Africa, Yes YOU Can!

Security and accountability are free public goods!

Public goods are those that are non-rivaled and non-excludable. This means, respectively that consumption of the good by one individual does not reduce availability of the good for consumption by others; and that no one can be effectively excluded from using the good. Due to the fact that the use by paying and non-paying consumers cannot be controlled, governments have to step in to ensure provision of such social goods. In turn tax monies go towards enabling governments to provide these social services.

Internal security is one such public good that falls to governments to provide to citizens. Though private sector security companies complement government security, they are constrained in providing this service for all as they do not enjoy economies of scale on the one hand and also to provide security for all is not economically viable in terms of ensuring that all consumers pay for such services.

According to Paul Collier writing in an article titled “Development in Dangerous Places” another public good is accountability. Historically, rulers needed revenue for their armies, which in turn provoked pressure for accountability and good governance from the taxpayers. Ultimately, security and accountability to Collier are not just public goods but expressions of power.

In countries of Collier’s Bottom Billion however, social divisions reign supreme. This lack of national cohesiveness in turn makes it more difficult to provide public goods. For instance, the 2008 post-election violence in Kenya aptly demonstrated the weak bonding of nationhood where tribes hacked one another with machetes and arrows causing the nation’s internal security to run down the doldrums. Kenya, fortunately or unfortunately has in its independence not had to face a massive external threat from an external aggressor which would galvanise its more than 40 tribes into a feeling of being Kenyan against foreign attackers. The Somalia and Ethiopian border squabbles never even reached such a point because the Kenya is home to sub-tribes of both nations. And even the most recent Migingo Island squabbles, were over a piece of land that hosts more Kenyans than Ugandans.

This lack of social cohesion breeds numerous self-identities and cultures which clash, and not without blood being poured. What is left is a fragmented population, where for instance the hint that Luis Moreno-Ocampo intends to prosecute crimes against humanity, send politicians into a tizz, whipping up ethnic hatred at the drop of a hat.

The second weapon politicians use is to invoke the concept of sovereignty forgetting that sovereignty requires a sense of nationhood; something that they themselves have to ensure is muted, so as to contain groupings calling for accountability.

Collier even names the weakened status of the military in bottom billion countries as a tool used by the political elite to retain power. It is this same military that presides over hurried swearing in ceremonies of tin-pot dictators when they steal elections overnight. And it is this same military that terrorises the masses to accept these “democratic election results”. But, it is this same military that must remain toothless in order for unpopular leaders to survive.

During the Migingo saga, many Kenyans commented that a small military battalion should invade the one acre island to shut Museveni up. But Kenyans were told that diplomacy was the way to go, even after President Museveni himself insulted Kenyans and more specifically members of the Luo tribe, from whom the Prime Minister Raila Odinga originates.

This was not the first time Uganda’s army had tried to stray onto Kenya’s territory. In the Moi era, and indeed during Jomo Kenyatta’s reign, Uganda insurgencies were swiftly turned back, and it was common to find the borders being closed as a matter of national security. However, probably as a good neighbour Kenya has turned to diplomacy as its weapon of mass destruction. This in turn has also led to the proliferation of small arms which have intensified a heightened scare amongst citizens for their personal safety.

The impact on business

Providing a safe environment where firms can conduct their business is a key function of any government. Yet, around the world, as many as 15% of firms report losses due to crime. In spite of this, a much higher share of firms (almost 60%) protect themselves from theft by using private security services, which adds to the cost of doing business. Interestingly, 16% of African firms report losses due to crime, at par with Eastern Europe and Central Asia. However, over half of the African businesses employ private security firms. Consequently, African firms spend an unrivalled amount of money on security, equal to over half a percentage point of sales, which is considerably higher than East Asia or South Asia.

The Africa Competitiveness Report 2009 (ACR) shows that most of the competitive disadvantage of African firms is due to invisible costs—that is, losses experienced by factors that include corruption (non-accountability) and lack of security.

