The elections of October, 1974, were politically significant for Kenya. It was the second time that the country was conducting a general election under a single-party regime and the first time that the voting age had been lowered from 21 to 18 years through a Constitutional amendment. It was also the first time that all ballot papers were to be put in a single box.
The July, 1974, National Assembly and Presidential Elections Act had changed the ballot box system and introduced a system that helped illiterate voters to identify candidates with particular symbols. There was also a complete re-registration of voters. By the end of May, 1974, a total of 4.5 million voters had been registered from a total adult population of 5.9 million.
Before the nominations, the Kanu National Organising Secretary, Nathan Munoko, told former Kenya Peoples Union (KPU) members – who had been detained for “subversive activities” – that they would not qualify to stand as Kanu candidates for the parliamentary elections, unless they fulfilled certain conditions.
Thus, before the 1974 elections, the Kanu Governing Council cleared only candidates who had been life members for the last three years and had identified with the party policies. This barred all former KPU members, those who had aligned themselves with Oginga Odinga, from taking part in the elections.
The results shocked the nation. Many leading figures, among them the powerful Foreign Minister, Dr Njoroge Mungai, lost their seats. Other Cabinet ministers who lost their seats included Natural Resources Minister William Odongo Omamo in Bondo, Labour Minister Ngala Mwendwa in Kitui Central and Tourism Minister Juxon Shako in Taita Taveta.
In total, 88 members lost their seats in the 158-seat assembly. Kenyatta, who was elected unopposed, commended the system, saying: “This is a massive demonstration that our people are responsible citizens and have reached maturity, which signifies a bright future for our country.” Of the 12 women who vied for parliamentary seats, four were elected: Grace Onyango for Kisumu Town, Julia Ojiambo (Busia Central), Winifred Nyiva Mwendwa (Kitui West) and Chelagat Mutai (Eldoret North).
When Kenyatta was sworn in for a third term in November, 1974, there were rumblings and power-plays in his Cabinet, all driven by succession politics. It was the Kenyatta succession debate that was to politically dominate the next four years until 1978 when the President died on August 22.
Insecurity and death of J.M. Kariuki
Kenyatta’s third term was a troubled one. While the 1960s had ended with the death of Tom Mboya and detention of Oginga Odinga and his political followers, in 1975 the country was thrown into a political spin.
The death of Nyandarua North MP Josiah Mwangi “JM” Kariuki, triggered a public outcry that threw the Kenyatta Cabinet into a new crisis. Coming at a time when several bomb explosions had been witnessed in Nairobi and Mombasa, the level of insecurity and the MP’s subsequent assassination pushed Parliament to form a select committee to investigate the murder.
The events leading to JM’s death were intriguing. On February 20, a bomb had exploded and shattered the doors and windows of the Tourist Information Centre opposite the Hilton Hotel in Nairobi. On Saturday, March 2, another bomb exploded in a crowded Mombasa-bound bus, killing 27 people and seriously injuring 35.
While the Government promised to investigate these bombings, there was a sense of panic in major towns and JM’s disappearance only heightened the crisis for the security apparatus.
Kariuki had gone missing for days. His body was discovered at the City Mortuary on March 11, 1975, by his wife. His death was complicated by an assurance by Vice-President Daniel arap Moi and the Daily Nation that he was in Zambia. With Tom Mboya’s death in 1969 and Pio Gama Pinto’s in 1965, JM’s disappearance worried his friends.
Kariuki was an ardent advocate of land reforms and equity and believed that tribalism was the root of many evils facing African governments.
In April, two bombs exploded within 15 minutes of each other on Mombasa Island. On June 13, two other explosions rocked the Panafric Hotel in Nairobi.
While the Parliamentary Select Committee led by Elijah Mwangale tried to get to the bottom of JM’s murder and establish if there was any link between the assassination and the gang behind the bombs, no arrests were made and the killers have never been arrested.
