The Chairperson That Jumped

When I’m not pounding on my laptop keys, feverishly trying to get 750 nitpicking words out to my very patient Business Daily editor every Thursday, I do get to spend some time doing governance work for different clients. Part of that work is evaluating the performance of boards of directors where we issue a questionnaire and it is filled by all the members of the board. The questionnaire is fairly comprehensive, covering all aspects of board work for instance board information and board processes, but then it can get really introspective by asking directors to rate the performance of their peers. Different aspects are interrogated here such as how the director prepares for board meetings, contributes during the meetings, interacts with her peers and management amongst other areas.

It’s not hard to know if a director is prepared for a board meeting because you will see whether they are asking questions whose answers are on page three of the board pack in red, bold font or who insist that management read the paper out loud, word for excruciating word, as if they were a kindergarten teacher providing a critical lesson in washing hands. On how the director interacts with her peers, as evaluators we are looking to see if the person engages her peers respectfully, listening keenly when required and not always hogging the airtime during meetings. Do her contributions generate a normal conversation or are they the Molotov cocktail that always start a fight amongst board members or against management? Well of course we don’t ask the question in such an incendiary manner, but the answers from evaluation participants who are honest will usually provide illuminating answers when truth has been chosen as the path to an evaluation Damascus.

As I’ve been doing these evaluations for the last ten years, I have met hundreds of directors who have enriched me with knowledge on how good and bad boards perform. Early in my governance journey, I took on an assignment of a board based in one of the East African Community countries. It was the first time that the board was doing the exercise, which had been instigated by a significant external stakeholder who needed to know that the organization was functioning optimally in order for that stakeholder’s continued critical support. In simple words: either you guys are a functioning governance organ or we should reconsider why the heck we are supporting you guys.

The exercise went fairly smoothly and all directors actively participated in the process, giving honest feedback about the board’s functioning as well as the performance of their peers. As a rule, I usually have a quick session with the board chairperson before I present the final report particularly where there are some sticky issues that have surfaced during the evaluation. As the client was not based in Kenya, the only time I had to meet with the chair person was literally thirty minutes before the meeting was due to start over breakfast at the hotel where the meeting was taking place. We went through the key areas of concern and then I left the chairperson to read the rest of the report quietly as I went to sit at a waiting area near the meeting room. Twenty minutes after the meeting started, I was called in to give my presentation. The chairperson gave an elaborate introduction of why the board evaluation had been required to be undertaken and then gave me the floor.

I presented the evaluation report and finished off by saying that the individual peer assessments would be sent to each director after the meeting. As soon as I finished, the chairperson said, “Well you have all seen the evaluation report. A number of you have issues with the way I lead the board and push for this organization to perform. I cannot lead where I am not appreciated so at the end of this meeting I will be resigning as chairperson.” Even the fruit flies buzzing over the raisin filled tea pastries came to a standstill as shock sucked the frigid air out of the room.

I had watched a leader undertake the “sepukku” which is an honor bound ritual suicide done by Japanese samurai warriors. The chairperson had chosen to fall on their sword, rather than continue to chair a board where some directors had raised issues with some of the leadership traits exhibited. Could the outcome have been different? Yes, if the chairperson decided to hang in there and undergo a self-imposed performance improvement plan. I have no doubt that there had probably been other issues simmering in the past, but my key take away from that episode was this: When it’s time to go as a leader, don’t wait to be pushed off the cliff. Just jump.

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Twitter: @carolmusyoka

Sights and Sounds of Zanzibar

About three years ago, we chose to spend part of the December holidays as tourists in Zanzibar. It was still at the time when the travel advisories against Kenya were in full effect following the Westgate terrorist assault. We flew into Zanzibar’s Kisauni airport, where, quite blissfully, there was a separate immigration counter for East African Community(EAC) citizens, contrary to the Dar es Salaam Julius Nyerere International Airport’s legacy of treating all arriving visitors as one heaving block of unwelcome travellers.

