KENYAFINANCIAL TIMES SPECIAL REPORT | Thursday October 29 2009 Page 5

InsideSomalis are ona propertyspree ParseleloKantai reports

www.ft.com/kenya­2009

Hamstrung by a crisis of leadership

In the lurching evolution of itsyoung democracy, Kenya hascovered more ground in less timethan many African countries,

and developed a bewildering tendencyto swing from despair to hope andback again in the space of weeks oreven days.

On December 27 2007, millions ofoptimistic Kenyans queued for hoursto vote in the tightest presidentialrace since the emergence of multi-party democracy in 1992. But theresult was disputed and the violenceof the two-month crisis that it trig-gered pushed the country to the brinkof civil war.

The power-sharing agreement thatended the crisis inspired hope onceagain, as the electoral rivals – Presi-dent Mwai Kibaki and Raila Odinga,now prime minister – buried their dif-ferences and heralded a new era ofco-operative politics.

But 18 months later, those expecta-tions have been ground down to noth-ing by the coalition’s lacklustre per-formance, leaving a dark pall of fearand disillusionment.

An economic and transport hub,and a vital base for the UnitedNations and aid agencies, Kenya isentering a decisive period that willdetermine not only the future of itsdemocracy, but its stability and viabil-ity as a state.

The government is beset by in-fight-ing and corruption and unable orunwilling to implement the reforms itpledged to tackle the injustices thatunderlay last year’s crisis. “The coali-tion is dysfunctional,” James Orengo,lands minister and an Odinga ally,admitted in July.

Because the government failed toset up a local tribunal to try the “bigmen” suspected of organising lastyear’s violence, some unnamed cabi-net ministers now face the possibilityof trial at the International CriminalCourt in The Hague.

This month Kofi Annan, the manwho brokered the power-sharing deal,returned to Nairobi to try to press itssignatories into action. “It is clear thisis a moment of truth for Kenya’s polit-ical leadership,” the former UN secre-tary-general said.

Perceived as aloof and indifferent,the coalition has alienated many Ken-yans. But beneath the common dis-content, people are divided over whatkind of political system and what kindof country they want to live in. Thatis why businesspeople and diplomatsare increasingly worried about thenext election. It could be the triggerfor more conflict if politicians againexploit the desperation of the poor byconvincing them that putting one oftheir own ethnic barons in power willlead to a better life.

There are decades of precedent:Kenya has more than 40 tribes, eachwith a different language and differ-ent customs and they have becomehighly politicised as protagonists havestirred up ethnic hatred and turnedelections into tribal battles overaccess to state resources.

If reports – strenuously denied bythe government and police – of ethnicmilitias arming themselves withAK-47s rather than the machetes of2007 are true, the violence could be onan altogether more gruesome scale. Itcould also cross a class divide, withthe poor attacking rich neighbour-hoods, regardless of tribe, to loot and

fill empty stomachs.In need of reform are Kenya’s police

force, its corrupt judiciary, land own-ership and the constitution, in whichmany Kenyans want to see the powerof the presidency reduced. But Kenyahas more to worry about because suf-fering across the country is increasingby the day.

In the Rift Valley, supposed to be itsbread basket, farmers pick their waythrough fields of crops withered bydrought and the effects of the destruc-tion of a vital water catchment area,

the Mau forest. In the muggy westerntown of Kisumu cash is drying up asthe fish stocks of Lake Victoria aredepleted. And in the semi-desertnorth, nomadic herders are askingwhether their way of life can survive.

Kenya has problems created by aconfluence of trends that emergedlong before the coalition was formed,but they are being aggravated by alack of leadership. “Climate changeand population growth, combinedwith a history of poor management ofthe natural resource base, have cre-ated an enormous crisis,” says Johan-nes Zutt, head of the World Bank’sKenya office.

Across the country, the stateappears to be in retreat, less able thanever to guarantee the security or wel-fare of its people. In its annual rank-ings of the world’s most failed states,the US Fund for Peace placed Kenya14th this July, up from 26th last yearand 31st before the 2007 election.

The international community isfrustrated and its relations with thegovernment are at a low not seensince the era of President Daniel arapMoi, a venal autocrat in power until2002. Criticism has been led by the USadministration of Barack Obama,whose father was Kenyan. Last monthit said it would ban politicians andbureaucrats who were blockingreform from travelling to the US.

The criticism has not been wellreceived, including by Mr Odinga,who is closer to the west than MrKibaki, the man he accused of riggingthe 2007 poll. Mr Odinga told the FTthat reforms could not happen over-night and that a series of commis-sions and reports organised by thecoalition were evidence of progress.Critics say they are being used to par-alyse reform through “process”.

“There’s a need to appreciate thatprogress is being made, but that morecould be made. But when this allturns into rubbishing virtually every-thing the government is doing, thenpeople get confused,” Mr Odinga says.He suggests that Kenya’s boisterousfree press and civil society tend toamplify the negatives unfairly.

An independent report for a groupset up by Mr Annan said this monththat relations between Mr Odinga and

Mr Kibaki had improved in recentmonths, but that within their parties“the factions and divisions have inten-sified so much that party leaders nolonger have absolute control andinfluence”.

If foreign pressure cannot break thedeadlock, it is possible parliamentcould: it was lawmakers who blockedthe establishment of a local tribunalfor the suspects behind the post-election violence, because some said it

The state appears to bein retreat, less able thanever to guarantee thewelfare of its people,writes Barney Jopson

Inside this issueThe economy The biggest risk facedby business is political, writes BarneyJopson Page 2

The stock exchange Crisis ofconfidence has little to do withexternal factors, writes ParseleloKantai Page 2

Politics Some Kenyans long for anend to dynasties that have heldpower since independence Page 3

The Mau forest Destruction isprecipitating an unprecedentedenvironmental crisis Page 4

Drought Extreme climate events aremaking the daily battle for survivalever more difficult Page 4

Kofi Annan (centre) finds that PrimeMinister Raila Odinga (left) andPresident Mwai Kibaki (right) no longerhave full control over their parties Getty

Kidnappers draw up pricescale based on local incomes

They came for the business-man, a property developerin his mid-30s, on a Fridaymorning in October. He wasinspecting one of his con-struction sites in Gachie, aperi-urban settlement westof Nairobi.

Four youngish men, well-dressed, smooth-talking andwielding pistols, forced himinto their car, blindfoldedhim and drove off. He didnot know where they tookhim, but from the floor bythe back seat, reckons theydrove for about an hour.

When they reached theirdestination, they asked himfor his wife’s mobile phonenumber, called her andinformed her that if sheever wanted to see her hus-band alive again, sheneeded to pay KSh 700,000(about $9,300).

