TOPIC: Political Cycles and Their Impact On The Economy: The Kenyan Experience

PRESENTER: EDWARD KISIANG`ANI (PhD)

DATE: 15th -17th FEBRUARY 2017

VENUE: KENYA SCHOOL OF MONETARY STUDIES, NAIROBI

WHAT IS POLITICS?

Process by which People of a polity make collectivedecisions.

Term is also applied to civil governments but is also usedin other interactions eg academic, family, c0rporate andreligious fields.

Kenya’s politics comprises many fields but elective politicsrules supreme

Aristotle defines politics as affairs of the state.

We can thus say politics could mean all the activitieswhich occur under a defined administrative, judicialdisposition.

WHAT IS POLITICS conti…. In political Science, politics is defined as study of power

and authority and also the exercise of power andauthority

Authority exists whenever several or many peopleexplicitly permit somebody to make decisions for them(Lindblom,1977)

Power means ability of individual or group to achieveoutcomes that reflect his/its objectives.

WHAT IS POLITICS conti…. In an untidy process called politics, some people who want

authority struggle to get it while others try to control thosewho have authority.

Those who succeed to control the group with authority wieldpower ( Weber, 1947).

This group is really dangerous. You have had it in Kenya fromGeoffrey Kariithi, Charles Njonjo, Simeon Nyachae, Sally Kosgeiand probably now Joseph Kinyua now.

WHAT IS POLITICS conti…. Where there is homogeneity as opposed to heterogeneity

of interests conflicts are less.

Kenya’s political terrain has complex heterogeneousinterests- regional, ethnic, individual, cultural, spiritual,class etc. Navigate through these diverse interestsremains the biggest challenge for any political formation.

Yet people with power and authority guided by narrowinterests continue to control the decision making processin the use and distribution of resources.

WHAT IS ECONOMICS.

Study of the optimal use of scarce resources (scarcebecause the resources have alternative uses.

It is the science which studies human behavior as arelationship between ends and scarce resources.(Robbin1932)

Challenge is always in Resource distribution- this is alwaysa political process done by those with authorityinfluenced by those with p0wer.

WHAT IS ECONOMICS conti… Often policy markers advise those with power and authority

on the best way they could use our resources- this is the workof economists like you.

Yet people with power and authority are not known to followthe advise of the professional economists.

People with power and authority are more interested inaddressing immediate political interests than observingrational economic models.

Some Theoretical considerations Cyclical theory In history the theory sees society as a product of alternating Dark

and Golden Ages. Plato taught the concept of the Great Year, andother Greeks spoke of aeons (eons). ... In the East cyclical theories ofhistory developed in China (as a theory of dynastic cycle) and in theIslamic world in the work of Ibn Khaldun

In economics, the theory purports to identify repeatingcycles in the economy, the stock market, politics, socialtrends, or other things. It is used to make predictions, oftencatastrophic, about the near future.

This shows society hardly makes progress because ittends to repeat past episodes of fortune and misfortune

Some Theoretical considerations cont.. Linear Theory:

History is about progress. The world is constantly improvingand heading in an ultimate direction.

There are no real repetitions in history, although they mayappear to exist every once in a while.

This theory is heavily based on the idea of cause and effect:"this happened, and then that happened; that happenedbecause this happened first.

So has Kenya’s political and economic history been Cyclic orLinear?

POLITICAL CYCLES

A definite historical period in which a certain political elite,ethnic group –unite in purpose or action- to wield power andauthority and by extension control the use and distribution ofresources.

The cycle could cover one or several election periods 5,10 , 15or even 40 years depending on whether you are talking aboutKenya or Zimbabwe.

In some countries where the head of state and governmentremains the same despite the elections, there may not beserious policy changes but there could be internalrealignments in which some old actors are excluded from thepolitical equation while new ones are administered.

POLITICAL CYCLES conti…. In Kenya, you can generally say that between 1963 and

1978, Kenya experienced the first political cycle definedby the leadership of Jomo Kenyatta. This period embracedseveral elections in which Kenyatta’s post of presidentwas hardly contested.(1964, 1969, 1974 etc)

Daniel Moi’s tenure was similar for 24 years with changesat the bottom but status quo at the top (1978, 1983,1988, 1992,1997)

Kibaki’s cycle of about 10 years lasted between2002(actual change in government) and 2013

Now we have the Uhuruto cycle from 2013- todate

POLITICAL CYCLEs cont….

