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Local Retail Giants Give Us Pride

My first trip to Lagos, Nigeria was in 2014, an experience that will forever be etched in my mind as a journey of paradoxical discoveries. I was the guest of an expatriate living in Lagos at the time and we went grocery shopping to a supermarket that specialized in imported foodstuff. The shelves were heaving with European dairy products and all manner of tinned basic goods like tomato paste, tinned pineapple and imported fruit. I asked my host [of Kenyan extraction] if we would be going to a local supermarket and, chuckling, she responded that if it was a Nakumatt equivalent I was looking for, it didn’t exist. “Everything that you’re used to is imported here, even the most basic item like packaged fresh milk.”

This was Nigeria. Africa’s largest sized country by population which at the time was about 176 million. I returned to Kenya with an enormous appreciation for the local retail giants that existed at the time in the form of Nakumatt, Tuskys and the smaller supermarket chains that had a majority of locally produced goods on their shelves juxtaposed with imported equivalent options in some select outlets. Our own homegrown retail giants had spawned a veritable supply chain of local goods that were being manufactured or grown for local consumption. From Kenyan farm to fork. From Kenyan factory floor to our homes. All via the numerous branches that dotted the country and, in Nakumatt’s case, the region. Nakumatt and Tuskys were revenue hot. Until they were not.

Nakumatt’s spectacular collapse in 2017 with over Kes 35 billion in debts owed to banks, employee liabilities, suppliers and other non-banking lendors will remain one of corporate Kenya’s vintage case studies. The Netflix movie that will be made about this debacle will quite likely be titled: “Titanic: The Money Hole that sunk MV Nakumatt”. Its cousin Tuskys suffered from an excruciatingly slow puncture demise after years of courtroom family drama that started in 2013 on the sharing of the spoils amongst shareholders, some of whom were in active management and some of whom weren’t. The former were viewed by the latter to be feeding from the communal family trough for their own individual benefits. An external chief executive officer was brought in, hounded out acrimoniously, brought back in when the commercial bankers cuffed the shareholder ears like the petulant children they were, and then pffft, the internal wrangles slowly brought the company to its knees. That story cannot be told in a Netflix movie, rather it will be a series titled “Game of Thrones Tuskys Edition”.

The upshot of these two spectacular failures is that there were significant operational and governance control failures. In Nakumatt’s case, money leached out, but the eye watering size of the amounts point to a finance team that looked the other way and who had a complete lack of whistle blowing ability because, well who does one whistle blow to when it is the shareholder themselves punching the holes into the ship? In Tuskys case, family members’ ability to do business with the supermarket chain presented significant conflict of interest challenges particularly if there was no way of creating an arms-length policy for that business to be done. Something that could have been cured had there been a policy framework for related party transactions from the beginning. After all, there was a family trough for communal eating and how could all members eat rather than just the ones with long necks?

A friend who heads a retail lobby group reminded a group of us recently that we should never underestimate the sheer amount of entrepreneurial talent that sits in this country and is exemplified throughout our economy in the form of local supermarkets, restaurants and hospitality outlets. The failures of two of the leading retail chains gave the space for other local chains to emerge and fill that space seamlessly. Yes, there may be one significant foreign chain at play, but we have several local options to choose from all of which continue to give a legitimate end market for the local agricultural and manufacturing value chain.

What will separate the boys from the men for these local supermarkets that are slowly becoming large corporate entities as we watch? Starting with a spectacular end in sight “Armageddon: We all crash and burn like those Nakumatt guys” and working backwards to see how that can never happen. A board made up of qualified independent and shareholder directors would be a good start to providing the appropriate risk based oversight independent of active management.

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Twitter: @carolmusyoka

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It’s the Economy Stupid

“It’s the economy, stupid!” was the epochal catch phrase for Bill Clinton’s 1992 United States presidential campaign against President George H.W. Bush. The expression was conceived by James Carville, one of Clinton’s campaign strategists and was hung up as a sign at the campaign headquarters as part of the key messages that the campaign team would harp against Bush’s performance in his first and only term as president, a term that had been marked by an economic recession. The looming covid-19 instigated global recession, with far reaching implications for our own emerging Kenyan economy, provides a dastardly moral conundrum for governments today. From decisions about total versus partial lockdowns to decisions about which sectors of the economy should be opened by when are hard decisions to make as the consequences are debilitating to both human health as well as human economic well being concurrently.