It took about an hour to drive to our destination in the northern part of the island, where we were going to stay at a villa belonging to a South African owner. We did however get pulled over twice on the otherwise uneventful journey. The first time was by the Zanzibar tourist police who wanted to check the “papers” of our van. The “papers” were found to be in good order and we were happily waved along.The next incident was not so easy. Two regular policemen wearing the full white Zanzibari police uniform, buttons agonizingly stretched across their corpulent bellies, asked Kiba our driver for his driving license, PSV license and rate card in that order after taking a long, languorous look at the license stickers on the windscreen and finding no fault. Of course, Kiba couldn’t produce a rate card since the van belonged to the villa’s owner, so he was told that the policemen would keep his driving license until he could find it. The cops were quite pragmatic and told Kiba to take down their mobile numbers and give it to any cop who might stop us ahead so that they could explain that they were in possession of the license.

After a few minutes, one cop asked Kiba to step out of the vehicle for a “conversation”. Money changed hands, the driving license was released and we were dispatched on our merry way. Total time taken for the transaction: 15 glorious minutes of our precious holiday. Kiba was visibly embarrassed and bristling with anger at the capricious display of greed in front of his visitors. We chuckled and consoled his morose spirit with the fact that we were coming from a country where our own Kenyan traffic cops would make his Zanzibari traffic cops look like omena at a Nile Perch beauty parade.

View of Stone Town, Zanzibar
Image from http://theseyyida-zanzibar.com/

Zanzibar is a beautiful island with a heritage quite similar to Lamu. Arab, African and Indian influences have melted into a traditional, conservative Islamic culture. Stone Town, which is the main city on the island is a tourist haven with several narrow winding streets dotted by the ubiquitous curio hustlers cajoling you to visit their shops that have the same kikoys, African traditional masks, paintings and batiks. I spoke to one boutique owner, marveling at how they were lucky to still have tourists in Zanzibar, as our villa owner had told us that they enjoyed bookings eleven out of twelve months in a year. She was not as bullish, however.

She told us that most of the tourists to Zanzibar were typically on a Kenya-Tanzania-Zanzibar circuit and the events in Kenya had significantly impacted the numbers coming through to Zanzibar at that time in 2014. This conversation was replicated two months ago when I was on a working visit to Kigali, shortly after the August 8th 2017 elections here in Nairobi. The general manager at the hotel I was staying at was lamenting at the impact the Kenyan elections were having on visitors to a city some 1,200 kilometres south west of Nairobi. He said the exact same thing as the Zanzibari boutique owner. A large number of tourists to Rwanda were usually partaking in a circuit that started in Kenya. Cancellations to Kenya therefore meant that the whole circuit, including Rwanda would be cancelled.


Image from https://www.neverendingfootsteps.com

That our fortunes (and our sticky-fingered traffic cops) are intertwined within the East African Community is an unassailable fact. The intangible but very apparent influence that Kenya has on the region’s economy should give some pause to the proponents of the monetary (and doubtful political) union for the EAC.Our seeming inability to arrive at a mutually agreeable political solution is one that is of our own Kenyan making, and should never be exposed to the wider, unsuspecting regional citizenry. Or perhaps the opposite is true: a regional constituency might require a very different big picture thinking at the political level, making Kenyan tribal issues the non-issues that they need to eventually become.

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Twitter: @carolmusyoka

Governance fights lead to ungovernable behavior

[vc_row][vc_column width=”2/3″][vc_column_text]“Cabin crew, disarm doors and cross check,”said the Captain of Kenya Airways’ flight KQ444 that had flown from Nairobi, via Bujumbura and landed at Kigali International Airport last Tuesday. The time was 18:36 precisely. Exactly ten amazingly short minutes later I boarded the hotel’s shuttle to begin my ride to Serena Kigali. It had taken about 8 minutes to deplane, walk into a gleaming airport terminal where six immigration counters were fully manned by young, blue suited officers, get mildly grilled as to the purpose of my visit and walk through with my hand luggage straight out of the terminal. To the right of the immigration counters were two E-Gates, where Rwandese nationals could pass through with just their passports and no human intervention.

We drove out of the airport with the twinkling lights of the beautiful city laid out bare in front of the airport gates and straight into the busy but moving vehicular traffic. Having just arrived from the Ghost of Kidero’s Past,the clean streets were a stark reminder of how Nairobi continues to heave under the collective weight of uncollected garbage and unbanked cash collections. There had already been indications of the Rwandese obsession with health when we departed from Bujumbura about an hour before that. The crew had walked through the cabin of the plane releasing insecticide spray that the Rwandan health authorities required for any incoming air traffic to exterminate potentially harmful insects. Not so in Kenya, we welcome you and your frequent flying vermin.

