In Summary
  • President Uhuru Kenyatta will need to rollout a ‘Marshall Plan’ for dealing with declining profitability levels of private companies.
  • Indeed, the significance of the ongoing anti-corruption drive is not so much in the fact that many big fish are facing the frying pan.

Here is my pick of the issues economic policymakers should focus on in the New Year.

Our leaders persist in the celebratory talk about robust growth of the economy — about green shoots of economy — and about stable macroeconomic conditions, even where the evidence in the real economy points to worrisome trends.

I don’t know when we will accept the reality that this economy has major problems, even with the profitability of companies and businesses.

Yes, debt-financed expenditure has allowed us to keep infrastructure spend at very high levels.

But where is the commensurate impact in recovery of private sector investment? What must be done to stimulate private sector profitability?

PROFIT

You will not see the evidence of sluggish performance of the private sector captured in official statistics.

But the contradictions and signs of anaemic growth in our economy are there for all to see.

The upsurge in the number of listed companies issuing profit warnings is one example.

The fact that the Kenya Revenue Authority is struggling to meet targets set by the Treasury is another.

We are seeing widespread distress among leading supermarkets. As a matter of fact, two leading retail chains — Nakumatt and Uchumi — have collapsed under the weight of mountains of debt.

Today, the government touts an exponential increase in the number of electricity connections as a major achievement.

Yet the statistics from published audited accounts of Kenya Power show this has not come with an increase in electricity consumption by households or industrial consumers.

MARSHALL PLAN

Although the uptake of credit by the private sector is recovering, it remains at a historically low point.

Yes, some of our large commercial banks are returning profits. But a much bigger number are in financial problems.

This is manifested by the high number of banks operating below minimum capital requirements, a good number operating below regulatory liquidity requirements and a significant number have seen non-performing loan portfolios rise unpredictably.

In the New Year, President Uhuru Kenyatta will need to rollout a ‘Marshall Plan’ for dealing with declining profitability levels of private companies.

He must return to his original plan and pet project of deep reforms in the parastatal sector.

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