Why Kenya's 6.3% GDP growth is voodoo

[RV Pundit]

I listed new 'sectors" that are private sector driven - previously - mostly around Fintech, tech and related. The private sector struggling are the ones that are being disrupted. The agile ones like Equity who saw the disruption - and boarded the train - are reaping profit. So yes a few old dead wood in private sector are bleeding (see NSE listed stocks) - because Kenya is in a cusp of a revolution powered by M-pesa like US was in 1990s powered by Internet & Computers. Like in the US - and worldwide - computers initially led to retrenchment - but the efficiency and productivity gains - grew the economy so fast - eventually new jobs emerged as new industries replaced the old ones.

If you don't have a tech or at least fin-tech strategy in Kenya now - and don't make mobile payments(M-PESA) the center of your strategy - then chances are whatever sector you're - you're going down very fast.

Look at Insurance sectors - they are bleeding - because you still have to go some office or agent to buy insurance with cash? They have no digital strategy. You should be able to buy third-party insurance from your phone, print an insurance cover and have it authenticated via USSD - if need be.

New players like SportPesa, the Jambopays, Cellulant, Twiga, Uber, Little Cab, Jumias - name them - are going to eat your lunch eventually. The Safaricoms & Equitys probably already ate your breakfast.

Pundit if this was private sector-led growth - there would be lots of new jobs, supply chains - new incomes and taxes - what you call sustainable growth. There would be no massive foreign debt - in fact debt would be minimal - private enterprise is much more efficient than GoK any day.

[Nefertiti]

Don't conflate your dreams with reality. Centum and Britam have lost big - BILLIONS - in real estate - "asset management" - as new malls remain ghost towns. The lower class housing - this remains a pipedream - slums have existed and expanded rapidly since independence. This "sector" is dominated by smalltime landlords and slumlords - who are corrupt as hell - very chaotic sector. Is this what you're saying has grown?  We are debating what has been done - not visions - when the Chinese build large scale cheap housing it will be all over the news. How would they do that when slum dwellers are dirt-poor with no 1K for rent? More debt? It's why you need private sector-led growth - not hard infra which noone uses - new incomes means new paying tenants.

I wish you could quote real empirical evidence beyond your own anecdotal stories walking around malls and upper hill. We have [Hass, Cytons and Knight Frank with good real estate data. I don't recall reading anything alarming from them lately.

Maybe you should start from Hass Index
http://hassconsult.co.ke/real-estate/hass-index
http://hassconsult.co.ke/images/Q12019Residential.pdf

I think you're confusing the oversupply in certain sectors of real estate sectors - esp in the upper end - with real estate sector. The bottom has not been scratched. This is where Uhuru's Big 4 housing comes in. Already we have some 25B dollars worth of commitments in the lower sector - I am talking low and lower-middle class housing (1-3M worth of housing).

Real estate has kind of cooled off (cement sales are leveled out) because of credit freeze thanks to interest capping and of course, everyone is waiting for Uhuru big 4 housing to start. The judiciary has not helped things - Jubilee had projected to raise 70B from taxes - and kick start this. Uhuru has to bring the hammer down on Judiciary or nothing gets done here.

Uhuru estimates in 5yrs - real estate will double - from 7% of GDP to something close to 15% - as Chinese investors come to town and build huge cheap houses - to fill the gap in low end of the market. We don't need have slums when Chinese can deliver very cheap social housing. We need to reign on informal housing sector where folks are building unsafe and inhabitable buildings in Eastlands & all over....instead of big chinese contractors like Edermann seizing the market and gifting the economy with economies of scale needed to deliver affordable and safe houses.

Often ignored part of the China economic model - is that construction for long time made 50% of China GDP - kenya needs to make sure construction (real estate and related) - moves from less 10% to 30% -  young generations should not be doing farming - they should be in mjengo - build houses, doing electrical wiring, plumbing, painting and all the many jobs - we have so many slums - people are squeezing in really tiny houses - and we have fintech, china construction machine and the money - to borrow from china.

