By Ibrahim Alubala

The ongoing debate around the division of revenue between the national and county governments is an eye-opener and a stark reminder to the counties that they should begin to think about generating their own revenue as anticipated by Article 209(3) of the Constitution.

ESTABLISH BOARDS

While the Constitution anticipates that at least 15 per cent of the most-recently audited accounts of government revenue should go to counties to support their operations, many devolved units are still in financial limbo, unable to pay workers and run their affairs.

But what can counties do when most rely on national government remittance to support their operations? It is noteworthy that own-source revenue for most counties averages less than 10 per cent of their overall budget.

The National Treasury, in its budget policy statement last year, observed that administrative inefficiencies and gaps in policy and legislation contributed significantly to the low levels of own-source revenue in the counties.

President Uhuru Kenyatta recently urged counties to reap where they sow, saying there is no more money to allocate to their increasing needs. How do counties begin to look internally to collect their own revenue?

Secondly, they should develop policies and legislation to assist in revenue collection. A number of counties are yet to legally institutionalise revenue collection mechanisms within their jurisdictions, for example by developing revenue administration legislations to establish boards or even directorates to streamline the collection of revenue.

MINIMISE LEAKAGES

We have witnessed cases where counties collect licence fees, cess and other forms of levies without requisite legislations. Any spirited taxpayer within the county can legitimately challenge that.

Thirdly, it is imperative to enhance public participation on matters of revenue allocation. Bungoma County, for instance, involved local boda boda riders in their Finance Act 2018. The riders, who initially found it problematic to pay daily operation fees of Sh30 to the county government, opted for a Sh500 annual fee. This year, Bungoma has experienced an increase in compliance from the riders, who now say they enjoy paying for the licence and anticipating services from the county. Public participation is a national value as stipulated by Article 10 of the Constitution.

Fourthly, counties should automate revenue collection to minimise ‘leakages’ caused when people handle money. When I recently visited Uasin Gishu, I was able to pay my parking fee through a paybill.

Lastly, they need to step up enforcement against tax and rate defaulters. The process can be incentivised through waivers for a limited period to allow the affected to comply.

Own-revenue will allow counties to sustain their operations and ultimately inch towards greater development.

Mr Alubala is an advocacy and child rights governance technical specialist at Save the Children. This email address is being protected from spambots. You need JavaScript enabled to view it. @ialubala

Posted On Tuesday, 17 September 2019 14:18

By Robert Shaw

The setting up of the earlier sugar factories such as Nzioa, Muhoroni, Sony and Mumias in the 1960s was driven by two main objectives: To help make the country more self-sufficient in sugar, and to create job opportunities in large swathes of Nyanza and Western provinces, where unemployment was high.

SEAS OF POVERTY

Today, more than 50 years later, neither objective has been achieved. Kenya still imports around a third of its needs, while vast areas, especially around the factories, are seas of poverty. It is estimated that over 5 million people are dependent, in one way or another, on the sugar industry, and many of them live in deprivation.

The main reason for the failure was that they were government-driven and controlled. In turn, they literally became victims of assorted political machinations, including patronage, nepotism and corruption.

Like many parastatals, they were pillaged and sucked dry of their productive qualities and were kept alive with government bailouts.

Nevertheless, these entities remain decrepit and function way below capacity.

Even outdated productivity yardsticks were used. For example, cane was paid for by weight rather than by sucrose content. This meant that the same amount was paid for old cane as the younger, much sweeter cane.

Bad habits like zoning crept in, meaning, certain areas planted with cane became the preserve of certain factories, equating to modern-day serfdom.

MERITOCRACY

Over the years, there have been various stabs at reviving the mixed fortunes of these operations, to little avail. The time has come for the government to seriously address this shameful blot on our economic and social landscape that consigns so many people to poverty and deprivation.

A coherent plan of action needs to be implemented, and must involve several key guidelines.

First, the privatisation of these sugar factories should focus on getting the best for them and those working for, or with them. That means successful bidders, both international and local, should satisfy the fundamental criteria of adequate financial means, commercial capability, the ability to develop nuclear estates, and of course, sustain and support farmers. The latter should be focused on buying the cane at the optimum time and paying farmers on time.

If the last two are fully adhered to, cane shortages and zoning would be things of the past.

To put it more bluntly, the exercise must be based on meritocracy rather than on quick-fix solutions and machinations often agreed upon in opaque circumstances.

POLICY FRAMEWORK

This means harmonising the activities of the Privatisation Commission with the Sugar Task Force Report so they speak and act in unison. At the moment, the sad irony is that they are almost in competition.

County governments must also live up to their responsibilities in maintaining the relevant sugar-belt roads. Financial support for this could come from the reinstatement of the Sugar Development Levy.

It goes without saying that this operation must adhere to strict accountability rules to ensure that money collected goes directly to road maintenance and is not diverted to other areas.