The police were neverinvolved, for obvious rea-sons. The weekend saw a

frantic series of phone callsbetween the businessman’swife in Nairobi, his fatherin Dubai, friends and otherrelatives – all monitored bythe kidnappers.

“The men seemed to beable to trace every call thathis wife and father weremaking,” says a relativewho was involved in thenegotiations. “They wouldcall them both up and tellthem whom they had lastcalled and how long the callhad lasted.”

In the end, the moneywas delivered in cashthrough a complicated set

of intermediaries and thebusinessman was set free,unharmed, the followingMonday.

Welcome to Kenya’s lat-est criminal fad.

Even as national crimelevels have steadily droppedover the past year, accord-ing to police statistics,abductions for ransom havebeen rising exponentially.

Between 2007 and themiddle of this year, thepolice reported 27 abductioncases. Now, there are anaverage of six a week. Manymore go unreported.

KK Security, a private

security company that pub-lishes a weekly crimereport, also has statisticsthat indicate an increasingincidence of abductions.

Until recently, most kid-nappings were beingreported in low- and middle-income suburbs in Nairobi’ssprawling Eastlands estatesand in the slum quarters ofNairobi and other cities.

However, more recentcases have shown the crimerapidly diversifying. Thereare even signs of a kind ofdisaggregation by neigh-bourhood; grapevine reportssuggest that kidnappershave now drawn up a pricescale according to perceivedaverage neighbourhoodincome levels.

Technology too, has madecriminals more efficient;the kidnappers communi-cate with the victims’ fami-lies via mobile phone, andin some cases, demand pay-ment via the M-Pesa mobilebanking system.

While this easily exposestheir locations to policetraces, hardly any arrestshave been made. Perhapsthe most infamous kidnap-

CRIME & SECURITY

Parselelo Kantaireports on theexponential risein abductions

Sect suspect: police arrest member of Mungiki movement

Continued on Page 4

could not be independent. Successfulprosecutions at the ICC could make adifference too, by spelling an end – atleast symbolically – to a decades-longculture of political impunity.

Otherwise, pressure from the Ken-yan people could make a difference,but there are doubts about whetherthey can be unified around a commonpurpose. In the multi-ethnic slums ofNairobi, there are signs of class con-sciousness taking hold. Young peopleare recognising that all Kenya’s maintribes are now represented in govern-ment but their poor kinsmen are notbenefiting.

But in many rural areas – especiallythe Rift Valley, where violence lastyear was at its worst – politics is stillhighly ethnicised. Grievances remainraw and some analysts say the ICCitself could trigger renewed violence,if indicted politicians portray thecourt as a vehicle being used to perse-cute their ethnic group.

Then there are those Kenyans whohave given up on politics entirely.That is an attitude that could suitsome members of the government justfine. Last month, Kiraitu Murungi,energy minister and a Kibaki ally,called for power to be concentrated inthe presidency under the new consti-tution and said: “Too much democ-racy, as being witnessed now, is dan-gerous.”

Jimmy Kibaki, the president’s son,told the FT he did not agree with MrMurungi’s statement. But, if he wasasked to choose between democracyand prosperity, he said, he wouldchoose the latter, as Asia’s tiger econ-omies once had.

“Really, you know, we Kenyans loveour freedom. But countries in Africa… I don’t know how to put this,because it’s a delicate issue … theyhave to be governed with a firm hand,with a real firm hand, otherwisethere’s a danger of them breaking upinto different tribal entities.”

Kenya is still one of the most opendemocracies on the continent, but ifthe discontent stirred by the coalitionmeans its next lurch is backwards, itwill be an ominous shift not just forKenyans but for all Africans.

2 ★ FINANCIAL TIMES THURSDAY OCTOBER 29 2009

Kenya

ContributorsBarney JopsonEast Africa Correspondent

Parselelo KantaiFT Contributor

Stephanie GrayCommissioning Editor

Steven BirdDesigner

Andy MearsPicture Editor

For advertising details, contact:Mark Carwardine on:+44 (0) 207 873 4880:mark.carwardine@ft.comor your usual representative

Cables set totransformbusiness

Having just lost his job asan advertising salesmandue to the downturn, it wasa Safaricom ad in a Kenyannewspaper that caughtMichael Wanganga’s eye.

The country’s biggest tel-ecoms provider was promot-ing a seminar for cyber caféowners in July at which itpromised important newson its internet services.

In spite of his lack ofcyber credentials Mr Wan-ganga went along and wasushered into a new era:where the internet does notsend your blood pressuresoaring.

For years, east Africa hadbeen stuck in an internetbackwater as the only partof the world not connectedto the global broadband net-work.

Consumers had no choicebut to pay sky-high fees forultra-slow satellite links,but this year’s arrival oftwo submarine cables hasturned the dearth of band-width into a glut.

Mr Wanganga has becomeone of the first to takeadvantage.

Inspired by the low-cost

packages Safaricom offered,he set up his own cybercafé in Kilometre Moja, acommercial enclave of con-crete-cube stores and listingwooden kiosks, separatedby bare earth and smoulder-ing piles of rubbish.

Kilometre Moja is aperipheral place that servesthe students of KenyattaUniversity north of Nairobi,reached by turning off theThika Road on to a dirttrack, crossing a railwayline, and skirting round apack of grazing goats.

But it is also a reminderthat there are smart youngpeople in all corners ofKenya with entrepreneurialget-up-and-go.

Many executives frombusinesses much biggerthan Mr Wanganga’s six-computer outlet say thearrival of the two cables –called Seacom and Teams –is the most important devel-opment in Kenyan infra-structure in decades.

The $600m Seacom cable,which was the first to getconnected in July, is whol-ly-owned by private inves-tors and connects severalpoints on the east Africancoast with India and, in duecourse, Europe.

The $110m Teams cable isa Kenyan initiative part-owned by the governmentand telecoms companies –including affiliates of Voda-fone and France Telecom –and connects Mombasawith the United Arab Emir-

ates, where Etisalat, theUAE’s dominant telecomscompany, also has a stake.

The cables have reducedprices from about $3,000 permegabit per month to as lit-tle as $200. In common withmany of its rivals, AccessKenya, one of the biggestproviders, says it haspassed the savings on tocustomers by giving themtwice as much bandwidthfor the same price.

But the arrival of broad-band has not been without

controversy. BitangeNdemo, a senior official atthe ministry of communica-tion, has accused someinternet service providers ofacting like a “cartel” by notpassing on a more generouschunk of savings.

