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When it pays to be poor (sometimes!); Has Kenya been penalised for diligently repaying its international debt obligations, while its East African neighbours have lived beyond their means are being rewarded for their folly?

One of the first things I noticed when I returned to Kenya from a sabbatical year in Boston was how bad the Kenyan roads were. Then I noticed how unreliable the water supply was. And though in the time I have been back, there have been no major power failures of the sort that Kenya frequently had a few years ago, I find that I still keep a torch close to me every evening, just in case.

I imagine just about anyone who returns to an African country after a period of many months in a North American or Western European city would make much the same observation: that the most significant difference between a place like Boston and Kenyan cities like Mombasa and Nairobi lies in the quality of infrastructure.


And it could further be argued that the absence of efficient public infrastructure is a key limiting factor to the growth of African economies. But there is a fundamental question here: Does infrastructure lead to new investment? Or does the potential for new investment guarantee the creation of new infrastructure?

Well, in the case of extractive industries like mining, the answer would have to be that it's the existence of a valuable natural resource that will guarantee that infrastructure will follow. And many other examples can be given of the fact that sometimes the creation of infrastructure is a consequence of investment - rather than the existence of infrastructure being a precondition for investment. But there are other cases in which, if the infrastructure does not already exist, then there can be no hope of any investment.

Take for example a recent report on tourism trends in Kenya and Tanzania: the Tanzanian Prime Minister informed the National Assembly that the government was proposing to profit from the current boom in tourism within East Africa by the construction of new infrastructure around the Serengeti National Park.

Now although these two nations have a great deal in common, there is one fundamental difference between them: Tanzania is significantly poorer than Kenya. And a good part of why Kenya is better off is due to the fact that Kenyan infrastructure - pathetic as it may seem to a Kenyan returning home from a prolonged visit to the US - is very much better than that of Tanzania.

The Serengeti-along with the Maasai Mara Game Reserve in Kenya - form part of a continuing grasslands ecosystem that has been made famous by the annual wildebeest migrations that involve about a million and a half animals crossing from the Mara into the Serengeti plains. But a look at the comparative revenues from this great wildlife spectacle tells a strange story: the Massai Mara is only about one sixth the size of the Serengeti, and the vast wildebeest herds only spend two months of the year there, before returning to the Serengeti plains. Yet Kenya collects 20 times as much as Tanzania does, from this jointly-owned tourist attraction. And the reason for this is that the Kenyan side has superior infrastructure - a better network of roads, airstrips, and so on - that supports far more hotels and lodges than are to be found in the Serengeti. So if judged purely by regional standards - as opposed to international standards - Kenyan infrastructure is to be envied rather than despised.

National pride

But investment, at the end of the day, is only a means to a greater goal, which is to generate economic development. And when it comes to development issues in general, there are situations in which a truly poor country will benefit in a way that a slightly better off neighbour cannot. Take, for example, the Highly Indebted Poor Countries Initiative of the World Bank and the IMF. Under this arrangement, the debts of the 38 poorest countries in the world, most of them in sub-Saharan Africa, were substantially written off by the lending institutions. There were conditions attached to this, but it was a massive debt write-off all the same.

In East Africa, Tanzania and Uganda qualified for the debt relief, but Kenya did not. Now, you would think that Kenyans would regard this as a compliment. After all, it cannot be a matter of national pride that your country is identified as highly indebted and poor.


But that is not how many Kenyans saw it. Both political leaders, and ordinary people, were prompt in expressing their outrage at the fact that Kenya had been left out of this beneficial programme. The argument raised was that Kenya was being punished for having been diligent in paying its debts, and for struggling to live within its means, while neighbouring countries, which had recklessly piled up loans beyond their capacity to repay, were now being rewarded for their folly. The more enterprising commentators took it a step farther, and presented convincing approximations on how many classrooms or clinics, how many kilometres of paved roads, and how many additional schoolteachers and nurses the government of Kenya would be able to employ if it could convert the money currently used on annual debt repayment to providing services to its people. And this line of argument invariably concluded with a demand that Kenya should immediately be placed on that list of poorest nations, so that it too could benefit from the Debt Cancellation Program.

So, whereas in tourism it pays to have some money if you are to create the infrastructure needed for success when it comes to the global programmes, run by the World Bank and the IMF, it's being poor and heavily indebted that will get you a big slice of the cake.
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Comment:When it pays to be poor (sometimes!); Has Kenya been penalised for diligently repaying its international debt obligations, while its East African neighbours have lived beyond their means are being rewarded for their folly?(LETTER FROM EAST AFRICA)
Author:Muga, Wycliffe
Publication:African Business
Geographic Code:6KENY
Date:Nov 1, 2008
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