Categories: BUSINESS

Difficult Economic Times in Taita Taveta County, Kenya

James Mwema, a cereals trader at Voi’s Lower Market, decries the worsening economic conditions. “Two years ago I could make sales of Shs15,000 in a day,” he recalls. Today, he considers himself lucky if he gets Shs 5,000 in one day.

“My friends and I each used to contribute Shs 10,000 a week to our self-help group (chama), says Abbie, a trader at the Voi Highway Market, “nowadays, I can only dream of such money.”

It is obvious that the economic situation in Voi town and the entire Taita Taveta County is dire. Incomes have declined for sure, with some businesses closing down. Workers are either sent home or get reduced pay. Construction activities have slowed down drastically, another sign of a damaged economy. Boda boda riders and matatu operators are complaining of reduced business. Meanwhile, landlords are lamenting on the lack of tenants as houses built for rent go empty for months at a time.

The entertainment scene has not been spared from the current economic woes. Bars that used to be full of people are recording lower sales today. A few others that used to be packed to the brim just a year ago have shut down completely.

What are the reasons for this situation? There are several factors some of which are national while some factors are specific to Taita Taveta County.

National debt and taxes

The national government is in debt. High debt repayments forces the government to increase taxes in order to raise money. County governments have also had to increase various fees in order to meet their revenue targets. Business licenses, permits, parking charges and market fees are all up. Taxes are necessary for the running of government, but high taxes hurt businesses and consumers.

Excessively harsh enforcement of regulations

Agencies of the national government have a duty to enforce laws and regulations, but the manner of enforcement is punishing businesses. A year ago, establishments that stock alcohol suffered huge losses when their stock was impounded allegedly for not having the right KRA stamps. Thousands of people that had invested in Toyota Probox vehicles across Taita Taveta County were left in debt after the national government suddenly decided that Probox will no longer be allowed to engage in public transport business. Investors engaged in building and construction also suffered when construction activity was suspended by the National Environment Management Authority (NEMA), National Construction Authority (NCA) and Water Resources Authority (WARMA).

Cap on interest rates for bank loans

In 2016, the national government imposed a limit on the interest rates that banks can charge on loans. As a result of the limits (rate caps), banks reduced the amount of loans available to small and micro enterprises. Kenya moved from a situation where banks were literally begging people to take loans, to a situation where business people have to move from bank to bank seeking loans. The lack of loans means there are no funds available for business.

Reduced county government projects

The number of projects being implemented by the county government are far fewer than those implemented in 2013 – 2017. The main reason is a decline in local revenues as well as delays by the national government in remitting funds to the county government. Fewer projects mean lower incomes to suppliers which in turn affects all other businesses.

Completion of the Mombasa – Nairobi SGR

Construction of the Mombasa – Nairobi phase of the SGR started in 2013 ending in 2017. At the peak of construction, the project employed several thousand people in Taita Taveta County alone. There were landowners compensated when their land was taken over by the railway. The salaries and compensation money boosted the economy of the county. Since the construction of the line ended, the construction workers are now jobless while compensation funds received by landowners have been exhausted.

Relocation of markets

The relocation of the Voi and Wundanyi markets from the CBDs had a big negative impact on the economies of those towns. Let us hope important lessons were learnt and that such moves will not be repeated without adequate consultation among all stakeholders. Ultimately, it is better to have a chaotic market that brings in money instead of a clean town where money is not circulating.

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Published by
Godfrey Kimega

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