Unit 1.3:
How does Kenya relate
 to the rest of the world?

Handout

Scenario

From Kivutha Kibwana’s ‘Learning Together to Build One Nation’

Questions:

Kenya and the Region

The East African Common Services Organisation was set up in 1962. It was responsible for Customs and Income Tax, the Post Office, the East African Railways, the East African Airlines, the East African Harbours Authority, East African Universities, and other services including tsetse fly control and research.
The East African Community was created in 1968 – only to break up in 1977.

Questions:

The African Union

 

Questions:

 


  
Background Information

 

The age of globalisation

At the time of Kenya’s colonisation it took weeks, even months, to travel or transport goods by dhow from East Africa to its trading partners along the Coast and in Arabia, Persia and India. The ivory and slave trading caravans we came across in the previous unit typically took at least six months to complete a round trip from the coast to Lake Tanganyika or farther inland to Lake Victoria and back, buying and selling and raiding for slaves along the way.

The coming of steamships and the railway (and later motor cars and graded roads) made a huge difference – people and goods could now travel from the Coast to Uganda in a couple of days and to most settlements around the country in weeks if not days. Trade boomed, more and more people travelled to trade and live far from home amid strangers speaking strange languages, eating strange food and following strange customs. More people wore clothes and used tools and utensils made in far away places. News of far away happenings arrived very quickly thanks to the telegraph and newspapers, then radio and telephones. Every day brought with it new products, new machines, new knowledge, new ways of doing things. The world had become a smaller place, and even the remotest Maasai herder or Luo fisherman or Luhya farmer now seemed connected to it – and part of it. In short, the new world of increased trade and speeded-up communications brought with it prosperity, progress and knowledge.

But not to everyone. While some people and groups became richer, others lost their lands and livelihoods and became more insecure economically than they had been in the days when they had been isolated and led simpler, harder lives.

Throughout the 20th century, with its upheavals, wars and revolutions, this underlying theme was always present – more trade, better communications, constant improvements in technology and its products, all with some benefiting more than others. In the post-colonial period, a new twist was introduced – the ex-colonies began to borrow heavily from international banks and their old colonial masters in an attempt to kick-start industrialization and economic development. They used this money to invest in infrastructure and capital goods, heavy machinery, etc. The ‘aid’ industry was born. But the loans tended to be negotiated with corrupt elites behind closed doors; much of the money went into grandiose, wasteful projects and in paying exorbitant fees to foreign ‘consultants’ and technicians who came in as part of the loan conditions. In the 1970s, with the international financial system awash in ‘petrodollars’ deposited by newly rich Arab oil sheiks, this did not seem to matter and the money kept flowing in. But with the floating of interest rates repayments began to mount, until most new money was going to repay old loans.

The combination of easy access to money through huge loans, and the poor governance structures captured in many of the newly independent African countries proved to have devastating effects.  The International Monetary Fund moved in to enforce ‘financial discipline’; its structural adjustment programmes forced heavily indebted countries to reduce spending. Often the social sectors like health and education were suffering the consequences in order for countries to be able to service their external debts. By the 1980s most ‘developing countries’ were caught in a debt trap; the World Bank began to note in its annual reports that more money was flowing out of Africa every year in debt repayments than was coming in as fresh loans and grants, reducing the surplus income that could be reinvested in African economies. Throughout Africa, a process of disinvestment began to be noticed – in the two decades to 2000, Africa’s income per head fell by 10%. This meant that after three to four decades of ‘development,’ the ex-colonies still had not caught up with the West. On the contrary, many were sinking deeper and deeper into debt to their former colonizers for loans that had been poorly managed or squandered by the governments and corrupt elites.

Then, towards the end of the century, two forces combined to give the whole process a huge boost – the computer (IT) revolution, and the collapse of the Soviet Union.

First, the great advances in communications technology that came tripping over each other’s heels – satellite television, computers, the Internet, e-mail, mobile telephones, high speed data cables – and the rapid expansion in air and sea transport (sea freight unit costs have fallen by over 70 per cent during the past 20 years, while air freight costs have fallen by 3-4% year on year) made it possible for not just trade in goods and services but also the production of many goods and services, information, knowledge, culture, and technology to straddle borders.

