Ethnicity, Foreign Aid, and Economic Growthin Sub-Saharan Africa: The Case of Kenya

John M. Cohen

Abstract

Academic publications and aid agency handbooks generally give little attention to therelationship between ethnic interests and foreign aid projects, agreements, and condi-tionalities. Reflecting on this pattern, academics specializing in the politics of ethnicityincreasingly argue that foreign aid has unforeseen consequences for ethnic groups andthat ethnic interests have unanticipated affects on the design and implementation offoreign aid interventions. Further, based on highly quantitative analysis economistswith limited awareness of task environment realities are increasingly asserting that inSub-Saharan Africa ethnicity is a major factor leading to inadequate policies, wastedresources, and limited economic growth.

These two views on the effects of ethnicity are in danger of becoming undocu-mented conventional wisdom. Hence, the principal purpose of this paper is to chal-lenge the validity of the first view and to provide empirical evidence in support of thesecond view. Towards this end the paper provides documented case studies of howpoliticians, public sector officials, aid agency professionals, and technical assistanceadvisors consciously deal with ethnic issues in a given Sub-Saharan African country. Inthe process of demonstrating that in Kenya all parties involved in the design andimplementation of foreign aid-supported initiatives pay close attention to ethnic issues,the paper also illustrates the mechanics through which ethnic competition can lead toadverse policies that limit economic growth. In evaluating these two views, the paperdemonstrates the utility of qualitative, detailed studies that can reveal the processesthrough which ethnicity affects, and is affected by, important political, social, andeconomic variables.

John M. Cohen is an Institute Fellow at HIID. He served as senior management advisorin the Ministries of Agriculture and Livestock Development (1979-82), senior advisorfor district planning in the Ministry of Planning and National Development (1985-90),and budget and investment program advisor for the Ministry of Finance (1990-92).

Ethnicity, Foreign Aid, and Economic Growthin Sub-Saharan Africa: The Case of Kenya

“Tribalism is the bane of independent Africa...There are 2,000 languagegroups of which 50 are prominent, and countless more subdivisions oftribe and clan. This complex heritage has been only slightly eroded byinter-marriage and the drift to the cities. Nor have the efforts of Africanleaders to impose a national identity on their diverse peoples, assembledwithin borders inherited from colonial days, worked well. African state-builders tread a narrow path between the fact of tribal loyalties and theneed to minimize inter-tribal hostility.”

“Tribalism in Africa,” The Economist (September 10, 1994), pp. 46, 48.

There is a growing literature on ethnicity anddevelopment.1 Unfortunately, this literatureis silent on the relationship between foreignaid and ethnic interests.2 To a large extent

1. See the contents of and bibliography in: JosephRothschild, Ethnopolitics: A Conceptual Framework(New York: Columbia University Press, 1981);Anthony D. Smith, The ethnic Revival (Cambridge:Cambridge University Press, 1981); Donald L.Horowitz, Ethnic Groups in Conflict (Berkeley:University of California Press, 1985); Milton J.Esman, Ethnic Politics (Ithaca: Cornell UniversityPress, 1994); Milton J. Esman and Shibley Tel-hami, International Organizations and Ethnic Con-flict (Ithaca: Cornell University Press, 1995). 2. Most writing on this topic is focused on situa-tions where foreign aid has negative effects onparticular ethnic groups, which is often the casewhere aid agencies support the construction ofhydroelectric dams and irrigation systems or areinvolved in resettlement schemes. See, for exam-ple: Elizabeth Colson, The Social Consequences ofResettlement: The Impact of the Kariba ResettlementUpon the Gwembe Tonga (Manchester: ManchesterUniversity Press, 1971); Thayer Scudder, “TheHuman Ecology of Big Projects: River BasinDevelopment and Resettlement,” in AnnualReview of Anthropology (Palo Alto: Annual

this is because most academic publicationson design and implementation of foreign aidinvestments give inadequate considerationto the relationship between ethnic interestsand foreign aid projects, agreements, andconditionalities.3 Because of this inattention it

Reviews, Inc., 1973); Michael M. Cernea, Anthro-pological Approaches to Involuntary Resettlement:Policy, Practice and Theory (Boulder: WestviewPress, 1993). In regard to Kenya, see, for example:Michael Halderman, “Stopped in Their Tracks:East African Pastoralists,” Cultural Survival Quar-terly, VIII, 1 (1984), pp. 39-45. 3. For example, one of the most influential state-ments on the design of rural developmentprojects strongly argues for going beyondtechnical, economic, and financial feasibility toconsider “socio-cultural feasibility.” WayneWeiss, Albert Waterson, and John Wilson, “TheDesign of Agricultural and Rural DevelopmentProjects,” in Planning Development Projects, editedby Dennis A. Rondinelli (Stroudsburg: Dowden,Hutchinson & Ross, Inc., 1977), pp. 106-7. But indescribing such a feasibility study no mention ismade of ethnicity. This pattern is found in everymajor book on policy or project design andimplementation. For example: J. Price Gittinger,Economic Analysis of Agricultural Projects

2

should not be surprising that aid agencystaff guidelines and handbooks also fail to beexplicit about ethnic issues, since academicwork has an important impact on theircontent.4 Based on deductive conclusionsdrawn from this inattention, some academicsspecializing in the politics of ethnicity assertthat foreign aid has unforeseen consequencesfor ethnic groups and that ethnic interestshave unanticipated effects on the design andimplementation of foreign aid interventions.For example, one study of ethnicity and for-eign aid asserted:

(Baltimore: Johns Hopkins University Press,1972); Earl M. Kulp, Designing and Managing BasicAgricultural Programs (Bloomington: Program ofAdvanced Studies in Institution Building andTechnical Assistance Methodology, 1977); DennisA. Rondinelli, Development Projects as PolicyExperiments: An Adaptive Approach to DevelopmentAdministration (London: Methuen, 1983); LouiseG. White, Implementing Policy Reforms in LDCs: AStrategy for Designing and Effecting Change(Boulder: Lynne Reinner, 1990); Derick W.Brinkerhoff, Improving Development ProgramPerformance: Guidelines for Managers (Boulder:Lynne Reinner, 1991). An limited exception isfound in: Albert O. Hirschman, DevelopmentProjects Observed (Washington, D.C.: TheBrookings Institution, 1967), which refers to theeffects of”tribal tension” on projects: pp. 46, 140-2, 146. When ethnic variables are mentioned it isonly done tangentially to the text. For example:Coralie Bryant and Louise G. White, ManagingDevelopment in the Third World (Boulder:Westview Press, 1982), pp. 49, 257, 291; MerileeS. Grindle, ed., Politics and Policy Implementationin the Third World (Princeton: PrincetonUniversity Press, 1980), p. 18. 4. For example, while USAID developed guide-lines for Social Soundness Analysis in the mid-1970s, it failed to build into its project designhandbook the need to focus on the kinds ofethnic issues that are described in this paper’scase studies. United States Agency forInternational Development, “Chapter 9:Implementation Planning,” Project Assistance,Handbook 3 (Washington, D.C.: USAID,1982/1993).

...the formally technical and neutralcharacter of decision-making proc-esses and alternative criteria at theinternational institutional level carryimportant, often unforeseen conse-quences for ethnic conflict...(but ifmore were known it might)...enableforeign aid donors to become moreaware of relationships between theresources and advice they provideand inter-ethnic relationships in thecountries in which they intervene.5

So too, the major publications on eco-nomic development rarely mention ethnicityas an important factor affecting policy mak-ing, investment decisions, and economicgrowth.6 Nevertheless, analytical argumentsare beginning to emerge that contend ethnic-ity is an important factor leading to inade-quate policies, wasted foreign aid resources,

5. Milton J. Esman and Ronald J. Herring, “TheProblem: How Development Assistance AffectsEthnic Conflict” (Paper Presented to Conferenceon Development Assistance and Ethnic conflict,Cornell University, October 6-7, 1995), pp. 1, 15-16. 6. Major text books on the economics of develop-ment do not address ethnicity, for example: Mal-colm Gillis, Dwight H. Perkins, Michael Roemer,and Donald R. Snodgrass, Economics of Develop-ment, 3rd Ed. (New York: W. W. Norton & Co.,1992). Even major books that do address genderand population issues overlook ethnicity, forexample: Gerald M. Meier, Leading Issues in Eco-nomic Development, 6th Ed. (New York: OxfordUniversity Press, 1995). Finally, major studies byeconomists of the agricultural sector, where eth-nicity should be very salient, also fail to addressthe topic, for example: Thomas P. Tomich, PeterKilby, and Bruce F. Johnston, Transforming Agrar-ian Economies: Opportunities Seized, OpportunitiesMissed (Ithaca: Cornell University Press, 1995).An rare exception that only briefly visits the issueis: Bruce Herrick and Charles P. Kindleberger,Economic Development (New York: McGraw-Hill,1983), pp. 104-5.

3

and limited economic growth.7 For example,a recent World Bank study argues that:

...Africa’s ethnic diversity tends toslow growth and reduce the likeli-hood of adopting goodpolicies...High ethnic diversity maylead to increased civil strife, politicalinstability, and destructivecompetitions for rents by ethnicfactions.8

In sum, despite the absence of empiricalcase studies supporting these assertions,both perspectives are moving toward thestatus of conventional wisdom. This in turnis leading to a call by experts for findingways to help government officials and aidagency professionals become aware of andsensitive to the importance of relationshipsbetween ethnicity, policy formulation,foreign aid interventions, and economicgrowth.

Contrary to the first deductive perspec-tive, this paper seeks to establish that: (1) it iscommon knowledge among aid agency pro-fessionals that ethnic issues affect and areaffected by all aspects of intervention, fromdesign and implementation through evalua-tion and completion; (2) for better or worseaid agency staff actively address ethnicissues in most of their professional fieldwork; and (3) case study analyses will pro-

7. Examples of studies relating polarized or com-peting groups to economic effects include:Alberto Alesina and Allen Drazen, “Why AreStabilizations Delayed?” American EconomicReview, LXXXII (1991), pp. 1170-88; TorstenPersson and G. Tabellini, “Is Inequality Harmfulfor Growth?” American Economic Review, LVVVIX(1994), pp. 600-21. It should be noted thatpolitical scientists have speculated on thisrelationship for some time. See the review ofethnicity publications by: Saul Newman, “DoesModernization Breed Ethnic Political Conflict?”World Politics XLIII, 3 (1991), pp. 451-78. 8. William Easterly and Ross Levine, “Africa’sGrowth Tragedy: Policies, Ethnicity, and Neigh-bors” (Paper Prepared for the World Bank,Washington, D.C., October 1995), pp. 3, 11.

duce deeper understanding and generatemore hypotheses relevant to ethnic-foreignaid relationships than the kind of macro-eco-nomic studies being currently carried out. Insupport of these arguments, the paper takesthe position that the failure of academic andaid agency publications to explicitly andadequately address linkages between foreignaid and ethnic issues does not mean thatthose linkages are vague, unforeseen, orignored by aid agency professionals and thegovernment officials they deal with.

The paper makes this argument by pre-senting a set of detailed case studies focusedon the relationship between ethnicity andforeign aid in Kenya. The objective of thesestudies is to provide a much needed portraitof how politicians, public sector officials, aidagency professionals, and technical assis-tance advisors consciously deal with ethnicissues in a given Sub-Saharan African coun-try. After providing detailed examples thatdemonstrate that in Kenya all partiesinvolved in the design and implementationof foreign aid-supported initiatives pay closeattention to ethnic issues, the paper con-cludes by asking why, given this reality,ethnic variables are so neglected in the aca-demic literature on foreign aid and in aidagency design and implementation hand-books and manuals.

In support of the second, econometricperspective, this paper seeks to provide a setof detailed, well documented case studiesthat elaborate some of the ways in whichethnicity leads to policies that have a nega-tive effect on economic development. Inproviding portraits of ethnicity in action, thepaper’s case studies illustrate how the cau-sality suggested in recent econometric asser-tions actually occurs. This evidence of themechanics of causality is important becausethe indicator for “ethnicity” being used inthe emerging econometric studies is tooinsensitive to reality to be trusted.9 It is also

9. For example, most econometric studies usingan ethnic variable draw on data generated in

4

useful because most studies carried out byanalytical economists demonstrate littleawareness of task environment realities andprovide few documented examples of actualsituations where ethnicity affected policymaking, resource utilization, and economicgrowth.

Tribe vs. Ethnic Group

No Kenyan politician, civil servant, newsreporter, or citizen uses the term “ethnicgroup.” Rather they explicitly use the Eng-lish word “tribe” or its Swahili equivalent(kabila). The pervasive use of the term “tribe”rather than “ethnic group” also holds forKenyans of Indian descent, European citi-zens of the country, and the large number ofexpatriates who work for embassies, aidagencies, technical assistance teams, Non-Governmental Organizations (NGOs), andforeign corporations. Nevertheless, in defer-ence to the academic literature focused onethnic issues in late developing countries,this paper will use the term “ethnic group”rather than “tribe.” This is done despite therecognition that in Kenya the term “ethnicgroups” makes the centrality of ethnic issuesto aid agency interventions less transparentwhile freighting the analysis with culturaland political conceptual meanings not foundin the Kenyan Government or the foreign aidcommunity.

As in many Sub-Saharan African coun-tries, every Kenyan government officialevaluates each Government and aid agencyactivity in regard to its specific effect on his

1960 by the Department of Geodesy andCartography of the State Geological Committeeof the Soviet Union. The World Bank study citedhere uses this data to measure the probabilitythat two randomly selected individuals in acountry will belong to different ethno-linguisticgroups. The score allows the study to rank acountry relative to other countries in terms of theextent to which it is fractionalized. Ibid., pp. 12,35.

or her own ethnic group and the groups ofothers.10 Both in public speeches and pressreleases, Government officials and opposi-tion groups talk about foreign aid in terms ofethnic interests and areas.11 So too, aidagency professionals, technical assistanceadvisors, and NGO specialists working inKenya constantly take ethnic interests intoaccount, directly referring to the interests ofspecific ethnic groups and their home areas.Further, among themselves and with Kenyanpoliticians and civil servants, foreign aidfunded professionals typically discuss theeffects of their activities on ethnic interestsknowledgeably, frankly, and openly. Theyalso discuss in the same open manner theways in which ethnic interests affect their aidinterventions.

Methodology

In specifying the relationship between for-eign aid and ethnicity, the paper provides acase study of only one country.12 It remainsfor others to carry out comparative studies inother Sub-Saharan African countries to testthe extent to which the arguments made here

10. The classic paper on this pattern is: Jon Moris,“The Transferability of Western ManagementConcepts and Programs: An East African Per-spective,” in Education and Training for Public Sec-tor Management in Developing Countries, edited byW. D. Stifel, J. E. Black, and J. S. Coleman (NewYork: The Rockefeller Foundation, 1977), pp. 73-83). 11. For example: “Who Benefits from Aid? Oppo-sition MPs Claim their Tribes are Neglected,”Weekly Review (July 22, 1994), pp. 17-23. 12. Indeed, there are few studies in Kenya thatexplicitly relate ethnic issues to bureaucracy andperformance, most notably: John Nellis, “TheEthnic Composition of Leading Kenyan Govern-ment Positions” (Report Published by the Scandi-navian Institute for African Studies, Uppsala,1974); Peter Blunt, “Bureaucracy and Ethnicity inKenya: Some Conjectures for the Eighties,”Journal of Applied Behavioral Science, XVI, 3 (1980),pp. 336-53.

5

are valid elsewhere. But, based on his experi-ence throughout Sub-Saharan Africa, theauthor is convinced that the Kenyan caserepresents both the norm and the realityabout the degree to which government offi-cials and aid agency professionals continu-ally address linkages between foreign aid,ethnic interests, policy formulation, and eco-nomic growth.

The principal years of focus for this casestudy are 1991 and 1992, the most recentyears for which adequate data and documen-tation are available. These are also the yearsduring which the author’s major advisorytask in the Ministry of Finance was to reviewall capital budget projects and in which theaid agencies began to withhold assistancebecause of the Government’s failure, largelyfor reasons related to ethnic interests, tocarry out agreed-upon structural adjustmentagreements or comply with significant politi-cal and economic conditionalities.

The case studies in this paper focus onlyon aid interventions related to the Govern-ment’s capital budget. While it is the casethat since 1991 aid agencies have tried tobypass the Government and channel fundsto NGOs, the extent to which the staff of pri-vate sector organizations deal with ethnicinterests will not be expressly dealt with inthis paper.

Evidence supporting this paper is basedon the author’s 12 years of advisory work atsenior levels of the Kenyan Government,data drawn from Government and aidagency archives, and personal interviewswith civil servants and aid agency profes-sionals. Wherever appropriate, evidencesupporting statements on government-aidagency calculations over ethnic issues will bepresented in footnotes.

