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Friday, June 17, 2011

Why Is Kenya So Suddenly Broke?

Economics is a terribly boring and yet it is terribly important.

Especially at a time like this in Kenya. For all intents and purposes this should be a pure economics post. But don’t worry I will not bore you today with macro-economic policy blah blah and stuff like that. Rather I will tell you some nice stories that will help you understand the mechanics of what is happening.
Why should you care about what is happening? Because whether you like it or not you are going to get hit in a very major way by what is unfolding currently. When the exchange rate to a dollar hits the three digit figure of Kshs 100 EVERYTING YOU HAVE TO PAY FOR will increase dramatically in price. Because EVEN if it is manufactured locally there is some imported content in it. Even agricultural produce is transported from the farm using petroleum products which are imported. Let us not even discuss oil prices in this post because if we do you will probably just lie down and wait to die quickly.

There was this man who had very high costs. He made them higher himself by taking a second wife. Each wife had children in school and so you can imagine what kind of costs we are talking about here. At first it was not a problem because he was dealing in drugs. But one terrible day the police moved in and shut down his cartel. He was lucky not to end up in prison. He had taken the right precautions and there was no evidence to link him to the vice. But he often wondered whether it may have been a better thing to end up in prison where he did not have to worry about how to put food on the table for his enormous family.

That man is Kenya with the big fat grand colallition government. It is now clear that drug money has been playing a much more major role in propping up the Kenyan economy than anybody will dare admit. Even the unprecedented political crisis of January 2008 did not put a dent on the shilling but the naming of drug king pins by President Obama has had a devastating effect on the Kenyan economy. Actually it has among other scary things put the Kenya shilling on a free fall where most analysts believe that we shall see a Kshs 100 US dollar by the end of this month or soon after.

What has happened at the treasury is that all of a sudden foreign currency has become very important and there are those analysts and experts who are suspecting that the government has accordingly changed it’s policy from that of keeping a strong shilling to one of attracting as much forex as possible at all costs. So in effect the government has decided not to fight the war they know they will lose anyway of trying to prop up the shilling. For those who have never understood; how is the shilling propped up? Imagine a situation where there is a scarcity of sukuma wiki (Kales) at the nearest fresh vegetable market to where you live. What will happen? Prices will shoot up dramatically. However they will come down very suddenly if a lorry or two suddenly arrives at the market loaded with sukuma wiki. Prices will fall like a stone back to normal or even below normal. That is exactly what the government does as part of it’s fiscal policy when forex gets scarce due to various factors, it brings “lorry loads of foreign exchange” to the marketplace which has the effect of keeping the shilling strong. Clearly the situation now is that somebody has realized that even if they bring 10 lorries of sukuma wiki to the market the prices will not go down because the demand for the vegetables from the hungry vilagers is much higher than 20 lorries. let alone 10 lorries. So in this case people will buy the lorry loads of sukuma wiki at high prices and some will not get any ad rpices will continue to climb. This is the situation the fiscal planners of Kenyan economy suddenly find themselves in.

In one sentence the word on the economics streets of Nairobi is that old man Kenya is completely flat broke and very desperate. What do you do when you are broke? You borrow. But what if you snubbed the people you usually borrow from over the last few years? Kibakinomics has involved snubbing old friends like Britain and United States for new kids on the bloc like Libya, China and the Arab world. Now Gadaffi of Libya is pretty much gone, the Arab world has their own very serious political problems just now mainly caused by Facebook that need plenty of cash to keep under control. China is busy and excited doing deals in the western world and has in recent times dramatically reduced engagement in Africa which is not a priority at the moment. Kenya’s old friends may be willing to help but they are waiting with their long list of demands before they can do anything. And besides Mwai Kibaki’s pride will not allow him to grovel at the feet of anybody and beg while asking to be forgiven for straying.

So where does that leave us?

You don’t want to know...

Because everything is pointing towards unprecedented economic crisis. A depression of the magnitude that has never before been witnessed in these shores. Prepare for scenes from the Great depression in America being played out on Nairobi streets. In the days of the great depression New York city was filled with very smartly dressed men in designer suits who were hungry because they suddenly couldn’t afford a meal. Many others (also in their smart suits) were jumping off high buildings to their death below. Our old friend Mwarangethe was right after all only that even he downplayed the catastrophe that is about to unfold.

What should you do?
Rush to your bank now and open a Euros or US dollar account and if you receive money from anywhere in the world in these currencies keep it there. Even if it means borrowing Kenya shillings to keep things going.

If you have never been interested in farming in your life you had better start getting very interested pronto. At least grow your own food if you feel that it is below you to grow and sell farm produce (a business that is guaranteed to be extremely profitable in the months to come).

