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Of the Kenyan Diaspora and Kenyan Economic Growth

By Matunda Nyanchama
Toronto Ontario
April 7, 2007

It is said that Kenyans abroad remit close to $1 billion annually. These remittances, it is also reported, is second only to tourism as a foreign exchange earner for the country. The remittances have served the country in many ways including helping offset the country’s current account and stabilizing the Kenyan shilling.

The government seems to have recognized the potential held by Kenyans abroad in this respect and would want to take it a step further. In the past few months, there has been a whirlwind of government activity to speak, entice and persuade Kenyans abroad to do more for the country’s economic growth. The message has been twofold: the Kenyan Diaspora could do more in direct investment and becoming agents that influence the flow of foreign investment in the country.

The Minister for Finance, Amos Kimunya, came to North America recently at the head of a powerful government delegation to spread the message. Together with his entourage, the minister addressed a number of Kenyan audiences across North America. He spoke to gatherings in Washington, Atlanta, Minneapolis and Toronto, among others. His message: the county’s economic recovery has been realized and the economic future is promising provided we keep up the pace and follow the direction already set.

In lengthy, number-laced presentations, the minister and his delegation carried a message of hope for the country. Unlike that of many other politicians that focuses purely on the politics of the day, the delegation’s message centred on the country’s economic turnaround and projected growth prospects in the future. Although the delegation could not completely avoid politics in such presentations, its message overwhelmingly focused on economic achievements realized since the 2002 elections and the encouraging signs of future growth.

From negative economic growth in 2002 the country’s economy is now growing at a rate of 5.8%. Inflation rates have been stabilized at single digits while the Kenyan shilling has held its own against major world currencies. Areas cited with substantial economic growth, among others, include manufacturing, agriculture and construction. The stock market is said to be booming as is tourism.

These accomplishments have been possible, in part, due to the government’s systematic approach to dealing with the dire situation of the economy it inherited on assuming office in 2002. Clearly, the government’s Economic Recovery Strategy (ERS) is bearing fruit. ERS focused on macro-economic stability; equity and poverty reduction; and improvements in governance. And with improved tax collection, the government can afford to fund major initiatives like free primary education, the innovative Constituency Development Fund (CDF) and health care support.

At some point the minister derided the poverty-related initiatives of the past for failure to focus on growing the “economic pie”. In the past, a lot of work was done on “redistributing” poverty rather than growing the economy so that there can be more that could be shared.

Kenyans abroad were urged help grow the economic pie through participation in areas such as tourism, real estate, the stock market and more. For example, it is reported that the current bed capacity cannot accommodate projected growth in tourism. The message: build hotels and bed and breakfast places to cater for tourists. Opportunities exist in real estate: providing housing in towns, cities and other urban centres. The stock market promises to offer more investment opportunities as companies turn to the bourse to raise capital. Recent public offerings indicate Kenyans’ thirst for alternative investment vehicles other than traditional focus on land and real estate. And Kenyans abroad could have a stake in the game and contribute to the nation’s economic betterment.

It would be interesting to see a formal report on where the $1 billion of remittances ends up. However, an informal survey suggests that the money is usually targeted at family support and individual investments. Like in most African countries, Kenyans support their extended families in many ways. They pay school fees, hospital bills and funeral expenses for their immediate and extended families. They support their aging parents and other relatives that may need help. Many Kenyans also carry on personal projects like buying land and building homes.

The case of homes is especially interesting.

Following the traditional culture that a person needs to have a home as a symbol of the person’s “presence”, many Kenyans have put up decent houses at substantial costs in rural areas. These are homes which remain uninhabited for most of the time as their owners remain abroad. They are homes which, were they to be located in urban centres, could fetch decent returns for their owners while contribution to the reduction on housing shortages.

As such, Kenyans abroad need to move beyond personal and family-related remittances and focus on formal investment instruments that would have greater economic impact and much better returns for themselves. And with the government focused on privatization, with a degree of organization, Kenyans abroad could capture a substantial chunk of these companies for themselves. However, to do so requires organization, planning and timely execution.

A while back, the Kenyan Community Abroad (KCA) launched the Kenyans Abroad Investment Fund (KAIF). The fund would provide a source of investment capital for companies, government or individuals targeting Kenya. Investors would choose either retirement or savings related plans. KAIF was modeled after similar initiatives in countries like India and Pakistan, where these countries Diasporas have been instrumental to their countries’ economic transformation.

The time is ripe to re-launch KAIF and similar investment vehicles.

In Kenya, opportunities exist in literary all areas of the economy, be it real estate, transportation, agriculture, education, technology, tourism, construction and many more. KAIF or a similar fund could provide needed structure in targeting investment in the country; provide efficiency in the collection of investment funds and selection of investment targets. It could provide decent returns for investors while contributing to the country’s economic growth.

On its part the government needs to address concerns expressed by many such as corruption, lack of security and nepotism. Fighting these ills and keeping them under control will go a long way in raising confidence in the government’s management of the country’s affairs.

To enhance its relationship with Kenyans abroad, the government needs to heed the Diaspora’s demands to be more participative in the nation’s affairs. Kenyans abroad have asked to vote in national elections. They have asked for dual-citizenship for themselves and their children. They have asked for greater democratic governance in the country and greater focus on core issues that affect ordinary Kenyans. The government needs to listen and act upon these demands. That way, Kenyans abroad can feel closer to their motherland and hence become more involved in the affairs of their lovely country.

© April 7, 2007 Matunda Nyanchama
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Matunda Nyanchama, a Canadian-based information security professional, is a past President of the Kenyan Community Abroad (KCA). He can be reached at mnyanchama@aganoconsulting.com

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