Statement from the World Bank on Kenya Youth Empowerment Project

Press Release No:2012/131/AFR

NAIROBI, October 25, 2011—On Sunday, October 23, 2011, the Sunday Nation published an article under the headline:  “World Bank cancels funding for Kazi Kwa Vijana over graft” (page 10).  In response to this and further media reports published on the program, the World Bank would like to share the following facts about the Kenya Youth Empowerment Project (KYEP) it finances:

The objective of KYEP is to support efforts of the Government of Kenya to increase access to youth-targeted temporary employment programs and to improve youth employability.  The project has three components: labor-intensive works and social services (US$43 million), coordinated by the Office of the Prime Minister (OPM); private sector internships and training (US$15.5 million), managed by the Kenya Private Sector Alliance (KEPSA); and capacity-building and policy development (US$1.5 million), implemented by the Ministry of Youth and Sports.

The KYEP became effective on August 18, 2010.  The first disbursement to the Government for Component 1, in the amount of US$9.3 million, took place on February 7, 2011.  This was subsequently allocated to six implementing line ministries to undertake public works for youth: the Ministry of Water and Irrigation, the Ministry of Regional Development Authorities, the Ministry of Roads, Ministry of Forestry and Wildlife, the Ministry of Environment and Mineral Resources, and the Ministry of Local Government, as well as to the Office of the Prime Minister (OPM) to coordinate and monitor project activities.

In June 2011, the World Bank initiated a Financial Management Review of the KYEP.  This is a standard exercise undertaken for all World Bank-financed projects during implementation.  The working draft of the Financial Management Review stated that transactions totaling Ksh 33,061,925 required further validation or clarification from the Government to determine whether they were eligible to be paid out of KYEP funds. The World Bank will continue to work with OPM to review these transactions in the coming days, with a view to determining definitively whether they are or are not eligible for KYEP financing.

Meanwhile, the Government let the World Bank know on October 11 that it wished to cancel Component 1 of KYEP and reorient the resources to other activities aiming to raise youth employment in Kenya.  The remaining KYEP components, including support to the Kenya Private Sector Alliance (KEPSA) and to the Ministry of Youth and Sports, will continue, and performance to date under these components has been satisfactory.

Contacts: Peter Warutere, (254-20) 3226444 pwarutere@worldbank.org

For more information, please visit: http://www.worldbank.org/

Doing Business in the East African Community 2011

The East African Community is deepening and widening cooperation among its 5 member states. Spurred by the need to expand markets, boost competitiveness and attract investment, East African countries have continued to take steps to make it easier for local firms to start up and operate.

The main findings of the report are:

• Doing business has become easier in East Africa since 2005.
• Sharing good practices could bring East Africa closer to global top performers.
• If each East African country were to adopt the region’s best practice in each of the Doing Business indicators, the region’s average ranking on the ease of doing business would be 18 rather than 117.
• If the best of East African regulations and procedures were implemented across the board, the business regulatory environment in East Africa, as measured by Doing Business, would be comparable to that in Japan.
• EAC members are already seeking to learn from one another’s good reform practices through the World Bank Group-sponsored Network of Reformers initiative.

Read the  Doing Business in the East African Community 2011 Report here

A good story sells

A recently published blog post by David Roodman titled “Kiva is not quite what it seems” has been causing quite a stir in cyber space. Not so much because of the provocative title mentioning Kiva – a pioneer and probably the best known Person to Person (P2P) micro-credit organisation; Roodman’s post also questions the real intentions why people choose to fund a micro entrepreneur from Cambodia, Kenya or Guatemala for that matter.

Roodman posits that a reason for the success of Kiva and similar internet based lending portals is because for as little as US$ 25, more people can become benefactors. Helping others has become a cheap commodity and not only the super-rich Bill Gates and Warren Buffett’s can now claim the title “philanthropist”.

Similar to the P2P lending model, goods from developing countries that sell on western supermarket shelves bear stories – some of them wild. This has been largely propagated by fair trade products. However, nowadays even a pesticide sprayed beetroot from Bulawayo must carry a story. A honey product from Kenya cannot just simply be labelled “Kenyan honey”. What’s required is a long tale weaving in a tapestry of sensory words probably going along the lines of “…this honey comes from the honey bee whose hives are in Africa’s savannah plains … The scents from the eucalyptus ensure a wild …”.