The ISPs respond thattheir own costs have notyet fallen because theyhave to see out their exist-ing satellite contracts.

Corporate users can nowdo things that were barelypossible before such as

using voice over internetprotocol (VoIP) services andlinking in to the real-timetransaction reporting sys-tems of overseas headoffices. Kenya’s nascent callcentre industry should be abig beneficiary.

Kenyan businesspeopleare excited about sellingtheir products online – itused to be a non-starter –and are picking up on thelate 1990s vocabulary of“B2B” (business-to-busi-ness) and “B2C” (business-to-consumer) transactions.

One of the only internetretailers is OnlineDuka,which sells everything frommoisturising cream to hubcaps. It had roughly 20,000visitors a day before thecables but now the figurehas jumped to 50,000, saysJoel Amenya, its co-founder.

Kenya does not have leg-islation in place for onlinepayment by credit card. ButMr Amenya allows custom-ers to pay using M-Pesa,Safaricom’s mobile phonemoney transfer service.

Back in Kilometre Moja,Mr Wanganga takes cashonly. Does he keepaccounts? “Not really.” Sohow does he keep track ofbusiness? “I check mypocket.” And how is itdoing? “I’m breaking even,”he says. “But it has poten-tial.”

BROADBAND

Barney Jopsonexamines ‘the mostimportantdevelopmentin decades’

Online: the internet no longer raises blood pressure Alamy

For years, eastAfrica had been theonly part of theworld notconnected tobroadband

Trouble at the‘old boys club’

The Tsavo Investment Securi-ties briefing had been movedonce already, from 9am on aSaturday morning to 11am. Halfan hour later, there were stillonly five people in the large con-ference hall. Fifty had con-firmed attendance. Fred Mweni,chief executive, tried to makelight of it. Another half hourwent by. Finally, when therewere 10 people present, hebegan.

It was, bizarrely, a lively pres-entation – a Billy Graham per-formance booming out to a pud-dle of believers in the middle ofa vast, empty hall.

Mr Mweni went through thedepressing statistics. The Nai-robi Stock Exchange 20-shareindex, temporarily falling belowthe 3,000-point psychologicalbarrier over the past year, hadnow inched just above it. Theexchange had lost KSh500bn orclose to half its value since June2008, when trading averagedKSh3bn a day. Now the NSEcould barely pull off those num-bers in a month.

Perhaps the most telling indi-cation of the NSE’s decliningfortunes were the investor num-bers. In June last year, in theimmediate aftermath of the big-gest IPO in the 55-year historyof the NSE, that of mobile serv-ice provider, Safaricom, localinvestors constituted 70 per centof the total. Now, foreign inves-tors account for 70 per cent ofthe total.

Between 2003 and 2007, morethan 500,000 Kenyans becameinvestors. A mix of central bankintervention and technologicalinnovations made it easier forinvestors to register accounts.

Fortunes were made, as shareprices soared on post-Moi politi-cal optimism and a raft of publicsector IPOs, all of them mas-sively over-subscribed.

The index rose from slightlyabove 2,000 points in late 2002 toa high of 6,000 four years later.

The trouble did not reallybegin with the economic skid ofthe post-election violence, oreven the global credit crunch.

Neither of these things ade-quately explains the enormousloss of confidence.

Between 2007 and late lastyear, as share prices began tofall, a number of prominentstockbrokers were exposed ashaving made transactions withtheir clients’ money.

Perhaps the most infamoushas been Nyaga Stockbrokers,which managed almost 200,000accounts. As the index fell, thefirm began experiencing severeliquidity problems and was una-

ble to cover its clients’ invest-ments. The NSE board quicklyorganised a bail-out, but this toofailed to get Nyaga out of thered. The firm shut down. Twoother firms, Francis Thuo andAssociates and Discount Securi-ties, both well respected, weresimilarly wound up.

The situation was exacerbatedby the fact that, according to oldrules set by the regulator, theCapital Markets Authority,investors can only reclaim amaximum of KSh50,000.

The queues outside theswanky offices of the defunctNyaga Stockbrokers early thisyear included elderly villagewomen, many of whom hadentrusted their life savings tothe firm.

Patrick Ndwiga Gachiavih,the managing director, had hisassets frozen and has beencharged in court. He remains afree man.

The situation was exacerbatedby a leaked forensic audit thatimplicated officials in dubiousdeals. Regulatory weaknesses atthe CMA and cronyism at theNSE are at the root of the stockmarket’s difficulties.

“There are integrity issues atthe Nairobi Stock Exchange,and these are historical,”explains a former regulator,hinting at the NSE’s reputationof being little more than an oldboys club.

“Many of these brokerages areone-man shows. All it takes tobecome a stockbroker is KSh5m,and yet you are entrusted withbillions. When you default, youget a slap on the wrist.”

Within the stockbroker com-munity, collusion betweenaccount auditors and IT opera-tors made it difficult for theCMA to spot anomalies.

“We have an honesty deficit,”says the former regulator.Reforms within the CMA areslowly being put in place. Thereis now an anti-fraud unit staffedby criminal investigations offic-ers, and brokers must disclosetheir annual accounts.

Is it enough to restore publicconfidence? Mr Mweni wistfullyrecalls the boom years: “Weused to have four training ses-sions, each with more than 50people. Then came the Safari-com IPO and everybody wentmad with unrealistic expecta-tions. They were accusing me ofmisleading them. But everybodylost,” he says, gesturing at theemptying room.

One of his clients, a youngwoman in her 20s, interjects.Five years ago, she and herfriends started an investmentclub, one of thousands formedduring the boom years.

Today, despite everything,they have made enough on thestock market to cash in on theirdream: a KSh5m house. “It’s nothow much you can make at onego,” she says. “It’s how muchyou can slowly build up.”

THE STOCK EXCHANGE

Parselelo Kantai onthe ebbing away ofconfidence, most of itdue to local factors

Problems compounded by politics

Two years ago the Ken-yan business world wasbubbling with talk of“decoupling” – the coun-

try’s economy had finallybecome detached from theintrigues of politics, executivesdeclared with evident relief.

How wrong they were. Theparalysis caused by last year’spost-election crisis, togetherwith the uninspiring perform-ance of the coalition govern-ment formed to end it, havelanded political risk back onexecutive agendas.

The country’s economy isforecast by the InternationalMonetary Fund to grow at 2.5

per cent this year, underper-forming Uganda, Tanzania andEthiopia and its own 2003-07boom, which ended with growthof 7.1 per cent growth in its finalyear.

The impact of the weak globaleconomy on Kenyan exports isone reason for the flat perform-ance – flat when you considerthat the population is growingat between 2 and 3 per cent.