But a line in the sand must be drawn between this and the actual running of the factories. Under no circumstance should the county governments be involved in the day-to-day operations.

Ditto goes for national government. The role of the central government is to provide the right policy framework and an enabling environment for these revamped operations to function and grow, not to be involved in their commercial operations.

Conversely, the running of these milling operations should not involve other non-core activities such as importing sugar or being allocated sugar importation quotas. Imports should be handled by such bodies as the Kenya National Trading Corporation and must be separate from manufacturing.

Particular emphasis should be placed on both price and comparative standards. When subsidies and bailouts are factored, the cost of production for some Kenyan sugar is among the highest in the world.

The above proposals should, and must, massively bring down production costs to become comparable to those in, say Mauritius and Kenana in Sudan.

In conclusion, it is clear that a competitive and transparent privatisation process must be conducted to transfer these limping operations from the clutches of government to commercially competent owners and managers. Last, but as important, national and county governments must be completely delinked from involvement in their operations.

If the above is carried out, there is a very good chance these moribund operations can be restored and in turn make a significant contribution to filling the gap between demand and supply.

Mr Shaw is a public policy and economic analyst: This email address is being protected from spambots. You need JavaScript enabled to view it.

This piece appeared in the Daily Nation on August 30th 2019

Posted On Thursday, 12 September 2019 15:41

By Michael Arum

The sugar sector employs over 250,000 Kenyans and supports six million livelihoods. Yet it has become one of the country’s loss-making ventures. Not because the industry is not viable and that farmers do not have the experience and skills, but because government policies are overriding a free and fair market system, breaching the Competition Act, 2010.

The Act advocates market forces, promoting effective competition and preventing unfair and misleading market conduct, and specifically prohibiting dominant undertakings and restrictive trade.

Yet the proposed Sugar Regulations, 2019, have no element that upholds these requirements, instead creating a buyers’ market – known as a monopsony - that will lead to the final death of Kenya’s sugar sector.

At the heart of ‘fixing’ the sugar industry is zoning, renamed cane catchment areas. This forces sugar farmers to register and then assigned one mill to sell to. The results will be irreparably damaging to Kenya.

By giving all the sugarcane buying power in a region to a single miller, the government is indirectly granting them absolute control over prices and farmers’ income too. Indeed, millers can treat their supplying farmers however they like, pay slowly, pay late, shift prices, demand off-sets, they can do anything, because there will be nowhere else any farmer can go that won’t be illegal. All competition has been ended.

It’s a policy-based redistribution of power that raises questions about why the Kenyan government passed the Competition Act in the first place. If the ideal way to rescue an ailing uncompetitive industry was to override all market forces, why was a competition policy commitment put onto the nation’s statute?

In the current climate of asserted determination to end corruption, its new regulations, furthermore, appear filled with opportunities for rent seeking, across requirements for letters of comfort as confirmation of commitment by investors to install a factory, special approvals, permission-based registrations and extra licences.

All of these are put in without justification, but all of them grant government employees power over industry players. Numerous extra barriers to market entry have been added too. No Kenyan can produce sugar seeds, grown sugar, process sugar, transport it, distribute or wholesale it with any normal business licence, but must now go through complex bureaucratic registration processes that include exorbitant licensing fees.

In the end, for sugarcane farmers and their dependents, the sum is set to be grave for it will be very expensive or near impossible to transition into alternative crops. This will open up a bigger trade deficit as Kenya imports even more sugar. Additionally, centralising sugar processing operations to millers will lead to further operational inefficiencies such as arbitrary deductions during ploughing, delayed services such as seed cane provision to farmers, harvesting and cane transportation.

If the country were to allow the forces of demand and supply to prevail – as the Competition Act specifies – with minimal government control, we would achieve far better results.

The writer is co-ordinator, Sugar Campaign for Change.

Posted On Thursday, 12 September 2019 14:44

By Manass Nyainda

Devolution, in its form and substance, was robustly canvassed in the making of the 2010 Constitution.

It was proudly received by Kenyans who had borne the brunt of concentrated executive power, as the ultimate antidote to the skewed distribution of national resources that mainly depended on patronage, cronyism and tribal affiliations to the man in power.

PEOPLE-CENTRED

However, the spirit was immediately dimmed after county governments effectively came into operation. This is because they were riddled with unbridled corruption, nepotism, ineptitude and arbitrary and unilateral decision making.

This unilateral decision making on behalf of the people has been one of the most fundamental springs of the failure of the county governments to effectively and efficiently provide public services.

It therefore goes without saying that public policy is at the nerve centre of running any nation. It cuts across all spheres of governance; economically, socially and politically.

Climate change, environmental conservation, healthcare, security, education, and agriculture, among others, are important global policy issues.

However, touted as the most economically and socially flourishing devolved unit, Makueni County is an outstanding testimony of what people-centred, need-based, practical and innovative public policy decision and implementation can do in transforming the lives of the people.

