Blog Archive

Monday, January 14, 2008

Economic Losses Mount for Kenya

In spite of various "all-is-normal" pronouncements by the (possibly illegitimate) government, Kenya has & will take a HUGE hit in 2008. I wonder if these "ivory-tower" mandarins, who get huge salaries no matter what, live in the same Kenya I do?

I can't go in much detail but I will highlight the major issues as I see them. Keep in mind Kenya is/was a US$12bn economy. KShs 780bn.

  • Cancellation of charter flights. Loss of immediate tourism benefits esp at the Coast.
  • Many charter firms will adopt a wait-and-see approach just as they did in 1997. Some may NEVER return. This is a long term loss.
  • Hotels are almost empty. Whereas January sees 70%+ occupancy coz its winter in USA & Europe, the maximum seems to be 35% for "new" arrivals. Taking into account that some hotels have closed that means true occupancy (vs available beds) is closer to 20%.
  • KQ loses traffic both local & European traffic. KQ has been growing rapidly since it was privatised. This may be its first year that it sees a drop in passenger & revenue growth. KQ - a Kenyan firm - contributes directly to Kenya by buying foods, blankets, services, etc from Kenyan manufacturers. Not to mention Kenyan staff.
  • Many Game & National Parks are no-go areas for tourists. These include L. Nakuru National Park & Mt. Elgon National Park.
  • Cancellation of conferences. Kenya was becoming a preferred destination for these regional conferences BUT there are other options e.g. Uganda which has recently built 1,000s of rooms for CHOGM.
  • Kenya's #1 forex earner about to drop a few places. Estimated losses in 2008 will be KShs 60bn. 7.7% of Kenya's GDP.
  • Loss/waste of produce destined for Europe during the holiday season. This produce rotted as it could not get to the airport.
  • Penalties for missed or late deliveries by the exporters.
  • Ethiopia & Uganda will "eat" Kenya's lunch as European importers diversify their suppliers. Long-term damage to Kenya.
  • #2 forex earner with substantial effects on the economy in terms of jobs. Losses could be KShs 40bn (5.1%). The loss of jobs & services associated with horticulture will just add to the misery.
Transport & Infrastructure
  • 100s (if not 1,000s) of cars, matatus, lorries & buses were destroyed. In Kisumu an entire car dealership was destroyed. This reduces competition among transporters.
  • Kenyans will have to pay more to transport goods & people to Rift Valley, Nyanza & Western province.
  • Damaged roads - in addition to the pathetic roads we already have - coz of idiots who dug trenches across them or blocked them with debris.
  • Knock-on effect on everything. Cost of commodities, services, etc will all go up fueling inflation.
  • Phone firms have losts sales & equipment. Hopefully, they will upgrade their equipment soon.
  • The port is congested. This affects exports from Kenya. Goods in transit to Uganda are also affected thus denying Kenyans income & jobs.
Fiscal & monetary
  • Increase in cost of basic commodities. Some of these "costs" will not go down. Inflationary pressures can be felt all over.
  • Increased government expenditure on providing aid & relief to displaced victims.
  • kibz announced relief packages to businessmen. I am worried that the funds will be wasted by (1) incompetent government employees (2) corruption (3) selected beneficiaries aka tribalism.
  • Kenya govt will see cessation of donor aid. Whereas the budget might not "use" donor aid in its calculations, many projects benefit from it. These are projects the government has either ignored or not interested in.
  • Increased gov't borrowing from local markets will crowd out the private sector.
  • Huge potential payouts by insurance firms will affect the balance sheets of these firms. Some will collapse.
  • Exports to COMESA & E.Africa accounts for 35% of Kenya's exports. Larger than any other region.
  • Uganda is working with Tanzania to set up an alternate route for fuel imports.
  • Kenya has lost markets in Burundi, Zambia, Rwanda & Somalia to others. The S.Africans are moving in. They provide stability that Kenya does not.
Local Manufacturing
  • Local manufacturers are stuck with goods they can't sell esp to the "opposition" strongholds.
  • Exports have slowed down to a trickle due to transport restrictions.
  • Many firms are laying off workers. Some had started hiring last year in anticipation of increased business in 2008.
  • Many firms have been severely affected by the slowdown & are in trouble with the banks. They can't service their loans.
  • I expect some bankruptcies in 2008. A real pity.
  • Idiots burned factories & equipment in tea-growing areas. The loss of exports will affect Kenya.
  • Farms are laying off workers. They can't process the produce coz the factories are damaged.
  • Crops are rotting since harvested crops can't be transported to the buyers. This is especially so in the Rift Valley region. Losses all around.
  • I have discussed exports above.
  • Dairy farmers are losing KShs millions DAILY since they can't get their milk to the processors. KCC's Eldoret plant remains closed.
  • They pumped in huge amounts over the past 2 years. Some of them will stop. Why build a house in Eldoret if it can be destroyed?
  • Many invested on the NSE. Why do so if the growth prospects are diminished?
There are a few (legitimate) beneficiaries:
  • Media - Politics is emotive & the media is taking full advantage. I am sure sales of newspapers, radio & TV ads have gone up.
  • Building suppliers will start benefiting from reconstruction but it will be a slow process.
  • Some firms will come out stronger as they will consolidate market share. This is a blow to a market economy by stifling competition.
The corruption networks will grow stronger as the government borrows more & accounts for a larger % of the GDP.

