Hold onto your seats, worst is yet to come

The man stopped me as I walked down the street recently. “Aye nunua saa mzuri,” he said in that familiar Somali salute. I waved my hand to signal disinterest in his wares. From my quick scan, I saw in his hand what I thought was a genuine Rolex watch.

Most of us distrust hawkers hectoring you in the streets. Not for nothing, but because for most of us, the streets are wild. It is the ground zero of all what has gone wrong with society, not just because of the fake merchandise being peddled there. The con-games and the swindling, the fake doctors, the fake exams, the fake lawyers, the fake engineers all traffic their trade out in the streets.

Yet quite ironically, the Kenyan economy rides on the wheels of the informal sector that includes hawkers. The man wasn’t taking my no for an answer. He went down on his knees, his hands on my knees and feet. “Haki wariahe… watoto abana kula kitu leo pea mimi ile wewe iko naye.”

Moved by the desperate antics the man had deployed to sell his watch, I decided to have a chat with him. He had not made a sale in the last couple of weeks and those whom he gave on credit have vanished or simply avoid him and his calls.

I bargained my way out by offering him cash for basic shopping. He insisted that I take the watch. I declined.

To understand how the Covid-19 pandemic has ravaged the economy, look no further than those at the bottom of the pyramid. Hawkers, SMEs and many of those who live on daily sales and rely on the mostly salaried and the casuals are struggling to make ends meet. Many have shut down while others are playing a run-around with the bank managers.

The most lucrative job in a strained economy usually is debt collection through the common line now is that even the debt collector is not sure if his task will be settled in cash, if ever.

In truth, the economy is strained both at the micro and the macro levels.

KCB, the biggest bank by capitalisation, reported a 22 per cent drop (Sh19.6 billion compared to Sh25.1 billion) in its 2020 earnings. With a third wave projected to hit harder than the first two, there will be more grim news ahead for the economy.

From an initial trickle, the tourism numbers have all but dried up. Meanwhile, the Kenya Revenue Authority reported a tax growth of 1.7 per cent in the 2019/20 financial year, signalling depressed growth in the key tax segments. Corporation tax grew by 4.8 per cent, a drop from 8.2 per cent in 2018/19; PAYE grew by a mere 2 per cent as companies laid off staff – or put employees on half salaries - to stay afloat and partly because of tax relief measures by governments; petroleum tax dipped to 1.4 per cent as a result of a decline in import volumes by 4.9 per cent.

These numbers tell a story. This is made worse by the dwindling fortunes in agriculture and horticulture sectors, once our economic mainstay employing nearly 50 per cent of the population. Yet it is not fair to put all the blame squarely on the pandemic. The fundamentals of the economy were utterly broken by the time the economy went into lockdown in March. It just found the economy vulnerable.

Worst of all, one feels that the Jubilee administration and the politicians are doing so little to enable businesses and the people ride out the storm. The silence and the half-hearted whimpers over last week’s steep rise in fuel price portrays the hypocrisy and cynicism of the political class. Those who warned in 2018 that reintroduction of VAT on fuel products will not of itself plug the hole in the budget were right.

They were wary of the unintended consequences. With the economy slowing down and rising costs in producing and transporting goods and services making our economy woefully incompetent, millions will sink into poverty.

Within OECD (an association of rich economies), government’s hand in shoring up the economy is strong. They have employed massive fiscal stimulus (up to 40 per cent of GDP including cash handouts) to get their economies up and running. French President Emmanuel Macron vowed last March that no business would “face the risk of bankruptcy” as a result of the pandemic. Such positive vibe – and action - is lacking locally. Many pundits questioned the wisdom of abruptly withdrawing the economic stimulus package in January.

And so as the effects of the pandemic on the economy persist and as resources dwindle, coupled with maturing debt obligations, creating jobs and investment in public good initiatives like healthcare, education, energy and good roads will fall off the priority list. And then we are back to square one - a circus game it is.

Mr Kipkemboi is Partnerships and Special Projects Editor, Standard Group