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Saturday, June 18, 2011

2011/12 Kenyan Budget: The Road Map to Neo Colonialism Feudalism/Serfdom/Debt Peonage

By Mwarang'ethe

here are two ways of conquering a nation. One by the sword. The other is by debt.
After some useless spectacle over the mode of presentation of the 2011/12 budget, Uhuru Kenyatta managed to deliver the same on 8th June, 2011. As expected, those who call themselves experts in taxation and economics gave their verdicts as they have done since 1963. By and large, according to these experts, Uhuru did a commendable job. For this communicated nonsense, see this: here and here and here. Please, note very carefully their emphasis on so called 2030 Vision.

However, with due respect, these so called experts are deceiving Kenyans because, they focus on the content, or, the data, but, ignore the context. In other words, just like the rest of Kenyans, they have totally missed the big picture. And, the big picture is this, the 2011/12 budget, is a road map to Neo Colonial Feudal Economic Order or Serfdom, or debt peonage. To appreciate the big picture, one must first understand the real objective of Vision 2030. On, March 21st, 2010, we summarised the mission of Vision 2030 in two lines as this: “Like Bastiat, we feel we have a moral duty to warn Kenyans of the greatest robbery which is a foot in the name of the so called Vision 2030.” We beseech thee to read the entire article before you proceed to read further. You will find that article here. The real title of that article should have been “2030 Vision Infrastructure and Great Robbery of Wanjiku.”

Hoping that, you have read the above piece, let us now hop to London to begin weaving the 21st Century feudal economy. On 7th February, 2011, the Guardian reported this: “To us, it's an obscure shift of tax law. To the City, it's the heist of the century.” Among other stuff, we are reading this:

At the moment tax law ensures that companies based here, with branches in other countries, don't get taxed twice on the same money. They have to pay only the difference between our rate and that of the other country. If, for example, Dirty Oil plc pays 10% corporation tax on its profits in Oblivia, then shifts the money over here, it should pay a further 18% in the UK, to match our rate of 28%. But under the new proposals, companies will pay nothing at all in this country on money made by their foreign branches. The exemption applies solely to "large and medium companies": it is not available for smaller firms. The government says it expects "large financial services companies to make the greatest use of the exemption regime". The main beneficiaries, in other words, will be the banks. But that's not the end of it. While big business will be exempt from tax on its foreign branch earnings, it will, amazingly, still be able to claim the expense of funding its foreign branches against tax it pays in the UK. No other country does this.

Please read the entire story here. If you have time, to read the primary source, see in particular, page 87 of the 100 pages document here. Let us now return to Kenya. So as to mesmerize Kenyans, Kenyatta allocated sh2.9 billion to modernize railway services in Nairobi and its environs. To ensure the plebs are informed of these wonderful developments, the DN told us that: “It’s full steam ahead for city commuter train” here. Among other stuff, we are told that, “Mr Kenyatta said it would cost Sh25 to travel from Embakasi to town and Sh35 from Ruiru to the city, down from Sh70 and Sh100, respectively, charged by PSVs.” It may be true that the fares may go down, but, we are not sure. However, even if fares will go down, will these savings translate into more money into the pockets of those who are funding the project? The answer is no. As soon as, or, even now that, this project has been announced, land rents in the affected areas will start to go higher. In others words, the few who own land will be the beneficiary of this project and not the masses who must fund it. The beauty is that, as we shall show later, these landlords are now corporate and income tax exempt.

However, there is something even more sinister for we are told that:

