Ann (not her real name) has closed her liquor store in one of Nairobi’s middle-income estates. It all started last year when customers stopped coming. The few that braved on wanted to drink on credit. They would then pay at the end of the month when they got their salaries.
At first, these few patrons gave her the cash flow she needed to stay afloat. She used this cash to offset her overhead costs including rent, electricity and water. She also used the cash to re-stock.
Suddenly, even those buying on credit also stopped coming. She was left with no option but to close shop. “There was just no demand,” she says wistfully. She is now looking for employment.
Eyes on legacy
Landing a job this year or the next might not come easy, but President Uhuru Kenyatta, who is a year older in age and in office, hopes that by the time his second term ends in 2022 people like Ann will not ‘tarmac’ for long.
“Hon. Members, we are all in broad agreement: Kenyans want to see lower cost of living; they want jobs for their sons and daughters; and affordable food on their table,” the President told Members of Parliament early this year in his State of Nation address.
As the President casts his eyes on a legacy he has christened the Big Four Agenda, he might need to refocus his attention on the present whose tough economic environment has seen Ann and millions of other Kenyans pushed into joblessness. Broad prosperity is far from being a goal, it is a dream.
Economists explain that part of the reason customers suddenly stopped visiting Ann’s shop was because demand - the ability and willingness to buy sagged. Unfortunately for her, the depressed demand has affected even the bigger firms where she is keen to find work. Because these firms are not selling as much as they would like, they cannot expand their plants or open new branches. Without expansion, firms cannot hire new workers.
President Kenyatta’s main goal is to stimulate the economy by getting the private sector - not Government - to consume more goods and services. Consumers need money to spend. Yet one of the sources of money, credit from commercial banks, has been increasing at a snail’s pace.
Credit to the private sector grew by a mere 4.3 per cent as of June, a far cry from a rocket-speed growth of 30 per cent during former President Mwai Kibaki’s time.
Without credit the companies are not buying new machines or households buying new cars. As a result, Ann’s customers are not getting enough cash which they can spend on essentials like rent, food, fees and be left with extra cash to splurge on alcohol.
The government could also ramp up spending on infrastructure projects, particularly around the Big Four Agenda of creating jobs, universal healthcare, building half a million low-cost houses and achieving food security and nutrition. This money would then funnel out throughout the economy, stimulating the economy.
“If we are to create the jobs for which Kenyans long, we need investment,” said the President in his State of the Nation address, citing the myriad infrastracture projects, including the Standard Gauge Railway, undertaken by his administration since 2013.
He now has a new pet project. “I conceptualised the “Big Four” from discussions I held with Kenyans about their problems and prospects, particularly as we went about seeking their support.
Unfortunately, the Government, which has borrowed as much as Sh5 trillion as of June, does not have the space to chalk up more loans.
And a good chunk of the government’s tax revenue is being spent on foreign interests and debt repayment, a situation that has seen the International Monetary Fund reclassify Kenya’s risk to defaulting on its external debt from low to moderate.
Other sources of finances for the private sector such as the capital market have also been unimpressive, with the Nairobi Securities Exchange (NSE) 20, the benchmark index, hitting a decade-low of 2,755 points as foreigners offload their stocks.
The country is experiencing some kind of capital flight with the shilling supported by diaspora remittances, tourist receipts and a few export earnings.
