A Political Kenya: Latest Politics and Kenya Economy News

MRS JACINTA MWATELA, who was replaced on Tuesday as deputy governor of the Central Bank of Kenya, is an extraordinary banker and public officer. Her story and record of service at the CBK offers an illuminating study on what personal commitment to probity by a public official can bring to public office.

Observers who have been keenly following the shenanigans at the Central Bank of Kenya know very well that her replacement and promotion to the position of permanent secretary for the Ministry of Northern Kenya and Arid Lands was not inspired by a sense of gratitude to the 30 years of exemplary service she has given to the CBK.

The truth of the matter is that somebody wanted her out of the way at the central bank in a hurry. It is an open secret that she was not in good books with the clique that wields power at both the Central Bank of Kenya and the Treasury.

Outspoken and uncompromising on issues to do with procedure and probity, she found herself on the wrong side with powermen over the manner in which the multi-million second generation currency printing contract was handled.

Last month, she rubbed the powermen the wrong way by the evidence she gave to the Chris Okemo-led parliamentary committee on finance and public administration that was investigating the Grand Regency saga.

Within the Central Bank itself, it was an open secret that she was among a group the insiders at the bank would derisively refer to with the code name, “The Three Musketeers”. Mwatela was perceived as the inspiration to a group of three tough women in the top management of the bank, who refused to play to the whims of politicians and influence-peddlers at the Central Bank of Kenya and the Treasury on matters of procedure and probity.

With her exit, the three musketeers have more or less been dismantled.

The manner in which Mrs Mwatela was replaced raises several broader policy questions. Can we— really — claim to have an independent central bank?

Why does the Government pretend to subscribe to the principal of central bank independence, but in reality treat the affairs of this critical regulator of the financial system as if it were another ordinary parastatal?

If we indeed believed in an independent central bank, the Government should have left the recruitment of the second in command of this key institution to its board.

The issue of Central Bank independence is as old as central banking itself. We need to renew our faith in this principle so that we can keep politicians and the Government away from the Central Bank as far as possible.

IT IS FOOLHARDY TO ENTRUST THE power of issuing paper money to the Government. Goldenberg happened basically because we had a central bank that was willing to cede power to ministers and permanent secretaries at the Treasury.

Why are were driving in the reverse in terms of the need to achieve independence and autonomy of the Central Bank of Kenya?

Last year, the Treasury tried to introduce changes to the Central Bank Act with the aim of introducing a chairman appointed by politicians.

Treasury’s argument at that time was that the current arrangement, which allows the governor to hold the positions of both chief executive and chairman of the board was not in line with modern corporate governance practice. Clearly, the intention was to get the Central Bank to cede space to politicians.

Fortunately, that move did not see the light of day. What Kenya needs is a central bank whose commitment to price stability cannot be influenced by either short-term considerations of politicians or the borrowing appetite of those big spenders at the Treasury.

Inflation is the cruelest form of taxation on the people. Yet only an independent central bank, operating autonomously without the influence of politicians, can deliver monetary conditions for non inflationary growth.

We should not allow politicians to come near the conduct of monetary policy. Faced with hyper-inflation, authorities in Zimbabwe recently ordered the removal of zeros from their currency notes.

THIS BIZARRE FIGHT FOR control of the National Social Security Fund (NSSF) between Labour minister John Munyes and the trustees of the fund, is not an isolated case.

Right now, the telecommunications market regulator, the Communications Commission of Kenya, does not have a chairman, reportedly because of a power struggle between Office of the President and its parent ministry.

We must blame this confusion on a corporate governance regime that allows the Office of the President and the so-called parent ministries to wield too much influence over parastatals.

As opposed to shareholders in private companies, our government- mainly through parent ministries and Harambee House- insists on steering and at the same time rowing the boat.

In the private sector, the shareholder allows the board of directors to steer the company. The management does the rowing. The kind of spectacle we are now seeing at the NSSF is easily avoided.

Pork and barrel politics is also a big factor in the confusion. Whenever a new regime comes in, the slate has to be swept clean to allow the new rulers to dish out jobs for the boys.

This what happened when Narc came to power in 2002. The current NSSF saga reflects the same phenomenon.

