Accountability: its about time!

This week Nigerian Agency for Food and Drug Administration and Control (NAFDAC) drug regulators announced they arrested 12 people in connection with the poisoning of 111 babies with a tainted teething medicine. If convicted NAFDAC says the 12 face upto 15 years behind bars or a US$ 3,500 fine.

The teething gel, ironically called "My Pikin" (my baby in pidgin) which contained a chemical substance, diethylene glycol that is commonly used as engine coolant, has already claimed 84 children’s lives.

On this side of the continent, impunity seems to be the name of the game as exhibited in the “trashed” report on defunct Nyaga Stockbrokers. By far in its time one of the more popular stockbrokers (as evidenced by long queues outside its Nation House headquarters in Nairobi), the report outlines a long standing fraud by the brokerage firm on unsuspecting investor clients.

Yesterday’s editorial in the Business Daily also pointed to further collusion in not pursuing the fraud. The paper’s journalists, as reported in the editorial, were dissuaded from investigating the Nyaga forensic report by industry insiders on the pretext that reporting on the Nyaga Stockbroker report “would erode investor confidence in the stock market”.

“Many sources talked to in the run-up to publication of our report on the Nyaga Stockbrokers fraud on Tuesday have, for instance, suggested that we should not carry the story for the simple reason that it would erode investor confidence in the stock market.

In these people’s world, stealing investors’ money, forgery, and engagement in illegal activities such as margin trading do not have any impact on investor confidence so long as the victims do not find out that they are being fleeced.” - Editorial: Investors deserve better than a landscape of fraud and graft, Business Daily, February 11, 2009

This burying of heads in the sand for the sake of keeping things “sawa” is what has led to the perpetuation of fraud and impunity in our society. When regulators and colleagues in the brokerage industry collude to hide evidence of fraud from the public, in the mistaken belief that “confidence” is at stake - of course it is at stake!

To allow the unsuspecting public to continue to invest in shams, when one knows the real story behind them, makes the abettor just as liable as the fraudster themselves.

As for the Capital Markets Authority where some of their officers did report anomalies in Nyaga and where nothing was done for five years, it is beyond comprehension how they have been allowed to sit on the forensic report since the end of last year on the pretext that they have to ensure its veracity! With such a slow pace in holding the fraud masterminds to account, it is such actions that do lead to “low investor confidence”. If our money will not be protected by the CMA who have dragged their feet in holding the wrongdoers to account, then why even be surprised when IPO’s such as Co-operative only subscribe upto 70%?

To know and not to do is not to know

Just yesterday in the UK, ex-HBOS bank chief Sir James Crosby quit as deputy director of the Financial Services Authority, after a memo was produced suggesting he’d sacked his head of risk back in 2005 for suggesting the bank’s strategy was too risky.

In China, 2 dairy company executives were sentenced to death, whilst the company’s board chairperson will spend the rest of her life behind bars for selling milk contaminated with melamine.

Nigeria has also started proceedings against the “My Pickin” poisoning culprits.

In Kenya, financial fraud scams have not taken any lives as yet. However, if we allow the Nyaga report to go unaccounted for, then we fully deserve to be scammed by the next Bernie Madoff that crosses our path!

Now, TODAY is the time to demand accountability – from our brokers, the regulators, our leaders, our managers, our employees, our friends, our family, and most importantly ourselves.

Where your business reputation precedes you…

“He who has relatives in other people's lands should make sure that he lives in peace with other people. Otherwise he exposes his children to the wrath of the other people should he misbehave against people from those areas in whose lands his children live”. - Taban Lo Liyong, Jan. 18, 08 (Juba)

This week an article on Kenyan business in South Sudan was posted on Breaking News Kenya. The article said Kenyan entrepreneurs are taking advantage of the 2005 Comprehensive Peace Agreement and moving to Southern Sudan in large numbers to open businesses. These run the gamut of enterprise, ranging from kiosks, wholesale businesses, road repairs, cargo and insurance, amongst others. Most traders narrate tales of success and are optimistic that Sudan's economy will continue to flourish.

However, the article also goes on to say that this prosperity was not going unnoticed by the locals who though admiring Kenyan business gusto, generally see our compatriot expatriate entrepreneurs as “dishonest, greedy and plunderous”.

This perception was even discussed a year ago by the well known academic and author, Taban Lo Liyong. In a presentation reported in New Sudan Vision, (The Professor of Controversy: Taban Lo-Liyong warns South Sudanese after Kenyan violence), Prof. Liyong warned his people not to let Kenyan businessmen and women take the lead in Southern Sudan.

According to him, Kenyan business practices of dishonesty and greed were mainly culpable for promoting the obscene inequality in wealth distribution in Kenya, sowing the seeds of hatred amongst poor Kenyans against the elite which were in part responsible for the post election violence experienced early last year.

Prof. Liyong (who lived in Kenya between 1968-1975) also tries to trace the roots of Kenyan business practice and attitude. In his presentation he writes that lucrative government contracts have always been the preserve of those linked to the government of the day. Tribalism has also played a key role in the monopolisation of business opportunities by the head of state’s tribe, creating “instant millionaires”.

