A Judas Moment: Betrayal in NyamakimaBy Dauti Kahura

The most painful state of being is remembering the future, particularly the one you’ll never have.” ―Søren Kierkegaard

About a month before the 8 August 2017 general elections, the business community of the famousNyamakima area in downtown Nairobi sealed the lower (southern side) of Charles Rubia Road thatconnects with Kumasi Road and part of the lower side of River Lane for a private function. All thepeople who conduct their business in this area were asked to close their premises as a gesture ofgoodwill, and primarily because they were all invited guests at the function.

The private function was a pre-presidential election party held in honour of Uhuru Muigai Kenyatta,the presidential candidate of the Jubilee Party who was going to face Raila Amolo Odinga aka Baba,the nominee for the opposition outfit, the National Super Alliance (Nasa).

Goats had been slaughtered and crates of “Ruaraka Waters” aka East African Breweries Limited(EABL) beer had been carted there and flowed in plenty. Those who preferred brandy and whiskywere also taken care of. The afternoon weather was super, the participants were ecstatic – lots ofcheer and laughter rented the air as the Kikuyus – both men and women – danced and waltzed tomugithi and one-man guitar lyrics. The bash went on till late into the night.

“Nimekumenya ni mahoya na ti urogi.” They will know its prayers and not sorcery, shouted thecrowd. The revellers were prepping themselves for a second stab at Uhuru’s presidential two-termuncontested win. “Nimekumenya matioi.” They will know, they hardly know. They were referring toRaila’s fervent supporters and Raila himself. “Reke Uhuru aingere…tugutonga mamake,” Kamwea,one of the younger businessman, was later to excitedly tell me. Let Uhuru bounce back into StateHouse…we’ll really grow rich, we’re going to astound them. To prove their loyalty to and undyingsupport for Uhuru Kenyatta, the businessmen and women had come together and collected moneyfor the Jubilee Party presidential kitty worthy of Nyamakima’s name and fame.

Later, when jolted by the Supreme Court of Kenya’s “adverse” ruling on 1 September 2017, whichrevoked Uhuru’s win (which they viewed as a temporary setback) they doubled their efforts: theyprinted loud banners and hung them mostly on roads in downtown Nairobi. “Nyamakima BusinessCommunity supports Uhuru Kenyatta,” read one banner…. “Gaberone Road Business Peoplesupports Jubilee Party’s President Uhuru Muigai Kenyatta,” read another. Still, Du Bois RoadBusiness Community Says Tano Tena.

The Supreme Court set the second fresh presidential election for 26 October 2017, a date that fell onPresident Uhuru’s birthday. “Kai atari Jehova…muthamaki aumaga kuri ngai.” It’s the workings ofthe Almighty God, they mused. (How else could you explain this coincidence?) A king is anointed byGod.

Befuddled and shaken by the Supreme Court’s unprecedented decision, the Nyamakima businesscommunity nonetheless rallied – now more assiduously than ever before – for Uhuru’s secondpresidential cause, which they took personally to be their own. “Ngai ndatiganagiria andu ake.” Thegood Lord doesn’t forsake his people, they consoled themselves.

“Nikumera ta thuraku,” (this time around) we must come out like safari ants, the Nyamakimatraders exhorted the Kikuyu traders and every other Kikuyu. “Tano Tena” five more, hollered thebusiness people moving around with loudspeakers in downtown Nairobi, like possessed preachermen. In the intervening period between 1 September 1 and 26 October, Tano Tena become thestandard greeting of the Kikuyu people in Nyamakima and practically everywhere else they lived.High-fiving in the air on the streets of downtown Nairobi became the norm.

Nyamakima is a Kiswahili word meaning minced meat. In the 1950s, during the colonialemergency period that lasted for seven years – from 1952 to 1959 – there was an Africanrestaurant in the present Nyamakima area. But the old women who sold cereals in thearea…could not eat bone meat either because they did not have strong teeth or they didnot have teeth at all. So the restaurant owner came up with a plan: why not mince themeat for the old ladies who could chew it with their gums?

Nyamakima traders are not averse to holding bashes: in January 1988, on hearing that KariukiChotara, the combustible Nakuru Kanu politician, had died, they momentarily closed theirbusinesses, stormed into pubs, drank themselves silly and toasted to his death. They reminded eachother, “gutiri utuko utakiaga”, which meaning every night has its dawn.

But what the Nyamakima Kikuyus (as indeed Kikuyus in Naivasha and Nakuru, where they alsocelebrated Chotara’s death) were observing is that nothing lasts forever. If Chotara thought he couldtorment his fellow kinsmen forever, he had another thought coming. Chotara had been the NakuruDistrict Kanu chairman, who took over from Kihika Kimani, a man who had tormented Vice PresidentDaniel Toroich arap Moi in the 1970s. Chotara, who became President Moi’s political courtier and a

court jester, was much loathed by Kikuyus countrywide.

Little Murang’a

Nyamakima is a Kiswahili word meaning minced meat. In the 1950s, during the colonial emergencyperiod that lasted for seven years – from 1952 to 1959 – there was an African restaurant in thepresent Nyamakima area. But the old women who sold cereals in the area – many of whom werefrom the Rwathia area in Murang’a District – could not eat bone meat either because they did nothave strong teeth or they did not have teeth at all. So the restaurant owner came up with a plan:why not mince the meat for the old ladies who could chew it with their gums?

Hence, Nyamakima, over and above everything else, is famously and popularly known for theseMurang’a women whose specialty for the last 60-plus years has been trading in cereals. Today, thosecereals come all the way from the border of Malawi and Tanzania, in the Mbeya region and Kabale,Soroti and Tororo regions of Uganda. In the 1950s, the women thrived in business because theywere too old to be arrested, unlike their sons, many of whom were arraigned and harassed by thecolonial police. When the emergency ended, the young men joined the old ladies to do what theyknew best: engage in trading hardware businesses.

The Murang’a folks were not generally interested in land per se, but in commodities’ businesses.That is why their women came to Nairobi and would buy the merchandise, then as now, fromwherever they could get them. Likewise, the Murang’a young men have been socialised to believe inbusiness and not so much in acquiring land or even advancing or excelling in academic and formaleducation, unlike their counterparts from Nyeri and Kiambu. That is why so many of the electronicand hardware shops in Nyamakima are run by Murang’a lads.

Nyamakima also become a famous and popular stage for Kikuyus from South Kinangop becausemany of them who were settled in the area hailed from the greater Murang’a area. The only placethey knew in Nairobi was Nyamakima because that is where their kith and kin lived and worked. So,when visiting their families and friends in Nairobi, they would ask to be dropped at Nyamakima. Todate, Nyamakima is the terminus for people travelling to Kinangop, Molo, Naivasha, Ng’arua, Njoro,Nyahururu, Nakuru, Narok and Sopili.

It is a wonder that Charles Rubia Road was not named after Kenneth Stanley Njindo Matiba.Although both were great friends and both came from the then greater Murang’a District, it is themercurial Matiba, the better known of the two politicians, who used to frequent Nyamakima (thebastion of his political support in Nairobi) just after the country returned to multiparty politics in1991. He even used to get his hair cut in a barbershop at Nyamakima area, which was called “LittleMurang’a”.

No more Tano Tena

Last week I visited Nyamakima, where I walked the length and breadth of Charles Rubia Road,ending up at River Lane, where I ate kamuchere na tuchahi (rice and turtle beans) at Wa-Michelle’sramshackle joint. “Nii ndiuwe tukurora nako.” I tell you I don’t know where we’re headed, Wa-Michelle told me. “Biashara ni gukua ira kua….tarori kutire andu akuria irio.” Businesses are slowlydying off…look, for example, there are no people to eat my food.

It was lunchtime but there were only two customers (including me) at Wa-Michelle’s place. “Barelytwo years ago, by 3.00 pm, I’d sell all these food and more and I’d be out of here to go and engage inanother business…Now I make little food, because I can’t afford to make losses,” said the foodseller. “The price of foodstuff has gone up: I used to buy white flour for ugali at Sh80, now it’s

Sh120, Wheat flour at Sh110, now it’s Sh130. The price of grains such as white and yellow beanshave equally gone up. When I pushed some of the burden to the customers, they didn’t like it, butwhat could I do? That’s also why some of them stopped coming. I don’t fault them.”

Nineteen months after the second presidential election that handed Uhuru Kenyatta thepresidency with even less votes, the Tano Tena mantra has been reduced to a whimper,a sob story. For most of the Nyamakima traders on Charles Rubia Road and River Lane,businesses having gone south.

I asked her what had been happening to the famous Nyamakima businesses. “We don’t know…wedon’t know…business premises are just closing down…didn’t you walk up River Lane to see foryourself traders who have closed shop and vacated the premises?” (I had.) Once thriving electronicbusiness premises have closed shop and now all one can see is white paper notices plastered on thegrill doors announcing premises for letting out and “no goodwill asked”.

Nineteen months after the second presidential election that handed Uhuru Kenyatta the presidencywith even less votes, the Tano Tena mantra has been reduced to a whimper, a sob story. For most ofthe Nyamakima traders on Charles Rubia Road and River Lane, businesses having gone south. It is afar cry from the scene of the “Uthamaki ni witu” (political leadership is ours [Kikuyus’] bash, wherethe traders dined and wined liberally, wiggling their bottoms in unbridled ecstasy.

Two years ago, it would have been unheard of that a Nyamakima business premise – whether on theground floor or inside a building – was being rented out and that the landlord did not demandgoodwill. But the traders have fallen on hard times; they can no longer afford the rents which arebetween Sh80,000 and Sh100,000 per month for strategically located premises, mostly on theground floor. If by happenstance a renting trader was vacating a premise, the owner of the premisewould ask the next tenant for a goodwill fee ranging between Sh1 million and 3 million and the placewould be snapped up like a hot cake.

“Thuraku cia itererio maguta ma tawa,” (after we voted for the second time), the safari ants mettheir calamity, Wa-Michelle said to me half in jest, half in sadness. “Uhuru arateng’eria aici aa njuguagatiga aa ruwa.” President Uhuru is apparently busy chasing petty thieves, while the real thievesare walking scot-free. Wa-Michelle spoke to me in idioms. Metaphorically, she was saying that thepresident had resorted to harassing Nyamakima traders who dealt in small-time businesses, whileneglecting to deal with the real corrupt Kenyans who were pilfering the state coffers.

In Kikuyu culture, a person who stole ruwa (animal skin), as opposed to the one who stole njugu(grains), was considered a more dangerous and vicious thief because he was stealing your entirelivelihood. A grains thief most likely stole your grains because he or his family was hungry andtherefore did not steal to spite you.

The shops owners whose shops had wound up, said Wa-Michelle, belonged to young Kikuyu men,who basically dealt in electronic goods imported from China. Now the goods were being confiscatedby the Kenya Revenue Authority (KRA), ostensibly, because they were considered counterfeits.“Realising there was a loophole to make a killing, the KRA officials had turned to blackmailing andpreying on the electronic goods’ traders,” opined Wa-Michelle. “They have been haunting thetraders to pay up humungous bribes, failure to which, they raid your shops.” Prayers had turned intowitchcraft, the anointed one had turned to tormenting his people and it has turned out that, in fact,it is the Kikuyu people who actually did not know that they indeed did not know.

‘How can Uhuru do this to us?’

I looked for Mwangi, who has been a trader for many years in Nyamakima. For many years, he ran ahardware shop but around 15 years ago, he also started importing electronic stuff from Guangzhou,China. His story sounded both bitter and confused. “I’ve been in this business for long, possiblylonger than many of the traders in this area, but I’ll tell you this, I don’t remember business being sodifficult and so down,” he said.

“As we speak, my goods have been detained at the government’s Embakasi warehouses, becauseKRA alleges they are counterfeit,” bemoaned Mwangi. “The goods are in a 40-foot container and ithas been at the warehouses since December 2018. I don’t know when it’s going to be released, if it’sgoing to be released at all. Everyday the goods spend a night at the warehouse and I’m surcharged$40 (Sh4,000). My clearing agent has been telling me that the KRA officials have been sendingmixed signals about the release of the goods, which he tells me, he can’t clearly interpret.” Mwangisaid that there are about 2,000 40-foot containers of 70 cubic meters volume detained at thewarehouses.

He admitted that he was among those businessmen who had contributed money to the Jubilee Party,but President Uhuru’s second term was turning out to be a nightmare for the Nyamakima traders. “Ifrankly don’t know what’s happening, we are at a loss. How can Uhuru do this to us?” Mwangithought aloud as I spoke to him outside his shop. It was a clear testament that business was doing sobadly that he could even afford to find time to speak to me. “My friend had business been flowingthe way it did two years back, trust me, I’d not have found time to talk to you. Look, how manycustomers have you seen coming to the shop since we stood here talking?”

“If the government doesn’t want us to be importing goods from China, it should set up itsown factories. We’re always ready to do business, because that’s our life,” pointed outthe businessman.

“President Uhuru’s government is telling us traders that we are importing counterfeits as well ascontraband,” said Mwangi angrily. “Hell knows we’ve been importing these goods from China allthese years. Yes, it true, the goods we import are cheap and not of great quality – they are meant formwananchi. But this new government story that the goods are counterfeit is boggling our minds.”Mwangi said that by the time traders were importing the goods, the government was aware becausethe declaration form they fill indicates all the types of goods they are bringing into the country.

“If the government doesn’t want us to be importing goods from China, it should set up its ownfactories. We’re always ready to do business, because that’s our life,” pointed out the businessman.“These goods are also used by the Chinese people…but it seems to the government…what’s good forthe gander is not good for the goose. We’ve been asking ourselves how and when the governmentdecided the goods are fake. It cannot be that the government has just woken up to the fact thatwe’ve been bringing in substandard goods for all these years. Why it has decided to punish us we’reyet to comprehend.”

The businessman said that the irony of this government exercise is that if after one year your goodsremain uncollected at the warehouses, it can auction the goods to interested bidders. “On the onehand, the government says the goods are fake, but on the other, to offset the charges and createroom at the warehouses, it offloads the goods to a willing buyer – to do what with them?” Manytraders unable to pay the mounting KRA fees waited for the auction to take place,in order to buyback their goods, said Mwangi. It was an irony, but one that the businessmen have to contend with.

The more he talked about their plight the more Mwangi was getting furious. “This is a governmentthat is telling us not to import goods from China, yet it is borrowing from the same country…Why isPresident Uhuru very quick to receive Chinese money, but won’t allow us to import their goods?President Uhuru has been talking about Agenda Four; he seems to be consumed with an imaginarylegacy than working for the people. Who, for example, told him we want to be built houses?”

