Although Kenya’s economy is projected to grow at 6.1 per cent this year, analysts are already painting a picture of grim prospects.
Increased layoffs due to a depressed private sector, profit warnings by listed firms as well as high rates of unemployment, all dampen the county’s economic prospects.
“We are still hopeful that County Governments and the National Government will clear pending bills owed to suppliers. This economy will therefore not change much over the next three or four months due to the fact that projects that are financed by the national budget take off within the third or fourth quarter of the financial year,” said Dr. Scholastic Odhiambo, Senior Economics Lecturer, Maseno University.
Dr Odhiambo is hopeful that with repeal of the Rates Cap law, small and medium sized enterprises will be able to access affordable credit.
“While the manufacturing sector contributes only 10 per cent of the GDP, we hope that the Jubilee administration will create policies that attract FDIs and providing incentives to local investors,” said Dr Odhiambo.
In the education sector, the focus shall continue to be on the Competency Based Curriculum, which is a key flagship of the Jubilee Administration.
“The challenge, however, will be that there will not be enough funding to fully implement the roll-out phase. Funding will be concentrated in pushing the Big 4 Agenda, which interestingly, did not foresee the role of investment in education,” said Mr. Awuor Ponge- an Associate Research Fellow, in-charge of Research, Policy and Evaluation at the African Policy Centre (APC).
Mr. Ponge observed that there are signs that the Treasury is not doing very well with regard to revenue collection. Counties are also not collecting much and relying on handouts from the National Government.
“With the new raft of measures for revenue collection, the investors are going to feel the pinch and may even be forced to start relocating. Investment in the education sector will go down, and even reliance on public Schools will not yield much as the services will go down due to limited or reduced funding,” said Mr. Ponge.
According to one Ephraim Njega, what lies ahead is beyond what many expect or imagine.
“The financial hurricane we have been foreseeing will make a landing in the next 12-18 months if not sooner. Many of us have already experienced the tightening economic noose. This is a tale that needs no telling,” said Ephraim.
He projects that 2020 will witness more debt restructuring and bailouts.
“This is because we have maxed out on borrowing and taxation capacity. Interest expense on public debt is expected to cross the KSh 400 billion mark this financial year. This is obviously unsustainable,” said Ephraim.
He said less government spending which will result in deeper money circulation concerns. The government will struggle to meet even basic expenditure such as salaries and routine supplies.
Bearing this situation in mind, Kenya will require huge growth in revenues to offset the adverse effects of high debt servicing costs.
“This is impossible in a weak economy which continues to falter. This is how debt restructuring and bailouts will become necessary,” said Ephraim.
Any further borrowing past the KSh 6 trillion mark will be akin to committing economic suicide.
Besides, the removal of interest rate caps means the era of government borrowing at cheap rates is over. Thus any extra borrowing will not only sink the country deeper but also faster.
Analysts contend that Kenya has borrowed too much in the last seven years and done so little with the borrowed funds that a fiscal crisis is inescapable.
The money has gone into vendor driven; cost inflated, economically unproductive projects.
“Part of the money has also been looted outright and the rest extinguished in reckless and illegal recurrent spending. No country can get away with such mistakes,” said Ephraim.
“We expect money supply to tighten further although the Nairobi bourse could experience an upsurge. There are also fears that the recently introduced sales tax will have adverse consequences on small business,” said Mwangi Ngamate- business lecturer at the International College of the Cayman Islands.
EQUITIES
The bourse opened the year with a total of 2M shares valued at KSh.76.8Million, against 10.6Million shares valued at KSh 303Million posted on Tuesday.
INDICES
The market indicators registered mixed reactions. The NSE 20 share Index was up 19.55 points to stand at 2673.94. All Share Index NASI shed 0.43 points to stand at 165.98.
The NSE 25 Share index was up 1.32 points to settle at 4101.89.
The Banking Sector had shares worth KSh.38.5Million transacted which accounted for 50.10% of the day’s traded value.
Equity Group Holdings touched a 12-Month high of KSh.54.50 before easing down to close at KSh.54.25 with shares worth KSh.16.5M transacted.
KCB Group touched a 52 week high of KSh.55.00 before retreating to close the day at Kes.54.25 with shares worth KSh.12.2M realized. NCBA Group unchanged at KSh.36.85 moved 167,000 shares valued at KSh.6M.
The Energy & Petroleum sector had shares worth 1.18M traded & accounted for 1.54% of the day’s traded value. KenGen up 1.40% to KSh.5.80 moved 147,000 shares worth KSh.854, 000.
The Insurance sector had shares worth 24M traded & accounted for 31.55% of the day’s traded value. Jubilee Holdings was the day’s main feature with 64,000 shares valued at KSh.22.5M changing hands at a fairly stable price of KSh.350.00.
Safaricom moved 349,000 shares valued at KSh.10.9Million and closed at KSh.31.30; this represented 14.20% of the day’s traded value.
The Bond market had bonds worth KSh.251Million transacted.
Related: Kenya Q3 Economic Growth Declined to 5.1%
Kenya Ranked 6th Most Competitive Economy in Sub-Saharan Africa
Update: This story was updated on 8th January 2020 to correctly attribute quotes from Ephraim Njega.
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