Overall... Kenya is in a funk. There is hope but in 2009 & beyond IF there is peace. It is difficult to say what teh real growth will be but probably around 5%. The loss of momentum will affect us far in the future.

Oh, and the bloody MPs, ministers, prez & cronies continue screwing us for more while the economy shrinks.


bankelele said...

nice summation; there needs to be political resolution before attempts to fix the economy can start.

Tax collection has only been 50% of expectations this year so a crunch is imminent, or the Safaricom IPO could be rushed forward

coldtusker said...

Banks: Politics in Kenya are proving destructive. I wish we had a Lee Kuan Yew. kibz ain't a LKY. Not by more than a mile!

SafCon sale is a 1-time fix. What of next year?

What about the 10% stolen from Kenyans via mobitelea?

The current "govt" showed ZERO interest in recovering that for us earlier. They will show even less interest in 2008.

Kenyans are going to be raped. Watch this space.

Gathara said...

I recently listened to a financial analyst on BBC fulminating on the damage to our economy occasioned by the violence. Her verdict: Not too much harm done so far but there's potential for disaster if the situation is not quickly addressed.

She posits that the main casualty of the violence has been the Tourism industry but that since it accounts for only 2% of our GDP (her figures), the fallout can be contained.

What do you make of that?

Ssembonge said...

As gloomy as your forecasts are it's difficult to massage the current situation in Kenya.

Personally, I'm worried bout inflation, corruption, food supplies and tourism.

I am curious as to whether Coca Cola is still going ahead with plans to build their Kshs 300 million hub.

Acolyte said...

This is a great summary, could you please explain this for me?
Local manufacturers are stuck with goods they can't sell esp to the "opposition" strongholds.

coldtusker said...

Gathara - What is she smoking? Tourism supports in a large part KQ, hotels & lodges, farmers, curio dealers, luxury ground transport, etc. Each of these "mini-sectors" support others. The multiplier effect is HUGE.

After 9/11, the US gov't encouraged TRAVEL i.e. holidays. They know the value of tourism's multiplier effect.

ssembonge - If peace returns. Otherwise, SA holds the cards. Ethiopia is growing to challenge Kenya. For many Dubai has become the "operations" center for Africa.

Nyanza - The NBO-KSM road was in real bad shape before the elections. Few transporters wanted to use the road or did so at a premium to NBO-MSA. Add in insecurity & even fewer want to deliver goods there.

Rift Valley - A huge market for Nairobi-based manufacturers esp Eldoret & Nakuru. Also a gateway to Uganda. After the torching of lorries & "eviction" of the Kikuyu middlemen, the business has dried up. The demand is there but no supply.

Western - In similar straits as Nyanza. Mumias sends trucks with sugar all over the country. These lorries then ferry goods to Western. Nairobi (Kenya's manufacturing hub) is a major destination for Mumias sugar. No trucks. No goods.

The unspoken "news" is the increase in corruption for transport firms. They have to pass through the roadblocks set up by the police. Erm, they were never free. It just got worse!

Some transporters have given up. They would rather make local runs than send lorries to the above regions.

Coast - Due to Nairobi's need for imports & exports (tea, clothes)... and substantially "low" incidence of violence, the transport trade has been hardly affected.

Anonymous said...

Advice to Those Who Have Intensions to CLEANSE KENYA Off the “KIKUYU”

GEMA Communities Will NOT Continue to be Slaughtered at Will Like Chicken


It has now become fashion that anybody with a problem with the Government, has a political score to settle, losses a football match or even cannot pass wind finds relief through KILLING the nearest Kikuyu, BURNING our homes, LOOTING and DESTROYING our businesses and property, RAPING our mothers and daughters and MAIMING our children.

