Politics
Understanding Africa’s Middle Class
4 min read.The middle classes of Africa are often idealized as spearheads of democratization and opponents of corrupt regimes. But what does the research actually say?
Since the early 2010s, development actors, financial experts, and academics have been discussing the “middle classes” in Africa. The rising income of considerable shares of the populations in many countries triggered a focus on a so-called “indispensable” middle class and was eagerly promoted by the African Development Bank. It had an aura of success in “development” and counteracted the long-cultivated perception in the Global North of Africa as a “lost continent.” Not surprisingly, the discourse received considerable attention.
Middle classes are defined mainly by daily income or expenditure. But the concept seemed to stand for much more than a slight financial improvement. Many of the ascriptions of middle classes in Africa were either hopes promising a better future, or unconsciously taken over mostly from middle class descriptions in North America and Europe since the 1950s. However, measurable empirical evidence was mostly weak with regard to middle class criteria, such as financial stability and well-paid employment or entrepreneurism, a lifestyle with consumption and leisure time, and a pro-democratic political orientation.
This middle-class concept came under critique and posed the question “Where and what (for) is the Middle?” Nevertheless, many of these connotations drew much attention to the “narrative of the African middle class.” Idealized as political actors, middle classes were turned into fictitious spearheads of democratization and opponents of corrupt regimes. The idea of middle-classes as political actors received increasing attention in reaction to the Arab Spring that began around 2011. North African and Middle Eastern countries such as Tunisia, Egypt, and Turkey saw massive protests against authoritarian regimes. These protests were frequently labeled as “middle-class.”
Yet, the discussion about the middle class as political actors in Africa remained arbitrary. Although many referred to an economic definition of middle class, they added a range of characteristics, such as a certain political consciousness. The empirical foundation of middle classes in Africa, their political positions, and the theoretical explanations remained thin. They could be considered a kind of distraction from and a caricature of class analysis. We engaged, therefore, with some of the main arguments about middle classes and protest and have been discussing them more systematically with colleagues.
The starting point was a 2017 conference in Stellenbosch funded by the German Research Foundation´s Point Sud program. Scholars from a wide range of African countries and other parts of the world identified crucial questions and examined the relationship between middle classes in Africa and protest. Many of the presentations focused on South Africa, but other speakers discussed the situation in countries such as Kenya and Namibia. As a follow-up, we initiated a guest-edited special issue of the Journal for Contemporary African Studies on African middle classes and social protest now published. It offers a range of case studies from Ghana, Cameroun, Kenya, South Africa, and Namibia. In our introduction, we summed up four major difficulties in the transfer of the middle-class category from Europe and North America to African societies.
African societies are not only heterogeneous in comparison to each other, but also they have different historical trajectories from Europe and North America, where the concept of the middle class originated. There, merchants and self-employed craftsmen began to advance their positions in the 19th century, when overwhelming numbers of people were working on farms and in burgeoning industry (with North American settler colonies still a different case). In the 20th century, better education and demanding physical work led to higher wages in the industrial societies of the Global North. Households became mostly identical to the nuclear family, workers had one qualified occupation, and families benefited from several public and private security systems. This was the foundation of the middle class as a social group and way of life. Can we compare the situation of these middle-income groups with middle-income earners in colonial and postcolonial African societies? The innocent use of the term “middle class” suggests that.
There is no compelling connection between a middle-income position and a pro-democratic orientation. Again, the progressive European and North American “middle classes” were the outcome of a specific historical context with certain economic and cultural conditions. Even in Europe, the association of middle-class and pro-democratic worldviews has only been true for certain episodes of the 20th century. Consequently, a transfer of the concept to African settings must consider the divergent backgrounds. As history suggests, middle classes were as often displaying conservative if not reactionary tendencies as liberal democratic ones and were active participants in right-wing policies. By all standards, they were never homogenous politically.
In the international academic division of labor, European and North American research is still hegemonic. This is problematic on many levels: African contexts have been marginalized for decades and are still marginal in empirical research and theory building. The knowledge about Africa is limited and social structures in Africa are not a common topic of theoretical explanation. To date, research on Africa is in the mainstream of many disciplines in international academia considered merely area studies or knowledge about “exotic” contexts. The lack of data and expertise in international disciplinary debates such as sociology and political sciences is a major factor because we must rely on potentially misleading terms like “middle classes” to describe social strata in Africa.
