HK - our macro-economic sound & economy to grow by 6%

[RV Pundit]

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https://www.businessdailyafrica.com/economy/Sun-rising-for-Kenyan-economy/3946234-4550928-bi1rly/index.html

[hk]

https://www.businessdailyafrica.com/economy/Sun-rising-for-Kenyan-economy/3946234-4550928-bi1rly/index.html

Kenya economy even if government does nothing it should grow by 4% to keep up with population growth and inflation. The key this year is agriculture, because of enough rainfall agriculture will do well and that represents 40% of our economy. The PMI after initial bounce has now stagnated or started going down  https://tradingeconomics.com/kenya/manufacturing-pmi . This shows after pent up demand during election the economy is now sluggishly growing.

[RV Pundit]

No - economic growth is not given - otherwise every country by default would grow by inflation+pop growth. The economy is doing very well considering 2017 was pro-longed electioneering lasting six months - and my expectation is we will exceed 6% this year & if we can keep the momentum we might get to 7% next year & eventually 8% - unfortunately all these cannot happen when our private sector is not tapping Chinese. Look at Ethiopia - Chinese companies are pumping money there - around 3.5-4B dollars annually - in their industrial parks - and here we are not doing anything - we need to build industrial parks - subsidize power ( to 3-6shs for chinese), give them free land and tax holiday (5yrs) --- and see if we can get the slice of low cost industries.

Kenya economy even if government does nothing it should grow by 4% to keep up with population growth and inflation. The key this year is agriculture, because of enough rainfall agriculture will do well and that represents 40% of our economy. The PMI after initial bounce has now stagnated or started going down  https://tradingeconomics.com/kenya/manufacturing-pmi . This shows after pent up demand during election the economy is now sluggishly growing.

[hk]

No - economic growth is not given - otherwise every country by default would grow by inflation+pop growth. The economy is doing very well considering 2017 was pro-longed electioneering lasting six months - and my expectation is we will exceed 6% this year & if we can keep the momentum we might get to 7% next year & eventually 8% - unfortunately all these cannot happen when our private sector is not tapping Chinese. Look at Ethiopia - Chinese companies are pumping money there - around 3.5-4B dollars annually - in their industrial parks - and here we are not doing anything - we need to build industrial parks - subsidize power ( to 3-6shs for chinese), give them free land and tax holiday (5yrs) --- and see if we can get the slice of low cost industries.

Last year even with election and drought economy grew by 4%, that's our latent growth. Ethiopia is a export driven economy  while kenya is a more consumer based economy. All that chinese investment in Ethiopia is for export, leveraging cheap labour and government free land. Kenya even EPZ are diverting export goods to local market. Instead of giving Chinese companies incentives only why not give private sector incentives irregardless whether foreign or local? BTW of late there are several private equity companies that are investing in local companies. Also companies like kenafric and kevian juice are sourcing cheap funding from IFC or the duetch development bank. Until there's sufficient credit growth there's no way kenya is hitting 8% growth. And if it does it'll be purely driven by government spending which means the kawaida mwanainchi wont feel that growth. 

[RV Pundit]

But right now we are importing goods from China & India worth billions - that we can probably produce by encouraging Chinese to set it up here. I think 4% (our normal growth) factors all the forward & backward linkages with Western Capital/Debt (IFC/Equities/Venture Capital). What I believe we are losing out is Chinese on private sector. Public sector is doing very well having tapped Chinese to build roads, railways, dams & etc...they still get their usual 10% for graft..but Chinese deliver on time+agreed cost. Now close home - Ethiopia - are tapping chinese - both for public & private sector - and they are growing by 8-10%. China is now the big top dog. If you aint talking to Chinese - you aint talking to anybody. Our private sector simply need to re-configure.

I wonder how far DL went with his industrial park with Chinese in Eldoret. Those are kind of partnership we need. Huge industrial park - both private & public from Chinese.

I disagree that we need to go slow on public investment - we cannot afford to lower taxes or grant incentive to local guys - we have huge deficit in roads, power, housing - that can do with more public investment - not less.

Private sector should stop looking at small pie in Kenya - but start making talking Chinese! There is barely any local company that are tapping into CHina.