From the ultra-modern Mother and Child Hospital with 200 bed capacity in Wote, the state-of-the-art Kalamba Fruit Processing Plant to other magnificent infrastructural milestones, Makueni County has redefined service delivery.

This is because it has adhered to the conventional but basic tenets underpinning progressive public policy development. That is, bottom-up public participation approach, empirical evidence informing the process, and responsiveness to the needs of gender equality.

LEGAL REGIME

Article 10 (2) (a) of the Constitution and the Fourth Schedule Part 2 (14), stipulate public participation as a function of county governments. Further, Section 87 and 115 of the County Government Act, 2012 outline the principles and framework of public participation.

Even though there is an existence of a legal regime to put public participation into operation, most county governments have stopped at nothing but tremendous failure in fulfilling this solemn mandate.

It is important that bureaucrats who make public policies on behalf of the wananchi pose and ponder the magnitude of the effects that those policies have on the people.

It would be imperative then that those whom the policy is going to affect are involved in every possible stage of the policy development and implementation for their input extensively enriches policy decisions.

This will not only inspire a sense of belonging, it will also be the basis for project prioritisation in accordance with the needs of the locals, building of consensus and coming up with people-centred innovative solutions. Makueni has designed a participation framework tailor-made to suit the respective groups of people and their demographics within the county and its outcome has been amazing.

As an enquiry into the nature of the problem that public policy seeks to address, policy research for acquisition of data is a critical element in policy development.

Every policy must be informed by data to establish the viability of the solutions proposed, consistency of the outlined interventions, evaluation of alternatives at hand, and prediction of possible outcomes.

EQUALITY GAP

While we struggle with the ramifications of gender inequality, it is increasingly becoming clear that most public policies in place are insensitive to the women gender. And yet, we cannot achieve sustainable socioeconomic development when almost half of the population is still lagging behind in almost all spheres of life.

In order to mainstream our women in governance, public policy decisions must seek to bridge the existing gender equality gap. Hence, breaking the structural hindrances erected by gender insensitive policies is key in promoting women’s growth socio-economically.

Either intentionally designed to fail or occasioned by inevitable circumstances, the systemic blunders and missteps in policy formulation and implementation can be extremely detrimental. Hence, every single step must be handled with the interest of the public at heart.

We must stand up for policies that promote humanity. Any single public policy decision made today fundamentally determines the course of life tomorrow. County governments must take the lead in revolutionising public policies for the betterment of the people.

Mr Nyainda writes on topical issues. This email address is being protected from spambots. You need JavaScript enabled to view it.

Posted On Thursday, 12 September 2019 14:07

By Edward Sigei

In the last few weeks there has been a raging debate about the entire system of royalty management since the music collecting societies - Kenya Association of Music Producers (KAMP), Performers Rights Society Kenya (PRISK) and Music Copyright Society of Kenya (MCSK) - distributed their royalties.

Some artistes accused the collecting societies, otherwise also referred to as collective management organisations (CMOs), of inefficiency while others alleged that they were corrupt.

Some members of the public wondered if they should exist at all, questioning the basis of their existence in law.

Some users accused the organisations of harassment and application of outdated methods of collection. Others doubted if they paid their members or rendered accounts.

The reason for the existence of collecting societies is that whereas majority of the rights available under copyright are managed by individual or corporate rights holders, there are some rights that cannot be managed individually for practical reasons.

EFFICIENCY

Those rights must, therefore, be managed jointly or collectively, hence the name collecting societies or collective management organisations.

They are managed by members who authorise them to manage their works in return for a share of the payment of royalties collected.

To enable efficient management of rights and offer easy access to artists’ work, the copyright laws of Kenya provide for their establishment.

Currently, we have collecting societies for music authors (MCSK), producers (KAMP) and performers (PRISK).

Actors are also represented by PRISK while publishing or reprography is represented by Reproduction Rights Society of Kenya (KOPIKEN).

Collecting societies are private entities registered as companies limited by guarantee.

TRANSPARENCY

They are licensed annually and regulated by the Kenya Copyright Board (Kecobo). Having been licensed, their tariffs are published after a fairly rigorous process with public participation.

As far as the recent distribution is concerned, the societies collected Sh118 million and distributed Sh80 million, representing 68 per cent of the collections.

As such, they performed extremely well with the distribution nearly matching the obligatory 70 per cent compared to 54 per cent; 24 per cent; 13 per cent for PRISK, KAMP and MCSK respectively for last year.

This performance follows measures put in place by the regulator to ensure transparency in collection including the joint invoicing and deposit in a common supervised account.

The measures have partially sealed some loopholes that led to revenue leakages and cut unnecessary costs.

PAYMENT COLLECTION

The anticipated passage of the Copyright Amendment Bill, 2017 will assist Kecobo to further stamp its authority on the management of these societies.

As far as collection methodologies are concerned, these are similar to those of other collecting societies globally.

