Uhuru’s declaration on graft: A study on how not to fight corruption

We have a public service where the only things that get done are where people are eating. Suppose the President’s war was to stop all the procurement rackets in their tracks? ... government spending would slow down to a trickle. Many property development projects would stall. Shopping mall parking lots would empty, as would those of Nairobi’s exclusive clubs. But in time, people would learn that the cheese has moved, and they would have no choice but to acquire new skills, writes David Ndii.

In his book Institutions, Institutional Change and Economic Performance, Douglas North, an outstanding economic historian and 1993 economics Nobel laureate makes the following observation:

“To be a successful pirate, one needs to know a great deal about naval warfare, the trade routes of commercial shipping; the armaments, and crew size of potential victims; and the market for booty.
“To be a successful chemical manufacturer in early 20th century, the United States required knowledge of chemistry, potential uses of chemicals in different intermediate and final products, markets, and problems of large scale organisation.

“If the basic institutional framework makes income distribution (piracy) the preferred economic opportunity, we can expect a very different development of knowledge and skills than a productivity-increasing (20th century chemical manufacturer) economic opportunity would entail. The incentives that are built into the institutional framework play the decisive role in shaping the kind of skills and knowledge that pay off.”

Case in point. When I was graduating from university, I cannot recall anyone wanting a career in procurement. Purchasing and supplies was a low status back office job that people ended up in by accident. Today, one out of three job applications I get from bright young people are for jobs in procurement.

I think this tells us a lot about what has become of our institutions over the last three decades. What happens to a society where the dominant aspiration of its youth is to find opportunities to be corrupt?

It should not surprised. This country was founded for, and built on, plunder. The colonialists came here empty-handed. First, they grabbed land. Then they compelled African’s into labour and suppressed wages.

They prevented Africans from adopting high value crops and European cattle breeds so as to prevent them from competing with European produce and also to keep labour flowing to settler farms. By 1950, immigrants who accounted for less than 10 per cent of the population, commanded 50 per cent of the income.

It is impossible to achieve this kind of income redistribution in a free market. The only way to do so was by means of the State. Our institutional legacy from colonialism was a State designed to enrich and protect a privileged minority.

Let us fast forward to 1972. I am referring to the infamous Ndegwa Commission. The mandate of the commission was to rationalise civil service pay. Hitherto, pay in the public service was based on race. Europeans earned more than Asians, and Asians earned more than Africans in the same job. On this, it did a good job. But its legacy is the position it took on whether it was legitimate for civil servants to do business. The report began by acknowledging corruption:

“The achievement of independence in Kenya has brought with it great opportunities for individual advancement both as to main careers and in other less orthodox ways. It is understandable that public servants should have taken their opportunities like other citizens but if the benefits in some cases seem out to be out of proportion with other citizens, it is inevitable that questions be asked as to how this came about.”

Still, it went on to draw the now infamous opinion:

“There ought in theory to be no objection to the ownership of property or involvement in businesses by members of the public services to the point where their wealth is augmented perhaps substantially by such activities.”

It is commonly argued that this Ndegwa Commission is the root of our inordinately corrupted and corrupting state. I do not share this view for two reasons. First, as demonstrated by the first part of the excerpt, corruption was already rife. Second, it is not at all evident that we are more corrupt than other African countries that did not adopt similar policies. Some, like the DRC and Nigeria have been plundered more than we have.

The contention seems to rest on a presumption that the counter-factual i.e., what would have happened otherwise, is that we would have progressed on the path of a modern market economy. This is improbable.

The more likely scenario would have been State domination of the economy. The enterprises that the Kenyatta elite “Africanised” to themselves would have been nationalised instead. They would have been badly run and plundered.

WEALTHIEST PEOPLE
This is not to say that the declaration is benign. It may have been the lesser 40 years ago, but it is certainly not the route to progress today. There is no civilised country where public service careers produce the wealthiest people in society.

Recently, we have been entertained by police officers who have claimed that sudden large deposits in their bank accounts are perfectly legitimate business earnings. If a police officer can be such a good entrepreneur while employed full-time in such a time consuming job, how much better off would they be if they devoted all their time and energy to enterprise? And so would we — they would create more jobs and pay taxes.

