Nipate
Forum => Kenya Discussion => Topic started by: RVtitem on July 12, 2016, 08:38:48 PM
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www.worldpoliticsreview.com/articles/19057/made-in-africa-will-ethiopia-s-push-for-industrialization-pay-off
ALEM GENA, Ethiopia—As she shuffles about the factory floor, watching over the machines that weave spools of thread into fabric, Asrat Yimam personifies the future of the Ethiopian workforce.
A 27-year-old mother of one from the nearby capital, Addis Ababa, Yimam has spent the past six years toiling for Ayka-Addis, a Turkish-owned textile and garment factory and the largest firm in Ethiopia’s emerging apparel industry. Six days a week, for 1,500 birr ($68) a month after taxes, she rises early for her eight-hour shift, dons her spotted blue and white Ayka uniform, and spends her day churning out cotton for t-shirts, pajamas and bed sheets bound for Europe. As a relatively senior employee, she’s better paid than many of Ayka’s 6,000 Ethiopian staff. With her 10th-grade education, she admits it would be hard to find better. Yet Yimam and her husband still struggle. ...
Yet a critical turning point may be just
around the corner. After years of
implementing an active industrial policy, characterized by massive state
investments in infrastructure, energy
and human capital, Ethiopia’s economic
architects insist the building blocks are
now in place to spur a manufacturing-
sector takeoff driven by foreign investment. Like China and the Asian
Tiger states before it, which
transformed from peasant societies to
leaders of industry in the course of a
generation, Ethiopia plans to start by
focusing on labor-intensive merchandise bound for export. Most
notably, its abundance of cheap labor,
low-cost electricity, and cotton-growing
potential have made it the newest
frontier of the global garment trade—
an “African Lion” alternative to industry-leader China, where wages are
quickly becoming uncompetitive.
Already, “Made in Ethiopia” garments
can be found on the racks of global
retailers like H&M, Wal-Mart and Tesco.
In the coming months, the U.S. sourcing giant Phillips Van Heusen (PVH), which
owns brands like Calvin Klein and
Tommy Hilfiger, will begin operating
from a new 130-hectare industrial park
in the southern Ethiopian city of
Hawassa. It will be joined by 10 other leading textile and apparel firms from
India, Sri Lanka, Indonesia, Hong Kong
and China. According to Arkebe Oqubay,
a special economic adviser to Prime
Minister Hailemariam Desalegn, the
park is expected to generate 60,000 jobs and $1 billion in export earnings
from textiles and garments—nine times
the sector’s current level—once it
reaches full capacity in the next few
years. At least eight other government-
financed parks, intended for textiles, apparel, leather, pharmaceuticals and
food processing, are under construction or being planned across the country.
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By the time of the “Asian
miracle,” however, most had liberalized their economies and opened up trade as part of World Bank and International Monetary Fund-induced structural adjustment reforms. Soon, Africa was flooded with low-cost Chinese imports.
Many of its existing manufacturing
hotspots, like northern Nigeria’s once- thriving garment sector, began to
founder.
“From a competitive standpoint, China was a major reason why Africa didn’t industrialize,” says Henok Assefa, managing partner of Precise Consult, an Addis Ababa-based firm specializing in investment and business intelligence.
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For all the buzz surrounding
Africa’s growth in services, and the
possibilities offered by the continent’s embrace of tech, history has shown that the most effective way to absorb excess labor and boost worker productivity is through a sustained shift toward labor-
intensive industry. Aside from a handful of Gulf oil producers and tourism or finance-oriented microstates, no country on earth has managed to achieve a high standard of living without putting large numbers of workers into factories.
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Now, starry-eyed technophile African leaders can talk about leapfrogging the historical stages of economic growth until the cows come home but there is no hiding from the fact that sustained growth and reduction of poverty will only come once Africa’s poor (up to 70% of whom still depend on subsistence agriculture in SSA) have access to well paying jobs. Yes, the types of jobs and products will be different, from say steam powered 18-19th century northwestern Europe or even 20th century East Asia, but there will have to be jobs for the masses. M-apps won’t do, as they will only benefit those who are already well off (mainly the creators), once they are sufficiently monetized. Asking poor people to be “entrepreneurial” with high interest micro-loans and grow themselves out of poverty as a matter of national development policy will also not work.
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To quote Chris Blattman:
The difference between a country with $1,500 and $15,000 of income a head is simple: industry. All the microfinance and microenterprise programs in the world are not going to build large firms and import technology and provide most people with what they really want: a stable job, regular wages, and a decent work environment.
The good thing is that in quite a few countries on the Continent structural conditions favorable to mass job creationare beginning to congeal. Hopefully sooner, rather than later, PRSPs will start focusing less onpro-poverty “pro-poor” initiatives and more on strategies for mass job creation. Remember, “ making the lives of poor people better is not the same thing as fighting poverty.” Over to you Development Economists and African policymakers.
https://kenopalo.com/tag/premature-de-industrialization/
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Totally agree. Ethiopia is the next China. The gov has really capacity to influence policy directions..needed for industralization. Labour at 68 dollars per month...is about half of min in Kenya. They are bringing in huge hydro power. Already many chinese companies have relocated there...now I think they are about to cornered leather/shoe industry, have cellphone assemblies, car assemblies, name it.
We need to be really close to Ethiopia....lots of great things are about to happen there.
Kenya path will have to follow the rare US of A model.
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Ethiopia's govt is very organized, at least from perception. They build foundations that will propel the country forward. Laws ant its enforcement seem to be enforced. Tanzania is another one that is really building foundations. In Kenya, they build and then the foundations come later. Youll find beautiful places in Kenya, but no infrastrusture. No laws to force property developers to put infrastructure before building, so its chaos everywhere.
Case in point, Kenya's land is extremely expensive due to speculators. Why didnt the govt put in place mechanisms to counter speculation that has driven cost of infrastructure to such exhorbitant levels? By the time Kenya wakes up, it will be 2030 and Tanzania has the biggest EA economy.
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THere was talk of Konza city, but I guess speculators came and gobbled up the land, sold and resold it, until now its too expensive to build any infrastructure around the area. Vesus Tanzania's model that forbids speculation.
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If Ethiopia becomes industrialized that would be a first for Sub Saharan Africa. Let's wait and see. They definitely have a huge advantage when it comes to low cost labor.
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Low cost labour, 80-90M strong population, Huge hydro power coming online (they are building one of Africa largest along the blue nile-6,000MW) and Gov capacity to influence things (owns all the land & can dish it left right and center). Economy is still gov controlled with no private sector allowed in key sectors like banking/telcoms/name it. Their economy has been growing at double digit the last 20yrs I think. They already overtook Kenya as largest economy in Eastern Africa...and the rate of their growth...should already be 3 or 4th biggest economy in sub-saharan Africa. This is classic China/Britain model.
Kenya economy is sophisticated, gov has very little capacity to influence anything (thanks to democracy), labour is way more expensive but more productive, economy is completly liberalized.....we cannot go the China way...there is a very rare US of A model that we can pursue. The US managed to industralize in early 20th century despite having these kenya kind of "disadvantages".
If Ethiopia becomes industrialized that would be a first for Sub Saharan Africa. Let's wait and see. They definitely have a huge advantage when it comes to low cost labor.
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Pundit,
Your thinking sometimes puzzles me. I disagree with you. Yes Kenya has capacity to influence the whole economy - by working hard to pass and enforce laws that benefits the majority. Current laws are not even enforced. The legislature and the executive, and the judiciary thinks that dressing in expensive suits and running around selling an image is the way, but I tell you theres more than expensive suits. Raila and Kibaki told us that paying people more money will reduce corruption, so the legislature raised there pay to astronomical figures, so did the corrupt individuals. During Moi's time - which i hated, few became rich by being civil servants. Check your latest figures - govt has become the tool to grab and be rich.
The executive sends these robbers to the judiciary, and puff the case is never resolved. Goldenberg is still going on!!. Retirements and other things mean the case will certainly be thrown out. So the wheels go round and round, same stuff in and out.
The same scenario is now playing in the county governments. Enforcement of corruption is a term only used on paper.
Meanwhile, issues like developing the basic framework for infrastructure development necessary for economic growth is lacking. Uhuruto are busy grabbing onto everything they can get their hands on, Especially swallowing other parties so Jubilee can become the only party in the country.
Getting back to 2030, Kenya will be left behind by Ethiopia, Tanzania, Rwanda, and Uganda, in that order. Kenyans Keep doing the same thing expecting different results.
Low cost labour, 80-90M strong population, Huge hydro power coming online (they are building one of Africa largest along the blue nile-6,000MW) and Gov capacity to influence things (owns all the land & can dish it left right and center). Economy is still gov controlled with no private sector allowed in key sectors like banking/telcoms/name it. Their economy has been growing at double digit the last 20yrs I think. They already overtook Kenya as largest economy in Eastern Africa...and the rate of their growth...should already be 3 or 4th biggest economy in sub-saharan Africa. This is classic China/Britain model.
Kenya economy is sophisticated, gov has very little capacity to influence anything (thanks to democracy), labour is way more expensive but more productive, economy is completly liberalized.....we cannot go the China way...there is a very rare US of A model that we can pursue. The US managed to industralize in early 20th century despite having these kenya kind of "disadvantages".
If Ethiopia becomes industrialized that would be a first for Sub Saharan Africa. Let's wait and see. They definitely have a huge advantage when it comes to low cost labor.
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You totally misunderstand and mix things up. Kenya gov (or Uhuru) like US obama has very little "power" to influence the economy compared to China or Ethiopia PM. And the answer is our constitution. Our democracy. Our economic model. Our land laws. Uhuru is not all powerful..his power is checked by constitution, parliament, judiciary, etc etc. He has little leeway. But let get back to the ecomony and gov capacity.
1) Land - Ethiopia gov basically own all land (kenya gov has to buy land -it owns very little); Ethiopia or TZ or China (leasehold land) gov owns ALL LAND. You want to get 50,000 acres-- TZ or Ethiopia gov can give you that land tomorrow. Kenya hakuna.
2) Public sector versus Private sector. Kenya basically is private sector ran. Public institution are just regulators. Ethiopia has little public sector. Private sector is not allowed to own a bank. an ISP. telcom company. There are so many sectors ran purely by parastal -pure monopolies. The nearest you have in kenya is maybe KPLC only. What that mean is gov of Ethiopia has huge public sector that it can deploy for good or bad.
