When government regulations establish a privileged position for certain companies or individuals it often creates opportunities for rent-seeking — an abstract economic concept perfectly illustrated by the plight of Khartoum’s 20,000 wheelbarrow users.
Typically, rent-seeking involves firms like regulated power monopolies leveraging their privileged position in a marketplace to extract excess profits by suppressing competition. Rent-seeking doesn’t generate wealth, it just redistributes it to those with more power and influence. The company benefits, and often the government officials involved benefit, but the rest of society loses out.
The regulations that enable rent-seeking are usually deeply entrenched and difficult to dismantle – for no reason other than the fact that someone, somewhere is benefiting from them.
The BBC recently examined a peculiar, yet classic, example of how such nonsensical regulations hamper entrepreneurship and economic growth: wheelbarrow fees in Sudan. According to the report, local Sudanese in Khartoum are not allowed to own their own wheelbarrows. Instead, they are forced to rent them from contractors who have made a deal with the local government.
Participants at a recent training workshop for South Asian women’s business associations in Kathmandu.
African women are almost twice as likely to have a new business idea they would like to develop than women in Europe and the United States, according to a new study commissioned by Dell. This is further proof of what many of us already know – that there is no lack of ideas and energy among women entrepreneurs in developing countries. It is institutional barriers and local economic conditions that primarily hold back women who are looking to start a business.
CIPE and its partners have supported women entrepreneurs in a number of countries to make significant gains in increasing their role in the economy and their input to public policy. For example, women’s business associations in Nigeria have successfully advocated to increase their role in a national conference to review the nation’s governing institutions.
In Pakistan, CIPE and its partners worked to reform the National Trade Organizations Ordinance to allow women to form their own associations and improve women’s representation on already established chamber boards. The Bangladesh Women Chamber of Commerce and Industry has successfully advocated for local and national level policies to improve access to credit for women entrepreneurs. And in Papua New Guinea, a new CIPE-supported women’s business association helped to establish a “women’s desk” at the largest commercial bank in the country to make it easier for women entrepreneurs to obtain bank loans.
Naledi Modisaatsone is a CIPE-Atlas Corps Think Tank LINKS Fellow at the Urban Institute.
Africa is in the news. The U.S.-Africa Leaders’ Summit is being held in August, the first of its kind. President Obama will be welcoming leaders from across the African continent to the nation’s capital in less than two months. The summit holds many promises; it could mark a turning point in U.S-Africa relations.
While there are many issues that can be discussed, not all of them should be on the agenda for this summit. To achieve the maximum benefits, it is very critical for African leaders to prioritize just what to put on agenda, and what to leave out. It is tempting to want to bring all the issues, but highly focused interactions are more successful. Topics for discussion should reflect the most critical issues regarding African economies and address challenges to sustainable growth and development.
One important issue is private sector development. Development finance and private sector entrepreneurship are powerful, but under-utilized, assets for development in Africa. While most countries have set goals for inclusive growth, they will not be achieved without better harnessing private sector resources that are ultimately the drivers of development.
By Ben Kiragu
One of the things Kenya’s new government succeeded in doing within its first year was to reduce the number of days it takes to move cargo from the Mombasa port to Malaba from 18 to 8 days — a 56 percent improvement in just 6 months. This is a major achievement which has boosted commercial relations with Uganda and other neighboring landlocked countries, forestalled competition from alternative transit routes, and ultimately reduced the cost of doing business, therefore improving economic growth in the region. How did the government accomplish this?
First of all, the president set up a cabinet subcommittee of Cabinet Secretaries dealing with the Northern Corridor — the transit links connecting Kenya’s landlocked neighbors to the sea — which reported to him during weekly cabinet meetings. Second, administrative changes were instituted; all agencies involved in the process including KRA, KEPHIS, KEBS and KMA were instructed to work under the authority of the Kenya Ports Authority and relocated to Mombasa port. Also all government agencies were to take orders from KPA and finalize operations in Mombasa without reference to any other authority. Finally, the process of clearing was digitized and weighing bridges were modernized.
