Dr. Wolassa Kumo
Introduction

Fixed capital has long been considered as an engine of growth both as a factor of production and as an embodiment of technological progress. Countries that had made sustained accumulation of fixed capital were able to achieve higher and sustained economic growth and development while those who had not lagged behind. For instance, economic development in Sub-Saharan Africa has been severely constrained by inadequate saving and investment, among other things. The average annual gross domestic saving rate by 41 sub Saharan African countries during the period 1980-2010 was as little as 14.3% of GDP while the average fixed investment was 20% of GDP for the same period. Therefore, sub-Saharan Africa’s burgeoning debt was not primarily meant to finance investment as the saving- investment gap was only about 6% of GDP during the past three decades.

Sub Saharan Africa’s dismal average economic growth of about 3.8% during the past three decades was therefore a direct consequence of low saving and low investment. The Sub Saharan Africa average saving and investment rates pale in comparison to the saving and investment rates of the newly industrialized and emerging Asian economies, such as China, whose saving and investment rates of over 40% of GDP ensured real economic growth rates of over 10% during the same period, i.e. 1980-2010.

Average annual growth in Africa reached above 5% during the past decade following the commodity price boom since the early 2000s but was dampened by the global economic and financial crises during 2008-2009. Growth rebounded in 2010 and is projected to reach 5.5% in 2011 making sub Saharan Africa the second fastest growing region in the world following Asia.

However, heavy dependence on growth driven by improved commodity terms of trade subjects the sub continent to vagaries of global demand uncertainty. Unless improved commodity terms of trade translates into higher saving and investment, the sustainability of the current improved growth performance will be at stake. Equally important is the continuation of economic and political reforms that are required to enhance the participation of the private sector in economic development, and also improve productivity and investment efficiency.

This brief paper presents an overview of investment efficiency, savings and economic growth in 41 sub Saharan African countries for the past three decades using data from the IMF, World Economic Outlook Data Base, April 2011. Six countries have been excluded from the analysis for lack of consistent time series data. These are Djibouti, Liberia, Mauritania, Sao Tome and Principe, Sudan and Zimbabwe.

Investment Efficiency in Sub Saharan Africa

There are two broad concepts of efficiency: allocative efficiency and technical or production efficiency usually measured by total factor productivity. Some empirical analysts use these broad concepts of efficiency to assess inefficiency in aggregate investment in terms of excess investment demand that captures the deviations of actual investment from the desired investment. These approaches usually use nonparametric methods, such as Data Envelopment Analysis (DEA), as well as, parametric methods including multiple linear or non- linear regression models.

In this brief article, we use a simple approach based on marginal productivity of capital, known commonly as the Incremental Capital Output Ratio (ICOR) to measure investment efficiency in 41 sub Saharan African countries for the period 1980-2010. ICOR is the ratio of investments in some previous period or periods and growth in output in subsequent period or periods measured at constant prices.

Growth in output is not attributed only to investment in fixed capital. It could be due to growth in productivity (partial or total factor productivity), increased use of labour input or improvement in the level of education of the labour force (growth in human capital), and/or improvements in productive capacity utilization. However, changes in fixed investment still explain a significant portion of growth in output particularly in developing countries with limited fixed capital stock and therefore the efficiency with which this input is utilized provides a useful clue about the correlation between the later and economic growth.

The higher the ICOR, the lower is the implied investment efficiency. That is fixed investment is more efficient if fewer dollars are required to generate a unit growth in output. The average ICOR for sub Saharan Africa for the period 1980-2010 was 5.23 and was comparable with the ICOR for of about 5 during the 1980-2003 period. This implies that fixed investment in sub Saharan Africa is pretty efficient and the level of investment efficiency in the sub region is comparable with that of China during the early two decades of its rapid industrialization. This is not only because the sub region is capital scarce but also because there have been marked improvements in business climate and political environment during the past two decades. Therefore, no wonder that foreign direct investment surged in Africa from less than US$15 billion in early 2000s to over US$80 billion in 2007 before the inflow was hit by the global financial and economic crises of 2008-2009.

While average investment efficiency in sub Saharan Africa is high, performance varies from country to country. The 41 countries in sub Saharan Africa can be classified into three groups based on their ICOR performance for the period 1980-2010: (a) those with ICOR value of 1-5, (b) those with 6-9, and (c)) those with ICOR values of above 10.

