The economy is growing, but where is the money?

November 18, 2016
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 According to the Kenya National Bureau of Statistics, Kenya‘s 6.2 percent growth in Q2 was buoyed by tourism which grew by 15 percent while manufacturing experienced the slowest growth at 3.2 percent.
According to the Kenya National Bureau of Statistics, Kenya‘s 6.2 percent growth in Q2 was buoyed by tourism which grew by 15 percent while manufacturing experienced the slowest growth at 3.2 percent.

, NAIROBI, Kenya, Nov 18  – As Kenya statistically continues to register impressive economic growth, Kenyans are starting to question the dividends of the growth, as more companies lay-off workers and restrategize citing ‘harsh economic times’.

A recent survey published by Pew Research Centre, on what citizens in Kenya, Nigeria and South Africa feel about the state of their countries, showed widespread discontent with the economy and corruption.

In Kenya, slightly over half of the respondents said they are dissatisfied with the country’s direction and the national economy, even as Kenyans below 35 years showed most optimism in the three countries.

The general feeling of discontent comes amidst positive economic projections by the government and international finance institutions.

The World Bank, in its Kenya Economic Update, says the country will grow at 5.9 per cent in full year 2016, expanding to 6 per cent in the first quarter of 2017.

Meanwhile, the government’s own figures paint a rosy 6.2 percent growth in the second quarter compared to 5.9 percent in the same period in 2015.

But while the numbers look good at the top level, the beneficiaries of the growth – ordinary Kenyans and businesses – have a different perspective.

Just this week, Standard Chartered Bank announced it will be relocating its Shared Service Centre to India, affecting 300 jobs.

Days later, East African Portland Cement said it will be laying-off over 1000 jobs in 2017 in a turn around plan.

In the last three years, more manufacturing firms including Eveready East Africa, Cadbury’s, Sameer Africa have either closed shop or moved operations to other countries, citing high operational costs, cheap imports or strategic realignment.

In the financial sector, several banks including Community Bank, Eco-Bank and Sidian bank have announced early retirement programmes affecting nearly 600 jobs this year.

According to Senior Portfolio Manager at Sanlaam Investment Limited Kevin Kiprono, consumers are currently facing challenging times from several factors which affect their cost of living including government elbowing out the private sector in terms of access to credit.

“According to CBK statistics, the country’s total debt grew by more than seven times  the GDP growth rate in FY 2015/16, much higher compared to 10yrs ago (2006) when GDP grew at a higher rate than debt.”

debt-gdp
CBK

“Bulk of the debt proceeds is being used to fund recurrent expenditure as opposed to public investments that will translate to future income to the economy,” he explained.

Meanwhile, Kenya’s current Fiscal Deficit to GDP has risen from 5.3 per cent in 2008 to 9.3 per cent in 2016.

He says the ballooning government wage bill and other infrastructure expenditures results to crowding out of the private sector as investors and lenders prefer government securities as their investment option.

Moreover, the recently passed Banking Act has made access to credit harder among most businesses as banks slow down and limit lending to quality borrowers.

“This in effect results to a slowdown in business expansion and interferes with normal operations (that includes insufficient cash) flows to pay suppliers,” he noted.

Some businesses nonetheless have sought alternative methods of raising capital which comes at a premium passing the cost to consumers through higher prices of goods and services.

“This challenging environment is expected to continue unless we experience great recovery in major sectors or government optimizes expenditure to income generating projects,” he added.

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