In spite of the aforementioned critique, we think it is highly promising to study “middle classes” and protest in Africa. New groups of middle-income earners are part of ongoing political and economic changes. Urbanization, economic growth, and new ways of life are a matter of fact in most parts of the continent. It is crucial to develop a more nuanced concept of “middle-class,” rather than the overstretched but rather empty notion that persists. There are many questions: How do individuals arrive at their middle-income position? How stable is their situation? How can we study different groups in the same income range?
We, therefore, opt for a multi-dimensional and intersectional approach. Socio-cultural features such as the extended family as a household unit, ethnicity (as well as gender and religion) as a relevant factor, and the specific shape of political networks are significant influences. Middle classes and protest have to be investigated in relation to culture, lifestyle, ethnicity, and/or “race” and religion, as well as gender and other sociocultural positioning.
These and many other aspects must be understood in a mix of empirical research and theorization to get to an appropriate understanding of middle classes and politics in Africa. Our published thoughts and arguments, in company with many others, are a modest effort to contribute to a more nuanced, less Eurocentric debate to challenge the hegemonic status of Western scholarship.
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This post is from a partnership between Africa Is a Country and The Elephant. We will be publishing a series of posts from their site every week.
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Politics
Low Budget Support is the Maritime Sector’s Biggest Challenge
The blue economy holds immense promise for Kenya but a lack of training capacity denies the country access to a properly trained workforce that could unlock the maritime sector’s potential.
The place of the maritime industry in accelerating economic growth in Kenya has been increasingly debated in recent years. However, not much has been done to create new jobs due to a lack of deliberate and sound policies that are matched with the necessary budgetary allocation to train a workforce in order to tap into what could arguably be the next frontier of economic development.
Even the Kenya Kwanza manifesto—which is detailed in other areas of the economy—is silent on how to awaken this sleeping giant. Moreover, the budget estimates for 2023/2024 only mention the blue economy in passing, giving it a paltry allocation. Two critical areas, which are closely related, have sealed the fate of this industry: failure to exploit the full commercial potential of the sector due to a lack of a properly trained workforce that is itself due to a lack of training capacity.
The weaknesses bedevilling the industry were identified when the State Department for Shipping and Maritime Affairs signed an agreement with the Higher Education Loans Board (HELB) to establish a Maritime Education and Training (MET) Financial Support Scheme in 2021 to support capacity building in the maritime and blue economy sector.
Amb. Nancy Karigithu, a former Director General of the Kenya Maritime Authority (KMA) and former Principal Secretary in the State Department for Shipping and Maritime, pointed out that there was a need for training funds to be made available in a more structured way in order for such opportunities to be more accessible for Kenyan Youth. Undertaking training abroad—as most skilled people working in the industry have done in the past years—is highly prohibitive in terms of cost.
Moreover, although a huge chunk of the country’s budget goes to the education sector, very little of it is absorbed by the maritime training institutions where huge infrastructural investments need to be made in order to train a competitive workforce. Such training institutions also require adequate space in which to install the equipment needed for the trainees, which must be adapted to the work environment to which they will eventually be deployed.
In a bid to address the issue of training, a policy decision was taken to establish Bandari College under the tutelage of the Kenya Ports Authority. It was later renamed Bandari Maritime Academy (BMA), gaining an independent status. Due to the slow pace at which maritime training has grown in the country, one of the biggest challenges facing BMA and other Technical and Vocational Education and Training (TVET) institutions that have rolled out maritime training courses is a lack of training personnel.
This is not just a Kenyan problem but a regional one. A stakeholders’ forum that convened on 7 October 2021 in Nairobi under the auspices of the Intergovernmental Standing Committee on Shipping (ISCOS—a regional maritime organisation for Kenya, Uganda, Tanzania and Zambia) to address the challenges in Maritime Education and Training (MET), returned a harsh verdict of a sector in dire need of reforms and significant government and regional support.
Industry stakeholders from ISCOS member states noted that the lack of qualified training staff and maritime professionals was a huge challenge that was holding back the growth of a critical sector of the economy. Inadequate and expensive training facilities, tools and equipment were also cited as a huge challenge that was hampering progress in the industry.