Indeed, the more evocative the story about the terrain or about how poor the farmers who produced it are, the better.

This is what consumers want – a feeling that when they put a spoon of honey in their morning tea, they feel part of that savannah so alluringly described on the product label. And it is these stories that add a couple of dollars or Euro’s onto the unit retail price. On some e-commerce websites selling African “ethnic” products, 2 kgs of maize flour which is the staple food for most East and Central African countries goes for US$ 10. The same product in an upmarket supermarket in Nairobi costs less than a quarter of that price. The point is that with good marketing, consumers pay more for the “story” than the product itself.

With rampant corruption constantly being reported in Africa, an ennui among citizens of western nations has emerged. Commonly people question why donor aid is poured into large infrastructure projects such as roads and geothermal plants yet there are numerous instances of money being siphoned off by corrupt public officials in Africa. Just last week it emerged that World Bank money earmarked for free primary education in Kenya had been stolen; thus begging the question why fund such a project when if you gave an entrepreneur a bit of money they could then be empowered enough to send their children to a fee paying school?

Media stories on Africa which in most instances focus on crises’ or the potential for crisis have made people who would otherwise dip into their pockets to alleviate hunger on the Continent averse. Thus when one sees a picture of Mary from a village just outside Kampala who has a banana kiosk, the need to assist Mary overrides the need to assist Fatma in a refugee camp in Eastern Congo.

In an age where people are sponsoring small businesses’, children and even guerrillas in Rwanda, what does this all mean for entrepreneurs either seeking funding or wanting to sell their products on the export market?

In a nutshell there is a palpable and growing demand for “virtual tourism” – a state where one can experience a lifestyle from the comfort of their seat in front of a computer monitor, or perhaps when they hold the honey jar from somewhere in Africa, gently open the lid, and smell the scent of the wild.

Read “Kiva is not quite what it seems” here

Nurturing Africa’s “green” youth entrepreneurs

Nowadays, the media is full of stories on green fuels, ranging from jatropha, coffee husks as well as peanut casings, amongst other innovative sources. There is even a sub-set of the social entrepreneur class, the so-called “green entrepreneur” who in turn consist of “renewable energy entrepreneurs”.

Biodiesels such as jatropha have the potential to create upto 300 direct and indirect jobs from every 1,000 hectares cultivated. The crop grows well even in arid areas, making it an ideal agricultural based enterprise. Even apart from its use as a fuel, jatropha is ideal for other consumer items such as soaps and insect repellents. However, such an enterprise is beyond the reach of young entrepreneurs. Not only do they lack access to land, but more importantly, they are often unaware of information on new trends in green enterprise.

Agri-based enterprise is now big business. African governments are even leasing land to Middle and far Eastern countries. Even large corporations such as Daewoo have leased large tracts of land. Indeed environmental conservation and climate change management have become common. Our larger companies have even found an alternative source of income through carbon credits trading.

Unfortunately youth entrepreneurs have not taken advantage of such opportunities.

To address this gap, the Yipe.org Entrepreneurship Portal regularly posts information for our “green” youth entrepreneurs. Currently, there are two opportunities that young entrepreneurs interested in making a change to our environment can take advantage of:
• The World Bank’s International Essay Competition invites the youth to share ideas on the impact of climate change on their lives and how to tackle climate change through youth-led solutions.
• The Financial Times Climate Change Challenge sponsored by Hewlett-Packard and Forum for the Future aims at highlighting businesses with ground-breaking approaches for tackling the threat of climate change.

As the business leaders of tomorrow, it remains imperative that the youth are made aware of such opportunities. At Yipe.org we shall continue to keep them “in the know”.

Where the paper is worth more than the contract written on it!

The Africa Development Index 2008/09 (ADI) launched by the World Bank at the beginning of this month focussed on the urgent need for interventions to address the ever increasing numbers of unemployed youth.

Indeed the index can be described as the World Bank’s best book of numbers on Africa covering more than 1,400 indicators on the economy, human development, private sector development, governance, environment, and aid to Africa, with a series of indicators dating back to 1965.

As such, the indicators provide a useful platform to analyse the socio-economic factors that have an impact on the business environment in Africa. On doing an analysis on youth entrepreneurship opportunities, we came across some figures, which we felt should have an index all to themselves.

One of the main assets of an enabling business environment is the ease with which contracts can be enforced. According to the ADI, Rwanda had the fewest number of procedures required (24) compared with Sudan with the highest number of procedures (53).