3) Dictarorship. In kenya or US people will argue about minimum wage and bla de bla. There are unions, politicians and name it. In Ethiopia gov decides and does it. Just like China. There is no minimum wage in Ethiopia. You get paid salary of 20 dollars. In kenya no company looking for low cost manufactuing can come here because minimum wage is 120USd. Ethiopia gov can dish incentives like tax cuts or whatever without caring. In kenya...parliament essentially make the budget and have to approve it.
I can go on and on. Ethiopia is BIG GOV. Kenya is a small GOv. Capacity wise...Ethiopia's is HUGE. This when used badly result into poverty that nearly 100M ethiopia find themsleves. When used correctly like now....then you're seeing 10% growth.
I would rather we keep our small gov....and depend on the private sector. This is our model. It the US model. It the India model. We cannot become Ethiopia or China.
As for TZ -- me think outside the minning sector - they are crap. All the extra growth they have been seeing is due to minerals being discovered.Just another Sudan or Angola or Botswana or Namibia or Nigeria. They won the natural resource lottery. We have been one of unluckiest country in earth with little underneath and above ground...but we have done well.
Pundit,
Your thinking sometimes puzzles me. I disagree with you. Yes Kenya has capacity to influence the whole economy - by working hard to pass and enforce laws that benefits the majority. Current laws are not even enforced. The legislature and the executive, and the judiciary thinks that dressing in expensive suits and running around selling an image is the way, but I tell you theres more than expensive suits. Raila and Kibaki told us that paying people more money will reduce corruption, so the legislature raised there pay to astronomical figures, so did the corrupt individuals. During Moi's time - which i hated, few became rich by being civil servants. Check your latest figures - govt has become the tool to grab and be rich.
The executive sends these robbers to the judiciary, and puff the case is never resolved. Goldenberg is still going on!!. Retirements and other things mean the case will certainly be thrown out. So the wheels go round and round, same stuff in and out.
The same scenario is now playing in the county governments. Enforcement of corruption is a term only used on paper.
Meanwhile, issues like developing the basic framework for infrastructure development necessary for economic growth is lacking. Uhuruto are busy grabbing onto everything they can get their hands on, Especially swallowing other parties so Jubilee can become the only party in the country.
Getting back to 2030, Kenya will be left behind by Ethiopia, Tanzania, Rwanda, and Uganda, in that order. Kenyans Keep doing the same thing expecting different results.
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It is interesting to read these arguments about how the way for Kenya to industrialize is to follow the "USA model". First thoughts that come to mind: How many countries since the start of the 20th century have done so? (I don't know, but perhaps some examples will be given to show why Kenya should succeed.) Are there any serious proposals elsewhere for Kenya (or any other country intending to industrialize today) to suggest that it might work for Kenya (or any other country intending to industrialize today)? If none, is it because people do not know US history?
One of the most curious things about these arguments is the timing aspect: Kenya is to follow the "USA model", but comparisons between Kenya and the USA are being made with respect to today's USA. Surely, a more logical argument would be to consider the USA at the time that it was industrializing. If we look at the USA of the time, here are just a couple of points to consider:
* The USA had (and still has) an abundance of natural resources that were put to good use. (And "value-adding" was done there, not via "export and then import".) Kenya?
* USA manufacturers and other producers demanded and got (from the government) high tariffs on imports. How is Kenya doing with stuff from Kung-Fu?
* Tremendous innovation that had a direct practical impact on all aspects of life. Here is a list of some USA inventions in the period 1800-1900: https://en.wikipedia.org/wiki/Timeline_of_United_States_inventions_(before_1890)
How is Kenya doing in the innovation business? Come to think of it, how it even doing in the "copying" business?
* Land: How cheap and available was land when USA industrialization started? As an example, just compare SGR's purchasing of land today and the USA's "railroad land grants" of the time.
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Pundit,
FYI. The provate sector controls very little. Local townships control what is built where and how much resources the entity will take - eg water roads. But the private sector has an edge in that they can use what we call an eminent domain law. This allows any project that is for public good can take away your property and compensate your at a fair market value. Example, Trump used the law to build his casinos in NJ and the owners were compensated at a rate that was fair.
In Kenya, if you wanted to build such, speculators move in and jerk up the price of land to the extent that the project will not make any money when finished. If they build it, then it has to be passed to consumers, who often complain that its too expensive and soon move to open air markets. So greed has taken over and everything is inflated to such an extent that it's not possible to build cheaper roads, sanitation systems, schools, etc.
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I think you're shooting from the hip. I meant the USA of 1900 had nearly the same conditions that we have here and that exist in India for example. I don't know if you're complaining about the constraints that we have or expressing your frustration. But I can tell you the USA became industralized...not through low cost manufacturing...but through higher productivity and efficiency in their economy..that attribute of US economy still shines through. If you don't have plenty of land and cheap labour...you can make the most of what you have. And that is what kenya shows...by far the most modern country in East Africa...with economy bigger and more sophisticated than many in Africa...yet we don't have natural resources.
Kenya and India find themselves in the same spot. It not a bad spot to be if you compare the alternative is a dictatorship gov like Ethiopia or Russia or China that at one point managed to move people forward...and often backward.
Kenya path to modernization...doesn't have to follow China or that Britain used in centuries ago or that Ethiopia are using. In any case we can't. We don't have the same conditions. We cannot dish out 30,000 acres to someone who will employ kenyans for salary of ksh 2,000 per month. That doesn't mean we cannot get into manufacturing. It just mean we have to do a little more sophisticated stuff....where productivity and efficiency pays more than primitive labour/land/capital.
Kenya is not doing that..but growing at 6%...while Ethiopia is doing 10%...TZ's 7%....therefore we can still match Ethiopia growth target of 10%...if we were to work a little bit harder and were to get lucky with natural resources.
Of course this stuff won't make much sense for people with little understanding of world's history & economics. People who see China or US now...and just want us to get there in a minute.
It is interesting to read these arguments about how the way for Kenya to industrialize is to follow the "USA model". First thoughts that come to mind: How many countries since the start of the 20th century have done so? (I don't know, but perhaps some examples will be given to show why Kenya should succeed.) Are there any serious proposals elsewhere for Kenya (or any other country intending to industrialize today) to suggest that it might work for Kenya (or any other country intending to industrialize today)? If none, is. it because people do not know US history?
One of the most curious things about these arguments is the timing aspect: Kenya is to follow the "USA model", but comparisons between Kenya and the USA are being made with respect to today's USA. Surely, a more logical argument would be to consider the USA at the time that it was industrializing. If we look at the USA of the time, here are just a couple of points to consider:
* The USA had (and still has) an abundance of natural resources that were put to good use. (And "value-adding" was done there, not via "export and then import".) Kenya?
* USA manufacturers and other producers demanded and got (from the government) high tariffs on imports. How is Kenya doing with stuff from Kung-Fu?
* Tremendous innovation that had a direct practical impact on all aspects of life. Here is a list of some USA inventions in the period 1800-1900: https://en.wikipedia.org/wiki/Timeline_of_United_States_inventions_(before_1890)
How is Kenya doing in the innovation business? Come to think of it, how it even doing in the "copying" business?
* Land: How cheap and available was land when USA industrialization started? As an example, just compare SGR's purchasing of land today and the USA's "railroad land grants" of the time.
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Kenya's private sector is huge. It employs 3 times the public/gov sector in formal jobs. This is not true in every country. Informal sector is even bigger. The trick is to get the informal sector into formal sector.
Pundit,
FYI. The provate sector controls very little. Local townships control what is built where and how much resources the entity will take - eg water roads. But the private sector has an edge in that they can use what we call an eminent domain law. This allows any project that is for public good can take away your property and compensate your at a fair market value. Example, Trump used the law to build his casinos in NJ and the owners were compensated at a rate that was fair.
In Kenya, if you wanted to build such, speculators move in and jerk up the price of land to the extent that the project will not make any money when finished. If they build it, then it has to be passed to consumers, who often complain that its too expensive and soon move to open air markets. So greed has taken over and everything is inflated to such an extent that it's not possible to build cheaper roads, sanitation systems, schools, etc.
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I think you're shooting from the hip. I meant the USA of 1900 had nearly the same conditions that we have here and that exist in India for example. I don't know if you're complaining about the constraints that we have or expressing your frustration.
No need to inject emotions into this. I have pointed out a couple aspects of the USA at the time of its industrialization. And there are many more. If you wish to argue about "nearly the same conditions", then what you should do is explicitly state them so that we can discuss them. We can then get to questions such as these, with you supplying the details of how exactly we are to follow "the USA model":
How many countries since the start of the 20th century have done so? (I don't know, but perhaps some examples will be given to show why Kenya should succeed.) Are there any serious proposals elsewhere for Kenya (or any other country intending to industrialize today) to suggest that it might work for Kenya (or any other country intending to industrialize today)? If none, is. it because people do not know US history?
You have stated that:
The US managed to industralize in early 20th century despite having these kenya kind of "disadvantages".
Actually the USA's industrialization phase largely occurred in the second half of the 19th century, and a great deal had already occurred before that.
You also state that:
I meant the USA of 1900 had nearly the same conditions that we have here and that exist in India for example.
And what same conditions might those be that we have here and in India? (I note that the USA had become the world's largest manufacturer by around 1895, that being a direct result of the applied technological innovation indicated above.)
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Low cost labour, 80-90M strong population, Huge hydro power coming online (they are building one of Africa largest along the blue nile-6,000MW) and Gov capacity to influence things (owns all the land & can dish it left right and center). Economy is still gov controlled with no private sector allowed in key sectors like banking/telcoms/name it. Their economy has been growing at double digit the last 20yrs I think. They already overtook Kenya as largest economy in Eastern Africa...and the rate of their growth...should already be 3 or 4th biggest economy in sub-saharan Africa. This is classic China/Britain model.
Kenya economy is sophisticated, gov has very little capacity to influence anything (thanks to democracy), labour is way more expensive but more productive, economy is completly liberalized.....we cannot go the China way...there is a very rare US of A model that we can pursue. The US managed to industralize in early 20th century despite having these kenya kind of "disadvantages".