Background Profile on Ethnicity andPolicy Making

Kenya is a country of 580,000 km2, with anestimated population in 1991 of 25.7 million

people, 25 percent of whom live in urbanareas.13 In 1991 it ranked 125th out of 138countries on the composite Human Devel-opment Index.14

Kenya’s population is divided into sev-eral ethnic groups. Censuses have identifiedapproximately 40 groups and labeled themas such.15 No one single ethnic group isnumerically dominant. The three largest andmost competitive ethnic groups are theKikuyu, Luo, and Luhya. It is generally esti-mated that together they make up 50 percentof Kenya’s African population. Two smallergroups, the Kamba and Kalenjin, are eachestimated to contain 10 percent of the Afri-can population. In sum, five ethnic groupscomprise approximately 70 percent of theAfrican population. The characteristics anddifferences between the groups are well-described elsewhere and need not bereviewed here.16 But it should be noted that

13. World Bank, World Development Report 1994(Washington, D.C.: Oxford University Press,1994), pp. 162, 222. 14. United Nations Development Programme,Human Development Report 1994 (New York:Oxford University Press, 1994), p. 130. The HDIindex is a composite measure of human develop-ment containing indicators related to longevity,knowledge, and income. Kenya’s profile as apoor late developing country can sketched with ahandful of statistics: between 1980 and 1991 itsGNP per capita growth rate averaged 0.3 percentper annum; and, in 1991 real GDP per capita was$1,350, annual population growth rate was 3.3percent, life expectancy at birth was 58 years, 50percent of the population had access to safewater, adult literacy was 43 percent, and 782,000children under five years of age were malnour-ished. Ibid, pp. 130-83. 15. For comparative purposes 185 states claim torepresent 5,000 ethnic groups. Kenya’s 40+groups should be compared to 350 in India, 130in the former Soviet Union, and 90 in Ethiopia. 16. See, for example, the survey and bibliographyin: Irving Kaplan, et al., Area Handbook for Kenya(Washington, D.C.: U.S. Government PrintingOffice, May 1976), pp. 85-104, 423-35.

6

the econometric World Bank study onethnicity and development, which was citedat the beginning of this paper, found Kenyato be among the 15 most ethnicallyfractionalized countries.17

Ethnic aggregation can be misleading, forthere are cross- cutting cleavages withinethnic groups and complex, mutually self-serving relations between members of differ-ent ethnic groups.18 First, a number of ethnicgroups are in effect composite categoriescovering smaller distinct but related groups.For example, the currently dominant Kalen-jins are made up of a number of smallergroups, one of which, the Tugen, is PresidentMoi’s ethnic group.19 Similar breakdownscan identified for other major groups, suchas the Luhya.20 The existence of compositecategories supports the assertion of someacademics that such ethnic groups are thecreation of colonial administration. But evenif this is the case, pre- and post-independence politics have made thesegroups de facto ethnic composites thatindividuals identify as their own.

Second, a given ethnic group can bedivided into factions. For example, theKikuyu, the powerful group of Kenya’s firstPresident, Jomo Kenyatta, has long been

17. Easterly and Levine, “Africa’s Growth Trag-edy,” p. 35. 18. The following three points are widely dis-cussed in the domestic and international press. Arecent illustrative example of these points isfound in: “Kenya’s Clothes: Moi’s Recent IllnessHas Sparked Hustling Among the Political Ambi-tious, With a New Contender on the Scene to beReckoned With,” Africa Confidential, XXXVI, 11(1995), pp. 3-4. 19. The Kalenjin ethnic group consists of anumber of different Nilotic groups that sharesimilar linguistic and cultural traditions: Kipsigis,Nandi, Pokot, Elgeyo, Marakwet, Keiyo, Tugen,Sabot, Sebei, Dorodo, and Terik. 20. The Luhya are divided into: Bukusu, Dakho,Kabras, Khayo, Kisa, Marachi, Maragoli,Marama, Nyala, Nyole, Samia, Tachoni, Tiriki,Tsotso, and Wangra.

divided into two highly competitive region-based factions: the Kiambu Kikuyu and theNyeri Kikuyu. So too, there is a great deal ofcompetition among the smaller ethnicgroups that make up the Kalenjin andLuhya. This competition is expresslyrecognized in the rhetoric of politicians,formation of political groupings, reporting inthe press, inter-Governmental struggles forresources, and the design andimplementation of aid agency interventions.

Third, for a number of pragmaticreasons, individuals belonging to an ethnicgroup out of favor or not part of the nationalruling coalition will join and becomeinvolved with that coalition’s political party.Throughout most of Kenya’s politicalhistory, individuals from all ethnic groupshave voted for and worked with thedominant political party and the coalitionthat controls it. They have done so asindividual dues paying party members,voters, leaders and members of local branchoffices, and elected municipal councilors andMembers of Parliament (MPs). All districts,and thus all ethnic constituencies, elect MPsunder the banner of the dominant party. Butmost MPs from ethnic groups not part of thecoalition do not get ministerial appointmentsand have great difficulty gaining access toGovernment resources for their homeconstituencies. Further, regardless of theirethnic group, civil servants refine andimplement the policies, projects, andprograms of the ruling Governmentcoalition. But this bureaucratic participationdoes not preclude them from workingclosely with politicians from their home areato gain resources or from using red tape tostall or limit the activities of MPs and civilservants who belong to the groups makingup the dominant coalition and dis-criminating against their home area.

In regard to this third point, the KenyanGovernment and its public sector, as pres-ently organized and functioning, is closelyrelated to the generation of patronage andrents required by influential ministers and

7

political godfathers to stay in power, a pat-tern of rule found in many Sub-Saharan Afri-can countries.21 That is, the prevailing systemof personalistic and patrimonial rule reliesheavily on the resources found in the publicsector to fragment ethnic opposition andbuild patron-client linkages of support tothose willing to facilitate their interests.22 Thecontrol this strategy generates is reinforcedby the ethnic coalition’s administrative con-trol of the police and armed forces.23 In short,the Kenyan Government is increasinglymarked by “crony statism,” a system of gov-ernment that is based on the distribution ofresources and rents to support clientelistnetworks, which are comprised of membersof ethnic groups in the ruling coalition andopportunists from ethnic groups not in thatcoalition. The result is an over-bloated,decaying bureaucracy that is weakened byconstantly shifting personal relations basedon ethnicity, with godfathers buildingcliques that assist them to generate the jobs

21. Thomas M. Callaghy describes this pattern asa “patrimonial administrative state: “The Stateand the Development of Capitalism in Africa:Theoretical, historical, and ComparativeReflections,” in The Precarious Balance: State andSociety in Africa, edited by Donald Rothchild andNaomi Chazan (Boulder: Lynn Reinner, 1988),pp. 80-8; Richard Joseph describes the pattern as“prebendal:” Democracy and Prebendal Politics inNigeria: the Rise and Fall of the Second Republic(Cambridge: Cambridge University Press, 1987). 22. See, for example: “Bribery and Extortion: TheMoi Way of Busying Support and Loyalty, andSilencing Opposition is a Perversion of Constitu-tional Government,” Finance (November 15,1992), pp. 18-23. A recent example of thewithdrawal of Government allocations to aconstituency that elected in a by-election for acandidate from the opposition party: “Split in theRanks: Kipipiri Loss exposes Rifts withinKANU,” Weekly Review (September 15, 1995), pp.4-11; e.g. “Road Grading Project in KipipiriHalted,” The Nation, September 11, 1995, p. 30. 23. “Kenya: The Security Home-Boys,” Africa Con-fidential, XXXI, 11 (1990), pp. 1-2.

and resources that can be used to benefitfamily, clan, and home area.24

From 1960 to 1965 the dominant ethniccoalition was led by President Kenyatta withthe support of the Luo and the Kamba. After1965 the Luo were excluded from Kenyatta’scoalition and the Meru and Embu wereadded. Since 1978, political power has beenheld by President Moi’s Kalenjin and ashifting coalition currently made up of twogroups: (1) the Masai and factions within theKamba, Coastal groups, the Luhya, and theKisii; and (2) opportunistic members of theKikuyu and Luo ethnic groups.25 The intensecompetition that has marked these two peri-ods, and the ways in which those holdingpolitical and bureaucratic power have dis-tributed Government resources and advan-tages to their ethnic group and the groupsand individuals making up their coalition, isalso well-described elsewhere and need notbe restated here.26

24. The implications of this for public sectorreform is reviewed in: John M. Cohen,“Importance of Public Service Reform: the Caseof Kenya,” Journal of Modern African Studies,XXXI, 3 (1993), pp. 449-76. 25. In 1993 President Moi’s cabinet wasdominated by members of the Kalenjin andMasai ethnic groups. The President argued thatsince groups such as the Kikuyu and Luo were inopposition there was no need for him to appointmembers of those groups to Cabinet posts or topromote ethnic balance in his Cabinet. 26. The most useful studies containing materialon the relationship between ethnic interests andnational politics are: David W. Throup, “TheConstruction and Deconstruction of the KenyattaState,” in The Political Economy of Kenya, edited byM. G. Schatsberg (Baltimore: Johns HopkinsPress, 1989), pp. 33-74; Joel D. Barkan, “The Riseand Fall of a Governance Realm in Kenya,” inGovernance and Politics in Africa, edited by GoranHyden and Michael Bratton (Boulder: LynneRienner, 1991), pp. 167-92; Jennifer A. Widner,The Rise of a Party-State in Kenya: from“Harambee!” to “Nyayo!” (Berkeley: University ofCalifornia Press, 1992).

8

So too, the characteristics of the politicalsystem are well described elsewhere.27 Butseveral points need to be expressly noted.First, Kenya is a republic based on a modi-fied parliamentary model, with an electedPresident serving as both the Head of Stateand the Leader of Government. The Presi-dent controls a highly centralized Govern-ment that reinforces its central domination ofpublic sector tasks through a parallelstrategy of deconcentrated provincialadministration that is based on stronglycontrolled deconcentration and limiteddevolution.28 Second, the President’s politicalcoalition dominates decisions on theallocation of domestic and foreign aidresources. Third, the jurisdictionalboundaries of Kenya’s deconcentrated local-level government units are largelycoterminous with identifiable ethnic areas.29

Fourth, grassroots ethnic leaders are

27. Recent descriptions of Kenya’s central andlocal-level administration are found in: Widner,Rise of a Party-State in Kenya; Joel D. Barkan, Poli-tics and Public Policy in Kenya and Tanzania (NewYork: Praeger, 1984); Merilee S. Grindle, Challeng-ing the State: Crisis and Innovation in Latin Americaand Africa (Cambridge: Cambridge UniversityPress, 1995); John M. Cohen and Stephen B.Peterson, Administrative Decentralization Strategiesfor the 1990s and Beyond (New York: UnitedNations Secretariat, 1995), pp. 181-97; Paul J.Smoke, Local Government Finance in DevelopingCountries: the Case of Kenya (Nairobi: OxfordUniversity Press, 1984). 28. John M. Cohen and Richard M. Hook,“Decentralized Planning in Kenya,” PublicAdministration and Development, VII, 1 (1987), pp.77-93; Joel D. Barkan and Michael Chege,“Decentralising the State: District Focus and Poli-tics of Reallocation in Kenya,” Journal of ModernAfrican Studies, XXVII, 3 (1989), pp. 431-53. 29. To a large extent this is the result of colonialrule. District Commissioners relied on chiefs whospoke the local languages. Through acomplicated process, boundaries of sub-locations, locations, divisions, and districts wereto some extent drawn with linguistic governancein mind.

involved in a number of self-helpgroupings30 and NGOs,31 most of which havea ethnic base that the political center tries tocontrol.32 Fifth, operating parallel to theprovincial administrative system are thebranch and sub-branch officers and

30. These showed dramatic growth between inde-pendence and the mid-1980s. It is estimated thatin 1991 there were 15,000 to 20,000 such groupsactively involved in carrying out tasks related toinfrastructure construction, social service provi-sion, and public welfare maintenance. Theirsources of funding come from private local,national, and international sources. Philip Mbithiand Ramus Rasmussion, Self-Reliance in Kenya:The Case of Harambee (Uppsala: ScandinavianInstitute of African Studies, 1977); Barbara P.Thomas, Politics, Participation and Poverty:Development Through Self-Help in Kenya (Boulder:Westview Press, 1985); Frank Holmquist, “ClassStructure, Peasant Participation, and Rural Self-Help,” in Politics and Public Policy in Kenya andTanzania, edited by Joel D. Barkan, rev. ed. (NewYork: Praeger, 1984), pp. 171-97. 31. In the early 1990s there were an estimated 100internationally funded NGOs and over 26,000locally financed NGOs in Kenya. Kenya NationalCouncil of Social Services, A Directory of (Non-Government) Voluntary Organizations in Kenya(Nairobi: KNCSS, March 1988); Alan Fowler,“New Scrambles in Africa: Non-GovernmentalDevelopment Organizations and Their Donors”(Paper Prepared for the Ford Foundation, Nai-robi, December 1988); Government efforts to con-trol NGOs are described in: Erastus Mambugoand George Kegero, “Is it to Co-ordinate or Con-trol NGOs?” The Nation (June 26, 1992), p. 20;“Evolving a Powerful Lobby,” Weekly Review(July 17, 1992); “A Rude Shock for NGOs,”Weekly Review (June 19, 1992), pp. 24-5. 32. At independence tribal welfare associationsacted in their home districts and in the nationalcapital to promote the development and politicalobjectives of their members. Eventually PresidentMoi abolished them on the grounds that theywere ethnic anachronisms that hampered theemergence of national unity. But in effect theywere abolished because they were strongestamong the Kikuyu and Luo and threatened Presi-dent Moi’s still emerging political coalition.

9

committees of the political parties, mostnotably KANU, the dominant party of thePresident.33 Opposition parties that haveemerged as a result of the reintroduction ofmultiparty democracy are generallyfragmented along ethnic lines.

Technical Assistance Resources andModalities

In the 1991/92 fiscal year the Kenyan Gov-ernment received $873 million in officialdevelopment assistance, comprising nearly11 percent of GNP.34 These resources wereprovided by 15 multilateral and 17 bilateralaid agencies.35 Of this assistance, 55.6 percentwas provided on a grant basis and 44.4 per-cent on a loan basis. Together, aid agencygrants and loans comprised 73.6 percent ofthe total capital budget. This pattern is typi-cal of the 1980-1991 period, suggesting thatfor more than a decade Kenya’sdevelopment activities have been over-dependent on foreign aid.

The aid agencies transferring theseresources to the Government of Kenya did sothrough three different modalities. First, theyfunded, on either a grant or loan basis, alarge number of projects. Second, they pro-vided general or sector-specific budgetarysupport or commodity assistance in returnfor Government agreements to carry out

33. The basic literature on KANU is described infootnote 77, infra. See also: KANU Manifesto:Peace, Love, Unity (Nairobi: Government Printer,1983), and the debates over party structure in theearly 1990s, summarized in the Weekly Review’s:“Great Expectations,” (July 27, 1990), pp. 3-8;“Time to Listen,” (August 5, 1990), pp. 4-11; and“KANU Review Committee Report.” (December7, 1990), pp. 37-75. 34. World Bank, World Development Report 1994, p.198. 35. The following data on aid agency assistance in1991 is drawn from: Republic of Kenya, Develop-ment Estimates for the Year 1991/92 (Nairobi: Gov-ernment Printer, 1991), Tables I-III.

specified structural adjustment measures.Third, they placed political and economicconditionalities on the Government, condi-tionalities that, if not met on a timely basis,would lead to reductions in current andfuture foreign aid allocations. The followingsections of the paper present case studiesfocused on how, under each of these modali-ties, foreign aid affected, and was affectedby, ethnic interests, competition, and conflict.

1. Project and Program Modality

In the 1991/92 fiscal year, the Govern-ment’s Development Budget carried lineitems for 2,528 projects, of which 654 werefunded on a grant or loan basis by aid agen-cies.36 These numbers are somewhat mislead-ing because many of the externally fundedprojects were actually carrying out a numberof sub-projects that were spread across thecountry and should have been counted sepa-rately. For example, the Scandinavian-financed Rural Development Fund (RDF),which comprises a case study in this paper,is listed in the Budget as one project eventhough it is a funding mechanism for 1,200sub-projects nation-wide. Or, for example,the Italian funded grain storage project,which was listed as one line item in theBudget, was actually building large-scalestorage facilities in over 30 different loca-tions. In effect, Government personnel, aidagency professionals, and the expatriateadvisors of consulting firms were imple-menting well over 2,000 foreign aid fundedprojects in 1991/92. A major reason whysome of the 654 line item aid projects had somany sub-components is that both Govern-ment officials and aid agency professionalswanted a sufficient number of sub-projects toensure that all ethnic areas received a fairshare of the funded activity. Another reasonwhy there were so many projects is that theruling ethnic coalition used domestic

36. Republic of Kenya, Public Investment Pro-gramme (Nairobi: Government Printer, 1991).

10

resources to earn rents from capital con-struction projects that were to be imple-mented in their home areas. Obviously, these“corruption driven construction” projectswasted scarce budgetary resources and lim-ited economic development. These criticalpoints will be demonstrated in a number ofthe case studies that follow.

2. Structural Adjustment Modality

Several important support loans listed inthe Development Budget were not projectactivities. Rather, they were general- or sec-tor-specific soft loans tied to significantstructural adjustment agreements, most ofwhich were provided by the World Bank andthe IMF. In 1991/92 the Government wasformally committed to carrying out over 150such agreements.37 These ranged fromsweeping tasks, such as privatization ofparastatals or civil service reform, to veryspecific tasks, such as keeping the budgetdeficit below five percent of GDP or intro-ducing monthly expenditure reporting sys-tems into the financial operations of minis-tries, agencies, and parastatals. Many ofthese agreements were designed to force theGovernment to terminate policies that wereholding back economic growth. Numerousother policies had their roots in ethnic inter-ests. For this reason, powerful members ofthe President’s coalition were opposed tostructural adjustment requirements that theybe reformed or ended. So strong was thisresistance that by late 1991 the aid agencies,led by the IMF and the World Bank, hadconcluded that Kenya’s record of compliancewith its structural adjustment agreementswas poor.38 This failed compliance led to thethird modality: conditionality.

