Economy carries cost of moral collapse

Oct 10, 2004 Life & Society, Sunday Nation

What is it with Kenyans and Other People’s Money? As soon as we are asked to handle money that is not our own, we become spendthrifts at best and outright criminals at worst.

A sweeping judgment, you say? Unfair? The record is not good, people.

You would all agree for a start that our politicians and civil servants cannot be trusted to handle Other People’s Money. Whenever these people have been asked to safeguard public wealth, the outcome has been highly predictable. If leaders are given the power to allocate land, they allocate it to themselves, their families and their cronies. If they are given the power to spend money on behalf of the people, they spend it on dubious projects that “kick back” a proportion of the loot straight to them.

If they are given fiscal responsibility, they exercise gross imprudence. And so as taxpayers we have funded fleets of limousines, foreign trips, fancy offices and endless conferences that contribute everything to cost and nothing to benefit. Because it was a public pool of funds, it was squandered. When the trough is publicly funded, the animals feed gluttonously.

We aren’t the only ones who lost out. According to World Bank figures, Kenya received an annual average of US$ 200 million in foreign aid in the 1970s; over US$ 600 million in the 1980s; and nearly US$ 1 billion in the early 1990s. We have been awash in aid for most of our post-independence history. But what do we have to show for it? Higher living standards, better infrastructure, stronger institutions? No, we have instead an enviable collection of abandoned projects and a clique of people who apparently have enough wealth to last their families several generations. All because the donors didn’t realise it was another case of Other People’s Money.

It isn’t just in public service that the problem rears its ugly head. “Mali ya kampuni” is also Other People’s Money, after all. Shareholders periodically find themselves denuded by rapacious managers. How many executives have you come across who are able to exercise modesty and restraint in the spending of shareholders’ funds? Not many, I wager. Plush offices, hefty packages and plenty of wining and dining are the norm. Do they improve performance? Well, we aren’t exactly renowned for producing world-beating companies, so you tell me.

But the problem doesn’t just exist at the top. What is it that seems to be every employed Kenyan’s wet dream? Why, foreign trips with plenty of healthy allowances, of course. We attend conferences, seminars, workshops, symposiums and site visits in all corners of the globe. Our managerial class is extremely well travelled. Why? Supposedly, to learn “best practice”. Actually, because we’re spending Other People’s Money.

In fact there’s a particular form of corruption that most of us who have gone on business travel have undoubtedly engaged in. This clever wheeze was devised by the airlines a couple of decades ago, and it’s known as the frequent flyer programme. You travel on behalf of your organisation; you are paid personally for this in a currency known as air miles. The company foots the bill; you pocket the reward. As a result, you engage in more and more unnecessary travel on the flimsiest of pretexts. Everyone does it, everyone benefits, so no one asks any awkward questions. Other People’s Money, so no problem.

But watch the behaviour of the same people when they’re spending Their Own Money. When he’s footing the bill, the politician will be chugging along in the modest Toyota that he sneered at as a minister cruising in his Mercedes. When he goes on holiday with his family, the executive who wouldn’t consider anything less than business class on official travel can be found skulking in the economy seats – simply because it’s coming out of his own pocket. Once unthinkable hardships become sensible options overnight – if the pain is felt in one’s own wallet.

We pay dearly for Other People’s Money syndrome. It is evident that our politicians cannot be trusted with taxpayers’ money; so we spend millions on audit controls and anti-corruption commissions before the event, and billions on special investigations and commissions of inquiry after the looting is over. We have to suffer the ritual humiliation of donors now insisting on the most stringent scrutiny of the projects they fund. We record loud objections, but we know in our hearts that this mistrust is both understandable and necessary. The record is not good, people.

We pay for this in our companies, too. Because no one can be trusted, we have to have the most elaborate systems of control to prevent and detect fraud. We have to employ armies of people to scrutinise transactions and conduct internal audits. We have to slow business processes down in order to complete the necessary checks. Chief executives know that true delegation is a myth in this poisoned environment – eyeball control is vital for personal survival. The customer suffers this inefficiency, and so does the shareholder.

We pay for it in our boardrooms. Boards of directors are meant to have two key roles in a company: as “pilots” who use their experience to guide strategic direction; and as “watchdogs” who keep their teeth bared to prevent abuse. In Kenya, the fear of fraud keeps directors firmly in the kennel rather than the cockpit. Our directors become mere extensions of the internal audit function. Their essential role becomes the enforcement of rules and regulations; they forgo flying in the high winds of strategy and policy.

Perhaps the biggest cost comes in the atmosphere of suspicion and mistrust that this disease engenders. We are ready to believe the absolute worst of each other – and usually for good reason. When we hear that a bank has been closed due to fraud by the directors and a receiver has been appointed, we expect the receiver to continue the looting – which he often does. When we hear that the press has uncovered irregularities in the award of a tender, we immediately believe another major scandal is breaking – and it usually does. When we hear of a major corporation making unexpected losses, we immediately suspect the managers of wrongdoing – and they usually don’t let us down. Assume the worst – it’s safer that way.

Can we run a country in such a noxious milieu? With great difficulty, and only by incurring a whole layer of unnecessary costs. We have imbibed the elixir of selfish gain to toxic levels, and must now spend a great deal on the medication. As the thinkers in our midst ponder the issue of why we have lost competitiveness as a nation, they would do well to look beyond the usual suspects. It isn’t just about our spiralling power costs and our crumbling roads. There is a cost of moral collapse that looms large in this economy.

Rebuilding our roads and institutions may take a few years. Rebuilding our ethics and our trust in one other is likely to take a generation or more. I hope I’m around to breathe the sweet air of mutual trust again.