Earlier this week the Central Bank of Kenya announced that it had put Imperial Bank under statutory management for what the CBK described as ‘unsafe business conditions at the bank’. This forced the Nairobi Securities Exchange to suspend it’s listing and locked in Sh58 billion of depositor’s funds. Media reports hinted at ‘massive fraud’. Imperial Bank was said to be one of the top ‘second tier’ banks in the country. As a result the CBK’s action sent ripples of anxiety through the banking fraternity and business community not only because it happened but how it happened: reminding Kenyans of the bad old Kanu days when banks collapsed regularly as a result of especially election-related politics, mismanagement and corruption. It remains to be seen whether the CBK’s action given how it was taken, was the most prudent given the wider context.
The jitters were also caused in part by the general condition that attends to economic affairs in Kenya. On the face of it the government is in the middle of a massive cash crunch. Reports of constitutional commissions not having received their allocations; teachers salaries delayed and those of others too; development funding to key ministries not yet disbursed etc. News that the allowances of legislators might also have been delayed evoked far less sympathy but the overall situation caused the Budget and Appropriations Committee of Parliament, to summon the Treasury Cabinet Secretary Henry Rotich, to explain where the money had gone! News that MPs were thinking of allocating them funds for their psychiatric care however was better received with some pundits arguing this should become effective immediately and applied expeditiously.
Yet the government’s whining about the wage bill for example has been shown by experts to be hogwash. So too, the idea that the Sh210 billion that goes into the counties is somehow ‘bankrupting’ the country. While it’s clear we have devolved corruption and there are significant losses in the counties, Kenyans are generally, at the current time, pragmatic about corruption at the grassroots. Their attitude is, “the centre (Nairobi) are the big thieves and they always have been. Now that crumbs are falling off the table and reaching the counties it’s our turn to eat and we wont stop while they are gorging in Nairobi”. It’s an imperfect situation but that’s our political economy. Besides, in the counties wananchi can see the results of devolution spending directly, they can touch and feel it.
To add to mood that the government is broke and clueless, in the past three weeks alone they’ve issued Sh50 billion in short term paper at over 20 per cent in part to pay the interest on long term paper that’s been redeemed which they borrowed from Kenyans at lower rates. In truth Kenya’s tax revenue in the last fiscal year was Sh1.16 trillion – more than enough to cover our needs if prudently managed. What’s clear is that debt management has collapsed into a total mess.
Three phenomena have then combined to contrive a crisis where none should exist: hubris, mismanagement and what has emerged as the most corrupt regime in Kenyan history. So scandal-prone is the Jubilee regime and so brazen the looting that its been normalised among certain sections of society. The cost of this in terms of deterioration of security and basic public service delivery by central government has been devastating.
When mandarins were trooping out to obligate us to the $2 billion Eurobond in June last year it was accompanied with the hubris and sneering arrogance of little boys who’d been let into the toy shop with daddy’s credit card. The profligacy has been mind-boggling and the excuses grimly amusing. In the firing line has been what we all thought was a global gold standard financial management system Ifmis, for example, which is now blamed for corruption as if it is a sentient being. All it has proved is that you cant digitize integrity. Give crooks the tightest system in the world and they’ll use it to steal.
Given what we collect in taxes and spend on recurrent obligations Kenya shouldn’t be in the middle of a cash crunch. Wild borrowing and out of control corruption has contributed to the current crisis. We are also in a rather unique situation. The Jubilee regime has hired some of the cleverest Kenyans in the world. People with the most impressive CVs. They are advised by international agencies similarly full of clever people with utterly impressive CVs. What we are learning the hardest way possible is that clever people caught up in their own hubris quite often do the very dumbest things. Kenya is a victim of this malaise as well. There are wise old men and women in Kenya, and many not even that old, who saw the current ‘crisis’ coming a couple of years ago. It is to these sober minds this regime should turn and in the meantime heed the advice meted out to people who’ve dug themselves into a hole: stop digging!
Correction: In last week’s article I stated that the High Court had opened a new station in Malindi. In actual fact the new station is in Tana River and in Malindi a decentralised Mombasa Court of Appeal sits.