37. Republic of Kenya, Ministry of Finance, Budg-etary Supplies Department, “The Status of DonorConditionalities” (Internal Memorandum, July 5,1992). 38. See the case study of Kenya in: Paul Mosley,Jane Harrigan, and John Toye, Aid and Power: The

3. Conditionality Modality

The conditions imposed by the aid agen-cies were not related to the provision ofadditional funding.39 In a sense, this is a falsefunding modality. There were two types ofconditions. The first simply made it clearthat there would be a reduction of foreignaid if structural adjustment agreements werenot carried out on a timely basis. The secondadded quite general and highly politicalrequirements. These conditions were intro-duced because it appeared to the aid com-munity that the country was increasinglygoverned in an autocratic and irrational waythat promoted narrow ethnic interests andprotected the fiefdoms and rents of membersof the ruling coalition. As such these condi-tions were seen as essential to getting theGovernment to terminate or reform policiesthat threatened aid agency investments andheld back development and economicgrowth. Foremost among the second type ofconditionality were demands that the Gov-ernment amend the Constitution and issuelegislation that would allow the emergenceof a dynamic multiparty political system,support the emergence of a free press,aggressively ensure the protection of humanrights, and address pervasive and significanthigh-level corruption in Government.

Case Studies

The three foreign aid modalities describedabove, namely projects, structural adjust-

World Bank and Policy-Based Lending (London:Routledge, 1991). 39. Conditions are found in project and programagreements and in structural adjustment agree-ments. But these are conditions spelled with asmall “c.” The conditionalities referred to hererelate to major economic and political require-ments that must be met in order for funding ofproject and program to continue. Theseconditions are designed to move a reluctantgovernment toward reform. This is conditionalityspelled with a big “C.”

11

ment agreements, and conditionalities, areused to organize the case studies that follow.

1. Project Aid

From 1960s through the early 1980s, proj-ects and programs were the building blocksof foreign aid in Kenya. There is a large aca-demic literature that focuses on defining anddistinguishing between these two types ofdevelopment interventions.40 For the pur-poses of simplicity, the term “project” will beused to describe both types of this aidmodality. Six case studies will be presented,each of which demonstrates different aspectsof how aid agency projects affect or areaffected by ethnic interests, competition, andconflict. Five of the projects reviewed werelargely funded on a grant basis by theirsupporting aid agencies. One of the projectswas rejected by aid agencies and not fundedfrom external resources.

The first case study focuses on long-termtechnical assistance projects that, amongother objectives, provided short- and long-term external training for public sectoreconomists, planners, and managementinformation specialists located in specificallytargeted ministries. This project demon-strates that the ethnic backgrounds of thosetrained were explicitly recognized and dealtwith by Government officials, expatriateadvisors managing the projects, and aidagency professionals overseeing and evaluat-ing project performance. The second casestudy focuses on the failed efforts of the cur-rent Government to obtain foreign aidfunding for the construction of an interna-tional airport in Eldoret, a key city in thePresident Moi’s home area. This projectdemonstrates: (1) how salient ethnic issues

40. For example: Dennis A. Rondinelli, ed. Plan-ning Development Projects (Straudsburg: Dowden,Hutchinson & Ross, Inc., 1977); J. Price Gittinger,Economic Analysis of Agricultural Projects(Baltimore: Johns Hopkins University Press,1972).

are in aid agency evaluation of project loca-tions and ethnic objectives; and (2) how eth-nic interests can lead to bad policy decisionsthat waste scarce budgetary resources andplace a drag on economic growth. The thirdcase study focuses on a project designed tostrengthen district-level planning in Kenya.It will be used to demonstrate how pervasiveand constant ethnic issues were in everyaspect of the project’s activities. The fourthcase study reviews a series of foreign aidprojects aimed at addressing the develop-ment of arid- and semi-arid regions. What isimportant about these projects is the way theGovernment and the aid agencies cooperatedto divide the country into ASAL districts toensure that all ethnic groups living in suchregions received development assistance.The fifth case study focuses on a projectaimed at supporting the Government’s RuralTrade and Production Center initiative. Areview of the design and implementation ofthe aid agency-funded intervention designedto implement this activity reveals the degreeto which ethnic interests and competitionimpact a foreign aid funded project. Moreimportantly, this case study demonstrateshow the ministry charged with implement-ing it and the technical assistance teamassisting the ministry took direct action tominimize the impact of that competition andto stop ethnic competition from wastingscarce foreign aid resources. Finally, thesixth case study describes two long-established rural development projects thatprovide aid agency funding on an annualbasis for more than a thousand ongoing sub-projects that covered every district and thustouched all ethnic groups. This last casedemonstrates: (1) how in selecting sub-projects the aid agencies, and their gate-keeping technical personnel, implementsystems designed to minimize the effects ofethnic interests on the distribution of theresources provided; and (2) the extent towhich aid agencies will go in trying toprevent ethnic-based decisions from

12

hampering economic growth and wastingscarce public sector resources.

i. Selection of Master’s-Level Trainees inCapacity Building Technical AssistanceProjects

Between 1976 and 1994, four separateHIID (Harvard Institute for InternationalDevelopment) executed, aid funded projectsprovided technical assistance to the Minis-tries of Finance (MOF), Planning andNational Development (MPND), and Agri-culture and Livestock Development(MALD). These projects were: (1) the RuralPlanning Project (RP: 1976-85) and (2) theResource Management for RuralDevelopment Project (RMRD: 1986-92), bothof which sought to strengthen district andsectoral planning in the MPND; (3) theTechnical Assistance Pool Project (TAP: 1977-94), which sought to strengthen sectoralplanning capacity in the DevelopmentPlanning Department of the MALD; and (4)the Budget and Economic ManagementProject (BEMP: 1990-94), which assisted theMOF to strengthen the management ofexternal aid resources, budget procedures,and expenditure reporting systems.41

All four projects focused on trainingKenyan Government economists, planners,and management information specialistswhile providing expatriate “gap-filling”advisors who could support public sectorfunctions during the time in which trainingefforts were carried out.42 These four projects

41. These projects are described in detail in: JohnM. Cohen and Stephen B. Peterson, “HIID’sAdvisory and Training Experience in Kenya,” inHIID in the 1980s, edited by Dwight Perkins(Cambridge: Harvard University Press, 1996),forthcoming. 42. Gap-Filling Advisors are one of six types ofadvisors identified in: John M. Cohen, “ForeignAdvisors and Capacity Building: the Case ofKenya,” Public Administration and Development,XII, 5 (192), pp. 493-510. This type of advisor isused in projects combining advisory and training

funded Master’s-level training for 108 juniorKenyan officers and two-to-three monthoverseas specialized training programs fornearly 270 Kenyan officers.43 The authorserved as advisor on all four projects.Among his duties was to oversee theselection and support of those sent foroverseas training.44

The identification and selection proce-dures for those receiving training wasalways affected by ethnic decisions. Theselection occurred at two levels. First, the listof officers selected for training in the nextacademic year was carefully balanced by thetraining advisor and Kenyan officers headingup the division whose capacity was beingstrengthened by the funding project. Specificattention was always given to ensuring thatthere was no bias toward a particular ethnicgroup. Discussions between the trainingadvisor and division heads was direct andexplicit. Among the ethnic-based selectionpatterns the author experienced were: (1) thepostponement of training for an eligible offi-cer when it would lead to selection of toomany officers from his or her ethnic group;

components through the provision of neededexpertise while training government officers toreplace its members. Such advisors are fundedby aid agencies at the request of ministries thatrecognize they lack professional capacity toformulate policies and forge administrativesystems and want to have their own nationalstrained in these skill areas. Ibid., p. 496. 43. Training and retention patterns for these offi-cers is described in detail in: John M. Cohen andJohn R. Wheeler, “Training and Retention in Afri-can Public Sectors: Capacity Building Lesions inKenya,” in Capacity Building in Late DevelopingCountries, edited by Merilee S. Grindle(Cambridge: Harvard University Press, 1996),forthcoming. 44. The author served as an advisor and trainingofficer for TAP (1979-82) RP (1985), RMRD (1985-90), and BEMP (1990-92). In addition, headministered training programs for theseprojects from Cambridge during the years 1982-85 and 1992-94.

13

and (2) the selection of an officer less quali-fied than other eligible officers because his orher ethnic group was under-represented.

At the second level, senior ministry offi-cers responsible for issuing the finalapproval of those selected for the next roundof training consistently pressured the train-ing advisor to make changes in the list thatpromoted officers from their ethnic groups.They also were quite consistent in theirefforts to complicate the training planned forofficers from ethnic areas they felt were notfriendly to their group or to the ruling politi-cal coalition. Among the tactics employed atthe senior approval stages were: (1) transfersof selected officers from the “wrong” ethnicgroup out of the division that was the targetof capacity building training programs; and(2) pressure at the final approval stage toadd officers from the approving officer’sethnic group or to delete officers from ethnicgroups the approving officer did not favor.

In regard to ethnicity and economicgrowth, no concern was given by senior offi-cers as to whether the “best and the bright-est” were being trained. Nor did they act inorder to implement an official policy aimedat dealing with past imbalances, such is thecase in the United States with affirmativeaction or in Malaysia and India in regard toethnic advancement policies. The entirefocus of those deciding who was to gettraining was on rewarding specific ethnicgroups what ever its effects on other groupsor public sector capacity building. It was noton the need to ensure the quality of futureeconomic policy analysts and developmentplanners.

These projects were funded by a numberof aid agencies. The RP and RMRD projectswere funded by USAID, the BEMP project byUNDP, and the TAP project by a consortiacomprised of the World Bank, USAID,CIDA, SIDA, GTZ, and the DutchGovernment. The ethnic background oftrainees was a topic of constant discussionbetween HIID’s chief-of-party and aidagency staff overseeing the implementation

of these projects. Based on 11 years of suchdiscussions, the author concludes that aidagency professionals were well aware of thepossibilities of ethnic biases in all thecapacity building projects they funded.When they felt that ethnic biases wereemerging in the capacity buildingcomponents of technical assistance projects,they went out of their way to work withproject training advisors, heads of targetedunits, and senior officers of ministries over-seeing targeted units to ensure that suchbiases were reduced or eliminated. Theywere generally unsuccessful in these efforts.

It should be noted that aid agency projectofficers in Nairobi, as well as HIID’s chief-of-party, were concerned about the number ofofficers trained to the Master’s-level whodeparted from Government service. Thisconcern with retention was justified because52 (48.1%) of the 108 trained under the fourprojects had left the public sector by 1994.Analysis of retention patterns reveals thatethnicity is one of the major causes of depar-ture of officers from the public sector posi-tions they were trained to fill. This of coursehas negative implications for ensuring qual-ity economic policy making and develop-ment planning in the MOF and MPND.Without such quality it is even more likelythat growth constraining policies will pre-vail.

There are several ways in which ethnicbackground affects retention. First, someGovernment officers openly discriminateagainst officers from particular ethnicgroups. This takes the form of slow promo-tions, negative evaluations, meaninglessassignments, transfers to undesirable jobs orfield locations, failure to approve personalrequests, and so on. When this happens itsubstantially lowers the morale of the officerbeing discriminated against and leads him orher to depart from the public sector. Second,social pressures for home area kinsmen andclient groups based on ethnic foundationscan make it impossible to meet demands onskilled Government personnel. This is most

14

likely to happen when budgetary allocationsare insufficient to allow them to carry outtheir assigned duties. Skilled personnel whoare denied the resources or leadership toeffectively serve kinsmen and clients arevery difficult to retain in Government posi-tions. Third, some senior ministry officialsuse their position to actively discriminateagainst officers from ethnic groups notbelonging to the dominant coalition, whojoin ethnic-grounded parties that are inopposition to the Government, or who areclients of ethnic godfathers such officialsoppose. Such officials know that ethnic dis-crimination is a major factor driving scarceprofessionals and technicians out of the pub-lic sector, if not out of the country. But formost of these leaders the politics of powerand ethnicity has always prevailed overcapacity building efforts.

It is the author’s experience that theeffects of ethnicity on retention of scarce per-sonnel in the public sector are openly dis-cussed among Government officials, aidagency professionals, and technical assis-tance advisors. But the thrust of these dis-cussions is not, in the author’s experience,put into memorandums, reports, and otherdocuments. This is unfortunate. Suffice tonote that it would help if aid agencies weremore frank about the effects of ethnicity onretention rates and worked with senior Ken-yan officials to prevent it from underminingretention efforts.

ii. Eldoret International Airport Project

Since the early 1990s, the powerfulKalenjin politicians who surround PresidentMoi, as well as the President himself, haveargued for the construction of an interna-tional airport at Eldoret, a Rift Valley Prov-ince town located in the President’s homearea. At present, Eldoret is neither an eco-nomic center nor a major tourist area. Rather,it is the de facto capital of the ruling political

elite. Not surprisingly, this project has beenthe subject of much discussion in the press.45

The projected cost of this airport, includ-ing the construction of export storage facili-ties, is $96 million. Aside from the handsomeland purchase and construction rents such aproject would generate for the President andhis fellow Kalenjins, having such an airportwould help break the dependence of theKalenjin on Kenya’s major international air-port, which is located in Nairobi, the heart-land of the Kikuyu. From the perspective ofKenyan politics, building this airport wouldstrengthen the Kalenjin hard-liners whoargue that their region, Rift Valley Province,should obtain greater regional autonomythrough a constitutional change that wouldconvert Kenya from a republic to a federalGovernment comprised of relatively inde-pendent provinces.46

Since the early 1990s the President andthe Minister of Finance have made extensiveefforts to obtain aid agency funding for thisproject. Discussions within Government, andbetween the Government and the aid agen-cies, over the implications of such a project

45. Most recently, “Eldoret Airport: False Start forControversial Project,” Weekly Review (September8, 1995),pp. 15-16. 46. Specifically, critics of the Government and aidagency professionals argued that powerfulKalenjin politicians were pushing for a return tothe Majimbo Constitution that Kenya had anIndependence. This Constitution gave substantialpowers to the Provinces. Those opposed to theairport argued that if the Kalenjin had their ownairport they would be more capable of actingindependently or even seceding from thecountry. If this argument is correct, it shows howethnic fragmentation could limit economicgrowth by setting up barriers to the movement ofhuman and capital resources that are so essentialto development. Agreeing with these points, oneof the many press statements also describes theairport as: “Kenya’s answer to Mobuto SeseSeko’s Gbadolite and Felix Houphouet-Boigny’sYamoussoukro;” “Kenya’s Clothes,” p. 3.

15

for ethnic balance and greater Kalenjinautonomy have always been direct andfrank. This has particularly been the casesince 1992 when many in the President’sparty began to talk about “majimboism,”which is the Swahili term for a system ofquasi-federal provinces having substantiallydevolved policy, administrative, and fiscalpowers.47 In the end, the aid agenciesemphatically declined to provide funding forthe project. The ostensible reasons for thisrefusal were that there was little need for anairport of the size planned by the Govern-ment, that aid resources were limitedbecause of aid agency decisions to reducefunding for Kenya until the country madeprogress in carrying out structural adjust-ment agreements and implementing politicaland economic conditionalities, and also thatthere were many projects needing fundingthat had greater economic and socialpriority. But the deeper and more persuasivereason was that any aid agency building theproject would be playing directly intoKalenjin-Kikuyu ethnic hostilities overmajimboism.

Despite the absence of foreign aid, theGovernment awarded a contract to a Cana-

47. Kenya gained independence on December 12,1963 under what was called the “MajimboConstitution.” It was based on extensive powersfor local level governments, the recognition ofwhich resulted from British efforts to protectwhite settlers and deal with ethnic distrustamong Kenyan nationalist leaders who weremembers of competing tribes. See, for example:Cherry J. Gertzel, Government and Politics inKenya: A Nation Building Test (Nairobi: EastAfrican Publishing House, 1965). Current debateson majimboism have had extensive presscoverage, most recently in: “Majimbo: Are theyBluffing?,” Weekly Review (October 7, 1994), pp. 4-13; “Changing the Constitution,” Weekly Review(January 6, 1995), pp. 4-9. The President playsboth sides of this issue, depending on his needs:“On the Wrong Track: President Moi RejectsTribal Clamor for Majimbo,” Weekly Review(October 14, 1994), pp. 4-9.

dian firm, which is currently involved inbuilding the facility on a turn-key basis. Ini-tial funding came from domestic budgetresources, which were already quite limited,a fact that generated a great deal of criticismfrom opposition parties. Leaders of suchparties, largely from the Kikuyu and Luoethnic groups, argued the project was a“white elephant” that would lead to enor-mous waste of limited Governmentresources, increase the country’s indebted-ness while denying essential recurrentexpenditures for other decaying airports inNairobi, Mombasa, and Kisumu, and notcontribute to economic growth. In the face ofthis criticism, the President tried to obtainfunding from the Canadian InternationalDevelopment Agency (CIDA). But theCanadian High Commissioner, largelybecause she recognized the relationshipbetween the project and ethnic interests andcompetition, quickly declared that CIDA hadno intention of providing funding, eventhough the contractor was a Canadian firm.With the inability of the Government to findan aid agency to help fund this large project,it was substantially scaled back. The domes-tic press, and more vocally, KANU politi-cians, directly attributes this result to actionsby aid agencies to scuttle the project.48

In sum, the Eldoret airport project pro-vides a very visible case of the aid agenciespaying close attention to ethnic issues under-lying a badly conceived project that wouldnot lead to economic growth. In particular, itsuggests how salient ethnicity and growthissues are in aid agency evaluation of a pro-

48. For example: “A Coincidence in Timing?:Donors are suspected to be behind this Week’sReform Decision,” Weekly Review (September 8,1995), p. 19. Another press report noted:“...government decision to scale down thecontroversial multi-billion-shilling Eldoret inter-national airport was made as a result of intensedonor pressure.” “Jitters Over Eldoret Airport,”Weekly Review (April 21, 1995), pp. 20-2.

16

posed project’s location and unstated objec-tives.

iii. USAID’s District Planning Projectand Disaggregated National Level Data

As noted in the first case study, between1976 and 1992 advisors on HIID’s RP andRMRD projects assisted the MPND to designand implement sustainable systems and pro-cedures for strengthening its district plan-ning initiatives.49 Because the project focusedon districts, and because, as noted earlier,district boundaries are closely associatedwith specific ethnic groups, these two HIIDprojects were sensitive to ethnic interests,competition, and conflict. One of their majorobjectives was to promote planning that ledto good policies that would promote eco-nomic growth.

