The Kenyan Army’s Criminal Racket in Somalia

Quoting from a new report from the Journalists for Justice project:

With the death toll from al-Shabaab attacks inside Kenya rising to over 400, Journalists for Justice felt that the task of examining whether Operation Linda Nchi is actually delivering was overdue. This study looks at the conduct of KDF forces in two areas: 1) sugar smuggling and financial enabling of al-Shabaab and, 2) human rights violations.

This report presents the findings of several months of research in Somalia in Kismayo and Dhobley and inside Kenya in Liboi, Dadaab, Garissa and Nairobi. A desktop review, encompassing UN monitoring reports, academic studies, African Mission in Somalia (AMISOM) communication and media reports was followed by one-on-one interviews with over 50 people with intimate knowledge of KDF activities, including serving senior KDF officers, UN officials, western intelligence officials, members of parliament, victims of KDF human rights violations inside Somalia, journalists, doctors, porters at the charcoal stockpiles, drivers on the sugar routes and middlemen in the Dadaab camp.

…. JFJ research suggests that both KDF, the Jubaland administration of Ahmed Madobe and al-Shabaab are all benefitting from shares in a trade that is worth, collectively, between $200 million and $400 million.

More on this here.

For more on the challenges facing Kenya’s security operation in Somalia see here.

How Kshs. 38.5 billion ($385m) of borrowed money “disappeared” from Kenya’s budget

… the June 2013/14 bond issues were moved to the 2014/15 opening balances carried forward from 2013/14 at that time, while the November bond issues were recorded as 2014/15 revenues. If so, we would have a balance of Ksh38.5 billion in the bank, and the full Ksh75 billion (what we had estimated at Ksh67.5 billion) coming onto the budget in 2014/15.

There are no further changes in these numbers in the final fourth quarter COB report for 2014/15, suggesting that by the end of that year, all but Ksh38.5 billion of the Eurobond had come onto the budget and been spent.

The Ksh38.5 billion balance was not brought onto the budget for 2015/16 at the beginning of the year. The August 31 Statement of Actual Revenues shows no budgeted carryover from 2014/15 and an actual balance carried forward of only Ksh204 million. There is a budgeted revenue of Ksh72 billion in further commercial loans for the year, and nothing collected as of August.

So… what happened to the Ksh38.5 billion balance? If it was not spent, it is hard to see why the government wouldn’t be using it now to smooth liquidity during an apparent cash crunch. If it was spent, when did it come onto the budget, for what purpose and why isn’t it visible in public reports? Cabinet Secretary for the Treasury Henry Rotich recently claimed that all of the Eurobond money was spent, but I have not found any official documents showing when the final balance came on budget.

Why should basic facts about billions of shillings require us to sift through vague reports and still come up short?

Lakin’s excellent accounting narrative of budget figures from FY2013/14-FY2015/16 is available here. 

So where did the money really go? Only Treasury Secretary Henry Rotich can tell us what happened, with certainty. In the meantime Kenyans can only speculate. Which is why it is very odd that CS Rotich so far has barely bothered to explain himself.

How tragic would it be if it emerged that someone (or a group of people) stole Kshs. 38.5b ($385m) of borrowed money?

The confusion over the Eurobond cash has elevated public uproar over corruption in the public sector to new levels. The only problem is that blame has been spread thin, with everyone in government being blamed (and no single officer really feeling the pressure, with the possible exception of CS Waiguru).

In my view the two people that should be forced to explain themselves (regardless of whether they are individually corrupt or not) are CS Henry Rotich at Treasury; and the Chairman of the Parliamentary Budget Committee, Hon. Mutava Musyimi. These two men should shoulder any blame arising from any emergent violations of the Public Finance Management Act.

A focus on specific officers and their specific failures will perhaps give the president political cover to get rid of offending public officials. The fundamental challenge of the anti-corruption drive in Kenya at the moment is that it continues to be blind and deaf to political realities. The president is a politician, with an eye on reelection in 2017. The challenge for reformers is therefore to come up with incentive-compatible means (for the president) of dealing with corruption and incompetence in the public sector before then. (The president himself admitted on record that a significant number of public officials are corrupt). Mere calls for public officials, including the president, to act nice will not work. That is the tragedy of politics.