Namibia had the shortest enforcement duration of 270 days compared with Liberia where one needs 1,280 days to enforce a contract. However a more glaring indicator was the cost of actually enforcing contracts.

The real cost of the debt

The debate between incurring costs in debt collection as opposed to writing off the debt is an issue that confronts many entrepreneurs. The ADI found debt collection costs in Tanzania and the Seychelles to be the lowest at 14.3% of the debt, whilst the Democratic Republic of Congo had the highest debt collection cost at a whopping 151.8% of the debt.

Yes, you read correct: 151.8%!

It costs more to collect your debts than it is to write them off! The DRC is not the only country where it is more expensive to collect debt (over 100% of the original amount). The ADI also listed Burkina Faso (107.4%), Malawi (142.4%), Mozambique (142.5%) and Sierra Leone (149.5%).

Contracts verbal or written, explicit or implied are what business is all about. Someone walks into your shop and picks up an item. You receive cash for that item and in exchange you give them the item. That is a contract. Contracts cover landlords, suppliers, agents, employees and run the entire gamut of business relationships.

Thus in a situation where pursuing a contract are too expensive and time consuming, the door is left open to less integrity uncertainty in doing business.

This in turn results in low levels of entrepreneurship and investment.

In fact delays and expense in contract enforcement can also have social repercussions. In Italy, a country where courts take 1,210 days on average on settle disputes, landlords were hesitant to rent apartments to young people, culminating in a large number of Italians living with their parents!

According to another World Bank product, the Doing Business Reports, countries faced with this situation have undertaken reforms to speed up contract enforcement processes.

Tonga is a country that markedly improved contract enforcement through the introduction of computerisation as well as alternative dispute resolution mechanisms such as mediation. Tonga managed to cut the time to enforce contracts from 510 days to 350. Cases are now monitored daily, and if they remain inactive for 3 months, the judge summons the parties and asks whether they plan to pursue the dispute.

In 2006, Slovenia where it takes an average of 1,350 days to resolve a dispute, a law was adopted obliging the government to pay plaintiffs up to €5,000 per case as a fine for delayed justice.

Though many African countries have specialised commercial courts, resolving disputes through the judiciary has commonly been perceived as a preserve of the rich. This also keeps small business litigants away from courts, which in turn adversely affects their business bottom line.

Nevertheless even though these courts speed up the process of collecting debt (such as the commercial courts in Kinshasa which set a strict deadline of 8 days to appeal judgments), the cost of going to court is among the highest in the world. Another concern for African entrepreneurs is the prevalence of corruption in the judiciary. However, increasing judges’ salaries (such as is the case in Kenya) has been a way to ensure that they maintain their integrity. Further afield, countries like Bulgaria and Moldova introduced random allocation of court cases to judges, whilst Bulgaria also made the selection and appointment of judges more transparent.

Of course while a case is in litigation business must go on. Many times, property is confiscated and evictions happen doubly hurting the business, if not closing it down. In Brazil, to avert this problem, debtors are now also obliged to tell their creditors where their goods are. If debtors do not cooperate, they risk a penalty of 20% of the claim.

Widening the mandate of courts so they can deal with cases involving larger sums of money also enhances the expediency of justice and encourages entrepreneurs to seek this option.

Bringing justice closer to the entrepreneur

The next frontier in opening up judicial enforcements of contracts is through the internet. As internet use becomes more widespread in African countries, the introduction of e-courts, whereby certain procedures can be carried out will not only speed up justice but also lower costs of the whole process.

For instance, litigants in New York are able to access case data and documents through the internet whilst lawyers in Milan can upload case information into a case management database.

As mobile phone use in Africa is much more common than internet use, maybe the Singapore system could be an option. In 2006 the country introduced 3G mobile phones to conduct virtual court hearings and a pilot project allowing pre-trial conferences by e-mail.

However, websites of judiciaries in Africa could also replicate India example where businesses can download court forms, look at the court’s schedule for the day, check the status of a case or read the judge’s orders. The supreme court even allows electronic filing of cases. In African countries where the road network is undeveloped or dilapidated, such a system would also benefit those small business owners who live in rural areas.

Even though the judiciary’s primary role is to enhance justice, fairness and equity, efficient courts can do much more — they can help the economy grow and thus promote entrepreneurship development.