Kenya's changing economic landscape
Naomi Nibon
Published: 13-MAR-06

Debate still rages over whether the referendum defeat of President Mwai Kibaki’s constitutional amendments was a vote of no-confidence in his government and cause for an early election, or a cutting off at the knees of Kibaki’s vision of a more powerful presidency. On the one hand, the ruling National Rainbow Coalition (Narc) maintains that the outcome of the referendum on 22 November was merely a rejection of some proposals in the constitution’s rewrite; the opposition, on the other hand, says it was an overwhelming rejection of Kibaki’s administration. Whoever is right, Kibaki’s throw of the constitutional dice has left Kenya with a leadership vacuum and an economic architecture that will never be the same.

The nation generally agreed on the need for a new constitution, seeing the one they have now is basically unchanged from the 1963 version written when Kenya won independence from the United Kingdom. In the ensuing 43 years it has dictated Kenya’s political ethos through two eras of de facto one-party rule – led by Jomo Kenyatta and by Daniel Arap Moi respectively.

Kibaki’s 2002 victory was Kenya’s first taste of real democracy and it brought with it all the angst and ecstasy of a truly politically free society.

The constitutional proposals’ defeat by 57 percent to 43 percent had, says conventional wisdom, as much to do with the rising unpopularity of Kibaki’s administration as with the proposals themselves.

It was a staggering blow for the government but, in the view of many Kenyans, it may end up doing more good than harm. Kibaki is a wily enough politician to know that the Kenya electorate has put him on notice and that his much-promised reforms – political, social and economic – will quickly have to be seen as more than vote-grabbing promises. The economy will occupy most of his attention as Kenyans watch closely the ways in which Kibaki will improve their lives.

The ruling coalition has only just over a year to prove its mettle before Kenyans go to the polls and decide whether it’s worthwhile keeping it on or relegating it to the political graveyard.

The political climate is now exactly right for the government to recommit itself strongly to its national growth initiative – the Investment Programme for the Economic Recovery Strategy for Wealth and Employment Creation (IP-ERS). The programme has the buy-in of parliament, nongovernmental organisations, development partners and other stakeholders, and has all the ingredients to turn the economy around.

“The Strategy was built on three interlinked pillars of economic growth; enhancing equity and poverty reduction; and improving governance, each of which is essential to improving the livelihood of the Kenyan people,” reports African Development Bank in its Country Strategy Paper 2005-2007, an assessment of Kenya’s projected economic path.

To increase economic growth, the IP-ERS commits the government to fostering a sound macroeconomic framework. It also requires reforming the financial sector and strengthening its regulations to increase savings and investment, implementing mechanisms for private sector participation in the provision of infrastructure services, and establishing a competitive environment able to attract increased private investment in productive sectors such as tourism, industry and trade. To improve equity and reduce poverty, the IP- ERS focuses on investment in the human capital of the poor, particularly basic education and health; agriculture and rural development; and development of traditionally overlooked ASAL (arid and semi-arid lands) areas. To enhance governance, the IP-ERS proposes a comprehensive reform of the judiciary; strengthening of rule of law and security; and implementing reforms of the public administration systems. The government has adopted a policy to actively involve all stakeholders in the development process. The preparation of the IP-ERS involved extensive discussions and consultations with stakeholders at national, regional, district and divisional level in the country that included representatives of the local communities, NGOs, civil society, the private sector and donors, on the development priorities.

Added momentum comes through an agreement the government reached with the IMF on a three-year arrangement under the Poverty Reduction and Growth Facility (PRGF) programme that releases some 175 million special drawing rights (SDRs), along with other new strategies for economic and social development. The Government can also reaffirm its commitment to pro-poor spending by renewed expenditures in programmes geared for the poor, most notably through its universal free primary education programme. The government can deflect much of the fallout from the abortive referendum by applying renewed energy in implementing its much vaunted governance reform measures. Both Kenyans and development partners have expressed concern with the slow pace of reform. The referendum results are exactly the wake-up call the government is in dire need of.

The president’s proposals, running to 200 pages, were a decidedly mixed bag that basically retained the powers of the president, but introduced the post of prime minister whom the president could dismiss, reports think tank Africa Investor. Opponents argued that the proposals did not go far enough in limiting the current autocratic powers vested in the presidency, largely because the envisaged prime minister would not have sufficient power to be a significant check on the presidency.

Other proposals were also regarded as controversial, including sweeping changes to land rights, and the right of women to own land.

“No doubt,” says Africa Investor, “many of the voters who opposed the proposals did so because they genuinely objected to the envisaged constitutional changes. But many more, one suspects, were expressing their lack of confidence and disappointment in Kibaki’s rule.”

He came to office in 2002 on a ticket of anti-corruption and free primary education, and has since made only marginal improvements – the most visible being in the economy where growth has improved from 2 percent to 4 percent in the last three years.

With a crackdown on corruption, the main plank in Kibaki’s 2002 election platform, the Narc swept to power.

“Especially under Moi,” says the publication, “Kenya became a by-word for corruption. Kibaki, an economist by training, recognised the extent to which the endemic corruption placed constraints on growth and diminished Kenya’s attractiveness in the eyes of foreign investors. It also led to strained relations between the government and the World Bank and International Monetary Fund, both of which were initially impressed by, and then disillusioned by, Kibaki’s apparent reforming zeal. His appointment of John Githongo to spearhead the anti-corruption campaign was widely interpreted as a token of his good intentions.”

