;v. ' »»,■ . ^ V y ■ yfl •» : • ■ ? i . Microfilmed by Univ. of Wis. ! • [ Department of Photography 72-24,-873 !i a i ! , I BUC^ALL', Jeffery, James, TSW- |; AN Appraisal' of some of THE'DEVELOPMENiAL impacts 4 OF THE KENYA NATIONAL TRADING CORPORATION •*. i: ; I The University o£ Wisconsin, Ph.D., 1972 ' k - • f, • Economics, general ■ > . 4 V University Micro£iltns, Inc., ;: Ann Arbor, Michigan (This title card prepared-by The University of Wisconsin) % PLEASE NOTE: 0 The negative microfilm copy of this dissertation was prepared and inspected by the , schopl granting the degree. We are using this f film without further inspection or change. If there are any questions about the film content, plea'se write directly to the school. i UNIVERSITY MICROFILMS «• ■f. i r ■■■• § -V." ■ ■ -i^j k'- ■ >-/• ■1i N*' -y (Jr'S- Vi - fes ■ An Appraisal of Some of. the Developmental Impacts, W-'- vr' of the Kenya National Trading Corporation [ ■ a •w 4 ■I > ■ ‘ .A thesis submitted to the Graduate School of v*- ■ th,e University-of. Wisconsin in partial fulfillment of the requirements for the degree, of Doctor of f, ♦ Philosophy. ' ■ , ^ V is. by > P. '•5 • - f ■ _-rf \ j Jeffery James Bucknall r £: Y Degree to be awarded January 19- S June19-2-2/ i August 19- rf- . .. ~7>r 1W' V" • -x:- '■ V. y • Id Profeasors;: MarvVrr Miracle -■Ji •Ha^h Gook Ann S^1-dman- .• i ’ ■ $ V , niis thesis ^ving bwn approyp,d in respeot 5 ’ ■ : ■ to.form wd medbanioal ezeoutioh is referred to . *■. you for judi^ent upon its substantial merit. V ~ 4 Dean •- t %- i Approved as satisfying in substanoe the ^T' * £> doctoral thesis requirement of the-University of ro- ' • • Wisconsin. % r HaJor Profess > \ Date of Examination, 4 • : 4 % ■ -r' . V ' •'% .. -■ ... A. , -rt y ■ V AN APPRAISAL OF S’OME OF THE DEVELOPMENTAL IMPACTS • OP THE KENYA NATIONAL TRADING CORPORATION i • • BY 0 r\- 4 JEFFERY JAMES BUCKfNALL >• • t ■' ■ ■ •f 4 • »' • ^ •: / •• ♦ 5» /■ {} 'C, • A thesis 'submitted'in partial fulfillment of the t«» ■ requiremenjs for the degree of ...... , —v-r 4 DOCTOR OF PHILOSOPHY (Agricultural Economics) at the UNIVERSITY OF WISCONSIN I' ■ ; ‘ 1974^ .i' Vi". •* »-/• i.i V -rt ■. PREFACE N'' y ■ I would' l ike .to take, this pppprtunity,.to express my o. , gratituiJe’ito al 1 those’indiyidual.S and institutions that were invpiyed in the preparation of this dissertation. Primary data was cpllePted over a fourteen month period 0 ■ in East Af,rica.^ ..During theHVjrst ten months (July 1969 to ■ May 197.6’) I- was' a Vi si tin^ Re'search Associate at .the Institute. ■ 'v‘- ■ • ..•for Development Studies, University College, Nairobi.This ► ■ ■ V '.association greatl-y facilitated my research and I would,/'. like tp express my thanks ^o the Institute for'the numerous ■■■ ♦ - . ■ \ ' . • \ support services they provided. In add ft ion I-would like to express my thanks to the many individuals of the |nstitu,te both for their professional- advise and their personal friendship. The final four months, pune 1970 to September ■ ■ /* 0 0 .1970) were spent as a consultant to the East African Devel-op- ; '. ment Bank in-Kampala, Uganda. t -->f The drafting of the-dissertation was done after my return to l|1adison., Wisconsin. 