Decentralizing Kenya: Four Paradoxes

These lessons are important for Kenya as it embarks on a massive decentralization program—

Devolution will reshape the country’s institutional architecture, not just because of the transfer of functions and finance, but also because it involves the creation of a forty-seven brand-new counties which will bring together deconcentrated offices of many national ministries, local authorities, and district administrations.

Kenyans have sky-high expectations of what devolution will bring, but decentralization is not in-and-of itself a panacea for development. Almost everywhere, at different times in history, decentralization has been driven by political imperatives, not by economic arguments.

The challenge for Kenya’s policy makers in the next year and beyond will be to manage expectations carefully because the risk of disappointment will be huge. To do this they will need to be mindful of four paradoxes that will characterize the decentralization process in this early phase of transition:

Paradox 1. What is politically desirable is economically impossible.

 Ideally, wealth and incomes should be distributed evenly across Kenya’s 47 counties. This is economically impossible because firms and individuals tend to locate where there are already clusters of economic activity—which is mostly in the cities—so they can benefit from “economies of scale.” Investments by companies also tend to be lumpy—think of establishing a factory—and thus geographically concentrated. This is why in Kenya most economic activity is concentrated along the Northern corridor—from Mombasa to Nairobi and onward to Kisumu and Kakamega—where the majority of Kenyans live

Paradox 2. To make decentralization work, you need strong central systems.

Some Kenyans want the central government to stay out of devolution and leave it to the counties to manage their own affairs. In fact, devolution requires sustained central coordination to be effective. Central systems serve two main purposes: to make sure weaker counties’ needs are being addressed through capacity building and that the spending and performance of county governments can be compared on a common basis thanks to accountability systems.

Paradox 3. If not managed well, decentralization may lead to greater inequality. Some counties will start at a relative disadvantage and it will take time to build up their capacity. They will be the least equipped in practice to make efficient and transparent use of their resources and retain the skilled staff that is essential to making services work.

Paradox 4.Despite decentralization, county governments won’t have a lot of additional resources to spend. Counties will receive transfers from the center but also inherit responsibility for delivering a wide array of existing services. The size of the transfers for each county will also be small. If the government would devolve 15 percent to sub-national governments, each of the 47 counties will only receive 0.3% of national revenues. Counties will have the latitude to shift funding to new uses but they will need to make cuts in other services that are currently provided.

In many countries, decentralization is associated with great hopes and disappointments. The disappointments resulted from a misunderstanding of what decentralization can realistically achieve in the short run.

One thing is clear. To address spatial imbalances in lagging regions while maintaining services where Kenya’s growth is generated, Kenya has to grow the cake while splitting it. This would make sure that each slice of the cake is bigger.

How to kick-start Kenya’s second growth engine

Last year, Kenya’s economy was behaving like a plane flying through a storm on one engine. After a lot of turbulence, especially when the shilling reached a record low against the dollar, the Central Bank intervened forcefully, and brought the plane back to stability.

But Kenya’s exchange rate woes are just the tip of the iceberg. Kenya’s big challenge is to reduce the gap between the import bill and exports revenues, what economists call the “current account deficit” (which remains large, even when services—such as tourism—are included). Last year, the deficit reached more than ten percent of GDP, approximately Ksh 400 billion (US$ 4.5 billion). This is larger than Greece’s.

In order to balance its current account, Kenya would have to more than double the volume of its three top exports—tea, tourism and horticulture. In addition, Kenya is vulnerable to shocks, like increasing oil prices. Oil is one of Kenya’s top imports, and the oil import bill alone rose from $2.7 billion in 2010 to $4.1 billion in 2011, further weakening Kenya’s fragile current account. A large current account deficit does not automatically translate into a falling currency, so long as capital inflows fill the gap. But in Kenya, capital inflows have increasingly been short-term (by contrast to Foreign Direct Investment which finances factories and offices). Short-term capital can leave a country as fast as it comes, and this uncertainty is an additional source of fragility for the national currency.