Githongo resigned in apparent frustration in February 2005, testimony that anti-graft drive had achieved little.

Despite the constitutional reforms having been passed by parliament early in 2005, the referendum split the Narc cabinet down the middle. Ralia Odinga’s Liberal Democratic Party joined forces with Uhuru Kenyatta (son of Jomo), leader of the opposition Kenya African National Union, to lead the winning “no” crusade.

Kibaki reacted swiftly to his defeat, firing his entire cabinet, imposing a ban on protest demonstrations and rejecting calls for new general elections. The next election is due in 2007.

For Kibaki, the referendum was a massive backfire that thrust his administration into crisis and Kenya into the most severe political upheaval since independence in 1963.

Some 19 members of parliament rejected posts in the new government, refusing to take up posts as ministers and deputy ministers following the walkout of Musikari Kombo, chairman of Ford Kenya, one of the major partners in the original 14-member National Alliance party of the National Rainbow Coalition. He accused Kibaki of having betrayed the party’s trust.

In the months following his accession to power, Kibaki cracked the anti-corruption whip with such vigour and resolve that international donors resumed funding they’d suspended during Moi’s rule. The foreign donor community had pointedly withdrawn support to underline their concerns over corruption which they blamed for Kenya’s negative growth and stalled foreign investment.

Kibaki’s administrative new broom made some headway in trying to sweep out corruption but, to the distress of donors, most of it ended up under the carpet. The Kenya Anti-Corruption Commission (KACC) and a slew of anti-corruption bills were widely perceived to have failed, as did the promise of reforming the economy and creating half-a-million jobs a year.

To show he was serious, Kibaki had installed Kenya’s Mr Clean – John Githongo – to excise the cancer of corruption. A few months later, in February 2005, Githongo resigned, saying he was no longer able to continue serving the government of Kenya.

It was a heavy blow for Kibaki who tried to demonstrate that he was tough on graft by reshuffling his cabinet, but even that was not enough to prevent the US and Germany from pulling the plug on further aid.

Death threats and bribes of sizeable dimension did little to intimidate the man Kibaki chose as his anti-corruption czar, but when his investigations were blocked to shield a few untouchable, corrupt official, John Githongo walked away. He could confront attempts on his life and scorn big bribes, but he would not be part of an operation that tackled corruption on a piece-meal and selective basis.

Githongo was hand-picked by Mwai Kibaki to head up the president’s anti-corruption unit. As director of the Kenya chapter of Transparency International, the 39-year-old former journalist had spent years probing Kenya’s culture of rampant graft and when Kibaki swept to power on an anti-corruption election ticket one of his first moves was to appoint the squeaky-clean Githongo to the post of Kenya’s secretary for governance and ethics.

Labelled “the high priest of good governance”, Githongo set about purging the bureaucracy. He remarked on his appointment: “I’ve always been fascinated by the connection between corruption and politics. It starts from the top and ends at the top.”

From the outset, Githongo spared no-one in his relentless purge of graft in the government in his determination to clean-up what Transparency International (TI) ranked as the world’s 6th-most corrupt country. He also had tough new laws on his side. Parliament had recently passed three crucial anti-graft laws that gave President Kibaki the legal framework launch an aggressive five-year campaign against corruption.

Says Tekla Szymanski, associate editor of World Press Review: “In December, after a six-month secret international investigation that he coordinated, Githongo identified former and serving politicians and civil servants in a US$1bn corruption probe.” He set about building a case for prosecution in an environment of bribery and fraud that costs Kenya hundreds of millions of dollars a year. The majority of Kenyans live on less than a dollar a day, but according to TI’s “Daily Bribery Survey”, they are made to pay an average of 16 bribes a month in two of every three encounters with public officials.

An anti-corruption commission was established with a hit-list of the public and civil service sectors, the police, immigration, the Revenue Authority, the Ports Authority and government officials. The judiciary had already come under fire: Six of the nine Appeals Court judges were found to be corrupt; 17 lower-ranking judges were suspended.

Githongo graduated from the University of Wales with a degree in economics and philosophy. He then set up and ran TI’s Kenya chapter, and for eight years, he wrestled with the Moi regime through his acid columns in Nairobi’s The East African weekly.

“This is a blow-by-blow the trenches of bureaucracy,” said Githongo. “Don’t think the culprits will just sit back. They fight. Corruption fights back.”

But, according to the BBC’s Gray Phombeah, “the spectre of high-level corruption has now returned with a vengeance to haunt Kibaki’s own coalition government - leaving his cabinet divided and his leadership wounded.”

Allegations, including charges by the British high commissioner of “massive looting”, that corruption was costing Kenya a billion dollars a year under the new administration reinforced the growing belief that not much had changed. Not long after the British diplomat’s accusations, Githongo resigned, saying he was no longer able to continue serving the government of Kenya. The US and German governments immediately suspended their several millions of dollars in aid to Kenya’s anti-graft agencies, followed by warnings of similar action by the EU and Japan.

Kibaki insists that he has not lost the political will to fight corruption and that his new cabinet is united in its determination to stamp out the scourge

This special report was first published in Business in Africa Magazine, February 2006. To subscribe click here

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