by Aamera Jiwaji

G21 AFRICA Staff Writer

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Aamera
Jiwaji

NAIROBI, KENYA - Pointing fingers is normally seen as a way of diverting blame away from oneself, allocating it to another party, establishing a scapegoat.

And when the Minister of Finance for the Republic of Kenya, Honourable David Mwiraria, delivered his budget speech for the year 2004/5 on 10 June 2004, he did not hold back when it came to pointing fingers and allocating blame for the current economic situation in the country.

But his fingers were not intended to divert attention away from Kenya, they were very strongly focused within the borders of Kenya and at particular individuals and groups within the country.

As with any budget speech, Mwiraria discussed the major macro-economic factors and trends of the economy in the past year and his department's predictions for the path the economy was to take in the following year. But his strongest message was that Kenya has no one but itself to blame for the economic situation that it is in today.

Since his party, NARC (the National Rainbow Coalition), came into power in December 2003, every campaign it has begun has been centred on the keyword of unity: unity between its different income groups, cultures, tribes, religions ....

Its new work ethic: working together to build a better future for all Kenyans.

Its AIDS campaign: "Pamoja tuangamize ukimwi" (Together we can fight AIDS.)

And this year's budget speech promoted the exact same message: that the actions of one group of people in the country are harming the lives and futures of all Kenyans.

Nowhere has this been seen more clearly in the last year than in

the passports scandal

Where a Kenya Shillings 936 million (US $ 12 million) plan was conceived by the Kenyan government to upgrade passports to the new generation (a secure system for issuing passports and other immigration documents) and then awarded at the higher cost of Kenya Shillings 2.7 billion (US $ 34 million) to one company without open tendering. The so-called "foreign" company that was awarded the contract is allegedly owned by a local businessman who is known for fixing deals with the government.

the Goldenberg inquiries

A corruption scandal during the Moi era that cost Kenya hundreds of millions of dollars (estimates place it at as much as US $ 1 billion) at a time when the economy was spiralling towards recession, a recession that the country is still struggling to recover from.

The Goldenberg Commission of Inquiries, created in 2003 after numerous lengthy and unsuccessful court proceedings, is attempting to uncover the story behind the dealings of Goldenberg International, an export company, and its principal owner, Kamlesh (Paul) Pattni. The commission is investigating why Moi's government paid hundreds of millions of dollars to Goldenberg International for the purported export of gold and diamond jewelery, despite the fact that Kenya has negligible gold deposits and no diamonds. Recent testimony by Pattni suggests that the former President Moi was a silent partner in Goldenberg International.

the Anti-Corruption tribunals

Investigative tribunals looking into the allegations of corruption, unethical conduct and other forms of misbehaviour by judges, both of the High Court and Court of Appeal, and judicial officers/ staff.

And the final peg to drive the message home: the annual budget speech.

Inherited difficulties

The first culprit, for Kenya's current economic situation that Mwiraria identified by name was the previous government, KANU (Kenya African National Union) which had been in power since the country's independence in 1963.

"The NARC government inherited an economy that had stagnated for well over a decade," he began. "The last one-year has therefore been a period o f laying a new foundation on which to build a better and more prosperous Kenya."

The stagnation of the economy during the KANU era he depicted through the deterioration of the main economic factors: increased unemployment, low economic growth, "chronic poverty, declining social and economic infrastructure and an unfavourable international image".

Inefficiency

Mwiraria tackled the issue of scarce resources, an economic concept world-wide, but one that has been exacerbated in Kenya because of the inefficient use of the little that is available. He explained how his government would not increase taxes because of the adverse effect it would have on investor confidence in a world where there were many developing markets all fighting for foreign investment.

Since a large percentage of Kenya's resources had already been committed to the upgrading of security after the recent spate of attacks following the declaration of war against terrorism, the only solution, he said, would be to increase efficiency. With this he announced the title for this years' budget: "Enhancing efficiency for accelerated economic growth." In other words making the most of what we have.

"In the past incidents of mismanagement in public enterprises have imposed heavy financial costs on both the economy and the taxpayer. ä the public has paid for services which were either not rendered or when rendered were of low quality irrelevant to their needs."

He went on to say that public enterprises should remain focused on their core mandate and not deviate to other non-performing projects, such as building high-rise office apartments.

Privatisation, he said, was another area that had been looked at in the interests of operating more efficiently. Commercial public enterprises that had been targeted for privatisation were in the departments of agriculture, tourism, finance and communication.

