Majority of Kenyans (64%) are optimistic that 2018 will be a better year than 2017. However, there is a significant number of Kenyans (17%) who are not sure about what the year holds in store and are adopting ‘a wait and see’ attitude.
Another notable number (14%) feel that this year will be worse than the just ended 2017. These revelations are according to the New Year Survey conducted by TIFA Research between the 12th and 16th December 2017.
Kenyans are hopeful that the start of 2018 will be a game-changer, especially on the divisive nature of Kenyan politics and hopefully the year will signal a return to normalcy for the country. Kenyans are also hoping that politicians will give them a break for the next 5 years so as to allow the country to focus on economic development that will spur job creation and the lowering of the standards of living as the country takes a path to recovery.
Nyanza, Western and North Eastern Most Pessimistic about 2018
The survey also reveals that the optimism levels of Kenyans vary by geographical regions. In terms of those who feel that 2018 will be better than 2017, residents of the Central region (81%) are the most optimistic followed by Eastern (73%) and Rift Valley regions (69%). The least optimistic regions include Nyanza (49%), Western (49%) and North Eastern (42%).
Jubilee Supporters are more optimistic than NASA Supporters
More than 75% of Jubilee supporters feel that 2018 will be better than 2017. On the contrary not more that 50% of NASA Supports feel that 2018 will be better than 2017.
Better employment prospects and political environment expected
Although the economy had slowed down during the election period at the tail end of last year, majority of Kenyans expect a turnaround in the economy in 2018. In addition, majority of Kenyans expect to see better employment prospects, better political environment, a reduction in the cost of living and better security. This signifies that Kenyans see the link between better economic performance and improved employment prospects and reduced cost of living.
High Optimism Towards Education and Public Health Sectors
According to the TIFA New Year Survey, 70% and 69% of Kenyans expects primary/secondary and higher education respectively to improve in 2018. These high expectations are recorded against the backdrop of a number of reforms in the education sector. The changes in this sector include the expected introduction of a new curriculum, new text book policy and stringent measures that have secured the integrity of national examinations. In the higher education sector, public university lecturers resumed work in December 2017 after they signed a Collective Bargaining Agreement (CBA) with the government. This signals the end of a protracted battle which had interrupted learning in higher institutions.
In March 2017, the doctors in Kenya ended their 100-day strike after signing a collective bargaining agreement with the government. However, to the detriment of Kenyans, the nurses’ strike began less than three months after the doctors’ strike came to an end and lasted for 151 days. These strikes exerted a lot of pressure on the public health system, making many Kenyans to suffer. With both doctors and nurses now back to work, it is not surprising that 67% of Kenyans feel that the public health sector will improve in 2018.
Main Focus of 2018: Entrepreneurism, Job Hunting and Advancement of Education
Looking at the goals for 2018, a third of the total sample said that they intend to set up a business with 32% mentions. The second highest goal is to get a new job by 24% of the sample. Advancing education is a goal among 22% of the total sample while additional academic qualifications is considered a strategy of enhancing prospects for promotion and subsequently increase in one’s remuneration. Also mentioned were goals such as getting work-life balance, constructing of a house, getting married, upgrading/investing in farming. Purchase of a car and land generated only 3% mentions.
Cryptocurrency is proving a threat to traditional banking and Bitcoin is the current talk of the town. When it came out in 2011, one bitcoin was trading at 1cent, today, it is at USD16,000 with a rising trend. I’ve been studying the phenomenon and many user experiences. I was particularly caught by the story of, Andreas Antonopoulos, a bitcoin blogger, an advocate who has trained many people the art of cryptocurrency since 2012. He has empowered many and in line made many millionaires but himself.
While he has been advocating for the bitcoin movement, he was low-key broke, for someone who started off early and had hundreds of units, you’d naturally expect him to be super rich now that one bitcoin is going for $16,000 but that would not be the case. He sold off his bitcoins to clear off debts leaving him church mouse broke. Overwhelmed, he placed a plea for donation, naturally given his high ranking in the bitcoin world, he received a backlash but more important, he received support from those he had mentored. He needed donations to support his work and life.
After revealing in late November he had not profited off bitcoin’s nearly 2,000% rise over the last year, Andreas Antonopoulos, who has convinced many to get into the bitcoin game through his speeches and books, received hundreds of donations totaling $1.6 million worth of bitcoin as of Friday. That’s about 102 tokens over the course of three days.
Cyprian Nyakundi is a renowned Kenyan blogger with outstanding record largely marred with controversy, he has made a name that many don’t want to mention but can’t escape. In the past two weeks, the blogger set up an experiment and ran a turbocharged campaign against toxic feminism and for the empowerment of boychild.
When this vicious campaign that includes going after his target group of women started, I wasn’t available online. On returning, things had changed and Nyakundi was baptized the President of the boychild. He had ignited a national debate from the comfort of his desktop. From the radios to TVs, the trending topic was boychild and the famous ‘Nyakundi said no’ slogan was trending. This I learned was to discourage the commercialization of sex where young girls ask for money from their boyfriends in exchange for sex.
I was reading a report by Mashujaa organization this morning and one of the things that stood out was that most young people are having sex, and some become active even before their teenage years.
According to the report, two out of three youths are sexually active and one in five start having sex before their 16th birthday.
“Curiosity and peer pressure are the key early motivators for sex; later on sex becomes a tool for getting tangible and intangible benefits,” states the report. It is this ‘benefits’ part that Nyakundi said No campaign took a toll.
Running such a campaign against ‘toxic feminism’ was definitely going to attract a nuclear backlash especially from the women and true to the words it sure did. His Facebook page is awash with swipes from the obvious.
Unknown to him, Nyakundi started a movement, it blew up from a normal social media rants, he became the talk of the town, conversations in bars, social gatherings revolved around this talk. It is a topic that needed to be addressed since more emphasis went to empowering the girl child at the expense of boychild whom majority felt neglected.
While many may not agree with Nyakundi’s tone of communication including yours truly, I think he busted a bubble and ignited a conversation that was so much needed. Sometimes we channel our energies on one thing that we forget about the rest ending up losing much.
Along the road, members of the boychild movement suggested to Nyakundi to have a donation platform where they would make donations to support his work, without hesitation, he picked up the idea, set up a paybill not knowing it was set to boomerang. Under an hour on Friday of going live with the fundraising, he had received about Sh30,000 and counting. Unexpectedly, he called it off citing serious backlash and many terming the drive as extortionate.
I don’t know why he didn’t see this coming, should’ve been anticipated especially that he has amassed a large number of enemies especially the pro-feminists. Some people have argued that the fundraiser was a bad idea that killed the boychild movement and I have to disagree.
You see most work that humanitarians, bloggers do is generally for free and out of passions, people dedicate their times and resources to a discourse. Nyakundi explains that he compiled a team of young talented men who developed the pro-boychild articles which makes sense, as a blogger I can’t emphasize much on how consuming both mentally and financially it is to develop content but most of you won’t know since all you can see is the end product.
The idea of a fundraiser to keep the activities of the pro-boychild campaign was well deserved but poorly executed for me. All that Nyakundi needed to do was build a momentum, create a visible void that would necessitate funding to achieve bigger goals, this ought to be followed with an elaborate explanation why donations were needed but it popped out of the blues and since many weren’t as prepared with enough details, took it as an extortion plan which it really isn’t.
If you look around most of these feminist movements, they’re running on donors funds I mean you need enough resources to maximise your audience reach and smoothly run your activities. This boychild movement needed to go all the way to the grassroots way beyond Facebook rants, this is how it ought to have been done but still online gives a great platform. For Nyakundi, he needs to diversify content not minimizing on articles alone, videos et al but all these needs talents and resources which is why I feel the donation was deserved.
If by now there’s no organization that has approached to work with him but he has plans to sustain and expand the campaign then definitely individual donations would keep it going. Money issues are case sensitive and a slight mishap can cancel all the advancements in a flash, Nyakundi didn’t do enough convincing even though he has the huge willing following to donate, that’s his mistake he made. He needs to convince his followers that the movement is growing and need to grow more channels for empowerment.
Lastly, like in Antonio’s story that I opened up with, there’s nothing wrong in supporting someone’s work, allow me to use a rated comparison, you splash notes on strippers When you go to the clubs but find it wrong to support a blogger’s work. Many blogs and movements like WikiLeaks, Guardian have donation links for avid readers to support their work so why is it extortion to support other bloggers as well be it Nyakundi or anyone else? It’s more of appreciation, don’t you people pay those matatu pastors sadaka?
I’d encourage Nyakundi to go back to the drawing board, you’ve started a movement that has become your trademark, I might not agree with A, B, C,D but the undeniable fact is you have a bright idea that needs a bit of tweaking and not be abandoned, if you chose to be the President of the boychild then you must be with or without the fundraiser after all you’ve been doing it for free. However, build the ground, expand this, team mafisi which stands for immorality was recently registered, have boychild movement registered and you n identified by it, go out hold talks in halls take your message home and hopefully the donations checks back.
Kenya has made a couple of noticeable strides on the path of ease of doing business. We have to appreciate the steps made so far but still advocate for continuous spontaneous changes that will ensure our full entrepreneurship productivity and potentials.
According to World Bank latest annual ratings, Kenya moved 12 places from position 92 in 2016 among 190 economies as far as ease of doing business pertains. All these are based on regulatory environment, protection of property rights. Efforts to make starting a business easier is notable by the merger of procedures necessary for startups and formal business operation.
Huduma Centre services have made this even convenient as well as online platforms set aside by various county governments and other authorities. In the previous financial year, Nairobi County, for example, did consolidate a total of 5 licenses to one permit such as single business permit, health certificate, advertising signage, food hygiene to fire clearance certificate, all these are applied by entrepreneurs online with digital payment as an option as well. With these, it’s true that investors have been relieved from previous burden and bureaucracies one had to undergo in order to kick-start a business.
With devolution taking deeper root in the country, every County governments are in the race of attracting it set of investors both foreign and local to boost its own economic agenda. More regulations have been given emphasis to attract the marginalized groups; youths, women, disabled through tendering and contracts i.e Access to Government Procurement Opportunities (AGPO) among other loans and grants provided to boost these group.This has as well come up with its own set of challenges from delayed or close to zero payment even after delivery of tenders,non-compliance to contracts, corruption et al which are all manageable with proper control structure in place.
Where are we? Are we heading somewhere? What can we learn?… Insights on Kenya’s external business environment
There have been cycles of economic growth as well as contraction due to several inevitable factors ranging from events, news, consumer preference, the general state of health of the market, these must always be taken into consideration by the investor who needs to start or spike growth of the business. In Kenya, let’s take quick look at several external environmental factors that must be contemplated by an entrepreneur ;
Political environment
Kenya economy is intertwined with the political aspect, impact on one will definitely have a consequence on another.It has been a long political season accompanied by political instability in several regions and towns thus derailing investment rates throwing most of the entrepreneurs into a ‘wait and see’ situation in order to explore their next step.With political rhetorics ‘slowly cooling down’ and political class showing capabilities of settling down issues at hand, entrepreneurs can only be optimistic about a better time ahead.
Business only thrives where there is sizeable peace and tranquility, security and a condusive environment full of a corporation with the political players, policies, and regulations that seeks to promote SMEs, manufacturing sector, processing, service, agricultural sectors for the good of the economy.
Interest rate
High-interest rates discourage customers /entrepreneurs from borrowing to expedite their entrepreneurial interests, on the other hand, the lower the interest rate the more the stimulation of industries growth, innovation, and more jobs.
The bill capping interest rate has been effected to law,this ensures maximum interest rate charged by commercial banks is only 4% above the CBK rate, the impact of this law is slowly being felt among the banking sector with several experiencing drops in ‘supernormal’ profits but critics including economists, banking sector have always stood their ground against the bill with IMF also chipping in to offer advice on the adverse effect in the long-run in the economic growth.
But the intention of those who pushed the bill was to support the growth of SMEs and entrepreneurs to access affordable loans and attract even those who were afraid of defaulting due to the high-interest rate. The challenge for many towards this remains to be collateral required for the loan acquisition. The banking sector have their own school of thought and continues to have own mitigation measures to curb the impact of the new law.
Prevailing currency strength
The value of Kenyan currency compared to foreign currency is an important business aspect for any entrepreneur, the strength of the Kenyan currency to US dollar is at least currently fairly stable despite the long political season but with time indication are pointing towards its growth.Whenever it strengthen, business in the sphere of international trade are able to be even more competitive in pricing, loss mitigation, and spike growth.
Economic status Kenya is indisputably the leading economy in East and Central Africa with the unique distinction of diversification and continuous advancement. According to the World Bank’s Kenya Economic update 2017, the country’s GDP projection is to decelerate to 5.5% which is 0.5 drift from 2016 forecast due to prolonged drought, food insecurity, crop failures and livestock death alluding to the fact that agriculture is the country’s economic backbone. Amidst all these, prudent macroeconomic policies are continuously considered to unlock the country’s full productive capacity; better credit access, agricultural productivity as well as optimization of sprouting new economic growth energies especially real estate which is increasingly taking center stage even in remote and previously sleeping regions, towns and cities.
Social Environment
Going by the latest country’s census, Kenya boasts of a population of about 44 million with 2.7% estimated annual growth rate.Away from the brief stats, it’s important to note that there exists continuous blossoming consumer demand particularly for high-end products and services attributed to uprising middle-class population. The country is strategically located making it a market hub in East and Central Africa.
It’s wise also to note here current existence of trade beneficial agreement and arrangement that the country has definitely optimized such as The African Growth and Opportunities Act(AGOA) as well as Economic Partnership Agreement (EPA), all these have offered a boost towards access to the European Union and other international markets as well on a duty free access. This has contributed to the growth and offer more opportunities in textile, processing, manufacturing and service industry.
Understanding your business environment into perspective is very paramount for proper planning, analysis plus informed decision making to ensure business productivity. Through SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis you are customed to be on the track of all aspects in the business environment and to keep you ahead of competitors & offer competitive edge as well as necessary adjustments of strategies to have a reflection of the environment under which you operate your business.
Ease of doing business report ought to be reprieve and challenge to the future of entrepreneurship in the country.This has had its own share of positive changes which are to the advantage of entrepreneurs to optimize with time. More adjustments must still be made to ease further business operations and support growth in terms of policies, empowerments to at least help bridge existing gaps.
Read the full World Bank’s report on Kenya’s economic outlook below
On October 13, 2015 a major bank in Kenya closed its doors without notice, due to the unnecessary instructions from the Deputy Governor of the Central Bank of Kenya (CBK) by placing the bank under receivership and put in the administration of Kenya Deposit Insurance Corporation (KDIC), claiming the bank was trading inappropriately.
Imperial Bank Ltd (IBL) had all funds in the bank frozen leaving depositors without any access to their funds. Now 12 months later only a small amount of funds have been released to the small depositors leaving retirees, people in business and investors with no means of support.
The Imperial Bank Directors brought in a UK company to carry out a forensic investigation report; however, CBK has not made the report public!
The only information the depositors have received is from leaks within CBK to newspapers indicating bribery and corruption to the highest levels in the CBK in which it is reported key top officials in CBK were bribed to place IBL into receivership and ensure liquidation of the bank so as to hide the scandal of unsecured loans not serviced for years by IBL directors, CBK auditors & WE Tilley.
The depositors have now embarked on a campaign petitioning the President of Kenya and the Governor of the Central Bank of Kenya, requesting that they intervene in helping in the arrest of all the corrupt individuals involved in the fraud of the funds from Imperial Bank depositors including those in their own departments, the release of the forensic report, transparency of financial events and records since the bank closed its doors PLUS the full payment of the funds to the Imperial bank depositors making good, this shocking breach of investors’ confidence.