Patronage politics is a very complex phenomenon. We have a system where every appointment to a public position is viewed in ethnic terms.

The other day, we laughed aloud and dismissed those Coast MPs, who were demanding that the managing director of the Kenya Ports Authority, must be recruited from the coastal tribes.

As the elite of this country, one of our big limitations is arguing in circles. In the wake of the post-election crisis, the impression out there was that we had started taking a serious look at our past to discover where the founding fathers went wrong.

The psyche of the nation had been jolted to the extent that we were now ready to start conversation over even what until then were considered as taboo subjects such as ethnic inequalities in public appointments, the politics of inclusion, injustices committed against some communities by past regimes and ethnic diversity in employment practices.

The moment the situation settled down, we returned to business as usual. If we wanted to remain intellectually honest, we should have looked at the lamentations of the Coast MPs in the broader context of the cry for inclusion and ethnic diversity in public appointments.

Until we start introducing institutions and practices which will tie the hands of decision makers to enforce ethnic diversity in appointment to public positions, the talk about national healing will remain just that-talk.

IS IT, REALLY, FAIR TO TREAT MERItocracy as if it was dogma, especially in a context where critical institutions and ministries are still allowed to be dominated by certain ethnic communities?

We have a system where the minister for Health can wake up one morning and replace all members of the Medical Supplies Board with his personal appointees.

Today, there are many cases where Harambee House has intervened to block appointments made by ministers exercising their rightful powers as heads of parent ministries.

The point here is this. Merit and performance contracting are very good principles. But where the principles are not allowed to be exploited by the ruling political elite as justification for perpetuating exclusion, they only serve to breed public cynicism about what the Government is preaching.

What needs to be done? We should demolish and overhaul the current regime for governing parastatals and put these institutions on a completely new corporate governance architecture.

Importers of fast-moving consumer goods are up in arms against a decision by the Kenya Bureau of Standards to introduce a quality mark on all imported goods sold in Kenya by October 1.

They raise very valid points against this new requirement by the standards body. First, the requirement that the mark be stuck on goods per product brand will cost time and money.

Second, the one requiring them to unpack every imported item and to stick the mark on it will cause them to endure time-wasting logistical problems.

Third, in these days of globalisation – where companies manufacture goods in separate locations in far-flung continents – and where packaging is done to conform global tastes, insisting on a quality standards mark for the Kenyan market alone is superfluous and tantamount to introducing non-tariff barriers.

Fourth, if forced to comply, the importers will inevitably pass on the costs to consumers, with negative consequences to a market already faced with consistently rising prices.

I do not want to go through the whole catalogue of grievances by the importers. But I think they have a major point, especially when they complain about the nuisance value of the new requirements.

The painful truth is that businesses in this country are forced to endure foolish and maddening regulations and laws. Law-abiding citizens are being converted into dodgers by excessive regulation and taxation.

In the computer world, they talk of user-friendliness to denote technology introduced with convenience for the user in mind. In this country, regulators do not bother to ensure the rules and regulations they introduce are user-friendly. They ram these regulations down your throats and expect you to comply.

In the specific case I refer to, the importers were invited to a meeting with the managing director of the Kenya Bureau of Standards one afternoon, told about the new requirement, and informed that the implementation date would be October 1.

It was as if the management had just discovered that standards marks for imported products were a legal requirement. The Standards Act, which they invoke has been in the statute books for ages. There was no gazette notice.

Indeed, the importers were more or less invited for an ultimatum: Introduce a new quality mark for your products or face discrimination in the market-place.

The only thing the management of the standards body is willing to discuss is the implementation and the timing of the effective date. It is the law and must be respected.

In a liberalised environment like ours, effective regulation is critical. But regulators destroy taxpayers’ morale – a valuable but delicate national asset – when they flex muscle without considering what some of these regulations do to business in terms of time and money.

The quality being introduced will be a big nuisance to implement in terms of time and energy. Compounding the problem for businesses in this country is the multiplicity of regulatory bodies and certification agencies they have to deal with.

At the Mombasa Port, you have to deal with the Kenya Bureau of Standards, Kenya Revenue Authority, public health authorities, the police, the National Intelligence Service, and many more.