The businessman observed that “the government had now come up with a scheme that nobodyunderstood what it was all about. This Huduma Namba is very suspicious: the government hasalready messed up with our businesses, now it wants to mess up with our privacy. Why does Uhuruwant to know about our private details? So that he can create more avenues to eke out more moneyfrom us?”

Mwangi, just like Wa-Michelle, had confided to me that many Nyamakima traders had kept off theHuduma Namba registration. “We’ve got more urgent matters to attend to than be preoccupied byinsidious people who want to mine our personal and secretive details for their use.”

Kamau, a property owner in the Nyamakima area and a staunch supporter of President Uhuru, hasbeen suffering panic attacks off and on: He simply cannot believe that his beloved President is killingtheir businesses. During President Mwai Kibaki’s tenure, he acquired three buildings, did someclever renovations and soon he was in good business. He could afford to service his bank loans andbusiness life looked very promising. In the past one and half years, he confessed to me that his realestate business has never received such a beating. “Traders have been vacating my premisesbecause they simply cannot afford the rents because their goods have been confiscated and so theyalso have nothing to sell.” He said if he doesn’t regularly service his loans, the banks would come forhim.

One businesswoman told me that Kikuyus are of the view that they would rather sufferunder a brutal leader who is their tribesman rather than be ruled by a good leader whois not of their ethnic group. It is God who gave them that leader – it is also the same Godwho will know how to deal with him, they argue.

Both Mwangi and Kamau could not bring themselves to lay the blame squarely on President Uhuru:“It is the people surrounding him that are advising him wrongly,” they both separately said to me. Itwas an argument with its obvious weak strand that explained the true dilemma of many Uthamakibelievers – they will not be openly caught criticising President Uhuru. To do that is to go against thegrain; it is to accept that they made a wrong choice in their voting; it is to repudiate the cardinalrule of their tribal teaching on electoral voting: you must always vote for one of your own –irrespective. But more significantly, is it not true that a muthamaki is chosen for the people by God?Is this not what their Christian faith teaches them? Is this not what they have been repeatedly taughtby their church leaders? If they criticise muthamaki, would they not, by extension, be finding faultwith the almighty God?

One businesswoman told me that Kikuyus are of the view that they would rather suffer under abrutal leader who is their tribesman rather than be ruled by a good leader who is not of their ethnicgroup. It is God who gave them that leader – it is also the same God who will know how to deal withhim, they argue. “We leave everything to God, in the meantime. Ours is to pray and ask God to notforsake us,’ said the businesswoman. Wa-Michelle told me Kikuyus could be suffering (even aftertwice voting for their man) because they had turned their back to God. “We’ve really sinned andcome short of the glory of the Lord. We’ve forgotten that we live and prosper because of his dutifulmercies. It is incumbent we rediscover God.”

Mwangi said Nyamakima and the downtown Kikuyu businesspeople in general are planning todemonstrate and protest against President Uhuru’s draconian measures against their businesses.“President Uhuru seems only to understand the language of protest. Last year, we organisedourselves and marched to Harambee House and the Office of the Deputy President and presentedthem with our memoranda of grievances. For some time, the harassment eased off, but not for long.”

In the meantime, the businesses in Nyamakima will continue to suffer losses.

Published by the good folks at The Elephant.

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A Judas Moment: Betrayal in NyamakimaBy Dauti Kahura

Published by the good folks at The Elephant.

The Elephant is a platform for engaging citizens to reflect, re-member and re-envision their societyby interrogating the past, the present, to fashion a future.

Follow us on Twitter.

A Judas Moment: Betrayal in NyamakimaBy Dauti Kahura

There was a time when the root causes of Uganda’s economic failure were so mercurial that onecould never quite locate them. The evidence sometimes suggested incompetence; other timescorruption; often a combination of the two. Examining the fiscal policy at a granular level reveals themethod in the madness: there is now incontrovertible proof that incompetence is an essential part of– and is often allowed to flourish in order to facilitate – grand corruption. We are not talking aboutsmall players operating out of cramped government offices but about the country’s top leadershipand their foreign and domestic partners.

In an old story, President Mobutu Sese Seko is said to have approached donors for assistance withZaïre’s out-of-control external debt. By that time, his history of raiding the treasury was widelyknown and the donors facetiously suggested he lend the government the money they needed out ofhis personal resources. He is said to have answered, “I can’t trust them to pay me back.” (This isonly funny when it is not happening in your own country.)

Uganda is in a similar situation. Unsustainable debt is rising in direct proportion to the wealth of thetop leaders. When payment of the over UGX 3 trillion balance on over 20 loans (Table 1 below)commences in 2020, the country’s debt-to-revenue ratio will jump from 44% to 65%. In 2015, whenUganda’s debt repayments stood at 38% of GDP, between 26% and 36% of the population wasundernourished. Undernourishment has made steady progress, rising by 1% a year between 2006and 2011 and accelerating to two percentage points plus every year from 2011 (World Bank).Nothing has happened since 2016 to ensure undernourishment does not increase; in fact, it rosefrom 39% in 2015 to 41% in 2016. In contrast, world undernourishment fell 14 percentage pointsover the same period and is on a downward trend except for a short rise in 2015-2016.

Despite trends in the increasingly unsustainable loan portfolio, on the one hand, anderratic public administration on the other, the IMF has assessed Uganda as a low risk forexternal debt distress. It says the risk was not increased by significant risks stemmingfrom domestic public and/or private external debt.

As a justification for further borrowing, President Yoweri Museveni and Ministry of Finance officialsclaim that the debt-to -GDP ratio is within the historically safe limit of under 50%. The AuditorGeneral has been of the contrary view, saying debt levels are “unfavourable when debt payment iscompared to national revenue collected which is the highest in the region at 54%.”

That argument has been overtaken by events. Current International Monetary Fund (IMF)projections show that debt-to-GDP will hit 49.5% in 2021. Furthermore, it is guaranteed todeteriorate as the outstanding balances on the loans will increase as the shilling continues to slideagainst the dollar and as further non-concessional (high-interest) loans are taken in the domesticmarket, such as the $104 million to be spent on security cameras and loans for ad hoc investmentslike the revival of Uganda Airlines at $388 million.

Table 1: Uganda’s Unsustainable Debt

Despite trends in the increasingly unsustainable loan portfolio, on the one hand, and erratic publicadministration on the other, the IMF has assessed Uganda as a low risk for external debt distress. Itsays the risk was not increased by significant risks stemming from domestic public and/or privateexternal debt. (Debt Sustainability Analysis).

They went on to claim, “Uganda’s economic performance remains strong, but has moderated inrecent years.” Further, “Government finances remain on a sound footing…” The only suggestion inthe Debt Sustainability Analysis (DSA) that all may not be well (inserted no doubt as a basis forclaims to due diligence to be made after the economy crashes) was “… though expenditurecomposition can be of concern.” Expenditure composition includes items not part of the NationalDevelopment Plan e.g. a national airline and a network of security cameras. In the same year, theAuditor General pointed out a serious barrier to attaining development targets: loans wereperforming poorly. He could not have been clearer when he warned that interest payments werebecoming unsustainable (Auditor General 2016 p. 14).

“Several loans appeared to be performing poorly, with some nearing expiry; while others reachedthe closing date without fully disbursing. As at 30th June 2016, committed but un-disbursed debtstood at UGX 18.1 trillion [approximately US$5 billion]. Such low levels of performance underminethe attainment of planned development targets and render commitment charges of UGX20.9 billion(US$5.9 million) paid in respect of undisbursed funds nugatory [i.e. wasteful or of no value] (AuditorGeneral 2016, p.72).” In other words, borrowed funds were not being put to use.

The problem has persisted in 2017 and 2018. This gives the lie to the IMF’s DSA 2016 finding that

Uganda is scaling up infrastructure for future economic growth. The IMF admitted a risk to growthgoals would be “failure to realize the envisaged growth dividend from the increased investment is akey risk”. What they did not mention was that the contingency had already materialised. A 2015special audit of the Uganda Support to Municipal Structure Development (USMID) project (financedwith a $150 million loan) showed under-utilisation of loan funds accompanied by incomplete projectsrequiring funds. The risk is that idle balances will eventually be diverted, as has happened in HoimaMunicipal Council.

We are not far from a full admission that Uganda is in debt distress although there arestill the persistent and irrelevant claims of on-target economic growth (of 6.3%).Irrelevant because it was during the past periods of alleged high economic growth thatuniversal primary education was degraded to the point where the drop-out rate was60%.

The current situation is that 95% of the UGX100 billion disbursed under USMID for municipaldevelopment and capacity building grants remains idle (Auditor General 2018, p. 5). Understaffingin specialised technical areas is one reason municipalities are unable to utilise infrastructuraldevelopment loans. (Understaffing is a result of a cap on recruitment enforced by the IMF.) Yet forthe past three years the Treasury has only been able to release UGX417 billion of the UGX800 billionrequired annually to maintain the feeder roads so crucial to farmers (Auditor General 2017, p. 33).

Uganda’s fiscal policy is ‘a moving target’

In 2019 the IMF is leaning towards the Auditor General’s point of view. They now say that risinginterest payments reduce resources available for education and health (human development). Theirlatest assessment states, “The current ratio of interest payments to revenue is comparable to whatcountries with high risk or in debt distress typically face.”

We are not far from a full admission that Uganda is in debt distress although there are still thepersistent and irrelevant claims of on-target economic growth (of 6.3%). Irrelevant because it wasduring the past periods of alleged high economic growth that universal primary education wasdegraded to the point where the drop-out rate was 60%. During high economic growth, inequality,and especially rural-urban equality, deepened. High economic growth preceded the current phase ofsocial unrest. According to the IMF, “In each of the last three macroeconomic assessments ofUganda, the projected debt path was revised upwards. Having a clear direction for fiscal policywould help budget planning and execution.”

Nevertheless, the IMF continues to claim that the risk of debt distress remains low, provideddomestic revenue can be mobilised. The set target under the National Development Plan II andmedium-term Sustainable National Development Plan is to increase the tax-to-GDP ratio from 14% to16% by 2019/20. If this cannot be achieved through job creation, it can only translate into moretaxes and austerity measures.

The question arises: With Uganda’s history of poor public administration and disastrous debtmanagement, corruption, and increasing civil unrest and repression, what was the basis of the IMF’soptimism? The organisation has a permanent office in the Ministry of Finance and its headquarterssends multiple missions every year to monitor economic progress. To solve Uganda’s perennialeconomic distress, citizens must first understand the IMF’s mission in Uganda.

In any event, the grace period on over 20 loans expires in 2020 and debt is now of concern. On topof expenditure on projects in the Public Investment Plan, there is significant expenditure arising

from unplanned projects, such as the revival of Uganda Airlines, requiring $380 million. LubowaInternational Hospital, initially planned as a public-private partnership with Finasi (a commoditiestrader) it eventually became a contract for Finasi to build and operate a hospital funded 100% by theGovernment of Uganda.

Incompetence in industrialisation and job creation

A recent round of commissioning of factories and other infrastructure has proven thatinfrastructural development is a chimera. The Isimba Dam launched in March may generate butdoes not transmit power. Together with Karuma, to be launched later in the year, it cannot do sowithout further expenditure of $3.5 billion to extend the grid. The Nile Bridge had to undergo majorremedial work owing to poor construction only days after commissioning. The president’selectioneering took in at least one factory many years old and employing a miniscule number ofUgandans. Nile Agro Industries Ltd has been producing soap, wheat flour, cooking oil, bottled water,lint bales, and fortification and industrial plastics since 1999. Yet it was commissioned and“launched” on 7th May 2019.

The Soroti Fruit Factory was founded in 2014 and funded by the government and a grant of $7.4million from Korea. Last year’s audit listed the factory as un-operational after accumulated publicinvestment of UGX 13,353,129,943. The factory was commissioned by the President on 13th April2019. It was reportedly closed on 10th May owing to a lack of operating capital for fruit from about1,000 farmers and salaries for the 123 Ugandan employees. The government’s investment arm,Uganda Development Corporation, has been advised annually for at least three years by the AuditorGeneral against making investments without feasibility studies but in Soroti it was the usual case ofignoring professional advice and pandering to the president’s whims.

“The corporation incurred expenditure amounting to Shs.9,000,026,869 during the year inundertaking industrial development investments in the areas of fruits in Luwero, Soroti andprocessing in Kabale and Kisoro. However, the Corporation did not undertake investment strategicstudies assessment prior to undertaking investments for purposes of assessing the marketability andcommercial viability of the final products processed from fruits like mangoes, oranges and teaplantations. The investment may not achieve anticipated results.” (my emphasis) (Auditor General2016 p. 519)

Apart from Soroti Fruit Factory, other warnings have related to Kampala Industrial and BusinessPark, Namanve, where UGX 1,000,000,000 for a feasibility study was diverted. Over UGX 131 billionis outstanding on loans for four industrial parks, including Namanve. Although National InformationTechnology Authority-Uganda (NITA-U) carried out a feasibility study for Commercialisation of theNational Data Transmission Backbone Infrastructure (NBI) and E-government Infrastructure (EGI),it did not factor in the costs of its maintenance. “As a result, it was difficult to assess the economicsense of the project as Management lacked sufficient benchmark to assess the bid proposals oncontract aspects such as the cost of maintaining the NBI, revenue sharing ratios and price ofinternet services.” (Auditor General, 2017, p. 53)

It is indicative of the general problem pointed out by the Auditor General, whoconcluded that ignoring planning procedures is a major weakness within the Ministry ofFinance “and presents a risk of funding projects which are not feasible and are notaligned to the National Development Plan (NDP).”

New projects are required to undergo four stages prior to being included in the Public Investment

Plan (PIP) and commencement: (i) Prepare a project concept in line with NDP, (ii) Prepare a ProjectProfile demonstrating key results, (iii) Undertake a pre-feasibility study, and (iv) Conduct afeasibility study. But the auditor found that “some projects obtained project codes and admissioninto the PIP without proper project vetting as stated in without vetting them”.

It is indicative of the general problem pointed out by the Auditor General, who concluded thatignoring planning procedures is a major weakness within the Ministry of Finance “and presents arisk of funding projects which are not feasible and are not aligned to the National Development Plan(NDP).” (Auditor General, 2017, p. 15)

Foreign direct investment

To attract foreign direct investment (FDI), many countries around the world privatised theirtelecommunications sectors – some voluntarily and others, like Uganda, under an IMF structuraladjustment programme. In the UK in the 1990s, public awareness-raising of the move involvedrepeated assurances that after unbundling postal and telecoms services, 51% of shares in BritishTelecom would be sold to the private sector but with the proviso that 34.3% would be sold to thegeneral public. Furthermore, in the interests of promoting share ownership, the shares were pricedat £130, a price considered below their value.

Kenya sold its telecoms sector, reserving 60% of the shares for the Kenyan state, of which 30% werelater sold directly to the public. The new entity, Safaricom, went on to become the most profitableprivate company in the East African region.