Drought is another: it helpsexplain why agriculture and for-estry, which (including tea andcoffee) make up roughly onequarter of the economy, havebeen contracting since the sec-ond half of 2007.

But politics are at play toobecause the drought’s witheringimpact has been aggravated bypoor management of environ-mental resources and a failureto put in place contingencyplans, say businesspeople anddiplomats.

Worse still, executives say theeconomy could fall backwardsonce again – it shrank in thecrisis-hit first quarter of lastyear – if the government’s fail-ure to reform sets the stage forworse bloodshed at the 2012election.

“The biggest risk we face ispolitical in nature,” says DavidMousley, a former tea executivewith James Finlay who works inthe flower industry.

He explains: “If the Mau forest[a vital rain catchment] isdestroyed and we don’t havewater, it’s because the politi-cians didn’t do anything aboutit. If there’s conflict between dif-ferent ethnic communities, it’sbecause of the politicians. It allcomes back to the managementof the affairs of state.”

There is an irony that thegripes of businesspeople todayare so different from those

under the country’s previouspresident, Daniel arap Moi,whose regime hampered busi-ness with red tape and demandsfor bribes and ownership stakes.

That is why President MwaiKibaki and the hands-offapproach of his first five-yearterm were welcomed as such abreath of fresh air.

Today, however, under thecoalition that Mr Kibaki leadswith Raila Odinga, the primeminister, hands-off governmentseems to have deteriorated intothe polar opposite of Moi-erainterventionism: off-duty gov-ernment.

Kenya is confronted by anoverwhelming range of prob-lems that have the potential tochoke off the supply of inputs,drive up costs, stifle domesticconsumption and make runninga business ever more difficult.

Only the government cantackle food shortages, powercuts, water scarcity, spirallingcrime, widening inequality, cor-ruption and the ever-presentthreat of ethno-political vio-lence. The private sector ispressing it to act.

Yet, if you want the govern-ment to do something, saysMichael Joseph, chief executiveof Safaricom, Kenya’s biggestmobile operator, one problem isworking out where to start.“Who do you talk to? Who’s incharge? Is it the president? Theprime minister? The head of thecivil service?” he says.

Steve Smith, chairman of theKenya Private Sector Allianceand managing director ofEveready East Africa, a batterymaker, complains there are“silos” in government.

Ministries do not co-ordinatewith each other and the situa-tion is not helped by the presi-dent’s management style, which

he describes as: “Sit back andlet them fight. Then pick up thepieces.”

One bright spot is infrastruc-ture. Mr Smith and others saythe coalition is making progressin fixing roads, such as the cru-cial Nairobi-Mombasa route, andpushing ahead with plans todevelop wind and geothermalpower as an alternative tohydro.

However, the poorest arestill not feeling the benefits ofwhat little growth there is –although some are cushioned byremittances from relativesabroad, which are probablyKenya’s biggest source of for-eign currency.

One paradox is that Nairobilooks to be in fine fettle. UnitedBank of Africa, a Nigerian insti-tution, has just set up a regionaloffice in town and so has Afric-invest, a private equity groupthat plans to invest at least$20m in Kenya.

New office towers and swankyapartment blocks, many fundedby Somali businesspeople, con-tinue to pop up: from April to

THE ECONOMY

Executives are worriedby the government’suninspiringperformance, writesBarney Jopson

‘If you want thegovernment to dosomething, oneproblem is workingout where to start’

Michael Joseph, chiefexecutive of Safaricom

June the construction sectorgrew at an annualised 10.7 percent.

The constant bustle in theshopping malls suggests thatmiddle-class spending is holdingup too. However, the activity isin large part thanks to the thou-sands of diplomats and UnitedNations officials in Nairobi,whose jobs are unaffected byswings in the world economy.

“How do you equate the frothin Nairobi with 2 per centgrowth and an uncertain politi-cal future?” asks MichaelTurner, head of the Nairobioffice of the private equitygroup Actis, which has invested$55m in the country.

“It’s the great dichotomy ofKenya, but it’s not inconsistentwith its history either.” Even inthe Moi era, some businessesmanaged to succeed, he says,thanks to the “entrepreneur-ship, resilience and adaptabil-ity” of Kenyans.

One sector familiar with cri-ses – sun-and-safari tourism – isrebounding from the post-elec-tion violence. From January toAugust the number of touristswho arrived by air was 611,000,only 11 per cent behind a 2007record.

Still, businesspeople say that,on the global stage, Kenyaremains an expensive and ineffi-cient place in which to operateand that is now overlaid withthe dangers created by a govern-ment short on leadership.

“We’re tied to the politiciansat the hip. We’ve got to helpthem to help us,” says MrSmith.

Decoupling has been replacedby recoupling and if the coali-tion’s course does not change,there is a risk that an enablingenvironment will become a disa-bling one.

Paradox: Nairobi looks in fine fettle with new office towers and swanky apartment blocks, many funded by Somali businesspeople, continuing to pop up Panos

GDP growth

* Estimates

Annual % change

-5

0

5

10

15

2003 04 05 06 07 08 09*

Ethiopia

Kenya

TanzaniaUganda

Source: IMF

FINANCIAL TIMES THURSDAY OCTOBER 29 2009 ★ 3

Kenya

New blood unlikely to dislodge old habits

Kenya’s first liberationwas from the injusticeof colonial rule. Its sec-ond was from the one-

party rule of President Danielarap Moi. Now some Kenyansare longing for a third libera-tion: from the dynasties thathave dominated the country’spolitics since independence.

For many ordinary citizens,the country’s malaise is theresult of a crisis in the leader-ship of a political class withroots in the independence strug-gle, whose members have cycledthrough every possible combina-tion of alliances over the yearsin the search for power.

But Kenyans see few signs ofchange when they consider thetwo most likely candidates forthe next presidential election in2012 (when President MwaiKibaki will step down after twoterms).

One is Uhuru Kenyatta, theson of Kenya’s first president,Jomo Kenyatta, who is financeminister and lost the 2002 presi-dential election to Mr Kibaki.The other is Raila Odinga, theprime minister and son of Jara-mogi Odinga, Kenya’s first vice-president until he fell out withMr Kenyatta senior. Raila cam-paigned for Mr Kibaki in 2002,but they fell out too and in 2007he ran against him, only to berobbed of victory amid accusa-tions of fraud.

The persistence of dynastypolitics is a “bad culture”, saysFlorence Jaoko, chair of theKenya National Commission onHuman Rights. “It’s totally dis-empowering . . . Some of [thepoliticians] have never caredabout the interests of Kenya.They’ve been known as the chil-dren of their parents. They havea right to be in politics, but theyshould not have an advantage.They should compete equally.”