But even if money is the least of your worries, don’t think this thLinking won’t touch you. Just think about it. All those guys who were relying on the drug trade to put food on the table, what will they do now? What about all those folks who are losing their good jobs everyday as the economic crunch continues to bite? Even if just 10% of them go into violent crime we all have too many reasons to be very very worried.

Will the last person leaving the crumbling house please remember to switch off the lights.


Moinomics, Biwottnomics and what Goldenberg really did to you explained in simple standard two English

Most recent post by Chris Kumekucha (a few hours ago).

18 comments:

M. Pesa said...

Interesting and simplified article on the state of our ailing economy. Kenya will soon become the sick man of Africa, just wait. I'm now spending much more to buy my goods from US than I used some months back for the same quantity yet when I try to raise prices a bit here to recoup my losses, my clients won't have none of it! Looks like they want to send me back to Ushago.

Chris even humorously recommends farming and that's exactly what many young Kenyans are thinking and doing. I was at the Brookside livestock show at Jamhuri Park a few days ago. I was shocked to see young Kenyans in those modified cars which look like safari rally taking notes seriously about the Freshian and Jersey cows.

Some in designer jeans and T-shirts could be seen taking photos with their smart phones while ipods blared music in their ears. For your info, there was this one cow that produces 50 litres of milk at 30bob per litre- prices guaranteed by Brookside for the next seven months and believe it or not all produce guaranteed to be bought. Just imagine if you have about 10 such cows, do the maths.. handsome check every month...er.. tax free!

Chris talked about drug money but forgot about the millions of dollars which used to flood in from piracy. There's a fleet of warships manning the Indian Ocean and that piracy tap has also pretty much dried up. Even the Somali Transitional Govt is waking up and regulating the huge black market between Kenya and Eastleigh.

Will leave the rest to Mwarangethe as he makes things more clearer on (land, money and monopoly.)

Mwarang'ethe said...

Oh, Kenyans!

We just add some interesting CONTEXT and PERSPECTIVE.

In THE 1990's, as Albanian economy collapsed, INTERNATIONAL CREDITORS who were anxious to collect interest payments on Albanian debts, fixed their eyes on foreign exchange proceeds of ILLEGAL trade.

As Albania fell into deeper debts quagmire and as local INDUSTRIES and AGRICULTURE collapsed, the only income left available was from ILLICIT trade.

As such, the CREDITORS and the Albanian GOVERNMENT shared a financial interest in the uninterrupted flow of lucractive ILLICT trade and PYRAMID SCHEMES.

Now, with our friends in economic shit, these funds must be carefully DIRECTED to the APPROPRIATE DESTINATIONS.

And, how best is that done? By turning very loud against their useful idiots. Off course, the plebs gets very excited with such news.

NB: Do you remember some PYRAMID SCHEMES in Kenya in 2007?

xxx

Sometimes back, we warned that, the idea of borrowing $$ to build houses will expose us to CURRENCY ATTACK as we saw in Latvia and Asia in 1997.

Well, many dismissed those warnings as rants of a mad man.

xxx

As concerns agri. we concur 101%. In fact, some of us are ahead of this game. The deal is this. When we study history, it is not just for amusement.

It is to provide the LIGHT for our feet. By such studies, you can precisely know where we are and where we are going and act accordingly.

xxx

Just one more thing. In our desperation, we are opening our land for foreign take over.

The question is, can Kibaki win against his "enemies" who are circling around him? Absolutely, YES, he can.

However, what is required is so drastic, Kibaki cannot do it. In that sense, we are done.

Anyway, take time and watch this:

Argentina's Economic Collapse:

http://is.gd/CnYxsG

xxx

As usual, we leave with words of Bob:

Cause I feel like bombin' a church,

Now - now you come to think about it, u know that the PREACHER is LYIN'.

http://is.gd/M0U8Cx

Anonymous said...

But I thought the new constitution says the government should ensure that every Kenyan gets food and clean water?
Can Kenyans use the government or did we pass a useless documents whose benefits were just more aditional offices with handsome perks for politicians, their wives and mistresses while the common mwananchi foots the bill?

Anonymous said...

* sue the govt not use

Chris said...

Great comment as always m.pesa.

I forgot to mention that piracy cash has dwindled dramatically due to various factors, some of which you have mentioned.

But the most important thing I forgot to mention is that mobile phone interconnectivity rates were suppossed to have gone down this week opening the door for long term low calling rates. But since the GOK is so desperately broke now, Safaricom taxes have suddenly become money coming in that GOK cannot do without and that is why Kibaki personally intervened and quashed the move to lower the rates.

