[kictanet] [strategic inefficiency is what creates a large number jobs] Jobs fall to 6 year low despite GDP "boom".

Sat Apr 27 02:06:09 EAT 2019

 [Resent: complete version with fixed typos]
Many thanks Mildred, for weighing in, and for enriching the discussion with industry-specific context. 
Dear Listers, I believe a good number of ICT (hardware / software / new media) startups will share similar sentiments as Mildred - and it would be great if you could weigh in too based on your personal experiences as founder/co-founder/practitioner etc. 

Some people have asked me, is it worth it? Won't we just be ignored? This concern was aptly captured by a recent humorous (yet painfully true) analogy on this forum, to the effect that: "croaking frogs cannot keep wild animals from drinking at the river/pond.."

But who said only frogs can make noise? There is another saying:
"It's the squeaky hinge that gets oiled eventually.."

Unlike the frogs, the squeaky hinge's purpose is aligned with the owner's intentions and goals (win-win). I think ICT (and allied) MSMEs will need to devise ways of accumulating strong negotiation leverage, in order to shift the perception of MSME issues from "croaking frogs" to the much more aligned "squeaky hinges" - and hopefully have MSME issues move higher -upon the Government's priority + high visibility lists.

I have been thinking of some (not mutually exclusive) ideas: 

1. An ICT and Allied Workers Union (ICTAWU); to champion unique issues around the ICT-related labor industry, provide a self-regulation mechanism for ICT practitioners who are employed (hence no need for ICT Bill) and a negotiation platform to address perennial issues such as outsourcing of ICT jobs as commodity labor to other countries - which denies our many of our highly qualified youth jobs. 

It should pain us to see our high performing ICT graduates hawking Chinese wares or Second-hand clothes in markets to eke a daily wage - while local corporations (and even Government agencies!) are happily outsourcing billions of shillings worth of work to India, Egypt, Portugal and even the US in the name of efficiency. 

Such labor commoditization practices harm our economy, deny us a chance to build export-strength indigenous technical capabilities, besides denying the Government hundreds of millions of shillings in much needed PAYE taxes.  ICTAWU will help seal immigration loopholes created by such remote "off-shoring" engagements, which brazenly bypass our work permit rules.

ICTAWU will also champion for things like preservation of moral IP rights for employees who innovate for their employers, so they can get recognized throughout their careers - and lifetime - especially if their innovation is a big hit. Recognition is important because it gives our children role models/heroes to look up to - while instilling self -confidence. 

 ICTAWU will also champion the use of local applications in companies and Government because that is how high quality jobs (and new streams of foreign exchange revenues) are created.

2. Also thinking of an umbrella association of all ICT (and Allied) associations that have MSME membership - together with the Workers union being a sister entity with shared interests (considering that ICT workers frequently shift between startups and employment).
I can predict very strong opposition to the workers union idea - because the power of unions is well known. Unions work because they have powerful legal and constitutional leverage. We must start using these tools to organize.

We cannot be the frogs. We have to be the squeaky hinges. Otherwise the future will be very tough for all of us (or our children). The one thing we undisputedly have is numbers - if only we can get organized to speak with one voice. Together we can!

Thanks again & Best Regards,Patrick.
Patrick A. M. Maina[Cross-domain Innovator | Public Policy Analyst - Indigenous Innovations]

    On Friday, April 26, 2019, 7:03:40 PM GMT+3, Mildred Achoch <mildandred at gmail.com> wrote:  

 Dear Patrick,
Thank you for this.
As someone in the "cottage industry" of film in Kenya, I agree with many of the points you have put across here.
"1. SMEs, e. g. cottage industries, are inefficient - compared to larger factories, but they can create exponentially more jobs with less tax breaks. Most SMEs also spend all their revenues in Kenya, while promoting other dependent MSMEs.. unlike large corporations which tend to move funds abroad for different reasons (tax, asset protection, hedging, dividends etc)."
All one has to do is look at the credits at the end of films, even low budget ones. The potential of the film industry to create employment is big and is yet to be fully explored in Kenya.  

"De-risked MSEs are what attracts high quality FDI in the form of venture capital. So rather than pitch tax breaks to global investors, the government should pitch de-risked high potential small enterprises (the way Israel and some EU countries are doing) whose business model has been proven in order to attract capital to scale up the businesses."

There are a number of relatively small film production companies in Kenya which have been churning out good content despite lack of adequate resources. If these production companies could be "de-risked', global investors will be more likely to invest in them. Citing the amazing example of South Korea, government has to take an active role in supporting the creative economy. We are in the Knowledge Information age. I think it makes sense to invest in the creative economy.
"Government should find ways/tactical excuses to ignore callous and unethical requests/pressures for cold blooded fiscal efficiency."I won't say much on this. I'll just say two words: Film licenses.
"I know some of the things I write are not supposed to be said because it will spoil some lucrative plunder parties.. but I alsonknow many of you know what I am saying is TRUE because you have seen it being done, heard about it or (God forbid) participated in it ."These are the challenges that many Kenyan filmmakers go through.  