And, complying with one set of these strangulating controls does not necessarily mean that you are compliant.

As an importer, you can wake up one morning and find that inspectors from the Nairobi City Council have raided retail outlets and removed your products from the shelves on the grounds that the packaging has included the manufacturing date but left out expiry dates.

Yet some of the goods, for instance, imported motor vehicle spare parts, do not expire.

The Safaricom refund saga is a total mess. According to the latest statistics from the Central Bank, cheques for a whopping Sh1.67 billion have yet to be refunded.

Poor investors have been made to wait for months on end for their money. As a matter of fact, the refund process started way back on June 9, 2008.

Clearly, somebody has minted millions from these inefficient systems. Mark you, the total cheque refunds amount was Sh92 billion. The opportunities for minting money by lending it on a short-term basis are very huge, indeed.

Admittedly, both the Central Bank and the Capital Markets Authority have lately been working very hard to try and sort out the mess.

What I don’t understand is why these regulators should pretend to be serious about resolving this problem when the cheques refund problem was anticipated long before the IPO was launched.

As far back as November last year, the Kenya Bankers Association wrote to the authorities forewarning them that over-subscription of the Safaricom shares would inevitably present an insurmountable cheque refunds problem.

The association went to the extent of suggesting what needed to be done to pre-empt the messy situation.

Apparently, these warnings fell on deaf ears. The upshot is that what we are now reaping are the fruits of failure to act on sound advice.

We are also paying a heavy price by not learning from experience because all these problems we are seeing now were experienced during KenGen IPO.

When, during an IPO, you allow the leading commercial banks to hold the funds for long periods pending the processing of the refund cheques, you create major distortions in the money market.

You end up with a situation where a huge proportion of the cash in the country end up in the vaults of a couple of the receiving banks.

The liquidity strains lead to a rise in inter-bank rates and precipitate short-term fluctuations in foreign exchange rates.

During KenGen, the Kenya Commercial Bank, which was the lead bank, found itself holding much more money than it could handle.

Worse, it could not lend the money to other banks as it did not have credit lines with most of the small banks. Several such small banks almost closed shop.

The worst hit was the clearing house where settlement of transactions became a major problem with commercial banks finding it hard to source funds to settle their net debit positions.

The whole financial system had to endure untold pressures.

The question here is this: Did we really have to go through these pains again with the Safaricom IPO? Wasn’t it obvious that the Safaricom IPO would exert a bigger strain on the financial system?

What was so difficult in allowing more banks to join the three receiving banks – Citibank, National Bank of Kenya and Equity Bank?

If you can get all cargo-clearing departments, all those multiple government authorities involved in processing cargo, and all container freight stations to work for 24 hours a day, you will have solved half of the congestion problem at the port.

But you will still have to follow it up by reviewing lengthy procedures in the processing of transit cargo, scanning and verification, and police escort for the cargo.

In the medium term, one of the most urgent things that needs to be done is to give the Kenya Ports Authority (KPA) more land and space.

I still don’t understand why the process of acquiring 30 acres of land belonging to the Industrial Commercial and Development Corporation (ICDC) is taking so long.

Several years ago, politically well-connected operatives in the former regime of President Moi forced KPA to donate this land to ICDC to develop a soya bean project.

Funded by expensive supplier credits from a European financier, that project stalled many years ago amid obsolete equipment and a huge State-guaranteed foreign loan that took the Government several years to clear.

Why can’t the Government just give the order that this land should revert to its former owners?

I gather that the KPA board has been negotiating with ICDC for an outright purchase. Apparently, ICDC is insisting that KPA pays for the equipment as well.

The question we should be asking is whether public interest will be best served by allowing the ICDC to own that land and the obsolete equipment on it, or by the Government ordering that the land be returned to KPA to build a new container terminal.

Secondly, there is an urgent need for KPA to come up with a long-term strategic position on container freight stations in its overall plans of easing congestion at Kilindini Port.

The authority badly needs to bring on board more of these private sector players if it wants to reduce the traffic around the port area.

The success of operations such as the Grain Bulk Handlers Ltd in providing quality handling is enough proof of what private capital is capable of doing in the cargo clearing services.

