Basil Ibrahim & Kevin P. Donovan, Costly Propositions — Sidecar

Basil Ibrahim & Kevin P. Donovan, Costly Propositions — Sidecar

On 20 July, Fitch Ratings, the credit scoring agency, downgraded its measure of Kenya’s ability to repay long-term foreign debts from ‘stable’ to ‘negative’. The Kenyan state has been on a borrowing spree in recent years, and some of those bills are coming due, including a $2 billion bond in 2024. Fitch noted that the government needed to widen its ‘narrow revenue base’ to meet its many costs, but that it faced ‘execution risks’ due to ‘social unrest’ – a reference to the protests that have gripped Kenya in recent months, brewing since March and reaching their height in mid-July.

Although the demonstrations have subsided, dissatisfaction remains rife, and the conditions that brought people to the streets persist: a cost of living crisis triggered by soaring food and fuel prices and exacerbated by new taxes. In contrast to Fitch’s view, for many Kenyans, the government’s revenue base feels anything but narrow. During the decade-long rule of President Uhuru Kenyatta, taxes were raised and their remit expanded – a process that continued apace after last year’s election of Kenyatta’s deputy, William Ruto. Now, new legislation promises to increase taxes even further, including doubling levies on petrol. The IMF, eager to lend more to Kenya, is pushing this reform as a precondition, justified in the name of reducing carbon emissions. It is a costly proposition for millions, at a time when mandatory contributions to the National Health Insurance Fund and a tax on telecoms are also squeezing incomes. The situation on the ground is worse than the official narrative suggests because most Kenyans not only pay legal taxes but are also forced to make private payments to police and other state officials.

Meanwhile, everyday expenses are prices for basic goods spiral. Some blame the war in Ukraine; others point to Covid-19. The reality, though, is that life has been getting more expensive since well before 2020. In Nairobi, the supply of affordable, decent housing is paltry. Huge numbers of modern apartment buildings have sprouted across the landscape, but very few are accessible to the majority. People remember a two-kilo bag of maize flour, a staple food, costing perhaps KSh.80 ten years ago.Today, it goes for KSh.250. Declining public schools mean even working-class parents feel they must pay for private education. Underinvestment in public health services has likewise pushed many Kenyans into for-profit medical care. A recent Oxfam study documented dozens of cases of private hospitals imprisoning patients until they agreed to pay up. More and more Kenyans are taking on debt to afford treatment.

If taxes are not actually funding decent schools, hospitals and other public services, what are they being used for? Much of the country’s tax revenue goes towards repaying the expensive dollar-denominated debts incurred by the previous government. Kenyatta’s administration spent the years 2013 to 2022 cycling through loans from private markets, Chinese creditors and the Bretton Woods institutions. Under his watch, public debt more than quadrupled. Ostensibly, the increased borrowing was used for infrastructure projects that would enable capitalist development: roads, railway, dams and so on. The government argued that improved transport and electrification would attract foreign investment, creating the reliable income sources that so many citizens lack. Tax hikes were the price of maintaining credibility in the eyes of lenders.

Whether the original expenditures were wise remains contested. When Kenyatta approached the World Bank to finance a new railway line to supplant the colonial one, for instance, he was turned away. The Bank deemed it likely to be a financial mistake – with high costs and little economic benefit. Kenyatta pushed ahead anyway, securing funding from China. Another recent infrastructure project is the elevated expresswaythat now runs through Nairobi, dwarfing the parliament buildings and enveloping one of the city’s few public parks in exhaust fumes. When we drove along it in July, the monstrosity was largely empty because the toll price is out of reach for most.

Much government spending over the past ten years has also disappeared into a series of massive corruption scandals. Some of it simply cannot be accounted for. Kenyan analysts speak of ‘state capture’to describe the thoroughgoing appropriation of public monies by self-interested officeholders. The former Auditor-General, Edward Ouko, claimed such appropriationis so commonplace that official budgets are prospectively inflated, with a shadow system of allocations directed not only to the corrupt and their clients but also to those who might try to bring them to account. Debt-fuelled infrastructure binges are as old as the Kenyan state (the settler-colony was founded to pay the cost of the railway to Uganda). State contracts and tenders have long been dependable mechanisms for the privatization of public wealth. Recent years are egregious, though, in part thanks to the proliferation of foreign financial sources. The latest scandals include dams financed by Italian money, railways by Chinese, and roads funded by the African Development Bank. Countless examples circulate through Kenya’s public sphere, known by shorthands – SGR, NYS, Afya House, Eurobond – each indicative of profligate spending and unaccountable elites.

In the past three years, the Kenya shilling has lost 25 per cent of its value against the dollar, making all these unproductive foreign-denominated debts harder to make whole. Creditors have thus far been assuaged by boosted domestic financing, but as the large payments come due, even that tap is insufficient. Structural adjustment, international market strictures and the imperative to earn foreign exchange make the choices stark. Instead of attempting to claw back ill-gotten wealth or re-negotiate with international lenders, the government has thus far decided that making ordinary people bear the cost is the best path.