Second, the fall of the Berlin Wall led to a unipolar world dominated by the United States and its allies, the UK, France, Germany, Italy – in short, the colonial powers of the last century. Governments in the old colonies, no longer able to play the West off against the Soviets, gradually gave in to intense pressure to liberalise their economies – that is, to allow unrestricted exports of goods and services, unrestricted investment by foreign companies in any and all areas of the economy, unrestricted access for foreign capital to their financial markets, the abolition of controls on wages and prices, the easing of bureaucratic licensing restrictions, and the privatisation of state-owned banks and power, telephone, water, railway and airline companies. Almost overnight, there was a huge expansion in economic, social, cultural and political ties across regions and continents. While the world's economic output grew at an average 2.4% per year during the 1990s, global trade increased at well over twice that rate. The pattern is forecast to continue for the next 10 years too, with global trade growing at around 6.8% per year – more than double the projected growth in world output.

The age of globalisation had dawned.

Globalisation means the world has shrunk to an interdependent global village; the real-time interconnection of different localities and nation-states means that events, decisions and activities in one part of the world can have significant consequences for individuals, communities and societies in distant parts of the globe. An investment decision made in London can spell unemployment for thousands in Indonesia, while a business decision taken in Tokyo can create thousands of new jobs for workers in north-east England. At the IMF’s urging, Vietnam in the 1990s began flooding world markets with low quality coffee, causing a permanent crisis in prices and affecting the livelihoods of coffee farmers from East Africa to Central America and Brazil. Similarly, cattle farmers from Burkina Faso to South Africa have been forced out of business as a result of cheaply produced (and heavily subsidised) meat from the European Union being dumped on African markets.

Giant multinational companies, whose size, power and reach have grown exponentially, source raw materials from one country, manufacture in another, assemble in yet another, and package and sell the final products around the globe. Cheaper freight costs and instant communication facilities have allowed companies to co-ordinate production at different sites across the world. In fact, a third of global trade is just the international movement of goods between different parts of the same multinational. One example of this can be found in the US car industry. When one typical US car was analysed to see how 'American' it was, it turned out that nine countries were involved in some aspects of its production or sale. Only slightly more than a third of the car's market value was generated in the USA.

There are now 63,000 multinational corporations in the world, and between them they are responsible for two thirds of global trade and 80% of investment. In terms of annual sales, General Motors is bigger than Norway’s national income, Ford is bigger than South Africa, and Shell is over twice as big as Nigeria. Of the largest 100 economic actors in the world today, 51 are corporations and 49 are countries.

Companies based in the US and the UK provide customer information and back-office services around the clock from ‘call centres’ manned by ‘cyber coolies’ in India and the Philippines. Financial systems around the world are connected, enabling bankers, investors and speculators (as well as organized crime syndicates and terrorists!) to move money around the globe at the click of a computer mouse. Over $1.5 trillion is traded on the world's foreign exchange markets every day!

Globalisation has seen the running of international relations pass from the hands of the United Nations to the World Trade Organisation and the ongoing trade negotiations (currently the Doha round). At the WTO, unlike the UN, it is not numbers (voting power) but bargaining power that counts. The richer countries have great clout, and the poorer countries need to form alliances like the G77 (comprising developing countries) and the African Group, where Kenya has provided strong leadership and a skilled pool of technical negotiators, to wrest concessions and ensure that new trading rules and regimes allow them to benefit from globalisation.

Few people will voluntarily turn the clock back and give up the gains of globalisation – increased choice of goods, services, entertainment and careers; increased mobility, better information, a sense of connection with the rest of the world – manifested in East Africa, surprisingly, by among other things an obsession with the English Premier League football.

Some farmers are already benefiting from the export opportunities that globalisation offers. Kenyan farmers, for example, have found a niche market in the European demand for year-round vegetables. East African producers of specialty coffees are developing high-value markets in the US and Europe. African and Latin American producers who supply fair trade outfits such as Oxfam or Tradecraft have managed to secure a stable source of income in return for their crops. The ability to use the Internet to find markets and best prices globally, while cutting out middlemen, is beginning to benefit not just farmers but specialised producers of all sorts of products from woodcarvings to software.

Globalisation has given Kenya’s world-class runners a chance to carve out well-paid international careers competing in different parts of the world (though regrettably some have also changed nationalities to further their careers). Large communities of skilled Kenyans now live in Northern, industrialised nations and are able to keep in touch with and contribute to developments at home through the websites of the national newspapers, e-mail and mobile phones.

As always, there are losers and winners in globalisation, dangers as well as opportunities. The globalisation of the financial system led to the unprecedented crises in Mexico, Argentina, and Southeast Asia, as speculative foreign investors reacting to localised events pulled their money out of the stock exchanges of these countries, leading to a collapse in their currencies and economic devastation. The crisis hit hardest in Indonesia, which saw $40 billion of foreign capital sucked out of its economy in the six months between November 1997 and April 1998. Real wages fell by 60% across the country; an estimated 40 million people – a fifth of the entire population – fell into poverty. The economy, which shrank by 13% in 1998, is only now beginning to recover.

