Confusion or Desperation - or Both

The Business Daily has an interesting story on the proposed increase in taxes on bank charges. The author of the story, Brian Ngugi, is my friend. He is hard working and often seeks my views on topical issues when he believes that my opinion will add value.

On this one, which masquerades as an analytical piece, he makes three core assertions.

1. That “banks have said they will pass on the additional taxes to customers”. This is trivia. This is a tax on the service so banks are merely collecting it on behalf of the Kenya Revenue Authority.

I thought this should be obvious to a guy who is indicated to be reporting on business and economics.

2. That “this new tax will also affect stockbrokers, fund managers and insurances firms that charge fees for their services”. Actually not; it affects the consumers, not service providers. This is a consumption tax. I thought this should be obvious too. Oh, and these other financial service providers are mentioned just as a by-the-way. 

The core story is about bank  charges and interest rate caps, two aspects that are not at all linked to the tax. But hey, this is the favorite of reporters and editorial writers, whose pretense to expertise on the subject,  is manifest in as many contradicting arguments as the number of stories/editorials that have read over the past two years. 

3. That tax amounts to increase in fees and commissions, which will go to boost bank profits. This is nonsense. See No 1 above.

In the same issue of the newspaper, Brian has another piece on the proposed new tax on mobile money transfer (it is actually not on Mpesa alone as the caption in the story erroneously screams). He correctly sees this as a pain to the consumers (see its equivalence to No 1 above). He does not see this as a possible increase in fees for the benefit of mobile network operators.

This begs the question: how can a guy get it wrong and right on the same subject in the same newspaper on the same day? 

This is either confusion or desperation, or both.

Bad Ideas Are Cockroaches!

Thanks to Paul Krugman, Economics Nobel Laureate, I know that bad ideas are like cockroaches: no matter how many times you flush them down the toilet, they just keep coming back.

Just look at this piece of nonsense (below)! It is not the IMF that is on the spotlight; it is our bad polices. This is basically a distraction from the real problem - a fiscal policy gone haywire.

But as I have argued before, it is easy to seek to blame somebody, anybody; so the IMF it is. But any critical thinker will tell you that all our mess was not a creation of the IMF.

Feigned Thought Leadership

"Eyes on the shilling as Sh152 billion IMF cushion ends ". This is how the Business Daily   screamed today (see picture).



To non-suspecting members of the public, this catchy headline represented deep thinking; it gives the impression that the Business Daily leadership is thoughtful of the fact that of the IMF stand-by facility lapses, as it now seems, the Kenya shilling will be vulnerable.

That could well be the case, as some of us have argued so in the past. Even though the Central Bank of Kenya (CBK) seems to argue that it has sufficient foreign exchange reserves to "defend" the local unit, there is limit beyond which inevitability of depreciation will come.

For those of us who engage in policy research and discourse, the Business Daily is yet again engaging in feigned thought leadership - I have called its editorial pages being a platform for intellectual pretence.

Why do I say so? Because in mid August, the same newspaper that now deeply concerned about the possibility of foreign exchange instability in the event  of the IMF facility lapsing had an editorial to the effect that we may well not need that facility! Oh, I forget; somebody must write stuff that - even when making little sense - can sell a newspaper.

That is why for instance, there is an editorial in  its pages today to the effect that  interest rates capping law - a misguided peace of legislation - is working now that banks are making profits ( a nonsensical argument) while a while back the same pages argued that it was a hasty policy no good for the economy.

It is not that they saw any sense; it is because at that point in time, the Nation Media Group's back was against the wall as its television station had been shut by Government. Now that it is on, it is back to the usual business of taking leave of all logic and donning the feigned thought leadership hat!