If Ethiopia becomes industrialized that would be a first for Sub Saharan Africa. Let's wait and see. They definitely have a huge advantage when it comes to low cost labor.
Suppose we can't go the China way. What is Kenya going to make and that the rest of the world just can't resist sourcing from there?
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MOON Ki,
The way I see it. Kenya, Uganda and Tz should have long ago by now made an economic union. Then as one entity, they would do the right things(which are many) while marketing the region for investors to bring their factories in(Kenya, Uganda, Tz, whichever suits them). They don't seem any closer to that than 20 years ago. In fact the vibe seems to be negative on that front.
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MOON Ki,
The way I see it. Kenya, Uganda and Tz should have long ago by now made an economic union. Then as one entity, they would do the right things(which are many) while marketing the region for investors to bring their factories in(Kenya, Uganda, Tz, whichever suits them). They don't seem any closer to that than 20 years ago. In fact the vibe seems to be negative on that front.
That too is how many people and organizations whose job is exactly to "see" in such matters also see it. For their part, the leaders of the three countries talk endlessly about "regional integration", with regular "summits" and many trees felled in producing the paperwork. The reality, however, does not seem to match. I'm not sure why that is so, but I get a sense of the same sort of Kenya "arrogance" that many years ago led to the demise of the embryonic union.
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Suppose we can't go the China way. What is Kenya going to make and that the rest of the world just can't resist sourcing from there?
Or from any of the countries that are taking up from where China is going other ways ... Indonesia, Thailand, Vietnam, etc. "Higher productivity and efficiency" are all very well, but in what and how? What is the starting point?
The case of Mondelez (swallower of Cardbury) says quite a few things about the situation in Kenya, as does that of Eveready which also moved its manufacturing to Egypt.*** Mondelez says that Nairobi will remain as its regional hub, that Kenya in particular is a growing market for their products and they expect sales to increase, but that it is, overall, cheaper to make chocolates and whatever in Egypt and import them. (Did they consider improving productivity and efficiency instead?) And the land where the former plant were in Kenya? Eveready has already made a decision: they will make money from it the Kenyan way of today---real estate.
**According to the World Bank, these are just the latest of manufacturers leaving Kenya. The local industry too has noted that:
Manufacturing nightmare that is turning Kenya into graveyard for companies, March 2016.
More than 200 employees of Tata Chemicals woke up to the shocking news that they would be rendered jobless.
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The same fate is now awaiting about 700 employees of Kenya Fluorspar in a month’s time when the Kerio Valley-based firm puts a padlock on its doors.
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“I was in a meeting recently with some players in the steel industry who told me that the industry had shed 18,000 jobs,” Kenya Revenue Authority (KRA) Commissioner General John Njiraini said in an earlier interview.
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Colgate Palmolive, Reckitt Benckiser, Cadbury Kenya, Bridgestone, Devki Steel and Procter & Gamble have also shifted their bases.
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What is worse is that more than half of Kenya’s exports are related to agriculture — including tea, horticulture and coffee — but not much of value addition is happening.
Read more at: http://www.standardmedia.co.ke/business/article/2000193411/manufacturing-nightmare-that-is-turning-kenya-into-graveyard-for-companies
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RV Pundit wrote:
I meant the USA of 1900 had nearly the same conditions that we have here and that exist in India for example.
India too is very different, right now, from Kenya, which explains why India-Kenya trade is tilted in India's favour. What does India produce and export to the rest of the world? And Kenya? This should give you an idea of the differences:
* Kenya imports a lot of pharmaceuticals, machinery, steel products, power transmission equipment, yarn, and automobiles from India.
* The latter imports tea, vegetables, leather, soda ash and scrap metal from Kenya.
https://www.standardmedia.co.ke/mobile/article/2000208198/kenya-to-push-for-deals-to-address-trade-imbalance-with-india
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MOON Ki,
The way I see it. Kenya, Uganda and Tz should have long ago by now made an economic union. Then as one entity, they would do the right things(which are many) while marketing the region for investors to bring their factories in(Kenya, Uganda, Tz, whichever suits them). They don't seem any closer to that than 20 years ago. In fact the vibe seems to be negative on that front.
That too is how many people and organizations whose job is exactly to "see" in such matters also see it. For their part, the leaders of the three countries talk endlessly about "regional integration", with regular "summits" and many trees felled in producing the paperwork. The reality, however, does not seem to match. I'm not sure why that is so, but I get a sense of the same sort of Kenya "arrogance" that many years ago led to the demise of the embryonic union.
When I see comparisons made between Kenya, Tz or Ug to show who is doing better it's a bit of a head scratcher. These were colonial entities built for exploitation by mzungu who left 50 years ago.
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Kenya's private sector is huge. It employs 3 times the public/gov sector in formal jobs. This is not true in every country. Informal sector is even bigger. The trick is to get the informal sector into formal sector.
Pundit,
FYI. The private sector controls very little.
Size or numbers alone do not necessarily equate to power. Also, the "private sector" is, by far, the major employer in just about every country in the world, including China and Ethiopia. So yours is not a convincing response to a claim that Kenya's private sector controls little.
And when it comes to actually controlling anything, the informal+jua-kali sector, which is a part of the private sector, should not even get a mention. Obviously. Yet it is the largest employment sector in Kenya.
Moving on past that:
I was curious about how big this informal sector is in Kenya. I looked at numerous data sources, among those I found informative is the 2015 report from the UN Economic Commission for Africa. The figures are around 75% among men and 80% among women (% of total employment). A UNECA report of the same year indicates that---because of a lack of various protections, opportunities to upgrade skills, the lack of productive income---this lot is largely trapped in poverty. Interestingly, 30 years ago, the figures were almost "reversed". This summary and the corresponding full report, from the Brookings Institution, are interesting:
http://www.brookings.edu/blogs/africa-in-focus/posts/2016/05/16-tapping-kenya-economic-growth-golubski
The other thing I was curious about is the contribution of this sector to GDP. Hard figures are hard to come by, for the obvious reason: the folks in the sector are not much into the business of reporting statistics. The figures I have seen appear to have been arrived at by looking at the formal sector and its contribution and then subtracting that from the total. Those figures lead to the inevitable conclusion expressed in numerous reports---that the sector is one of low productivity and relatively low contribution to GDP. (In Kenya, as in most of Africa, the high-productivity sectors are not creating many jobs.)
Prospects for the future:
Over the last year or so, the World Bank has produced a few reports that are of significance to Kenya and the rest of Africa. (Off the top of my head, a good one to read would be "Africa's Demographic Transition: Dividend or Disaster?" See Google)
- One of those was somewhat "negative"---that around 1950 (or so) most of the world's poor were in Asia, but Africa has increasingly taken over that "market" and, on the present path, will have cornered it completely in a a couple of decades or so. Even with "Africa Rising". (It appears that the male member is rising more than the economy is ... )
- The one I mention above states that merely not reproducing like rabbits will not be enough to make a significant change. The reports recommends the "East Asian" way at such a phase. A part of that is developing a serious export-driven economy---not of scrap metal and vegetables.
- The World Bank's most detailed report on Kenya this year recommends that Kenya focus on improving commercial agriculture, which is still the mainstay of Kenya's economy, as a major path to poverty reduction. (There are good reasons for that, whether one chooses to look at 19th-Century USA or 20th-Century East Asia.) What is Kenya doing in that regard? I'm not sure. But I hear a lot of noise to the effect that those at the bottom will soon be able to lift themselves up by producing "apps" (Konza City, Silicon Savannah, etc.) or using MPESA to join the financial industry. The sexy stuff.
- One recent report I read from the African Development Bank is to-the-point on exports: Kenya will not get far as long as its main exports are what the report calls "low processed agriculture" (specifically tea and cut flowers). This,of course, is the story of Africa---from Ghana and Ivory Cost, producing most of the world's cocoa and then importing chocolates etc., to Nigeria, exporting crude oil like nobody's business and then spending billions on importing the products of refining. (By way of contrast, take a look at what Singapore makes out of oil.)
I like the optimism expressed in the Brookings Institution report: the "African Lions"! Goes well with "Africa Rising!". And of Kenya, RV Pundit writes of "by far the most modern country in East Africa...with economy bigger and more sophisticated than many in Africa". Certainly true enough. But at the core of that is no more than an observation that even among the down-and-out there will be some at or near the top. C- students in the sub-class of D students. One needs to look at the rest of the class.
As I see it, Africa's prospects are not especially bright on the present path. Whether there is the will or motivation to change that is far from clear. I think the stated end-goal requires more than endlessly stating goals and visions and whatever.
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When I see comparisons made between Kenya, Tz or Ug to show who is doing better it's a bit of a head scratcher. These were colonial entities built for exploitation by mzungu who left 50 years ago.
This is exactly what the problem with Kenya is.
After the British handed power to Jomo, he continued the same process of exploiting the country and "natives". This explains, among others, why Jomo and his mates went on a massive land grabbing spree.
Over 50 years down the line, the same practice continues, with our major exports being, as Moonki mentioned, raw materials feeding overseas industries. Basically, all of our institutions are primarily engaged in keeping the status quo with no interest in industrializing Kenya. Our elites became colonists.
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This is what happens when you're trying to google things up and try to understand them.US industralization model (2nd -around 1890 to 1920s-) was unlike Britain or China or Russia or Asian tigers. The China model is to deploy huge cheap and almost slavish labour amongst other common conditions (free land, import restriction, huge public investment in infrastructure). The US was bit different coz it industralize while wages were comparatively higher; they didn't deploy million of cheap american slavish labour; yet the were able to industralize. There are many ways of skinning the cat. Kenya doesn't have the crazy cheap labour that exist in Ethiopia. But we have better skilled labour thanks to competitive education we got here.
In summary for kenya-we have to follow the US model--and first get to where India is-- before we get finally get to US. India manufacture high skilled stuff - pharma,biotech,softwares,etc -yet it still not industralized -coz they have globally competitive education that is English based just like Kenya. Those jobs are few but highly paying.
Ethiopia will first get to Indonesia then finally China. Low cost slavish labour in unprecedented scale. Slowly move the food chain of manufacturing from mudane to high tech stuff. Kenya can easily leapfrog the mundane stuff if it continues investing heavily in Education like it been doing.
Different ways of skinning the cat.
