DAILY NATION Blogs Jaindi Kisero

Jaindi Kisero

By JAINDI KISERO (email the author)

Posted Tuesday, March 30 2010 at 20:10

The Monetary Policy Committee (MPC) of the Central Bank of Kenya has put out new statistics which should be of interest to policymakers.

Here are a few highlights. First, the Government has revised its domestic borrowing programme for the current financial year by a massive Sh50 billion.

Clearly, we are still on track with the strategy of reflating against the slump. The debt mountain is growing bigger and bigger. The positive side to it is that the debt-financed government spending strategy is beginning to make an impact at least in terms of the take-up of loans by the private sector.

According to the statement by the MPC, private sector borrowing is beginning to pick up both in the volume and in the number of loans.

The number of loan accounts increased from 1.6 million to 1.8 million between December 2009 and February this year. Gross loans increased from Sh717 billion in December 2009 to Sh783 in the same period.

MPC has consequently reduced the bank rate to signal to commercial banks that they should reduced lending rates.

The MPC has no powers to dictate rates to commercial banks. But no commercial bank will respond to the signal coming from the Central Bank of Kenya.

Banks routinely ignore the MPC, thus undermining the monetary policy. The latest MPC statement has more numbers and statistics. But I will not cram this column with more statistics. Ours is a society with a deep-seated phobia for numbers and economic statistics.

You cannot single out one MP you can describe as having a sharp antenna for economic issues. The Tenth Parliament has more or less relegated economic policy to the back burner.

Admittedly, the strengthened parliamentary committee system has become more vigilant in interrogating the expenditure side of the Budget — in exposing graft and summoning State bureaucrats to appear before them to answer questions and defend their decisions.

But in the macro-economic policy arena, Parliament is yet to make a major mark ever since Mr Joe Donde literally forced major changes in the conduct of monetary policy.

The MPC as presently constituted has the fingerprints of not only Mr Joe Donde but also of the Eighth Parliament.

Today, a significant happening such as publication of a new monetary policy statement will happen without as much as a whimper from Parliament.

THE POLITICAL CLASS ONLY GETS excited and passionate when it comes to the issue of tribe. See how they have reduced the constitutional review process to a matter of ethnic calculus of power.

Indeed, the obsession of the moment for our leaders is how the constitutional review process might affect their tribes. Which tribe will end up with more counties?

Which tribe will have more senators? How can the incumbents ensure that they will still wield effective power even after they have relinquished the presidency to another tribe?

Why aren’t we debating capacity for fiscal management at the devolved levels of government before discussing issues to do with revenue and expenditure authority? Will we need a framework decentralisation law?

On public platforms, leaders will make high-minded statements. It is all presented as principled argument. But in reality, our leaders cannot think beyond tribe.

I have digressed in a major way. The point I wanted to stress is that Parliament should revisit the whole question of strengthening the effectiveness of monetary policy.

If Parliament does not revisit Donde, banks will not bring lending rates down. In the past, the standard refrain from banks was that the level of non-performing loans in the economy was too high.

In those days, non-performing loans were in the region of 20 per cent. Today, they are at 2.6 per cent, yet banks still don’t want to reduce interest rates.

They used to argue that the cash ratio, which was then at double-digit levels, was too high. The rate has been progressively reduced. But banks still insist on maintaining huge lending spreads.

The Treasury Bill rate is trending downwards, the inter bank rate is low, inflation is at single digit. The argument by banks that the cost of funds is high has no merit. They pay savers peanuts for deposits and charge an arm and a leg for the same money to the borrow.

This economy needs to experience dynamic and durable recovery. It will not happen if what the Government is doing on the fiscal side — and what the Central Bank is doing on the monetary side — is not supported by commercial banks.

