Friday, May 20, 2011

Threats to the Kenya Tea Industry under The Global Production Network.

The Oxford Journal of Economic Geography defines the Global Production Network (GPN) as the nexus of interconnected functions and operations through which goods and services are produced, distributed and consumed. The GPN aims to reveal the multi-actor and multi-scalar characteristics of transnational production systems through intersecting notions of power, value and embeddedness (Ibid).

The tea industry directly and indirectly supports the livelihoods of agricultural communities and even the national economy of Kenya, yet, tea-dependent livelihoods in Kenya are now facing four major challenges:

i) First, the newly signed Economic Partnership Agreement (EPA) between the European Union (EU) and the ACP, that ended preferential trade access to the EU market for ACP products including tea . A key element under EPA is the creation of regional markets through regional trade agreements (RTAs) such as the East African Community. The full impact of such RTAs on development is yet to be known. For example, in the East African Community (EAC), Ugandan businesses complain of domination by a competitive manufacturing sector in Kenya. Kenya is also taking over the banking, hotel and retail businesses in Uganda.

ii) Globalization has led to disparities in economic outcomes for upstream and downstream actors, that is; the increase of profits and power for retailers in the global-north at the expense of producers in the global-south. For instance, the researcher Omen demonstrated in 2009 that in the global tea industry, power is concentrated in the hands of just four Trans-National Corporations (TNCs); Unilever, Van Rees, James Finley and Tata Tetley/Standard. This quartet influences price setting at auctions in India, Sri-Lanka and Kenya where about 70% of global tea is trade. Earlier in 2002, Benoit Daviron & Peter Gibbon showed that these TNCs invest more in branding and marketing at the expense of transformation in production and labour processes and that the goal of such TNCs is no longer expansion of activity but maximization of profits even if this requires downsizing the workforce.

iii) Agritrade, a Kenyan agribusiness research organization, highlights the role of state regulatory power in the local-global political economy. For example, the EU uses its competition policy against “abuse of a dominant market position” to prosecute and punish EU companies that collude in setting prices. Kenyan farmers need know whether the EU will agree to a joint ACP-EU action against international companies, like the above quartet, that collude in fixing prices (Ibid). Scholars like Jeniffer Bair of Yale University and Peter Gibbon support this view by showing that regulatory mechanisms shape the geography and configuration of commodity chains as well as the regulatory context that affects the extent to which developing country exporters may benefit from their participation in global production networks.

iv) Lastly, Agritrade notes that the increasing impact of climate change is generating unpredictable harvests, leaving many small-scale tea growers struggling to plan for the future. Tea bushes yield the best-quality tea between 18 and 32 degrees Celsius. Should global warming cause temperatures to rise by 2 degrees Celsius, large areas of Kenya currently suited to growing tea would become unsuitable. Other ecological questions include whether to allocate more land for non-food crops when incidences of food shortages are on the rise.

In an attempt to answer the above four questions, in-depth studies are needed in the areas of:

a) The GPN. This can be used to explain the political-economic outcomes of the global tea industry by tracing the trajectory of the crop from the farm gate at Unilever tea Kenya to a high income country retail outlet like Tesco in the United Kingdom while taking note of the level of actorness (relative economic & political power) of the different actors in the chain. The acto-ness of non-state actors in the ACP states is limited for reasons such as the political environment that allows neither mass action nor divergent socio-political views.

b) Political economy: According to Prof. Stasavage of New York University, Comparative political-economy is the study of how political context determines economic policy choice and economic performance. New studies must attempt to unravel the complex political economy of interactions between Kenya’s policy response to globalization in general and to Transnational Corporations involved in the transhipment, processing and marketing of tea.

