What you need to know:
- The escalation from grand corruption to looting is usually symptomatic of regimes which are so desperately insecure.
- Economic growth in the order of 5-6 per cent of Gross Domestic Product (GDP) is usually associated with 15-25 per cent annual credit expansion.
- The production side is the one that receives more media coverage, that agriculture grew by so much and manufacturing by so much.
The day before John Githongo and I got wind of the invitation to the President’s ill-fated corruption shindig, Githongo in an NTV interview declared Jubilee the most corrupt of our four post-independent administrations.
The administration has not challenged the assertion.
Many, perhaps most Kenyans, also seem to concur.
Why this is, how it came to be and what it portends for us has become the number one political issue, particularly for the forthcoming General Election.
Sixteen years ago, Githongo gave a talk on “The Culture of Corruption in Kenya” in which he postulated three types of corruption namely “petty corruption”, “grand corruption” and “looting”.
The petty/grand distinction were not new, “looting” as a distinct form of corruption was Githongo’s novelty, and a very useful one.
Petty corruption typically transacted between ordinary citizens and frontline public employees and usually entails paying a bribe to get a government service or to avoid sanction, for a traffic offence for example.
Grand corruption is typically transacted between senior government officials and business, notably kickbacks for government contracts.
Githongo defines looting as “large-scale economic delinquency”, “scams whose figures are so huge that when they are successfully concluded, they have macroeconomic consequences”.
Looting schemes, he expounds, “cause banks to collapse, inflation to rise and the exchange rate to decline”.
Looting, he argued, differs from grand corruption in two ways.
First, grand corruption entails cost inflation on budgeted projects, but the projects actually get done.
Looting is “premeditated”— money is put in the budget already earmarked to be stolen, and the projects and programmes are merely means of doing so.
Second, while grand corruption can be executed at any sufficiently high level of authority, looting is politically engineered, conceived and executed “under the direction or with the acquiescence of the dominant political players”.
Looting is unsustainable. Sooner or later an economic crunch will ensue.
The escalation from grand corruption to looting is usually symptomatic of regimes which are so desperately insecure.
The multiparty political tsunami precipitated Goldenberg.
Kibaki people came to power on a wave that they did not control.
Kibaki was unwell, and Vice-President Michael Wamalwa started ailing shortly after assuming office, succumbed eight months later.
Anglo Leasing was conceived to raise a war chest to finance an election campaign in the event of Kibaki’s demise.
This puts perspective to the Jubilee administration’s looting spree.
Uhuru and Ruto are the most insecure regime to date.
They sought and secured office to fight International Criminal Court (ICC) charges.
The stakes for them were not just the trappings of power, but the very real possibility that they would not finish the term.
It cannot be that those around them did not see the prospect of being bundled out of office unceremoniously were Uhuru and Ruto to be convicted.
The Jubilee administration’s looting spree is an integral element of the impunity package. Choices, consequences.
“Figures so large that when executed, they have macroeconomic consequences.”
What are we looking at? One of the paradoxes that has emerged recently is the disconnect between economic growth figures and other economic indicators, such as record number of profit warnings issued by listed companies.
The rate of credit expansion is one of the most robust indicators of economic activity.
Economic growth in the order of 5-6 per cent of Gross Domestic Product (GDP) is usually associated with 15-25 per cent annual credit expansion.
Credit expansion has been trending downwards from a peak of 25 per cent in June 2014 and is now down to 5 per cent per year.
The last time we experienced such a sustained credit slowdown was during the recession of Moi’s last term.
How do shrinking profits and a credit slump square with 6 per cent growth?
The circle is not as difficult to square as it appears.
There are two ways of looking at GDP, namely production and expenditure.
The production side is the one that receives more media coverage, that agriculture grew by so much and manufacturing by so much.
Expenditure side is seldom reported.
Its components are consumption, investment and exports (that is all domestic production and imports ends up as one of the three).
Last year, public consumption grew by 15 per cent while private consumption grew at 5 per cent.
In 2014, investment was the standout performance also at 15 per cent while private and government consumption grew at 4.6 and 6 per cent respectively.
The data does not provide a break down between public and private investment but the breakdown of asset types shows that its public infrastructure driving the investment numbers.
Transport equipment grew by a whooping 66 per cent in 2014 — thanks to the Standard Gaude Railway (SGR).
In short, it is the government expenditure that is primarily driving the GDP growth.
But what exactly are these expenditures.
The Chinese tell us they have build Sh100 billion worth of SGR, that goes into the investment component.
That alone is in the order of 1.5 per cent of GDP, a quarter of the reported 6 per cent growth.
How much has actually been spent we cannot know, and even that is not putting money in our pockets, what we are doing is borrowing concrete and steel from China.
The contraptions lying in a yard in Mombasa are in there too, recorded as a billion shillings worth of government investment in mobile clinics.
Public consumption includes hairdresser Kabura’s sack loads of money, Out of the Box and Things of Desire.