The 2007 parliamentary elec-tions showed that the patienceof voters was waning whenthree sons of former presidentMoi, all members of parliament,

were defeated. But one of them,Gideon Moi, remains visible andis vice-chairman of his father’sparty, the Kenya AfricanNational Union. Its chairman isUhuru Kenyatta. Even the sen-ior Mr Moi is active again, seem-ingly emboldened by the factthat his most famous prediction

– that a multi-party systemwould stoke tribalism anddestroy Kenya – is lookingrather less far-fetched than itonce did.

Several politicians cite the US– with the Bushes, Clintons andKennedys – as evidence thatpolitical dynasties are not

unique to Kenya or unambigu-ously good or bad. “I don’t thinkthat you can talk of dynasties,because this is a democracy,and I think that people reallyhave a choice,” says Mr Odinga,the prime minister. “Nobodyhas stopped anybody from run-ning against these people. Peo-

ple will not be elected becauseyou are the son of so and so.People are elected because ofwhat you represent.”

Michael Aronson, a lawyerand former member of the Brit-ish colonial administration, saysdynasties are not likely to suc-ceed in the long term. “The

most obvious reason is that theelectorate is generally fed upwith the arrogance of the fami-lies of an incumbent president,and other leading political per-sonalities who use their positionwhen in power to enrich them-selves in many different fields.”

For many politicians – but notall – the iron triangle of ethnic-ity, corruption and patronageremains strong. Politics is ameans of gaining access topower for the sake of enrichingthemselves and their kin, if nottheir entire tribe, generally atthe expense of others.

Wealth is also crucial to theendurance of dynasties becausecash hand-outs can secure votesin a country where so manypeople are living on the marginsof survival. One diplomat inNairobi laments the lack of poli-ticians who want to work forthe good of the whole country.“Why doesn’t someone step outand try to speak for the wholenation? Why doesn’t someonespeak to this? Someone could dothat,” he says.

This is what Jimmy Kibaki,the president’s son, says hewants to do. He is starting outon his political career just as hisfather’s enters its final phase.Many Kenyans assume he will“inherit” the president’s constit-uency in 2012, but Mr Kibaki iscoy on that and says a move-ment he has started – SimamaKenya – is about empoweringthe youth and finding a newgeneration of leaders.

Kenya’s problem is not dynas-ties, he says, but the impendingretirement of the politicians intheir 60s and 70s.“Kenya needs anew anchor and that anchorshould be the majority of thepeople who are young,” he says.“Kenya’s stability will beensured once we have genera-tional change.”

Mr Kibaki’s motives and com-mitment have been questionedprecisely because of his nameand background. Kenya’sNational Youth Convention saidearlier this year that SimamaKenya was a “cheap politicaloutfit” constructed to hijack itsagenda for short-term gains.The challenge for the presi-dent’s son is therefore to provehe is a real liberator – and notthe next instalment of thedynasties.

POLITICS

Barney Jopson on theiron triangle of ethnicrivalry, corruptionand patronage

A thorn in the side

The coalition government hasmany critics, but the biggestthorn in its side is MichaelRanneberger, the tweetingambassador, writes BarneyJopson. The US envoy hasdeployed Twitter, themicroblogging website, tohector Kenya’s political leaders.

Tweeting under the nameUSAMB4REFORM (USambassador for reform), hecomments on news events andposts links to items in themedia that help reinforce hismessage: “The pace of reformmust be quickened. That’swhat the Kenyan people want.”

When President Mwai Kibakireappointed Aaron Ringera ashead of the ineffective KenyaAnti­Corruption Commissionlast month, Mr Rannebergertweeted: “Outraged byRingera’s reappointment.Indication of impunity. AKenyan told me it’s a slap inthe face of Kenyans. What todo? Suggestions?”

Mr Ringera subsequentlystepped down after anationwide outcry.

Mr Ranneberger alsoregularly holds web chats thatare open to ordinary Kenyans,although as the number ofoff­the­wall questions for himpiles up, they tend todegenerate into online versionsof Africa’s fevered and chaoticpolitical rallies.

He has succeeded in gettingup the noses of the coalition’sleaders, who accuse him of“interference” and say he isgiving his bosses inWashington a misleadingaccount of what is happening.

In September, MutulaKilonzo, the justice minister,sent a public message to theambassador, telling him:“Please shut up”. When askedabout it a few days later, MrRanneberger responded: “Atleast he said ‘Please’.”

Dynasties: the 2012 election, in which Mwai Kibaki (above left) will have to step down, will be contested by the sons of former leaders Getty

4 ★ FINANCIAL TIMES THURSDAY OCTOBER 29 2009

Kenya

Area

Languages: English, Kiswahili and morethan 40 other ethnic languages

Currencies: Shilling (KSh)

Exchange rate:

2008 average

Latest figure

Population (2008 UNPOP est)

Nairobi

Mombasa

Kisumu

Nakuru

569,259 sq km

$1=KSh 69.12

$1=Ksh 75.28

38.6m

1.35m

465,000

185,000

163,000

200 km

I N D I A NO C E A N

SUDANETHIOPIA

TANZANIA

UGAN

DA

Nairobi

Kisumu

Elimi Triange under Kenyan administration

Nakuru

K E N YA

LakeTurkana

Mt Kenya5199m

Mombasa

SOM

ALIA

ConstitutionOfficial nameRepublic of Kenya

Form of stateUnitary republic

Legal SystemBased on English common law and the 1963 constitution; new draft constitutions were published in 2002 and 2005 (the latter was rejected in a referendum)

National legislatureUnicameral National Assembly of 210 elected members plus 12 nominated members, the attorney-general and the speaker; a multiparty system was introduced in Dec 1991

National electionsDec 2007; next presidential and legislative elections are to be held in Dec 2012

Head of statePresident, directly elected by simple majority and at least 25% of the vote in five of Kenya’s eight provinces

National governmentThe president and his cabinet, comprising a grand coalition between the Party of National Unity (PNU) and the Orange Democratic Movement (ODM) and allied parties

Political parties in parliamentOrange Democratic Movement (ODM), Party of National Unity (PNU), ODM-Kenya (ODM-K), Kenya African National Union (KANU), Safina, National Rainbow Coalition-Kenya (NARC-Kenya), National Rainbow Coalition (NARC), Democratic Party, Forum for the Restoration of Democracy-Kenya (Ford-Kenya), New Ford-Kenya, Ford-People, Ford Asili, Sisi Kwa Sisi, Mazingira

