I am frequently asked, including by people close to Kenyatta, what it is that he, Kenyatta should do to turn around the economy. My answer is invariably is that there is a world of difference between what can be done, and what Kenyatta can do. The reasons are clear. Kenyatta is so severely enmeshed in the conflict between his family’s business and the public interest that there is hardly a sector of the economy in which the required reforms do not conflict with his personal interests.
Kenyatta’s family enterprise, Brookside Dairies is the largest milk processor in Kenya. It achieved this through a string of acquisitions executed since Kenyatta became finance minister and subsequently president. The reason why Kenyatta’s directive is a talking point is because, since he assumed power, Brookside has been taking money out of people’s pockets. When he took office, processors bought milk from farmers at between Sh30 and Sh35, and sold it to consumers at between Sh60 and Sh65, obtaining a margin of about the same, i.e. Sh30 to Sh35. By the end of Kenyatta’s first term, the consumer price had increased to between Sh110 and Sh120 (i.e by Sh55 to Sh60 per half-litre packet), while the producer price remained unchanged, raising the processors’ margin to the Sh75-Sh90 range. Over the last two years, the squeeze has shifted from consumers to producers. In August last year Brookside reduced the purchase price of milk from Sh30 to Sh25 per kilo. By December, the media reported that farm-gate prices had fallen to Sh20, and to as low as Sh17 in some places.
The convergence of family and state is best exemplified by Stawi, a mobile phone-based lending platform owned by NCBA Bank—another Kenyatta family enterprise—that is being passed off as a national policy initiative to provide affordable credit to small businesses. Kenyatta himself first spoke of it in his 2019 State of the Nation address, and again in his Mombasa address two weeks ago:
“Measures to enable MSMEs access affordable credit include the recently launched Stawi. This will provide unsecured credit to MSMEs, which, because of their informal nature and lack of collateral securities, had been locked out of the formal credit market. Five commercial banks have set aside 10 billion shillings to be lent to MSMEs at an interest rate of 9 percent per annum, in loan amounts ranging between 30,000 to 250,000 shillings.” This is sleight of hand, also known in trade lingo as mis-selling. First, the Stawi platform belongs to NCBA, the other four banks are agents. Second, the interest rate of 9 per cent per year, while true, amounts to mis-selling. The true cost of credit is given by the Annual Percentage Rate (APR) which combines both interest and other fees. In addition to the 9 per cent per year interest, there is a facility fee of 4 per cent of the loan amount, a 20 per cent excise duty on the facility fee and a 0.7 percent insurance fee. All in all, these add up to an APR of 14.5 per cent for a one-year loan, 20 per cent for a six-month loan, 31 per cent for a three-month loan and 75 per cent for a one-month loan.
Read more at:
https://www.theelephant.info/op-eds/2020/01/30/the-economic-cost-of-conflict-of-interest-the-kenyatta-dairy-industry-case/The Elephant - Speaking truth to power.
Topic: Kenyata Family Vested Interests In Kenyan Economy (Read 4006 times)