Five Things You Should Know About the Ongoing Monday Protests in Kenya

Over the last couple of weeks opposition parties in Kenya have staged public protests across the country demanding for personnel changes at the Independent Electoral and Boundaries Commission (IEBC) — Kenya’s electoral management body (EMB). This week’s Monday demonstrations turned violent in some towns and cities, with at least four people reported dead at the hands of anti-riot police.

The organizers of the protests have vowed to keep at it every Monday until the current IEBC commissioners resign. Here are the five things you need to know about the protests:

  1. A plurality of Kenyans have lost faith in the IEBC (see here). Screen Shot 2016-06-07 at 8.07.41 PMIn the run up to the 2013 election, several members of the commission (then known as IIEC) and its secretariat were implicated in graft (known as the chickengate scandal) involving a number of British companies. These individuals’ accomplices were found guilty by UK courts; and court documents explicitly mentioned the Kenyans that were bribed by their UK counterparts. Yet a number of those adversely mentioned in the UK court documents continue to remain in office — including the chairman of the commission, Issack Hassan. It is partially for this reason that a plurality of Kenyans (including politicians on both sides of the political divide) have lost faith in the IEBC.
  2. Opposition politicians, including those in CORD and KANU, want the IEBC reconstituted over suspicions that its current leadership favors incumbent Uhuru Kenyatta and the governing Jubilee Alliance. CORD (in my view, erroneously) maintains that the IEBC was used to rig the 2013 election in favor of President Kenyatta. KANU has most recently accused the same EMB of rigging the Kericho senatorial by-election in favor of the Jubilee candidate. CORD has also argued that its failure to meet the threshold for a popular referendum (dubbed Okoa Kenya) —  whose main thrust was a change in Kenya’s electoral laws — was a result of bias within the IEBC. CORD wants the IEBC reconstituted and the new commission to have proportional representation of parliamentary political parties. Although the constitution lays out the procedure for removing commissioners of an independent entity like IEBC (through Parliament), CORD is wary of this option due to its minority status in the legislature. Initially it pinned its hopes on a popular referendum. But when that failed it resorted to mass action in a bid to strategically influence any eventual institutional reform of the IEBC (in my view this eventuality can partially be blamed on the singular failure of the(Jubilee) leadership of the National Assembly).
  3. The Uhuru Kenyatta Administration is caught between a rock and a hard place. On the one hand, it is hard for the administration to defend an obviously tainted EMB. This would also go against its continued claim that the IEBC is an independent body. But at the same time, the administration needs a reform path that will not embolden the opposition. The thinking within the Jubilee Alliance appears to be that if they give in to CORD on IEBC, what will CORD demand next? The contention that any and all reforms touching on the IEBC should follow constitutionally stipulated channels is partly motivated by this fear. In this regard, if CORD is genuine about surgical reforms specifically targeting the IEBC, it’s leadership should perhaps think of a way to credibly signal to the Kenyatta Administration that their reform agenda is limited in scope. From a purely political standpoint, President Kenyatta has reason to be cautious about the potential to open a whole pandoras box of constitutional reforms.
  4. Police brutality is (still) common in Kenya. Screen Shot 2016-06-07 at 7.27.32 PMOne of the goals of Kenya’s new political dispensation following the adoption of a new constitution in 2010 was police reform (majority of the 1,300 killed in the post-election violence of 2007-8 were shot by police). The institution even changed its name from Police Force to Police Service; and an independent police oversight authority was created (to democratize the institution through civilian oversight). But experience since 2013 has shown that these attempts at reform have not yielded any tangible results. The Police Service is still as corrupt as ever. And has little consideration for constitutional limits to its use of force (see image). Which means that more Kenyans will be killed in the hands of the police if the Monday protests continue.
  5. The 2017 presidential contest will likely be more competitive than most people think. Six months ago I would have predicted a landslide reelection victory for President Uhuru Kenyatta in 2017. Not anymore. President Kenyatta is still the favorite to win (because of incumbency advantage). But the jostling over control of the IEBC and the Supreme Court are telltale signs that the political class is expecting a close contest that will likely be disputed. It says a lot that despite being the incumbent, President Kenyatta’s poll numbers have stubbornly stuck in the low 40s (he can thank mind-blowing corruption and general Public Sector incompetence for that). This means that unless we see a drastic shift in regional alliances, next year’s election will most likely go to a runoff contest between Kenyatta and Odinga — which will be close. The more reason to have credible institutions in the form of a trusted IEBC and a Supreme Court beyond reproach. 

