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!

Kenya's youth fund wrangles continue

Africa, Yes YOU Can!

Transcript of President Obama’s Video Message to the AGOA Forum in Nairobi

Hello everyone. I’m sorry I couldn’t be there with you in person. But please know that for me and for my family, the memories from our recent trip to Ghana are still fresh — we will always remember the warmth of the Ghanaian people and the promise of Africa’s potential.

I hope you’re enjoying Kenya — and the hospitality of the Kenyan people — as much as I always have. When I first came in 1987, it was to discover the story of my father, who had grown up herding goats in the tiny village of Alego. When I visited as a Senator, I promised to work for a U.S. foreign policy that gives hope and opportunity to the people of this great continent.

Today, it is my privilege to address you as President. And I want to repeat what I said three weeks ago in Accra. I do not see the countries and the peoples of Africa as a world apart. I see Africa as a fundamental part of our interconnected world. In our global economy, our economic fortunes are shared. And history shows that economic growth is among the greatest forces for progress in lifting people out of poverty.

That’s why the African Growth and Opportunity Act is so important. That’s why the AGOA Forum is so critical. By breaking down old barriers and opening new markets, we not only increase trade between our countries. We create powerful incentives for African entrepreneurs to grow their businesses, to create jobs and build a brighter tomorrow for their children. That is what AGOA is all about.

So I thank President Kibaki and Prime Minister Odinga for hosting this Forum. And I pledge to you the full support and partnership of the United States. That is why my Administration is represented there today by outstanding members of my Cabinet.

Over the last decade, AGOA has transformed the U.S.-African trade relationship. Opening America’s doors to your exports has been good for Africa — creating African jobs, bringing millions of dollars of investment to sub-Saharan Africa and sparking new trade across the continent. And it’s been good for America — with African exporters seeking U.S. expertise, investments and joint-ventures. And today, we’re your single largest trade partner.

At the same time, it’s clear that U.S.-African trade has yet to realize its full potential. And if the current recession teaches us anything, it’s that in a global economy not only the opportunities are shared. So are the risks. So there’s so much more we can do together to plant the seeds of our economic recovery, and to achieve lasting prosperity.

Only Africans can unlock Africa’s potential. It will take your entrepreneurship. Your innovation. And only Africans can ensure the good governance and strong institutions upon which development depends. Open markets alone are not enough. Development requires the rule of law, transparency, accountability, and an atmosphere that welcomes investment. And I encourage every country to set concrete goals for overcoming the obstacles to economic growth.

And to all Africans who are pursuing a future of hope and opportunity, know this: you have a partner and a friend in the United States. That’s why we’ll work with you to develop strong institutions, clear legal frameworks and the regulations and infrastructure that help bring new products to market. That’s why we’ll work together to harness Africa’s vast natural resources to generate clean, renewable energy for export. That’s why I’ve pledged substantial increases in our foreign assistance — not simply to help people scrape by, but to unleash transformational change. And that’s why we’ve joined with our international partners to promote food security by investing $20 billion in agricultural development — not simply to hand out American food, but to promote African self-sufficiency.

These are the things we can do together to unleash the skills and talents of our people. And to ensure our common prosperity in the 21st century. And if we do, I’m confident that Africans can live their dreams from Nairobi to Accra, from Lagos to Kigali, from Kinshasa to Cape Town.

Thank you for your work at this important Forum. Enjoy Nairobi.

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Kenya’s Education System: A leaning tower of Babel

Today's top news story of the Daily Nation went by the title “students with lower grades to join varsity”. The good news was that public universities agreed to admit high school graduates with lower marks compared to last year.

Of course this will improve the lot of students who because of grades would not be able to enter university. However, though this should be a harbinger of hope for Kenya’s youth, several questions emerge on the real effects of such a move.

The unemployment rate amongst Kenya’s 35 million people is approximately 40%. It is estimated that 64% of these are the youth. Out of these, only 1.5% of unemployed youth have formal education beyond secondary school level and the remaining over 92% have no vocational or professional skills training, at all. But does allowing these extra youth the opportunity to go to university make a real impact in their chances of getting a job?

Even though universities are the cradle of research and innovation which could be perceived as a step in the right direction of nurturing future entrepreneurs, the education system before tertiary level does not adequately impart the innovative and resilience skills required of entrepreneurs.

Annually more than 240,000 post-primary students enter the labour force. Additionally 143,000 students graduate from high schools. The Kenyan education system in its current form does not equip these school leavers with skills to start business. Rather the curriculum is founded on rote learning rather than creativity and innovation, further stifling entrepreneurial development.

