Nipate
Forum => Kenya Discussion => Topic started by: KenyanPlato on May 03, 2021, 05:51:18 PM
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Uhuru is over working.
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Very impressive, the way KRA seemingly manages to squeeze water from rocks every fiscal year considering the poor state of the economy. But they 've been very zealous in their tax compliance efforts last few years. Just goes to show how much tax evasion slack tey was in the system, their tough enforcement policy has paid dividends. I'm in two minds however, on one hand, its commendable they are hitting their targets but on the other you know a big junk of that tax revenue will be used to enrich Uhuru/uthamikstan illegal enterprises and their Chinese partners at the expense of the rest us ala Kemsa. It also sends a wrong message to the treasury mandarins - "you can milk this cow even more", whets their appetites for even more punitive taxation imposed on the suffering Kenyan citizen.
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Very good. This year look like KRA likely to do something great. The KRA head was head of customs and anti-graft tsar. They must be sealing big holes in customs. The huge under-declaration.
Look like if KRA seal the loopholes; they should be able to raise 20B - as one would expect from a 100B dollar economy - that taxes like crazy.
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Beating reduced collection targets. Payroll and domestic taxes are dismal reflecting the depressed current economic situation. More importantly the mad finance secretary is proposing huge budget deficit of more than 8%. Basically even after entering IMF rescue program instead of slashing the budget government has opted to raise taxes. Immediate spending withdraw would have adverse effect on the economy but its better to slash spending than increasing taxes and running huge budget deficit. Good luck private sector getting credit.
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More reason to justify more loans. IMF will be impressed.
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RV Pundit frowns on this Dr Mukhisa-esque macro-economic mumbo jumbo. Prof Ndung'u is working on a fresh bottom-up model. Calm down and expect miracles.
Beating reduced collection targets. Payroll and domestic taxes are dismal reflecting the depressed current economic situation. More importantly the mad finance secretary is proposing huge budget deficit of more than 8%. Basically even after entering IMF rescue program instead of slashing the budget government has opted to raise taxes. Immediate spending withdraw would have adverse effect on the economy but its better to slash spending than increasing taxes and running huge budget deficit. Good luck private sector getting credit.
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IMF is in town. Ukur and ufool will only be signing on the dotted lines.
Going forward, theirs is to ask how high to jump to IMF horror music.
Fire oldies working from home and steal their pension - Yes massa!
Cut transport budget - Yes Massa.
With BBI popularity contest they can only pray for better rains.
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Yes I don't understand HK reduce taxes - then wait for trickle down. These theories don't even apply in US or developed world - leave an informal economy like Kenya. We need BOTTOM UPS.
RV Pundit frowns on this Dr Mukhisa-esque macro-economic mumbo jumbo. Prof Ndung'u is working on a fresh bottom-up model. Calm down and expect miracles.
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Yes I don't understand HK reduce taxes - then wait for trickle down. These theories don't even apply in US or developed world - leave an informal economy like Kenya. We need BOTTOM UPS.
RV Pundit frowns on this Dr Mukhisa-esque macro-economic mumbo jumbo. Prof Ndung'u is working on a fresh bottom-up model. Calm down and expect miracles.
Hk model works,well
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No. It doesn't. Equity Bank is clearly example that bottom up works better. Lowering taxes for a few big corporation will not transform the bottom of Githunguri. Deliberate actions like Githunguri Dairy will. Without deliberate action like organizing farmers of Githunguri to form their dairy corporation - reducing taxes for Limuru Tea or Brooke Bond will not dent poverty in your village.
Get out of ivory towers - and go to villages - and fix the issues there. If it means start cooperatives like was done in 70s - DO IT. If it means start micro-finance like was done in 90s DO IT. If it means spending billions employing idle to build cabro roads...do it.
It has to be deliberate! We cannot wait for the magic of trickle down.
Hk model works,well
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No. It doesn't. Equity Bank is clearly example that bottom up works better. Lowering taxes for a few big corporation will not transform the bottom of Githunguri. Deliberate actions like Githunguri Dairy will.
Hk model works,well
You join your fellas in stealing. Let kikuyus teach you biashara. Uhuru is a industrialist while ruto is govt employee.ruto is consumer while uhuru is acproducer
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Let's keep it a little cerebral. I know you want to drag us to the bottom and beat us there.
If you lower taxes - how many Kenyans will feel it - there less than 2M paying taxes.
The bottom pyramid are living in informal economy - growing their crops and eating it - maybe they buy sugar and few such items - but most of their purchases is untaxed food.
You raise or reduce taxes - it has almost zero effect - in the informal economy. It;s like South Sudan :) or deep in Maasailand.
Majority of kenyans live in that kind of extreme poverty! Famr their crop for food subsistence - maize and vegetables name it - they feed from their farms - you raise taxes for LPG - they don't care - they use firewood - you raises taxes for beer - they brew their illegal beer:) - they grow their tobbaco and make their cigarettes (remind me the guy I bought a plot in Nakuru had huge tobbaco pile - destined for Transmara from Nakuru). They don't even buying cooking oil - they make their own butter and use it - or get it from the butchery.
The only thing rural kenyans will complain about is maybe SUGAR prizes. They are yet to figure out they can make their own jaggeries :) and use honey. The Mhindi did a number on kenyans - by ensaring them with sugar.
You join your fellas in stealing. Let kikuyus teach you biashara. Uhuru is a industrialist while ruto is govt employee.ruto is consumer while uhuru is acproducer
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Bottom up is NOT complicated.
Equity Bank is an example. They deliberately targetted the UNBANKABLE - and now they are LARGEST BANK in east and central Africa - easily 10B dollars in assets.
EABL - KEG BEER is good example. Began as CSR - and now EABL leading brand in VOLUME. And supply chain of sorghum farmers - and Keg bars. The amount of lives it saved from illicit brew !!!
The micro-packaging by industries in Kenya are good example.