What are the lessons learnt from this? There was very clear knowledge, analysis, and understanding of the problems and where the bottle necks lay, therefore solving the problem was undertaken with almost surgical precision. There was very little need for new financial resources or the construction of major physical infrastructure. This is one of the key reasons why most projects in Kenya are delayed, as they wait for budgetary allocations or get into procurement bureaucracy and controversy as we have come to see especially as a result expanded democratic space. Lastly and probably most important there was clear and dynamic leadership, the president led from the front on this one and delegated to decisive and action-oriented managers. The impact is there for all to see.
Creation of jobs was one of the rallying calls of the Jubilee campaign with 1 million jobs promised per year, but so far no major job creating initiative has borne fruit. The government seems to be waiting for big projects such as the Standard Gauge Railway and the Galana-Kulalu irrigation project to create jobs; one wonders if this will work, as time is clearly not on their side especially given the issues associated with some of these projects. My recommendation: why not replicate the cargo movement magic to prune low-hanging fruits and achieve quick wins in job creation by creating an enabling environment for micro and small enterprises (MSEs)?
A member of one of Kenya’s new county assemblies sets up an office in an open-air market outside of Nairobi. (Photo: VOA News)
One way to improve democratic governance is to devolve more responsibilities to local and regional governments — but only if those governments have the capacity take on such responsibilities and a willingness to listen to input from their constituents. This is the challenge Kenya faces as it implements the devolution outlined in its new constitution.
On April 9th, Chief Executive Officer of CIPE partner in Kenya Institute of Economic Affairs (IEA) Kwame Owino gave a presentation at the National Endowment for Democracy on the status of the country’s constitutional reforms. Owino explained the contentious transition that has been occurring in Kenya since the March 2013 elections, which transferred some key powers from the central government to 47 newly-created counties.
Owino cited many roadblocks in the way of quick, successful decentralization, including power struggles between newly-established governors and county senators, a highly centralized government bureaucracy reluctant in some cases to relinquish power after an institutional life of 50 years, and an economy weakened by poor policies and widespread corruption.
To address the uncertainty regarding the strength of the devolution movement, Owino stated that accountability was the answer, arguing that Kenyan civil society organizations had a place as “protectors of devolution,” and that they must put pressure on the government to stay the course of decentralization. For devolution to succeed, the constitution needs to be followed exactly, and not be avoided or ignored as it is in many instances to maintain some of the employment and power institutionalized in the old bureaucracy.
Gregg Talley is the CEO and President of Talley Management Group. He is serving as a mentor to Small and Medium Entrepreneurial Resource Centre in Kenya through CIPE’s Knowhow Mentorship program.
I have the good fortune of traveling to Kenya annually to see friends and family. But now, thanks to CIPE, I have another great reason to visit. I met with the CEO and founder of my KnowHow Mentorship mentee association, the Small and Medium Entrepreneurial Resource Centre (SMERC), June Gathoni, in Nairobi on my trip this March.
We all know the value of face to face meetings and this proved itself again to be true for us. While we had many productive calls and have been able to deliver on the value of the mentorship, the ability to sit together and discuss our lives, challenges and plans for the future proved invaluable to us both. We now have a personal connection that will remain well beyond the life of this mentorship program.
Like any small to midsize program, June has A LOT going on and has to balance management of the day to day with the bigger picture role she has for the future growth and sustainability of the organization. Luckily, SMERC is completely aligned with the KENYA 2030 Plan envisioned by the national government.
Even better, SMERC has “sandals on the ground” in the counties where much of the devolution of government programing and spending is being focused. We have been working on how June and SMERC can raise their visibility within academia, the corporate sector, and government in Kenya.
By David Owiro. This post originally appeared on IEA Kenya’s blog.
If you have ever taken a walk around the major towns in Kenya you will come across warning notices and signboards announcing to the world that “this plot/land is not for sale” or that “this property is not for sale.” Also, if you are a keen reader of the daily newspapers you will come across, in the back pages, notices announcing “caveat emptor or buyer beware” on some parcels of land. These are often put up by individuals seeking to enforce their property rights by deterring members of the public who are likely to be defrauded by unscrupulous groups or individuals.
And now, the National Land Commission, which is the body mandated by the constitution of Kenya to hold public land in trust, has also began placing adverts warning members of the public against buying land without carrying out background searches or relying on certificates of titles.
The reason all this is happening is that people have taken advantage of the previously weak property rights regime that allowed for exploitation and manipulation of official land and property records in order to defraud unsuspecting members of the public.