When the Central Bank increased interest rates sharply at the end of last year, it brought the airplane into safety, cooling the engine that was overheating. The price was some economic slowdown, as loans (which businesses rely on to invest), became more expensive. Now that the plane has emerged from turbulence, every attempt should be made to make it fly faster and higher. Kenya’s first engine—domestic consumption—which is fuelling vibrant service and construction sectors, has always been strong. But the second engine—exports—needs to perform better. If not, Kenya will continue to operate below potential, for years to come.

But how do you do that? What products could Kenya realistically export? Picking winners is typically not a good idea. The government needs to provide the conditions—such as infrastructure, the rule of law, and basic social services—for businesses to thrive, but not run them. At the same time, it is clear that Kenya needs to move into new products, because it cannot grow rich on tea and flowers alone. The natural starting point is manufacturing. Kenya has a good location and a skilled labor force, which is rapidly urbanizing. The global manufacturing market is also changing. Today, Asia is the world’s workshop, producing almost everything from clothes, shoes, toys and increasingly cars. But Asia’s economic success translates into higher wages, and many manufacturing jobs will soon leave its emerging economies. The World Bank projects that 85 million manufacturing jobs will leave China over the next decade. Where will these jobs go? Can Kenya get a share?

A new way to understand a country’s competitiveness is to look at the existing composition of exports or “product space”.

Ricardo Hausmann from Harvard University has been spearheading the global analysis of countries’ product spaces, and the World Bank recently hosted him in Kenya. According to him, some countries are richer than others because they have more productive knowledge, which they can use to make more and more complex products. In short, rich countries make a lot of products, including several which only few countries produce. Poor countries only make a few products, and the margins they earn are low because many other nations are also producing them. Realistically, a country will only be able to diversify gradually, moving first to products where a country can apply existing capabilities. Kenya is strong in tea and flowers, but it will have a hard time producing airplanes overnight.

What types of products are within Kenya’s reach, and which activities are most likely to create the conditions for industry to invest and expand? There is some light at the end of the tunnel. Kenya has started to diversify its export products and markets. Three sub-sectors stand out: textiles (exported mainly to the US), chemicals and machines (to Africa and Asia). In the 1990s, these exports accounted, on average, for about US$ 120 million in earnings. In the following decade, the figure was four times larger at US$ 480 million. On an international scale, these are still extremely small numbers, but they are starting to add up.

Still, Kenya is currently punching below its weight. According to simulations by the Harvard team, Kenya should grow at 7 percent a year. If it did, it would reach Middle Income status by 2018, and remain East Africa’s uncontested economic heavyweight.
We know that Kenya can grow at such levels. It happened in 2007, but the big question is how to sustain the momentum? Can Kenya really grow at 7 percent year after year, including through election turbulence? Can the second engine start pulling its weight? Once it does, sit back, enjoy the flight, and definitely buckle up!

Let’s face the reality

We keep on deluding ourselves that’s Kenya has a mature democracy,economy and very optimistic citizens ( optimism / religion is the opium of the lumpen proletariat)

In Moi era all ills were attributed to Moism- even when a cow can’t produce enough milk.
We promulgated the constitution (copied from USA wishing to be likethem) and attribute all to it and expect heavens from it but we ain t ready tobreak a sweat; even under the old constitution DCJ Baraza could have been investigated by the JSC- whats eats Kenya is impunity at all levels- we dont have respect for the law!!

We must wake to the reality the Kenya Electorate is ignorant, misinformed,and illiterate and highly disintegrated to tribal/cultural cocoons.
This is why we keep on voting back/in leaders who can’t deliver much;but remember the kind of political leaders a country has is a reflection of theelectorate; the kind of MPs is representative of the Kenyan population mindset,attitude, aspirations etal…..why do we have so many grouping in FB-Bunge laMwananchi, WMK, Kenya youth decide, tribe less Kenyan all with a seeking toreap from the ideological vacuum.
Only a few in such forums as WRK, tweeter, bar talk, other FB groupingswho tend to wear a face of reformist patriots but quickly ebb to their comfortzones in times of distress.