One Acre fund - targeting farmers with less than acre of farm - now have I think a million farmers in 10yrs - large than any KTDA or such
MPESA is good example. - began as CSR from DFID donation to some microfinance in thika and now the global lifeline for telcoms.
These simple yet scalable solutions CAN BE DONE.
Come up with beer as cheap as local brew - yet hygienic and safe
Come up with energy as cheap as firewood - yet clean and safe.
What is gov role here? Work with private sector to come up with bottom down products? Gov has to also deliberately target the bottoms? Not wait for trickle down fiscal policy Mumbo JUMBO.
If you're targeting the bottom - you should get tax waivers! As for middle class and the rest - they can fix their problems -or wait for mumbo jumbo from HK fiscal economic abracadarbra.
Give these bottom pyramid people some few years - and you start taxing them - you make CRAZY MONEY. Tax M-PESA now - and you're gonna get so much money!!! Tax 2shs of KEG BEER - and that is more money than all the Tuskers. SCALE!!!!!!!!!!!!!
The reason - everyone IS ON BOARD - you're gonna be taxing 25M adult kenyans - not 2m!!!
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Yes I don't understand HK reduce taxes - then wait for trickle down. These theories don't even apply in US or developed world - leave an informal economy like Kenya. We need BOTTOM UPS.
RV Pundit frowns on this Dr Mukhisa-esque macro-economic mumbo jumbo. Prof Ndung'u is working on a fresh bottom-up model. Calm down and expect miracles.
Tax reduction is always good, reduce for both consumers and companies. I believe tax rates should be capped. Kenya is currently being strangled by over taxation.
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1. The opposite of supply side economics is demand side economics. The examples of keg,equity, cited are perfect example of supply side economics working. Government lowered taxes on keg, making it more affordable, thus creating a huge industry. Equity was a lowly building society before 2002, processing tea and coffee payments for farmers. What led to explosive growth was after kibaki government(David ndii working for anyang nyongo planning) stopped crowding out the private sector by Mwiraria reducing banks capital reserves and lowering interest rates. The banks started lending to individuals, SME etc and that's how equity capitalized on that by becoming banker to informal sector. Prudent fiscal policy led to growth of equity bank.
Demand side economics example universal electricity connections. This how you end up with almost 1m idle connections and kplc bankrupt. supply side dictates that addressing cost(supply side) would've been the right policy which would have led to demand.
2. The more apt diagnosis of kenya economic problem would be government led growth vs private sector led growth. Government led growth is what Jubilee embarked on which has landed us where we are. Borrowing, taxing and spending model end up in disastrous results. The good news is that kenya has reached an inflection point just as in 1993. There's no fiscal room or increased taxation to keep public led growth model going. So just like what musalia did( big bang economic reforms) is needed. Private sector( big, small and micro) led economic policy that ensures fiscal prudence, low taxation, deregulation, registration and decriminalization of small enterprises is what needed. Almost all presidential candidates will adopt some version of this cause its the only option available. The days of government led growth are over, government can't tax enough to keep it going or borrow.
This is why despite heady GDP numbers kenyans are poorer.
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Before the taxation someone had to come up with KEG as bottom products.Before kibaki came I had gone to Equity bank to get the cheapest bankers cheque for UoN school fees.The same with derided mpesa.What your are missing is deliberate action to reach the informal economy.It cannot happen with magic..
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1. The opposite of supply side economics is demand side economics. The examples of keg,equity, cited are perfect example of supply side economics working. Government lowered taxes on keg, making it more affordable, thus creating a huge industry. Equity was a lowly building society before 2002, processing tea and coffee payments for farmers. What led to explosive growth was after kibaki government(David ndii working for anyang nyongo planning) stopped crowding out the private sector by Mwiraria reducing banks capital reserves and lowering interest rates. The banks started lending to individuals, SME etc and that's how equity capitalized on that by becoming banker to informal sector. Prudent fiscal policy led to growth of equity bank.
Demand side economics example universal electricity connections. This how you end up with almost 1m idle connections and kplc bankrupt. supply side dictates that addressing cost(supply side) would've been the right policy which would have led to demand.
2. The more apt diagnosis of kenya economic problem would be government led growth vs private sector led growth. Government led growth is what Jubilee embarked on which has landed us where we are. Borrowing, taxing and spending model end up in disastrous results. The good news is that kenya has reached an inflection point just as in 1993. There's no fiscal room or increased taxation to keep public led growth model going. So just like what musalia did( big bang economic reforms) is needed. Private sector( big, small and micro) led economic policy that ensures fiscal prudence, low taxation, deregulation, registration and decriminalization of small enterprises is what needed. Almost all presidential candidates will adopt some version of this cause its the only option available. The days of government led growth are over, government can't tax enough to keep it going or borrow.
This is why despite heady GDP numbers kenyans are poorer.
Bingo! Prioritizing Micro, small & Medium enterprises (MSME) is the key along with deregulation and reducing taxes. Infrastructure mania will get us nowhere.
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MSME is bottom up. Infrastructure is the hardware. You need to fix it before you go to software issues - deregulation and reducing taxes.
Bingo! Prioritizing Micro, small & Medium enterprises (MSME) is the key along with deregulation and reducing taxes. Infrastructure mania will get us nowhere.
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No sir. Think about this. Public Sector. Private sector. Informal sector. Before Jubilee - we had private sector led growth - everyone including imf/wb - complained that we were running on one engine - hence growth of 4% (before the rebasing)- while some countries like Ethiopia had public sector firing.
Jubilee corrected that imbalance - and we started growing at 6% - although that growth it turned out was due to mostly agricultural production.
Now for me we need all the three engines firing. Public sector. Private Sector. Informal Sector.
How do you mainstream informal sector to be part of the economy? How we get informal sector to become MSMEs? Then when everyone is onboard - there is formal sector big enough - we can start applying those tools - of low taxes, regulation, fiscal policy?
