A Primer on Securitization

Farmer Kurgat ole Kamau has defaulted on a bank loan. His dairy farm is about to be auctioned. He can sell cattle and pay arrears, but he will lose his income so that would just be kicking the can. He will soon be in arrears again. Securitization solution. Loan arrears = Sh1m, milk farm gate price = Sh50, loan arrears = 20k kg of milk. Farmer Kurgat sells 25k kg for Sh1m to be delivered over next 2 years ie a 25% “profit” for the financier ~ 12.5% interest p.a. (The financier could be the milk off taker)

Civics for a new generation of activists. A thread.

Patrick Gaspard’s insight on socialization of youth as consumers was a light bulb moment for me. It clarified a discordance between the new digital activism and that of my generation that I perceived but could not place.

https://twitter.com/davidndii/status/1814003497656045847

I did not know how prescient it would turn out to be. What do I mean? I’ve been struck by how the new generation makes political demands with personal detachment, as we do with consumer rights. They seem to relate to the State as a business that has sold them a defective good or service.

My reading of this political moment is that it is about corruption. It is very pivotal. We have reached pivotal moments before. The 1990-92 moment was about multiparty which is a byword for political freedom and civil liberties. We achieved that. For the first time in Kenya, we could caricature Moi. The 1997 no- reform-no-election” moment was about political reforms.

This warrants a comprehensive response.
CJ, you will be familiar with the anti-corruption campaign mantra that corruption hurts the poor. These protests are telling us that the chickens have come home to roost. 1/n

https://twitter.com/wmutunga/status/1804576991468810385

Such are the excesses of the last decade, that cost of corruption has reached the perpetrators. One of the differences with old corruption is that over the last decade we have been plundering and squandering borrowed money.

Uhuru’s economic legacy is fake debt financed prosperity which benefited urban rentier elites, at the expense of producers, reflected in consumerism similar to resource windfalls economists call “Dutch Disease”. There was no other way this was going to end but in tears. This economy is going to shrink. The other day someone who deals in high end cars asked me when I think economy would turn around. I gave him my honest opinion, told him his line of business was unlikely to recover and he might want to look into a production oriented sector.

I keep hearing rose tinted retrospectives of Kibaki. Maybe I was in a different country. My recollection of defining moments of Kibakis first term. Kibaki reneges on NARC MOU i.e appoint Ralia PM (paradoxically, PEV triggered by his fraudulent re-election forces him to co-habit with Raila as PM in 2nd term)

1. Kenya’s macroeconomic fundamentals including debt, deficits, exports and FDI are presently much weaker than Uganda and TZ.
2. They have not been propping up their currencies artificially.
3. Kenya is more integrated with global finance hence more exposed to financial shocks.

https://twitter.com/mwangocapital/status/1721543076295184797

Our external trade weaker, trade deficit averaging 10% of GDP, Uganda 7.6%, Tanzania 5.3%

The G-G is working like a charm. In fact, we are improving on it all the time. Contrary to many distortions I see here, it is not a public procurement. Its a framework agreement that facilitates extended credit terms between the state owned IOCs and our industry players. Contrary to distortions I see here, paying for oil imports in shillings is not part of it. Its the domestic OMCs to pay for their products in shillings solving two problems (a) supply disruptions due to dollar shortage and (b) exchange loss exposure occassioned by multiple exchange rate regime that has already wiped out many small companies.

Facts are stubborn things. You can blame greedy lying politicians (and you’d be right), shake fists at the President, berate the IMF, shoot the messengers, fantasize about all manner of miracle cures and when you are done, the facts will be staring at you, unfazed. We have abused credit for far too long , splurged money on vanities, neglected production and become a nation of tenderpreneurs living large on wasteful public spending. We say all this in The Plan but clearly most of us don’t read.

New University Funding Model. An Explainer.
University fees have not increased. The fees universities are publishing have been on their prospectus all along, and are what self sponsored students pay. Under the old funding model, government committed to fund a capitation of 80% of cost, based on formula known as differentiated unit cost (DUC). But the government has never met the target funding.