Energy to top the African Development Bank’s agenda

The FT reports:

Akinwumi Adesina, who took over as president of Africa’s lead development lender in September, has said that his flagship project aims to raise $55bn of investment to close the energy deficit in the next decade.

He says the bank will take a leadership role, coordinating with existing multinational initiatives and pushing member states to move faster to privatise and liberalise their energy sectors.

More on this here.

The paper also has a neat report on African economies’ adjustment to China’s slowdown, US pension funds’ move into the PE space in Africa, the grievances that fuel extremism in Africa, among others.

Full report is here (unfortunately, gated).

Africa’s looming debt crises

The 1980s are calling. According to Bloomberg:

Zambia’s kwacha fell the most on record after Moody’s Investors Service cut the credit rating of Africa’s second-biggest copper producer, a move the government rejected and told investors to ignore…..

Zambia’s economy faces “a perfect storm” of plunging prices for the copper it relies on for 70 percent of export earnings at the same time as its worst power shortage, Ronak Gopaldas, a credit risk analyst at Rand Merchant Bank in Johannesburg, said by phone. Growth will slow to 3.4 percent in 2015, missing the government’s revised target of 5 percent, Barclays Plc said in a note last week. That would be the most sluggish pace since 2001.

The looming debt crisis will hit Zambia and other commodity exporters hard. As I noted two years ago, the vast majority of the African countries that have floated dollar-denominated bonds are heavily dependent on commodity exports. Many of them are already experiencing fiscal blues on account of the global commodity slump (see for example Angola, Zambia and Ghana). This will probably get worse. And the double whammy of plummeting currencies and reduced commodity exports will increase the real cost of external debt (on top of fueling domestic inflation). I do not envy African central bankers.

Making sure that the looming debt crises do not result in a disastrous retrenchment of the state in Africa, like happened in the 1980s and 1990s, is perhaps the biggest development challenge of our time. Too bad all the attention within the development community is focused elsewhere.

Does Kenya have too many MPs?

An article in the Daily Nation asked this provocative question. In the article, the author examined the cost per capita of legislatures in several countries; and concluded that legislatures in OECD democracies tend to be relatively more representative (seats/million people) as well as cost effective (per capita cost/east) than their counterparts in the developing world.

Of course, linking per capita income to the density of representation has its pitfalls. An assumption that countries with smaller economies should have smaller assemblies, regardless of population size, implicitly undervalues the political voice (and rights) of citizens of poor countries. At the same time, setting an arbitrary upper bound on the remuneration of legislators (and general resourcing of legislatures) has the potential to limit the continued professionalization of legislatures in emerging democracies. Under-resourced legislatures find themselves in a bad equilibrium of high turnovers, weak institutionalization (lack of experience), inability to check the executive or effectively legislate, and a whole lot of dissatisfied voters who invariably choose to go with erstwhile challengers.

How break out of this bad equilibrium is one of the key questions I grappled with in the dissertation (and in the ongoing book project). But I digress…

legseatsThe standard metric in Political Science for comparing the density of representation was developed by Rein Taagepera in the early 1970s. The Taagepera formula predicts that assembly sizes tend to approximate the cube root of the total population of states. In the dissertation I looked at how African states faired according to this metric (see figure) and found that the vast majority of countries on the Continent have relatively smaller assemblies than would be predicted by their population sizes (the figure only captures the sizes the lower houses). Somalia, Uganda, Sudan, the DRC, South Africa, and Ethiopia are the clear outliers. Incidentally, Kenya’s National Assembly is right on the parity line.

The usefulness of this metric (at the national level) diminishes beyond a certain population size. For countries with hundreds of millions of people or more, it makes more sense to apply the formula with respect to sub-national assemblies, if they exist. This is for the simple reason that beyond a certain number of seats the legislature would become too big to reasonably be able to conduct its business (see Nigeria).

Thandika Mkandawire on the “Kenya Debate”

The ‘Kenya debate’ was a debate not among Kenyans but about Kenya by a group of expatriates, most of whom were temporarily resident in Kenya. This may partly explain its abrupt end. Kitching (1985) also suggests that the fact that all the protagonists viewed themselves as progressives precluded the further pursuit of the debate on how a capitalist accumulation process could be promoted.

