From Slavery to Racism: Unearthing Forgotten History of Black Experience.

By Thura Nira

1. Recalling the Ages of extremes for black experience

When you delve deeper into the historical context, you’ll discover that the distinction between “us” and “them”, between a white nation and their black counterparts, is illusory. Sadly, the Black people’s role in history of these nations is often overlooked or forgotten.

Yet, an identity dichotomy of the “us” versus “them” has recently been sweeping. The revisiting of narrative of identities often results into revisionism of historical contexts. The people of African descent have become deeply intertwined in the history of the western world, and it’s increasingly impossible to tell a credible version of that history without referencing the black experience.

This essay offers an analysis of the historical context of the black experience by reviewing a Book by David Olusoga: Black and British: A Forgotten History.

Cover of Olusugo book, which inspired this essay

2. The Agony at Garden of Bunce, the Mouth of Sierra Leone River

There’s an island at the mouth of the Sierra Leone River. It is called Bunce Island. This island contains the ruins of a fortress that, for over a century, was at the heart of the British slave trade in Africa.

From that fortress, tens of thousands of enslaved Africans were shipped to plantations in the Caribbean and the Americas. Between 1618, which marked the rise of the British slave trade, and 1807, when the country abolished it, Britain was the premier slave-trading nation in the Atlantic. Half of all the millions of Africans carried into slavery in the eighteenth century were transported on British ships.

Nonetheless, Britain’s role in the slave trade is often glossed over or ignored. This is evidenced by the fact that Bunce Island itself remained forgotten for generations. It wasn’t until the 1970s that archeologists rediscovered the site and identified it as a major British slave fortress in West Africa, a site that the historian Joseph Opala called the “Pompeii” of the Atlantic slave trade.

Even today, most British people have a far clearer picture of American slavery than they do of their own country’s involvement in it. This is compounded by the fact that historically, British plantations were located in the West Indies, in places like Jamaica and Barbados, far away from the British populace residing in Britain.

Bunce, the Island of no return. Photo: courtesy

3. The Victorious Company of Horatio Nelson

But black people were not just victims of the British slave trade. They were also important actors in British history. The explorer Francis Drake’s famous mission to circumnavigate the globe in 1577 included four Africans as part of his crew. And in another journey to Panama, Drake formed an alliance with mixed-race Africans known as the Cimaroons in order to outwit the Spanish in Central America.

 Black sailors accompanied Admiral Lord Horatio Nelson, renowned for his defeat of Napoleon’s French navy in 1805, during his battle against the French at Cape Trafalgar. Among those who served under Nelson that day were 18 men who were born in Africa and another 123 who were born in the West Indies.

One African and six West Indians served directly under Nelson on his ship HMS Victory. In fact, Nelson’s Column, the landmark in central London that commemorates his achievements, includes a brass relief depicting a black sailor standing near Nelson at the moment of his death at Cape Trafalgar.

Both as victims and as actors, black people have been central to British history. It’s high time their story is heard. Tudor and Elizabethan England’s attitude toward black people was complex and contradictory.

Admiral Nelson and his solders in a battle.

4. Blacks in the age of Tudors

Historical records provide us with only the faintest glimpses into the lives of black people living in England between the years 1485 and 1603, when the Tudors – including the famous Queen Elizabeth I – ruled.

The glimpses are fleeting, but point to the fact that most black people in Tudor England were employed as domestic servants, occupying the lower social rungs.

Nonetheless, a tiny handful of black Britons reached the very top of Tudor society. Among them was John Blanke, who probably came to England as part of the entourage of Catherine of Aragon, who had arrived from Portugal in 1501 to marry Arthur, Prince of Wales.

Blanke became a trumpeter in the Tudor court. When, following the death of Arthur, Catherine married Henry VIII, Blanke performed at the celebrations marking the birth of Prince Henry, the second child born to Henry and Catherine.

During the period preceding the rise of the Atlantic slave trade, attitudes toward black people were complex and contradictory. This is reflected in the work of the most celebrated playwright of the Elizabethan age, William Shakespeare.

Before racism. John Blanke, a jester in Catherine of Arragon’s court.

5. From Othello, Moor of Venice to the Prince of Morocco, the Black ‘Devil’

Shakespeare’s play Othello, about the “moor of Venice” – a black man who becomes a high-ranking general in the Venetian army – points to the ambivalences in the Elizabethan view of people of African descent. 

On the one hand, the play’s fixation on Othello’s dark skin and his exotic origins reflects Elizabethan anxieties around blackness. Othello marries, then murders, his white wife, Desdemona. This violent and tragic end to the marriage between a black man and a white woman points to Elizabethan fears about interacial mixing.

On the other hand, Shakespeare depicts Othello with empathy and nuance. He is valiant, dignified, and honorable, in stark contrast to Iago, his evil subordinate, a white Venetian who harbors destructive hatred for Othello and who leads him to mistrust Desdemona. 

With the rise of the slave trade, however, any nuanced views of black people, along with any empathy, would disappear altogether. A burgeoning slave trade led to the hardening of racist ideologies.

Othello and Desdemona

6.The days before Granville Sharp and William Wilberforce

In 1637, out of a population of 6,000, there were only 200 enslaved Africans in Barbados. By 1680, there were 38,000 enslaved people on the island, vastly outnumbering the white slave-owning class. 

This drastic increase in the number of enslaved people points to the rapid expansion of the slave trade during the second half of the seventeenth century. This expansion had grave consequences for relations between white and black people. Prior to the rise of slavery, society was divided along class lines – white indentured servants, for instance, occupied the lower rungs of the social hierarchy along with black people.

In 1661, however, Barbados sugar planters passed the Barbados Slave Code. For the first time, this code drew a distinction between “white” servants and “negro” slaves. All white men of all classes were given rights that were denied to all black people.

“White and negro” became the new dominant categories, thus splitting society along racial lines. As such, the rise of the British slave trade was accompanied by the rise of a racial ideology that stratified society according to white and black.

While many black people were condemned to slavery in British colonies abroad, by the mid-1700s, there were also between 3,000 and 4,000 black people living in Britain.

Most of these black Britons lived extremely constrained lives as enslaved people or low-ranking servants. During the first half of the seventeenth century, black servants even became a status symbol favored by the privilege.

William Wilberforce

7. ‘Father! Father! Why have you forsaken me!’

Wealthy slave owners liked to pose with enslaved people for portraits. In George Stubbs’ 1759 painting Henry Fox and the Third Earl of Albemarle Shooting at Goodwood, for instance, a young black man holds the reins of his master’s horse. In Joshua Reynolds’ Portrait of the Prince of Wales, another young black man in elaborate livery adjusts the grand costume of the Prince of Wales himself.