Having sat on many discussions about how to force institutions to review academic fees, I have realized that we are now being forced to take into account what exactly it is we have been paying for all this time. In the time of our blissful pre-Covid existence, many of us paid school fees without ever trying to take cognizance of the inputs that went into arriving at the fees that were charged to us. But in the current times where we are analyzing our expenditure with a fine-tooth comb, we are now forced to determine what is a must-have and what is a nice-to-have in our daily lives.

The costs of school fees include the critical component of staff salaries. By asking schools to shave off the costs in light of the current situation, largely due to the fact that parents are now taking over responsibility for the oversight of lessons, it can be viewed to be a justifiable ask. But looking at it from the schools’ point of view, the fixed cost of salaries still need to be paid. The uncommunicated representation from schools not reducing the fees is “Listen here, we need you to help us pay these salaries as these are human beings we are talking about”. Is that conscionable? Do we have to pay for people whose work has made the life of our children easier as we sit in our workplaces earning our daily bread?

As a silent observer on the multiple conversations taking place on fee reductions, I realize that many of us have taken a one-dimensional view of what we have been paying for. Why do we look at the school environment as only involving the teachers? There are multiple other players involved who ensure that the learning cogs are oiled for the smooth running of the institution. From cleaners to cooks and security guards to administrative staff. The question we should be asking as parents is: are we responsible for the unseen background folks who are a critical part of the overall learning environment? An analogy can be drawn to a diner at a restaurant who orders a hamburger and only eats the meat patty, then when given the bill asks the waiter to remove the price of the hamburger bun because he did not eat it. But the hamburger was priced based on the total cost of the food inputs, as well as the staff who prepared it, the electricity, water etc. that are all required to produce the meal.

The sad fact of the current situation is that schools are now under fire for not reducing fees, but still have a significant fixed cost base to manage despite the fact that their principal product offering of academic learning has been greatly compromised. A number have taken loans to finance capital expenditure to build classrooms and other infrastructure to provide the very environment that attracts fee paying parents and there are non-academic staff salaries to be paid. So the current proposed legislation in parliament to require employers not to terminate employee contracts and not to force employees to accept variations on the contracts with regards to salary reductions is something that should give every parent pause. These proposals, if they become law, will impact absolutely everyone not only in their personal capacity as employees at their work places, but also as fee paying individuals for their beloved offspring.

At the end of the day what our legislators must keep in mind as they push their proposals is that taking a one-dimensional view of termination of employee contracts has significant ramifications for everyone. Including themselves. It is also imperative for parents to realize that what they have been paying for all this time is a wholesome learning environment rather than just teachers alone. Which makes the premise of home schooling even more attractive, assuming one has the luxury of time and patience to dedicate oneself to becoming the primary academic provider.

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Twitter: @carolmusyoka

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Banks do not sabotage economies

A man and his wife owned a very special goose. Every day the goose would lay a golden egg, which made the couple very rich.”Just think,” said the man’s wife, “If we could have all the golden eggs that are inside the goose, we could be richer much faster.”So, the couple killed the goose and cut her open, only to find that she was just like every other goose. She had no golden eggs inside of her at all, and they had no more golden eggs.
The Sunday Nation on March 4th 2018 published an article titled “New credit law to help small firms”. The article featured a debatable quote from the Member of Parliament for Kiambu constituency Mr Jude Njomo who shot to the national limelight with his successful Banking Act (Amendment) Bill 2015 that capped interest rates for Kenyan banks.Close to a year and a half later, with credit in the economy at an all time low and a significant drop in the profitability of the entire banking sector, Jude Njomo was quoted as saying,“The credit squeeze to SMEs is a deliberate effort by commercial banks to sabotage the economy so that the government may influence Parliament to remove the interest rate caps.”

Parliament was about as smug as a bug in a rug when they passed the interest rate capping law. The collective view was that banks needed to be taught a lesson and to be dictated to on how to do business. However, the reverse happened. Banks simply stopped lending as it was not worth the risk and the funds that were meant to fuel the economy through lending for working capital and capital expenditure simply moved to the safest borrower of all mankind: the sovereign.