Ouch. Kenyanists (Kenyan or not) will appreciate the zinger (please bring back economic history!) The quote is from a footnote on page 198.

Mkandawire’s paper on “Thinking About Developmental States in Africa” (not on Kenya) is a must read in any PE class on African development.

A Kenyan Scientist Joins the Worm Wars

For those new to the deworming debate, see here, here, here, here and here (Macartan’s response is worth reading in detail). The famous original deworming study was conducted in western Kenya, so it’s nice to get the perspective of Kenyan scientist Dr. Charles Mwandawiro. Dr Mwandawiro is the Chief Research Officer and Assistant Director of Partnership and Collaboration at the Kenya Medical Research Institute (KEMRI). He writes:

I have studied and seen myself the negative effects chronic parasitic worm infections have on childhood development. Children with severe or recurring infections have impaired growth and cognitive development because the worms lodge in their bodies, stealing the nutrients a child is able to take in. Heavy infections can result in serious clinical disease. To combat infection and give our children a chance at good health, many countries, including Kenya, run school-based mass deworming programmes that have been shown to be a simple and cost-effective strategy to reduce the disease burden of parasitic worms in school-age children, the group at highest risk.

Safe, low-cost drugs are available to treat intestinal worm infections and are the standard of medical care. The World Health Organization (WHO) recommends periodic mass treatment in areas where worm infections are above certain thresholds. Some have challenged this WHO policy, accepting that those who are known to be infected should be treated, but questioning whether the existing evidence base is strong enough to support mass treatment.

Let me say unequivocally: Mass school-based deworming works. Just three years ago, Kenya launched a national deworming program. Prevalence of parasitic worms has been reduced from 35% to 17% and as low as 6% right after a deworming round. Our focus in the National Deworming Programme in Kenya is on the reduction of infection and possibly even elimination of the public health threat of worms.

More on this here.

The WormWars are a fantastic lesson on the complications of policymaking. Contributors have weighed in from different perspectives: Does school-based mass deworming work in reducing the prevalence of parasitic worms?; what is the opportunity cost of deworming kids, thereby improving their developmental prospects?; Does a kid’s health trump everything?; did the Busia intervention increase school attendance?; did the authors adequately address the methodological challenges involved in the study? What is a policymaker to make of all of this?

Because of the complicated nature of the questions involved, the original study is being asked to bear more weight than it can withstand. Like Macartan, I think the focus should be on the school attendance outcomes, which was the primary goal of the original study. This, of course, does not mean we should completely disregard the very important questions relating to the health and developmental prospects of kids in locales with high prevalence rates of parasitic worms. Because of the long-term effects of malnutrition on cognitive development, it is reasonable to make the case that deworming kids should trump most competing uses of resources.

Policymakers, if you can, Please. Deworm. All. The. Kids.

H/T Chris Blattman

A Commentary on Research Priorities in Development Economics

Over at the Bank’s Future Development blog, Princeton Economist Jeffrey Hammer writes:

The Chief Minister posed serious questions that have traditionally been the bread and butter of the economics profession. Unfortunately, we are not even trying to answer them any more. The specific question was “Should I put more money into transport? Infrastructure (power, roads, water)? Law and order? Social services? Or what? And where am I going to get the money?” What questions could be more solidly part of the core of economics than these? Unfortunately none of these were even remotely the focus of the “evidence-based” policy making discussed.

Almost all of the cases analyzed were  single, simple policy “tweaks” that were, first of all, isolated from the broader market context in which they occurred and, second, had no conception of opportunity cost – what we would have to give up to pursue these things? We had an answer to “how to improve a public food distribution system” but even with a precise answer (to whether a tweak would work) we had no idea whether the substantial amount of money funding such a system is a good idea. Maybe the Chief Minister would be better off improving education or road networks or police or rural electricity. Some of these alternative policies could have more impact on food consumption than food distribution if we thought about how the world worked. Getting food to market securely (roads, better cold storage, trustworthy police and safe roads – this is Pakistan, which no one seemed to notice) may increase food availability much more than any tunnel-visioned food program Or not – maybe the food distribution system is better. We just don’t know. And none of us “experts” are trying to find out.

