Cash and Markets in Development

This is from a story in Kenya’s Standard Newspaper:

Martin Wepukhulu is a small-holder farmer in Trans Nzoia County, popularly described as Kenya’s breadbasket. To produce a two-kilogramme tin of maize known as gorogoro here, he spends about Sh25 on land preparation, seeds and fertilisers on his one-acre farm.

Some 270 kilometre away in Turkana County, one of Kenya’s poorest counties, is Loseny Nguono, a goat keeper, with two wives and 13 children. Turkana is one of the 23 counties affected by drought which has left close to 4 million people in danger of starvation.

Loseny receives Sh8,000 after every two months from the national government through the national safety net programme. He is willing to pay Martin a decent Sh70 for his gorogoro of maize. Unfortunately, neither Martin nor Loseny will get his wish. A reclusive government, ruthless cartels, dilapidated roads and marauding bandits conspire to ensure that while Martin sells his cereals at a low of Sh40, Loseny buys it at a high of Sh150.

Read the whole thing here.

It is great that Loseny has cash; and that unconditional cash transfers for social protection are increasingly becoming a mainstream policy option (notice that the story doesn’t even acknowledge the awesomeness of this reality). But the other lesson that we can learn from the story is that in order to get Loseny out of poverty we need good roads, properly functioning markets, and security. All these are public goods that must be provided through collective action, above and beyond the improvements in Loseny’s private consumption.

An East African Geopolitical Dilemma: Which pipeline route makes most sense for Uganda?

Bloomberg reports:

Screen Shot 2016-03-25 at 9.34.21 AMKenya is competing with Tanzania to build the pipeline from oilfields in Hoima, western Uganda. It would either traverse northern Kenya’s desert to a proposed port at Lamu, near the border with Somalia, or south past Lake Victoria to Tanga on Tanzania’s coast. A third option would be through the southern Kenyan town of Nakuru.

Tanzanian President John Magufuli said earlier this month he’d agreed with Museveni to route the conduit via his country at a cost of about $4 billion, with funding from Total SA. The Kenyan option favored by Tullow, which has oil discoveries in Uganda and Kenya, may cost $5 billion, according to an estimate by Nagoya, Japan-based Toyota Tsusho Corp.

Uganda is in a rush to get its oil to market. It also wants to make sure that it does not tie its hands in an obsolescing bargain with Kenya. Being landlocked, the country already depends a great deal on Kenya as an overland route for its imports and exports. The pipeline would add to Nairobi’s bargaining power vis-a-vis Kampala.

In an open letter to President Yoweri Museveni, Angelo Izama, a Ugandan journalist (and a friend of yours truly) articulates these concerns and concludes that it is better for Uganda to build the pipeline through Tanzania in order to minimize its political risk exposure:

It is not rocket science that routing both commercial traffic and oil through Kenya would give Nairobi near total influence on economic matters and would, added to Kenya’s already considerable market penetration in Uganda, leave little wiggle-room for unforeseen and some predictable hazards. The Ugandan domestic commercial and industrial community as well as consumers remember well how helpless they were when disruptions followed the Kenyan election of 2007 (even when some of us had urged the government earlier to restock fuel in anticipation of political violence). Many also live with the challenges of a single port to our import-addicted economy and the cost to family fortunes whenever Nairobi pulls bureaucratic red tape. Obviously being landlocked is not a “non-issue” as you framed it in Kyankwanzi. It needs to be placed in a detailed context. I have some reservations over your optimistic take on political and market integration, and that said, clearly having one member, in this case Kenya, within this greater EAC community with more power and influence than the rest is not an advantage to the growth of the community and may in fact prove rather dangerous. This as I recall has been the common fear cited in our neighbourhood about Uganda’s aggressive military spending (to which the Kenyan government responded with its own expenditure in the decade ending 2018).

The official reason given by Uganda for considering the Tanzania option (see map) is that construction of the Kenyan pipeline would be delayed (due to corruption, expensive land [Kenyans and land!], security threats from al-Shabaab, and the fact that the Lamu Port is yet to be completed).

