The Head of Central Bank of Kenya Prof. Njuguna Ndung?u recently went against the grain to declare that, “the economy is on the recovery path”? I scratched my head hard to see how on earth the? Prof could be that optimistic despite? the indications on the ground showing completely the opposite. The battering on the economy is as multi-faced as its multi-dimensional, affecting households, SMEs as well as large corporations. And yet, there are no signs of letting up. Three successive futile rainy seasons have nearly rendered the fine-print strategies and policies useless as food, water and electricity shortages continue to gobbledygook earlier laid out plans. Maybe it is the realisation that ours is purely rain fed economies that made Ndung?u to do away with economical graphs and rely on Ngwata Francis satellite pictures in his recent press statement where he pegged the economic recovery on the El Nino. It is a sad scenario that we have to rely on a disaster to solve another disaster. It is equally poignant that there is nearly universal agreement that any recovery depends not on what ought to be done now but how soon the country records enough rainfall.
To start with a significant number of the 80 per cent of Kenya?s employees who drive their livelihood from Agriculture are facing reduced returns or earnings. The sustained draught in the last three seasons have left millions of Kenyans hungry and the food prices have sky rocket beyond many leaving the Country on brink humanitarian disaster.?
The rain patterns in Kenya in the good old days were predictable. There were areas which experienced two harvests in the short and long rains. Other areas mostly in the highlands were a one harvest season-these were /are the breadbasket of the nation. Though the areas that experience two seasons do not contribute much to the nations? breadbasket they are very strategic in that they ensure that the residents of these areas are self reliant on food through their subsistence farming. They are also known to provide Nairobi with horticultural products. ?That was before the greedy politicians started grabbing out the forests land, Mau case is the best example.
One of the direct effects of draught on the economy is the shortfall in energy supply. This has affected both large manufacturers, as well as SMEs. The juakali sector ?has lived up to its name and for real the jua ni kali. The gravity of the rationing is felt by the guys and firms who now have to operate four day a week. This effectively means that his turnover is cut by half while the running costs have almost doubled. Those who can?t afford loss of business have been forced to buy diesel guzzling generators. These require substantial capital overlay depending on one?s power needs and size of business. The fuel costs are a no go zone for my discussion. (Despite the high prices of fuel in Kenya the fuel companies have recorded substantial losses with Total recently issuing a profit warning-don?t know whether to blame this on the rain).
Another sector that has taken a beating from the lack of rains must be the tourism industry. Having seen the magnitude, with which the pastoralists have lost their animals, I am sure the animal Kingdom is not faring better. With the gods having adopted what looks like scorched earth policy most of the attractive scenery, I am sure it is not eye-catching anymore.
It is sad to see us buy/import foodstuffs which practically with good planning we can produce and Kenyan Balance of Payments is not looking that healthy. The money we are using to import food when the rain patterns are reliable circulates in the country as it buys foodstuffs from the farmers in the breadbaskets. The farmers in the breadbasket district in turn have the ability to pay their fees, buy services e.g. Safaricom overpriced scratch cards, beer from the not so Kenyan-Kenya Brewery or even Keroche Industries, and if he has some coins to spare become a member (of Equity) or the lucrative pyramid schemes.
The other angle of the effect of rain on the economy is the trickle down effect of the foodstuff prices. A casual worker in Kibera who earns Ksh.150. Currently a packet of Unga goes for an average of Ksh. 80 in the slums (at the poshomill it is cheaper by around Ksh. 10). With the remaining Ksh. 70 he buys kerosene at Ksh. 30, sukuma at Ksh. 20, Cooking fat at Ksh. 10 and milk at Ksh 10. This budget is supposed to cater for two days so the next days will cover other expenses like clothing, rent and other necessities leaving no surplus. Having no surplus means that the Kibera residents can?t afford the Bamba 20 which drove the Safaricom profits to 17 Billion in the sweet bambing days. The residents can?t afford the Keg which drove KBL?s profits to 12 billion. In my not so humble opinion, around 80% of Kenyans fit perfectly in the Kibera scenario. This kind of inclination has hurt demand for commodities with consumers cutting back on purchase of non-basic items as they adopt survival tactics. The development has lead to reduced corporate sales that in turn meant lower economic growth prospects. Estimates from Kenya Association of Manufacturers indicate there has been a 10-15 per cent drop in demand for goods. Shrinking demand for goods has an overall impact of affecting profitability of companies, the level of employment and lead to recession. But what is being watched keenly with the onset of rains is to what extent they will restore food supply.
I must also point out that employees who aren?t bathing in the morning don?t look to me like the most motivated fellows I would like to work with or I would like to work for me.
From that it is clear that we have to two things urgently:
One, we can take a leaf from Malawi?s example and put our effort to improve agricultural production capacity.? Or find a way of? steering our economy from what it is now to knowledge based. In that case the government need to invest heavily on ICT, and education