According to world bank reports reviewed by News play,the economy is more likely to slow down multipartyelections than to grow and take time to heal in singleelections the office of the president is not up for groups.

Slowdown is because of fear of violence.

Political cycles cont….

POLITICAL CYCLEs cont…. 1st three election years of multi-party era the economy

slowed to a virtual standstill shrinking to 0.8% in 1992and inclining forward to by 0.5% in 1997 and 2002.

In 2007 and 2013 plunge in economic growth did notmaterialize because of governance and electoral reforms.

2007 economy grew by 7%- only to change in 2008-growth rate of 0.25%.

Chat on the economic performance

Economic performance cont…

Economic performance cont…

POLITICAL CYCLES ONE: The Kenyatta Era.

Characterized by a dominant Kikuyu elite-dominating civilservice and cabinet.

They delivered most resources to Central Kenya.

By the time Kenyatta dies in 1978 - Central Kenya had moretarmacked roads, more hospitals, schools than any other partof the country. Is this accidental?

During the elections under the Kenyatta regime more moneywas spend by those with power and authority to ensurenobody opposes Jomo and to sponsor Kenyatta’s sycophantsfrom other communities to win elections.

POLITICAL CYCLES ONE: The Kenyatta Era cont… KENYATTA’S KEY PROVINCIAL COMMISSIONERS Paul Boit — PC Central, Western and Nairobi (1964-80) Kalenjin –

Nandi, son of chief Isaiah Cheluget — PC Nyanza (1969-80). Kalenjin – Kipsigis Charles Koinange — PC Central and Eastern (1967-80). KIKUYU from

Kiambu, son of senior chief, Mbiyu Koinange’s brother and Kenyatta’s brother-in-law

Eliud Mahihu — PC Eastern and Coast (1965-82). KIKUYU from Nyeri, colonial administrator and ex-Home Guard

Isaiah Mathenge — PC Coast, Rift Valley and Eastern (1965-82). KIKUYU from Nyeri, ex-Home Guard and detention camp warder

John Godhard Mburu — PC Coast, North-Eastern, Nairobi and Western (1964-79). KIKUYU from Murang’a

Simeon Naychae — PC Rift Valley and Central (1965-79). Gusii, son of chief

POLITICAL CYCLES ONE: The Kenyatta Era cont….. SENIOR KIKUYU PARASTATAL HEADS IN THE 1970S Ephantus Gakuo — Director-general of East African Railways (later Kenya Railways),

1987-1970s. MURANG’A Bethwell Gecaga — Chairman, Industrial Development Bank (1976-9). MURANG’A Julius Gecau — Managing director, East Africa (later Kenya) Power and Lighting

Company (1970-84). KIAMBU James Karani Gitau — General manager, Kenya National Trading Corporation (1969-

79). KIAMBU Stanley Githunguri — Executive chairman, National Bank of Kenya (1976-9).

KIAMBU Charles Karanja — General manager, Kenya Tea Development Authority (1970-81).

KIAMBU John Matere Keriri — General manager then managing director, Development

Finance Company of Kenya (1972-82). KIRINYAGA Peter Kinyanjui — Chairman, East African Harbours Corporation (later Kenya Ports

Authority) 1970-80. KIAMBU John Michuki — Executive chairman, Kenya Commercial Bank (1970-9). MURANG’A Philip Ndegwa — Chairman, Agricultural Finance Corporation (to 1974). KIRINYAGA Matu Wamae — Executive director, Industrial and Commercial Development

Corporation (1969-79). NYERI

POLITICAL CYCLE ONE:The Kenyatta Era.conti… This means more money was put in voter intimidation,

transportation and buying. Every election moved the Republicaway from serious economic investment to consumption.

Those who had made money combined their wealth with stateresources to win back power and authority

POLITICAL CYCLE TWO: The Moi Era. Those who wielded political power and authority came

from the Rift Valley.

New actors emerged new tycoons such as Mark Too.Nicholas Biwott, Philemon, Chelegat, Ezakiel Bargentunytook to the podium with power at authority to determinethe use and distribution of resources.

