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    CCI Global, Gateway Real Estate Africa start Construction of new Contact Centre in Kenya

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Kenyan Business Feed
  • Home
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    Auditor General raises red flag over Education ministry’s Sh10 million per day perdiem

    Auditor General raises red flag over Education ministry’s Sh10 million per day perdiem

    IEBC begins enlisting voters in the diaspora

    IEBC picks Greek firm Lykos to print ballot papers

    Exposed: How Police are Running Illegal Trade Cartels in Kenya

    Exposed: How Police are Running Illegal Trade Cartels in Kenya

    Portugal settles on Kenya as its gateway for investments in Africa

    Portugal settles on Kenya as its gateway for investments in Africa

    Africa Avant-Garde explores the art of filmmaking on the continent

    Africa Avant-Garde explores the art of filmmaking on the continent

    Good news for Kenyans as fuel prices drop

    Hope for Cheap Fuel as Kenya Looks to the Middle East

    Epson Scanners Shine at the Seven Data Master Lab Awards

    Epson Scanners Shine at the Seven Data Master Lab Awards

    CBC Headache: KNUT pushes to have learners use primary schools for Junior Secondary Education

    CBC Headache: KNUT pushes to have learners use primary schools for Junior Secondary Education

    Rebecca Miano feted for promoting diversity and inclusion at KenGen

    Rebecca Miano feted for promoting diversity and inclusion at KenGen

  • Markets
    Naivas Opens its 83rd Store in Kiambu

    Government Subsidizes Maize Flour by Sh 2

    Showmax slashes subscriptions paid for via M-PESA

    Showmax slashes subscriptions paid for via M-PESA

    Epson Scanners Shine at the Seven Data Master Lab Awards

    Epson Scanners Shine at the Seven Data Master Lab Awards

    DCI arrests COVID-19 scammers

    Mobile Loan: Telkom Kenya set to launch M-shwari competitor

    Emirates Takes Triple Gold For The Third Year In a Row For Safety

    Emirates Takes Triple Gold For The Third Year In a Row For Safety

    IBL Group acquires Amethis stake in Naivas International

    IBL Group acquires Amethis stake in Naivas International

    Revealed: The number of Kenyans with over Sh100 million in their account

    The raging debate on Twitter over the lack of US dollar in Kenya and the downplaying of the issue by the Central Bank of Kenya

    Agricultural subsidies unfair – Kenya tells WTO

    Agricultural subsidies unfair – Kenya tells WTO

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    Criminal Syndicate Defrauding Kenyan Accounts and Buying Bitcoins Thwarted

  • Real Estate
    National Construction Authority Suspends Licences of 18 Contractors

    National Construction Authority Suspends Licences of 18 Contractors

    CCI Global, Gateway Real Estate Africa start Construction of new Contact Centre in Kenya

    CCI Global, Gateway Real Estate Africa start Construction of new Contact Centre in Kenya

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    NEMA Re-Introduces Another Tax for Developers

    Centum Digitalizes Real Estate Sector

    Centum Digitalizes Real Estate Sector

    Superior Homes Launches Reward Program for Investors

    Superior Homes Launches Reward Program for Investors

    Report: High Demand for Luxury Houses in Nairobi Fueling  Increase in Prices

    Report: High Demand for Luxury Houses in Nairobi Fueling Increase in Prices

    Regional property summit kicks off in Nairobi

    Regional property summit kicks off in Nairobi

    Five Reasons Why Real Estate Increases in Value

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    Optiven Foundation Launches TVET Sponsorship Program

    Optiven Foundation Launches TVET Sponsorship Program

  • Tech
    Africa Avant-Garde explores the art of filmmaking on the continent

    Africa Avant-Garde explores the art of filmmaking on the continent

    DCI arrests COVID-19 scammers

    Mobile Loan: Telkom Kenya set to launch M-shwari competitor

    Tecno Kenya Announces Launch Of Camon 19 Series & Spark 9 Series

    Tecno Kenya Announces Launch Of Camon 19 Series & Spark 9 Series

    Nairobi Women to start offering online outpatient services

    mTek Secures Sh340m to Accelerate Paperless Insurance in Kenya

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    OPPO Launches its Flagship Device Find X5 in Kenya to Retail for Sh100,000

  • World Business
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    Why Mercedes Benz is Recalling Their Old Models

    Cold comfort awaits a springtime Davos

    Cold comfort awaits a springtime Davos

    Meet The Richest Man Who Can Fund Kenya’s Budget Alone for 10years

    Meet The Richest Man Who Can Fund Kenya’s Budget Alone for 10years

    EA Sports End 29 Years of Video Game Partnership With FIFA

    EA Sports End 29 Years of Video Game Partnership With FIFA

    Central African Republic Adopts Bitcoin as an Official Currency

    Central African Republic Adopts Bitcoin as an Official Currency

    Netflix Stock Collapses After Losing 200,000 Subscribers

    Netflix Stock Collapses After Losing 200,000 Subscribers

    Putin spokesman refuses to rule out use of nuclear weapons if Russia faced an ‘existential threat’

    Putin spokesman refuses to rule out use of nuclear weapons if Russia faced an ‘existential threat’