I think you're shooting from the hip. I meant the USA of 1900 had nearly the same conditions that we have here and that haexist in India for example. I don't know if you're complaining about the constraints that we have or expressing your frustration.
No need to inject emotions into this. I have pointed out a couple aspects of the USA at the time of its industrialization. And there are many more. If you wish to argue about "nearly the same conditions", then what you should do is explicitly state them so that we can discuss them. We can then get to questions such as these, with you supplying the details of how exactly we are to follow "the USA model":
How many countries since the start of the 20th century have done so? (I don't know, but perhaps some examples will be given to show why Kenya should succeed.) Are there any serious proposals elsewhere for Kenya (or any other country intending to industrialize today) to suggest that it might work for Kenya (or any other country intending to industrialize today)? If none, is. it because people do not know US history?
You have stated that:
The US managed to industralize in early 20th century despite having these kenya kind of "disadvantages".
Actually the USA's industrialization phase largely occurred in the second half of the 19th century, and a great deal had already occurred before that.
You also state that:
I meant the USA of 1900 had nearly the same conditions that we have here and that exist in India for example.
And what same conditions might those be that we have here and in India? (I note that the USA had become the world's largest manufacturer by around 1895, that being a direct result of the applied technological innovation indicated above.)
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Sounds like a conspiracy theory. Jomo actually grew the economy at double digit before things went south in late 70s due to the global oil crisis. You cannot wake up and move from raw material to finished goods in few years. That is simplistic thinking. There are a lot of background work that has to be done -some needing lots of years -before you can change the economy of the country.
When I see comparisons made between Kenya, Tz or Ug to show who is doing better it's a bit of a head scratcher. These were colonial entities built for exploitation by mzungu who left 50 years ago.
This is exactly what the problem with Kenya is.
After the British handed power to Jomo, he continued the same process of exploiting the country and "natives". This explains, among others, why Jomo and his mates went on a massive land grabbing spree.
Over 50 years down the line, the same practice continues, with our major exports being, as Moonki mentioned, raw materials feeding overseas industries. Basically, all of our institutions are primarily engaged in keeping the status quo with no interest in industrializing Kenya. Our elites became colonists.
-
What we need is increase in productivity whether its in agriculture, manufacturing or even service sector. The increased electrification is a step in the right direction as now more mechanisation and automation will occur especially in the Informal sector. The other thing is taxation, corporate tax is 30%, paye starts at 12k and I think after 50k the rate is 30%. This is very punitive. So most SME opts to operate informally instead of paying punitive taxes( wage pressure increases cost of labour ). That's a catch 22 because by being informal it means they're not getting access to good credit to purchase capital goods which would lead to increased productivity.
The companies that has closed like cadbury were losing market share to more nimble local companies namely kenafric industries. The bottomline is how many africans are involved in manufacturing? That is almost the preserve of indians, we've few africans manufacturers I see it all the time when supermarkets invites suppliers. The culture of investing real estate, government tenders etc has to end we start real investment in serious business producing real stuff or services. The good thing is in some sectors like light manufacturing local companies are doing great. For example kimberly clark is having a hard time competing with chandaria. We have local pharmaceutical manufacturers being bought by indians firms to expand manufacturing and export to the rest of africa http://www.businessdailyafrica.com/Indian-firm-to-buy-Sh1bn-stake-in-Universal-Corp/-/539552/3076566/-/view/printVersion/-/brl0m9/-/index.html.
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You just like to argue for it's sake. How can a communist/marxist state have private sector? leave alone one large than public sector. Which private sector are you talking about in Ethiopia when Gov doesn't allow any private sector in key sectors of the economy - Finance & Intermediation in kenya is private sector led -and account for 10% of the economy-in Ethiopia - you can by default assume that finance sector is public sector - the same for telcoms (safaricom -a behemoth is private - you can assume Ethiopia one is public/gov). You can go to China and find out how many private sector companies can match state ran parastals in every sector.
Accept facts and move on. Kenya has a huge private sector -not by default- but because it chose the capitalist way -while TZ or Ethiopia or Russia or China - have a huge public sector (some guy had problem with understanding gov capacity -that is clue)- coz gov choose to go that way and nationalize the little private sector they had- all the big companies are gov run - of course most of these countries have been recently opening up sectors for private sectors -so the lines is a little blurred except for some messed countries in Latin America- but it not comparable to say US or Britain or Kenya who chose this path earlier.
As for informal sector and WB advice...I think these are complex and complicated issues...and gov has very little capacity to influence things here ---they just have to continue being the enablers--build infrastructure - roads/rails/power -law & order - and let the informal & private sector compete.
Sorry the era of directing an economy to go this way was last succesfully in soviet union in 60s. The configuration of our economy is largely private sector doing their thing with gov regulating. So instead of complaining about why XYZ has not be done...DO IT.
Size or numbers alone do not necessarily equate to power. Also, the "private sector" is, by far, the major employer in just about every country in the world, including China and Ethiopia. So yours is not a convincing response to a claim that Kenya's private sector controls little.
And when it comes to actually controlling anything, the informal+jua-kali sector, which is a part of the private sector, should not even get a mention. Obviously. Yet it is the largest employment sector in Kenya.
Moving on past that:
I was curious about how big this informal sector is in Kenya. I looked at numerous data sources, among those I found informative is the 2015 report from the UN Economic Commission for Africa. The figures are around 75% among men and 80% among women (% of total employment). A UNECA report of the same year indicates that---because of a lack of various protections, opportunities to upgrade skills, the lack of productive income---this lot is largely trapped in poverty. Interestingly, 30 years ago, the figures were almost "reversed". This summary and the corresponding full report, from the Brookings Institution, are interesting:
http://www.brookings.edu/blogs/africa-in-focus/posts/2016/05/16-tapping-kenya-economic-growth-golubski
The other thing I was curious about is the contribution of this sector to GDP. Hard figures are hard to come by, for the obvious reason: the folks in the sector are not much into the business of reporting statistics. The figures I have seen appear to have been arrived at by looking at the formal sector and its contribution and then subtracting that from the total. Those figures lead to the inevitable conclusion expressed in numerous reports---that the sector is one of low productivity and relatively low contribution to GDP. (In Kenya, as in most of Africa, the high-productivity sectors are not creating many jobs.)
Prospects for the future:
Over the last year or so, the World Bank has produced a few reports that are of significance to Kenya and the rest of Africa. (Off the top of my head, a good one to read would be "Africa's Demographic Transition: Dividend or Disaster?" See Google)
- One of those was somewhat "negative"---that around 1950 (or so) most of the world's poor were in Asia, but Africa has increasingly taken over that "market" and, on the present path, will have cornered it completely in a a couple of decades or so. Even with "Africa Rising". (It appears that the male member is rising more than the economy is ... )
- The one I mention above states that merely not reproducing like rabbits will not be enough to make a significant change. The reports recommends the "East Asian" way at such a phase. A part of that is developing a serious export-driven economy---not of scrap metal and vegetables.
- The World Bank's most detailed report on Kenya this year recommends that Kenya focus on improving commercial agriculture, which is still the mainstay of Kenya's economy, as a major path to poverty reduction. (There are good reasons for that, whether one chooses to look at 19th-Century USA or 20th-Century East Asia.) What is Kenya doing in that regard? I'm not sure. But I hear a lot of noise to the effect that those at the bottom will soon be able to lift themselves up by producing "apps" (Konza City, Silicon Savannah, etc.) or using MPESA to join the financial industry. The sexy stuff.
- One recent report I read from the African Development Bank is to-the-point on exports: Kenya will not get far as long as its main exports are what the report calls "low processed agriculture" (specifically tea and cut flowers). This,of course, is the story of Africa---from Ghana and Ivory Cost, producing most of the world's cocoa and then importing chocolates etc., to Nigeria, exporting crude oil like nobody's business and then spending billions on importing the products of refining. (By way of contrast, take a look at what Singapore makes out of oil.)
I like the optimism expressed in the Brookings Institution report: the "African Lions"! Goes well with "Africa Rising!". And of Kenya, RV Pundit writes of "by far the most modern country in East Africa...with economy bigger and more sophisticated than many in Africa". Certainly true enough. But at the core of that is no more than an observation that even among the down-and-out there will be some at or near the top. C- students in the sub-class of D students. One needs to look at the rest of the class.
As I see it, Africa's prospects are not especially bright on the present path. Whether there is the will or motivation to change that is far from clear. I think the stated end-goal requires more than endlessly stating goals and visions and whatever.
-
Totally agree -improve productivity & efficiency in the economy.After we nail electrification - we have to look at cost of electricity - same with cost of transport -etc etc. The formalization of retail sector is going to help. The financial revolution going on is one building block laid. Then we really need to build capacity in vocational training. Gov should consider making polythenic and middle college - free. Most of kenyans think education end after form 4 if you don't qualify for university. That has to change. Once this has been done -gov doesn't have to find money - FDI will flow into private sector.
What we need is increase in productivity whether its in agriculture, manufacturing or even service sector. The increased electrification is a step in the right direction as now more mechanisation and automation will occur especially in the Informal sector. The other thing is taxation, corporate tax is 30%, paye starts at 12k and I think after 50k the rate is 30%. This is very punitive. So most SME opts to operate informally instead of paying punitive taxes( wage pressure increases cost of labour ). That's a catch 22 because by being informal it means they're not getting access to good credit to purchase capital goods which would lead to increased productivity.
The companies that has closed like cadbury were losing market share to more nimble local companies namely kenafric industries. The bottomline is how many africans are involved in manufacturing? That is almost the preserve of indians, we've few africans manufacturers I see it all the time when supermarkets invites suppliers. The culture of investing real estate, government tenders etc has to end we start real investment in serious business producing real stuff or services. The good thing is in some sectors like light manufacturing local companies are doing great. For example kimberly clark is having a hard time competing with chandaria. We have local pharmaceutical manufacturers being bought by indians firms to expand manufacturing and export to the rest of africa http://www.businessdailyafrica.com/Indian-firm-to-buy-Sh1bn-stake-in-Universal-Corp/-/539552/3076566/-/view/printVersion/-/brl0m9/-/index.html.
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Sounds like a conspiracy theory. Jomo actually grew the economy at double digit before things went south in late 70s due to the global oil crisis. You cannot wake up and move from raw material to finished goods in few years. That is simplistic thinking. There are a lot of background work that has to be done -some needing lots of years -before you can change the economy of the country.