In a cruel practice, some of the enslaved people who lived in England during this time were marked out as human property by brass or copper collars that were padlocked around their necks. The extent to which black people were dehumanized under slavery is reflected in an advertisement put up by the goldsmith Mathew Dyer. In the ad, Dyer offers his services to produce “silver padlocks for Blacks or Dogs.”

The rise of slavery and the racist ideology that accompanied it, therefore, drastically constrained the lives of black people both in the colonies outside of Britain and inside Britain itself. 

8. A bow to Lord Mansfield! The Mansfield Judgment of 1772

One day in London in 1772, James Somerset, an escaped slave, arrived at the doorstep of an abolitionist named Granville Sharp. For over 20 years, Somerset had been enslaved under Charles Stewart in the colony of Virginia.

In 1769, Stewart brought Somerset with him to London. Two years later, Somerset escaped but was recaptured by Stewart. Having managed a second escape in that same year, Somerset sought Sharpe’s aid in helping him maintain his freedom.

Sharp took Somerset’s cause to the British courts. While slave-dependent British colonies such as Virginia and Barbados had evolved clear laws designed to protect the slave system and to ensure the rights of slave owners over slaves, Britain had not.

This meant that when slave owners brought slaves on to British soil, their legal rights over their slaves were unclear. Could an enslaved person continue to be held in captivity on British soil, if Britain had no explicit law authorizing slavery? Did slave masters have a right to have escaped slaves in Britain forcibly returned to them?

Granville Sharp, along with a team of other advocates and lawyers that he assembled to defend Somerset, argued that Charles Stewart had no rights over Somerset now that Somerset had escaped from him on English soil. Stewart’s lawyers argued that Somerset was legally Stewart’s property, and as such, he should be forcibly returned to him. 

The court case was presided over by Lord Mansfield, an esteemed judge who found himself at the center of a national drama. The court gallery was packed with spectators at each session, and the proceedings were reported in all the major newspapers.

When both sides rested their cases, Mansfield took a month to reach his verdict. He ruled that because, unlike the colonies, there was no “positive law” affirming slavery on British soil, “the black must be discharged.” That is, James Somerset was a free man; Charles Stewart could not force him back into slavery.

To those who heard it and read about it later, the judgment seemed to grant freedom not only to James Somerset but also to all enslaved black people in Britain. Although the exact scope of Mansfield’s ruling has always been subject to debate, at the time, the popular understanding of the judgment – particularly by enslaved people and their abolitionist supporters – was that all those in England were free. 

Whatever Lord Mansfield’s intentions, his ruling constituted one of the first and most important victories for enslaved black Britons against their masters. 

Inspiration of the Somerset v Steward case.

9. The massacre by the crew of Zong

In 1781, the Zong, a slave ship, sailed from Accra, in Ghana, with 442 enslaved people on board – twice the number a ship of that size was designed to carry. After a series of navigational errors by the crew, which led to the ship spending more time at sea, freshwater supplies began to run low, and disease spread among all those on board.

To preserve supplies and ensure that at least some enslaved people reached Jamaica alive, the crew of the Zong undertook a terrible action. They cast 133 of the most diseased and frail captives overboard, into the ocean.

The events aboard the ship only came to public attention in 1783, when the owners of the Zong filed an insurance claim for the loss of “cargo,” demanding 30 British Pounds for each captive the crew had thrown overboard. When the cold financial reasoning behind the massacre came to light, there was public outrage.

The Zong massacre, along with reports of other terrible aspects of the slave trade, were key to galvanizing the abolitionist movement in Britain. That movement, which began as a campaign by minority religious groups, was formally born in 1787.

That year, nine Quakers and Evangelical Christians, including the abolitionist campaigner Granville Sharp, formed themselves into the Society Effecting the Abolition of the Slave Trade.

An illustration of the Zong Massacre

10. Black Masters in the abolitionist campaign.

Former enslaved people, Olaudah Equiano and Ottobah Cugoano, both wrote autobiographies that became bestsellers. Along with others, they formed the group the Sons of Africa, which was made up of people who had experienced slavery or were descended from slaves. Members of this group travelled the country, speaking about the horrors of the trade. 

The abolitionists waged a highly successful public campaign, pioneering, for instance, the use of the mass petition. Between 1787 and 1792, 1.5 million British people signed petitions against the slave trade, out of a population of 12 million. The abolitionists also deployed the boycott as a weapon, blacklisting rum and sugar produced by enslaved people.

It was through the tireless efforts of both black and white abolitionists that, in 1807, the Slave Trade Act was passed in parliament. This bill officially ended the nefarious trade. It took another 26 years of abolitionist campaigning for parliament to pass the Slavery Abolition Act in 1833, though. This second bill went beyond the first by ending slavery all together. All enslaved people in British dominions were set free in 1838

Despite abolishing slavery, Britain continued to be economically complicit in American slavery.

11. Eli Whitney Invention and its impact on slave trade

In 1792, Eli Whitney, a school teacher in Savannah, Georgia, invented a simple machine that separated useless cotton seeds from the valuable cotton fiber in which they were trapped. This process had previously been done by hand in a laborious procedure that slowed down the cultivation and harvesting of cotton. Whitney’s cotton gin – “gin” being short for “engine” – reduced the time it took to separate seeds from fiber by a factor of eight.

Whitney’s invention transformed the economics of cotton production. The invention gave American cotton slavery – which many had assumed would slowly decline – a terrible second wind. In the wake of Whitney’s cotton gin, more and more planters turned to the lucrative business of cotton cultivation. As a result, in southern states such as Louisiana, Alabama, and the Carolinas, the demand for slave labor rose. 

This growth in the production of cotton led to a merging of interests between American slave owners and British manufacturers. Cotton from American plantations was shipped to northern British towns such as Manchester, Lancashire, and North Cheshire, which, during the Industrial Revolution, became the boom towns of cotton manufacturing. Between 1848 and 1858, the proportion of cotton that came from the United States into Britain never fell below 73 percent, and climbed as high as 97 percent.

Three decades after abolishing slavery and half a century after abolishing the slave trade itself, Britain was up to its neck in American cotton slavery.

Indeed, the extent to which Britain was embroiled in southern slavery became apparent with the outbreak of the American Civil War in 1861. The war dealt a massive blow to the British economy. By 1862, 70 percent of the cotton industry labor force in Britain was out of work because of disruptions in cotton cultivation in the southern United States.