'This tiresome task was made easier . and more enjoyable.by constant encouragement and advise'^rom Marvin Miracle. In addition to expressing m.y gratitude for ■'T ' ' ' h!s advise on this dissertation I would also like to thank him for his counsel during my stay in. Wisconsin. Many ;; ■ thanks are also dPe to Ann Seidman and_Hugh Cook for their •' ■ constructive criticismTof~lny work. The usual caveats, about.any opinions expressed being mine and 'not necessari1y those of any of-the above institutions, or individuals apply. f ... ,... i I i #■ V . Sv ■STABLE- OF CONTENTS - y ■ Chap.ter 'Rages ys u I. .Intfrodustien \ ^ . " ft . '7- r. :/. ; 1.. Background to the Problem 1 ^'Organisation of ’Remainde'r of ,Thesi|' 6 11. The Nature of-the inherited Kenyan EcoViomy . "-s# 1. Introduction ‘(J II 21 InteTnatTonal-^Trade - - . •.V 12 ' 3. --The institutional Framework,15 ;• *V- - ■ Kenyan Oomestic Industrial Production' Financial Institutions ^ •: ‘..'Tfad'i.ng Institutions- 4. Domestic Trade , ' Hi story of .Trade I . Marketing Functions! ; 4 35r.- - Channels of, DistributLon ' ' ' ■ f 5. Summary: • 49 ; • ,• ' ^ • ' ' . • • 1,11. Government Programmes;:and African Trader ProbTemS f 1 1. Ijitreduction -■ 52 2. Consequences of Development Process . 53 • V.. r ,3. Government Pfpgrarnmes ' . 56 ’ o ■ ■ NonTTrade Programmes 56 - ■ • .•' Trade Frog rarfimes 60 68 : 4. .Problems of Africah'Traders ■ ■ 5. Summary '83 r . - ' 1-V*.-^ Actual and Potential RoTe of the KNTC 86 > il. Introduction = • . 2, Objectives of Government with Respect to Marketirig System •3. Potential Role o.f KNTC 4. Summary ,r V. Operations and Financial Analysis of KNTC ! ; 1. I ntroduction H3 0 . 2. Organisation Growth and Modus Operand! of KWTC . The Organisatipivof the KNTC' r _Growth^of the KNTC ii|- .KNTC Marketing Oherations.- 126 ... 3. Financial Analysis of KNTC' -131 . 4. Summary A! 4;': ■'•i' . IV ■:‘: / V . ^TABLE OF CONTENTS. y' : (con t. ) Chapter Vi . *■ .Pa^es ■ A fe:' VT.' The R6i’e'.'of the KNTC in-.(ncrecfsing"Afri can Participation in Wholesale Trade in Kenya / * 1. Introduction I 140 2. The Success|oT the- KNTC in AfricanTsing Importing attftrWholega^ing^f Selectedv Commodi tiesM:, \ . J4l 3, Bossib'ie Resisons Many ,Sub-Distr.ibutors- » <■ .Are InadtiyeS ' ' 151 “ ■ V- , 4.. Summary 169 •• ^Vll. KNTC' PriciTig-and Distributorship Policies 1. .introduction 17.1• ■ 2. An Analysis of the KNTC Pricing- Policiesl72 ♦ 3. An-Analysis bf the KNTC Dis.t-i^'butoF- -v' t . % ship._ Pol icy, — ^ 184 ■ .-*i- , 4,' Summary - ,191 i.- VIM. Summary and Conclusions •193 • Bibliography .206. > 0 -■ Appendix -213: fQ ‘ ••'V •r.-:. • r«» > - i * 4 * . ■. i. ;• ’j\' r-r.- • V V . * ^ LIST OF TABLES y ■ PAGE 11-1 Kenya^-Balance of Tracle 1964 and. 1-968 .-j ..... I 1-2 |.mport;s:,,and Exports of Kenya by .Major. SITC Classification 1969 . 11-3 Ql-igin and Destination of Imports and Exports 1*964 and 1968 17 ■ M-4 Kenya's Nine Largest Industrial Producfion Groupings* 1963- ; 19 11-5 Loans.and ‘Adyaraces of Comiite.rcial Banks Dec. 1967 24 11-6 pi strjbution-or Wtiolesale Sales by,Kenya . Citizens, Residents, and Non-Residents . '•33’ ^ 11-^- Sources of' Sup|5.Ti,es of Textiles and Clothing V . in Kenya ,1963 42 11-8 Percentage of WhoJejale Establishments Analysed By-Kind of Business and (a) Location and .