Notes on Affordable Housing programme (AHP). A long thread A 2019 study estimated that Mukuru slumlords collect Sh Sh2.8b rental income per year from 100,000 households occupying 680 acres. This works out to Sh 340,000 per acre. In essense Mukuru slumlords earn Muthaiga/Runda rents on shacks built for at most at most Sh5m per acre.

State capture is the repurposing of public institutions to serve private interests. Northlands City is a textbook state capture case study. It begins with the Jomo Kenyatta land grab and ends with Uhuru using same office to monetize the land. 1/4 Even assuming a modest Sh50m/acre value from just public infrastructure provision, the value of the 11,000 acres works out to Sh550b, $4.6b, 4% of GDP! This is what is at stake for Kenyatta dynasty.

The role (lack thereof) of academic credentials in political leadership. A thread. My take away from this degree debate is that the nature of political leadership vis a vis policy & public administration is greatly misunderstood. 1/N The purpose of political leadership is to build consensus on the what of public policy. The role of experts is to figure out the how? There is a proposition in welfare economics called the Arrow Impossibility Theorem.

Funny how a government ran by business people does not seem to understand business. Oil companies are losing money every day they don’t trade—they are incurring costs without revenues. Only reason for not trading is they stand to lose more money if they do. 1/4 The responsibility for this predicament is none other than the government now heeing and hawing economic sabotage. It is the government that is the saboteur, not business. I don’t recall seeing this level of economic policy incoherence since the last days of the Soviet Union.

The economics of the fuel shortage. A short thread.

There are two parts to the ongoing fuel shortage.

First, is a failure of price controls. In short when circumstances change, prices adjust accordingly enabling businesses to operate profitably. 1/7 If prices are fixed and cannot adjust, then it is quantities (supply) that adjust. That is why price controls and shortages go hand in hand. Once upon a time, this was the norm in Kenya, especially before the budget when products were hoarded in anticipation of price hikes.

“As an outlier in Kenya’s political power matrix, which is dominated by a tiny clique related by familial and economic ties and adept at manipulating tribalism, Ruto was elbowed out by the establishment. But he has somersaulted back by appealing directly to the masses.”

https://twitter.com/tezira/status/1507249119533936641

For almost six decades, political and economic power has been confined within a group around Kenya’s first two presidents – Kenyatta and Daniel arap Moi. Raila Odinga joined this group in the sunset years of Moi’s tenure.

Brought our daughter an ardent space science fan to the Luigi Broglio Space Centre (San Marco) in Malindi. Watched Naomi (in green) officer on duty track satellites AGILE and IXPE. Also in picture our gracious host Warrant Officer Tangus of Kenya Navy. Wonderful outing. Seems quite a few people are surprised that there is a space centre in Kenya. A thread. 1/9

https://twitter.com/DavidNdii/status/1472502449697177605

Has the economy grown 3.7 fold, from Sh4.4tr to Sh11tr under Uhuru Kenyatta? A fact check, and primer in national income accounting. 1/16 At the end of this lesson, non-economists will know difference between nominal and constant price GDP, and how cartel economics could explain Uhuru confusing nominal GDP increase for real growth.

An economic policy analysis of Northern Kenya rangelands with reference to pastoralism and conservation tourism. A long thread.

In economics, we value resources using the opportunity cost principal. 1/18 Simply put, opportunity cost is what is forgone in a trade-off e.g when resources are appropriated for one use over another. When farm land is acquired for for a school, we do not compensate the farmer based on the education services but rather for the forgone agricultural income

My Chris Kirubi obituary.

I’ve known Chris Kirubi for close to 30 years. We interacted mostly as a client as I have consulted for companies he was involved in over the years, but we were also good friends. CK was a very easygoing person. But my most memorable encounters with him are political. In the run-up to the first multiparty elections, I was a young economist at the World Bank’s Nairobi office, then known as the Regional Mission in East Africa.

On the myth of Kenya’s bountiful past. A thread.

I was born in the mid sixties, in a cohort of 300k.. Child mortality was 170/1000 meaning 50k of my age mates died before 5th birthday. ((46/1000 today) Transition to secondary school was 20% i.e of the 250k who survived childhood, only 50k made it to secondary school (its 80% today). University enrolment was 2k per year ie 4%.