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THE
CENTRAL BANK OF KENYA (AMENDMENT) ACT 2000
Michael
Mundia Kamau
P.O.
Box 17510
00500 Enterprise Road
Nairobi. Kenya.
21st April 2002
The
High Court of Kenya ruling last week in favour of the Central Bank of
Kenya (Amendment) Act on interest rate controls, adds another
episode to the
desperate quest for economic revival in Kenya. The Donde Bill, as the Act
is otherwise popularly known,
is now set to be re-tabled in parlament for a vote on it's commencement
date. The bruising battle is however not over and the Banking sector will
most certainly respond with a counter offensive.
Interestingly,
the Donde Bill has lacked all along in critical public support and
lobbying, yet it is designed to benefit the general public and
hypothetically spur economic growth. It is on this basis that we need to
question the real extent to which the Bill actually has a bearing on the
public. No doubt, cheap and readily accessible credit is as much a factor
in deflation and economic growth, as it is in inflation and economic
recession. The major reason that the Donde Bill lacks in public support is
simply and plainly, poverty. The majority of Kenyans live below the
poverty line.
Different
estimates put it at between 60% and 70%. The figure in real terms could be
as high as 80%. Retail banking in this country therefore remains
severely underdeveloped and continues to be marginalised as years pass by.
A People's bank like the Kenya Commercial Bank requires savers to maintain
a minimum balance of 1,000 Kenya shillings at all times, a figure is set
to rise to 3,000 Kenya shiilings in June 2002. Just about the whole
country is hard pressed and in debt, and can simply not afford the luxury
of an idle 1,000 Kenya shillings lying somewhere, let alone 3,000
shillings. Functions for most account holders have been reduced to mainly
withdrawals. Banks are
mainly making their money from corporate clients and huge government
deposits.
The
issue in as much as it is high interest rates, is also the gross
undevelopment of vibrant financial markets. The Donde Bill thus requires
expanded outlook and incorporation. Many Kenyans are marginalised from
retail banking and have developed alternative avenues of finance and
investment. These are co-operatives, land buying companies and welfare
organisations. The latter is where highest activity and following is.
Members pay small monthly contributions and fall back on welfare
contributions every so often. Welfare organisations are an invaluable mode
for small savings, providing relief all across the country.
Co-operatives
and land buying companies on the other hand are riddled in perennial
controversies and clashes, and appear to have a bleak future.
Another powerful interest group consists of small scale businessmen and
women variously referred to as the "Mama Mbogas". Their
influence and wealth
is taken for granted, but it is formidable. Many of us so called
progessive types for instance, stay on rental properties constructed and
owned by "Mama Mbogas". These are people who can quite easily
raise sums of 200,000 Kenya shillings (approx. US $ 2,500), at short
notice, even in these difficult
economic times. These are individuals whose finances are not however
active in the wider financial market due to reasons of either mistrust or
lack of proper inducement. The Donde Bill by extension, should be revised
to enforce state and private sector support and development of welfare
organisations and "Mama Mbogas" as this is where the economic
mainstay of this country lies. Sound economic policy papers are not
lacking. State sponsored intiatives like Sessional Paper No. 10 of 1965 on
African Socialism and Sessional Paper No. 1 of 1986 on District Focus on
Rural Development are in existence, but dormant and neglected.
What's to say that the Donde Bill will be any different ?
Donde Bill or no Donde Bill, the revival and growth of this economy
ultimately lies with the people. It is decisions that we make or do not
make that will determine our destiny. Arising out of technical problems
for instance, mobile phone provider, Safaricom, recently revealed that it
had a base of 440,000 subscribers. This would put the subscriber base of
the other mobile phone provider, Kencell, at about 300,000. The cheapest
calling card on the market costs 250 Kenya shillings, which means that at
any one moment (roughly, three times a month), 555,000,000 Kenya shillings
(approx. US $ 6,937,500), is being spent on conversations we can do
without. Add to this the time and resources that are are spent on
fundraisings for weddings and
sending our children abroad inter alia, and it emerges that we do not need
the Donde Bill in as much as we need to change our economic ways. So many
Kenyans are unnecessarily in financial debt and crisis.
Economic
change must also extend to the management of our resources. Money seems to
have lost all sense of value in Kenya over the past several years. Prior
to the 1997 general election, the deputy leader of government business
sought parliamentary allocation of two billion Kenya shillings ( approx.
US $ 25,000,000). There is absolutely no way that a Kenyan election of
whatever scale can cost that much. In November 1999, A.I.D.S. was
officially declared a National disaster at a weekend parliamentary
symposium in Kenya 's coastal city of Mombasa that cost 300,000,000 Kenya
shillings (approx. US $ 3,750,000).
It
was amazing to see certain wealthy parliamentarians with distinguished
career track records and sound investments, scrumbling for
state sponsored flights to Mombasa that they should have been able to pay
for themselves. In November last year, the Presidential entourage to
America
was involved in an accident when the British Airways carrier that they
were in, knocked down two flag poles each reportedly costing ten million
Kenya shillings (approx. US $ 125,000 each). That we do not seriously
question and follow up on such issues is an indictment on our sincerity
and integrity in bringing about change to this country.
The Donde Bill therefore is not the single redeeming solution to this
country's economic problems. Our situation is more complex and requires
much more than the statutory regulation of interest rates. In as much as
the Kenya Government has sought and gotten debt relief from the Paris
Club, so also should the Donde Bill seek out to facilitate in the short
run, as long term solutions are sought.
Michael Mundia Kamau
COMMENTS
AND REMARKS: WuonAbila@joluo.com
©2002,
JALUO dot KOM
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