The current high interest rate spreads is why banks are reporting huge profits even in the context of sluggish economic conditions. They must be slashed.

jkisero@ke.nationmedia.com

DAILY NATIONNews

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Ms Eunice Sirankasio displays the Yakunte dictionary. Ms Sirankasio has been distributing the dictionary, a glossary of Yakunte words translated into the Maasai language, in an effort to preserve the language of her Yaaku people. Photo/MWANGI NDIRANGU

From left: Prime Minister Raila Odinga, His Highness the Aga Khan, President Kibaki, Rwanda President Paul Kagame and former Tanzanian President Benjamin Mkapa after the opening of the first Pan Africa Media Conference and the 50th anniversary celebrations of the Nation Media Group at the KICC, Nairobi on Thursday. Photo/LIZ MUTHONI

Eradicate Extreme Poverty and Hunger

Achieve Universal Primary Education

Promote Gender Equality and Empower Women

Reduce Child Mortality

Improve Maternal Health

Combat HIV/AIDS, Malaria and other Diseases

Ensure Environmental Sustainability

Develop a Global Partnership for Development

Published March 16, 2010

The FCC released this report on a plan for national broadband access to Congress on March 16, 2010. The press release states,

“Today, the Federal Communications Commission delivered to Congress a National Broadband Plan setting an ambitious agenda for connecting all corners of the nation while transforming the economy and society with the communications network of the future — robust, affordable Internet.

…the Plan found that while broadband access and use have increased over the past decade, the nation must do much more to connect all individuals and the economy to broadband’s transformative benefits. Nearly 100 million Americans lack broadband at home today, and 14 million Americans do not have access to broadband even if they want it. Only 42 percent of people with disabilities use broadband at home, while as few as 5 percent of people living on Tribal lands have access. Meanwhile, the cost of digital exclusion for the student unable to access the Internet to complete a homework assignment, or for the unemployed worker who can’t search for a job online, continues to grow.

Other gaps threaten America’s global competitiveness. A looming shortage of wireless spectrum could impede U.S. innovation and leadership in popular wireless mobile broadband services. More useful applications, devices, and content are needed to create value for consumers. And the nation has failed to harness broadband’s power to transform delivery of government services, health care, education, public safety, energy conservation, economic development, and other national priorities.

…The Plan was mandated by the American Recovery and Reinvestment Act in February 2009 and produced by an FCC task force that set new precedents for government openness, transparency, and rigor.”

Essential Documents are vital primary sources underpinning the foreign policy debate.

Capital News

Posted Tuesday, March 16 2010 at 08:26

BY SARAH WAMBUI

NAIROBI, Kenya, Mar 15 - A report released by the World Bank indicates that if Kenya and other African countries focused on ‘quiet’ corruption with as much vigor as they did to grand corruption shams, they would achieve their Millennium Development Goals on time.

The report dubbed African Development Indicators 2010 showed that in Kenya nearly four out of five firms expected to make informal payments to obtain government services.

Chief Economist for the World Bank’s Africa region Shanta Devarajan who defined quiet corruption as the failure of public servants to deliver services paid for by government said African countries were off track in realising their MDGs.

“Quiet corruption does not make headlines the way bribery scandals do, but it is just as corrosive to societies,” he said.

He further added that tackling corruption required a combination of strong and committed leadership as well as strong policies and institutions.

“The track record of these anti corruption commissions that people have set up to fight grand corruption has mixed; I don’t say they are all bad but they have probably been disappointing. None of these institutions concern themselves with quiet corruptions. I have never seen an anti corruption commission saying we are going to go after absentee teachers,” he said.

Mr Devarajan who also proposed tighter mechanisms to fight corruption at all levels further maintained that the vice remained a big impediment to development in Africa. He explained that the vice derailed efforts by government to ensure that resources reached the grass root levels.

“When countries try to solve the problem of accountability they actually make progress. For instance in Rwanda in the health sector they introduced a system called results based financing; where doctors were paid a bonus depending on the number of children they immunised or the number of pregnant mothers they saw and this was verified by an independent NGO,” he said.

Mr Devarajan however commended African countries for their efforts this far in trying to achieve their MDGs saying all was not lost. He said Africa’s poverty levels had decreased from 59 percent to about 50 percent between the years 2000 and 2010.

“What’s remarkable is that over the last 10 years the progress that Africa has made on the MDGs has been among the fastest that we have ever seen. For instance the poverty rates in Africa have been declining at about one percent per year. That’s a faster rate of poverty reduction than India’s,” he said.

Jorge Arbache an economist working under Mr Devarajan also explained that effects of small scale corruption would eventually take their toll on society further emphasising the need to stop them from getting out of hand.

