Election tension hurting businesses

The market at City Stadium which deals in second-hand clothes and shoes is an interesting eco-system.

“Here, when there is a flow of money somehow everyone will feel it,” says Francis Wanyama, a trader in second-hand clothes and shoes, popularly known as mitumba, at City Market.

Not that a trader gets to adequately sell his goods at the end of each day. However, there is an agreement among the traders that you can always act on behalf of your fellow trader, and take home the excess profit.

And when this opportunity does not present itself, the lucky seller can always extend to the unlucky trader what they call ‘ya macho’.

It is almost like being given a share of the loot simply for being there when the game was hunted. But this is no longer the case. And Mr Wanyama now longs for the better days. Not long ago, he says, everyone would happily give their chama contributions of Sh500 a week without qualms.

Not anymore.

Moreover, Wanyama, a husband and father of two, used to take off on Mondays so as to spend time with his family. Today, this is a luxury he cannot afford. And yet there is still no money. “Job iko down deadly (Business is really bad),” says Wanyama.

“Now we are at the end of the month, and there is just no one coming to buy,” he adds.

He does not understand why. Those who know, or think they know, say the economy has gone into a ‘sleep mode’.

Firms and households are simply not spending. And the effect of this is not affecting small businesses such as Wanyama’s. Florence, a trader who sells advertising space for one of the media houses, says firms are also less reluctant to market their products.

She says on average she could do sales of between Sh3.5 million and Sh4 million. But as September comes to an end, she has only done Sh1.9 million. Her clients are mostly banks and insurance companies.

Having been in this business for nine years, she says 2015 marked the end of her golden time in this business. Last year and 2017 have been her worst years.

The economy has been sluggish. In the Second Quarter of 2017, gross domestic product (GDP), the total value of goods produced in a year, expanded by five per cent compared to a growth of 6.3 per cent in the same period in 2016.

According to the Kenya National Bureau of Statistics (KNBS), the slowdown was due to a weaker performance in agriculture, manufacturing and financial services.

“I am a trader in this country and many traders like me are not satisfied with how the business has been failing,” says the CEO of Top Security Systems Limited Arusi Yehoshua. “No purchases are forthcoming, no one is willing to pay debts; the banks are complaining; low turnover, shops losing business up to 50 per cent and more and so many are the shops that have closed business,” he adds, noting that the only business that seems to be doing well is the shylock business that is charging 10 per cent per month on interest.

Politics around elections is the main culprit. Florence says that immediately after August 8 elections, business returned to normalcy with her sales rising to Sh4 million. But immediately the Supreme Court rendered its judgement annulling the presidential elections, things went south.

The uncertainty around the election has also put off investors from the capital markets after they beat a hasty retreat once the presidential polls were annulled.

Data collected by Weekend Business shows that investors had put elections behind them when Kenyans peacefully went to the ballot rallying the stock market to Sh2.41 trillion mark.

When the Supreme Court annulled the presidential polls, foreign investors were quick to pull out sending the stock market to a crash. The market has since recovered to Sh2.37 trillion by the end of trading on Friday signaling a wait-and-see attitude.

However, , investors are jittery due to the political tension over electoral laws, postponement of election dates by the Independent Electoral and Boundaries Commission and opposition coalition threat to boycott the repeat elections.

The slowdown in the economy is casting a gloomy shadow on Kenya’s prospects. “The uncertainty on the election date which shifted may have played a role but generally we have been recovering,” said the Capital Markets Authority Chief Executive Paul Muthaura during the World Investor Week.

“Investors look at long-term trends and once the uncertainties clear out, after the election is over, they will take up positions,” he said.

Mr Muthaura said that despite the political noise, the stocks of companies in Kenya are actually trading albeit at a lower value which means they have a potential to increase once the political temperatures cool.

“What we insist is that there is no fundamental changes in the individual companies so the prices do not reflect the value of the stocks,” he said.

When stock prices are down on sentiments, the market becomes an opportunity to buy since they are certain to rebound once the noise cools down

In August 2016, banks’ shares plummeted by up to 10 per cent when President Kenyatta signed the law capping interest rates.

Those who bought during the banking stocks’ collapse are now reaping big as the share price for lenders has rebounded bringing in capital gains of up to 50 per cent, like in the case of Diamond Trust Bank, in the first half of the year.

“This is why we need investor education so that they know the market presents a good opportunity,” Muthaura said.

Next week, CMA plans engagements targeting university students. Investor education outreach through Huduma Centres in Meru and Eldoret, radio campaigns, a social media campaign will be carried out.

Increased trading also means the NSE will make more money from trading fees. In the banking sector, which has been under pressure with capping of interest rates, a new global accounting standard is set to restrain them more.

“With introduction of IFRS 9 and the rate cap in place, the combined effect of the two won’t be good for the economy. Lending is likely to slow as banks assess the impact of the standard,” said Kenya Bankers Association CEO Habil Olaka.