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.