Kenyans too have had this experience of becoming poorer overnight after the 1992 elections, when the printing and handing out of Sh12 billion to ‘influence’ the outcome of the election led to a rush for dollars, and the shilling lost three-quarters of its value against the dollar in a matter of months. Imports became much more expensive and export earnings fell dramatically. New car sales plunged and beer consumption literally dried up, as entire sections of the middle class were wiped out…

It is not just finance capital that is fickle. Bona fide foreign investors who set up factories and create jobs can also disappear overnight – as Kenya has seen with its Export Processing Zones, where many of the investors who set up shop to take advantage of the markets opened up by the USA’s Africa Growth and Opportunity Act (Agoa) are packing up now that Agoa exemptions are about to end. Similarly, some investors in Kenya’s spectacularly successful horticulture industry are departing to Ethiopia, as new EU quality standards drive up costs of production here.

Around the world generally, with the exception of India and China, the gap between rich and poor countries has widened, and income inequalities within both poor and rich countries have become much worse. Farmers in poor countries are also losing their livelihoods to subsidised exports from the industrialised countries – a sore point at the WTO.
 
According to the International Labour Organisation's World Employment Report, while a record number people are working in the global economy – about 2.8 billion people were employed globally in 2003 – half of them make $2 a day or less. Nearly 1.4 billion, the highest number ever, are living on less than $2 a day, while 550 million are living under the $1 poverty line. The gap between the richest 20% of the world's population and the poorest 20% has doubled in the past 40 years. The assets of the world's three richest billionaires exceed the gross national product of all 48 least developed countries and their 600 million people.

Globalisation also exacerbates some of the negative aspects of life on a shrinking planet: the threat of global warming – the mass movement of goods across the world – is now one of the fastest growing sources of the greenhouse gas emissions behind global warming; the international traffic in women for sexual exploitation; or the spread of AIDS throughout Africa and Asia. In Kenya alone, there are now 1.2 million people who are infected with the HIV virus, according to the UNAIDS report of 2004.

There are real worries about the world’s unique cultures being swamped by American consumerism – increased cultural exchanges through enhanced global communication – what some call the Coca-Colonisation of the world.

So globalisation offers great opportunities and great risks. At present, while minorities in developing countries are benefiting, these countries as a whole are among the group of losers. Economic planners in many of these countries – including Kenya and her neighbours in the East African Community (EAC) – believe that one way to turn globalisation to their benefit is through regional co-operation, by forming economic blocs like the EAC.

 

Kenya and the region in the age of globalisation

Kenya, Uganda and Tanzania are no strangers to the idea of economic co-operation. Before Independence, when these three territories were British colonies, each had a British governor, but for many purposes they were treated as a unit. As independence approached, in 1962, the East African Common Services Organisation was created, which was responsible for Customs and Income Tax, the Post Office, the East African Railways, the East African Airlines, the East African Harbours Authority, East African Universities, and other services including tsetse fly control and research. Most important was the Monetary Agency, which issued the common currency, the East African Shilling.

After independence, the three governments failed to agree on setting up a Federation and gradually went their own ways, splitting all the common services. The Common Currency broke up when Tanzania adopted socialism in 1966 and nationalised all its banks. Customs posts were set up on roads which previously had experienced free trade, making ordinary traders into smugglers. In 1968, the East African Community was created. But soon, in 1971, the Uganda government was overthrown by Idi Amin and the Heads of State ceased to meet, as the Tanzania’s President Julius Nyerere refused to sit at the same table with Amin. The joint Corporations were then broken up, creating three weak economies where there had previously been a relatively strong regional economy. The airline and railways suffered by losing their common maintenance and planning. The community effectively ended in 1977, only to be revived in the mid-1990s. In 2005, the new EAC’s most ambitious project, the Customs Union, came into being.

Under the Union, the three countries have a common external tariff (CET) and internal duties are being phased out in such a way as to protect the weaker industrial sectors of Tanzania and Uganda from being swamped by Kenya’s much stronger industries; most goods from Uganda and Tanzania are already entering the markets of the other member countries without being taxed; while Kenyan manufactures will continue to pay a 5% tariff for the next few years. The fear of ‘Big Brother Kenya’ and loss of jobs continue to slow progress on many fronts. There is also the complication that while Kenya and Uganda are members of the larger COMESA (the Common Market for Eastern and Southern Africa), Tanzania is a member of the Southern African Development Community (SADC).