Folks prepare for the rates to start creeping up again even as Safaricom continues to make billions in profits.

Kumekucha Chris

M. Pesa said...

One of my favourite singers of all time is an American lady called Tracy Chapman whose greatest hit is the classic Fast Car.

Her emotional songs and sultry voice make grown men shed tears because they touch your very inner heart of hearts, even if yours is made of stone like those of our politicians.

The reason why I brought Tracy Chapman in this economic topic is because I believe the next phase of our tribal wars will be what is known as Class Wars. We have all seen the Jasmine Revolution sweeping across the Arab world, haven't we?

Poor people in Kenya are slowly getting fed up with hard life which doesn't seem to get any better. Our leaders are busy stuffing their pockets with our cash while Wananchi go hungry.

One casual labourer employed by Wahindis at Industrial Area where they earn just 200 bob after long hard work recently told me sometimes he prays for the night not end since he can't face the reality of dawn every morning.

I have also met some very poor IDPs near Limuru who are very bitter such that even their children are also growing up knowing only about hate and nothing at all about love.

One IDP told me in my face he felt embarrassed since previously he used to provide for his family in his own farm but not any more. Within a few years, this man who used to be well off and respected has become a beggar wearing tattered clothes!

That humiliation makes him even unable to face his wife, so he told me. The poverty and humiliation had forced many of his friends to turn into a world of crime. Previously good people who now hated the society that has continuously ignored them to sub-human levels.

Before you shake your head, fart after a six course meal or retreat to your air conditioned office or Mercedes Benz, please let's go back to Tracy Chapman as we ponder about the looming class war in Kenya. There's this great song she sung called Talkin' Bout Revolution and some of the lyrics go like this:

Don't you know
They're talkin' about a revolution
It sounds like whisper

While they're standing in the welfare lines
Crying at the doorsteps of those armies of salvation
Wasting time in the unemployment lines
Sitting around waiting for a promotion


Poor people gonna rise up
And get their share
Poor people gonna rise up
And take what's theirs


Don't you know
You better run...
Oh I said you better
Run
run
run...

Mwarang'ethe said...

Anonymous said...
But I thought the new constitution says the government should ensure that every Kenyan gets food and clean water?
Can Kenyans use the government

xxx

ehehhee, ahahaha, delusions, illusions and childish fantasies.

xxx

Folks prepare for the rates to start creeping up again even as Safaricom continues to make billions in profits.

Kumekucha Chris

xxx

The assumtption is that the users of these mobiles have money. Where is it brother?

xxx

The reason why I brought Tracy Chapman in this economic topic is because I believe the next phase of our tribal wars will be what is known as Class Wars. We have all seen the Jasmine Revolution sweeping across the Arab world, haven't we?

xxx

Yes, this is coming.

However, the question is, will it solve anything? It will not, for this simple reason. Wealth refers to

(a) the ORDER and PROCEDURE of PRODUCTION, DISTRIBUTION and EXCHANGE and not really, accumulation of perishable stuff like maize, and

(b) a trust/credit system in men and institutions and not useless paper money, checks etc.

If this is the truth, VIOLENT REVOLUTIONS have never distributed WEALTH, but, POVERTY unless led by very enlightened men. How does that sound?

The problems we face are basically two:

(a) artificial check on wealth creation by MONOPOLIES created by your wonderful katiba,

(b) maldistribution of wealth when created due to MONOPOLIES sitting in your wonderful constitution.

Why Kenyans cannot see this, is for gods to explain.

xxx

Anyway, we are of for our study of OLIGARCHIES of ancient world. Why would we be interested in ancient oligarchies? Simple. Most governments have been oligarchies, i.e. rule of the minority by:

(a) birth, see the UK/Europe,
(b) religious org. See Iran, Vatican.
(c) wealth. See all so called democracies such as USA, Kenya etc.

Anyway, enjoy We and Dem by Bob:

http://is.gd/vz5PDO

Anonymous said...

instead of dollar or euro-account i rather suggest open a swiss-franc-account......thts the real good currency.....even dollar and euro are weak..

luke said...

Chris,
About a year ago or so I wrote a 2 part post here on this blog about the looming class wars (http://kumekucha.blogspot.com/2010/04/tell-tale-signs-of-on-going-class-war.html) and (http://kumekucha.blogspot.com/2010/04/kenyas-looming-grand-class-wars-cont.html)

This being KK as usual i was laughed off scornfully and dismissed as being unable to write social commentary and an intellectual underweight LOL. Well, since then Mwarang'ethe has done a good job of putting it in terms which can be understood better by all. no need to re-invent the wheel.