The question should be; how do we get out of this quagmire???

If look at the Arab revolution i.e. Libya, Egypt et al the general populace is highly enlightened and well catered for basic needs and wants. This is the reverse in Kenya-only 10% can afford three meals a day…
Back to pre-colonial times; the insurgences were successful since tribes were not that disintegrated and had a common foe; still they were tribal outfits fighting for tribal/clan interests.

The Kenyan populace is split into tribes , clans , and classes.
We need to raise the level of enlightment; campaign for increased uptake to FPE & SSE to reduce illiteracy,Voter education , start forums ( not on twitter or FB )but what can reach the common man like what PLO started in ‘’Moving the masses’’

Do we have true patriots in Kenya?
Is anyone ready to die or atleast loose his daily comforts for the sake of Kenya???
We must plant a tree that’s weshall never enjoy its shade

The 6 Core Economic Principles

1. People Choose: We always want more than we can get and productive resources
(human, natural, capital) are always limited. Therefore, because of this major
economic problem of scarcity, we usually choose the alternative that provides the
most benefits with the least cost.

2. All Choices Involve Costs: The opportunity cost is the next best alternative you
give up when you make a choice. When we choose one thing, we refuse something
else at the same time.

3. People Respond to Incentives in Predictable Ways: Incentives are actions,
awards, or rewards that determine the choices people make. Incentives can be
positive or negative. When incentives change, people change their behaviors in
predictable ways.

4. Economic Systems Influence Individual Choices and Incentives: People
cooperate and govern their actions through both written and unwritten rules that
determine methods of allocating scarce resources. These rules determine what is
produced, how it is produced, and for whom it is produced. As the rules change, so
do individual choices, incentives, and behavior.

5. Voluntary Trade Creates Wealth: People specialize in the production of certain
goods and services because they expect to gain from it. People trade what they
produce with other people when they think they can gain something from the
exchange. Some benefits of voluntary trade include higher standards of living and
broader choices of goods and services.

6. The Consequences of Choices Lie in the Future: Economists believe that the
cost and benefits of decision making appear in the future, since it is only the future
that we can influence. Sometimes our choices can lead to unintended
consequences.

Kwani???

The article by Omar gives a grim picture of the Kenya citizenry, not the leadership only; it exemplifies the problem graphically but only leaves distaste in the minds / mouths of many.

Why do i say so?

One, we don’t like the bare truth and two we don’t offer solutions, we only blame the leadership

PS: The leadership is a reflection of the citizenry,

We must move away from entitlement mentality and ask ourselves what we can give, contribute and share.
The media (blogs TV, FM, fb tweeter etal) patronized by the Kenyan all seek to impress poignant
(not rational) side characterized by blame game but not proposing a trace to the answers.

As this articles whips up our emotions do we ask ourselves how we got there? What could we have we contributed? How did this Kenya train derail? How do I promote ‘’a tribe less Kenya’’ in my family, workplace, hood?

 The answers lies within the voter, we elebad tribal kingpins, we trade our constitutional for cheap liquor, lesos,

The solution in Kenya lies in creating one nation thro a change of values; we need a leader who can inspire (Obama like attitude); talk to the family unit

Corruption is an offshoot of wrong values/morals and that’s why is must be fought from the individuals level/ family unit; it’s not caused by unemployment;-let no one cheat you– why are the super-rich still corrupt?, why the maize and oil scandal? We all want to cut corners, get rich quickly ( why are the pyramids doing good)
Anyone born in 80s was born and bred in corruption, it’s a culture

Start a campaign in your neighborhood and talk about corruption and tribalism

 How can we alleviate the problem; by tribal bashing???