It was for this reason that many large northern manufacturing towns, such as Liverpool, supported the southern Confederacy in the Civil War. The British government itself took a position of neutrality, refusing to support the Union forces of President Abraham Lincoln against the Confederacy – despite having outlawed slavery in its own dominions.

Slaves in a cotton field

12. The rise of colonialism and control of African territory

In 1884, the British and Foreign Anti-Slavery Society held an “anti-slavery jubilee” in London to celebrate 50 years since the abolition of British slavery. Three months later, on the other side of Europe, the Berlin Conference of 1884 was convened.

It involved diplomats and politicians representing the “Great Powers” – European countries such as Britain, Germany, France, and Belgium, among other states. This conference – which did not include a single African representative – was aimed at dividing up the continent of Africa among the Great Powers.

It marked the beginning of the “Scramble for Africa” – the period in which European colonial rule over the continent spread exponentially. In 1870, 90 percent of the continent was under African rule, and only 10 percent under European control. By 1900, the opposite was true – Europeans controlled 90 percent of the continent.

During that period, nine million square miles of land were added to the European empires. No country was more successful in the scramble for Africa than Britain. By 1900, one in three Africans was a British subject. This added up to 45 million new subjects.

The rapid increase of Britain and other European powers in Africa was made possible by technological advances. Shallow-drafted, steam-powered riverboats turned Africa’s rivers into highways along which European powers could penetrate the continent’s interior.

Medical advances, and the development of quinine, in particular, allowed Europeans to survive in tropical regions without succumbing to diseases such as malaria, which had seen off their predecessors. The final element was the development of the Maxim machine gun, a piece of military technology that allowed small numbers of European soldiers to overwhelm enormous African armies.

Berlin conference of 1884

13. The nexus of the rise of colonialism and the rise of social Darwinism.

Charles Darwin’s Origin of the Species, which presented the theory of evolution by way of natural selection, was published in 1859. Colonizers, to affirm their own dominion over “lower” races used Darwin’s theory. The act of conquest itself was taken as proof of the superiority of Europeans.

As such, a harder, more biological view of race emerged. This was reflected in the popularity of “human zoos” during this period. In these colonial exhibitions, “natives” from the colonies were displayed for the entertainment of British and other European audiences.

Colonialism, therefore, marked a new chapter in the relationship between Britain and African peoples – one in which Britain nonetheless continued to exploit and dominate. 

However, Lincoln’s Emancipation Proclamation, issued on 1 January 1863, which emancipated all American enslaved people, changed everything. After that declaration, the American Civil War was explicitly understood as an armed struggle against slavery. Finally, Britain aligned itself behind the north, seeing the emancipation of southern enslaved people as the final realization of its abolitionist mission. 

The honorouble President Abe.

14. The abuse of black ‘clansmen’

During World War I, one million Africans were recruited as “carriers” – porters carrying supplies to British troops fighting the Germans in Africa. Nairobi, the capital city of Kenya, has a region still named in honour of these carrier corps.  Of those, at least 100,000 died during the war.

In Europe itself, the British War Office refused to allow black men to fight against the Germans. While the War Office created a special regiment for black servicemen – the British West Indies Regiment, or BWIR – it was used as a labor battalion to support white troops.

British authorities believed that allowing black soldiers to fight white men, including the German enemy, would undermine racial prestige, which would, in turn, threaten British control over black subjects in the colonies.

Despite the War Office restrictions, some black people did manage to circumvent the military color barrier. The most famous black British soldier to serve in the war was William Tull, whose grandfather had been a slave in Barbados.

Tull achieved the rank of second lieutenant – a rank that technically should have been impossible for a black Briton to achieve, given that army regulations stipulated that all candidates for officer rank must be of “pure European descent.” On the Western Front, he led white soldiers into combat against the Germans. In March 1918, he was killed in combat in France. 

In spite of their support and contribution to the war effort, black troops were treated with disdain in the aftermath of the conflict. For instance, no black troops were allowed to march in the victory parade that was held in London in 1919 to mark the defeat of the Germans.

In fact, the end of the war led to a massive backlash against black people. Returning white soldiers were resentful toward black servicemen, particularly because peace brought with it major competition for jobs. As such, black people who had found work during the war because of labor shortages were systematically dismissed after the war to make way for demobilized white men.

African carrier corps

15. The Murder of Charles Wootton and the birth of racism

In a case similar to the murder of George Floyd, killed by racist police in Minneapolis by kneeling on his neck, so was Charles Wootton killed. In 1919, racial tensions escalated to such a degree that black people were routinely attacked by white mobs in cities such as Glasgow, London, and Liverpool. This culminated in the lynching of Charles Wootton, a black sailor from Bermuda, who had served in the Royal Navy during the war.

In 1919, he was set upon by a white mob in Liverpool, which drove him to jump into the water to save himself. As he was floundering, the mob threw stones at him, one of which struck him on the head, causing him to sink and drown.

Racism became much less acceptable in the aftermath of Hitler’s defeat, especially given the atrocities committed in Germany in the name of racial ideology. Nonetheless, in Britain, racism continued to persist in subtle ways. For instance, while there was a massive postwar shortage of workers in the country, the British government was reluctant to allow black workers from the colonies into Britain. 

Still, black workers found their way there. The arrival of the Empire Windrush – a ship carrying Jamaican immigrants – in London in 1948 marked the beginning of a boom in migration from the West Indies over the next decade.

Between 1,000 and 2,000 West Indians entered Britain in 1948, but by 1956 this number would peak at 56,000. This migration was partly driven by a hurricane that devastated Jamaica in 1951 and destroyed the livelihoods of many of its citizens, thus forcing them to look for better prospects abroad. 

These new migrants faced a great deal of discrimination in Britain. In 1958, for example, violence erupted in the city of Nottingham when white men in a bar objected to a black man and a white woman sitting together.

Clashes in the Notting Hill neighbourhood of London also followed, with white mobs attacking black people and their homes. And yet, while black people were, by and large, the victims in these disturbances, politicians dubbed the violence “riots” and blamed black migrants.

Politicians capitalized on the violence to appeal for immigration controls. In 1962, Parliament passed the Commonwealth Immigrants Act, which curtailed immigration. Further restrictions followed in 1968 and 1971.

In the media, politicians affirmed the need for these controls. In a 1978 interview, Margaret Thatcher, not yet prime minister, insisted that the British populace was “swamped” by immigrants. Given that, at the time, immigrants made up only 4 percent of the population, such a characterization was an exaggeration. 

