Ghosts of colonial-era regulations that are haunting traders out of business

I don’t know Nyambura Munyua of Thogithi.com. But this week, and on Facebook, she raised an important question that should be elevated to the national level.

She posed: “Did you know that as a manufacturer in Kenya, you will pay a licence in your county (and then) you will then be required to pay a distribution licence for every county that you intend to sell to if you are using a branded vehicle.”

For instance, she went on; “A beverage licence in Laikipia County goes for Sh10,000. A few meters down the road from Nanyuki bus station is Meru County. You will be required to pay an additional Sh8,000. If you are moving to Nyeri County, you pay Sh8,000.

“You plan to sell in Samburu County, you cough Sh30,000. To Kiambu County, Sh15,000. To Isiolo, Sh7,000. Marsabit is Sh30,000. Embu, Sh30,000.

“Yaani, manufacturing in this country is getting punished by the national government and the county governments by all means necessary. My question is, when a country with an industrialisation vision taxes itself to death and punishes manufacturing, when shall it lift itself out of poverty? This should be discussed at length during the next Council of Governors meetings.”

The bad news is that Nyambura Munyua’s lone voice will be drowned in the cacophony of political nonsense. But she represents millions of traders and businessmen who wonder why their enterprises are treated like a criminal venture.

It was Winston Churchill who once said: "For a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”

Let me give a few examples on why our business licensing regime is hogwash and it has roots elsewhere.

Matatu industry

Let us start with the multi-billion matatu industry which has been left at the mercy of police – who openly extort in public roads. And this also applies to any person who owns a pick-up, or lorry, and requires a Transport Licensing Board (TLB) licence to be on the road. Certainly, I am not the only person who sees this daylight robbery on both matatu and transport industry – without anyone raising a finger.

We all watched senior police officers, who during their vetting gave us cock-and-bull stories on their poultry projects, fisheries and dairy enterprises which were minting millions for them. Yet, we all know, that these are proceeds of crime.

When the police were first sent to police the transport sector in colonial Kenya, the idea was to protect the railway interests – and to an extent tame the rising control of Indians in the transport sector. The unwritten rule was to frustrate the private interests in the transport sector since the railway, whose manager also sat in then parliament, was supposed to be king.

In the 1937 bill, the railway could object to the issuance of a TLB licence for passenger transport vehicles – even though the railway only carried 8 per cent of the passenger traffic then.

The Federation of Indian Chambers of Commerce and Industry in Eastern Africa raised this concern.

“While the Federation is not opposed to the road transport being regulated for such matters as the safety and public dimensions, weight, upkeep, and loading of vehicles, it is opposed to undue and unnecessary restrictions calculated to bring about a complete prohibition and making it practically impossible for the road transport to compete with the Railway under reasonable conditions.”

On passenger transport, the Indian Merchants Federation said it was “against public interest and policy to protect and give monopoly to a railway which no longer conforms to the modern ideas of speed, comfort and economical fares.”

An Indian MP, Shamsud Deen, said, “It is nothing short of tyranny to compel people to use only one form of transport. Surely, people ought to have a choice, but to say they must use the railway means compulsion.”

Lunatic express

“The railway proceeds at the speed of a tortoise and takes about eight hours to reach Nakuru, whereas an ordinary motor lorry does it in about four hours quite comfortably, and the native passengers who generally use this means pay much less than they would in railway fares.”

The idea of making the lunatic express pay for itself also saw the TLB licence brought in order to eliminate any competition in conveying goods and that is why lorries were targeted.

Today, these ghosts of colonial rules still reign over our transport industry since 1930s and TLB has, over the years, never lost its founding philosophy. The police, despite all shifts in our laws, still see the transport industry as an irritant and which brings me to the second issue of business licensing.

When the first Traders Licensing Ordinance was passed in 1919, it was viewed by traders as a taxing machine rather than assisting in the provision of regulations to govern business. The complaints were addressed in 1933 when professions and businesses – such as banks, insurance and shipping – were included. It is important to note that a majority of traders were Indians. But after four years, the professionals and businesses were dropped and only traders were to pay for the licence.

Actually, it was suggested that the ordinance’s title should be Traders Taxation Ordinance and it created various categories of traders: hawkers and peddlers

Questions were raised on why only (Indian) traders were being targeted by this law and minority leader Shamsud Deen was vocal on this in 1936: “I submit that this ordinance is another evil that exists and is peculiarly of this colony. There is no such thing, I understand in England, there is no such thing in Indian and other civilised countries… you have passed the poll tax, which is direct; and there is customs duty, railway freight, and on top of this there is ordinance. I submit that the whole thing is absolutely wrong in principle.”

Despite protest, the bill was passed on December 31, 1936. The harassment of Indian traders and which saw the creation of many laws that seem to, almost, criminalise trade was noted in 1946 when the secretary of African Shippers Association in Bombay wrote: “The position of the Indian trader in East Africa has been that of an orphan due to the fact that all measures either political or economic are framed under the pressure of the European settlers whose interests only are taken into consideration…recently a revised price control regulation has come into force, which to all intents and purpose solely applies to the Indian traders who are scattered all over the African hinterland…the Indian trader is eking out a living under monstrous handicaps unknown elsewhere,” wrote A.K Kanji in an 1943 article in The Indian Express.

Colonial bylaws

But the more things change, the more they remain the same. In 1969, some three years after independence, the Kenyatta government decided to give majority of Kenyans a chance to enter into the trading arena. The Kenya Trading Licensing Act was supposed to cure the gap between African and Asian traders.

When the Act came into force, the Minister for Commerce Mwai Kibaki told Parliament that some general business areas will be reserved for African traders. And because some Asian traders – some who had not taken citizenship – were working in partnership with Africans, the Trade Licence Act rules were issued in October 1969 defining partnerships and demanding that “traders will be required to display their licence in a prominent place in their premises.” What was supposed to keep Asians out of trade is now used to tax those who were beneficiaries.

My final example is how some of the colonial bylaws have actually metamorphosed over the years.
The reason why our bylaws appear to be inhumane and are enforced with ruthlessness is because they originated from a callous system.

When Nairobi was a township, before it became a municipality in 1919, it did not have proper bylaws and it borrowed some from Muthaiga, then an exclusive suburb of Nairobi’s European community. Muthaiga had existed as a separate township for Europeans, just like Eastleigh township, which was reserved for Indians.

In order to enact its bylaws, all what Muthaiga Township Committee was supposed to do was “frame and submit to the Governor rules for the welfare, good order and good government of the township…”
Muthaiga’s by-laws – though in existence – had been adopted officially in 1922 after it became a recognised township.

It was after the Justice Feetham Commission in 1927 that looked into, among other things, the future of Nairobi Municipality in relation to these “ring of townships”, that the Local Authorities (Municipalities) Ordinance of 1928 was enacted and it allowed Nairobi to take over Muthaiga and its litany of bylaws to control the ‘native” problem in the city. Also brought on board were the Proclamations, Rules and Regulations of 1932.

Many years later, most of these rules are enforced by the council askaris who have no idea on why they were enacted. The European community in Nairobi had no time for Africans and Indians and a critical study of these bylaws reveal the anti-trade element in them.

Ask any trader in Nairobi about their worst fear and they will mention the county. And that takes me back to the story of Nyambura Munyua. This country should stop criminalising business. If the traders and business people are going to drive the economy, their voice should have more decibels than those of politicos. Something is wrong and it is time the Kenya Private Sector Alliance studies all these business laws and where they came from and ask for change. 

[email protected] @johnkamau1