    How new regulations are shaking up the world’s fastest sport

    How new regulations are shaking up the world’s fastest sport

    President Uhuru Urges International Community to Lift Sanctions on Zimbabwe

    President Uhuru Urges International Community to Lift Sanctions on Zimbabwe

  • KBF
    • All
    • Agribusiness
    • Banking
    • Insurance
    • Manufacturing
    • Opinion
    Naivas Opens its 83rd Store in Kiambu

    Government Subsidizes Maize Flour by Sh 2

    Showmax slashes subscriptions paid for via M-PESA

    Showmax slashes subscriptions paid for via M-PESA

    Exposed: How Police are Running Illegal Trade Cartels in Kenya

    Exposed: How Police are Running Illegal Trade Cartels in Kenya

    CIC urges Kenyans to Invest in Last Expense Covers to Cushion From Financial Instability

    CIC urges Kenyans to Invest in Last Expense Covers to Cushion From Financial Instability

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    Winfall For Tea Farmers as Bonus Set to Increase

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    • Banking
      NBK partners with Kodris Africa to enable easy payments for new coding programme

      NBK partners with Kodris Africa to enable easy payments for new coding programme

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      Procedure for funding your Metropolitan National Sacco account through MPESA

      KCB Group Shareholders Approve Sh9.64B in Dividend Payout

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    • Insurance
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    • Opinion
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How 1979 Iranian crisis crippled Kenya economy

by Kenyan Business Feed
June 11, 2019
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Ideas & Debate

How 1979 Iranian crisis crippled Kenya economy

Tuesday, June 11, 2019 19:50


By GEORGE WACHIRA

oil
In the early 1980s, Kenya lost the momentum towards becoming an “economic tiger”. FILE PHOTO | NMG 

In 1979, as President Moi was acceding to the Presidency, the Iranian Revolution was ousting the US-supported Shah and ushering in Ayatollah Khomeini in the midst of violence. This is when the Iranians took US embassy staff hostage for 444 days. The violent Iranian power change was the beginning of a US/Iran conflict that has lasted for 40 years to this day.

The Iranian events were followed by the 1980 Iran-Iraq War, started by Sadam Hussein of Iraq encouraged and supported by the US. Significant loss of oil production in the two major oil exporting countries prompted global oil price to rise from about $11 per barrel to $35 and this created a serious global economic recession including Kenya.

The emergent economic crisis caught President Moi by surprise as he went about restructuring his new government. By 1980, Kenya’s oil import bill had shot to over 30 percent of total imports, putting an unsustainable strain on foreign exchange. The western countries that traditionally supported Kenya’s balance of payment were similarly going through economic recession.

Mr Moi’s priority was to ring-fence agriculture which was the mainstay of Kenya’s economy from the new threat of high oil prices. The highly mechanised crop production (wheat, barley, maize, sugar) and agro-industries could not sustainably absorb the price increases. And these crops were mainly grown in the President’s political strongholds.

At the time I was the supply planning manager of a multinational oil company, and was also assigned the role of coordinating oil industry price matters with the Treasury. I found myself unofficially helping the government to formulate critical oil/energy “survival” policies. I did of course clear my involvement with the oil industry CEOs who defined the “no-go” conflict of interest areas.

The June 1980 budget statement contained farreaching reactive oil and foreign exchange policy changes. Oil price differentials were introduced for the first time to reduce diesel and kerosene prices and to significantly load petrol prices. The unregulated jet fuel was to attract a throughput levy payable to KAA to increase foreign exchange earnings while reducing impacts of invoice transfer pricing by the oil industry (a serious malpractice at the time!).

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To simultaneously reduce petrol consumption and conserve foreign exchange, imports of passenger cars were banned for the next few years. A foreign exchange allocation licence fee of 2.5 percent was introduced on all imports. The balance of economic power (and corruption) shifted to the Central Bank as queues for forex allocation for imports, management fees, offshore dividends payments, and foreign travel became longer and slower.

It became urgent to form Ministry of Energy in 1980 to mainly steward the oil industry. To reduce the oil import bill, gasohol, a mixture of petrol and 10 percent alcohol from Muhoroni became mandatory in the Nairobi distribution areas. Energy conservation and efficiency programmes were also initiated and prioritised.

In 1981, intentionally or otherwise the then Minister for Finance, Mwai Kibaki significantly delayed in granting genuine oil price increases to the oil industry. As cash flows became unsustainable, the oil companies threatened to delay crude oil imports until selling prices were increased.

President Moi angrily called it blackmail by multinationals, and immediately issued an executive order to form National Oil to import 30 percent of country’s crude oil and products requirements. Politicians and their Israeli partners immediately saw the big opportunity and became the offshore suppliers of National Oil.

The early 1980s economic crisis prompted foreign investments to scale down or even wind up due to unsustainable foreign exchange and price controls that negatively impacted businesses.

It is also during this time that high level state-sponsored corruption kicked in resulting in severe economic impairment. Bad politics of retribution also sent many Kenyan talents into the Diaspora further reducing the country’s economic capacity

It is during this period of early 1980s that Kenya lost the momentum towards becoming an “economic tiger”. And the economy never recovered until early 2000s when a new Kibaki government came in.

Whereas the 1979 Iranian crisis was only an event in our economic history, we have only ourselves to blame for not rising and running forward towards full economic development.


Kenyan Business Feed is the top Kenyan Business Blog. We share news from Kenya and across the region. To contact us with any alert, please email us to [email protected]

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