There is a global workforce shortage in seafaring, a key area that Kenya could tap into and create jobs in just a few years if deliberate efforts are made towards that end. This is low-hanging fruit for the Mombasa economy, which has witnessed dwindling economic opportunities since the Standard Gauge Railway (SGR) moved logistics to Nairobi. The proposed Special Economic Zone (SEZ) that could have offered alternative employment has been challenged and is facing litigation in the courts after environmentalists questioned its ability to deal with sea pollution.
Kenya’s success in the hospitality industry has seen shipping lines such as Mediterranean Shipping Company (MSC) recruit locals to work on their liners. But this is not the case on container, bulk and tanker ships because most Kenyan-trained seafarers lack the skills needed by crew working on these vessels.
The International Maritime Organisation (IMO)—where Amb. Karigithu is one of the candidates for election to the position of Secretary-General slated for 18 July this year—has developed a series of model courses that provide suggested syllabi, course timetables and learning objectives to assist the instructors to develop training programmes that meet the Standards of Training, Certification and Watchkeeping for Seafarers (SCTW) convention.
Of the more than 30 courses offered in maritime training, as recommended by the IMO, BMA was only able to offer six in 2021. In addition, the country lacks onboard training opportunities as Kenya does not have a training ship of its own. This has caused delays in the completion of training courses given that onboard training is compulsory to obtain certification. This is a problem facing other institutions providing maritime training such as Jomo Kenyatta University of Agriculture and Technology (JKUAT) which offers marine engineering courses. Training programmes must ensure that students acquire practical knowledge through actual work experience; trainees must learn by doing while at sea and in port.
Lack of training has also affected the exploitation of marine fishing since the country does not have the seafarers and equipment necessary to fully exploit the immense fish volume in the high seas. The International Convention on Standards of Training, Certification and Watchkeeping for Fishing Vessel Personnel, 1995 (STCW-F 1995), which came into force in 2012, sets certification and minimum training requirements for crews of seagoing fishing vessels of 24 metres and above in length.
Training programmes must ensure that students acquire practical knowledge through actual work experience.
Last year, the government drafted a set of regulations to empower industry players, which it said would double the fish catch to 300,000 metric tonnes. According to the Draft Marine Fisheries (Access and Development) Regulations 2022 and the Lake Turkana Fisheries Management Plan, Kenya has the potential to earn at least KSh100 billion and create 240,000 jobs annually once the new regulations are fully implemented.
Former Agriculture Cabinet Secretary Peter Munya last year said billions of people globally, especially the world’s poorest, rely on healthy oceans as a source of jobs and food nutrition. About 60 million people globally are employed in fishing and the oceans contribute about US$1.5 trillion annually to the overall global economy according to a 2022 World Bank report.
In Kenya, marine fisheries account for less than 10 per cent of the national fish landings and sustain the jobs of more than 1 million individuals whose income depends directly or indirectly on fishing, according to Munya. The number of fishers employed directly in Kenya’s marine sector is 13,426.
Kenya has an abundance of untapped potential in maritime resources along its marine coastline that extends over 650 kilometres, translating to a total area of 9,700 square kilometres of territorial waters and an Economic Exclusive Zone (EEZ) constituting a further 142, 400 square kilometres.
About 60 million people globally are employed in fishing and the oceans contribute about US$1.5 trillion annually to the overall global economy.
Optimal exploitation of marine fishing in Kenya is hindered by infrastructural limitations, inappropriate fishing craft and gear and a lack of properly trained seafarers. Artisanal fishers restrict their operations mainly to the continental shelf because they are ill-equipped in terms of craft and equipment to fish in the deep sea.
Despite its huge potential, the sector is underfunded. In this year’s budget, KSh3.5 billion went to the Kenya Marine Fisheries and Socio-Economic Development Project; KSh1.2 billion to Marine Fish Stock Assessment; KSh580 million to Capacity Building in Deep Sea Fishing; KSh142 million to rehabilitation of Fish Landing Sites in Lake Victoria; KSh141.5 million to Aquaculture Technology Development and Innovation Transfers; KSh500.7 million to Liwatoni Ultra-Modern Fish Hub and KSh88 million to the Development of Blue Economy Initiatives.
The deep-sea waters are left to the Distant Water Fishing Nations (DWFN) that mainly fish tuna species; Kenya lies within the rich tuna belt of the West Indian Ocean where 25 per cent of the world’s tuna is caught.