Main trading partnersShare of total trade to world, 2008 (%)

SouthAfrica

China

India

United ArabEmirates

Tanzania

Uganda

UK

Netherlands

8.7

9.0

9.2

10.0

5.7

10.0

14.1

11.5

Exports Imports

KENYA

2010(forecast)

2009(estimate)

2008

Total GDP (KSh bn)Total GDP ($bn)Real GDP growth (annual % change)GDP per head ($ PPP)Inflation (annual % change in CPI)Agricultural output (annual % change)Industrial production (annual % change)Services production (annual % change)Money supply M1 (annual % change)Foreign exchange reserves ($bn)Budget balance (% GDP)Current account balance ($bn)Exports of goods ($bn, fob)Imports of goods ($bn, fob)Trade balance ($bn)

2,64534.54.0

1,8177.83.32.02.6

20.13.1

-5.0-1.35.09.6

-4.6

2,40630.22.5

1,75112.01.02.02.0

22.42.6

-5.6-1.94.59.0

-4.6

2,06729.61.7

1,71213.1-5.04.83.7

27.32.9

-5.0-2.05.0

10.7-5.6

Economic summary

Fitch B+S&P BSovereign credit rating

Kenya merchandise exports 2008, $m

Food and liveanimals 1,841.4

Crude materials 777.1

Manufacturedgoods 665.2

Chemicals 576.4

Machinery 502.5

Mineral fuels 185.6Other 1,184.5

Top 20 countries in sub-Sahara Africa

Projections 0 5 10 15 20

SeychellesEquatorial Guinea

GabonBotswanaMauritius

South AfricaNamibia

AngolaSwaziland

Congo, Republic ofCape Verde

DjiboutiSudan

NigeriaCameroonMauritania

São Tomé and PríncipeSenegalKenya

Côte d’Ivoire

Ranked by GDP per capita (PPP$ ’000, 2009)

Source: EIU, IMF, Thomson Reuters Datastream: Comtrade

Imports 2008, $mFood and live animals 680.3 Crude materials 226.6

Manufactured goods 1,611.7

Chemicals 1,460.7

Machinery 3,190.1Mineral fuels 3,055.6

Other 2,552.1

Pricescaleset forkidnaps

ping case, that of an Asianbusinessman in 1998, wassolved using police trackingdevices, technology thatnow appears to have eludedthe force.

Police have linked theabductions to Mungiki, thebanned ultra-conservativereligious movement. Once avigilante outfit that pro-vided security in the slums,Mungiki was sent under-ground by the first MwaiKibaki administration inearly 2003.

Composed of young menalmost exclusively fromPresident Kibaki’s Kikuyucommunity, Mungikiturned to organised crime.It has been linked to racket-eering and extortion.

Last month, EmmanuelAgwar Adar, a six-year oldboy of Sudanese parents,was abducted while playingoutside the family home inEastlands’ Komarockestate.

Soon after, the kidnap-pers demanded KSh500,000.The family failed to pay.Four days later,Emmanuel’s mutilated bodywas found in a sack, aprint-out of the notice theparents had circulatedstuck on the front. The kid-nappers were sending amessage to the neighbour-hood. Many feared thatMungiki was involved.

There have been noarrests linking Mungiki tothe abductions, however.The police, insisting thatthe situation is under con-trol, appear to have fewanswers. Nevertheless, EricKiraithe, police spokesman,is convinced that the move-ment is behind this newcrime. “There are severalstudies going on at themoment and they all linkMungiki to the kidnappings.The motive seems clear:spreading terror to force thebusiness community to sub-mit to them,” he says.

Others, however, havefingered the police them-selves, notoriously corruptand recently accused byPhilip Alston, the UnitedNations Special Rapporteur,of abducting and murderingyouths on the pretext thatthey were members ofMungiki.

The police have deniedthe charges and accusedProf Alston of bias. How-ever, a 2008 report by theKenya National Commis-sion on Human Rights doc-umented the disappearanceof at least 300 youngKikuyu men, all suspectedto have been abducted bythe police.

Continued from Page 1

Battered by climate extremes

The red warning trianglealerting vehicles to the riskof flooding looks out ofplace amid the parchedsemi-desert wastes of theTurkana district in north-ern Kenya.

Out of place, that is, untilthe tarmac road vanishesand drivers are forced totake a bumpy diversionacross a dried-out river bed.

There they find the car-cass of a truck that hasbeen flipped on to its backlike a helpless beetle – andburied up to its chassis.

All that is visible are fourtyre-less wheels protrudingfrom the ground.

It looks as if it has beendropped into quicksandfrom a great height. But in

fact it was dumped there bya flash flood.

The truck’s eerie presenceis a reminder that droughtis not the only extreme cli-mate event that Kenya issuffering with growing fre-quency.

Africa has always been acontinent of extremes, butthe heavy rains are failingmore often, followed by sud-den gluts of water thatcause mayhem when theymeet the impermeable,hard-baked soil. Both areprobably linked to climatechange.

But while the intricaciesand uncertainties of the sci-ence are beyond them, whatmost people in Turkanaknow is that these eventsare threatening their liveli-hoods and making the dailybattle for survival evermore difficult.

The region is home topastoralists who live anomadic existence herdingcattle across plains that arepopulated by little more

than brittle acacia thornsand rocks.

As hundreds of thousandsof their animals have per-ished due to thirst, hungerand disease, the nomadshave lost their sources ofmilk and cash.

They are one of the com-munities most affected bythe three-year drought, butit has taken its toll acrossKenya, pushing the countryinto crisis as wheat andmaize crops fail and foodprices rise so high manyfamilies cannot afford tofeed themselves.

Even the country’s vitalsafari tourism business hasbeen affected as elephantsand other animals havedied in popular nationalparks such as the MasaiMara.

The drought has also ledto severe power rationingas Kenya is heavily depend-ent on hydro electricity:houses in some of Nairobi’splushest neighbourhoodshave been without power

for at least four days aweek.

The water stopped flow-ing in many residentialareas too, forcing people tobuy from expensive privatewater vendors.

Nearly 5m Kenyansrequire food aid, accordingto the United Nations WorldFood Programme, withnearly 23m people in needacross east Africa, mostnotably in Ethiopia.

The worst previousdrought was in 2000 but thecurrent one has been exac-erbated by man-made fac-tors that are raising toughquestions for Kenya: whydoes one of the most devel-oped countries in Africaremain so dependent on for-eign food aid?

James Nyoro, a food secu-rity expert, told the Finan-cial Times earlier thismonth that the reason wasthat successive govern-ments have failed to put inplace contingency plans orto modernise agriculture.