Economy and oil crisis again
In October, 1975, the Government announced that fuel prices were to rise by another 25 per cent after months of an already painful belt-tightening by Kenyans. The raise was the steepest in Kenya’s history and followed a 10-per cent rise in the oil price announced by the Organisation of Petroleum Exporting Countries (Opec). It followed the 15-per cent rise in the cost of imports caused by devaluation of the Kenya shilling in October, 1975.
From the 1973 oil crisis, triggered by the Yom Kippur War and the quadrupling of prices at the end of 1974, the Kenyan economy took a direct hit. Also, following the global stock market crash of 1973 and 1974, many stocks quoted at the Nairobi Stock Exchange lost value as US President Richard Nixon devalued the dollar.
Like other nations, Kenya faced the crisis occasioned by the February, 1973, decision by the Bretton Woods institutions to close the currency exchange markets and replace them in March with a floating currency regime.
During 1974, Kenya’s economy entered a period of economic stagnation blamed on Opec nations for fuelling the oil crisis. Attorney-General Charles Njonjo blamed the Arab nations for the oil crisis that was affecting all sectors of Kenya’s economy. He asked MPs: “What is the cause? The Arabs, of course. Let nobody here kid himself that oil is any longer a luxury. It is an essential commodity. Whether you live in Kitui or anywhere else in Kenya, or the world, for that matter, you still need oil.”
While Central Bank Governor Duncan Ndegwa wanted the country to import less since oil was becoming too expensive, the Kenyatta government performed a tricky act to protect the Kenyan businesses from ruin.
The Cabinet agreed that to protect local manufacturers, the Government would restrict the importation of goods similar to those manufactured locally. The targets were steel, tyres and roofing products and the aim was to eventually ban their importation.
The Government also introduced the Export Compensation Act of 1974, which established reimbursement procedures for exporters for duties paid on imported intermediate inputs. Firms qualified for the benefits if they had a 30-per cent domestic value added.
Although Nigeria had offered to supply African countries with oil at a concessionary rate, it was on condition that the oil would be only for domestic use. Also the countries were to have a crude oil refinery. But the reality was that it was more expensive to transport crude from Nigeria to most African nations. Kenya thus did not benefit from this offer.
With that, the prices of most commodities started to rise and the cost of living shot up. The domestic savings fell to new levels, while the real GDP growth rates fell from four per cent in 1973 and 3.1 per cent in 1974 to reach a low of 2.9 per cent in 1975.
The oil crisis of 1974 triggered Kenya’s qualification and application for an IMF Extended Fund Facility (EFF) and this kick-started an era of policy experimentation demanded by the IMF. The country had already sought assistance from the IMF in 1974 within an oil-facility designed to aid members in balance of payments difficulties.
While the Kenya shilling was initially pegged to the British pound and had in the 1960s been moved to the dollar, the series of dollar devaluations precipitated by the oil crisis forced the Kenyan Cabinet to agree to an official peg to the SDR, a special drawing rights’ basket of currency maintained by the IMF.
The next shock for the economy came as a result of the 1974/75 drought. But the pressure for adjustment was relieved by the 1976/1977 commodity boom as the tea and coffee prices climbed to an all-time high. This triggered a secondary boom in the construction and financial sectors and, given the fixed exchange regime, led to a moderate overvaluation of the Kenyan currency. It also generated excess liquidity in the market.
Kenya, however, managed an economy with biases to the production and trade of exportable products and import substitutes. It was not until the breakup of the East African Community in 1977 that Kenya realised that its exports could no longer compete effectively in the region and that the export sector had been weakened.
But the coffee boom of 1976-77 managed to shield the country from an economic crisis. That was used to delay any economic adjustment that would have been triggered by the oil crisis and eventual collapse of EAC. The parastatals expanded rapidly but Government expenditures rose by a staggering 37 per cent in the two years between 1977 and 1979. And while money grew by 18 per cent and domestic credit by 23 per cent in one year (1978/77), the period was also marked by a huge increase investment by parastatals of 14 percentage points of gross domestic income between 1978 and 1982.