Are we really doing "well"? Real estate is going bust - Two-Re I went there 2017 and beyond 1st floor it was empty. Haunted hallways - the construction boom is not efficient - just like SGR - cause they are expensive without sufficient demand. It's worse at Upper Hill - with all the corporate HQs concentrated there. So as the trucks continue to haul cargo along the roads - giving the SGR a wide berth - so do the tenants in Nairobi and other places. Most last-mile connections are yet to flip the switch on. Hard infrastructure must be pared with utility - we can forgive GoK whose incompetence we are accustomed to - but these Centums, Britams and private investors are quite buffling - with such poor choices. Centum posted reduced margins - with profit warnings - Britam made BILLIONS in losses - despite all the technology, integration, optimizations and what not. Their "IT transformation" - or some crap like it - was all over the media a year or so ago - as they continue to hawk antiques - motor or life insurance to millennials. You asked what companies were going bust? KQ is another one - minting BILLIONS in losses year after year - despite going digital and poaching MJ on board - Mr M-Pesa himself.

[RV Pundit]

You're shooting in the dark as always using purely "common senses" to judge complex stuff. You should try to read that Hass report, find Cyton and Knight Frank. If you do not trust KNBS real estate data. Our real estate is very tiny just like our economy. The people struggling are those who made huge bets on the upper-end of the markets - there is an oversupply and there is reduced effective demand. The people who are dealing with lower-end of market - like Ederrman's GreatWall are making money. Edderman are building twenty-three (23) 34 floors apartments - 8 in Ngara - and 15 in Ngong roads - and they are closing sales - because they are selling units for 3M kshs.


There is a huge effective demand in that segment. Many Kenyans can easily afford a 2-3M mortgage house - it about how much they pay rent. Landlords - are in the informal market - Uhuru just need to sort the land - give gov land for free - to developers - and developers will build house for 3m - and everyone will happily buy them.

As for Britam and the likes - they need to stop building malls and high-end office spaces - and start building 1-3m houses. With 10B - that they use to build skyscrapers - they can build even 10,000 units of cheap housing estates - and sell them easily - and make tonnes of money.

There is time for everything as bible says. There was a time when investing in universities made sense - now it doesn't with a cap of 70,000 students eligible annually - all absorbed by JAB(or whatever it call now). Now it's time to invest in TIVET  and middle-level colleges - with all the Matangi's Es, Ds and Cs - desperately looking for opportunities to gain practical skills.

Don't conflate your dreams with reality. Centum and Britam have lost big in real estate - "asset management" - as new malls remain ghost towns. The lower class housing - this remains a pipedream - slums have existed and expanded rapidly since independence. This "sector" is dominated by smalltime landlords and slumlords - who are corrupt as hell - very chaotic sector. Is this what you're saying has grown?  We are debating what has been done - not visions - when the Chinese build large scale cheap housing it will be all over the news. How would they do that when slum dwellers are dirt-poor with no 1K for rent? More debt? It's why you need private sector-led growth - not hard infra which noone uses - new incomes means new paying tenants.

[Nefertiti]

In short you have future visions - not present reality - of agriculture performance. Agric at present is doing quite badly.

We are transitioning from low-value crops (Uganda & TZ can have them) into high-value crops (horticulture, dairy & etc) - and then when Ruto become PORK - we will move the value chain - by enforcing value-addition. But first we have to discourage the planting of small-holder planting of maize, beans and such nonsense - by bitting the bullet - and allowing those products to be imported duty free - and have Galanas doing large scale planting of them - and then force our farmers to engage in high-value crops - and for those sectors that are already mature (like Tea) -force them to do value-addition - like we did for Macadamia. No Kenya tea should be sold in bulk. Sri Lanka did this - and they earn twice from their tea. We can double our tea earnings by simpling - decreeing they be packed and branded in Mombasa before shipping.