The recently built Bossfreight Terminal at Mariakani is yet another example of efficiency levels which the private sector can bring to bear in providing some of these services.

Bossfreight is a facility exclusively handling vehicles, and that makes it possible for users to clear their vehicles in one place during which the vehicles come out complete with number plates.

The point here is this: If KPA can’t come up with a well-crafted policy of sharing some of the responsibilities with private freight firms, it will be impossible to increase the flow of international capital into the business.

In this regard, the Government needs to review the 10-kilometre rule for building container freight stations, as this will make it possible to put up these facilities on easily affordable land.

I do not agree with those who say that the Mombasa port faces a major threat of cargo diversion to Dar es Salaam Port right now. Currently, Dar es Salaam is facing major problems. It lacks capacity to handle additional cargo.

The real future threats to Mombasa are the recent developments taking place in the road and rail links in what is referred to as the Central Corridor – those that connect Dar es Salaam with the hinterland countries of Uganda, Rwanda and Burundi via a road network stretching 1,500 kilometres.

A NEW GALLUP SURVEY REveals that Kenyans are more concerned about unemployment, poverty and high prices, than they are about a new constitution.

That is worrying. That we are more concerned about simple bread-and-butter issues — about our creature comforts and well-being — than about the constitution, shows we conform to the hackneyed argument of years past that matters of the stomach are more important than freedom and democracy.

During the struggle for multi-partyism in the early 1990s, President Moi and his academics-on-hire went into overdrive trying to sell the argument that the crusade for democratisation and human rights was alien and foreign-inspired; and failed to take cognisance of the fact that Kenyans had much more important issues to occupy them.

Politics of the stomach, President Moi used to say as he presided over a kleptocracy that looted the national coffers, drive in a wild binge aimed at buying hearts and minds.

Well, a few in the inner sanctum grew very rich, but the vast majority of Kenyan became much, much poorer until they eventually realised how important it was to boot out the Kanu regime before it starved them all to death.

So, in a way, Mr Moi was right. He bankrupted the country and the people he was trying to buy with politics of the stomach came to realise that their long-term interests lay in democratisation rather than temporary satiation.

In time, the process was completed when the Moi regime was shown a wide open exit door to mark what came to be recognised as a pivotal stage in the Second Liberation.

It was not long, however, before the new President Kibaki reneged on the promise to deliver a new constitution, one of the cardinal pledges of election campaign, and the coalition that had ended four decades of a Kanu monopoly on power started crumbling.

President Kibaki’s biggest letdown to Kenyans has always been the aborted new constitution; and after the near meltdown following the disputed 2007 presidential election, it was widely recognised that the path to peace, national reconciliation and healing would have to be paved with a new economic and social order.

Hence the surprise that just over half a year since the country was pulled from the brink, Kenyans no longer recognise the paramountcy of a new constitution.

I don’t know whether that is a sign of contentment, indifference, or desperation, but it is still worrying.

If it is contentment with the relative peace and calm following installation of the Grand Coalition government, then Kenyans are in a state of dangerous delusion.

Peace is not just the absence of war. The fact that Kenyans are not killing each other at the moment does not mean a state of peace, it only means a ceasefire. Until the things that divide Kenyans are resolved and he solutions entrenched in a new constitutional order, we cannot talk about having attained peace. We are still in a state where a tiny spark can lead to fresh bloodletting.

Indifference is just as dangerous. It means Kenyans simply do not know or do not care that they are sitting on a ticking time bomb that could explode at any minute.

Then there is desperation. It is true that a people struggling just to keep body and soul together, as in the Moi years, might have little time and energy to expend on abstract things like a new constitution. They have enough problems about where the next meal will come from.

Perhaps Mr Moi’s ideology of the stomach held that hungry people do not have the luxury of time and energy to agitate for improvements in their lives.

True, to an extent, because the more chilling reality is that a hungry and desperate people do not have the luxury to look forward to a future of hope and promise.

They are more likely to turn to crime and other acts of desperation merely to survive. Runaway crime and the proliferation of dangerous gangs in the urban areas and all sorts of bandits in the remoter areas are a direct manifestation of that state of desperation and hopelessness.