The Uganda coup of 1971 not only eroded investor confidence in the region but also caused serious economic disruptions and eventual collapse of the neighbouring economy. This had a ripple effect in East Africa. It intensified Uganda’s reliance on Kenyan products. But rather than lead to growth in the Kenyan economy, it stressed the system. The eviction of Asians in Uganda led to a sharp decline in the manufacturing sector and this increased Kenya’s imports to the Ugandan market. The Asians of East Africa who had invested in medium and large industries started fearing that similar predicaments as had befallen their brethren in Uganda would happen elsewhere in the region and stagnate the entire region’s industrial growth.
While Kenya-based multinational companies extended their services to Uganda to fill the void left by the Asians, the Kenyan businessmen were targets of Idi Amin’s soldiers.
By 1976, Amin started a massive buildup of troops along the Kenyan border to retaliate against Kenya’s assistance to Israel during Israel’s raid on Entebbe in which Israeli commandos rescued hostages held in Uganda after their plane had been hijacked.
The incident started when five Palestinians and two Germans hijacked an Air France Airbus and flew it to Entebbe with over 100 hostages. Amin tried to negotiate with the world on their behalf but he only incurred the wrath of Israel. An Israeli commando raid on Entebbe in 1976 succeeded in freeing the hostages, killing the hijackers and 20 Ugandan soldiers. The commandos also destroyed a third of the Ugandan air force. It was after this humiliating defeat that Amin turned his wrath on Kenya for allowing the returning Israeli planes to refuel in Nairobi.
The Kenyatta Cabinet was much concerned about a possible military attack at a time when its economy was wobbling and when the war of words with Somalia over the North Eastern region, which wanted to secede, continued.
In February, 1976, Amin joined Somalia in making territorial claims on Kenya by insisting that Uganda’s border with Kenya had previously run along Naivasha.
The Kenyan Government reacted immediately: “Kenya has stated on many occasions,” said a statement, “that she has no territorial ambitions on her neighbours, but equally she will not part with a single inch of her territory.”
Amin had then closed the border and started a trade boycott. For its part, Kenya refused to supply fuel to Uganda until all the transit bills were paid. “We are not obliged to subsidise the Ugandan economy,” said Foreign Minister Munyua Waiyaki as Kenya refused to send more fuel to Kampala until Uganda had paid the Kshs400 million it owed. It also detained an arms cargo destined for Uganda at the Mombasa port. Uganda retaliated by cutting the electricity supply from the Jinja Dam, evicted Kenyan traders and roughed up Kenyan truck drivers en route to Sudan and Rwanda. After three days of intense negotiation, a peace formula was finalised by the Organisation of African Unity Secretary-General, William Eteki. The two presidents signed an agreement as Waiyaki warned: “To me, the success of the talks will be realised only when things are moving on the ground.”
While war was averted via these diplomatic manoeuvres, the relationship between Kenya and Uganda remained tense even after Amin remarked that he had “nothing but peaceful intentions towards Kenya”. His State Research Bureau continued to terrorise Kenyan students and traders in Uganda.
EAC breakup and sharing of assets
The breakup of the East African Community was perhaps the most significant event during Kenyatta’s last term as President. While the cracks had started developing in the regional body after the June, 1965, collapse of the East African Currency Board and the single-currency regime, Tanzania had thrown the East African nations into a monetary crisis when it announced that it would withdraw from the system, which had been in place since 1919.
The East African shilling collapsed as a result, with the three separate nations issuing their own currencies. Kenya launched its own on September 14, 1966, and Uganda on August 15, 1966. Both countries also launched separate Central Banks.
The East African shilling – which had until 1965 been the official currency in southern Arabia – was now facing its worst nightmare.
