After a peaceful General Election and a hotly-contested presidential poll that made its way to the Supreme Court, the country’s highest court on the land, Kenyans have resumed their lives to normalcy.
However, one thing will not have them rest until they get it right, the depreciating shilling . The Kenyan shilling continues to sink into new lows against the US Dollar currently at Sh121 as of October 7, 2022.
That the Kenyan shilling has taken a beating, slipped, slid and fallen with a thud in the last four years is not news anymore. It is the prevailing drought, skyrocketing food prices , and generally high cost of living occasioned by global fuel prices that have had Kenyans gasping for breath. Presidential candidates in the 2022 general elections had made the state of the economy part of their campaign manifestos, with each promising a clear-cut prescription for the economy.
“Post-election, the business has returned to normalcy, but there is no purchasing power.
People are not spending as much. The sales are still low. We are yet to recover to pre- Covid times,” says Abdi Athman, a businessman at Katani shopping centre.
Mr Athman has seen several businesses not far from her premises close, open and close again as investors and start-ups struggle to survive the post-Covid wave. “That closed adjacent building housed a big entertainment joint – a restaurant and a club with an open sitting area. The owner, who is my friend, has tried re-opening it twice and thrown in the towel. It is tough out here. If not careful you can take crippling loans trying to revive an existing business yet it is already a ‘dead horse’.”
He too is struggling. “I am not out of the woods yet. I have to fast-track every daily transaction each week to make a decision on how to run my retail business in the coming week. The shift in spending power and what kind of goods consumers are going for is shifting every other day. I have to observe the trends and be dynamic in what to procure every other week,” Mr Athman explains.
Her biggest wish is that there was a way that the new government can support entrepreneurs like her who are fighting to remain afloat in the midst of a struggling shilling and post-Covid economic crunch.
However, as things stand Kenyans may have to wait for longer, for the economic puzzle to resolve if not improve. You see, since the first Covid-19 case was reported in Kenya on March 13, 2020, businesses have suffered losses as consumers went into self-isolation. In March 2020, the government implemented a partial lockdown, this was preceded by a series of lockdowns for the better part of 2020, which saw many businesses cut down their operations, leading to job losses and a difficult time for families.
The situation was such a huge gamble with lives, as the global pandemic found an already struggling shilling. With businesses closed, loss of incomes and the solitude that came with social distancing many households in Kenya found themselves vulnerable, living on the edge a-day-at-a-time.
A 2020 study on the socio-economic impact of the Covid-19 pandemic among households in Mavoko Constituency in Machakos County established that 95 per cent of all households surveyed had made adjustments to their spending, especially on food and rent. The study, which was commissioned by the Africa-China Reporting Project at Wits Journalism of the University of Witwatersrand in South Africa was carried out in late 2020 and early 2021.
Through physical interviews and questionnaires, the researchers sampled 200 households in Katani, Athi-River, Syokimau, Lukenya and Mlolongo environs which lie within the vast Nairobi metropolis. A good majority, 65 per cent of the respondents had moved houses to smaller ones with affordable rents, 20 per cent had negotiated rent- cuts with their landlords, while 10 per cent had been given a grace period (three to six months) to stay in the houses without paying rent until they recover, while five per cent were living in their own homes.
All households surveyed had to make adjustments to their food expenditures, and this affected the quality of nutrition. The study established that an estimated 50 per cent half of the households were doing with one meal per day, with 33.4 per cent only being able to afford two meals per day, while a paltry 16.6 per cent of households could raise three meals in a day.
The latter are Kenyans living in their own homes and thus can afford to substitute meals with what they grow in their gardens. “Growing veggies in my backyard instead of flowers and keeping chicken have come in handy. We can go on eating Sukuma Wiki (kales) and eggs until we get some extra coin to buy beef, chuckled Agnes Musalia at her home in Syokimau. Agnes shares vegetables from her garden with her neighbours and friends, together beating the economic crunch.
Heads of households in both low and middle-income households were equally affected by the financial disposition that they found themselves in with many disclosing up to 50 per cent pay cuts, mass loss of jobs and business closures.
As Kenyans continue to grapple with the post-Covid economic crisis, the new government has the dual challenge of rising inflation and a skyrocketing debt to resolve. Kenya’s inflation hit 9.2 per cent in September, the highest in five years since it hit the same figure in 2017. President William Ruto ’s government has inherited Sh8.5 trillion debt and stalled projects from the previous government. In his maiden address to the United Nations General Assembly, President Ruto called upon global financial institutions and the international community to take urgent measures and release all existing financial instruments to provide much-needed additional liquidity and secure better fiscal space for developing countries like Kenya.
And as many look up to President Ruto to fulfil his numerous campaign promises in his pursuit of the presidency, his administration is left with little headroom to continue borrowing. President Ruto has in his policies the creation of a Sh50 billion Hustler Fund to spur enterprise development in Kenya through financing to SMEs.
However, the Kenyan economy has experienced the sharpest contraction of the economy in the last two decades at 0.3 per cent. Figures from the Treasury indicate that Kenya spends at least sixty percent of its tax revenue on debt servicing. Across the sectors, the service sector was the most affected by the pandemic, with near collapse of the tourism sector. COVID-19 reversed the gains made in poverty reduction by pushing approximately 6.2 million Kenyans into poverty.
This is attributed to loss of income, equivalent to 11.7 per cent of the national gross domestic product (GDP), job losses, and pay cuts. Revenue collections were severely affected during the pandemic, resulting in heightened debt accumulation.
Noteworthy, Kenya’s public debt increased from Sh5.8 trillion in June 2019 to Sh6.7 trillion in June 2020 and further to Sh7.6 trillion in June 2021 and Sh8.5 trillion as of June 2022. Fiscal stability has remained a matter of necessity post-Covid-19.
The punishing cost of the depreciating currency, which has remained on an accelerated devaluation trend for months now, is not only being felt by taxpayers while servicing the external debts but also by businesses while importing goods since they have to purchase dollars first.
In recent months, companies have complained of an acute shortage and high cost of dollars in the market, with some being forced to scale down operations. The ultimate victim is the final consumer, as businesses pass on the cost when setting prices. This has led to higher prices of commodities and increased overall cost of living in the country.