When someone says “we should have more “X” because we have evidence that it works”, the response should be “compared to what?” What should we cut in order to promote your particular interest? My hobby horse these days is more sanitation in South Asia. I should have to defend it against (at least) a few alternatives.

What’s your justification for your latest hobby horse?

My take on the gap highlighted by Hammer is that what is good for reviewers is seldom useful to policymakers. The incentive for academics is to publish. And this will always be reflected in the design and implementation of interventions headed by academics. This is not necessarily a bad thing [For obvious reasons we should firewall academic research from the actual process of policymaking. The latter should be the political process that it is, albeit informed by the former]. I think the widespread acceptance of rigorous evidence-based policymaking has been a net benefit for the developing world. What it means though, is that the “public sector” development research community — i.e. the IMF, the World Bank, & host country research institutes — should do more to ensure that funding for hyper-targeted interventions do not detract from broader macro research (like, when and why did the rain start beating Ghana?)

However, in the long run, developing countries will be better served by having more and more of their own/country-based politically relevant macroeconomists.

This is because answering the types of questions posed by Hammer requires one to also take a political stand (on account of a lack of consensus among economists). Economists who can’t do this will invariably resort to “technical” solutions that can be perceived as “apolitical” by both host governments and the sponsoring foreign development agencies. Again not necessarily a bad thing, just a reflection of the politics of knowledge production.

H/T William Easterly.

The potential impact of a Chinese slowdown on Africa’s economies

The FT reports:

For Africa’s non-oil exporters, the collapse in crude prices has provided a cushion. But, with many African countries import-dependent, the depreciation of currencies affects inflation and the cost of imports. It will also put a strain on those nations that have taken advantage of investors’ search for yields to tap into international capital markets.

The likes of Zambia, Ethiopia, Rwanda, Kenya, Ghana, Senegal, and Ivory Coast have all issued foreign currency dominated sovereign bonds in recent years. “In the past, foreign exchange weakness in Africa was largely shrugged off. Economies adapted and found a way to cope with it, but the recent surge in eurobond issuance has been a game-changer,” says Razia Khan, chief economist for Africa at Standard Chartered.

“Now, when currencies depreciate, external risks are magnified, public debt ratios rise, and perceptions of sovereign creditworthiness alter quite dramatically.”

Prof. Deborah Brautigam of SAIS sees the following happening:

  • Prices for African commodities will worsen, then improve. In recent years, China’s slower growth has pushed down prices for gold, crude oil, copper, platinum and iron ore. South Africa’s mining sector was expected to lose over 10,000 jobs due to lower demand
  • Africa will import even more from China. Cheaper Chinese exports will please African consumers while putting Africa’s manufacturers at a further disadvantage. There will be more pressure for tariff protections
  • [L]ow wages in Ethiopia and elsewhere had been attracting significant factory investment from China. With costs now relatively lower in China, the push to relocate factories overseas will slow. This will save Chinese jobs, but postpones Africa’s own structural transformation.

And concludes that:

In the short term it is hard to see how this devaluation can help Africa, notably its productive and export sectors.

The thing to note is that different African countries have different kinds of exposure to China. The commodity exporters (both petroleum and metals) will be hit hard. The effects will be somewhat attenuated in countries exposed primarily through Chinese FDI and infrastructure loans. Domestic fiscal reorganization and resources from the AfDB and other partners should plug a fair bit of the hole left by declining Chinese investments (although certainly nowhere near all of it). And with regard to sovereign debt, a Chinese downturn might persuade the US Central Bank to delay its planned rate hike — which would be good for African currencies and keep the cost of borrowing low.

Lastly, for geopolitical reasons I don’t see China rapidly reducing its footprint on the Continent. In any case, as Howard French makes clear in his latest book, there is a fair bit of (unofficial) private Chinese investment in Africa. Turmoil back home may incentivize these entrepreneurs to plant even deeper roots in Africa and expatriate less of their profits. The net result will be slower growth in Africa. And like in China, slower growth will challenge prevailing political bargains in democracies and autocracies alike.