Foreign fishing fleets can operate in Kenya’s Exclusive Economic Zone (EEZ) through the regional and international agreement and cooperation provision of the National Oceans and Fisheries Policy, which allows governments to continue granting fishing rights in their EEZs based on the state of the stock and the economic returns.
Another critical area in which Kenya can exploit the blue economy is through the ownership of ships in partnership with already existing shipping lines. Former president Uhuru Kenyatta signed a controversial deal between the Kenya National Shipping Line Ltd (KSNL) and Mediterranean Shipping Company (MSC) with this objective in mind but the deal has not been actualized.
A recent promise by the Shipping and Maritime Affairs Permanent Secretary Shadrack Mwadime that the government would invoke the cabotage laws under the Merchant Shipping Act to allow and facilitate sea-borne transshipment is a good proposal that needs government support.
Kenya does not have a national shipping carrier. Transshipment, which involves the transfer of goods from one vessel to another for shipping to the final destination, is an opportunity that Kenyan ship owners could exploit. However, the country must remove the bottlenecks cited by shipping lines as a hindrance to using Mombasa port, particularly the customs procedures that make Mombasa unattractive as a transshipment hub.
In supporting the deal signed between KNSL and MSC, the government estimated that its cargo imports cost an average of KSh14 billion in freight per year, while local destination charges by shipping lines comprise another KSh34 billion. With local shipping capacity and the application of “Buy Kenya, Build Kenya” policies, the amount of freight charges of KSh14 billion could be retained in Kenya.
In the absence of a pricing framework or a competitive environment, the Mombasa port tariff for shipping lines has proliferated to 36 charge items. The revived KNSL, the government observed, could be used by the government to influence and leverage the reduction or elimination of components of destination charges thus reducing the national burden in the maritime transport of government cargo. The charges include delivery order fees, amendment to the bill of lading fees, supervision fees, manifest correction fees, currency exchange rates, container repair charges, and equipment management fees, among others.
In running the liner service, KNSL had the option of chartering or acquiring its own vessels over time. It was anticipated that income arising from transferring MSC transshipment cargo from Mombasa to other ports around Africa would yield sufficient funds to make vessel acquisition a reality in the long run.
Kenya can draw vital lessons from the Ethiopian Shipping and Logistics Service Enterprise (ESLSE). By 2020, when ESLSE was planning to acquire two more vessels, it had 11 ships with a total loading capacity of 400,000 tons of cargo.
Transshipment, which involves the transfer of goods from one vessel to another for shipping to the final destination, is an opportunity that Kenyan ship owners could exploit.
Marine Cargo Insurance (MCI) also has huge potential, if the government puts in place strong measures to enforce it. Its overall performance has significantly improved since the National Treasury’s directive to enforce Section 20 of the Insurance Act came into effect on 1 January 2017, which requires compulsory purchase of MCI from local underwriters.
However, importing cargo on Cost Insurance Freight (CIF) and the lack of proper coordination between the various agencies has made enforcing this requirement a huge challenge.
Claims of undercutting have been cited in the MCI insurance business as a record number of players have entered the segment. The Insurance Regulatory Authority (IRA) had in the past raised concerns over unsustainable premiums.
Following the directive, however, the MCI has performed considerably well compared to the years before 2017. The gross written premiums were KSh2.3 billion compared to KSh1.45 billion in 2016, representing an increase of 59 per cent. Based on the value of the imports, MCI premiums can generate up to KSh20 billion annually, according to ISCOS.
However, there is a silver lining on the horizon. Insurance companies are being brought onto the online cargo clearing system that is operated by KenTrade, which is being integrated with the Kenya Revenue Authority’s (KRA) Integrated Custom Management System (iCMS). This could help in enforcing section 20 of the Insurance Act.
If the government rhymes its rhetoric with policy and budgetary support, harmonizes the activities of the 22 agencies running the industry that have conflicting roles, and focuses on maritime training and education, the blue economy has tremendous potential to propel Kenya to great economic heights.
Politics
War Has Arrived
Writer and feminist activist Reem Abbas on the personal costs of the war between Sudan’s military and the Rapid Support Forces.
Why should I be surprised?
