KTN News has just aired the first part of a four part series of an investigative documentary on how the City Government Askaris extort, arrest, harass, maim and inhumanely treat hawkers. According to the investigative piece titled Kanjo Kingdom, the amount of bribes paid to the Askaris per year exceeds shs 1.52 billion, money that is claimed to climb stairs from the low level askari all the way to their commandant seated in a high office in the heart of City Hall.
Even though this article is against hawking and other informal businesses practiced in Kenya, in no way do I support the extortion, unwarranted arrests, harassments, maiming and any nature of inhumanely treating hawkers as shown in the several clips in the Kanjo Kingdom documentary. However, I strongly believe that the informal sector is not helpful to those who engage in them neither is it contributing significantly to the growth and development of this nation.
My stand on informal business was first made clear in the article titled, at the end of the day, we must plan to get rid of mama mboga. In that article I provided reasons founded on previous research works and expert opinions why we need to formalize and commercialize the Agricultural sector – that is, why our long term goal must be to get rid of our accepted mama mboga culture. The reasoning espoused in that article extends to other informal sectors and particularly to hawking – especially hawking within CBDs of major cities and towns.
To get rid of hawkers in CBD is not as hard as getting rid of mama mbogas in our estates. Governor Mbugua of Nakuru County for instance managed to “formalize” hawking by providing them with market spaces and stalls from where they can hawk their merchandise, even though his aggressive move will most likely cost him the 2017 gubernatorial elections.
As has been shown by the documentary Kanjo Kingdom, it is not in the interest of City County Askaris of Nairobi to get rid of hawkers since these hawkers are a source of millions of shillings per month that go directly into their pockets. The County Government of Nairobi however knows that hawking is a disgrace due to environmental degradations it causes, entrenched poverty it contributes to, and conflict with formal businesses it has. Below we discuss the reasons why we cannot in our right senses promote hawking.
Hawking is chaotic, degrades the environment and causes traffic congestion
Prior to Governor Mbugua’s intervention, it was close to impossible for PSVs to enter and leave the Nakuru Bus main stage. The one way exit road was half blocked by the hawkers who had erected permanent sacks in which they stocked potatoes and cereals. The same road also connected a mini bus stage that serves the Kanu Street routes, and the turn towards that mini bus stage was completely blocked by hawkers – it was turned to a market ground. The hawkers were closely packed such that even those who visited the place to buy products hardly had space to step on.
The blockage of the road meant that traffic piled up to the main roads all the way to the highway, and this contributed to the daily traffic jam at the Cigma Plaza roundabout. Ever since these hawkers were kicked out of that road, the traffic congestion was eliminated.
In Nairobi hawkers have contributed greatly to human traffic congestion along Tom Mboya Street. The trash they leave on the streets each night are in tons and they have also turned the main Bus Station to a dumping site. Check out the article Nairobi Youth Night Market will turn CBD into a dumping site for more on this.
Hawking constraints the growth of formal businesses
We all acknowledge the fact that our mitumba culture has killed our textile industry. Although the mitumba industry has provided millions of jobs to the youth, this has come at the expense of two things, the death of textile industry and the increase in the country’s trade deficits over the years. The same argument applies to hawking vs formal businesses.
A formal business person operates on the principle of acquiring all relevant licenses and permits, operates from stalls or within a building for which he or she pays rent, and generally employs staff. Hawkers who mostly sell the “mitumba” merchandise do not acquire the licenses and the permits, do not pay rent and hardly employ anyone other than themselves. In this way, the hawkers are always able to sell their wear at extremely discounted prices thereby killing the formal businesses.
In the last few years, many stalls around Tom Mboya, Moi Avenue, River Road, and Ronald Ngala have closed shops due to proliferation of hawkers. Proponents of informal businesses have always pointed to the fact that the sector provides about 80% of the employment opportunities as the reason the sector should be recognized and developed, stating that the formal sector has been unable to absorb the millions of graduates and school dropouts seeking work every year. But one thing that is clear, there is no way the formal sector can absorb millions of job seekers when the informal sector continues to kill opportunities for formal businesses.
Government loses billions of shillings in potential taxes
The Kanjo Kingdom documentary has made it very clear that officially the County and National Governments do not get any revenues from the multi billion hawking industry. The hawkers operate illegally in the city and in the designated markets like Gikomba and Eastleigh, and that’s why they find it okay to bribe the City County Askaris with an average of shs 200 per week. This money that translates to over shs 1.52 billion per year would otherwise get into the Government’s Bank Accounts if the industry was formalized and regulated.
Although those City County Askaris who solicit for bribes, harass, maim and torture hawkers ought to be arrested and jailed, formalizing the hawking industry will also eliminate the opportunity the Askaris have to inhumanely treat the hawkers. Ever since Governor Mbugua formalized hawking in Nakuru by providing the hawkers with a space to sell their merchandise, direct bribery between the hawkers and Nakuru County Askaris have reduced, and the harassment of hawkers have been eliminated. The only things the hawkers are complaining about is the reduced sales and the fact that they now have to pay a daily/weekly/monthly tax to the County Government, payments of which they receive official receipts.
Informal economy entrenches poverty
There has been found a positive correlation between increase in poverty and informal economy. Even though it might be reasoned that poverty is the cause of informal economy, a study done in the UK found out that informal economy also entrenches poverty, thus the cycle becomes impossible to break.
The contribution of informal economy to increased poverty is easy to understand by the level of income generated from the sector and how the sector generally operates. It is extremely hard for an informal business person (informal in the sense that they are unlicensed, do not keep records, and are mostly business illiterate) to earn income that can expand his or her business beyond the hand to mouth business model, and as they remain in the hand to mouth income status, they become poorer and poorer as the middle income and upper class citizens who operate formal businesses continue to get richer and richer – thereby the income gap continues to widen.
Formalizing the economy whereby every business person is required to operate from recognized locations, keep basic accounting records, and pay necessary taxes provides the business person with focus and an opportunity to operate beyond the hand to mouth business model – which in turn generate more jobs.
The other immediate advantage of formalizing all businesses including the jua kali and subsistence farming sectors, is the ability for the overall economy to immediately respond to manipulations of the monetary and fiscal policies. Today, even if the Central Bank of Kenya lowers interest rates, the mama mbogas and hawkers cannot have immediate feel of the lowered interest rates since they do not do formal banking. When inflation rate lowers like it happened in February 2016, the hawkers still go to sleep without noticing. However if their operations were formalized such that they operate within the banking system, they would immediately appreciate when the Government manipulates these monetary and fiscal instruments of the economy to their advantage.
What Next after Kanjo Kingdom?
To completely eliminate the corruption and inhuman treatment of our business brothers and sisters who operate in the formal economy, the government must come up with a strategy to formalize the entire economy whereby each business person operates under a business name, operates from a recognized location (physical address), keeps basic accounting books, and pays for relevant licenses and taxes. The strategy must however be cognisant of the fact that the millions in the informal sector foremost do not have money, and thus all fees payable to the government in the name of business name registration, acquisition of licenses, and rental of business space must be reasonable or even free in the first few years.
When all businesses are formalized, there will be no reason for the County Government Askaris to demand for bribery, harass the poor hawkers, or even torture them.