This has gone on every 5 years from 1992 ( Kikuyus should lie low like an envelope was the call by one William Ntimama) and up until today our brothers and sisters have been denied their right to occupy land that they rightfully own and still live as refugees in their own country. The killing of GEMA community has continued and is now a 5 YEARLY RITUAL. It has now even been baptized ETHNIC CLEANSING by the Press and the Political Class.

This has gone on because those that kill, rape, maim our people or burn, loot or destroy our property wake up the following day and go on with their lives as if killing a Kikuyu is the next NORMAL thing to do.

It has continued because those doing the killings, rapes, maiming or destruction of property have not faced any CONSEQUENCES for perpetrating their crimes.

They kill us and get away with it. They kill us again and get away with it. They rape our mothers and daughters and get away with it. They maim our children and get away with it. They burn our homes and get away with it. They loot and destroy our businesses and get away with it. After all it was just another Kikuyu.

We wish to state the following

1. We are Kenyans with rights like every other Kenyan

2. Whatever we own has been acquired through blood and sweat

3. We have a right to live and rightfully own property in any part of Kenya

4. We have a right to guaranteed security by the Government

5. We have a right to protect our children and Property

6. We are our brother’s keepers.

Our PATIENCE, CALM and BELIEF IN THE RULE OF LAW have been taken as WEAKNESS. Our brothers and sisters get killed and we wait for the law to take its cause. Our mothers and daughters get raped and we wait for the law to take its cause. Our children get maimed and we wait for the law to take its cause. We lose property and keep quiet about it. We sleep in makeshift houses and plastic tents in refugee camps because our homes have been burnt down by our well known neighbors and our legally acquired land has been occupied by others. We get insulted publicly and keep quiet about it.

Our patience, calm and belief in the rule of law seem not to have paid dividends. This situation cannot and will NOT be allowed to continue. Our people will not be killed at will again. Our mothers and daughters will not be raped with impunity again. Our children will not be maimed mercilessly again. Our property will not be burned down or looted with impunity again. We will not continue to be refugees in our own country. We will not be CLEANSED. We have no apologies to make for having been born GEMA. We are proud to be Kenyans who are Gikuyu, Embu, Meru or Akamba.

Henceforth, there will be CONSEQUENCIES.

We know those who commit these crimes because they are our neighbors. We work together. We went to school together. We worship in the same Churches. We drink in the same Pubs. We belong to the same Golf Clubs. We travel in the same bus. We draw water from the same river.

We know where YOUR MOTHERS, BROTHERS, SISTERS, DAUGHTERS and CHILDREN work or live. We know where YOU own property. We know that YOU too, CAN BLEED.

If YOU have read history and follow current affairs YOU know just how violent and ruthless we are capable of becoming. YOU know that high walls, fierce dogs and guns in Lavington cannot stop us from getting to YOU and YOUR RELATIVES. You know that we took an OATH during the MAU MAU, in 1969 and as recent as last year to protect freedom. You know just how DETERMINED, RESILIENT and THOROUGH we can be.


We have lived PEACEFULLY as neighbours for decades. We have been family friends for years. Your son has married my daughter, and mine yours. We derive great joy from our grand and great grandchildren. We have depended on each other for generations. We have done profitable business together as partners for years. Our COLLECTIVE hard work has built Kenya . We have no wish to destroy this GREAT NATION.

We are therefore advising you to look for the RIGHT PLACES to vent your anger. To look for the RIGHT AVENUES to air your grievances. To reach out to or create the RIGHT FORUMS to correct any perceived historical misdeeds. To look for OTHER WAYS TO SETTLE YOUR POLITICAL SCORES. But whatever you do, NOT through killing our people.

Our people are not your chicken for you to slaughter at will

By Kenyans who love their Country dearly, 6th January, 2008

Ben Mkamba said...

I have read with great interest your outlook on the economy and I tend to agree with you for the most part. However I don't believe that the outlook is as gloomy as you make it seem. The desire to acquire wealth the laws of supply and demand will out in the end.
There is great need for goods and services to reach all parts of the country. Though they have burnt down the same stores that they depend on for their daily supplies of milk, bread etc,they will need them and this need will be filled by the always enterprising Kenyan looking to make a few shillings.

Truly however those destroying property and infrastructure will pay dearly in the long run by having to fork out more for basic commodities. I won't be delivering tomatoes to Eldoret unless I can recoup my expense and add on a hardship percentage for having to risk my property and life.

All in all very informative great insight into the current situation.

Anonymous said...

This is a good analysis of how everything in the economy is so inter-connected and how one sector going down can affect the other sectors.

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