(b) Amount of Annual Turnover 47 11-9 Percentage of Wholesale Establishments Analysed ♦ By Kind of Business and (a) Location and (b,)'; ^ ' , Amount of Annual. Turnover 48 lll-i KNTC I'nvestments for the Year Ending SOth, June . 1-964- ; 58 V-1 KNTC Produce/Provi'sIons Sales 1965-1969 120. •V-2 KNTC Textiles Sales 1965-1969 121 V-3 KNTC°Hardware Sales 1965-1969 ’ ' 122 _ .^V.-4 ;qr i^g i n of* the KNTC .Trad i ng Prof i ts -1965-1969 ■133- a : . •V-5- '-.Summary, of , KNTC Balance Sheet 1968 . .. 1 36* ..*• y-6 Revised-KNTC Balance Sheet 1968 • 137 VI-;!' Numbe'r and • ConeentratforR of.Sugar Sub-Distfibu- tors in Kenya Ja'nua-ry 1970 1-44- Vl7;2, Number'and Coneentrat ion of Oil Sub-Distributors —V ^ in Kenya. October 1969-to January 1970 145 VI-3 Number and Concentration of Textile Sub-Distri- l^utors PuVehasing Textile Cloth frpm KNTC Ware- • - houses Between October 1969 and January 1970147 VI-4 Ntimber and Concentration of .Textile Sub-Distributors Importing Shirts'Between October I969 and January . 19,70 ■ ' 149 VI-5^^ N.umber and Concentration-of-. Text i le Sub-Distri- , butors Importing- Blankets Between October 1969 and- January 1970 , .150 Vi-6 Number and Concentration, of Hardware Sub-Dist- ributprs Purchasing Cement from the KNTC ' .. Between 1969 and January 1970 151 VI-7- -Number of Appointed and Active Sub-Distributors 7 of Selected CommoditTfs^ • 153 VI 1-1 Est-imated Cash Wage Bill, and Retailers' -Sale of Goods Anal ysed by Type..of 'Area ' 1.74 •Vil-2- Current Cost of Distribution Analysed by .Type of. Cost -and. Area - . 177 «- V ■ *>-■ . ■■’t :* :-'. <£>. - - r v'' Vi :t;.. •y •■■■■•■ 'IrSI^ OF FIGURES ’ '>- Figure . Page mm... 1.1 Cdhtrtfl'-of Kenya's ;Mii 1 in^g Industry -20 2 .Schematic Channels of Distribution of Imported TdxTri^les into Kenya in Early Sixties *' 43 . S” Schematic 'ChanSets bf Distribution ofv.,Domest- ical 1 y .produced . Texti les 44 •• V. 3 A Monopolist Selling to Perfectly Competitj-ve “ Middlemen ' ‘ 1.‘ . ’ , 96 y > ^ ..4 A Monopol ist■ Sel l ihg^-to a Monopsonist'ic State 'Trading Corporation ■ 98 5 A Monopolist Selling to a Monopsonisfrc State" . ♦Trading Corporation ...':^98- ■ 6 ■ A Monopol 1 st Selling, to a Monopson i st ic .State • ■ Trading Corporation • '100 . ' - ■’7 , Perfect i y'Cpmpet i t ive Importing and Oligopo­ listic Importing Without Government Intervention '• - ' 1 rv iP 102 :.8 ... Demand for Imports intp Kenya. 104 ■— .. 9 KNTC: Average Monthly Sales of Produce/Pro- ; '^visions, Textiles and Hardware .1965-1969 118 —.V ■ . ■ s . i i -i ..v' . 1 •L “/■ ■f : :tf:: v- ..•i; I 1 ■«»! X- -S-;* V. - Hv y ' •CHAPITER |. INTRODUCT-ION ’■ ; . 1. BACKGROUND TO THE PROBLEM 4 . *■ i . ' The, Ken.yah*.Government has commjtted itself to • * • ' --- ' ' . ^ ■ several general economic obj^^ives of which the major , # ones are, Liniversal freedom from want, disease and f exploi taction; \equal opportunities for advancement; and high and growing per capita incomes equitably distributed amotjg the population., 1 The purpose of ,this thesi-s is. to ascertain the- actual and potential role of the Kenya . National Trading Corporation' (KNTC) in meeting these economiccobjectives. /■ ,* The economic objectives of the Kenyan Government o 'outnned,-above are .attainabie only with Increased specialisation and exchange.