c) Gary Gereffi, Peter Gibbon & Benoit Daviron reached a consesus in the last decade that the actorness of actors in a chain changes over time. For instance, Kenyan farmers accounted for 55% of all fresh fruits exported from Kenya to the UK in 1993 but this value fell to under 20% in 1999. These changes are attributed to the entry of better financed and dedicated British importers with the necessary logistic capacity for production and shipment in Kenya plus distribution and ripening centres in the United Kingdom. These developments raise questions about the future of smallholder crop producers and whether this economic marginalization and exclusion of smallholders may not threaten international development.

d) Farm workers fear protesting against unfair practices because if they lost a job, there would be few other alternatives while the tea farmers lack a major negotiating tool; the ability to walk away from trade negotiations since there are just a few buyers. Institutional actors such as the Kenya government or the Kenya tea board make little or no input in the international rules governing their commodities yet they must enforce such laws.

In sum, the threats faced by the Kenya tea farmers arise out of the imbalances in international trade. Correcting these imbalances by reconstructing the GPN will involve a political struggle and renegotiation among states and firms in and across multiple jurisdictions. Giving the Kenya tea farmers more actorness in the GPN will also be to the advantage of the TNCs since no business can survive as an island of wealth in a sea of poverty.

By
Peter Bill Kisitu
Trade Consultant

Monday, November 16, 2009

High Money Transfer Costs are pushing Africa out of International Trade

Money Transfer and International Trade

Policy Paper by Gro Trade Consulting
In the year 2007, 318 billion dollars were sent back home by 150 Million international migrants. The top remittance earners were India at 27 billion, China at 25.7 billion, Mexico 25bn, the Philippines at 17billion and Sub-Sahara Africa received 19 billion. According to the World Bank, the remittance fees range from 6% of amount sent for inter-bank transfers to 20% for money transmittance companies like western Union. On top of the remittance fee is a hidden exchange rate charge.

Insofar as the current money transfer companies and banks do a great deal in helping deliver the much needed help to families, the high transfer fees they charge make them unsuitable as a system of payment in international business. These charges wipe out African Sme profits Furthermore; the high cost of borrowing money in Africa further increases the cost of doing business. With the current financial crisis pushing many migrant workers out of work, the remittance problem has never been worse.

The emerging consensus is that more competition in the money transfer industry will bring the remittance fees down. International Bank transfers are often reported as a highly efficient alternative to money transfer companies because they streamline the complicated process of handling cross border and inter-country disbursements and collections since each country has a different clearing system with its own rules and regulations thereby saving customers up to 90% in fees.

However, maintaining multiple Bank accounts and complying with country specific payment format is expensive and time consuming and payment delivery and time is uncertain. Furthermore, more than 80% percent of the population in Sub Saharan Africa do not keep a bank account. This calls for the use of technology that is accessible to people without bank accounts but is affordable.

The EU-Africa Trade and Investment conference (http://eatc2010.blogspot.com/)will seek as one of its objectives to find the most competitive rates for money transfer. To this end, three companies with some of the most competitive rates have been identified, these are; Atena, a Dutch company that charges a standard rate of 3% regardless of amount. The other is Xoom which charges from 0.3%-8% per transaction depending on the amount being sent. The third alternative is Money transfer software (MTS).

MTS is an easy to use interface that can be used by anyone with or without computer experience and supports multi-currencies. It keeps track of the recipient’s previous transactions in the history. The transaction is available immediately and is available for the payee agencies worldwide.

Therefore, the shift from western Union which charges 20% per money transfer transaction to Atena which charges 3% percent per transaction would translate into savings of 3.23 billion dollars for Africa per year and 54 billion for global remittances. These savings will help the small companies to increase their investments and consequently increase their share of international trade.

http://eatc2010.blogspot.com/

Wednesday, November 4, 2009

Regional Tier Versus Multi-level Governance- The Uganda Scenario

Multi-level Governance would work better than Regional Tier

The regional tier federal system being proposed by the Uganda government, looks like a basket mix of apples and tomatoes, although these two are similar in shape, one is a fruit and the other a vegetable.