You're really serious, aren't you?
After more than half a century (50 years!), Kenya hasn't even started establishing an manufacturing base.
For your information, the growth under Jomo was extensive growth, which is absolutely useless for the development of a country and perfectly explains the mess we're in today.
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I am always serious.Kenya inherited a fledging manufacturing from colonial master and has kept it as 10% of the economy - manufacturing has kept pace with rest of the economy - but it could be better. The last serious manufacturing attempt was EPZ. Now we are thinking of Naivasha and Dongo Kundu special economic zones.
My point - don't focus too much on gov - nothing stops you from manufacturing. I am starting to see kenyans doing basic stuff - packaging water, juices, soaps-even githeri - we need to stop lamenting on gov -and start doing it - Indians in Kenya are doing it.
You're really serious, aren't you?
After more than half a century (50 years!), Kenya hasn't even started establishing an manufacturing base.
For your information, the growth under Jomo was extensive growth, which is absolutely useless for the development of a country and perfectly explains the mess we're in today.
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I am always serious.Kenya inherited a fledging manufacturing from colonial master and has kept it as 10% of the economy - manufacturing has kept pace with rest of the economy - but it could be better. The last serious manufacturing attempt was EPZ. Now we are thinking of Naivasha and Dongo Kundu special economic zones.
My point - don't focus too much on gov - nothing stops you from manufacturing. I am starting to see kenyans doing basic stuff - packaging water, juices, soaps-even githeri - we need to stop lamenting on gov -and start doing it - Indians in Kenya are doing it.
Private businesses always need incentives from government to flourish.
If you have a government that is not interested in providing said incentives but is instead more interested in accumulating wealth and protecting the elite from any repercussions, then things fall apart.
EDIT: What is the cost to Kenya's fledgling industrial base caused by both Okemo and Gichuru who have absolutely nothing to worry about? Their systematic looting of KPLC caused our electricity costs (inputs) to be among the highest in Africa, making our manufacturing costs very high.
See Simarova's post: http://www.nipate.org/index.php?topic=3273.0
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Okay I give up. I think if our kenyan indians thought that way - we would still be waiting for gov to get it act together - before we ever do anything.
Private businesses always need incentives from government to flourish.
If you have a government that is not interested in providing said incentives but is instead more interested in accumulating wealth and protecting the elite from any repercussions, then things fall apart.
EDIT: What is the cost to Kenya's fledgling industrial base caused by both Okemo and Gichuru who have absolutely nothing to worry about? Their systematic looting of KPLC caused our electricity costs (inputs) to be among the highest in Africa, making our manufacturing costs very high.
See Simarova's post: http://www.nipate.org/index.php?topic=3273.0
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You just like to argue for it's sake. How can a communist/marxist state have private sector? leave alone one large than public sector.
I don't know how you understand English, but let me try and make it simple:
(1) the employment sector in any country is divided into two parts: private and public (where the latter also includes "state-owned enterprises).
(2) China, Ethiopia, etc. both have non-government enterprises that employ people; those are in the private sector.
Without getting into details, I encourage you to use Google with "private sector China", "private sector Ethiopia", etc; look at the Chinese government's economic plans to see if they include the private sector; etc.
Which private sector are you talking about in Ethiopia when Gov doesn't allow any private sector in key sectors of the economy - Finance & Intermediation in kenya is private sector led -and account for 10% of the economy-in Ethiopia - you can by default assume that finance sector is public sector - the same for telcoms (safaricom -a behemoth is private - you can assume Ethiopia one is public/gov).
Here, learn something new today: the private sector, in any country, is not limited to just "key sectors", however one defines those. See all that Chinese junk around you? That's produced by the private sector.
You can go to China and find out how many private sector companies can match state ran parastals in every sector.
Nowhere did I suggest otherwise.
Accept facts and move on. Kenya has a huge private sector -not by default- but because it chose the capitalist way -while TZ or Ethiopia or Russia or China - have a huge public sector (some guy had problem with understanding gov capacity -that is clue)-
My comments were on employment figures. Here are some figures from the ILO on public sector employment around the world: https://en.wikipedia.org/wiki/List_of_countries_by_public_sector
(This is 2016, but we can reasonably that there have not been really huge changes)
- Ethiopia: 20%
- Tanzania: 4%
- Russia: 30%
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More semantics just for argument sake. If the proportion of formal employment in private versus public sector is not indicative of the size of either then I don't know what other measure we should be looking into. I see you're now throwing even NGOS as private sector! Heck throw in everyone who doesn't work for gov including the farmers and juakalis working informally -
You're a classic case of someone with just too much time to waste. You don't grasp the simplest of concept but goes to great length to back your ideas with "data" :). Private sector is private enterprise that is formal. It doesn't include ngos or informal sector. It simply mean corporation or companies. Grasp that basic concept first.
Once again it self-evident that China or TZ or Ethiopia have way less private sector than US or Kenya or say India. The reason can be found in reading a little history of communism that involve nationalizing private sector and restricting private companies from doing business...but of course over the years these countries realized it was stupid idea...and have been opening up sectors of their economy to private sector...but still they are not "there" yet.
Now start a long hopeless argument over nothing.
You just like to argue for it's sake. How can a communist/marxist state have private sector? leave alone one large than public sector.
I don't know how you understand English, but let me try and make it simple:
(1) the employment sector in any country is divided into two parts: private and public (where the latter also includes "state-owned enterprises).
(2) China, Ethiopia, etc. both have non-government enterprises that employ people; those are in the private sector.
Without getting into details, I encourage you to use Google with "private sector China", "private sector Ethiopia", etc; look at the Chinese government's economic plans to see if they include the private sector; etc.
Which private sector are you talking about in Ethiopia when Gov doesn't allow any private sector in key sectors of the economy - Finance & Intermediation in kenya is private sector led -and account for 10% of the economy-in Ethiopia - you can by default assume that finance sector is public sector - the same for telcoms (safaricom -a behemoth is private - you can assume Ethiopia one is public/gov).
Here, learn something new today: the private sector, in any country, is not limited to just "key sectors", however one defines those. See all that Chinese junk around you? That's produced by the private sector.
You can go to China and find out how many private sector companies can match state ran parastals in every sector.
Nowhere did I suggest otherwise.
Accept facts and move on. Kenya has a huge private sector -not by default- but because it chose the capitalist way -while TZ or Ethiopia or Russia or China - have a huge public sector (some guy had problem with understanding gov capacity -that is clue)-
My comments were on employment figures. Here are some figures from the ILO on public sector employment around the world: https://en.wikipedia.org/wiki/List_of_countries_by_public_sector
(This is 2016, but we can reasonably that there have not been really huge changes)
- Ethiopia: 20%
- Tanzania: 4%
- Russia: 30%
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More semantics just for argument sake. If the proportion of formal employment in private versus public sector is not indicative of the size of either then I don't know what other measure we should be looking into.
That's one way to look at it. But I don't quite know how to respond when someone you writes (of Ethiopia):
Already many chinese companies have relocated there...now I think they are about to cornered leather/shoe industry, have cellphone assemblies, car assemblies, name it.
and then asks:
How can a communist/marxist state have private sector?
And then:
Private sector is private enterprise that is formal. It doesn't include ngos or informal sector. It simply mean corporation or companies. Grasp that basic concept first.
That's a Pundit Definition that not everyone seems to know; and that includes people who, one assumes, know about such things. Let me give you just one example: Take the African Development Bank's most detailed analysis (that I have seen so far) of Kenya's private sector; it is from 2013/2014, but the concept in question has not changed since then. The report is "The State of Kenya's Private Sector", and you will find it here: http://www.afdb.org/en/documents/document/the-state-of-kenyas-private-sector-34093/
Now, pay attention to the following:
In the "Executive Summary", you will find this:
Structure: The private sector is noticeably split into two parts: a formal, large business sector which is relatively healthy and productive, and a massive, informal small business sector that is poorly understood and supported.
On page 7, you will find this:
The private sector is worryingly dualistic in nature, comprised of a productive formal sector of big business, underpinned by a massive poorly understood informal sector. According to KNBS calculations, almost 9 out of 10 working Kenyans are employed in the informal sector.
And these are people who are supposed to know such things! Shame on them. They should grasp that basic concept first and then do their analysis and report-writing.
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The US was bit different coz it industralize while wages were comparatively higher; they didn't deploy million of cheap american slavish labour; yet the were able to industralize.
...
In summary for kenya-we have to follow the US model--
I have already pointed out three key factors: (1) tremendous applied innovations in technology, (2) massive natural resources put to good use, and (3) keeping high tariffs on imports until its industry was competitive. Given that, please explain how Kenya will follow the USA model.
US industralization model (2nd -around 1890 to 1920s-)
Even those dates don't help your your case. At around 1860, Britain was the world's leading manufacturer, but the USA was already second. If Kenya is going to follow the "US model" of that period, a first question is this: what is the current status of Kenya's manufacturing? And the growth in manufacturing was very rapid in the USA period before 1890, so a secondary question is this: how has manufacturing been growing in Kenya.
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You don't need ADB for commonsense definition.1) Public sector -gov controlled 2) Private sector -formal tax paying and regulated 3) Informal sector -informal; these are commonly accepted definitions when talking about the economy. Ethiopia has very small private sector -they are starting from near zero attracting chinese companies -otherwise it doubtful you'll find homegrown private corporation in Ethiopia -that doesn't mean there are no dukawallas. Kenya has a big private sector that is responsible for most of FDIs in the region. Those are facts.
More semantics just for argument sake. If the proportion of formal employment in private versus public sector is not indicative of the size of either then I don't know what other measure we should be looking into.
That's one way to look at it. But I don't quite know how to respond when someone you writes (of Ethiopia):
Already many chinese companies have relocated there...now I think they are about to cornered leather/shoe industry, have cellphone assemblies, car assemblies, name it.
and then asks:
How can a communist/marxist state have private sector?
And then:
Private sector is private enterprise that is formal. It doesn't include ngos or informal sector. It simply mean corporation or companies. Grasp that basic concept first.