“We’ve not had a droughtmitigation or recoverystrategy,” he said. “Everytime we declare it as anational disaster, as if wedidn’t know it was coming.”

The dysfunctional rulingcoalition has not begun toturn the tide, even thoughit was clear for months thata food crisis was looming.Instead, corruption seemsto have proliferated.

In January, a dozen sen-ior agricultural officialswere sacked after thou-sands of bags of maize dis-appeared from Kenya’s stra-tegic grain reserve.

This month Raila Odinga,the prime minister, orderedan investigation into foodaid that was thought tohave been stolen by localgovernment officials.

As a result, donors aregrowing impatient withKenya. “They permanentlyhave their hand out. Theirreaction to the crisis is tosay: the donors will pay forit. So there’s general dissat-

isfaction,” says one aidagency official in Nairobi.

In the past three weeks,however, rain has at longlast begun to fall, providingsome relief for the govern-ment and, more impor-tantly, the Kenyan people.

It has come thanks to ElNiño, the periodic warmingof the tropical Pacific Oceanthat affects weather sys-tems worldwide.

“So far, the rains havebeen far above average forthe season, but harvestswill only come in early 2010,so the food needs are stillgreat,” says Gabi Menezes,

WFP spokeswoman. “It’salso going to take sometime for cows to start pro-ducing milk, and aroundnine months to start calv-ing.”

The rain has producedawful traffic snarl-ups onmuddy main roads in south-ern Kenya.

But in Turkana locals aregrateful it has not beenstrong enough to cause theflooding that can rot crops,destroy houses, increase thespread of water-borne dis-eases such as cholera – andupturn unsuspectingtrucks.

DROUGHT

Barney Jopsonreports on Kenya’sever fasterweather seesaw

Lifeless: hundreds of thousands of animals have perished AP

Attempt to repair adamaged ecosystem

Wilson Sitonik Tisia, asoft-spoken, middle-aged man, began togrow old on the one-

hour commute between Bometand Narok towns in the southernRift Valley. A headmaster at asecondary school in Bomet, hehad been elected chairman of theSaptet Multipurpose Group, a147-member co-operative. In thelate 1990s, the co-operative hadbought a piece of land from thefamily of an old Maasai man,Mzee Kuluo, carved out of a com-munal ranch. The land borderedthe Maasai Mau forest.

The forest, regarded as com-munal land under the trustee-ship of the Narok County Coun-cil, had never been clearlydemarcated. It was, in fact, forestland by default, its bordersdefined by the five groupranches that bordered it.

Shortly after the Saptet Multi-purpose Group purchased theland, the area district commis-sioner issued it with an evictionnotice. The co-operative had, hesaid, encroached on forest land.When they resisted, they wereevicted. That was in 2000.

Soon after they were removed,Mr Tisia began hearing that gov-

ernment officials and their cro-nies had been allocated the land.He went to Narok town andhired a lawyer, challenging thegroup’s eviction. It was then thathe began spending his life inNarok-bound matatus (sharedtaxis). Soon after filing the case,his lawyer became unavailable.Mr Tisia’s journeys to Narokbecame exercises in futility.

Then one day in 2006, fiveyears after he had embarked onhis commutes, Mr Tisia receivedan unexpected call. It was fromhis lawyer. He had news, he said.They had finally won the case.“That day I was so happy,” he

says. “I told my members. Wecelebrated the whole night. Thenin the morning, I dressed and goton to the matatu and went toNarok to see the lawyer.”

He was not there. The lawyer’sclerk was rude. In despair, MrTisia walked dumbly out of theoffice. As he took the stairs, asecretary from another officestopped him. “She told me some-thing unbelievable. She said thatI was being cheated. That formany years she had been hear-ing the lawyer speaking to me onthe phone, telling me he was incourt when in fact he was in the

office. He had never even filedthe case.”

It is quite possible that MrTisia and the Saptet Multipur-pose Group were the first unwit-ting victims of what has becomeKenya’s greatest environmentalPonzi scheme: the sale of the400,000-hectare Mau Forest com-plex, Kenya’s biggest watercatchment area.

From the late 1990s, senior offi-cials of the Moi administrationallocated themselves huge piecesof the Mau forest, the land hav-ing been set aside on the pretextof resettling Rift Valley residentsand victims of the ethnic clashesthat preceded the 1992 and 1997general elections.

In 2001, the government for-malised the process by excising67,000 hectares, about 10 per centof the Mau complex, despite pub-lic protests and court injunctionsforbidding the government fromdoing so. Thousands of people,mostly Kalenjin supporters ofthe Moi government, were set-tled inside the forest.

In the Maasai Mau, where halfof the forest’s 50,000 hectareswas encroached on, this processwas reversed in June, 2005. Agovernment security operationevicted 10,000 people from theforest, burning houses, schools,churches and market centres.

A task force commissioned byPrime Minister Raila Odinga toput in place a conservationregime for the restoration of theMau Forest Complex, establishedthat the title deeds in the Maasai

Mau saga were fictitious, hadbeen produced within govern-ment offices through a conspir-acy that involved civil servants,a Maasai political family andMoi-era politicians.

The group had reportedly soldthe forest land to third parties,mostly unwitting ordinary folk,and used professionals in Narokand elsewhere in the Rift, law-yers and private land surveyors,to legitimise the process. Thenew settlers went on a loggingspree, clearing the forests tomake way for farmland and, inthe process, providing billions ofshillings worth of timber for

commercial loggers. In short,everybody made a killing. Every-body, that is, except for those,like Mr Tisia who had no idea ofwhat was at stake.

The task force recommendedthat all settlers in the Mau For-est complex be removed, andonly those able to prove genuinetitle be compensated. That lastrecommendation set off a politi-cal firestorm that threatened totear Mr Odinga’s ODM party inhalf. His aggrieved Kalenjin sup-porters read it as an attack ontheir community.

Ever since, the governmenthas hesitated, even as the

destruction of the Mau precipi-tates an unprecedented environ-mental crisis. The Mau is thesource of 13 rivers which feedthe lakes in western Kenya,including Lake Victoria. Its eco-system supports about 25m peo-ple in Kenya and Tanzania.

Now the task force team isready to move on the settlers. Itwill begin issuing evictionnotices at the end of this monthand will carry out a phased oper-ation starting in November. Ithas been a long journey. Still,there are no guarantees that pol-itics will not, once again, get inthe way of good intentions.