WE NEED A REVOLUTION ; not the Gaddafi or Mubarak way; but of the mind ,of the values of the culture; lets stop blame game;

Facebook Is Making Us Miserable

Facebook Is Making Us Miserable

When Facebook was founded in 2004, it began with a seemingly innocuous mission: to connect friends. Some seven years and 800 million users later, the social network has taken over most aspects of our personal and professional lives, and is fast becoming the dominant communication platform of the future.

But this new world of ubiquitous connections has a dark side. In my last post, I noted that Facebook and social media are major contributors to career anxiety. After seeing some of the comments and reactions to the post, it's clear that Facebook in particular takes it a step further: It's actually making us miserable.

Facebook's explosive rate of growth and recent product releases, such as the prominent Newsticker, Top Stories on the newsfeed, and larger photos have all been focused on one goal: encouraging more sharing. As it turns out, it's precisely this hyper-sharing that is threatening our sense of happiness.

In writing Passion & Purpose, I monitored and observed how Facebook was impacting the lives of hundreds of young businesspeople. As I went about my research, it became clear that behind all the liking, commenting, sharing, and posting, there were strong hints of jealousy, anxiety, and, in one case, depression. Said one interviewee about a Facebook friend, "Although he's my best friend, I kind-of despise his updates." Said another "Now, Facebook IS my work day." As I dug deeper, I discovered disturbing by-products of Facebook's rapid ascension — three new, distressing ways in which the social media giant is fundamentally altering our daily sense of well-being in both our personal and work lives.

First, it's creating a den of comparison. Since our Facebook profiles are self-curated, users have a strong bias toward sharing positive milestones and avoid mentioning the more humdrum, negative parts of their lives. Accomplishments like, "Hey, I just got promoted!" or "Take a look at my new sports car," trump sharing the intricacies of our daily commute or a life-shattering divorce. This creates an online culture of competition and comparison. One interviewee even remarked, "I'm pretty competitive by nature, so when my close friends post good news, I always try and one-up them."

Comparing ourselves to others is a key driver of unhappiness. Tom DeLong, author of Flying Without a Net, even describes a "Comparing Trap." He writes, "No matter how successful we are and how many goals we achieve, this trap causes us to recalibrate our accomplishments and reset the bar for how we define success."And as we judge the entirety of our own lives against the top 1% of our friends' lives, we're setting impossible standards for ourselves, making us more miserable than ever.

Second, it's fragmenting our time. Not surprisingly, Facebook's "horizontal" strategy encourages users to log in more frequently from different devices. My interviewees regularly accessed Facebook from the office, at home through their iPads, and while out shopping on their smartphones. This means that hundreds of millions of people are less "present" where they are. Sketching out a mind-numbing presentation for the board meeting? Perhaps it's time to reply to your messages. Stuck in traffic? It's time to browse your newsfeed. Recounted one interviewee, "I almost got hit by a car while using Facebook crossing the street."

Leaving the risk of real physical harm aside, the issue with this constant "tabbing" between real-life tasks and Facebook is what economists and psychologists call "switching costs," the loss in productivity associated with changing from one task to another. Famed author Dr. Srikumar Rao attributes mindfulness over multitasking as one of his ten steps to happiness at work. He argues that constant distractions lead to late and poor-quality output, negatively impacting our sense of self-worth.

Last, there's a decline of close relationships. Gone are the days where Facebook merely complemented our real-life relationships. Now, Facebook is actually winning share of our core, off-line interactions. One participant summed it up simply: "We Facebook chat instead of meeting up. It's easier."

As Facebook adds new features such as video chat, it is fast becoming a viable substitute for meetings, relationship building, and even family get-togethers. But each time a Facebook interaction replaces a richer form of communication — such as an in-person meeting, a long phone call, or even a date at a restaurant — people miss opportunities to interact more deeply than Facebook could ever accommodate. As Facebook continues to add new features to help us connect more efficiently online, the battle to maintain off-line relationships will become even more difficult, which will impact their overall quality, especially in the long-run. Facebook is negatively affecting what psychology Professor Jeffrey Parker refers to as "the closeness properties of friendship."