If you go sector by sector...in financial...we are doing fine...there... in telcom...we are fine there...in retail and wholesaling...we are at 30-40% (spread of supermarkets)...you go to agriculture and livestock...HUGE MESS...totally informal except for few like KTDA...if you go to transport...there is been attempts at least on matatus....but zero on boda bodas?
Quick win.
1) Continue with the formalization of the retail and wholesaling sectors. Kill these plethoras of loss-making shops in every corner of Kenya - by having a few supermarkets - where people can buy everything cheaply.
2) Commercialize and formalize agriculture. We need more KTDAs or dairy sector. Something that can almost guarantee monthly payments to farmers. We need to organize our smallholder farmers into co-operatives and such.
3) Fix the transport sector..especially boda bodas and matatus...for example we can demand all boda boda belong to a SACCO...and assist those saccos...with finances and governances.
4) The same for the rest of the informal sectors. Look for example at all the mechanics and juakali on the road side...they need support from gov...they need to be organized into cooperatives...so they can buy better equipment, have safe environment and all that.
And that to me is the bottom up....going directly to the people operating boda bodas, juakali, mechanics, poor farmers...and mainstreaming them into the formal economy.
And most importantly encouraging the private sector to go to the bottom....like agency/mpesa did or KEG beer or name them. Find out why private sector are not reaching to informal sector and help fix that....if it mean deregulation do it...if it mean lowering taxes do it...but only for informal sector or bottom down products.
1. The opposite of supply side economics is demand side economics. The examples of keg,equity, cited are perfect example of supply side economics working. Government lowered taxes on keg, making it more affordable, thus creating a huge industry. Equity was a lowly building society before 2002, processing tea and coffee payments for farmers. What led to explosive growth was after kibaki government(David ndii working for anyang nyongo planning) stopped crowding out the private sector by Mwiraria reducing banks capital reserves and lowering interest rates. The banks started lending to individuals, SME etc and that's how equity capitalized on that by becoming banker to informal sector. Prudent fiscal policy led to growth of equity bank.
Demand side economics example universal electricity connections. This how you end up with almost 1m idle connections and kplc bankrupt. supply side dictates that addressing cost(supply side) would've been the right policy which would have led to demand.
2. The more apt diagnosis of kenya economic problem would be government led growth vs private sector led growth. Government led growth is what Jubilee embarked on which has landed us where we are. Borrowing, taxing and spending model end up in disastrous results. The good news is that kenya has reached an inflection point just as in 1993. There's no fiscal room or increased taxation to keep public led growth model going. So just like what musalia did( big bang economic reforms) is needed. Private sector( big, small and micro) led economic policy that ensures fiscal prudence, low taxation, deregulation, registration and decriminalization of small enterprises is what needed. Almost all presidential candidates will adopt some version of this cause its the only option available. The days of government led growth are over, government can't tax enough to keep it going or borrow.
This is why despite heady GDP numbers kenyans are poorer.
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The biggest problem keeping mwafrika down is obsession with real estate.Now informal.Muhindi has taken over manufacturing as mwafrika spend all their life savings on brick and mortar without any real investment value
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MSME is bottom up. Infrastructure is the hardware. You need to fix it before you go to software issues - deregulation and reducing taxes.
No you have the cart before the horse. You need a thriving small sector that will pay for the supposed infrastructure you keep mentioning, what is holding MSME back are rules and regulations that favor large formal corporate style businesses, a holdover from colonialism. Look at the examples HK posted.
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The biggest problem keeping mwafrika down is obsession with real estate.Now informal.Muhindi has taken over manufacturing as mwafrika spend all their life savings on brick and mortar without any real investment value
I know right...
Real estate is overated. only a few do well.
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No sir. Think about this. Public Sector. Private sector. Informal sector. Before Jubilee - we had private sector led growth - everyone including imf/wb - complained that we were running on one engine - hence growth of 4% (before the rebasing)- while some countries like Ethiopia had public sector firing.
Jubilee corrected that imbalance - and we started growing at 6% - although that growth it turned out was due to mostly agricultural production.
Now for me we need all the three engines firing. Public sector. Private Sector. Informal Sector.
How do you mainstream informal sector to be part of the economy? How we get informal sector to become MSMEs? Then when everyone is onboard - there is formal sector big enough - we can start applying those tools - of low taxes, regulation, fiscal policy?
If you go sector by sector...in financial...we are doing fine...there... in telcom...we are fine there...in retail and wholesaling...we are at 30-40% (spread of supermarkets)...you go to agriculture and livestock...HUGE MESS...totally informal except for few like KTDA...if you go to transport...there is been attempts at least on matatus....but zero on boda bodas?
Quick win.
1) Continue with the formalization of the retail and wholesaling sectors. Kill these plethoras of loss-making shops in every corner of Kenya - by having a few supermarkets - where people can buy everything cheaply.
2) Commercialize and formalize agriculture. We need more KTDAs or dairy sector. Something that can almost guarantee monthly payments to farmers. We need to organize our smallholder farmers into co-operatives and such.
3) Fix the transport sector..especially boda bodas and matatus...for example we can demand all boda boda belong to a SACCO...and assist those saccos...with finances and governances.
4) The same for the rest of the informal sectors. Look for example at all the mechanics and juakali on the road side...they need support from gov...they need to be organized into cooperatives...so they can buy better equipment, have safe environment and all that.
And that to me is the bottom up....going directly to the people operating boda bodas, juakali, mechanics, poor farmers...and mainstreaming them into the formal economy.
And most importantly encouraging the private sector to go to the bottom....like agency/mpesa did or KEG beer or name them. Find out why private sector are not reaching to informal sector and help fix that....if it mean deregulation do it...if it mean lowering taxes do it...but only for informal sector or bottom down products.
