Wednesday, September 23, 2009

The missing Kshs. 8 billion: Uncovering Kenya's pyramid schemes


On 14th January, 2009 the Hon. Minister for Co-operative Development & Marketing appointed a Taskforce to look into the operations of pyramid schemes. The appointment of the Taskforce was a reaction to the hue and cry from victims of pyramid schemes and other related schemes.

The Taskforce held public hearings countrywide where views from the victims were received. A lot of data regarding the particulars of the investors, directors and promoters of pyramid schemes was collected during the exercise. Interviews were also held to provide opportunities to directors of pyramid schemes, individuals and groups to give information on the role they may have played in the pyramid schemes saga.

270 pyramid and other related schemes were identified with148,784 investors registered as having invested a total sum of Kshs. 8,178,737,402.

The top ten institutions in terms of amounts invested were:

  • DECI , founded by one George Donde and his sister, Mary Odinga with 93,485 investors amounting to a total of Kshs. 2,405,518,832.00
  • Clip Investments Sacco Ltd 5,846 1,993,866,422.00: The taskforce discovered that a director of Clip Investments Sacco, Peter Ndakwe bought plots in Runda estate worth Kshs. 200 million. He later transferred the property to a company in Panama "at the height of complaints by investors". The transfers of the four plots in Runda L.R 1470/15,14970/14, 14970/7 and 14970/6 were made on July 11,2006 and April 20, 2007, when the crisis broke out.
  • Kenya Business Community Sacco Ltd with 921 investors amounting to Kshs. 780,698,218.00. In early 2007, The Standard newspaper reported the founders of Deci (listed above) and Kenya Business Community had previously been involved in another financial scam, Kenya Akiba, banned in 2005. 
  • Sasanet Investment Sacco Ltd with 629 investors amounting to Kshs. 739,948,412.00; and whose director is identified as Michael Chege. Sasanet allegedly bought 30 units of flats worth Sh60 million in Sunrise Estate, 11.5 acres of land in Nyari Estate, Nairobi, four flats along Chaka road in Nairobi and later sold 32 flats at Sh2.5million each in Nairobi’s Imara Daima Estate through his advocate Ajaa Olubayi. 
  • Jitegemee Investment Sacco Ltd with 3,828 investors amounting to Kshs. 494,401,600.00. Jitegemee was faulted for dual registration both as a limited liability company and as a co-operative society.
  • Circuit Investment with 1,392 investors amounting to a total of Kshs. 348,943,103.00. The director of that company which closed in September 2007 was Emilio Kifue Mwangi.
  • Family In Need Organisation (FINO) with 4,580 investors amounting to Kshs. 157,280,553.00. Investors in the scheme were told they would double their initial investment after three weeks.
  • Global Entreprenership with 9,206 investors and a portfolio amounting to Kshs. 139,006,632.00.
  • Spell Investment with 544 investors amounting to Kshs. 120,326,860.00 whose deceased director was Boniface Anderson. At his death Sh200 million held in his account at Stanbic Bank was transferred to his mother. 
  • Mont Blanq Afrique with 774 investors amounting to Kshs. 82,834,000.00. The directors are listed in the Task Force report as being the same as those for Jitegemee. 
Read the Report of the Taskforce on Pyramid Schemes here

Friday, September 18, 2009

Kenya’s IDP crisis: Only history can judge our collective inaction

In the aftermath of Kenya's 2007 general election over half a million people were displaced. Fleeing homes, loosing livelihoods and loved ones. To date some of the 2007 internal refugees still remain both in camps and transit sites. Yet the anomaly of internal displacement is not new to Kenya. From pre-independence, many Kenyans have been forcibly removed from their homes, having to settle elsewhere as refugees within their own country.

In contemporary history, the IDP crisis has been closely linked to the country’s electoral process, particularly with the advent of the country’s multi-party era. The crisis became the proverbial elephant in the living room – a topic that was too taboo to mention. For years following the post-election clashes of the 1990s the Moi regime swept the issue under the carpet, maintaining that there were no IDPs. However, with more freedom of expression and opening up of the media airwaves, the plight of IDPs has gained more limelight.

Kenya’s internal conflict has been almost like clockwork set to the political scene during general election years of 1992, 1997, 2002 and 2007 as well as the constitutional referendum of 2005. Every five years people have had to flee their homes and that is why the IDP situation falls into the category of a “complex emergency”.

So why term Kenya’s IDP crisis a complex emergency? For the simple reason that unlike natural catastrophes, people loose all they have in a matter of minutes yet the underlying cause is politically instigated and conflict-generated (Macrae and Zwi, 1994).

