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A bandit pen writing for the old master

Posted by Popular Ombudsman on December 15, 2009

REPRINT: “Liberalising a Bandit Economy”
Nairobi (The Nation, July 9, 2000)
In the last 10 years or so, corruption and crime have become the fourth factors of production in Kenya. The only problem is that they are yet to be liberalised and probably taxed.

In my view, if we cannot get rid of corruption, we should probably liberalise it and make it available to all. We should subject it to the forces of supply and demand and make it affordable to every Kenyan.

Bribing a judge for ‘selective justice’ should not be the preserve of the rich, for instance. A liberalised ‘regime of bribes’ in the judiciary, the police force and within government should be instituted so that all Kenyans can benefit from ‘buying’ the services of these institutions.

This argument may sound far-fetched, but when we consider how much the “Bandit Economy” generates through crime and corruption, then we might just understand why our economy is in such a mess and why we should either deal with corruption and crime or be given an equal opportunity to partake in them. Of course not literally!

In a recent study conducted by the Series on Alternative Research in East Africa (SAREAT) entitled Liberalising the Bandit Economy in Kenya, we argued that crime and corruption generate much more than most sectors of the formal economy in Kenya do. Put together, carjacking, land grabbing, government corruption, bank robberies, cattle rustling, drug and arms trafficking comprise a vibrant bandit economy probably more viable than the formal economy.

We did an analysis of each of these sectors using publicly available information from the government, the police force, and the private sector. Most of the figures we arrived at were conservative estimates, but they give a rough idea about the vibrancy of the bandit economy and why something must be done about it. We give a sector-by-sector analysis below indicating how much is made through corruption and crime and what it could have done for the economy.
On carjacking, our analysis was based on the Annual Police Reports and a series of interviews with a select group of insurance firms. The Annual Police Reports made available to us by the Kenya Police reveal that an average of 250 cars are stolen country-wide every month.

Of these, about 41 per cent are saloon cars with an average value of Sh350,000 per car. Another 30 per cent comprises trucks (pick-ups) and vans with an average value of Sh600,000 each. The remaining 29 per cent of the stolen cars comprise a mixture of models whose unit value ranges from Sh300,000 to Sh3 million.

A mean tabulation was done to determine the average price per unit of the stolen cars. The mean value of each of the 250 stolen cars was found to be Sh515,000. Given that only 20 per cent of these cars are recovered, the carjackers are able to sell 200 cars a month to their ‘bandit markets.’ From these sales, the carjackers generate a total of Sh130 million (US$ 1.73 million) a month. In a year, this translates to a total of Sh 1.56 billion (US$ 20.8 million).

Put differently, the country’s middle-class is robbed of Sh130 million a month or Sh1.56 billion every year through carjacking activities. It is not a wonder we are all broke.

But what is Sh1.56 billion worth in real terms and what can such money do for the economy? According to the 1999-2000 Annual Budget Estimates, the government required Sh1.6 billion to rehabilitate all roads in urban centres.

This means that the monies generated by carjacking a year is enough to fund the rehabilitation of all roads in our urban centres. This includes Kirinyaga Road, Juja Road and all such nasty roads in urban centres from Voi in the South to Lodwar in the North, Nyeri in central to Busia in western Kenya.

Similarly, the 1999-2000 budget allocated Sh200 million to a revolving fund aimed at providing car loans to Members of Parliament. While it was expected it would take the government 12 months to raise this kind of money and then lend it to our legislators, our tabulations show that it would take only one-and-a half months for the carjackers to raise the Sh200 million required for this fund. This is how vibrant carjacking as a market activity has become.
Land grabbing
Under the land grabbing sector of the bandit economy, our analysis looked at only two forms of illegal allocations, these being the allocation of government forests and government land in urban areas. On the illegal allocation of government forests, we focused on the allocation of Karura Forest situated in the most exclusive part of Nairobi.

On November 12, 1998, the Ministry of Lands and Settlements presented to Parliament a list of 67 private companies that had been allocated land in this forest. From this list, it turned out that out of the 1,041 hectares comprising of Karura, only 541 hectares had not been allocated. A total of 500 hectares had been divided among the 67 private companies. 500 hectares equals to 1,234.6 acres. Assuming that one acre of land in the Muthaiga-Runda areas is worth Sh5 million, the total worth of the land that was illegally allocated to these companies is worth a staggering Sh6.2 billion (US$ 823 million).

On the illegal allocation of government land and houses, evidence from the Parliamentary Public Accounts Committee reveals that a total of 576 individuals were allocated government land and houses between 1996-97. These allocations were confirmed through a letter by the Permanent Secretary in the Ministry of Lands and Settlement to the Clerk of the National Assembly providing a list of the 576 allotees, the specific areas they were allocated and the number of acreage.