Anonymous said...

Are we talking of KIBAKINOMICS or [a]KIBANOMICS?

There was one very proud, stubborn and arrogant patriarch who suffered from an abrassive personality disorder (APD).

To make matters worse, he was the homeowner of three homesteads that had platoons of his offsprings who were constantly under the gaze, spell and oppressive shadowy figure of their patriach.

The three families were not allowed to ask for any outside assistance, borrow money or even admit their unmet needs, including certain weakenesses, dysfunctional existence, lack of money, food supplies, proper nutrition, clothing and other basic needs to their neighbours, close or distant relatives, friends, schoolmates, teachers and fellow members of their religious community.

It was anathematic and suicidal to go against the grain and the strigent rules imposed upon them by their know-it-all patriach.

Long story short, when he died all of a sudden, the three homesteads quickly came together, united not grief but in relief, exuberance and celebration of their new found freedom.

As for the patriarch's funeral, the three familes, thanks to their matriachs, ended up borrowing a four bulls, twelve goats, thirty-six chickens, four sacks of maize flour, two sacks of wheat flour, five sacks of rice, two sacks of sugarloaf cabbage, one sack of drumhead cabbage, three sacks of potatoes, one sack of onions, one sack of ground coffee, one sack of sugar, several backets of tomatoes and mixed vegetables, one 20 gallon container of cooking oil, two drums of diesel for the main homestead generator, and a tractor load of fire wood to feed the mourners, associates and helpers.

Ironically, due to lack of adequate funds the three matriachs also decided to borrow a swath of white linen fabric that used to wrap the remains of their 'departed n beloved' patriach.

So, days went by, weeks went by, months went by and a year went by without any of the lenders coming by or stopping by to collect or demand what was legally owed to them based on the promissory notes.

After a while, the dead patriarch's family later learned that their immediate neighbours and friends of their patriarch("lenders") who contributed so generously to the farewell party and rituals of the departed patriarch, had owed a lot lot more to their old man, the patriarch, but he had been too proud to go out of his way and collect what was owed to him because he deemed such move or action as being beneath him and an obvious sign of weakness for man of his stature.

Yet his three homesteads had led a very spartan existence, a tough life of bear minimums for the thirty-nine and a half years they lived under the auspice of their 'beloved' patriarch.

Guess what? The three matriachs later found out through their lawyer for the three families that their patriach was the owner of three very fat, huge, accounts, a 156 acre wheat farm, two rental apartment complexes in Hurlingham, Westlands, another one in Mombasa and a huge beachfront rental property on the south coast.

The late patriach was a man who was known to have never owned a vehicle, wrist watch a single dress suit and TV set.

So why did he always seem to be very broke and perpetually unemployed?

It's a secret he took with him to the grave when he was laid to rest around 3*13'45*6'6*E
-3.229167,40.101667
.

Anonymous said...

Chris, what do the rural Irish of old and the current crop of Kenyan political elite have in common?

Akheillus said...

With Donors demanding thier money back from the embezzlers under Kenyatta and Ongeri's wing,no actual implementation of the new constitution and IDP's and the Hague does Kibaki still think he has any credible legacy? Raila has no better stature either. With a parlimenatry and civic majority after the last election why didnt the man force through his campaign promises? Does the man really think if he wins the next election heaven will descend from the sky.? You prepare for success and achievements. What achievements have these guys prepared for? Are there still any lost souls out there who still believe the proclaimed economic growth rates did anything for this country?
Maybe they think Kenyatta will make another computer mistake and fix all thier problems.

Akheillus

Anonymous said...

See Obama comments about his Kenyan dad;

"You know, I can't say I miss my father, because I just didn't know him," Obama said. "And so, I don't have enough of an emotional bond there to miss him. I profoundly miss my grandfather. You know, I profoundly miss my mom. And my grandmother."

And the way Kenyans are head over heels trying to own Obama..dah!!!

http://news.yahoo.com/s/yblog_theticket/20110617/ts_yblog_theticket/obama-says-no-more-children-for-first-family-doesnt-miss-his-father

Anonymous said...

LOL! My goodness! My gosh! When will Obama learn to count his blessings?

Anyone raised by his or her maternal grandparents can concur with him 100% in that regard.

But the so called "leader of the free world" needs to humble himself and find the social graces to enbale to stop shooting off his mouth aimlessly with regard to any issues and all things concerning his biological father?

There comes a time when a mature man should already know by the time he reaches the age of 22 yrs, at times silence is golden when one has nothing good say about his biological parents, clan, ethnicity, and the land of a half of his ancestors.

