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How we squander Other People’s Money

I was on holiday along my beloved Kenyan coastline recently, and discovered that not everyone at the resort where I was staying was in leisure mode. I observed one group of people sitting in a specified corner of the hotel every single day. They were not sunning themselves or going for a swim. None of them was relaxing or reading a good book. Indeed, they appeared stressed and fatigued throughout – a demeanour highly incongruous with their surroundings.

This is what they were doing: sitting before a laptop computer, evidently working on an important report. I wondered why anyone would come to sit in the balmy and soporific sea air just to work on a document. Coming for a seminar or conference is one thing, but just sitting there typing on a keyboard? Why pay huge hotel charges and airfares for a few people to go and bang out a report?

The answer, of course, is evident. These people were, in all likelihood, using Other People’s Money.

I wrote about this disease way back in 2004, but it is clearly still with us. Give the average Kenyan someone else’s money to use, and he invariably turns into a complete spendthrift who must do everything in the most expensive and expansive way possible. If you had a report to write, would it occur to you to spend a packet on getting a group of people across the country and into a five-star hotel in order to do it? Only if the money you were spending was not yours. If it was your money, you would sit in your office and do it. What else are offices for?

In Kenya we are famous for being lavish with Other People’s Money. If a donor or a corporation is footing the bill, then we must have the best possible facilities and the enjoy the most expensive services. When a foreign government or an aid agency is paying, we must always conduct our deliberations in an appropriate setting – in a coastal resort, ideally, or at least by a lake or a mountain!

We must insist on flying business class or hiring a four-wheel-drive vehicle to get us there in comfort. And we must insist on healthy allowances to compensate us for all the trouble of being away from home – so someone must pay for our newspapers, laundry, entertainment, and alcoholic consumption. I await the day when donor-funded managers ask for an allowance in order to conduct their daily ablutions – very necessary for good performance, after all…

This problem is not just a public-sector or NGO phenomenon. Managers of private corporations are also great spenders of shareholders’ money. When the money comes out of a common kitty, then they must simply insist on the best. That is why you see so many remarkably ostentatious offices, such swanky vehicles, so much pomp and show.

But watch the executive who leaves the cushy corporate job to start his own company. This is a common trend: many Kenyan managers, having acquired sufficient skills by working in large companies, do indeed strike out on their own in order to fill their own pockets rather than enriching others.

And what a stark difference there is when they do! Out goes the flashy office, for one thing. The newly self-employed CEO, even of a substantial business, will now be talking of “functional” and “appropriate” furniture and fittings. He will no longer upgrade his computer every six months in order to have the latest toy – he will now push a battered laptop for years. The business-class travel that was so essential when someone else was paying will now become a silly and pointless luxury. And why spend several million on a new Mercedes or Prado when a “mitumba” Toyota does the job just as well?

Yes indeed, when one’s own wallet is being opened, one learns great prudence and thrift. Does this matter? Of course it does. I listened to Justice Kriegler taking the Electoral Commission of Kenya to task last week, and thought his scathing remarks were spot on. This was an organisation that was given a huge responsibility and a huge budget to match. What did it do? It blew the money on ridiculous foreign “inspection” trips, coastal junkets, fancy cars, handsome allowances and expensive computers that were never used.

Had the commissioners done a great job, perhaps we would not have denied them their little pleasures. But we all know what happened during and after the December 2007 elections, which the ECK was given all that money to manage. The elections were an unmitigated disaster, and the ECK mandarins behaved like overstuffed clowns as they watched the whole thing unravel.

If we are going to get better performance out of Kenyans who have been entrusted with Other People’s Money, we have to get very clever about building incentives and penalties into their contracts to make them manage money better. All this waste and profligacy is taking us nowhere.

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