Saturday, April 28, 2007

When Matatus Were Young

Believe it or not! There was a time that the government defended the matatu (minibus) industry. That was in 1973, when the industry was still young, innocent and loved by many town dwellers. The key matatu defender was President Kenyatta himself. He consistently told bureaucrats and bus owners to leave matatus alone. Two bus operators (Jogoo Kimakia and Godfrey Muhuri) were met with a rude shock when Kenyatta refused to protect their buses from matatus. Kenyatta told Kimakia that, "If I were you, I would sell the buses and buy matatus."

Another occasion is when Transport Ministry (under Ronald Ngala) tried to introduce TLB rules. This did not go well with matatu operators. During one of Kenyatta’s roadside speeches, he was asked when rules and taxes on matatus would be repealed, on which he answered: "It is repealed forthwith!" Kenyatta later declared matatus “a legal mode of transport that could carry passengers without obtaining special licenses . . . but had to comply with existing insurance and traffic regulations.” (IPAR)

Kenyatta’s roadside declaration gave birth to Kenya’s most chaotic, yet iconic industry. In just three decades, matatus have evolved from a simple man’s business to a multi-billion industry, which has provided thousands of Kenyans with entrepreneurial opportunities.

The industry has succeeded this far because the government performed its proper role at the beginning: it ensured that matatus were not harassed, and it eliminated the burden of bureaucratic requirements. Now the industry is facing a new challenge: WHO SHOULD OWN/CONTROL A MATATU ROUTE? Is it vijana wa mtaa (home boyz) or matatu owners.

Bottom Line: According to Karol Boudreaux of Enterprise Africa at George Mason University, the solution lies with the enforcement of property rights in transit routes. That means recognizing the true "owner/operator" of a matatu route. The issue could be too hot to touch, but it is the only solution to our public transport chaos. Karol has done extensive research on South African matatus (called kombis in SA). Her publication (Taxing Alternatives: Poverty Alleviation and South African Taxi/Minibus Industry) offers a glimpse of how Kenya could streamline the matatu industry.

Wednesday, April 25, 2007

The Ugly Side of Kengen Subsidies

The recently announced electricity subsidies are politically right but economically wrong. They are directed at appeasing Kengen shareholders but will surely hurt the electricity sub-sector, as well as halting economic growth. They also equate to wealth transfers from the tax-paying-mwananchi to the fast rising investment class; this might affect the war on poverty.

Minister Kimunya said that the first Kshs 1.3 billion is “compensation for losses caused by regulator’s refusal for Kengen to increase power tariffs.” But that’s not a credible reason, considering that the government will get the lion's share of the subsidy. Check this out: the state owns 70% of Kengen, which would translate to KShs 910 million or 70% of the subsidy. The other 300,000 shareholders will share 390 million.

Bottomline: As Kengen shareholders (including GoK) ‘fatten’ their CDS accounts with subsidies, 33 million Kenyans will have to deal with poor roads, inadequate schools and hospitals, insecurity, and many other problems that could be solved with Kimunya’s 1.3 billion give-away. Subsidies will not solve electricity problems in the country, they’ll only postpone a major disaster in Kenya's energy sector.

Monday, April 02, 2007

On the Trail of Moi’s Dream-Team

The twenty first century belongs to Moi’s dream Team Alums. The six gentlemen did not succeed in streamlining government bureaucratic procedures, but they have done wonders in their respective corporate, academic, and non-profit careers.

It all started with Kitili Mbathi going to work for Stanic Uganda, which recently rocked Ugandan Stock Exchange; then Titus Naikuni taking the helm of Kenya Airways; then Oduor Otieno becoming the CEO at KCB; Dr. Wilfred Mwangi heading research projects at ICRAF; Mwagazi Mwachofi flying high with Celtel International; and Richard Leaky becoming the short-term care taker of Transparency International (Kenyan Chapter).

Google could not tell Kenyanomics what the sixth technocrat (Prof Shem Migot-Adhola) is up to. Does anybody know what Prof Migot-Adhola is doing of late? Following is a summary of Dream Team's occupations, during and after the 1999 dream:

Team Members



Martin Oduor-Otieno

Treasury PS

KCB Chief

Richard Leaky

Cabinet Sec.


Titus Naikuni

Transport PS


Dr Wilfred Mwangi

Energy PS


Mr Mwaghazi Mwachofi

Financial PS


Kitili Mbathi

Investstment PS

Stanbic UG

Prof Shem Migot-Adhola

Agric PS


Bottomline—: Kenya would be a different place if the state operated like the private sector.