Even in the universities the calibre of the teaching staff raises questions. The Commission for Higher Education recently proposed reforms where the lowest qualified lecturer would be a tutorial fellow holding a Masters degree. The eminent scholar and noted historian Prof. Bethwell Ogot has been in the forefront as an opponent of this measure. He was recently quoted in the media decrying such a move saying "some teachers with a Masters are even allowed to teach Masters students".

And though these new regulations should be commended as a move to regulate the amphitheatre football stadium scenario many university students have to face and hoarse throated lecturers’ rue, at the end of the day it’s really not what is heard in a lecture but the quality of the content and transfer of knowledge that counts.

Kenyan education reforms have not only been the preserve of academia. Politicians whilst campaigning have promised “new education systems” that increase the capabilities and capacity of the youth to “effectively operate in the knowledge economy”. Even Vision 2030 - Kenya's development plan has lofty claims founded on the education system that will by then make Kenya if not a newly industrialised economy then a middle class one. However government commitment to education has been compromised with a new Education Bill that at least is expected to enforce laws that will keep children in schools, where the Ministry of Education has been less than proactive in ensuring it passes through parliament.

A question of merit versus the feel good factor

Meritocracy is a situation where opportunities are extended based on demonstrated talent, competence and ability, rather than wealth, family background, socio-economic class and other historical determinants of social position.

When extending a helping hand to enable those who just by a few points missed entry into university, thought must also be given to both those already in public universities who worked hard to make the grade as well as those still in secondary school. With no ultimate reward (a decent job with a decent wage assured at the end), the message to those students in our campuses as well as high schools is that hard work in school no longer pays. After all, another meeting of university dons can be convened to lower the entry grade further at a later date.

So what balance can be accommodated?

First, as the first crop of standard one pupils of the 2003 universal primary education policy edge closer to entering secondary school, the policy of free primary and subsidized secondary schooling needs a committed review, with the ultimate objective of providing quality education, whether for all or for a few has to be debated, as well as the subject of another post.

Kenyan policy makers also have to be honest with themselves and the People of Kenya about the increasing rate of unemployment particularly amongst the youth. The education system has to provide financial literacy, personal and business management training as core subjects. The time when a job was assured even in the civil service is over – at Yipe.org we have even heard of Masters degree holders digging trenches as part of the ill-thought Kazi Kwa Vijana programme.

To accommodate both the university graduates and lower level school leavers estimated at 800,000 annually, business reforms that specifically target micro-enterprise startups also need to be implemented.

Ultimately, education has to be held sacred. Kenyans need to take ownership of education and never allow it to be politicized ever again.

Security and accountability are free public goods!

Public goods are those that are non-rivaled and non-excludable. This means, respectively that consumption of the good by one individual does not reduce availability of the good for consumption by others; and that no one can be effectively excluded from using the good. Due to the fact that the use by paying and non-paying consumers cannot be controlled, governments have to step in to ensure provision of such social goods. In turn tax monies go towards enabling governments to provide these social services.

Internal security is one such public good that falls to governments to provide to citizens. Though private sector security companies complement government security, they are constrained in providing this service for all as they do not enjoy economies of scale on the one hand and also to provide security for all is not economically viable in terms of ensuring that all consumers pay for such services.

According to Paul Collier writing in an article titled “Development in Dangerous Places” another public good is accountability. Historically, rulers needed revenue for their armies, which in turn provoked pressure for accountability and good governance from the taxpayers. Ultimately, security and accountability to Collier are not just public goods but expressions of power.

In countries of Collier’s Bottom Billion however, social divisions reign supreme. This lack of national cohesiveness in turn makes it more difficult to provide public goods. For instance, the 2008 post-election violence in Kenya aptly demonstrated the weak bonding of nationhood where tribes hacked one another with machetes and arrows causing the nation’s internal security to run down the doldrums. Kenya, fortunately or unfortunately has in its independence not had to face a massive external threat from an external aggressor which would galvanise its more than 40 tribes into a feeling of being Kenyan against foreign attackers. The Somalia and Ethiopian border squabbles never even reached such a point because the Kenya is home to sub-tribes of both nations. And even the most recent Migingo Island squabbles, were over a piece of land that hosts more Kenyans than Ugandans.

This lack of social cohesion breeds numerous self-identities and cultures which clash, and not without blood being poured. What is left is a fragmented population, where for instance the hint that Luis Moreno-Ocampo intends to prosecute crimes against humanity, send politicians into a tizz, whipping up ethnic hatred at the drop of a hat.