He assuaged public fears related to the pursuit of efficiency by large corporate bodies such as retrenchment (as seen recently with Kenya Airways and Kenya Railways), by asserting that domestic participation will be ensured, national interests will be protected and safety nets for workers established in the privatisation process.

"Kenyans will be expected to play key roles in ownership and leadership during the privatisation process."

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Easing the constraints

Mwiraria identified the role played by the financial sector as key to the development and growth of Kenya.

"Kenyans have paid and continue to pay a very high price, both in budgetary and economic costs, for the financial indiscipline of the 1990s" which was characterised in high fiscal deficits, excessive domestic borrowing, high inflation and political interferences in banking sector.

Successive to the reforms of increased transparency and improved governance which Mwiraria introduced in last year's budget, he suggested a number of other measures that would enhance competition in the banking sector and reduce the costs of delivery of financial services to Kenyans.

The In Duplum Rule which is already in practice in the Netherlands, South Africa and Zimbabwe, seeks to reduce the load placed on customers with interest charges on a debt that is clearly non-performing. In other words, the maximum amount that a bank can claim from a non-performing customer is capped and interest charges cannot exceed the principal amount outstanding at the time when the loan stopped to perform.

The second was an improved system of governance, integrity and competence in the running of Kenya's financial affairs to ensure safety, soundness and success through: the continual monitoring and vetting of the CEOs, directors, significant shareholders and financial entities prior to assuming responsibilities.curbing the money laundering menace by monitoring commercial banks and other financial institutions that are the first port of call in attempts to legitimise the proceeds of crime and facilitate high levels of corruption. introducing an improved system of governance to promote bottom end financial institutions, such as co-operatives and Post Savings Banks.

"With a population of over thirty million people, majority of Kenyans do not have access to financial services while some areas of the country have no commercial bank outlets."

"As Honorable members are fully aware," he continued, "Kenyans are paying a very high price for the dishonesty of a few people. Today, every school, hospital and trading store requires payment by bank cheque. Indeed schools no longer accept cash for fear of robberies nor do they accept personal cheques which they fear could bounce. It has therefore become a nightmare for people living in rural areas where there are no banks to pay school fees. Parents travel long distances to buy bank cheques at charges which are as high as a thousand shillings a cheque (US $ 12), money which they can ill afford."

He suggested that with this crisis in mind, the Penal Code be amended to make the "issuing of bouncing cheques while aware there are no funds in the drawer's account an offence".

Goods entering across the borders

Mwiraria outlined a number of measures that he shall be introducing at ports of entry around the country in the hope of making the current cargo monitoring system more efficient.

"These measures ä should send a clear message to traders in the region that the days when well-connected persons diverted goods into local markets with impunity, are over."

He also suggested amendments to the Export Processing Zones Act following a recent incident where ready made imports were being relabelled as Kenyan goods and sold in the domestic Kenyan market. One of his suggestions was to separate commercial zones from manufacturing zones to discourage such practices.

Light at the end of the tunnel

But according to Mwiraria, there is hope. East African relations are strong and growing There are few cases of armed conflict in the sub-Saharan region, and growth prospects from the peace initiative in southern Sudan augur well.

The East African Community (EAC) which is comprised of Kenya, Tanzania and Uganda has made progress towards the establishment of a customs union, and Mwiraria is hopeful that a common external tariff (CET) will be implemented and effective by 1st January 2005.

So, despite the domestic constraints and the challenges presented by the world economy, such as higher fuel prices, terrorist attacks and the corresponding travel advisories and bans on Kenya which are affecting its tourism and travel opportunities, there are prospects for economic growth and development in the near future.

"For us to succeed and realise the full potential of our nation we must all work harder together in unity," Mwiraria said. And for this to happen, the motto of a "working nation" must be taken to heart and practiced "surely and honestly".

His last appeal, and most heart felt, was directed at the groups he knew could have an effect on Kenya's economy if they made up their minds to propagate change: those in power, the people in Parliament with him and the businessmen who had taken the afternoon off to watch the budget speech.

"Let us show by action that the projects we select for funding are pro-poor and address the most urgent basic needs such as provision of water, building of classrooms and health facilities etc. In all we do let us always remember that "Leadership is action, not position".

Let us reason together on how to rebuild this nation for "United we stand, divided we fall". For the sake of our electorate and generations to come, we cannot afford to fall."

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Useful links

The budget speech ( HYPERLINK http://www.kenya.go.ke/speech.pdf Image of East Africa ( HYPERLINK http://www.un.org/Depts/Cartographic/map/profile/eastafr.pdf