[Nefertiti]

TIVET is great - a future potential. The present again is doom - as dirt-cheap labor in Ethiopia steal the thunder - with Chinese setting up there. It wioll be very hard to attract manufacturers with our unionized labor - even with TIVET - cause you have to beat ET and such - where there are no unions and labor courts. Maybe automation - with robotics, etc - which is still hard to beat the first world or Chinese.

Yes Manufacturing is the toughest - but SGR is the start - esp if we build SEZs around it. SGR will become cheaper once we used it for it's purpose - to transport bulk non-containerized goods - I am talking clinker, iron & steel, cereals, such - and we now have excess electricity - that needs to be sold for cheap for industries.

Labor cost is acceptable if we improve worker productivity - and this where TIVET comes in - where companies are getting workforce with the right skills- therefore Jubilee huge investment in TIVET instead of universities - will mean companies can literally locate anyway - and get workforce who knows how to operate say CTC machine.

[RV Pundit]

It not all doom and gloom - we are doing okay in EPZ textile and apparel - been leading Africa for decades now (I guess post-Madagascar getting booted out of AGOA). What will work is EPZ and SEZ - where Chinese are allowed more leeway - and given incentives. Salaries outside Nairobi are set low (min salary) - but I have to agree that Manufacturing is going to be a tough nut to crack. I think we should aim for the construction industry - and focus on agriculture (high value) - where we have more chances of success. I don't see Jubilee hacking manufacturing....there is no incentive for politicians to do this...because there is no rent-seeking opportunities.This will remain Asian-driven sector in Kenya - only them seem to understands the money that can be made from it and the incredible hardwork needed. So sad.

TIVET is great - a future potential. The present again is doom - as dirt-cheap labor in Ethiopia steal the thunder - with Chinese setting up there. It wioll be very hard to attract manufacturers with our unionized labor - even with TIVET - cause you have to beat ET and such - where there are no unions and labor courts. Maybe automation - with robotics, etc - which is still hard to beat the first world or Chinese.

[RV Pundit]

Yes at present - it's bit moody depending on Mr Rain. That is why last year we did 6.3% and this year we will do 5.7% economic growth - with agri expected to take the hit.

In short you have future visions - not present reality - of agriculture performance. Agric at present is doing quite badly.

[Nefertiti]

I am sure Centum and Britam have all these data. If low-class lower middle housing is booming - why have cement sales flattened? The working class - that can afford 2-3M mortgage - already pay for housing - and cannot drive growth. They would just move from rental to own house - not have 2 or 3 houses. The un-housed slum-dwellers - these would be real NEW demand - sadly they have no cash to pay. Imposing 3% on tiny working class is unfair and ill-advised - afadhali hata VAT - which all consumers pay. Of course - just like Kibaki/Ngilu universal healthcare 3% on payslip in 2004 - it has hit a snag with court orders.

What must be cracked is INCOMES - until the slum dwellers have $$ to pay rent or mortgage - there can be no sustainable housing or end of slums - which are a symptom of poverty.

You're shooting in the dark as always using purely "common senses" to judge complex stuff. You should try to read that Hass report, find Cyton and Knight Frank. If you do not trust KNBS real estate data. Our real estate is very tiny just like our economy. The people struggling are those who made huge bets on the upper-end of the markets - there is an oversupply and there is reduced effective demand. The people who are dealing with lower-end of market - like Ederrman's GreatWall are making money. Edderman are building twenty-three (23) 34 floors apartments - 8 in Ngara - and 15 in Ngong roads - and they are closing sales - because they are selling units for 3M kshs.


There is a huge effective demand in that segment. Many Kenyans can easily afford a 2-3M mortgage house - it about how much they pay rent. Landlords - are in the informal market - Uhuru just need to sort the land - give gov land for free - to developers - and developers will build house for 3m - and everyone will happily buy them.