No areas of project activity were morepotentially sensitive to ethnic issues thanthose aimed at assisting the MPND to profiledistrict socioeconomic development needsand disaggregate Governmental data to theprovincial and district levels. This is becausethe patterns of resource allocation thatemerged with President Moi’s governingcoalition after 1978 were decidedly differentfrom those that had prevailed during theyears of President Kenyatta’s administration.Conventional but undocumented wisdomholds that the share of the Kikuyu, in par-ticular, was declining, while funding wasincreasing among the Kalenjins of the RiftValley and the ethnic groups President Moisought to induce into joining his coalition,such as the Luhya and Kamba.50 But when

49. Kenya’s long-term district planning objectivesand 1982 District Focus Strategy are described in:John M. Cohen and Richard M. Hook,“Decentralized Planning in Kenya,” PublicAdministration and Development, VII, 1 (1987), pp.77-93. 50. Joel D. Barkan and Michael Chege,“Decentralising the State: District Focus and Poli-tics of Reallocation in Kenya,” Journal of ModernAfrican Studies, XXVII, 3 (1989), pp. 431-53.

HIID advisors began to work on districtprofiles and data there was little evidencethat this speculation was true. This wasbecause no study had been done and it wasso difficult to obtain disaggregated numbers.But if true it would vividly demonstrate thatsenior politicians and decision makers valueethnic benefits over economic growth (for thehome regions of Moi’s ethnic coalition hadlimited economic potential relative to otherdistricts, what ever the merits of equity).

Efforts to disaggregate data to the pro-vincial, district, and sub-district levels wereessential to strengthening district planningand budgeting and ensuring that scarceresources were targeted on investments thatpromoted social and economic development.These efforts were enhanced by the project’ssuccessful introduction of microcomputerand spreadsheet technology, an innovationthat assisted the Government in computeriz-ing the national budget and the districtplanning processes.51

Of the several data-related activities car-ried out by HIID’s team of advisors, thethree most instructive were those related toannual district budgets, infrastructureinventories, and sociocultural profiles. Thisis because these three initiatives made itpossible to compare Government capitalbudget allocations by district, revealing inthe process how control of Governmentfavored the home areas of the ruling political

51. These innovations are summed up in: ClayWescott, “Microcomputers for Improved Gov-ernment Budgeting: An African Experience,” inMicrocomputers in Development: A Public PolicyPerspective, edited by Stephen R. Roth andCharles K. Mann (Boulder: Westview Press,1987), pp. 67-93; Stephen B. Peterson,“Institutionalizing Computers in DevelopmentBureaucracies: Theory and Practice in Kenya,”Information Technology for Development, V, 3(1990), pp. 277-326; and his “From Processing toAnalyzing: Intensifying the Use ofMicrocomputers in Development Bureaucracies,”Public Administration and Development, XI, 1(1991), pp. 491-510.

17

coalition and discriminated against areasassociated with the opposition. Sothreatening was this potential thatthroughout the years during which thesethree activities were carried out there wasmuch frank discussion between MPND offi-cials and HIID advisors on the advisability ofthese data disaggregation undertakings, aswell as continual discussion between theGovernment and USAID as to whether suchactivities should be carried out and, if so, towhat extent their findings should be releasedto the public.

Since 1974 the Government has beendesigning and implementing a nation-widedistrict level planning system. By 1984, withthe assistance of HIID advisors, this initiativebecame a reality. In that year the full set ofthe 1984-88 District Development Plans werewritten and published for all districts. Muchto the Government’s surprise and concern,the 1989-93 Plans improved upon theirpredecessor by addressing in some detail,and across all 40+ districts,52 the same com-parative topics: (1) profile of the District’sphysical characteristics, administrative units,demographic and settlement patterns, eco-nomic potential, and supporting develop-ment institutions; (2) review of the District’smajor primary production activities, com-merce, trade, manufacturing, services, socialand economic infrastructure, and welfareprograms and indices; (3) presentation of theDistrict’s five-year development strategy;and (4) presentation of the District’s priorityprojects organized by sectors. As a result ofthis progress, for the first time, any Govern-ment officer, journalist, or private citizencould have a set of bound studies of each ofthe districts, all running 150+ pages.

The more revealing data, however, werefound in annual mimeographed DistrictBudget Annexes to the Plans, which were

52. From 1990 onwards, largely for ethnic-political reasons, an increasing number ofdistricts were divided. Each year since then thenumber has grown.

designed to convert the exercise into anongoing, annual working process. TheAnnexes were based on the district’sallocation from each ministry and detailedthe actual work program for the year inwhich they are written. They also included aforward budget submission based on boththe ongoing work program and the planpriorities as spelled out in the plandocument. They were produced betweenJuly and August of each budget year by theMPND’s District Development Officer(DDO) and the field officers of the lineministries, and approved by DistrictDevelopment Committees.

In principle these Annexes were to beforwarded to both the MPND and thefinance officers in the ministries and agenciesin time for incorporation into their forwardbudget proposals. The objective was to makemajor progress toward a practical marriageof planning and budgeting. But in practicethe Annexes were invariably late and gen-erally ignored by MOF, MPND, and sectoralministry budget officers.

Importantly, these Annexes weremimeographed rather than offset and bound,as was the case with the District Plans. Theywere produced in limited numbers and for-warded only within Government channels.To make the information more widely avail-able, HIID advisors used the computer-based national budget system and thedistrict-related codes embedded in itsrelational data software program to produceDistrict Allocation Books for thedevelopment and recurrent budgets. Theselarge documents were printed and issued bythe Government Printing Office for the1984/85 and 1985/86 fiscal years.

The District Allocation Book listed minis-terial allocations for projects for each district.The objective was to better inform districtlevel staff of the allocations programmed fortheir districts. But these books made the allo-cation process transparent. They also compli-cated a long-established informal budgetreallocation process whereby MOF and sec-

18

toral ministry budget officers held back Par-liament-approved budget allocations fromless politically favored districts and infor-mally reallocated those resources to districtsrepresented by ethnic leaders making up thePresident’s political coalition. As a result, noDistrict Allocation Books were publishedafter the 1985/86 fiscal year. Line ministryfield agents in the districts could do littleabout this because they generally did nothave sufficient information to know whattheir allocations were.

In their final report to USAID on theproject HIID stated that the production ofthe books was stopped because of acomputer problem.53 But it was obvious to allparties concerned that the Annexes, ifanalyzed and compared, would reveal thechanging patterns of district budgetaryallocations and the effects of ethnicity onthose patterns.54 Officers in the MOF andMPND made it clear that the Books posed athreat to efforts of the Office of the Presidentto keep its ethnic-based allocations processesmurky, more internally flexible in regard toawards and punishments, and lessvulnerable to the bright glare of publicanalysis.

Started in 1983, the Infrastructure Inven-tory was designed to provide essentialinformation on the location and status of allpublic infrastructure in each District. Produc-ing such documents proved difficult untilcomputers were introduced. By 1987 theMPND had sufficient computer capacity toupdate and extend the information collected.Working with ministry planning officers,HIID advisors formulated computer-basedformats and guidelines for entering data into

53. Harvard Institute for International Develop-ment, “Final Report: Rural Planning II (June 1981to February 1986)” (Report Prepared for USAID,Nairobi, September 1986), pp. 52-4. 54. One study tried to look at such data: Joel D.Barkan and Michael Chege, “RMRD Mid-TermEvaluation” (Evaluation Review, USAID,Nairobi, September 1, 1987).

them. The revised inventory, which wasproduced for all 40+ districts, covered 11major types of development facilities.55 Itwas sufficiently complete to provide afoundation for the 1989-93 DistrictDevelopment Plans.

As planned, the data in the InfrastructureInventories is capable of being plotted bycomputer-based mapping programs. Trialruns in specific districts revealed that suchmapping was possible. But it was immedi-ately recognized that the maps revealed evenmore about biased allocation of infrastruc-ture than did the Inventories. Senior officersin the MPND, and HIID advisors who wereresponsible for the exercise, frankly dis-cussed the political implications of districtmaps that plotted the location of infrastruc-ture, for the pilot maps made it immediatelyobvious that physical facilities were maldis-tributed within districts, much less betweendistricts, and that ethnic godfathers had agreat deal to do with this pattern. At therequest of the Government, HIID advisorsceased to carry out computer-based mappingactivities and no comparative studies of pat-terns of infrastructure investments amongthe districts over time were undertaken. Themajor reason given to USAID by HIID wasthat carrying out such activities was toocostly in terms of the scarcity of skilled plan-

55. The facilities surveyed were: roads (classifiedand unclassified) and airfields; primary schools;secondary schools; service and training institu-tions; water facilities; health facilities; cattle dips;livestock holding/auction facilities; grain storagefacilities; and cooperative societies. Those carry-ing out the inventory were required to provideadditional date on each facility identified,namely: location, function, utilization, andmaintenance. A lengthy description of this datadisaggregation exercise is found in: HarvardInstitute for International Development, “Semi-Annual Report No. 7: Resource Management forRural Development Project (March 1989-August1989)” (Report Prepared for USAID, Nairobi,October 1987), pp.20-4.

19

ners who could carry it out, and that mapsproduced for the 8 pilot districts revealedsubstantial gaps in the data.56 But a deeperreason for not undertaking this activity wasthat mapping and comparative studies werenot politically acceptable to the Government,which controlled access to the data and heldit closely.

The District Socio-Cultural Profile activ-ity was a joint venture carried out betweenthe Institute of African Studies, University ofNairobi, and the MPND with funding pro-vided by the United Nations. The exercisebegan in 1981 with the objective of preparingcomprehensive district reports covering thetraditional values, beliefs, and cultural prac-tices of the people in a given district. Theintention was to use the document to pro-mote better understanding and communica-tion between Government administrators,extension personnel, trainers, and otherdevelopment agents as well as the localpeople with whom they are working.

HIID advisors played a role in concep-tualizing this exercise. More importantly,they worked with the MPND officers and theInstitute of African Studies to ensure that theProfile Reports were incorporated into thetraining of district-level staff and the prepa-ration of District Development Plans. By1988 some 18 district reports had beenprepared, and research was being plannedfor additional districts.57

56. Harvard Institute for International Develop-ment, “Final Report: Resource Management forRural Development Project: A Summary ofProject Activities” (Report Prepared for USAID,Nairobi, June. 1992), p. 18. 57. At this time final published reports wereprinted for Samburu, Taita-Taveta, Busia, SouthNyanza, Baringo, Marsabit, Turkana, Kajiado,and Elgeyo-Marakwet Districts. Draft reports fornine other districts were in various stages ofpreparation and review for Meru, Embu, Narok,Kisii, Machakos, Kilifi, Siaya, Kitui, and KwaleDistricts. Proposals were pending for studies ofWest Pokot, Nyeri, Murang’a, and NyandaruaDistricts, and Isiolo Districts.

No more studies were carried out. Tosome extent, the studies were not completedfor the 40+ districts because of intellectualfatigue on the part of Institute of AfricanStudies staff and problems getting moreUNICEF money. Not moving forward, how-ever, was facilitated by the fact that studiesfor the districts of some of the most powerfulpoliticians in President Moi’s Governmentcoalition had been completed. But progressalso stopped for political reasons. First,because of the correlation between districtsand ethnic groups described earlier, the pub-lished studies were overtly cultural. Thisemphasized the extent to which districtswere dominated by particular ethnic groups.Second, senior MPND officers responsiblefor overseeing the studies were aware of thepolitical implications that would follow ifthese cultural profiles were correlated withDistrict Budget Annex and InfrastructureInventory data. Discussions occurredbetween these officers, HIID advisors, andthe funding agency, largely in an effort toconsider ways in which the emphasis of thestudies could be less cultural and morefocused on development-related variables.But the staff of the IAS did not favor thisrevision. Hence, it is the conclusion of theauthor, who participated in these discus-sions, that the MPND stopped supportingresearch on profiles because they were wellaware of the extent to which they made therelationship between ethnic interests andpublic sector investment more salient andtransparent.

iv. Arid and Semi-Arid Lands Projects

The Arid and Semi-Arid Lands (ASAL)initiative was launched in 1979.58 It repre-sented a major Government and aid agencyinitiative to induce development in the drier

58. Government of Kenya, Arid and Semi-AridLands Development in Kenya: The Framework forImplementation, Programme Planning andEvaluation (Nairobi: Ministry of Agriculture,1979).

20

and more marginal districts of the country.Twenty-two districts of Kenya fall into thiscategory. Together they contain an estimated30 percent of Kenya’s population and coverover 80 percent of the country’s total landarea. The thrust of the initiative was to assistareas of the country perceived to be“disadvantaged” so they could catch up withthe more developed and wealthier centralcore of the country. Essentially the effortcould be characterized as “welfare oriented”and based on a sense of equity. Importantly,all parties to the design of the ASAL initia-tive and its component projects recognizedthat the “more developed and wealthier”districts were those of former President Ken-yatta’s core ethnic coalition and that the dis-tricts in need of “welfare and equity” werethose that were part of the ethnic coalitionthat supported President Moi when he tookpower in 1978.

The ASAL idea can be attributed to thePermanent Secretary of the MPND, an intel-lectual force in the Government and aKamba.59 So it was not by chance that thefirst ASAL project, the Machakos IntegratedDevelopment Project (MIDP), was located inthe Permanent Secretary’s home district. Abiography of the Permanent Secretary arguesthat he was a strong nationalist and anti-ethnicist who never argued for the MIDPbeing based in his home district. Further, itargues that the funding agency, the Euro-pean Economic Community (EEC) went overthis Permanent Secretary’s head to the Vice-President to have the project placed inMachakos District. But the biographer notesthat once the Permanent Secretary’s homedistrict was selected, he did everything pos-sible to make sure it was well designed, wellfinanced, and promptly implemented. And,importantly, he argues that the Permanent

59. For a management biography on this Perma-nent Secretary, Harris Mule, see: David Leonard,African Successes: Four Public Managers of KenyanRural Development (Berkeley: University of Cali-fornia Press, 1991), particularly, pp. 198-9.

Secretary pushed for the creation of similarprojects in other arid areas. This was done, inpart, to protect himself from charges of act-ing only in favor of his ethnic homeland.60 Itis for this reason that while the aid agencyfunding the project favored placing it underthe jurisdiction of the Ministry of Agricul-ture, the project commenced under thejurisdiction of the Permanent Secretary’sministry.

But there is a deeper story here. Kambasupport was important to President Moi.Two of the important Kambas who werecritical to Moi’s coalition, Paul Ngei, a longtime MP and Minister, and Mulu Mutisya, apowerful grassroots politician, wanted aproject for Machakos District. It was their“behind the scenes” influence that put pres-sure on the EEC delegate and the Vice-Presi-dent to select their home district for the firstASAL project.

During the design phase of MIDP it wasrecognized that the ASAL initiative shouldalso cover other arid areas. An aid agencyconference organized by the Permanent Sec-retary led to the balkanization of ASAL dis-tricts, with each aid agency that was inter-ested in funding an ASAL project beingdirected to a particular district. Thisapproach received strong Government sup-port, to a large extent because the politicalcoalition being built by President Moi camefrom ethnic groups in ASAL areas. By mid-1991 there were 11 aid agency funded ASALfield projects covering 14 districts andfunded by eight donor agencies.61

60. Ibid. 61. The funding of specific ASAL projects hasalways been reliant upon external aid. The majorpublished comparative study of Kenya’s experi-ence is: Steve Wiggins, “The Planning and Man-agement of Integrated Rural Development in DryLands: Early Lessons from Kenya’s Arid andSemi-Arid Lands Programs,” PublicAdministration and Development, V, 2 (1985), pp.91-108. The ASAL projects are: (1) MachakosIntegrated Development Programme – European

21

Throughout the build-up of ASAL activi-ties there was explicit and frank discussionbetween the Government and the aid agen-cies over the relationship between the Presi-dent’s emerging ethnic coalition and therationale for selecting particular locations forprojects. HIID advisors participated in thesediscussions as part of the earlier discussedTAP, RP, and RMRD projects, for the MALDand MPND played a major role in identify-ing districts and matching them with aidagencies. It is the experience of the author,who was at one time or another Chief-of-Party for all three projects, that the arid areasreceiving priority design and implementa-tion advantages were those most closelyconnected to the President. For this reason, itwas not by chance that the second, fourth,fifth, and sixth projects designed and fundedwere located in the home areas of the Presi-dent and his most influential ethnic sup-porters.

In sum, the ASAL initiative demonstratesthe extent to which aid agency professionalsare attuned to the linkages between the eth-nic coalition in power and the need for lead-ers in that coalition to bring large projects totheir home areas. There is little doubt thatbalkanization of Kenya’s arid areas by aidagencies after the initial conceptualization ofthe activity in 1979 was done with explicit

Community, commenced in 1978; (2) BaringoASAL Programme – World Bank/IDA,commenced in 1979; (3) Embu/Meru/IsioloASAL Programme – ODA, commenced in 1980;(4) West Pokot ASAL – Netherlands, commenced1980; (5) Kitui ASAL – USAID 1981-89/Danidacommenced in 1981; (6) Elgeyo Marakwet ASAL– Netherlands, commenced 1982; (7) LaikipiaRural Development – Swiss Government,commenced 1984; (8) Kwale Rural Development– IFAD, commenced 1985; (9) Kilifi RuralDevelopment – IFAD, commenced 1985; (10)Taita Taveta Rural Development – Danida,commenced 1985; (11) Kajiado ASAL –Netherlands, commenced 1987. A twelfth ASALprogramme, the Turkana Rural DevelopmentProject was funded by Norwegian Governmentuntil their withdrawal in late 1990.

awareness of ethnic interests and com-petition.

v. Rural Trade and Production Projects

The Rural Trade and Production Centeractivity (RTPC) demonstrates how Govern-ments and technical assistance advisors for-mulate resource allocation rules designed toensure that the benefits of a major foreignaid project are spread equitably amongmajor ethnic areas. It also shows how ethnicinterests will promote investments that givemore priority to their utility for ethnicinterests than to their capacity to promoteeconomic growth.