The majority of the 41 counties (i.e. 25 countries) in the sub region recorded higher investment efficiency during the past three decades. These countries include both the least developed countries with very low fixed capital stock base, as well as, some middle income economies with higher level of capital stock. These best performing countries with ICOR value of 1-5 are: Botswana, Cameroon, Central African Republic, Comoros, DRC, Republic of Congo, Equatorial Guinea, Ethiopia, Gabon, The Gambia, Ghana, Guinea, Guinean Bissau, Kenya, Malawi, Mali, Mozambique, Namibia, Niger, Nigeria, Rwanda, Seychelles, Togo, Uganda, and Zambia. Most of these countries are not only face extreme capital scarcity but have also shown some progress in opening up their economies during the past 3 decades.

The countries with medium investment efficiency level of ICOR 6-9 include: Benin, Burundi, Cape Verde, Eritrea, Mauritius, Sierra Leone, and Swaziland. Mauritius is among the Upper Middle income countries and top reformers in the sub region. Lower investment efficiency may imply an over investment in the economy where marginal investment needed to generate a unit output was greater during the past three decades than during the earlier years of its economic expansion.

Investment efficiency was the lowest in the following countries during the past three decades: Angola, Chad, Cote d’Ivoire, South Africa and Tanzania. All of these four countries have experienced some form of economic and political upheavals during the past three decades. Preliminary data analyses showed that South Africa’s ICOR was comparable with that of China for the post-Apartheid period, but the number was very high for the pre 1994 period, i.e. 1980-1994 pulling the country’s overall performance significantly down. Investment efficiency was very low during the Apartheid rule in South Africa, due to global isolation and heavy state control over the economy. Thus if we exclude the pre 1994 period South Africa’s investment efficiency will fall within the first group of best performers. Poor performance by Angola, Cote d’Ivoire and Tanzania reflects the continued impacts of civil war and socialist mode of production in the case of the later which contributed to wasteful investment.

Investment required to achieve a minimum growth threshold of 7 percent

While Africa’s growth performance is the second best in the world at present, the continent still lags behind other regions in terms of socioeconomic development. Over 380 million people in Africa today live below poverty line, while youth unemployment is as high as 70% in some countries. Most economies are still heavily dependent on rain fed subsistence agriculture with extremely limited investment on irrigation. Weak economic structure reinforces poverty and poses a major risk to the sustainability of the current growth fuelled by commodity price boom.

African countries will not be able to address this fundamental economic challenge with current growth rates of 5% or less. They should achieve a minimum of 7% annual growth rate individually or collectively for the coming two decades to make a dent on poverty and unemployment. With an average ICOR of 5.23, the sub Saharan Africa region therefore requires a minimum fixed investment of 35% of GDP over the coming two decades collectively or by each country. Given the current actual average regional fixed investment rate of 20% of GDP, the desired investment rate of 35% over the coming two decades seems insurmountable, but not unrealistic. China’s economic growth during the past three decades was fuelled by fixed investment of over 40% of GDP. China’s massive investment was financed by extraordinarily high household and public savings which at times reached 50% of GDP. The major challenge for Africa, in this respect, is a culture of low savings, which we expound in the following section.

Saving-investment gap in Sub Saharan Africa

When domestic household and public savings fall short of the fixed investment needs of a country, this leads to a saving-investment gap. This gap is exacerbated when export earnings of a country fall short of import demand leading to a second, foreign exchange gap. Most developing countries in Sub Saharan Africa are often characterized by both gaps. Except five countries, i.e. Botswana, DRC, Gabon, The Gambia, Namibia, and South Africa, the rest of 41 sub Saharan African countries had an average saving -investment gap ranging from 1% to nearly 30% of GDP during the past three decades.

The saving-investment gap, however, significantly varies across the countries in the sub region. Countries that faced relatively lower saving-investment gaps ranging between 1-5% in the sub region during the period under review include Angola, Cameroon, Central African Republic, Comoros, Republic of Congo, Cote d’Ivoire, Eritrea, Ghana, Kenya, Mali, Nigeria, Swaziland and Uganda. The lower gap by some countries reflects increased savings from oil revenues, while lower gap by others simply mean lower level of investment.

