Nipate
Forum => Kenya Discussion => Topic started by: RVtitem on December 04, 2016, 03:09:17 PM
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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.
(http://www.capitalfm.co.ke/business/files/2016/11/DEBT-GDP.jpg)
Mohamed Wehliye, Senior Vice President Financial Risk at Riyadh Bank, says the problem is that the country’s growth is being felt in the services sector which doesn’t add too many jobs.
“Almost 80 percent of our growth is in services that include financial services which add a lot to GDP but employ a few people. On the other hand, almost 80 percent of employment is in agriculture and manufacturing which is shrinking. The combination of these two scenarios is what you are witnessing and what economists refer to as jobless growth::),” he explained.
He says there is a need for Kenya to prioritize on competitive manufacturing by bringing the cost of power significantly lower even as processes and infrastructure are continually upgraded.
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.
The agriculture sector grew by 5.5 percent compared to 4 percent recorded in the same period last year owing to well-distributed rainfall that greatly enhanced agricultural production.
Wehliye says no country has attained a high standard of living on the basis of services alone.
“Countries that have escaped poverty have had to put a lot of workers through factory gates. China, US, Germany, Japan, Europe. There is a traditional path where an economy transitions from an agricultural one to an industrial one and then to a service economy. There are no shortcuts to economic development,” Wehliye added.
http://www.capitalfm.co.ke/business/2016/11/economy-growing-money/2/
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Lots of unemployed Kenyans. Invested thousands in education but still waiting for a job, even menial.
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It is a very hard to understand society, we are always drinking while talking about how things -biashara, family/national budgets... are bad.
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Non performing loans are going up either because of economy weakness or better reporting http://www.businessdailyafrica.com/Borrowers-hit-hard-times-as-bad-loans-rise-to-Sh207-billion/539552-3475134-snau0x/index.html . Also credit growth has slowed down. Then government is only spending less than 75% of its small development budget http://www.businessdailyafrica.com/Kenya-to-spend-40pc-of-tax-revenue-on-servicing-public-debt/539552-3470912-juq1fh/ . The kenya economy might be sputtering.
Something simple like building pedestrian bridges to remove bumps that create traffic jam on thika road was announced in january almost an year later nothing. Development funds absorption is low . Drinking also has been greatly affect especially mainstream brown bottles type of beer, EABL is producing less beer than it did in the 90s more people have shifted to cheap spirits and keg.
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HK,
I think the growth of non-performing personal loans has been going up since Kibaki boom years.. I remember seeing the staggering growth on CBK books back in 2002. I think some of these loans went to investments that never materialized.. Also, there is a big chuck of this money tied in Real estate. Until we have a vibrant trustworthy capital markets the economy will continue to be anemic..there has to be a better investment vehicle than real estate to be offered to people looking for passive income generation. All the retirement money has gone to land speculation and real estate.. Now the glut is real.. the ROI on Real estate is low and some people are having a tough time servicing their debt. Too much money chasing few opportunities resulting in inflation in housing, food retail sector which erodes savings and consumer confidence.
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Lots of unemployed Kenyans. Invested thousands in education but still waiting for a job, even menial.
A ticking time-bomb, but the coming disaster could have a positive outcome--when the masses of unemployed youth realize that they have been conned, that a few shillings and busaa to create chaos at political events will not do, that they cannot survive on petty crimes or the "service economy" of selling illegal brews in dens or mandazis by the roadside, dot, dot, dot. Then, if they have the brains, they will decide to forcefully grab a bigger share and rudely awaken the looters they have so far been supporting in the "our man" spirit. Until then, we have some words from the Hon. M. Kibaki: kazi iendelee. Kazi ya nyama.
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My relatives complain of unemployment since finishing college. For a growing economy that' should not be. You see all these politicians running all over making deals with each other but you don't see major highway construction except maybe SGR where landowners got lotsa money and used it to get more wives. Private sector is doing well but infrastructure is 10yra behind. So businesses are not sure whether to expand into NKR due to limited infrastructure. Uhuru borrows money for good use but it ends up being misused in buying crappy health containers at inflated prices. Meanwhile the borrowing continues.