This has led to the Kenyan expatriate entrepreneur greed and arrogant bravado in South Sudan, which in turn seems to have also been passed onto local businessmen and women. Prof. Liyong recounts an outburst in a Juba bank by a GOSS-beneficiary of government contracts instant millionaire:

“The instant-millionaire: "Give me US$ 50,000. I want to go abroad with my family for holidays?"
Bank teller: "We do not have dollars!"
Instant millionaire: "How can you have no dollars? Have I not recently brought here US$ 5,000,000 in cash?"

All this (Liyong continues) for someone whom only a short while ago did not have a bank account!”

The lack of financial control by the GOSS government in Liyong’s estimation has also promoted the impunity evidenced in business. In a predominantly cash based economy, the temptation to evade taxes has become ever more possible and appealing. The Professor accuses Kenyan entrepreneurs of showing local business people how to siphon money out of the country as well as evade company taxes by misreporting their earnings. To quote the Professor: “though Kenya has some things to show South Sudanese, Kenyan greed, callousness and bad business habits should not be copied.”

So is Prof. Liyong’s view of Kenyan business practice shared?

Unfortunately yes. Negative perceptions about Kenyan entrepreneurs and indeed Kenyan business ethics also occur within our borders. Cultural stereotypes have prevailed (even before independence) of entrepreneurial-minded communities particularly Kikuyu and Asian entrepreneurs.

“Kazi ni kazi”

In September 2007, the Mashada forum even had a debate on whether “the myth about Kikuyu's entrepreneurial genius can be debunked”. Kikuyu entrepreneurs were listed as hardworking and primarily motivated by money. They were also described as generally more focused, determined and daring in business, apart from being renowned for their opportunity recognition skills. However, some forum members also accused them of operating their business in an aggressively ambitious manner where the end justifies the means, to the detriment of all else.

In a blog post by african bullets & honey titled "The Pain Machine: The Collapse of the Gikuyu Social Contract” Kikuyu entrepreneurs were portrayed as being individualistic, grasping, conniving, driven, entrepreneurial and migratory.

Kenyan Indian entrepreneurs have been accused of preferring to keep business opportunities within their community.

Blogger kenyanentrepreneur in a post writes that the community is insular, arrogant and racist. Regarding business, Indian entrepreneurs have been especially accused of mistreating their African employees. A different Mashada forum discussion described Asian entrepreneurs as proficient at underpaying employees and overworking them plus failing to guarantee permanent employment. About their propensity to ship in Indian nationals (the so-called “rockets”) to handle sensitive dockets such as finance, kenyaentrepreneur writes “a Kenyan would never be able to open up a business in India. Never. Who is giving these people work visas?”

Another popular accusation is Asian entrepreneurs do not like competition especially when it comes from an indigenous i.e. black Kenyan and have a predilection for evading taxes (the same thing Liyong accuses Kenyan entrepreneurs of doing in South Sudan).

Regrettably such opinions seem likely to continue because for every Manu Chandaria and Aga Khan group business, there are also the Kamlesh Pattni’s, Somaia and most recently Devani (Triton) that give this community’s entrepreneurs a bad name.

The Tanzania Experience

On the foreign scene, it’s not just in south Sudan where concerns have been raised about Kenyan entrepreneurs. In 2007, as a result of a spate of bank robberies Kenyan business men and women faced the brunt of a backlash of local mistrust. Blogger ritch-kentanz posted in October 2007:

“Kenyans, in Tanzania speak, are a byword for armed robbers; illegal immigrants; conniving schemers (perpetrators of pyramid schemes and other such hair brained ideas); sticklers for diligence and industry on the job (the trump card they save for the opportune moment!); opportunists (who are out to wrench and wrest job opportunities from Tanzanians’ hands); possessors of a rude and uncouth disposition and a host many more”.

So are Kenyan entrepreneurs the only group of business people who are unpopular both at home and abroad?

China which also has vast business interests in Sudan has often been accused of only acting in its national self-interest regardless of human rights and good governance issues.

According to Stephanie Hanson’s in a Council on Foreign Relations article “China, Africa, and Oil”, Chinese companies see Africa as both an excellent market for their low-cost consumer goods, and a burgeoning economic opportunity. However, concerns about Chinese companies have been voiced with them being accused of underbidding local firms and not hiring Africans (Chinese infrastructure deals often stipulate that up to 70% of the labour must be Chinese).

Chinese immigrants have also been accused of forcing local entrepreneurs out of business in both Kenya and Lesotho. Transparency International the anti-corruption watchdog has also investigated the way expatriate Chinese entrepreneurs do business—particularly their willingness to pay bribes.

So, what lessons can we learn here?

Probably most important, is that stereotypes are a sticky phenomenon, which as seen by the Kikuyu and Indian entrepreneur experience locally will probably take generations to change.

As growth oriented as the South Sudan economy seems to be, Kenyan entrepreneurs should take Prof. Liyong’s words seriously. The Tanzania experience has vividly shown how devastating to business and personal security, negative beliefs about Kenyan business practices can be.

Finally, we need to face reality. Kenya is not like China – there are not many countries opening their arms wide to welcome our small business entrepreneurs. This means that our expatriate entrepreneurs must ensure their business practices show the best of what Kenyan entrepreneurship is: hard work, passion for innovation, and of course a (healthy) regard for money!