Tariffs are set and collected by amongst others, taking measurement of the premises, counting seating capacity and considering number of items that play music.

The societies’ staff visit to collect payments. The process of assessment of premises is perilous to the staff of the societies and is considered a nuisance by some users.

As a result, compliance by users is very poor in all sectors. This partly explains the amount distributed by MCSK and other societies.

COMPLIANCE

Users have complained about the tariffs stating they are quite high and proposing their own procedures for determination of tariffs.

The suggestions have not received traction with collecting societies as they are afraid of losing royalty income. The impasse often leads to unnecessary litigation.

The historically poor compliance places a heavy burden on the few that the collecting societies can reach to make up for the rest who fall through the net.

This thereby creates an endless cycle. Sadly, those who have not complied were the loudest critics about the poor pay to artists.

The poor compliance represents a big threat to artists’ rights as it puts into question the future of these organisations.

The societies must adapt to local and technological realities.

The payment of copyright dues is clearly a new concept to many business owners who use copyright works. It is hard for them to understand and comply.

TECHNOLOGY

Technology has the potential of providing the collecting societies with new tools and approaches to collection of royalties.

Kecobo has been toying with methods of collections that do not involve direct contact with the users and the use of police in enforcement.

These include imposing a music levy on food and hotel establishments to be collected in the same manner as catering levy; music levy on alcoholic beverages; a subscription model for media houses that pays for every song played and a flat royalty at NTSA license desk.

Universities can collect a nominal fee for the photocopies done in the campuses in favour of book authors’ royalty. Any shortfall can be made up from flat rate collections.

Subject to an impact study and the setting of appropriate fees on those platforms, the implementation can be as soon as next year.

Of course, the realisation will depend on other government agencies and ministries, especially the Treasury approving.

If this is implemented, there is reason to believe that the amount of royalties payable to artists can consistently grow while businesses can run smoothly. This system will finally deliver for artists an important campaign promise.

Mr Sigei is the executive director, Kenya Copyright Board. This piece appeared in the Daily Nation on 27th August 2019.

    

Posted On Thursday, 12 September 2019 11:24

By Robert Komu

The world marked the International Day of Cooperatives on the 6th of July this year. In Kenya, the day was not marked with any fanfare or celebration in the sector unlike other parts of the world. This is a sad state of affairs bearing in mind the integral role cooperatives play in the economy. The day was set to remind the public that cooperatives across the world continue to help preserve employment and promote decent work in all sectors of the economy.

Cooperatives have been around for now 200 years, since the proposed "villages of co-operation" in the United Kingdom as a response to the economic crisis in 1815. The idea spread was adapted, and went global, with around 1 billion members of cooperatives worldwide today. In Kenya, the first cooperative Society was established in 1908 with the government formally getting involved in 1931. Since then there has been several developments and legislations in the sector which have led to exponential growth, a lot more still needs to be done.

Kenya is estimated to have over 14 million people in cooperatives; with about three-quarters of the population which nears 30 million depending on the activities of cooperatives and Saccos either directly or indirectly for a living. The cooperative sector has played a key role in directly employing over 500,000 people. Sacco’s today account for 80% of the total accumulated savings while Kenya’s sub-sector is the largest in Africa.

In recent decades, co-operatives have made tremendous contributions to millennium development goals, through the generation of income for their members and also offering a range of benefits which has led to their inclusion in the development conversation. Their role was recognised within the development community when the UN declared 2012 as the International Year of Co-operatives. Consequently, this has had far-reaching effects; a good example of this is the UN's Food and Agricultural Organisation noting that cooperatives have been and are key to feeding the world.

Cooperatives worldwide offer a dynamic and flexible business model that bridges market values and human values. Due to this, they have a very integral role to play in the frameworks for inclusive growth; however, they are faced with a myriad of challenges that prevents them to thrive and offer better value. For instance, in the 1960 and 70’s due to high expectations and being seen as integral and major players to development, there was a lot of government interference which led many to fail and were, as a result, written off by most development agencies. Government interference is still rife in the sector.

This interference by government today is through over-control and regulation. Cooperatives are often subject to burdensome regulations with high cost and time burdens associated with setting up a cooperative. A robust legal environment with prudential regulation needs to protect democratic member control, autonomy and independence, and voluntary membership.

At the same instance, many agencies working with cooperatives do not recognise or understand their specific governance and legislations, thus the challenge of fighting back laws that do not support the growth of cooperatives. In 2018, Kenyan co-operatives lobby groups opposed the proposed changes to the Co-operative and Sacco Act, which intended to give members with enormous resources powers to moot and control investment plans and returns from their investments; this would have been detrimental to the principle of one man, one vote and equitable distribution of returns in Sacco’s and co-operative societies.

The Industry, Investment and Trade ministry also opposed the proposals contained in the Statute Law (Miscellaneous Amendments) Bill 2018 saying they risked creating a parallel class of investors within Kenya’s co-operative movement.