The purpose of rebasing is to capture entirety of the economy. Posting huge GDP numbers that's not lifting citizens living standards is almost pointless. Macro economics matters and can't be suspended to first work on "hardware". Its like having a supercomputer but no software to utilize it. In reality software drives advancement in hardware, the same applies to economics.
Formalization of an economy is driven by increase in productivity. The small dukas makes money and that's why they haven't been driven out of business by supermarkets. The price of milk at your local kiosk is the same as supermarket. All businesses activities need to be registered, this will lead to capital accessibility. The combination of knowledge and capital is whats leads to increased productivity. Setting up cooperatives and saccos its only good for regulators and coop administrators. What's the inherent benefit for a matatu saccos or boda boda sacco? If there's its marginal. What would lead more to formalization is provision of scheduling, customer acquisition, i.e aggregation with clear economic benefits.
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Assume Mzungu was running this country, we all know it would be very developed, and for me it would be down to Mzungu organization, strictness`
nd formalization, and the almost outlawing of black informal market. Rwanda is trying to do the same. I do favor a more democratic cooperative model than crushing illegal business.
The reality is when Mzungu left we allowed informalization to take root - so as to bring the majority of blacks to the mainstream economy - we lowered the BAR (on decency, on standards, on legality, etc)
1) The first informality started from retail and wholesaling - it's no longer a mhindi selling things in large shops - it was million of shops hardly breaking even all over the country. This happened in 1960s. These were unlicensed, unregulated, unregistered, zero tax-paying shops. They could not expand for they depend mostly on the owner's capital.
Now go to any rural parts of kenya - you'll find those rusted 1960s shopping centers all over - with barely any improvement.
2) The 2nd informality took root in the 1970s - when Kenyatta allowed Matatus to become free for all - we moved having organized public buses - to complete mess - and by the 1990s when Nyayo bus/Kenatco taxis closed down - transport sector became totally informally matatu run - with attendant mess - of noise, police corruption and all the mess.
3) The third informality soon arose in urban housing - by 1980s some slums had started to crop up and by 1990s they were growing very fast - in the meantime plot maguta maguta was starting - kenyans were starting to build Kayoles, dandoras, and all sort of rental mess in Nairobi Eastlands. By 2000s - the action had crossed over to richer neigherbhood west of Nairobi - there were now apartments of all shades all over Nairobi - built informally - not by large housing companies, insurances or pension fnunds but informally. As we speak housing has totally gone informal - and it's attendant mess - building a expensive poorly built hovels without sewage or any horizontal infrastructure..ugly structures all over.
Those three examples - will illustrate how we have become an informal black market economy - with a tiny private sector - and also a tiny public sector (collecting 17% of GDP - instead of anything 25% if you consider income tax is upto 30%, customs even more, and VAT at 18%).
The elephant in the house is how to reverse all the mess created post mzungu leaving us a decent country. Well, part of the problem was of course population growth on steroids that saw Kenyans move from 8M to 50m. Well that is well that seem handled now.
The next step, therefore, is to bring the informal economy back - from clustered well-rusted dukas in every corner to few regulated, well-capitalized supermarkets and convenient shops. From matatus that operate like thugs to decent timed buses that arrive and leave on time. From kayole like structures back to big real estate projects by gov, private sector, insurance and name it.
How do you get these informal people into formal. You need to organize them - cooperative is good example. Look at these Kajiado women - who would be hawking unhygienic milk all over Kitengela - but now with largest women owned cooperative - supplying milk.
The same need to happen in all the rest of the sectors...Matatus saccos are good step like these 2NK guys. Matatus are on baby steps - next will be to give Sacco or two a route entirely - and require them to meet some parameters - like having a BUS departing every 5 minutes - full or not. The banks would be willing to finance assets if you have got say Nairobi-Nyeri route. Gov can assist in whatever they can do fill in losses from having timed buses.
The same need to happen in housing, in agriculture, in livestock, in local manufacturings, transport (fix the boda boda mess - by requiring them to be saccos - have uniform color, helmet - and all that)
Kenyans need to be organized, registered, and formalized - and from there it would be easy to assist them - either through capital, training, capacity buildings - or well ECONOMIES OF SCALE.
Obviously, formalization doesn't mean remove market economics or the benefits of 1990s liberalization. It just means you cannot wake up and put up a duka or start a matatu or hotel or build house - without meeting some basic standards of decency, registration and regulation...like happens in the US or developed country.
ONCE YOU HAVE FORMALIZED ECONOMY - you can then apply those MACRO-ECONOMIC TOOLS. For now it almost comical.
The purpose of rebasing is to capture entirety of the economy. Posting huge GDP numbers that's not lifting citizens living standards is almost pointless. Macro economics matters and can't be suspended to first work on "hardware". Its like having a supercomputer but no software to utilize it. In reality software drives advancement in hardware, the same applies to economics.
Formalization of an economy is driven by increase in productivity. The small dukas makes money and that's why they haven't been driven out of business by supermarkets. The price of milk at your local kiosk is the same as supermarket. All businesses activities need to be registered, this will lead to capital accessibility. The combination of knowledge and capital is whats leads to increased productivity. Setting up cooperatives and saccos its only good for regulators and coop administrators. What's the inherent benefit for a matatu saccos or boda boda sacco? If there's its marginal. What would lead more to formalization is provision of scheduling, customer acquisition, i.e aggregation with clear economic benefits.
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Bottom up.
To fix our smallholder agriculture -we need the aggregation of smallholder farmers through farmers’ organisations and cooperatives. This for example has seen kenya tea rise to the top of the world in export - and will probably hit 1Million metric tonnes soon - India and China (sub-continent) are doing 2m each - and Kenya is now at 0.6m.
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In a structurally corrupt society, formalization has limited benefits. You are more likely to end up being taxed to death without any meaningful development like the Fresha in Githunguri. No roads yet. Their innovation is easily copied on a larger scale by Kenyattas who then use policy to strangle the firm. The money you were to use to maintain your investment or upgrade ends up in corrupt government officials who dream what to suck from you day and night in permits, licences....