Likewise, so many Kenyans as well as Africans will not miss him if he were to be voted out of the oval office in 2012 or if he's lucky enough to stay on until he leaves White House in 2017.

There is no bond between him and many Kenyans beyond him being a bearer of his father's name. A name he has always invoked when appealing to the public's sympathy or attention seeking whenever he wants to score some political points.

I will go of on a limb by reinterating the fact that one in the nature of Barack Obama would never have been elected to the White House had he been a bearer of his grandfather's name or step-father's name.

He would have been just another politician of mixed race from Hawaii. No more, no less.

Anonymous said...

Economics is a terribly boring subject and yet it is terribly important.

Chris, I hear you loud and clear. On a somehow serious note, a narrative (i.e. stingy billionaire patriach) should always be follwed by a discourse of some kind.

Well, Kumekuchans, many others, and myself know too well that economic issues are active in our lives every day.

Yet the subject of economics is almost unbelievable - inexplicable on one level and fully understandable on another.

Hence, one of the reasons why economic issues should never be the exclusive reserve for the professors, lecturers, instructors, and teachers in some of our universities, colleges, institutions and high schools around the country.

Including the boring economic experts and the so called every growing intelligentsia in our midst.

Many will agree with the fact that
when the subject of economics comes up in conversation or on the news, we find ourselves longing for a more sophisticated understanding of the fundamentals of economics.

We the people are always left yearning for someone or a team of good minds who are willing and able to help the public think about and discuss the economic issues that affect us and the nation every day - interest rates, unemployment, personal investing, budget deficits, globalization, and many more - with a greater level of knowledge, sophistication, entertainment as well as down to earth delivery.

Further, it would be more beneficial to the economy and nation in the longrun if we the ordinary people are helped to understand the behaviour of individuals, housholds, (lest we forget various communities,) and firms; and how they interact in markets for goods, labour, and saving and investment.

As well as how we the ordinary people can learn how to examine the factors that help our so called local and international economists evaluate the economy on a national and global scale.

Instead of us the ordinary people wasting all of our exessive energies, valuable resorces and lives 24/7 on overly wasteful indulgements talking about warped politics and dirty electioneering that never seems to amounts to any substantial uplifting of ourselves, our respective communities and nation.

The discussion and understanding of economic issues should be brought into mainstrain as well as into the social arenas of everyday existence, and not just left to be learned through boring instructions at some of the aforementioned institutions that are still evolving.

Talking economics should be the pulse of the nation, a way of life, and Kenyans should be able to talk economics, eat economics, dream economics, do economics and have it imprinted in their DNA. And why not?

Anonymous said...

The mysterious disappearance of forty million dollars from under the watchful eyes of the Ministry of Education, including countless of other sacntioned embezzlement programs in various minsitries, corporations and organizations, are what have contributed to Kenya going broke.

"It's Our Turn To Eat" as usual until we are removed from office or defeated in the next general lections. In the meantime corrupt Kenyan officials will continue with their time to eat to their hearts'content.

Anonymous said...

Kumekucha,
I still believe that in spite of the condition of the Kenyan economy, in spite of joblessness, in spite of Kenya having 70% of its population as underclass, in spite of the on going corruption encouraged by the lords of impunity (those who eat together), in spite of the stress and distress that engulf majprity of us, the ordinary people, in spite of the dark pail of clouds that like smoke have obstructed our view of the sun's bright rays of a new day on the horizon [a better Kenya, better tomorrows, honest judiciary, truth telling prophets, good governance, a less corrupted civil service, productive parliament, et al], we the ordinary people still have something to shout about.

We the ordinary people want and demand a good nation (Kenya), good presidential leadership, good government, good parliament, good civil servants, good economy, good way of life for all, good infrastructure, good inter-ethnic relations, good education for all Kenyan children, good environmental conditions, etc.

Yes, demanding goodness in all things has everything to do with our sovereignity as our nation.

Otherwise, if we the ordinary people fail to what's good for us and our nation, then we would be better of known as one of the many tsagnated and redundant African plantations, a banana republic of Kenya.

Anonymous said...

People like Sam Ongeri and all those who are responsible for the theft of the 40 million dollars from have been put on notice.

They should all know that "malipo ni hapa hapa dubiani" and they will not take the stolen loot with them to the grave when thei time comes calling one of these days. Let's hope it come sooner than later.

Let Chiluba's timely death serve as a lesson to many of those ministers, MPigs, civil servants and CDF officials who continue to eat and bankrupt the nation.

Chiluba embezzled over $46 million but was somehow acquitted by some not so smart coppernecked judges within the corrupt judiciary system of Zambia.

LOL! Death could get him acquitted in 2011. Just desserts, if I may say so.

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