This said the delays in concluding the cooperative policy-making process are now impeding the growth and management of cooperatives in the country. This kind of confusion prevents the growth of a sector that has a great experience in building sustainable and resilient societies, For example, agricultural cooperatives have been at the heart of ensuring the longevity of the land where they grow crops through sustainable farming practices. Consumer cooperatives increasingly support sustainable sourcing for their products and educate consumers about responsible consumption. Housing cooperatives help ensure safe and affordable dwellings, while Worker and social cooperatives across diverse sectors i.e. health, communications, tourism, aim to provide goods and services in an efficient way while creating long-term, sustainable jobs.

It is therefore important to give the utmost support to the  cooperatives sector, the core principles and values of voluntary and open membership, democratic member control, economic participation by members, autonomy and independence, education, training and concern for the community that guide the sector is pivotal to member and economic development of the country .

The writer is a communication consultant and a supporter of the cooperatives movement.

This email address is being protected from spambots. You need JavaScript enabled to view it.

Posted On Wednesday, 31 July 2019 14:47

By Oscar Amadi Lusiola

Many governments, especially in Africa, lack resources to sufficiently provide security needs for all, prompting the establishment of private security firms to complement the government exertions in protecting the citizenry. Private security companies make a vital contribution to state security efforts. They are equally a significant employer.

QUESTIONS

With increased criminality and terror threats, this not only makes security big business but has also prompted the Kenya Security Industry Association (KSIA), a federation of private security companies, to warn investors against fake firms.

The criticality of security to humans cannot be overemphasised; modern society depends on a security system that is available and accessible. Private security guards are the first line of security; they access control for most facilities in Kenya. Their major roles include not only guiding visitors but also searching and frisking them for any item that may cause harm or threaten life. Most use bare hands, other metal detectors.

Questions are being asked about the viability or criticality of the guards’ roles, especially when searching for visitors. A recent survey by a local television station revealed how an armed intruder can go through searching zones undetected, even after the “search”. It is about time we asked some pertinent and fundamental questions.

Is it time the guards were retrained, particularly on emerging threats? Do we do away with manual searching or frisking, for “walk-through” metal detection machines? How many organisations will afford it? How do the guards' store firearms retrieved from visitors who are licensed gun holders? Do they know how to “make safe” when receiving or issuing arms? What if they found a visitor with an illegal gun?

Apart from CCTV, what other mechanisms are in place to ensure an all-round “Onion Layer” security arrangement that deters, denies, delays and detects threats? What of the response plan — and time?

Adam Curtis, a British documentary filmmaker, said: “Nobody trusts anyone in authority today.”

Wherever you look, there are lying politicians, crooked bankers, corrupt police officers, cheating journalists and double-dealing media barons, sinister children’s entertainers, greedy energy companies and out-of-control security services.”

This, then, implies that there is a general feeling by a section of Kenyans on the likelihood of the private guards being “out-of-control” if issued with firearms.

The National Security Advisory Committee is set to approve or reject a proposal to give guards guns. The Private Security Regulatory Authority came up with regulations on whom to grant a gun permit and the criteria for recruitment, training, follow-up, deployment and discipline of armed guards.

Though this has been received positively by the private security sector, most Kenyans are sceptical of the viability of the arrangement amid fears of gun misuse by the guards.

It’s prudent that private security management agencies be duty-bound to liaise with government agencies for thorough physical security and access control training of guards with a focus on emerging threats. For now, arming them should not be the priority.

Mr Lusiola, a security consultant, is a PhD student. This email address is being protected from spambots. You need JavaScript enabled to view it.

Posted On Wednesday, 31 July 2019 10:50

By Richard Ngatia

In a competitive global market, at a time of dwindling trade barriers and border restrictions occasioned by ubiquitous nature of technology, economic diplomacy has become an all-important tool to secure investment opportunities through bilateral and multilateral trade co-operation.

Economic diplomacy deals with the nexus between power and wealth in international affairs. It not only promotes the State’s prosperity but also, as the occasion demands, and opportunity permits manipulate its foreign commercial and financial relations in support of its foreign policy.

Accordingly, economic diplomacy is a major theme of the external relations of virtually all countries. At home, economic ministries, trade and investment promotion bodies, chambers of commerce and, of course, foreign ministries are all participants in economic work.

COLLABORATION

Current trends include increasing collaboration between State and non-official agencies, and increased importance given to WTO issues, the negotiation of free trade and preferential trade agreements, and accords covering investments, double taxation avoidance, financial services and the like. Abroad, embassies, consulates, and trade offices handle economic diplomacy.

The main focus is on promotion, to attract foreign business, investments, technology and tourists. Economic diplomacy connects closely with political, public and other segments of diplomatic work.

