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Articles by Ritesh Barot
How to ensure shilling holds up against dollar
The Kenya shilling-versus-US dollar topic is a favourite in East Africa. On January 25, the dollar was exchanging at Sh163.50. On April 13, it was Sh127. And earlier this month, the greenback was trading at Sh132. But as many rejoice the strengthening of the shilling, others query the measures being taken to avoid its weakening.
Do positive days lie ahead for the Kenya economy?
Kenya is witnessing a slow yet gradual upturn in the economy. The shilling strengthened against the dollar. Statistics show the unemployment is static. Manufacturing is set to see a revival after prolonged suffering. On the money markets, Nairobi Securities Exchange-listed firms are announcing year-end 2023 financial results. Some have declared momentous dividend payouts, triggering a rise in the NSE index after a long time.
Wheels of the economy have begun turning
In a bid to curb the growing inflation and stabilise the shilling, the Central Bank raised its benchmark interest rate to 13 per cent. This is the highest level since 2012. However, it is not surprising that the rates were increased so as to contain the inflation rates and reduce pressure on the Kenya Shilling. One of the key factors attributing to inflation is that Kenya is almost a net import nation and the shilling has depreciated more than expected against foreign currencies.
What should be done to reboot the economy
The new year, 2024, was expected to bring a fresh start, however, the economy is feeling the pinch of an escalated cost of living. The US Dollar is trading at over Sh160, and the economy almost being a net importer, filters this effect down to the mwananchi, who continue feeling the impact on their pockets. As per various analysts, we expect growth to accelerate in 2024 through to 2028, supported by structural reforms.
Link between food security and climate modulation
Kenya was very well represented at the recent COP28 climate summit in Dubai with 763 participants. These included 51 participants cleared by the national government and several Kenyans facilitated by non-government entities. President William Ruto gave a moving speech highlighting that Africa is providing global climate leadership and that it is time for the continent to be turned into a green powerhouse.
Reversing price spiral not easy but it is doable
Year 2023 is soon coming to an end with the upward spiralling cost of living showing no sign of abating. Recent statistics show the annual inflation rate in Kenya rising to 6.8 per cent in September 2023. The strengthening of the dollar against the shilling and rising fuel prices have also dealt a blow to the pockets of individuals as the prices of all commodities gradually rise. The ever-increasing cost of living is attributed to the rising exchange rates, increased fuel prices and taxes.
Time to ditch oil for other energy sources
What you need to know: Heating, lighting, manufacturing, travel and transportation are all fuelled by mostly non-renewable energy, including coal, petroleum and natural gas. With the recent Israel-Hamas conflict, oil prices are expected to spike further and speculated to reach record-high levels next year. The price of crude oil is on the rise. Whilst there is a movement for green energy, the modern world cannot be imagined without the use of petroleum; it runs on electricity and fuel.
Africa is ever embedded in world summits
What you need to know: The two-day G20 summit in New Delhi showcased hospitality, technology, innovation and culture while addressing critical global issues. Africa’s most populous country Nigeria attended the G20 summit and is considering membership. Africa is rising. As is often said, “Show me your friends and I will tell you who you are.” With the growing list of international partner nations, African countries are definitely playing their cards right.
Consider climate change while setting priorities
Since the Industrial Revolution, the burning of coal and other fossil fuels to power factories and engines has led to voluminous amounts of greenhouse gas emissions into the atmosphere. Consequently, this is one of the primary reasons cited for climate change. Kenya is contributing to the change too.
Why global recession looms large
American businessman and politician Robert Foster Bennet Famously said “As sure as the spring will follow the winter, prosperity and economic growth will follow recession.” As central banks across the world simultaneously hike interest rates in response to inflation, the world may be edging further toward a global recession as the year 2023 continues.
Why China was the elephant in the room at G7's Hiroshima summit
Each year, several summits take place across the globe championed by several groups of nations. These summits could work as a catalyst to align leaders, advance solutions to emerging problems, present strategies, and initiate partnerships. The G7 summit took place between 0n May19-21, 2023 in Hiroshima. Hiroshima can never be a summit destination without everyone experiencing the permanent effect of wrong decisions.
Is there bright side to rising interest rates?
