‘You are not seeing a CEO in me,’ Kibaki told Equity boss in meeting that set off Vision 2030
President Mwai Kibaki’s sharp economic mind drove drastic reforms across key sectors of the economy following his election in December 2002, and under his stewardship, the economy blossomed.
He made significant investments in sectors such as transport, health, education, information technology, energy and financial services, with the gross domestic product (GDP) rising from a paltry 0.6 per cent to an impressive seven per cent in his first term.
Kibaki died last week aged 90. Dr James Mwangi, Equity Group managing director and chief executive, on Wednesday spoke with Nation reporter Brian Ambani at his office about Kibaki’s legacy.
Dr Mwangi notes that the fruits of Kibaki’s great investments in the economy are being reaped today and will continue to be felt for years to come.
“When I got my first job and I needed a car, I went to my sacco and did reverse saving. I borrowed from the sacco, bought a car and then over the next five years I paid for the car (while using it),” Dr Mwangi said.
“That is the situation that we are in. We needed the infrastructure and we had to incur the cost upfront.”
Below is the full interview:
Daily Nation: How can you describe the late President Mwai Kibaki?
James Mwangi: I celebrate with the family, Kenyans and the world at large the life of a man who selflessly gave himself to this country and laid a foundation on which future generations will benefit from his devotion to the nation.
What was your very first meeting with President Kibaki?
Our first meeting was when he called on me, (after) I had been proposed for the think tank that developed the Vision 2030, and in the presence of Ambassador (Francis) Muthaura (head of Civil Service at the time) it was decided that I would fit better in executing the dream.
Former President Mwai Kibaki talks to Mr Francis Muthaura (left) at JKIA.
That was the first meeting where I saw a man who could trust me not just as a part of the think tank but taking me to executing and implementing (Vision 2030). As I tried to find out why he gave me that responsibility, I was told he said I had executed well at Equity and so my job was cut out for me.
It was to execute and implement his ideas under Vision 2030. The second meeting was when I was appointed and I went to him and said, ‘To be effective and to immediately execute it, I need a chief executive” and he looked at me and said, ‘You are not seeing a CEO in me, go and look for one and we will support you’.
We went and interviewed (potential candidates) and I think within 24 hours the first Director-General Mugo Kibati was effectively appointed and that demonstrated what he expected of me – make decisions and execute quickly. And that became my philosophy and mantra for Vision 2030, quick execution.
What were President Kibaki’s best leadership qualities that you also identify with as a distinguished banker?
I think the distinguishing and outstanding capability I saw in President Kibaki was thinking through things. Essentially, when you took a proposal to him, he listened and he could never interrupt you until he found a different view and then he would ask you to clarify something.
That humility in terms of believing others can have an opinion – respecting that once he had given you a job he expected you to do it and not for you to go and seek his views – was the most outstanding and one of the biggest lessons that I have taken and have tried to deploy at Equity Group.
What do you consider to be President Kibaki’s biggest contribution to the banking sector?
I think it is liberalising and enacting the right policy framework. President Kibaki came into power when the entire banking industry was at about Sh365 billion and by the time he left we were about Sh1.1 trillion. Essentially, we are talking about an industry that grew almost four times during his time.
One thing he did right was putting in place the right and integrated policy framework for the financial sector that built the capital markets, the Nairobi Securities Exchange (NSE), the banking sector, the insurance sector and the sacco sector.
Also read: Isaiya Kabira: The Mwai Kibaki I knew
That integrated approach and a liberalised, market and private sector-led policy framework was the brilliance of President Kibaki in building the financial sector as we know it today.
Not all leaders have an economist background. How much influence do you think President Kibaki’s background in economics had on how he managed the economy?
President Kibaki was very lucky because he went to very reputed institutions of higher learning, Makerere University and the London School of Economics, so we must give it to him that he was grounded.
I believe he was given a good opportunity when in the Ministry of Finance to practise economics, and particularly under the leadership of President Jomo Kenyatta, he was given the leeway together with those around him such as the late Tom Mboya to build the framework for the country which became Sessional Paper 1 of 1965.
And then when the world celebrated him in 1977, by the Financial Times naming him among the top 100 economists in the world, it gave him confidence during the reign of the late President Daniel Moi, because he understood what needed to be done.
Kenya Vision 2030 document.
So in just 10 short years, a man who inherited an economy of just Sh1.3 trillion left it at Sh3.5 trillion and we can see that he knew what he needed to do. But what distinguished him as an economist is that he was a systems person, he was a man of structures.
He didn’t say that ‘I will do’, he said ‘let’s create a plan’ and you can see he didn’t just create a plan for his 10 years of leadership but he created a plan that could see the country emerge as a middle-income economy.
How did President Kibaki stimulate the growth of the private sector?
President Kibaki inherited a budget of about Sh200 billion and tax revenue of Sh200 billion so it was a balanced budget that literally had no borrowing. But what he did is that he did not go to borrow to grow the economy, he stimulated the private sector.
His intervention was not in funding, it was in policy reforms. He reformed the private sector, the regulatory regimes and consequently made the economy not to be driven by government investment but by the growth of the private sector.
That is why the private sector then quickly went to the banks to borrow, so instead of the government borrowing, it is the private sector that was borrowing to invest and to grow the economy.
