19 January 2008
Nairobi — The collective impact of the post-election violence was felt this week as businesses in major towns remained shut in the afternoons while police battled demonstrators protesting the presidential election results.
The effect of the Orange Democratic Movements's three days of mass action which ended Friday was felt especially by those in the informal sector, and small and medium-sized businesses.
In Nairobi, Mombasa, Kisumu and Eldoret, commerce was disrupted by the violence which always started in the afternoons, following which police ordered businesses and major roads leading into the towns closed.
The violence which has claimed 510 lives paralysed work in the private sector and public offices.
But those likely to suffer most are people engaged in private business, jua kali and matatu sectors who rely heavily on daily collections.
The transport sector has not been spared. Many Kenyans have been trekking to catch the few operating matatus which have mostly been picking and dropping passengers outside the central business districts.
And upcountry transporters have been spending days and nights at stopovers either waiting for police escort or for the chaos to subside.
Matatu owners association chairman Simon Kimutai says many operators have not been working.
The sector is made up of about 60,000 vehicles, each making an average of Sh 8,000 a day.
"We are currently operating at 40 per cent. The proceeds can only take care of the fuel, wear and tear and staff wages. As the MD of the business, you get nothing. We are not making profits," explained Mr Kimutai.
He argued that if the situation is not controlled urgently, most operators will be pushed out of business.
The police also say it is costly to keep controlling the chaos.
"If you look at the man-hours spent to keep the police on the streets all over the country, the exposure and trauma some young constables are subjected to and the trucks as well and land cruisers surveying the country, you will agree with me the total cost is enormous," said police spokesman Eric Kiraithe.
Business analysts say the crisis is likely to hurt the country's economy for a long time. But more disturbing is the fact that the common man should anticipate tough times ahead.
Some of the immediate effects have been laying off of workers as businesses struggle to cope with diminishing revenue.
The chief executive of the Nairobi Central Business District Association, Ms Wangui Muchiri, said this is already happening.
And generally, loss of livelihoods, reduced income and increased prices mean wananchi cannot buy what they used to before. Life has suddenly become expensive.
"The cost of transport has increased because of both the high fuel prices as well as the need to provide security to goods in transit. Many businesses are unable to collect their goods from the port, from the producers in remote areas, and from manufacturers due to fear of losses incurred while in transit," said Mrs Elizabeth Maloba, the managing director of Business Africa, an SME mentor.
Manufacturers and importers on the other hand are unwilling to incur distribution costs for fear of losses. This has led to a breakdown of the market's ability to access goods.
"Kenyans in small business are more vulnerable to this as they are considered a greater risk by financial institutions and are the first to have their lending prices increased," explains Mrs Maloba.
But the Managing Director of the National Bank of Kenya, Mr Reuben Marambii, says if normalcy returns, the banking sector would just need to reschedule some loans to give the clients more time to settle.
And now there is even a greater danger. The donor community says it is considering cutting its aid to the country. In fact the European Parliament has called on donors to consider imposing economic sanctions on Kenya if the political impasse remains unresolved.
Should this happen, the Government will have no choice but to resort to domestic borrowing. This would be bad news for small businesses because financial institutions would revert to lending to the Government at higher interest rates.
The Director General of Kenya Revenue Authority Michael Waweru is looking at decreased VAT (Value Added Tax) collection.
"We are aware consumption levels must have dropped during the skirmishes and as a result we expect declines in VAT collection," Mr Waweru says.
But the Mr Waweru is confident that the impact would be accommodated, however clarifying that it is possible if the skirmishes "ended yesterday and re-construction started tomorrow."
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