Even formalisation of tea just is a tax avenue - 42 taxes!
Matatus is all about taxes - no parking; no dignified treatment by kanjo who are milking you; no protection from mungiki. Even better saccos legitimise mungiki.
Bodabodas - no different from matatus
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This "bottom-up" voodoo is not new. All those formalization or digitization is organic industrial maturity. Claiming it is a new model by Ruto is disingenouous false hope to con the youth. A ponzi scheme in short.
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Interesting but I think you're being to cynical. Our SMEs can only grow if they leverage. They cannot leverage without being legal and playing by the books. That way they can attract investment in capital, loans and such things.
In a structurally corrupt society, formalization has limited benefits. You are more likely to end up being taxed to death without any meaningful development like the Fresha in Githunguri. No roads yet. Their innovation is easily copied on a larger scale by Kenyattas who then use policy to strangle the firm. The money you were to use to maintain your investment or upgrade ends up in corrupt government officials who dream what to suck from you day and night in permits, licences....
Even formalisation of tea just is a tax avenue - 42 taxes!
Matatus is all about taxes - no parking; no dignified treatment by kanjo who are milking you; no protection from mungiki. Even better saccos legitimise mungiki.
Bodabodas - no different from matatus
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Nobody claims it a new model.If you see the example I have given out - KBL was developing KEG in 90s as CSR response to illicit brew killing people. Bottom up/pyramid was all craze I think 20yrs ago - when Bangaledshi Grameen bank won a nobel for investing in the poor.
After couple of years - it's appears the bottom down - lost it's shine.
Ruto is at least trying to do something more cerebral than BBI.
This "bottom-up" voodoo is not new. All those formalization or digitization is organic industrial maturity. Claiming it is a new model by Ruto is disingenouous false hope to con the youth. A ponzi scheme in short.
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Formalizing retail under few chainstores or supermarkets - is actually kicking out '000s of kiosk or duka or shopkeepers - in favor of few rich wahindi. Opposite of bottom-up.
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Formalizing retail under few chainstores or supermarkets - is actually kicking out '000s of kiosk or duka or shopkeepers - in favor of few rich wahindi. Opposite of bottom-up.
Precisely. He is delusional. His prescription to give a few well connected individuals exclusive access to the keys of the retail sector is the antithesis of hustler economics.
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If they cannot be organized to create economies of scale - then It best they get kicked out - so they can do smallholder farming organized into saccos. But they are bottom up models - like Uniliver-Mastercard Jaza Duka - to help micro-retailers.
These micro-retailers get good on credit like supermarkets do - otherwise it may make sense to organize all dukas into some saccos - and close some of them.
The point is clear - Dukas do not work, Smallholder farming duking it alone do not work, Matatus working alone do not work, name it.
What work is to create economies of scales/consolidations - by aggregating the bottom up - to have the muscle to take on big boys and girls.
Formalizing retail under few chainstores or supermarkets - is actually kicking out '000s of kiosk or duka or shopkeepers - in favor of few rich wahindi. Opposite of bottom-up.
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I think formalized retail and wholesaling will unlock job opportunities in manufacturing - that will employ some of these wannabe dukawallas. Big supermarket giving one large order - will encourage manufacturers - including agro-processing firms in rural areas. But these micro-retailers do not create formal aggregate demand that a manufacturer can rush to the bank and say - we got 100M dollar deal with walmart - please fund us to bring in equipment and hire more people.
Africa problem is INFORMAL BLACK MARKET ECONOMY
Precisely. He is delusional. His prescription to give a few well connected individuals exclusive access to the keys of the retail sector is the antithesis of hustler economics.
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I think formalized retail and wholesaling will unlock job opportunities in manufacturing - that will employ some of these wannabe dukawallas. Big supermarket giving one large order - will encourage manufacturers - including agro-processing firms in rural areas. But these micro-retailers do not create formal aggregate demand that a manufacturer can rush to the bank and say - we got 100M dollar deal with walmart - please fund us to bring in equipment and hire more people.
Africa problem is INFORMAL BLACK MARKET ECONOMY
What if those big supermarkets fail as we have seen repeatedly in this country due to mismanagement, where will people go for shopping? What happens to the suppliers? Your vision is eerily similar to communism. What dis needed is diversity not monopoly. We actually need thousands of Dukawallas up and down the country not a few giant marts. Here in the West, people are talking about reviving mom and pop shops that have been driven out by the big box stores and strip malls because they realized their mistake too late.
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None has failed due to market economics; just governance issues; otherwise as soon as one fails; another pops up.
The difference btw Kenya and developed world - you cannot just wake up and open a mom and pop shop - you have to meet stringent standards, file taxes and bla bla- you have to be formal, have bank account, etc.
Micro-retailers are not as efficient as Walmarts; they are not good for everyone.
Unless these micro-retailers can be organized into groups - where they can do bulk purchases, negotiate for big discounts, get capital and the work - these are hopeless time and money wasting ventures.
Let us say Kisumu dukawallas agree to form sacco - where all purchases are done jointly - and cheaply - but well mwafrika want to compete - even a micro-level leading to loss making dukas all over.
The same way - rather than everyone building a house - we form housing cooperatives - we jointly purchase land (cheaply) - and build - and it becomes cheaper, more organized, more decent, etc
communism is forcing people- but we are talking cooperative models.
What if those big supermarkets fail as we have seen repeatedly in this country due to mismanagement, where will people go for shopping? What happens to the suppliers? Your vision is eerily similar to communism. What dis needed is diversity not monopoly. We actually need thousands of Dukawallas up and down the country not a few giant marts. Here in the West, people are talking about reviving mom and pop shops that have been driven out by the big box stores and strip malls because they realized their mistake too late.
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Assume Mzungu was running this country, we all know it would be very developed, and for me it would be down to Mzungu organization, strictness`
nd formalization, and the almost outlawing of black informal market. Rwanda is trying to do the same. I do favor a more democratic cooperative model than crushing illegal business.
