Category: Poverty

According to Article 43 of the Kenyan Constitution, every person has the right to “accessible and adequate housing and to reasonable standards of sanitation”. The reality is somewhat different for those who live in the slums – some 65% of Nairobi’s population, according to UN-Habitat figures. On average, there are 318 households per acre in the slums, and those who live there are required to pay rent to landlords who have dubious title claims.

A court action brought by a coalition of NGOs was due to get underway yesterday, seeking cancellation of title deeds to the slum areas. It is alleged that governments have illegitimately issued title deeds to well-connected individuals, instead of auctioning the land publicly as required by the law. The recipients of title deeds have then used them to exploit the poor, requiring them to pay rent for slum accommodation with very poor sanitation and living conditions. Landlords are able to charge rentals of up to $100,000 per acre per year.

Other alleged irregularities relating to the title deeds concern the conditions of grant. The titles were apparently granted pursuant to conditions limiting the use to light industrial purposes and requiring the grantees to erect buildings for such purposes within 24 months. Grantees were prohibited from subdividing, selling or charging the land. All of these conditions have been ignored.

The month of July saw a 10% increase in global food prices, and while this might be good news for farmers who have had a good harvest, it is bad news for the world’s poor who have to pay for their food. High temperatures and a severe drought in the US has resulted in a very poor harvest there, and a drought in parts of the former Soviet Union has also resulted in reduced harvests. The shortfall has led to increased prices.

According to the World Bank, during the month of July corn prices rose by 25%, wheat prices rose by 25%, soybean prices rose by 17%, and rice prices dropped by 4%. The World Bank’s Food Price Index, which is derived from current prices for a range of foods, was 1% higher than the previous maximum which had been reached in February 2011.

Countries which import food are likely to experience the biggest impact. The price of sorghum in South Sudan has increased by 220% in the past quarter, while the price of maize in Mozambique has increased 113% during the same period. At the moment, most countries which import food are hoping that growers in the southern hemisphere have a bumper crop in the current season in order to take the pressure off prices.

Somalia’s new constitution exists in a “parallel universe”, according to some critics. Last week saw the institution of a new government, and the country is hoping to start moving towards a brighter future with order replacing anarchy. Moves are underway to establish the sorts of institutions enjoyed by other countries, including a stock market, but the country has a long way to go before the reality reflects the aspirations outlined in the new constitution.

The progressive new constitution provides a broad range of rights for women, and declares everyone to be equal, regardless of clan or religion. Many Somalis think that such ideas are improperly imported from Western countries, and fail to reflect true Somali cultural priorities. For example, it is difficult to see how the constitution’s ban on female circumcision can be enforced given the very broad extent to which it is practised in the country.

In fact, given that the country has been without effective central government for 21 years, the new government is going to face significant challenges in achieving acceptance. International forces have not yet been able to subdue al Shabaab militants, and the militant philosophy has a lot of support in the country. Furthermore, it is difficult to imagine warlords with vested interests peacefully submitting to a new central government.

The countries in the East African Community face a dilemma. They need to achieve economic integration in order to maximise their rate of economic growth, but recent history demonstrates that the European model may not be ideal. In particular, the plight of Greece and some other financially stressed European nations demonstrates that a single currency can lead to problems if countries have differing financial approaches.

Accordingly, an East African Community taskforce is investigating the approach taken in West Africa by the West African Economic and Monetary Union (UEMOA), which was created in 1994 with Benin, Burkina Faso, Côte d’Ivoire, Mali, Niger, Senegal, Togo and Guinea-Bissau as its members. The countries share the CFA franc as their common currency, but there is a lower degree of monetary union than is the case in Europe.

The eight UEMOA countries are a subset of the 15 ECOWAS (Economic Community of West African States) countries. They have adopted a customs union and common external tariffs. UEMOA is further along the path to economic integration than any other African group of countries, although none of the member countries are widely regarded as economic superstars.

The funding received by Kenya from European sources declined last year as a result of the European economic crisis. Spain, which has been one of the hardest-hit countries, reduced its contributions by 29%. France, which has never previously reduced its contributions had a 3% reduction in funding. Even Britain, which has made considerable efforts to maintain the level of its giving through the crisis, had a slight reduction in its contributions.

Kenya’s receipts from tax collections in the past financial year have been $100 million less than budgeted, and the current year’s budget assumes external funding of around $2.3 billion including the contributions from European countries, so the prospects of a balanced budget to support the country’s ambitious infrastructure program seem to be diminishing. Funding from European sources for health programs is also declining.

China and Japan, on the other hand, have recently provided funding to Kenya for roads and water projects, and the Kenyan government has been seeking assistance from East Asian countries to help fund the infrastructure projects needed to achieve the official Vision 2030 goals. Nonetheless, the level of new funding received from East Asia is not likely to be sufficient to balance the reductions in funding from Europe.

