Kenyan Economy in Recession as PR on Performance Goes into Overdrive

Most of us have a difficult time deciphering the business language that our journalists throw at us. We don’t understand how the markets work. We don’t get how the trading at the NSE is done. We don’t comprehend what the numbers mean when institutions like World Bank tell us that by 2018, our economy will be growing by 6.3%. Most of are okay being guided and led and ruled under the guise of ignorance bliss as we struggle to pay bills, pay debts, meet our financial obligations.

World Bank, Bloomberg have praised Kenya as the beacon of hope in sub-Saharan Africa in terms of economic growth and trade balance. The numbers have been shared. The projections have been done and everyone is happy. Everyone here meaning those in leadership with a 7-figure salary. As an entrepreneur with over 10 employees, my views and perceptions are somehow different from the rosy picture being painted.

Most will think I am anti-jubilee. Many will say I have been bought by CORD but the truth is, I am suffering like I have no other means of growth or survival. If then, my status is tough, what about the rest of us? What about my staff? I belong to a group of local entrepreneurs, where we number over 5000 and I am the only one who has not yet laid off anyone. Its tough out there but they say the numbers are good and our economy is doing very well.

There are eight indicators that economists’ world over use to measure the stability of the economy and see if its growing or not. In Kenya, we seen to depend on World Bank, IMF and Bloomberg to tell us what’s happening instead of looking at the critical numbers collected by the KNBS. I would trust KNBS over any other institution when it comes to data on our economy and this is something that our dear government needs to look at.

GDP measures the level of economic activity within an economy of a country and from a Kenya’s perspective, the only key economic activity is the high import of steel for the SGR, mega scandals and key brands shutting down. We have over 30 brands that have laid off staff and more in the process of doing so to reduce costs of operations, consolidate in order to compete better, and some have fallen by the wayside due to slowness to adapt to the fast-changing technological advancement.

We are creating jobs via gambling firms while real brands in manufacturing and agriculture are shutting down or relocating. Is our economy well? Is it sound? Our debt levels are extremely high and unsustainable.

Examples of these brands that have led to over 25,000 loss of high end jobs in the last 4 years are;

• Fluorspar laid off workers as Kenya Fluorspar company closed down in April.
• East Africa’s biggest broadcaster to close radio and TV stations in Kenya. 
• Sameer  tyre factory closure
• Cadbury Kenya closed shop
• Eveready East Africa, the biggest dry-cell battery maker in the region, shut its Nakuru factory.
• Banking giant Hong Kong Shanghai Banking Corporation (HSBC) formally exited Nairobi.
• Reckitt & Benkiser, Procter & Gamble, Bridgestone, Colgate Palmolive, Johnson & Johnson and Unilever have all relocated or restructured their operations mostly to Egypt or South Africa
• Tata Chemicals Magadi  closed down its main factory in Kenya.
• Coca-Cola Company downgraded its massive regional headquarters in Nairobi and relocated most of its operations to South Africa and Nigeria.
• Barclays Africa shuts down Nairobi office over redundancy and moves to South Africa.
• Royal media lays off over 100 employees to cut costs. 
• Sidian Bank staff layoffs  point to a bigger issue with the Kenyan economy. 
• Family Bank will lay off unspecified number of workers in a bid to cut costs. 
• StanChart Kenya lays off 167 as parent firm orders cost-cutting. 
• EABL to lay off 100 staff at main Kenya subsidiary due to high costs of operations. 
• Ericsson Kenya staff demand to know retrenchment terms (However this affected larger sub-saharan Africa). 
• Telkom Kenya to lay off 500 employees in fresh retrenchment wave
• Kenya Airways cuts 80 jobs in first phase of layoffs. 
• Kenya Meat Commission lays off 119 employees in it’s rationalization of staff. 
• Mumias lays off 100 staff at closed water bottling plant.
• Equity Bank reports drop in staff costs as 660 workers exit. 
• Co-op Bank sends 160 managers packing in cost-cutting measure. 
• Agony for 2,600 workers as Karuturi flower firm shuts down
• Oserian flower farm lays off 400 employees.
• Airtel lays off 60 employees. 

To make matters worse, a report done by KNBS indicates that over 2.5M SMEs have shut down in the past 4 years. These are reported SMEs with records and the number could be high. Reason for this closure is a myriad of reasons ranging from over-regulation, lack of payment for work done for big brands by SMEs, copy cats hence stiff competition for limited customers and disruption of various sectors by advancement in tech apps.

Assuming each closed SME had an average of 5 employees, this translates to over 12,500,000 job losses in the last 4 years alone. This means we are losing an average of 3,125,000 jobs a year against a backdrop of 800,000 that Jubilee says we are creating per year. So, is our economy healthy really?

The other measure that we use to tell if the economy is well is the CPI (The Consumer Price Index) which measures the current price levels for goods and services that Kenyans buy. For the month of October, the inflation % was higher than the previous month due to increasing food prices meaning life is very expensive for ordinary folks. The interesting bit is that, this is the only measure that we seem to release diligently every month. I guess, because few understand what it measures and its implications.

The unemployment rate measures the percentage of workers within the total labour force who don’t have a job but who have looked for work in the past 4 weeks and are available for work. This is the one measure that the Jubilee Govt has refused to release since they took power except for the former CS of Devolution who mentioned how many jobs they have created since they assumed power. She never touched on the rate of unemployment which currently stands at over 48%.

Trade deficit measures the difference between the value of a nations imported and exported goods. When exports exceed imports, the country is running a trade surplus and this is an alien concept for Kenya because I don’t recall the last time we ever had a trade surplus. We are basically an import country in every sense of the word.     

The above few measures give you a clear perception of how our economy is doing. Question is, is the PR machinery forgetting something as they push how well the economy is growing well? When the biggest employer in the country is the security sector employing over 400,000 askaris, that should tell you something. With the retail sector reeling under disruptive technologies, poor management, stiff competition and over bearing regulation, what will happen to the millions they employ? What will happen to the manufacturers?

I hope you can see through the smoke screens and tell for yourself what you think about the economy.

Related: Economy in Focus: Nigeria Goes into Recession, Will Africa Suffer?