The reality is when Mzungu left we allowed informalization to take root - so as to bring the majority of blacks to the mainstream economy - we lowered the BAR (on decency, on standards, on legality, etc)
1) The first informality started from retail and wholesaling - it's no longer a mhindi selling things in large shops - it was million of shops hardly breaking even all over the country. This happened in 1960s. These were unlicensed, unregulated, unregistered, zero tax-paying shops. They could not expand for they depend mostly on the owner's capital.
Now go to any rural parts of kenya - you'll find those rusted 1960s shopping centers all over - with barely any improvement.
2) The 2nd informality took root in the 1970s - when Kenyatta allowed Matatus to become free for all - we moved having organized public buses - to complete mess - and by the 1990s when Nyayo bus/Kenatco taxis closed down - transport sector became totally informally matatu run - with attendant mess - of noise, police corruption and all the mess.
3) The third informality soon arose in urban housing - by 1980s some slums had started to crop up and by 1990s they were growing very fast - in the meantime plot maguta maguta was starting - kenyans were starting to build Kayoles, dandoras, and all sort of rental mess in Nairobi Eastlands. By 2000s - the action had crossed over to richer neigherbhood west of Nairobi - there were now apartments of all shades all over Nairobi - built informally - not by large housing companies, insurances or pension fnunds but informally. As we speak housing has totally gone informal - and it's attendant mess - building a expensive poorly built hovels without sewage or any horizontal infrastructure..ugly structures all over.
Those three examples - will illustrate how we have become an informal black market economy - with a tiny private sector - and also a tiny public sector (collecting 17% of GDP - instead of anything 25% if you consider income tax is upto 30%, customs even more, and VAT at 18%).
The elephant in the house is how to reverse all the mess created post mzungu leaving us a decent country. Well, part of the problem was of course population growth on steroids that saw Kenyans move from 8M to 50m. Well that is well that seem handled now.
The next step, therefore, is to bring the informal economy back - from clustered well-rusted dukas in every corner to few regulated, well-capitalized supermarkets and convenient shops. From matatus that operate like thugs to decent timed buses that arrive and leave on time. From kayole like structures back to big real estate projects by gov, private sector, insurance and name it.
How do you get these informal people into formal. You need to organize them - cooperative is good example. Look at these Kajiado women - who would be hawking unhygienic milk all over Kitengela - but now with largest women owned cooperative - supplying milk.
The same need to happen in all the rest of the sectors...Matatus saccos are good step like these 2NK guys. Matatus are on baby steps - next will be to give Sacco or two a route entirely - and require them to meet some parameters - like having a BUS departing every 5 minutes - full or not. The banks would be willing to finance assets if you have got say Nairobi-Nyeri route. Gov can assist in whatever they can do fill in losses from having timed buses.
The same need to happen in housing, in agriculture, in livestock, in local manufacturings, transport (fix the boda boda mess - by requiring them to be saccos - have uniform color, helmet - and all that)
Kenyans need to be organized, registered, and formalized - and from there it would be easy to assist them - either through capital, training, capacity buildings - or well ECONOMIES OF SCALE.
Obviously, formalization doesn't mean remove market economics or the benefits of 1990s liberalization. It just means you cannot wake up and put up a duka or start a matatu or hotel or build house - without meeting some basic standards of decency, registration and regulation...like happens in the US or developed country.
ONCE YOU HAVE FORMALIZED ECONOMY - you can then apply those MACRO-ECONOMIC TOOLS. For now it almost comical.
There are basic factors that leads to formalization of an economy. In a market economy the more productive business basically drives out the inefficient ones. There's a reason why there many small kiosks, there's a value proposition to what they provide. It wouldn't be cost effective for a supermarket to sell for example pima cooking oil. The purchasing power of customers necessitate that there are micro enterprises. Safaricom had to offer prepaid airtime of low dominations cause that's what the market could afford. There's this misconception that MSEs don't pay taxes, actually there are more than 1.6m mses that pay taxes according to knbs.
The issue of real estate disorganization is mainly due to lack of planning by cities and counties. Formalization in economics is led by increased productivity. 80yrs ago majority of americans were farmers today less than 1%, the increase in productivity led to urbanization, creation of new industries etc.
Macro economics in a market economy is like oxygen, indispensable. David ndii will have a rough time convincing built it and they'll come, infrastructure cultist and macro deniers to accept bottom up economic model driven by private sector. The bottom up economic model kenya should follow is vietman, 40% of vietman gdp is smes.
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What you're proposing is to let market economy sort out issues - for gov to almost stay out of the scene. I don't think that works anywhere. It will lead to chaos.
Gov role is to provide infrastructure plus regulation. Bottom up is about fixing regulation end.
Nearly all economies I am aware of - SMES - make the bulk of the economy - including US of A.
The difference btw developed or modern economies and Africa - Informal sector (SME) occupy that space - that could be SMES.
So the challenge for gov in the economic front -
1) how to fix the infrastructure deficit
2) how to transform the informal black economy into a formal SME economy.
Some ideas include cooperative models we have seen around Kenya - most successfully ones including KTDA - that has transformed what everyone thought would be uneconomical - smallholder tea farming - into one world most thriving sector.
How can the gov replicate this in all sectors - Boda boda, Matatus, Juakalis, Dukas - and of course the rest of agriclulture. In fact the bulk of work will lay in agrisector - where Kenya has I think 8-10M farmers - more than any other job group!
How did KTDA thrive as nation-wide farmers organization? That could be a good model to replicate. We are seeing the dairy sector is doing great. Horticulture - the smallholder is almost totally chaotic - and it could be good candidate. Sugar, maize and name them. All these people need to join together -and build up the value chain.