The Authorities need to take into consideration the Miserable Plight of the Imperial Bank Depositors who have been reduced the “Status of Ultra Poverty “…with Every Passing Day Ushers in Despondency & Degradation in Our Vicious Society Where those who Commit Crimes Whether they be Economic Saboteurs or Using Brutal Force, both Using their Criminal Brains to Defraud & Fleece the Common Citizens of the Country with Ease ….as they are the “Untouchables” Freely Bribing their Way through the Echelons Of The Law.
When is this all Going to Stop?
Is there No Justice at all In Modern Day Kenya? Why are the Criminals Roaming Freely with Impunity…..Who are the God Fathers Offering them Sanctuary & Safe Haven to Further Indulge in their Immoral & Unethical Behaviour?
ARREST THE MAFIAS & GOONS & PUT THEM BEHIND BARS WITH NO MORE REPRIEVE TO CASH BAILS. CONFISCATE ALL THEIR PROPERTIES BUSINESS OR PERSONAL & FREEZE ALL THEIR ACCOUNTS & ATTACH ALL THEIR PROPERTIES WHETHER WITHIN THE COUNTRY OR OUTSIDE OUR BORDERS. THEY SHOULD PAY THROUGH THEIR NOSES.
HUMBLE & PASSIONATE APPEAL TO ALL THE COMMUNITY LEADER’S WHERE THESE MAFIAS & GOONS HAIL FROM. …TO STOP GIVING THEM UNDUE ATTENTION & PRIORITY & PLATFORM TO FURTHER SUBJUGATE THE COMMUNITY MEMBERS AS IF NOTHING HAS HAPPENED.
Kenya Insights as part of of our social good responsibility, enjoins the depositors in pursuit for justice which will result in getting back their money.
Public debt has been an issue of public discourse for centuries. The debate is not about to end anytime soon. With developing countries investing much more resources in public infrastructure, education and other social amenities, public debt is expected to become even a bigger point of discussion moving forward. Just before the March 4, 2013, General elections, Kenya for the first time, held a presidential debate. Uganda followed suit earlier on this year. From those debates, it is evident we are yet to start discussing ideas in our presidential debates. My guess, however, is that going forward, these discussions are going to tackle key issues affecting these emerging market economies, key among them the issue of Public debt.
To start us off, let us try to understand some key terms. Debt refers to a contractual obligation in which a party uses the counterparty’s money or any other valuable resource with the view of repaying it at a later date, with interest. People have been borrowing since time immemorial, and they are not about to stop anytime soon. As long as resources for satisfying human needs and wants are limited, we shall always consume something we do not currently own with intent to repay at a later date. Just like individuals, body corporate and governments too, borrow. Public debt is what a government owes to its lenders. Government/ Sovereign debt can be used synonymously with public debt. Public debt can either be domestic or foreign. The former involves borrowing from within a country’s borders and among its citizens while the latter involves borrowing from outside the country’s borders. It could be a loan from foreign nationals, foreign governments or even international financial institutions. Ordinarily, domestic debt is denominated in the local currency while foreign debt is likely to be denominated in a foreign currency. External debt, on the other hand, is the amount of money owed to foreign investors by both the government as well as the private sector.
Since the year 2013, Kenya’s public debt has been on an upward spiral. According to Keynesian Economics, there are two possible scenarios that would put a country’s debt on an upward trajectory; War and recession. Since war is unanticipated, it is usually not planned for adequately in the budget, and therefore in the event of war breaking out, the country is likely to start borrowing to fund the cost of the war. In a recession, the economy has slumped. Jobs are scarce, and demand for products within the economy dwindles. This reduces tax revenue that the government had anticipated and corporate profits plunge, leading to lower corporate taxes being availed to the government. In such a case, the government will operate on a budget deficit, which is, in fact, public debt. For the last four years, Kenya has neither had a war nor a recession. In fact, the Kenyan economy has grown enormously over the period, as H.E the president has persistently said.
Key Facts and Figures
As at 2013, Kenya’s debt ceiling was Ksh. 800 billion. That same year, Parliament in its wisdom or lack thereof raised this ceiling by 500 basis points. We ended the year with a debt ceiling of Ksh. 1.2 Trillion. By the end of 2014, Parliament had more than doubled our debt ceiling. It now stood at Ksh. 2.5 Trillion.This figure was higher than our budget for the financial year 2014/2015 which stood at Ksh. 1.7 trillion. Kenya Debt to GDP ratio has grown from below 30% in 2012 to currently stand at 49.7%, 4.97 points above the treasury’s benchmark.
Is Debt Bad?
In life, nothing is bad. Similarly, nothing is good in absolute terms. What matters is a person’s perspective. In the corporate world, most capital projects are undertaken through use of debts. Most individuals develop themselves by using debt. The government too can make enormous economic progress through the use of debt. In the corporate world, you will rarely find a company that operates on 100% equity. In fact, theoretically, the most valuable firm would be the one that is 100% leveraged. This is because, interest expense as a cost of capital, is a member of an exclusive club called “allowable tax deductions” To illustrate, let’s assume we have Firms A and B. A’s capital structure is 100% Equity while B’s capital structure is 100% debt. If these two companies make the same earnings before interest and tax, firm B will end up paying the lesser tax. Equity, as a cost of capital, is expensive. In practice, however, strong B does not exist. And if it did, it would have a very high risk compared to A. What companies therefore do, is to find a balanced mix between equity and debt. They get a debt that will enable them to enjoy tax benefits while not unnecessarily raising their risk profile. Finding the right balance is what governments should look at while borrowing.
Measuring a country’s public debt
There are various ways that can be used to judge whether a country’s debt is healthy or moving in the wrong direction. This article will attempt to look at Kenya’s sovereign debt using two approaches. The first method, which is preferred by most researchers, is to measure debt as a percentage of GDP. There is no rule of the thumb here. However, the world bank looks at it from two angles; developed economies and emerging market economies. According to the world bank, an extended debt to GDP ratio of above 77% drags economic growth. In fact, it states that for every additional point above the 77% mark, the country loses 1.7% in economic growth. For emerging market economies such as Kenya, the ratio should not exceed 64%. Any figure above that slows economic growth by 2% each year. As a matter of policy, the Kenyan treasury has set its target Debt: GDP ratio as 45%. This is 19 percentage points lower than what the World Bank considers to be the benchmark. To this, end one must appreciate the government’s proactiveness. 19 percentage points is a field, wide enough to play all manner of games.
The second approach that can be used to measure a country’s debt is to look at it about Government revenues. This measure gives you a rough figure of how long it would take for the government to pay its debts if it were to use its ordinary revenue to pay for its debts. The current debt for our country stands at Ksh. 3.2 trillion. The government, on average generates Ksh. 100 billion every month. If we were to use our tax revenues to pay our debts exclusively, it would take us 32 months only! This is, of course, wishful thinking.
Is Kenya headed in the right direction?
There is no simple answer to this question. As alluded to earlier, it is evident we cannot explain our growing debt using Keynesian Economics. However, in a growing economy, the following variables are expected to be on an upward spiral as well. They include population, revenues, expenditure among others. To cater for the increasing need to provide service to the growing public, the government will need to dig deeper into its pocket. At this point, debt is the only option. Unlike in private sector budgeting where expenditure is based on revenue, in public financial management, revenue is based on expenditure. The government comes up with an expenditure plan, before creating revenues. This is why most governments operate deficit budgets.
It is tough to answer the above question. The answer depends on who you ask. I know of a particular person who when asked about our high Debt: GDP, answers by stating that the USA’S Debt: GDP is at 106%.
“This is more than double our own; we should not worry.” He concludes.
France is at 116%, and Japan is at 228%. Bahama’s at only 6%. So if indeed Debt: GDP meant much, Bahama’s would be the most financially stable country in the world. This was as at 2015. Greece closed the year 2015 at 188%. We all know where Greece is, economically speaking.
The above argument is simplistic. It does not take into consideration the individual components of that debt.
Public debt is composed of domestic debt and foreign debt. A large chunk of the US debts are owed to its citizen, and even those owed to foreigners are mostly dollar-denominated thereby eliminating the foreign exchange risk. If bad comes to worse, the FED can just print more dollars to repay its debts. Conversely, as at August 2015, 51.9% of our public debt was external. The risk associated with the foreign debt is that it is exposed to foreign exchange fluctuations, meaning if the shilling were to fall, we would spend more money to pay the debt than we had anticipated. Of course, the government can still hedge against this exposure through the use of derivatives, such as interest rate swaps. However, such derivatives also come at a cost. Japan has the same case as the USA, most of its debts are owed to its own citizens. So, our Debt to GDP ratio should not blind us.
In conclusion, it is not easy to determine if our public debt is sustainable or not, however, if you try to find ou the answer, here is my advice: Borrowing for the purpose of incurring recurrent expenditure is financial illiteracy unless you are in a financial crisis. Secondly, borrowing to loot, in the name of infrastructure development, and borrowing to invest in white elephants like the SGR, is not sustainable.
Finally, it is Adam Smith who once said,
“What can be added to the happiness of a man who is in health, out of debt, and has a clear conscience?”
The writer writes to inform.
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Disclaimer: This article expresses the author’s opinion only. The views and opinions expressed here do not necessarily represent those of Kenya Insights or its Editors. We welcome opinion and views on topical issues. Email:[email protected]
www.pcmakokhasays.wordpress.com.
The frontier market of Kenya isn’t often on U.S. or European investors’ radar. It should be. It offers a timely reminder of financial markets’ complacency about the risk of populism; and the attractiveness of bashing banks to win votes.
East Africa’s most advanced economy has introduced a law setting a cap on commercial lending rates and a floor on deposit payout rates, an instant squeeze on margins that sent shares of Kenyan banks to their lowest in years. Investors were clearly unprepared for a measure designed to make banks poorer — or less greedy, depending on your point of view — in the face of what Kenyan President Uhuru Kenyatta described as ordinary citizens’ frustrations about the cost of credit and earnings from deposits.
Kenya Crush
Bank stocks have plunged since the announcement of a law to cap lending interest rates
Source: Bloomberg
There’s no denying Kenyan banks make rich returns. The country’s largest bank by assets, KCB, has a return on equity of 24.7 percent, according to Bloomberg data, while rivals Cooperative Bank and Equity Group are on 24.5 percent and 26.9 percent respectively. That’s not just leagues ahead of the 5-7 percent ROE at Europe’s biggest banks, it beats the 15-18 percent at South Africa’s top lenders. Market concentration may have something to do with it: Kenya’s seven biggest lenders (there are about 43 in total) hold 80 percent of the banking system’s cash.
But capping interest rates risks damaging the Kenyan economy and stunting credit growth, a danger not lost on officials at the country’s central bank and finance ministry, who opposed the measure. If banks stop catering to anyone but the safest credit risk, it may encourage shadow banks or dodgy lenders to step in. If smaller banks find it harder to make ends meet, they may get bought up, making those dominant banks even bigger. And the new loan cap, at 4 percentage points above the base central bank rate, sets a potentially “unreasonable” ceiling for Kenya’s risk premium, according to investment firm Cytonn.
So why take such a chance? Well, next year’s election and a bank-bashing law may be just the ticket to win votes. Some analysts reckon it’s a purely populist move.
Yet the sell-off of Kenyan bank stocks over the past month suggests markets weren’t adequately prepared for this risk, with the chorus of credible dissenting voices perhaps lulling investors. And while it’s easy to dismiss this as the kind of problem specific to emerging markets, there are echoes of the anti-elite vibe in Europe and the U.S.
Championing the banks, in particular, isn’t much of a vote winner. The U.S. election has put the restoration of Glass-Steagall back on the table, with Republicans calling for big banks to be broken up. British chancellor Philip Hammond is trying to put a protective arm around the City of London by exploring continued access to Europe’s single market, but he’s clashing with the crowd-pleasing instincts of the “three Brexiteers”, Boris Johnson, Liam Fox and David Davis.
There’s still hope that pragmatism will prevail. Calls for a restoration of Glass-Steagall look like posturing, while Moody’s reckons that even if the U.K. quit the single market, its finance firms could probably still do plenty of business in the EU.
Yet the Kenya experience shows the potential for nasty surprises in a populist age, whether self-harming or not. Don’t forget that Brexit itself caught investors on the hop.
As the dust settles on the implementation of new laws on loans and deposits interest rates, the focus is now shifting towards areas that may not have been addressed explicitly or sufficient in the law, that has received praises from the mwananchi and sharp criticism from economists on its long-term effect on the economy, and that’s the Mobile money space.
Since a mid-last week, M-Shwari (a product of CBA and Safaricom) has come under attack from the Consumers Federation of Kenya (COFEK) as well as competitors, who claim that the product should be subjected to the Kenya Banking (Amendment) Act, 2016.
COFEK argued, “The law is clear that it applies to all loans. Whether offered directly or indirectly, any loan from a licensee of the Central Bank of Kenya via an agent and or mobile phone or any other technology is not exempt from the 4 per cent over and above the Central Bank Rate.” Launched in November 2012, Mswari set the pace for mobile loans attarcting others.
In seeking expert analysis on the Mshwari facts as policy of Kenya Insights, material available indicate that, there is no interest levied on M-Shwari loans. The only cost to the borrower is a one-off facilitation fee of 7.5%, charged at disbursement. Time value of money: Tenor of M-Shwari loans is 30 days only, as compared to competing products have longer tenors.
Interest and Fees/Charges are two different types of revenue.
Facility fees in the case for M-Shwari is return the lender earns from the activity of arranging credit. Fees are charged as either absolute amounts or relative amounts. Given the short-term nature of the credit (30 days) and the fact that a customer can payback sooner (at any time within the 30 days), it is more appropriate to levy a fee over interest.
Interest on the other hand follows the concept of time value of money and earns the lender an increasing return over time, for as long as the loan is outstanding. As such, interest is quoted per defined period either as per annum (over 12 months) or per month, etc. M-Shwari loans are levied a fee against the amount disbursed, irrespective of the repayment duration.
If COFEK’s position was to carry the day, we are likely to witness the following scenarios; Erosion of gains in Financial Inclusion- this is because it is the low income earners who usually use M-Shwari on a regular basis for economic gain. If M-Shwari is not viable for business, the bank may be forced to do away with it thereby reversing the gains that have positioned Kenya where it is.
Experts are warning that we would be facing an Economic slowdown/ exclusion- Many traders will be unable to access the more expensive lending products leading to the death of a number of businesses. High cost of credit- Alternative products are more expensive and this includes loan sharks. Failure to repay the loan on time, has very adverse repercussions. Tax Implications- CBA pays taxes on income from M-Shwari. Loan sharks and other competing products do not pay taxes.
Among these areas is mobile savings and lending, as well as discussions on who will lead in the efforts to amend the law and what will be reviewed therein. As the President said when signing the law, “We will implement the new law, noting the difficulties that it would present, which include credit becoming unavailable to some consumers and the possible emergence of unregulated informal and exploitative lending mechanisms.” It is not in doubt that the cracks are already emerging.
Quick Statistics
• Over 420,000 loan applications are made every day
• Over 70,000 loans are processed daily on M-Shwari.
• Majority of the loans are repaid within 30 days.
• Average loan amount is Kes. 3,200.
• Current NPL is by far, much lower by average than the ones you would find in commercial banks
• CBA has increased the interest rate on deposits made to M-Shwari accounts- in line with The Banking (Amendment) Act, 2016
• Close to 16 million customers on M-Shwari have made CBA the biggest bank by customer numbers
• Many small businessmen use M-Shwari as their working capital- with some borrowing and repaying up to 7 times a day.
• CBA has similar propositions to M-Shwari the E.A. region and plans are afoot to extend the footprint to other markets in the African continent. In Tanzania, CBA partners with Vodacom to offer M-Pawa (5 million customers), whilst in Uganda the bank has partnered with MTN to offer the recently launched MoKash.