The major economic blocs on the continent are, apart from the EAC:

 

But hopes are high that the Community, with its combined market of 90-million people, will emerge as a competitive player in the global arena. Rwanda will soon be admitted to the community, while Burundi has applied to join. Economic ties to Southern Sudan and Somalia are already strong, and are likely to grow swiftly as peace and stability return. A number of regional giants operate in all these countries and beyond, and cross-listing on the three countries’ stock exchanges is coming into vogue; East African Breweries, for example, is selling its shares on all three. Meanwhile, Kenya and Uganda have handed their railways over to a joint concessionaire, and there will soon be serious efforts to market East Africa as a single tourism destination. As mentioned earlier, Indian, Chinese, Korean and Southeast Asian countries are lining up to invest in East Africa, which they see as the gateway to the rest of Africa. The emphasis at business and EAC gatherings these days is on value-addition – for example, Kenya is officially the world’s second largest exporter of tea after Sri Lanka (unofficially, it is believed to have overtaken the island nation) but, in comparison, it earns only a fraction of the final price of its tea on world markets.

Facilitators at many of the discussions are likely to find that a number of their participants already have economic as well as social and kinship links with the other countries in the region. It should prove enlightening to get their views on the benefits and risks of regional integration and whether they feel that fears of Kenyan domination are justified.

Beyond its existence as an economic bloc, the EAC will also need to build a common stance on international social, political and economic issues, especially the threat of international terrorism.  Kenya has yet to pass a much contested Terrorism Bill on the lines of those already passed by Uganda and Tanzania. However, given the strength of Kenya’s civil society and their opposition to the erosion of civil liberties, it is unlikely that it will do so in the near future. It has also, again unlike its EAC partners, resisted pressure to sign so-called Article 29 agreements with the US under which US soldiers cannot be extradited to face war-crimes charges before the International Criminal Court. The whole issue is an extremely sensitive one for the region, given that it cannot afford to persecute and marginalise its large, peaceful and economically vital Muslim populations – but also given the evidence of terror cells operating in those populations.

Apart from the EAC, Kenya is an active member of the Intergovernmental Authority on Development (IGAD), which brings together Kenya, Ethiopia, Sudan, Somalia, Eritrea, Uganda and Djibouti where it has its headquarters. It was initially created in 1986 to tackle drought-related problems and resolve conflicts within the Horn of Africa region. However, its mandate has since then widened and it has become a vehicle for regional security and conflict prevention, regional economic growth, infrastructure development (transport and communications), food security and environmental protection – as well as the promotion of political dialogue between member countries.  From Kenya’s perspective, IGAD’s success has socio-economic implications. Kenya is often regarded as an ‘island of peace’ in the region, and it has therefore played important roles both in peace mediation and in hosting of refugees.

If the wider East African region is the first front in the battle to turn globalisation to our advantage, what should the next front be?

Globalisation and a united Africa

Does East Africa’s future lie in a wider pan-African alliance? Historically, as we have seen, the region’s closer links have been with Southern Africa and the world of the Indian Ocean rim, while North and West Africa has remained rather remote. Nevertheless, there are both practical as well as emotional reasons to turn Africa-ward, especially now that the African Union is involved in vigorous new initiatives and a pan-African parliament has been set up.

The African Union, or AU, is a pan-African organisation whose goal is to propel a united continent towards peace and prosperity. The AU advocates the political and economic integration of the continent. It aims to boost development, eradicate poverty and encourage Africa’s integration into the global economy. It succeeds the Organisation of African Unity (also known as the ‘dictators’ club’), which originated in the decolonisation struggles of the early 1960s, but which soon turned into an ineffective talking shop.

The AU’s New Partnership for Africa’s Development (Nepad) has drawn Western leaders into a constructive dialogue that recognises that it is in their own interests to help Africa come out of poverty and indebtedness, hunger and civil war, and take its place in the community of nations. Already the ravages of globalisation are sending waves of desperate economic refugees from North and West Africa into Europe, risking death by drowning and interment in detention camps in their search for a new life. While they enrich European culture and brighten its football, besides providing cheap seasonal labour on its farms, the situation is rapidly becoming explosive. So, no matter how inadequate the pledges and how slow their implementation, the very fact of Nepad’s existence means that there is a lifeline to the future.

