The Real Reason Why Kenyatta is Suddenly Pushing For Paycuts, How Kenya is in Deep Trouble Over the last one week Kenyatta and his deputy have been all over the news pushing for pay cuts for the government employees in order to cut the bloated wage bill that is threatening to bring the government down. They first began by magnanimously offering to take a paycut on their salaries. Never mind that they first awarded themselves a huge pay rise of 40% and then took a cut of 20% which even to a standard one child translates to a no-reduction on salary.Kenyatta then went ahead to dictate that parastatal chiefs take a paycut or step aside. Our interest was piqued. Why the sudden use of force to take paycuts? Rumours have been rife that the government is broke.We were intrigued by the use of dictatorial force demonstrated by Kenyatta and set out to find out why the sudden urgency and panic emanating from the hill on the house. What we found out is shocking to say the least.Our mole at State House has now confirmed that Kenya is broke and is on the brink of collapse due to a precarious financial nightmare caused by the Chinese. If you are of good memory, you will recall that Kenyatta shunned the West and looked to the Chinese to finance Kenya in the next few years.Well, guess what? China has gone back on it’s promise.
Not just to Kenya but also to Zimbabwe. Kenyatta first heard the news through his long time ally old man Robert Mugabe. First the story on Mugabe’s misfortune.Last November,China pledged to give Africa some $1 trillion in aid over the next 12 years. At the time, a clearly bedazzled Mugabe regime, just re-elected in late July, told itself, its creditors, and its citizens that Zimbabwe would reap a windfall of some $30 billion in Chineseloans and grants. It sent a series of delegations to Beijing for that purpose.Zimbabwe and its autocrat, Mugabe, badly need the money. The country is isolated, financially tattered, and increasingly desperate economically. Its financial obligations are $11 billion in arrears, and with its ongoing ideological standoff against the West, the nation is unable to borrow from the IMF and the World Bank and the UN. It has no viable industries, and with more than 85 percent of the population unemployed and an estimated 20-25 percent of Zimbabweans living outside the nation, an inability to secure a stabilityloancould breed serious political problems.
It appeared that China would step in, solve the autocrat’s problems, validate his so-called “Look East” policy, and gain a stronger foothold in southern Africa. The bailout would help stabilize the government and pacify a growing trend of middle- and working-class anger at the poor economy and corruption. The aid was being called a “friendly boost.”Yet in what appears to be an embarrassing slap, China’s much-touted bail-out – or at least Mugabe’s portrayal of it – now appears to have fallen through.
Mugabe’s spokesmen have steadily downgraded the size of China’s support – from $30 billion to $10 billion, to $3 billion, and then, in February, to $400 million. Now it appears China won’t play Santa Claus at all. In what may be a harbinger of a tougher approach, it last week apparently ruled out any direct aid.“We don’t normally provide budgetary support to other countries but we try to help Zimbabwe in our own way,” the Chinese ambassador to Zimbabwe told reporters.Chinese officials and the business community in Shanghai told the most recent Zimbabwe delegation, headed by Finance Minister Patrick Chinamasa, that he needed to offer bankable projects instead of promises like the one he tried to sell Beijing to get cash.Mr. Chinamasa had sought funding for the giant Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZimAsset), a $27 billion plan to bring economic revival. Zimbabwe’s entire annual budget is $4.5 billion, to give a sense of how large the request was.
Chinamasa’s delegation tried to secure loans using the nation’s mineral reserves as security. But the Chinese demanded an accounting of when Mugabe’s projects would break even, and how a payment plan would work – which Chinamasa did not appear to have ready.“Mugabe cannot economically hold fort from now till 2018 without a huge financial boost, so we are likely to see more trips to China,” says Clive Moyo, an economic analyst based in Johannesburg.“But, as we have seen in past times, such trips have mostly been fruitless when they concern huge financial aid, yet we keep trying. We are now like gamblers who keep putting money and efforts toward trying to land the jackpot, only to see yet another heavy loss. Unfortunately, no one else can bail us out, so it [is] a vicious cycle of hopes and heartbreaks.”
Since their controversial election victory last July 31, the Zanu (PF) government’s pleas for funding have gone unheeded, as more and more doors seem to be closing in their bid to turn around an economy that has faced 15 years of questionable management. Earlier this winter Chinamasa failed in trips to Washington to secure IMF and World Bank loans.The African Development Bank estimates Zimbabwe needs $14 billion to pay back lenders and be eligible for aid that stopped in 1999 because of arrears.Going back to Kenya, the Chinese ambassador has been reluctant to meet with Kenyatta over the last two weeks saying that his country has not yet given him the official position.But clearly the writing is on the wall. Kenya is not getting money from the Chinese.Perhaps it is not too late to turn to the West and seek funds to save an ailing Kenya.