In late 1980s Kenya’s regional develop-ment strategy was based on the premise thatthe promotion of rural-urban interaction wasessential for the creation of vibrant regionaleconomies. Known as the “rural-urban bal-ance strategy,” its basic assumption was thatgiven an adequate increase in agriculturalproductivity and sufficiently conduciverural-urban terms of trade, a dynamic andmutually reinforcing process of economicdevelopment can be generated.62 Theassumption was that rising rural incomes, inresponse to Government efforts to raise agri-cultural productivity, lead to an increase infarm household demand for inputs and con-sumer goods, thus stimulating the growth oflocal non-farm economic activities. Over thelong run it was expected that such adynamic would generate settlement, jobcreation, and overall development patternsthat were more balanced nationwide.

To facilitate this strategy the Governmentformulated an initiative that would concen-trate resources on urban infrastructure inselected small towns located in rural areas,which towns would be designated as RTPCs.Each package of investments was to provide

62. This Strategy is spelt out in Chapter 4 of“Sessional Paper No 1 of 1986”, Republic ofKenya, Economic Management for Renewed Growth(Nairobi, Government Printer, 1986).

22

a range of basic physical infrastructure andfacilities that supported agriculture and pro-ductive employment-generating enter-prises.63

Funding for this objective was madeavailable by USAID under its “PL480 Coun-terpart Fund” arrangements.64 The amountallocated in the first tranche was enough tofund 8 pilot packages. Further funding waspromised if the first round of investmentswere efficiently and effectively carried out.Since further funding was not guaranteed, itwas obvious to both the Government andUSAID professionals that competition for the8 pilot packages was going to be intense andclosely related to ethnic politics. The problemwas to ensure that RTPCs were located intowns that had the economic potential tojustify being selected.

The RTPC initiative was designed byMPND planners and HIID advisors servingunder the previously described USAID-funded RMRD project. Throughout thedesign and implementation phase Govern-

63. More details of the RTPC programme arefound in Sessional Paper No 1 of 1986, the Gov-ernment of Kenya’s Sixth National DevelopmentPlan, Gary L. Gaile, Kenya’s Rural Trade and Pro-duction Centres (Cambridge: Harvard Institute forInternational Development, Development Dis-cussion Paper No. 263, 1988) and for a detaileddescription of their implementation, Paul Smoke,Beyond Planning to Implementation: the Case ofKenya’s District Development Fund (Cambridge:Harvard Institute for International Development,Development Discussion Paper No. 326, 1990). 64 Under PL480, the US Government providesgrain to the recipient country, which then raisesmoney from its sale locally. Bilateral agreementsregulating this programme stipulate that USAIDmust approve the use of these funds, which areknown as counterpart funds, because they are alocal currency complement of the donors foreign-currency supply of commodities. The Kenyancase is the basis of: Michael Roemer, “TheMacroeconomics of Counterpart FundsRevisited,” World Development, XVII, 6 (1989), pp.795-887.

ment planners and HIID advisors wereacutely aware that it would be very difficultto keep powerful politicians in the Moiadministration from intervening in the selec-tion process so as to have the centers locatedin their home areas, primarily to gain rentsfrom the construction of facilities under theproject rather than to stimulate economicgrowth in their communities. As a resultthey attempted to design a selection systemthat would be based on empiricalindicators.65 The explicit purpose of thissystem was to ensure that the pilot centerswould not be selected for ethnic reasons andwould be placed in all regions of the country.Long experience among advisors andGovernment planners was that theprobability of a project being successful waslowered when ethnic godfathers wereactively involved in winning it for theirregion.

Based on the criteria that wasformulated, 8 Districts were selected toreceive funding for an RTPC package. Froman initial review of districts scoring high onthe selection criteria, it was clear that a majorKalenjin district would not be included in thepilot group of projects. It was also clear thatthere was a bias in the districts selected, one

65. Initial concentration of funds was intended tobe in districts that were under-urbanized andhad the potential to produce agricultural andlivestock surpluses. The indicators and criteriaused are laid out in: Government of Kenya,“Technical Recommendations for Districts fromWhich Proposals for Initial RTPC Will beSolicited,” Technical Report No 1 (Nairobi, RuralPlanning Department, Ministry of Planning andNational; Development, March 1987). A critiqueof these criteria and recommendations forimproving them is contained in: Paul Smoke,“An Evaluation of Kenya’s Rural Trade andProduction Centre Selection Process andCriteria,” RMRD Discussion Paper No. 7(Nairobi, Harvard Institute for InternationalDevelopment, Resource Management for RuralDevelopment Project, Ministry of Planning andNational Development, July 1989).

23

that favored ethnic areas not in PresidentMoi’s coalition. This was politicallyunacceptable to senior MPND and MOFofficers. In effect, they ordered that theindicators and data in the selection system bealtered to ensure more regional (read“ethnic”) balance, as well as the inclusion ofthe President’s home district.

The revised selection put one RTPC dis-trict in each province, except for Rift ValleyProvince, which received two RTPC districts,largely because it is Kalenjin and Masai terri-tory.66 The alteration of statistics to get the“right” combination of districts is a goodexample of how ethnicity can lead to deci-sions not in the best interests of promotingeconomic growth.

Under the strategy, it was up to each ofthe District Development Committees(DDCs) in the 8 selected districts to identifyan appropriate town where their RTPCwould be located. Using additional selectioncriteria, MPND planners and HIID advisorsselected a list of candidate towns from whichthe district was to select its one center.67 Thisintradistrict selection process was marred byunseemly competition, although in this caseusually among MPs from the same ethnicgroup. In contrast to the MPND’s “objective”criteria for selection, this process at the DDCwas heavily influenced by political consid-erations. For example, in Bungoma Districttwo powerful Luhya MPs disputed the loca-tion of the RTPC, each wanting it to be intheir constituency.68 For several months offi-cers of MPND believed the DDC had made

66. The Districts selected were Kwale, Mandera,Kitui, Kirinyaga, Kericho, Elgeyo Marakwet,Bungoma and Kisii. 67. For details see: Government of Kenya,“Selection Criteria for Rural Trade and Produc-tion Centres,” Technical Report No. 2 (Nairobi,Rural Planning Department, Ministry of Planningand National Development, May 1987). 68. Some background on this intra-ethnic compe-tition is found in: “The Luhya Dilemma,” WeeklyReview (May 14, 1993), pp. 3-11.

its choice, having been so informed by one ofthe MPs and the District Commissioner.Only when the second MP wrote to the Per-manent Secretary of the MPND did itbecome clear that the DDC had still notmade any decision on the matter. Finally, 6months after MPND thought the selectionhad been completed, the DDC agreed on itsselection.

Similar inter- and intra-ethnic issuesaffected selection of package components,the hiring of local consultant firms to designproject components, the tendering of con-struction awards, and the implementation ofthe projects. These will not be recountedhere, but it should be pointed out that thesepractices wasted scarce resources that couldhave been better focused on economicgrowth inducing investments.

vi. Rural Development Fund and EEC-Micro Project Projects

The Scandinavian-supported RuralDevelopment Fund (RDF) and the Europeancommunity funded EEC-Micro Project (EEC)illustrate how Government professionals andexpatriate technical assistance advisors workto minimize the effects of ethnic interests onannual program allocations. They also illus-trate the extent to which aid agencies have togo in order to ensure that their assistanceleads to investments that promote social andeconomic development.

The RDF represents the only source ofannual discretionary funding that is avail-able to every district in Kenya.69 Established

69. Basic information on the RDF is found in: C.Anonsen, et al., “Kenya’s Rural DevelopmentFund: A Study of Its Socio-Economic Impact”(Consulting Report prepared by Chr. MichelsenInstitute, Bergen 1985); “RDF Handbook”(Nairobi, Rural Planning Department, Ministry ofPlanning and National Development, 1989);Appraisal Report, “Kenya: the Rural Develop-ment Fund” (Appraisal Report prepared by aScandinavian Mission to Kenya, Danida, Copen-hagen, 1990).

24

in 1974, this project aims at alleviating pov-erty through improving the living standardsof the rural poor by funding infrastructurethat promotes social and economic develop-ment. But funding of sub-projects isrestricted to communities that can demon-strate they have the necessary knowledgeand organizational ability to effectivelyidentify sub-projects and collect and admin-ister self-help contributions in support ofthem.

The RDF has been used by districts tofund a wide variety of sub-projects coveringvirtually all sectors. These have included:water systems, cattle dips, road building, soilconservation, youth polytechnic construc-tion, fodder production, bee keeping, affores-tation, posho mills, and other income pro-ducing sub-projects. It is considered a“budget gap-filling” project that can fundpriority sub-projects that ministerial budgetscannot accommodate.

Since its inception the RDF has beenfunded by a consortium of aid agencies fromDenmark, Sweden and Norway. In the ear-lier years funds were also provided by TheNetherlands. Between 1974 and 1988 theproject had funded 5,557 sub-projects at acost of over $ 40 million. In 1990 the projectwas supporting about 1200 sub-projects, ofwhich about half were new and halfongoing.

The European Economic Commission’sEEC Micro-Project is quite similar to theRDF.70 Both projects are managed by MPNDofficers and assisted by expatriate technicaladvisory teams. The significant differencebetween the two projects is that RDF pro-

70. The activities of the project are described indetail in two evaluations: Genevieve de Crom-brugghe, “Report of an Evaluation of Micro-Projects in Kenya” (Consultant Report, COTA,Bruxelles, April, 1985); Gratien L. Pognon, SylvieWabbes and Edith Gasana, “Microprojects inKenya” (Evaluation of EDF Co-funded Pro-grammes under Lome II Convention, October1988).

vides discretionary funds to all districtsevery financial year while the EEC providesfunds to only one-third of the districts everyfinancial year. The other major differencesare that the EEC funds only one sub-projectin a district, funding levels for EEC sub-projects are far higher than those for the RDFproject, and sub-projects are generallydirectly related to development related infra-structure. One significant result of these dif-ferences is that MPND officers managing theEEC project are under much greater pressurefrom powerful politicians in President Moi’scoalition to make sure their district isselected, if possible more than once everythree years.

Since 1977 the EEC has funded, on aver-age, 10 to 15 sub-projects a year at anaverage annual cost of approximately $3 to$4 million. Throughout its history, theproject’s major emphasis has been uponbuilding schools and water supply systems,although irrigation systems, bridges, andother infrastructure also have been funded.As with the RDF sub-projects, the EEC’s sub-projects are supposed to be identified at thelocation level (one of the loweradministrative levels in Kenya’sdeconcentrated system), recommended bythe DDC, and selected by officers of theMPND and representatives of the EEC.

The technical assistance personnel whoassist the MPND officers managing the twoprojects perform a “gate-keeping” function.71

As such their major tasks are maintainingselection procedures, evaluating engineeringdesigns, monitoring expenditures, minimiz-ing corruption, and wherever possible, usingfield visits to confirm certificates of comple-tion. The openly acknowledged sub-text ofthis charge is that these advisors are toensure that ethnic interests do not bias theselection process by district or by invest-ment, that rents are kept to a minimum, that

71. These types of advisors in Kenya aredescribed in: Cohen, “Foreign Advisors andCapacity Building,” p. 497.

25

materials are not misappropriated by localgodfathers and field officers, and that proj-ects lead increase human and infrastructurecapital.

Both advisory teams, working closelywith MPND planners, formulated selectionprocedures to ensure nation-wide equity inallocations. For example, the RDF system isbased on calculations related to the popula-tion of the district and a measure of pastimplementation capacity and performance.Based on this system, different districtsreceive different levels of funding. Once theallocation was made it was up to the dis-trict’s DDC to divide their allocation amongdifferent sub-projects.

The nature of the RDF as a district dis-cretionary fund led to it having a very highpolitical profile, not least of all because itprovided politicians with an opportunity to“shepherd” sub-projects and so be seen tobring development to their constituencies.72

At times, powerful politicians sought toobtain DDC approval for sub-projects thatdid not meet technical appraisal criteria orhad not originated at the grassroots level. Ifthey are powerful members of the Presi-dent’s ruling ethnic coalition, they often tryto force sub-projects on the MPND. Thus theselection process becomes an uneasy com-promise between “neutral” technical andovertly political considerations. This processis carried out by an ad hoc RDF Sub-ProjectCommittee located in the MPND. In review-ing the sub-projects selected by a district,gate-keeping advisors serving on the Com-mittee pay close attention to ethnic interestsand competition. They are not reluctant toblow the whistle when they find corruption

72. The importance of MPs delivering projects totheir constituencies is described in: Joel D.Barkan, “Bringing Home the Pork: LegislativeBehavior, Rural Development, and Rural Changein East Africa,” in Legislature and Development,edited by Joel Smith and Lloyd Musolof(Durham: Duke University Press, 1978), pp. 265-88.

or politics leading to inefficient use of RDFresources.73 Year after year they are involvedin efforts to ensure that the share of each dis-trict can be justified and that the sub-projectsselected in each district make sense. At thecore of these considerations are ethnic issues.And these are directly discussed bymembers of the Committee. TheScandinavian aid agencies supporting theRDF have made it clear to their advisors thatthey are to directly address ethniccompetition and eliminate it in both thedivision of the annual allocation amongdistricts and in the selection of sub-projectsin particular districts.

Significant problems have plagued theimplementation of both projects. But this isnot the focus of this case. Rather, what thecase has attempted to demonstrate is theextent to which aid agencies go to place gate-keeping advisors in large, ostensibly nation-wide projects to minimize the extent towhich ethnic interests bias location and sub-project identification, design, and implemen-tation, or otherwise waste aid resourcesintended to contribute to social developmentand economic growth.

2. Program Aid and StructuralAdjustment Agreements

Beginning in the early 1980s, aid agenciesbegan to make general or sector-specificloans to the Government. Most of the loanswere used to provide budget support. Theywere largely provided by the World Bankand the IMF on soft terms. Tied to each loanwere a series of structural adjustmentrequirements that the Government agreed to

73. For example, the RDF engineer advisorserving in Marsabit District attracted nationalpress attention when he pointed out delays andcorruption hampering the expenditure of KSh.1,7 million of RDF money in the district. “ProjectCash Lying Idle,” Daily Nation (February 26,1989), p. 5; and the Daily Nation’s lead editorialon the situation in “Marsabit: It is Indeed aCrying Shame” (February 27, 1989), p. 6.

26

carry out. The pressures and rationalebehind the structural adjustment strategy arewidely documented and need not berepeated here, except to emphasize out thatone of their principal objectives was toreform policies and institutions thatconstrained economic growth.74 As notedearlier, by the early 1990s Kenya wascommitted to carrying out over 150 suchagreements. These structural adjustmentagreements sought to reform policies andinstitutional patterns that were constraintson economic growth. In requiring suchreforms, both the Government and the aidagencies were well aware that ethnicinterests had led to the need for reforms andthat ethnic interests would be major roadblocks in their implementation.

Two case studies will be presented toillustrate this point. The first case studyfocuses on the requirement that the Govern-ment design and implement a Public Invest-ment Program (PIP). It illustrates how struc-tural adjustment agreements can lead togreater transparency in Government actions,revealing in the process biased budget allo-cations among ethnic areas that are not sup-portive of economic growth. It also demon-strates how the Government and the aidagencies reacted to the PIP’s potential forrevealing patterns of ethnic competition andbiases. The second case study addresses therelationship between structural adjustmentrequirements that parastatals be privatizedand crucial ethnic interests. In the process,the case study illustrates how the rulingethnic coalition undermines economicgrowth by allowing parastatals to wastescarce resources. It also shows how suchethnic elites will attempt to both protect the

74. For example: Vinod Thomas, et al., Restructur-ing Economies in Distress: Policy Reform and theWorld Bank (Washington, D.C.: OxfordUniversity Press for the World Bank, 1991); AjayChhibber and Stanley Fisher, eds., EconomicReform in Sub-Saharan Africa (Washington, D.C.:the World Bank, 1991).

advantages they gained from control of para-statals, what ever their effect on the budgetand the economy, and to capture the benefitsthat any sale of a parastatal to the public sec-tor might generate. How the Governmentand the aid agencies related to such effortsshows the salience of ethnic issues in theoffices of aid agency professionals.

i. Public Investment Program

Throughout the 1970s and 1980s thenumber of projects in the development port-folios of ministries, agencies, and parastatalssteadily expanded, financed throughexternal loans and grants as well as domestictax revenues. During the same period theGovernment’s budget deficits, as apercentage of GDP, grew increasingly larger.By the late 1980s the World Bank and theIMF argued that the Government had toreduce its overall level of developmentexpenditure while restructuring the nature ofthat expenditure toward investments thatmore directly contributed to economicgrowth. To do this, these and other aidagencies argued, the Government wouldhave to limit budget deficits to five percentof GDP and formulate a Public InvestmentProgram (PIP) identifying all developmentprojects and guiding the budget allocationdecisions that were essential to improve thequality of the development investments. In1990 these two requirements wereincorporated into the larger body ofstructural adjustment agreements.