So, what should we do to avoid these three traps? Recognizing that "quitting" Facebook altogether is unrealistic, we can still take measures to alter our usage patterns and strengthen our real-world relationships. Some useful tactics I've seen include blocking out designated time for Facebook, rather than visiting intermittently throughout the day; selectively trimming Facebook friends lists to avoid undesirable ex-partners and gossipy coworkers; and investing more time in building off-line relationships. The particularly courageous choose to delete Facebook from their smartphones and iPads, and log off the platform entirely for long stretches of time.

Is Facebook making you miserable? What other tips can you share?

First, Let's Fire All the Managers

First, Let's Fire All the Managers

Management is the least efficient activity in your organization.

Think of the countless hours that team leaders, department heads, and vice presidents devote to supervising the work of others. Most managers are hardworking; the problem doesn’t lie with them. The inefficiency stems from a top-heavy management model that is both cumbersome and costly.

A hierarchy of managers exacts a hefty tax on any organization. This levy comes in several forms. First, managers add overhead, and as an organization grows, the costs of management rise in both absolute and relative terms. A small organization may have one manager and 10 employees; one with 100,000 employees and the same 1:10 span of control will have 11,111 managers. That’s because an additional 1,111 managers will be needed to manage the managers. In addition, there will be hundreds of employees in management-related functions, such as finance, human resources, and planning. Their job is to keep the organization from collapsing under the weight of its own complexity. Assuming that each manager earns three times the average salary of a first-level employee, direct management costs would account for 33% of the payroll. Any way you cut it, management is expensive.

Second, the typical management hierarchy increases the risk of large, calamitous decisions. As decisions get bigger, the ranks of those able to challenge the decision maker get smaller. Hubris, myopia, and naïveté can lead to bad judgment at any level, but the danger is greatest when the decision maker’s power is, for all purposes, uncontestable. Give someone monarchlike authority, and sooner or later there will be a royal screwup. A related problem is that the most powerful managers are the ones furthest from frontline realities. All too often, decisions made on an Olympian peak prove to be unworkable on the ground.

Third, a multitiered management structure means more approval layers and slower responses. In their eagerness to exercise authority, managers often impede, rather than expedite, decision making. Bias is another sort of tax. In a hierarchy the power to kill or modify a new idea is often vested in a single person, whose parochial interests may skew decisions.

Finally, there’s the cost of tyranny. The problem isn’t the occasional control freak; it’s the hierarchical structure that systematically disempowers lower-level employees. For example, as a consumer you have the freedom to spend $20,000 or more on a new car, but as an employee you probably don’t have the authority to requisition a $500 office chair. Narrow an individual’s scope of authority, and you shrink the incentive to dream, imagine, and contribute.

Hierarchies versus Markets

No wonder economists have long celebrated the ability of markets to coordinate human activity with little or no top-down control. Markets have limits, though. As economists like Ronald Coase and Oliver Williamson have noted, markets work well when the needs of each party are simple, stable, and easy to specify, but they’re less effective when interactions are complex. It’s hard to imagine, for instance, how a market could precisely coordinate the kaleidoscopic array of activities at the heart of a large, process-intensive manufacturing operation.

That’s why we need corporations and managers. Managers do what markets cannot; they amalgamate thousands of disparate contributions into a single product or service. They constitute what business historian Alfred D. Chandler Jr. called the visible hand. The downside, though, is that the visible hand is inefficient and often ham-fisted.

Wouldn’t it be great if we could achieve high levels of coordination without a supervisory superstructure? Wouldn’t it be terrific if we could get the freedom and flexibility of an open market with the control and coordination of a tightly knit hierarchy? If only we could manage without managers.