From our tabulations, the average (conservative) value of each of these allocations is about Sh6 million (US$ 80,000) which means that the total worth of the allocations stands at Sh3.46 billion. Added to the Karura allocation, land grabbing alone generated Sh9.7 billion in the last five years. This figure does not include the other illegal allocations whose data was unavailable for our scrutiny.
Government corruption
Government corruption as a ‘market activity’ is the main source of revenue for the bandit economy. An analysis of the Auditor General’s annual reports shows that during the 1996-97 financial year alone, the government lost more than Sh12 billion through fraudulent payments and outright embezzlement.

A further analysis of the accounts for the period 1990-95 reveals that a total of Sh127 billion (US$ 1.7 billion) was lost in a period of five years. This amounts to an average of Sh25.5 billion (US$ 344 million) a year, a figure slightly higher than the development budget for 1996-97 (US$ 24.4 million). It also represents an average of 15 per cent of the total budget, which means that in this period one out of every six shillings in the budget was misappropriated.

Put differently, every six months between 1990 and 95, ‘government sharks’ stole a total of Sh12.5 billion which is almost equal to what Kenya is negotiating for from the International Monetary Fund and the World Bank (Sh14 billion).

Further revelations from the PAC indicate that the government had lost a total of Sh500 billion through fraud, embezzlement and uncollected revenue in the last decade.

The question we need to ask here is; if we lose such amounts of money annually through fraud, why are we so desperate about a mere Sh14 billion promised by the IMF/World Bank for the last four or so years?

Some argue that this will give us a clean bill of health and hence boost investor confidence. But my understanding of capitalism is different. I do not think investors are gullible and that they will simply invest because the IMF and World Bank think we are likely to ‘behave’.
Bank robberies
Our analysis focused on the violent and non-violent forms of bank robberies. Of the violent bank robberies, the most lucrative was the theft of Sh160 million (US$ 2.1 million) from the Cargo Service Centre strongroom at the Jomo Kenyatta International Airport, Nairobi, in 1997.

The five gunmen involved in this theft are reported to have arrived at the airport in an official police Mahindra car and escaped in a waiting pick-up truck. Arguably, the five gunmen believed to be policemen, stole a near equivalent of the entire budget for the regular police force for the 1999-2000 financial year (Sh 195 million).

Although some of the monies stolen through bank robberies have been recovered, records show that most of these funds are untraceable. This is probably where corruption and crime complement each other.

For non-violent bank robberies, we looked at the unsecured and non-performing loans in the commercial banks. The 12 banks placed under receivership in 1998 had been robbed of a total of Sh3.5 billion in the form of unsecured or non-performing loans. One private company, for instance, owed Postbank Credit Limited a total of Sh7.3 billion, while a cabinet minister owed Trade Bank limited a total of Sh0.7 billion.

In the troubled National Bank of Kenya, a group of top-brass politicians and their companies topped the list of 87 debtors who owe the bank a staggering Sh8.4 billion. In total, Sh21.9 billion is at stake for the 12 collapsed banks and NBK.

There are serious doubts as to whether this money will ever be recovered. Our considered opinion is that the banking industry has been robbed of much more than is known to the public. The tragedy is that the ‘bank robbers’ involved in this process number not more than 200.
Cattle rustling
One of the most lucrative market ventures in Kenya today is cattle rustling. Tabulations done by lkhalika Katumanga, a Ph.D candidate at the University of Bordeaux in Southern France reveals that an average of 3,300 cattle are stolen a month in the cattle rustling activities of northern Kenya.

Given that each cattle has a conservative market value of Sh20,000, the total monthly returns from this activity amounts to Sh66 million. The annual returns from this activity according to this estimation is Sh0.8 billion.

According to Katumanga, although these activities involve Kenya and its northern neighbours, almost all the stolen cattle end up in the Kenyan market.

With the collapse of the Kenya Meat Commission, this bandit activity partly feeds the meat market in Nairobi and the rest of the country.
Way forward
As Chinua Achebe wrote in his book The Trouble with Nigeria, the problem with African countries is that of leadership. The problem with Kenya is not its people or their attitudes. The more you squander from them, the harder they work. The lower the economy sinks, the more determined they are to keep afloat.

The problem with Kenya is that our leaders prefer politics to leadership. They prefer to exercise power from the dias as opposed to reflecting on the direction of the country in the quiet of their offices and board rooms.

From this kind of leadership, we have not only produced the ‘bandit economy’ but a parallel ‘bandit state.’ This notwithstanding, I am persuaded that there is a way out of this political and economic banditry. And the route-map for this path is in the possession of our president.

* Mutahi Ngunyi is a political scientist and a director of an East African research institute. Email:

Some Hard Questions:

Given the earlier inferences, what could be the conclusions now given the almost countless billions that have been embezzled in the last 7 years alone? One could expect this pen to be equally vocal on the endless pilferage still going on, sorry nothing doing. But you see, perhaps part of the loot ends up in the stomach of the bandit pen through some personal public relations companies such as Consulting House. We shall investigate and tell you.

Anyway, did you know what happened to the East African Research Institute alluded to above? Did you know the role of one Jonathan Moyo in that mix? What about John Githongo? Keep an eye on this page…a dossier on the bandit pen is on the way! -Editor


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