After all, I did see this war coming. I saw it a few days beforehand, right after the RSF took over a military airport in Meroe in Northern Sudan. I had seen this war coming since 2019, when the revolution attempted to thwart the security committee of former president and general, Al-Bashir (Omar Hassan Ahmad Al-Bashir). However, politicians made a deal to split power and share it between the army and the RSF. I saw it coming after the 2021 military coup was launched against the flawed transitional government, and after I saw how politicians worked to empower the RSF in the aftermath of that coup d’état. They dwarfed the national army (the Sudanese Armed Forces) and furthered the concept of having two armies. I saw it coming because no country has two armies unless the two are at war with each other and they are controlling different territories.
I panicked momentarily. We don’t have enough food. I need to pay my phone bill. Do we have diesel for the generator in case the power goes out for days? I ran to the kitchen to fill up every pot and pan with water. Water could be turned off at any moment. My mind was racing; I went through a war-essentials checklist. It was never a tried and tested checklist, but I was hoping for the best. Two days later, I found myself in my sister’s home office, trying to finish an orientation for work. We had to stop it mid-way, as the fighter jets were looming too close to home. I could not focus.
My nights were sleepless, I didn’t know where to place my daughter so that she would be covered. I never realized that our beds weren’t raised high enough to fit her underneath, which, according to friends on Facebook, is the safest place to be. I felt like my room was the safest because it had one window that was blocked by another building. I forced my whole family to switch their rooms. My sister slept on a mattress on the floor, and my mother slept on a bed next to my daughter and I.
I wasn’t able to learn how to sleep at night again, because the fighter jets would come after 12 am. Their sound actually comforted me. Sound as a phenomenon is described as a wave of compressed air. The high compression of sound reduces its loud volume so if you hear the jet, it means that it is far away and not going to hit you with bombshells. There is always silence before your house is shelled. A few days into the war, my sister and I left the house to buy food. I told her, if anything happens to me, pretend you don’t know me. Walk away. One of us has to return, we can’t leave our parents alone. A small grocery shop was open. We bought basic non-perishable goods. I bought Oreos for my daughter. She likes them and I wanted to give her a sense of normality.
Another shop opened a few days later. Its metal door was still locked, but the shopkeepers would open it just a little bit, just enough to allow us to crawl inside. We used the last cash we had to buy more food. I bought fresh bread that day and felt better after binging on it. A few days into the war, my mother told us to enjoy the salad, as it was the last tomato that we had in our fridge.
The war began taking a toll on my family. We began bickering on a daily basis. My daughter’s father asked me if he could take her with him to another city. I was under pressure, I felt that choosing to resist him would undermine her safety. She began to ask me about the day this would end and said that she missed her school and her friends. She wanted to go to the restaurant we had gone to a week before the war, where she played on the trampoline while I had a latte, and where she loved eating the pizza. My father and I wanted the family to stay. We began to hear that the RSF was occupying houses. They would kick people out of their houses, loot those houses and then move in. They were not just occupying houses, they were occupying the city. As inhabitants, we were being erased from Khartoum. Our life was cheap, it was only worth as much as a phone or some cash that they could loot. The RSF would take your property, live in your house and drive your car.
Our street, which was close to a highway, became a bus station overnight. Buses that were heading out of Khartoum into other states or even into Egypt, were just a few steps away from our house. There was an exodus happening, but we felt the need to stay.“Staying in our house is in itself resistance,” wrote my father on his Facebook page. But three weeks into the war, we were packing our bags.
We felt suffocated in our own home. We were too terrified to leave the house and we also felt a bit defeated. My stomach was upset and I had my period twice in three weeks. I was completely nerve-wracked as I packed my bags. I looked at my books, collected over fifteen years. I looked at the beautiful painting by Essam AbdelHafiz that I bought to hang in my new apartment. Just a few weeks before the war, I had gone to his exhibition with my colleagues and we talked about art and resistance. I had no idea why I packed the way I did. With me came a few non-fiction books and the book by George Packer that I was reading, as well as two dresses and two pants, and some skincare to save my face which has aged non-stop since the war arrived in my city.
When we left Khartoum and drove three hours to Medani, I felt strange. I had come to Medani many times for work and to visit friends. But, I was now a stranger in my own country. I was learning how to walk on the streets again. I was learning how to sit at a cafe, and I was learning how to live without the constant sounds of gunshots and fighter jets.