Cross the border into Uganda where income from the lucrative telecoms sector is enjoyed only by anarrow oligarchy. Although the government was to retain 49% of the shares in Uganda Telecom, itcurrently holds only 31%. Much has been written about how MTN went from being the secondnational operator to a virtual monopoly and regulator of the sector.

MTN is the biggest player, with 54% of the telecoms market. Only 5% of MTN shares are Ugandan-owned, (the Ugandan being an individual with board membership in at least two privatised entities,including the defunct Rift Valley Railway.) It is only in the past few months that the president beganto press MTN to make some of its shares available to the public.

Uganda Telecom, the entity that was supposed to retain residual rights in the sector, was onlycreated after Celtel and MTN (the first and second national operators) had been running for a while.This has meant that MTN has the technology to permit or bar new indigenous competitors from themarket, which reportedly it does. Indigenous Ugandan start-up Ezeemoney, a mobile money platformdesigned to allow banking over different platforms (i.e. between MTN, Africell and other serviceproviders), was awarded over two billion shillings in a suit against MTN for refusing to provide themwith access to the network.

Tax evasion and illicit transfers

Returning to the objectives of privatisation and incentivising foreign direct investment, greaterefficiency and cash inflows may have been achieved but the benefits have been annihilated by illicitoutflows mainly facilitated through tax evasion.

Another 13 foreign investors have been found to have used a lacuna in the law to avoid taxes foryears, a fact the IMF was in a position to know. Thirteen of the investors owe UGX 353.5 billion.Some have been beneficiaries of FDI incentives, another has been operating in Uganda since 1969(and therefore not in need of incentives). One is in possession of the infrastructure that is theprivatised Nytil textile manufacturing plant (founded in 1954). A fourteenth is a joint venture once

touted as the only manufacturer of ARVs in Africa. It was founded to supply ARVs for domesticconsumption and export to Burundi, the DRC, Kenya, Rwanda, South Sudan, Tanzania, Cameroon,Comoros, Namibia and Zambia. The majority shareholding is foreign-owned; the three majorUgandan shareholders own less than 10% of the shares and 18% were sold on the stock exchange in2018. It turns out that the company may really be in the business of acquiring government tendersfor a parent company in India.

In response to the discovery that opportunities to increase the tax-to-GDP ratio are beingsystemically undermined by tax evasion by investors, the Ministry of Finance this month tabled aproposal in Parliament to give the offenders a waiver of taxes owed on the basis that it would beunwise to drive FDI away by collecting the arrears.

Returning to the Mobutu story, it is not just African despots who have sufficient illicit funds to makea significant dent in their countries’ public debt; the taxes owed by foreign investors could clear it.MTN’s tax arrears (of UGX 2.8 trillion as extrapolated from data recovered during litigation) couldclear 73.6% of the current UGX 3.4 trillion outstanding balance on the loans which Uganda willbegin to repay in 2020.

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A Judas Moment: Betrayal in NyamakimaBy Dauti Kahura

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A Judas Moment: Betrayal in NyamakimaBy Dauti Kahura

Did the economy really grow by 6.3 per cent last year, or is someone pulling wool over our eyes? Oras we say these days, is it real growth or the one you have to log into the #GoKDelivers portal tosee? When the figure was first disclosed by Uhuru Kenyatta in his State of the Nation address lastmonth, I received a call from a very disturbed Nairobi businessman who challenged me to explain tothe public, in language they can understand, how the economy can be said to be growing as fast as itwas during the Kibaki years yet businesses are collapsing and ordinary citizens can barely makeends meet. As it happens, my very first op-ed of this, my second stint as a columnist (I wrote aweekly column for the Sunday Nation in the mid to late 90s), published in January 2014 and titledWhy you are struggling to make ends meet, was on this very subject.

One of the observations that has led people to question the 6.3 per cent growth is the poorperformance of big companies. Year after year, listed companies are issuing profit warnings. Thereis now hardly a listed company – other than banks – that has not issued a profit warning over the lastthree years. Is it possible for the economy to grow while businesses are making losses? The answeris yes.

To see how this could happen, we need to understand what GDP actually is and how it is computed.GDP is short for Gross Domestic Product, which means the quantity (not value) of all goods andservices produced in an economy. Sukari Mills is a sugar producer. In 2017, Sukari produced 20,000tonnes of sugar, down from 25,000 tonnes in 2016, due to drought.

In 2018, production recovers to 25,000 tonnes. Trouble is, during 2017, the government opens theduty-free import window, and “tenderpreneurs” inundate the country with (contaminated) sugar.Consequently, in 2018, Sukari suffers both depressed prices and depressed sales, and posts a hugeloss. The GDP accountants will capture the 25 per cent increase in production, as well as theeconomic activities created by the imported sugar, that is, the transportation, warehousing,packaging and distribution. Sugar GDP will be up big time, even as Sukari and other millers chalk uplosses.

The recovery of the agricultural sector from drought is in fact the story behind the 6.3 per centgrowth figure. Agricultural sector GDP grew 6.4 per cent, just about the same rate as the economy.But it was all recovery growth since the sector had slumped from 4.9 per cent in 2016 to 1.9 per

cent in 2017.

Because agriculture is the single largest sector, accounting for a third of the economy,what happens to agriculture has a big effect on the overall GDP growth figure. Thisyear’s long rains were late, and have been poor – another challenging year foragriculture

Looking at the actual production of some principal commodities, we see that coffee, sugarcane andmilk are well below 2016 levels and that tea is only 4 per cent higher. Only maize production is wellabove the 2016 harvest (see table). Moreover, while production increased, prices for most productswere lower in 2018. Maize led the way with prices down 56 per cent, from Sh4,000 to Sh2,260 perbag. Coffee prices were down 15 per cent while tea, sugar and milk prices were down by between 6and 9 per cent. But as observed, GDP growth only captures volume, not value – hence the fact thatmilk farmers are suffering from depressed prices will not be reflected.

It is readily apparent that a number that fluctuates with the weather is not an idealmeasure of economic performance. In fact, in economics this is not what we mean byeconomic growth – we refer to it as “change in output”.

Because agriculture is the single largest sector, accounting for a third of the economy, what happensto agriculture has a big effect on the overall GDP growth figure. This year’s long rains were late, andhave been poor – another challenging year for agriculture. Next year the story may be the opposite.

It is readily apparent that a number that fluctuates with the weather is not an ideal measure ofeconomic

performance. In fact, in economics this is not what we mean by economic growth – we refer to it as“change in output”. It is useful for studying macroeconomic policy on managing inflation and thelike, but not as a measure of progress towards prosperity or lack thereof. For prosperity questions,we are interested in how two – often very similar – countries start out at an income level of $500 perperson and twenty years on, one is at $1,500 and the other $5,000. This boils down to the followingsimple question: how countries raise productivity. Let me illustrate.

Land is the ultimate finite resource, and when you use it for one thing, it not availablefor another. Material inputs, fertilizers, tractors, irrigation systems, etc. require us tosave and invest, and there is a limit to how much we can save. The whole point of savingand investing is to consume more tomorrow, but starving oneself today in order to eatendlessly tomorrow does not make economic sense.

Nanjala, a maize farmer in Busia produced 100 bags of maize last year on ten acres of land. Thisyear she has produced 120 bags. There are a number of ways in which she could have done this. I’llfocus on three. One, she could have obtained the additional 20 bags from tilling two more acres ofland. Two, she could have applied more fertilizer on the ten acres and increased her yield to 12 bagsper acre. Three, she could have adopted a new high yielding variety that gives 15 bags per acre,meaning that she obtained the 120 bags from tilling eight acres. To till more land, it stands to reason

that she would have had to use more labour as well. It is also the case that if she used morefertilizer, more labour and more capital were also used. But the case of adopting new high yieldingseeds is different. The additional 20 bags were obtained by using less land, less fertilizer and evenless seeds. The only additional input is knowledge, that is, the science and research resources thatdeveloped the new seed variety.

It is not too difficult to see that we cannot sustain growth by using more resources. Land is theultimate finite resource, and when you use it for one thing, it not available for another. Materialinputs, fertilizers, tractors, irrigation systems, etc. require us to save and invest, and there is a limitto how much we can save. The whole point of saving and investing is to consume more tomorrow,but starving oneself today in order to eat endlessly tomorrow does not make economic sense.

Knowledge is different. New knowledge and technology enable us to do more with less. And oncenew knowledge is introduced, in this case a seed variety, its benefits will spread widely at little or nocost; word of mouth is sufficient to spread the news about Nanjala’s 15 bags per acre all over BusiaCounty. In economics, we say that consumption of knowledge is non-rivalrous. We can’t farm thesame land, but we can share seeds. In today’s tech parlance, we say that it has high scalability.

In economic accounting, we call the growth associated with more material inputs factoraccumulation. The growth that remains after we have accounted for factor accumulation we refer toas total factor productivity (TFP). TFP is the growth that enables a society to become wealthy overthe long haul. If we were to rely on tilling more land to feed the burgeoning population we’d wakeup one day and find that we’ve cleared the entire Mau forest – which is where we are headed. If weare to rely on irrigation and other material inputs we will, sooner or later, run out of water anddrown in a mountain of debt – which is where we are headed.

But TFP is not reported in the GDP growth headline news, and you cannot see it in the data unlessyou know where to look. We need to do a number-crunching exercise we call growth accounting,which decomposes the growth into its sources, namely capital accumulation, labour force growthand TFP. I do not have growth accounting analysis of Kenyan GDP readily available but as ithappens, the most recent edition of the IMF’s Africa Regional Economic Outlook published this pastApril has just what we need.

The chart shows Africa’s and Asia’s growth decomposed into physical capital, human capital andTFP. These three components are what I defined earlier as factor accumulation. Human capital is“proxied” by the change in average years of education in the workforce. By proxy we mean that it isnot the actual human capital but the closest data we have that approximates it.

In the decade and a half from 2000 to 2014, Africa’s economy grew by 5 per cent peryear. Productivity grew at less than 1 per cent per year – about 17 per cent of thegrowth – with the rest coming from factor accumulation. Asia grew by 7.2 per year, withproductivity growth at 2.7 points per year, contributing close to 40 per cent of thegrowth.

The red segment at the bottom of the bar is the TFP while the green, light blue and dark bluesegments above represent growth attributable to more workers (or labour force growth), morehuman capital (better educated/skilled workforce) and more physical capital (infrastructure,machines, etc.) respectively, all of which add up to factor accumulation. But the IMF has its coloursthe wrong way round. The red ink is what corresponds to profit in a business, while the blue ink iscapital expenditure, a cost. The red ink is what pays the bills.

In the decade and a half from 2000 to 2014, Africa’s economy grew by 5 per cent per year.Productivity grew at less than 1 per cent per year – about 17 per cent of the growth – with the restcoming from factor accumulation. Asia grew by 7.2 per year, with productivity growth at 2.7 pointsper year, contributing close to 40 per cent of the growth.

From 2015 onwards, Africa’s productivity growth has slumped to 3 per cent per year, andproductivity growth has turned negative. This translates to investing more and getting less outputper unit of investment. If we go back to Nanjala’s farm, it is the equivalent of increasing acreagefrom 10 to 12 acres but getting 108 bags, meaning that average yield has declined from 10 to 9 bagsper acre. While Asia’s economies have also slowed down a little, productivity growth has actuallyincreased to 3 per cent per year and, in fact, it is investment in physical capital that has sloweddown the most.

The seemingly small magnitude of this divergence in productivity growth is deceptive. An economywhere incomes are rising by three per cent per year doubles its income in 25 years; the one per centeconomy will take 70 years. This is precisely the difference in growth rates that has left peopleasking how the Asian Tigers left us behind. Plus ça change, plus c’est la même chose.

Kenya is typical of the Africa growth story. This analysis is making a point that I have belaboured

over the last five years – that we are squandering money on vanity infrastructure projects of little orno economic value. When the government borrows domestically and invests unproductively, itdeprives the private sector of the use of those domestic savings on more productive investments. Wealso do not produce the capital goods that go into these investments. There is no money that comesinto the economy when we borrow from China to build a railway. What we are really doing is takingChinese goods and services on credit, but as every shopaholic knows, the credit card starts burninga hole in the pocket right away. Asia on the other hand, manufactures its capital goods, hence itsinfrastructure and other capital investments stimulate and create jobs domestically.

We already know that most of the capital is in public infrastructure with little or no impact onproductivity – you need only think of the SGR railway. While the growth accounting analysis showsus the employment contribution, it does not tell us what the expanding workforce is doing. We knowthat the majority are absorbed in the informal economy where they have little capital to work with,since the government has hogged all the domestic savings, leaving little for the private sector toequip workers with productive capital. While the aggregate data will show that capital per worker isrising, in reality, it is falling since the aggregate figure includes every worker’s slice of the SGRrailway, for example. Moreover, we do know that our economies are not creating nearly as manyjobs as they should. As the African Development Bank’s (AfDB) most recent Africa Economic Outlookreport laments, “the rapid growth achieved in Africa over the last two decades has not been pro-employment”. This is a consequence of the infrastructure-led growth paradigm that this veryinstitution bears most responsibility for promoting.

The economies may be growing, but because unemployment and underemployment are also rising,the incomes of those that are earning are supporting more people. People are not feeling the growth.They are feeling the financial burden of adult children who were expected to be contributing tofamily upkeep.

Next time you hear them trumpeting five, six, seven per cent GDP growth, you know what to showthem.

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A Judas Moment: Betrayal in NyamakimaBy Dauti Kahura

The debut of this column in the E Review grappled with the Jubilee administration’s profligatespending. As it happens, dams were one of the big red flags that popped up. Records show thatduring its first term, the Jubilee administration spent upwards of KSh 160 billion on water andirrigation projects. These Arror and Kimwarer dams are costed at KSh 51 billion — let us say KSh 26billion on average. The KSh 160 billion spent works out to at least six of these dams completed, oralternatively at least double that number under construction. And KSh 26 billion is a huge amount ofmoney for a dam. Thika Dam, commonly known as Ndaka-ini, our biggest reservoir for drinkingwater to date, cost US$80 million in the early `90s, equivalent of US$140m (i.e. adjusted for dollarinflation) or KSh 14 billion today. These dam budgets are telling us that the cost of building damshas doubled in dollar terms, or that we are building infinitely grander dams. Neither is the case.

We now know for sure that there were no dams built. This mindless plunder is replicated in virtuallyevery sector. The budget records show KSh 280 billion on power transmission lines, enough for6,000 kilometres of 400 Kv lines (based on the cost of Marsabit-Suswa line), but information postedby KETRACO, the agency responsible for building them, shows only 2800 km of lines underconstruction, whose total cost is at most KSh 100 billion. We are talking KSh 180 billion missing, anamount, I should add, of the same order of magnitude as the Eurobond money that the AuditorGeneral could not find.