I was in Kigali to attend a training program where the attendees were citizens of the East African Community member states. Tanzanian, Ugandan and Rwandese attendees brought my unceasing wonderment to a crashing halt as they bombarded the Kenyan attendees with questions about our prevailing political situation, particularly about a bold judiciary, an electoral commission in doldrums and two perennial protagonists that were both sure of victory come October 17th 2017. It was apt that the subject matter of the training – corporate governance- was being tested on a daily, if not hourly basis at the Independent Electoral and Boundaries Commission(IEBC) later in the week. As at the time of writing this piece, 5 out of 6 commissioners had issued a press statement disowning a memo allegedly written by the Chairman Wafula Chebukati censuring the Chief Executive Officer Ezra Chiloba on the handling of the elections.

It is curious that the commissioners did not draw any attention as to the veracity of the leaked memo, which the more sober social media pundits had begun to question. In fact they inadvertently affirmed its authenticity by declaring that they had neither discussed nor sanctioned the memo’s contents, which they only learnt about through the media. What the five commissioners clearly demonstrated was that they were only standing behind their leader long enough to throw him under a bus, which is any chairman’s worst nightmare.

Add to that the fact that there is a communication leak of a confidential memo makes for the script of a Kenyan edition of The Poltergeist. It is unfortunate that a governing body like the IEBC’s commissioners has resorted to lifting up its skirts to reveal the family jewels through the media. There can be no winners with media wars.A chairman’s job is fairly difficult and requires high levels of emotional intelligence, diplomatic speak and consensus building amongst the various internal and external stakeholders that a board has to deal with including its own members.
This could only have happened if some of the Commissioners felt that their Chairman was not building consensus and getting the collective view of the Commission as the governing entity before making critical decisions, especially if he is not an Executive Chairman. I doubt that it was the intention of the drafters of the constitution to give executive powers to the IEBC chair by dint of his being the returning officer for presidential elections as provided for in Article 138 (10) of the Constitution of Kenya.

Our constitutional commissions seem to have created a mongrel of a governance framework that creates a blurred line between oversight of the administrative roles played by secretariats and the execution of the mandate for the constitutional commissions which some commissioners actually undertake. The governance incongruence that this electoral crisis has surfaced at the IEBC, which is quite likely replicated at the nine other constitutional commissions, is one that requires some reflection and urgent clarification by lawmakers of the next parliament.
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Twitter: @carolmusyoka

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SMEs need less talk and more walk

[vc_row][vc_column width=”2/3″][vc_column_text]Achieng’s Uncle was visiting when she asked, ”Uncle, I’ve been a good girl, will you give me a thousand bob?” He looked at her fondly and said “I think you would be more successful if you asked for a hundred bob.” Achieng answered, ”Look Uncle, give me a hundred bob or give me a thousand bob, but don’t tell me how to run my business.”

The Ministry of Industrialization and Enterprise Development (MOIED) recently launched its strategic plan for transformation. I sat down in anticipation, ready to find a document that would be the road map to guide Kenya’s achievement of middle-income country status. At fourteen pages long, the document is short and crisp and spends a considerable amount of space defining the ten industries that demonstrate great potential. These have been identified as agro-processing, fisheries, textiles and apparel, leather, construction materials and services, oil, gas and mining services, Information Technology, tourism, wholesale and retail and finally small and medium enterprises. Then the document skids into two pages that quite aptly describe the challenges facing those industries backed by quantitative economic data. By this time my excitement was building up to a frenetic crescendo, the solution had to be coming round the corner by the time I got to page 13 of the 14-page document. I turned the page and slid down my seat, slack jawed and drained. There was nothing. Unless you count a 5-point strategy that uses language such as develop, create, launch and drive but does not put a single timeline or work plan around those pledges. I kid you not, if someone opens up that document in the year 2050 they would quite easily place it in the public domain and pass it off as a fresh document, since there are absolutely no time commitments or demonstrable goal driven action plans attaching. Fine, there is ONE time bound goal: “To drive ease of doing business reforms and reach top 50 by 2020”. I’m still grappling with top 50 of which beauty parade we are trying to achieve and what the “ease of doing business reforms” actually consists of. Let me latch on to that one for now.