For example, if all maize farmers join up - save some maize annually - they can start to own warehouses - and soon milling the plants. What would gov do then - form a farmers cooperative - give up assets of NCPB - to it slowly - and encourage farmers to grow up the value chain - into milling, animal feeds and name it.
There are basic factors that leads to formalization of an economy. In a market economy the more productive business basically drives out the inefficient ones. There's a reason why there many small kiosks, there's a value proposition to what they provide. It wouldn't be cost effective for a supermarket to sell for example pima cooking oil. The purchasing power of customers necessitate that there are micro enterprises. Safaricom had to offer prepaid airtime of low dominations cause that's what the market could afford. There's this misconception that MSEs don't pay taxes, actually there are more than 1.6m mses that pay taxes according to knbs.
The issue of real estate disorganization is mainly due to lack of planning by cities and counties. Formalization in economics is led by increased productivity. 80yrs ago majority of americans were farmers today less than 1%, the increase in productivity led to urbanization, creation of new industries etc.
Macro economics in a market economy is like oxygen, indispensable. David ndii will have a rough time convincing built it and they'll come, infrastructure cultist and macro deniers to accept bottom up economic model driven by private sector. The bottom up economic model kenya should follow is vietman, 40% of vietman gdp is smes.
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What you're proposing is to let market economy sort out issues - for gov to almost stay out of the scene. I don't think that works anywhere. It will lead to chaos.
Gov role is to provide infrastructure plus regulation. Bottom up is about fixing regulation end.
Nearly all economies I am aware of - SMES - make the bulk of the economy - including US of A.
The difference btw developed or modern economies and Africa - Informal sector (SME) occupy that space - that could be SMES.
So the challenge for gov in the economic front -
1) how to fix the infrastructure deficit
2) how to transform the informal black economy into a formal SME economy.
Some ideas include cooperative models we have seen around Kenya - most successfully ones including KTDA - that has transformed what everyone thought would be uneconomical - smallholder tea farming - into one world most thriving sector.
How can the gov replicate this in all sectors - Boda boda, Matatus, Juakalis, Dukas - and of course the rest of agriclulture. In fact the bulk of work will lay in agrisector - where Kenya has I think 8-10M farmers - more than any other job group!
How did KTDA thrive as nation-wide farmers organization? That could be a good model to replicate. We are seeing the dairy sector is doing great. Horticulture - the smallholder is almost totally chaotic - and it could be good candidate. Sugar, maize and name them. All these people need to join together -and build up the value chain.
For example, if all maize farmers join up - save some maize annually - they can start to own warehouses - and soon milling the plants. What would gov do then - form a farmers cooperative - give up assets of NCPB - to it slowly - and encourage farmers to grow up the value chain - into milling, animal feeds and name it.
While we both agree on the need to formalize, the question of how to get there is what we disagree. The most important aspect in a market whether formal or informal is its efficiency. To formalize, MSEs needs to be registered (at very little cost)and with license comes basic regulations where to operate etc, this need to be as unrestrictive as possible.
With license to operate(respecting every hustle) they can have access to capital and grow from there.
The issue of infrastructure deficit while it's there compared to developed world, it needs to be addressed according to necessity and priority. Taxing, borrowing and spending beyond certain parameters it impedes growth of private sector thus negating any benefits that could have been realized( macro econ).
KTDA was successful cause they focused on a very simple concept of a bud and two leaves. This ensured that they get high quality tea that the multinationals couldn't. That's the bases of ktda success, however it seems the commodity model has reached its limit. Conversely in coffee sector the cooperative society didn't focus on quality which led to low yields, low quality and ultimately low incomes. The solution introduced was licensing of small estates(now down to 2acres), this are farmers that are thriving. Its imperative that cooperative societies aren't given a monopoly.
The most successful dairy farmers are Githunguri farmers, what underpins their success is high productivity. They produce more milk per cow than any other farmers. The fact that they have their own cooperative with its brand is a huge bonus. Increasing productivity of farmers is more important and crucial than setting up cooperatives or aggregating.
Bottomline there's no country that has ever developed without producing goods or service whether for local or export market. Kenya focus should be in production of goods and provision of services.
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In all you economics - macro and micro - you really fail to talk SCALE. That is most important aspect. Otherwise everywhere there are two or three farmers doing great...even in South Sudan.
Why do we SCALE? So we can benefit from economies of scale/consolidation/locations.
How do we scale? How do we convert one or two success stories into a nationwide succes story.
What comes first. Did Githunguri farmers invest in good breeds of cows and the animal feeds during the time of collapse of KICC and milk hawking; or this started when farmer organized themselves into Githunguri dairy; giving them economies of scale to be efficient and productive like large dairy firm like Delameres.
For me bottom-up model - is to find success stories of efficiency and high productivity - try to model AND SCALE THEM nationwide.
If it worked in Githunguri - it can work everywhere else. The model for dairy - let farmer worry about feeding the cow - the dairy saccos will do milk marketting, provide feeds on loan, capital to buy good breeds, and even emergency loans - that way the farmer is focussed daily on just being an efficient farmer - not doing everything like someone hawking milk on the streets in the afternoon and feeding the cow in the morning.
How do we scale our micro-farming (small holder compared to large scale successfully model)? KTDA gives us a model.
How do we scale single matatu operator to work like global transport conglomerates that are efficient? 2NK sacco gives us a model
How do we scale our micro-retailers so they are as efficient and as productive as Walmart? Something like Jaza Duka is good model - where shopkeepers are registered - and companies give them goods - with open micro-credit lines from banks.
How do we scale Juakali operators or mechanis? By making them to register as SACCOs or companies - so they can win big contracts - and share the profit.
Now what is gov role here - first it to force them if possible - and 2ndly to incentivize them - for example, gov can decide they will be buying furniture from furniture making saccos in kenya - not individual furniture shops - or gov can give them huge land with facilities - again as long as they are registerd and operated as cooperative or company.
If you deal with individuals - YOU WILL NEVER SCALE - and it will remain black fragmented market.