Overall, records show that KSh 2.5 trillion went through the development budget during Jubilee’sfirst term. The biggest ticket item here is the SGR railway which cost KSh 350 billion. The remainingKSh 2.15 trillion works out to KSh 45 billion worth of development projects per county. The moneyavailable to county governments over the same period would have enabled expenditure on averageof KSh 6 billion on development projects. In effect, we should be seeing six times more nationalgovernment development projects in each county as county government ones.

We now know for sure that there were no dams built. This mindless plunder is replicated

in virtually every sector. The budget records show KSh 280 billion on powertransmission lines, enough for 6,000 kilometres of 400 Kv lines …but information postedby KETRACO, the agency responsible for building them, shows only 2800 km of linesunder construction, whose total cost is KSh 100 billion. We are talking KSh 180 billionmissing, an amount, of the same order of magnitude as the Eurobond money that theAuditor General could not find.

Makueni county built a 200-bed Mother and Child hospital for a princely sum of Ksh. 135m. KibraMP Ken Okoth built and equipped a girl’s secondary school that’s been all the rage for Ksh. 48m. Ahospital like Makueni’s in every county is KSh 6.4 billion; a girls school like Kibra’s in everyconstituency, KSh 14 billion. Both combined add up to just over KSh 20 billion — about the moneythat has already been spent on the ghost dam projects. If national government has spent KSh 45billion per county on development projects these two projects would not be the talk of the country.There would be the equivalent of 300 Mother and Child hospitals in every county or alternately, 150Kibra girls schools in every constituency.

Galana-Kulalu Irrigation project is on its death-bed. It is not yet known how much money has gonedown that drain. One senior Jubilee official said to me that it is their Goldenberg, to which I quippedthat the competition for that dubious appellation would be strong. The last mile connectivity projectwas one of Jubilees flagship projects: over 800,000 connections are dormant. The connectedhouseholds have never switched on the power. This should not surprise. Most of these householdscannot afford electrical appliances other than a few lightbulbs that they would use only for three orfour hours a day. It would have been infinitely more sensible and cost effective to mandate the RuralElectrification Authority to serve these rural hamlets with micro-grids and stand-alone domesticsolar installations. The Kenya Power and Lighting Company (KPLC) is now weighed down with thecosts of maintaining these loss-making connections. These costs have to be passed on to consumers.And this is over and above the costs of carrying the excess generation capacity courtesy of theequally hare-brained if-we-build-it-they will come 5000 MW drive that has now been abandoned. Ithas been a long climb for KPLC to recover from the plunder of the Moi regime.

Makueni County built a 200-bed Mother and Child hospital for the princely sum of KSh135 million. Kibra MP Ken Okoth built and equipped a girl’s secondary school that’sbeen all the rage for KSh 48 million. A hospital like Makueni’s in every county is KSh 6.4billion; a girls school like Kibra’s in every constituency, KSh 14 billion. Both combinedadd up to just over KSh 20 billion — about the money that has already been spent on theghost dam projects.

This week, we have been entertained by the mysterious disappearance of 51 million litres of aviationfuel worth KSh 5 billion from the tanks of the Kenya Pipeline Company. This follows from a reportthat KPC lost 23 million litres worth Ksh 2.3 billion in 15 months. Even for the KPC, historically oneof the most profitable and cash-rich public enterprises, a KSh 7 billion hole is a crippling loss. WhenJubilee took over, the project on the table was to upgrade the 14-inch pipeline with a 16-inch one ata cost of KSh 16 billion. Jubilee scaled this up to a 20-inch one at a cost of KSh 48 billion, three timesthe mooted cost. The pipeline was to be completed in 18 months — by 2016 that is. Costs haveescalated, and it is still not complete. It has been reported that the corruption investigation in KPCcovers 27 projects worth KSh 95 billion. Most of this money is expensive foreign commercial loans.It’s hard to see how KPC can remain solvent. We are looking at another black hole here of the sameorder of magnitude as Kenya Airways, if not bigger.

The mother of all Jubilee financial blackholes is indisputably the SGR. According to CompassInternational, an engineering and construction consultancy, the benchmark cost for a new single-track high speed rail at between US$997,000 and US$ 1.13m per km, plus cost of signalinginfrastructure at between US$154,700 and US$189,000 for a total of US$1.15 million to US$1.3million The SGR is not an electrified high-speed rail, but we paid $6.7m per km, five times the highend of the benchmarking cost.

Galana-Kulalu Irrigation project is on its death-bed. It is not yet known how much moneyhas gone down that drain. One senior Jubilee official said to me that it is theirGoldenberg, to which I quipped that the competition for that dubious appellation wouldbe strong.

After years of denial, a government task force has established that the SGR is not viable. The SGRwas sold on bringing down the cost, and improving the efficiency, of freight. According to the saidtask force, the SGR has increased the cost of transporting a 20-foot container by 118 percent, from$650 (Ksh. 65,000) by road, to US$1,420 (Ksh. 142,000) and by 149 percent for a 40-foot containerfrom $850 (Ksh. 85,000) to US $2,120 (Ksh. 212,000).

There are two components in this cost escalation. First, the SGR tariff is set to try and repay theloans. Even then, the SGR is yet to cover operating costs, let alone generate an operating surplusthat can service debt. Secondly, the SGR has introduced additional costs notably “last mile” cost oftransporting containers from the railway terminal to the owners premises, as opposed to truckingwhich is port-to-door, as well as additional container handling logistics. These challenges ofintegrating rail and seaport are universal, and are part of the reason why the rail share of freight inthe EU has declined from over 40 percent in the 70s to less than 20 percent today.

Even for the Kenya Pipeline Company, one of the most profitable and cash-rich publicenterprises, a KSh 7 billion hole is a crippling loss. When Jubilee took over, theproject…to upgrade the 14-inch pipeline with a 16-inch one at a cost of KSh 16 billion.Jubilee scaled this up to a 20-inch one at a cost of KSh 48 billion, three times the mootedcost. The pipeline was to be completed in 18 months – by 2016 that is. Costs haveescalated, and it is still not complete.

The long and short of it is that SGR is increasingly demonstrating what this columnist and othershave maintained from the outset— that it is a white elephant. Without being forced, people wouldnot use it. And if it were to charge a competitive tariff, it is doubtful that it would keep the trainsrunning, let alone service its debt. I have opined before that the least costly option may be tomothball it, seeing as the debt will be paid by the taxpayer, we should not be made to pay four timesnamely, the debt, operational subsidy, higher freight cost and trucking industry jobs and incomes.The next best thing is to take over the debt, cancel the Chinese management contract and leave it toswim or sink in the market place under the management of Kenya Railways. The only beneficiary ofthis project is China. It is doubtful that the Jubilee administration can muster the resolve to bite thebullet on this one. So we will continue to bleed.

After years of denial, a government task force has established that the SGR is not viable.The SGR was sold on bringing down the cost, and improving the efficiency, of freight.According to the said task force, the SGR has increased the cost of transporting a 20-footcontainer by 118 percent, from $650 (Ksh. 65,000) by road, to US$1,420 (Ksh. 142,000)

and by 149 percent for a 40-foot container from $850 (Ksh. 85,000) to US $2,120 (Ksh.212,000).

This is Uhuru Kenyatta’s legacy as it now stands. Mindless plunder and worthless vanity projects—aUS$ 25 billion (Sh. 2.5 trillion) hole in the economy and counting, and contingent liabilities, financialbooby traps if you like, Kenya Airways, Kenya Pipeline, Kenya Power and others we don’t know ofyet, that could go off at any minute.

This is Uhuru Kenyatta’s legacy as it now stands. Mindless plunder and worthless vanityprojects—a US$ 25 billion (Sh. 2.5 trillion) hole in the economy and counting.

The penny is beginning to drop, and sections of the regime are now beginning to talk about a turn-around strategy that can salvage the President something of an economic legacy. They have theirwork cut out. Economic crises of this nature are not solved by the same people who created them.Ethiopia’s EPDRF government came to this realisation about a year ago. Ethiopia was headed for arevolution such as unfolding next door in Sudan. Former Prime Minister Hailemariam Desalegn hasrecently intimated that he resigned to make it easier for the regime to reform. So far, the bet on aleadership change is paying off, even though the new Prime Minister’s magic touch is yet to betested on the inevitable painful economic reforms. The political honeymoon also appears to beending.

The penny is beginning to drop, and sections of the regime are now beginning to talkabout a turn-around strategy that can salvage the President something of an economiclegacy. They have their work cut out. Economic crises of this nature are not solved bythe same people who created them.

The rapprochement between Kenyatta and Raila Odinga a year ago, popularly known as the“handshake” offered an opportunity to engineer something similar. But as soon as they pledged tobuild bridges, Kenyatta set off to burn them. A year later, no-one seems to know where it is headed,other than hazy talk of a referendum, and holding the political ground as Kenyatta prosecutes yetanother hypocritical and inept anti-corruption war, as opportunistic as it is ineffectual. With toxicsuccession politics in full throttle, it is difficult to see how resolve and focus on radical economicreform can be mustered.

Amidst the entire dam hullabaloo, there was a small event last week that did not attract muchattention. The cornered Treasury CS took time out from his daily commute to the Directorate ofCriminal Investigations to launch a private external audit of the Eurobond funds commissioned bythe Treasury. No prizes for guessing that the audit sees no evil. External audit is an exclusiveconstitutional mandate of the Auditor General. We all witnessed the President staring down theAuditor General on his special audit ordered by parliament. It has yet to see the light of day. Thenational government’s audit for the year remains qualified. There is no country where questions canbe raised about two billion dollars of public money, and the president of the country acts about it asnonchalantly as Kenyatta has, unless there is direct complicity with the thieves. Malaysia’s 1MDBand Mozambique’s Tuna sovereign bond frauds have unravelled. This one will too, in the fullness oftime. Kenyatta has plenty of reason to want to extend his influence beyond his term of office.

To plunder the way the Jubilee administration has, it has had to raze the public financialmanagement system to the ground. Without public financial accountability, there is no government,

no economy, no country. To budget anything from a quarter to a third of the country’s annual GDPfor stealing — to then borrow it, steal it, feign outrage, compromise parliament, and diffuse publicanger with ineffectual corruption investigations, again and again and again – defies corruption. It isa crime against humanity.

Yes, the economy is crumbling, but its turnaround is not the priority. Getting rid of this monstercalled Jubilee is.

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A Judas Moment: Betrayal in NyamakimaBy Dauti Kahura

The year was 1998, just after the second multiparty elections that, like the first, was marred by

ethnicized political violence and allegations of massive fraud. The horizon was ominous. Moi wouldbe coming to his two-term limit in the subsequent election, and there was already talk of aconstitutional amendment to remove the term limit as was happening in Zambia and elsewhere atthe time. The economy was in free fall. The big imponderable then was whether Moi would go whenthe time came, and whether the country could survive a conflagration if he sought to cling to powerby hook or crook.

The departure point of Scenarios was that Kenya’s business model had reached the end of the road:“Kenya had reached the limits of its chosen political and economic models.” This prognosis wascaptured by an analogy of an umbrella. We inherited at independence a dualism of the colonial erawhich created a “modern” enclave sector occupied by Europeans and their Asian and Africanauxiliaries, and a “native sector” occupied by the excluded African masses. The modern enclave,which I prefer to call the privilege sector, comprised the State, a small corporatized economy withsuperior social amenities especially education facilities and urban residencies. Colonial Europeanshad the exclusive Duke of York, Prince of Wales and other exclusive schools, Asians had their own —the Duke of Gloucester, Allidina Visram, Racecourse Secondary — and the lucky few Africans hadAlliance, Maseno, Mang’u and a few others. Even though African schools and urban residencies werebelow those enjoyed by Europeans they were way above the life of the ordinary native. Once you gotinto one of these schools, you had made it.

The departure point of Scenarios was that Kenya’s business model had reached the endof the road: “Kenya had reached the limits of its chosen political and economic models.”

Now think of the enclave economy, the privilege sector if you like, as an umbrella. People under theumbrella are protected from the elements, but how well protected you are depends on your positioninside the umbrella. People at the centre are completely protected and warm, while those at theperiphery are less protected, but they are better than those outside. The trick is to get deeper intothe umbrella until you are the guy actually holding it.

Before independence Europeans were at the centre, followed by Asians, and Africans at theperiphery. After independence, many Europeans and some Asians left making more room forAfricans to move deeper into the umbrella, and a few more to move into the shelter.

A fresh graduate was guaranteed a position previously occupied by a European, and a high schoolleaver, a position previously occupied by an Asian. Even though there was a whiff of tribalism, withKikuyus getting the prime jobs, all Africans with university education got on the gravy train. Thosewith post-graduate degrees went straight to the top of the public service.

We inherited at independence a dualism of the colonial era which created a “modern”enclave sector occupied by Europeans and their Asian and African auxiliaries, and a“native sector” occupied by the excluded African masses.

By the mid-seventies the privilege sector was already feeling the strain of the numbers of people. Upuntil then anybody with an O-Level Div. 3 was assured a good clerical job in the private sector whileA Levels who did not proceed to university or diploma courses joined as management trainees.

By the end of the `80s, the economy was struggling to absorb 2000 university graduates a year.

The problem was about to get a whole lot worse.

In 1990, the labour force was in the order of four million people, of which one million, a quarter thatis, were in the “privilege sector” (i.e. public and private sector formal wage jobs). The other threequarters were in the informal non-agricultural and smallholder agriculture. Unemployment wasrelatively low, since smallholder agriculture and informal sector was absorbing those who did notget into the privilege sector.

Three decades on, the Kenya National Bureau of Statistics estimated the economically activepopulation (15-64 year-olds) at 25 million, and the actual labour force (i..e excluding students andothers inactive) at 19 million — a five-fold increase. Formal wage employment is estimated at 2.7million and non-farm informal employment at 14 million, leaving one million unemployed, andimplying that there are just about two million smallholder farmers and pastoralists. Out of theincrease of 16 million, the privilege sector has absorbed 1.7 million, only 10 percent, and itscontribution to employment is down to 8.5 percent from 25 percent three decades ago.

In the meantime, university enrolment has increased to 500,000 which works out to 125,000graduates a year, or 63 times the rate three decades ago, while the privilege sector is absorbing justover 100,000 a year. Even if they took up all the jobs, the privilege sector simply cannot absorb theannual throughput of university graduates.

In 1990, the labour force was in the order of four million people, of which one million, aquarter that is, were in the “privilege sector”… Three decades on, the economicallyactive population (15-64 year-olds) is at 25 million, and the actual labour forceS at 19million — a five-fold increase.

