Companies, broke Kenyans hope for better fortunes in 2020

Kenyans shop at Naivas supermarket in Nyeri on December 21, 2019 as they hope food prices will be more affordable come the year 2020. PHOTO | JOSEPH KANYI | NATION MEDIA GROUP

What you need to know:

  • Managing the cost of living will also be a great task given that a number of foodstuffs are now getting out of the reach of many Kenyans.
  • The World Bank projects Kenya’s economy to expand by six per cent this year, rising from a projected growth of 5.8 per cent last year.

Kenyans are cautiously optimistic 2020 will not be a tough year although projections point to a year of economic turbulence that will require families to trim their budgets and Kenyans to brace themselves for shocks.

Avoiding unplanned expenditure, keeping away from loans and offers that may drive one to the precipice, and saving any extra money for a dry day are some of the tips that will help many survive the vagaries of a battered economy.

Staying healthy, avoiding the gambling addiction as well as binging on luxuries will also help sustain many a family.

While individuals will play a pivotal role in riding the tough times wave, the onus of digging the country out of its current debt trap and stopping the economy from tumbling downhill will be the biggest task of the Jubilee government in the New Year.

Despite the government churning out rosy figures on the economy in the past, Kenyans have described 2019 as a ''really bad year''.

LOAN PAYMENTS

The government will need to craft a new economic stimulus package and add more fuel on the economic engine to help its growth dividends trickle down to the hurting majority.

The Jubilee government has been accused of lacking the stomach to stem spiralling debt that has seen it run an economy that is dangerously addicted to borrowing. This will be the year to bite the bullet.

The reality of this borrowing will start biting this January, when Kenya pays the first Sh25 billion instalment for the Sh327 billion Standard Gauge Railway (SGR) loan as reality on the impossibilities of breaking even any time soon start to sink in.

This is after the expiry of the five-year grace period in line with the May 11, 2014 loan agreement to finance the Jubilee government’s pet project. Another Sh25 billion will fall due in June 2020.

REVENUE SHORTFALLS

This will also be the year when the government starts correcting the mess in the budget-making process that saw Treasury mandarins cook up figures to balance the budget books.

“The verdict is in — 2019 was a brutal year all round! Still, we accomplished a lot at the Central Bank of Kenya, the banking sector and more widely,” Central Bank Governor Patrick Njoroge said in his end-year message.

Dr Njoroge recently called Treasury’s budget making “abracadabra” for randomly picking up revenue number projections from thin air.

However, when the revenue shortfalls came, the country went into a borrowing binge described in common street parlance as “parte after parte”.

“The good news is 2019 is ending. The bad news is 2020 may prove as challenging. But we believe we are ready and will prove up to the task, ultimately improving the lives of those around us especially the most needy,” Dr Njoroge said.

COST OF LIVING

Managing the cost of living will also be a great task given that a number of foodstuffs are now getting out of the reach of many Kenyans after a 2kg packet of maize flour rose to Sh135 apiece, the highest in the last three years.

Inflation numbers released on Tuesday showed that things are not getting any better after the rate rose for a fourth consecutive month to close the year at 5.82 per cent in December.

This is up from 5.56 per cent in November, 4.95 per cent in October and 3.83 per cent in September, which was the lowest rate in 2019.

The Kenya National Bureau of Statistics (KNBS) attributes the increase to the rise in prices of some foods and non-alcoholic drinks. Inflation measures the cost of living.

SLOW GROWTH

But it is not just inflation numbers that should worry Kenyans.

The GDP growth numbers also released on Tuesday showed that the country grew at 5.1 per cent in quarter three of 2019, down from 6.4 per cent in the corresponding quarter of 2018.

Mr Kenneth Okwaroh, a director at Acepis, a Nairobi-based think-tank, says job losses, slow private sector growth [and] a broke government and a general cash crunch are just initial telltale signs of even harder times ahead.

“Truth is, our government got its past debt management decisions all wrong, and this is fast catching up with us,” Mr Okwaroh said.

