Better News from Kenya - Adam Smith would have approved

Not much good news comes out of Africa these days, but there are glimmers of the way forward, this time for that most unpromising of countries, Kenya (notorious among development specialists for its common corruption, much of it linked to the government from ministers to clerks).

Corruption adds a new dimension to government waste, especially when its proceeds are spent on consumption (it diverts savings out of revenue that could be used for investment in capital projects and wealth creation). But government expenditure itself can also be a contributor to the slowing down of growth in net domestic product – it can also be a great facilitator of commerce in cases of security, justice, education, health and public works and institutions.

In today’s New York Times, Thomas Friedman has an article, ‘The African Connection’, about an example of off shoring services that has some salutary lessons for development and governments.

“The techie who helped you was also a Kenyan at that same Nairobi call center.
It’s called KenCall. It is located in an abandoned avocado processing plant, and it is the largest of Kenya’s blooming outsourcing call centers, with almost 300 employees and annual revenues that have grown to $3.5 million since it opened three years ago. If you’re surprised it’s here, so are most of its customers.

KenCall is one small reason that Kenya’s economy grew 6 percent last year. Yes, Kenya still has all the ills of other African states — from AIDS to abject poverty. But Kenya also now has a democratically elected government that is learning to get out of the way of Kenya’s entrepreneurs and to get them the bandwidth they need to compete globally. It’s way too early to declare Kenya an economic “African Tiger,” but something is stirring here that bears watching — and KenCall is emblematic of it.
There was one big problem. Kenya, like the rest of East Africa, was not connected to any global undersea fiber-optic cable that would give it the cheap high-speed bandwidth of the scale needed by call centers. The Internet here all came via satellite, which is more expensive to begin with and was made even more so by the fact that the Kenyan state phone company had a monopoly.

In a rare move in Africa, the Kenyan government decided to give up that monopoly and open competition for satellite-provided bandwidth — even though it meant laying off 6,000 government workers. The competition made KenCall’s business possible. The Kenyan government is now working feverishly to get connected to the global fiber-optic network, via an undersea cable, which would make bandwidth here cheap and plentiful enough for all sorts of outsourcing.

KenCall’s employees can make in a month what half of Kenya’s population makes in a year: around $350. They get health care and free transportation.”

Comment
The Kenyan government loosened its grip on telephonic services and the export oriented call-centre business took off; a wise government decision to say the least. A global IT business routed its customers’ calls to a service they required because its founders spotted an opportunity and acted on it, risks and all.
This combines what Smith said was a problem in his day with what is a problem today too. In stagnation, government officials and the organizations they license, manage and control, tend to squeezing rents out of the population forced to deal with them for anything, especially permissions, licenses and paperwork.

Business activities make more people richer, and incentivised more business activities, than all the corruption, misallocations of ‘aid’ (too often a euphemism for deposits in private bank accounts), put together. It only requires governments to relax their controls on their citizens’ natural drive to ‘better themselves’, a drive that is with them from the ‘cradle to the grave’.

[Read Thomas Friedman’s article at The New York Times at: NYTimes.com (nytdirect@nytimes.com)]