How multi-party politics changed Kenya's economy

In Summary

• From the Goldenberg Inquiry, it was established that the firm also diverted funds into the former giant political party’s bank accounts intended for political and election activities.
• Mr Kamlesh Pattni, the company’s founder, with the help of political bigwigs, was able to siphon billions of shillings from the Central Bank of Kenya guised as subsidies for exports of gold.
• As a result, the economy was destabilised and the regime found itself in difficulties.

As the longest serving president in Kenya’s history, Daniel Moi was on the list of African leaders who clung onto power against the wishes of many Kenyans.

For a long time, Moi was opposed to a multi-party system of governance. During his inauguration in 1978, he said he would follow in the footsteps (nyayo) of the first President Jomo Kenyatta.

The onset of a multi-party system in Kenya created a different headache for Moi and his tactics of bullying or controlling the opposition had to change.

In need of money from the International Monetary Fund and the World Bank to keep the economy from collapsing, Moi was forced to allow multi-party democracy and other changes to expand democratic space in Kenya.

With the eyes of the world on how the election process would go in 1992, Moi and Kanu came up with a strategy to ensure they had a upper hand against the opposition.

Moi created Kanu national secretariats (with full time staff) and youth wings to counteract the opposition’s gains in different parts of the country. This meant an increase in the budget than was initially planned for.

Moi not only used money to manipulate government contracts and consolidate patronage by appointing cronies to high government positions, but also gave out public land in attempts to win votes.

A research paper titled ''Monetary Clout and Electoral Politics in Kenya: The 1992 to 2013 Presidential Elections in Focus'' states that huge amounts of taxpayers’ money -- about Sh2 billion -- was funnelled into Moi’s election campaign. The funds were used for a variety of purposes, ranging from hiring transport for voters, bodyguards for candidates, to employing thugs, distributing party T-shirts and even cash for passers-by.

Following the increased government borrowing associated with government expenditure related to the elections in 1992, large quantities of Treasury Bills were issued to curb the inflationary spiral – subsequently leading to high interest rates and the associated negative impact on private investments.

Dr Joel Barkan in the journal “Kenya: Lessons From a Flawed Election” said ''so great was the flow of money from the Central Bank of Kenya to the President and Kanu nominees that the money supply increased by an estimated 40 per cent during the last quarter of 1992''.

That wasn’t the only way that the Kanu regime used the 1992 elections to disrupt Kenya’s economy. Jerome Bachelard, in his book “Governance reform in Africa: International and domestic pressures and counter-pressures”, wrote that Moi and his loyalists (including members of their families) “bought shares” in private companies by leveraging them into some sort of monopolies in different sectors. In some cases, they just sought financial returns of some kind by giving the companies (local and sometimes international) licensing and other facilities that would have taken them years to acquire.

Another way was through manipulation of public procurement and subsidies. The companies were given the mandate to supply the government with goods and services but would either highly inflate the prices or grossly under-supply what was required.

From the Goldenberg Inquiry, it was established that the firm also diverted funds into the former giant political party’s bank accounts intended for political and election activities. Mr Kamlesh Pattni, the company’s founder, with the help of political bigwigs, was able to siphon billions of shillings from the Central Bank of Kenya guised as subsidies for exports of gold.

As a result, the economy was destabilised and the regime found itself in difficulties. While the possibility of losing power as a result of economic challenges plunged Moi into a state of anxiety, it did not deter him from his plan and his attempt to win the presidential election.