20billion of NRB county money can't be accounted for??????. And that's just one county
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The unemployment numbers in Kenya will never make sense- First Kenyans do not consider Jua Kali sector jobs as employment- Mimi ni kushikilia tu. Majority of young Kenyans can't hold a job for more than two years especially in the Jua Kali sector. Reason is not the incomes but the push to get the 'opportunity' to make/scheme/steal/deal/hustle easy monies from their employer/well to do relatives/ sponsors/government tenders. Despite the untaxed good incomes whether manning a bus/matatu/stall/all sort of IT jobs; everybody is looking for major breakthrough or serious marupurupu
About credit majority of micro, small, medium and even NSE listed firms are under-capitalised. Even real estate is still undercapitalised. There can never be anything as a 'glut' given that only a small portion of Kenya is served with proper infrastructure. Corruption also means land and real estate are among the best bets across Africa.
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Non performing loans shot up from 120b in 2015 to 207b in 2016 thats an increase of about 80% either this is because better stringent reporting by banks being enforced by CBK or companies aren't able to service the loans. After capping the interest spread the non-performing loans should be going down.
Glut of real estate if its there is mainly in upper middleclass areas and malls. The lower income areas are under-served and a lot of investment is actually needed. The fastest growing companies are borrowing outside kenya e.g tropical heat http://www.businessdailyafrica.com/Corporate-News/World-Bank-unit-IFC-to-lend-Tropical-Heat-Sh450m-for-factory/539550-3357816-yrgbl9z/ cause its a lot cheaper. Maybe one of the reason why companies are under capitalized is cost of acquiring capital.
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Interesting blog to follow regarding the Kenyan Economy:
Factors affecting the Kenyan economy (https://anzetsewere.wordpress.com/)
I have been getting several questions pertaining to what is ‘really’ happening in the Kenyan economy. Many Kenyans see incongruence between economic growth statistics and their own lived experience. According to the World Bank the economy is expected to grow by 5.9 percent in 2016; the Kenya National Bureau of Statistics reported that Kenya’s economy expanded by 6.2 percent in Q2 2016. However, several companies have closed down operations in the country and thousands of jobs have been lost this year alone. There are numerous variables that may be informing why Kenyans do not seem to be feeling the positive effects of economic growth.
The first is that GDP growth and Ease of Doing Business data do not capture the reality of the growth and Ease of Doing Business in the informal economy where over 80 percent of employed Kenyans earn a living. Therefore, one cannot extrapolate positive overall statistics as reflective of performance of the informal economy. To what extent does Ease of Doing Business research reflect improvements in the business environment for informal businesses? Parameters such as increased ease with regards to tax compliance and business registration inform Ease of Doing Business performance, yet these are parameters with which informal businesses largely do not intersect. Thus, perhaps the incongruence stems from the fact that the economy from which millions earn a living is largely ignored by official data gathering and analytical efforts.
With regards to companies closing and job loss, several factors at play; I will focus on manufacturing and the banking sector. Manufacturing in this country is under threat because the cost of doing business for manufacturers in Kenya remains high particularly with regards to electricity, transport, cross-county taxes and, frankly, corruption. Additionally, the country has allowed the entry of cheap goods, particularly from Asia, to flood the market; goods that benefit from protection and subsidies in their home economies which is not reflected here. The combination of these factors is making Kenya an increasingly uncompetitive location for manufacturing which is diametrically opposed to the Government’s industrialisation agenda. With regards to the banking sector, job shedding seems to be informed by automation and the interest rate cap. Mobile and e-banking means that many customers do not need direct human contact to effect the transactions they require. The interest rate cap has removed a key risk management tool that banks used to manage information asymmetry with regards to credit worthiness. As a result, banks seem to have limited space to make numerous loans as the risk buffer is no longer present. Fewer loans means fewer staff are needed to monitor loan compliance.