The second weapon politicians use is to invoke the concept of sovereignty forgetting that sovereignty requires a sense of nationhood; something that they themselves have to ensure is muted, so as to contain groupings calling for accountability.

Collier even names the weakened status of the military in bottom billion countries as a tool used by the political elite to retain power. It is this same military that presides over hurried swearing in ceremonies of tin-pot dictators when they steal elections overnight. And it is this same military that terrorises the masses to accept these “democratic election results”. But, it is this same military that must remain toothless in order for unpopular leaders to survive.

During the Migingo saga, many Kenyans commented that a small military battalion should invade the one acre island to shut Museveni up. But Kenyans were told that diplomacy was the way to go, even after President Museveni himself insulted Kenyans and more specifically members of the Luo tribe, from whom the Prime Minister Raila Odinga originates.

This was not the first time Uganda’s army had tried to stray onto Kenya’s territory. In the Moi era, and indeed during Jomo Kenyatta’s reign, Uganda insurgencies were swiftly turned back, and it was common to find the borders being closed as a matter of national security. However, probably as a good neighbour Kenya has turned to diplomacy as its weapon of mass destruction. This in turn has also led to the proliferation of small arms which have intensified a heightened scare amongst citizens for their personal safety.

The impact on business

Providing a safe environment where firms can conduct their business is a key function of any government. Yet, around the world, as many as 15% of firms report losses due to crime. In spite of this, a much higher share of firms (almost 60%) protect themselves from theft by using private security services, which adds to the cost of doing business. Interestingly, 16% of African firms report losses due to crime, at par with Eastern Europe and Central Asia. However, over half of the African businesses employ private security firms. Consequently, African firms spend an unrivalled amount of money on security, equal to over half a percentage point of sales, which is considerably higher than East Asia or South Asia.

The Africa Competitiveness Report 2009 (ACR) shows that most of the competitive disadvantage of African firms is due to invisible costs—that is, losses experienced by factors that include corruption (non-accountability) and lack of security.

The business costs of crime and violence and the sense that the police are unable to provide protection from crime are particular concerns for African entrepreneurs. The ACR disaggregates security into costs of terrorism, crime and violence, organized crime and the perceived reliability of police services. Amongst the survey’s findings Morocco’s weakening security environment was found to contribute to the country’s declining competitive position. The security situation in Kenya is also extremely worrisome, particularly in crime and violence, the potential of terrorism, and the prevalence of organized crime.

Unfortunately for small enterprise, there is no significant difference in the cost of security services borne by small firms compared to medium and large ones (in terms of share of sales), nor is there a difference between foreign and domestic firms. Africa’s export potential is further impaired as local exporters tend to spend more (almost 10% more) than non exporters.

In Africa, individual country’s competitiveness is also adversely affected by the lack of security. For instance, Egypt one of Kenya’s major competitors has relatively high levels of security and a resulting low cost of crime and violence for business. In terms of interest from foreign investors to set up businesses in Africa, security makes many shy away from putting their cash in jeopardy in unsecure environments. Mauritius has been able to exploit insecurity on the continent, benefiting from significant inflows of FDI over the past years in part due to the fact that the level of security in the country is good, particularly by regional standards.

Within East Africa, Kenyan 75% of firms have to pay for private security services. This is 5% higher than the regional average. Kenya also pays the highest cost for these services. In turn government accountability data in East Africa indicates that government wastage of resources is highest in Kenya and the country also has the highest perception amongst its business community that the police are unreliable.

Security and accountability are two public goods that make economic development and growth possible. History has provided more than adequate testimony that civil conflicts in poor countries last longer than international wars. With such a looming dagger hanging over these countries, unless security and accountability to address wrongs are provided (not at cost!), the interest of entrepreneurs to venture into business will be lost. Somalia is a prime example of this where revenues generated from enterprise (whether legal or through illegal means such as piracy) are stashed away in foreign countries, further plundering the country into a failed status.

Finally as Collier states accountability is indeed a two way street between government and citizens. Thus standing up to demand security and accountability is required of us all in the democratic spirit of no taxation without representation!

The Cost of Red Tape for East Africa Business

A study on businesses in Rwanda titled “Cutting The Cost Of Red Tape for business growth in Rwanda” based on a country-wide sample of more than 400 businesses found that regulatory compliance imposes significant costs on local businesses and on the economy as a whole. Overall, the study reported that red tape cost businesses in the formal sector at least RwF 55 billion, equating to approximately three per cent of GDP.

Tax compliance was found by 53% of the surveyed businesses to be the most problematic regulatory area in terms of the time consumed in navigating troublesome regulations. These included preparation of paperwork for tax audits.