Countries in the sub region with the average saving investment-gap of 6-10% during the stated period include Benin, Burkina Faso, Burundi, Central African republic, Ethiopia, Guinea, Guinea Bissau, Madagascar, Malawi, Mauritius. Niger, Rwanda, Senegal, Sierra Leone, Tanzania and Zambia, while those with average saving-investment gap of above 11% include Cape Verde, Chad, Equatorial Guinea, Lesotho, Mozambique, Seychelles and Togo.

The poor performance of the sub region in terms of the saving-investment gap reflects two major challenges: First, most countries are characterized by low saving and low investment and hence are at the risk of being trapped in vicious circle of poverty if the they do not raise their saving and investment rates immediately; and second if they raise their investment levels without a concomitant increase in domestic savings they may be trapped in vicious cycle of debt which could undermine the value of their investments, provided money borrowed is invested in economic development. Since the recent economic crisis proved that most of the aid pledged by non-African donors is unlikely to be delivered, the only sustainable solution to Africa’s development challenge is aggressive domestic resource mobilization for development. This could be supplemented by foreign direct investments, if the countries in the sub region speed up the current economic and political reforms.

Concluding remarks

Africa is rising. After 5 decades of civil strife and economic stagnation, the first decade of the 21st century shone a new light on the continent. Africa is no more a hopeless dark continent. Like its diamonds in the West, South and at the center, the continent is shining.

It is also shining as a second fastest growing continent in the world. However, there is no time for complacence as Africa is still the least developed continent in the world plagued with high level of poverty, unemployment, political instability and corruption. To sustainably address these fundamental socio economic challenges the region should at least grow by 7% per annum for the coming two decades. However, this is unlikely to be achieved with the current investment rate of 20% and the saving rate of 14% of GDP.

While the return to investment in Africa is high, it is such low levels of investment and saving that are holding the continent back. Given higher returns to investment, Africa’s economic transformation will depend on radical shift in the saving culture of its people, further economic and political reforms, and accelerated fixed investment.

   Dr. Wolassa Kumo
The cradle of mankind, Horn of Africa, remains the land of untold human tragedy. While we still have a vivid memory of the 1984 famine in Ethiopia that killed over a million people, 12 million more people are facing agonizing famine once more. The death of over 29000 Somali infants during the past few months will always remain a scar on the conscience of Somali politicians, the leaders of Horn of Africa and the continent, as well as, the global community. While leaders of these countries bear prime responsibility for such calamities, lack of political will on the part of the international community, particularly the African continent, is ignominious. There is enough food in the world to feed everyone on the planet, but there is no political will to distribute it. It is, nevertheless, recognized that while continued relief aid by the global community can save lives it cannot prevent another famine and is, therefore, paradoxically undesirable.

The current famine is triggered by the most severe drought that hit the region in 60 years, but it is not caused merely by climate changes. The current famine in the region is the result of deeper structural and geopolitical anomalies. First, Somalia, the hardest hit by the current famine, does not have a functioning state, and hence a functioning market. Lack of functioning state and market undermines food security and expose the people to vagaries of nature. Nature just took toll of the already vulnerable people; it did not cause the vulnerability.

Second, economies of the Horn of Africa countries are characterized by severe structural weaknesses. Over 80% of the population in Ethiopia, Eritrea, Somalia, Sudan, Uganda, and Kenya lives off traditional subsistence agriculture. However, no concrete measures have been put in place to improve the productivity of this vital sector by the governments of the respective countries during the past five decades. Subsistence agriculture in Horn of Africa is still today characterized by archaic technology, hand ploughing and oxen driven farming, with insignificant use of mechanization and irrigation technologies. According to IFAD (2011) only 1% of the land in the Horn of Africa region is irrigated, versus 7% in Africa and 38% in Asia. Thus underinvestment in agriculture and in adequate management of natural resources including soil, water and forestry are the main reason behind chronic food insecurity in the region and the recurrent famine we witness in the region today.

Agriculture contributes 44% of GDP and 85% of employment in Ethiopia; 33% of GDP and 80% of employment in Sudan; 21% of GDP and 75% of employment in Kenya; 22% of GDP and 82% of employment in Uganda; 17% of GDP and 80% of employment in Eritrea; and 65% of GDP and 71% of employment in Somalia. Clearly, Horn of Africa’s economy is predominantly agrarian and therefore the least developed economy in the world. Sustained and higher economic development in the sub region therefore depends crucially on the transformation of the predominantly traditional agriculture. The current famine haunting the sub region is therefore the direct consequence of decades of failed agrarian policies pursued by the countries in the sub region.