As far as the World Bank and IMF wereconcerned, the primary objective of the PIPwould be to gather and publish specific dataon Government-funded projects. The techni-cal argument in support of this focus as amajor PIP objective was that: (1) substantialbudget allocations were required to completeongoing projects in the development budget;(2) the problem of financing these projectswas compounded by the fact that new Gov-ernment-financed projects and programswere constantly being added to portfolios;

27

(3) under-funding of projects was leading todelayed implementation, cost escalation, andcrippling pending bills; and (4) this expand-ing number of Government-financed devel-opment projects required financing fromGovernment borrowing, which must berepaid with high interest, and createdincreased demands for future recurrentexpenditures. This line of argument wasexplicitly stated in a series of internal memo-randa exchanged by the aid agencies andsenior MOF officials. Importantly, none ofthese memoranda nor published restate-ments of them addressed the relationshipsbetween ethnic interests and the growth ofGovernment-funded projects or the increas-ing levels of budget deficits.75

But this does not mean that this relation-ship was unrecognized. Quite the contrary.Throughout negotiations over how to curbthe growth of Government-funded projects(1988-90), as well as through the complexprocess of designing and implementing aPIP (1990-92), internal discussions betweenGovernment officials, expatriate technicalassistance advisors, and World Bankprofessionals monitoring the exercise alwaysconsidered ethnic issues. This is confirmedby the author, who was charged withassisting the Government in putting the PIPin place and who participated in most ofthese discussions. Government official-advisor discussion constantly focused on thefact that the increase in Government-financed projects was driven by such ethnicforces as: (1) the sequential efforts ofPresidents Kenyatta and Moi to buildfacilities and infrastructure in their ethnichome areas or the areas of other ethnicgroups belonging to their ruling coalitions;

75. The most widely available published descrip-tion of the structural adjustment arguments andprograms is: World Bank, Kenya: Re-Investing inStabilization and Growth Through Public SectorAdjustment, 2 vols. (Washington, D.C.: CountryOperations Division, Eastern Africa Department,Report No. 9998-KE, November 1, 1991).

(2) the necessity for MPs tied to the rulingethnic coalition to “bring home the bacon” totheir constituencies and ensure that visiblepublic investments were made in their ethnicareas; and (3) the rising tide of “constructiondriven corruption” that was associated withcapital projects and tolerated by ruling elitesso long as the rents generated benefitedpublic service personnel who were membersin good standing of the ethnic alliance inpower.76 Importantly, both governmentofficials and advisors discussed the negativeeffects these practices had on the effectiveuse of scarce budgetary resources and howthey negatively affected efforts to promoteeconomic growth.

In sum, it was clear to all concerned thatGovernment- financed projects were prolif-erating with little or no regard to theirpotential contribution to economic and socialdevelopment or to national or district devel-opment plan priorities aimed at social devel-opment and economic growth because ethnicgodfathers close to the center of power werepushing for projects in their home areas.Frank discussion at all levels focused on howpowerful politicians used Government-funded projects to both increase publicfacilities and infrastructure in their ethnicareas and to generate rents for themselvesand their kinsmen. Further, it was explicitlyrecognized by all parties to the PIP exercisethat the current project reporting and docu-mentation systems in place were so inade-quate that they made it extremely difficult toidentify the number of Government-financedprojects, much less describe and analyze thepatterns marking their priority ranking, sec-tors, locations, or levels of expenditure. Assuch, it was clear to all concerned that if thePIP were published it would contribute to anincreased transparency that would allow aidagencies, in the interests of social develop-ment and economic growth, to better moni-tor the budget allocation process, which

76. All these factors are reviewed in: Barkan,“Bringing Home the Pork,” pp. 265-88.

28

would most likely be to the detriment ofpowerful ethnic interests.

It is primarily for this reason that theMOF initially resisted the World Bank andIMF structural adjustment agreement for theestablishment of a PIP. However, the aidagencies held the Government’s feet to thefire on this issue. As a result, in 1989 theGovernment negotiated a project with theUNDP that would, among other things,assist the MOF in designing and implement-ing a PIP. This effort was carried out by ateam of planning and budget supply officersassisted by two expatriate HIID advisorsfunded by the UNDP project.77 The PIPdesign that emerged from their effortsrequired ministries, agencies, and parastatalsto: (1) state their strategies, objectives, andpriorities; (2) list all ongoing and plannedprojects; (3) provide information on projectlocation, costing, and expenditure; and (4)present briefs for all projects giving descrip-tive and summary information. The first PIPwas published by the Government Printer in1992, and a PIP for each subsequent fiscalyear has also been issued and distributedwithin Government and to all aid agencies.78

All PIP publications are public. Indeed, cop-ies are sold in major Nairobi bookstores.

77. Between 1990 and 1994 the HIID-executed andUNDP-funded Budget and Economic Manage-ment Project provided one full time advisor tothe PIP exercise. In addition, between 1990 and1992, another USAID-funded HIID project,Resource Management for Rural Development,provided an additional expatriate advisor,representing the MPND, to the exercise. Bothprojects are described in: Cohen and Peterson,“HIID’s Advisory and Training Experience inKenya.” 78. The rationale and methodology for theKenyan PIP is presented in: John M. Cohen andJohn R. Wheeler, Improving Public ExpenditurePlanning: Introducing a Public Investment Programin Kenya (Cambridge: Harvard Institute forInternational Development, DevelopmentDiscussion Paper No. 479, March 1994).

As noted earlier, the 1992 PIP identifiedand provided data on 1,874 Government-funded projects, many of which comprised anumber of sub-projects. The tables in thedocument were generated by a relationaldata-base software program that drew on thecomputerization of the Government’s budgetsystem, an exercise that had been carried outsince the mid-1980s under USAID, UNDPand World Bank funding.79 Because of thecodes used, it is possible to break down thedistribution of Government projects by anumber of dimensions. However, to date thishas been done only by sector and cost.80

Efforts to produce descriptive data on projectlocation have not been requested from Gov-ernment personnel by the MOF and MPNDofficials who control access to computers anddata. Nor has it been requested by the aidagencies.

To a large extent, this failure to pursuean obviously interesting bit of data analysisresults from the fact that conventional wis-dom currently holds that there is a majorbias of ongoing and new project activity inethnic areas of the President and hissupporters. But another reason it has notbeen done is that the professional capacity ofthe key ministries is too limited to addresslocation variables.

The only analysis undertaken to date thathas implications for revealing ethnic alloca-tion patterns was carried out in 1992. It wasused to assist an Ad Hoc Committee of Per-manent Secretaries to identify ongoing proj-ects that should be phased out or canceled.

79. The basic computerization process isdescribed in: Clay Wescott, “Microcomputers forImproved Government Budgeting: An AfricanExperience,” in Microcomputers in Development: APublic Policy Perspective, edited by Stephen R.Roth and Charles K. Mann (Boulder: WestviewPress, 1987), pp. 67-93. 80. “Analysis of the 1992 PIP” (Internal Memoran-dum, Budget Supply Department, Ministry ofFinance, File No. ES 1/026, July 24, 1992,Nairobi).

29

Again, the pressure to identify such projectscame from the World Bank and the IMF. TheCommittee identified a number of projectsthat were too under-funded or delayed tomerit additional allocations in the nextbudget. However, because a number of thoseprojects identified were protected by power-ful politicians from the ruling ethnic alliance,and because it was recognized that projectsselected for deletion from the budget wouldin all likelihood be in ethnic areas not con-sidered supportive of President Moi’s Gov-ernment and subject to outcry, little attentionwas given to the Committee’s recommenda-tions by MOF and MPND officers whenformulating the 1992/93 Annual BudgetEstimates.

Nevertheless, as with the earlierdescribed District Budget Allocation Book,all projects are coded by district and divi-sions, areas that have clear ethnic identities.So in principle, data on project and budgetallocations by ethnic area exist. All that isnecessary to retrieve this data is for an enter-prising journalist, Master’s-level student, oraid official to pick up the published andpublicly available Development Budgetdocuments, the PIP, and the District BudgetAllocation books and take the time to organ-ize, enter, process, and analyze the data.That this potential exists is clearly the resultof aid agency structural adjustmentagreements and the provision of supportingexpatriate technical personnel with the skillsrequired to design and put in place the PIP.In sum, foreign aid generated data nowexists that can, if drawn upon, shedconsiderable light on the relationshipbetween external and domestic capitalbudget resources and allocation patterns toethnic areas.

ii. Privatization of Parastatals

By 1992 the Government had enteredinto several structural adjustmentagreements with the IMF and other aidagencies that committed it to reduce the

number of parastatals. Specifically, it agreedto establish a high-level Parastatal ReformPolicy Committee that would, among otherthings: (1) prepare a list of non-strategic,viable parastatals that could be privatized,liquidated, or put into receivership; (2)formulate a framework and time table for thedivestiture of these parastatals; and (3)deposit the proceeds from the sale ofparastatals to a special account in the CentralBank for application to the PaymasterGeneral’s current overdraft.81

The principal objective of these reformactions was to promote economic growth.The history of state-owned enterprises inKenya, their record of performance over thepast few decades, and their effect on Gov-ernment budget deficits are well described inaid agency reports and the academic litera-ture.82 Rather than restate this literature, thiscase study focuses on two points: (1) therelationship between ethnicity and the rea-sons why the Government is reluctant toimplement the privatization agreement; (2)and the efforts being made by the aid agen-cies to ensure that privatization is carried outin a business-like manner that minimizes thepotential of members from the ruling ethniccoalition to benefit from the sale of state-owned enterprises.

One of the major criticisms of parastatalsis that they are inefficiently run. As a result,their earnings are usually less than theircosts, resulting in the need for the MOF tosubsidize their budgets. This obviously con-strains public investment and economicgrowth. Since the mid-1980s this problem

81. Office of the Vice President and Ministry ofFinance, “Donor Conditionality List,” pp. 6-10. 82. Most recently in: Barbara Grosh, Public Enter-prise in Kenya: What Works, What Doesn’t, and Why(Boulder: Lynne Rienner Publishers, 1991). Acomplete list of Kenya’s 100+ parastatals is foundin: Philip Ndegwa, Chrm., Report and Recommen-dations of the Working Party on GovernmentExpenditures (Nairobi: Government Printer, 1982),pp. 87-101.

30

was a major contributor to the Government’sincreasing budget deficits. Further, parasta-tals took on hard money loans that the Gov-ernment guaranteed. When these were notpaid by the parastatal, the Government’sbudget deficit increased as it paid back inter-national creditors. While not directly studiedby academics, it was clear to aid agency pro-fessionals and thoughtful members of thepress that ethnic interests were a major rea-son for parastatal inefficiency and that suchinefficiency was an important constraint onthe promotion of economic growth. Forexample, one of the major drains on limitedbudgetary resources was the poorly man-aged and heavily subsidized National Cere-als and Produce Board, a parastatal that theGovernment protected despite donor pres-sure because, among other things, it bene-fited powerful Kalenjins who had movedinto large-scale grain production in Rift Val-ley Province.83

Again, ethnic aspects of parastatal ineffi-ciency were frankly discussed throughoutGovernment and in internal aid agencymemoranda seen by the author. Briefly,these memoranda note that the seniorpositions in the parastatals generally went toformer MPs and senior Government officialswho were members of the President’s ethnicgroup or groups comprising his rulingcoalition. Importantly, the shift fromPresident Kenyatta’s appointments toPresident Moi’s occurred at the same timethat corruption was rapidly increasing.

Many of the former MPs, district partyleaders, and permanent secretariesappointed to head parastatals used theirpositions to pillage their organizations’financial resources. Their practices extendedfar beyond rewarding themselves with suchcostly benefits as high salaries, luxury cars,

83. The politics of the NCPB are well described in:Robert H. Bates, Beyond the Miracle of the Market:the Political Economy of Agrarian Development inKenya (Cambridge: Cambridge University Press,1989).

subsidized housing, and opportunities tocreate unnecessary jobs for their kinsmen.84

In the early 1990s, for example, one powerfulminister appointed ethnic colleagues to para-statals controlled by his ministry. He estab-lished a family-held private bank (non-banking financial institution) and requiredhis appointees to deposit the revenues oftheir parastatals in this bank. He then usedthe deposits of these parastatals to financethe construction of office buildings held inthe name of a relative, on which he took thecustomary kickbacks from the contractors.When the minister was transferred toanother ministry his bank was unable toreturn the deposits of the parastatals. Thenow burnt parastatals were not inclined togo after the assets of the failed bank becausethe minister still had substantial influence.

As the processes of pressuring the Gov-ernment to comply with privatizationagreements unfolded, aid agency internalmemoranda became increasingly directabout the link between foot-dragging andethnic interests. Specific individuals andtheir ethnic linkages to President Moi werediscussed. For example, angry aid agency

84. The extent of this type of rip-off of publicresources is revealed by the request of oneformer Permanent Secretary, a Kalenjin who wasdemoted to a parastatal appointment because ofaid agency pressures on the Government toaddress high-Level corruption. On beingappointed Executive Chairman of a parastatal hisfirst action was to demand that his benefits beequal to those of other parastatal chairman,namely: (requests were in terms of shillings,which are converted at prevailing exchange rate)annual salary of $24,000 per year (nearly twicethe salary of a permanent secretary), a housingallowance of $7,200 per year, an entertainmentallowance of $400 per month, a car allowance of$160 per month, electricity and water paid for byhis parastatal, two gardeners, one servant, 24hour guards, and, most importantly, privateplates on his Government owned Mercedes,which would eventually allow him to keep thecar when the appointment ended. Document inpossession of author.

31

memoranda focused on the head of Kenya’spost and telephone parastatal who wasforced by the aid agencies, much against hiswill, to stop construction of a 20 story sky-scraper at the 8th floor, resulting in a sub-stantial reduction in construction relatedkick-backs.

Suffice to say that the appointment ofethnic raiders to key positions in state-owned enterprises was a major cause of theirinefficiency and of the need for Governmentsubsidies. The President used these appoint-ments as rewards to shore up his rulingcoalition and build Kalenjin wealth so thatmembers of that ethnic group could holdtheir own with the Kikuyu members of theemerging wabenzi class. He did so with littleregard to their affect on his budget or theeconomy. Such appointments generally didassist the President in maintaining politicalsupport and control. But the aid agenciesrecognized the costs of granting cash cows aspolitical rewards, so they began to take stepsto stop pillaging practices and directly dis-cussed specific individuals who wereinvolved in holding back implementation.Referring to the example given, they pres-sured the Government to introduce reformsthat prohibited the deposit of parastatalrevenue in any bank other than the CentralBank and regulated the practices of the non-bank financial institutions that were beingused to suck resources out of state-ownedenterprises.

As noted earlier, one of the reasons whyPresident Moi’s Government was reluctantto implement privatization agreements wasthat state-owned enterprises proved valuablefor rewarding supporters and members ofhis ethnic coalition.85 As pressure built dur-ing the late 1980s and early 1990s to get pri-vatization moving, the Government tookanother approach, one that used the sale of

85. “A Test of Political Will: Success of theParastatal Sector Reform will Depend on StrongSupport from the Government,” Weekly Review(May 27, 1994), pp. 32-3.

enterprises or stock in them to continue tobenefit its ethnic-based coalition of sup-porters.

Pressure to begin selling state-ownedenterprises, and to do so with transparencyand public accountability, came primarilyfrom the World Bank and IMF. Internal staffmemoranda and public press statements onthis topic focused closely on how PresidentMoi’s Government used parastatals to pro-vide political patronage to key ethnic god-fathers central to the maintenance of his rul-ing coalition.86 In discussions they publiclypressed the Government to begin to sell bothstrategic and non-strategic parastatals. Bankprofessionals, with IMF support, drew upboth a schedule for privatization and sub-jected the Government’s activities to strin-gent monitoring.87 Kalenjin hard-linersopposed the move toward stepped-up priva-tization and urged the President to stopdealing with the World Bank and the IMF.By 1994, influential Presidential advisors andthe moderate Minister of Finance, a Luhya,made the economic costs of such an actionclear to the President, leading him toapprove the World Bank’s divestiture plan,including the sale of some parastatals onceconsidered too strategic to let out of Gov-ernment hands.88

As actual sales began in 1993 and 1994,aid agency staff began to have serious mis-

86. For example, the Washington based IMF offi-cial overseeing the shadow program, HiroyukiHino, openly criticized the slow pace of privati-zation, declared its lack of transparency, andnoted that loss of parastatal cash cows to the pri-vate sector would remove a major source ofpatronage from the President’s resources.“Kenyan Official Hits Out at IMF on Privatiza-tion,” Reuters (March 2, 1995). 87. “Kenya: A Very Private Affair,” Africa Confi-dential, XXXV, 10 (1995), pp. 10-11. 88. Kenya: A very Private Affair,” Africa Confiden-tial, XXXV, 10 (1994), pp. 3-4; “Kenya: AfterMulti-Party Politics a One-Party Style,” AfricaConfidential, XXXV, 14 (1994), pp. 1-2.

32

givings about the Government’s privatiza-tion procedures.89 In particular they wereconcerned about the extent to which seniorofficials charged with implementing thedivestitures were unaccountable to inde-pendent audit. To a large extent their con-cerns were accelerated when the Kambahead of the civil service took steps toundermine the Office of the Controller andAuditor General. Their internal memorandadiscuss and follow the ways in which theGovernment seeks to ensure that the sale ofenterprises or stocks go to members of Presi-dent Moi’s ethnic coalition or other powerfulKenyan capitalists whose support and busi-ness opportunities he and his inner core ofcronies need. The emerging practices trackedby aid agency professionals, and directly dis-cussed in-house and in meetings with Gov-ernment officials, are widely commented onin Nairobi and reported in the domestic andinternational press.90

One common practice is to sell underval-ued shares to Kenyan businessmen of Asianbackground who have powerful politiciansand senior government officials as silentpartners. Another practice is to sell parasta-tals quietly without providing public infor-mation on the valuation of enterprises to besold, pricing of stocks, or payments. Anexample of such practices is found in the1994 sale of the Kenya Cashew Nuts Limited,a state-owned enterprise located in CoastProvince, a region dominated by smallerethnic groups that have been loyal membersof President Moi’s coalition. Almost noinformation was provided by the Govern-ment on the price of the sale or the purchas-ers. The current evidence is that the parasta-tal was bought for undervalued prices by agroup of coastal cooperative officials who

89. “Skepticism Over Privatization in Kenya,”Reuters (June 12, 1994). 90. For example: “Kenya: The New Capitalismand Its Cronies,” Africa Confidential, XXXV, 24(1994), pp. 4-5; “Skepticism Over Privatization inKenya,” Reuters (June 12, 1994).

then sold it at a markup to a Kenyan firmowned by Asian nationals. This information,if true, would be typical of the quick profitbusiness turnovers common to Kenya, apractice made famous during the early Ken-yatta years when a number of Asian nation-als were forced to sell their cloth and textilebusinesses to African nationals, who thensold the firms back to the former Indianowners with 10 to 20 percent price markups.