The supermarket shelves were becoming emptier and emptier. Stocks were low because most factories in Khartoum were burned down or looted or both. Carnage was the new normal in Khartoum, led by the RSF as they broke into banks, factories, companies, and houses.
We have all worked very hard to build the little infrastructure we had, and now it is gone. I was joking with a friend that there was no Coca-Cola in Medani. No Coca-Cola in the country that produces one of the most vital ingredients in this drink, gum-arabic. If the war continues, the world may actually start caring because of the Coca-Cola shortage. A war-torn country in the horn of Africa could be relevant after all, for international business.
Hemedti captured the revolution
When I joined the protests in 2019, one of the main slogans was: “The military to the barracks, the RSF to its dismantling.” This slogan continued until the sit-in that brought an end to Al-Bashir in April 2019. The RSF could read the street, they knew that Al-Bashir’s rule was coming to an end. They began marketing themselves as supporting the will of the people. Its leader Hemedti (Mohamed Hamdan Dagalo), emerged as a separate political force. Sudan emerged as a country with two armies. No entity has reaped the fruits of the revolution as has the RSF.
The transitional period (2019-2021), failed to fix the most critical problem: the problem of how to merge the two forces and reform the problematic military institution. In the period after the coup, the international community began working with political actors to reach an agreement that would once again realize a new partnership between the political forces and the military institution. Once they carried out security sector reform talks, the military dragged their feet, because it became clear that the agreement would largely disempower the military. It would take away their key economic interests and also empower the RSF by giving them space to continue growing their economic power. Not only that, it would take almost a decade to integrate RSF forces into the army. Much to the dismay of the international community who kept pushing for an agreement to be signed, the government postponed signing the agreement. For civilians, the agreement still meant that for at least a decade, the country would continue to have two armies.
The war was inevitable, but one can never prepare for a war. In Medani, I tried to withdraw money from my account. I had about two dollars in my pocket, just enough to buy coffee from the tea lady on the side of the road, as I sat on a stool awaiting my turn at the bank. I was client number 101, and the bank had set up a massive tent to shield the clients from the sun. They said the system was down and there was no hope. After three hours, I left defeated.
My whole life is (was?) in Khartoum. Our home has books and paintings and the many spices I buy when I travel. My mother is a plant mom. She always claims that her plants smile when she walks into the garden to water them and that they move when she speaks to them lovingly. When we left, we kept our refrigerator and freezer running. We were only supposed to be gone for a few days. I told my mother’s plants that we would spend two days and then return. Two days before the war, I had an appointment at the Spanish embassy. I was excited about going to France to meet my colleagues and to travel with them to Granada and Barcelona. Now my passport was stuck at the embassy and all the diplomats had been evacuated.
Khartoum is no longer ours. Our building, a building we spent 10 years building with my father’s retirement money, is now controlled by RSF. They live in the rooms and they park their car in our garage. Our house remains safe, but we are waiting for the news that we don’t want to hear. RSF is close to our house and they began looting our neighbors. The war got close to our doorsteps, but we are no longer there.
A few days after we left, I read the news online. RSF had looted the bank at Omdurman Ahlia University, and the looting of the university itself began. A research center inside the university was burned to the ground. Ten years ago, my family celebrated at this very same center. We donated thousands of books from the library of my great-grandfather, a politician, public servant, and author, to this center. It was full of books, resources, and manuscripts. It was part of our cultural infrastructure. This war was coming for us, it was coming for our history and our very existence.
I saw the news on Twitter. The Spanish embassy was broken into and everything was looted. But some young men went there and picked up some passports. After hearing this, I was now trying to trace my passport. At that point, I was ready to pay any price. I ended up retrieving my passport from one of these young men through a friend over a month later after the war broke out. By that time, I had crossed the border to Egypt using an old passport that I renewed at a border town. I now have a valid passport, but no home to go back to.
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This post is from a partnership between Africa Is a Country and The Elephant. We will be publishing a series of posts from their site every week.
Politics
Kenya’s Public Debt: Risky Borrowing and Economic Justice
Repayment obligations for private sector debt have had negative implications for the economy and undermined the realisation of fundamental social and economic rights.