Key macroeconomic indicators provide further testimony to such failed economic policies. The combined GDP of the 7 Horn of Africa countries in 2010 was US$139 billion, while the total population of the seven countries in the sub region in 2010 was 222 million, with the implied average nominal per capita income of US$626. The sub region contributes 22% of the continent’s total population, but only 9% of the continent’s nominal GDP. The GDP of the 7 Horn of Africa countries is only about 60% of the GDP of Nigeria, itself not a shining economic star.

The much praised fast economic growth during the past decade in Ethiopia and Uganda has not made any dent on the level of underdevelopment and poverty either nationally or in the sub region. The major economic hub in the sub region, Kenya, is plagued with endemic corruption as well as low investment that for decades stifled any economic progress in this otherwise dynamic economy. According to the IMF World Economic Outlook Database (April 2011), Kenya’s average annual real economic growth for the period 2001-2010 was just 4% compared to over 7% recorded by Uganda and Ethiopia. Investment increased to 22 % of GDP in both Ethiopia and Kenya in 2010 slightly lower than Uganda’s 24%, but still falls far short of that needed to fundamentally transform the structure of the economy. In other smaller countries in the sub region, such as Eritrea, investment remains below 10% of GDP while the war-torn Somalia has not seen any meaningful investment in two decades.

Therefore, while undesirable, climate change was not the root cause of the current misery in Horn of Africa. It is the failure of the governments of the region to collectively or individually address the fundamental structural weaknesses in their respective economies and ensure political stability, in the case of war-torn Somalia, during the past decades that are behind the current malaise.

During the past two years most Horn of Africa countries, such as Ethiopia, Sudan, Kenya and Uganda leased large chunks of fertile lands to investors from emerging economies of Asia and the Middles East to produce food for export or biofuel. While the host governments and foreign investors claim that this constitute proper investment in agriculture to ensure food security, civil societies in Africa and the west label it as “Land Grab” that is bound to further undermine food security in the continent. It is premature to conclude, given a relatively short period of time since global land lease began, that land lease contributed to the current worsening food insecurity in the sub region, but the signs are worrying that it may worsen food insecurity in the future. Leasing large portions of fertile land to few foreign conglomerates in countries where 80% of the population live under subsistence farming, does not fundamentally address the structural anomalies of these economies and is therefore bound to fail.

The transformation of traditional agriculture as an engine of growth and development was emphasized by Theodore Schultz (1964), who states that all resources of the traditional type are efficiently allocated, and hence the rate of return to increased investment with the existing states of the art is too low to induce further saving and investment. According to Schultz, therefore, the development of traditional agriculture depends on breaking the established equilibrium. Based on a theory of the price of income streams, he suggests that breaking such established equilibrium requires the introduction of modern inputs in the form of human and material capital, not leasing the most fertile land to foreign conglomerates whose primary concern is food or fuel security at their own homeland. We are not sure to what extent the recent massive land lease arrangements in Africa have been based on economic theories or pragmatism, what we are sure is that they are not the most innovative of the policies to address the structural imbalances in African economies.

Correcting such imbalances in African economies need African solutions; of course, with the right mix of foreign direct investments in all sectors of the economy, while the root causes of the chronic famine in the Horn of Africa can only be addressed by (IFAD, 2011):

•   Protecting and restoring degraded land resources.

•   Improving water management and expanding irrigation

•   Improving animal, plant, and range management practices of small scale farmers to make them less vulnerable to hazards and climate variability

•   Strengthening community-based animal health services.

•   Identifying viable and acceptable alternatives to pastoral livelihoods.

Further, appropriate land use policy including tenure security, and agriculture development centered industrialization strategy are key to ensuring sustainable rural development in the sub region. Horn of Africa is a home for millions of pastoral farmers. As indicated in the last bullet above, recurrent rain failures and drought have made the survival of pastoral communities increasing precarious over the past five decades. It is time for governments of the Horn of Africa countries to act decisively to create a viable alternative livelihood to the pastoralists in the sub region. Governments must mobilise resources both domestically and globally to permanently address the pastoral problems of Horn of Africa. Such supports must be sustained and be backed by provision of other basic services such as education, health, clean water and economic infrastructure. Failing this, the governments of the region and the international community should brace themselves for the worst during the next drought cycle.