Kenyans are also concerned that economic growth is not associated with job creation; the country seems to be stuck in the ‘jobless growth’ rut. Again, this is informed by several factors. Firstly, Kenya’s economic growth is services driven, and services produces far less jobs than manufacturing for example. The main services sub-sectors that are labour intense are health, education and hospitality; sub sectors such as telecoms and financial services need far less labour. It is no secret that tourism in the country has been hit leading to job losses; and even when there is marginal recovery, a limited number of jobs are created and those are seasonal. Until the manufacturing sector is given the attention it requires such that economy is driven by export-led manufacturing, the ‘jobless growth’ challenge will continue. Finally, the education system in the country is doing a gross disservice to the youth by making millions of young people essentially unemployable. 62 percent of Kenyan youth aged 15-34 years have below secondary level education. Further, Kenya is characterised by a persistent mismatch of skills between what is taught and the skill requirements of the labour market. Thus most youth are poorly educated and those who are well educated are not trained in skills the labour market seeks.
Finally, financial mismanagement at both national and county levels is compromising growth. It seems that government funds that are meant to be economically productive and generate economic activity do not reach intended projects. As long as this continues to occur, jobs and growth that could have been created by government investment and financing will not materialise.
All these factors inform the disconnect between rosy economic statistics and the reality Kenyans feel on the ground; and these will persist if there is no change in financial management and economic development strategy going forward.
Anzetse Were is a development economist; anzetsew@gmail.com
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Non performing loans shot up from 120b in 2015 to 207b in 2016 thats an increase of about 80% either this is because better stringent reporting by banks being enforced by CBK or companies aren't able to service the loans. After capping the interest spread the non-performing loans should be going down.
Glut of real estate if its there is mainly in upper middleclass areas and malls. The lower income areas are under-served and a lot of investment is actually needed. The fastest growing companies are borrowing outside kenya e.g tropical heat http://www.businessdailyafrica.com/Corporate-News/World-Bank-unit-IFC-to-lend-Tropical-Heat-Sh450m-for-factory/539550-3357816-yrgbl9z/ cause its a lot cheaper. Maybe one of the reason why companies are under capitalized is cost of acquiring capital.
The lower income areas of rents going for $3k to 6K is where the beef is. the problem is that you have to target a specific area as mobility for this group is limited so expect to pay high for land.. plus you got cut corners to make this work..since cost is a factor on the return.. personally I am not ready to risk in this market
Cash flow is a serious threat.. I remember in the beginning of Uhuru term a SME telecom company I know well was having serious cash flow issues due to non-pay by GOK enterprises .. So in turn employees were not getting paid, suppliers were not getting paid, rent by employee was not getting paid.. so it is multiplier effect
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since kibaki left bills have not been paid. many contractors n suppliers just can't survive.
Non performing loans shot up from 120b in 2015 to 207b in 2016 thats an increase of about 80% either this is because better stringent reporting by banks being enforced by CBK or companies aren't able to service the loans. After capping the interest spread the non-performing loans should be going down.
Glut of real estate if its there is mainly in upper middleclass areas and malls. The lower income areas are under-served and a lot of investment is actually needed. The fastest growing companies are borrowing outside kenya e.g tropical heat http://www.businessdailyafrica.com/Corporate-News/World-Bank-unit-IFC-to-lend-Tropical-Heat-Sh450m-for-factory/539550-3357816-yrgbl9z/ cause its a lot cheaper. Maybe one of the reason why companies are under capitalized is cost of acquiring capital.
The lower income areas of rents going for $3k to 6K is where the beef is. the problem is that you have to target a specific area as mobility for this group is limited so expect to pay high for land.. plus you got cut corners to make this work..since cost is a factor on the return.. personally I am not ready to risk in this market
Cash flow is a serious threat.. I remember in the beginning of Uhuru term a SME telecom company I know well was having serious cash flow issues due to non-pay by GOK enterprises .. So in turn employees were not getting paid, suppliers were not getting paid, rent by employee was not getting paid.. so it is multiplier effect