This encapsulates what the scenarios team meant by the end of the road: “Radical changes to revivethe economy, a comprehensive reorganization of Kenya’s primary institutions, models of governanceand relationships between citizenry and the government are all required.” Would it happen?

Two transformational imperatives were self evident, political and economic, making for four possiblescenarios. The first is the No Reform scenario, that is, the continuation of the trajectory that thecountry was on at the time. We called this the El Nino scenario. The second is the economic reform-only scenario. We called this scenario Maendeleo. The third is political reform-only scenario. Wecalled this the Katiba scenario. Initially, these were the only scenarios developed. But whenpresented to the project trustees, they argued that the presented scenarios were all too pessimisticand insisted that the team develop a fourth scenario with both political and economic reform. Theteam obliged, even as it felt this was not a viable prospect. We called this the Flying Geese scenario(See ‘Kenya Scenarios Project’ box).

Kenya’s politics for the better part of the last two decades can be characterized as a strugglebetween the Maendeleo and Katiba scenarios.

University enrolment has increased to 500,000 which works out to 125,000 graduates ayear, or 63 times the rate three decades ago.

In 2003, the National Rainbow Coalition (NARC) rode to power on a Katiba platform. For a shortwhile, the cross-ethnic unity of purpose displayed by erstwhile bitter political rivals, reminiscent ofthe Flying Geese scenario, made Kenyans the most optimistic people in the world. It did not last. Onassuming office the old order coalesced around Kibaki, sabotaged the constitution-making process,and proclaimed a Maendeleo agenda. Instead of a constitution, we got Vision 2030. Katiba-

Maendeleo was not just a battle between politics and economics but it played out in the economicarena, between NARC’s bottom-up-inclusive growth and the trickle-down economics of the privilegeeconomy. A good number of the experts I mobilized to work on NARC’s Economic Recovery Strategy(ERS), Betty Maina, Sam Mwale, Gem Kodhek, Wachira Maina, Richard Ayah, John Kashangaki,Joslyn Ogai among others, were members of the scenarios team, as was Prof. Anyang’ Nyong’o, theminister in charge of the ERS. After the 2005 referendum, the transformative political and economicagenda was abandoned. Instead of a new constitution and the economic empowerment agenda thatNARC had promised, we got the trickle-down infrastructure-led Vision 2030.

Kenya’s politics for the better part of the last two decades can be characterized as astruggle between the Maendeleo and Katiba

It took the 2007/8 post-election violence to jolt maendeleoism back to reality, and create theimpetus for the 2010 Constitution. It is our great misfortune that we put the constitution in abeyancefor two years instead of going to election immediately after promulgation as is the norm. This gavetime for the old order to regroup behind the anti-ICC narrative. The rest, as they say, is history.

For the 2017 general election, we once again united the opposition around the Katiba platform.NASA was crafted straight out of the 2003 NARC playbook. Those who paid attention to themanifestos may have noted that the NASA manifesto led with the political reform agenda, followedby social and economic priorities in that order, while the Jubilee one led with an economic agenda;social and political reforms were treated almost as an afterthought.

It is our great misfortune that we put the constitution in abeyance for two years insteadof going to election immediately after promulgation as is the norm.

The Jubilee government’s plunder and incompetence has no doubt contributed to the economicimplosion that is now unfolding. Perhaps distracted by the melodrama of the plunder and blunders,the clawback of the privilege sector has gone, if not unnoticed, then unremarked. Recently, aPrincipal Secretary gloated on social media that they have secured US$26 billion in pledges frominvestors for the housing pillar of the so called Big Four Agenda, whose claim to bigness no oneseems to know. Twenty-six billion dollars is a lot of money. It is equivalent to the GDP of Uganda.The idea that a government of a country that cannot feed itself can contemplate investing that kindof money in urban middle class housing, let alone shout about it, is astounding. The question I posedto him: what will the houses produce?

According to the National Housing Survey conducted by the KNBS five years ago, 60 percent ofKenyans live in their own houses (88 percent of rural. No surprises there — Kenya is still apredominantly agrarian society — 60 percent of Kenyans are rural and 88 percent live on land theyown. Urban home ownership stood at 30 percent but this understates actual home ownership, asmany urban residents also own rural homes, and actually see their sojourns into cities and towns astemporary.

Recently, a Principal Secretary gloated on social media that the government has securedUS$26 billion in pledges from investors for the housing pillar of the so called Big FourAgenda. Twenty-six billion dollars is the equivalent to the GDP of Uganda. That agovernment of a country that cannot feed itself can contemplate investing that kind ofmoney in urban middle class housing…is astounding.

More significant perhaps is that over 70 percent paid monthly rents under Sh. 6,000, and 90 percentunder Sh.10,000. Realistically, only about 10 percent of urban residents, less than three percent ofKenyans, are in the potential home ownership bracket. It’s hard to see what kind of logic would leadthe government to the conclusion that urban middle class home ownership is one of the country’stop four development priorities. But this is the logic of the privilege society.

In the old days, entitlement was rationalized with the graduates being the creme de la creme ofsociety, a merited reward for scaling the heights to reach the pinnacle of academic achievement.Many students did the minimum necessary to graduate. Those who seemed to be “overworking”were often frowned upon. The former were right in a sense. Education replaced Race as a ticket tothe top of the social ladder. Not what you do, but who you are, a graduate. Graduates were the newwhites. Times and circumstances have changed, but culture dies hard. It is in the rubric of thisculture that prioritizing residential housing over enterprises in a country with a monumentalunemployment crisis can look perfectly normal.

With Maendeleo imploding, and Katiba proving too potent a threat to privilege, what we see now isa political class in self-preservation mode, laying the groundwork for what I’ve called an eat-and-let-eat grand ethnic coalition—KANU 3.0. In the meantime, the demographic clock ticks, at the rate of150,000 university graduates a year. Frustrations rise.

Education replaced Race as a ticket to the top of the social ladder…Graduates were thenew whites.

Where does the political class think it is going with this? No political reforms, no economic reforms.That would be El Nino:

“The state is captured by a small elite that employs it as an agent of its own private enterprise. Onthe other hand, the economy is characterized by low productivity which makes it impossible for thepopulation to realize upward economic mobility. Thus, the construction of both the economic andpolitical spaces generates tension and conflict. The result is an implosion.”

The Kenya at the Crossroads Scenarios proved prescient 20 years ago. It may well be yet again.

El Nino: “The state is captured by a small elite that employs it as an agent of its ownprivate enterprise. On the other hand, the economy is characterized by low productivitywhich makes it impossible for the population to realize upward economic mobility. Thus,the construction of both the economic and political spaces generates tension andconflict. The result is an implosion.”

–

The Kenya at the Crossroads Scenarios

No Political Reforms, No Economic Reforms: El Nino

In the El Niño scenario, neither the reform of the state nor the restructuring of the economy takesplace. It is a story in which the state remains predominantly patron-client based and therefore

partisan, subjective and ineffective in the manner in which it performs its functions. The state iscaptured by a small elite that employs it as an agent of its own private enterprise. On the otherhand, the economy is characterized by low productivity which makes it impossible for the populationto realize upward economic mobility. Thus, the construction of both the economic and politicalspaces generates tension and conflict. The result is an implosion.

Economic Reforms with Minimal Political Reforms: Maendeleo

This scenario explores a technocratic attempt to reform the economy with a view to using economicgains as a means of pre-empting or forestalling demands for political reform. The major assumptionin this scenarios is that if the economy is growing steadily, there will be little or reduced demand forpolitical reform. Whilst this model is initially successful, as the limits of the system are reached andeconomic growth slows down, the demands for political reform pick up once again and the system isfaced with two basic choices: to be repressive (and perpetuate the economic decline) or negotiatepolitical reforms (and kick-start the economy again). Though this strategy leads to short-term gains,it breeds a lot of inequality. Without addressing the deeper political and structural questions withregard to Kenya’s problems, this success cannot be maintained for a long period. Sooner or later,one has to address these structural questions.

Political Reforms with Minimum Economic Reforms: Katiba

The Katiba scenario presupposes a successful political negotiation that sees the country adopt a newconstitution which recognizes the diversity of the peoples of Kenya and puts in place a mechanism ofchecks and balances which ensure that the centre is not in a position to dominate over any of theregions of the country.nsuccessful, the outcome for the country can only be bleak. The Katiba storyis a story of an inclusive long-drawn out but successful political negotiation process which leads tothe reform of and creation of key national institutions. This process takes place in an environment inwhich there is little or no economic growth. It is the story of a stormy, painful, but decidedlysuccessful attempt by Kenyans to resolve the inconsistencies in their political processes and keyinstitutions of public life that have led to domination, marginalization and fostered corruption. Thenew institutions reflect the diversity of the country, increase the accountability of leadership at alllevels and allow a greater role for the citizen in shaping and managing those activities that affecttheir day-to-day lives.

Simultaneous Economic and Political Reforms: Flying Geese

This is a scenario of inclusive growth and fundamental institutional reorganization. The team ispersuaded that with decisive action and a keen interest in redressing the past and capturing thefuture, sufficient resolve could be brought to bear and this scenario launched. The Flying Geesestory explores the renaissance of Kenya through a determined effort to reform the social, cultural,economic and political models in force. This effort is spearheaded by a new leadership which isarmed with a vision and the conviction that Kenya deserves better and can be more than it presentlyis. For simultaneous reforms on both the economic and political fronts to succeed, a huge reservoirof goodwill is required. There is also a need to for there to be a body (or bodies) that can act asguarantors to the process.

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A Judas Moment: Betrayal in NyamakimaBy Dauti Kahura

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A Judas Moment: Betrayal in NyamakimaBy Dauti Kahura

Is the Kenya shilling overvalued or not? According to the IMF it is currently overvalued by 17percent. In an unusually combative response to his former employer the Central Bank governor saysthat is only off-kilter by 5 percent and accuses the IMF of making Kenya a “guinea pig in its newapproach.” The offensive claim, contained in the IMF’s latest report on the country dated October2018, states as follows:

“The EBA-lite methodology for the exchange rate suggests that the external position is weakerthan fundamentals. The current account approach shows that the current account deficit (bothactual and cyclically adjusted) are above the norm (the CA gap is -2.5 percent), suggesting anovervaluation of about 17.5 percent of the real exchange rate. This can only marginally beexplained by the policy gap. The REER approach also shows a similar-size of overvaluation,equivalent to about 18.0 percent. Again, the policy gap is marginal. Given the continuedappreciation of the real exchange rate, the external position is assessed to be weaker thanfundamentals. Regarding the last approach, the external sustainability approach, it was notpossible to use it as the international investment position data is not yet produced by theauthorities.”

This needs a fair amount of disambiguation. EBA is a needless acronym that stands for externalbalance approach for exchange rate assessment. The methodology is described in an IMF paperpublished in 2013 as an update of a previous methodology known as CGER. CGER is anotherneedless acronym for consultative group for exchange rate assessment. This EBA thing appears tobe what the CBK governor is referring to as a new approach.

The methodological spat is a red herring. Economic models are tools, not oracles. What we havehere is workmen quarrelling over tools. Our top three economic mandarins are former IMF staffers.

Surely, as former colleagues, they can sit together with their colleagues and their models andconverge on an assessment as to whether the shilling is overvalued or not?

The IMF refers to three methodologies: the Real Effective Exchange Rate (REER), the currentaccount and external sustainability approach. Of the three, the REER is the most intuitivelyunderstandable and also the one for which we have data. But what is this animal the REER?

The methodological spat is a red herring. Economic models are tools, not oracles. Whatwe have here is workmen quarrelling over tools. Our top three economic mandarins areformer IMF staffers. Surely, they can sit together with their colleagues and their modelsand converge on an assessment as to whether the shilling is overvalued or not?

Suppose bananas are retailing at KSh 100 shillings a bunch in Kenya. The Kenya/Uganda shillingexchange rate is one to ten. At this exchange rate and banana price, 20 percent of bananas arecoming from Uganda. Suppose price of Kenyan bananas goes up to KSh 125 a bunch (e.g. because ofincrease in taxes), and exchange rate remains the same. Ugandans can continue to sell bananas inKenya profitably at KSh 100 while many Kenyan producers cannot. In fact, Ugandans are likely tohike their price to let us say KSh.110 making Kenya an even more profitable market than their homemarket. Uganda bananas will flood the market and put Kenyan producers who are not profitable atKsh. 110 out of the banana business. For the market to remain at the old equilibrium (i.e. 20/80Uganda/Kenya market share) requires Kenya shilling to fetch USh. 8.00 so that to get USh. 1000 asbefore, the Ugandans will also have to sell their bananas at KSh125.

Its readily apparent that if our domestic prices go up faster than those of our trading partners, thenforeign goods will keep becoming cheaper. But you cannot tell by just looking at the dollar shillingexchange rate. We need to factor in the price movements with every trading partner. The REER is anindex that combines the relative exchange rate and price movements of all our trading partners.

If the REER is rising, our goods are becoming more expensive. We can expect to import more andexport less. If this happens our trade deficit will widen. If the trade deficit continues to widen, werun the risk of defaulting on our international obligations in particular debt service and repatriationof profits and capital. This is where the IMF comes in. The IMF’s mandate is to maintaininternational financial stability. The IMF is a financial cooperative whose job it is to ensure membersdo not run into external payments difficulties, and to bail them out when they do, in order to keepglobal finance and commerce going.

The spat between the IMF and the CBK is therefore about our external creditworthiness. The keyindicator for this is the current account balance. The current account balance has two components:trade and income. The trade account I have already mentioned. The income account consists ofpayments for “factor services” such as interest (use of capital), labour (e.g. for services of Kenyantroops abroad) and another component we call unrequited transfers (meaning money we have notearned) such as diaspora remittances, grant aid and such like. The external account in turn, has athird component, the capital account where, as the name suggest, we record investmenttransactions.

The spat between the IMF and the CBK is…about our external creditworthiness. The keyindicator for this is the current account balance.

This is how it works. Kenya Airways buys an aircraft using a foreign loan. The aircraft is entered in

the trade account as an import and simultaneously in the capital account as a capital inflow. Thefollowing day it ferries passengers from Lagos to Dubai. The income is recorded in the trade accountas a service export. At the end of the month it remits repayment on the loan. The interest is recordedin the income account as a factor service payment and the principal is in the capital account as acapital outflow.

The net of the current account and the capital account are added together to give the overallbalance. An increasing overall deficit depletes foreign reserves, while a surplus leads to a build up ofreserves. Current account surpluses mean that a country’s savings exceed its investment; it can,therefore, export capital, like China. A current account deficit means that a country is investingmore than its savings, in other words, it is importing capital (either debt, FDI, remittances, grantsetc).