As for Britam and the likes - they need to stop building malls and high-end office spaces - and start building 1-3m houses. With 10B - that they use to build skyscrapers - they can build even 10,000 units of cheap housing estates - and sell them easily - and make tonnes of money.

There is time for everything as bible says. There was a time when investing in universities made sense - now it doesn't with a cap of 70,000 students eligible annually - all absorbed by JAB(or whatever it call now). Now it's time to invest in TIVET  and middle-level colleges - with all the Matangi's Es, Ds and Cs - desperately looking for opportunities to gain practical skills.

[Nefertiti]

Pundit and Ruto have many visions for the future because they have failed in the present. It is the status quo that matters not what could be. Debt-driven growth - is hollow - and you have rapid slum expansion - and starvation - as proof of growing poverty. Despite all the growth.

[KenyanPlato]

The situation of the ground for majority small scale traders in informal sector. If DP office wanted to win hearts and minds it should focus on ways to solve problems like this. I think Kenya executive is very dysfunctional. Even in Nigeria the sickly buhari is able to delegate gate most of the work to his VP.

Today on my way to Murang'a town,i made a stopover at Kenol town.

At the stage i noticed household items being auctioned-this made me curious

On enquiring what was happening,I was told those irems belonged to mama mbogas,vendors and shop owners who had defaulted on their loans.

— Mr. Kinuthia Pius. (@Belive_Kinuthia) May 12, 2019

?s=20

[Nefertiti]

How do you allow the Chinese "leeway" in SEZ? The unions will run to court and wages will go up. Also our power is still too costly compared to say Ethiopia. I think manufacturing will take a miracle. Your fix of flooding the market  with cheap large-scale housing - and force local investors into manufacturing or agric value-adds - is doable with political will. But as you note this political will is lacking - plus GoK cannot afford to take on more debt - cause especially free housing is zero- or very low-ROI investment - unlike say roads. Slums are an efficient housing scheme - economically speaking - but inhuman and undignified. These super-poor folks will only benefit when real growth happens - permanent salaried jobs or cash in their pockets - which SGR or such hard infra-led growth don't provide. With Baringo or Turkana or Mandera - the perennial starving ASALs - they are the poster child of hollow growth and inequality.

It not all doom and gloom - we are doing okay in EPZ textile and apparel - been leading Africa for decades now (I guess post-Madagascar getting booted out of AGOA). What will work is EPZ and SEZ - where Chinese are allowed more leeway - and given incentives. Salaries outside Nairobi are set low (min salary) - but I have to agree that Manufacturing is going to be a tough nut to crack. I think we should aim for the construction industry - and focus on agriculture (high value) - where we have more chances of success. I don't see Jubilee hacking manufacturing....there is no incentive for politicians to do this...because there is no rent-seeking opportunities.This will remain Asian-driven sector in Kenya - only them seem to understands the money that can be made from it and the incredible hardwork needed. So sad.

[RV Pundit]

The day you stop ranting and start arguing with facts like HK does - I am talking data - then maybe we can take your seriously. Ruto always has his facts. The fact is the economy grew by 6.3%. Poverty has reduced from 46% to 35% as at 2016 - and by now I think we are probably at 30% poverty rate.

Pundit and Ruto have many visions for the future because they have failed in the present. It is the status quo that matters not what could be. Debt-driven growth - is hollow - and you have rapid slum expansion - and starvation - as proof of growing poverty. Despite all the growth.

[RV Pundit]

Ruto has left the gov for the drunkard Uhuru to ran - Kibicho and co' are the ones you need to ask to step in. Ruto is busy campaigning for 2022.

The situation of the ground for majority small scale traders in informal sector. If DP office wanted to win hearts and minds it should focus on ways to solve problems like this. I think Kenya executive is very dysfunctional. Even in Nigeria the sickly buhari is able to delegate gate most of the work to his VP.

Today on my way to Murang'a town,i made a stopover at Kenol town.

