How economic inequalities could shape 2012 campaigns

Published on 24/12/2011

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By GAKUU MATHENGE

The stalemate over the shelved Finance Bill 2011/2012 has raised the spectre of economic

President Kibaki (second right) and Prime Minister Raila Odinga (right) at a joint Parliamentary meeting at KICC last week. [Photo: PPS]

inequalities becoming the battle ground on which next year’s General Election will be fought between President Kibaki’s Party of National Unity (PNU), and Prime Minister Raila Odinga’s Orange Democratic Movement (ODM).

This would create a repeat charged campaign similar to 2007, which President Kibaki’s Central region was painted by ODM rivals as having disproportionately enjoyed higher levels of development while the rest of the country languished in backwardness.

ODM promised to ‘correct’ the perceived inequalities if it assumed power, a campaign that galvanised nearly all regions of the country around the party against PNU.

The debate on the interest rates seems to assume similar undertones and some fear it is just a matter of time before a more overt rhetoric takes over.

During debate on high interest rates, ODM – through Chief Whip Jakoyo Midiwo – emerged as the one standing up for the economically hard pressed man on the street, by accusing Finance Minister Uhuru Kenyatta of colluding with banks to fleece Kenyans.

"We have a situation where the Government helps crooks to create an artificial economy...the banks are fleecing Kenyans ..." Midiwo said sensationally in Parliament on Wednesday.

Battle lines

Uhuru was on the spot and was compelled to admit he had vested interests in the banking sector – the Kenyatta family is associated with the Commercial Bank of Africa – but denied that was the reason he opposed Midiwo’s proposals to insert bank interests rates ceiling into the Finance Bill.

But whether by design or default, the battle lines in the House on Wednesday brought out all the hallmarks of the classical ethnic undertones of "you people " (Uhuru and his PNU cohorts in Government) as the lot with vested interests in the status quo, anti-reforms, including the high interests, as the reason he opposed the capping proposals.

Observers agree Midiwo’s push to regulate the manner in which banks determine interest rates may have reasonable merits, and so is Uhuru’s counter argument that banks’ should be allowed space free of micro-management.

But notions of ‘cartel’ like behaviour by banks seemed to gain currency and popularity on the floor of the House, especially coming at a time when the matter of the ethnic hegemony of management of the country’s financial sector – Uhuru, Finance PS Joseph Kinyua, CBK Governor Joseph Ndung’u and KRA Chairman, Michael Waweru – has been in the public discourse lately.

Consumer goods

It did not help the run away inflation and weakening shilling that has sent the prices of many consumer goods through the roof has festered since March when Kenyatta, Ndung’u and Kinyua spent most of first half of the year outside the country, with Uhuru distracted by the International Criminal Court (ICC), and Ndung’u and Kinyua attending International Monetary Fund (IMF) and World Bank meetings in Washington.

Uhuru cautioned MPs at a tense joint Parliamentary meeting at KICC, attended by Kibaki and Raila, that imposing restrictions on interest rates would jeopardise Kinyua’s negotiations with the IMF for a $600m loan to strengthen the shilling. The caution was met with howls and taunts that MPs were concerned about the welfare of suffering Kenyans, and not IMF whims.

"MPs reminded Kenyatta IMF mandarins were opposed to interest rates controls because they were free market profiteers, but Parliament had a duty to protect the common citizen.

"We told him Kenya could as well get a better deal from China where even the US Government is borrowing, if it was a matter of accessing credit facilities," an MP who attended the Tuesday meeting told The Standard On Sunday.

The Kibaki succession election year is only days away, and the rivals are desperate for a campaign platform on which to compete for the minds and hearts of voters next year.

His key re-election slogan in 2007 was that he had turned around the economy from negative two (-2) percent in 2002, to seven per cent.

But ODM said Central Kenya region seemed to enjoy the lion’s share of the growth and the rest of the country had little to show for it.

This inequality narrative formed the central mantra of the so-called 41 against 1 campaign platform.

It also features prominently in the Kenya National Dialogue and Reconciliation (KNDR) Framework Agenda Four raft of reforms which strongly recommended urgent action to address inequalities in allocation of economic resources in all corners of the country.

President Kibaki is set to retire next year, and Uhuru is one of the most prominent faces of the PNU side lining up to face Raila in the succession race.

The two sides hit a dead end on Wednesday over amendments proposed by ODM Chief Whip, Mr Jakoyo Midiwo, to impose legal limits to bar banks from charging more than four per cent interest on loans.

The Finance minister opposed the amendments, arguing imposing a legal limit on interest rates would be too cumbersome and disruptive on the entire financial sector operations.

While Uhuru and his economic managers at the Treasury have been at pains to explain how the situation spiralled into a crisis as they watched, it was instructive he was keenly aware about the political minefield the matter was assuming when he said he would not engage Midiwo as an individual but Parliament through the relevant Finance and Budget committees.

On a reconciliatory note, Uhuru seemed willing to explore a compromise after the recess saying:

"Let us use this break to engage ourselves in a much more level headed manner because I think the interests of this House are Kenyans’ and I have no doubt we will find a solution," he said.

Political mileage

Scholar and Development Studies lecturer at the University of Nairobi Karuti Kanyinga said the dispute over interest rates in Parliament had little to do with genuine concerns for the plight of Kenyans but cruel exploitation of hard economic times for political mileage by both sides ahead of next year’s General Election.

"Let’s not delude ourselves. The stalemate is one more manifestation of the two competing Governments in the coalition trying to position themselves for political mileage. Anything each of them does is viewed from political gain or loss prism, and the reaction is based on the same parameters," he said.

Prof Kanyinga says while Midiwo is trying to project himself and ODM as the public interest champion by attacking banks may be understandable, the political gain was the greater motive in casting Uhuru and President Kibaki’s side of Government as defender of banks.

"But on the balance, President Kibaki’s side bears greater responsibility. It should have behaved more proactively by intervening early enough before matters got out of had. PNU controls the Finance and State machinery and Kenyans expected more from them, than from ODM," Kanyinga said.

"It is made worse by the absence of opposition, and the civil society and the religious sectors have no partners in Parliament like they had before the Coalition Government was formed.

It is unfortunate the Coalition Government has relapsed into the business as usual mode of politicking and pretending they have mandate to rule Kenya. It came to power on an disputed mandate, and was expected to organise fresh election upon promulgation of the new Constitution. However, we have an immature leadership and democratic culture where leaders flout even rules they have committed to with impunity," said Kanyinga.