Kenya is among African countries with the highest debt-to-GDP ratio and was categorised as at high risk of debt distress by the IMF in 2020. In just ten years, the debt-to-GDP ratio has increased by 30 per cent, from 38 per cent in 2012 to 68 per cent in 2021. This has been attributed to resource demands for offsetting perennial budget deficits, largely occasioned by expansionist policy on infrastructure development, the weight of a bloated government, corruption and waste in the civil service. Consequently, the government’s ability to efficiently deliver essential public goods and services to its citizens has been substantially constrained.
In recent times, many developing countries including Kenya have demonstrated an increased appetite for commercial debt, preferring to borrow from private companies, local and international bond markets, or banks rather than relying on concessional loans. Kenya’s shift to commercial borrowing can be attributed to various factors, including ineligibility to access concessional funding due to its change of status from a low-income country to a lower-middle-income country following the rebasing of its national accounts. Additionally, loans from private creditors often come with less scrutiny and conditionalities compared to loans from multilateral financial institutions and traditional Paris Club lenders.
As a result, Kenya’s commercial/private debt component has significantly increased, accounting for more than half of total national debt. Between 2012 and 2020, debt from private creditors averaged 58 per cent, with the highest share recorded in 2014 (60.5 per cent), 2018 (62 per cent), and 2019 (62.2 per cent), which aligns with the periods when Kenya had Eurobond issues. The majority of Kenya’s private sector debt consists of loans from domestic creditors, accounting for an average of 81 per cent between 2012 and 2020. Domestic sources include debt instruments such as treasury bills and treasury bonds, while external sources mainly comprise loans from commercial banks. Some of the major commercial banks that have issued credit to Kenya include China Development Bank, Citigroup Global Markets, Erste Group of Banks, First Mercantile Securities Corporation, Société Générale, Standard Bank Limited UK and Trade plus Development Bank.
In 2019, half of total tax revenues were spent on servicing debt from both local and external private creditors.
Existing scholarship indicates that debt from private creditors is associated with three major components that are detrimental to economies, especially in the developing world—high interest rates, shorter maturity periods and limited transparency in contractual agreements. Each of these components has its own repercussions, which are now manifesting in Kenya.
On transparency and accountability, debt from private creditors often lacks sufficient scrutiny due to limited public participation and availability of information regarding its acquisition and management. Private credit is also argued to have fewer conditions compared to concessional loans, leaving room for corruption and mismanagement of borrowed funds, especially where legislative oversight of debt management is weak. A notable example is the 2014 Eurobond issue, where KSh215.5 billion from the proceeds could not be accounted for, as revealed by an audit by the Auditor General. This involved alleged expenditure of the borrowed funds outside of the government’s Integrated Financial Management Information Systems.
On the cost of borrowing, private creditors generally offer loans at higher interest rates compared to the more favourable concessional loans offered by traditional multilateral and Paris Club creditors that are often below market interest rates. According to the National Treasury, the average interest for concessional external loans has never exceeded 4 per cent. In contrast, private sector debt, particularly in the form of Eurobonds, carries higher interest rates. For example, the 2018 Eurobond issue had an interest rate of 8.25 per cent, significantly higher than the rates for concessional loans. Interest rates for domestic-issued private debt have also been high. The average interest rates for treasury bills with maturities of 91, 182, and 364 days were 6.7 per cent, 7.3 per cent, and 8.4 per cent respectively in 2021. These rates are still higher compared to the interest rates for concessional loans. Generally, the higher interest rates have translated to greater debt servicing costs.
Further, loans from private creditors have shorter maturity periods of up to five years, while loans from multilaterals and Paris Club creditors have grace periods of five years and maturity periods of up to 30 years. The shorter maturity period coupled with higher interest rates implies that governments have a limited window to invest resources from such debt instruments into the economy and begin to accrue economic benefits, before commencing repayments.
Regarding fiscal justice, increasing repayment obligations for private sector debt (especially external creditors) has had negative implications for the economy and undermined the realisation of fundamental social and economic rights outlined in Article 43 of the constitution. For instance, the government’s development expenditure as a proportion of total revenues (and total budget) continues to reduce as the government diverts revenues to debt servicing. In 2019, half (KSh761.4 billion) of total tax revenues were spent on servicing debt from both local and external private creditors. This trend has continuously limited government expenditure on pro-poor sectors such as health, education, agriculture, and social protection, denying the majority of citizens access to quality and affordable public services. For instance, in 2020 the government allocated KSh548.41 billion to servicing private sector debt, which was twice the allocation for the health sector (KSh247 billion) during the same period. These debt servicing amounts could have been channelled towards improving COVID-19 response interventions, such as acquiring respiratory equipment, personal protective equipment and hiring additional health workers.