Just this week the Kenya Revenue Authority announced that tax returns would now be online, reducing the need to visit the tax offices in person – which, for many businesses, means that someone has to stand in frustrating long queues to file returns and make VAT payments. For most micro-entrepreneurs, such visits mean closure during business hours. translating into further loss of revenue. As the Rwanda red-tape survey states, “standing in one of those queues, with our business on hold, it is hard not to think that regulations are a waste of time – simply ‘red tape’ and nothing more”.

Other hindrances to tax and business regulation compliance include poor customer service from unhelpful public officers, as well as the slow pace of processing forms. Other indirect obstacles include the high costs of public transport, making visits to these offices higher in opportunity costs.

When applying for public utilities such as water and electricity, the need to visit various departments in order to complete company requirements also act as a disincentive, when weighed against profits if the business owner remains at work in their business premises. It thus becomes more attractive to pay for illegal connections than waste time and money moving from one office to another checking the status of one’s status of their connection applications.

For businesses involved in exports, the paperwork requirements are both numerous and complicated. This again turns out to be costly in terms of time. Furthermore, the requirement that each consignment has to be verified by standards bureau’s in turn act as a disincentive to comply with existing rules.

And although Kenya’s President Kibaki ordered that the Kenya Ports Authority operates 24 hours, there still remain substantial delays at Customs for clearing and forwarding agents. These delays are felt not only in terms of time spent, but also involve direct expenses having to be paid to transport companies for the waiting time of their trucks and drivers awaiting clearance. According to the Rwanda survey, some businesses said that delays from Customs in some cases resulted in them losing clients.

There is also lack of clarity about products that fall under tax exemption status. Unfortunately tax regulations offer various interpretations within their exempt goods brackets. Licensing of goods is also mired in misunderstanding as well as long delays in obtaining the necessary approvals. A recent example regards the introduction of bans on certain plastic bags where even larger retail enterprises queried the exact plastic weight of bags that were banned.

The cost of red-tape

Compliance costs are of two types: one-off costs, such as the costs associated with initial business registration and recurring costs, which arise on a regular basis.

In the Rwanda survey, the overall total regulatory costs for the Rwandan economy amounted to at least RwF 55 billion per annum. The majority of these costs were spent on complying with tax regulations (33.8%) followed by costs of complying with export requirements including delays (33.6%).

Tax compliance was found to affect micro-entrepreneurs as much as large companies. For instance in the Rwanda red-tape survey, there was a difference of 15% in the responses of enterprises with over 100 employees and those employing less than 5.

Business registration procedures were most felt by businesses employing less than 10 employees, with temporary interruptions by having to close the businesses in order to comply with regulations being cited most. According to the 2005 Human Development Index Report titled “Aid, Trade and Security in an unequal world” on average the cost of starting a business in sub-Saharan Africa is 224% of the average national income, compared with 45% in South Asia. This factor keeps many entrepreneurs in the informal sector in order to survive.

To comply with red-tape costs, firms are often forced to pass on these costs onto their customers, which in turn have economy-wide knock on effects. For business startups this makes marketing their products and services doubly onerous. Ultimately the government loses revenue and taxpayers may face higher rates as a result of the government seeking to recoup lost revenue from registered businesses.

Higher taxation results in businesses not disclosing full information with regard to income and/or number of employees in order to avoid higher penalties. This in turn sometimes results in employee layoffs as a way to mitigate reduced earnings.

High tariffs on imports also lead to smuggling by unscrupulous entrepreneurs, who often have set up rings where they receive tip-offs of impending raids and offer bribes to evade prosecution. This leads to law-abiding entrepreneurs to exit the market as they are unable to compete on an equal basis with such enterprises.

Even VAT, the most common tax acts as a disincentive to registered enterprises. Businesses are required to pay VAT when they order supplies of inputs, but they often experience a considerable delay between paying the VAT and receiving payment from their customers for the goods or services provided. When combined with the costs of actually buying raw inputs in the first instance, this forces small business to operate with very little working capital.

Reducing the costs of red-tape frees up resources for more productive activities as well as spurring wider economic growth. Thus it is imperative for economic reforms to focus on regulatory and administrative environments that act as the foundation of business-friendly policies thereby stimulating trade and attracting more people to venture into entrepreneurship.

For starters as regards micro-entrepreneurs simplifying procedures that reduce the need for in-person interactions are a first step in the right direction. As seen from the increase in mobile phone cash transfers and banking, revenue and regulatory authorities can also harness these tools. This move should also encourage more entrepreneurs to comply, as well as reduce unnecessary delays in business.