What does this say about overall political stability in Kenya? At this point in time I am a lot  more worried about county-level electoral violence than a 2007-08 style national disaster. That said, there is reason to fear that continued police brutality, especially targeting opposition supporters, may trigger wider civilian violence against presumed Jubilee supporters.

It is a little too early to talk specifics about next year’s presidential election. But what is clear is that Kenyatta’s reelection battle will no longer be a walk in the park.

Barack Obama on Uhuru Kenyatta

This is from Jeffrey Goldberg in the Atlantic:

Obama’s relationship with Kenyatta is complicated. A careful reading of Obama’s memoir, Dreams From My Father, suggests that he holds Kenyatta’s father, Jomo Kenyatta, the liberator of Kenya, indirectly responsible for his own father’s premature demise. (The elder Kenyatta, a member of the Kikuyu tribe, froze out Obama’s father, a Luo, from government service after the elder Obama complained too insistently about corruption.) And the younger Kenyatta’s association with human-rights violators has placed a question mark over his head. But Obama also believes that Kenyatta is at least intermittently committed to battling tribalism and corruption, and aides tell me that Obama will devote a part of his post-presidential years to the issue of African governance.

Instead of focusing on “African Governance,” I’d suggest President Obama spends part of his post-presidential years as Africa’s economic ambassador to the United States and beyond.

“Good governance” and “good institutions” are great. But the notion that African states have to reach zero corruption and zero rigged elections before any factories can be built is a misguided fantasy. Institutions and positive economic performance co-evolve. Good politics is not always good economics; and good economics is not always good politics. Africa, despite everyone’s apparent belief in the region’s exceptionalism, is not unique in this regard.

On the high cost of corruption in Nigeria

This is from the Economist:

In 2014 a respected former central-bank governor lost his job after claiming that $20 billion had been stolen. But this captures only a small share of the damage done by corruption. The much bigger question is where Nigeria could be if its politicians and officials were a little more honest.

One answer comes from economists at PricewaterhouseCoopers (PwC). They compared Nigeria to three other resource-producing countries that are somewhat less corrupt than it, though by no means squeaky clean: Ghana, Malaysia and Colombia. PwC concluded that Nigeria’s’s economy, which was worth $513 billion in 2014, might have been 22% bigger if its level of corruption was closer to Ghana’s, a nearby west African country.

By 2030, the size of Africa’s biggest economy should triple in real terms come what may. Yet if Nigeria manages to reduce corruption to levels comparable to Malaysia (itself hardly above suspicion: its prime minister recently had to explain how almost $700 million had made it into his bank account), its economy could be some 37% bigger still. The additional gain would be worth some $534 billion (adjusted for inflation), or about as much as the economy is currently worth. If it does nothing to change then the cost of corruption in Nigeria would amount to almost $2,000 per person a year by 2030, PwC reckons.

Corruption in Nigeria has inspired interesting strategies of combating the vice:naijacorruption

The full PwC report is available here.

Also, a gentle reminder that not all government money gets stolen through corruption (most estimates I have seen from leading African economies cap the figure at around 30% of budgets being lost). That means that there is still upwards of 70% of government budgets that never get spent well, or in some cases, never get spent at all.

Improving state agencies’ capacity to absorb budgetary allocations and to effectively carry out their duties is therefore just as important as fighting corruption.

Btw, Nigeria only collects about 8% of its GDP in taxes. Which is absolutely nuts.

Fighting Corruption in Nigeria (Your Uncle is a Crook!)

naijacorruption

This approach to fighting corruption goes against the lessons in Peter Ekeh’s delineation between “primordial” and “civic” publics in Nigeria. According to Ekeh one’s uncle may be corrupt in the civic public, but as long as he provides benefits and adequately “shares” in the primordial public he can remain in good standing within his community.

That said, the strategy might work if every Nigerian credibly promises to expose their uncle who’s corrupt but pretends to be an international businessman. The Nigerian government could nudge Nigerians in the right direction by actually prosecuting and jailing the country’s corrupt uncles and aunts.