Mr. Jude Njomo and his legislative colleagues need to be disabused of one notion: You cannot juxtapose the word “banks” to the words “sabotage the economy” and expect a logical outcome. If anything, that is a fairly fallacious theory. It is about as oxymoronic as placing the words “parliament” next to the words “bans salary increases for lawmakers”. The two concepts are mutually dependent. Banks need a thriving economy to ensure that there is credit uptake and that those credit facilities are repaid which obviously leads to profitable business. Parliament need never set a ban for legislator salary increases because…well you can fill in the blanks yourself on that one. Aesop’s fable above summarizes it well, one does not kill the goose that lays the golden egg.

Credit is the lifeblood of any economy. Banks take in deposits and use the same to lend out to various sectors based on how much of their own capital they have in the business, what is termed as risk based capital allocation. Lending to the sovereign via treasury bills and bonds consumes minimal capital while lending to Tom, Dick and Harry consumes maximum capital. As banks by nature of regulatory rigour require a lot of capital, their shareholders will demand a significant return on that capital and lending to the ordinary mwananchi is the surest way of sweating that capital more efficiently. In a speech to the Kenya Bankers Association Banking Research Conference last September, the Central Bank Governor Patrick Njoroge reminded the banks about why they were in the position they were in. “There has (sic) been concerns about the Kenyan banking sector’s high average ROA of above 3% and ROE of close to 30%, when compared to similar economies….In any case the high ROAs and ROEs are not sustainable in the long term as customers cannot afford the high cost of banking services indefinitely.”

The Governor has been consistently rapping the knuckles of the Kenyan banking industry and the intervening period between the interest rate capping bill becoming law and its impending demise requires banks to significantly change their mindsets away from the traditional lending models to more innovative ways to make income as well as assess borrower repayment capacity (the fintechcredit algorithm methodologies for non-secured lending are a case in point). The Governorin his speech categorically pronounced the regulator as a key supporter of lenders that are fairly priced, lenders that provide differentiated risk-based pricing based on a borrower’s history and lenders that disclose information in a transparent manner. Legislators needs to be alive to the regulatory premise as the basis on which they should hold the banking industry to account, and not through reckless statements that the banking industry is in any shape or form killing its own economic golden goose.

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Twitter: @carolmusyoka

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Mpesa is a key economic engine

I have a little farm on the sweeping eastern Laikipia plains that has me visiting at least once a month. The singular cause of blinding migraines for the many telephone farmers is farm worker fraud. Those fellows will find a way to skim money, farm inputs or farm outputs at any given opportunity and trust me, as soon as you plug one leak they’re ten steps ahead of you preparing for the next scam. So one has to, as a telephone farmer, accept a certain level of pilferage as part of the business-as-usual operations, or opting to move and reside permanently in the farm. Irritated and exhausted by one certain input request, I set up a system that didn’t require the farm worker’s intervention. I got a trustworthy boda boda operator in Nanyuki (where trustworthy is a fairly fluid virtue) to be purchasing the input on my behalf. But I don’t send him the cash. He goes to the outlet, sends me the “Lipa Na Mpesa” till number where I pay and he takes the goods together with an electronic receipt to the farm. I specifically chose the outlet for those two reasons: they have an mpesa till number and they issue electronic receipts. I then pay him, using mpesa, for delivery of the goods and have peace of mind, knowing full well that another scheme is likely being hatched at the farm since I blocked what had been a lucrative cash cow for the workers before.

Two things that are critical to the urban telephone farmer: a local boda boda “guy” and mpesa. While I don’t have any data on the impact that boda bodas have had on the transport economy – which must be undeniably high – more data on mpesa is readily available. In the latest published Safaricom financials for the half year ended 30th September 2016, the company had 26.6 million registered customers out of which 24.8 million or 93% were mpesa customers. However, a more accurate number is yielded by looking at the 30-day active customers which registered as 23 million, with 17.6 million active mpesa customers or 76.5% of total active customers. Safaricom made more money from mpesa at Kshs 25.9 billion than it did from mobile data, which generated Kshs 13.4 billion. Mpesa revenue was equivalent to 43.3% of the voice revenue data of Kshs 45.7 billion. In simple words, mobile money is no bread and butter; it’s the cream with a cherry on top!