Like in the media, who opposed digital migration, the banking players in Kenya have also been hesitant on adopting the new changes so it really shouldn’t come as a surprise when they pull dark innuendos but one thing we can’t deny is the fact that mobile loans has been to the advantage of the mwananchi who can now sit at the comfort of their homes and get a quick loan at the touch of a button a break from the traditional tedious ordeal in securing a loan from the Banks.
Refer to the whistle blower report we published previously regarding the scandals at the East African Development Bank and the call to request the Director General Vivienne Yeda to step aside after 7 years of oppressive leadership at the Bank. Following the whistle Blowers dossier received by board members early June, Senior managers met with the Board members on the 15th July 2016 and were able to substantiate with evidence the details published about Vivienne Yeda, the Director General of EADB as true.
Despite the board members receiving collaborative evidence that what was written about Vivienne Yeda was the truth, Vivienne has been left to continue with her work as if nothing happened. More shocking details have emerged on how Vivienne Yeda has misappropriated the Bank funds in a number of ways as we shall explain in this article. Staff members are calling on the member states of the East African Development Bank including Kenya, Rwanda, Uganda and Tanzania, to commission their respective auditor general’s offices to carry out an investigation on the actions of Vivienne Yeda and how she has squandered tax payer’s money. That she should be asked to step aside for the period of the investigations in order not to interfere with the investigations team. Despite the board members confirming the shocking revelations as true, they have done nothing to interdict her. You will know why no action has been taken in this article.
During the interview between the senior managers and the board members, the Directors were shocked to hear that staff never receive end of year bonuses even when the board has annually approved a budget of USD 65,000 annually for staff end of year bonuses. Vivienne has been drawing the entire USD 65,000 which ends up on her personal account. She normally channels such monies through the staff payroll which is managed by Deloitte to her personal account.
Such money is usually transferred to her account either at end of the year or beginning of the year. Investigations can be carried out at Deloitte to confirm the staff salary figures sent to them during these periods starting 2013/2014, 2014/2015 and 2014/2015. Staff members are still in shock that the Director General has been embezzling money meant for staff bonuses. Vivienne has also negotiated her salary increment with the board twice during her 7 years tenor at the helm of the Bank. The board approved both increments; one in the middle of her first five years and the second at the time when she was renewing her contract. Much as the board was shocked to learn that it’s only her who gets salary increments at the Bank.
The fact that she is the DG, Head of legal and Company secretary, she normally alters board minutes to indicate that he salary increment was to take effect one year back for the first increment and a couple of months back for the second increment. Looking at the staff payroll for the periods when her salary was increased, one would notice large sums of money which were channeled through the payroll to her account. Other such dubious payments have been taken out of the Bank to her account through the payroll. She uses the staff payroll to channel funds to her account because she knows the payroll is never scrutinized.
The former finance manager who resigned at the end of May this year was never allowed to look at the payroll because he would question such payments. We doubt that the board would approve bonuses and salary increments to only one person in the Bank. Red peppernews paper in Uganda and as per the whistle blower dozzier, informed you in their article of 13th July 2016 that staff don’t receive any form of motivation either through training and career enhancement or travel and exposure even when funds have been set aside for these purposes.
We confirm that unlike other previuos Director Generals, the Bank pays Vivienne both the profident fund, which she recieves annually and contributes towards her pension which she is supposed to receive when she leaves the services of the Bank. The annual provident fund payment is usually made directly to her account through the Bank’s SWIFT payment system and this appears in the general legder. The USD 65,000 mentioned above can not be her provident fund since it is paid out through the staff payroll. Towards the end of July 2016 even after the board had sat to discuss the whistle blowers report, she went a head to request HR to pay her pension through the end of July staff payroll. Pension is supposed to be paid when a staff member has left the services of the Bank.
But she wanted her pension paid out with the July salary. But after HR had consulted with the senior advisor to the DG, Mr. George Aaron, they declined to pay the pension to her because this would have been iregular. During last year, Vivienne requested finance department to pay her USD 175,000 calling it pension/provident fund in arrears which is fradulent. The finance department declined to pay the money to her account because she failed to provide clear documentation for the money. This needs to be investigated.
In 2014, the Bank was rated by AADFI as the best DFI in Africa.
This was after she had bribed the rating team to give her the top position. Much as one could say, this was good for the Bank’s image,it is not sustainable. The image of the Bank should be enhanced by improving gorvernance, systems, policies and structures in the Bank. At most, the rating agencies coud have been bribed when she is also doing much to improve the Bank. But this has not happened.
She has boosted of posting profits for the Bank, but this is all not true. A lot can be discovered in this area but we shall bring out on example when she has fradulently reported profits which is not real. The Bank is supposed to value all its assets annually and the valuation figures taken into consideration when reporting profits. The high the value of assets the higher the profits reports. Recently a firm was hired to value the Bank assets in Kenya, Uganda and Tanzania. The firm carried out the valuatioin exercise in all the three countries and submitted the reports to the Bank. She was okay with the value of assets in Kenya and Uganda. Because the Bank’s assets in Tanzania returned a lower real market value than she had hoped for, she asked the firm to inflate the figures of the value of assets in Tanzania, but the firm refused. she instead hired another firm which re-valued the assets in Tanzania to give them a value of her choice.
If she had used the real market value as reported by the first firm, it would have reduced the amount of profits reported. But the fact that the second firm hired agreed to her demands, they reported a value which she wanted, and as thus, this helped her to report an increased amount of profits. The Bank money twice for the same service and the results of the assignment were compromised. In the June dossier, we reported that she reported a wrong Non-performing loans percentage to the board of 0.83% instead of 5% during the end of Feb 2016 boarding meeting held in Nairobi. This was to avoid reporting on some Kenyan projects like DARI, Abarderes and Benvar Estates which were non-performing.
Non-performing loans are supposed to be provided for and if the mentioned projects had been reported and provided for, they would erode most of the profits she was reporting to the board. These two examples show Vivienne has been reporting fraudulent profits to the board to give them the impression that the Bank is performing well, when its actually not performing that much and not growing at the same time. This is fraudulent and false reporting to the board and should be investigated and stopped. So many other lies have been told to the board. Believe it or not, this is not sustainable.
NEW YORK, NY – SEPTEMBER 22: Director General of East African Development Bank Vivienne Yeda speaks during the 30th Annual Awards Gala hosted by The Africa-America Institute at Gotham Hall on September 22, 2014 in New York City. (Photo by Bennett Raglin/Getty Images for The African-American Institute)
During the board which sat on the 14th July 2016, Vivienne falsified the portfolio report on the number and amount of projects approved and disbursed between January to July 2016. She reported some of the projects which were approved and disbursed in Q4 of 2015 as projects which were approved and disbursed in 2016 to confuse the board members since the previous dozzier had reported that only two projects had been approved for the entire bank between Jan to June 2016. All these lies are to show the board that she is performing when in real sense there are huge issues within the Bank. This can be verified with the Portfolio management unit in Bank, the chief internal auditor and the finance manager.
Board members were also shocked to learn that renovation of the Head office building on plot 4 Nile avenue cost the Bank (and the tax payer of East Africa) USD 6.6 million. The board did not know that the cost had escalated to this level because she did not seek board approval for the entire sum in one go. She presented the renovations budgets to the board in piecemeal. We believe USD 6.6 million could have put up a brand new building the size of the EADB head office and more. Of concern is that the contractors and the project managers who implemented the renovations were single sourced and the contracts negotiated and approved by herself. She has deliberately refused to put in place a procurement committee and at the same time the bank does not have a procurement expert to support these very expensive procurement contracts. We request that an audit in the processes and procedures of procuring and negotiating the renovations contract be investigated.
Experts can be called in to value the cost of the renovations to confirm that the work actually cost USD 6.6 million and that there was value for tax payers money. The renovations have gone on since 2012 until todate. The fact that the implementation team comprised her friends (project managers and architects who were handpicked from Kenya using a single sourcing method to manage the project), we believe the value of the contracts was inflated so as to give her kickbacks.
The same project managers and architects have been building a hotel and apartments for her in one of the national parks in Kenya which has just been completed. The construction of her hotel and apartments progressed at the same time with the office renovations and it is believed that money for some of the inflated office renovation bills went to her hotel construction.
Another building that has been renovated by the Bank whose renovation costs, value for money and the procedures followed to procure the service providers are being challenged, is a block of apartments commonly referred to as “block 4” in Naguru. The cost of USD 6.6 million mentioned above does not include the renovation costs for this block of apartments. This should also be investigated.
Senior managers have been shocked to hear that the information they provided to the board members confirming the allegations, even after the board chairman had assured managers that they were protected and therefore should not fear to say the truth, has licked to Vivienne including which manager mentioned what. Managers wonder why the board went on to ask the senior managers to expose themselves by revealing the truth, if they knew they were not going to take any action.
The result of this has exposed some managers to harassment and threats from Vivienne and her machinery. Some of these managers have received threatening phone calls indicating that something bad will happen to them and their families if they don’t stop revealing information about Vivienne Yeda.
The first whistle blower report and the red pepper article of 13th July reported that 99% of all international travels at the Bank are undertaken by Vivienne Yeda alone.
An analysis carried on the costs associated with her travels between 2013 and to date reveal that she spends not less than USD 135,000 per year on her travel related costs alone. This is a lot of money and therefore value for this money needs to be investigated.
As per the whistle blowers reported published in red pepper on the 13th July 2016, Vivienne Yeda refused to hire staff to fill all key vacant positions in the Bank and therefore heavily relies on the use of very expensive consultants who have cost the Bank a lot of money with no value for money. The Bank has a legal department with no lawyers at all. She single handedly sourced an international law firm called “Eversheds” based in London who have been doing the day to day legal work at the Bank. This law firm has todate cost the Bank USD 1.2 million to do work which would have ordinarily been done by the staff members in the legal department.
These colossal sums have been spent without a formal contract between EADB and Eversheds, (Atleast no staff member has seen the contract and the terms of engagement including the finance department that is always forced to prepare payments for such expenses. Noformal procurement procedures were followed and most importantly there is not value for money for the work this law firm has been hired to do for the Bank. It also emerged that Vivienne Yeda’s daughter who has been pursuing her studies in the UK worked at this law firm, raising question marks on the possible conflict of interest in giving this law firm huge sums of money. The work of eversheds, the procurement process and value for money should also be investigated.
The Bank received grants worth over USD 3 million from AfDB, DEG and KfW for various capacity building activities at the Bank. That fact that the Bank does not have a procurement committee and a procurement specialist; it becomes questionable how these huge contracts have been selected and awarded. Though for some grants especially from AfDB, the AfDB team got involved in the procurement of consultants though she still wanted to be fraudulent about the process. The fact that Vivienne Yeda single handedly approves the final bidders, to whom these consultancy contracts are awarded, raises several question marks. Some of the contracts cost over USD 900,000 per single consultancy contract.
The fact that key staff positions at the Bank are vacant due to the fact that several senior staff members have resigned because they could not continue working under such conditions. The capacity building interventions will not benefit the Bank much. For the Bank of less than 70 staff members, about 44 staff have resigned since 2012 todate. The systems and policies/operating guidelines being introduced in the Bank don’t add much value when the key users are not in their positions. In a letter written by African Development Bank after an audit they carried out at EADB in April 2016.
The report was addressed to Vivienne Yeda and signed by the Manager Portfolio Management Division atAfDB. The letter reads in part as an example “despite AfDB having given EADB guidance on procurement process for a credit cycle management consultancy firm, to undertake a credit management cycle documentation consultancy assignment at the Bank, Vivienne Yeda’s choice of the consulting firm to be selected was a Kenyan firm charging over USD 800,000 almost three times the price of the next candidate who charged below 300,000”. In AfDB’s opinion after reviewing the technical proposals and credentials of the other firms, the other two consultancy firms that had applied for the consultancy work were also well qualified to deliver the consultancy based on the terms of reference provided. It is possible that these consultancy contracts are inflated and the consultancy firms selected end up giving hefty kick backs to Vivienne Yeda. Most of the contracts with consultants and other service provider have been determined in this manner.
The African Development Bank audit report about EADB further reads in part, we quote “the AfDB officers who carried out the audit noted that, there were several bleaches regarding operational limits in treasury, bleaches in procurement guidelines, and non-compliance of policy in relation to credit approval of some of the high value transactions’. The report further read that “Management committee is effectively made of only the Director General (Vivienne Yeda) which we believe does not conform to best practice and does not exhibit good corporate governance”. These revelations make any one wonder why audit firms like KPMG who carries out quarterly audits at the bank for hefty sums of money have not been able to flag these weaknesses.
The Bank has an internal audit department, but the fact that they have been very critical of how Vivienne conducts bank business (they have reported to the board several times despite the board not taking any serious actions), she chose to frustrate them by not bothering about their reports. She instead chose to duplicate their role by hiring KPMG to carry out quarterly audit reviews at the Bank. Despite the fact that KPMG’s reports indicate that there are no issues at all at the Bank, they have cost the Bank and the tax payers money USD 382,000. We believe she retained KPMG to cover up her loot and since KPMG is looked at as a credible audit firm, the board members would not question their reports but also dismiss the issues raised by the internal audit. The annual financial audit is carried out by PWC, much as we are surprised that they have also not been able to raise a red flag (not even noticing that lots of money is chanelled through Vivienne Yeda’s account through the payroll, among other flaws) of the appalling situation at the Bank.
Vivienne Apopo signing a deal
When the whistle blower report which red pepper published on the 13th July 2016 first came out, Vivienne Yeda hired KPMG Kenya to come and investigate the source of the whistle blower dossier. It was surprising to see that a firm of KPMG’s caliber could accept to investigate the origin of the report as opposed to investigating the facts contained in the report. We believe they have been compromised by money. KPMG came into the EADB offices on the night of 23rd June 2016 in the absence of staff members and hacked into computers of all staff members to try and find out who might have originated the dossier but also to try and delete some of the documents that might be incriminating to Ms. Yeda. The fact that they copied information from hard discs of all staff computers, it is evident that all bank information is now in the hands of those individuals who took the information under the directive of Vivienne Yeda. KPMG went ahead to isolate some managers who were interrogated on 4th July 2016 and their statements recorded to try and find the originator of the dossier. KPMG Kenya has issued an invoice for USD 22,000 to be paid by the Bank (without any engagement letter and terms of reference) for investigating the whistle blower. This is not acceptable. She has hired full times services of an ex-police detective (a one Egessa) to try and investigate staff in efforts to identify the person who originated the dossier. This police detective together with one of the law firms which the Bank uses regularly have helped her to file a complaint which she has taken to Interpol asking them to give her additional protection (in disguise that her life is in danger) but also to give her permission to get staff phone records and also tap staff phone conversations.
This is not acceptable. She has hired full times services of an ex-police detective (a one Egessa) to try and investigate staff in efforts to identify the person who originated the dossier. This police detective together with one of the law firms which the Bank uses regularly have helped her to file a complaint which she has taken to Interpol asking them to give her additional protection (in disguise that her life is in danger) but also to give her permission to get staff phone records and also tap staff phone conversations.
The ex-police detective moves around office with a tape recorder recording staff conversation.
The reason it is being proposed that each EADB member state should commission their auditor general’s office to investigate the massive abuse of office and misuse of tax payers money at the regional Bank is that, each member state (Kenya, Rwanda, Uganda and Tanzania) contribute USD 4.5 million annually as their capital contribution towards the lending activities of the Bank. In other words, Yeda has at her disposal USD 18 million contributed annually by the member states from tax payers money in the hope that the Bank would lend out the money to befitting projects to promote social economic development among the member states.Seeing how the board has chosen to protect someone who is using tax payer’s money in this manner, one wonders why the governments should not channel this money in other useful projects if the Bank cannot get good leadership to enhance the mandate of the Bank. EADB should have been much bigger and visible that it is today if the Board had agreed to change the top leadership at the Bank.