The Kenyatta/ Kikuyu script was replicated in a Kalenjinfashion.

We slowly started seeing real efforts to establish new wellequipped schools in the Rift Valley.

POLITICAL CYCLE TWO: The Moi Era. Cont….. Even a university and international Airport were

built and in Eldoret airport came up.

Civil Service was dominated by Rift Valley people.

Tarmacking of roads and supply of electricity in theKalenjin areas was enhanced. Was this acoincidence? NO.

So most resources were spent on voter bribery,intimidation, buying and manipulation. So fakeprojects were set up to persuade voters if they voteKanau there would be development( eg the OlKalou poer fraud).

POLITICAL CYCLE TWO: The Moi Era. Cont….. The controversial electrification programme in Kipipiri

constituency of Nyandarua District , which was abandoned in 1995, was back on schedule, 20 days to the 2002 General Election .

The programme was hastily abandoned in 1995 when Kanulost the seat to the outgoing MP, Mwangi Githiomi of DP, during a by-election necessitated by the death of former MP, Laban Muchemi( The Standard 7 December 2002)

The economic implication of this withdrawal is obvious

POLITICAL CYCLE TWO: The Moi Era. Cont….. Increased money supply as was the case in 1992 Multi-party

election was done against a crippled production system.Inflation rates hit the double digit mode.

The economic downturn was worsened by increase politicalintolerance by the state and the general uneasiness by theInternational donor community.

Moi’s situation was aggravated by the declining fortunes ofthe Cold War- something Jomo Kenyatta never experienced

POLITICAL CYCLE THREE:THE KIBAKI

ERA

Return of most of the features in Cycle One.

Re-diversion of resources to Central Kenya.

Domination of Kenya’s political and economic life by theCentral Kenya elites.

No wonder, this led to bloody political confrontation in 2007that cut economic growth from about 7% in 2007 to 2% in in2008!

In the countdown to 2013 election, the drop in economicperformance was relatively low from 5.4% to 5.3%. This wasbecause of the ICC threat. Nobody wanted to cause troubleagain for fear of being implicated by the Hague –based court

POLITICAL CYCLE FOUR; The Uhuruto Era

The harmonization of political cycle one and two. Inwhich there has been increased forces in thedevelopment of central Kenya and rift valley.

Most of the people who control power and authorityunder Uhuruto came from the two regions.

UhuruRuto Manifesto In an attempt to win 2013 election, Uhuruto appealed to people’s

emotions over the ICC matter and quickly floated a very attractive election Manifesto that promised the following:

Five international stadiums in Nairobi, Kisumu, Mombasa, Nakuru and Meru.

Promote talent amongst the young

Free Wi-fi to every major town .

Zero tolerance on corruption.

Inclusive governance of all tribes,

Laptops to every school going child.

Creation of 1 million jobs yearly, for the youths

Connection of electricity to all Kenyans across the grid.

There was renewed hope that we then have got our politics right. We now know that optimism was not entirely accurate

The Uhuruto Era conti…. Founded on Kikuyu-Kalenjin interests

Most public appointments favoured the two communities

The details captured in the Capacity Assessment and Rationalisation of the Public Service report exclusively show that 77 per cent of all public service positions are held by six communities.(Kikuyu Luhya ,Kalenjin, Luo, Kamba, Kisii etc)

This means that the rest of the tribes are left with 23 per cent positions to fight for

The Uhuruto Era conti…. In the counties, the Kikuyu have the highest number of

employees at 27,947 which translates to 22 per cent,

While the Kalenjin are second with 18,623 employees.

Is this an accident?

The report also states that there are counties where minorities or external groups constitute a higher proportion of the public service employees. One such county is Marsabit county

Borrowing and expenditure Since President Uhuru Kenyatta and his Deputy

William Ruto took office in 2013, the corruption has

widened and deepened.

Corruption invariably crops up in most conversations

about the national condition and its effects have

started to grind away at some of the country’s most

vital institutions.

A recent survey by auditors PricewaterhouseCoopers

(PwC, 2016) found Kenya to be the world’s third-most

corrupt country in terms of the prevalence of economic

crimes.