Ugandans will benefit greatly by considering a third option on top of the current system and the regional tier, this would be what Shakespeare called the 'third way'. This third way is what is in use in European Union Politics and is called Multi-level Governance (MLG).

MLG is a theoretical perspective on the organization of modern states that acknowledges flexible structures of overlapping jurisdictions, both above and below the national government as well as in a lateral relationship to it. The increasing fluidity of political power is an issue for scholars of politics and government

The transfer of competencies upwards to supra-national organizations such as the East African Community, sideways to quasi-autonomous actors like Inspector General of Government, and downwards to sub-national authorities like districts, has arguably transformed both the structure and capacity of national governments. It is within this context that the concept of multi-level governance emerges as an approach to understanding the dynamic inter-relationship within and between different levels of governance and government. Multi-level governance is a novel analytical framework that refines traditionally dominant approaches.

In the case of European Union politics, regions such as England, Scotland, Bavaria, and Flanders, Catalonia are considered to be on the same level which is overlapping with European Cities such as London and Antwerp. Each of these levels contributes to European legislation separately but where their interests merge, they can put up a common position, this common position increases the power of sub-national actors.

Unlike the regional tier which suggests that MPs, counsellors and cultural leaders from the same should have a common assembly, in MLG you never find a situation where the European Parliament, the British Parliament, the Scottish parliament and Queen Elizabeth's representative debate policy together. Each level is considered as a special interest group and will only meet that arm of government that is concerned with those interests.

This creates space for all actors in a democracy to contribute to the law making process. Kingdoms, although apolitical, would unite to pursue and defend their interests to the appropriate organ of government or Parliamentary committee, businesses will unite under an umbrella such as the Chamber of commerce to lobby the Parliament committee on trade, schools and universities will unite and lobby the Parliamentary committee on education et cetera. Another major advantage of MLG is that it creates a breathing space for nations trapped within states, in this context, regional cooperation would allow Buganda to cooperate with Rift valley province of Kenya or Kampala to have direct Cooperation with Kigali.

Therefore the Parliament of the republic of Uganda should consider adopting multi-level governance (MLG) as it will give more power to the people, more power to our parliament and more legitimacy to the state.

Tuesday, September 15, 2009

Challenges of illegal Immigration: Public Hearing at the European Parliament

CONTRIBUTION BY MR PETER BILL KISITU

http://www.virtual-personnel.com

Introduction

There are no international arrangements at present to recognize economic migration as forced migration hence most of the people in this category will end up either as refugees or illegal immigrants. The illegal immigrants will accept working conditions that are below what the authorities in host countries recommend. These will enter the EU illegally or just overstay their visa.Perhaps it is important to give a profile of an illegal economic migrant at this point so that we have a clear picture as we go along.

The profile of an economic migrant

• Fairly educated, from high school dropout to university graduates.
• Urban to semi-urban dweller with frequent access to the media(mainly international media)(It should be noted that Rural Africa has access, mainly to government media and mostly radio, the lack of electricity means that images of Hollywood, Paris and London are never seen)
• Has got access to 2000-3000 euros in cash, through relatives or in the form of property that can be sold to raise this amount.
• Has got relatives or friends in the EU (Abroad)

With this profile in mind, we can now discuss what motivates these people to migrate: It is said that there are push factors such as poverty, conflict, natural disasters and famine and pull factors such as the lure of better economic prospects and a western life. We note that economic migrants are mainly influence by pull factors.

Main causes of economic migration

Media

According to a Rutledge article edited by Nancy wood and Russel King, the media serves to increase economic migration in the following way:
Images transmitted from the destination countries or by the global media are an important Source of information for potential migrants, for example about how immigrants are depleting national coffers of destination countries. Whether this information is accurate or not, it can act as an important stimulant to move. Images of wealth and a free and relaxed lifestyle in the west are commonplace in developing countries.