“A rail operator is expected to manage the proposed commuter service. Procurement of the operator is going on through an international tender advertised by the Kenya Railway Corporation and InfraCo Ltd (InfraCo Africa), a donor-funded privately managed infrastructure development company. The project will also involve the construction of about seven kilometres of a new track to Jomo Kenyatta International Airport’s Unit 3, and the rehabilitation or construction of stations and other facilities along the network. The multi-phased project, whose cost is estimated to hit Sh24 billion once completed, is expected to link the city centre with outlying areas like Thika, Limuru and Athi River/Lukenya. ... the project began in April 2009, when the corporation signed a joint development agreement with InfraCo. InfraCo shoulders much of the upfront costs and risks of early stage development, reducing the entry costs of private sector infrastructure developers.”
In other words, the so called donors have formed a company to invest in the Kenyan railway system. Three questions are in order. Firstly, since all the bankrupt “donors” have divested from their own railways, why the hell are they investing in third world railways? And, if natural monopolies can be privately managed, why then, did we sell out rightly monopolies like Safaricom and KPLC? And, what is this animal called Private Finance Initiative (PFI) under which the InfraCo. is being brought in? Well, in the UK, these PFI vehicles are being used to divert millions of pounds from the NHS into offshore tax havens. Please read this by the BBC: “Portsmouth hospital NHS cash 'destined for tax haven”. In simple words, it is a scam of a century.

Also, in the DN, in an article entitled: “Experts fault some tax proposals as vague and open to abuse,” we find the tax leader of Deloitte East Africa, a Mr Nikhil Hira telling us that:

“But the firm welcomed the introduction of the Real Estate Investments Trusts (Reits) to boost investments in the property market. Part of the proposals pegged on the Reits are that those registered with KRA will be exempt from corporate tax, as well as incomes earned by investors in this vehicle being exempt from tax.”
This, you can read here: What this means is that, real estate companies will now organise themselves as stock companies in the form of Real Estate Investment Trusts (REITS). So many things are now going to happen to mention them in a short article. Suffice to say that, we have created a perfect mechanism for real estate bubble, i.e. like that of Ireland, Latvia, Spain, UK and America, just to give a few examples. Yes, on the surface, we will appear to be doing well. However, when that bubble will burst, we will go the Latvian, Greek and Ireland way.
There are many issues we can raise about this vital question. However, for today, we wish to bring out two things. First, having exempted the land barons who are the richest men in Kenya from both corporate and income tax, we ask, who then, is going to pay the taxes for running the bloated bureaucracy we have created in the name of a new constitution? We answer that, CAPITAL and LABOUR.

In other words, should you as a capitalist wish to start a factory to create WEALTH, while creating the jobs we desperately need, you and the labor you employ will be highly taxed. When you combine high taxation and the increased land rent which will be occasioned by the land speculation, our production cost will soar. This will be the last nail on our beleaguered manufacturing sector about which we reading that, “Manufacturers map exit routes as Kenya attractiveness wanes.” This, you can read here. This is coming as the battery manufacturer Eveready East Africa is planning to close its factory in Nakuru, “because the cost of manufacturing in Kenya is high, driven by high labour and energy costs.” This you can read here. The question is, since our manufacturing base will be decimated by this policy, where shall you and your kids find work? Well, if your dream is to work in the so called Kazi Kwa Vijana projects, it is fine.

Now, the expectation of humanity was that, with industrial revolution, we should move to industrial wealth as opposed to landed wealth. However, with these policies, it is a signal that, the industrial dream and its promise is being buried. In other words, we are cycling backwards to feudal economic order. Do not worry; they have baptized this feudalism as the post industrial economy.

Now, we come to the second and most troubling issue. By real estate, we mean business entities like railways, roads, ports, and dams etc which dominate the Vision 2030. If you analyze Vision 2030, you now begin to see where the so called donor led infrastructure company fits in all this. If this is the case, does it follow that, someone in the UK, USA, Japan can now get let us say, £ 5 billion for free (0.5% interest rate in 2011), come to Kenya, buy almost all of our land, infrastructure, mineral wealth, and then, go back to London and smoke cigars as he waits for his corporate and income tax free income from the African slaves? We are saddened to say, yes, this is the future. If you want know the origins of these REITS, read the history of the first one, which was appropriately called, Foreign and Colonial Investment Trust, founded in 1868, here . If you recall the ongoing UK corporate tax reforms, the donor infrastructure company and the real estate investment trusts we are introducing, you can start to see the great game of re-introducing feudalism is afoot.

