Saving Kenya’s Businesses From The Auctioneer’s Hammer: Why Viable Firms Deserve A Second Chance

Across Kenya, a silent economic crisis is unfolding. Once-thriving businesses, some of them listed on the Nairobi Securities Exchange (NSE), are being hauled into courtrooms and auction yards—not because they are beyond saving, but because the prevailing system makes liquidation faster, easier, and more rewarding for certain actors. In a country struggling with unemployment, underinvestment, and shrinking private sector dynamism, this trend is not just alarming—it’s economically suicidal.

The rise in business closures, forced auctions, and administration orders is no longer a string of isolated cases. It’s a pattern. We have watched giants like Nakumatt, ARM Cement, Uchumi, and Mumias Sugar fall, not always from terminal business failure, but due to mismanaged debts and poor restructuring mechanisms. Now, even mid-sized firms and viable SMEs are on the chopping block. What’s deeply troubling is that many of these businesses still have operational capacity, customers, and cash flow, just not enough to fend off aggressive creditors in the short term.

According to the Kenya Association of Manufacturers (KAM) 2023 report, over 35% of medium-scale manufacturers faced enforcement threats despite showing signs of recovery or profitability. Similarly, PwC’s Kenya Business Resilience Report (2022) showed that over 60% of firms placed under administration had turnaround potential if given 6–12 months and a well-structured workout plan. But time is a luxury rarely afforded to Kenyan businesses.

The issue is rooted in how we define insolvency and how the system is incentivized. Kenya’s Insolvency Act (2015) was enacted with the promise of restructuring support and creditor negotiation frameworks. But in practice, banks, auctioneers, and some administrators have found more value in quick asset seizures than in slow recoveries. In an environment where trust between borrowers and lenders is thin, the law is often weaponized to extract value instead of preserving it.

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The consequences are dire. Each liquidation doesn’t just represent a failed business—it means hundreds of lost jobs, broken contracts with local suppliers, vanished tax contributions, and shattered innovation. A single collapsed firm can ripple across its entire ecosystem, dragging down partners, service providers, and communities with it. The informal sector, which is already overcrowded and underregulated, cannot absorb the fallout.

Kenya’s obsession with recovery through auctions has also damaged our image as a viable investment destination. Investors want to know that if things go wrong, there’s a path to restructure, not just to destroy. In contrast, countries like South Africa and the UK have robust business rescue cultures. For example, South Africa’s Companies Act 2008 introduced business rescue proceedings that have saved several large enterprises. Kenya needs to adopt a similar framework—not just on paper, but in practice.

The problem extends beyond laws to the attitudes of key stakeholders. Banks have become more risk-averse since the 2016 interest rate cap, preferring secured lending and asset seizures. The judiciary, already stretched thin, often lacks the time and technical knowledge to oversee complex business restructuring cases. The result? A pipeline of firms is thrown into administration or liquidation, even when other options exist.

Even more disheartening is how SMEs are treated. These are the backbone of Kenya’s economy, accounting for 98% of all businesses and employing over 15 million people, according to KNBS’s MSME Survey (2022). Yet they face the same brutal enforcement processes as large corporations, with no cushion, no mediation, and no access to turnaround capital. Once an SME misses a few loan repayments, they are treated as failures—often publicly—triggering reputational collapse before financial one.

It is also worth noting the toxic influence of auction culture. Kenya’s auctioneering industry, now bloated and underregulated, has evolved from a last-resort mechanism into a lucrative enterprise. Properties, vehicles, and machinery from struggling firms are listed on weekly pages in local dailies as though liquidation were a badge of honor. This culture undermines any serious effort to build a business recovery ecosystem.

The government cannot ignore this anymore. With Kenya seeking to attract FDI, boost manufacturing, and promote entrepreneurship, it must rethink how it treats businesses in distress. That means reforming the insolvency process to prioritize restructuring and negotiation over destruction. Tax incentives should be offered to banks and private equity firms that participate in turnaround deals. Public institutions like KDC (Kenya Development Corporation) should expand their mandate to include special recovery funds for distressed but viable businesses.

The Central Bank of Kenya (CBK), the Capital Markets Authority (CMA), and the Office of the Attorney General must issue clear guidelines encouraging debt-equity swaps, pre-packaged administration agreements, and the use of turnaround professionals. These reforms have worked in countries like India, where the Insolvency and Bankruptcy Code (IBC) allows companies to restructure quickly and re-enter the market with new investors.

Another opportunity lies in building an ecosystem of turnaround specialists. These are financial and legal experts trained to diagnose a struggling business, restructure its debts, renegotiate contracts, and rebuild operations. Kenya lacks such a pool today. A certification framework, supported by universities and regulators, could change that.

Meanwhile, we must address the short-termism of our financial sector. Banks must be reoriented to think beyond collateral and adopt cash-flow lending models for businesses with steady performance and potential. This shift is not just moral—it’s profitable. Data from McKinsey’s Global Banking Review (2023) shows that banks involved in successful business turnarounds eventually recovered 2–3 times more than through liquidation.

For the judiciary, we need specialized commercial benches with business judges trained in insolvency, restructuring, and corporate finance. These benches must be empowered to halt wrongful auctions, scrutinize administrator performance, and enforce turnaround plans that protect both creditors and firms.

Importantly, the media and public discourse must stop framing struggling businesses as failures. The path to success is rarely linear. Even global giants like Apple, General Motors, and Delta Airlines went through near-death experiences and came back stronger—because their systems believed in rehabilitation, not ruin.

What Kenya needs now is a pro-business philosophy that embraces resilience, not punishment. Liquidation should be a final resort, not a first instinct. We must treat businesses as national assets, not disposable entities. A job saved is just as valuable as a shilling recovered.

If we want a thriving private sector, attract capital, create jobs, and build long-term prosperity, we must build a system that supports survival. Our economy doesn’t need more auctions—it needs more comebacks.

It’s time to fix the way Kenya handles business distress. Behind every firm facing liquidation is not just a balance sheet—it’s a family, a community, and a nation’s future.

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