Friday, July 27, 2007

Vanity Fair on Kenya

Okay, I thought the previous article on monopolies was good, but that's nothing compared to this article on Kenya (as Thomas Barnett says, it's written by an actual African!).

If you're a fan of Hernando DeSoto, you'll really enjoy this article. Great perspective on how the informal economy gains legitimacy and supplants the formal (read: corrupt) economy. The 1990s consist of well-connected but inexperienced CEOs making short-term decisions, banks swallowing customers' money, etc.

Later, what is now the most powerful bank in Kenya develops a reputation as The People's Bank, giving out microloans (which, now that I think of it, is sort of a derogatory term, no? They're for the same things we would take out a "normal" loan here in the states for)...

My apologies for quoting so excessively, but it's that good:

Since independence, in 1963, there has been a war of sorts between "formal" retail and "informal" retail. Informal retail paid off the city council, set up shacks and mobile shops, and overwhelmed the city. Formal retail complained, and the informal traders were cleared away—there were pitched battles on the streets every day. Old women could pack up their goods in minutes and disappear. The most hated people in Kenya, the city-council askaris—a very colonial enterprise—would disembark from trucks and use batons and tear gas to disperse people.

By 2000, Nairobi was also one giant, heaving market. A new craze swept the city: exhibition centers. As formal businesses closed up, buildings were left empty. One enterprising guy established a giant market in the city's largest park, Uhuru (Freedom) Park. It was called Freemark. Goods were brought in from Dubai and sold in little partitioned stalls. Soon, every second abandoned building, it seemed, was taking short-term leases to start these "Dubai exhibitions." One floor of a building could host sometimes hundreds of vendors. The informal sector was drilling into the heart of the city, selling anything you could think of. Soon, trade in leases began. You could sell your 10-by-10-meter stall for a goodwill payment of up to $5,000. Today, these small stalls, thousands of them, are the formal retail industry of the city. An evolution took place, and space is now used more efficiently, to maximize profits.

We were all becoming hustlers. I was learning angles to make money doing freelance writing work on the Internet. A young 11-year-old I knew, Vincent Ogutu (who helped me do research for this piece), was selling hand-painted greeting cards on the streets. He was putting himself and his younger brother and sister through school. He was taking care of his invalid mother. In high school he was head prefect and an above-average student. The family's only asset is his bicycle. His brother and sister are now in good boarding schools. They did very well in their national school examinations, studying by the light of a paraffin lamp. Vincent is now 18, has finished high school, and continues to support his family, while looking for a scholarship to study in the U.S.

For 30 years, Kenya was a partly subsidized country. Western donor money flowed into the economy. Jobs were reserved, space made, in the civil service, in hospitals and multi-national businesses, for certain so-and-sos. The country's income gap between rich and poor is one of the world's 10 worst.

You did not need to be creative. You could own a large business without any entrepreneurial skills: just be the sober African face in a British company; or the strategic surname in a foreign-owned company that needed to get its stuff through customs. Real enterprise in Kenya has always been in the streets, in the markets, in the large dusty parks where people beat metal and wood and soldered things into being. This enterprise was regulated to the hilt, beaten down, beaten up, by askaris, fined, charged, and locked down in what we now call the slums, which were, 40 years ago, the only place in the city where "Africans" could live.

In the 1990s, nobody outside of the politically connected and the banks was making real money. We hobbled on, dizzy and frenzied, sinking even when we thought we were climbing. Trying to avoid at all costs dealing with the vampire state: paying tax, registering your business, even holding a bank account. Then came 2002.

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