All these are reasonable concerns.

Plus, it would have been foolish for Uganda not to strengthen its bargaining position by CREDIBLY demonstrating that it is considering BOTH options.

But Uganda must also know that whatever the outcome, this is an obsolescing bargain. Once the pipeline is constructed, it will be at the mercy of the host country government.

It is for this reason that it should seriously consider the kinds of future governments that might be in office in Nairobi and Dodoma/Dar es Salaam.

To this end Ugandan policymakers need to ask themselves the question: Would you rather deal with a government that partially answers to private sector interests and operates in a context of weak parties; or do you want to be at the mercy of a party-state in which some politically-motivated party stalwarts can actually influence official policy?

Understood this way, Uganda’s concern should be about what happens after the deal has been sealed; rather than the operational concerns that have thus far been raised by Kampala.

Notice that Kenya has been able to protect its existing oil pipeline well enough. Rioters may have uprooted the railway in 2007, but that was because they felt that Museveni was supporting their political opponent (Museveni could be more discreet in the future). Also, it is a lot harder to uproot a pipeline buried in the ground. The construction delays due to land issues can also be solved (and in Kenyan fashion, at whatever cost) — notice how fast Kenya is building the new standard gauge (SGR) railway line from Mombasa to Nairobi despite the well documented shenanigans around land compensation (More on this in a World Bank report I co-authored in my grad school days here).

Perhaps more importantly, the Kenyan option is attractive because Kenya also has oil, and will have to protect the pipeline anyway. This scenario also guarantees a private sector overlap between the two countries — in the form of Tullow or whoever buys its stake — that will be in a position to iron out any future misunderstandings.

Tanzania is also an attractive option. The pipeline will be $1 billion cheaper. Because it passes through largely uninhabited land, construction will be speedy. And the port at Tanga is a lot further from the Somalia border than Lamu, and should be easier to protect.

All this to say that the operational concerns raised by Kampala are a mere bargaining tool. These issues can be ironed out regardless of the host country. The big question is what happens AFTER the pipeline is constructed.

And here, I don’t see why Tanzania is necessarily a slam dunk.

The history of the EAC (see here for example) tells us that Kenya tends to subject its foreign policy to concentrated private interests. Tanzania on the other hand has a record of having a principled an ideologically driven (and sometimes nationalist) foreign policy with significant input from well-placed party officials. Put differently, the calculation of political risk in Kenya involves fewer structural veto players than in Tanzania. Ceteris paribus, it seems that it would be cheaper to manage the long-run political risk in Kenya than in Tanzania.

That said, the Tanzania option makes a lot of sense in a zero sum game. As Angelo puts it:

I have some reservations over your [Museveni’s] optimistic take on political and market integration, and that said, clearly having one member, in this case Kenya, within this greater EAC community with more power and influence than the rest is not an advantage to the growth of the community and may in fact prove rather dangerous.

But even this consideration only makes sense in the short run. Assuming all goes well for Tanzania, in the long run the country’s economy is on course to catch up to Kenya’s. Dodoma will then have sufficient political and economic muscle to push around land-locked Uganda if it ever so wishes.

To reiterate, the simple question Museveni should ask himself is: who would you rather negotiate with once the pipeline is built?

I don’t envy the Ugandan negotiators. And they have not helped themselves by publicly stating their eagerness to get their oil to market ASAP.

general kianga should be a little bit embarrassed by this

The Kenyan army is one of the most professionalized on the Continent. When their counterparts across the region were going nuts with politics through most of the 60s, 70s and 80s they opted instead to stay in the barracks. The coup attempt of 1982 died before it began. Just to illustrate how disinterested they are in politics, many Kenyans, including yours truly, cannot name the top generals in the armed forces.

But I think they are taking their dormancy too far. Uganda illegally occupied the Kenyan island of Migingo a while back. Now they are trying to annex yet another Kenyan island.

Most recently the Daily Nation is reporting that a group of Ethiopian tribesmen who attacked and killed 20 Kenyans within Kenyan territory stopped Kenyan officials from visiting a Kenyan village on the Kenyan side of the border.