Borrowing and expenditure cont…. Kenyatta’s is the most corrupt regime in Kenya’s history was

confirmed by a $2.7 billion Eurobond commercial loan the

country borrowed for recurrent and development expenditure in

2014.

Kenya’s most credible independent experts can’t conclusively

tell if this money ever arrived in the country in its entirety and, if

it did, it wasn’t immediately “eaten,” as Kenyans say..

The regime’s reaction to the resultant public questioning and

opprobria in the face of these scandals has not been quenched

friends and relations are repeatedly mentioned in some of the

most egregious scandals and a wall of impunity appears to

protect them.

Election and Economy Kenya’s biggest economic hurdle right now is itsupcoming election. According to a recent new reportfrom the parliament’s budget office released in (May2016), the general election in August 2017 will be the“greatest challenge” to the national economy.

Elections are always a time of uncertainty for Kenya.

The election mood currently being experienced asthe country is gearing itself for the 2017 elections havedampened the investment mood of the country asmost investors are practicing the wait-and-seeapproach,”

Election and Economy cont… Reports by economists and analysts advising the budget office,says that investors have beenare waiting to start new projects orput more money into existing ones after the General Election. In2017, the pace of growth should thus remain flat, at about 5.6%,last year’s rate of expansion. (Officials had previously given anoptimistic projection of 6.0%.)

Elections have been bad for the Kenyan economy in the past.The economy has slowed or remained stagnant through three ofthe five multi-party elections held in Kenya.

But does Electoral spending lead to poor Macro economy and micro economy?Catering services

Catering is the business of providing food and drinks. Political campaignsconsist of people gathering in one place to be address by their candidate. Thismeans that people must eat and drink.

Graphic Design and Printing

This is a recruitive deal at this time of the year. Candidates are printingposters, t-shirts, and other campaigning materials

Car hire/transport services

If you have a bus or other big vehicle that can convey a decent number ofpeople, then consider approaching an election candidate.

Courier services

This is a service you can do at a small-scale level. Politicians will need todistributor letters, parcels, and campaign materials to different parts of theirconstituency

Election spending cont…. Entertainment

Election campaigns and partying are synonymous. Campaign

trails are characterized by loud music, dance and drama and

booze

Citizen journalism/blogging

This needs some levels of professionalism and passion. Let us

start with photography. People want to keep memories

Consultancy services

It is a wise decision for a candidate to hire a consultant or a

consultancy firm to do things he cannot do.

Election spending cont…. Volunteering

This is not exactly a business but it can keep you occupied and earn you some allowances.

Offer professional services

For example some people are good talkers, orators, writers, researchers, planners and posses organizational skills which can add value to a particular candidate.

Events management

The most important part of the campaigns for a candidate is rally where he communicates to people who are going to vote.

Important notes and Observations While the electioneering season can be a godsend for

some enterprises, it’s not all good news for the economyas a whole.

Increased inflation, heightened political risk, lower valuefrom the labour market with energies diverted topoliticking, and relaxed enforcement of laws as the vote-seeking incumbents seek political expediency are justsome of the negative effects on business

Important notes and Observations cont… “Overall, elections are bad for the economy because they tend

to support ‘cash cows’ and ‘cash traps’ – enterprises that yieldprofits in the short term but have no long-term future orbenefit for the wider economy,”

Economists argue that ‘cash cows’ and ‘cash traps’, which tendto succeed during elections, flourish at the expense of ‘star’and ‘question mark’ enterprises that either earn good profitsor offer the potential, with suitable investment, to providesustainable long-term growth and therefore aid the economy.

Challenges for the in UhurutoGovernment National Security:

Corruption:

Diplomacy & International Relations-

Diaspora

Economy

Taxes

Transportation and 24 Hour Economy

Tourism

Tribalism, Nepotism and Cronyism – Appointments

An important questions about Uhuruto Has the Uhuruto to presidency dealt with the bad

features of cycle one two and three?

If they have then kenya is experiencing linear growth that means we are on a path to progress.

But if they haven’t then we are in the cyclical mode in which we keep on repeating our past era by engineering negative ethnicity, corruption and discriminatory development

So is 2017 election about our cyclical nightmare or is it about our linear progression, thanks you

THANK YOU