What roughly $470m of borrowed money gets you in Nigeria vs Ethiopia

Ethiopia and Nigeria both borrowed roughly the same amounts of money from China’s EXIM Bank for massive infrastructure investments. The former sought to transform its capital’s transit system with a light rail ($475m); the latter tried to boost security in its capital by installing security (CCTV) cameras ($470m).

The outcomes of the two projects are an indication of what will be the impact of China’s ongoing infrastructure projects in much of SSA. Some countries because of the specificities in their domestic political economy are using borrowed money to deliver on actual tangibles — dams, power lines, stadia, housing projects, railway lines, roads, et cetera (corruption plays a role, but projects get completed). Yet others are accruing loans (albeit on concessionary terms) simply to treat the cash injections in the same manner that political elites have treated windfalls from mineral resources in decades past.

Ethiopia just opened its new light rail system in Addis. Nigeria’s CCTV project was a major flop. Of course this fact was not lost on a section of Nigerians on twitter:

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How much does it cost to construct an MDG borehole in Abuja?

The Premium Times of Nigeria reports:

Nigeria’s Millennium Development Goals (MDG) office spent N154.2 million to construct a single borehole in Abuja, in a shocking example of contract inflation that has helped undermine the country’s ability to achieve its MDG goals.

Drilling a single borehole drilling in Abuja averages N1.5 million. A hydrology firm told PREMIUM TIMES that the amount should cover drilling and casing, installation of a solar-powered submersible pump, steel tower for the tanks, tanks, pipes, joints & suckers, installation and labour.

The firm allowed an expanded estimate of N10 million if a water treatment facility is included alongside other optional accessories.

The Abuja borehole, constructed at Gwarinpa, an expansive estate in the federal capital, had no such fittings. Indeed, the borehole had long become dysfunctional and was no longer dispensing water to the residents when PREMIUM TIMES visited in June 2015.

Still, the Abuja MDG office told this newspaper it was more concerned with service delivery to the people, than the amount it takes to do so (emphasis added).

The Anatomy of Tax Evasion in Africa

Africa Confidential has a great piece analyzing leaked documents from PwC, the professional services firm, showing the various arrangements that enable multinational companies to evade taxes in Africa. You can read the whole piece here (gated).

  • One of the measures PwC advised multinationals to take was to create a wholly-owned Luxembourg-based subsidiary which would hold the rights to intellectual property used by the rest of the group. The rest of the group would then pay licensing fees to the Luxembourg-based subsidiary which, by agreement with the authorities, would be granted tax relief of up to 80%……
  • A second tax avoidance mechanism simply involved the companies becoming incorporated in Luxembourg. In 2010, Luxembourg concluded an agreement with several companies of the Socfin (Société financière) agribusiness group, which was founded during the reign of Belgian King Leopold II by the late Belgian businessman Adrien Hallet. The companies chose Luxembourg as their base and made an agreement under which their dividends were subject to a modest 15% withholding tax, a lower figure than those in force where their farms are located (20% in Congo-K and Indonesia, 18% in Côte d’Ivoire).
transfer-pricing

The art of hiding profits

Altogether, Socfin subsidiaries in Africa [in Sierra Leone, Nigeria, Liberia, Cote d’Ivoire, and Cameroon] and Indonesia produced 123,660t. of rubber and 380,770t. of palm oil in 2012. The combined turnover of its main African subsidiaries reached €271 mn. in 2013. The list also includes the 100%-owned Plantations Socfinaf Ghana Ltd. (PSG) and Socfin-Brabanta (Congo-Kinshasa). Socfin also holds 88% of Agripalma in São Tomé e Príncipe and 5% of Red Lands Roses (Kenya).

  • A third mechanism involves cross-border lending within a group of companies. Companies registered in Luxembourg are exempt from tax on income from interest.

According to the Thabo Mbeki High Level Panel report between 1980 and 2009 between 1.2tr and 1.4tr left Africa in illicit flows. These figures are most likely an understatement. Multinationals, like the ones highlighted by Africa Confidential, accounted for 60% of these flows.

Alex Cobhan, of the Tax Justice Network, has a neat summary of the various components of illicit financial flows (IFFs) and how to measure them. He also proposes measures that could help limit IFFs, including: (i) eliminating anonymous ownership of companies, trusts, and foundations; (ii) ensuring that all bilateral trade and investment flows occur between jurisdictions which exchange tax information on an automatic basis; and (iii) making all multinational corporations publish data about their economic activity and taxation on a country-by-country basis.