What were these mpesa customers doing, you ask? Well telephone farmers like me were a piddly fraction of the mpesa volumes. Three quarters of the total Kshs 25.9 billion in revenue that Safaricom received from mpesa was from what they call “bread and butter” business, which are the person-to-person transfers and withdrawals: John sends Mary a thousand shillings, who promptly goes to an agent to withdraw the same in cash and purchase food items for the house. Telephone farmers like me are to be found in what Safaricom calls “new business” which accounts for 24% of their mpesa revenue or about Kshs 6.2 billion.
New business includes customer to business (individuals paying for services using mpesa), business to customer (businesses sending money to individuals for example Kenya Tea Development Agency paying farmers their tea bonuses), Business to Business (Distributors paying a manufacturer for goods delivered) and the rapidly expanding Lipa Na Mpesa that has saved many urban dwellers the pain of having to send cash to purchase items via fundis, rogue relatives and even more rogue workers. But mpesa revenue aside, it is the sheer transaction volumes that are simply eye watering. By September 2016, mpesa had transacted Kshs 3.2 trillion. Kenya’s Gross Domestic Product or GDP, according to World Bank figures is US $ 63.4 billion or Kshs 6.34 trillion. The mpesa volumes are virtually 50% of Kenya’s GDP. However, hang on to your hat please as there is some double counting in the mpesa transaction volumes since they include deposits, withdrawals, person-to-person transfers and the business volumes. The bigger question is whether mpesa then poses a systemic risk in the event it is out of commission for whatever reason.

Firstly, mpesa is a methodology of transferring cash virtually. The actual cash sits in various mpesa trust accounts in Kenyan commercial banks. The bigger concern is not whether one’s funds are safe if mpesa goes down, it’s how to access a system that will release those funds which are sitting safely in a bank. Central Bank data from 2014 demonstrates that while mobile money volumes are extremely high at 66.5% or two thirds of the national payment system, they only account for 6.6% of the throughput value. It’s definitely a case of more bark than bite where systemic risk proponents are concerned.

But having said that, the attraction to track the mpesa movements from a tax collection perspective goes without saying. Even though the values may be low, mpesa provides an excellent opportunity for the taxman to bring in smaller businesses into the taxpayer net as each transaction has an electronic signature and trail. Designing and applying resources to create that tracking framework may perhaps be where the challenge lies.

That mpesa has changed lives goes without saying. We live in a country where one can literally take a trip from Mombasa to Malaba carrying zero cash, zero plastic card and with just her phone be able to eat, drink and seek lodging for that entire trip. The growth of the Lipa Na Mpesa payment points was 73% year on year in the half-year 2016 Safaricom financials. This means that there is rapid uptake by commercial establishments of the mpesa payment option, which quite honestly presents a better cash flow option than credit cards as there is no lag time between customer transactions and when the funds are deposited into the business account (typically 2-3 days in the case of credit cards).

Mpesa’s metamorphosis is not inclined to stop here and a banking licence may end up being required at the rate mpesa is transforming.

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The Road To Economic Hell Is Littered With Good Intentions

“The road to a Kenyan hell is paved with good intentions” – Anonymous Parliamentarian

The IMF recently released a report titled “First Review of Kenya Under Stand By Credit Facility” in which a review of the effect of the interest rates capping on the Kenyan economy was undertaken. And it confirmed the warning that was consistently given by economists and bankers alike in the period leading to the signing of the interest rate capping bill in August 2016: Wanjiku is not getting loans from the banking industry. But we all knew that was going to happen, didn’t we? Perhaps I should define the “we” as those that were not drunk with the giddy excitement that parliamentarians had infected across credit addicted Kenyans: a fatal assumption that banks could be tamed by legislation into giving Wanjiku more money for less interest. The IMF report states and I quote, “International experience, however, shows that such controls are ineffective and can have significant unintended consequences. These would ultimately lead to lower economic growth and undermine efforts to reduce poverty. In addition, linking deposit and lending rates to the policy rate limits the central bank’s capacity to maintain price stability and support sustainable economic growth.”