MMFA: Conservatives Can’t Decide If Obama Was Too Busy Golfing Or Biking To Stop The Earthquake — Following the 5.8 magnitude earthquake that shook the D.C. region last afternoon, conservative media figures have responded the only way they know how: by twisting it into an attack on Obama’s vacation in Martha’s Vineyard. [ READ MORE ]

   Courtesy News Corpse

Fox’s Varney: “I Just Want To Bring Up The Earthquake” To Bash Obama On Spending

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….and ‘Birther‘ Wanna Be Billionaire Donald Trump Wants To Steal Libyan Oil!

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By JULIUS SIGEI

Saturday Nation reveals details of how these top officials’ retirement will further burden the taxpayer, already reeling from the high cost of living amid one of the most devastating famines in the country’s history.

Four messengers

President Kibaki can expect a life of luxury in retirement with 38 servants paid for by the public at his beck and call.

These include two personal assistants, four drivers, four messengers, four secretaries, two cooks, two housekeepers, two gardeners, two laundry persons, and four house cleaners.

Six security officers will be provided for his personal safety and six others to guard his homes.

In his bank account will be deposited a Sh17 million (183,486.24 USD) goodbye token.

This is calculated as the sum equal to his annual salary for the two terms he served as President as stipulated in the Presidential Retirements Benefits Act of 2003.

He will receive at least Sh950,000(10,253.64 USD) pension each month — calculated as 80 per cent of the salary of the next president.

He will be entitled to a housing allowance of Sh300,000 a month; Sh300,000 a month for electricity, water and telephone and a further Sh200,000 for entertainment.

Overseas treatment

He will also be entitled to two four-wheel drive vehicles with an engine capacity of 3,400cc and two others of his choice with an engine capacity of at least 3,000cc. To fuel the cars, he will get a Sh200,000 monthly allowance.

He and his wife are also entitled to full medical and hospital cover for local and overseas treatment from a reputable insurance company.

The taxpayer will also pay for a fully furnished “suitable” office for the retired president.

Chapter 11 of the 2003 Presidential Retirements Benefit Act says “a retired President shall, during his lifetime, be entitled to a lump sum payment on retirement, calculated as a sum equal to one year’s salary for each term served as President.”

Section 3, however, includes the caveat that the National Assembly may withhold the benefits if the retired president engages in politics or other misconduct.

His predecessor, Daniel arap Moi is enjoying benefits which easily put him among the best paid public servants in Kenya.

Treasury documents show that Mr Moi, who has largely kept to non-official duties and political campaigns, pocketed Sh58.4 million in allowances last year, reflecting a major increase in his retirement package from an average of Sh12 million since 2006. Treasury officials were tight-lipped on the sudden rise.

Mr Moi’s package was first included in the 2006/07 estimates. In terms of personal allowances, he took home more money than President Kibaki, who earns Sh16.1 million in personal allowances annually.

President Kibaki constitutionally vacates office in 2012/13 and his successor will inherit the same payments, according to the recurrent estimates.

Details of Mr Moi and his successors’ pay are contained in the recurrent expenditure estimates under the Consolidated Funds Services, the account from which constitutional office holders and debt services are paid.

Observers say the lavish perks were first mooted towards the end of the Moi administration to entice him to leave office quietly after what critics say were years of economic mismanagement, graft and repression.

Yet retiring presidents are really not some of the neediest citizens.

Reported to own seven impressive homes across the country and associated with 30 major companies, Mr Moi’s personal wealth has often been compared to that of Zaire’s late dictator, Mobutu Sese Seko.

   RETIRING IN STYLE: From left, Retired former President Daniel Moi, Retired Kacc boss Aaron Ringera
   and Retired Chief Justice Evan Gicheru.

While the Saturday Nation could not establish retired Chief Justice Gicheru’s retirement package, sources at the Treasury say Mr Gicheru will continue drawing his salary for the years left for him to clock his retirement age of 74.

Given that he is only 66, he will have earned in excess of Sh120 million by the time he retires in eight years’ time.

He has also retained two new cars — a Mercedes and a 4WD as well as a home in Karen.

Mr Gicheru was earning Sh916,500 per month and Sh400,000 in allowances and other benefits totalling Sh1.3 million per month.