This article reveals some shocking details as to why, despite all the information out there concerning Yeda’s abuse of power and office, she has remained in her office intact and untouchable. The Board members received the whistle blower dossier at the beginning of June 2016 as confirmed by Mr. Muhakanizi during the red pepper interview leading to the publication of 13th July 2016. The same was also confirmed by the chairman of the board on the 15th July 2016 when meeting senior managers of the Bank.
Anyone reading this would have expected the board to have taken immediate action (asking Vivienne to step aside for investigations jointly commissioned by the Bank member states to take place) but this has not happened. Usually under such circumstances, the board would convene urgently to hear from both sides, which they did (board sat one and a half months after they received the report). The board would recommend to the Governing Council of the Bank which comprises of the Ministers of Finance of the Bank Member states who have the powers to sack the Director General according to the charter that governs the Bank. 75% of the Governing board members must vote to sack her if she is to be fired.
Two weeks after the board confirming the allegations, the Director General is still going on with her work at the Bank as usual, and renovations and hiring of consultants is still going on. This procedure should naturally not apply under situations where it is clear that Bank funds have been misappropriated? Is has emerged that the board has remained divided on whether they recommend to terminate her contract or not. As opposed to normal practices in other financial institutions, EADB Board members are allowed to borrow from their own Bank (purely against good corporate governance practices). As earlier reported by the whistle blower and published in the 13th July red pepper, EADB board members borrow hefty sums of money from the Bank to run their personal businesses. Much as Mr. Muhakanizi in his interview with red pepper denied any board member applying for any loans from the Bank, we confirm that, in 2014 the Bank approved a loan of USD 4 million to Mr. Muhakanizi through a real estatescompany called Reunion Estates Ltd. The Bank approved a loan of USD 500,000 for another board member from Kenya called Mr. Francis Karuiru through his company “Edron Communications Ltd’ based in Kenya. Because of the above, board members have been compromised and therefore don’t want to make a firm recommendation to terminate the services of the mighty Yeda.
This being tax payers money, we call upon Governments to take action. The Ministers also don’t get detailed information from board members (who are their permanent secretaries) regarding the affairs at the Bank because of their vested interests which is purely a conflict of interest.
We also report that the Bank, its staff and assets are protected under diplomatic immunity. This means that Yeda and the Bank cannot be sued in local courts of law. This could also explain why she also went against the laws of the EAC member states that protects whistle blowers setting clear procedures to be followed when a whistle blower report comes out. It’s because of this immunity that she has had easy access to Interpol to start investigating who the author of the dossier could be so that the author is punished instead of the accused. A cover letter forwarding the whistle blowers report to the IGG and requesting them to launch an investigation into the abuse of office is attached to this dozzier, but because of the Bank’s immunity, it seems the IGG’s office lacks the Mandate to investigate the Director General.
We believe the immunity status was among others aimed at protecting the Bank and the tax payer’s money. Right now, the Bank’s diplomatic immunity is being used to protect an individual who has abused tax payer’s money. The rights of staff members are being infringed upon the fact that their phone conversations are being tapped; their phone records have been printed and investigated. These staff members are innocent and suffering because one person has bribed her way into impunity.
The auditor General offices among the Bank member states are called upon to investigate the allegations so that Vivienne can account for her actions. This will help retsorestability and growth at this regional Bank.
A good number of people do not know Vivienne Apopo but amongst the banking fraternity, she’s one of the most powerful figures of the industry in the region. Vivienne Yeda Apopo is a Kenyan banker and business attorney. She is the current Director General of East African Development Bank(EADB).She assumed that position on 15 January 2009. She also currently serves as a member of the Board of Directors of the Central Bank of Kenya, since 14 March 2011.
The East African Development Bank (EADB) is a development finance institution with the objective of promoting development in the member countries of the East African Community. Governments of Kenya, Rwanda, Tanzania and Uganda both have stakes in the Bank. Coincidentally, African Development Bank and Commercial Bank of Africa which is affiliated to President Uhuru also have stakes in the Estimated USD381M assets valued bank.
Vivienne was posed by a section of ruling elite to succeed Njunguna Ndung’u as the Central Bank Of Kenya Governor since they viewed her as a compliant to innuendos that they might pursue. Her bid however didn’t materialize. However, from information within Kenya Insights hold, Apopo’s efforts did materialize elsewhere, creating a corruption and impunity den at EADB.
The lady boss who is a darling to the President given that he holds stakes in EADB, boasts of being untouchable making her run the institution as she wishes knowing no repercussion would befall her in line.
Distressed staff members wrote a petition to the Board of Governors of EADB detailing gross misconduct but Kenya Insights is informed by insiders that she used her influence to silence and water down the petition forcing the staff to seek other alternatives including writing a letter directly to the President who happens to be a double shareholder as GoK and CBA.
The petition from EADB staff members below, details the gritty details of how Apopo is slowly but steadily running down one of the highly valued Banks in the region something that should worry all stakeholders, majorly the individual governments.
We, a group of staff at EADB write to express our concern over the manner in which the Bank is being run under the leadership of Ms. Vivienne Yeda Apopo. We bring to the attention of the concerned parties requesting that her services as Director General at EADB should be terminated immediately for several reasons some of which we will explain below; Despite the fact that the Bank went through a restructuring process in 2011, the loan book is not growing.
The DG is hesitant to grow the business. Much as she might have been good at cleaning up the book and recovering the written off loan (which account for a bigger percentage of the profit the bank has been reporting) she does not have the will and capacity to grow the loan book. The business teams within the Bank have brought in several viable projects in the pipeline but she never wants to approve them or recommend them to the board. Some of these projects have very high social and economic development impacts and are financially viable but she has declined most of them.
The Bank is currently highly capitalized with regular share capital contributions from the member states. The bank has also been able to attract several lines of credits from the likes of African Development Bank, the European Investment Bank, BADEA, OPEC, etc. However out of the Bank total assets of USD 381 million, only USD 165 million has been utilized to lend to projects. The Balance of USD 216 million has been placed as short term deposits in commercial banks.
To confirm that the current DG does not have the interest or capacity to grow this strategic Bank for the region, if you check through the records at the Bank, you will find that over the last 3 years, projects valued at over USD 200 million, (most of which are viable) have been declined and removed from the Bank pipeline at her instructions. Countries like Rwanda and Tanzania have financed less than 5 projects each in the last five years. Yet these countries have a pipeline that she declines, even when the country units and the projects committee of the Bank have recommended them for financing. Uganda and Kenya have equally suffered the same. Countries like Rwanda and Tanzania also subscribe to share capital from tax payers money and yet they are not fully benefiting from the Bank. Her lack of interest to grow the Bank has become worse in that since we started this year of
2016, only two projects in the entire Bank have been presented to the board for approval and we still don’t have projects that she has cleared for detailed appraisal as candidate for the next board approval. We are likely to see no business at all this year much as the Bank still receives viable projects that require funding and at the same time the Bank is well capitalized. The two projects which were approved early this year are far away from being disbursed due to a very slow legal documentation process caused by the reasons we shall highlight below.
Because the Bank is not lending and yet it is well capitalized (some of the lines of credits are used to reimburse some of the projects which have already been funded/disbursed which is fraudulent) the Bank profits have started dropping as evidenced in 2015, which situation is likely to continue because the high profits recorded in the previous years were mainly from recoveries of loans previously written off. These written off projects have fully paid up and at the same time the book is not growing because we are not lending. Coupled with some bad projects which she has single handedly pushed to the board even when the rest of the teams in the Bank have recommended not to proceed (Like Dari Ltd in Kenya) the bank will soon find its self in the situation it was in about 8 years ago with no business, high NPL’s and with some court cases which might take the direction of blue line case.
Much as she declines a number of projects, she still accepts some projects in which she is deemed to have personal interest because some of them are at times not viable like the DARI we have just mentioned above. The Bank needs a new DG who will put systems and structures in place, empower and respect the structures to deliver. Otherwise the Bank is not visible at all in the region and we risk becoming irrelevant very soon.
List of EADB owners and stakes.
Out of all the projects approved by board in the last three years, projects worth over USD 150 million have never been disbursed and will never be disbursed. A few of these projects were declined or halted by the clients but over 80% of these projects were stopped by the DG. The clients got so frustrated and end up going to look for funding somewhere else. She does not want to grow the book and she ends up frustrating good projects. The Bank’s name in the market has been tainted partly because of this practice.
In the first place, she brings such projects to the board to show the board that she is working hard, but at the back of her mind, she is simply manipulating the board members to approve her other requests which have nothing to do with business. She did a lot of that to get the board to approve the several budgets for renovations of the office and residential bank houses, on top of using it as a lobby tool for the board to give her the current contract. We wonder why the board does not ask despite approving many projects, the book is not growing. Please note that all projects we bring to the board will have paid 1%
of the loan amount as appraisal fees. We are supposed to refund 75% of that 1% if we don’t disburse the project. However the appraisal fees refund process has been applied selectively. Clients known to her normally receive their refunds and those not known to her or the small ones never get their refunds. An example is, she refunded appraisal fees for the Rai Holdings group (a multimillion dollar company) but refused to refund for a small farmers organization called Igara Tea Growers. Over USD 500,000 remains un refunded to date much as these funds were part of the profits declared by Bank. Some of the clients have threatened to take the Bank to court if these monies are not refunded.
The Bank is currently experiencing serious governance issues with the current DG making all decisions by herself at all levels. She approves all payments even for buying coffee, she approved any project into the pipeline, she approves all term sheets, she approves all appraisal reports, etc. in other words the Bank is one a person show and if she is away, every thing comes to a stand still. Since she travels a lot and even when she has left any one in charge, that person can never approve or make any decision on anything without her express instructions (even if she is in Europe) which stalls so many activities at the Bank.
The Bank is supposed to have a staff structure comprised of the DG and other Directors/Head of Departments, among others. The Directors/Heads of departments would be running the day to day affairs of the Bank and leave her as the DG to make strategic decisions for the Bank. However the opposite is true. She manages each and every aspect of the Bank’s day to day operations which stifle activities and decision making at the Bank. For very many years now she has refused to fill most gaps in the organization structure which leaves her to run the bank as an individual would run a house hold. She has told some people that the EAC region does not have qualified people that can be recruited to run the Bank in those positions and yet other institutions have been able to recruit people from within the region.
Remember the Bank recruits very highly qualified and skilled staff who once they get into the bank, she makes them idle. She is scared of being challenged and the reason she makes all decisions by her self. This means that all existing structures and activities of the Bank must wait for her approval before anything moves, however small the decision to make might be. We invite the board members to come and interact with staff members in the absence of the DG, they will be shocked at what mess the DG has put this Bank into. In all her life as DG at EADB, she has never held a single management meeting with the senior managers in the Bank and not even with the country managers responsible for the different countries. She has never addressed staff, she never
participates in staff end of year parties, and therefore no body in the Bank knows her vision and strategy for the Bank. Which leaves every one guessing which direction the Bank will take apart from herself? Since she solely determines which projects the Bank should fund, the basis of which is some times is not project viability, rather personal interest and whether she knows the project owners personally or not.
For sure the Bank can not do business in that way. The Bank is currently managing a line of credit from KfW of Euros 8 million with a Euros 1 million for Technical assistance. The financial institutions who benefited from this line of credit include; Dfcu bank (Euro 5 million), Ecobank Uganda (Euros 1.5 million) and Finance Trust bank (Euro 1.5 million). The selection of Dfcu bank and Ecobank were influenced by the DG personally. The fund is meant for rural enterprises but Ecobank has only 4 branches out of Kampala and may not effectively utilize the funds.
Funds were disbursed to Dfcu in July 2015 but todate they have on lent less than 10% of the funds. Ecobank has held the funds for close 6 months now and they have not lent even a single coin. The staff had preferred the smaller banks like Finance Trust bank who have to date lent out over 90% of the funds we disbursed. The smaller banks whose main mandate is to lend in rural areas are more effective for this kind of fund as longer as they are regulated by the central bank. The DG insists on putting in place tough conditions which weed out the smaller banks in the process. The IPC consultants hire by KfW are currently in the bank and can confirm this information. This is an example to show bad leadership and how the DG wants to manage each and every process and decision in the bank. Of course we would propose that KfW puts a halt to the ongoing process for the new agribusiness line of credit until the board has sorted out leadership issues at the Bank otherwise the funds may not meet the objective for which it is meant to achieve.
The permanent secretary Ministry of Finance sits on the board of the Bank and therefore KfW could make sure the board acts through the Ministry of finance. The Bank had a strategy 2010 to 2015, but this strategy changed several times depending on who she was presenting it to. Staff members were not allowed access to the strategy and as a result, if you randomly talked to most staff especially managers and below, they don’t know which direction the Bank is heading. We proposed several times to her that the Bank should hold meetings with all staff to cascade the strategy down wards but she refused all that. Right now the Bank is supposed to be developing a strategy for 2016 to 2020, however she hired a consultant from the UK who is paid very expensively to develop a strategy alone. This activity has not involved other staff and therefore the draft strategy is only
known to her and the consultant. We believe she is preparing the strategy document to simply meet the requirements of the board members and other external parties. However like many other documents prepared by consultants it will never be cascaded widely within the Bank. This can also be confirmed by the IPC consultants who were hired as part of the KfW line of credit technical assistance. So most likely business will continue as usual. She sets targets for countries arbitrarily without putting in place resources to help counties achieve these targets.
The DG does not even hold the quarterly and annual appraisal meetings with the managers who report directly to her. She has delegated this role to a HR consultancy firm (adept systems/Sally Mukwana based in Nairobi) which firm does not appreciate the day today challenges the staff go through in order to do their jobs. Even when the consultant is told of the challenges the staff go through dealing with a DG who can not communicate properly with staff, despises every one, they can’t change how she operates because they still want to be hired for the job.
The HR consultant resorts to intimidating staff and sometimes recommending some of them for firing or not renewing their contracts simply based on imagination. The internal HR unit has been reduced to clerks and can never advise the DG and she takes in their advice. The staff members are de-motivated and frustrated which ends up in many staff members simply resigning and moving on. If some one cares to cross check this information, get to the Bank records and you will be surprised at how many staff have resigned in the last 4 years for such a small organization. This destabilizes the Bank since staff members that are critical to the Bank and have gained understanding of how the bank operates, normally leave the Bank.
The Bank needs stability and growth. But this can not and will never be achieved under the current leadership of our DG. Adept systems consultancy firm (Sally Mukwana) has continuously been retained by the Bank for over four years now, initially to support the recruitment process but after failing to recruit staff. They have ended up duplicating roles of the HR department on an ongoing basis and yet the HR manager and her staff are left idle. The consultancy firm has cost the Bank close to USD 500,000 over time doing assignments which should have been implemented by the HR department if we had a DG who respects her staff.
Much as the Bank might have required short term HR consultancies, they should never have taken on lots of the roles played by the HR unit on a long term basis. The HR consultants have even on several occasions gone to present to the board, when it should have been the HR manager doing this. As a result these permanent consultants cost the Bank a lot of money in air tickets, 5 star hotel accommodation for long periods and consultancy fees. This is a waste of tax payer’s money and gross abuse of office by the DG who hires them.
Because she can not manage people and she never wants to implement recommendations from a professional HR manager, she retains these HR consultants to manage and intimidate staff on her behalf.
known to her and the consultant. We believe she is preparing the strategy document to simply meet the requirements of the board members and other external parties. However like many other documents prepared by consultants it will never be cascaded widely within the Bank. This can also be confirmed by the IPC consultants who were hired as part of the KfW line of credit technical assistance. So most likely business will continue as usual.