In Wanjiku-speak, the IMF tells us that central banks globally are responsible for the monetary policy of countries. They use interest rate tools to increase or decrease money supply in the country in order to manage inflation and stimulate economic growth. In Kenya, that tool has been the Central Bank Rate (CBR). Now when that tool is used as a benchmark to lend money at the same rate to both platinum and God-knows-if-they’ll-repay-us borrowers, the obvious tendency will be to cut off the latter like the gangrenous arm that they are. Here’s an example. Jim runs the supermarket at the corner. You’ve watched him start that business from a small 100 square feet shop at the shopping centre to 5,000 square feet of retail space. He comes to you for a bridging loan as his bank has accepted to give him a loan but there’s a bit of paperwork that has to be completed. He expects to repay you when the bank credits his account in the next two weeks. Peter, who lives across the road from you, is a habitual drunk and has been fired three times in the last five years. He wants you to loan him some money and promises to repay you when he receives his salary, since he now has a new job. Who will you lend to and why? Before the interest rate caps, if you were flush with cash you would lend to Jim at say 15% and were happy to extend that loan to a year because you knew that he would repay it with the cash flows from his business, even if the bank loan didn’t come through. You might have considered lending to Peter, but at 30%, a higher rate to mitigate for the higher default risk. You also give him short repayment tenor of one month, as you know he may be fired any time.

What the interest rate capping has done is to force the banks to lend to both Jim and Peter at the same rate. And in most third world economies, there are more Peters than there are Jims in terms of quality borrowers, meaning that there will be more banks chasing fewer quality loans. Furthermore, by using the CBR as the benchmark, it has forced the Central Bank to be very cautious in how it uses that tool for monetary operations. If it drops the CBR, it causes bank interest rates to drop from an already precipitously low rate to an unsustainable level. Whatever little lending is occurring already will simply come to a shuddering halt. The interest rate capping law essentially forced the Central Bank to play football with both hands tied behind its back.

The Central Bank issues a quarterly report titled The Credit Officer Survey and is used to establish the lending behavior in the banking sector. The report is issued at the end of every quarter and essentially requests banks to submit information on eleven economic sectors on items like credit standards for approving loans, demand for credit and interest rates amongst others. The last published report is for September 2016, and I am assuming that the department responsible for its publishing is crossing the T’s and dotting the I’s in what will most certainly be a revealing December 2016 report. The Q3 survey showed that demand for credit increased in the Trade, Personal/Household and Real Estate sectors compared to the previous quarters. In other words, your entrepreneurs, salaried payroll check off workers and homebuyers were borrowing more in that particular quarter. But it wouldn’t be for long.

As I couldn’t get the biblical truth in the form of the Q4 report, I decided to do a soft survey in my networks within three Tier 1 banks in Kenya. All three banks had virtually stopped unsecured lending in the SME sectors. All three banks had also stopped salary check off loans unless they had express agreements with the corporate employers where the banks were handling the payroll. In simple words, your entrepreneurs and your salaried workers are not getting loans as much as they used to. One bank said that for the first time in memory, they had negative growth in their loan book: the monthly loan repayments outstripped new loan drawdowns, which simply means that their loan book was shrinking. In the Q3 Central Bank report, total loans to total assets had slightly reduced by 2% from 61.16% to 59.17% from the preceding quarter. You should expect this reduction to be significantly higher in the Q4 report as the asset mix moves in favor of short-term government assets.

Parliament can try and legislate interest rates, but they cannot legislate appetite. Banks cannot be forced to lend, they can only be encouraged to do so via central bank driven monetary policy incentives. Parliament may have had the best intentions, but they’ve created an economic hell. Once the shine has worn off the cheap bauble that is the interest capping law, the glaring truth has been revealed. The impact will be devastating to the Kenyan economy.

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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.