The Kenyan government has just completed a renovation of its parliament building designed to bring the parliament “into the digital age”. Included in the renovation were 350 new odd-looking red cinema-style chairs, each with the Kenyan coat of arms on the headrest. The remarkable feature of the new chairs is not so much their appearance as their cost, which was said to be around $3000 per seat, with the total refurbishments costing $12 million.

The chairs are said to have been made by the Kenyan prisons department after the original quote of $5000 per chair received from a manufacturer in another country was deemed too expensive. One reason given for the high expense is that the mould used was very expensive. Some commentators have speculated that another reason might be substantial mark-ups charged by intermediaries who are keen to get their hands on public funds.

Although Kenya has the most advanced economy in East Africa, it is still classified as a developing country, and half of its residents live in absolute poverty. To a Western mind it seems strange that such a country should spend large sums of money on chairs for politicians when the poor have such obvious needs. However, the prevailing sentiment amongst those in power seems to be that the political need to be looked after if economic development is to trickle down to the poor.

Kenya’s finance minister Njeru Githae has provoked controversy with the draft Value Added Tax Bill 2012. The Bill proposes to simplify Kenya’s VAT system by removing a number of exempted items, and thereby increase government revenues. However, critics say that the measures, which essentially impose a 16% tax on basic commodities, will cause significant harm to the country’s economic development.

The proposed changes will result in a 16% VAT being applied to maize flour, bread, wheat flour and milk. As these are all items required by the poor, with low elasticity of demand, the tax is a regressive one because it will account for a higher proportion of the income of the poor than of the rich. The Central Organisation of Trade Unions has threatened a “nationwide strike by workers and the unemployed”, although it is not clear how the unemployed can go on strike.

The Bill also proposes to tax fertiliser, seeds, insecticides, and pesticides. These are all agricultural inputs, and raised prices are likely to threaten the country’s fragile food security at a time when the government should be investing in agriculture, not taxing it. Other proposed taxable items which are relevant to the poor or to economic development include sanitary towels, exercise books, mosquito nets and pumps.

The Somali Transitional National Government and the subsequent Somali Transitional Federal Government have been able to explain how $124 million of the money they received between 2000 and 2011 has been spent. Unfortunately, however, they have not been able to account for the rest of the $308 million in bilateral aid (mostly from Arab nations) and $53 million in domestic revenue that they have received.

Donor countries and the World Bank are trying to establish a Joint Financial Management Board to reduce the irregularities and improve accountability, but such moves are being resisted fiercely by the Somali government, which does not want to be financially managed by outsiders. The implication seems to be that the current leadership does not want any impediment to continued pillaging of the country’s financial resources.

Apparently the largest Arab donors have paid their contributions in cash to individual politicians, rather than depositing them in a bank, and, predictably, the politicians have been pocketing most of the money, while depositing only a small amount in Somalia’s Central Bank. The government prefers to rely on external assistance, instead of employing appropriate measures to raise revenue internally.

The AIDS pandemic has now been running for three decades. It has killed some 25 million people, and another 34 million people are living with immunodeficiency virus. Despite extensive research and enormous expenditure and efforts, there is still no available cure; and yet, according to the director of the US National Institute of Allergy and Infectious Diseases, Anthony Fauci, it may be possible to end the pandemic even without a cure.

AIDS, as well as being a common cause of death, has been one of the key factors keeping people in poverty in Africa. Illness leads to inability to earn income for those infected, and loss of productivity for businesses that employ them. It also leads to impoverishment when all of a household’s funds are spent on expensive medicine or medical treatment. Additional financial burdens are placed on surviving family members who must care for orphans.

Although there is no cure for AIDS, there are effective treatment regimes which can keep people alive indefinitely. As a result of education and preventative measures, the rate of new infections in most countries has fallen. For example, in Kenya the prevalence of HIV infection has fallen from a high of 13.4% in 2000 to around half that amount.

An interesting opinion piece by Charles Onyango-Obbo in The East African describes how Swiss bank accounts contribute to the death of African lions. When some of a Maasai man’s goats are eaten by a lion, it is a major economic disaster for the man, who has no access to insurance or any form of social safety net. The only practical way for him to protect what is left of his resources is to kill the lion, regardless of whether that is illegal.

However, the government has not made any provision for insuring or compensating people whose livestock is killed, because, according to the author, “the big men and women in most of Africa pocket the tourism dollars that come into the Treasury,” and then “they stash it in Swiss bank accounts”. According to recent news reports, East Africans currently have more than $1 billion invested in Swiss bank accounts, much of which is believed to be the proceeds of corruption.

Capital flight is a serious problem for many African countries because when money is taken out of the country and invested overseas that money is removed from investment in African business. Foreign investment helps a country, whereas capital flight harms the country. If the money was acquired corruptly, that also harms the country because it distorts the allocation of resources and contributes to scarcity.