Last year even with election and drought economy grew by 4%, that's our latent growth. Ethiopia is a export driven economy  while kenya is a more consumer based economy. All that chinese investment in Ethiopia is for export, leveraging cheap labour and government free land. Kenya even EPZ are diverting export goods to local market. Instead of giving Chinese companies incentives only why not give private sector incentives irregardless whether foreign or local? BTW of late there are several private equity companies that are investing in local companies. Also companies like kenafric and kevian juice are sourcing cheap funding from IFC or the duetch development bank. Until there's sufficient credit growth there's no way kenya is hitting 8% growth. And if it does it'll be purely driven by government spending which means the kawaida mwanainchi wont feel that growth. 

[Globalcitizen12]

Pundit you are talking from both sides of your ass. Economcs is a social science. For every action there is reaction. Simple stuff like lowering taxes to encourage investments escape you because you are trying to hard to  have your cake and eat it. There is no statistical evidence that investment in infrastructure has lead to gdp growth..it is like a farmer who builds a massionnette with his farm capital at the expense of his farm..Kenya needs to improve infrastructure without borrowing too much.

[hk]

Its very clear treasury is crowding out the private sector https://www.businessdailyafrica.com/markets/capital/Banks-step-up-investments-in-State-securities-/4259442-4609104-110iqok/index.html . Why would a bank lend to private sector while they can lend government at the same rate?

[RV Pundit]

Nice one on the farmer - however the farmer here is building a massionatte by borrowing from equity bank against his future earnings - I don't see why gok should stop leveraging -  I don't think you guys appreciate what opportunity we have with China - it's not every decade or two that you got a country like china awash with money & willing to lend (rather than hoard all the money in US/Europe like bloody Saudis or Norwegians).

Pundit you are talking from both sides of your ass. Economcs is a social science. For every action there is reaction. Simple stuff like lowering taxes to encourage investments escape you because you are trying to hard to  have your cake and eat it. There is no statistical evidence that investment in infrastructure has lead to gdp growth..it is like a farmer who builds a massionnette with his farm capital at the expense of his farm..Kenya needs to improve infrastructure without borrowing too much.

[hk]

Pundit,
Any chance we can view the chinese loan prospectus?

[RV Pundit]

Unless there is some corruption or collusion - Treasury should be able to get money from banks cheaply. If the rate is the same - then something need to be done. Perhaps a study on why this is true and some recommendation.

Its very clear treasury is crowding out the private sector https://www.businessdailyafrica.com/markets/capital/Banks-step-up-investments-in-State-securities-/4259442-4609104-110iqok/index.html . Why would a bank lend to private sector while they can lend government at the same rate?

[RV Pundit]

From what I know they are mostly on the same terms with WB/IMF loans - concessionary. We have huge opportunity with these Chinese loans....and we need to take them. These are super cheap long maturity loans..SGR maturity is 30yrs...by then railway would have paid itself.

Pundit,
Any chance we can view the chinese loan prospectus?

[gout]

Very sound macroeconomics, indeed.

Though laws mean very little when you have insatiable rogues in charge with tyranny of numbers and foolproof rigging machinery insurance policy.

https://www.standardmedia.co.ke/business/article/2001282914/new-treasury-move-could-set-off-kenya-s-debt-time-bomb

https://www.capitalfm.co.ke/business/2018/02/treasury-outlines-measures-to-tame-growing-deficit-debt/

https://www.the-star.co.ke/news/2018/06/07/government-debts-to-eat-up-half-of-next-years-revenue_c1769234

Leading economic indicators by KNBS as at March 2018.

https://www.knbs.or.ke/download/leading-economic-indicator-march-2018/

[hk]

Unless there is some corruption or collusion - Treasury should be able to get money from banks cheaply. If the rate is the same - then something need to be done. Perhaps a study on why this is true and some recommendation.

Its very clear treasury is crowding out the private sector https://www.businessdailyafrica.com/markets/capital/Banks-step-up-investments-in-State-securities-/4259442-4609104-110iqok/index.html . Why would a bank lend to private sector while they can lend government at the same rate?

The CBR rate is 9.5% which means no Tbill would be cheaper than that. Treasury has borrowed a whopping $23b locally. To reduce the CBR rate core inflation has to be tamed and liquidity increased. To increase liquidity treasury has to stop borrowing locally, this is what is impending growth of private credit. The consequences of huge expenditure(i.e inflated projects) is high interest rates.