Efforts of President Moi’s Government toensure the sale of parastatal stocks to thebenefit of the current political elite are, attimes, highly visible. For example, in 1994the KANU- dominated parliament passedthe Capital Markets Authority AmendmentBill. It gave the Government control overelections or appointments to the private Nai-robi Stock Exchange (NSE), as well as powerto approve new stock brokerage firms seek-ing to operate on the increasingly lively NSE.To a large extent these steps were takenbecause the Government perceived the NSEas being dominated by Kikuyus and Asiannationals fronting for Kikuyus. Throughoutthese efforts to control the stock exchange,aid agencies have been involved in pushingfor its protection from Government control.

Political resistance to privatization proc-esses is likely to continue. This is because itis increasingly clear to the President that heneeds the patronage resources embodied inparastatals to maintain the loyalty of keypoliticians comprising his political coalition.Of late this is particularly the case with somepowerful Luhya, Kamba, and Kisii politi-cians who are flirting with the oppositionparties.91

91. By 1995 the potential loss of parastatals as apatronage resource was clear to all parties.“...ministers with a strong local following amongthe Kamba, Kisii, Luhya and Coastal groups haveindicated that they cannot guarantee a large pro-KANU turnout next time until they receivefavors for these ethnic loyalties.” “Moi Goes UpCountry,” Africa Confidential, XXXVI, 3 (1995), p.3.

33

In sum, from the beginning discussionsover a parastatal-focused structural adjust-ment agreement, aid agency professionalshave recognized both the benefits state-owned enterprises offered the ruling coali-tion and the probabilities that the implemen-tation of the privatization agreement soughtwould be substantially hampered by ethnicinterests. The unstated subtext of their eco-nomics-based background documents argu-ing for privatization center on a full under-standing of how parastatals were used toboth build political support for PresidentMoi’s Government and to promote the trans-fer of wealth to ethnic groups that had notdone nearly as well as the Kikuyu duringPresident Kenyatta’s era. As a result of theirexplicit focus on ethnic linkages to the priva-tization process, aid agencies have been ableto make progress in stopping managementabuses and promoting the fair and open saleof state-owned enterprises.

3. Funding Conditionality

The end of the Cold War and the pres-sures on aid agencies to allocate resourcestoward Eastern Europe and the new Com-monwealth of Independent States allowedthe IMF, the World Bank and the major aidagencies to require substantial political andeconomic reforms as a condition to contin-ued grants and loans to Third World coun-tries. The first conditions were slapped onKenya in November 1991. Frustrated by theGovernment’s rhetoric and slow implemen-tation of structural adjustment agreementsrequired to promote economic growth, aswell as President Moi’s drift toward auto-cratic politics and human rights violations,the aid agencies providing most of Kenya’sforeign aid decided to suspend a number ofongoing and emerging projects and budgetsupport loans until the Government com-plied with a new set of political and eco-

nomic conditions.92 In the words of the thenUSAID Kenya Mission Director: “We sent avery strong message...I don’t think this hasever happened before – no performance nomoney in certain areas.”93

This decision, taken in Paris at a formalmeeting between the Government and theaid agencies known as the “Paris Club,” wasfollowed by subsequent meetings in thesame venue. One of these meetings, held inNovember of 1993, awarded the Governmentincreased funding on the ground that it wasshowing some progress in implementing thestructural adjustment agreements.94 But itwas also the case that the Government wasopenly rebelling against these conditions.95

The most recent meeting, held in July 1995,

92. In this initial step the aid agencies suspendedall fast-dispersing aid (foreign exchange relief),amounting to $350 million (including $28 millionfrom USAID), pending substantial progress onspecified economic and political conditions. Proj-ect and humanitarian aid continue as pro-grammed. See, for example: Jane Perlez, “CitingCorruption in Kenya, Western Nations CancelAid,” New York Times (October 21, 1991), p. 1. 93. Jane Perlez, “Kenya: As Donors Meet, Moi hasAides Seized and Halts Murder Inquiry,” NewYork Times (November 26, 1991), p. 1. 94. “Kenya: A Difficult Courtship,” Africa Confi-dential (October 8, 1993), pp. 4-6. At this meetingthe aid agencies indicated new commitments for1994 of about $850 million, including at least $170in fast-disbursing balance of payments support.“From Paris With Money: Donors Resume Aid toKenya,” Weekly Review (November 26, 1993), pp.21-9. The World Bank press release on the meet-ing noted that while first steps were takentoward multi-party democracy and a firstelection held, the aid agencies were very worriedabout ethnic clashes in Rift Valley and thetendency of the Government to hamper theexpression of political views and turn a blind eyeto corruption. 95. An example of the numerous press reports onthis resistence is: “Rejecting the Bitter Dose:Kenya Finds the Donor Prescribed EconomicReforms a Bit too Unpalatable,” Weekly Review(March 26, 1993), pp. 14-26.

34

found the Government insufficiently com-mitted to the reforms and threatened sub-stantial future aid reductions if more prog-ress was not made on such conditionalitiesas democratization, freedom of the press,human rights, and prosecution of high-levelcorruption.96 Still, a number of senior Kenyanofficials appear to believe they can eventu-ally succeed in obtaining aid resources with-out actually carrying out agreements andconditions demanded by aid agencies, par-ticularly those holding back economicgrowth but benefiting the ethnic coalition inpower.97

In discussions during these meetings,both the Government and the aid agencieswere well aware that some of the agreementsand conditions had significant implicationsfor ethnic interests and competition. Beyondthe meetings, many of the embassies and aidmissions openly criticized the failure of the

96. See, for example: Chris McGreal, “Kenya GetsHuman Rights Warning,” Guardian Weekly (July30, 1995), p. 4; “Aid for Kenya: Stop, Go,” Econo-mist (August 19, 1995), p. 37. Domestic pressreports are illustrated by: “Voices of Criticism:Many of Kenya’s Donors Have Placed a HighPremium on Political Reform,” Weekly Review(May 26, 1995, p. 23; “After Paris What? KenyaShould Brace Itself for Difficult Relations withBilateral Donors,” Weekly Review (July 28, 1995),pp. 12-25. In advance of this meeting GTZ drasti-cally scaled back its aid, DANIDA put a hold on180 billion Danish kroner in aid, and Japanthreatened to hold further funding of a hugehydroelectric power station on the Tana River. 97. For example: Suguta Marmar, “Will the ParisClub Players be Duped Again? The Public ThinksDonors Are Losing a Major Battle of Wits,” Sun-day Standard (July 30, 1995), p. 10. Two monthsafter the Paris meetings there are signs that theGovernment is still trying to avoid carrying outconditionalities, particularly those related to cor-ruption, human rights, and democratization, forexample: Donatella Lorch, “Is Kenya Sliding Backtoward Repression?” New York Times (October 1,1995), p. 3; and her “Kenya’s Asphalt Jungle,With a Law to Match It,” New York Times(October 5, 1995), p. 4.

Government to meet structural adjustmentagreements and the emerging conditionali-ties, a practice that angered President Moiand was widely reported in the domesticpress.98 Only the most naive of observerswould have failed to recognize that the Gov-ernment would have great difficulty imple-menting these conditions because, if carriedout as demanded, they would have powerfulnegative effects on the interests of the ethniccoalition ruling Kenya.

Two case studies will be presented. Thefirst reviews how the demand for multipartydemocracy generated substantial andsustained ethnic conflict throughout thecountry. This conflict had more than aneffect on the lives of the people involved, itslowed down external investments, sentwrong signals to the economically crucialtourism sector, and held back agriculturalproduction in a very fertile area of thecountry. The second demonstrates howethnic competition has led to corruption on amassive scale, corruption that greatlyhampers economic growth and wastes futureresources required for developmentinvestments. The case study illustrates howdifficult is for the ruling ethnic coalition tocomply with the condition that thoseresponsible for well known, high-levelGovernment corruption be prosecuted. Indescribing both case studies, efforts will bemade to demonstrate that all parties to dis-cussion and setting of these conditions rec-ognized that they would have significanteffects on ethnic interests.

98. Particularly outspoken donor countries wereGermany, Denmark, and, surprisingly, Japan. Forexample: “Poking His Nose Too Deep: Mutzel-berg is accused of Meddling in Kenya’s InternalAffairs,” Weekly Review (July 21, 1995), pp. 11-12;“Diplomacy and National Dignity,” WeeklyReview (August 4, 1995), pp. 3, 10-11.

35

i. Democratization and Reinstitutionof Multiparty Political Competition

Throughout President Kenyatta’s presi-dency the power of the dominant rulingparty, the Kenya African National Union(KANU) party, declined in importance.99

After gaining the Presidency in 1978, Moiundertook to strengthen KANU so that itwould provide a major foundation for hisGovernment. Such substantial progresstoward this objective was made over the nextfew years that in 1982 President Moi suc-ceeded in obtaining the passage of anamendment to the Constitution that estab-lished a de jure one party state. By 1991, thethen 41 districts were divided into 188 MPconstituencies and controlled by strong partybranches, which facilitated control over eth-nic interests and competition.

Between 1990 and 1992, Kenya wentthrough extensive political change. This isbecause the aid agencies imposed conditionsrequiring the Government to: (1) amend theConstitution to end the one-party state andallow a multiparty system to operate; (2)establish an impartial elections board, rein-

99. The decline of KANU during the Kenyattaadministration and its affect on politics and gov-ernance is described in: Gerry Gertzel, ThePolitics of Independent Kenya (London:Heinemann, 1970); Joel D. Barkan and John J.Okumu, “‘Semi-Competitive’ Elections,Clientelism and Political Recruitment in a No-Party State: the Kenyan Experience,” in ElectionsWithout Choice, edited by Guy Hermet, et al.(New York: Wiley Interscience, 1978), pp. 88-107;Joel D. Barkan and John J. Okumu, “Linkagewithout Parties: Legislators and Constituents inKenya,” in Political Parties and Linkage: AComparative Perspective, edited by Kay Lawson(New Haven: Yale University Press, 1980), pp.289-324; Susan D. Mueller, “Government andOpposition in Kenya, 1966-9,” Journal of ModernAfrican Studies, XXII, 3 (1984), pp. 399-427; Joel D.Barkan, “The Electoral Process and Peasant-StateRelations in Kenya,” in Elections in IndependentAfrica, edited by Fred M. Hayward (Boulder:Westview Press, 1987), pp. 213-37.

state the secret ballot, redistrict wherepopulation shifts require it, and update voterregistration roles; and (3) relax direct andindirect state censorship of the press.

To date, the Government has amendedthe Constitution to allow a multiparty sys-tem to operate but has moved slowly onreforming the election process and barelytolerates a free press.100 The opposition hasremained fragmented, allowing the Presi-dent’s party, KANU, to win an overwhelm-ing victory in the December 1992 electionsand subsequent by-elections.101 What isimportant to note here is that negotiationsbetween the Government and the aid agen-cies over these conditions and the effects oftheir outcome on ethnic interests, competi-tion, and conflict has been widely acknowl-edged in internal memoranda, press reports,and academic studies.102

100. Frank Holmquist and Michael Ford, “Kenya:Slouching Toward Democracy,” Africa Today,XXXIX, 3 (1992), pp. 97-111; Jennifer A. Widner,“Kenya’s Slow Progress Toward Multiparty Poli-tics,” Current History, CXI, 565 (1992), pp. 214-18. 101. “Kenya: Adieu au Vieux I,” AfricaConfidential, XXXV, 4 (1994); “After Multi-PartyPolitics, A One Party State,” Africa Confidential,XXXV, 14 (1994), pp. 1-2l; “Moi Goes UpCountry,” Africa Confidential, XXXVI,3 (1995), pp.3-4. While KANU captured only 36 percent of thevote the divided opposition allowed the party tohold a majority 108 of 188 seats, including 12appointed seats awarded to the dominant party’sleader. Because no Kikuyus and only one Luowon a KANU seat, President Moi appointed anumber of former MPs from those ethnic groupsto these 12 seats. See: Joel D. Barkan, “Kenya:Lessons from a Flawed Election,” Journal ofDemocracy, IV, 3 (1993), pp. 85-99. 102. For example: Frank Holmquist and MichaelFord, “Kenya: State and Civil Society in the FirstYear After the Election,” Africa Today, XLI, 4(1994), pp. 5-25; and the yearly up-datesprepared by the International RepublicanInstitute, most recently: Kenya: Political Update(Washington, D.C.: International RepublicanInstitute, August 1995). Both these studies flowout of consulting work for USAID.

36

The Constitutional amendment and themarch toward multiparty Governmenttouched off ethnic violence, particularly inthe Kalenjin Masai heartland of Rift ValleyProvince. There “opposition” to multipartypolitics was used as an excuse to drive anestimated 30 to 40,000 Kikuyu and Luo set-tlers off their land, killing approximately1000 people in the process. These effects arealso well documented and need not berepeated here.103 Indeed, both the domesticand international press are full of detailedreports on the linkage between the formationof opposition parties and ethnic violence. Toa large extent, much of this literature focuseson how the Kalenjin and their Masai sup-porters have used the threat of oppositionparties operating in Rift Valley to mobilizegangs of young men to force poor Kikuyuand Luo migrants out of their home districts,allegedly with the assistance of the country’ssecurity forces. It also focuses on the effortsof the President to curb the formation andactivities of opposition parties, frequentlycharging that such parties “thrive on tribal-ism and whose agenda is to hurl insultswhile jostling for leadership positions.”104

Currently the press is focused on the actionsof a famous white Kenyan citizen, RichardLeakey, who is seeking to form a new partythat consolidates opposition parties. He hasbeen explicitly labeled as a racist by Presi-

103. For example: Human Rights Watch, Divideand Rule: State-Sponsored Ethnic Violence in Kenya(New York: Human Rights Watch, 1993); Makauwa Mutua, “Human Rights and State Despotismin Kenya: Institutional Problems.” Africa Today,XLI, 4 (1994), pp. 50-6, Typical of domestic pressreports are: “Moi’s Tribe Goes on the Rampage,”Daily Telegraph (May 1, 1992); “Kenya: SilentSlaughter,” Economist (July 16, 1994), pp. 39-40;“Mess in Maela: Officials Charged withResettling Eviction Victims Engage inProfiteering,” Weekly Review (January 13, 1995),pp. 4-10; Holmquist and Ford, “Kenya: State andCivil Society,” pp. 11-14. 104. “Kenyan President Renews Attack onLeakey,” Reuters (May 14, 1995).

dent Moi, and he and a number of support-ers were recently roughed up, apparentlywith the Government’s tacit approval.105 Butrather than elaborate on the history andeffects of these types of conditionality-gener-ated problems, a history that is well docu-mented, this case study will focus on howone aid agency has been acutely aware of therelationship between the democratizationconditionality and ethnic interests, competi-tion, and, in this case, conflict, and how ithas acted to address these problems.

The major pressure on the aid agencies toimpose democratization on the Kenyan Gov-ernment came from the United States. TheAmerican Ambassador, Smith Hempstone, aRepublican political appointee and formerjournalist for a conservative Texas news-paper, led the charge.106 He was highly visi-ble in the political arena. His close contactswith Kikuyu and Luo opposition leaders andhis statements and arguments for multipartypolitics were welcomed by oppositiongroups and publicly criticized by the politi-cians in power.

The Ambassador was assisted in hisefforts to tie progress on democratization tothe receipt of foreign aid through the use ofUSAID personnel. He commandeered a well-known American political scientist who wasworking throughout Eastern and SouthernAfrica as an analyst for USAID’s Democracyand Governance Project. This expert, JoelBarkan, was on leave from the University ofIowa to work on the larger project. TheAmbassador knew Barkan was particularlyknowledgeable about Kenya. Using hisinfluence, he managed to co-opt Barkan sothat he could only work on Kenya. Barkanhas long recognized and written about the

105. “Taking the Plunge: Dr. Richard Leakey is inthe Line-Up of Muite’s Party,” Weekly Review(May 12, 1995), pp. 4-9. 106. Widner, The Rise of a Party State in Kenya, pp.174-5.

37

political and economic effects of ethnic com-petition.107

In a series of internal memoranda, Bar-kan made the ethnic basis of the emergingopposition parties clear to the Ambassadorand greatly facilitated his ability to under-stand the issues required to force PresidentMoi’s coalition to agree to carry out thedemocratization conditions. Barkan providedhigh quality insights into issues dividing thedifferent parties and the carrying out of theelection processes.