Returning migrants collude in strengthening the veracity of these images mainly to impress and partly to deny any elements of failure, suffering or exclusion to their family, friends and to themselves. An example is an African who lives on 10 British pounds per day in London, when he goes to Africa he will spend 300 pounds per day, this big spend will mislead the locals into thinking there is so much money out there not knowing this man has been saving for twelve months just to come and impress.

The local media has not helped either; they have concentrated on foreign news reinforcing the belief that the European way of life is superior to the African one. Case in point: Ugandans know more about the English premiership than about their local football leagues. If you visited any part of Uganda and asked any Ugandan aged between 18 and 35 to name just three Ugandan footballers you will get a blank, however if you asked the same person to name the entire line up of Manchester United, they will answer with ease. In nightclubs, on Fm stations there are songs by local artists about Arsenal and Manchester United but none about local teams.

The local media needs to report in a way that builds the confidence and self -esteem of their people by praising their sportsmen and women, culture, musicians while the western Media needs to give Africa more positive coverage, by highlighting some success stories that build pride and hope for Africa. The media can also be used to tell people about the dangers of illegal migration, such as deportation, detention, alienation or the risk of death by drowning on rough seas or suffocation in truck bodies. I discussed this point with an official of the EU delegation in Uganda but he said we should not spend EU money on any thing that portrays the EU in a negative light. The other solution to this problem may be to increase funding for local sports programs and for media training to improve the quality of reporting.

Causes of illegal migration

Chief among these are lack of information on legal channels, inaccessibility of these embassies, intimidation and high visa fees

Intimidation

Terrorist threats against Western installations abroad have led to the fortification of most European Embassies abroad, sometimes with the presence of heavily armed security personnel. I tried to photograph the perimeter wall around the British High Commission in Kampala so I can show you how heavily guarded it is. Unfortunately I was arrested on the spot and my camera was confiscated, later the camera was returned but the memory card retained, later the security manager, a one Mr. Simon Bowskill came and he deleted all my holiday photos before returning my memory card, I told them that I wanted to show MEPs how similar it looks to the terrorist prison at Guantanamo bay, and he replied" If you think we are heavily guarded, you simply have no idea." By any standard, this is a terrifying experience, when one thinks of this experience, they will evaluate all available options. On this note, people smugglers offer better ‘customer service’ than the embassies since they meet their victims in informal settings like restaurants.

Witch doctors and pastors

Because of the intimidating nature of embassies, most visa applicants do have to consult a witch doctor, a pastor, or both before they can start processing their visas. It is now common for witch doctors to announce on radio and in Newspapers that they have the magic to influence the outcome of a visa application.

lack of information on legal channels.

Among the other Embassies I visited were the French, Belgian and Danish. I discovered that the Embassy of Denmark was the most inaccessible.
One is not granted access to the embassy premises, the security can give out visa forms from a pigeon hole at the gate to the embassy and that is all, I asked the security officers for information on study opportunities in Denmark and they simply answered that they could only give out visa forms, more information can be got from the internet. I told them that like the 98% of other Ugandans, I had no access to the internet and they said that is not their problem.

The French embassy too, does not allow access to the premises, all questions are answered on the main road, but with a more courteous receptionist who answers some of the questions. Lastly, I visited the Belgian Embassy, which in my opinion offers the best service of the four embassies I visited. The security at the Belgian embassy is there to make sure that visitors are not armed, but they kindly admit the visitor into the embassy premises where the visa officer can answer queries directly. So what makes the Belgian Embassy in Kampala have some of the best services and the Danish embassy have some of the worst service when the two are Schengen countries and are about 100 meters apart?, Even though the Belgian visa officer did not answer most of the questions I had, but by talking to me directly, I got a good feeling of respect and trust.