“Think about the consequences that a child who drops out of school because of teachers’ absenteeism may have. After a long period the consequences may be significant not only for the child and his family but also for the economy as well because of low productivity,” he said.

According to the report 38 percent of government resources in Kenya did not get to their destined places while 99 percent of the same resources did not get to recipients in Chad. The report also indicated that corruption had gradually extended to practices that did not necessarily involve monetary transactions such as teacher absenteeism.

28.75 percent of Kenyan firms expected to give gifts to get operating licenses while 32.25 percent of firms expected to give gifts in meetings with tax officials. Still in Kenya 71.2 percent of firms expected to give gifts to secure a government contract and 38.35 percent of firms identified corruption as a major constraint.

The largest population in Sub Saharan Africa was Nigeria’s which had a population of 151.3 million while the smallest was Seychelles whose population stood at 0.1 percent.

Sub Saharan Africa with its over 819 million people in 47 countries continues to present the world with formidable development challenges. The number of people living in abject poverty continued to rise with the number of people living on less than $2 a day had nearly doubled. In 1981 it stood at 292 million and rose to about 555 million in 2005.

The 2010 African Development Indicator contained more than 450 macroeconomic, sectoral and social indicators covering 53 countries.

Rampaini Letereuwa at her parents’ home at Ol Dubai village in Ol Donyiro. Letereuwa, 13, became pregnant after a temporary marriage to a moran she is related to, a taboo among the Samburu, and her baby risks being killed when it is born. Photo/MWANGI NDIRANGU

Capital News

Posted Tuesday, March 9 2010 at 12:44

BY EVELYN NJOROGE

NAIROBI, Kenya, Mar 8 - Citadel Capital, the Egyptian private equity firm has said it plans to overhaul the Kenya Uganda railway line and have it operating efficiently in the next two years.
More from Capital Business

Managing Director of Africa and Middle East Karim Sadek told Capital Business that they plan to start rehabilitating the 2,350 kilometre line in sections with the Nairobi-Mombasa track getting priority.

“It has to start from the source. The first section of improvement would probably be Nairobi and we are hoping to have that done in a few months but it will be a function of our negotiations with our lenders on when to release the loan. My guess is maybe late 2010 or early 2011,” he said.

Citadel Capital confirmed its acquisition of a 49 percent shareholding in Sheltam Railways Company, which is the largest shareholder at the Rift Valley Railways late last month in a move that saw it indirectly have a 17.5 percent interest in the concessionaire.

At the time, the MD hinted that they were looking at acquiring the remaining stake at Sheltam but that now is almost a done deal. Mr Sadek explained that they are only awaiting the nod from the International Finance Corporation (IFC) so that they can assume the 100 percent control of Sheltam.

“We signed a two-tier agreement with the first part being that we have acquired 49 percent (at Sheltam) which is done and we have a conditional sale and purchase agreement with (Roy) Puffet of Sheltam for our acquisition of the remaining 51 percent. It is conditional because that is what is stipulated in the shareholder agreement of RVR and in the loan agreement with the IFC,” he explained.

He added that they had already sought the approvals from the IFC and were hoping to hear from them soon.

“We are not going to negotiate again on the 51 percent nor do a new contract. It’s one document with two parts. One is 49 percent, the other one is effective once the two conditions are met,” he emphasised.

Citadel will become the largest shareholder with three representatives to the RVR board up from the current two.

IFC, the private sector arm of the World Bank which has been involved in this project in several areas, has been leading the project financing although it has been accused of delaying funding for the revitalisation of the rail line.

The private firm has indicated its intention to inject $150million (Sh11.5b) into RVR to turn around the company. This money is expected to be generated from one third equity, one third debt and the remainder from internally generated profits.

Mr Sadek was optimistic that once the railway line was fully operational, they would break even after two years.

He added that Citadel Capital plans to ensure that RVR is well funded which would enable them to achieve their goal of having an efficient rail network for East Africa and at the same time ensure a good return on investment for their shareholders.

“We are going to work closely with the shareholders and with the lenders to start unlocking the loans which are sitting there and have not been used alongside other subsequent capital injection,” he added.