She sets targets for countries arbitrarily without putting in place resources to help counties achieve these targets. The DG does not even hold the quarterly and annual appraisal meetings with the managers who report directly to her. She has delegated this role to a HR consultancy firm (adept systems/Sally Mukwana based in Nairobi) which firm does not appreciate the day today challenges the staff go through in order to do their jobs. Even when the consultant is told of the challenges the staff go through dealing with a DG who can not communicate properly with staff, despises every one, they can’t change how she operates because they still want to be hired for the job.
The HR consultant resorts to intimidating staff and sometimes recommending some of them for firing or not renewing their contracts simply based on imagination. The internal HR unit has been reduced to clerks and can never advise the DG and she takes in their advice. The staff members are de-motivated and frustrated which ends up in many staff members simply resigning and moving on. If some one cares to cross check this information, get to the Bank records and you will be surprised at how many staff have resigned in the last 4 years for such a small organization.
This destabilizes the Bank since staff members that are critical to the Bank and have gained understanding of how the bank operates, normally leave the Bank. The Bank needs stability and growth. But this can not and will never be achieved under the current leadership of our DG. Adept systems consultancy firm (Sally Mukwana) has continuously been retained by the Bank for over four years now, initially to support the recruitment process but after failing to recruit staff. They have ended up duplicating roles of the HR department on an ongoing basis and yet the HR manager and her staff are left idle. The consultancy firm has cost the Bank close to USD 500,000 over time doing assignments which should have been implemented by the HR department if we had a DG who respects her staff.
Much as the Bank might have required short term HR consultancies, they should never have taken on lots of the roles played by the HR unit on a long term basis. The HR consultants have even on several occasions gone to present to the board, when it should have been the HR manager doing this. As a result these permanent consultants cost the Bank a lot of money in air tickets, 5 star hotel accommodation for long periods and consultancy fees. This is a waste of tax payer’s money and gross abuse of office by the DG who hires them. Because she can not manage people and she never wants to implement recommendations from a professional HR manager, she retains these HR consultants to manage and intimidate staff on her behalf.
Of great concern is how she has handled the legal department in the Bank. The current DG was in the past years at the Bank as head of legal. Which roles she still duplicates up to today even when she is the DG. The legal department is very critical to the operations of the Bank but it has been crippled because of her. About 3 years ago, the bank had a stable and well experienced team of 4 lawyers from within the region (one from each country), who she frustrated and they all left the Bank.
These lawyers are still within the region working in various institutions they went holding very senior positions. So someone can talk to them to collaborate our story. After they resigned, she hired 4 other lawyers; 3 from Europe, 1 from USA and 1 from Kenya. These lawyers struggled to understand the local lawyers. Coupled with her frustrating them and not allowing them to question any thing, they all resigned in a space one year. The very expensive lawyers from Europe and USA were not necessary, since at that time we dint have many international transactions we were handling and if we had such, it would have made a lot of sense to use external local firms who are affiliated to some international firms. These lawyers disagreed with her mode of operation and all the three resigned.
This is after the Bank had spent a lot of money on them. At the same time, the DG single handedly sourced another law firm in the UK called Evershed who she has also used on several assignments over a period of time. So in procuring both the HR consultants and now the London law firm, not proper procurement guidelines were followed. The Bank does not have a lot of business at the moment to warrant the use of such law firms which charge the Bank an hourly fee of USD 520. The lawyers from this firm are sometimes flow into the country and spend at least a month in Kampala. They have to be accommodated in apartments which cost USD 3,000 per month.
The kind of assignments these international lawyers are paid a lot of money to do can surely be done by our lawyers within the region without wasting tax payer’s money. Simple assignment like reviewing tenancy agreements, reviewing term sheets drafting facility agreements for simple transactions should not be given to the London law firm which over time has cost the Bank close to USD 1 million.
We believe that because of her arrogance, she despises lawyers from within the EAC region. We don’t need such a person to continue heading a regional institution. She can argue that the use ot the London law firm is to avoid court cases like the blue line which almost took the Bank down. But remember blue line case was created by her when she was still the Head of legal at the Bank. Because she is extremely rude and arrogant to clients and staff (much as she puts on a different face to the outsider), this ends up getting the bank is legal battles especially with the clients which could have been avoided. Currently there are some loaming court cases which could easily end up like blue line if she continues as the DG at the Bank. Eden international took the Bank to court because of her arrogancy. She refused to meet and discuss amicably with the owner of the project who is also a Judge of the high court in Uganda.
This very simple case could end up badly. Another project (DARI Ltd owned by Hon Raphael Tuju) in Kenya has been mishandled by herself and there are many chances that it will end up in court for a loan of USD 9.197 million. Every body in the Bank advised against this project but she directed that the project should be taken to the board, it was approved and disbursed. However as we speak, it has already gone bad. An internal legal team recruited from the region supported by a panel of regional law firms from each country can sufficiently support the Bank without the need for London or USA based lawyers.
Currently the Bank has another lawyer on full time basis who was hired from London. He has been made idle and yet the Bank continues to pay him a heavy salary and an expatriate allowance. Even if the bank was to use international law firms, this should be on a very short term basis and on a particular transaction and such costs could be shared with the clients.
The manner in which the legal department has been handled is pure abuse of office and power. During the previous board meeting held in March this year, DARI Ltd and Benver Estates both projects from Kenya were supposed to have been on the NPL list. Because she did not want the Board members to ask many questions about DARI since it was only disbursed recently and not even fully. And by including DARI as an NPL, this would have raised the NPL ration above 5% which she did not want. She instead forced and intimidated one of the staff to lie to the board by including another project called Lake Heights in the portfolio report as an NPL when this project was not an NPL since it had been paying its loans normally for the last 7 monthly installment cycles.
Because of this, the staff who was forced to lie to the board by the DG, resigned immediately he returned from the board meeting in protest of this action, among other reasons all related to how he was belittled by the DG in front of the board members. This information can be confirmed by looking at the Bank records and the portfolio report which was presented to the board and the email exchanges between this particular staff and DG, where she pushed for these changes. We believe this is not the first time she is telling lies to the board members.
The Bank excessively uses consultants who are given short term contracts (3 to 6 months) which are always reviewed for up to 3 years and some beyond. These consultants cost the Bank a lot of money and yet they don’t help to build the institution. DG’s strategy is not to build a sustainable team at the Bank but to use short term and very expensive resources to achieve her person targets. Am sure she does not care what happens to the Bank after she leaves. She has painted a rosy picture to the outsiders and yet the Bank is rotten internally. Things could drastically change if a new DG is appointed for the Bank. For a small Bank of about 65 staff members, we have over 10 permanent consultants. Some of these consultants even sign documents and approval payments on behalf of the Bank which is very dangerous.
The Bank has received some grants from some institutions like AfDB and DEG (both shareholders) to build capacity of the Bank. What she has done is to hire very expensive consultants from Europe who come and work on their own and not allowed to interact with any staff members apart from her self.
These consultants have developed products, policies, manuals, risk management systems, however all these are idle. They can not apply because the day to day users were not involved or the consultants did not interact with the staff to ensure what they develop can be used in this environment.
I can say these grants have gone to waste. And yet they are meant to build the capacity of the bank and staff for sustainability. An independent audit needs to be carried out at the Bank but can only be successful when the DG has been interdicted. She threatens staff members not to renew their contracts and in the end staff keep quiet in order not to loose their jobs. However if every one knew that she is out, you can get the truth about the appalling state of the affairs at the Bank. The DG single handedly participates in all international and regional events, workshops, conferences and meeting where the Bank is usually invited. No staff member is ever involved in such travels and events. Even her country managers have not been exposed to international foras including those where a third party is willing to meet the costs. Under normal practice the DG would sometimes travel with her senior managers for exposure and training purposes but this does no happen here.
If an analysis was carried out on the Bank’s travel budget, you would be surprised that 99% of the travel budget for the bank is consumed by the DG alone. Because she never prepares any reports for such travels and neither does she brief any one on her return, the Bank can not effectively benefit from all the money it spends in such travels. Because she travels a lot and she still wants to control the Bank even while away, the Bank always comes to a stand still whenever she travels. We have lost creditability in the market because we delay to close transactions and can not give quick responses because we always have to rely on her availability to approve any responses.
You will realize that over 50% of approvals are made on mail, because she is rarely around. For example she has not stepped at the head office the entire month of May. Payments to service providers and suppliers have been pending. No project work is moving and everything at the Bank has come to a stand still because she is away. We believe that she could either delegate real authority while she is away so that work can continue but this can not happen. Or else she could delegate her senior staff or country managers to represent her at some of these foras but she never does so. Her expensive trips alongside the high budget for her office and her home cost the Bank a lot of money.
Imagine an institution where the DG earns USD 35,000 per month on top of all her personal expenses being catered for by the Bank including at home, with two SUV vehicles at her full time disposal, while the rest of the majority of staff earn below USD 5,000 apart from consultants. She also frequently cancels air ticks in business class which costs the Bank a lot of money. We believe this is abuse and it should be stopped. All these facts can be confirmed. The DG has on several occations picked perdiems from the Bank that she is going to work from the Nairobi office but she never appears at the Bank’s office in Nairobi at all. Since Kenya is her home country, we imagine she spends this bank time and money on her private errands.
On several occasions, the DG has used the Bank cars to go for her private trips in her home village in western Kenya. The use of the Bank vehicle for her personal trips in her home village has happened several times and can be confirmed from records at the Busia board between Kenya and Uganda. The latest occurrence being during the recent Uganda election period where she spent quite alot of time in her village with the office car. This is total abuse of Bank money and assets. The DG spends a lot of time travelling in the name of looking for partners and lines of credits and yet we can’t lend out the funds we have currently from various lenders. We propose the bank cuts down on the many partnerships being negotiated and instead concentrate on the lending business since this is our core business.
Once we have stabilized and grown the book, then we can get into partnerships and look for more lines of credits. Otherwise we are spoiling our name as a bank because the lender and partners we have are starting to realize that what they were told at the time of getting into partnerships was not true. Once we lose them, word will go around and we shall end up failing to get more in feature.
For example, we have hard KfW and AfDB complain about certain things they were told would be put in place and up to now she has not allowed them to be in place. The Bank has a projects committee and country office projects committees. However most decisions from these committees are not respected by her. If she does not like the project or the owner, even if every one else has recommended the project, it will never be funded. And yet in normal institutions, the DG should not be involved in such technical work and decisions.
If she has an interest in a project (Like Dari) however bad it is, she will intimidate every one until the project has been funded. Whoever tried to oppose her, usually have their contracts not renewed. Recently African Development bank had a supervision mission at EADB. This mission talked to some staff and discovered most of the abuse of office and governance weaknesses we have revealed in this petition.
The mission was conducted by Ms. Juliet Byaruhanga (Senior Private Sector Officer based in Kampala) and Mr. Dennis Ansah (Chief Portfolio Manager Officer based in Nigeria). The board should feel free to read their report or directly talk to them. They will confirm much of what is contained in this petition. She does not respect other institutions and their heads both within the region and out side the region. Most CEO’s in the market have complained that she does not give them due respect. Examples include; she never attends most of the EAC secretariat meetings even when invited by the secretary general.
In 2015, FMO indicated to the Bank that they wanted to sell off their shares and exit the Bank. FMO senior officers who were working on the exit plan made several attempts to meet the DG but in vain. They are not happy with the Bank. Some heads of units from KfW head office in German tried to make appointments to meet with her last year but they failed. They are not very happy with the Bank. The Bank is currently hosting the UNFCCC – Regional collaborating centre for East South and central Africa at the Bank Head office in Kampala.
However the DG has refused to meet the UNFCCC bosses who come to the RCC in our Kampala office on several occasions. The UNFCCC team has hosted several high profile seminars and workshops where she is invited to officiate but she never attends. They have invited her to attend some meetings at their head offices or send staff which she never responds to. They don’t respect the bank and they are not happy. Locally in Uganda where the Bank HQ is located, she has ignored severely high level events.
We appreciate that she can not be every where at all times or attend every event, but some are normally very critical for the Bank and she cant even delegate. As a result, we are loosing value in the market and lately, the Bank is not invited to some key events, where a Bank like EADB would add value being a regional bank. The Bank has started loosing visibility, credibility and relevancy both within the financial services market because we are not financing serious projects but also in the eyes of the key stakeholders because of the way the DG behaves. If you talked to some CEO’s of some commercial banks, they will tell you that she is very disrespectful.
At the moment, there are two large syndicates being arranged in the Ugandan market but the lead arrangers for these syndicates and the participating banks don’t want EADB to participate because of how EADB has handled documentation for syndicates in the past, causing lots of delays to concluding these transactions, since the DG wants to manage every step of the process. The Bank’s image in the market has diminished.
Because of the several resignations, some country offices which generate business for the Bank have been left grossly understaffed for some time and yet she does not seem to be interested in filling up some of these positions. For example, Country office Rwanda has one project officer and the country manager, Tanzania has one project officer and the country manager and Uganda also has one project officer and the country manager. We believe there are enough skills within the region to fill these positions. Much as she tells HR that we cant find the right people in the region. She has on several occasions tried to negotiate with staff from the UK but we strongly believe that the Bank does not need staff from the UK or USA.
The region has enough skills which can fill the positions and deliver for the Bank if well motivated, trained and exposed alongside good leadership. Regarding the bank strategy and her ability to get the outside world to think the Bank has greatly inproved, she has kept various versions of the previous strategy and the organization structure. Depending on who she is presenting to, she has always used different versions of the strategy and organization structure. She has told lies at different foras that certain positions within the organization structure are filled, when she is referring to consultants who go away after some time.
The current strategy has been prepared by a consultant from Maxwell stamp London who are very expensive, they don’t have an appreciation of the local operating environment and we believe the draft strategy in place currently will keep in the shelf like the previous strategies. The consultant has worked by himself and the users have no idea what has been prepared, what has informed the strategies, etc. a proper DG would have involved all key staff in the strategy formulation and review process. Of course she has manipulated the outside world including Lenders, the board, rating agencies only because the Bank cleaned the book and was making some profits. But these might not be the case any longer.
Because she has told many lies to the board and other partners, she never wants staff to freely interact with the board and other partners. The same reason she might not want to travel with staff to some international events for fear that staff could easily spill the beans. Staff members have tended to keep quiet in fear of loosing their jobs since the DG has been given excessive powers to determine staff members destiny.
All staff are given two years contract while some after being renewed are given one year. Two years are two few for a staff working in a development bank. A project cycle from admitting a project into the pipeline to approval, to full disbursement and implementation takes about 5 to 10 years. Staff should be given at least a 5years contract to be available during the life of the projects they work on. However the DG reduced the contract tenor as a tool for her to intimidate staff.
Staffs live and work under fear, praying that after two years their contracts should be renewed. At the Bank contract renewal does not depend on performance per say but on what the DG feels about the particular staff. HR does not have any say in contract renewal. Some staff who she is not in good books with normally have their contracts expire and they work for even months before she renews their contracts. If she wants a staff to leave the Bank, she gives short contracts for 2 weeks to 3 months simply to frustrate the staff until they resign.
The 2 years contract affects staff productivity because after one year, most staff spend time looking for other jobs just in case their contract is not renewed. Remember staffs have families to look after and this uncertainty is normally inhuman. On the other hand, most staff normally depend on staff loans from banks for personal development. Coupled with the fact that the Bank does not give staff loans, no commercial banks out there will give staff loans for 2 years, and even when they do, and such a loan can not help any staff to develop.
These are some of the things that motivate staff to work hard. The bank has serious procurement flaws which need urgent attention. The Bank seems to be loosing a lot of money through the single sourcing approach by the DG. We strongly believe costs have been inflated due to lack of proper procedures. The Bank at some point had hired a professional procurement specialist to support guide the Bank to follow procurement guidelines, but he shortly resigned when the DG tried to arm-twist him to circumvent procedures.