Visa Fees

The other anomaly I found at the Danish Embassy was that the Visa fee for Denmark is 92 euros while for France and Belgium it is 60 euros, why the difference if the Schengen visa fee is fixed by the EU. A second anomaly I found with visa fees was with the British visa. The fees are 100 euros for a
multiple six months visa, to 450 euros for a marriage visa. This is very expensive. The current exchange rate between Uganda shillings and British pound sterling was:

Currency market rate 1 £ = 3400 Uganda shillings
British visa purposes, 1 £ = 3700 Uganda shillings

I left a questionnaire at the British high commission, the main questions were, why are theirfees higher than the rest of the EU member states and why they exchange the pound at a rate higher than the market rate? and was told to contact Mr. John Hamilton and I called several times to get some answers from him but was always reportedly out of the office. We need some explanations on these anomalies from both the British and Danish authorities.

Loopholes at Airports

Airlines:
I interviewed people from several airlines but the country manager of SN Brussels airlines gave me the most credible and detailed information. He told me that per month, they have 15 suspicious cases and 2 obvious fraud cases. Check-in is done by handling companies in the presence of one or two airlines staff. When Fraud is involved, a procedure agreed by the Civil Aviation authority of Uganda is followed. However, according to information I got from a former employee of a handling company, the procedure of the CAA creates a vicious cycle. CAA recommends that the suspect and his passport should be handed over to the police and the airlines retain the ticket.

But the police has no transport facilities to go and cross check the visas and passports at the concerned embassies, so they take a small bribe and will release the suspect with his passport, the following week the same person could be back with the same or new passport. To fight fraud the police and immigration must properly investigate and document all cases before they release the suspects, in this case the knowledge gained can be used to improve the security at airports and to trace the sources of fake visas and passports.

Our response (Proposed solution)

We have set up a visa advice bureau that will have an internet connection to give people all the information they need on legal channels to come to the EU, for example on scholarships, sports programs and jobs. With the help of the Conservative MEP for London Mr. Syed Kamal, we hope to acquire hundreds of computers from digital pipeline for schools in E.Africa and some of these computers will be used in the Visa Advice Bureau. We will also give information on the dangers of illegal migration such as drowning, detention,
deportation, social exclusion, economic and sexual exploitation etc.

If we get money, we can run media programs on these dangers. We shall give people options for example e-business between Uganda and the EU, suggesting alternative destinations if they cannot have a visa for the EU, these alternatives may be Singapore, Hongkong etc for people who want to travel for business these are very good alternatives. Act as mediators where visa applicants feel they have been treated unfairly. Collect and document information from visa applicants, airports, airlines, the public, and embassies while respecting the confidentiality of the sources. The knowledge collected will give us new insights into the problem of legal, illegal, and economic migration. The manager of Digital pipeline tells me that they can help us set up ICT centres where schools in Uganda and in the EU can jointly work on projects and the same centres can be used for ebusiness, these centers can go along way in eliminating the need to travel.

Trade.

We are working with the Conservative MEP for London Mr. Syed Kamal to find markets for our agriculture products from East Africa. If we export raw materials, we export jobs together with the raw materials and the migrants that are coming here are chasing after those jobs, so in order for our export program to have an impact we shall request our clients to set up coffee processing plants in Uganda, so we can export finished or semi finished products. Therefore, we can create jobs at home while earning money from exports.

Monday, August 17, 2009

European Policy Makers Need to Understand the Immigrant Before Making an Immigration Policy

By Peter Bill Kisitu

Two decades ago, becoming an engineer or a doctor was life’s ambition for many African youngsters. Today however, becoming a migrant is a popular dream. Stories from the media and relatives abroad serve to reinforce this dream. It is for this reason that the European Union and sending countries need to invest considerable effort in changing this mindset right from an early age.

This dream is fuelled by the prospect of economic advancement and adventure. Contrary to popular belief in the west, most African immigrants in the EU are not the poorest in their countries of origin as the journey requires a substantial investment by sub-Saharan African standards. The fee normally ranges from US dollars 1000 to 10,000 depending on mode of transport and the smuggler’s fees.