The business costs of crime and violence and the sense that the police are unable to provide protection from crime are particular concerns for African entrepreneurs. The ACR disaggregates security into costs of terrorism, crime and violence, organized crime and the perceived reliability of police services. Amongst the survey’s findings Morocco’s weakening security environment was found to contribute to the country’s declining competitive position. The security situation in Kenya is also extremely worrisome, particularly in crime and violence, the potential of terrorism, and the prevalence of organized crime.

Unfortunately for small enterprise, there is no significant difference in the cost of security services borne by small firms compared to medium and large ones (in terms of share of sales), nor is there a difference between foreign and domestic firms. Africa’s export potential is further impaired as local exporters tend to spend more (almost 10% more) than non exporters.

Within Africa, individual country’s competitiveness is also adversely affected by the lack of security. For instance, Egypt one of Kenya’s major competitors has relatively high levels of security and a resulting low cost of crime and violence for business. In terms of interest from foreign investors to set up businesses in Africa, security makes many shy away from putting their cash in jeopardy in unsecure environments. Mauritius has been able to exploit insecurity on the continent, benefiting from significant inflows of FDI over the past years in part due to the fact that the level of security in the country is good, particularly by regional standards.

Within East Africa, Kenyan 75% of firms have to pay for private security services. This is 5% higher than the regional average. Kenya also pays the highest cost for these services. In turn government accountability data in East Africa indicates that government wastage of resources is highest in Kenya and the country also has the highest perception amongst its business community that the police are unreliable.

Security and accountability are two public goods that make economic development and growth possible. History has provided more than adequate testimony that civil conflicts in poor countries last longer than international wars. With such a looming dagger hanging over these countries, unless security and accountability to address wrongs are provided (not at cost!), the interest of entrepreneurs to venture into business will be lost. Somalia is a prime example of this where revenues generated from enterprise (whether legal or through illegal means such as piracy) are stashed away in foreign countries, further plundering the country into a failed status.

Finally as Collier states accountability is indeed a two way street between government and citizens. Thus standing up to demand security and accountability is required of us all in the democratic spirit of no taxation without representation!

Business activism: Positively transform Kenya with the 2009 Budget Campaign

As any entrepreneur knows, business in the current economic climate is becoming well-nigh impossible.

With inflation adversely impacting raw material and final product prices, instability as a result of political bickering, a tax regime that places punitive impositions on micro-enterprises as well as dwindling consumer purchasing power, Kenyan small business enterprises are now under threat.

A few weeks ago on this blog, we decried the fact that the way the government to which we pay taxes was spendthrift, positing that if it were a business, it would have collapsed ages ago.

Well the season of the National Budget has come upon us again. And this time we can make our representatives to parliament more accountable by ensuring that government expenditure provisions reflect the will of the people of Kenya.

As the accountability portal Mars Group and the Partnership for change point out:

“The National Budget as presently constituted is enmeshed in corrupt and wasteful expenditure and there is need for Kenyans to educate each other on this so that we can pressure our representatives to scrutinize the budget to identify such expenditure. Savings can be used to boost development expenditure.”

As entrepreneurs are the main drivers of the economy, we should be in the fore-front of such an initiative. For instance we can demand accountability from our parliamentary representatives on the following:

• A reduction in the size of the Government of Kenya via the enactment of a statute pursuant to section 16 of the Constitution to cap the number of Executive Cabinet Ministries; and the need for integrity criteria for public service.

• A reduction of the recurrent expenditure of Government and the setting of ceilings on recurrent expenditure.

• Demand for full accountability and transparency in the External Public Debt Register which records all debts incurred by the Government of Kenya with international multi-lateral, bi-lateral and commercial creditors.

Apart from contacting your MP, you can also write a letter to the Commissioner General of the Kenya Revenue Authority (either when making payments or not) to register your displeasure that you are fulfilling your business obligations, albeit to a government that does not manage its resources responsibly.

Or, you can join the Partnership for Change 2009 Budget campaign to mobilize public support so that the Government of Kenya becomes accountable and transparent in the borrowing and implementation of the funds it collects from the public in taxes.

This time the onus is on us entrepreneurs to make the change we wish to see in Kenya today.

Fiona Mati
Founder
Youth Interactive Portal for Enterprise (Yipe.org)