Hard economic times dampen Christmas spirit for families

On Saturday, December 17, 2016, Gerrison Muema was working as usual as a tyre salesman on Kirinyaga Road in Nairobi. He has been doing that since 2012.

The 28-year-old kept a sharp eye on the cars slowly driving by, lest he lost a possible client. Gerrison is a salesman at Safe Auto Tyres and Accessories. Inside the shop, car tires and rims adorn the walls and shelves.

“From 2012, things have definitely changed. This shop had 25 workers until 2014. Now there are only 12. During Decembers of 2012, 2013 and the first months of 2014, we were doing very well. The business had 10 delivery vehicles. Now there are only four vehicles. The owner sold six,” he explains, never taking his eyes off the street.

As the business went from very good to good then to not-so-good, Gerrison made personal adjustments. He moved from the Sh12,000 a month house he lived in at Komarock in Nairobi in 2012 to a Sh7,000 a month one in Umoja in February 2015.

“My wife works for a printing firm here in town. There is fare to and from work for both of us, we have a househelp to tend to our daughter. Every day, I have to leave money for the househelp and the baby plus our evening meal. My salary and commissions together with my wife’s salary can’t meet these needs by a long shot.”

To keep up, Gerrison runs a gas dealership business on the side. The shop also sells electricity tokens and runs as an Equity Bank agent.

'HAVE CLOSED'

“Business is not good. Along this street, several businesses have closed,” he says.

Across in Kiambu County, one rental space in the tiny town of Gacio has changed faces three times in the last one year and a half. It was a milk store, the milk store closed, giving room to a movie rental store which stayed afloat briefly and then closed to give room for a beauty care shop, the current occupant.

It is not different in Rongai, Kajiado County where in a space of less than two years, a premise has changed from being a household goods shop to a butchery to a clothes shop now. All under different owners.

This against the backdrop of government data and even World Bank reports that are painting a rosy picture of the economy.

In March, the World Bank estimated Kenya’s economic growth rate for 2016 at 5.9 per cent and projected next year’s growth at six per cent.

This was reiterated by Kenya National Bureau of Statistics quarterly report, which indicated that Kenya’s economy expanded by 6.2 per cent in the second quarter of the year compared to 5.9 per cent in the same period in 2015.

But amid these positive projections, a Nation survey found gloom in many small businesses and large companies laying off workers as auctioneers repossessed cars and houses in record numbers.

MIDDLE INCOME

The association of auctioneers says the rate at which Kenyans are getting auctioned has more than doubled in the last 12 months. The hardest hit are middle income earners with a taste for classy and posh lifestyles.

Nixon Okumu, the chairman of National Association of Kenya Auctioneers in Nyanza/Western and the executive director of the Kisumu-based Joni Consult Auctioneers, says his firm has auctioned cars for over 400 loan defaulters this year. This is twice the numbers from last year. Nyanza/Western has 32 auction firms.

“People are being auctioned at unprecedented rate. They tell us that they supplied goods and services to county governments who delay payment,” Mr Okumu said.

The auctioneer says most are below the age of 45.

The Kenya National Bureau of Statistics has reported that about 2.2 million small enterprises have closed over the last five years, underlining a tough business climate.

It says the highest number of establishments shut in 2015, accounted for 35.4 per cent of the total closed in the last five years. About 1.2 million were closed in rural areas compared to one million in urban areas.

The survey cited shortage of operating funds as the main reason for business closure. This is after the businesses diverted operating capital to other uses.

It is not just small businesses that are struggling.

Three years ago, Equity Bank announced that it was freezing staff recruitment. As 2016 ends, 660 Equity bank employees exited the firm.

'VOLUNTARY RETRENCHMENT'

Sidian Bank announced in October that it planned to send 108 staff members home. Family Bank also offered an unknown number of its employees ‘a chance at voluntary retrenchment’. The national carrier Kenya Airways started the year by announcing that it planned to lay off 600 employees within the year.

The list of companies laying off their workers in order to cut costs or because they are posting losses is long and it includes supermarkets and media houses.

Auctioneers and asset recovery businesses offer a glimpse into the state of affairs. According to Francis Njagi, the owner of Smart Recovery Auctioneers, his business repossesses between five and 20 cars every month from individuals who can’t make their payments to their financiers or dealers.

“When someone obtains a Sh1 million car from a dealer by paying half and then agrees to pay the balance and interest in installments of say 10 months, if they default or miss making payments for say 3 or 4 months, we are called in.”

He says up to 80 per cent of cars being recovered are personal cars.

Mr Njagi has been an auctioneer since 1999 and he says business has is bad. “I struggle to auction off even half of the assets that my company repossesses. They don’t move.”

He is not alone. Former banker David Wanderi is the owner of Taifa Auctioneers Kenya. He says repossessions are many but the goods don’t move once seized.

“You are lucky if you advertise an auction and sell half of the property. After advertising 20 properties (land or houses or vehicles), only four or five will be sold,” he explained on phone.

GOOD YEARS

Mr Wanderi has been in the business since 1991 and says that 2000 to 2010 were good years. “Then people called to ask for vehicles, land and houses.”

He says in Kitengela for instance, land advertised for sale never lasted a week. It would be gone in three days. Today, even with the prices going down, people are still not buying.

“On average, we repossess 10 cars a month. Some months, it is embarrassingly high. Whether it is motor vehicles or land or apartments or houses, many people now just won’t honour their payment schedules,” Mr Wanderi says.

Mr Wanderi says his company also offers distress for rent service to property (homes or rental apartments) owners. “There was a time when people paid rent on time. Now some pay on the 17th and landlords just can’t handle such, so it is us who do it for them. Rent defaulters and late payments are on the rise.”

He said these some of these people use households to cover rent sometimes.

Those are the lucky ones; others are kicked out.” Calling from Rarieda, one Mr Onyango Omollo says; “You don’t need a PhD to know that the economy is not healthy. Just put Sh1,000 in your hand, go to the shop and buy three simple household items and watch what happens to that money.”

According to the CIA world Fact Book, unemployment in Kenya is at 40 per cent, with 7 out of 10 unemployed people being youths. An estimated 800,000 young people per year are expected to enter the job market.