I’ll give you the true story of an amazing female entrepreneur who is blazing the trail in her chosen industry of furniture manufacturing. Let’s call her Moraa for today, as she has been trying to meet with the Cabinet Secretary at MOIED for the last five months with no success and I don’t want to ruin her chances for that hallowed meeting when it eventually happens. Moraa started off her business about five years ago manufacturing quality furniture. She survived the first year, and the second, and the third and is now a proud employer of 28 Kenyans. Feeling that she should expand her horizons and mitigate market concentration risk, she travelled to Uganda last year and found a retailer willing to purchase her quality products. That’s where the fun and games began. ‘Carol, there is not a single place where one can get information about how to export one’s goods in Kenya,’ she told me. ‘But how did you figure it out?’ was my surprised response.

Moraa’s treacherous self taught journey to becoming an exporter was one that demonstrated tenacity, grit and a typical entrepreneurial strength of character that defines anyone doing business in Kenya.
Her first port of call was the Export Promotion Council. “Are you exporting tea? No? What about coffee? No? What about curios? No? Aii, we can’t help you!” Moraa stood there, gob smacked at the sheer lack of interest in assisting her with a basic checklist of what a Kenyan businessperson who wants to export non-tea, non-coffee and non-curio related products needs. Using her networks she discovered that she needs an export duty exemption certificate so that her goods could freely pass through the Kenyan border point of Malaba for their initial entry into Uganda, a member of the East African Community. After a few false starts she ended up standing in line at the Kenya Revenue Authority’s (KRA) imposing banking hall and paid the paltry sum of Kes 300/-. ‘Carol, it’s 300 bob per container, can you believe it? And it doesn’t matter whether it’s a 20 foot or 40 foot container!’

Moraa’s disappointment with our government is that they are bending over backwards to make life easy for foreign investors to open up shop in Kenya, but not doing enough to ensure ease of doing business for the very SME’s that form the 10th engine of economic growth in the MOIED strategic plan. She showed me a screenshot from the Invest in Kenya web page and mused how a foreign investor who was willing to start up with Kshs 200 million could get a 10 year tax holiday in the Export Processing Zone scheme. ‘I’m based here in Kenya, and KRA tells me that if I want to get a 5 year tax holiday I must put in start up capital of Kshs 250 million. How? I’m an SME!’

If you want to know where to fish, listen to the sound of the river. That is an old Irish proverb that is often used to educate business leaders on how to understand the markets in which they operate and get an emotional connection to their customers. The hard working folks over at MOIED need to put on a pair of sneakers and walk the length and breadth of Nairobi’s Industrial Area, knocking on doors and looking into the battle weary eyes of business owners today. They might discover that far from the new fangled ideas that have been cleverly written into the strategic plan, part of the answer to Kenya’s economic growth is in facilitation, education and ease of doing business in its purest form: opening new market frontiers and having a single point of information on how to do business for Moraa and her entrepreneurial kith. The entrepreneurs will do the rest: run their businesses and grow our economy.

[email protected]
Twitter: @carolmusyoka[/vc_column_text][/vc_column][vc_column width=”1/3″][/vc_column][/vc_row]

Kenya Airways needs another shot in the arm

What do Britam, Kenya Tourism Federation, Independent Electoral and Boundaries Commission, Strathmore Business School, MTN Business Kenya, Kenya Commercial Bank and British American Tobacco Kenya Limited all have in common? Absolutely nothing. Except that senior executives from these organizations were present in Kigali last month, more precisely on May 26th for various business reasons that were not only mutually exclusive, but it is quite likely that many of these executives never crossed each other’s paths. But they crossed my path. The serendipitous points of confluence were the Kigali airport and at the Serena Kigali where many of us were staying. Most of the executives had come in using the Pride of Africa, Kenya Airways, which is the lifeblood of business travel in the East, Central and Southern Africa region. A tiny fraction had used Rwandair, the national carrier for that beautiful nation state nestled in the bosom of the East African Community.