At the same time, Mr Sadek downplayed boardroom wrangles that have plagued the concessionaire since it was formed in 2006 saying it was not their plan to own 100 percent at RVR.

“Our intention is to make sure that we have enough leverage inside the company to make sure that the story of the last few years is not repeated meaning that when the company needs funds, there’s a capital called on and the funds come in,” he said adding that they had consulted all the shareholders who had agreed to work together to ensure the success of the firm.

Currently, Trans-Century has a 20 percent shareholding in RVR while Prime Fuels of Kenya holds a 15 percent stake. Centum Investments Kenya, Tanzanian Mirambo Holdings and Australia’s Babcock and Brown each own a 10 percent share.

Capital News

BY SARAH WAMBUI

NAIROBI, Kenya, Mar 8 - Prime Minister Raila Odinga has maintained that politicians and leaders implicated in corruption must be held to account for the government’s war against graft to succeed.

Mr Odinga on Monday told an International Monetary Fund forum on Africa’s Economic transformation that corruption had been the biggest impediment to development.

The Premier who insisted that the war on corruption must not be personalised also said Kenyans should single out individuals who swindled public property for their selfish gains. The PM who last month clashed with the President over the suspension of Ministers William Ruto and Sam Ongeri over corruption allegations further added that African countries continued getting financial aid which was fraudulently lost.

“Corruption actually removes the necessary resources from public to private hands; it is committed by individual people even if they are politicians and when you point them out you are not politicising it you are fighting it. Most of the aid money finds itself into private pockets; some of it into private bank accounts in Europe and here the giver and the taker are equally guilty,” he said adding that global financiers also needed to put in place measures that would ensure money was rightly used.

Mr Odinga further observed that bad governance and tribalism were also big threats to Kenya’s economic potential as they hindered development.

“It is a paradox that the richest continent is also the poorest. Brazil was a former colony of Portugal, India was a former colony to Britain but they are way ahead of us. When we got independence Kenya’s economy was equivalent to South Korea but right now their economy is almost 46 times bigger than ours. What did they do right that we did wrong? We have the power to change this country” he said.

Nobel Laureate Professor Wangari Maathai who was also present added that financial prudence remained Africa’s biggest challenge. She cautioned Kenyans against waiting for external intervention to sort out the country’s matters saying home grown solutions would work best.

“The point I want really to emphasise and what I have experienced in my three decades of work here is that money has never really been the problem. It is not as if IMF will not give us the money. It is not as if any governments represented here will not give us the money. It is what we do with that money; it is how we spend that money and that’s the challenge that we have,” she said.

IMF Managing Director Dominique Kahn however hails efforts by African governments to address the vice saying more should be done.

“The reality at least here in Kenya is that the government is really committed to addressing this problem and that is also something totally new. Not so many people have been convicted yet but the change is enormous,” he said.

Bob Geldof an international political activist known for his anti poverty campaigns in Africa also asked African governments to increase their anti corruption efforts and also challenged African countries to rise up and reach their economic potentials.

“We all want our turn to eat but we don’t have to gorge ourselves ladies and gentlemen; we don’t have to get fat and stuff ourselves so we no longer think clearly. There is enough to go around and when we rob a country for personal gain we commit the greatest theft against a nation’s future destiny. And that is why corruption is such a hideous, despicable and abominable thing,“ he said.

Mr Odinga also said ethnicity had led to the unfair distribution of resources terming it ‘the disease of the elite’. He said it divided the country and equally hindered the nation’s development.

“The elite in competition for resources usually resort to ethnicity to discriminate against their fellow country men and this has been in this country from regime to regime and it is a big enemy to the people of this country. The real Kenya will not emerge until we have dealt with it as well as corruption,” he said.

The PM also noted that Africa had survived the global recession however adding that remittances from the Diaspora into Kenya had declined and that trade and investment opportunities had also been affected.

“It had been reasoned that the crisis would be confined to the developed countries whose economies were intertwined financially; that Africa would be insulated from this. But this of course turned out very wrong. It is said that when the United States sneezes, Europe catches a cold, Asia develops influenza and Africa gets TB or HIV/AIDS and that is how it actually turned out,” he said.