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

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Greek Crisis Explained

Once upon a time, there lived a government that ruled a country called Kulahappy. Kulahappy’s government had no problem spending money, actually lots of it. You see, in the government’s mind, the people had to be taken care of and it instituted a fairly generous public pension and healthcare system. The public pension system was open to all working citizens of the country and productive citizens were allowed to take early retirement and jump into the merry pension bandwagon. The people were very happy, especially since the government of Kulahappy was not in the habit of taxing them very much. Everything was humming along very well until a global financial crisis occurred.

Suddenly Kulahappy and other countries had difficulties borrowing money in the international markets as everyone turned off the lending taps while trying to assess who was a good or bad credit. Kulahappy’s government then decided to let out a secret that it had been hiding for several years: they had a massive budget deficit and were spending way faster than they were able to collect in taxes. It was so large that they couldn’t possibly fund it by issuing more government bonds in the domestic market. They needed external help. But international private lenders had had enough of Kulahappy’s antics and were struggling to sell off the existing government bonds faster than you could say Athens. With no takers, Kulahappy had to turn to the Union of neighboring countries with its hat in hand and ask for help.

The Union rapped Kulahappy’s delinquent knuckles very hard and said they would only lend if Kulahappy started taxing its citizens more and cut down on its public spending. What? Kulahappy was being asked to act like a grown up and it didn’t like this one bit. Its back was against a wall and, with its piddling options, started making pension and healthcare cuts while slowly trying to increase the tax brackets. The Union released the funds, 107 billion units of relief, which was the biggest debt-restructuring program in the history of the world and life went on. But the citizens were not a happy lot at all. Pension cuts led to social unrest while the underlying economic factors of production were not improving, in fact the economy contracted by 25% over the next four years. Youth unemployment began to rise, there were more poor people on the streets and before you could say Tsipras is your daddy, the government was thrown out and a new one was voted in.

The new government was made up bad boys. These boys were so tough that they told the Union exactly where it could go and stuff its face with German sausage. You see, the new boys had managed to convince the electorate that the Union-inspired austerity measures were bringing the Kulahappyians to their non-taxpaying knees and that the Union was the cause of all their problems. The new government told the Union that, quite frankly, it wanted a 50% debt write off and it wanted any discussions about budget cuts thrown into the pit latrine of history. Did I mention that the debt that was being requested to be written off was the biggest emergency loan given to a country in the history of mankind? These boys were gamblers par excellence, taking a bet that it would be suicidal for other Union members to try and force a Kulahappy exit. In their rose tinted glasses view, they were all joined at the hip for better or for worse, in richness and in poverty and only a communal seppuku ceremony would separate all parties concerned. The disgraced Kulahappyians and their thoroughly annoyed Union cousins lived unhappily ever after.

The Greeks are having a tad bit of “kula happy” fever. They have the European Union members over a barrel as everyone probably wants them out but the legal process for exiting the monetary union was not put in place as it was never envisaged that a free-wheeling, sun kissed, tax avoiding member would fall into the kind of trouble that Greece has done. The Greeks are better suited as African Union members since we can totally relate to their habits of runaway spending and tough talking governments.

But their mastery of political doublespeak is what should make them card carrying members of Africa’s political elite. Prime Minister Tsipras and his team have some serious gumption to stand in front of its lenders, the International Monetary Fund and flip them a proverbial finger by saying they have to go to the people and get their mandate as to whether to implement the austerity program. Tsipras has put the monkey on the back of his austerity weary citizens: “Say no to the austerity, so that we can bring the lenders back to the negotiating table on the basis that the people have spoken. Say yes, and we’re up the creek without a paddle. Chaos panic and disorder will become our mainstay and, by the way, I’m out of here because I can’t see a way out of the quandary this government is in.”

Good people, we need to keep a careful watch over what’s going on in Greece. We can’t shrug our shoulders every time the media highlights yet another profligate abuse of financial discretion by the Senate or the National Assembly. Each and every penny of government spending comes from us, at least that which is not funded by borrowing. If ever the music stops, and the government is unable to finance its budget deficit externally for whatever reason (political turmoil, default of existing debt etc.) the trickle down effect of a government that stops spending are too frightening to dream about. The economic contagion of a broke government inevitably leads to social unrest in an already fragmented country. But I guess no one wants to hear doomsday news like that. Neither did the Greeks five years ago.

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Twitter: @carolmusyoka