In reality, black people’s long relationship to Britain – forged largely through the oppression of slavery and colonialism – meant that they were far from some politically imagined “alien horde.” Their fates, and their lives, have always been deeply tied to Britain. 

People of African descent are entirely central to the history of the British Isles. While Britain’s story is shaped deeply by those Africans it enslaved during the transatlantic slave trade, as well as the African and Caribbean peoples it colonized, their influence is often set at the margins of British history.

Black Britons were not only victims of British dominance; they were also actors who fought to end the horrors of the slave trade as well as defend Britain against its enemies. Ultimately, the story of British history cannot be told without them. 

16. My Dear People, Be wary of biases in mainstream telling of black history. 

When you read a history book. Or watch a historical documentary. You probably take what you read or hear to be the full story. However, mainstream historical accounts often sideline the stories of marginalized peoples and populations.

When you dig deeper, you will often discover that the groups that seem to be in the margins of history are, in fact, at its very heart. So always pay attention to who is telling history and be vigilant for hidden stories. 

Primary Reference:

           David Olusoga:Black and British: A Forgotten History.

The author is a Senior Writer with the Gatuyuriana. His interests include blasting fake revisionism of history

Statue of Dedan Kimathi Must Fall


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By Baikolia-O-Bamung’o

THERE, in the centre of Nairobi city, stands erected an extremely gruesome and a highly repulsive statue, of a gun wielding ruffian. Dedan Kimathi. The gory glorification of bloodshed of years gone, illustrates the rogue side of slanted and incompetent revisionism of history.

Dedan Kimathi is an imposter. He was nothing but a butcher of the innocents and architect on the massacre of the harmless. Venerating him as a national hero, is nothing but a delusion and a worst form of national psychosis.

Historical revisionism, has led to the so called founding fathers of the nation, such as Kenyatta, finding centre space in the national dialogue. But luckly, consensus has built, that these were nothing but founding villains, with Kenyatta now ably carrying the tag of a leader into death and darkness.

It is this toxic revisionist history that has glorified Mau Mau as front runners to independence, instead of what they actually were, a gang of thieves, savages and cold blooded murderers.

There is something wrong with this country. Seemingly,  the easiest way to accumulate fame and ascend to pinnacles of power is engineer some political violence?  We have seen some people. Some people we know. But whose names we have forgotten. They were propelled to power by crimes against humanity charges.

Mau Mau, were they fighting for Kenya or for Kikuyu nationalism? Did they even care about Kenya? Countries which did not have militancy agitation, such as Uganda and Tanganyika, gained Independence before Kenya. Hence, Mau Mau were a nuisance, not a aide, to independence efforts.

There is a book. It is by Professor Caroline Elkins book, Britain’s Gulag:The Brutal End of Empire in Kenya. She romanticizes Mau barbarity.

Sadly, facts betray her. Mau Mau, a bunch of cowards, could not face other soldiers. They resulted into a cowardly tactic of raiding and butchering fellow Kikuyu kinsmen,  who disapproved their scoundrel savagery.

The only notable thing Mau Mau ever did was raiding Lari station to loot armour. In the end of their savagery, it is only 12 British soldiers had died. But thousands of Kikuyu kinsmen died.

If Dedan Kimathi was alive today, he would certainly be facing crimes against humanity charges, for breaching ALL the Geneva conventions.

Dedan Kimathi was a hero of not shade. His statue at the town center is a symbolism of ignominy and a fallacy of history. It must fall.

Nevertheless, the grandees of Kikuyu nationalism wants continuity of this historical farce as a tool for continued state capture. It is why you will hear them saying. “Tulipigania Uhuru.” “We will not give them power.” As if Kenya an intellectual property. To decide whether to hold solely, or to share.

A true liberation of the country should start by debunking these historical myths. We should stop venerating goons and savages of all kind. Both the living and the dead. Mau Mau were nothing but bunch of savages, crooks, and criminals. The Statute of Kimathi, must fall!

The writer is an historian and an enemy of bogus revisionism of history

Why the Year 2020 is Moving Too Fast

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Photo: Courtesy

BEAUTY, the adage goes, lies in the eyes of the beholder. Nevertheless, research indicates, individuals bestowed with certain physical features are more likely to be perceived as having beauty. These features are having a facial symmetry, oozing youthful looks, and a general form that does not deviate from the norm. These, will get one more right swipes on tinder.

FACE, is the reception of a human being. By it, we know the moods a person, their health status, and the age. Baikulia-O-Bamung’o, a consultant for this journal, has a gift. He can estimate one’s age, with admirable degree of accuracy, with a single stare on the face.

BUT, the face is not static. The appearance of the face, and neck typically, changes with age. Loss of muscle tone and thinning skin gives the face a flabby or drooping appearance. Equally, as one ages, the skin pores widen, the skin develop crevices, the looks lose their glare, with a gradual decrepitude, waste and decay. The face loses its plump, smooth surface.

CLEOPATRA, the majestic queen from Macedonia, who reigned over Ptolemaic Kingdom of Egypt, was on verge of unleashing the elixir of mortality, which would have deterred bodily decay as one ages, but she will get entangled in fatal romance with Mark Antony, the successor of Caesar.

PERCEPTION, of time, is one thing that changes as one ages. A 21 year old lass will drown with glee when offered an employment contract of one year, and the period will look like eternity. Then give e a 28 year old woman same offer, and there may be snide, at the brevity of the offer.

OLDER people perceive time as moving faster. That is, the rule. There are psychology effects. It often leads to accumulation of regrets. It also has occasions sighs, that one has not accomplished much, to justify their years. Perhaps, its its nudges life keeps offering. Mind time and clock-time are two totally different things. They flow at varying rates.

WHY, now, has this year 2020 moved so fast? Has it? Please check your age! But you can speed up the time. How? Venture, and create more memories.

Kenya should adopt Proportional Representation electoral system

By gatuyu t.j

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Just look at the Kenya’s National Assembly. It is composed of 349 Members. These comprise of 290 members elected from single member constituencies across the country. There are 47 women representatives elected from each of the 47 counties. There are 12 members nominated to represent special interests – youth, persons with disabilities, and workers.

You have noted. This number is too big to debate in one chamber. Why all this number, when the number of days that MPs attend Parliament and committee proceedings, is just 3?. The size alone is too big to allow for thorough debates.

There are 67 Senators. There are over 2,200 MCAs. Kenya has over 2,600 representatives. This is a ratio of about one representative to about 16,000 Kenyans. This is raising questions as to whether Kenyans are over-represented. If one looks at both the county and national levels, then there is need to recognize the sentiments about over- representation.

