signs of grand corruption in the kenyan treasury

Every year, the Treasury presents the Controller and Auditor-General a revenue statement, disclosing details of revenues received on income tax, VAT and corporation taxes.

The accounts for all revenue categories are kept separately. The gist of the new report by Mars Group is that the Auditor has discovered several cases where records of revenues received by KRA does not tally with what was actually received by the Treasury.

There are also cases where accounts of revenues banked at the Central Bank differ from the records kept by the receiver of revenues.

Where there are material differences, what the Auditor-General has been doing has been to exclude such revenue categories from the general certificate issued to the Treasury at the end of the year.

Is it just a matter of sloppy accounting? We all know that accounts which cannot reconcile are a recipe for irregular dealings.

That is Kisero writing in the Daily Nation. I am trying to get a soft copy of the actual report from the Mars Group. More on this soon.

Prof. Ndung’u should stay, away with the whining MPs

For once Kenya has a responsible academic running the Central Bank of Kenya (CBK). Prof. Njuguna Ndung’u has exuded nothing but confidence in his first term in office. Given that finance is a confidence game, this has been a most welcome scenario. It is therefore weird that there are MPs out there crowing that his reappointment be reviewed. Given the country’s political temperature this seems like a dumb misguided move. You remove Prof. Ndung’u and you might end up with someone who is down with printing money to pay for next year’s elections. I say let’s not play politics with the Central Bank.

I fully support Prof. Njuguna Ndung’u remaining as CBK governor. Just one request, echoing Jaindi over at the Daily Nation:

A piece of advice for Prof Ndung’u. You will go down as the best governor in the country’s history if you get the banks to reduce banking spreads. Commercial banks are fleecing borrowers.

populism gone mad

The Kenyan parliament today passed a law that empowers the finance minister to fix prices of “essential goods” in an effort to tame unscrupulous traders who exploit wananchi with arbitrary price hikes. That is the story the sponsors of the bill want us to believe. Trade Minister Amos Kimunya has criticized the bill as a bad signal to investors. Kenya, he said, is still committed to the principles of economic liberalization. I concur with Mr. Kimunya’s criticism of the bill. Hayek’s old wisdom about the impossibility of controlling the economy still holds; You can’t fix retail prices without also having to fix the costs of production, transportation, advertising etc. And don’t even get me started on the demerits of allowing politicians – like Finance Ministers – to have this much power over the market.

The market definitely needs responsible regulation but in this instance the best way to protect wananchi, if this is the true aim of parliament, would have been to reduce the barriers of entry in the relevant industries and let competition and the invisible hand of the market drive the prices down. It is the best way to do it. President Kibaki should reject this bill.

UPDATE: For more read Jaindi Kisero of the Nation

strengthening the social contract?

Occasionally I come across news that make me think that Kenya is still on the right track. The circus that is the current debate on the review of the constitution is definitely a reminder that the east African nation has a long way to go. But things are looking better elsewhere. For one, more Kenyan businesses (which include some of the noisemakers in parliament and their relatives) are lending to the central government. This is encouraging news in two ways:

First, it means that more people are investing in Kenya Co. and therefore will have incentives to make sure that the country does not go the way of the Ivory Coast.

Second, it means that more of the idle capital will get utilized in the provision of public goods, albeit inefficiently. They may have been late and not smartly implemented but I was quite impressed by the Finance ministry’s counter-cyclical policies to alleviate the effects of the slump. Job well done.

Now if only we could find a way of pooling all the cash that routinely gets used to over-subscribe to IPOs and package it in order to meet the treasury’s minimum requirement for investment in public debt. It would be kind of neat to see millions of wananchi investing in their own country. In this way they can indirectly pay taxes while at the same time strengthening the social contract because they will have incentives to monitor how government spends the money they loan it. Just a thought.

jua kali will not take us where we want to go

Informal businesses provide employment for millions of Kenyans. Kiosks (both big and of the mama mboga variety), the mitumba business, matatus and even peasant agriculture are what keeps the average Kenyan going. Because of governance issues – like corruption and poor laws – the formal sector of the Kenyan economy has consistently failed to provide enough jobs for the ever growing population. That said, I believe that the jua kali (informal) sector will not take Kenya where it wants to go. Economic History teaches us that scale has merits. It provides the resources for R&D, lowers operational costs and generates revenue for the government because it is hard to hide profits from the taxman like is commonplace in Kenya’s jua kali sector. Plus if we have scale we can export surplus production to places all over the Continent thus creating even more Kenyan jobs – why should we cede these markets to the Chinese, Indians and other “Dubai” traders?

That is why I think that Jaindi Kisero has a point with regard to Kenya’s matatu-dominated transport sector. It is time Nairobi, if not all major cities and towns, had decent public transportation unlike the chaotic and thuggish matatu industry. The matatu industry has given rise to a matatu culture that has taken vulgarity and criminality to a new level – the epitome of which is the dreaded Mungiki sect. Because of this, most reasonable people would concur that “formalizing” public transportation and the matatu industry would go a long way in reducing crime and bringing some sanity to Kenyan roads. Now if only there was a place where we could purchase political will and secretly feed it to Kenyan politicians.

And in other news, Somalis in the southern part of the country will be forced to go hungry after al-Shabab kicked out the WFP. About 900,000 people will be affected by the WFP decision. 2.8 million Somalis are dependent on food relief. The WFP decided to close shop in the face of several demands from al-Shabab (the demands were not all bad, I should add. One of them was that the WFP should not import food during the harvest season in order to promote local agriculture. These al-Shabab types know something about the demerits of food aid in Africa, it seems). Somalia has not had a functional government since the fall of Siad Barre in the early 1990s. Sometimes I wonder whether instead of the US paying the Ethiopians to invade Somalia it might have been better to have the Islamic Courts Union run the country. Well, at least for some time before incentivizing their being less predatory and misogynistic. Most politicians the world over have a price. Especially once they have tasted real power.

Lastly, Somalia is not all gloomy. If you are daring enough you can make money in the land of the al-Shabab, without being involved in piracy.

more reasons why Mang’eli should go home

Related to the previous post, here is Jaindi Kisero’s piece in the Daily Nation shedding some light on the validity of the sacking of Kioko Mang’eli, the former boss of the Kenya Bureau of Standards.

And in other news, where is the East African Standard? I keep being redirected to this website that says that the account has expired and is awaiting renewal or deletion. Really? Like seriously?