Alex Cobham blogs here.

More Evidence of The Effects of Unconditional Direct Cash Transfers

Haushofer and Shapiro have a really cool paper evaluating the impact of unconditional direct cash transfers to households in rural southwestern Kenya (Rarieda in Siaya County). The paper contains several great insights relevant for policy-makers on the promise of direct cash transfers. Here are some highlights:

[i] …… we find increases in holdings of home durables (notably metal roofs, ownership of which increased by 23 percentage points over a control group mean of 16 percent), and productive assets such as livestock, whose value increases by USD 85 over a control group mean of USD 167. These investments translate into higher revenues from agriculture, animal husbandry, and non-agricultural enterprises; monthly revenue from these sources increases by USD 17 relative to a control group mean of USD 49. Note, however, that this revenue increase is partially offset by an increase in flow expenses for agriculture, animal husbandry, and business (USD 13 relative to a control group mean of USD 24).

[ii] We find that indeed monthly transfer recipients are significantly less likely to invest in durables such as metal roofs than lump-sum transfer recipients, suggesting that households may be both credit- and savings-constrained. The fact that program participation required signing up for mobile money accounts, which are a low-cost savings technology (people could have chosen to accumulate their transfer – and even add other money – on their M-Pesa account), suggests that the savings constraint at work is more social or behavioral than purely due to lack of access to a savings technology.

[iii] …. contrary to previous literature and our expectation, we find no significant differences between transfers to men and transfers to women in expenditure decisions or any other outcomes.

Oh, and there is more…

… we find significant reductions in cortisol levels in several treatment arms: specifically, large transfers, transfers to women, and lump-sum transfers lead to significantly lower cortisol levels than small transfers, transfers to men, and monthly transfers. Some of these effects occur in the absence of differences in traditional outcome variables. Together, these results support a causal effect of poverty (alleviation) on (reductions in) stress levels. More broadly, they suggest that psychological well-being and cortisol can complement traditional welfare measures, and in some cases may in fact respond to interventions with greater sensitivity than these traditional measures.

Amazing stuff.

So what are some of the policy implications?

Direct cash transfers are not the panacea to underdevelopment. But these findings and others out there (see summary here) are evidence that we should seriously consider Martin Ravallion’s idea of raising the consumption floor of the poorest of the poor in developing countries through direct policy intervention (e.g. through cash transfers).

Making direct cash transfers work for development will be predicated on taking the interventions out of the humanitarian/aid sphere, and integrating them into the national political economies of developing countries.

In my view, the need for a higher consumption floor will soon become politically salient due to rapid urbanization rates in many developing countries. Obviously, aid money alone will not be able to fully finance such a policy. More efficient public finance management in developing countries will be one way to fill the gap. Putting aside the overhyped storied budgetary leakages due to corruption, many developing countries still do not meet their annual budgeted expenditure goals due to lack of absorptive capacity, i.e. money simply never gets spent at the end of the fiscal year and is returned to the treasury.

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Click on image to enlarge

For instance, according to an internal Ugandan government report, between 2004-2010 an average of 3.4% of budgetary allocations to central government ministries, departments, and agencies returned to the treasury (this was net of corruption and other leakages). Note that the figure is most likely higher if you factor in local government expenditures. And as Figure 2 above shows, late disbursement is the norm, which makes budgeting within government agencies a nightmare. In addition, over the same period (2004-10), the proportion of the budget that was simply not released (as opposed to released and not absorbed) was a staggering 9.92%!

This is money that can go directly to citizens’ pockets. And we have the technology, thanks to M-Pesa, to effect the policy. Governments shouldn’t be allowed to handle more money than they have capacity to spend. Plus making legislative appropriation conditional on agency capacity could be a way to incentivize capacity building more than a million workshops and study tours could ever do.

Lastly, the idea of a consumption floor for the urban poor might not appeal to some higher income tax payers. But smart politicians should be able to remind these voters that there is only so much physical security that one can get from high fences topped with electrified razor wire.

Most read posts in 2014

Here are the top posts in 2014

1. Corruption under apartheid South Africa: This post was top partly because of the 2014 South African elections. More on the legacies of apartheid era corruption and rent-seeking in South Africa here.