These aggregators - like KTDA or SACCO - will set the standards, code of conduct and name it for all members - and gov can easily
manage, control, encourage and fund them.
For example, most of KTDA factories initial years were funded by gov, because it was simply NOT viable for banks to dump their money, when they could just lend to Uniliver Tea.
The biggest problem - of course people fear they will be taxed if they operate legally - but they need to know the benefits outweigh the taxes.
While we both agree on the need to formalize, the question of how to get there is what we disagree. The most important aspect in a market whether formal or informal is its efficiency. To formalize, MSEs needs to be registered (at very little cost)and with license comes basic regulations where to operate etc, this need to be as unrestrictive as possible.
With license to operate(respecting every hustle) they can have access to capital and grow from there.
The issue of infrastructure deficit while it's there compared to developed world, it needs to be addressed according to necessity and priority. Taxing, borrowing and spending beyond certain parameters it impedes growth of private sector thus negating any benefits that could have been realized( macro econ).
KTDA was successful cause they focused on a very simple concept of a bud and two leaves. This ensured that they get high quality tea that the multinationals couldn't. That's the bases of ktda success, however it seems the commodity model has reached its limit. Conversely in coffee sector the cooperative society didn't focus on quality which led to low yields, low quality and ultimately low incomes. The solution introduced was licensing of small estates(now down to 2acres), this are farmers that are thriving. Its imperative that cooperative societies aren't given a monopoly.
The most successful dairy farmers are Githunguri farmers, what underpins their success is high productivity. They produce more milk per cow than any other farmers. The fact that they have their own cooperative with its brand is a huge bonus. Increasing productivity of farmers is more important and crucial than setting up cooperatives or aggregating.
Bottomline there's no country that has ever developed without producing goods or service whether for local or export market. Kenya focus should be in production of goods and provision of services.
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In all you economics - macro and micro - you really fail to talk SCALE. That is most important aspect. Otherwise everywhere there are two or three farmers doing great...even in South Sudan.
Why do we SCALE? So we can benefit from economies of scale/consolidation/locations.
How do we scale? How do we convert one or two success stories into a nationwide succes story.
What comes first. Did Githunguri farmers invest in good breeds of cows and the animal feeds during the time of collapse of KICC and milk hawking; or this started when farmer organized themselves into Githunguri dairy; giving them economies of scale to be efficient and productive like large dairy firm like Delameres.
For me bottom-up model - is to find success stories of efficiency and high productivity - try to model AND SCALE THEM nationwide.
If it worked in Githunguri - it can work everywhere else. The model for dairy - let farmer worry about feeding the cow - the dairy saccos will do milk marketting, provide feeds on loan, capital to buy good breeds, and even emergency loans - that way the farmer is focussed daily on just being an efficient farmer - not doing everything like someone hawking milk on the streets in the afternoon and feeding the cow in the morning.
How do we scale our micro-farming (small holder compared to large scale successfully model)? KTDA gives us a model.
How do we scale single matatu operator to work like global transport conglomerates that are efficient? 2NK sacco gives us a model
How do we scale our micro-retailers so they are as efficient and as productive as Walmart? Something like Jaza Duka is good model - where shopkeepers are registered - and companies give them goods - with open micro-credit lines from banks.
How do we scale Juakali operators or mechanis? By making them to register as SACCOs or companies - so they can win big contracts - and share the profit.
Now what is gov role here - first it to force them if possible - and 2ndly to incentivize them - for example, gov can decide they will be buying furniture from furniture making saccos in kenya - not individual furniture shops - or gov can give them huge land with facilities - again as long as they are registerd and operated as cooperative or company.
If you deal with individuals - YOU WILL NEVER SCALE - and it will remain black fragmented market.
These aggregators - like KTDA or SACCO - will set the standards, code of conduct and name it for all members - and gov can easily
manage, control, encourage and fund them.
For example, most of KTDA factories initial years were funded by gov, because it was simply NOT viable for banks to dump their money, when they could just lend to Uniliver Tea.
The biggest problem - of course people fear they will be taxed if they operate legally - but they need to know the benefits outweigh the taxes.
Organic grown or earned economic scale is very important. What I don't advocate for is forced or induced economic scale. Forced scale leads to high artificial barrier to entry, creating a cartel like organizations.
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But gov role is to create such scale; coz it posses the capacity to do that? Why would want to wait for organic anemic growth? When gov is a great leverage if you used well.
I think we are in agreement that Kenya has a tiny private sector - and huge informal sector - and this where we need to fix.
Gov has the biggest role here. It can create policy, financing and necessary infrastructure to make it happen.
If you look around the last 10 yrs - we have created new industries in m-pesa/agent shops,digital taxis, boda bodas and maybe diary/nuts/fruit sectors
Safaricom, Banks, Uber were largely responsible for scaling this but gov policy helps - gov allowed m-pesa, agent banking, removed taxes on boda boda and these have created new industries.
HOW DO WE REPLICATE THIS?
If they fumble like they have done severally on Keg beer (non malt beer) - introducing and removing taxes - that would tragic. I have complained here bitterly over many years for KEG beer mishandling - and then later we cry about illicit dangerous alcohol killing people or reducing them to walking dead.
Gov has to think about the bottom (large informal sector) as it's core business - and stop engaging in little private sector talks. They are not the majority - and do not deserve any more attention than informal sector.
If a private company is willing for example to come up with solution to fix boda boda mess - give them what they need-yes boda boda are invaluable last mile transport in kenya but they are unruly and chaotic - and barely making money for riders. If the policy is to make them belong to SACCOs - go for it - and give them the incentive to do this.
Private sector companies that are large like Safaricom and gov have the capacity to create industry size scale needed to transform our economy.
Organic grown or earned economic scale is very important. What I don't advocate for is forced or induced economic scale. Forced scale leads to high artificial barrier to entry, creating a cartel like organizations.