It was in this economic confusion and suspicion that the East African Community was hatched. The collapse of the East African Currency Board, a body which had for years stabilised the East African shilling on a par with the British pound, saw the emergence of three Central Banks. With one of the strongest pillars of unity gone, the other institutions within the shared services started to waver. These included the East African Railways and Harbours (EARH) and the East African Airways. In August, 1976, the EARH was wound up, giving the economic engine of the community a severe blow. A month before that, Tanzanian Transport Minister Alfred Tandau told Parliament that cooperation had “reached a point where each of these countries will have to run these corporations itself”.
The Tanzanian declaration was inspired more by politics than by economics and was driven by the country’s desire to nationalise its institutions as Kenya advocated a mixed economy. For its part, and with the entry of Idi Amin, Uganda was a demand-led dictatorship.
By July, 1977, most of the institutions within the EAC had collapsed as a result of the political tensions. The EARH only existed in name and the separate countries now operated their own networks without any reference to the Nairobi headquarters. Kenya and Tanzania had launched their separate airlines and East African Airways planes were detained in several international airports because of debts. Tanzania had also closed its border with Kenya and suspended all official trade with Kenya.
When the EAC collapsed in 1977, it introduced another problem: how to share the assets and liabilities. The discussions continued intermittently for six years and it was only in 1983 that a final solution was reached. Kenya was allocated a 42.6 per cent share, whose value was put at $898 million, while Tanzania received 32.5 per cent and Uganda 25 per cent. Uganda was also to be paid compensation of $191 million by Kenya and Tanzania because their share of the assets were greater than the equity shares they held at the Community.
The breakup was perhaps the most painful political challenge that faced the Kenyatta Government. President Amin had in a lengthy letter accused Nyerere, who was then the President of the EAC Authority, of sabotaging the body by not meeting with his fellow heads of state. But Nyerere did not recognise the Amin regime and had sworn never to sit around a table with him. The policy response towards the break-up of EAC was weak. When this natural market broke down, Kenya failed to implement the needed policy to allow the nation to shift towards a more export-oriented approach. Instead, it continued to protect local business.
Lands and settlement crisis
By 1974, the Government-controlled settlement schemes had failed to eliminate the squatter problem and no more schemes were being opened. This created a major crisis since many squatters who had failed to get land were still occupying other people’s land or government-owned forest reserves. The co-operative settlement schemes, like the Ol Kalou Salient Project in Nyandarua, had failed and there was fear of starting similar experiments elsewhere. Ol Kalou had been purchased in 1965 and was to be operated as a cooperative farm to settle about 2,000 landless farm workers’ families in two and half acre plots. The rest of the land was to be managed as a single unit under the Ministry of Lands. Known as Shirika Cooperative Scheme, it failed to prosper and by 1974 it was losing about K£370,000 annually.
The Ministry of Cooperatives tried to keep the unprofitable cooperative projects alive and its officials did not help either as the Government was torn between splitting the farms to the farmers and continuing to subsidise them. The Government was also grappling with squatters arriving at the land offices in many areas demanding to be settled.
But amid all these, the overall agricultural growth in the newly distributed productive land increased and promoted the cultivation of cash crops such as tea, coffee and hybrid maize and the development of dairy farming. As a result of this and good market conditions, rural incomes rose by five per cent a year from 1974 to 1982.
Managing the mushrooming of land-buying companies in the 1970s in both Central and Rift Valley provinces, especially where large farms for purchase were available, was another tricky issue for the Cabinet. Like the Government-run projects, these land-buying companies were also not successful in managing the farms profitably. While the farms were registered under the Companies Act, meaning that they were not subject to the controls of farms under cooperative societies, they were hampered by a government policy which did not favour land subdivision.
For much of the 1970s, the Government did not favour the subdivision of land into smaller unprofitable plots. Also, the Government faced the dilemma of dealing with corrupt officials of these land-buying companies, who exploited the shareholders.