The United Nations’ Office for Co-ordination for Humanitarian Affairs (OCHA) (which draws its definition from the UN's Inter-Agency Standing Committee) defines complex emergencies as ‘a humanitarian crisis … where there is total or considerable breakdown of authority resulting from internal or external conflict …. (IASC, 1994). However, this reliance on authority breakdown has been criticized. David Keen author of the book "Complex Emergencies" writes on OCHA's definition having shortcomings arguing that in the case of 1994 Rwanda, the problem was not so much the breakdown of authority, rather that the "authority" being imposed was "ruthless” and had “vicious efficiency".

Indeed Kenya has always had a government, and the UN Guiding Principles on Internal Displacement stipulate that it is this same government that should ensure that the IDPs receive requisite humanitarian assistance, are resettled and reintegrated back into society. However the Kenya government has mismanaged this obligation.

The Government’s Ministry of State in charge of Special Programmes initiative to resettle the nation’s IDPs has been dubbed “Operation Rudi Nyumbani” (return home) which includes financial assistance and transport among other short- term measures.The causes of displacement and obstacles to resettlement have not been adequately addressed and the Ministry's stop-gap activities have failed to assure Kenyans that the Operation is not just a PR exercise so the government looks good to donors.

There has also been a disturbing tendency where anyone (whether an IDP or an interested party such as the Kenya Human Rights Commission) who questions how an unaccountable government can accountably distribute funds and materials to IDPs are met with torrents of abuse and muzzling.

Queries on government commitment and initiatives to assist IDPs to ensure long-term peace have centered on: poor co-ordination and corruption; insecurity; child and gender based violations; inadequate shelter and compensation for loss. The Kenya Human Rights Commission in an October 2008 report “A Tale of Force, Threats and Lies” even accused the government of forcing IDPs to go back to their homes.

As for the UN and those that adhere to the IDP Guidelines and rules regarding complex emergencies, they have been confined in that they have to deal with the government of day and trust that the government will most effectively and equitably distribute humanitarian assistance. However when the lives of people and those of future of generations are at stake, a dire need emerges to make sure that this complex emergency does not become a permanent one. It is thus imperative that the international community demands that the government ensures that the rights of all IDPs are upheld.

Indeed recent political events have shown the danger of inaction in enforcing strict observance of ethical standards regarding resettlement. Just last week, the government decided to compensate settlers in the Mau forest. This is hardly the first time such a compensation scheme has been conceived, however the common occurrence has been that the majority of the money falls into the pockets of the fat cats who grabbed the land.

The eponymous Ndung'u report which investigated illegal allocation of public land, lists no less than the families of former presidents Jomo Kenyatta and Daniel arap Moi as those who grabbed public property earmarked for squatter resettlement. On this issue, Nobel Laureate Prof. Wangari Maathai was today quoted in the media saying, “… the Kenya government does not have money, it’s your taxes. So if they don’t have taxes they will ask the World Bank to give them money to come and compensate leaders who misused their power (to acquire) land they should never have acquired …”

As it is, the Ministry of State for Special Programmes requires more funds which will come from the National Budget and the excess from donors. Isn’t it about time to first question whether Operation Rudi Nyumbani has been a success and whether indeed the government should still spearhead IDP assistance?

In August 2000, Fr. John Anthony Kaiser, a crusader for the rights of internally displaced persons was murdered. He was vocal speaking out on the injustices meted out to the displaced. However, almost a decade later, even more people languish miserably exiled from their homes.

As it is who knows how many more people will join the ranks of IDPs come the next general election, or for that matter the anticipated constitutional referendum? We also need to re-examine our outlook towards Kenya’s IDPs. In an age of reality television where shows such as Big Brother Africa keep viewers glued to their screens; alas when it comes to our brothers and sisters living in camps we are no longer voyeurs. Indeed, there is no difference between our IDPs and those in Darfur, yet though our eyes face the screen watching news stories on their plight, we no longer see the real suffering; we no longer question why this is happening; we only say a silent prayer that come 2012, we will not be the ones taking up airspace as IDPs.

Is it only in Kenya where we have become immune and impervious to news stories on corruption, impunity and gross violations of human rights? Could this be because this is the country where even those that engineer and carry out grand larceny on our nation’s coffers have the opportunity to transform themselves into televangeslist? Is that why we do not find it dysfunctional to watch the IDPs in their tattered clothes which cover emaciated bodies and hold up despondent faces?

Thursday, September 3, 2009

Slum Safari’s: Tourists pay for the squalor and stench of poverty, not development

There was uproar on twitter this morning regarding Kibera Tours, a website advertising slum tours in Africa’s largest slum. Indeed Kibera Tours is not the first nor will it be the last outfit trying to make money out of poverty. Tourists seeking such experiences can go to Dharavi in Mumbai - the biggest slum in Asia, the favelas of Rio de Janeiro, South Africa’s townships or even Mexico City’s garbage dumps.