Attorney General Wako’s retirement package is being worked out by the Solicitor General and will soon be handed over to Deputy Prime Minister and Finance minister Uhuru Kenyatta.

Given the longevity of his service and the fact that he has not taken leave for a long time he is expected to go home with even more than the former.

Judges are also expected to go home with hefty retirement packages.

It is believed many would be opting to leave rather than face a potentially crushing interview and they would be leaving with huge perks, given their current earnings.

Justice Minister Mutula Kilonzo has in the past been quoted saying judges and magistrates who opt to retire would be assured of their perks.

Figures from the Judiciary showed that the basic salary of the highest paid judge is Sh481,000.

The basic entry salary for a High Court judge is Sh232,000 while that of a Court of Appeal judge is Sh292,000.

The Judiciary has 44 High Court judges and 11 in the Court of Appeal.

Prime Minister Raila Odinga and Vice-President Kalonzo Musyoka can also expect to be paid hefty retirement perks if Parliament passes new laws on MPs’ salaries.

If they decide to quit politics, Mr Odinga will be entitled to Sh1 million a month while Mr Musyoka will take home Sh800,000.

The handsome packages are contained in reports by a tribunal set up to review MPs’ pay and the Parliamentary Service Commission headed by retired judge Akilano Akiwumi.

Legislators are, however, yet to debate the draft Bills.

The report proposes the enactment of The Retirement Benefits (Prime Minister, Vice-President and Speaker of the National Assembly) Bill 2010 to provide for a raft of benefits these officials will be entitled to.

The Bill, which was to be tabled in the House by Finance Minister Uhuru Kenyattta a year ago, proposes that the retired PM and VP each receive a monthly pension equal to 80 per cent of the last monthly salary earned while in office.

The report also recommended that the PM takes home a basic monthly salary of Sh1.3 million and the VP Sh1 million.

In addition, the Bill grants a retired PM and VP a Sh200,000 monthly housing allowance and gratuity, paid at the end of every two years and calculated at the rate of 20 per cent of their last monthly salaries while in office.

But Parliament, through a two thirds majority, may vote to deny them the benefits if they cease to hold office for violating the Constitution, gross misconduct or, since retirement, been convicted and sentenced to three or more years’ in jail or actively engaged in politics.

The bill has, however, not come before the House, with MPs in the know saying they decided to leave the Salaries and Remuneration Commission to do the job.

Both the PM and VP will receive a 3,000cc car, a new four-wheel drive car (not exceeding 3,000cc) and a Sh50,000 fuel allowance.

The taxpayer will also maintain the vehicles and replace them every four years.

There is also full medical cover for the PM (for life), the spouse (for as long as the spouse lives) and all children under 18 years.

The retired VP and PM will have a personal assistant, secretary, cook, butler, gardener, cleaner, two drivers and two security officers, courtesy of the taxpayer.

Former Kenya Anti-Corruption Commission boss Aaron Ringera enjoys the same perks he used to have while heading the anti-graft unit.

These include chauffeur-driven limousines and bodyguards for the next 10 years.

The contract was signed between him and the Kenya Anti-Corruption Commission Advisory Board.

The document, which the Saturday Nation was reliably told cannot be revised without breaching the contract, entitles Mr Ringera to continue using the vehicles he used as Kacc director.

Also at his service are a driver, a bodyguard and a security officer at his home.

Maintenance of the vehicles, including fuelling, is also paid for by the taxpayer.

Work tickets in our possession show three GK vehicles — two Mercedes Benz and a Prado — as having been used by Mr Ringera as late as last week.

The documents bear the Kacc stamp with Mr Ringera signing for each journey as the authorising officer.

An official familiar with the contract said it was signed by the previous Kacc Advisory Board chaired by Mr Allan Ngugi and does not allow for revision by the current one headed by former Law Society of Kenya chairman Okong’o Omogeni.

Mr Ringera resigned after days of relentless pressure from the body’s advisory board, civil society, politicians and Kenyans.

While current office holder PLO Lumumba may not go away with exactly the same perks as his predecessor because of the manner the latter left office, the perks may not be any different given his high pay of Sh2.5 million a month.

The Akiwumi Commission gives the Speaker of the National Assembly Sh240,000 per month as pension, one year non-taxable salary amounting to Sh3.6 million per term subject to a maximum of two terms amounting to Sh7.2 million.