It was only in the 80s, after Kenyatta’s death, that the Government ordered most of the land-buying companies to distribute the land to the shareholders.
Tourism and Wildlife Conservation
The hunting ban of 1977, imposed through Legal Notice No. 120, remains the most radical legal instrument on animal protection in Eastern Africa. While many African countries still allow game hunting as a hobby, the Kenyatta Government, on realising the dwindling numbers of animals in Kenya’s parks, followed the previous ban on elephant and rhino hunting with a blanket ban on hunting of all animals.
The Cabinet discussed the indefinite ban in May, 1977, and applied to all private hunters, professional hunters and companies holding hunting concessions. With the number of game animals reaching an all time low in a decade, the Minister for Tourism and Wildlife, Matthews Ogutu, said the ban would also help protect the animals from poachers and give its anti-poaching campaign some credibility. As a result, all Wildlife Conservation and Management Department officials in charge of the national parks were ordered to stop any further hunting – though hunting was earning the Government a Kshs10 million through licences annually. “We want to give the animals some breathing space to reproduce for our future prosperity,” said Ogutu.
What this meant was that, after 1977, the consumption and trade in wildlife products was also outlawed. Thus, in Kenya, the only forms of wildlife use are non-consumptive, such as photography and game viewing. For the first time in history, the hunting ban changed the historic relationship between people and wildlife. For many years, people hunted wild animals for food, bedding and clothing and the relationship was regarded as symbiotic and a trade-off for the damage that animals posed through depredation.
There was no industrial policy shift during President Kenyatta’s last term. The Government had adopted import substitution as a strategy to support industrial development. It involved promotion of capital-intensive technologies and Kenya largely kept out of the labour-intensive manufacturing sectors, such as garments, footwear and light assemblies. However, the protection of local industries occasioned an uncompetitive industrial structure that delivered an annual growth rate of five and 11 per cent in the 1970s and 1980s. But the fall of the regional Customs Union and in private sector investment in manufacturing, and the violence against business after the 1982 coup attempt led to a collapse in industrial production.
Foreign direct investment, which had risen steadily in the 1970s, was affected by high energy prices after the oil shocks of the 1970s. During much of Kenya’s post-independence history, a strong anti-export bias existed. The flat rebate export compensation scheme put in place in 1974 was ineffective and benefited only large exporters.
The growth of government parastatals in the 1970s was significant. By 1980, the Government held interests in 250 commercial enterprises and held the majority interest in at least half of them. These represented about a tenth of the GDP. The flipside of this is that in later years they contributed nothing to economic growth.
Indeed, productivity growth in parastatals in later years was negative. They were dogged by economic inefficiency while imposing a heavy burden on the budget and on public banks. This held the majority of them into debt. They also contributed 28 per cent to the trade deficit. In 1992, only 11 companies declared dividends, amounting to Kshs6.6 million. Fourteen did not declare dividends, while eight had never declared dividends despite the fact that some of their investments dated as far back as 1977.
The industrial growth was also hampered when the Government introduced controls on bank lending, introduced licensing of foreign exchange transactions, import quotas and price and interest rate controls in 1975. All these had a negative impact on industrial development.
Development finance institutions
One of the most ambitious acts during the Kenyatta rule was to create development financial institutions as vehicles to mobilise resources. The idea was to facilitate access to long-term capital for growth.
At independence, the financial sector was unable to serve the interest of African farmers and businesspeople and failed to provide adequate long-term capital to finance economic growth. This was largely due to the inherently weak structure of the sector.
In response, the Government made a deliberate effort to set up various DFIs to provide enterprises and projects with equity and long-term loans that commercial banks were unable or unwilling to supply.
By 1974, the development financial institutions largely spearheaded the Kenyanisation process by enhancing local participation in economic development. The Government’s development objective was to integrate the marginalised citizens into productive activities. The Industrial and Commercial Development Corporation (ICDC), established to lend to small entrepreneurs, especially those acquiring businesses from non-citizens and those wishing to expand their trading activities, continued to help African enterprises. Further, under the Small Industrial Loans Scheme (SILS), Kenyans were helped to acquire enterprises in saw milling, woodwork, shoe-making, leather processing and clothing.
