Kenyatta Era Kenyanization and Economic Policy
When independence was achieved in 1963, Europeans and Asians were firmly entrenched in control of Kenya's economy, the result not only of their competitive advantage over the African majority but also of restrictions imposed on African participation during the colonial period. Although the transfer of land to African ownership had begun with British assistance before independence, Europeans still occupied the best agricultural areas in the White Highlands. [Asians were dominant at every level of the business community, from that of the large-scale merchant to the small shopkeeper. Meanwhile, fewer than one in three of those in the Asian community and a much smaller percentage of permanently resident Europeans had accepted the option to become Kenyan citizens.
Noncitizen Europeans and Asians operated the country's financial institutions, its industries, and most of its services and included most of those engaged in the liberal professions, such as medicine and law. After independence African leaders condemned the overwhelmingly disproportionate presence of noncitizens in the economic life of the country as an unwanted legacy of the colonial period that compromised Kenya's sovereignty and barred the African majority from making material progress. In Kenyatta's words, "A country is never fully inde pendent until its economy is controlled by its citizens."
Accordingly, a policy of Kenyanization was proposed that required the replacement of noncitizens by citizens in all sectors of the economy. It not only aimed at giving positive assistance to citizens in obtaining property or gaining employment but also discriminated actively against noncitizens. In principle, the program was not racially motivated, formally distinguishing between citizens and noncitizens engaged in economic activity rather than between Africans and non-Africans, but in practice Kenyanization was clearly intended to further African interests by eliminating competition from better trained, better financed Europeans and Asians.
African owners, it was anticipated, would in turn hire African employees, unlike entrepreneurs in the typically family-operated Asian businesses. Meanwhile, priority would be given to training Africans to take over skilled positions from noncitizens.
Kenyanization efforts first focused on ensuring for Kenyan nationals preference in hiring in the civil service and, as they became qualified, for executive and technical positions in large foreign-owned firms. Implementation of the program on a broader scale, involving the displacement of noncitizens, was advanced in two specific pieces of legislation, the Kenya Immigration Act of 1967 and the Trading Licensing Act of 1968. The 1967 act repealed the ordinance that had allowed noncitizens temporary residence on renewable four-year work permits. Under the new law noncitizens could apply to remain in Kenya only if their skills were not available in the African work force. Under the provisions of the second act, licenses to conduct commercial enterprises were progressively withdrawn from Asians and reissued to Africans.
The act also limited those areas where "noncitizens"—specifically Asians—could legally engage in business. Wholesale, retail, and export-import trade was reserved exclusively for citizens, and a deadline of January 1, 1969, was set for noncitizens to liquidate their holdings. Businesses owned by noncitizens in Nairobi and Mombasa were excluded initially because of the size of foreign involvement in those cities, but restrictions were gradually imposed there as well. Noncitizens were expected to leave Kenya as soon as possible after their affairs had been settled.
Some 15,000 Asians who had retained British passports after independence left Kenya in the months immediately after enactment of the Kenyanization legislation, most of them heading for Britain. To stem the sudden influx, the British government limited entry to the holders of 1,500 immigration vouchers that were to be issued annually to Asians in Kenya holding British passports. India, meanwhile, barred entry to Asians holding British passports. By 1970 the number of Asians in Kenya, which had been 200,000 at independence, was reduced to 140,000, less than one-half of whom had obtained Kenyan citizenship.
Five years later, only 100,000 Asians remained, of whom 20,000 were on the waiting list for vouchers to emigrate to Britain. Many of the potential emigrants were deprived of the means to earn a livelihood, while others made illegal arrangements with African proxies to operate their businesses. Even Asians who held Kenyan citizenship reportedly suffered from official harassment, and some had their Kenyan passports canceled.
By the mid-1970s Kenyanization of retail trade and road transport was virtually complete, although as elsewhere in the private sector non-African citizens played the dominant role. The influence of large multinational corporations, which furnished a large share of the investment and technology needed for economic development, was strengthened in the intervening years, during which the corporations were supportive of Kenyanization through their hiring practices. Foreigners, mostly British, still occupied more than one-third of management and about two-thirds of all professional-level posts in foreign-owned corporations.