"The youth are our children. It is our duty to create an enabling ecosystem framework that attracts opportunities and truly rewards them for innovation."Yes, that rewards them for innovation, not penalizing them. I am still not over what someone said at a recent film market in Nairobi. That if one is caught filming without a license, they shall be arrested. 
Surely, there must be a better way to both encourage innovation while still keeping order?
I remain disillusioned,Mildred Achoch.
Check out the Rock 'n' roll film festival, Kenya TV Channel! 
http://kenyarockfilmfestivaljournal.blogspot.com

On Fri, Apr 26, 2019 at 4:49 PM Patrick A. M. Maina via kictanet <kictanet at lists.kictanet.or.ke> wrote:

Dear listers,
In order to create jobs, the government should move away from policies that focus on increasing efficiency to those that are strategically inefficient.
Examples: 
1. SMEs, e. g. cottage industries, are inefficient - compared to larger factories, but they can create exponentially more jobs with less tax breaks. Most SMEs also spend all their revenues in Kenya, while promoting other dependent MSMEs.. unlike large corporations which tend to move funds abroad for different reasons (tax, asset protection, hedging, dividends etc).
2. We always see donors (especially, I believe, WB & IMF if I recall correctly) always pushing govt to redirect expenditure from recurrent/wages to "development"/infrastructure (clearly in their own interest as assets can be securitized for their own peace of mind, and more debt can be incurred in dev projects). So they push developing countries to reduce manpower in critical strategic sectors of the economy (less teachers, doctors etc) or to pay below-market wages. 
What is the impact of such financial efficiency measures? Do they not care that the employees they keep asking to be retrenched are real people with families? Do they not care that manpower reduction means our children get the worst teacher:pupil or doctor:patient or police:civillian ratios?
Such recommendations lead to massive hidden costs downstream that cannot be attributed (e.g. low quality education, poor healthcare, increased insecurity due to overloaded+underpaid workers). It just looks like we have endless problems of incompetence but it is not by accident... we follow "weaponised advice", designed to keeps us poor.
Efficiency efforts should be limited to enabling high impact service delivery (optimized processes) not financial efficiency.
Government should find ways/tactical excuses to ignore callous and unethical requests/pressures for cold blooded fiscal efficiency.
Public sector Performance Contract targets need to be linked to a basket of grassroots metrics that reflect the general quality of life for the ordinary population (besides GDP, Inflation, NSE Index & exchange rate). This can be presented in dashboard format on eCitizen so that wanjiku can see what is happening, hold officials to account for not delivering and be motivated to support such initiatives (but the data must be *real* to avoid risk of future backlash).
Our "missing middle" problem (i.e. a tiny middleclass) needs to be addressdd. It exists because government incentives for business have focused mainly on Micro enterprises which are too inefficient to be sustainable, and large corporations that are too efficient to fill the jobs gap (and too demanding - always asking for endless concessions just to maintain status quo).
If you track current incentives given to large corporations and account for all outflows and hidden costs (many of these corporations are the architects of grand corruption in the country) - you will see a MASSIVE NET LOSS / WEALTH EXTRACTION directly attributable to corporate activities (e.g. encouraging harphazard spending, lobbying for bad laws or poor incentives).. despite the appearance of "gains" on simplistic paper reports that ignore the full impact.
A thriving middle class (people who are not rich and not poor - with ability to buy a car, spend regularly on mid-level leisure and even save for luxury spending) is what ends poverty and drives a strong economy. 
Small and Medium-sized Enterprises SME are the key to a thriving middle class and rapid, large scale jobs creation. They tend to lean towards formality, will often have more educated founders, are inefficient because of scale - but not overly so as to be unsustainable like Micro enterprises, and a few will have potential to grow into mega corporations. 
De-risked MSEs are what attracts high quality FDI in the form of venture capital. So rather than pitch tax breaks to global investors, the government should pitch de-risked high potential small enterprises (the way Israel and some EU countries are doing) whose business model has been proven in order to attract capital to scale up the businesses.
The reality of Tax incentives to big corporations is that they only cannibalize the treasury - and these same corporations will do everything they can to minimize local expenditure (even furniture is imported yet we have skilled carpenters), and extract wealth in all manner of ways (e.g. transfer pricing). 
Most jobs offered by large factories are low level, while skilled jobs (r&d, conceptualization, design, development) will be outsourced with the (false) excuse that Kenyans are not competent. In reality they just want to prevent HIGH VALUE KNOWLEDGE TRANSFER so that locals don't build indigenous alternatives.
I know some of the things I write are not supposed to be said because it will spoil some lucrative plunder parties.. but I alsonknow many of you know what I am saying is TRUE because you have seen it being done, heard about it or (God forbid) participated in it .
This habit of taming monsters by feeding them with our kids is becoming too much and has to be called out for what it is. 
The youth are our children. It is our duty to create an enabling ecosystem framework that attracts opportunities and truly rewards them for innovation. 
We need a Kenyan Steve Jobs or Bill Gates who own their own companies - rather than have them and their ideas gobbled up by monopolistic dinosaur corporations that want to suppress their enterpreneurial dreams supressed in order to delay, the next wave of disruptive innovations. We need hundreds of winning case studies - not tens of mostly foreign owned startups (not that it's a bad thing to have foreign ownership, the key thing is that, given our history of suppressed esteem, our youth desperately need role models they can relate to so that they can start BELIEVING in themselves).
We can't just tell youth to be job creators.. that's like telling a starving person to go find food. If they knew how - or where, they would not be starving. 
The REAL reason we tell the youth to employ themselves - yet we have not created an enabling framework - is because they have caught us napping and we want to deflect responsibility.
"We" means anyone over 35 years old whether in privage sector or Government. Our parents didn't give us a gift to keep (the opportunities we enjoyed), they gave us a BATON to pass on in a long term RELAY RACE. 
Did you drop your baton (I did too)? Pick it up. Ignore the naysayers. Start running.
Link:
https://www.businessdailyafrica.com/news/Formal-jobs-fall-to-6-year-low-despite-GDP-boom/539546-5088750-nra671z/index.html

Warmest regards,Patrick.
Patrick A. M. Maina[Cross-domain Innovator | Public Policy Analyst - Indigenous Innovations]_______________________________________________
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