“Prime Minister Raila Odinga and five Cabinet ministers were barred from accessing a Kenyan village occupied forcibly by Ethiopian tribesmen for fear of being attacked.”

Really? Seriously?

Where is the Kenyan army?

gettleman does it again

Do not get me wrong. Jeffrey Gettleman’s story on the famine in Kenya is as important as any other article on a humanitarian disaster. It is his delivery that sucks. In typical Gettleman fashion (more about his style here and here), the article is full of sensationalism that does not belong in the Times. He goes way out of his way to depict all Kenyans as hapless, passive victims of the weather and their ineffectual government.

“The aid community here has been predicting a disaster for months, saying that the rains had failed once again and that this could be the worst drought in more than a decade. But the Kenyan government, paralyzed by infighting and political maneuvering, seemed to shrug off the warnings.”

Lines such as these are meant to convey the message that ordinary Kenyans – meteorologists and even some civil society organizations or even the Kenyan media – have had nothing to say about the famine that is affecting the country. It is the do-gooder foreigners who know it all that have warned the intransigent government. It is the same foreigners who are expected to send in food aid to help the dying Kenyans. Nothing is ever said about local initiatives to mitigate the disaster. That would give agency to Kenyans, and nobody really wants to read about that.

Instead we are told that “Turkana men are abandoning families, simply vanishing into the desert because they cannot face the shame of being unable to feed their children.” And the story would not be complete without the mention of tribal conflict. So even though it is obvious, and quite rational, that in times of acute scarcity there would be conflict over resources – and even Mr. Gettleman acknowledges this – there is still subliminal hints to an irrational ethnic conflict between the Turkana and the Pokot. Again, nobody wants to hear about rational people fighting over resources. No, being in northern Kenya is like “stepping back in time.” The place is full of starving people who engage in irrational tribal wars. This is the much more sexier story.

May be I am holding Gettleman to too high a standard. After all he is an American lacking enough knowledge of local conditions to appreciate the nuances involved even in the midst of such disasters. But he is the Times’ bureau chief and because of that people take what he writes seriously. There must be a more humane way of telling the world about the problems afflicting the inhabitants of the arid and semi arid parts of Kenya.

I reiterate, this lifestyle is not sustainable

The Economist’s Middle East and Africa section has a piece on the plight of those exposed to environemntal disasters due to climate change. The article talks a bit about the nomads of northern Kenya and how their livelihood remain endangered as the place gets drier and the drought cycle shortens. As I have stated before, it is not enough for us to pretend that the type of lifestyles still maintained by the nomads of Kenya, and Africa in general, are sustainable. The simple truth is that they are not. It is 2009 and human beings should not still be living at the mercy of nature, if they can avoid it. It is time these communities were given incentives to start laying the groundwork for a sedentary lifestyle. This is not cultural imperialism or anything. It is what’s practical.

And by the way, it is not condescending to say that nomadic pastoralism belongs in the stateless past when there was no concept of land tenure or stuff like libraries and hospitals and schools that require a sedentary lifestyle. “Incentives” here means some sort of nudge in the right direction. And to be quite honest, sometimes communities might make the wrong choices if the state stays out of their business. If a community chooses a lifestyle that kills half its children before they are five, confines women to the fields and kitchen, promotes high illiteracy rates and is generally backward by universally accepted standards of human life then I believe that the state has a duty to intervene. Now I know that for most of Africa the state is largely unable to do anything, and that is why there are NGOs everywhere (well to some extent). But this (the existence of an interventionist developmental state) ought to be the case.

How we can make the state do what it ought to do is another can of worms. But I think that right off the bat those involved in the development industry should always make it clear that the aim is to guarantee people a decent livelihood and not to merely make them comfortable in their poverty by pretending to “respect” their cultures and ways of life. This faux-respect is the kind of stuff that should never leave anthropology seminar rooms.

And going back to the Economist piece, the clown who wrote that piece should know that talking about the poor of the global south “picking up sticks” in conflicts is not cool. Such a condescending tone does not help anyone. The cheap humor is not worth it.