The Constitution of Kenya 2010 retains the majoritarian system of elections (First-Past- the-Post or FPTP).

The Yash Ghai CRCK report states. During the constitutional review process, there were mixed views on the kind of electoral system that should be used.

While some were in support of retention of the majoritarian system, others called for Proportional Representation (PR), where members of the National Assembly are elected through party lists as opposed to single member constituency system that is currently applied. Others recommended a representation system that has either both elements (FPTP and PR) or Mixed Member Proportional Representation (MMPR).

An ideal electoral system should ensure or promote representation of the people and all major interests in a political system. The system operating in the framework of a republic should, therefore, be as inclusive as possible by making it possible for as many of the divergent interests and concerns as possible to be represented.

Identifying these interests is critical to ensure no one interest group dominates the rest, as this would be unrepresentative and undemocratic.

There are a number of challenges with the majoritarian system. These include a lack of incentive for candidates to cooperate with their parties, ethnic voting patterns and ethnic considerations that lead to exclusion of smaller voter groups, gerrymandering of constituency boundaries to favour certain candidates, disadvantage to smaller parties, among other factors.

While most of these challenges could still manifest in PR system in a different form, the focus on individual candidates and ethnicity, to the exclusion of other factors, led to favouring of larger parties and ethnic personalities who are perceived as strong politically.

The majoritarian system have their benefits.  The system, for instance, encourages accountability since the candidates are directly accountable to their voters (as opposed to a political party). A balance between majoritarian and PR system of elections is ideal.

Therefore, there should be first past the post seats. There should also be an additional seats filled through a system of Proportional Representation, in accordance of votes a party garners in an election. This way, part of the members would have been directly elected through the constituencies and a part of them through the party lists.

The Kenyan Constitution does not have an option of mixed member or proportional representation. Yet, there is credible evidence that Proportional Representation System or Mixed Member Proportional Representation system is good for societies such as Kenya that are deeply divided along ethnic and other social lines.

The 12 seats (out of a total of 349) left for nomination of special interest groups are hardly enough to accommodate the diversity of the Kenyan society. It is not adequate to represent the interests of all groups in a constituency. FPTP is also not good for national cohesion, because it encourages individuals (FPTP) to mobilise support along clan, religious and ethnic lines. It encourages parties to form on basis of these cleavages.

In the long term, Kenya should consider adopting either a pure PR system or a Mixed Member Proportional Representation System in order to allow all groups equitable chance of representation.

The current system results in exclusion of certain groups, particularly those who do not support the winning individual. The proposed options will strengthen the institution of political parties and provide equal opportunities for all groups to be represented. This proposal will also allow for adequate and effective representation of ‘Special Interests’ than is the case at present

The End of the Last God of the Gaps -And the Downfall of Religion

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Insignias of Religions

Early humans had a relationship of wonder with their universe, especially with phenomena they couldn’t rationally understand. To solve these mysteries, the ancients created pantheon of gods to explain anything. We ended up with a god of thunder, tides, earthquakes, volcanoes, infertility, plagues, love, among others.

Thus, wherever there were gaps by ancients in understanding the world around them, they filled those gaps with God. This typically led to phenomena of the ‘God of the Gaps.’ However, as scientific knowledge increased, gaps in understanding of the natural world gradually disappeared, so pantheon of gods began to shrink. As gaps in understanding narrowed, gods that were created to fill a void in understanding shrunk.

But these gods did not ‘go gentle’. It is always a messy process for a culture to abandon its deities. Spiritual beliefs are etched deeply on peoples psyches at a young age by—hammered by parents, teachers, religious leaders. Hence, it becomes difficult to disengage from such beliefs without leaving a portrait of deviance in the wake, or suffering a social backlash. Religious shifts occur over generations, often with bloodshed.

As the gods of the gaps vanished, Zeus, the god of all gods, from whose image Abrahamic religions (Christianity, Islam, Judaism) are fashioned, has proved resilience despite the narrowing gaps in understanding of the universe.

Zeus, the most feared and revered of all the pagan deities, has resisted his own extinction, and mounted a violent battle against the dying of his own light, precisely as had the earlier gods Zeus had replaced.

The resilient of Zeus has presented unprecedented illogical scenarios. Unlike before, how can we have modern human minds, that is capable of precise logical analysis, and yet simultaneously permits acceptance of senseless religious beliefs that should crumble beneath even the slightest rational scrutiny?

We have an otherwise enlightened society. We have people admirable mental aptitude. Yet, they suffer no shame feeding their children harebrained junk such as christian analogies of the Resurrection, the Virgin Mary, Noah’s Ark, the parting of the Red Sea, heaven, and hell. How can an otherwise intelligent mind take mythologies, hook, line and sinker.

How can a modern rational individual, be an adherent to a religions that hosts wild claims—humans rising from the dead, miraculous virgin births, vengeful gods that send plagues and floods, mystical promises of an afterlife in cloud-swept heavens or fiery hells?”

Initially, it has been because even with modern rationals, there are still gaps in appreciation of nature, and Zeus has to fill such void. Secondly, wherever Zeus has been threatened, he has been spread by the brute of violence and political dominance. It is why the two leading religions, Christianity and Islam, were spread through conquests, bloodshed and by brute force of political dominance.

These arsenals are no longer viable. There is no society which is invading another to spread religion. The growth of science and advent of globalization has caused immense knowledge spread, hence closing the gap of understanding, held by Zeus.

Hence, without tools of dominance and with increasing closure of gaps of understanding. Science has filled huge void that was there. In this case, Zeus, the last God of the gaps, cannot be sustained. This will eventually lead to the collapse of the religions.

 

 

Why Governor Waititu is Right in Resuming Duty

Governor Waititu in Court.

Governor Waititu is right in resuming his duties. The power of people holding elected offices is derived directly from the people. That is why there are established mechanisms for removing them from office.

In canons of statutory constructions, there is the golden rule. A judicial official should not give meaning to a provision of a statute that results into an obnoxious results.

Assume a governor without a deputy, like Sonko, or both governor and their deputy are charged, would the county remain without leadership? The speaker of the assembly cannot assume because there is neither vacancy nor inability to act.

By asking the governor not to attend to his duties, it amounts to technically removing him from office through back door. If a governor can be removed from office by a resident magistrate, it makes a complete mockery of democracy.

Where a governor is charged, it forms a ground of removal from office, the process that is outlined.

The difference between the president and a governor, is the president is given a constitutional immunity from any prosecutions.