And then quickly, that gave him an opportunity to exponentially increase the tax revenue. So he got an economy that was generating Sh200 billion in taxes and by the time he left it was generating Sh800 billion in taxes.
To properly contextualise President Kibaki’s achievements, it is important to understand the economic situation before he took office. What were the structures underpinning the economy at that time?
I would describe it as a controlled, central command economy that was highly controlled at the centre by the government. And his first change was to liberalise the economy, remove it from the hold of the government and allow the market forces to work.
Also read: Economic growth plan gathers steam
And as a result, you can see his first priority was the economic pillar, he wanted a functioning economy, he stabilised the interest rates and exchange rates and inflation. The market became predictable, global capital could flow into the country, the private sector could invest because it was an enabling economic environment.
Then he institutionalised it by creating a policy framework that whoever comes after him was bound by the policy framework. He said that now that the economy was functioning, who should benefit from it? Then he turned to the social pillar and said Kenyan children should be the first to benefit, declaring free education and then universal healthcare and affordable housing.
He created a people-centred economy. Then he said, “That is very good but this economy needs to continue growing. We have stabilised the micro-economic environment, how do we enable the economy to grow? Let us improve the ease of doing business’.
He found Kenya at position 139 in the (World Bank’s) Ease of Doing Business index and he improved it to 92.
One of the big drivers of growth, especially in the private sector, is access to credit. How significant was the introduction of agency banking to the growth of banking services?
I think because of his background as an economist, President Kibaki got it right that it was not for the government to fund the private sector and the economy but it was for the private sector to fund itself.
That is why among the first things he did was to liberalise the financial markets so that they could grow and use their growth to fund the economy.
And because the government was not competing for loans with the private sector, the interest rate the government was offering the banks for the loans was one per cent, so banks focused on hawking loans.
In the process, farmers improved agricultural produce significantly, the informal sector formalised and today some of the largest Kenyan companies such as Equity were micro-enterprises. The banking industry was his first sector of focus and he got it precisely right and today we have one of the best banking industries in Africa.
How did the growing economy during President Kibaki’s first few years in office influence Equity’s move to issue its Initial Public Offer (IPO)?
President Kibaki came into power when Equity was almost getting out of technical insolvency. So it needed to be capitalised and he had liberalised the market. The easiest way was for Equity to enter into the capital market and in 2007 the bank listed on the NSE when its capital base was only Sh800 million.
Late President Mwai Kibaki welcomed by then Safaricom CEO Michael Joseph, while then Privatisation Commission Chairman Prof Peter Kimuyu looks on during the launch of the mobile service provider’s IPO on March 27, 2008 at the KICC grounds.
The following year, in 2008, Equity was able to take an investment from Helios and increased its capital from Sh1.4 billion to Sh14 billion and that is what financed its growth.
Also read: Kibaki launches long-awaited Vision 2030
That is the power of his liberalising of the market. He unleashed the power of the markets to the private sector.
One of the laws enacted during his reign was the Microfinance Act of 2008. How significant was its role in enabling credit access to ordinary citizens?
You can give President Kibaki credit for being an economic genius. He realised it was good to build big banks, it was good to have international banks and private and government banks but he knew mwananchi at the village level needed financial services.
So he pushed the Microfinance Act to allow tier three banks to develop. That to me created an incubation centre for local entrepreneurs. Those are all formed by local capital.
But he went beyond microfinance institutions and streamlined the credit and savings cooperative societies (saccos) and even created a ministry for cooperatives. That is the genius in the man knowing that the easiest to grow an economy was funding the citizens to realise their economic dreams.
It was also under President Kibaki’s tenure that the 2009 Proceeds of Crime and Anti-Money Laundering Act was passed. How important do you think the Act was in cleaning up the banking sector of illicit financial flows?
President Kibaki’s integrated economic plan had the economic, infrastructure and social pillars. But he also had the governance pillar. It was the institutional framework that could guarantee sustainability of the economic plan and ensure its management was predictable.
While he ran with the first three – that is, the economic, social and infrastructure pillars – we derailed him as Kenyans with his governance vision. It was only in 2010 that he was able to enact our governance structure (through the new Constitution) but it only became effective with the elections of 2013.
So he did not benefit from the governance structure that he could use to fight corruption, fraud and holding people to account, so the accountability vision was heavily derailed.
What is your final tribute to President Kibaki?
I would really like to celebrate with his family and Kenyans a great man who demonstrated what selflessness means, a man who taught us how to be gentle despite having power, a man who taught us how to be humble and a man who taught us how to be simple and down to earth irrespective of our positions.
He taught us that all of us are leaders even without positions, and his commitment to the public good. I worked in proximity to him as his chair of the Vision 2030 Secretariat and I can say that he held himself to very high ethical standards and he became a mentor and a role model for me.
I am celebrating the life of my hero.
Can you, therefore, say that you are a better Dr James Mwangi after having met President Kibaki?
I am a better version of James Mwangi. To be honest, I would not be who I am today (without President Kibaki). He challenged and inspired me and I felt that he had given me too much in coaching and mentoring.
And to those much has been given, much is expected and consequently, I aspire every day to be a good and better version of James Mwangi. BY DAILY NATION
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