For its part, the Agricultural Development Corporation (ADC) continued to offer loans to farmers. The Agricultural Finance Corporation was Kenya’s largest single agricultural credit institution, providing credit and advisory services for the development of agriculture and agricultural-based industries. By providing loans to farmers, and agriculture-based cooperative societies, the AFC became one of the most popular financial institutions and tailored its loans to suit farmers’ needs.
But the industrial funding had been left to the Kenya Industrial Estates. Although this was transferred in 1978 to the Treasury and the Ministry of Trade and Industry, where it was to become an independent state corporation registered under the Companies Act, it failed to achieve that mandate.
During the 1970s, however, the KIE provided medium- and long-term machinery, equipment and finance to small and medium industrial enterprises, for start-ups, expansion, modernisation or rehabilitation of projects throughout the country. It also offered payment to suppliers of equipment, mortgage terms for sheds/incubators, and direct payment to clients in terms of working capital. It also provided workspace industrial sheds/parks to small and medium enterprises by developing industrial estates countrywide. Twenty-eight estates were established with a total of 444 sheds. However, some of these have been sold to indigenous entrepreneurs on mortgage terms.
The Kenya Industrial Estates has notable success cases of firms graduating to become large enterprises. These include East African Spectre, Mastermind Tobacco, Mareba Industries, Haco Industries and Kuguru Foods.
Other development financial institutions that also gained importance in the 1970s included the Development Finance Company of Kenya (DFCK) and the Industrial Development Bank (IDB), which were providing long-term loans and/or equity to medium- and large-scale industrial enterprises, and to tourism enterprises in cooperation with other DFIs.
Another lofty debate that dominated the last years of Kenyatta’s Cabinet was on his succession. Tailored as a change-the-constitution bid to bar the Vice-President from automatically holding the presidency for 90 days after the President’s death, the debate was cut short by Njonjo.
In 1976 he declared that it was a criminal offence for any person to “compass, imagine, devise or intend the death or deposition of the President. Anybody who committed the offence could face the death penalty”.
It had all started when Nakuru North MP Kihika Kimani, the national organising secretary of Gema, held a Kanu rally attended by three Cabinet ministers and 20 MPs. The change-the-constitution campaign was supported Foreign Minister Njoroge Mungai, Gema leader Njenga Karume, Defence Minister James Gichuru, Lands and Settlement Minister Jackson Angaine and many other political power players. Cooperatives Minister Paul Ngei warned that a lot could happen within the 90 days before an election after an unexpected departure of the president: “If you give me that period,” he said, “I can really teach you a lesson and I can assure you that it would not be a pleasant lesson.”
While Moi was never mentioned as the person under siege, it was not lost on observers that he was the target of the group. They wanted to bar him from taking over from the aged President.
On August 22, 1978, Kenyatta died in Mombasa. The transition was, however, smooth and Moi was sworn in as acting-President.
In the first years, Moi pursued a liberal policy. He ordered a re-organisation in the ruling party Kanu. Moi endeared himself to the public by introducing a free milk programme for schoolchildren and abolished the school building fund. This increased primary school enrolment.
Moi also released all the detainees, including novelist Ngugi wa Thiong’o, politicians Koigi Wamwere and Martin Shikuku, and appointed Oginga Odinga as chairman of Cotton Lint and Seed Marketing Board.
In the 1979 General Election, many of the powerful ministers under Kenyatta fell. Among them were Cabinet ministers Mbiyu Koinange, Dr Julius Gikonyo Kiano and James Nyamweya.
Moi appointed Mwai Kibaki as his Vice-President and Minister for Finance and largely allowed for a continuation of the status quo until 1982, when an attempted coup significantly altered the political landscape.