AU and Nepad are currently dominated by South Africa, Nigeria and Libya. Kenya and East Africa need to engage more fully. One very good reason to get involved with continental initiatives is that Africa hangs together or falls apart together, so to speak. The reality of the legacy of colonialism is that Africa’s peoples and countries have all been lumped together in the consciousness of the rest of the world. To far too many outsiders, there is no difference between Nairobi and Bujumbura, or between Johannesburg and Lagos. Instability or conflict in one part of Africa hurt investment and tourism all over the continent in a sort of reverse globalisation. So self-interest dictates that East Africans wholeheartedly support the AU efforts to negotiate an end to conflicts in Burundi, Cote d’Ivoire, Congo – or any other place.

The AU’s Peer Review Mechanism, to which Kenya and Rwanda have already submitted, is a unique mechanism for states to monitor each other’s governance and human-rights records as well as their economic practices. However, sceptics have questioned the real political will to dig into other States’ internal affairs and politically sensitive issues. Nevertheless, the Peer Review Mechanism – if implemented well – holds the potential of one day bringing the curtain down on the era of the corrupt dictatorships that have thrived on the continent since independence.
 
Meanwhile, there is a huge scope for continental infrastructure projects that tap the vast natural resource riches and economic energy of the continent. Air and road links are improving slowly and steadily. The plans to link southern Sudan into the East African railway network (which is itself linked to Zambia and Southern Africa by Tazara) are reviving the dream of a Cape to Cairo rail link.

The relations among different regional economic blocks in the continent (as seen in the previous section) are also fragmented, tenuous and sometimes overlapping. But with the platform for dialogue provided by the African Union, the potential for deepening links is big.

A ‘United States of Africa’ – which was the Libyan leader Muammar Gaddafi’s dream when he conceptualised the AU – may be a romantic dream. But once the world’s largest continent starts to act in concert, who can doubt that it will become a major player on the global stage?

 


Notes for Facilitators

Objectives      

Sequence
1. Scenarios: Refer the participants to the cartoon from Professor Kibwana’s book, ‘Learning Together to Build One Nation’. Ask them to reflect on what is shown here. What do they see?  A young man is sitting at a table, having a cup of tea and a sandwich…. Behind him there is a thatched hut nestling underneath a tall office block. ‘I am a citizen of the World!’ the young man is saying.

 

Read them the quotation from Kibwana’s book that accompanies the cartoon:

Today the world has become my village. The communications revolution ensures that what happens in a village in a Third World country can become world news the same day. In addition, the world economy is extremely interdependent. With the collapse of the Soviet Union liberal politics now dominate the world scene. There is a scope for anyone to be a citizen of the world and to be involved in negotiating a New World Order, which truly recognizes the needs of the global citizen.

Ask the participants whether they agree with this.

Explain that this last point will be explored further in the discussion to follow.

 

2. Identification of Issues: Again, whether the discussion prompted by the scenario is carried out in a plenary session or (if there are too many participants) in sub-groups, remember to draw out the key issues that emerge and write them up on a flipchart or a board. You will be able to relate them to the discussion based on your reading of the background information.

3. The Age of Globalisation: You could make a brief presentation based on the first section of the Background Information, which describes the effects of easier travel and better communication – where ‘the new world of increased trade and speeded-up communication brought with it prosperity, progress and knowledge’.

But then note the qualification:
‘But not to everyone. While some people and groups became richer, others lost their lands and livelihood and became more insecure economically than they had been in the days when they had been isolated and led simpler, harder lives.’

Ask the participants:

Explain the effects of the growth of multinational companies, which source raw materials from one country, manufacture in another, assemble in yet another – and then sell all round the globe.
Note what is said about the gains of globalisation: ‘increased choice of goods, services, entertainment and careers, increased mobility, better information, a sense of connection with the rest of the world’
Ask:

And on the ‘swamping’ effect of American consumerism:

4. Kenya and the Region: Remind the participants of the setting up of the East African Common Services Organisation in 1962, which was responsible for Customs and Income Tax, the Post Office, the East African Railways, the East African Airlines, the East African Harbours Authority, East African Universities, and other services including tsetse fly control and research. And then the East African community was created in 1968 – only to break up in 1977.
Possible questions to raise:

 

5. Globalisation and a united Africa: Perhaps it would help to make a brief presentation on the concept of Pan-Africanism – which was strongly advocated, especially by leaders such as Kwame Nkrumah and Julius Nyerere in the early years of Independence. And now there is the African Union and NEPAD.

Apart from emotional reasons – what are the practical reasons?