This doesn’t mean presidents don’t commit acts of thievery or other malfeasance. But is is logical to ring fence them from disruptions of prosecutions.

The court order barring Waititu from discharging his duties is not constitutionally grounded. Waitutu’s power is derived directly from the people of Kiambu, and only the People of Kiambu, through their MCA’s, can initiate a process of removing from office.

The enthusiastic resident magistrates should exercise some restrains, and not issue court orders, whose header is an invitation to dishonor them.

An alarming precedent. Asking the governor to keep away from office is asking him to abdicate his constitutional duties and obligations to serve his electorates.

Why the Treasury’s appetite for betting taxes is no solution to gambling problem

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By gatuyu t.j

Drawing parallels between financial markets investing and gambling is an analogy disliked in the world of finance. Yet, at a basic level, gambling and investing are identical activities, both involving wagering an outcome in an environment of uncertainty.

Speculator investors buy stock for the same reasons that gamblers bet on a certain football teams to win or choose lottery numbers. Both have same illusions. Whereas in financial markets the goal is to beat the market, in gambling the goal is to beat the odds.

Notably, investing in instruments such as derivative markets has the same potential for negative externalities as gambling, yet it has been accepted and even embraced as the newest way for investors to act either rationally or irrationally in the capital markets.

With these similarities, why does society view investing and gambling differently?

Regulators characterise investing as an enterprise of skill in which those who are diligent may earn deserved rewards, while gambling is an enterprise of chance that encourages lazy and untalented people to divert useful capital with undeserving few reaping ill-gotten gains foolishly lost by vast majority. This divergence is paternalistic, more triggered by classes of people participating and profiting in these activities.

Henry Rotich, the Treasury Cabinet Secretary, has in almost every budget speech lamented at how betting has created negative social effects to the young and vulnerable, before imposing, often hurried and haphazard, tax measures. There has been an observable heightened frenzy to control betting industry through tax measures. This is visibly creating a hostile environment for the sector’s operations.

The proposed excise duty adds to the heavy tax burden in the sector. This includes a 15 per cent betting tax levied on gross gaming revenue, 30 per cent corporation tax on profits, and 20 per cent withholding tax deducted winnings.

There are some notable anomalies with these tax measures. Betting is a form of entertainment. Levying entertainment taxes is a mandate of the county governments. Were counties to enact laws to impose entertainment taxes from betting revenue, it would add to this taxation burden.

Arguably, the betting tax currently levied by the national government, save perhaps for online betting activities, is unsupported constitutionally.

Again, subjecting the gross winnings of a player to 20 per cent withholding tax is inconsistent with best tax practice, for it creates a higher tax burden for the players. This withholding tax ought to be levied on net proceeds, after amount staked is deducted from winnings.

For tax accounting, the amount staked should be deemed to have been wholly and exclusively used for the production of this taxable income and deducted.

Further, charging betting tax on gross gaming revenue and later levying corporation tax is unjust and double taxation. Gross gaming revenue is equivalent of “sales”, not “profit”.

Corporation tax is levied on taxable profit in the company’s accounting year after expenses are deducted. As earlier argued, if betting tax has to be levied, it is the county governments that ought to charge it under the heading of entertainment tax.

Lastly, the proposed excise duty on amount staked is what is known as the Pigouvian tax. The purpose of a Pigouvian taxes is to force private markets to internalise the social cost of an activity and reduce negative externalities. It has been effective in areas such as reducing environmental pollution or controlling certain harmful consumptions.

For Pigouvian taxes to be effective in the gambling industry, there is need to appreciate the two consumer types. These are the price-sensitive recreation gamblers and price-insensitive problem gamblers.

Generally, consumption levels of recreational gamblers are disproportionately reduced by increase in cost while problem gamblers are to a bigger extent cost-insensitive. The consequence is recreation gamblers may exit the leisure and leave problem gamblers to fund the tax, bringing about inequity of incidence.

Since problem gambling triggers negative externalities, Pigouvian taxes should be applied for forms of gambling popular with problem gamblers.

Applying it across board will not achieve optimal results because negative externalities are not uniformly spread. Hence, the proposed excise duty will be a blunt tool as a Pigouvian tax.

The trend of taxing betting firms in Kenya betrays that these high, duplicating taxes are more of intention to capture economic rents than maximise economic welfare.

However, even without benefit of econometric model, the multiple taxes in Kenya’s betting sector have possibly reached the peak of the Laffer curve. A Laffer curve illustrates that revenue will increase with rate of taxation until a certain point, where further increase in tax rate will lead to drop in revenue collected.

The Treasury should therefore be sincere and drop the pretence that it is using taxation as deterrence on gambling. Such admission will enable it to create a fair tax regime with features of allocative and distributional efficiency. This will probably enable betting firms to create shared values with their customers and promote industrial competitiveness, hence enhanced revenue.

Equally, any betting tax policy initiative should not be made in a domestic vacuum. As we learn from game theory, it has to grasp possible moves of betting players relocating to offshore jurisdictions if there are significant tax savings of doing so.

This essay was first published in the Business Daily. Available Here

 The Author is the Managing Editor of the Gatuyuriana Journal

Rigid financial rules can stifle innovation

 

Governor
Patrick Njoroge, Central Bank of Kenya Governor

By gatuyu t.j

The microfinance banks in Kenya are not doing well. A report by the Central Bank of Kenya (CBK) reveals their gradual decline in profits from Sh549 million in 2015 to a loss of Sh731 million in 2017.

The CBK, in a consultative note, has formulated regulatory proposals to redeem the sector. These include enhancing corporate governance, increasing capital and liquidity requirements and reducing reliance on deposits and borrowed funds.

In summary, the CBK solution is more and more regulations. This regulatory philosophy needs to be revisited. For excessive, prescriptive, regulatory interventions in financial sector do cause market distortions and stifle innovations. Regulatory enthusiasm in addressing market failures often trigger government failures.

The goal of financial regulation is to ensure the triple objects of financial stability, consumer protection and market integrity. Each of these objects ought to be pursued on structure of a bigger picture as this essay illustrates.

Ensuring financial stability is an essential goal. However, when regulators pursue financial stability as the only overarching goal, financial institutions may become overly risk averse and refrain from discharging their intermediation functions, restraining economic growth.

Prescriptive regulations may make financial institutions consider that compliance with rules is all that is expected of them. In such a case, they may not make efforts to improve their products or services to best suit the interests of customers, limiting the financial industry’s contribution to the growth in national wealth.

