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A nation of Gamblers and an Unemployment Crisis

Monday February 17 2014

Bitange Ndemo

Bitange Ndemo 

BITANGE NDEMO
By BITANGE NDEMO
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In the early 1990s while in the diaspora, I purchased a half- acre piece of land in Runda for KSh700,000.  In the mid-1990s I invested in a stock portfolio amounting to KSh500,000 and a retirement fund starting at Ksh. 5,000 per month with an initial unit trust of KSh250,000. 

Nearly twenty years down the road, land without structures in Runda has appreciated more than 40 times.  The stock portfolio has barely doubled.  The unit trust is down to KSh235,000 thanks to the global financial meltdown.  In the absence of clear land tenure policies, we have become a nation of gamblers exerting pressure on land to the extent that you do not have to do anything to make money.  

There are virtually no other investment returns in Kenya that beat land and this is where our problems begin.  It creates a situation where there is no incentive for anyone to buy machinery for production when there is more return in speculating on land.  To create employment, we must invest in productive sectors and in turn create employment opportunities.  Foreigners too have noted this anomaly to the extent that some of the foreign direct investment goes into nonproductive sectors with abnormal returns.  

Worse, the first thing even youthful Kenyans invest in is kogora omogondo (buy land).  How much land does a man need?  A Russian author, Leo Tolstoy posed this question in 1886 and as Wikipedia summarizes the story, man only needs a six-by-six foot deep piece of land.

PLENTY OF LAND 

The protagonist of the story is a peasant named Pahom, who overhears his wife and sister-in-law argue over the merits of town and peasant farm life. He thinks to himself "if I had plenty of land, I shouldn't fear the Devil himself!" Unbeknownst to him, Satan is present sitting behind the stove and listening. Satan abruptly accepts his challenge and also says that he would give Pahom more land and then snatch everything from him. A short amount of time later, a landlady in the village decides to sell her estate, and the peasants of the village buy as much of that land as they can. Pahom himself purchases some land, and by working off the extra land is able to repay his debts and live a more comfortable life.

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However, Pahom then becomes very possessive of his land, and this causes arguments with his neighbors. "Threats to burn his building began to be uttered." Later, he moves to a larger area of land at another Commune. Here, he can grow even more crops and amass a small fortune, but he has to grow the crops on rented land, which irritates him. Finally, after buying and selling a lot of fertile and good land, he is introduced to the Bashkirs, and is told that they are simple-minded people who own a huge amount of land. 

Pahom goes to them to take as much of their land for as low a price as he can negotiate. Their offer is very unusual: for a sum of one thousand rubles, Pahom can walk around as large an area as he wants, starting at daybreak, marking his route with a spade along the way. If he reaches his starting point by sunset that day, the entire area of land his route encloses will be his, but if he does not reach his starting point he will lose his money and receive no land. He is delighted as he believes that he can cover a great distance and has chanced upon the bargain of a lifetime. That night, Pahom experiences a surreal dream in which he sees himself lying dead by the feet of the Devil, who is laughing.

He stays out as late as possible, marking out land until just before the sun sets. Toward the end, he realizes he is far from the starting point and runs back as fast as he can to the waiting Bashkirs. He finally arrives at the starting point just as the sun sets. The Bashkirs cheer his good fortune, but exhausted from the run, Pahom drops dead. His servant buries him in an ordinary grave only six feet long, thus ironically answering the question posed in the title of the story.

Although Pahom wanted to use the land productively, greed could not allow him to see his dream.  Here at home, the land economy is destroying the future of a generation.  Across Africa, we are importing things we should be growing and adding value to, to enable us create jobs.    In 2011, the Food and Agricultural Organization said that the global food import bill hit $1.3 trillion of which 18 per cent ($239 billion) are imports to food deficit countries or Least Developed Countries.  Africa food imports are in excess of $40 billion with Nigeria spending $11 billion on staple food while its land lies fallow.  Gabon spends $40 million importing eggs from Europe.  Evidently, we simply acquire the taste from Europe but not the skill to rear chicken for our own egg consumption.

SUN DRIED TOMATOES

Walk in the aisles of supermarkets in Africa and see sun dried tomatoes from Spain and sun dried beef from Australia when God gave us more sunshine and land than any other part of the world.  In economics, it is argued that there are three factors of production, that is, land, labour and capital.  Philosopher John Stuart Mill added a fourth one, entrepreneurship. Other academics discarded Mill's theory and said information should be the fourth factor of production.  But what they failed to see is the underlying assumption that the interplay of the four factors will function smoothly if none of the factors will undermine the other.  As such use of capital to purchase land for speculation undermines production and stifles entrepreneurialism.  Without an entrepreneur in a free market economy, there are no jobs.

While large and fallow lands are in the hands of the rich, subsistent farming is undermining agricultural productivity through over utilization of land and excessive subdivisions.   From Google Earth, I cropped land use in Kisii and compared it with Switzerland.



Land use in Kisii. Credit: Google Earth
Land use in Kisii. Credit: Google Earth

Whereas in Switzerland they have incorporated environmental factors into their planning, in Kisii you can see the pressure on land in farming right up to the river which in turn carries away the soil nutrients through soil erosion.  Over time the land will be depleted to the extent that we shall have undermined the livelihood of future generations.  Each homestead serves as the family cemetery complicating any future re-planning or investments as no amount will buy family burial sites.   Our preoccupation with land is our undoing.  Close to 50 per cent of court cases in the judiciary are land-related.  Most cases are tying up billions of shillings waiting to be settled when the resource could be used to create jobs.



Land use in Switzerland. Credit: Google Earth
Land use in Switzerland. Credit: Google Earth

There is much we need to learn from other countries like Switzerland and the United States of America.  The US’s obsession with real estate almost brought down the economy and memories of the crisis are still fresh.  Our obsession with land and ownership structures is worse than feudalist Europe. Feudalism was a system for structuring society around relationships derived from the holding of land in exchange for service or labour.  Urbanization defeated feudalists.  We can change with rapid urbanization that will free land for productive agricultural activity.  More than anything else we need a comprehensive land use law and stop any further land subdivision in highly productive rural land.  To speculate is to gamble with a critical factor of production.  Let us not be a nation of gamblers.

Dr Ndemo is a Senior Lecturer at the University of Nairobi, Business School, Lower Kabete Campus. He is a former Permanent Secretary, Ministry of Information and Communication. Twitter: @bantigito

 

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