With the Ambassador’s support, in 1994USAID launched a $7 million project titled“Kenya Democracy and Governance Proj-ect.” This project, which was agreed to bythe Government because of the pressure ofconditionality, focused on strengtheningParliament, the Auditor and ControllerGeneral’s Offices, and civil society. Becausethe Government showed little interest insupporting the first two objectives, only thethird received any funding. In regard to thisactivity, civil society funds were to be usedto “sponsor conferences on democracy in amulti-ethnic society.” Further, it workedwith local human rights groups to, amongother things, track “state-sanctioned ethniccleansing” and study “weaknesses in civilsociety,” giving particular attention to the“Asian-African split” and “ethnic divisionsamong Africans.”108

It should be noted that the Ambassadorwho replaced Smith, Aurela E. Brazeal, hasbeen much less aggressive about democrati-zation and human rights conditions.109 Herconciliatory approach, based on praisingprogress rather than demanding changes,

107. Many of his articles on this topic are cited infootnotes in this paper. 108. “Kenya Democracy and Governance Project(615-0266) (1994-97)” (Washington, D.C.: UnitedStates Agency for International Development,n.d.) 109. Keith B. Richburg, “Africa’s ‘Big Men’ Mus-cling Aside Democracy Movements,” WashingtonPost (January 2, 1995).

has not been effective. As a result, hard-liners in President Moi’s coalition have beenmore forceful in trying to stiffen Governmentresistance to structural adjustment agree-ments and supporting conditionalities. Thisillustrates the importance of determinedpostures by ambassadors in obtaining politi-cal and economic reforms. Smith’saggressive role has recently been taken overby the German Ambassador and theAustralian High Commissioner. Sointernational pressure to promotedemocratization continues.

Clearly, these facts demonstrate an aidagency mission deeply involved in ethnicissues. Perhaps no other case study pre-sented in the paper demonstrates howdirectly concerned aid agencies are with theeffects of their aid resources on ethnic inter-ests, competition, and conflict.

ii. Prosecution of High-Level Corruption

Historians will some day note that toler-ating, if not stimulating, corruption was cen-tral to President Kenyatta’s strategy forbuilding an African middle and upper classthat could hold its own with the large num-ber of whites who were “staying on” afterindependence. He did this by appointingfellow Kikuyu and other ethnic supporters topositions in Government that generatedrents. For example, politicians and seniorcivil servants were circulated through theMinistry of Home Affairs, which controlledthe Department of Immigration and the issu-ance of work permits. President Kenyattatolerated “good corruption,” which wasbased on ten-percent rents, investments ofgains in economic growth generation, suchas firms and farms, and limited transfers ofthose gains into foreign exchange bankedabroad. This strategy worked well. By theearly 1970s there were so many wealthyKenyans with homes, farms, and firms equalto the holdings of the whites and member-ships in the formerly exclusive white countryclubs that a new Swahili term was coined:

38

the “wabenzi” or the people who havereached the Mercedes class.

Towards the end of his life, PresidentKenyatta was less attentive to governanceand corruption began to spread, especially asthe bureaucracy swelled and new opportu-nities for dishonesty appeared. When Moibecame President he allowed corruption toaccelerate, in large part to make sure hisethnic group and the groups supporting hisefforts to consolidate power became wealthyenough to hold their own with the new Afri-can elite Kenyatta had assisted. By the late1980s corruption was increasingly out ofhand, constraining economic growth to a fargreater extent than the form of corruptionthat prevailed under Kenyatta. Moi’s cor-ruption was “bad corruption.” That is, kick-backs were running 20 percent, there was nolimitation on greed, investments were beingmade in unproductive “Gone With theWind” farmhouses, and a fair percentage ofrent gains were transferred abroad intoWestern banks and investments.

The increased levels of corruption andtheir connection to ethnic interests wereopenly discussed by most Government offi-cials, aid agency professionals, and technicalassistance staff. Every few months a newspectacular case of high-level corruptionwould be reported in the foreign press andhinted to in the local press. So pervasive wasthis discussion that an additional Swahiliword entered into common use: the “chaisyndrome,” chai being the local word for tea,which was the common man’s term forrents.110

Today, Kenya has a deserved reputationfor financial chicanery, much of which ismade possible by the complex set of Gov-ernment controls and parastatals that the aid

110. Martha Mbuggus, “Kenyans and the ‘ChaiSyndrome.’” The Nation (December 18, 1991), p.1. See also: Gichuru Njihia, “Inquiry Rivited byTales of Corruption in High Places,” The Nation(August 11, 1991), p. 4; “Bribery and Extortion,”Finance (November 13, 1992), pp. 18-23.

agencies were trying to change throughstructural adjustment agreements. Ironically,it was also stimulated by specific aspects ofsome structural adjustment agreements.111

For example, the Goldenberg scheme, whichwill be described shortly, was made possiblewhen the Government implemented itsagreement with the World Bank to introducean export compensation scheme. Or, forexample, great opportunities for rent seekersemerged when the Government imple-mented in 1993 a structural adjustmentagreement requiring it to introduce a pre-shipment finance facility providing cheapcredit to exporters.

Seeking to reduce high-level corruption,the aid agencies turned to the modality ofconditionality. This came to the forefront ofGovernment-aid agency relations at the pre-viously mentioned November 1991 ParisClub meeting. There the aid agenciesdemanded that the Government take steps tostop high-level corruption and prosecutewidely documented cases of such corruption,returning the proceeds to the Treasury.112

Aid agency officials played a major rolein documenting the massive corruption thatwas undermining the Kenyan budget andeconomy. The most notable case was theTurkwell Dam, the largest project ever car-ried out by Kenya. The project had a signifi-cant negative impact on the Turkana pas-toralists downstream from the dam, animpact that was widely considered anddebated in aid agency memoranda, consult-ing reports, and Government decisions. Thiscase has been extensively reported in theinternational press, so only the basic story, asrelated to the topic of this paper, will be pre-sented.113 Briefly, in 1986 the EEC offered to

111. “New Avenues for Corruption: ReformsHave Opened Opportunities for CreativeSchemers,” Weekly Review (January 6, 1995), pp.26-7. 112. Perlez, “Citing Corruption in Kenya,” p. 1. 113. Most notably in by Blane Harden, whoreviews both the effects of the project on Turkana

39

provide grant and soft loan funding to con-struct a hydroelectric project on the TurkwellRiver in Turkana District. The project’s totalcost exceeded $400 million. As the aidagreement was about to be signed, Frenchconstruction firms supported by Frenchbanks, with the knowledge of the FrenchEmbassy, paid large bribes, estimated to bein the neighborhood of $25 to 30 million, tothe President and a few of his closest Kalen-jin colleagues.114 As a result, the EEC agree-ment was scrapped and the Governmentcontracted with French firms under hardloan financing. The EEC aid representativewas so angered by this outcome that hewrote a memorandum documenting allaspects of this pay-off and sent it to theheads of aid agency missions in Kenya.115

Shortly thereafter he left the country. Butthere is no easy way out for Kenyan citizens,who together with their children and grand-children will eventually pay for this uncon-scionable act of high-level corruption.

Kenya has witnessed similar cases ofsince the emergence of President Moi’scoalition. The one that has attracted the mostattention and triggered the corruption con-

pastoralists and the levels of corruption gener-ated: Africa: Dispatches from a Fragile Continent(Boston: Houghton Mifflin Company, 1991), pp.182-216. 114. Ibid., p. 210. 115. In the words of the EEC delegate: “The prob-lem is that the French contract and financingconditions are extremely disadvantageous forKenya. The price of the French ‘turnkey’ offer ismore than double the amount the Kenyan Gov-ernment would have had to pay for the projectbased on an international competitive tender,and it is surprising that this was accepted at atime when the Kenyan government is cuttingdown on investment in the country because oflack of budgetary funds. A major portion (78percent) of the total price quoted by the Frenchcontractor is proposed to be finance bycommercial loans payable at 16.01 percent, muchhigher than the current commercial borrowingrate of 12 percent.” Ibid., p. 209.

ditionality relates to the Kenyan firm Gold-enberg International. Any one of its severalscams demonstrates the degree to which aclosely connected, high-level group of poli-ticians and senior civil servants had come tobelieve they could get away with corruptaction.

Foremost among Goldenberg’s scamsrelates to its claimed export of gold and dia-monds, for which it received or has claimedin excess of $350 to $470 million (dependingon which press assertion is accepted, how itcombines various scams, and what exchangerates are used) from the Government’sexport compensation scheme.116 The claimsand payments to Goldenberg aroused atten-tion because Kenya produces only a smallamount of gold, there was no record of theSwiss company to whom the claimed goldand diamonds were delivered, due to specialtreatment granted by the MOF the exportpayment was made at 35 percent of totalclaimed export value, which was 15 percentabove the 20 percent legally authorizedunder the scheme, and Goldenberg could notdemonstrate that it had remitted its allegedforeign exchange earnings, for which thecompensation was paid.

The head of the company is an Asiannational, Kamlish Pattni. Confidential docu-ments prepared by aid agencies allege thatthe key investors in Pattni’s firm were rela-tives of the President (Kalenjin), the Com-missioner of Customs (Kalenjin), and theGovernor of the Central Bank (Kalenjin).These documents further allege they werefacilitated in their efforts by side payments tothe Vice-President and Minister of Finance(Kikuyu who in his youth claimed member-ship in the Masai and represents a Masaiconstituency), the Commissioner of Mines(Luo), and two Permanent Secretaries of the

116. “The Goldenberg Report: Irregular Paymentof Export Compensation,” Finance (April 30,1995), pp. 20-5. The $470 million comes from datain: International Republican Institute, “Kenya:Political Update: August 1995,” p. 5.

40

MOF, one a Kamba, who was deeplyinvolved from the beginning, and the otherhis Kikuyu successor, who arrived after theextent of the fraud was already known inmost circles. If these allegations are correctthey vividly demonstrate how brazen ethnic-based rent-seeking coalitions can becomeand the negative effects they can have oneconomic growth.

Throughout the early 1990s, this case wasso widely reported in the domestic press thatthe aid agencies were forced to take actionusing the conditionality modality.117 Thiscame at the previously described November1991 Paris Club meeting. However, no prose-cution occurred. It was not until 1994 thatthe current Minister for Finance, using all thepolitical resources available to him, managedto prevail over President Moi’s inner circle toinitiate criminal charges against Pattni, thetwo ex-permanent secretaries of the MOF,and the Commissioner of Mines and Cus-toms. The local press directly attributedthese actions to the IMF and a coalition ofaid agencies.118 The current expectation is

117. For example: “Audit-General: A Sorry Litanyof Funds Misuse,” Weekly Review (June 22, 1990),pp. 26-7; “Puzzling Questions Over Gold FirmDeals,” The Nation, (April 20, 1991), Business Sec-tion, p. 1; Gighuru Kjihia, “Inquiry Riveted byTales of Corruption in High Places,” The Nation(August 11, 1991), p. 4; “Days of CorruptionOver, Vows AG Wako,” Kenya Times (April 11,1991), p. 4; Peter Warutere, “Gold ExportingFirm Deals Raise Eyebrows,” The Nation (April13, 1992), pp. 1-2; “Uproar Over Goldenberg,”The Nation (May 15, 1992), p. 1; “Millions MissingFrom Public Funds,” The Standard (July 16, 1992),pp. 1, 11. 118. “Kamlesh Pattni Arrested,” Weekly Review(March 25, 1994), pp. 19-24; “Kenya Court OrdersSix to Answer Fraud Charges,” Reuters(December 10, 1994). “Pattni: the BillionaireBusinessman is in the Docks for the FourthTime,” Weekly Review (May 26, 1995), p. 18.Despite the indictment, an additional $40 millionis claimed by Goldenberg International: “Has theGrand March Turned into the Grand Farce?”News Focus (April 17-23, 1995), p. 16.

that several of the cases will be dismissed,particularly those against the two permanentsecretaries who were largely facilitators, andthat Pattni, who is very useful to powerfulKalenjin members of the President’s innercircle, will be treated lightly.119 The aid agen-cies, responding to the lack of progress onthese cases, withheld further aid at a specialmeeting of the Paris Club in August 1995.120

In sum, aid agency staff have recognizedand documented, where possible, cases ofGovernment corruption and their ethnic-based underpinnings. As noted in the RDFand EEC case studies, aid agencies fundgate-keeping advisors to minimize ethnicinfluence and bureaucratic corruption intheir projects. Aid agencies have also helpedintroduce microcomputers and managementinformation systems into ministries, in partto increase transparency as a means ofreducing corruption. But addressing high-level corruption is a departure for them. The

119. For example, the Attorney General droppedthe case against Vice President George Saitoti,who appears to have been clearly involved inboth Pattni cases: “A Close Shave: The Attorney-General Halts the Criminal Proceedings AgainstV-P Saitoti,” Weekly Review (March 17, 1995), pp.12-17. Further, the Parliamentary AccountsCommittee to found no wrong in the Goldenbergpayments and ordered the MOF to meet Golden-berg’s outstanding claims, thereby creating apublic outcry that forced the Attorney General toreopen the case: “Man on the Spot: WamalwaFinds Himself Under Pressure Over the Golden-berg Affair,” Weekly Review (April 7, 1995), pp.13-21; “The Big Losers: Twists and Turns of theGoldenberg Saga,” Weekly Review (April 14,1995), pp. 4-9. 120. “Aid for Kenya: Stop, Go, Economist (August19, 1995), p. 37. Currently, World Bank and IMFmission staff are tracking the Auditor-General’srecent Appropriation Accounts Report notessome $283 million in funds are untraceable fromthe 1993 budgetary expenditures, some of whichis clearly related to the Goldenberg exportcompensation payments. Greg Barrow, “MoneyScandal Shakes Kenya,” Manchester GuardianWeekly (October 15, 1995), p. 3.

41

agencies have recognized that continuationof the present state of corruption willundermine the entire structural adjustmentpackage, as well as mortgage future genera-tions of Kenyan taxpayers. Using their welldocumented internal memoranda on corrup-tion and its linkages to ethnic interests, theaid agencies are now holding the Govern-ment’s feet to the fire.121 The corruption theyare after is so closely connected to the Presi-dent and his Kalenjin-based coalition thatthey are unlikely to be successful in obtain-ing meaningful prosecution, restitution tothe Treasury of stolen Government funds, ora Parliamentary crackdown on corruption inthe public sector. To a large extent, this isbecause aid agencies can do little to forcepolitical leaders to prosecute corruption,reduce ethnic competition for publicresources, and set honest examples.122 But bytaking this step they do demonstrate thatthey clearly understand and are ready totackle ethnic-based corruption.123

121. Most recently: “Surprise Verdict: the IMFPegs the Conclusion of ESAF to the Resolution ofthe Goldenberg Case,” Weekly Review (September15, 1995), pp. 18-19. 122. The importance of leadership in reducing cor-ruption is emphasized in: Robert Klitgaard, Con-trolling Corruption (Berkeley: University of Cali-fornia Press, 1988). 123. Defining “ethnic-based,” a concept usedthroughout this paper, is best done in regard tocorruption. In reference to the American system,Spiro Agnew is an example of independent indi-vidual corruption unlinked to his Greek origins.But the Sicilian-based Mafia’s extortion controlover garbage collection firms is an example ofethnic-based corruption. Ethnic-based corruptionis more than just a case of greed on the part of amember of an ethnic group. Rather it is corrup-tion that is only possible because the member isfrom a ethnic group and that the ethnicleadership sanctions, or indeed protects, thebehavior.

Implications of Kenyan Case forConventional Wisdom

It is submitted that the Kenyan case studiesdemonstrate over a wide range of projects,structural adjustment agreements, and con-ditionalities that in Kenya both host countryand aid agency officials pay close attentionto ethnic issues at all stages, from design andimplementation through evaluation. It is fur-ther submitted that the case studies illustratethe complex mechanics through which ethnicinterests and competition lead to adversepolicies and dysfunctional institutions thathamper development processes and eco-nomic growth.

As such this paper has implications fortwo views currently moving toward thestatus of conventional wisdom. First, it pro-vides evidence that undermines assertionsthat aid agency personnel are often unawareof the effects their interventions can have onethnic groups. This being the case, what isneeded are not academic studies aimed atassisting aid agency professionals to betterunderstand relationships between foreignaid and ethnicity. Rather, what is needed aremore qualitative and comparative case stud-ies that, upon analysis, generate guidelinesprofessionals can adopt in their efforts to: (1)limit the negative effects ethnicity can haveon aid interventions; and (2) reduce thenegative effects aid interventions can haveon ethnic groups.

Second, the paper confirms recenteconometric arguments that ethnic competi-tion can lead to policies that have adverseaffects on economic growth. In doing so itdemonstrates the complex processes under-lying this relationship. What is needed aremore qualitative case studies in other coun-tries that, together with the ones presentedin this paper, can generate more finely tunedhypotheses for both macro and microeconomists to test through their econometricmodels and analyses.

Unfortunately, it will not be easy to gen-erate further case studies in a broad range of

42

Sub-Saharan African countries. To a largeextent this is because such studies can onlybe written by host country academics andexpatriate field practitioners who are in closecontact with Government officials, aidagency professionals, and those affected bygiven foreign aid interventions. The firstgroup of potential researchers are oftenreluctant to carry out such studies. Africansocial scientists who study and write on thecomplexities of ethnic competition takepolitical risks that many of their Westerncolleagues would find too high.124 Thesecond group of professionals typically havelittle time to write case studies useful toacademics. There is a classic and wellrecognized gap between academics and fieldprofessionals.125 This gap will make it quitedifficult to get such professionals to generatecase studies similar to those presented here.Still, ways must be found to get both groupsto provide comparative, detailed qualitativecase studies of the relationships betweenethnicity and policy formulation, foreign aid,and economic growth. Only when more evi-dence is available will aid agencies be able tobetter design interventions sensitive to ethnicinterests and to assist governments to avoidadopting ethnic-generated policies thathamper economic growth.

124. Indeed, as in a number of Sub-SaharanAfrican countries, some of Kenya’s leading,university-based social scientists have left boththe university and the country as a result of theirresearch into the effects of ethnicity ongovernance, democratization, and development. 125. Robert Chambers best describes this gap asone between negative social scientists and posi-tive field practitioners: Rural Development: Puttingthe Last First (London: Longman, 1983), pp. 28-46.