At the stage i noticed household items being auctioned-this made me curious

On enquiring what was happening,I was told those irems belonged to mama mbogas,vendors and shop owners who had defaulted on their loans.

— Mr. Kinuthia Pius. (@Belive_Kinuthia) May 12, 2019

?s=20

[vooke]

Banks are the only booming sector because they are lending to the government almost exclusively nowadays

Pundito , you shouldn't be quoting Hass and Knight Frank or Cytonn reports. It is in their interest to paint a rosy picture of their industry so they can keep drawing more capital. If you want to know the state of real estate look at cement manufacturers. How are they doing? Or what is our cement consumption?

Consumption is down to 4-year low which roughly coincides with SGR commencing:

https://www.standardmedia.co.ke/article/2001316334/demand-for-cement-drops-to-four-year-low

Things are thick

[RV Pundit]

Centum and Britam don't have the ability to predict the market. The market is dynamic. There is oversupply now and depressed demand as Matiangi has chased away Bazungu. I think what you fail to understand is that if we take advantages of Chinese construction machine and gov free land - we can get the economies of scales to bring down house prices and rental - at least at the lower segment. Gov owns a lot of idle lands. Bazungu did this with likes of Jericho and all those eastlando estates where rent upto now is 500shs or about - as competitive as tin shanty in Kibera - and we can do the same. We just need to give Chinese the seed money (this is where deduction or taxes come in) - and Chinese can deploy their incredible construction machine - and deliver us very cheap, sound and safe housing.

And as you said this hopefully will free lots of billions that Kenyans invest in rental flats.....and such investment can be redirected to cottage industries, agri-processing and other SME business that will provide employment.

There is no trick that gov can use to generate jobs and income - it's the people themselves to generate those jobs - gov job is to provide infrastructure - and the SMEs to provide the bulk of jobs.

The problem is tunnel-vision that most of the Kenyans have - they only see now like you - they are not that many visionaries like Bitange Ndemo who can imagine the country in 10-20yrs - and walk towards making it a reality.

I am sure Centum and Britam have all these data. If low-class lower middle housing is booming - why have cement sales flattened? The working class - that can afford 2-3M mortgage - already pay for housing - and cannot drive growth. They would just move from rental to own house - not have 2 or 3 houses. The un-housed slum-dwellers - these would be real NEW demand - sadly they have no cash to pay. Imposing 3% on tiny working class is unfair and ill-advised - afadhali hata VAT - which all consumers pay. Of course - just like Kibaki/Ngilu universal healthcare 3% on payslip in 2004 - it has hit a snag with court orders.

What must be cracked is INCOMES - until the slum dwellers have $$ to pay rent or mortgage - there can be no sustainable housing or end of slums - which are a symptom of poverty.

You're shooting in the dark as always using purely "common senses" to judge complex stuff. You should try to read that Hass report, find Cyton and Knight Frank. If you do not trust KNBS real estate data. Our real estate is very tiny just like our economy. The people struggling are those who made huge bets on the upper-end of the markets - there is an oversupply and there is reduced effective demand. The people who are dealing with lower-end of market - like Ederrman's GreatWall are making money. Edderman are building twenty-three (23) 34 floors apartments - 8 in Ngara - and 15 in Ngong roads - and they are closing sales - because they are selling units for 3M kshs.


There is a huge effective demand in that segment. Many Kenyans can easily afford a 2-3M mortgage house - it about how much they pay rent. Landlords - are in the informal market - Uhuru just need to sort the land - give gov land for free - to developers - and developers will build house for 3m - and everyone will happily buy them.

As for Britam and the likes - they need to stop building malls and high-end office spaces - and start building 1-3m houses. With 10B - that they use to build skyscrapers - they can build even 10,000 units of cheap housing estates - and sell them easily - and make tonnes of money.