We saw a lot of poor quality work and materials used during the Head office building renovations and yet a lot of money was spent. In some areas of the building, certain fittings are already falling apart. We believe there will be serious issues between the Bank and the contractor when finally handing over the building because of quality issues. A serious procurement audit needs to be carried out. In some cases we observe more items were procured that would normally be required for an institution like EADB which uses tax payers money.
A simple example is a well furnished board room with state of art equipment, which is never used. The Bank continues to spend a lot of money holding board meetings in hotels even when the meeting has taken place in Uganda. The building has two restaurants with state of art fitted kitchens, both of which are never used at all and yet staff have to go out of the building to look for lunch even on rainy days. We believe over procurement and single sourcing approach was used as a means to squander bank money.
To give you an example of how staff are mistreated, all staff including senior managers and the Uganda country manager park their cars on the street or at the Imperial Royale parking lot (about half a kilometer from the Bank) whereby staff have to walk to office after parking their cars whether its raining or not. The office parking space is 75% empty and only used by the DG infront of the building at some tenants at the back of the building.
Seriously the Bank’s core business is financing projects and not letting out buildings. Therefore tenants should not be give priority for parking space over staff members who dedicate their time to work for the Bank. I know because the DG does not want to grow the book through lending, and yet she still wants to report some profit, she is sacrificing staff for tenants because she needs that other income from letting out Bank property to supplement the bank profits. This is not the Bank’s core business and therefore staff should be treated with respect.
Another example is the manner in which foreign staff members working in Kampala are treated when it comes to the use of Bank houses in Naguru. The best houses are given to non-bank tenants and the worst houses are left for Bank staff. Recently one of the flats where most of the Bank staff members were staying was renovated. After the renovation and to every one’s surprise, the Bank staff are being asked to pay higher rent of UGX 1.336 million (about USD 400) and non-bank staff members are asked to pay UGX 900,000.
We are surprised why non-bank tenants both at the office and at the flats are favored more than the Bank staff. We believe the rating agencies (Moody’s and Fitch) have been given false information or influenced to give the bank the Baa3 rating. We are very sure, if carried out an independent rating audit without meeting with the DG, the rating would fall considerably because she has not built a sustainable institution. She only cares about what happens while she is around and she will do any thing including bribing to maintain that status quo. Some lenders have started noticing the lies and it will be a matter of time before things get out of hand.
There is nowhere in the world an institution which is being run in this manner can be rated Baa3 unless the rating agency has been influenced which we believe is the case with EADB. The staff and tenants on the building are concerned as to why the DG moves with an armed body guard at all times. The body guard sits infront of her office door at all times. The DG does not allow any other person in the bank lift when she is in it apart from her driver and the body guard.
In fact the lift is locked when she is in it and opened when she is exiting. This paints a very bad picture for a leader of such an institution. If she can not be free with her own staff and tenants at office, then she is not supposed to be leading such an institution. Sometimes the heads of institutions who rent space at the office building are left dismayed as to why a leader of such an institution like EADB could behave in this manner.
Very interesting is that there are some staff members at head office who spend more than two years without ever seeing the DG. The fact that the DG refused to hire heads of departments including head of legal/company secretary (a position she still heads todate) who would also independently record board and governing council meeting minutes, there has been a conflict of interest and sometimes falsification of minutes of the board and governing council meetings to suite her needs.
Much as there is always a minute taker), she decides the final version of the minutes which are circulated to the board by herself. Some of the board decisions are usually altered and because there is no closer monitoring of her activities, such things go on un-noticed. For example, some time back the board approved an update of the Bank IT systems. However the Bank is currently installing new Bank systems for over USD 1 million which have been single sourced by the DG. Similar situations could have happened with the decisions taken regarding renovations of the Bank building.
It is possible that the money spent on renovating the bank building could have built and furnished a new building of the same size. Similarly sourcing of the IT installations (of the magnitude of over USD 1.2 million) going on at the Bank at the moment was single sourced and negotiated by the DG herself without going through the right procurement procedures. This could lead to loss of Bank money. In order to avoid such situations in feature, we believe DG’s should work for one fixed term of 5 years and rotated from different countries of the EAC like it is for the secretary general of the EAC.
The Bank needs some level of regulation by a financial institution regulatory agency. The member states could decide to have the central banks for the different countries supervise some aspects of the bank on a rotational basis annually. The EAC secretariat could play part of this role, but we believe as a financial institution there needs to be proper supervision of the Bank by a financial regulator. It is important for the powers of the DG to be spread, otherwise this actions of impunity will always continue because of the too much powers the chatter gives to the DG.
You will wonder why as staff of the Bank we have taken very long to bring these issues out in such a manner. We believed that most of these issues have been noted and reported at board meetings by the Chief Internal Auditor but we don’t see the board taking any action to propose change of top leadership at the Bank. A detailed audit report was presented to the board at the end of 2014 by the internal auditors highlighting all these issues but things have instead deteriorated.
This is now long over due and if the Bank is to be saved from going back where it was about 7 years ago, some immediate action needs to be taken. We request that the DG is immediately relieved of her duties. One of the country managers can act for a short period and the board and the governing council finds a replacement. Like we mentioned earlier, the Bank has very qualified and skilled staff who simply needs a good leader to drive the Bank business to greater heights. The fact that we have used these means to bring out these issues, we are willing to go all the way to ensure that change takes place in the interest of the Bank and the tax payer’s money.
And therefore if no immediate action is taken, we shall share this information with the international lenders and the class B shareholders and the media. Obviously the heads of state will get to know as well. Please note that we are not holding you at ransom and neither are we threatening you. We just need to save this Bank. The region needs it. We also encourage the board to meet with the staff, and as long as you promise to protect the staff, you will get to the bottom of the issues.
But with the current DG in office, staff may not be willing to come out and give you more details. There is more that we could not put out here. The DG needs to change now. We are aware of when her current contract will expire but by then, things will be irreversible. Its better she steps a side now. There wont be any crisis. The Bank will continue running much as the board might have to put a mechanism where they support whoever will act as a temporary DG until a new and substantive DG is recruited.
The Bank needs stability and growth. These can only be achieved if Vivienne Yeda is out of the Bank. This can be done peacefully by simply asking her to resign. We are also proposing that the Charter should be amended to among other things, stop serving board members to borrow from the Bank. We are aware some board members have borrowed from the Bank. Once a board member has borrowed from the bank, they get compromised and cannot put the DG at task to explain why certain things are done the way they are done, because they feel they owe her and therefore such board members easily lose objectivity.
This might partly explain why things have gone so wrong and the board is aware and yet not action is taken. We have delivered this document to many recipients using hand delivery, email and courier. However we request that who ever receives it first should bring it to the attention of the Bank board chairman (DR. Kamau Thugge – Principle Secretary, The National Treasury, Republic of Kenya) just in case he delays to receive it to enable him initiate action. This petition was initially sent out weeks ago to the board members. However we have not seen any action being taken. We have decided to share with the lenders (KfW, AfDB and EIB.). FMO has also been notified because we have reffered to them in this petition. Should we not here any reaction and a communication from the board to all staff of the Bank on the actions being taken by end of June 2016, we shall escalate to another level). This might hurt the bank but the board will be held responsible since you are aware of what is happening. You might chose to ignore this petition because it has not been signed by any staff member. This does not stop the fact that there is a big problem which needs urgent attention.
It is common knowledge that Kenya is among the top countries in the world in Corruption matters. This evil that bedevils us has done us more harm than we can statistically quantify. From unemployment to under-employment, the Kenyan youth continues to harbor that elusive Kenyan dream, if ever, there was one. It is because of these economic upheavals that the youths engage in new frontiers to try and make ends meet.
From innovation to invention, an average Kenyan is trying through thick and thin to ensure that they can at least put a meal on the table. The new kid on the block as far as “hustling” is concerned, is Gambling. This article will try to approve or and disapprove gambling as an economic activity that is “The Next Big Thing.” Is a sport betting our new Oil??
A Wiseman once said, a fool and his money are soon parted. There has never been a time in Kenya’s history when this saying became so applicable than today. Gambling is different things to different people. The English dictionary defines it as the act of playing for stakes in the hope of winning. It includes payment of a price for a chance to win a prize.
Wilson Mizner defines gambling as ‘the sure way of getting nothing for something.’ Mizner’s definition thus, excludes existence of any direct Quid Pro Quo in gambling. Is gambling really this bad? If it is, why is it legal in Kenya? Does it have any economic benefits? Let us try to answer some of these key questions.
Before we delve into the nitty-gritty of the cost-benefit analysis of betting, let us first review why one would be interested in this activity in the first place. Psychologists have identified some of the reasons that lead to gambling as:
Desperation for money- this point is tied to the high rates of unemployment.
Since unemployed people do not have any regular source of income, they are generally, financially desperate. This desperation acts like a catalyst for them to gamble the few coins they have with the view that they will win big. After all, one of a gambling advert I see on T.V every day says…”IT IS BIG!” It is not in the gambler’s interest to doubt an alligator that has just come out of the river and reported the crocodile as sick!
Another reason for gambling is for the player to experience highs. Placing a bet and waiting for the final results of the match to know whether one has won or not, is such an enticing experience that keeps the players in some sort of stupor. Ordinarily, a person who engages in gambling based on this reason will have learnt it from peers. Gambling is generally high among youths because of peer pressure.
Supporters of gambling have advanced some key reasons in support of this industry. Some of the reasons are:
It aids in employment creation. In an economy where unemployment is officially at 25%, and unofficially at 60%, it is common sense that we need to create jobs. In this endeavor, we also need to diversify such that our jobs are not shaken by threats such as terrorism.
To this end, gambling both in casinos and on-line sports betting has created an avalanche of opportunities for the youths. In fact, Kenya boasts of 23 sports betting firms as at June 2016. These are in addition to many other casinos that have existed for decades. It is common knowledge that a lot of jobs have been created by these firms.
Ronald Karauri, Sportpesa CEO
It is a source of revenue to the government. At least 50% of our GDP is supported by government revenue in form of taxes. Gambling companies, like any other corporate, they too pay their fair share of taxes. This is a great source of revenue to the government. Other than taxes, they also pay relevant licensing fee to the relevant statutory organs, in this case, Betting Control and Licensing Board.
It is therefore reasonable to understand why the government would permit gambling activities within its jurisdiction. Macau in China, which is the largest gambling town on earth, generated Ksh. 45T in 2014. The second largest gambling city being Las Vegas, which made Ksh.6.5T. In fact, Las Vegas economy is more than 90% built on gambling. Prior to engaging in gambling, it was a mere desert with nothing to show to the world.
Looked at from the perspective of positive Economics, gambling is a good investment and a booming industry that poor countries can encourage as a way of uplifting them from poverty. This argument can be supported by the case of Las Vegas.
Whereas, the above points seem plausible, prima facie, a critical look at the gambling industry proves otherwise. The economic and social costs associated with gambling far outweigh any perceived benefits.
To start with, gambling leads to financial devastation. They say that gambling is a successful business because the house always wins. The player will generally start gambling with the aim of achieving some financial freedom. However, they never reach this level. The more one wins, the more they will gamble with the hope of winning much more.
This trend will continue till finally, they have lost all they had. At this point, one will find themselves in deep debts and financial troubles. Their gut feeling will be to further borrow and win back their bet, so the cycle will continue.
Yet another cost of gambling is job losses. Betting is like a drug. It is more dangerous than cocaine or heroin. It is addictive. The more one gambles, the more they are ensnared in this prison. Once addicted, it alters the normal functioning of the individual. Anxiety and depression will kick in and sooner rather than later, the productivity of the player at the place of work will deteriorate. The only logical end to this story will be firing of the employee who is unable to produce because of depression tendencies that have been caused addiction to gambling.
Julie Gichuru, a partner in betting firm M-Cheza affiliated to her father-in-law Samuel Gichuru entangled in KPLC multi-million heist
Studies also show that 66% of gambling addicts will engage in illegal activities to pay for their gambling debts. This therefore implies that crime rates will increase. The rate of criminal activities in a town prone to gambling is far much higher than the rate of crime in the general population. Mugging and drug abuse is higher among the betting population because of the need to get money for betting as well as trying to control anxiety and depression.
Gambling leads to a lot of family problems. Studies show that 90% of gambling addicts around the world have family issues. In the US, 65% of the couples that consist of one spouse with a gambling addiction end up divorcing. This is a social cost that positive economics overlooks.
In conclusion, we cannot deny the role played by gambling companies in Economic growth. Economic growth should not be confused with Economic development. Gambling can never help in economic development of any economy. While not overlooking the role of gambling as a growing industry especially in developing countries, it is important for us to understand that the Net Present Value of Gambling is negative. Its social and economic costs far outweigh its economic benefits. From a positive economic point of view, Betting/Gambling looks like the next economic frontier that has the ability to grow the economies of 3rd world countries. However, in social welfare economics, there is no Pareto optimality in gambling.
Finally, it is President Barack Obama who once said, “We didn’t become most prosperous country in the world just by rewarding greed and recklessness. We didn’t come this far by letting the special interest run wild. We didn’t do it just by gambling and chasing paper profits on Wall Street. We built this country by making things, by producing goods we could sell.”
The writer is a hustler with ideas that can change the world. He holds a Bachelor of Commerce degree in Finance from JKUAT.
Disclaimer: This article expresses the author’s opinion only. The views and opinions expressed here do not necessarily represent those of Kenya Insights or its Editors. We welcome opinion and views on topical issues. Email:[email protected]
Things are evidently not looking up well at the troubled His Highness Aga Khan Empire, Nation Media Group has reported a 15% drop in half-year after-tax profits to Ksh 785.4 million compared to Ksh 925.2 million reported in the same period last year. The drop was largely as a result of a 7.8% drop in group turnover to KSh 5.6 billion despite the management blaming government’s failure to pay bills on time.
Profit before tax stood at Ksh 1.15 Billion, representing a 20% drop from the Ksh 1.43 Billion posted in the same period in 2015. Delayed payments increased by a small margin of Ksh 23.5 Million to Ksh 163.6 Million versus Ksh 140 Million posted in June 2015. NMG is putting the bulk of blames on state-owned entities accounted for a significant part of this bad debts.
Print revenue especially from the major outlet Daily Nation, which contributes to over 80% of the group’s revenue fell by 9%. The dwindling in figures from the weak sales of the newspaper has seen the company laying off some staff. The stability of NMG hangs on the sales from print and a fall in numbers sends shivers across the rest of the establishments.
Earnings from the group’s digital business grew by 90% though this accounts for less than 5% of its total revenues. However, the company says they plan to increase the digital division’s contribution to total earnings to 10% within the next three years. This explains why NMG has revamped their focus on digital presence.
They seem to be shifting efforts from traditional print to digital where the audience have migrated to. Earlier this year, following poor returns, NMG closed down two radio stations which they switched their transmission bases to digital and sublimed Qtv, this also led to the mass layoff of journalists. With the newspaper sales that forms the backbone of NMG’s existence faced with a possible extinction, the future of the Group remains shaky and uncertain.
President Uhuru signs into law the interest capping bill in Statehouse.
By Philip Makokha
That same day Jesus went out of the house and sat by the lake.2 such large crowds gathered around him that he got into a boat and sat in it, while all the people stood on the shore. 3 Then he told them many things in parables, saying: “A farmer went out to sow his seed. 4 As he was scattering the seed, some fell along the path, and the birds came and ate it up. 5 Some fell on rocky places, where it did not have much soil. It sprang up quickly, because the soil was shallow. 6 But when the sun came up, the plants were scorched, and they withered because they had no root. 7 Other seed fell among thorns, which grew up and choked the plants. 8 Still other seed fell on good soil, where it produced a crop—a hundred, sixty or thirty times what was sown.
The above text comes from the book of Matthew chapter 13. It piqued my interest because, government policies are like seed. The sower is the government- legislature, judiciary and executive. Assuming, an ordinary man immediately appeared after the seeds had started germinating, he would have been thrilled by the seeds sown on rocky ground that had sprung up quickly. I bet, he would even thank the sower.