He said the country is now among 18 countries globally that the IMF considers at high risk of distress because their public debt has gone way above safety thresholds.

“There is evidence linking high levels of unsustainable public debt, especially in developing countries, to macroeconomic challenges that threaten stability. This could explain what we are going through, and is projected to intensify in the not-so-distant future, if we do not drastically adjust our sails,” he adds.

KRA TARGETS

Eyes will also be on the Treasury as it prepares the next budget for the country that is expected to address the various challenges in the economy.

Mr Tony Watima, an economist, says he expects a better performance in the agriculture sector in the New Year, but the economic mistakes of the past few years will still hound the country into the New Year.

“The economy will still be held back by poor fiscal management, KRA missing targets and an increase in public debt ... there will be private sector growth picking up but not a rebound,” Mr Watima said.

“A number of CBA implementations come into effect in 2020, so labour strikes are expected given that the government does not have money to honour them,” he added.

INTRA-TRADE

The other key development to watch is the African Continental Free Trade Agreement (AfCFTA) that enters a critical implementation phase in 2020.

AfCFTA is a single market for goods, services, facilitated by movement of persons in order to deepen the economic integration of the African continent.

“It is also 2020 that will see the start of policy implementation of AfCFTA. This is one thing to watch because there will be both winners and losers,” Mr Watima said.

The World Bank projects Kenya’s economy to expand by six per cent this year, rising from the projected growth of 5.8 per cent last year.

Captains of industry are hoping for a better year in 2020 to help wipe off some of the losses experienced last year.

INVESTING IN SMEs

Ms Nasim Devji, the DTB Group Chief Executive Officer, says the bank will focus on SMEs in 2020.

“In 2020, we shall be rededicating our commitment to support the growth of these businesses through our products and innovative digital channels. Our aim is to enable SMEs to grow, thereby spurring economic growth in the country.”

Mr Dan Githua, Group CEO of Tusker Mattresses, says 2019 brought the company a mixed bag of fortunes.

“Our top-line growth remained subdued due to the overall economic climate, which has a ripple effect on the retail industry. In the year 2020, we expect to tremendously reap the benefits as the new branches in Nairobi, Malindi and Nanyuki begin to contribute to the bottomline,” Mr Githua said.

He said Tuskys will start a new meat processing facility in the first quarter of 2020.

“In the new year, we also hope to unveil the Tuskys franchise model, which will allow us to cost-effectively expand our footprint through a mutual benefit partnership model with other entrepreneurs,” he added.

BOLD RISKS

Mr Ronald Ndegwa, Managing Director Savannah Cement, says the manufacturer is looking ahead with optimism.

“The year 2019 has been relatively difficult with depressed building and construction prospects. However, the year 2020 appears very bright particularly due to the recent lifting of the interest rates ceiling and government interventions for affordable housing efforts,” Mr Ndegwa said.

He sees the affordable housing project lifting the prospects of cement makers in the country after the government announced plans for local content in big projects.

Mr Patrick Tumbo, the Sanlam Kenya boss, said that 2019 provided much needed corporate stability for the firm, which has also returned to profitability.

“We expect some level of accelerated growth in the year 2020 from our insurance (general and life) businesses,” Mr Tumbo said.

EMPOWERING FARMERS

Kenya Breweries Managing Director Jane Karuku says 2020 will see more growth for the firm, which will commission more brewing vessels into the Kisumu Brewery.

“This continues the investment we started in Kisumu in 2017, forging ahead even as the country went through a lengthy electioneering period,” she says.

More brewing vessels mean the brewer will be able to take in more sorghum from the 17,000 farmers from the Western region, in addition to the 30,000 around Kenya, who supply raw material for the brewing of Senator Keg, she says.

“On the regulation front, we have seen significant progress in the fight against illicit alcohol, and we are optimistic that this will continue into 2020 and we will apply the lessons learnt in 2019.”

The brewer said the alcoholic beverages industry continues to suffer the unintended effects of the latest taxation policy and called on the government to stick to the certain, predictable approach to taxation.