Diplomatic relations through state visits, export promotion and development co-operation are relevant in minimising potential risks that businesses encounter in their foreign operations, especially in Foreign Direct Investments (FDIs). They provide an avenue to mitigate risks such as political, legal and credit that may discourage potential exporters from entering foreign markets through negotiated trade agreements.

At the same time, the role of diplomatic relations in facilitating trade between and among states taking the forms of state visits, opening trade missions, consulates and embassies cannot be gainsaid as critical determinants of bilateral and multilateral trade relations.

Last week’s Common Market for Eastern and Southern Africa’s (Comesa) Source 21 International Trade Fair and High-Level Business Summit brought together 21 Comesa member countries.

REGIONAL BLOCS

Officially opened by President Uhuru Kenyatta at the Kenyatta International Convention Centre (KICC), it was a clear manifestation of the importance of regional blocs and the positioning of Nairobi as a regional economic hub and preferred conferencing destination.

Nairobi has in the past hosted international conferences and President Kenyatta played host to Heads of States and government, which have yielded trade agreements through fruitful negotiations for export of Kenya’s agricultural produce to the international market.

The ‘Big Four Agenda’ outlined by the President on food security, affordable housing, manufacturing, and universal health coverage presents unlimited opportunities for the local business community and also foreign investors. That will open avenues to investments, create jobs and facilitate skills transfer for our people on the new competitive technologies.

The Kenya National Chamber of Commerce and Industry (KNCCI) has embarked on an aggressive push to expand trade opportunities in international markets through its extensive network, however cognisant of the need to adhere to global standards. During the Kenya Trade Week 2019, KNCCI presented an agenda to upgrade its Certificate of Origin (CoO) systems to accept the issuance of all preferential certificates of origin issued by the Kenyan government.

MOBILITY

Automation of the issuance of Ordinary Certificates of Origin will enhance the efficiency and security of the process. Since the automation in late 2015, fee collection has increased from Sh1.6 million to Sh4.5 million per month. Additionally, the system shall hold a database on all pertinent export information which shall be used for targeting new markets and improving existing ones.

Effectively, Kenyan traders will enjoy an expanded market for their goods and services as KNCCI seeks to achieve the Integrated National Export Development and Promotion Strategy (INEPDS) by embracing sustainability, connectivity and mobility.

Effective day-to-day economic diplomacy by the foreign service officers will ensure that Kenya statecraft achieves the best for our country.

Mr Ngatia is the president of the Kenya National Chamber of Commerce and Industry (KNCCI). This email address is being protected from spambots. You need JavaScript enabled to view it.

Posted On Wednesday, 31 July 2019 10:23

By Donatus Njoroge

Once again, Kenya finds itself in a Catch-22 situation. A food crisis script that has become an annual ritual is slowly unfolding. Plans by the Ministry of Agriculture to import 12.5 million 90-kilogramme bags of maize casts doubts on the government’s commitment to one of the Big Four Agenda: Food security. Many are now wondering what went wrong and whether there could be lessons from neighbouring countries like Uganda and Tanzania.

FARM TO FORK

Researchers from Tegemeo Institute estimated an average production of 40 million bags of maize against an estimated annual demand of 45—50 million bags per year.

Even as we import to cover the deficit, statistics from the Ministry of Agriculture indicate that post-harvest loss in maize is close to 30 per cent.

Kenya imports maize in excess of Sh42 billion in foreign currency, but ironically in 2017, for example, farmers lost close to Sh29.6 billion to post-harvest losses, mainly due to spillage during handling, transportation, processing, marketing, rotting, aflatoxin and weevil attacks.

These losses are greater than the entire 2017 harvest for the annual short rain season. How much money can we save as a country if we manage post-harvest losses?

Where are we as a country four years after the 2014 Malabo Declaration on Africa Enhanced Agricultural Growth and Transformation? According to the 2018 Economic Survey, Kenya continues to experience losses as a result of poor storage, handling and rejection.

As the country prepares to mark the 2019 World Food Day, we need not lose sight of the government agenda of attaining a food waste target of 15 per cent by 2022.

What this means is that food security efforts by the government may remain a pipe dream unless adequate measures are instituted to manage food loss and waste that occurs at various points from farm to fork.

To achieve this, there is need of an integral approach from the country’s scientists, scholars, farmers, policymakers and investors to adopt innovative ways to reduce the food wastage and losses in the value chain for long term consumption and food production.

EMERGING ECONOMIES

As the world grapples with climatic problems, any amount of food harvested from the farm, sold at supermarkets and bought in households is of value and should be protected to avoid spoilage as its presence contributes to improved food security and can save a life.

Ms Immaculate Wanjiku, a maize farmer in Rift Valley, pointed out that her 10 bags of 90 kilos were destroyed by weevils last season as she waited for better prices.

“I just sold all my stock at a throwaway price to a broker, only for prices to improve a month later,” Peter Mwangi, another farmer in Kitale said.

This is only a pinch of the many tribulations facing grain farmers in the country.