In other words, did we bitterly fight for our land, to have the same given back to the colonialists by the son of Jomo, son of Odinga and Kibaki and thereby, make us and our children the drawers of water and hewers of wood in perpetuity in our own land? If not so, how shall we recover these lands in the future? Shall we be recolonized through debt? Shall we be recolonized by our own ballot? You may be animated by the ongoing spectacle about the Chief Justice and such, but, we ask, will not it be the job of that Chief Justice to enforce these feudal laws? And, once you have taken the 2012 OPIUM, shall it not be the work of whoever you will elect to enforce these feudal laws which exempt the barons from taxation while grinding the poor?

It seems Kenyans have forgotten what Machiavelli taught us. He taught us that, a Prince conquering a republic has three options:

  1. Utterly destroy it. For such an example, see Iraq or the ancient Carthage.
  2. Conquer and live there. For that, recall colonialism.
  3. Set up a puppet government. See the new constitution. As they say, The King is Dead. Long Live the King.
Remember this, know the truth, and it shall set thee free. To the extent we are not free, then, we do not possess the truth. This being the case, then, it follows that, what they teach us is not the truth. They do not teach us the truth because, such truth would threaten those who wish to imprison us and keep us dominated. As such, the imperialists profit by the lies they tell us, the false perception and the false consciousness they creates in us.


Anonymous said...

Wonderful post as usual from Mwarangethe. Keep em coming coz we are learning alot and we are better prepared to handle whats coming thanks to you.

(The only irony is that Phil of Jukwaa had to post this article and then rush back to that tribal den. Sigh!!)

Chris, what happened. You promised us here that Mwarangethe will be able to post his articles by himself. Why allow people whose allegience is obviously in other shady blogs to be the ones posting such masterpieces from Mwarangethe??

Anonymous said...

Kenyans are surely going for a very harsh period in the next few months. The Kenyan shilling is in a free fall, inflation has hit 20%, Unga is retailing at 130 Kshs for 2 kg packet and fuel is approaching 120 Kshs a litre. On the other hand, our politicians are increasing their per diems, scandals in education and ministry of lands, and appointment of a crook chief prosecutor.
What do our politicians do? Raila is busy recruiting crooks back to ODM to give it more national outlook, Kibaki is making plain statements and Uhuru just froze negotiated and agreed reviews of salaries of civil and public servants in line with IMF's loan conditions.

Where are we heading.
The writings is on the wall. We have 2 options. The fatal one of remaining silent and complaining in blogs. The second one of taking back our country through massive street protests. The second option is the inevitable end.
However, the politicians lining their wallets with our taxes will not want the disruption of their feeding frenzy and will appeal to our tribal animosity to keep us busy fighting amongst ourselves.
REality, In the next 6 months, the dollar will be retailing at 130 Kshs, the politicians will be busy selling the same lie to get re-elected back and hunger will have decimated 10's of thousands of Kenyans. The future is looking bleak for ordinary Kenyans.
Sadly, the the new constitution which we gullibly voted for was the last nail on the coffin.
Mwarangethe warned us but we dismissed him as an e-conomist.


Anonymous said...

Very important, Mwarangethe.
What next, then? Armed with this knowledge, what are our (the masses that take opium) options? Note that it is these same countries and their companies "grabbing" land in Kenya and elsewhere in the name of food security and bioenergy production, yet we know that speculation is a major factor--none of them has done anything substantial with the land they have been acquiring.
Infrastructure projects similar to those listed in vision 2030 are littered all over the continent.

Anonymous said...


You are a true patriot of Kenya.

Continue educating us please.

Anonymous said...

Education without ACTION is as stale and useless as a blunt sword. EGO...

Anonymous said...

Yet again thanks for a nice post, and even more for continuing being consistent on what hurts Kenyans most.

And the new constitution has some wordings of the 2030 initiative. what happens on 2031 will we change the constitution again to remove such words if we are alive?

I hope Mwarang'ethe gets heard outside kumekucha too.

Philip said...

Thanks Mwarangethe for that.

We know the causes of our problems, now tell us the solutons to these problems, you never know maybe someone in Parliamentary Select Committee always read this blog.

Quote from today's newspaper concerning PSC recommendations:

"The committee has also recommended several policy changes including procurement, tax and land reform to tackle the food and fuel shortages."

The link is below:

Maybe it seems that farmers have also learnt the economy of speculations.

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