That's a Pundit Definition that not everyone seems to know; and that includes people who, one assumes, know about such things. Let me give you just one example: Take the African Development Bank's most detailed analysis (that I have seen so far) of Kenya's private sector; it is from 2013/2014, but the concept in question has not changed since then. The report is "The State of Kenya's Private Sector", and you will find it here: http://www.afdb.org/en/documents/document/the-state-of-kenyas-private-sector-34093/
Now, pay attention to the following:
In the "Executive Summary", you will find this:
Structure: The private sector is noticeably split into two parts: a formal, large business sector which is relatively healthy and productive, and a massive, informal small business sector that is poorly understood and supported.
On page 7, you will find this:
The private sector is worryingly dualistic in nature, comprised of a productive formal sector of big business, underpinned by a massive poorly understood informal sector. According to KNBS calculations, almost 9 out of 10 working Kenyans are employed in the informal sector.
And these are people who are supposed to know such things! Shame on them. They should grasp that basic concept first and then do their analysis and report-writing.
-
Now you're deliberately mixing stuff. Kenya can never be US or China with its 45M people. So let not debate about being no 1 or 2 or 3 in the world. We are talking about becoming INDUSTRALIZED. That is achieved I think when industry (manufacturing) account for 30-50% of GDP. Swiszterland is industrialized but isn't anywhere near no 10 or 20.
You have also deliberately ignored my India analogy - which is more advanced kenya - whose economy mirrors kenya - ignoring the scale! The same way Ethiopia economy seem like copy-paste of China 50 yrs ago.
I don't know how I can simplify this but Kenya -India - US and Ethiopia - Indonesia - China is the best I can do for now. The structure of the economy and it's future prospect mirrors those "models".
The US was bit different coz it industralize while wages were comparatively higher; they didn't deploy million of cheap american slavish labour; yet the were able to industralize.
...
In summary for kenya-we have to follow the US model--
I have already pointed out three key factors: (1) tremendous applied innovations in technology, (2) massive natural resources put to good use, and (3) keeping high tariffs on imports until its industry was competitive. Given that, please explain how Kenya will follow the USA model.
US industralization model (2nd -around 1890 to 1920s-)
Even those dates don't help your your case. At around 1860, Britain was the world's leading manufacturer, but the USA was already second. If Kenya is going to follow the "US model" of that period, a first question is this: what is the current status of Kenya's manufacturing? And the growth in manufacturing was very rapid in the USA period before 1890, so a secondary question is this: how has manufacturing been growing in Kenya.
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You don't need ADB for commonsense definition.1) Public sector -gov controlled 2) Private sector -formal tax paying and regulated 3) Informal sector -informal; these are commonly accepted definitions when talking about the economy.
Clearly, there is not much common sense at places like the ADB. A failure to grasp that basic concept first.
Ethiopia has very small private sector -
Which reminds us of this question:
How can a communist/marxist state have private sector?
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Sounds like we are into bla de bla phase. Ethiopia, TZ and China at one point had no private sector. They were communist or marxist states. They've been working on opening up their economy for private sector. As we speak there are still sectors in Ethiopia where private company cannot be allowed to operate. Now go google around and come up with more back up links. Such obtuseness.
You don't need ADB for commonsense definition.1) Public sector -gov controlled 2) Private sector -formal tax paying and regulated 3) Informal sector -informal; these are commonly accepted definitions when talking about the economy.
Clearly, there is not much common sense at places like the ADB. A failure to grasp that basic concept first.
Ethiopia has very small private sector -
Which reminds us of this question:
How can a communist/marxist state have private sector?
-
Now you're deliberately mixing stuff. Kenya can never be US or China with its 45M people. So let not debate about being no 1 or 2 or 3 in the world.
Your argument is that Kenya should follow the "USA model" because Kenya is somehow like the USA in the late 19th Century to early 20 Century. What I have done is point out to you a few significant differences.
If you wish to sustain your argument, then the definition of "industrialized" and population sizes are not helpful. Instead of such, you should do at least two things: (1) state how Kenya is like the USA of the period; (2) give some indicators of how, on that basis, Kenya will then be able to follow a similar path as the USA. Feel free to proceed whenever you are ready. But "proof by assertion" simply won't do.
We are talking about becoming INDUSTRALIZED. That is achieved I think when industry (manufacturing) account for 30-50% of GDP. Swiszterland is industrialized but isn't anywhere near no 10 or 20.
My point was to indicate the growth in US manufacturing of the period. See the "follow-up" question on the growth of Kenyan manufacturing.
You have also deliberately ignored my India analogy - which is more advanced kenya - whose economy mirrors kenya - ignoring the scale!
I did not ignore it. You wrote that:
I meant the USA of 1900 had nearly the same conditions that we have here and that exist in India for example.
I noted that:
* Kenya imports a lot of pharmaceuticals, machinery, steel products, power transmission equipment, yarn, and automobiles from India.
* The latter imports tea, vegetables, leather, soda ash and scrap metal from Kenya.
Just to be sure, I asked you to tell us what those "same conditions" are. I did not see an answer.
You subsequently wrote that:
In summary for kenya-we have to follow the US model--and first get to where India is ...
So, now, India and Kenya are not comparable, and what Kenya should do is get to "where India is". I have already stated my views on the the "USA model". As to working to get "where India is", I'm all for it. What is it that you wanted me to comment on in regard to India?
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Sounds like we are into bla de bla phase. Ethiopia, TZ and China at one point had no private sector. They were communist or marxist states. They've been working on opening up their economy for private sector. As we speak there are still sectors in Ethiopia where private company cannot be allowed to operate. Now go google around and come up with more back up links. Such obtuseness.
No need for links or additional obtuseness from me; (in the implied context of Ethiopia, Tanzania, and China) it appears that I've resolved your difficulties on:
How can a communist/marxist state have private sector?
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Private businesses always need incentives from government to flourish.
If you have a government that is not interested in providing said incentives but is instead more interested in accumulating wealth and protecting the elite from any repercussions, then things fall apart.
I am unable to think of a country that has lifted masses out of poverty, industrialized, properly tackled unemployment, etc. without serious government intervention. But in Kenya those who lead the government take the view that their chief task is to rob the public---from grabbing public land (some of which is later sold back to the government at exorbitant prices) to simply running away with large amounts of cash.
Not too long ago, a friend asked me what major policies and plans the Kenyan government had to lift masses out of poverty. I was unable to answer, and I did search for them.
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Dude this is way beyond your paygrade; you don't just pick any topic; quickly google and then engage in a meaningful debate where you twist facts. All you do here is bombard us with links of copied data but generally you cannot weave your own yarn here.
Talk about something your truly understands. Not something you google around and pretend to know.
Sounds like we are into bla de bla phase. Ethiopia, TZ and China at one point had no private sector. They were communist or marxist states. They've been working on opening up their economy for private sector. As we speak there are still sectors in Ethiopia where private company cannot be allowed to operate. Now go google around and come up with more back up links. Such obtuseness.
No need for links or additional obtuseness from me; (in the implied context of Ethiopia, Tanzania, and China) it appears that I've resolved your difficulties on:
How can a communist/marxist state have private sector?
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Dude this is way beyond your paygrade; you don't just pick any topic; quickly google and then engage in a meaningful debate where you twist facts. All you do here is bombard us with links of copied data but generally you cannot weave your own yarn here.
Talk about something your truly understands. Not something you google around and pretend to know.
Quite so. I really ought to do something about my pay-grade, shouldn't I? I also appreciate your excellent suggestion that I talk about only things I truly understand. But I find some of the comments in these discussions very amusing, and it's hard to resist the temptation to jump in. My bad. Anyways ... may I take it that no more details will be forthcoming on the "USA model"?
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Why not google around, find some publication, summarize and paste it here. That is all you do anyway. When you're ready to engage at a my level - I'll be ready - right now we can't even agree on basics!private sector is something you have to go find out? How are we suppose to talk about US economic structure of the yore and how it mirrors kenya? Once you have ready, have truly understood this stuff and synethezies them...enough to make your own conclusions...then come here...otherwise I am not interested in reading canned reports.
Quite so. I really ought to do something about my pay-grade, shouldn't I? I also appreciate your excellent suggestion that I talk about only things I truly understand. But I find some of the comments in these discussions very amusing, and it's hard to resist the temptation to jump in. Anyways ... may I take it that no more details will be forthcoming on the "USA model"?
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Why not google around, find some publication, summarize and paste it here. That is all you do anyway. When you're ready to engage at a my level - I'll be ready - right now we can't even agree on basics!
I doubt that I'll ever be ready to engage at your level; it's actually not something I particularly aspire to.
otherwise I am not interested in reading canned reports.
I can't fault you on that one; some of these reports can be rather "awkward" and "unhelpful" to some arguments. And, again, you make excellent suggestions for me that I will keep in mind.
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Right. You jumped in to discuss something that you don't even know. What for example is industralization in the context of the debate and economy of a country? Google that and come with std 6 response..Industralization is the process of converting raw material to finished goods :) - When do you think kenya will become industralized? You won't even know if it hit you. Kenya just has to grow it industry 3 times..and it will become an Industrial Nation. That is not rocket science.
I doubt that I'll ever be ready to engage at your level; it's not something I particularly aspire to.
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Right. You jumped in to discuss something that you don't even know. What for example is industralization in the context of the debate and economy of a country? Google that and come with std 6 response..Industralization is the process of converting raw material to finished goods :) - When do you think kenya will become industralized? You won't even know if it hit you. Kenya just has to grow it industry 3 times..and it will become an Industrial Nation. That is not rocket science.
Again, you are absolutely right in all that. Much appreciated. By the way, may I suggest that you not consider that you write just for me---low pay-grade, Std. 6, etc.---as I'm sure that many other readers will benefit from your deep understanding of the "USA model" and expert ideas on how Kenya can follow it.
I will now bow out of this one; but, again, I thank you for the many excellent suggestions that you have made for me. That's what I call "ndugu helping ndugu"!
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US model is all over. Google it. US industralized through highly skilled labour - they didn't go for bottom of the pile manufacturing - but focused mainly on domestic market/import-substitution. Not through low cost manufacturing meant for export like Britain,China and rest of Asia countries like Japan/South Korea. Russia industralized through communist state command economy that "forcefully" made soviet union a big factory. China industralized by deploying cheap and near slavish labour. Throw in the other "common" stuff like infra structure. There are different model for each country due to the nature of that country. There is not one size fit all model. IMF/WB tried that and failed. Kenya cannot deploy labour at Ethiopia cost (20 dollars per month) neither does she have land to dish out! Therefore it cannot go China way. It has to find another way. There are many ways out there. Google them.
understanding of the "USA model" and how Kenya can follow it.