Introduction of the Grain Warehouse Receipting (WHR) System could be one piece of the puzzle to bring order into the sector.

Post-harvest credit, in the form of warehouse receipting finance, has proven to be a critical component for agricultural sector growth in emerging economies.

The system creates a buffer against uncertainties in supply and demand, and takes advantage of economies of scale, and lower purchasing and transportation costs.

It improves the post-harvest operations in the grain sector to increase smallholder farmers’ capacity to get additional finance to invest in all the necessary inputs because the receipts issued are acceptable to banks as collateral for loans.

CHAOTIC MARKET

It’s no new concept, agricultural commodity exchanges have been practised for centuries with immense success.

In 1848, a group of businessmen who wanted to bring order to the Midwest’s chaotic grain market came together to form The Chicago Board of Trade. It’s now one of the busiest commodities exchanges in the world.

The government should speed up adoption and implementation of the Warehouse Receipts System Bill if the country wants to achieve its goals on food security.

Finally, food loss and wastage is a global challenge and the country needs a collective tracking mechanism to identify areas prone to losses and adopt technologies and other approaches to curb this challenge, otherwise we will end up spending too many resources to produce foods that end up as trash while millions of people go hungry every day.

If food security goes wrong, nothing else will have a chance to go right in the country.

Mr Njoroge is the Global Innovation through Science and Technology 2019 First Prize winner. This email address is being protected from spambots. You need JavaScript enabled to view it.

Posted On Wednesday, 24 July 2019 16:22

By Michael Arum

Kenya’s sugar industry has many natural advantages, almost all of which have been undermined by policy and public mismanagement that has seen its productivity slump. As a result, when import protection ends, supposedly next year, the industry will be immediately undercut by far cheaper imported sugar with huge costs to the country.

A quarter of a million farmers grow sugarcane. Up to six million Kenyans draw a livelihood from Kenyan sugar.

IMPORT COSTS

The nation saves Sh40-55 billion a year in import costs by using locally produced sugar — which matters more as our trade deficit continues to grow and place downward pressure on the value of the shilling.

Yet, in its bid to remedy the decline in the industry, the government has drawn up regulations that appear unjustified and inexplicable.

The Common Market for Eastern and Southern Africa (Comesa) has warned that there will be no further extensions in protecting domestic sugar production from imports, yet Kenyan sugar costs $870 (Sh87,000) a tonne to produce compared to $350 in Malawi and $400 in Egypt. There is, therefore, no possibility of Kenyan sugar competing against imports without the cost of production falling dramatically. That makes it a top priority for the new regulations to reduce production costs.

LOW YIELD SEEDS

Yet, the proposed controls comprise a peculiarly old-fashioned model of expensive (for taxpayers) state intervention that will further load costs and actively prevent the key corrections that can reduce our production costs.

The starting point for Kenya’s excessive costs is seeds. Farmers still use old-fashioned, low-yield seeds, meaning that Kenya produces far less sugar per hectare than any competitor.

A clear jump-start would have come from regulations that encouraged entrepreneurs to produce any of the 14 new high-yield seeds developed by the Sugar Research Institute (SRI) and already released for commercial production. Likewise, delivering on the Crops Act’s commitment to extension services to get farmers switch to better seeds would even double yields.

DEAD HAND

Instead, the regulations take sugarcane seed production away from the Kenya Plant Health Inspectorate Service (Kephis), which handles all of the country’s seed licensing, and puts it under the Sugar Directorate.

Setting up a department in the directorate with the requisite technical capacity, expertise and infrastructure will be costly and time consuming and promises delays and disruptions.

The next ‘dead hand’ is the mismanagement and inefficiency of our sugar mills. We produce around 5.3 million tonnes of sugarcane a year for 16 mills while Egypt produces only half as much, at 2.8 million tonnes, but has 14 factories.

Egypt produces nearly five times the sugar that we do — 2.3 million tonnes, compared to Kenya’s 0.5 million tonnes. Its mills are larger and newer and crush better-quality sugarcane more efficiently. However, the regulations add a framework that is proven to deter farmers and create disincentives to millers.

ZONING

They introduce zoning — meaning a farmer is assigned just one mill to sell to. In other countries, it drove farmers out of production. It ruined a once-thriving industry in Australia; when it was abandoned, raw sugar production doubled in five years. Countries such as Pakistan, India, and South Africa have all suffered from it.

The new rules also require investors to have high-powered management teams up to two years before getting licences or going into operation and build sugar mills ahead of licensing.

And they are illegal. Besides breaching the Constitution and other laws, they did not undergo the required impact assessment. The Parliamentary Committee on Delegated Legislation is due to review this decision to ‘forget’ to carry out a cost-benefit analysis or comparative assessment of other policies.

The six million Kenyans hope for a more serious attempt at cutting sugar production costs.

Mr Arum is the co-ordinator, Sugar Campaign for Kenyan cane growers (Sucam). This email address is being protected from spambots. You need JavaScript enabled to view it.