But by the mid-1970s, as more Africans acquired the requisite education and experience and as British nationals who had remained in top managerial positions were repatriated, about 75 percent of middle- and high-level positions in government and modern private enterprise were held by Africans, and close to 90 percent of public employees were Africans. Although the last of the British officers on secondment to the Kenyan armed forces and police were relieved in 1975, government administration still relied significantly on a small cadre of expatriate personnel in professional grades.
The Kenyanization of European-held farmland was both more complete than had been possible with managerial and professional positions and less traumatic than had been the exodus of Asian aliens. A large part of British economic assistance to Kenya after independence was used to buy out European settlers through the Land Transfer Program and to facilitate the resettlement of African farmers. According to the letter of the law, sales were voluntary, but the Kenyan government warned that "severe action" might be taken against noncitizens who delayed in disposing of their landed property. In 1974 the number of African-owned farms in what once had been known as the White Highlands had reached 1,400 as compared with only 58 in 1963, and the process of transfer of land from noncitizens was completed bv the end of the decade.
Many of the large estates were acquired intact by African buyers, who continued to operate them in the same manner as their previous European owners had. Despite the turnover in proprietorship, about 120,000 hectares of prime farmland remained in the possession of Europeans who had become Kenyan citizens.
Kenyanization also furthered the development of an educated and prosperous African elite that owed its rise to the regime. It included not only government and party officials and members of the legislature and the civil service, many of whom had benefited from their public positions to become successful in business, but also successful businessmen and landowners who had used their newly acquired wealth to gain entry into public life. The connection of government and business through interlocking political, professional, and entrepreneurial elites seemed to ensure public support for various enterprises and to attract investment to them.
Opponents of the regime criticized the government for its gradualist approach to Kenyanization. Odinga in particular spoke in favor of forced expulsion of noncitizens and outright expropriation of their property. He and others considered to represent the left wing of Kenyan politics also urged public control of businesses given up by the Asians and redistribution of land vacated by Europeans to smallholders, alleging corruption and favoritism in the reissuing of commercial licenses and the sale of property to politically well-connected Africans.
The prevailing economic philosophy in post-independence Kenya differed markedly from that in many other emerging African nations in placing primary reliance on private enterprise to generate rapid growth. KANU's preindependence manifesto and the government's subsequent paper on African socialism in Kenya had stated that nationalization would be resorted to only in cases of extreme urgency, when foreign-owned firms were clearly operating to the detriment of national interests. The concept of African socialism itself was defined in Kenya as one that promised equality of opportunity but did not guarantee equality of results.
By the late 1960s this liberal policy was modified somewhat to meet the demands of the Kenyanization program, which required the government to increase the degree of public participation in key sectors of the economy. Private enterprise, however, remained the dominant element. At the same time, by granting liberal provisions for the repatriation of profits, Kenya succeeded in attracting substantial foreign investment and in generating an exceptionally high overall rate of growth, averaging 6.5 percent annually during the period 1964-72. The advantage was partially offset by a parallel population growth rate of more than 3 percent and, although per capita growth persisted despite the population rise, it neither provided a cure for unemployment nor alleviated the poverty of the lowest income groups in rural areas.
In 1974 the World Bank cited Kenya as one of the 30 countries whose economies were worst hit by the increase in world oil prices. The rate of growth dropped markedly, and in 1975 real income declined for the first time. The dominant features of the Kenyan economy in the second half of the decade were a deteriorating foreign trade balance and a high rate of inflation, both related to energy costs. A fortuitous boom in export commodity prices in 1976 and 1977 reversed this trend temporarily, but underlying structural problems — slowing agricultural growth, dependence by the modern sector on costly fuel imports, and limits to export substitution development — posed an obstacle to sustained growth.
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