It is human nature, to live in the present and enjoy facades, which are our daily lives. On August 24, 2016, H.E President Uhuru Kenyatta assented to the Banking amendment Act (2015) which among other things introduces interest rate ceilings and floors. In his statement after signing the law, the president says “…Upon weighing carefully all these considerations, on balance, I have assented to the Bill as presented to me. We will implement the new law, noting the difficulties that it would present, which include credit becoming unavailable to some consumers and the possible emergence of unregulated informal and exploitative lending mechanisms.
First, let us start from the very basics. Interest is the price charged on money. Since it is presented as a percentage, we refer to it as a rate. Interest rate ceilings/restrictions/caps refer to the maximum interest rate charged by the lender to the borrower. On the other hand, interest rate floor refers to the minimum interest paid on bank deposits i.e. deposit rate. The difference between the two is the SPREAD.
Ordinarily, these interest rates are driven by market forces- demand and supply. Market forces work best in a perfect competition market. This is a market where among other features; it has many buyers and sellers. Other markets are monopoly, oligopoly etc. It is not possible in practice, to find a market that is 100% its type e.g.100% perfect competition or oligopoly. Ordinarily, we characterize a market as perfect competition if the features of a pure competition dominate features of alternative market structures. Other than markets, we also need to look at different types of economies. An economy can be Command, free or mixed. Generally, Kenya is a free market economy. As to whether, the banking sector in Kenya is oligopoly or pure competition, I do not know. Theoretically however, it is a pure competition. The Kenyan economy is majorly free enterprise where an owner of capital can put it in any sector and await returns. Of course, there are regulations governing each of the sectors that an entrepreneur may venture into. These regulations are not necessarily barriers to entry.
INTEREST RATE AS PRICE FOR MONEY AND ITS DETERMINATION
Let us throw this animal called interest rate out of the window for a moment. Let us talk about and ordinary good-sugar. How is price for sugar determined? In any business transaction, there are two parties involved. The buyer (demand) and the seller (supply). The buyers want to buy at the lowest possible prices while the sellers want to sell at the highest possible price. So how is the price determined? The sellers will set a price that covers their production costs plus a mark up. The buyer wants to buy at a price that gives them value for money. In a market with only one seller and many buyers, the seller is likely to exploit the buyers while in a market with only one buyer and many sellers, the buyer is likely to benefit. In practice, there exist many buyers and sellers and therefore prices of items are determined at an equilibrium point. On a graphical presentation, this is the level where quantity demanded equals to quantity supplied. QUANTITY DEMANDED IS NOT DEMAND! The prices will generally hang in this range. The interest rate is determined in a similar manner.
BANKING IN KENYA: OLIGOPOLY OR PERFECT MARKET?
The answer to the above question depends on who you ask. Generally speaking, financial industry is a pure competition. There are many sellers and information is readily available. For example, you can easily know what Bank X charges as interest rate compared to Bank Y. Thanks to the Central bank of Kenya. Some people argue that banking industry is an oligopoly- there is a small number of sellers who control the market. To some extent, this is true. Kenya is dominated by less than 10 banks even though we have in excess of forty banks in operation. These banks, it is argued work in a cartel-like manner thereby charging unnecessarily high interest rates. What high interest rate is, am yet to understand.
WHY INTEREST RATE CEILING AND ‘FLOORS?’
Hon. Jude Njomo, having studied the cartel-like behavior of commercial banks and their high interest rates, deemed it appropriate to regulate the interest rates that banks charge in order to cushion the common man-Wanjiku. From what I gather, Wanjiku is a group of people at the bottom of the economic pyramid. Members of parliament therefore, deem it unfair and predatory for the banks to continue exploiting these members of the society. The attempt to cap interest rate is a third one since the last two decades. The other two attempts having been made by the former mp Joe Donde and Hon. Jakoyo Midiwo. The bill, now the Act addresses many things, among them interest rate capping. This is what this article is about. Many countries have tried capping interest rates including Zambia in 2013. The law has since been abolished. Around the world, approximately 76 countries have some sort of interest rate capping. Some sort because, not all interest rate capping work as the one we have enacted.
A study by Samuel Munzele Maimbo and Claudia Alejandra Henriquez Gallegos titled,
‘Interest Rate Caps around the World Still Popular, but a Blunt Instrument’ reports:
‘In this exercise, we found that the main reasons for using interest caps on loans were to protect consumers from excessive interest rates, to increase access to finance, and to make loans more affordable. Most countries regulate interest rates with the broad aim of protecting consumers, as in the case of Spain. Other countries provided more specific objectives, such as protecting the weakest parties (Portugal); shielding consumers from predatory lending and excessive interest rates (Belgium, France, the Kyrgyz Republic, Poland, the Slovak Republic, and the United Kingdom); stopping the abuses arising from too much freedom (Greece); controlling over-indebtedness (Estonia); and decreasing the risk-taking behavior of credit providers (the Netherlands). Similarly, in Thailand authorities stated that the purpose of the caps was to make finance affordable for low-income borrowers.3 Finally, Zambia’s authorities introduced the caps to mitigate the perceived risk of over indebtedness and the high cost of credit, as well as to enhance access to the underserved.
The Zambia law was abolished three months later.
WHAT INTEREST RESTRICTIONS WILL DO
There are two probable things that restricting interest rates will do. One, what the government tells us that will happen and the second happening is what economic theory supports. I will talk about both cases.
According to the government and the supporters of the law, low interest lending rates will increase access to credit by Micro, small and medium enterprises. It will also increase access to credit by families that could not afford credit facilities under a regime without the caps. This will boost productivity and ultimately improve economic growth. Jobs will be created and we shall be a few steps away from achieving a million jobs a year as promised by Jubilee. The government will also achieve greater financial inclusion rates for the Kenyan citizen.
On the other hand, interest rate floors set for saving deposits (deposit rate) will encourage a savings culture thereby ultimately, boosting our economic growth. After all, a saving economy is a growing economy. It is however, misleading to think that limiting deposit rates at 70% of CBR will encourage savings. According to the Central bank, the deposit rate as of April 2016 was 6.92% .With the new low; it will be at least 7%. I do not think a marginal increase of 0.08 will do anything to encourage savings. With the 6.92% of deposit rate, our saving rate is at a mere 1.4%. The interest rate floor will thus, have negligible effect, if any. Low lending rates encourage investment as well as consumption and both these activities are good for economic growth. By controlling deposit rates, the government will be able to arrest any inflationary pressure that would have occurred because of availability of cheap loans. Whereas these arguments are convincing, they are flawed.
However, according to economic theory, two scenarios are more likely to occur. First, availability of cheap loans will increase liquidity in the economy. The question that begs is what is the effect of an increase in money in circulation? An increase in money in circulation will automatically increase consumption. If the increase in money is not accompanied by a commensurate increase in production, as is likely to be the case in Kenya, there is likely to be inflation.
There will be too much money chasing too few goods! This inflationary pressure will lower the purchasing power of our money. The real value of our shilling will be eroded. For example, Ksh.1000 will buy less than it could have bought prior to interest rate restriction. As a result of this pressure, workers will demand more pay. This will cause industrial unrest and production will plunge further because of time wasted on pay negotiations.
If employers will agree to increase salaries, the cycle will continue. This policy therefore, creates a vicious cycle that is a zero-sum game.
The second likely event to occur according to economic theory is credit rationing. A key component of interest rate is the risk aspect. Banks generally weigh the risk profile of a client and adjust the rate accordingly before advancing a facility.
A client either has low risk profile or high risk profile. A client with a good credit history and a regular stream of income is less risky than a client who is probably borrowing for the first time. In a regime where interest rates have no upward limit, banks will accommodate the riskier client by adjusting the rates accordingly. On the other hand, if the rate has a cap, and the risk profile of a client cannot fit within this regime, the best alternative is to deny that client the facility all together.
These clients are SMEs and Wanjiku. Apparently, the very people this legislation intends to protect. From my experience, when someone wants money, the cost is not their priority. The priority is AVAILABILITY. And this is why; Shylocking is a thriving business in Kenya. This ‘locking out’ of potential borrowers, will lead to establishment of more informal lending businesses that are likely to exploit the public much more. The president notes this in his statement. Kenyans will be exploited much more by the unregulated sector of shylocks!
WHAT WORKS?
Spain is among the few countries that have a law similar to what the president assented to on August 24, 2016. Does it work? Whereas interest rates are low in Spain, studies show that it boasts of notoriously high charges. This means, what the banks cannot make through interest, they make through other charges. This is also a possibility. If these charges too, are capped, the banking industry is going to be a no-go zone for investors. Investors like to put their money where it generates the highest possible returns. Since the major role of management is to maximize shareholder value, caps limiting their ability to achieve this goal can only mean one thing: COST REDUCTION.
A huge percentage of total costs for many businesses are labour related and thus, banks may be forced to freeze hiring of new staff or reduce their workforce so as to continue making profits. Is this job creation? Banks are henceforth going to invest much more in technology and less in human labour in order to return value to shareholders.
The best alternative of handling the high interest rates would have been more of moral than legislative. For example, the government through CBK would have advised bank executives to set aside some percentage of their loan portfolio for SMEs and Wanjiku. This alternative accompanied by threats of legislation would have yielded much better results in the long run. We can think of this as setting up of EPZ in the manufacturing industry. In fact, the government could even decide to tax income generated from this portfolio at a lower rate or give it a tax holiday. This would boost credit access to the marginalized without interfering with the banks’ independence. This is more likely to stimulate economic growth and development. Controlling interest rates is sowing on a rock; the seeds will spring quickly because the soils are shallow. They will however, not live for long as they have no roots. Let’s sow in deep fertile soils. It may take long for the seeds to germinate, but when they do…they will grow to maturity and yield maybe thirty times or more of what we sow!
Finally, s I conclude, I would like to paraphrase Dr, Ndii, no amount of growling at critics is going to make foolish policy wise.
The writer Is a degree holder in Commerce, specializing in Finance from JKUAT And a hustler with ideas that can change the world. Twitter: @pcmakokha | Facebook: PC Makokha | IG: PC Makokha
Disclaimer: This article expresses the author’s opinion only. The views and opinions expressed here do not necessarily represent those of Kenya Insights or its Editors. We welcome opinion and views on topical issues. Email:[email protected]
Finally, after bustles and tussles around the matter with the Bankers pleading with the President not to sign into law the Interests rates amendments, Uhuru finally inked it into law. On July 28, 2016, the National Assembly passed the Banking (Amendment) Bill, 2015. The Bill intends to regulate interest rates that are applicable to banks’ loans and deposits, capping the interest rates that banks can charge on loans and must pay on deposits. The bill proposed a ceiling on loans at no more than four per cent of the Central Bank of Kenya’s recommended rate.
The Bill was then forwarded to the President for approval. “Since receiving this Bill, I have consulted widely, and it is evident to me from those consultations that Kenyans are disappointed and frustrated with the lack of sensitivity by the financial sector, particularly banks. These frustrations are centred around the cost of credit and the applicable interest rates on their hard-earned deposits. I share these concerns.” Says the President.
This is the third time that the National Assembly is attempting to reduce interest rates to affordable levels. In the previous two instances, dialogue and promises of change prevailed and banks avoided the introduction of these caps. In those instances, banks failed to live up to their promises and interest rates have continued to increase along with the spreads between the deposit and lending rates.
Despite having one of the most efficient and effective financial markets, Kenya has one of the highest returns-on-equity for banks in the African continent. Banks need to do more to reduce the cost of credit and ensure that the benefits of the vibrant financial sector are also felt by their customers.
The President has assented to the Bill as presented. The Government will now implement the new law, noting the difficulties that it would present, which include credit becoming unavailable to some consumers and the possible emergence of unregulated informal and exploitative lending mechanisms. This law is a win for borrowers who’ve had to repay dearly given existing borrowing rates as high as 21%. Now that the Bill will Cap interest rates at 4% above Central Bank Rates that is currently at 10.5%, Interests rates are expected to go down to 14.5%
Radio Africa Group Managing Director Patrick Quarcoo
All is not rosy at the Radio Africa Limited print department according to information getting to Kenya Insights from the insiders. In a confidential memo dated August 1, 2016, tipped to us originating from the Chief Operating Officer Agnes Kalekye and copied to Benjamin Otido, Cathy Oganga, Robert Kibutiri and William Pike, the salaries for the Month of August were delayed for up to six days for both junior and senior staff members.
The Star recently relaunched with a new look in what was expected to boost the sales of the newspapers, but our source in the company say things have worked in contrary. Sales have reduced drastically from average 20,000 copies a day to a mere 10,000 copies throwing accountants into the panic.
The burden of sustaining the salaries is getting heavier, and the management is considering laying off its staff to a manageable size. The Star which has cut a niche as the Number one’s newspaper for politics has scared off some soft advertisers who don’t want to be associated with the thick political theme that clouds the pages, a factor that our informant say has contributed towards low income.
There are grave fears that the management is seriously contemplating retrenching employees who now stand at 600 in a bid to contain cost and optimise profits. Faced with stiff competition from the digital trend and the consumer’s consumption shift to digital phase, traditional media like radio, tv, newspapers are restructuring their systems to adopt with the new order.
Nation Media Group was recently forced to shut down it’s two radio stations and QTv following poor remittance and opted to merge the TV stations and shift the radio stations to the online platform only. Digital migration of audience has dealt a significant blow to the media houses which now have no other but to chase after the consumers who’re steadily dumping the traditional media. However, this shouldn’t be seen as the death of traditional media, it’s far from going dead, the companies just have to formulate strategies to have them blend for survival.
Mostly to be affected in the anticipated Star shakeup are subeditors and senior reporters who were poached from other media houses with high salaries and allowances which cannot be met now due to weak sales. Upcountry reporters are also a bitter lot as they never receive their pay and allowances in time.
A stressed fan of my investigation pieces approached me with what is not shocking since I’ve heard such cries before. Because of security reasons and on her request, her identity shall remain anonymous. The names used in this article are fictitious with the story continuing as it was narrated.
Marion works with Qatar Airways as an air hostess and lives in a Gulf city where she mostly spends most of her times on land notwithstanding the fact that nearly all her time she’s afloat the air.
With her career catching up and the pay smiling on the other side, she thought wise to make savings back home. After consolidation, she chose on Barclays bank as the right prospect to use given its worldwide presence, and since she’s a trot, that would present a better option.
Two weeks ago, she flew back to Kenya, opened a savings account with Barclays made a deposit of over a million bob. Considering her investment was in better hands, she continued with her work, flew to the US almost immediately after opening the account.
Unfortunately, while in the US, she was mugged and lost her purse plus her phones too. Being precautious, she almost immediately called Barclays Bank back home as a security measure on her account. Travelled back to her residential Gulf country where she renewed her line she was initially using.
This was when the cat and mouse games with the staff in Nairobi started. Marion originally opened the account with her Kenyan phone number linked to it, and now that she wasn’t in a position to access that line which went along with her stolen items, she filed to have contact number changed to her present’s.
She intended to access the money in her account, and the only way of doing this was by activating internet banking. A pin is supposed to be sent to her number to activate the system. Before this could happen, the staff were to send her forms via email to fill for the internet banking system to be activated.
Concealed to her, a fleecing scheme was in its primary stages with the communication spark. Instead of promptly, sending the forms, they bought time and only sent them to her days later and this when she discovered the shock of her life.
Someone had fraudulently accessed her account and withdrew Sh.600,000 in an unexplainable transfer. Faced with the bitter reality and shocking discovery, she called the bank to inquire how this possibly happened while herself hadn’t made any transfer transaction. As usual, they told her to give them time as the fraud unit worked to establish how this could’ve happened.