The country’s creditworthiness thus depends not just on trade but also on other financial flows, thatare determined by factors other than trade competitiveness, both economic and non-economic.Complicated stuff.

Both the IMF and CBK agree that the shilling has appreciated, but they disagree on the magnitude.The IMF also implies that the appreciation is a reflection of policy action while the CBK maintainsthat it is a reflection of market forces. The IMF view translates to accusing the CBK of misleadingthe public by espousing a monetary policy that claims to target inflation, while in practice it isactually targeting the exchange rate. The IMF’s “smoking gun” is the fact that the NEER hasflatlined for the past six years (see Chart).

Recently the IMF re-classified the Kenya shilling from a “floating” (meaning market determined) to“other managed arrangement.” This means the IMF is convinced that the Central Bank is proppingup the shilling. What reason would the Central Bank prop up the shilling especially if it underminesthe country’s competitiveness and solvency?

Foreign currency debt exposure is one reason. The interest payments on the first Eurobonds issuedin 2015 ($185 million a year) has increased by KSh 3 billion, KSh 16 billion to KSh 19 billion onaccount of the depreciation of the shilling. Translate that to the total interest payments this yearwhich are in the order of $1.4 billion dollars. The shilling has weakened by about three shillings tothe dollar since the beginning of the financial year. The total interest payments this year which arein the order of $1.4 billion. This translates to a KSh 4 billion squeeze on a government that is already

living way beyond its means. The last thing the Treasury wants to hear is that the shilling should betrading at about 120 to the dollar.

Recently the IMF re-classified the Kenya shilling from a “floating” (meaning marketdetermined) to “other managed arrangement.” This means the IMF is convinced that theCentral Bank is propping up the shilling. What reason would the Central Bank prop upthe shilling especially if it undermines the country’s competitiveness and solvency?

Another reason is pressure to keep low interest rates. Interest rate is the policy instrument in aninflation-targeting monetary policy regime such as we claim to have. Central Banks are givenstatutory independence over the conduct of monetary policy to insulate them from such pressure sothat they can raise interest rates when they need to, even when it is politically costly for thegovernment of the day. Parliament’s capping of interest rates two years ago is ample demonstrationthat political pressure on Central Banks is real.

Keeping interest rates artificially low puts pressure on the exchange rate. A weakening currencycreates inflationary pressures, which is what the Central Banks are mandated to control in the firstplace. The Central Banks end up trying to meet incompatible objectives, low interest rates, lowinflation and a stable currency.

This is precisely what happened from mid-2009 to September 2011. The Central Bank bent overbackwards to accommodate the government’s economic stimulus meant to respond to both the post-election violence and the global financial crisis. Interests rate were driven to the floor. Frommid-2010 to mid-2011 the benchmark 90-day Treasury bill rate was kept below 3 percent. The IMF’scharts show how this ended— with a very hard landing. The shilling which had been propped up atabout 80 to the dollar, started unravelling in April peaking at KSh100 to the dollar in September.The Central Bank was forced to jack up interest rates in a hurry. By the end of 2011, the T-bill ratewas heading to 20 percent.

The IMF seems to believe that, left to market forces, the shilling will depreciate in real terms. TheIMF’s REER chart covers eight years, from 2010 to 2017. A longer timespan does not necessarilysupport this contention (see Chart). My chart goes back to the beginning of the liberalized regime in1994. What do we see? The shilling has been appreciating in real terms since it was liberalized.Overall it has appreciated 157 percent, by 9 percent per year on average. This could mean that theGovernment has been propping up the shilling all these years, or that market forces are not workingthe way the IMF expects.

ManyKenyans have observed that we have become an importing country. One also hears policymakerslamenting that we are losing our markets in the region and blaming all manner of things. There is nomystery to it.

My [assessment is that] the shilling has been appreciating in real terms since it wasliberalized. Overall it has appreciated 157 percent – by 9 percent per year on average.This could mean that the Government has been propping up the shilling all these years,or that market forces are not working the way the IMF expects.

But is the Central Bank propping up the shilling? That we cannot be able to tell that easily. Thereare lots of moving parts. It can also be on account of some trading partners manipulating theircurrencies: China, for example, is regularly accused of maintaining an artificially weak currency.China has a big weight in our REER and it’s been growing over time.

The ultimate question is whether it is sustainable. There are two parts to this, financial andeconomic. The widening trade deficit has been plugged by remittances and portfolio inflows (moneyflowing into the stock exchange and government securities), not all of it honest money, and lately,government commercial borrowing, the ubiquitous eurobonds and syndicated loans. As long as thesekeep flowing, the show can go on.

Why are we told the economy is growing and yet we cannot feel it? This is the shoppingmall economy. How long can we keep that going?

The economics is a different story. This is the shopping mall economy. It is not good for employmentand equity. It is not good for employment, or equity, or sustainable growth. It is part of the answerto the question that Kenyans keep asking: why they are told the economy is growing and they arenot feeling it. This is the shopping mall economy. How long can we keep that going? Your guess is asgood as mine. Governments are known to manipulate currencies and to distort financial marketsgenerally. The IMF is known to (a) have more faith in market forces than warranted and (b) get theworkings of those market forces wrong. What to do?

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A Judas Moment: Betrayal in NyamakimaBy Dauti Kahura

Not too long ago, Angola opened an embassy in Nairobi on a quite well-appointed address on RedhillRoad in the diplomatic suburb of Gigiri, a road I use frequently. You couldn’t miss it. It had anoutlandish gate and a black granite signboard with gold lettering. I was rather intrigued that Angolawould need such a large embassy in Kenya. I have made a point of observing how much activity wasgoing on there— very little. I passed there the other day and lo and behold, the outlandish goldlettered black granite signboard was gone, replaced by a more modest one announcing theBotswana High Commission. The Angolan foray would have cost no less than $10 million, and Iwould imagine that Kenya was not the only country that Angola had spread its diplomatic footprint.

What has changed?

Angola has squandered the oil bonanza of the last decade. Angola is Africa’s second-biggest oilproducer after Nigeria, with a daily output of 1.6 million barrels of crude and 18 million cubicmetres of natural gas. There is an economic principle that windfall earnings should be saved. Angoladid not save. Instead, it leveraged the oil boom to pile up debt. Angola is China’s biggest debtor inAfrica, owing US$ 23 billion accounting for about a fifth of Africa’s debt to China.

If Angola had set a windfall benchmark at $50 per barrel, its nest egg for the five and a half year oilboom (April 2009 to May 2014) would have been in the order of $100 billion on crude oil alone ie.excluding natural gas. A conservative investment yielding 5 percent a year would be earning Angola$5 billion a year to invest in infrastructure or whatever else it chooses. This is how Norway got richon oil. Norway’s sovereign wealth fund, the worlds largest, is now worth a trillion dollars. If Norwaywas to pay dividends from the fund to its 5.2 million citizens, each would get US$9,000 a year.

There is an economic principle that windfall earnings should be saved. Angola did notsave. Instead it leveraged the oil boom to pile up debt. If Angola had set a benchmark of$50 per barrel of petroleum, its windfall for the five and a half year oil boom (April 2009to May 2014) would have been in the order of $100 billion on crude oil alone… Aconservative investment yielding 5 percent a year would be earning Angola $5 billion ayear to invest in infrastructure or whatever else it chooses.

They say once bitten twice shy. Not Zambia. When I was a college student eons ago, Zambia was acase study on how not to manage an economy. Zambia rode the post independence commodity boominto middle income status by the early seventies. At $600, Zambia’s income per person was one-thirdhigher than the Sub-sahara Africa average. In Nairobi, Zambia’s heydays are represented by its well-appointed embassy property on Nyerere Road, overlooking Uhuru Park. When commodity pricesreceded from the late seventies, Zambia plugged its finances by borrowing – and borrowed itself intopoverty. Over the next decade, Zambia’s foreign debt increased seven-fold, from one to seven billiondollars. By the mid-90s when it got HIPC (Highly Indebted Poor Countries) debt relief, averageincome adjusted for inflation was half of the mid-1970s level.

Zambia rode the post independence commodity boom into middle income status by theearly seventies. When commodity prices receded from the late 1970s, Zambia pluggedits finances by borrowing – and borrowed itself into poverty.

Copper prices surged again in the 2000s peaking in 2011 at $4.60 a pound, about the same ininflation-adjusted terms, as at the 1970s peak. In 2012, against the backdrop of retreating copperprices, Zambia debuted in the Eurobond market, borrowing $750 million. It also borrowed heavilyfrom China. Copper prices have fallen again and Zambia is in debt distress. The eurobonds are nowtrading at around15 percent yield, almost three times the debut bonds 5.6 percent yield at issue.What this means is that the bonds for which investors paid $94 are now trading at $34. It means thatZambia is now effectively locked out of any more borrowing in the sovereign bond market. WillZambia turn around its finances before the bonds are due for re-financing? Doubtful.

Zambia is only slightly less dependent on copper now than it was in the 1970s. Copper still accountsfor two-thirds of exports. Zambia has no shortage of low-hanging fruit in terms of diversificationoptions: it has plenty of idle arable land and underexploited tourism potential. Chile was once ascopper dependent as Zambia. In fact, copper still accounts for half of Chile’s exports. But Chile has

diversified its economy and worked its way up to being the first Latin American country to beadmitted to the OECD club of rich countries. Interestingly, Chile has become a wealthy countrywithout following the Asian Tiger holy grail of export manufacturing, but rather by diversifying toservices and agricultural exports. Its other key exports are agricultural including horticulture, wineand fish, especially farmed salmon.

Chile was once as copper dependent as Zambia. Copper still accounts for half of Chile’sexports. But Chile has diversified its economy and worked its way up to being the firstLatin American country to be admitted to the OECD club of rich countries. Interestingly,Chile has become a wealthy country without following the Asian Tiger holy grail ofexport manufacturing, but rather by diversifying to services and agricultural exports.

Historically, financial recklessness on this scale was the preserve of resource-rich African countries.But the disease has spread all over the continent. Resource-poor countries such as Ethiopia andKenya are now just as reckless as the resource-cursed. In the past, resource-poor countries simplydid not have access to the money to steal or finance megalomania. When they tried to do so bydomestic borrowing and printing money, the macroeconomic feedback loop quickly kicked in andwreaked financial havoc. Moi learned this lesson. Mugabe did not. He ended up with a hyperinflationfor the ages, and the demise of the Zimbabwe dollar.

There are two reasons why resource-poor countries have also caught the disease: the 2008 globalfinancial crisis, and China.

Since the global financial crisis, which began in 2007 and properly set in the next year, the financialmarkets have been awash with money churned out by the US Federal Reserve and other centralbanks, thereby depressing interest rates to near zero, prompting money managers to go looking forbetter returns in emerging markets in what is known in market lingo as “hunting for yield”.Aggressive salesmen were everywhere scouting for and massaging the egos of potential borrowers.When Kenya set out to debut in the Eurobond market it indicated that it would raise a $500m“benchmarking” bond whose proceeds were to retire a syndicated bank loan borrowed two yearsbefore, and which was the only foreign loan in Kenya’s books at the time. By the time the issue wasgoing to the market, it had grown fourfold to $2 billion. By the time it closed, the government hadborrowed $2.8 billion.

Within weeks of the successful debut, the treasury mandarins were talking of Sukuks (Islamic bonds)and Samurais (Japanese Yen denominated bonds), like children accidentally locked inside an icecream parlour. Other than the syndicated loan repayment of $600 million there is no trace ofanything financed with the money.

Since the global financial crisis, the financial markets have been awash with moneychurned out by the US Federal Reserve and other central banks, thereby depressinginterest rates to near zero, prompting money managers to go looking for better returnsin emerging markets. Aggressive salesmen were everywhere scouting for and massagingthe egos of potential borrowers. Africa Rising.

China is getting more than its fair share of flak for Africa’s debt distress. The fear of the Dragon isover the top. Unlike the Western banks and markets which are embedded in the Western powerstructure, China will have little recourse when countries default. It cannot run them through the millwe saw “the troika” run Greece when it went into debt-distress in 2009. The head of China Export

and Credit Insurance Corporation, known as Sinosure was recently quoted lamenting the poorquality of China’s infrastructure loans abroad. He went on to disclose that the agency is already abillion dollars out of pocket on Ethiopia’s new railway, whose preparation he termed “downrightinadequate”. “Ethiopia’s planning capabilities are lacking, but even with the help of Sinosure andthe lending Chinese bank it was still insufficient.”

It has also been reported that China may offload its infrastructure loans to the secondary market.The plan is to sell the loans to the Hong Kong Mortgage Corporation which will in turn repackagethem, dice them up and sell them to investors, thereby releasing liquidity back to the primarylenders such as China Exim Bank to make more loans. This is not funny. First, the lenders admitthat they have made dud loans. Then they follow this with an announcement that they will sell thesame to investors. It is a scheme such as this, which mixed up low risk and high risk (a.k.a sub-prime) mortgage loans into securities known as Collateralized Debt Obligations (CDOs) thatprecipitated the erstwhile mentioned global financial crisis. More poignantly, the Dragons debt trapdiplomacy as it’s been called, begins to look uncannily like hunting for yield.

That is the supply side. On the demand side, you have African leaders who have no ideas of theirown. From import substitution industrialization, to neoliberal orthodoxy in the 80s, to povertyreduction strategies and now infrastructure-led growth, they wander thoughtlessly from one aidparadigm to the next, all the while living up to Fanon’s prediction that they were destined to become“a transmission line between the nation and capitalism.”

The bigger problem is delusions of grandeur. Seemingly every one of these African big men has aLee Kwan Yew complex. Even Uhuru Kenyatta, a man who couldn’t run an orderly kindergarten in achildren’s park if his life depended on it, is prone to bouts of megalomania during which hecomically dons military fatigues and goes around doing General Park Chung-hee skits.

On the demand side, you have African leaders who have no ideas of their own. Fromimport substitution industrialization, to neoliberal orthodoxy in the 80s, to povertyreduction strategies and now infrastructure-led growth, they wander thoughtlessly fromone aid paradigm to the next, all the while living up to Fanon’s prediction that they weredestined to become “a transmission line between the nation and capitalism.

Africa has its economically successful nations: Botswana, Namibia, Mauritius, Cape Verde and theSeychelles. What do these successful African nations have in common? First, they are all small.Three of them are small island nations. Namibia is large geographically, but its population is only 2.5million people. Second, they are also successful democracies. The five are consistently the highestranked African countries in democracy league tables such as the Economist’s Democracy Index andthe Freedom House Index.

Why are Africa’s small countries more politically and economically successful than the big ones?

Size matters. It is easier to build a small nation than a big one. Small islands are natural nations,hence it should not surprise that all the small island nations are successful. Madagascar is Africa’ssole big island nation, and it is not successful at all.

