noted that Kenya has over the years been
importing maize and maize flour from countries such as Uganda, Tanzania and
even at one time from Malawi. Acknowledging the principle and concept of
comparative advantage in trade between nations, it is comical for a country
like Kenya that has a high agricultural potential to be importing a food crop
like maize.
Fast
forward, the ‘shortage’ of maize apparently forced the government to import
maize and this came after the tax exemptions on maize and wheat imports as per
the Budget Policy Statement presented by the Cabinet Secretary of The National
Treasury in the National Assembly in March this year. Conflicting reports have
been issued by some of the senior government officials on just who is importing
the maize and the point of origin of the imported maize. Initially, reports
issued by the government stated that maize was to be imported from Mexico with
the importing entity solely being the government. Later on, it emerged that the
maize was to be imported from South Africa by three private companies. Conflicting
information and communication is a strong indicator that perhaps things are not
adding up and it is from such that you can be able to detect the machinations
of the cartels. As a matter of fact, the consignment of maize that has just
been imported was apparently ordered late last year by the importing firms.
 |
| Packaged sugar on sale at a supermarket. Photo: Courtsey |
Turning
to sugar, savage politics and economics shaped by the cartels continue to haunt
this industry. At the moment, a 2 kg packet of sugar retails at approximately
Kshs.400. Still there are some people who believe that the natural forces of
demand and supply are fully responsible for the current shortage! The discipline
of Economics, however, gives leverage to individuals to present different
arguments and belong to different schools of thought hence the commonality of
the phrase “on the other hand…” In August 2015, there was a heated debate
around the country following the deal signed between the current administration
and the Ugandan government to import sugar from Uganda. Kenya’s demand for
sugar exceeds the local supply and this necessitates the importation of sugar
but the supply deficit has never been chronic. How then is it possible that most of the sugar
companies excluding Butali Sugar Mills and West Kenya have been closed for
regular maintenance? If so, then what informs such action that is devoid of any
form or kind of strategic thinking? Let’s forget about the regular maintenance
stuff because it has been happening year in year out. This is the strong hand
of the cartels busy at controlling the economy.
The
poor performance of the sugar-milling factories seems to be more of a political
issue than an economic issue. The sugar industry has been politicized resulting
in vague resuscitation programmes such as the common bail-outs from the
national government. The sugar industry is under the manacles of the cartels
and the latter strongly dictate which sugar-milling company is to be bailed out
or not.
Fundamentally,
the current economic chaos that is yet to morph into an economic crisis is as a
result of an inconsistent political leadership. A consistent political
leadership, both at the National Assembly and the Executive, would ensure that
the formulated agricultural/economic policies such as the Agricultural Sector
Development Strategy and Vision 2030 are implemented as expected and would also
viciously fight the cartels. Political leaders and other experts should not be
talking about seeking for long-term solutions because there are existing
economic blueprints whose implementation is erratic and inconsistent. The
cartels in the Kenyan economy fashion the vicious circle of poverty and are
sworn enemies of the ideal virtuous circle of prosperity. The tail (cartels)
has successfully wagged the dog (Kenya).
This article was first published on blog.savicltd.co.ke.
No comments:
Post a Comment