Puzzle of Kenyans’ empty pockets in a ‘thriving economy’

A two-kilogram packet of maize flour has hit Sh135, the highest price in the last three years, making the cost of living the biggest pain point in an increasingly bad economy for the poor.

Retailers and shopkeepers further away from major towns are now selling the same packet for as high as Sh140 due to transport costs.

This follows successive hikes by manufacturers in the last six months that have seen the commodity cost move from Sh110.

At Sh135, ugali is now more expensive than chapati, a departure from the norm given that maize is Kenya’s staple.

A 2kg packet of wheat flour is retailing at about Sh125 a piece, which is Sh10 less than maize flour.

But it is not just cost of food that is wrong with the economy. Government numbers paint a rosy picture of a growing economy.

Looking at all the major economic indicators, everything seems more than just fine.

DWINDLING FORTUNES

Last year, the economy grew by 6.3 per cent and provisional numbers show that it is headed for a similar expansion this year.

The Gross Domestic Product (GDP) is tipped to hit Sh10.1 trillion from Sh9 trillion in 2018.

At 3.83 per cent, inflation has fallen to its lowest point in the last 18 months and is well within the government’s target of between 2.5 per cent and 7.5 per cent.

Data from the Kenya National Bureau of Statistics (KNBS), the official statistical agency for the government, also reveal a flourishing country that is way ahead of its peers on the continent.

The economy has been growing by between 5.6 per cent and 6.4 per cent in the last four quarters, an enviable solid growth given that most nations in sub-Saharan Africa have been growing by less than three per cent. But on the ground, things are different.

Everyone you talk to will tell you that the Kenyan economy is biting — hard.

From shopkeepers in Nairobi to boda-boda operators in Migori, importers in Mombasa to big manufacturers in Industrial Area, from Small and Medium Enterprises (SMEs) in Busia to blue chip companies listed on the Nairobi Securities Exchange (NSE), everyone is hurting.

JOB CUTS

Ironically, auctioneers who thrive in times of hardships are also feeling the heat of the economy given that they are struggling to find buyers.

Mr Joseph Gikonyo, a licensed auctioneer at Garam Investment Auctioneers, says he has witnessed a 30 per cent jump this year in the number of properties and real estate that have been put up for sale due to debt distress.

Mr Gikonyo says auction requests are at an all-time high, and attributes the turn of events to a bad business environment, including non-payment of suppliers by both the national and county governments.

“Weak purchasing power is a reality. The private sector, including corporate entities, are also not paying their suppliers and this has only served to compact the problem,” he said.

Mr Stephen Kang’ethe, an auctioneer with Nairobi-based Dalali Traders, says his firm has had to do several repeat auctions to find buyers, but without much luck.

“We are in a tight spot. We are advertising, but not selling. What you are seeing are repeat adverts for the properties that did not go,” Mr Kang’ethe said.

Nothing tells the story of the state of the economy better than the number of jobs it is able to generate or lose.

At least 20,000 Kenyans have lost their jobs across various industries in the last one-year as companies struggle to remain afloat.

UNCONDUCIVE ENVIRONMENT

Some of the firms that have fired employees in the recent past include James Finlay (1,100), East African Portland Cement (1,000), Kenya Airways (600), Telkom Kenya (575), Karuturi (3,000), Sameer Africa (600), Airtel (144) and Kenya Power (302).

Others that have reorganised their operations in ways that have reduced their staff counts include food giant Nestlé, Microsoft, HP, Tata Chemicals Magadi, Coca-Cola and Cadbury.

Others have opted to close shop entirely or shift operations to other countries due to various reasons, among them competition, taxation and difficult operating environment. These include Eveready, Sportpesa and Betin.

In firing 1,100 employees last week, James Finlay joined several flower firms that have taken that path in painful decisions that are rendering thousands of flower firm workers jobless. The multinational fired 1,800 workers last year.

On its part, Karuturi, a flower firm that was based in Naivasha, went down with 3,000 jobs.

Some of its former employees have turned to illegal fishing in Lake Naivasha while most are languishing in joblessness.

Security firm Securex is also sending home more than 200 workers, citing ‘difficult prevailing economic times’.

INSOLVENT FIRMS

It is not just the private companies that are firing. Government-owned entities are also increasingly taking that route.

The Nakumatt and Uchumi supermarkets retail chains have cut about 5,000 retail jobs directly and thousands more indirectly, according to the Kenya Union of Commercial, Food and Allied Workers.

Due to its planned merger with Airtel, Telkom Kenya plans to lay off 575 employees so as to start on a clean and leaner slate after the merger.

Despite the huge infrastructure spend by the government, local cement manufacturers are not getting a piece of the action.

East African Portland Cement Company (EAPCC) wants to retrench all employees and let them reapply under new terms.

Today, Mumias Sugar Company has less than 500 employees, down from about 1,500 in 2017.

Other state-owned sugar firms, including Sony, Nzoia, Chemelil, Muhoroni and Miwani, are also insolvent.

Commercial banks have collectively laid off more than 5,300 workers over the last few years as technology and interest rate caps take away jobs.

There is always a bank dismissing staff every quarter since 2018. This year, Stanbic sent home 200.

INEQUALITY

The KNBS data shows that earnings from exports shrank by Sh16.7 billion to Sh303.31 billion in the first six months of this year.

A drop in exports points to difficult times for local firms growing or manufacturing goods for the export market and it means fewer jobs.

Economists argue that the Kenyan economy is just good for the top 10 per cent while squeezing most citizens.

“Since the Jubilee government came in, they chose to invest heavily in infrastructure projects over the basics of development such as access to quality education, better healthcare services, and other poverty alleviation programmes that target the standards of living of majority of Kenyans,” Mr Tony Watima, an economist, says of many infrastructure projects that do not directly uplift the standards of the 70 per cent of the population that live in rural areas.

“That’s without mentioning the questions surrounding the economic viability of the many projects. And many are just rent-seeking deals,” he adds.

More than a dozen people interviewed for this story share his sentiment.

Mr Jude Maina, a bus driver plying the Nairobi-Kiambu route, says he used to make about Sh1,500 a day last year.

Today, he is lucky to go home with Sh1,000. Mr Maina, who recently got a baby, says he has to make a lot of personal sacrifices to make ends meet.

SLOWDOWN

Ms Mary Waithera, a Kimathi Street fruit vendor, says she used to make Sh500 from selling three bunches of bananas a day.

On the day we spoke to her, she had made Sh300. She says her capital takes away Sh150, leaving her with only about Sh150 to take care of her family.

Shop owners are also feeling the effects of the economic downturn and are being forced to adjust accordingly.

Ms Evelyn Njambi, a boutique owner, says her colleagues have had to vacate their premises because they are unable to pay rent, a trend that has been the norm since the beginning of the year.

The story is the same for laptop vendors we spoke to in various parts of the capital. Two such vendors, who chose to identify themselves as Kariuki and Jennifer, say they have seen the biggest slowdown after the Central Bank replaced the old generation Sh1,000 notes.

BLEAK FUTURE

This is a sentiment shared by Pauline, an M-Pesa shop owner, who says that for the last three months, the number of transactions using the platform at her shop have significantly diminished. This, she says, is hurting her livelihood.

“It is very difficult to save any money with this economy,” she says. Macharia, a hotel manager at Cafe San Burners, says the number of clients has been going down.

Around 2pm in the afternoon, on a weekday, his restaurant was nearly three-quarters empty. Oduor, a coffee shop owner inside the Technical University of Kenya, says business has been slowing down.

He was hoping that with the reporting of First Year students in August, things would improve. This, however, was not the case.