Auction hammer hangs over heads of the rich
By Moses Michira | June 5th 2019
A brother of President Uhuru Kenyatta’s lawyer Desterio Oyatsi has joined the list of distressed borrowers being hounded by auctioneers.
Pancras Oyatsi’s Sh135 million home in the upmarket Karen neighbourhood will go under the hammer this week after he failed to pay off a loan.
Mr Oyatsi’s financial difficulties offer a snapshot of the wealthy who are increasingly finding themselves in crises that have long afflicted the low- and middle-income classes.
He is one among many borrowers caught up in a battle with lenders, in what auctioneers are describing as a repeat of what they last witnessed nearly two decades ago. The difference is that back then, banks had ‘gone rogue’ by hiking interest rates.
Elsewhere, Glen Makindu’s business ventures since 2014 have been an unmitigated disaster, punctuated by three auctions of his property and closure of his construction firm that employed 22.
Life was rosy until he was contracted to put up buildings for various campuses of the National Youth Service, which had been freshly restructured to help address youth unemployment.
Today, Makindu’s only remaining vehicle from a fleet that has rapidly shrunk with each auctioneer’s visit is being targeted by lenders while the State owes him close to Sh100 million for the works completed.
“I have lost hope and my integrity is in tatters because all my property has been attached,” Makindu said, capturing the despair that has cloaked borrowers who are engaged in business.
These financial problems have got to the wealthy in the society, leaving an indelible mark on individuals who would typically not have a problem servicing loans in a seemingly vibrant economy whose growth has failed to trickle down into the pockets of the masses.
Other individuals staring at a crisis include the heirs of the late Mombasa billionaire Tahir Sheikh Said (TSS), Othaya Group founder brothers Harish and Kirit Kanabar, and the wealthy Suraya Group couple, Sue and Pete.
Billionaire businessman Zedekiah Bundotich (Buzeki), who unsuccessfully contested in the Uasin Gishu gubernatorial race, has recently been battling auctioneers who sought to attach 119 trucks and a 13-acre parcel of prime land outside Mombasa.
While the reasons for the financial distress among the borrowers are varied - ranging from individual shortcomings to a broader, sluggish economy - difficulties in servicing loans is usually a pointer to a deeper problem.
Oyatsi, for instance, told his now impatient lender that his Sh85 million was stuck in South Sudan, while Sue said her firm’s troubles are only temporary.
Banks are seeking to dispose of several luxury homes in Kanabar’s Highgrove Village within the Spring Valley neighbourhood, where a single unit has a price tag of over Sh100 million.
So severe is the bank-loan defaulting crisis that it has drawn the attention of the Central Bank of Kenya (CBK), which has cited the non-performing loan portfolio as the highest on record.
CBK boss Patrick Njoroge indicated that 12.9 per cent of all loans granted by commercial banks were in default by April, especially those lent as personal loans and to the housing industry.
Just two months earlier, the default rate was 12.8 per cent. The 0.1 per cent rise may seem marginal but it’s an increase of a cool Sh230 million in absolute terms.
Garam Auctioneers Managing Director Joseph Gikonyo told The Standard that the rich are falling into debt distress at the highest rate in the last two decades he has been in business.
At the heart of the crisis are the tough policy directives issued by Dr Njoroge, which demand banks to aggressively pursue defaulters to keep the financial books clean.
Previously, lenders were lenient in declaring loans to be in default in a wider scheme of protecting friends from the auctioneers’ hammer.
“There is simply no money in the market which is why so many borrowers are in distress. Everyone is broke,” Mr Gikonyo said.
The CBK boss linked the soaring default rates to delays in settlement of debts by both the national and county governments, a position that prompted last weekend’s presidential directive on the immediate payment of pending bills.
“Prompt settlement of delayed payments by Government and private sector entities will curtail a further increase in NPLs (non-performing loans) and support economic growth,” Njoroge said.
Counties, which owe suppliers Sh108 billion, have been accused of holding on to payments, whose ripple effect is significant because the traders have salaries to pay besides settling dues to their own suppliers.
Last Saturday, President Kenyatta directed ministries to settle all pending national government payments that do not have audit queries within one month.
In his Madaraka Day speech, the Uhuru explained that pending payments had negatively affected many businesses, particularly those whose bulk of capital was locked in non-payment, hence the need to clear them.
The failure to settle suppliers’ dues have helped to compound the effect of a biting credit crunch occasioned by the enforcement of the lending rate regulation, which controls the cost of credit.
Banks decried the legislation of interest rates, arguing that lending to riskier borrowers would be curtailed because their risk of defaulting was higher than how the law priced the loans.
Instead, banks opted to lend to the Government through Treasury bonds on the premise that the State cannot default on its loan obligations.
Economists have also attributed the shortage of money in circulation to corruption, with beneficiaries said to be hiding their illicit wealth.
XN Iraki, who teaches economics at the University of Nairobi, said the fight against graft could be the reason money has disappeared.
Dennis Munene, another businessman whose property was recently auctioned over a Sh1.8 million loan, has since registered an association of contractors and suppliers whose aim is to unblock delayed payments, besides other interests.
KETRACO managers headed to court as sabotage probe continues
- It is raining mangoes! But where is the money?
MONEY & MARKET
- Standard Group’s YouTube channels surpass 1 billion views
- Engineers lose bid to exclusively head three key road agencies
- Transport sector loan defaults double to Sh44b on Covid woes
- Trends: When old is not gold for Nairobi housing