[Higgins the genius]

Our debt servicing obligation is 870B this year and we are still taking 560B loans? This is serious

[RV Pundit]

Why is it serious..in 2012 when I last checked..treasury was paying 35B monthly to service debts..or around 400B - now it double that...translate to around 75B monthly...and our revenues from KRA monthly are 150B...so we are fine...and should take more and more loans..until the lenders started worrying and stop lending us.

Our debt servicing obligation is 870B this year and we are still taking 560B loans? This is serious

[hk]

To pay the debt the government is increasing taxes on already overtaxed taxpayers https://www.businessdailyafrica.com/economy/Consumer-tax-pain-in-Rotich-s-Sh3trn-budget/3946234-4611516-153y0lk/index.html . The growth that was premised on the expenditure incurred hasn't materialized yet Rotich is doubling down on more debt. Last year budget was $26b a year later $30b, kra will collect about $16b so $14b has to be borrowed. The bulk of that will be used to rollover debt, meaning the government will be crowding out private sector and high interest will be persistent. This will be like a horror economic movie. Rising crude oil, vat on petroleum, high inflation, high interest rates. And there is uhuru's legacy.

[Globalcitizen12]

Pundit economics is simple. Brread and butter. Nothing complicated. If rotich promised 3 percent additional growth from sgr spending then he has to deliver that by making sure his financial model stay on course and any extrrnal factors threatening this are mitigated..you been harping to us that more debt means more growth but it hasn't happened

The reality is that rotich needs to be fired and someone who can work with cbk chairman hired. Uhurus legacy is going to be recession..I think predictions are USA is about to enter its boom burst cycle in 2022

[RV Pundit]

The economy has grown at 6% plus except last year when it went down to 5.5%. That is a star performance in a very mature economy like Kenya.  6% in now 88B dollar economy is like adding...nearly 6B dollars every year....or 600B kshs is being "created" every year by Rotich & Jubilee.

Pundit economics is simple. Brread and butter. Nothing complicated. If rotich promised 3 percent additional growth from sgr spending then he has to deliver that by making sure his financial model stay on course and any extrrnal factors threatening this are mitigated..you been harping to us that more debt means more growth but it hasn't happened

The reality is that rotich needs to be fired and someone who can work with cbk chairman hired. Uhurus legacy is going to be recession..I think predictions are USA is about to enter its boom burst cycle in 2022

[RV Pundit]

Target collection is 17B - if you include A-I-A & Grants (maybe another 3B dollars) - the debt we are taking is not huge. When economy start tanking, when macro-economic fundamentals start going south - then we can shout. Right now inflation is 3%.CBR rate is 9.5% (ought to be less). Banks are charging (13% for Interest). And beyond that - nobody is complaining - there is free education - now including TIVET --- so kenyans are sending their kids to schools - without selling their cows - there are crazy tarmac opening up - electricity everywhere -  Kenya is DOING EXTREMELY WELL.

It doing extremely Jubilee has NOT solid one single kenyan asset. It been adding more equity in KQ, Mumias, Uchumi and other failing companies. Kibaki sold many including Safaricom.

If we ever get distressed....we can sell safaricom shares... 35% of nearly 12B dollars.....is nearly 500B Kshs - that should pay off  a lot of loans. In fact Uhuru should sell those safaricom shares...Treasury is minting 40B every year from Safaricom with divided a small part of it....so sell it and build more roads, more railways, more pipelines, more public investment.

To pay the debt the government is increasing taxes on already overtaxed taxpayers https://www.businessdailyafrica.com/economy/Consumer-tax-pain-in-Rotich-s-Sh3trn-budget/3946234-4611516-153y0lk/index.html . The growth that was premised on the expenditure incurred hasn't materialized yet Rotich is doubling down on more debt. Last year budget was $26b a year later $30b, kra will collect about $16b so $14b has to be borrowed. The bulk of that will be used to rollover debt, meaning the government will be crowding out private sector and high interest will be persistent. This will be like a horror economic movie. Rising crude oil, vat on petroleum, high inflation, high interest rates. And there is uhuru's legacy.

[Globalcitizen12]

Will USA recession impact Kenya..USA is predicted to enter recession from 2019 or 2020