The big African countries are almost invariably very ethnically diverse. Recently, someone on socialmedia asked me why benevolent dictatorship cannot work in Africa the way it worked in SouthKorea. My answer was a question: what tribe will the dictator be? He has not responded. Proponentsof developmental autocracies fail to recognize that the East Asian countries are old nations, not thearbitrary colonial creations that African countries are. Korea is a culturally homogenous society with

unified dynastic rule going back to 900 AD, and a political history, known as the Three Kingdoms,going back another millennium. The Thai Kingdom dates back 700 years.

Proponents of developmental autocracies fail to recognize that the East Asian countriesare old nations, not the arbitrary colonial creations that African countries are. Korea is aculturally homogenous society with unified dynastic rule going back to 900 AD, and apolitical history, known as the Three Kingdoms, going back another millennium. TheThai Kingdom dates back 700 years.

Ethiopia is Africa’s oldest nation-state, and the only one that is not a colonial creation. It is also oneof the largest and most diverse(100 million people, over 80 officially recognized ethnic groups). Afterthe Derg’s reign of terror, Ethiopians adopted a constitution based on a loose ethnic federation. ButMeles Zenawi could not resist the allure of the developmental autocrat. He borrowed and built like aman possessed but the economic miracle did not materialize, and Ethiopians, tired of autocracywithout prosperity, took to the streets. The edifice has unravelled. The leadership is coming to termswith a historical fact that the rest will be reckoning with sooner or later: political developmentprecedes prosperity.

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A Judas Moment: Betrayal in NyamakimaBy Dauti Kahura

Set on a 20-acre piece of land in the Athi plains, the Mavuno “Hill City” Church (a Kiswahili wordmeaning harvest) looks like anything but a church: its mega dome tent resembles one huge dancehall – complete with discotheque-type revolving multi-layered and multi-coloured strobe lights thatflash on and off, and a soundtrack system that would rival sound system proprietor DS Njoroge’s,10,000-watts sound system equipment. Kendrick Lamar, the American hip-hop mega star rapperwould have no problem holding a concert here. As a visiting Anglican Church cleric commented:“There’s nothing to suggest this is a holy sanctuary: a rap reggae artist could as well find his footinghere. The tent could also be used to hold a conference for businessmen or entrepreneurs discussingmulti-billion-shilling investments.”

Hill City, which can hold up to 4,000 worshippers, is one of the symbols of the growing influence ofAmerica’s evangelical religious culture of giant churches, whose preaching is beamed in real time onbillboard-sized LED smart screens. The church precincts are no longer referred to as a compound,but a campus.

It is the kind of church where testimonies warm and cheer up the worshippers. Testimonies ofsuccess abound. “Since coming to this church, I cannot keep up with the growth of my company…myproducts are moving faster than I can replenish them.” Or “After I started attending this church, myprayers were answered – I got a job, which flushed the anxiety from my heart. The job gave me arelaxing feeling, the kind of feeling you have when you know you’ve a big bank account somewhere.”

Surrounded by Chinese-themed mega estates, Hill City is 35km from Nairobi city centre. Located offthe Nairobi-Mombasa highway, it is a 3.5km walk from Stage 39, the nearest bus stop forworshippers intending to trek to the church. It would really take an inspired Christian to attend thischurch – the scorching sun and choking dust is not made for trekking. In short, it is not your typicalwalk-in-walk-out church. Its parking bay can easily hold 500 vehicles.

“Mavuno Church’s relocation of its headquarters to a location just beyond the city limits in 2014resulted in a number of members moving to other churches, as well as to other Mavuno campusescloser to their areas of residence,” said Pastor Linda Ochola-Adolwa, who oversees MavunoCrossroads Church, which meets in the Lavington suburbs.

Mavuno Crossroads was started in June 2016. Its worshippers are the remnants of the original

Mavuno Church that used to meet at Bellevue in South C. Reluctant to move to “Hill City”, theyfinally found a suitable location where they could pray and worship: at the Lavington PrimarySchool. They refurbished seven classrooms and gave a face-lift to the primary school. Today, thecongregation is made up of nearly 400 worshippers.

“The people who formed Crossroads were the well-heeled Christians who had been supporting theMavuno Bellevue Church with their big tithes,” said a Mavuno church-goer. “The Crossroads Churchworshippers are all professionals and affluent and they meet in a rich suburb, away from the pryingeyes of the less privileged Christians.” It was just a matter of time before Mavuno Crossroads’leadership and the headquarters at “Hill City” were at crossroads over the issue of control of moneyallocation and tithe contribution, whispered a Crossroads Mavuno worshipper.

“Pastor Muriithi Wanjau [founder of Mavuno] is upset about the fact that Crossroads, which is amuch smaller congregation, has a lot bigger slice of money than the huge congregation at Hill City,”said a Mavuno Church Athi River worshipper. “He has always wanted control of the Crossroadsmoney, but he seems to be encountering headwinds. It is a public secret that Pastor Muriithi hasshown displeasure with Mavuno Crossroads Church’s leadership over his inability to oversee itsfinances.”

“Nothing could be further from the truth”, retorted Pastor Muriithi. “In fact Hill City, with its bigcontribution of tithe is able to fund other churches that are not as endowed as Mavuno Athi River.Every church (independently) controls its finances and its choice of projects, even as they contributetheir share to the central operations of the Mavuno Church,” posited the pastor. The biggestoperation of the church is planting Mavuno churches where there are none.

“Hill City contributes 42 per cent of its finances to the centre, Crossroads about 15 per cent, thesame as Downtown, but generally churches give between 5 and 20 percent of the finances toMavuno Church, of course, depending on their financial capabilities.” There has been a lot ofrumours and misinformation out there about Hill City and me, said Pastor Muriithi.

“It is true, there was a disagreement between Pastor Linda and I”, the soft-spoken Pastor Muriithitold me, “but let me not disclose what the disagreement was about.” Pastor Muriithi said he andPastor Linda agreed to engage “a trusted resource person,” in the person of Oscar Mureu, who isconsidered to be the titular bishop of Mavuno/Chapel group of churches. “We sat down with Oscarand he agreed to arbitrate our pressing issues and, we all agreed to leave the matter with him, soit’s an ongoing matter because he is currently looking into it.”

There are seven Mavuno churches in Kenya, “but because of planting churches along the logic ofcolonial lines within the city, the outcomes of this has been a subtle segregation within the Mavunocongregations,” said a Downtown Mavuno church-goer. Downtown Mavuno meets at Ufungamanobuilding near the University of Nairobi. “Crossroads is the best example of a group of people forwhom class and space are more important than just being called Christians.”

Mavuno Church encourages the starting of satellite churches based on specific area’ needs to caterfor specific Christians, said the worshipper. In Eastlands, for instance, there is Mavuno Mashariki(Kiswahili for east). For long Mashariki used to meet in Donholm estate, but now meets at Naivassupermarket’s premises, where they erected a tent off Rabai Road opposite Buru Buru Phase V.“That church is for people from Eastlands…that’s just it,” said the worshipper.

There are seven Mavuno churches in Kenya and, in addition to their apparent intra-competition over which among its branches has the most money, “Mavuno is a church

that practises subtle segregation,” said a Downtown Mavuno church-goer.

Mavuno Churches are led, presumably, by pastors influenced by the American televangelists fromthe south and mid-west who preach the message that success comes to those who pray. Forty-nine-year-old Senior Pastor Muriithi, takes no prisoners and pulls no punches in his preaching. In themonth of October, he aptly called his preaching, “Wakanda Unchained – The Financial Liberation”series. “It was one of my boldest preaching,” confessed the pastor. “I will tell you something – ourchurch looks rich…many are in debt…Christians give the illusion of success, you know, the idea is tofake it until they make it.”

In one of his Sunday sermons (which the church uploads online and which are available for all toview), Senior Pastor Muriithi rankled some of his congregants by talking about Jews and them beingGod-inspired money geniuses. He claimed Jews were successful because they understood thelanguage of money and that is why they continue to attract hatred from other races as theirblessings get multiplied.

“In a country riven with deep ethnic passions and where Kikuyus refer to themselves as Jews, it wasdeeply inconsiderate and insensitive to use the analogy of the Jews as God’s chosen people, whosesuccess is seen as money-driven in a heterogeneous and multi-ethnic congregation,” said a Hill Cityworshipper to me. “Pastor Muriithi was preaching about Uthamaki theology in the guise of extollingJews’ money virtues.”

“Let me say this, I regret the comments made afterwards by one of my congregants on my Jews’analogy,” surmised Pastor Muriithi. “She misinterpreted my choice of Jews as people who havesucceeded financially and otherwise as the biblical people of God. I could as well have used theexample of the Ismailis. What I was saying is this: Jews are successful because they have stucktogether, they are there for each other and, unlike some of our people who are socially andeconomically envious of one another, Jews help each other.” The pastor pointed out that after Jewswere persecuted and suffered immensely, they learned that their success and survival lay in hangingtogether and not separately.

“I’m not a career pastor,” Pastor Muriithi reassured me as we concluded our somewhat difficultconversation suppressed by muttered breaths from both sides. He told me tithe- giving has beenabused no doubt by many pastors, who are out to make money from their churches. “But thatdoesn’t invalidate the fact that Christians must not offer their tithes as commanded in the Bible. It isscriptural, it isn’t Pastor Muriithi’s command.”

‘Poverty does not glorify God”

“Africa suffers from [a] deficient money idea,” sermonised Senior Pastor Muriithi in one of hisWakanda series (the title is taken from the runaway success Black Panther movie about a mythicalEast African country). “Poverty does not glorify God,” boomed the pastor. Fired up like an Americanprototype televangelist, some of Senior Pastor Muriithi’s biblical pronouncements have been puttingsome of his worshippers on edge: “By God, where did he get that one from?” asked an exasperatedHill City church-goer.

“All what Pastor Muriithi seems to be preaching about is money, money and money,” said thechurch-goer. When does he get to preach about theological foundations?” As the presiding andfounding pastor of the Hill City Church, one of the first sermons he preached at the newlyinaugurated church in Athi River in 2014 was “financial plan for couples and money.”

As he preached in one of his Wakanda series, Pastor Muriithi plucked his authored pamphlet –

“Financial Foundations” – and waved it to the crowd, saying it was the key to unlocking financialsuccess. In an unflattering comment, a worshipper confided to me: “Pastor Muriithi is lessconcerned with spiritual matters, but with making money. How I wish he could write on thetheological foundations to understanding the Synoptic Gospels,” bemoaned the worshipper.

“All what Pastor Muriithi seems to be preaching about is money, money and money,”said the church-goer. When does he get to preach about theological foundations?”

“Mavuno Church is run like a business,” said one of its pastors, who asked for anonymity for fear ofantagonising his congregation and upsetting the church’s leadership. “It has a business plan modelthat must fit its expansion plans – in the country and elsewhere in Africa.” The church’s grandmission is to conquer and evangelise to African cities’ urban wannabes, “hence money is at the coreof its expansionist manoeuvres,” said the pastor.

It is true Mavuno has an ambitious plan: “to plant culture-defining churches across the capital citiesof Africa and the gateway cities of the world,” observes Pastor Linda.

Other than preaching about their favourite subject (money), “evangelical pastors have becomeexperts in everything and anything,” said a Mavuno church-goer. “From investments and wealthcreation, to sex and sexuality. From marital issues and parenting, to what type of people you shouldbe associating with and who to invite in your house.” Senior Pastor Muriithi has been advising anddiscussing how to set up a business and how to avoid the pitfalls of incurring debt by not going to abank to borrow money, said the Christian. “Is Pastor Muriithi an investments banker or aneconomist?” queried the churchgoer.

“It’s true I teach about saving and investing,” said a confident Pastor Muriithi. “And it is my desireto teach about money, because I consider it to be part of my obligation to preach on socialtransformation as a way of uplifting the Mavuno Church. I am raising a church to bring changeamong the younger generation, the so-called millennials and Generation Z. It is important for ourpeople to understand why poverty exists amidst us and for the blessed to use their blessing to upliftthe less privileged in society.”

“It is very strange that some people would accuse me of preaching about money,” said a somewhatmiffed Pastor Muriithi. “My Wakanda series came after two years of not talking about money…Ithink I spoke about money one other time in those two years.” The pastor reminded me that thisyear alone, he preached for only three months “and out of those three months, I only spoke aboutmoney for four weeks out of 52 weeks. It is not as if my preaching is all about money,” the pastorsaid.

In 2012, Fr Ambrose Kimutai described some of his colleagues as church ministers who put the loveof money above everything, in essence, “bastardising the holy shrine of God.”

“The new churches of the evangelical type are in the business of promoting capitalism and neo-liberalism through their prosperity teachings and have nothing to do with spiritual nourishment orcontemporary societal problems facing Kenyans,” said Njonjo Mue, the Oxford-educated lawyer witha theology degree from the Nairobi Evangelical Graduate School of Theology (NEGST), today knownas African International University (AIU). “These pastors are just careerists, advancing their owncauses of enriching themselves in the churches.”

“The church in Kenya is still colonial in form and structure,” said Njonjo. “After the exit of thecolonial church, presumably with the colonial government, it bequeathed its reign of power to the

‘white community’ of Kenya – the Kikuyus. Is it any wonder that the former Attorney General, ‘Sir’Charles Njonjo (no relation), in his heydays would decide, for instance, who was going to be theAnglican Archbishop in Kenya?” he posed. “The majority of Kikuyu church leaders fought formerPresident Daniel Moi, not because he was dictatorial and oppressive, but because he was aKalenjin,” said Njonjo, a born-again Christian.

“The new churches of the evangelical type are in the business of promoting capitalismthrough their prosperity teachings and have nothing to do with spiritual nourishment orcontemporary societal problems facing Kenyans,” said Njonjo Mue, the Oxford-educatedlawyer with a theology degree…”

The reference to picking Anglican archbishops by Charles Njonjo cuts back to the 1980 elections ofthe second Anglican archbishop. Archbishop Manasses Kuria, who died in 2005, was the secondAnglican Church of Kenya (ACK) Archbishop after Festo Olang’ who retired in 1979. In line tosucceed him was the fiery Henry Okullu, the Bishop of Maseno South. The elections became acontest between ethnicities.

In his autobiography, The Quest for Justice, Okullu wrote: “The Luhya and Kikuyu ethnic sentimentsenforced by political tribalism blocked my way, such that a third person, out of the 25 electors couldnot be found to sign my nominations.” Okullu said that Bishop David Gitari told him, “SinceArchbishop Olang’ was from Western Kenya (Olang’ was a Luhya), this time, you people fromWestern are to be prepared to support an Archbishop from Central Province.” Okullu shot back:“This time the election of the Archbishop must be geographically decided?”