2. Kenya Security Laws (Amendment) Bill 2014: This bill (now an Act of Parliament) is further evidence of Uhuru Kenyatta’s autocratic tendencies. I personally don’t think that he is an incarnation of Moi or other dictators of years gone. Rather, Mr. Kenyatta is a poor administrator who likes taking shortcuts to get quick results. As I argued in a related post, the Security Laws (Amendment) Act 2014 could potentially severely limit civil liberties in Kenya.

3. Did European Colonialism Benefit Africans? The popularity of this post is perhaps a reminder that more research is needed on the long-run effects of colonialism not just in Africa but in other formerly colonized places as well. So far all the literature tells us is that colonialism was bad, but that the Western institutions that Europeans spread around the globe are good. More recently we’ve seen evidence that pre-colonial institutions in the colonies were pretty resilient in the face of colonial intrusion; and have had lasting effects (also remember that the duration and intensity of colonialism varied widely across the globe). One avenue of research that I have been exploring is how pre-colonial institutions interacted with colonial administrations, and how this shaped the institutions that emerged out of the independence wave of the early 1960s. More on this in the new year.

4. Why Raila Odinga Lost: A sizable proportion of Kenyans still believe that Odinga was robbed in the March 2013 election in Kenya. I disagree. In my own projections on this blog – merging disaggregated opinion polls with historical district turnout rates (perks of having a case with tight ethnic voting) – I found Mr. Kenyatta to be ahead of Mr. Odinga by about 740,000 votes, or 7.2 percentage points (which was close to the final official figure of 6.7% difference between the two).

I don’t think that Kenyatta won in the first round, but do believe that we would have trounced Odinga in a runoff anyway. Which is why I have never come to terms with the unanimous Supreme Court decision granting Kenyatta victory on the basis of less than 9000 votes out of 12.3 million cast.

5. Understanding Uganda’s Military Adventurism Under Museveni: General President Museveni has managed to create an image of himself as the anti-terror hatchet man in the wider horn of Africa region. Ugandan troops are the backbone of the AU mission in Somalia (AMISOM). Since his triumphant entry into Kampala in 1986 Museveni has also been involved in conflicts in Rwanda, the DRC, Sudan, C.A.R, and more recently South Sudan. Because of the degree of militarization of the Ugandan state and recent public displays of intra-elite friction, I think Uganda will continue to inch up in the coup sweepstakes ahead of the 2016 election.

Kenya Security Laws (Amendment) Bill 2014

Here is a pdf copy of the Kenya Security Laws (Amendment) Bill 2014.

The proposed amendments will, broadly speaking, curtail the freedom of speech and association, and limit media coverage of security related stories. They will also cut into the independence of the Kenya Police Service by granting the president the powers to appoint and fire the Inspector General of Police. Presently an independent commission picks a list of candidates from which the president chooses the IG. Lastly, the law promises to resurrect the position of the all powerful internal security minister with broad discretionary powers.

All in the name of keeping Kenyans safe from foreign terrorists, and themselves.

There are a few good things in the proposed law, including the sections that clarify the roles of the office of the Attorney General and the Director of Public Prosecutions (DPP); and those that limit judges’ discretion in the handling of cases involving terror suspects.

Despite the dubious constitutionality of some clauses in the bill, I bet a majority of Kenyans would support it in a poll. For that we have to thank the recent uptick in terror attacks and fatal communal conflicts. This year alone hundreds of Kenyans have died from such attacks.

That said, if you ask me the problem of insecurity in Kenya is not simply a result of restrictive laws that limit the government’s ability to pursue and prosecute criminals. It is a problem of a corrupt police force that takes bribes from petty criminals, poachers, drug dealers, and terrorists, alike. It is a problem of an increasingly unaccountable intelligence and military securocracy that is both fighting jihadists in Somalia and trafficking in charcoal and other goods, the proceeds of which benefit the same jihadists. It is a problem of an ineffectual intelligence service that instead of diligently doing its homework prefers to carry water for foreign agencies, regardless of the domestic consequences.

And finally, it is a problem of an elite political class that wants to have its cake and eat it. They want a criminal justice system that protects those who steal from public coffers but punishes chicken thieves. A system that protects poachers and drug dealers but nabs terrorists and armed robbers. At some point something will have to give.

Iko shida.