Such escapades have been made even more popular by celebrities who sometime go by the title “Ambassadors” such as Angelina Jolie and Chris Rock, who after a tour of the ramshackle huts, having had to hold their breath while passing the open sewers, ducking the flying toilets while walking the narrow footpaths and in front of a trash heap, maybe surrounded by big bellied snot nosed children, express outrage at the poverty and make impassioned pleas for more money to assist the people. Even the Oscar award winning movie Slumdog Millionaire put comedy into the scenario.


The ironic thing is that Kibera has the most number of NGOs, INGOs, CSOs, FBOs, CBOs, students on their gap year or whatever name they go by per square foot compared to the rest of Kenya. Yet, poverty persists, maybe a prime example of the economic law of diminishing returns.


Recently at Yipe.org we met a youth group from Kibera who told us they were into “eco tourism”. When we delved into their enterprise further, there was nothing eco friendly about their business. It was slum tourism pure and simple. However the lead entrepreneur was un-phased and said why care what it’s called or what it’s about when you make US$ 20 on a bad day! – this in a place where the majority live on less than US$ 2 per day.


Reading the customer testimonials on the Kibera Tour website makes one wonder whether the inhabitants have been dehumanised. Among the customer reviews posted on the site a few stood out:

“This is what our guests said after joining about our tour, our organisation and about Kibera: ‘It feels safe’ … ‘Very interesting to see. Unique experience! Friendly people! Solidarity and happiness. Impressive!’ … ‘Impressive to see how strong the people are’ … ‘I thought first it was very dangerous, but now I think every one was friendly and helping each other'….” And the list goes on …

So what is on display: the people or the slum environment?

The reviews above teeter dangerously close to the environmental determinism movement of the late 19th and early 20th centuries that got away with saying things such as people that live in the tropics are lazy, slothful and riddled with venereal diseases amongst other slurs. To objectify the “people” of Kibera in such a way is even worse because they don’t receive the cash for the tours; the tour companies do.


Further, objectification of the people comes on the advice posted on the Kibera Tours site to the tourists:

Please don't hand out anything during the tour. So don't hand out money, sweets, pens, balloons and so on. This can create chaos and quickly may establish the assumption that tourists equal gifts”.

So, how come slum tourism seems to be the hottest business idea around, judging by the number of people involved? Well, it’s really simple. For an entrepreneur seeking to venture into such an industry the entry barriers are low; so low they are almost negligible. Kibera is an informal settlement which means it officially doesn’t exist. The sprawling slum has a reputation of being dangerous, so even police or local authority presence is low – so you can pretty much do anything without too much interference.


The startup costs are also minimal – the slum is already there and with rural-urban migration it continues to grow. No need to invest in infrastructure on that score. The “people” are also there for the tourist’s viewing, and with high fertility rates coupled with high unemployment levels (which would otherwise take them out of the slum) the total package is there.


What about attracting customers? With internet access getting cheaper one can within no time set up a slum-safari site and get interest from eager do-gooders from afar. Without much government regulation the dollars, yen, euros or whatever other currency goes direct into your pockets. In fact you don’t even need to share it with the “people”.


Demand is also inelastic, it would take a great calamity for a do-gooder’s heart to change (demand) and poverty (supply) will remain and even grow – making a perfect equilibrium point. Finally there are no sunk costs; indeed it is in the interests of such entrepreneurs that the slum stays just the way it is. Slum upgrading initiatives are thus the only threat for the business. Tourists won’t pay to tour high rise concrete apartments equipped with basic living facilities even if the people living there are the “people”. Tourists pay for the squalor and the stench of impoverishment, not development – that they do by donating money to aid agencies.


But what to do when even the larger travel companies are joining the fray? Victoria Safari’s which operates throughout East Africa has a package called “Africa Slums Tours” calling it “pro poor tourism”. From its website pro poor tourism is described:

“the concept of pro poor tourism in Africa is not new as it has been and is being practiced in South Africa. Soweto and Shanty tours in Johannesburg and Cape Town respectively are not new tours but have been ongoing slum safaris that are changing the face of South Africa's Slum areas. Kibera Slum dwellers in Nairobi - Kenya are gradually beginning to reap the benefits of Kibera Slum Tours just as other Kenya Slums dwellers, courtesy of Victoria Safaris.”

If slum dwellers have been benefiting then wouldn’t that mean there would be no more slums to visit? Besides that, there is also the worrying aspect of the logo of Eco Tourism Kenya at the bottom of the Africa Slums Tours web page. Ecotourism Kenya is a civil society organization that was founded in 1996 to promote ecotourism and sustainable tourism practices in Kenya. Is slum tourism then sustainable tourism?


So will slum tourism continue to thrive? Of course as long as the barriers to entry remain low, and the government does its best to do nothing to uplift the lives of the millions of Kenyans living in informal settlements. And it is doing that job very well!