Kenyans are more conversant with political transitions from colonialism to uhuru and from a single party to multipartyism.
And now no partyism. The economic transition from controlled prices to the market economy, called sojourn in the countryside is less publicised.
In the past, the price of essential commodities such as sugar and petrol were controlled. And so were the prices of beer and cigarettes. As expected, price controls led to shortages because the suppliers lacked incentives to supply more.
We saw the same effect on loans with the interest cap. Price controls went hand in hand with monopolies. Lots of services and goods were supplied by monopolies.
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We had one telephone company, one airline, one taxi company, one broadcaster, one milk processor, one university and many other ones. And we had one political party, KANU.
The shift to a market economy driven by multilateral institutions such as the International Monetary Fund (IMF) brought in competition and reduced shortages. Customers now had choices, which is at the core of economics. Even the famous KANU got competitors in politics.
But as expected, prices rose much like in Russia after the end of the Cold War. The Kenyan economy slumped after liberalisation partly due to political upheavals starting from 1992. Remember the tribal clashes? The real fruits of liberalisation were reaped during the Kibaki era after KANU reign ended.
Uhuru Kenyatta continued with the market system which has made Kenya very attractive to investors but to corruption too. Further liberalisation came after the new constitution which liberalised politics.
Now Kenya is a really liberal country; more liberal both economically and politically than lots of advanced economies.
Lots of things we do and say in Kenya can’t happen even in most mature democracies. Lately, the gains of liberalisation are being rolled back in lots of sectors. The rollback is in the guise of regulation.
The fact that most regulations have to go through parliament means it is highly politicised and unlikely to spur competition and benefit ordinary citizens.
The regulatory issue is couched in political language, ostensibly to protect the vulnerable members of the society. Competition Authority of Kenya needs more teeth.
The first sector to be rolled back is politics where multipartyism has been neutered.
We are almost back to a single party where toeing the line including bootlicking meant contacts and jobs. My hunch tells me that once there is a monopoly in politics it’s easy to roll it out that monopolistic thinking to other sectors. Let us look at a few sectors. The interest rate cap in banking was an experiment only reversed by courts.
It has been speculated that the State wanted controlled interest rates to easily borrow through Treasury bills and bonds. Courts involvement in purely economic matters is another question.
Can courts make optimal decisions on such economic matter? Was any economist called in as an expert witness in the case involving interest cap?
Another sector is second-hand cars. Why is the age of imported cars being capped to five years and zero by 2023?
The most recent draft policy on auto industry even proposes to do away with tax hailing services like Uber, 14 seater matatus and tuk tuks.
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Who will have the last laugh in the car sector? In the milk industry, an attempt to have processors monopolise the sector’s supply chain has been postponed.
As we write, the fertilser sector is on the verge of excluding animal manure leading to another monopoly. I thought we are going organic? Unusual areas have also been monopolised too.
Have you noted how our leaders now write articles in the newspapers? They are also monopolising honorary degrees.
Professional associations have pushed through regulations to ensure only those sanctioned by them can practice.
They cite ensuring standards are upheld as the reason behind new regulations. But the monopoly is not far. Why the return to over-regulation? It’s lucrative creating legal monopolies.
It makes it easier to make money by reducing competition. It’s almost a conspiracy against helpless consumers.
At times, we import regulations without contextualising them which make them difficult to implement or have unintended consequences.
The fact that most regulations are written in a crisis increases the chances of going overboard.
Think of new regulations after a major accident. The fact that regulators are quasi-government institutions politicises regulations. We have noted that though the constitution explicitly provides for consultations among stakeholders, lots of interested parties never turn up for consultation leading to unbalanced regulations.
Without some stakeholders’ involvement, regulatory capture results with vested interests holding sway. Regulations are often introduced when markets fail. What happens when regulations themselves fail?
The economy operates sub-optimally and special interests take over. One outcome of bad regulation is rent seeking or better corruption. Players in industries or sectors look for short cuts when they feel stifled by regulations.
Have we keenly looked at regulations as we fight corruption?
Good regulations unleash competition which often leads to innovations and economic growth. Unfortunately, regulation is not a science.
It works better when there is a diversity of perspectives from different subject areas like economics and law. Loyalty to specialisation makes regulation hard. Economists, lawyers, medics, accountants and other professionals think differently.