THE MAU FOREST

Parselelo Kantaireports on a Ponzischeme threateningenvironmental disaster

The Mau is the sourceof 13 rivers. Itsecosystem supportsabout 25m people Clearance: settlers went on a logging spree, clearing the forests to make way for farmland Getty

FINANCIAL TIMES THURSDAY OCTOBER 29 2009 ★ 5

Kenya

Somali factor drives up price of property

On First Avenue,Eastleigh, the centreof the Somali immi-grants community, the

start of the El Niño rains,eagerly anticipated after theworst drought in living memory,brought with it a familiar story.

As rainwater collected in thepotholes scattered across thelunar-like surface, it mixed withsewage from burst undergroundconnections. After the seconddownpour, the road was a stink-ing river, impassable for motorvehicles, forcing pedestriansinto an ant-like procession alonga pebble-strewn pavement andthreatening an outbreak of chol-era or typhoid.

While residents and tradersgrumble about the possible out-break of disease, most of theconcerns about the state of theroad have to do with the incon-venience to business. Once aquiet Indian residential neigh-bourhood in east Nairobi,Eastleigh is now in the seconddecade of an economic boomdriven by the influx of Somalidiaspora money.

Thus the crisis of burst sew-age pipes: as people and busi-ness flooded in, some bearingthe proceeds of Somalia’s col-lapse in the early 1990s, busi-ness and construction flour-ished. Old bungalows werequickly transformed into high-rises.

Long-time home-owners, pre-sented with offers they couldnot refuse, moved out, theirhomes giving way to residentialapartments and a tumult ofSomali-owned trading com-plexes bursting with importsfrom Dubai, China and Indone-sia; Sony hi-fis, Nokia phones,sharp Hugo Boss suits bought atwarehouse prices in Guangdong,Java cloth. Nairobi City Hallofficials looked the other way asa planning nightmare loomed.

Property developers tappedinto the mains and connectedtheir new buildings to a sewersystem that was meant to serv-

ice a 10th of the resulting popu-lation. And as the tentacles ofSomali diaspora money stretchacross the global village, fromSan Diego, Toronto, Minnesotaand Dubai, via Eastleigh, thisold neighbourhood now resem-bles a cross between Dubaidowntown glitz and Mogadishumayhem.

‘The whole of East Africashops in Eastleigh,” MohammedAbdi Mohammed, a KenyanSomali businessman confidentlyasserts. In the mid-1990s, heowned a textile shop in GarissaLodge, a giant trading complex.“I would get clients from Kam-pala, Arusha and Bujumburaand also Nairobi Indians. Busi-ness was good. Sometimes, Iwould make KSh 200,000 ($2,700)

in a day,” he says.Kenya’s big banks, including

the foreign multinationals, havecashed in on the neighbour-hood’s boom; nowhere else inthe country does Barclays Bank,for example, keep a branch openseven days a week.

Somalis, operating intricatenetworks meshed along thespine of the hawala globalmoney-transfer system, havebecome perhaps east Africa’spremier traders.

Little stalls source their prod-ucts directly from warehousesin China or Indonesia wherethey have agents, undercuttingmost other traders in the regionwho have now turned toEastleigh, particularly for theirtextile and electronic imports.

Recently, however, Somalicapital has become problematic.Often regarded as minority out-siders in Nairobi, when Somalimoney spilled into “mainstream

Nairobi”, there were whispers ofa Somali invasion. Now, thosewhispers have become a publicoutcry. In national newspapersand TV stations, a debate,

tinged with “down Kenya” xeno-phobia (a colloquialism amongSomalis for their southernKenya compatriots), has raisedalarm about the possiblesources of Somali money, aswell as motives.

Now, as Somalis buy realestate in upmarket Nairobi,often in hard cash and for sub-stantially more than the askingprice, speculation about thesources of the money haveraised the spectre of the wind-falls from the recent spate ofIndian Ocean pirate attacks.

“We have no hard proof thatpiracy money is circulating inthe economy,” says EricKiraithe, police spokesman.However, he raises concernsthat the money could be hot.

Security experts agree, pointingout that Kenya’s weak moneylaundering laws, and anunclear, infrequently enforcedpolicy on property acquisitionare gateways to the entry ofdirty money.

Furthermore, with Kenya’snotoriously corrupt public offi-cials, there are few safeguardsagainst dubious money enteringthe economy.

For estate agents, however,Somali investment has beennothing but good news: “All ofus are targeting them. If you arelooking for buyers for mostlyupscale properties, there are nobetter buyers than Somalis,”says a salesperson with a lead-ing estate agency.

While property prices in Nai-

REAL ESTATE

Parselelo Kantai onspeculation over theorigin of largeamounts of money

Whispers of a Somaliinvasion havebecome a publicoutcry and triggereda debate tingedwith xenophobia

Eastleigh: Somalis, operating intricate networks of money transfer systems in the neighbourhood, have become perhaps east Africa’s premier traders Reuters

robi have remained high despitea slowdown in diaspora remit-tances, one of the main drivingforces in the market, sales hadstagnated.

In the port city of Mombasa,recent Somali interest in theproperty market has generateda legion of anecdotes aboutSomali investors. The most com-mon one is of a businessmanoffering double or more for aproperty, in cold, hard cash.

Apocryphal as they may be,there is little doubt, however,that Somali capital has been thebiggest factor driving up theprice of commercial and residen-tial apartments in and aroundthe central business district.

Because much of this newmoney tends to circulate in theinformal economy of second-hand goods, counterfeit importsand the bandit economy ofdrugs, crime and small armstrade – an emerging sector ofunlicensed agents and middle-men have been quick to cash in.

“A few years ago, an agentwould charge KSh 10,000 to bro-ker a property deal. Today, thesame agent will charge KSh500,000. But his job now is sim-ply to bring a potential Somaliinvestor and a property ownertogether. Just that.” says MrMohammed.

The effects of Somali invest-ment in the real estate markethave been especially felt in Nai-robi’s middle-class neighbour-hoods. Predominantly Christian,the establishment of gated,almost exclusively Somali hous-ing estates in these neighbour-hoods has fed rumours that theyare breeding Islamic fundamen-talists.

“It is a real concern for coun-ter-terrorism, especially becausethese neighbourhoods are gatedand therefore difficult to infil-trate,” says Simiyu Werunga, aretired army captain and now asecurity consultant. “It’s impos-sible to tell who is al-Shabaab[Somali insurgency group] andwho is not,” says Mr Moham-med. “But they are here amongus.”

While these are legitimateconcerns, much of the suspicionfuelling them betrays a lack ofunderstanding of the depth andsophistication of a global net-work of capital that grew in theshadow of Africa’s first failedstate.