The new Constitution, however, requires all public officers to pay taxes.

He will also get a house allowance of Sh200,000 a month, two armed guards on request, a car — a Mercedes Benz E240 or a vehicle of equivalent value maintained by the State, which shall be valued after every three years.

The Speaker will get fuel allowance of Sh25,000 a month and a driver to be paid by the State.

Enquiries by the Saturday Nation revealed that former Speaker Francis Ole Kaparo takes home an accumulated amount of Sh354,000, which the Cockar Commission gave him.

The National Assembly and Remuneration Act, says an MP gets a winding up allowance at the end of five years, irrespective of whether he or she is re-elected or not.

This is now Sh300,000 per year, which translates to Sh1.5 million for the five years and is paid as a lump sum.

Given that there are 222 MPs, taxpayers will part with more than Sh300 million.

This figure is expected to rise exponentially with the increase in constituencies and incoming senators in the next Parliament.

The Exchequer this year began paying millions of shillings in lump sum and monthly payments that will see some former MPs earn more than Sh400,000 each month for the rest of their lives after the Treasury invoked the Parliamentary Pensions Act Cap. 196, which governs payment of MPs’ pensions and gratuities.

The law stipulates that an MP who served only one term will be paid pension refund but members who served more than one term will be paid a lump sum on application for the pension, which will thereafter be followed by monthly payments.

Top among the beneficiaries of the retirement law passed in June 2002 are MPs who have served for five terms, and these include former Keiyo South legislator Nicholas Biwott and former Speaker Mr Ole Kaparo.

The former speaker qualifies for a lump sum payment of Sh6.4 million besides a monthly payment of Sh405,000 for the rest of his life.

Five-term MPs will retire with a lump some package of Sh4.6 million and earn a monthly pension of Sh290,000 for the rest of their lives.

Economists warn that the real import of the pensions law is likely to be felt in the next 15 years when more than 300 MPs expected to have been sent packing by their electors qualify.

The strain will be felt in the Consolidated Fund, which will finance the pensions burden given the high rate of turnover in Parliament.

During the last General Election alone, only 71 members out of the 210 MPs who served in the Ninth Parliament made it to the 10th.

This means that the 139 MPs who were kicked out must be paid their lump sum pensions beginning this financial year.

MPs have a contributory scheme to which they pay 12.6 per cent of their earnings, with the government contributing an additional 25.4 per cent.

Each MP’s pensionable emolument is calculated from the total salary, perks for responsibility, constituency and house.

The annual pensionable emolument of an ordinary MP stands at Sh3.8 million while that of ministers and assistant ministers amounts to Sh4.2 million and Sh3.9 million, respectively.

Early this year, the Finance ministry’s pensions department issued a notice to all the former MPs asking them to file claims for payments of gratuity, pensions and other benefits.

“The Pensions Department will process benefits for MPs who were not re-elected to the 10th Parliament,” said the notice.

For example a former MP who served only one term will take home Sh4.4 million in pension refund.

But if the MP was a minister, he or she would take away Sh5.5 million. A one-term MP who was an assistant minister would earn Sh5.2 million.

Twenty ministers were voted out of Parliament while 25 assistant ministers did not make it to the 10th Parliament.

From this group alone, five ministers were first time MPs meaning that Treasury will part with Sh30 million.

Fifteen of the assistant ministers who did not see the inside of the current Parliament were first time MPs and will take home a cumulative Sh75 million.

The ministers and assistant ministers who were felled but had served more than one term in Parliament will take home about Sh200,000 more than the ones who served one term.

A minister who served more than two terms is entitled to a lump sum pension payment of Sh1.5 million besides a monthly payment of Sh95,000 for the rest of his or her life.

For an ordinary MP who served two terms, a Sh1.4 million cheque would be drawn on his name and he will be lining up at the pensions department at the end of every month for a Sh90,000 payment.

The MPs who served three terms and more would earn Sh142,000 every month in pension.

In rough estimates, taking into account that 142 MPs — who include seven nominated ones — did not make it to the 10th Parliament, the government will spend about Sh12.7 billion in monthly pension payments on them, assuming that all of them were two time legislators.

The Consolidated Fund Service was allocated Sh129.1 billion in the 2007/2008 budget. It is from this kitty that MPs draw their salaries and the same that will fund pensions for retired MPs.

Former MPs who spoke to the Saturday Nation admitted that they were already drawing the pensions from the Exchequer.