There is massive trading of goods and services occurring across the five East African Community members. Pivotal to that business is the travel that the business owners and their managers have to undertake to make that business happen or monitor its performance. Pivotal to that travel is Kenya Airways like the critical aorta in the East African cardiovascular system. It hit me, after saying hello so many times, that I was starting to think I was at a diluted version of the Kenyan Company of the Year Awards. Kenyans are doing business aggressively in the region and any problems facing Kenya Airways are problems that will have far reaching impact on business in the region. Board meetings will be missed, conferences will be delayed, workshops will be remiss without key trainers, performance appraisals postponed just if the airline had one daily hiccup.

So it was with the deepest regret that I told my workshop organizers in April that they had to book me on Rwandair for the May workshop that took me to Kigali. I am proudly Kenyan and fiercely loyal to Kenya Airways, so much so that I take deep umbrage whenever the airline is trashed in any gathering. The golden handcuffs called frequent flyer miles also don’t allow much in the form of adulterous predilections with competitors. You are penalized heavily via ego bruising downgrades by the Flying Blue program, of which Kenya Airways is a member, for not maintaining a rigorous flight schedule annually. I was in the tiny fraction that flew the competition simply because the anecdotal evidence of missed and delayed regional flights by our national pride were starting to take their toll on the brand’s promise of reliability. I ended up being vindicated for my decision as my colleague who chose to fly the airline did indeed have his morning flight to Kigali cancelled. It is also noteworthy that Kenya Airways is the only decently reliable airline flying to Tanzania and Uganda respectively directly from Nairobi. It therefore has a captive market well sewn up in this region.

The airline has monumental goodwill and plays an undeniably enormous role in flying the country’s flag high. As one of only four African national carriers that are of global significance (the other three being South African Airways, Ethiopian Airways and Egypt Air) Kenya Airways’ financial problems are Kenya’s problems. They merit scrutiny and concern in equal measure, if for no other reason than we cannot, as a proud nation, permit this symbol of nationalism to fly into headwinds as my media colleagues like to infer.

In November 2012, I raised an eyebrow in this column regarding the motive for the rights issue that Kenya Airways had undertaken 6 months earlier:

“The timing of the rights issue in April this year was ostensibly to raise the equity for the airline and improve its debt to equity ratios for the further leveraging the airline needs to undertake to grow its fleet for its future expansion. However, looking at the airlines’ statement in changes in equity, if the rights issue had not happened when it did, Kshs 6.2 billion would have been wiped out from the equity arising from the operating losses as well as losses from the cash flow hedges that have caught the airline on the wrong side of the very necessary derivative bet for a few years now.”

Looking at the Half Year 2014 results released by the airline, the total comprehensive loss of Kes 13.2 bn pretty much almost halved their equity to the position of Kes 15 bn from a starting position of Kes 28.2 bn at the beginning of the financial year in April 2014. Cash was down to Kes 4.5 bn at half year as well from Kes 11.2bn at the beginning of the period. The airline is burning through cash at a high rate driven by high loan and interest repayments and basic operational expenses like salaries while grappling with labor relations that are a key cause of the delayed flights across the region.

The recently announced Treasury cash bailout of Kes 4.2 billion will be swallowed within the airline’s operational bowels without the pleasure of a satisfactory burp. That will also be putting an Elastoplast over a gaping wound that needs the kind of suturing provided by a massive capital injection that will be very apparent when they release their full year results for the period ending March 2015. Some feverish calls will have to be made or are probably being made to the key shareholders GoK and KLM to pony up certainly much more than the Kes 4.2 bn that has been put in Treasury budget estimates.

If GoK can consider injecting capital into a moribund, badly mismanaged train smash of a sugar miller like Mumias, it goes without saying that an injection into the national carrier is not only inevitable, but it is imperative. If it doesn’t happen the unimaginable impact will extend beyond Kenya Airways stakeholders: It will impact how business is done in the East African region as a whole.