Adjusted for looting, we are talking at best 3.5 per cent “real” growth.
More fundamentally, the loot is borrowed.
Many people will now know that the Jubilee administration has doubled both our foreign and domestic public debt.
But many presume that the reckoning is far in the future. Wrong.
We are not burdening our children, we are bleeding ourselves now.
In just the first quarter of this financial year we paid Sh7.4 billion interest on our foreign debt, Sh5.3 billion of it (72 per cent) to China, which accounts for only 17 per cent of the foreign debt.
This works out to an interest rate of 7 per cent on Chinese loans, and 0.6 per cent the rest.
The macroeconomic reckoning may not be as melodramatic as the Goldenberg aftermath but take it from me, it is of a vastly greater scale, and is going to be unfolding in stealthily over the next decade.
Second domain of consequences is the impact on governance institutions.
Governance experts contend that the Goldenberg scheme alone did more damage to the Judiciary than any other assault, perhaps more than all the other assaults on it put together.
The public finance system is in tatters, and I don’t mean the Ifmis.
Ifmis is simply an accounting system.
By public finance I mean the architecture that governs public money, all the way from raising revenue to auditing and accountability.
The Jubilee administration increased the National Youth Service budget from less than Sh5 billion to Sh25 billion in three years.
As I have observed before, there is no organisation other than a military going to war, that can increase its capacity to absorb the budget that much.
When the Eurobond was mooted, the plan was to borrow $500 million just to establish our presence in the market.
The money was earmarked to retire the now infamous $600m syndicated loan, in effect, replacing a short-term bank debt with market debt.
By the time the government was through, we had raised $2.8 billion, more than five times.
There was no public discussion anywhere that I am aware on what we should do with such huge sum of money.
In fact, the Treasury did not disclose that it kept the tap open for another six months until questions were raised about the issue.
The mandarins borrowed $800 million, two Thika highways worth of debt on a whim, just because the market was receptive, without seeking authority or even informing anybody.
Other than settling the syndicated loan, the Treasury cannot show anything we did with the money.
Recently, we have read that the President’s Chief of Staff instructed the Ministry of Health to pay suppliers.
Few people in government if anyone, understand public financial management as well as Mr Kinyua does, and he knows that is sacrilege.
Yet he put it on paper. The rules have been torn up and thrown out of the window. Impunity has spread.
The President has been on whirlwind tour of central Kenya to energise his demoralised political base, throwing around projects like confetti.
We are supposed to have an annual budget governed in turn by a medium term expenditure framework.
The President cannot go around making roadside budget re-allocations, so either the projects are already budgeted, and he is hoodwinking the public or the budget system no longer exists.
The sole institution holding out is the Office of the Auditor-General.
In truth, it is the person of the Auditor-General himself who is holding out, and he too is on the cross-hairs.
This is not the first instance. In the 1980s, Auditor-General D.G Njoroge was as much a problem to the Moi administration as Mr Ouko is to Jubilee today.
They found a solution. Under the pretext that the office was overstretched, they created a subsidiary office Auditor-General Corporations to audit parastatals.
This one did not have security of tenure. Within a decade, most parastatals were on their knees.
Some, like Kenya National Assurance, then the industry market leader, did not survive.
The Jubilee narrative is that there is no better alternative, the Opposition, and the county governments will be just as corrupt as they are.
Even us citizens are all corrupt since it takes two to tango. We are all thieves and aspiring thieves.
We are a corrupt society, therefore we have the government we deserve.
This as with all Jubilee political narratives, is a false narrative.
Let us go back to Githongo’s pathology.
Yes, corruption is endemic in Kenya and many of us engage in petty corruption regularly or occasionally.
This does not mean we like it.
Most people who do business with government bribe, but most businesses in the country sell their wares to consumers and other businesses, not the government.
The one thing the overwhelming majority of us are not, is looters.
Petty and grand corruption are “normal” corruption that exists in all societies to some degree.
Looting is an affliction of insecure myopic political thugs. All the looters we have in Kenya today, are in Jubilee.
By way of analogy, the notion that there is no alternative is to say that if you employ Wanugu who turns out to be a thief, you fire and hire Wacucu who also turns out to be a thief, you might as well keep Wacucu since the next person you hire may well turn out to be a thief. That is nonsense on stilts.
More fundamentally, seems to rest on the notion that the alternative to thugs is saints.
This is a very flawed premise as well as grammar — alternative is not synonymous with opposite.
The Jubilee looting spree was precipitated by the ICC cases, just as Anglo Leasing and Goldenberg were precipitated by the insecurities engendered by Kibaki’s illness and the multiparty transition respectively.
It is noteworthy that among the multiparty era administrations, the Grand Coalition is the only one that did not engineer a looting scheme.
Why, because it did not have similar insecurities as the others.
When I look around, outside Jubilee, I do not see any potential government in anything remotely resembling the circumstances that propelled Uhuru and Ruto to power. Everyone, anyone, is an alternative.
[email protected] @DavidNdii