Kenya’s first loan from the US was stalked by same concerns as today

 

March 13, 1963. Kenya’s Legislative Council (Legco) debates a proposed law to facilitate borrowing from the United States. 

The $18 million facility was to be Kenya’s first loan from the US government. 

Colonial Kenya was still under a Governor but on course to gain independence at the end of that year. 

Jomo Kenyatta was a minister in charge of Economic Planning – one of the two ministers in the Ministry of State for Constitutional Affairs. The other one, in charge of Administration, was Ronald Ngala. 

Then, as is the case now with raging controversy over Jubilee government’s borrowing, heated debate ensued about whether the loan was necessary and if it would be put to good use. 

Most agreed the loan was necessary, but they clashed on how it should be spent.  

There are those like Machakos constituency representative George Nthenge who felt building African houses around Kariokor wasn’t wasteful. 

Others like Mr Mohamed Jahazi, the Temporary Member for Mombasa West, wanted the Mombasa-Nairobi road given first priority.

Rejected the borrowing

He argued the town of Mombasa was underdeveloped as a tourist centre. 

“If the Americans give us their dollars we must use those dollars to attract them to this country as tourists so that we are able to repay them with their own money,” Mr Jahazi said.  

Then there was Mr Taita Towett, Member for Kipsigis, who flatly rejected the borrowing.  

He was furious that the Parliamentary Secretary for Finance, Sheikh M.A. Alamoody, who had initiated debate on The Loans (United States of America) Bill, had declared Kenya had no choice other than borrow.  

“Originally, I was going to say how good this particular loan would be, but when the Parliamentary Secretary said that we must depend on overseas capital I begin to question whether he knows what he is talking about,” Mr Towett said.  

He went on: “It is not that we must depend on overseas capital, we are forced by conditions to depend on overseas capital. It is not that we must depend on it, we are forced by circumstances and we must escape depending on such capital.”

Mr Alamoody had stressed that Kenya was dependent on overseas assistance to finance development. 

Reluctant to borrow

“The Kenya government is at the moment reluctant to borrow, because we feel that if you borrow you have eventually to repay, but if there is no other alternative one has to borrow, and we are going for long-term financial loans rather than short-term loans, and of course it must be at attractive interest. 

“I anticipate that during the next few years, as is indicated in the World Bank report, it will be necessary for the government to seek new capital overseas in the form of grants and loans as well, amounting to between 25 million to 30 million sterling pounds, if this country is to have an adequate development programme in the public sector alone, apart from the private sector,” he said. 

Mr Alamoody, however, emphasised on prudent financial management, cautioning Independence would be meaningless if it would further impoverish Kenyans. 

“There are no shortcuts to economic development and we must work hard if we are to survive. If the country is to go ahead, we must maintain law and order. We must maintain fiscal solvency and balance our budget as well…If do not do this, this Independence will only bring poverty to us. To sit back and let the country fall into this state would be sheer folly,” Mr Alamoody said. 

But he ruled out Mombasa-Nairobi as a priority. 

“We have many other projects that need more serious attention than the Mombasa/Nairobi road,” he said. 

He then explained the genesis of the loan, informing the members that Kenyan ministers for Finance, Labour and Commerce had, during a tour of the US in October 1962, discussed numerous projects with the American government. 

Mr Alamoody, who was also the National Member for Mombasa, disclosed the loan was conditional, as the Kenyan government had to furnish the US with “suitable development programmes”.

“We have in the past had substantial assistance from the US government by way of grants, but loan funds from the US is a new development now and we are trying to exploit it. 

“Negotiations are proceeding well at the present moment,” he explained, adding the Bill essentially sought the council’s approval for the Kenyan government to seal the deal. 

He cited the provision for the extension of the Nairobi city water supply and the Kariokor developments in Nairobi, among the projects under consideration. 

“The important point is that loans, if they are spent on capital works, have one great advantage, and it is one we should never overlook. It applies to works which are undertaken, such as the road building which is being done up to Nanyuki and elsewhere,” said Air Commodore Howard-Williams, Nairobi West’s constituency member. 

“Money spent on capital works is worthwhile and the only way I know whereby government can make money by spending,” he added during the debate overseen by Speaker Humphrey Slade. 

Mr D.Q. Erskine said while it was important to borrow at least up to a reasonable ceiling, Kenya’s economy would depend “more on outright gifts from the richer nations of the world to help develop this little undeveloped estate of the world”.

“There cannot be anything but danger today in a world where the per capita income of 160 million people of the United States is around 600 pounds per annum and in Kenya 32 pounds,” Mr Erskine said. 

Mr Nthenge said while they encouraged borrowing of money, “we want it to be well spent”.

Equal distribution of development

“If the money is not going to be spread all over Kenya then we doubt whether it is really right to accept the loan,” he said.

Mr Nthenge however faulted suggestions that spending the loan on improving housing for Africans was wasteful. 

“It should not be understood that the whole of this House thinks that money spent on building African houses around Kariokor is badly spent because with the present speed of Africanisation, we hope Africans will be able to pay an economic rent and, therefore, the money borrowed will be refunded without too much feeling,” he said. 

And he lobbied for equal distribution of development and not to favour certain regions.

“This money should be spent very widely on projects that will make this country produce more so that we do not dilly-dally because this money might be borrowed and be spent so badly that the repayment would be very difficult and expensive.”

Just like today’s concerns on marginalisation, Mr F. W. Odede complained that Nyanza had been neglected. 

“We want this loan to be used in non-scheduled areas where we can start new development.

These areas are badly neglected by the Government,” he said, prompting Land, Settlement and Water Development minister Bruce McKenzie to interject asking which these areas were.

Drop in the ocean

“Central Nyanza District is one. We would like this money to be used in these areas so that the economy of the country is raised. Using money on land that has been developed is not good enough because we are just going to get what we have been getting before. I would like to emphasise that there should be industrial development in African areas. We in Central Nyanza and Machakos need industry, private industry, and this is where such money should be used,” Mr Odede responded. 

He protested that most of the money had been spent on settlement on land that had already been developed. 

“The development of this country is just starting, it is not the end, and therefore $18 million is just a drop in the ocean,” said Mr Jahazi. 

“We need more millions of dollars, or roubles, anything we can have. This money, whenever it is borrowed, should be borrowed with the honour of this country as the first consideration, although we need every penny from outside.” 

But he cautioned against loans that mortgaged the country to lenders. “I hope by borrowing this, the minister has not swallowed any strings attached to the $18 million.” 

“Perhaps loan money of this sort, with a proper balance maintained, could be used to help young industries onto their feet in different areas of the country. Of course, I always plead for the underdog,” pleaded Mrs A. R. Shaw, Kericho’s representative.  

Sheikh Alamoody in the end informed members the money was yet to hit public coffers and when it did it would be spent well.

“We have made it clear that we are trying, as far as possible, to finance our recurrent expenditure ourselves, and I think it is the government’s intention that as far as possible, all our loans should be capital ones.”  BY DAILY NATION