Generation Kenya – the Equity Generation

There’s a fabulous piece on Kenya in this month’s Vanity Fair magazine. Written by BINYAVANGA WAINAINA, the piece draws you into the heaving, thriving marketplace of Kenya. I highly recommend you read the entire 5-page piece, but it’s so well done I can’t resist a good-sized excerpt here. I think it speaks for itself, capturing as it does the fits and hopes of being in the informal market and the huge impact of rule of law, political development, and clean government — all issues near and dear to us at CIPE, of course.

… [After Kenyan independence in 1963] we were building an economy on top of a crumbling colonial infrastructure and sensibility. In the late 80s, roads fell apart and water pipes burst, and we were being held hostage by the tyranny of small minds and big ambitions, our political leaders…

[By 2000] the country was unraveling. Western donors, unable to deal with a nakedly criminal government, essentially pulled out…
Nairobi was one big bar. There were bars on sidewalks, at every street corner, in all the housing developments. There was sex and dancing everywhere. My generation was not wasting time. There was alcohol for every budget. If you kept your salary in the bank, bank charges ate it up. The big banks were actively seeking to shed customers—poor, rich, they didn’t really care. They were making huge profits lending the now completely amoral government money through treasury bonds.

Thousands and thousands of people were broken by the banks. And the rest of us were dancing, loving frenziedly, fighting, eating up time, cash in pocket. There were so many holes in the government that cash was leaking everywhere, little booms and busts; benders and debts were the status quo…

Eastlands and Mathare North, a slum, were booming. Somali traders had set up shop. There were bazaars everywhere, and thousands of people milling about wheeling and dealing. As Kenyans’ capital left banks and formal businesses, as more and more college graduates started small, informal businesses, as nearly everybody started to buy secondhand clothes and handmade furniture and smuggled goods, the informal sector in Nairobi became the engine of the economy.
It seemed as if the whole Somali economy had settled here—and it set the bar high—bringing in all manner of products, cheap and useful, and sometimes just shiny, breakable, and new-looking. ..

Since independence, in 1963, there has been a war of sorts between “formal” retail and “informal” retail. Informal retail paid off the city council, set up shacks and mobile shops, and overwhelmed the city. Formal retail complained, and the informal traders were cleared away—there were pitched battles on the streets every day. Old women could pack up their goods in minutes and disappear. The most hated people in Kenya, the city-council askaris—a very colonial enterprise—would disembark from trucks and use batons and tear gas to disperse people.

By 2000, Nairobi was also one giant, heaving market. … Goods were brought in from Dubai and sold in little partitioned stalls. Soon, every second abandoned building, it seemed, was taking short-term leases to start these “Dubai exhibitions.” One floor of a building could host sometimes hundreds of vendors. The informal sector was drilling into the heart of the city, selling anything you could think of. Soon, trade in leases began. You could sell your 10-by-10-meter stall for a goodwill payment of up to $5,000. Today, these small stalls, thousands of them, are the formal retail industry of the city. An evolution took place, and space is now used more efficiently, to maximize profits.
…
In the 1990s, nobody outside of the politically connected and the banks was making real money. We hobbled on, dizzy and frenzied, sinking even when we thought we were climbing. Trying to avoid at all costs dealing with the vampire state: paying tax, registering your business, even holding a bank account. Then came 2002.
We knew President Moi had agreed to retire, and we expected doom. …For as venal as he was, he and his machine were law and order. …

In the months building up to the elections, we began to trust one another. Everywhere I went, I heard the same words. Roads. A new constitution. Taps. Water. Electricity. Education. The usual tribal chauvinism and crude political sycophancy vanished. Nations are mythical creatures, gaseous, and sometimes poisonous. But they start to solidify when diverse people have moments when aspirations coincide…. We began to become something resolute and possible. For—and this must be remembered—like most African countries, we had been a nation for a short time—only 39 years. This year, Ghana is 50, Zimbabwe 27. Eritrea, already called a “basket case,” is only 14 years old. It should be remembered, also, that not much was left to build new nations with. ..

After its conception in the mid-1980s, Equity Bank was a small mortgage lender. In 1994, it rebounded from financial struggles to become a micro-finance institution…Today, Equity is Kenya’s largest bank. It recently hit the million-customer mark. It controls one-third of the country’s bank accounts. It targets as customers the vast majority of Kenyans who, until recently, did not have bank accounts at all. It has invested millions of dollars in building a sophisticated I.T. system. It is commonly thought to be a bank of the people. They call you Sir! They are nice to you! You can see the manager! You can get a small loan in one day! No more seven months of frenzied calls and asking your cousin to talk to so-and-so. They have a rapidly expanding network of more than 100 A.T.M.’s across the country.

The Nairobi Stock Exchange is on fire. Since 2002 the index has risen 787 percent in dollar terms, making it one of the world’s best-performing markets. This boom is not unique to Kenya. African stock markets in general have been performing with increasing robustness. In 1994 the Ghana Stock Exchange was the best-performing among all the emerging stock markets in the world. In 2002–3, it was one of the best-performing stock markets in the world. It continues to grow, as do the markets of Nigeria and Uganda.
..
Since its inception, in 1995, the Kenya Revenue Authority has more than doubled its annual revenue. Our budget, which now includes an allocation for free universal primary-school education, is now almost fully funded from our own resources.
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All these changes have something to do, too, with a changed technological landscape. Africa is the fastest-growing mobile-phone market in the world. In 2005, the continent had 135 million subscribers. There are more than 6.5 million mobile phones in Kenya, a country of 37 million people. Now all you need to start a business is a phone. To get your national high-school exam results you text 7070 and provide your student number. You can pay your electricity bill by text message as well. This year, Kenya was one of the first countries in the world to introduce digital money. …

Last year, the Kenyan economy grew by 6 percent. Following Equity’s example, the historically aloof banks are now scrambling to make solutions for the small entrepreneur. A source at Barclays Bank projects that in 10 years Kenya’s boom will be driven by small- to medium-scale enterprises.

We are, though, far away from where we need to be. Our new government is struggling to adjust to a transparent way of doing business. ..The capital base of Kenya, of Ghana too, is still small, and it will take many years before these countries can build more durable economies. In Kenya, poverty remains—the majority of Kenyans struggle to feed themselves when the rains fail. At least 46 percent of Kenyans still live below the poverty line.

… What has changed is that we can vote in a referendum against the desires of the president when they do not suit us. What has changed is that, according to government statistics, in 2005 a full 10 percent fewer Kenyans than in 2000 were living below the poverty line.
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[in the news] Africa feels like one fevered and infectious place. In this diseased world, viruses spread all over—and a small local crisis in one corner can infect the rest of the continent in one quick blink. In a highly suggestive New York Times piece, dated April 23, 2007, and titled “Africa’s Crisis of Democracy,” Nigeria’s recent flawed election is used to show how everything democratic in sub-Saharan Africa is teetering on shaky stilts.

This habit—of trying to turn the second-largest continent in the world, which has 53 countries and nearly a billion people of every variety and situation, into one giant crisis—is now one of the biggest problems Kenya, South Africa, Tanzania, and Ghana face.

We have learned to ignore the shrill screams coming from the peddlers of hopelessness. We motor on faith and enterprise, with small steps. On hope, and without hysteria.