Public disquiet about inflation and tax hikes has been growing. Since March, the opposition faction of Kenya’s elite has tried to capitalize by orchestrating a series of protests (known in Swahili as maandamano), led by the veteran politician Raila Odinga, who blames Kenyans’ economic travails on President Ruto. Odinga was an important advocate of multiparty democracy during the repressive rule of Daniel arap Moi. He has contested several presidential elections without success (including a number clouded by credible allegations of misconduct), sometimes on a redistributive platform and carrying the banner of the marginalized. Despite this, he is very much of the Kenyan ruling class, with substantial business interests, intermittent government postsand his own share of questionable dealings. As a result, some critics accuse Odinga and his allies in the Azimio la Umoja Coalition of manipulating supporters in order to relitigate the 2022 election he narrowly lost to Ruto.

In early July, maandamano gained momentum. Azimio la Umoja politicians held a large rally in Nairobi on 7 July, a symbolic date associated with the nationwide protests in 1990 that eventually led to multiparty elections. In 2023, as in 1990, police violence followed, presaging a more elaborate government effort to isolate Odinga and his message. On 10 July, he surprised everyone by sneaking into downtown Nairobi on a public bus, attracting crowds and sending the state into a panic. Two days later, the police attacked another planned opposition rally. In response, more protests coalesced, both in neighbourhoods typically associated with Odinga’s supporters and in more unexpected places, including along thenew Nairobi highway, which was damaged. Pollsters reported a steady uptick in popular discontent with the government and its steering of the economy.

While it was predominantly young, urban men who participated in the always-risky street protests, their networks of support and shared feeling reach much further across society, and the extent of the demonstrations surprised many. The events the week prior could not be reduced to the will of politicians – they were only harnessing public anger arising from the generalized pressure on working-class Kenyans. Did the protests augur more widespread unrest, even a popular insurrection? When Odinga called for three more days of maandamano the following week, the tension was palpable in Nairobi. At least one large international organization cancelled trips to Kenya in fright.

When the three protest days arrived, some observers thought them muted; others labelled them a failure. It would be more accurate to say they were suppressed. Caught off guard by the protests the week before, this time the state’s repressive apparatus was ready. Opposition politicians and their bodyguards were arrested. Military-grade weapons and vehicles were deployed to poor neighbourhoods, urban centres and other strategic locations. Demonstrators were met with tear gas and live fire, especially in Odinga’s stronghold, the westerncity of Kisumu. Dozens were killed. Some of this made it into the press, more circulated on social media, but much went unreported, known only through the sound of gunfire at night or worried texts from friends. For its part, the government has been unrepentant.

Why have the protests petered out? It is not only state violence and informational vacuums that stymie popular movements. The country’s history of ethnic competition has long been inflamed by an elite strategy of divide and rule, with politicians instrumentalizing identity politics to curtail class-based alliances. Although Kenyans from across the country are critical of government policy – inflation and taxation cut across ethno-linguistic divides – longstanding accusations that Odinga principally represents people from the Luo ethnic group make it easy for some to reduce maandamano to an old narrative of ‘us versus them’.

If the message resonated less loudly in some corners due to the ethnic identity of the messenger, its traction was also limited by the deep-seated capitalist ethos that courses through the country, making it hard to sustain a solidaristic politics.Ruto’s presidential campaign promised to favour ‘hustlers’, a term he cribbed from the country’s youth culture to invoke an everyman entrepreneurialism – the striving not only of the working poor but also better-off Kenyans who supplement their main incomewith a side gigor two. For some, this amounted to economic populism, perhaps even class politics; yet ‘hustling’ is about self-advancement and independence, not redistribution and solidarity: a hustler is self-made, demanding neither social welfare nor revolution. A broad-based opposition to elite predation – whatever its ethnicity – would need a vision beyond the hustle.

Perhaps an even more important factor weakening protest movements is the precarious position of so many Kenyan workers. Unlike a waged working class that can count on a monthly salary – however small – most Kenyans live day-to-day: selling goods, driving taxis, earning tips in service work. Attending a march means they cannot make money that day, and without meaningful savings, they risk going hungry. Widespread insecurity is what summoned the maandamano crowd, but at least in this case, poverty also demobilizes. Even the threat of large protests and a police crackdown deprives many people of their daily income, as shops pre-emptively close, cab drivers keep off the roads and parents have to stay home to look after children whose schools are closed. In such conditions, with livelihoods at stake, potential support can easily slide into resentment.

For both the opposition and the government, such public nervousness makes for a delicate dance. By August, Ruto’s government was making confused gestures on economic policy – temporarily resinstating fuel subsidies while still increasing taxes. The opposition coalition and the government are to enter talks superintended by Nigeria’s former president, Olesegun Obasanjo. There, economic fundamentals are being side-lined – just one among several items on an agenda that gives the impression Kenya’s woes can be solved through bureaucratic re-organization. The talks present at most a chance for elite reconciliation.

Meanwhile, working people continue to struggle with rising costs. The international credit agencies are right: the outlook is negative. Improving it will require more than another loan or a broader ‘revenue base’. Yet forKenya’s streets to erupt in sustained revolt, there would have to be a rupturebetween the people and the ruling class. This wouldrequire a collective movement that bypasses politicians and challenges the state – not merely its leadership.

Read on: Paul Nugent, ‘States and Social Contracts in Africa’, NLR 63.

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