Economy
State foray back into business giving traders sleepless nights
Monday March 20 2023
President William Ruto with Trade Cabinet Secretary Moses Kuria, at a past event in Gatundu South, Kiambu County. FILE PHOTO | PCS
The new administration of President William Ruto has sent jitters in the private sector with its aggressive foray into business, raising fears that the State is moving back into direct competition with traders.
Since it came to power in September last year, the Kenya Kwanza Government has moved into non-strategic sectors such as retail and wholesale, petroleum and agriculture that are dominated by the private sector.
Other than importing large quantities of rice, cooking oil, sugar, wheat and beans duty-free through the Kenya National Trade Corporation (KNTC), the government is also distributing cheap fertiliser, giving micro-loans to businesses and individuals in the informal sector as part of efforts to tame the rising cost of living and correct market failures.
Read: New regulations to allow State direct oil imports
Nairobi will also next month sign contracts with farmers in Zambia to grow maize exclusively for export to the Kenyan market, with Kenya being allocated at least 50,000 acres of land for growing maize in the Southern African State in the current planting season.
The government has also struck a government-to-government deal that will see local oil companies pay for oil imported on credit, with the State shouldering the currency risk for oil marketers that will be dealing with the Middle East oil suppliers.
Energy and Petroleum Cabinet Secretary Davis Chirchir said on Monday that the government signed a deal last week with Saudi Aramco to supply Kenya with diesel and Super for the next six months, while Abu Dhabi National Oil Company (Adnoc) will deliver three cargoes of Super petrol every month.
Ruto’s government has also set aside Sh20 billion to lend to individuals and businesses at the bottom of the pyramid through the Hustler Fund.
These developments have caused disquiet among the private sector players who fear the government forays will push them out of business, resulting in massive unemployment.
“Very worrying times. Many OMCs will be affected especially traders-sellers in the OTS and companies that do a lot of transit exports to the neighbouring countries,” said a senior executive of an oil marketing company (OMC).
On February 20, the Kenya Association of Manufacturers (KAM) released a statement expressing its disapproval of the government’s plan to import 125,000 tonnes of finished and refined edible fats/oils through the KNTC.
“From our perspective, this move will, therefore, promote unfair competition to local industries and the government stands to lose revenue to the tune of over Sh3.5 billion and puts over 40,000 jobs on the line.
“On behalf of our members, KAM calls on the government to reconsider the plan and engage our members to find a long-lasting amicable solution,” said KAM in a statement.
These imports, the government argued, were aimed at stabilising prices of essential household commodities such as cooking oil and alleviating the current drought situation.
The Ministry of Trade says it has mapped 120,000 retail shops in the country, especially in low-income areas, where these cheap imported foodstuffs will be stocked as the government targets to bring down prices of basic commodities.
Read: Tax-free essential good imports to fight inflation
“The government wants to do everything, in the end, they will do nothing,” said Samuel Nyandemo, an Economics lecturer at the University of Nairobi, adding that the work of government is to facilitate enterprise.
Dr Nyandemo does not think that the government is getting into the business because of market failures.
Timothy Njagi, a research fellow at Tegemeo Institute, an agricultural policy think-tank, described the move by the State to get into business as “anti-hustler.”
“It is anti-hustler because one of the things the government is supposed to do is to help create jobs. If the government gets into business, that is killing jobs,” said Dr Njagi.
He noted that the fertiliser distribution through NCPB has been disappointing. “It replaces private sector retailers, but they are still not learning,” said Dr Njagi.
He said fertiliser subsidy is not sustainable. “We are just using resources and time on models that will not work.”
Ironically, President Ruto has promised to revitalise the private sector, by borrowing less from banks.
He has also promised to rejuvenate the Nairobi Securities Exchange (NSE) by bringing to the bourse through initial public offerings (IPOs) between six and 10 companies, a target that if met would see him surpass the record set by the late President Mwai Kibaki’s administration.
Dr Ruto also wants to fully privatise the struggling national carrier Kenya Airways.
The head of State last year met top executives of Delta Air Lines in his American trip where he launched the government bid to sell its entire 48.9 per cent stake in Kenya Airways.