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Twitter: @carolmusyoka

The Political Premise for a Monetary Union

What do Brian Cowen, Jose Socrates, George Papandreou and Silvio Berlusconi have in common? Before you ask, this is not one of those “what did the Irishman, the Portuguese, the Greek and the Italian do at a bar” kind of joke. In actual fact, the four gentlemen -of exactly those European extractions- all resigned as Prime Ministers between January and November 2011. The reasons for resigning were for the most part economic: government austerity measures that were leading to social unrest due to the unfolding Euro crisis following the global financial crisis of 2008. Yes, my dear aspiring presidential candidate from an East African state: you need to read this and weep. The Eurozone crisis left many political corpses in its wake and all because they were having to pay the political price for economic excesses undertaken by both public and private sectors in the common monetary union of the Euro.

If you can tear your eyes off your political ambitions for a minute, let me explain why. By the summer of 2008, a few months before the global financial crisis emerged, private bank lending in the core countries of Germany, France, Netherlands and Belgium to non-core Eurozone countries (Greece, Ireland, Italy, Portugal and Spain) had reached a peak of almost US$ 2.5 trillion. This was propelled by the low interest rate regime driven in large part by the stable economies of the core countries and the elimination of currency risk by having a unified currency. The access to international capital by the non-core countries (which by the way, did not have the same economically productive capacity of the core countries) fuelled private sector borrowing which was channeled to a large extent to the real estate sector rather than higher employment generating or revenue productive areas of their economies. Furthermore, public sector wage bills ballooned as there was now a point of comparison for wages in view of the fact that there was a common unit of currency measure, notwithstanding the fact that factors of economic production in the non-core countries such as manufacturing and the resultant exports were not growing at the same level as those of the core countries.

Following the global financial crisis in 2008 which originated in the United States and shook international capital markets across the globe, the European banks began to tighten credit which had by then become a very scarce resource and began to pull out of their positions in the non-core countries. Tightening credit hit most aspect of the European economies resulting in a recession which led to job cuts and reduced public and private sector spending. Meanwhile fiscal deficits in some of the Eurozone countries meant that governments had to introduce austerity measures to tame their runaway expenditure driven by huge public sector wage bills (something Kenyans can totally relate to as we witness the runaway expenditure related to salaries at both national and county levels). Some of the austerity measures introduced in Greece for example, were freezes in public sector hiring and reduction of salaries, reduction in social security payments, tax hikes and pension reforms.

The effect was felt immediately by citizens who engaged in violent protests and suicides in some extreme cases as the effect of a shrinking economy began to be felt at an individual level. In both France and Spain, the retirement age was raised to 67 to mitigate the effect of the public sector hiring freeze. In a nutshell, with Euro-citizens feeling the pinch in their pockets (except for the Germans who pretty much financed much of the bailout that followed) they voted with their stomachs and kicked out the governments that had started to put in the austerity measures.

The fact is that there can be no successful monetary union if there is no political union first. And many Euro-skeptics argue this very point that the political union should have come first. This would have enabled a unified position taken on economic matters such as a bigger push on manufacturing and agriculture in Rwanda and Burundi as key sources of revenue to balance out the future oil revenues from Uganda, Tanzania and Kenya’s recent oil finds. This for instance would drive a balanced revenue generating objective across the five members rather than one member being the key producer which generates strong capital inflows and the other four sitting back and being key spenders on the back of low interest rates and high foreign currency reserves generated by one member. It would also drive a unified fiscal objective that would enable a controlled expenditure plan.

But pushing for a monetary union without a political union is akin to a couple that marries without consummation of the marriage ever taking place: there is certainly no intention to have a productive outcome of that union. And lest we forget, it was our differing political ideologies that saw the initial East African Community fall apart in the first place. We can achieve the East African Community objectives without having to merge politically and monetarily by simply opening our borders and allowing free movement of labor and goods. After all, that is what we want isn’t it: Bigger markets for our goods and services and more opportunities for our citizens to get employment beyond our physical borders, right?

I worry whether the current 11th Parliament has the technical or even emotional capacity to challenge the government on the merits of this cockamamie plan to merge our currencies. The recent passing of some laws makes me doubt this view in its entirety. I then hope trust and pray that this will be put to a referendum and hope that the citizens of Kenya, at the very least, will see past the smoke and mirrors of this ill advised initiative. And perhaps, ten years later we will truly see the outcomes of the current Euro crisis and be in a better position to question our government of the day as to why they think they can beat the Europeans at this game.