The rules must allow flexibility on banks to periodically improve their services. As regulators pursue triple objects, they should not sacrifice bid for better services by market players, effective intermediation and normal market vigour and innovation.

A cursory look at the Kenya’s banking industry reveals a sector with multiple equilibria.

We have some banks making huge profits while others are struggling. A sector with multiple equilibria is ripe for disruption as the market strives for efficiency gain to a better equilibrium.

However, an efficiency shift requires change in strategy. Where prescriptive rules overhang, like in Kenya, they hinder operational flexibility. The effect is that no institution is willing to change their strategy, as the first mover from inefficient models can become disadvantaged and often becomes a prey to dominant firms, creating the prisoner’s dilemma scenario.

The result is that no bank exits from the strategy. Smaller banks are more disadvantaged as they hold on into inefficient business models. That is why supervisory approaches have to be consistent with the ultimate goal of regulation. A way the CBK can create financial stability in banks is addressing vulnerabilities in the financial system.

As successive collapse of Dubai Bank, Imperial Bank and near collapse of Chase bank illustrates, a bank’s failure has domino effects on other lenders due to the inter-connectedness. But the management of the bank may not take this potential spill-over into consideration due to information asymmetries.

Depositors may not have enough information to distinguish good banks from bad ones, yet bad lenders may cause runs on good ones. This is the danger of information asymmetries.

In promoting better services, market forces may not necessarily foster competition towards better services. This is because financial institutions have varying asset management capabilities or their dedication to customers’ interests may not be properly appreciated by customers due to, again, information asymmetries and bounded rationality, limiting differentiated growth of firms.

The question which may arise from this narrative is how the CBK can minimise government failures while addressing market failures. Sadly, the current supervisory approach by CBK on banks, as espoused in among others, prudential regulations, majorly based on compliance checks and asset quality reviews, may no longer be effective.

Mechanical and repetitive application of rules makes the industry to be obsessed with compliance with the letters of the rules (focus on form), backward-looking review of the evidence of the past (focus on the past) and analysis of details and elements (focus on elements).

Focus on forms, rather than substance, makes it easier for bankers to defend their lending decisions by referring to collaterals and guarantees than by presenting bankers’ own views on borrowers’ future business prospects. This promotes complacency on the sustainability of banks’ business models.

Where a banks regulator spends much time criticising specific past incidents of misconduct, they may fail to discuss whether firms meet the changing needs of the customers. The CBK should expand its supervisory approaches from a backward-looking, element-by-element compliance check with formal requirements to substantive, forward-looking and holistic analysis and judgment. This would ensure banks better contribute to the ultimate goal of regulation. To this extent, CBK can adopt a supervisory approach with three pillars.

The first pillar is the enforcement of minimum standards. Such includes accounting standards on loan classification, loan write-offs and loan loss provisioning, capital adequacy requirements, rules on consumer protection and market integrity, internal controls, all as a precondition for adequate business management.

The second pillar is the dynamic supervision. On this, the CBK would avoid imposing a one-size-fits-all solution across the industry by developing approaches to engage in constructive two-way dialogue with an individual financial institution and explore solutions tailored circumstances.

The third pillar is promotion of disclosure and engagement with financial institutions to encourage them to adopt best practices. Basel III, the international framework for prudential supervision of banks, recommends these three pillar approach.

The Author is the Managing Editor of Gatuyuriana and financial markets specialist

NOTE: This essay was first published in the Business Daily. Available here https://www.businessdailyafrica.com/analysis/ideas/Rigid-financial-rules-can-stifle-innovation/4259414-5060636-2cg30o/index.html

Retail investors can spur vibrant capital markets

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Photo source: Courtesy

By gatuyu j

This essay was first published in the Business Daily

Having deep capital markets is a reliable mechanism to unlock new pools of capital and ensure efficient allocation of resources in the economy. However, establishing vibrant capital markets is a drawn-out process requiring a mix of financial instruments, stable regulatory framework, market infrastructure, and a critical mass of market participants.

The Kenyan capital markets is underdeveloped relative to economy’s potential. The trading at the Nairobi Securities Exchange (NSE) is characterised by low liquidity in both equity and fixed incomes segments. The turnover ratio averages at five percent with some counters running for weeks without an activity.

Ordinarily, efficient markets should have well-balanced supply and demand sides of capital. In the past, policy measures have majorly focussed on the promoting demand side of the markets, on creating new instruments and encouraging issuers, without equivalent efforts to spur the supply side markets especially in relation to broadening the investor base.

A constant supply of capital is a critical pillar for securities market. A way of nurturing it is by ensuring every class of investors is able to get their desired outcome from the markets. Investors, both retail or institutional, are either “buy and hold investors”, “buy and trade investors”, “active investors”, and “private market investors”.

However, there has been a tendency to encourage the “buy and hold” investors and discourage active traders or speculators, on account of discouraging short termism approach to the markets. This view is unfortunate. Stable capital markets needs all groupings of investors irrespective of their anticipated outcome. The vilified speculators, for instance, provide liquidity to the markets and improve the quality of pricing.

Thus, the next frontier in deepening Kenya’s capital markets is widening the investor base. Currently, the main class of investors are institutional and foreign investors, and participation of retail investors is limited. Institutional and foreign investors bring in capital and skills to the market. However, in the case of foreign investors, their dominant participation in small markets may have de-stabilising effects. They pose a ‘sudden stop’ risk, where capital inflows are quickly reversed as a result of changes in the domestic or international risk environment, resulting into sell-offs and markets meltdown.

To broaden demand side of the markets, participation of local retail investors has to be encouraged. There have been reports of Kenyans recently being duped into sham investments. Sad, as these tales are, some lessons can be learnt. A number of citizens are on the lookout for attractive investments opportunities, a gap the capital markets should tap.

A hindrance for entry of retail investors in Kenya capital markets result from market illiquidity, high transaction costs and market power of brokers. These impediments need to be addressed.

Of these, a transactions cost is a major one. The brokerage fee for a trade transaction at NSE is two percent of amount involved. A buy and sell of equities results into transaction costs of four percent.

To this extent, for an investor to break even, a traded stock has to generate a return of about five percent, which is not easy to actualise in short runs. These transactions costs are detrimental.

This makes a case for introducing the direct market access mechanisms to enable retail investors directly interact with the order book of the exchange without having to pass through a broker-dealer. Stock brokerage is a disrupted practice. Trading has moved from traditional open outcry on trading floors to decentralised electronic, screen-based trading, where investors can trade for themselves rather than handing orders over to brokers for execution.