In the ensuing cacophony – of who should succeed Olang’ – Olang’ himself asked Okullu to throw hissupport towards the Assistant Bishop of Mombasa, Crispus Nzano, a nondescript auxiliary bishop,but a bishop nonetheless. Okullu declined. To break the impasse, Nzano had been nominatedalongside Mannases Kuria, an equally unknown bishop from Nakuru. On the eve of the election,Attorney General Njonjo telephoned Nzano and prevailed him to step down for Kuria and he obliged.James Hamilton, the then Chancellor of ACK, declared Kuria the second Anglican Archbishop ofKenya unopposed.

“The Christianity Kenya received from Western missions seemed to have emphasised personal pietyat the expense of public and social implications of the Christian faith,” said Pastor Linda. Shedescribed the Mavuno congregation as largely middle class, professional, and young: “Hill City is ayoung congregation having started in 2005. This middle class congregation, which is multi-ethnicand sometimes multi-racial, tends to be apolitical in its approach to socio-economic and politicalmatters.”

These types of Christians have come to view politics as anathema to their well-being: cushioned andshielded from the vicissitudes of real politik because of their privileged class backgrounds andprofessional lives, their economic largesse has also afforded them the luxury of ignoring the politicsof the day around them. But after the post-election violence of 2008, many middle class (Mavuno)Christians woke up to the crude reality that politics was part and parcel of their lives and, even if itdid not affect their lives directly, they had friends and relatives who had suffered because of politicsgone awry.

Living in a ‘Christian bubble’

“Middle class Christians are aware of the corrupt political system, the socio-economic breakdown ofour institutions and ethnic chauvinistic politics, but they seem to be exasperated and worn down by

all these societal ills,” says Pastor Linda. “The greater temptation for this class of Christians is tolive in a ‘Christian bubble’ of donating Christmas gifts to the poor and children’s homes, hencebelieving they have done their bit of civic and societal obligations.”

Yet, according to Pastor Linda, the church’s greater dilemma seems to lie in how it views its definedprophetic role: Does it obey the secular rules here on earth as stated in Romans 13 and just preachfor peaceful co-existence as St Augustine proposed, or does it engage in the politics of the day andhope not to be muddied by it or shun politics altogether?

“Middle class Christians are aware of the corrupt political system, the socio-economicbreakdown of our institutions and ethnic chauvinistic politics, but they seem to beexasperated and worn down by all these societal ills,” says Pastor Linda. “The greatertemptation for this class of Christians is to live in a ‘Christian bubble’ of donatingChristmas gifts to the poor and children’s homes, hence believing they have done theirbit of civic and societal obligations.”

“Although the majority of Kenyans are Christians – more than 80 percent – they have relegated theirchurch sanctuaries to politicians,” said a senior Anglican Church cleric. “Nowadays, it is thepoliticians who are crafting and dictating what messages the pastors and priests are to preach totheir congregations.” The result: church leadership has become impotent and obsolete.

“After the poll violence of 2008, it became increasingly difficult for the Catholic Church to speakcollectively in one voice,” said an Archdiocese of Nairobi priest. “The post-election violence hadexposed the deep running ethnic fissures within the church. The Church had taken political sides,and one of its clergy members had been killed because of the ethnic mayhem and the dangerousethnic and political emotions,” said the priest. “The Kenya Conference of Catholic Bishops (KCCB)meets nowadays to preach bland messages, such as the need for Kenyans to keep peace. It hasceased to have the moral compass to direct and guide the people.”

The priest told me that it was implicitly agreed among the bishops who form the episcopalconference that the church would not “impose” its collective stand on the politics of the day, or evenpretend to inform it on the individual priests. “Politics became an individual priest’s responsibility –so long as he did not purport to speak on behalf of the Catholic Church of Kenya.”

“You cannot fight the government,” the priest said. “Even a powerful church like the CatholicChurch is bound to be on the receiving end.” The priest confidentially told me that the governmenthad allegedly sent a subtle message to the church’s leadership that if it pushed it too hard, it wouldimpose taxes on its land and other properties it owns. The Catholic Church is the largest landownerin Kenya outside of the government. The cleric informed me that the government had even“threatened” to repossess some of the land it owned controversially, or land it had given the church.

The church and the state

Instead of effecting these threats, the government had done the opposite: Three weeks ago,President Uhuru Kenyatta, officiating at the funeral mass of the retired Archbishop John Njenga,asked the Principal Secretary at the Ministry of Land, Nicholas Muraguri, to return to the CatholicChurch land that could have been appropriated or otherwise from the church. It is obvious that theCatholic Church leadership has been playing ball with the Jubilee Party state and hence the reward.

Although most of the Catholic Church’s land was acquired before Kenya attained its independence in1963, “once Jomo Kenyatta became president, he gave the church a plot of land in the posh

Lavington area,” said the priest. In Nairobi County, the Catholic Church’s land is concentrated in theLangata/Karen area, leading to the area being referred to as the “Little Vatican”. The other primeland is the Lavington property, where they have built posh schools, convents and even have acemetery for their priests.

“If the state turns on the church it would be the worse for it and it will lose big time,” said the priest.“The church has never contemplated paying taxes, it would never pay taxes and therefore, it woulddo anything to avoid creating such a scenario.” The Catholic Church imports tonnes of drugs for itsclinics and hospitals across the country, all tax-free. It is exempt from paying land rates. More thanthat, it has a large expatriate workforce that works in hospitals, schools and universities. “The lastthing the church would want is for the government to make it difficult for the foreigners to work forthe church,” pointed out the priest.

“When President Moi vacated office in 2002, and his former VP Mwai Kibaki stepped into his shoes,relations between the church and the state altered dramatically,’ wrote John Githongo in 2013. “Thevisceral antagonisms of the prior era melted away. A number of church leaders, includingsignificantly, the National Council of Churches of Kenya’s (NCCK) Mutava Musyimi, were elected toParliament. President Kibaki, not one for direct confrontation, cultivated a close relationship withthe Catholic Church, whose national leadership seemed to share his conservative instincts,especially, in regard to property and acquisition.”

A senior Anglican cleric, who was a close friend of Archbishop Gitari, told me, “Once Kibaki becamepresident, the archbishop ceased any fiery attacks against the state. He even subtly cautionedcriticism of the new NARC government from fellow Anglican clerics.” It would seem the upshot ofArchbishop’s Gitari’s pullback from finding fault with Kibaki’s government, unlike his constantattacks on Moi’s government, was that their man a (Kikuyu) had re-captured state power and that isall that mattered.

“When President Moi vacated office in 2002, and his former VP Mwai Kibaki stepped intohis shoes, relations between the church and the state altered dramatically,’ wrote JohnGithongo in 2013. “The visceral antagonisms of the prior era melted away…”

So was the Catholic Church – which had tested Moi’s patience by its stinging episcopal pastoralletters, which talked of social justice, political accountability and morality, among other pressingsocio-economic and political issues – compromised?

Raphael Ndingi Mwana’a Nzeki, the Catholic prelate who had been at the forefront of demandingpolitical transparency and of fighting against state corruption, which was rife in Moi’s KANUgovernment in the 1990s, suddenly went mute, as did the church leadership, when his friend MwaiKibaki became the president. It was not lost on Kenyans and keen observers that Kibaki shared thearchbishop’s faith. Even more noticeable was the decline of the “sharp” pastoral letters that spoketruth to power.

Published by the good folks at The Elephant.

The Elephant is a platform for engaging citizens to reflect, re-member and re-envision their societyby interrogating the past, the present, to fashion a future.

Follow us on Twitter.

A Judas Moment: Betrayal in NyamakimaBy Dauti Kahura

I was ten years old in 1996 when my parents separated. It seems to me that I had never reallynoticed them before it happened. Until that tumultuous December my parents were like the airaround us – crucial to life, and you would notice when they shifted around, but otherwise somewhatunremarkable. I always thought my extended relatives were much more interesting than my parents– my aunt, who lived with us for a while, laughed loudly, spoke excitedly, and let us watch Indianmovies late into the night when my mother was away working the housekeeping night shift at theNew Stanley. My mother’s (step)father, my Guka, always brought us halua and kaimati every time hevisited. We were fascinated bulging veins on his hand, wondering why they popped back up nomatter how hard we tried to push them down.

And then, it happened. My father spoke a lot at this time, more than I had ever heard him speak, itseems, and he would say things like – “your mother is using you as a conduit to get to me.” At theend of his long speeches, I would go to my blue and red Oxford English Dictionary and look up theword conduit. And my mother became more quiet, I think, transfigured into glass that wasdangerously on the verge of shattering at a moment’s notice. I was terrified at the thought of this.How does one pick up those kinds of shards?

But what none of us siblings could have known at the time – I am one of three – was that our family’s

troubles were not ours alone, and that the intensity of our struggle to remain afloat was not entirelythe fault of my mother and father. It was, (objectively?), the wrong time to get divorced – they werewalking right into an economic blizzard, with the three of us in reluctant tow.

Kenya was in the midst of an economic recession, the fallout of implementation of the infamousBretton Woods structural adjustment programs (SAPs), which led to a slash in governmentexpenditure, especially on public servants’ salaries, administration, economic and social services. Tomake matters worse, the architects of the Goldenberg scandal had promptly drained an equivalent of10 per cent of Kenya’s GDP from the Central Bank, just like that. Neglect and dilapidation were allaround us, and in my ten-year-old mind, I connected the dots and concluded that this is actuallywhat happens when your parents split up – the world goes to literal ruin. Garbage starts flowing inthe streets. Potholes eat the road in front of your house.

Which is why I was not prepared for how painful this month’s Reflections series at The Elephantwould be to read, edit and curate. They remind me, in the words of @tjjullu on Twitter, ‘ndalosituation’, days of situation, when the folks would say, “you know the situation…. We’re in a tightsituation…”

Twenty-odd years later, state theft, poor fiscal management and an exorbitant debt appetite hasushered in a new season of austerity measures. Ndalo situation.

Read: Beyond the Numbers series

This Reflections series was intended to go ‘Beyond The Numbers’ of macro-economic policy andexcavate the memories of those tough times, and connect that with what’s going on today. How didfamilies cope? How did it affect social arrangements, like people having to live with relatives, or thestress that it put on marriages? How are millennials being affected by its iteration today –frustrating unemployment, and the unspoken angst of not being able to achieve dreams? How do weconnect the brunt of the hustle to the dysfunction in national economics? How does society react tothis culturally – chanelling frustration through music, sports, the arts and so on? And what are theuntold stories of those traumas that were never discussed?

The series began with Lutivini Majanja’s extensive piece on how tea – its availability, quantity andquality – marked her family’s turbulent economic fortunes and domestic disruptions.

Then came Gloria Mari on the ‘extreme sport’ that is job searching today, where beyond skills,qualifications, work ethic and experience, it seems like you have to have guardian angels, good luckcharms and even the occasional visit to the mganga to have hopes of finding a well-paying job.

We published Carey Baraka reflecting on how disconnected younger millennials are even from thememory or understanding of the 1990s ‘ndalo situation,’ and what that lack of memory does to ageneration grappling with through similar challenges – but without a historical anchor to ground the

struggle.

Filmmaker Amina Bint Mohamed explored the concerns and challenges of the so-called ‘middleclass’ in a short documentary film, a demographic whose definition is contested and whose securityis precarious.

There was Wanjeri Gakuru’s reflection on “flying out” as a way for families to cope with a depressedeconomy and diminished opportunities in the 1990s, but that is no longer an option today, withincreasing xenophobia in the traditional ‘greener pastures’ – US, UK, Australia, and the like.

Darius Okolla detailed the decline of his hometown Kitale during those years, where the earth andrust seemed to swallow everything, and how the town never really recovered.

And Silas Nyanchwani’s devastating article on how he was making more money as a student a fewyears ago, than as an adult today with a family to support (and with a Masters degree from one ofthe most prestigious universities in the world), was almost too much to bear.

But could anything good come from all this distress? At a different time in my life, I would havewritten something clever about how economic turmoil allows innovation to emerge.

Like the way M-Pesa’s success may be partly because after the pervasive joblessness of the 1990sand early 2000s, there was a whole group of people who were willing to do the dreary work of beingM-Pesa agents.

Much of the talk around M-Pesa has been why it worked so well in Kenya, and not so well in otherplaces, and various reasons have been advanced – Kenya had a huge unbanked population, a lenientregulator, and a culture of sending money to relatives and friends.

But on the agent network, Safaricom had envisaged that agents would bolt on to already-existingbusinesses, like pharmacies, kiosks and convenience stores, which would then just do the M-Pesatransactions in a corner somewhere, the company’s corporate communications head told me in apast interview.

But the rapid rollout of the agent network was possible because of the very high informality in theKenyan economy. In fact, the company was surprised at how there was a whole cohort of peoplewilling to be M-Pesa agents as a stand-alone job, basically self-employed, sitting in a small stall, withno salary, benefits, or retirement package, earning a small percentage of every transaction.

Today, I can only make that argument intellectually, and even so, not completely sincerely. I ammuch more sensitive to the suffering that we tend to gloss over when we neatly tuck such losses intogrand narratives of progress – that it all ‘worked out’ in the end, look at M-Pesa!

As philosopher Walter Benjamin argued, narratives of progress render history coherent andharmonious by resolving the traumatic dimensions of history, incorporating them into affirmativeaccounts that underwrite the positions of those in power.

It means that memory is always in danger of becoming a tool of the ruling classes, a situation that“threatens to murder the dead twice, to erase and eliminate the dissonant quality of past suffering,injustice, struggle and loss.”

Mine is a melancholic hope today, a “hope draped in black” in the words of writer Joseph Winters. Itis the kind of hope that refuses to peddle in fantasies of a coherent, harmonious world unscathed bypainful events, conditions and memories, in the name of the gospel of innovation. Sometimes

suffering produces innovation. But it always produces pain, and the cheerful silver linings obscurethis.

This series is our attempt, in the words of author Ralph Ellison, “to keep the painful details andepisodes of a brutal experience alive in one’s aching consciousness, to finger its jagged grain…in thehope that we might transcend it, not by the consolation of philosophy but by squeezing from it anear-tragic, near-comic lyricism.”

Like Winters, I see melancholy gesturing towards a better, more promising hope, which must entailcontemplation, remembrance, and critical encounter with vulnerability, cruelty, and death, ratherthan endeavours to resolve or deflect them through reassuring images of progress.

It is a blues sensibility, “unhopeful but not hopeless”, offering no solutions, only a way of respondingto, working through, and coping with painful incongruities.

Perhaps the next M-Pesa will come out of all this. Perhaps not. But we at The Elephant will be awitness to ndalo situation.

Published by the good folks at The Elephant.

The Elephant is a platform for engaging citizens to reflect, re-member and re-envision their societyby interrogating the past, the present, to fashion a future.

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