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Ethiopia is welcoming the investors Kenya has frustrated
Ethiopia is the world’s fastest growing economy.
If you doubt that, watch CNN’s recent One Square Meter Report which highlighted this second-most populous nation in Africa whose economy has consistently grown by double digits over the past 10 years.
Several industrial parks have been built and more are coming up. There are four operational industrial parks, three of which are privately owned.
They include the Eastern Industrial Zone at Dukem, the Lebu Industrial Zone which is owned by Huajian Group, and Modjo Industrial Zone owned by George Shoe. A government-owned industrial park, Bole Lemi Industrial Zone is also coming up.
Ethiopians are taking advantage of Africa’s population dividend to target investors moving out of China, and providing a soft landing for them in Ethiopia.
Their flagship Ethiopia Industrial Park, which would put our Konza to shame, is coming up, connected to Addis with the ultra-modern Modjo-Hawassa Expressway.
Construction of the 700-acre Hawassa Industrial Park started last year. It will accommodate 35 factory sheds and 19 exhibition halls, food courts, dormitories, and other required facilities in the first phase. The country aims to become Africa’s hub for manufacturing.
AFRICA'S AGOA LEADER
Ethiopia has identified textile, agro-processing, leather, light electronic manufacturing and other labour intensive industries to absorb the massive number of youths who are unemployed.
The Chinese have financed and built most of these industrial parks. Whenever they encounter African indiscipline, they instill the discipline themselves through rather harsh measures.
Consequently, Ethiopia is now Africa’s leading exporter of boots to US under the African Growth Opportunity Act (AGOA).
It is not just industrial parks they are building. At the Africa Economic Commission for Africa experts meeting, Arkkebe Oqubay, Minister and Special Advisor to the Prime Minister, explained the source of their success.
“We realised that of the 1 million university students, more than 80 per cent were in arts. We headed to Germany and sought cooperation in higher learning. Today more than 80 per cent of the students are into science and technology,” he said. “We linked our learning institutions to industry. We still have 400 German educationists transplanting their system into Ethiopia.”
In addition to more than 40 public universities, Ethiopia has also created and equipped several technical institutions.
The import of all this is that Ethiopia is not just offering highly educated cheap labour but also fast improving power supply, transport and other infrastructure.
While we are still celebrating the Thika Superhighway, they were building expressways into the country’s interior. Ethiopia also built the first light rail system in East Africa and is now leveraging the technology transfer to build a rail network throughout the country and possibly into neighbouring countries.
In contrast, we have left it to the Chinese to complete our Standard Gauge Railway and stay on to provide maintenance services.
MINISTER 'ABRUPTLY TRAVELLED'
They are also likely to be invited to build future SGR extensions. Nobody is seriously concerned about Chinese technology transfer in Kenya.
The indiscipline and the lack of patriotism of our civil engineering firms, coupled with government inability or unwillingness to properly supervise them, means that the Chinese will be building public works in Kenya long after Ethiopians become really good at it.
Who knows, in future the Ethiopians might even replace the Chinese as builders of Kenyan public works!
Investors in Ethiopia are happy that the government is taking the initiative and delivering on promises. They are flocking in, and the many hotel brands that have mushroomed all over Addis Ababa are not disappointed.
During the reception at the Radisson Blue, I meet a group of European investors and this is what they told me. Initially, their desire was to set up in Kenya and grow their business to other parts of Africa.
They travelled to Nairobi. Through a local contact, they tried to set up an appointment with the Minister but after several days in Nairobi, the appointment never materialised.
They went back to Europe, saying they would try to get a firm appointment before coming back to Kenya. Eventually, the appointment was set up and they travelled to Kenya.
On reaching the Ministry, they were told that the Minister would not be in. He had abruptly travelled, without sending an apology to his guests.
A Director at the Ministry met with them and since he could not commit in anything, they achieved nothing.
But they had one last hope. That evening, they were to meet with a county Governor for dinner. The Governor showed up late with his wife, giving excuses that they had had a long drive and the traffic was unbearable.
SPEED OF ACTION
As they talked, the county Governor’s wife interrupted to tell the investors that she was setting up a children’s home and she would need Sh10 million donation to set off the project.
By this time they had made up their mind that Kenya was not going to be the place to invest. They politely paid for the dinner and left without mentioning the reason why they wanted to talk to the Governor.
To their surprise, the Governor did not ask what the purpose of their meeting was. With their Kenyan link, they decided to give Ethiopia a try.
One phone call and an Ethiopian official on a Tuesday morning secured an appointment the next day, Wednesday. They travelled to Ethiopia and were met at the Airport.
To their amazement, they were driven to the prestigious Sheraton Hotel by a retinue of vehicles led by a police car with a siren. In the evening, the Foreign Ministry had arranged a dinner with two other Ministers.
During the dinner, they were asked what kind of investment they were interested in. After explaining what they wanted, they were told that the following morning they would meet with the Governor of Oromia.
After breakfast on Thursday, they were driven to Oromia. The Governor was waiting for them. They were promptly shown three sites where they could put up the investment.
By 1pm, they had signed up a memorandum of understanding. Slightly more than three months later, they are through with the initial infrastructure on the ground.
With this speed of action, it does not surprise me why the Ethiopians are re-writing the story of economic transformation.
Kenyans may argue that they are a better democracy than Ethiopia, but that won’t stop a bloody revolution by dissatisfied, unemployed, hopeless youth who discover their leaders have grabbed everything including the entire Export Processing Zones.
FALLING THROUGH OUR FINGERS
Let us not just simplify corruption to mean stolen money. We must expand the definition of corruption to also include impeding progress.
Corruption must be understood by all its synonyms which, as per the Merrian-Webster Dictionary include: “alteration, falsification, doctoring, manipulation, manipulating, fudging, adulteration, debasement, degradation, abuse, subversion, misrepresentation, misapplication, breakdown, decay, decomposition, festering, putrefaction, putrescence, rot, spoilage.”
Fellow Kenyans, this is not the Ethiopia of 30 years where gun-toting youths met you at Bole International Airport. This is a country of patriots who know exactly where they want to take their country – and are succeeding.
Ethiopian leaders are not shooting themselves in the foot. They are thinking about their poor people, not just about lining their pockets. They appear to understand that the fate of all Ethiopians is inextricably intertwined – the fate of leaders and the led.
Sadly, this does not appear to be the case in Kenya. Until we put our national interests ahead of our own selfishness, we may never get near where Ethiopia has reached.
Our preoccupation with land is our undoing. The pride that Kenya is the largest economy in the region is fading fast. It is not the size of the economy that matters but rather how many of our people are escaping poverty and are benefitting from this size.
We must create employment for our youth and avoid the nasty consequences of our inaction, which will likely follow if we do not act to avert the creeping discontent.
Far too many opportunities are falling through our fingers. These opportunities come along only but once. We may never see them again.
ROOM FOR RISK-TAKING
We must foster good leadership devoid of threats, leverage our democracy to consult with the people, act within reasonable time and mind the national interest.
Above all, we must live by the rule of law. Selective justice, mob justice and failure to take personal responsibility for our actions, which happens to be the trademark of our culture, undermine the rule of law.
We must create room for risk taking that is necessary to propel our country to greater heights. Many Kenyans with or without leadership would die for their country but there must be political will to drive Kenya as a team.
Ethiopian leadership, through a combination of credibility born out of honest, patriotic, strategic leadership and high-handedness against dissenters, has galvanised the country with one specific objective – Prosperity.
The question we must ask ourselves, all of us, whether we are in government or the opposition, is: do ordinary Kenyans see us as honest people who are working for and minding their welfare or do they see as us all as competing, directionless monsters?
Do we really love Kenya? Do we love fellow Kenyans? Do our actions and utterances show this love for all Kenyans, regardless of ethnic origin?
John F. Kennedy said, “Economic growth without social progress lets the great majority of people remain in poverty, while a privileged few reap the benefits of rising abundance.”
As we take stock of economic growth, let us also ensure there is social progress. The measure of success in this modern day is how inclusive our economic growth is.
http://www.nation.co.ke/oped/blogs/dot9/ndemo/-/2274486/2995990/-/cbjjj/-/index.html
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Reading the comment on Ndemo - It interesting that power in Ethiopia is 3 usd cent per KWH while ours is 24 cent(usd) per kwh. That is nearly 8 times more expensive. We have to stop this nonsense of green energy and really get coal powered power plants.Looking at this site - it seem we "subdized" power for large consumer to 14shs (14 cents) USd- which is still 5 times more expensive than Ethiopia. Jubilee and opposition need to debate on such kind of issue. Retirement of diesel station seem to have reduce cost from 24 to 18(domestic)-14(commercial) -while Ethiopia have 3 (for commerical) and 6 for domestics. Meaning on average our electricity is 3-5 times more expensive. Ethiopia though seem to be sudsizing power (not a good idea) coz the break-even cost is 9shs or cent (usd) per KWH.
https://stima.regulusweb.com/
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Reading the comment on Ndemo - It interesting that power in Ethiopia is 3 usd cent per KWH while ours is 24 cent(usd) per kwh. That is nearly 8 times more expensive. We have to stop this nonsense of green energy and really get coal powered power plants.Looking at this site - it seem we "subdized" power for large consumer to 14shs (14 cents) USd- which is still 5 times more expensive than Ethiopia. Jubilee and opposition need to debate on such kind of issue. Retirement of diesel station seem to have reduce cost from 24 to 18(domestic)-14(commercial) -while Ethiopia have 3 (for commerical) and 6 for domestics. Meaning on average our electricity is 3-5 times more expensive. Ethiopia though seem to be sudsizing power (not a good idea) coz the break-even cost is 9shs or cent (usd) per KWH.
https://stima.regulusweb.com/
Why you can't see the connection with the shenanigans of Guchuru and Okemo, among very many others in the power sector, as being responsible for the high electricity tariffs is beyond me. Good luck with industrialization and making competitive products.