From my investigations, there are minimal incidences that this could’ve happened, and all pointers take the directions at an insider plot at the bank. When Marion lost her items, she didn’t have her Barclays ATM card in it. In fact, she’s yet to collect the card from the bank. This rules out cybercrime instance by stealing bank details by blackhat criminals.
She was yet to activate internet banking service so there were nearly zero percent chances of effecting internet transactions by fraudsters or herself unless the bank had activated this service without her consent. Which in that case is criminal.
As she would later come to realise, the transaction was enabled via mobile banking, a service that again she hadn’t subscribed for. The only person who activates this, the bank. A basic explanation here, someone inside the bank enabled this services, accessed her account, transferred the cash without her knowledge.
The bank would’ve locked down her account the moment she called to inform them of her items lost and asking to switch contact numbers. They took a time to send her the internet banking activation emails in what now looks like a strategy to buy time for them to cook ways of accessing her account and making the illegal transfers.
The bank insists, they’re investigating the matter, but these developments expose what could be a bigger scandal going on within the bank. You can bet this isn’t an isolated case and that the staff could be actively involved in this fraud plot. If this amount is anything to go by then billions could be lost to rogue bankers schemes annually.
The bank must come out and weed out the criminal elements in the desks, crippling many people’s incomes, unless, its party to the larger syndicate. Marion is patiently waiting for answers, as she waits the fraudsters could be preying on another victim. Are you a victim of this same scheme or any fraudulent deals going on at any local bank? Email me ([email protected]) I will investigate the matter and expose the evil elements.
The cheap tilapia imported from China being sold in Kisumu
The news of cheap tilapia fish sold in Kisumu and environs has in the past days been the topic of debate. Being a delicacy of the lake community, a smart but rather conniving businessman saw the opportunity to import fish from China.
There has been a steady decline in fish supply in the region with fishermen citing a decrease in fish population in Lake Victoria. Fish population in Africa’s biggest freshwater lake has been the downfall in the recent times due to some reasons. With the supply being unable to meet the demand for fish, businessmen resorted to importing tilapia from China.
The most shocking part is the imported fish is way cheaper than the local ones. Tilapia, locally known as Ngege, goes at a market price of Ksh.300 while the Chinese tilapia is just a mere Sh.30, a 100% reduction in price. The fish is transported and kept frozen in boxes where they’re sold and distributed to different market zones. Local leaders have come out saying this is a sabotage of the local economy in which fishing is the primary economic pillar. But that’s not even the worst.
A fish farm in China
In a random research conducted by Kenya Insights, we’ve established that the cheap tilapia being sold to the locals come with dangerous repercussions with them. Most of the fish being sold are bred and fed on raw sewage as a way of cutting costs and contaminated with microbes like salmonella.
Fish farming is a thriving venture in China. However, there are set fish feeds that the government allows farmers to use, but most farmers do not adhere to this standards. In several disgusting videos we viewed on the internet of fish rearing, farmers opt for raw sewage to feed the fish claiming the government-recommended manure is too expensive.
Demand for fish imports from China continues to go up worldwide with US alone consuming over 30% of seafood from China. Feeding the fish with faeces isn’t even half of it, the tilapia are frozen before package, and the ice used in this process is also made from sewage water according to a Bloomberg report in 2012.
Given the health risks posed to the farmers themselves, they’re adding chemicals like illegal and powerful pesticides and antibiotics to fight off and calm down stressed fish to the fish feed and water to counter bacterial and fungal infections.
A common anti-bacteria they use is nitrofuran which was banned in animal husbandry in China itself, USA, and Europe as lab tests proved that it caused cancer in rats.
A fishmonger sets up her merchandise at the famous fish retail market in Kisumu, Oile.
As the poisoned and faeces bred tilapia continue to fill plates given its economic reprieve, consumers must look forward to a future of unexplainable illnesses. The pandemic isn’t closed to Kisumu alone, given the market pyramid in Kenya, there’s a high probability this Cheap China tilapia has gotten its way to most parts of the country including the leading cities as Nairobi, Nakuru and Mombasa.
In our next piece, we will expose and explain the persons behind this health risk venture in Kisumu. Next time you order for that tilapia, you might want to ask the seller kama ni ya China
Fly 540 Aviation Company yet again finds itself in the wrong spotlight following discrimination claims by a physically handicapped client. Mr Muhib Noorani, the proprietor of Rocky Driving School, is the latest victim of a worrying trend of disdain for Persons with Disabilities (PwD) by the airline. Mr Muhib says that the airline’s staff in Eldoret denied him access to the aircraft because of his physical condition.
“I booked Fly 540 as I had been told there was no other flight. I checked in at 6.35pm, but they wouldn’t let me aboard. They didn’t give any explanation for the refusal. I was asked to look for other means to get to my destination and let the other passengers behind me check in,” he narrated in an emotional testimony.
“This is the first time I’ve been made aware of my disability. I had to speak out so that other citizens in a similar condition don’t have to go through such trauma. Disability is not inability, and we didn’t choose to be this way.”
Unpleasant history
This is not the first time a complaint has been lodged against the low-cost aircraft. A few months ago, another PwD- a paediatrician at Nyeri Provincial Hospital, complained of a ‘dark-skinned, very tall and intimidating’ Fly 540 pilot who had kicked her out of the aircraft claiming that she was going to delay everyone.
Dr Agnes Mithamo said that the pilot wouldn’t even let some volunteers help her up the stairs of the plane. “The pilot told me that he had the powers to decide whether I was going to use the aircraft or not. He ordered the men who had volunteered to help me aboard to take me back to the lounge. It was humiliating.”
In 2014, Bishop Jackson Kosgei, the current chairperson of Kenya Film Classification Board and father to musician Emmy Kosgei, was forced to crawl his way out of the aircraft after the staff blatantly refused to help him disembark.
The chairperson of Kenya Disability Parliamentary Association (KEPIDA), nominated MP Isaac Mwaura, has condemned such incidences and said that they will call for sterner actions such as suspension of the airline’s license since even parliamentary summons has failed to tame the practice. “We cannot allow systemic discrimination of Kenyans with disabilities,” Mr Mwaura has warned.
A Fly 450 response to a client on Facebook stating their policies on persons with disability
As corruption scandals continue to cloud institutions in Kenya and killing mega investments, the latest company to bow out of Kenyan market is Americas, One Alliance. The U.S based tobacco firm One Alliance has called off its contract with Kenyan farmers.
Following forensic auditing that was carried out by a third party audit company hired by the American firm. One Alliance says they spent Sh.180Million to investigate the fraud in their Kenyan subsidiary which revealed up to Sh.5Billion was lost in an insider fraud scam.
The company had contracted 1,000 farmers in Migori which are the region’s biggest tobacco producer to supply it with the raw product for making cigarettes. One alliance has since cancelled their contract with Kenyan farmers and now engaging Uganda for the raw material.
Migori farmers had been contracted to supply the American company with tobacco to its processing plant in Thika. “improper accounting occurred at our Kenyan entity resulting in approximately $50.8 million of discrepancies, mainly in inventory and accounts receivable that stretches back to at least 2008,” read part of the company’s statement.
Tobacco Farmer in Migori
Insider dealings as that of the One Alliance has seen many big companies in Kenya call off their contracts if not collapsing. Uchumi Supermarket is on the verge of closing their shops. Imperial, Dubai and Chase Bank were both put on receivership following dirty inner frauds.
Another South African Company, Haco Tiger under the chair of the industrialist Chris Kirubi after forensic auditing was found to be another case of insider deals.
Directors accused of manipulating their data including profits. Investor confidence is key in any venture, and the corruption state in Kenya continue to swallow many and a discouragement to many investments.
The cancellation by One Alliance now leaves British American Tobacco an upper hand as the region’s biggest buyer of Tobacco.
It all started on the 13th of October. I went to the bank only to find a notice attached to the door stating the bank is currently under receivership. At first, I thought it was probably wind up as only a month before did I fix a deposit with the bank. I have worked for no less than 35 years of my life through so many ups and downs. But none comes close to what I felt on the day that I saw the bank being placed under receivership.
A receivership in other regions of the world usually bodes well for the depositors and creditors but ‘this is Kenya’ was the first thing that struck my mind. I felt like collapsing. My family, my kids hard earnt money is locked up in IBL. What was I going to say to them? Most people have limited or no faith in the Kenyan judicial system. Justice in Kenya is something that has never been easy to achieve, in most cases it’s nonexistent. Most of my friends from around the world thought I was crazy in investing in Kenya.
At the time, I disagreed with them and went ahead to give my family a stable life. For some people like the shareholders, they deal in billions. I don’t expect even to come close to those figures in my lifetime. I was happy with what I had. God had blessed me and helped me achieve what others might deem to be nothing.
My family to this day is torn over what the Kenya’s central bank’s governor will decide in regards to the fate of our locked deposits and funds. We are simple people. We are old. We invested our money
We have never taken a cent from anyone. We spent our money to help us reach our goal which was to eventually have enough to get one house for our family. Everything has been taken away from us and all other innocent depositors in an instant. We were grateful when we got the first Sh.1M released to us, but that’s just a small portion compared to what we had in the bank. Is it right that we work so hard in our life for years only to have our money frozen away from us without any form of access to it?
We paid our taxes, obeyed his law. We always believed that the laws are there to protect us. Were we wrong? Worked hard. Saved money for old age, for giving our family a headstart only to
Imperial Bank Offices
Then get robbed. I recall the president of Kenya saying no depositor will lose a penny. That all will be fully reimbursed was he only referring to chase bank? Are imperial bank customers not people? Why isolate us? We are all people created by God. We shouldn’t be discriminating people based on their caste or nationality or color.
We, depositors, feel as if we are being discriminated against. Only three weeks to go until we learn of the way forward. Only three weeks to go until we learn of the way forward. But do you think it would be fair to announce a way forward without giving us access to at least a substantial amount of money to keep businesses, family, bills amongst other stuff going?
What have we done to deserve to wait for eight months without any meaningful access to our money? DR NJOROGE I know you know the world is following the IBL case with a keen eye but please don’t just focus on turning this into criminal proceedings that will drag on while we depositors are left to suffer. We did our part.
We fulfill all our responsibilities to the Kenyan government. We trusted the regulator to be able to sniff anything that was about to go wrong before it caused severe damage to depositors. We feel that we have been failed. We depositors are not to blame for any of this but for some reason, we are getting punished the most.
At times, I feel that you are more focused on other stuff rather than the depositors , the people that matter. Why are we depositors getting punished? Why do we feel that we are being blamed for their shareholders lack of cooperation towards CBK?
Imperial Bank board chairman Alnashir Popat is overcome with emotions during a briefing
You said you were raised up to help people. Why don’t you help us IBL depositors? We ain’t asking for anything more other than what belongs to us. Losing even 10% of our money could take more than a year or 2 to claw back. We have suffered enough. Days are getting tougher, times getting slower. It’s the month of Ramadhan. We can’t even afford to pay zakat to our old folks. People that have been dependent on us for decades. What do we say to them? We don’t know what to think anymore. Who in all of this truly wants to help us?
Who in all of this truly wants to help us? We hope it’s you Njoroge but until the end of June we won’t know. Please put yourself in our shoes just for a day and then tell us how you would have felt both mentally and emotionally. Is it right that thousands are made to suffer due to a problem that’s outside their control? We expected CBK to be cracking down on rogue bankers.
Imperial Bank Depositors demonstrating in Nairobi
Mistakes can happen and it might have slipped through their watch by accident or they might have been involved or shareholders planned everything step by step including the limiting of evidence to avoid being found guilty. Our question is how is this of any help to us? We are still suffering. The statements being released by shareholders, the media are not helping. If anything it deepens our pain even more… if you want Kenya to be great, Njoroge start by sympathizing with us.
Start by giving us access to our hard earned money. Start by ensuring we all get our money back in full if possible. But please don’t make us wait anymore than what we have been asked to wait so far. We will wait till end of June but we can’t help but fear that in Kenya people’s hope are built up only to then get crashed down. Please give us access to what was ours. Don’t punish us for the regulator and shareholders disagreements.
The informal economy in Africa is big business. The International Labour Organisation (ILO) estimates that its average size as a percentage of gross domestic product in sub-Saharan Africa is 41%. This ranges from under 30% in South Africa to 60% in Nigeria, Tanzania and Zimbabwe.
It is also a huge employer. It represents about three-quarters of non-agricultural employment, and about 72% of total employment in sub-Saharan Africa. About 93% of new jobs created in Africa during that 1990s were in the informal economy.
The International Labour Office defines the informal economy as:
All economic activities by workers or economic units that are – in law or practice – not covered or sufficiently covered by formal arrangements.
Today the informal economy appears to be as important as ever to Africa and its future development. But governments, and international organisations like the World Bank and ILO, do not like the informal economy. As a result international policy has veered from supportive to antagonistic.
At times opposition to the informal economy has been violent. One example is the notorious Operation Murambatsvina (“get rid of trash”) in Zimbabwe in 2005. At best it is directed at pulling the informal economy into the formal economy.
Antagonism is driven by a range of reasons. Informal firms do not pay tax. In addition, reports abound of child labour, low wages (especially for women) and low job security as well as high incidence of HIV.
Yet, as the Swedish International Development Co-operation points out, many governments are unaware of the contribution of the informal economy, particularly the high involvement of women.
The report also suggests that it is expanding and is here to stay. And a World Bank report points to a trend of people with higher levels of education entering the informal sector as a career of choice.
… a closer look at the informal sector in Africa provides a glimpse of what could be achieved if Africa’s economies and financial policies were more attuned to the continent’s everyday realities.
He sees the informal economy as being community-based, representing:
… socio-political entities, with their own rules, forms of organisation and internal hierarchies, constituting a node of resistance and defiance against state domination.
The point is that practices more closely allied with collectivist communities may be far more appropriate than “modern” management methods. These methods are based on Western principles and neoliberal economic policies. They have largely been discredited as inappropriate to African communities.
But the informal economy is largely marginalised. It has a weak voice and is rarely listened to by policymakers in government or in international organisations. When policies are made they affect a large percentage of firms, entrepreneurs, employees and communities. But it is unlikely any have been consulted.
Issues that could be given more prominence in policymaking are access to capital and the provision of relevant training. More important is what the formal economy can learn from the informal economy as a model for economic development.
Indigenous practices in a globalised world
If communities that rely on economic activity in the informal sector are indeed the repositories for indigenous management, entrepreneurial and employment practices it is little wonder they are not listened to.
Indigenous refers to practices, knowledge and values that are related to, and grow out of, local and community circumstances. These often stand in contrast to international or global practices, knowledge and values produced by universities and international corporations.
The dominant discourse is that indigenous practices are outmoded, archaic and out of tune with modernity. Yet seeing indigenous practices and those in the informal economy as frozen in time is a mistake. Even the glib packaging in management consultancy circles of concepts like “ubuntu” presents a glorified perception of indigenous knowledge being static and timeless.
As Cheru has pointed out, the informal sector may represent a resistance, an alternative to the prevailing globalised view.
Even so, it exists in the globalised world. While constantly adapting, sometimes resisting, it is never apart from globalisation. Rather than eschewing modern technology, communications, the internet and social media, Africa has been embracing it. This is happening through:
better cellular telecommunications;
access to cheap smartphones; and
initiatives, not without controversy, such as Facebook’s internet.org, providing free and wider internet access.
… there are 100 million people coming to Facebook every month across the African continent, with over 80% on mobile.
This includes a majority of people living in the informal economy.
These developments are providing new tools to trade, to market products and to work. They may even be changing the nature of employment. With practices and organisations still rooted in local contexts and communities, identities are changing.
In addition, social media has the potential to change things by providing greater voice and potentially better representation.
Political leaders may have to start listening to entrepreneurs, managers and staff working in the informal economy to formulate more inclusive policies that may prove more relevant to Africa’s development.