To spur economic growth, we must have good regulations to supplement the visible hand of the market. That should apply to all sectors of the economy because of their interconnectedness. We also must subject regulation to cost-benefit analysis.
-The writer teaches at the University of Nairobi
World Bank pushes G-20 to extend debt relief to 2021
World Bank Group President David Malpass has urged the Group of 20 rich countries to extend the time frame of the Debt Service Suspension Initiative(DSSI) through the end of 2021, calling it one of the key factors in strengthening global recovery.
“I urge you to extend the time frame of the DSSI through the end of 2021 and commit to giving the initiative as broad a scope as possible,” said Malpass.
He made these remarks at last week’s virtual G20 Finance Ministers and Central Bank Governors Meeting.
The World Bank Chief said the COVID-19 pandemic has triggered the deepest global recession in decades and what may turn out to be one of the most unequal in terms of impact.
People in developing countries are particularly hard hit by capital outflows, declines in remittances, the collapse of informal labor markets, and social safety nets that are much less robust than in the advanced economies.
For the poorest countries, poverty is rising rapidly, median incomes are falling and growth is deeply negative.
Debt burdens, already unsustainable for many countries, are rising to crisis levels.
“The situation in developing countries is increasingly desperate. Time is short. We need to take action quickly on debt suspension, debt reduction, debt resolution mechanisms and debt transparency,” said Malpass.
Kenya’s Central Bank Drafts New Laws to Regulate Non-Bank Digital Loans
The Central Bank of Kenya (CBK) will regulate interest rates charged on mobile loans by digital lending platforms if amendments on the Central bank of Kenya Act pass to law. The amendments will require digital lenders to seek approval from CBK before launching new products or changing interest rates on loans among other charges, just like commercial banks.
“The principal objective of this bill is to amend the Central bank of Kenya Act to regulate the conduct of providers of digital financial products and services,” reads a notice on the bill. “CBK will have an obligation of ensuring that there is fair and non-discriminatory marketplace access to credit.”
According to Business Daily, the legislation will also enable the Central Bank to monitor non-performing loans, capping the limit at not twice the amount of the defaulted loan while protecting consumers from predatory lending by digital loan platforms.
Tighter Reins on Platforms for Mobile Loans
The legislation will boost efforts to protect customers, building upon a previous gazette notice that blocked lenders from blacklisting non-performing loans below Ksh 1000. The CBK also withdrew submissions of unregulated mobile loan platforms into Credit Reference Bureau. The withdrawal came after complaints of misuse over data in the Credit Information Sharing (CIS) System available for lenders.
Last year, Kenya had over 49 platforms providing mobile loans, taking advantage of regulation gaps to charge obscene rates as high as 150% a year. While most platforms allow borrowers to prepay within a month, creditors still pay the full amount plus interest.
Amendments in the CBK Act will help shield consumers from high-interest rates as well as offer transparency on terms of digital loans.
Scope Markets Kenya customers to have instant access to global financial markets
NAIROBI, Kenya, Jul 20 – Clients trading through the Scope Markets Kenya trading platform will get instant access to global financial markets and wider investment options.
This follows the launch of a new Scope Markets app, available on both the Google PlayStore and IOS Apple Store.
The Scope Markets app offers clients over 500 investment opportunities across global financial markets.
The Scope Markets app has a brand new user interface that is very user friendly, following feedback from customers.
The application offers real-time quotes; newsfeeds; research facilities, and a chat feature which enables a customer to make direct contact with the Customer Service Team during trading days (Monday to Friday).
The platform also offers an enhanced client interface including catering for those who trade at night.
The client will get instant access to several asset classes in the global financial markets including; Single Stocks CFDs (US, UK, EU) such as Facebook, Amazon, Apple, Netflix and Google, BP, Carrefour; Indices (Nasdaq, FTSE UK), Metals (Gold, Silver); Currencies (60+ Pairs), Commodities (Oil, Natural Gas).
The launch is part of Scope Markets Kenya strategy of enriching the customer experience while offering clients access to global trading opportunities.
Scope Markets Kenya CEO, Kevin Ng’ang’a observed, “the Sope Markets app is very easy to use especially when executing trades. Customers are at the heart of everything we do. We designed the Scope Markets app with the customer experience in mind as we seek to respond to feedback from our customers.”
He added that enhancing the client experience builds upon the robust trading platform, Meta Trader 5, unveiled in 2019, enabling Scope Markets Kenya to broaden the asset classes available on the trading platform.