The Painful Truth About Kenya's Dual Economies

This isn't news. It zoomed way past the careless whispers stage years ago. It's no secret that Kenya has two economies characterised by parallel structures. In short—the documented and the undocumented economies (DE & UE)—both joined at the hip by legal tender, the Kenya shilling—but separated by regulations. The documented side pivots around the Central Bank of Kenya and runs on a path that adheres to all applicable laws of the land while the undocumented one finds its functional equivalent of a Central Bank in a known financial district that remains nameless in this article. And in the place of laws governing the documented side, an intricate web of organised tax evasions and suspended laws help make the UE competitive and attractive.

The biggest undoing of the DE that gives the UE massive appeal, is the absence of, or, failure to apply a transparent type of pricing science to the value of goods and services. We arrive at our pricing more by selfish proclamations than by reasonable formulae. For instance, with the current rains as has been the case before, cars will stall under flooded roads and some gearboxes shall be irreparably damaged. If you drive a top range mercedes, that may take you back a million shillings or more. But if you get it via someone in the nameless address, landed and delivered to your doorstep, that will cost you about a fifth of the DE's pricing. And like pendulums many conveniently swing between both economies without batting an eyelid.

In the UE, the laws of the land are viewed as obstacles that undermine business. It thrives on the existence of porous borders, corrupt officials, the presence of protection-lending elites in the high echelons of power and willing people ready to work or invest in that alternative economy. The economic implications are dire. First, The DE is what is recognised as Africa's 7th largest economy. And considering that the UE is larger than the DE (as is estimated in private conversations), we could perhaps be 4th overall but sadly, who cares? you who can do nothing about it?🤷 No chance.

Many have advised that Kenya can collect more revenues across the board if it shifted to indirect taxation. This would make sense if the porous borders are sealed and all counterfeits are done away with. It sounds easy on paper but the political implications are too heavy for any single political party to carry and mount a meaningful fight. The UE finances politics, buys influential positions and is increasingly entrenched in the Kenyan day-to-day life. Thank God, Banana is still the name of a fruit but it could swiftly have the 'Republic' bit as an extension added to it. This is the perfect place to use the analogy of a frog placed in a pot full of cold water over a fire. The frog stays comfortable and only realises that it is in hot water when its leg muscles are already cooked. It cannot jump out at that point. Fortunately, Kenyans are in luck. They can jump out now by saying NO to the UE that has existed from before independence day.

These types of articles are few and far between because they threaten to expose or move away the cheese of many an 'innocent' gangster and supposed holy Joes who hear or see no evil. Let us borrow President Kibaki's defense line..."you know and I know and everybody else knows that I am....and only have one dear....". In our case we have two economies, the official one and the clandé. And for it to thrive, the clandé needs the official economy to stay afloat and that is why some of its money finds its way into the banking system. It is like being told, "he is enough for both of us only if we stick together", and when the official one is sick, the clandé pays her a visit in hospital to wish her well and also stand in as a caregiver. For without her, the good life is impossible. A gearbox at two hundred thousand shillings spares you eight hundred thousand shillings that would have been gobbled up by the DE. But there's a bigger price to pay for this.

The UE is now wreaking havoc on the DE. A sizeable chunk of manufacturers have shut down locally in favour of operating from neighbouring countries. And with this, job and tax opportunity losses abound. The kids we are raising now feel the pinch and are stepping up their aggression in response to the hardships by finding mentors in the UE while their parents stick to the unpalatable straight and narrow DE. The resultant gap in having a generation of morally challenged children ready to make money whichever way-whatever way in one corner and stressed up parents in the other corner helplessly watching their kids do the opposite of what they painstakingly imparted in them, is too much to bear.

But we know that in life, a lie can never be equal to the truth in much the same way that no matter how hard you clean the annus, it can never become a mouth and cannot be trained to say hello there! Let us not be a sh**hole economy now that President Trump is headed back to the Whitehouse. He just may call us out and there are no guarantees that our national sphincter muscle is strong enough to overcome the rough and tumble of the unpredictable geopolitical terrain. Just give us back our country.