Posted On Monday, 22 July 2019 16:18

By Washington Ndegea

In 2018 June, Treasury Secretary, Henry Rotich strode to parliament carrying the characteristic briefcase with the Kenyan Coat of Arms on the side to read the 2018-2019 budget. That was in the month of June.

Expectations were high, that the prices of various basic commodities would reduce, and that the insurance industry would get much-needed relief creating an enabling environment for business.

Concerns on the prices of the basic commodities were met, but the insurance sector was left reeling by the recommendations proposed in the Insurance Act in form of Insurance (Amendment) Bill 2018, that would criminalise the handling of insurance premiums if passed.

Players in the sector quickly instituted an emergency meeting to examine what could have prompted the Treasury Department to come up with such proposals, even while noting that Section 156 of the Insurance Act catered for that.

It was agreed that the insurance intermediaries, to whom this was addressed, were to quickly come up with a counterproposal to be presented to Parliament when the issue would come up for debate after the Second reading of the House.

We got busy and borrowed our counter proposals from the same document Insurance Regulatory Authority – IRA- had borrowed from in their advice to Treasury, that is, the International Association of Insurance Supervisors (IAIS) which adopts Insurance Core Principals (ICP’s) that provide a globally accepted framework for the supervision of the insurance sector.

The proposals in the budget aimed at deleting the whole of Section 156 of the Insurance Act instead of repealing certain subsections and which we felt would provide a soberer approach to the issue of premiums handling by the intermediaries.

We felt that the proposals as fronted by Treasury would negatively affect insurance penetration in this country. We also noted that there was no stakeholder involvement in this proposal and it caught everyone by surprise.

We would have preferred that a penalty be introduced in Section 156 to address the issue of any embezzlement of premiums.

We were happy when our proposals were accepted by Parliament which saw the bigger picture and that the issue of insurance penetration was tantamount in any decision that Treasury was to look at.

That was until the matter came up to the President for his assent to our recommendations and which he refused to assent. What that means is that premiums handling is going to be a criminal offence. Not embezzlement as would have been expected, but the mere touching of a client’s cheque will be a criminal offence.

That is responding to a mosquito bite with a hammer. The only reason the President gave for refusing to assent to our proposals was that by allowing for the handling of premiums by intermediaries, which they have always done anyway, it will negate the principal of Cash and Carry which will, in turn, affect the ability of companies to pay claims since most of the premiums will be with the intermediaries.

At this point, it would be good to point out that over ten insurance companies in Kenya are not paying claims, whether by default or otherwise.

There’s no single company that has complained of delayed premiums or in effect named any of those that could be delaying their premiums. They are simply not paying claims because they have mismanaged their finances. The Insurance Act is very strict on the non-payment of premiums by intermediaries’ and their licenses are at stake should one fail to pay.

It is also important to point out that since the entry of banks into the insurance field a lot of bad blood has been created, mainly caused by the banks encroaching on and forcing our clients to take up insurance with them.

Our cries to IRA have gone unheeded even when we point out that they are doing insurance business in an unorthodox manner. But then banks cannot let go of insurance broking at all because it has given them free money to trade within the form of premiums.

Banks never remit insurance premiums to insurance companies unless they are forced to do so. Any insurance company doing business with a bank can attest to this. They simply do not follow the insurance rules as stipulated.

Why they are never penalized or chastised is anyone’s guess. The only gainers of this action by the President are the banks because insurance will only be done by them and from experience, they will not follow the rules laid down by IRA.

It is acknowledged that the owners of banks in this country are politically connected and ride roughshod over everyone. The President’s refusal to assent to the Insurance (Amendment) Bill 2018 has several grave implications.

At the top is stalling the growth of insurance in this country. Insurance in Kenya is sold and not bought. We all know that the growth of insurance since independence and even before independence has been largely effected by insurance agents and who have always been in their thousands.

There’s practically no one in this country who doesn’t know of an insurance agent and over ninety per cent of the insureds have interacted with an agent at a point in time. By criminalizing premiums handling, it will become impossible to do insurance business as it is akin to selling your wares while you have closed the door. The many thousands of intermediaries will have to look elsewhere for a job.

Why is the government creating unemployment and going against their Vision 2030 objectives?

Another culprit is insurance broking. Insurance brokers play a very big role in the growth of insurance and are mainly owners of corporate business.

They canvass for the insurance business, advice their clients and even settle small claims on behalf of their principal. It is a rule that brokers receive monies on behalf of their clients and later remit to the principal. Insurance broking has effectively been killed by this bill.

The higher the growth of insurance in this country, the higher the country will earn the much-needed revenue, but this government seems to have shot itself in the foot with this bill.

Why kill the goose that lays the golden egg?

Washington Ndegea is the Chairman - Bima Intermediaries Association of Kenya (BIAK).

Posted On Tuesday, 25 June 2019 11:29
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