The law should not require it be mandatory that traders must access order book through brokers. Instead, stockbrokers should justify their continued relevance through value addition for traders to engage them.

Transaction costs

Adopting direct market access mechanism would certainly lower transaction costs, because only the technology is being paid for and not the usual order management. This would give traders more control over the final execution and the ability to exploit liquidity and price opportunities.

Another way to improve market liquidity is by reducing the trading cycle from the current settlement of three days (T+3) to same day settlement (T+0). Such will encourage more retail traders, especially the speculators, and increase trading volumes and facilitate more price discovery. The NSE should be able to demonstrate similar efficiency showcased by online sports betting firms.

Related, promoting margin trading would equally improve market liquidity to benefit of retail investors. Margin trading would enable investors increase their purchasing/selling power. The regulations to operationalize margin trading have been made, but the product is yet to be operationalized.

Lastly, the regulators must maintain a tempo of robust protection of investors by guarding against fraudulent practices which kill market confidence. A recent energised effort by Capital Markets Authority on allegations of insider trading in dealing with KenolKobil shares is encouraging.

Nevertheless, more is needed in legal reforms, especially in protecting minority investors especially against lock-in from protracted takeovers. To attract retail investors, above the liquidity of investments and attractiveness of returns, the safety of their invested money has to be assured. This combines with proactive investors’ education, especially on evidence-based, sensible investment strategy.

How Kenya Can Regulate Initial Coin Offerings

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Photo: courtesy

By gatuyu t.j

The Capital Markets Authority (CMA) has in numerous occasions issued public cautions to warn the public against investing in initial coin offerings (ICO) that have floated by various start-ups, citing the unregulated nature of the offering and the risk of investors losing their money.These cautions comes on a background of continued surge of ICOs as a new model of fundraising, with parallels to initial public offerings (IPO), venture capital, and crowd funding.

ICOs allow Blockchain-based ventures to raise money by creating and selling digital assets usually known as “tokens”. Even though ICOs continue to be a prominent source of fundraising, some have turned out to be speculative ventures without underlying utility, triggering regulatory actions.

New ideas facilitate market efficiency, spurring improvements to services and products and promote market competition. In guiding new innovations, regulations should address and potentially mitigate negative externalities.

In a rapidly changing world of finance, regulators ought to recognise the unique dynamics of emerging technologies and discourage regulatory environment with largely binary outcomes, of either approval or disapproval, which lacks flexibility and often torpedoes innovations.

IPO versus ICO

A company issuing tokens to the public in return for funds is a setting that strongly resembles an IPO used for traditional securities. However, there are visible distinctions. Whereas an ICO leads to the creation of digital tokens on Blockchain, an IPO leads to the distribution of shareholdings to the public, often through underwriters.

Only well-established private companies with profitability record are allowed to carry out IPOs, while ICOs are floated by start-ups on basis of proof of concept outlined in a whitepaper. Lastly, IPOs offer dividends from company profit as a form of return while ICOs offer tokens which have prospects of value increase after a project launch.

muthaura
Paul Muthaura, CEO, Capital Market Authority. Photo source: CMA

The ICOs have been able to gain huge popularity because they have certain merits. First, unlike the IPOs, an ICO enables the compensation of initial developers without giving them more control of the network than other token holders.

For in IPOs, founder shareholders often reserve certain controlling rights in the management of a corporate entity. Second, ICOs permit a venture to finance from future users, similar to the pre-sale of goods or forward contracts, and this provides issuers with an early signal about consumer demand, enabling better informed investments in building.

Further, ICOs tokens have high liquidity, which triggers instances of temporary overvaluation (phenomenon that also exists in IPO markets), leading to huge gains for investors. Lastly, tokens can hasten network effects, which are often central to the marketplaces that ICO issuers seek to build. This is experienced where token price appreciation leads more users to join the platform, even though this may have an offside of facilitating market bubble creation.

Criteria for a security

In exploring the regulatory status of ICOs, interrogation usually centres on whether an ICO meet the definition of a security. The Kenyan Capital Markets Act provides a broad definition of security and includes a phraseany instruments commonly known as securities.”

There are no clear guidelines in Kenya or court decision that has clarified when an investment contract becomes a security. In other jurisdictions,a criterion popular as the “Howey Test”, which originated from a US Supreme Court decision, is often applied to determine whether an investment scheme qualifies as a security.

The Howey Test postulates that an investment will be deemed to be a security if it meets four conditions. An offering will be a security where an investment of money is made by the purchaser, the investment is part of a common enterprise among numerous investors, the success of the enterprise depends on the efforts of a third-party promoter, and the investor has an expectation of a financial return, such as capital gains.

Applying Howey Test for ICO in Kenya will end with a conclusion they are an offer of securities, hence subjecting the offer to a slew of capital markets regulations, and eventually killing it.

Rules are necessary for proper functioning markets in order ensure market fairness and integrity, protect investors and facilitate systemic stability. However, it is impossible to regulate new innovations like traditional securities.

Many statutes in the financial sector in Kenya date back decades. As a result, the regulatory framework is not optimally suited to address new business models and products that continue to evolve in financial services. This has the potential negative consequence of limiting innovation to the detriment of consumers and small businesses.

If it not for regulatory restraints expended by former CBK governor Njuguna Ndung’u, perhaps M-Pesa similar payment systems may not have been allowed to operate. By the CBK allowing M-Pesa to operate, without unduly alarming the public with public cautions, it fast-tracked the development of this product to the giant it is today.

Agile Regulations

The mix of technology and its applications to financial services has increased dramatically. It is important for financial regulators to adopt appropriate regulatory approaches without stifling innovations that require time to mature, or create unnecessary barriers to innovation.

Agile regulations and mechanisms such as regulatory sandboxes programs ought to be encouraged, for they facilitate controlled disruption. Further, there need to spearhead proactive amendments of the laws to ensure they keep pace with development in the financial sector.

For every new innovation presents its inherent risks. The regulatory environment should instead be flexible so that firms can experiment without the threat of enforcement actions that would imperil the existence of a firm. Innovating is an iterative process, and regulator feedback can play a helpful role while upholding safeguards and standards.

The regulators should been seen to encourage innovation. They should strive to acquire and understand existing and emerging technologies, to engage with developers and first-movers. Otherwise, the country will lose its repute as a centre of financial innovation. Instead of always issuing warning, CMA should work with innovators and ensure services such as ICO are rolled out successfully. That is the way to foster vibrant financial markets and promote growth through responsible innovation.

The author is the Managing Editor with the Gatuyuriana and a financial markets specialist.