There is time for everything as bible says. There was a time when investing in universities made sense - now it doesn't with a cap of 70,000 students eligible annually - all absorbed by JAB(or whatever it call now). Now it's time to invest in TIVET  and middle-level colleges - with all the Matangi's Es, Ds and Cs - desperately looking for opportunities to gain practical skills.

[RV Pundit]

Mwea rice irrigation seems to be doing well - hope this can be replicated countrywide.
https://www.nation.co.ke/business/Mwea-rice-farmers-income-rises-94pc/996-5111810-kjudy2/index.html

[RV Pundit]

M-pesa continues to see double digit growth - number of agents (new "jobs" or income revenues for SMEs') - now well into 226K.
https://www.businessdailyafrica.com/markets/marketnews/Mobile-cash-transactions-hit-Sh1-1trn-in-Q1/3815534-5111672-yu3gja/index.html

[Nefertiti]

Banks are the only booming sector because they are lending to the government almost exclusively nowadays

Pundito , you shouldn't be quoting Hass and Knight Frank or Cytonn reports. It is in their interest to paint a rosy picture of their industry so they can keep drawing more capital. If you want to know the state of real estate look at cement manufacturers. How are they doing? Or what is our cement consumption?

Consumption is down to 4-year low which roughly coincides with SGR commencing:

https://www.standardmedia.co.ke/article/2001316334/demand-for-cement-drops-to-four-year-low

Things are thick

Heart of the matter. The growth is public sector and the banks lending it money or mobile shylocks - which is all we are trying hard unsuccessfully to tell Pundit. Instead he accuses us of tunnel vision - cause he thinks we want to undermine Ruto. It is possible hard infrastructure -led growth is real yet uneven or unfelt on the ground at the same time. This fact plus the credit crunch has made many question the GoK numbers as they did Kibaki's 7% growth 2005-7.

[RV Pundit]

I always try to cross-reference data - from Hass/Cyton/Knigt Frank - together - with Cement stats - together with KNBS - and Banking sector reports- We also have building approvals plans by Nairobi & Mombasa city council providing crucial data - should give us an overall of how the sector is - Not Robina anecdotal evidence walking around Two Rivers.

KNBS does a good job cross-referencing their data anyway.

I thought I alluded to the flattening of cement demand and the reasons for that. And it linked to banking sector lending gov and reducing exposure in real estate amongst other sectors. Real estate is also leading in bad and doubtful loans that banks have to aggressively. provision for.

SGR phase 2 has been under construction.... I think cement or real estate is down due to banks refusing to lend, 2017 election blues and now Uhuru housing agenda is making most developers adopt a wait -n-see attitude.

Banks are the only booming sector because they are lending to the government almost exclusively nowadays

Pundito , you shouldn't be quoting Hass and Knight Frank or Cytonn reports. It is in their interest to paint a rosy picture of their industry so they can keep drawing more capital. If you want to know the state of real estate look at cement manufacturers. How are they doing? Or what is our cement consumption?

Consumption is down to 4-year low which roughly coincides with SGR commencing:

https://www.standardmedia.co.ke/article/2001316334/demand-for-cement-drops-to-four-year-low

Things are thick

[RV Pundit]

You're running on empty in a topic you're ill-prepared in - just shouting Ruto or Pundit this or that. There has been slowing of credit to private sector thanks to interest capping but not many Kenyans are complaining about banks loans killing them. It's a dicey situation. Yes digital loans have pretty much made up for the credit freeze. Hopefully, someone starts tracking the numbers that Tala, Branch and all these 50 digital lenders are doing. It surely must be crazy.

Heart of the matter. The growth is public sector and the banks lending it money or mobile shylocks - which is all we are trying hard unsuccessfully to tell Pundit. Instead he accuses us of tunnel vision - cause he thinks we want to undermine Ruto. It is possible hard infrastructure -led growth is real yet uneven or unfelt on the ground at the same time. This fact plus the credit crunch has made many question the GoK numbers as they did Kibaki's 7% growth 2005-7.