According to the chairman of the Public Accounts Committee, Dr Boni Khalwale, retirement benefits are a huge burden on the taxpayer, especially taking into consideration that younger people are getting appointed into top posts, most of which have two fixed terms and hefty severance terms.

“Even as we put everything on the shoulders of the Salaries and Remunerations Commission, we must remember that allowances and benefits must be seen to be in tandem with current economic realities,” said Dr Khalwale.

He said giving civil servants retirement benefits was the best practice all over the world but patriotism and honour for serving in such hallowed positions should be primary.

Dr Khalwale added that it was worrying that some leaders who were enjoying a cosy retirement at the expense of the taxpayer were actively engaging in politics, contrary to the law that granted them the benefits.

“Is it fair for example, to have a retired politician driving the same vehicle he was given to political rallies which further their interests?” asked Dr Khalwale.

   By: Crispy Kaheru
When the East African Community (EAC) collapsed in 1977, it did so not just because Kenya demanded for more seats than Uganda and Tanzania in decision-making organs of EAC but because there was generally a lack of integrity, trust and selflessness among the leaders at that time.

With its restoration in 2000, the EAC is making strategic leaps towards political integration.

However the ultimate political integration is going to heavily depend on the extent through which the political leaders in Kenya, Uganda, Tanzania, Rwanda and Burundi seek to fulfill the core values of the regional bloc as opposed to undertaking individual self-seeking projects. While regional cooperation may be important in developing constructive relations between states, it cannot be assumed that pooling resources to provide public goods for populations and creating platforms for dialogue regarding shared interests will automatically follow.

Despite the high hopes raised by the re-ignition of the EAC concept, the region continues to suffer from deep-rooted mutual suspicions, as well as selfishness by some of its contemporary main political actors. The neatly woven suspicion and individualism amongst some of the regional political players might sooner than later pause a greater challenge to regional integration.

   EAC Heads of State – From Left: Uganda’s Museveni, Kenya’s Kibaki, Rwanda’s Kagame, Tanzania’s Kikwete
   and Burundi’s Nkurunziza [ ENLARGE ]

The Kenyan Triton Oil Scandal of 2008/9 that led to the massive fuel shortage in the entire East African region is said to have been engineered by sections of political leadership in Kenya for self vested interests. Without naming names, considerable evidence unraveled after that fuel scandal pointed to key political figures issuing orders to the Triton management to hoard fuel in order to escalate the oil prices beyond the market rates for individual gains. To the best of luck of the proprietors of this fraud, the oil prices more than doubled in Kenya, Uganda and Rwanda for about a month in the later part of 2008.

Similarly, recent media reports have associated the current economic slowdown characterized by the skyrocketing inflation in the region to the artificially triggered fuel prices in Kenya whose brunt is now being intolerably felt by Uganda, Rwanda, and Burundi. Although initial explanations by the Ugandan, Rwandan and Burundian governments dwelt on the insurgency in North Africa and the Arab world, the focus has dramatically shifted to analyzing the costs levied on fuel between Mombasa port and Eldoret. In his swearing in speech, President Museveni last week actually revealed his intentions to start importing crude oil from Sudan as a measure of curbing the soaring prices of fuel. Although Uganda has time immemorial got its fuel from Mombasa, Museveni expressed concern on the costs charged on fuel products to Uganda by the Kenyan authorities.

Of course with the fuel fraud precedence that has been set, I would not be shocked if the economic crisis in East Africa is yet another individually engineered or exacerbated scam to amass quick wealth for just a few politicians who trade in oil at the expense of the ordinary citizens in the region who now cannot even afford one meal a day, due to the unbelievable commodity prices. Yes, this has happened before and it wouldn?t be shocking if the same game is being played by a cabal of cruel, self-minded leaders somewhere in the region.

Such politics of selfish interests will definitely serve to breakdown the foundation of trust between what are essentially supposed to be cooperating countries in the region. Interstate agreements on partnership relations of cooperation are supposed to be built on mutual trust, respect and confidence between the countries’ leaders.

It is imperative to note that regional cooperation, as a middle path between complete self-reliance and complete openness, gives countries increased room to maneuver in pursuing development. Therefore, the only way to maintain regional political stability and social and economic welfare is to have an altruistic attitude in administration rather than leadership that presages selfishness.