The Obama Visit to Kenya: Four Key Issues Deserving Special Attention

This weekend Kenya is hosting the 2015 Global Entrepreneurship Summit. The chief guest at the summit is U.S. president Barack Obama. Mr. Obama is scheduled to hold bilateral talks with his host President Uhuru Kenyatta; and will also give two public speeches on the sidelines of the summit — one at Kenyatta University and another at the Moi International Sports Centre in Kasarani. Here are the things I hope Obama and his team will focus on while in Kenya:

  • Infrastructure Development and FDI: Kenya is currently in the middle of an epic infrastructure investment drive (power generation and transmission, roads, railway lines, ports, and water systems). The most impactful thing the U.S. president can do for Kenyans is to facilitate a more robust involvement by the U.S. private sector in these projects – either through private investment or PPPs (Public-Private Partnerships). And perhaps the most natural place for U.S. companies to put in even more money is Kenya’s buzzing tech scene. IBM, Intel, Google, Microsoft, and GE have led the way. More need to follow.
  • A New Approach to Civil Society Support: The Kenyan government still has a lot to do in terms of governance reforms. But the way partners like the U.S. and the EU approach the challenge needs to change. The 2010 Constitution devolved and, by a large measure, professionalized government in Kenya. Unfortunately, the Kenyan Civil Society appears to not have caught up. The same can be said about political affairs officers in various embassies in Nairobi. The new institutional game is different and favors Think Tanks with deep research benches as opposed to multipurpose activists. Support for the Kenyan Civil Society therefore needs to catch up to this reality. Project cycles need to be elongated. Also, if I were a donor with a large pot of money I would focus a lot of energy in getting governance right in a few of Kenya’s 47 counties as an example to the rest. These subnational units have substantial financial and political resources that make them ideal testing grounds for public policies. They are also sources of future national politicians.
  • Taking Security Seriously: Kenya continues to be mired in the conflict in Somalia as part of the AMISOM mission. The involvement has exposed Kenya to terror attacks by al-Shabaab – the most bloody of which was the Garissa University College attack that left 148 people dead. The U.S. has been a key partner of AMISOM, providing equipment, funds, intelligence, and air support. Given its leverage, America could do more in making sure that Kenya’s involvement in Somalia does not lead to an erosion of KDF’s professionalism. Credible reports have linked KDF officers to the smuggling of charcoal and sugar, activities that line the coffers of al-Shabaab. There is also evidence that the Generals are the ones driving Kenya’s Somalia policy, instead of elected civilians. U.S. support should be predicated on civilian control, a healthy reverence of military professionalism, and an appreciation of the local and regional consequences of American actions in Somalia. America also needs to realize that Kenya is still a young democracy struggling to consolidate rule of law. Unlawful arrests, disappearances, and executions of suspected terrorists who are Kenyan nationals must stop. The fight against al-Shabaab must not be allowed to erode hard fought gains in the quest for rule of law.
  • A Constructive Political Engagement About Reforms: The U.S. can help Kenya clean up its public sector through reforms founded on political reality. For example, presently corruption appears to be worsening in the country. This is both a function of media exposure and dispersal of power. More people in government now have access to state coffers – mainly throught the tender process (as a result tenderpreneurs abound). Corruption is also political. The president is ultimately a politician who wants to be reelected. the same applies to MPs and Governors and Senators. Many of them engage in corruption as a means of campaign finance (Harambees are expensive). Tackling corruption therefore requires more than mere moralizing about its ills on society. All involved must be willing to address the hard and uncomfortable truths about the political economy of the vice. This would mean, for instance, coming up with a way to allow politicians access to campaign money in a legal and transparent manner. It may also entail some form of amnesty for past offenders (you can’t jail the entire public service). Corruption in Kenya is not a simple law enforcement problem. The same logic applies to other reform initiatives. They are likely to succeed if grounded on political realities, instead of some notion of a moral failing among Kenyan politicians.

Here are some pieces I liked about Obama’s trip to Africa:

– Charles Kenny on why Obama is selling Africa short

– Todd Moss on Obama’s missed opportunity in Africa 

– The challenges facing power Africa in Nigeria