Another interesting article from this week's Business Daily:
IMF warns Kenya of Sh313bn undisclosed debt risk
The Treasury is carrying a heavy load of undisclosed debt in the form of power sector guarantees made in the past 10 years, the International Monetary Fund (IMF) has warned in its latest assessment of the shape of Kenya’s public finance.
The guarantees totalling Sh313 billion, which the IMF has flagged in its latest report on Kenya, were in support of power purchase agreements between Kenya Power and independent power producers.
“Information on active Public Private Partnership (PPP) contracts worth up to $3.4 billion (Sh343 billion) or 5.7 per cent of the GDP has not been made public or accounted for in official public finance documents, meaning that their fiscal implications are yet to be fully assessed,” the IMF report says.
Twelve power purchase agreement contracts worth $3.1 billion (Sh313 billion) signed before the PPP Act of 2013 became law carry the most significant fiscal risk for the taxpayer, the IMF says.
The extent of risks to the taxpayer from the guarantees came to the fore last month after a Virgin Islands-registered consortium Kinangop Wind Park Limited (KWP) sued the Kenyan government at the International Chamber of Commerce (ICC) for compensation after its Sh15 billion wind power project in Nyandarua collapsed.
The wind power firm blames protests by Kinangop residents for the project’s collapse and is now hoping to recover the losses from a guarantee the government promised to offer in the event the plan flopped for political reasons.
Attorney-General Githu Muigai has responded to Kinangop Wind Power’s demand with the filing of a suit in the Milimani High Court in Nairobi to stop the firm from selling 38 wind turbines it acquired for the power project pending determination of the ICC suit.
The IMF says in a report released on Tuesday that the power purchasing contracts carry a real financial risk as they “involve an obligation for a minimum demand or revenue guarantee (“take” or “pay”) supported by government letters of support”.
The guarantees cover political risks and are underwritten by partial risk guarantee instruments provided by the World Bank.
“Partial risk guarantees backstop any obligation of Kenya Power, over few months only, under letters of credit for any amount drawn by the IPPs as a result of breach of a payment obligation by KPLC (capacity payments plus contingencies), effectively adding to the government’s debt once called. Political risks include war and civil disturbance, expropriation, changes in the law, regulation, taxes and licensing arrangements.”
Government guarantees made on such contracts would ordinarily add to the country’s debt load in the event that they are called by the PPP partners.
The IMF says that although Kenya’s current debt stock of about Sh2.5 trillion is deemed sustainable the size of the PPP contracts is significant enough to warrant more and better disclosure.
Neither Treasury secretary Henry Rotich nor his budget, fiscal and economic affairs director, Geoffrey Mwau, commented on the report.
Despite its clear warning, the IMF has offered no indication that the government has had to pay up for any of the guarantees on behalf of Kenya Power between 1996 and 2013 when most of the guarantee were given.
Kenya produces regular fiscal reports, which are available to the public, including the Treasury’s quarterly economic and budgetary reviews (QEBR) and the monthly exchequer account flow statement and the Controller of Budget’s quarterly budget implementation review reports.
Meanwhile, the IMF report also identified the 25-year Kenya-Uganda Railways concession as carrying a high fiscal risk arising from the exclusivity provisions in the Rift Valley Railways’ (RVR) contract that may be called to bear once the standard gauge railway becomes operational.
Earlier this year, officials of Qalaa Holdings, the RVR parent company, said a provision for compensation was included in line with 25-year exclusive contract covering for loss of business during the standard gauge railway (SGR) operation and construction.
Clauses in the concession agreement stipulate that the governments of Kenya and Uganda cannot introduce changes that jeopardise the firm’s profitability during the tenure of the contract, effectively shielding RVR from competition such as the one being brought by the SGR.
The government has, however, sought to downplay the SGR’s risk to the old railway, insisting that it will maintain and continue to invest in the existing metre-gauge railway to offer the business community an alternative and keep prices competitive.
The IMF is also calling for further disclosure on contract terms for new partnerships between the government and private sector players in the transport, tourism and housing sectors.
This includes agreements for construction of the Lamu Port, South Sudan, Ethiopia transport corridor (Lapsset), and the Nairobi housing plan.
“New PPPs planned over the period 2014–17 will pose additional risks if their fiscal implications are not properly managed and disclosed. A list of 47 national priority PPP projects has been identified in several sectors, notably transportation, tourism, housing, and energy. This will add to contingent liabilities going forward, and urgently requires a PPP assessment framework to be put in place for which technical support has already been agreed with the World Bank,” says the IMF.
The report has faulted the government’s expenditure record keeping, stating that three quarters of contingent (potential) liabilities amounting to Sh869.4 billion or 17.2 per cent of GDP in 2013 are unreported.
The government is, however, deemed to have low exposure to financial sector risks. It also regularly discloses all support to the financial sector in various reports such as the Central Bank of Kenya’s bi-annual Financial Stability Report and an annual Bank Supervision Report.
Financial reporting in the country governments is flagged as a concern, with the IMF giving an example of the 2013/2014 financial year when counties collected only Sh25 billion in revenue against the Sh60 billion they had projected to get.
http://www.businessdailyafrica.com/IMF-warns-of-Treasury-s-Sh313bn-debt-risk/-/539552/3294160/-/item/1/-/7im7c5z/-/index.html
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The connection is there but I don't think it the main reason why we have expensive power. I think our pursuit of wrong & expensive source of power is the real cause. Right now you're free to generate power as independent producer and sell it to KPLC..but which kind of power is coming online...expensive renewable engery (wind/solar/geothermal power)..instead of conventional dirty cheap coa or huge hyrdos (like ethiopia) for example with or without corruption -cost of solar power is very high- i have seen figure of 20-25 cents per kwh -and coal -is 2-4shs per kwh.
If we want to compete with Ethiopia or Chinese we have to bring lots of coal powered plants online -and we can start selling power for 7shs per kwh.
Why you can't see the connection with the shenanigans of Guchuru and Okemo, among very many others in the power sector, as being responsible for the high electricity tariffs is beyond me. Good luck with industrialization and making competitive products.
Another interesting article from this week's Business Daily:
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There should be 50 distributors of power in Kenya, other than KPLC.
Why could a distributor buy power at 25 shillings/kw?
Thats a lot of cash.
power is expensive because the powers to be have added a Corrupt deals that has to be paid.
Ethiopia has the same kid of power, how come its much cheaper?
The connection is there but I don't think it the main reason why we have expensive power. I think our pursuit of wrong & expensive source of power is the real cause. Right now you're free to generate power as independent producer and sell it to KPLC..but which kind of power is coming online...expensive renewable engery (wind/solar/geothermal power)..instead of conventional dirty cheap coa or huge hyrdos (like ethiopia) for example with or without corruption -cost of solar power is very high- i have seen figure of 20-25 cents per kwh -and coal -is 2-4shs per kwh.
If we want to compete with Ethiopia or Chinese we have to bring lots of coal powered plants online -and we can start selling power for 7shs per kwh.
Why you can't see the connection with the shenanigans of Guchuru and Okemo, among very many others in the power sector, as being responsible for the high electricity tariffs is beyond me. Good luck with industrialization and making competitive products.
Another interesting article from this week's Business Daily:
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KPLC is part of the the mess and I am for spliting KPLC into 3 or 4 entities that can compete against each other if we cannot get new entities to compete with it. We are probably among few countries with sole distributor. But first let us study why our power is expensive. Hopefully after Ketraco is done de-bundling the network - we will get there.
I know gov (through KPLC/REA/) & donors are busy with supply/distribution problem and has done an amazing the last 10yrs where electricity connection was mere 12% to now where it nearly 60% of all household..with nearly all primary and public institution connected to power (few offgrid)...and where we are talking universal coverage in 2010.
(https://scontent.xx.fbcdn.net/t31.0-8/13701187_1327886770573190_8219362644098887084_o.jpg)
Now it time we focussed on the next problem "Cost of that electricity".
We now have indepedent power producer....who sell power to KPLC...but at what price? From the little I seen it around 8-9shs (or usd cent) per kwh. Then KPLC & GoK doubles that up with fuel surcharge (now dropping), foreign exchange losses, so many levies and KPLC margins - so you pay now 14-18sh - which some improvement from 24shs we paid recently - before Olkaria geothermal -retired most of the diesel power stations.
If our goal is to compete with Egypt/South Africa/ Ethiopia then we need to reduce power by at least 100% from 14shs (for industrial consumers) to 7shs. That mean producing power at 4shs and selling it at 7shs. That mean establish say huge coal plant like AMU one in LAMU and selling power to KPLC at 2-4shs -and then KPLC an double that up with supply expense to 4-8shs.
Ethiopia from the little I have read produce & supply power at 9shs but subsidize it to 3 shs (for industries) and 6 shs (for domestics). Ethiopia basically began from very little power and recently added 1,800MW from Gibe III - which was some 5 or so times more power than previously. I think if you have huge hyrdo -then economies of scale kicks in- and you can produce power very cheaply. We cannot go big on hydro because we don't have the Nile like river --so our only hope is Kitui or imported coal.
We need to go big on coal and enviromental concern be damned. The rich countries can retire coal and use expensive renewable power. This is our turn to pollute the enviroment.
There should be 50 distributors of power in Kenya, other than KPLC.
Why could a distributor buy power at 25 shillings/kw?
Thats a lot of cash.
power is expensive because the powers to be have added a Corrupt deals that has to be paid.
Ethiopia has the same kid of power, how come its much cheaper?
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Here is quick breadown -look like hyrdo is really cheap at 3 cent usd per kwh.
http://www.businessdailyafrica.com/Corporate-News/Relief-for-power-users-as-expensive-Aggreko-diesel/-/539550/3298794/-/loglyiz/-/index.html
Emergency power is priced as high as ¢50 per kWh, which is more than double the cost of diesel-fired electricity set at ¢20 for each unit.
Hydropower, through susceptible to the vagaries of weather, is the cheapest at ¢3 per kWh followed by Mumias co-generation (¢6 per unit), geothermal (¢7 per kWh), Biojoule’s biogas (¢10 per unit), and Strathmore University’s solar power is priced at ¢12 per unit.
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LAMU's coal plant (1,050MW) will charge 7shs .
http://www.businessdailyafrica.com/Sh200bn-Lamu-coal-plant-eyes-Nema-hurdle-/-/539546/3300324/-/x25dtrz/-/index.html