There is no war without casualties and collateral damage. How would a real war on corruption in Kenya unfold?

First, we have a national elite composed predominantly of people with no other skills other than finding opportunities to profit from the State. As North observes, fortunes in the United States are made in industry, not in Washington.

I have heard some of our oligarchs compare themselves with the 19th and early 20th century American robber barons. Nonsense. Vanderbilt, Carnegie, Rockefeller and all the other so called robber barons were phenomenal industrialists.

They built railroads, steel plants, oil refineries and more. None of them was in government. Their notoriety was ruthlessness in business, not plundering the public purse.

Our oligarchy, by contrast, has not build anything of substance. It is, as Fanon observed, “not engaged in production, nor in invention, nor building, nor labour” but rather in “activities of the intermediary type”. Every so often, we get a glimpse of its fragility, such as the sudden demise of Mugoya, once the mightiest construction company in East Africa, and the more recent expose and subsequent implosion of CMC. There are few African “old money” fortunes in this country that would survive the end of graft and State patronage.

Second, we have a public service where the only things that get done are those that further private interests, in plain language, the ones where people are eating.

Suppose, for argument’s sake, the President’s war was to stop all the procurement rackets in their tracks, that from one day to the next, there would not be a single “cut” paid big and small alike? Government spending would slow down to a trickle. We might even run budget surpluses for a year or two.

Many property development projects would stall. High end private schools would suddenly find themselves struggling to fill classes. Shopping mall parking lots would empty, as would those of Nairobi’s exclusive clubs.

Of course in time, people would learn that the cheese has moved, and they would have no choice but to acquire new skills. Instead of honing chicken trapping skills, those whose appetites exceed the number of chickens that the public pay can afford would be compelled to learn how to rear chicken. But the transition would be painful.

Not all plunderers would find poultry farming appealing. They are used to easy money. Institutionalised corruption is a form of organised crime. Many plunderers would transfer their skills to other forms of organised crime — narcotics, bootlegging, people trafficking, poaching, smuggling and so on.

And now a few words on the Presidents’ war on corruption. His sights, as far as we can see, are trained primarily on the procurement rackets in his government. It has been an open secret for several months that the President was losing grip of the government as even MPs and key operatives in his TNA wing of the coalition had jumped on the gravy train.

Moreover, the political and the bureaucratic corruption networks have converged. Using corruption to fight political battles is a temptation that many leaders fall into. More often than not, it is counter-productive, resulting in loss of both the political and corruption wars.

Prosecuting the corrupt is necessary but not sufficient. It is necessary because corruption is a crime and crime should be punished. That’s a rule of law issue. But just like many other crimes, it does not end the committing of crimes. China routinely executives high profile people for corruption.

A prominent businessman was executed in February. It does not seem to deter corruption. The EACC dossier the President tabled in Parliament suggests that Chinese contractors are in a league of their own.

OPTIONS AVAILABLE

Of the options available to him, the President in my view chose a bad one. As I pointed out in a previous column, the Constitution has shorn of the Presidency of most of the command and control authority it had accumulated under the old constitution. The President has no control of the institutions that he needs to prosecute his war on corruption. The clumsy handiwork displayed in the attempt to dismantle the EACC demonstrates this.

The Anglo-leasers and the new barons have between them more than enough money to corrupt all these institutions. Goldenberg probably did more to destroy our old Judiciary than all other assaults on it put together. The political class will close ranks. It is already in election mode. It is not lost to them that the President does not have to fret about financing his campaign.

I see at least two strategies that in my view would have been superior. The ideal would have been to build a very strong national consensus for it, say, by convening a national conference and getting all important constituencies — the opposition, religious leaders, private sector, civil society and the media — to sign on and own it. The challenge with this strategy though, is that the Jubilee government has spent the better part of the last two years burning its bridges with these constituencies.

The second one would have been to limit his action to the domain of his authority. He could have fired his cabinet secretaries and bureaucrats and left it at that. He need not have declared a war.
As Wole Soyinka observed years ago, “a tiger does not proclaim its tigritude. It pounces.”

David Ndii is Managing Director of Africa Economics. ([email protected])