At the same time, profound challenges persist. Within days of Obama’s visit, Kenya’s Office of the Auditor-General released a troubling report that brought to light some uncomfortable numbers. According to the report, only 26% of money spent and collected by the government has been fully approved in an audit for 2013-2014. The health department alone failed to account for 22 billion Kenyan shillings ($216 million) worth of spending. What is more, over 12,000 false names were discovered on the government payroll.
“There is no development that can be done if it’s not budgeted for.” These are the words of Edwin Kiprono, the president of Kerio Community Trust Fund, explaining the importance of citizen’s alternative budgets in Kenya.
In 2010, Kenya adopted a new constitution, establishing a system of devolution in which more control and responsibility was shifted from the national government to newly-created county-level governments. These governments, which began operating in 2013, now oversee certain aspects of local health care, infrastructure, and education. For the first time, the counties are now expected to raise their own revenue through taxes and fees and establish their own budgets for spending that revenue.
Such a move provides great opportunity for local development to be taken into the hands of local citizens – but it also requires citizens to be engaged and provide input and feedback to their local governments.
Throughout Kenya, CIPE has been working with local partners to develop citizen’s alternative budgets – a system of participatory budgeting made possible through the devolved government system. One of the counties CIPE has been working in is Elgeyo Marakwet – a diverse county in which citizens have various and competing concerns and opinions on what the priorities of their county should be when developing a budget and spending its resources.
Those wishing to send aid, remittances, and investment overseas face exchange rate manipulation and inflated fees when using traditional money transfer services. One emerging alternative to using these services is to transfer Bitcoin internationally. Bitcoin is alluring because financial institutions do not manage its online trade. The transfer of Bitcoin is therefore much less costly than transferring traditional currencies because it bypasses bank fees and regulation.
Several organizations are already beginning to trade and transfer Bitcoin across international borders, and profitable businesses have developed plans to facilitate these trades. Although hesitant investors remain wary of Bitcoin, optimists see the potential to make a big splash in the way $167 billion of foreign aid and $436 billion of global remittances are transferred to the developing world.
Bank-less money transfers are swiftly becoming the norm in the developing world, where less than fifty percent of adults own a bank account. Hassle-free mobile money services such as Kenya’s M-Pesa, Vodacom Tanzania and MTN Uganda are used in lieu of credit and debit cards in these areas. However, the benefits of convenience and low cost mobile transfers are largely limited to domestic transactions.
“The work of development is too important to be left in the hands of governments alone. It is the responsibility of everyone. Especially the business community… Business, like governments, will have to be at the forefront of this change. No one can do it alone.”
In the latest Economic Reform Feature Service article, CIPE partner and Chief Executive Officer of the Kenya Association of Manufacturers (KAM) Betty Maina highlights the crucial role of multi-stakeholder platforms in an enabling business environment.
“The work of development is too important to be left in the hands of governments alone. It is the responsibility of everyone. Especially the business community.” This was Betty Maina’s main point in her speech last week at the 8th Public-Private Dialogue (PPD) Workshop in Copenhagen, Denmark.
The workshop explored how the government, private sector, and civil society organizations can effectively use PPD platforms for collaborative governance and leadership in addressing difficult challenges. Through its collaborative process, PPD provides a structured, participatory, and inclusive approach to policymaking directed at reforming governance and the business climate.
As the CEO of CIPE partner the Kenya Association of Manufacturers (KAM), Maina spoke on the crucial role that multi-stakeholder PPD platforms can play in building a better enabling environment for business. Maina recognized the social, economic and environmental challenges that we face, and the important role the business community can play in tackling those challenges.
“Instinctively people recognize that [these] challenges demand a new kind of leadership, a new way of doing things,” she said. “Business, like governments, will have to be in the forefront of this change. No one can do it alone.”
One need to look no farther than Kenya as an example of the private sector’s role in solving societal problems. During the 2007 election crisis, the business community was crucial in supporting peace efforts and dialogue which helped prevent further violence. The business community was also instrumental in supporting the development of Kenya’s new constitution in 2010 and now plays a critical role in its implementation.
Transparency International’s Corruption Perceptions Index ranks Kenya in a distant 136th place. That low ranking confirms the sentiment often encountered in Nairobi: corruption is widespread in many aspects of life, from bribing a policeman to avoid charges for alleged traffic violations to graft at the highest levels of government, as poignantly described by a British journalist Michela Wrong in her book about Kenyan whistleblower John Githongo, It’s Our Turn to Eat.
Not surprisingly, many segments of the Kenyan society are fed up with the status quo and ready for change. That includes many companies in the private sector that see their growth potential and competitiveness stifled by the highly corrupt environment. Such companies are not waiting for the government to clean up its act and instead are taking the initiative to limit corruption through setting up or strengthening internal compliance procedures.
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)?
The CIPE Development Blog provides coverage of the Center for International Private Enterprise and its partner network at work -- highlighting successes, drawing out lessons from failure, and exploring the broader issues of political and economic development. For more information visit CIPE.org.