Additionally, due to overwhelming debt repayment obligations, the government has had to initiate tax reforms aimed at raising more revenue that also have fiscal justice and human rights implications. The proposed Finance Bill 2023 includes amendments to various laws relating to taxes and duties, which depict the dire state of the country’s finances. Some of the proposed amendments include introducing a 1.5 per cent housing levy deduction, increasing VAT on petroleum products from the current rate of 8 per cent to 16 per cent, implementing a 35 per cent tax band for those who earn above Sh500,000, increasing the Turnover Tax (TOT) from 1 per cent to 3 per cent, and introducing a 15 per cent withholding tax on proceeds from digital content creation, among others. If passed into law, these tax reforms will be regressive, imposing an increased burden on people’s livelihoods and businesses.
Lastly, increased domestic borrowing by the government (largely from the private sector) has also had a negative impact on micro, small, and medium-sized enterprises (MSMEs). According to the Central Bank of Kenya, there has been a declining trend in access to credit for MSMEs. The 2020 Access to Credit Business Survey revealed that the average loan size to MSMEs has reduced from KSh6.03 million in 2017 to KSh3.56 million in 2020 from commercial banks, and from KSh1.88 million in 2017 to KSh1.64 million in 2020 from microfinance institutions. During the same period, government debt holdings in commercial banks stood at 54.1 per cent. The increased holding of domestic debt by the government risks crowding out the private sector, leading to declining investment and financial market instability.
Despite participating in the 2020 Debt Service Suspension Initiative (DSSI), Kenya is currently trapped in a debt conundrum. Kenya’s maiden Eurobond issue is due for repayment in 2024, and the government plans to issue a new Eurobond whose proceeds will be used to repay the maturing 10-year bond. However, this approach only postpones the government’s chance to address the worsening debt situation and amplifies resulting implications, as seen when the government prioritised debt repayment over civil servants’ salaries in March 2023. The country’s deteriorating debt situation has also led credit rating agency Moody’s to recently downgrade the country’s foreign currency issuer ratings from B2 to B3, the lowest classification of “high credit risk” and just one level above “very high credit risk.”
Nevertheless, the country’s debt situation is not beyond redemption. There is a clear need for better debt management, with more effort directed towards pursuing opportunities for debt restructuring from private creditors. In 2020, International Financial Institutions such as the World Bank and the IMF called on private creditors to participate in the DSSI, but unfortunately, only one private creditor participated. Discussions on private debt restructuring need to begin by engaging private sector creditors, urging them to recognise their role in the country’s public debt problem. This could create space for negotiation, restructuring and debt relief programmes that could expand fiscal space for government spending on essential public goods and services.
The government plans to issue a new Eurobond whose proceeds will be used to repay the maturing 10-year bond.
Further, it is crucial for both state and non-state actors to advocate for the operationalisation of laws or policies that promote transparency and access to information regarding public debt, including loans obtained from the private sector. Transparent and accountable management of private debt is essential to prevent corruption and mismanagement of borrowed funds. The Kenyan legislature (both the National Assembly and the Senate) also bears the responsibility of effectively utilising its oversight role to hold the Executive accountable for fiscal policy decisions and debt management practices.
Additionally, ordinary citizens, who are increasingly bearing the brunt of the implications of the shift to private credit among other bad fiscal policy decisions, also have a significant role to play. Through advocacy and private litigation, citizens can push for publication of information—such as contracts between the government and private creditors—and demand accountability in the management of private sector debt. By actively engaging in these efforts, citizens can contribute to creating a more transparent and responsible debt management system that prioritises their interests.
In summary, addressing Kenya’s public debt challenges requires a multi-faceted approach involving better debt management, engagement with private creditors, transparency, accountability and citizen participation. These are now critical issues that Kenya must prioritise in alleviating the debt burden and risk of default, ensuring sustainable economic development and promoting fiscal justice for its citizens.
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This article is based on insights from ACEPIS, East African Tax and Governance Network (EATGN) and Tax Justice Network Africa (TJNA) publication — Risky Borrowing and Economic Justice: The Role of Private Creditors in Kenya’s Public Debt Problem.
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