A holistic approach that seeks to understand the motivations of an individual’s desire to travel abroad as well as an examination of alternative ways of meeting such objectives will increase the knowledge available to European policy makers and how to better manage migration. Although no agreement has been reached on the best way to deal with the migration challenges, consensus is emerging that it is difficult to stop it. Therefore, together with international law and agreements, a study of the migrant may have to take center stage in managing south-north migration.

The migrant is taken care of only in the return policy where, as a way of encouraging voluntary return, the immigrant in illegal circumstances is granted a long term multi entry visa and is promised facilitation if they want to come back and work in the former host country. This might serve as the new pull factor for others who want to enjoy the same privileges as those who have previously broken the law. Hence the need to involve the applicant at the country of origin will be greater when this European Commission policy comes into force.

There are more Africans in the EU today than during the slave trade era. During slavery times, Africans were forcefully uprooted from their villages, this time however, they are coming voluntarily and are willing to be enslaved by unscrupulous business owners. In most EU countries, the issue was first left to the media who did the reporting in a populist way causing disquiet among the population and giving ammunition to far right parties like the Vlaams Beerlang of Belgium and Front National of France.

Globalization of the media is another area that needs further examination. Images transmitted from the destination countries by the global media are a source of information for migrants and the relaxed lifestyle and luxuries are a sure magnet. What has not been discussed under the media is; what will be the impact on South-North migration if the dangers of illegal migration were made known to the applicants early enough? These dangers include drowning, deportation, economic and sexual exploitation, social and economic exclusion in the destination countries.

Intergovernmental conferences such as the Tripoli Summit (2006), Rabat Declaration(2006) and the Berne Initiative (2002); have been held between the EU and the sending countries but no single mention is made on the inclusion of the migrant in the debate yet influencing his behaviour may hold the key to defeating illegal immigration.

A President for the East African Community?

Published in the New Vision newspaper, Uganda’s leading daily on September 24 2007
Author: Peter Bill Kisitu

EDITOR—On September 19, The New Vision published a story entitled “Tanzania will be part of federation - Kategaya”. A single president should not be an aim in itself. take for example the President of the European council. his job is to chair the meetings of heads of state and government and perhaps help draw up the agenda for such meetings.

So President Museveni should not be very excited about this job as there will be only a few meeting per year. Furthermore, if there are five countries, there will be five side shows as all five will continue to pursue national interests alongside community interests. This is what happened in Brussels during the Iraq war. a common stand was agreed to oppose the war but Britain, Poland, the Czech Republic, Spain and Denmark sided with the US to the frustration of the presidency. This leaves the presidency

looking inept and disenfranchised. Leaving Tanzania out of the federation for now is a good idea but we need to amend the treaties to insert a clause that allows for multi-speeding. Multi-speeding has two main advantages: it allows those who are ready to take an initiative to go ahead while allowing others like Tanzania to get ready and join later.

It puts pressure on the indecisive as they risk becoming irrelevant, and worse they will be bound by most of the rules which they don’t participate in making. that is the case for Norway and Switzerland. even though they are not EU members and have no legislators in Brussels, they are bound by 70% of the acquis communautaire or the body of Community law. Multi-speeding will ensure that we do not grind to a halt as unanimity may be difficult to attain all the time. So those that agree should not be held back by Tanzania which only seems to be afraid of the chequered history of Uganda, Rwanda and Burundi as well as the intentions of the proposed first President of the federation.

As the leaders continue to provide guidance, they should also be creating East African citizens. this will not be achieved by a single passport for East Africa, nay, but a student exchange programme where Ugandan university students can do their final year in Tanzania and Vice versa can be started. You can also exchange civil servants in a kind of secondment so that they can share best practices and also compare corruption levels. If you build only from the top, you are likely to engender more incredulity in Tanzania.