Economies globally are currently gearing gravitating towards higher interest rates. This is seen as a possible solution to the rising rates of inflation. Interest rates have been at historic lows since the global financial crisis of 2008 and are now creeping upwards. In Kenya, the Central Bank of Kenya raised its benchmark interest rate by 75 basis points to 9.5 percent at its March meeting. In England, interest rates rose for the 11th consecutive time in March 2023.
Using Silicon Valley Bank crisis to stem similar failures globally
Recently, Silicon Valley Bank, an important financial intermediary in one of the most important industrial centres of the world failed. Depositors queued demanding withdrawals. Within the same week other banks in the USA, including Signature Bank, and Silvergate Bank also failed and have since put immense pressure on more banks, including Credit Suisse, and First Republic Bank. One large bank failure even in isolation is a serious problem to the wider economy.
Evolving work of State in economy
The role of governments in the social economic sphere has changed considerably over time. As society's development becomes complex, heterogeneous and specialised, the necessity for agreements or contract rules grows. Therefore, governments across countries have assumed greater significance in their role towards the economy.
How to effectively tackle Kenya’s growing unemployment rate
Kenyans are wedged in the grasp of increasing food prices resulting from a mix of factors including adverse weather, increasing input costs worsened by the Ukraine war, and rising dollar pricing together with the effects of policy adjustments. The situation is made worse with the levels of unemployment during these costly times. According to CEIC Global Economic data, “in 2021, the unemployment rate for Kenya was 5.7 percent.
Balancing public good benefits and taxation
Security, infrastructure, environment, and health are among the first of many examples of public goods. Governments plan for most of the expenses and the provisioning of these public goods, mostly funded by tax revenues. Public goods are designed to be available and have specific merits that prevent individuals, citizens or residents from being unable to access them. The theory of public goods provides a rationale for the allocation function of public policy.
Why tracking economic cycles matters
Influential economist Alan Blinder said “in the classic old business cycles, there would be a diminution in sales; it would take a little while for this information to reach corporate headquarters. And there would be an inventory pileup. And then – bam- businesses would react, sometimes violently, by cutting production.” With the current technology and speed of information exchange, this has since changed. After the industrial revolution, our global economy has seen unprecedented growth.
Kenya must aim to understand, gain from the multiplier effect
During the 2022 FIFA World Cup, it was reported that Qatar hosted more than 1.4 million visitors. When the COP27 summit took place at Sharm-el-Sheikh in Egypt more than 100 heads of State and more than 35,000 delegates were hosted. When countries host business summits, trade conferences, intergovernmental summits, and major sports tournaments, there is an upsurge in the demand for facilities. How does this benefit the economy apart from foreign income?
Playing by different rules - the secret to a leader’s success
Business Guru Warren Bennis stated “leadership is the capacity to translate vision into reality.” Genius, pioneer, and innovator are words often used to describe Apple founder Steve Jobs. He brought an imaginative sense to technology which began as a business with his friend Steve Wozniak. Apple grew to become one of the world’s largest corporations. In the journey came the Macintosh computer, the iPad, and the iPhone. Jobs’ product launches turned into headline-making events.
Getting right budget for a country is secret sauce for assured prosperity Original
A budget is more than just a series of numbers on a page; it is the embodiment of our values” these words of Barack Obama stand true in America and across the world today. On 18th January 2023, the draft Kenya budget policy statement for 2023 was issued. The Kenya Revenue Authority is expected to raise over Sh3 trillion.
Why government holds key to robust growth path
Times are changing rapidly and economies are evolving. Over the past few years, the economic and market barometers have been giving mixed signals owing to recessionary times. Most discussions of economic growth lead to the importance of enhancing private sectors globally. However, this is only possible with favourable government policies.
Are the terms of trade for primary product-based economies falling?
Why do some countries manage to capitalise being primary product-based economies while others flounder and fall behind those who have taken the manufacturing route? In Africa, Ghana, Kenya, and many other nations specialise in primary products. Kenya’s exports include tea, coffee, cut flowers, and agriculture.
Navigating firms in uncertain times
Businessman and educator Stephen Covey said “if there is one thing that is certain in business, it is uncertainty”. It is well known that start-ups and small businesses tend to fail, but the life expectancy of multinational companies is also limited and shrinking. Fifty-two percent of the fortune 500 companies that existed 20 years ago have disappeared. In the 1970s, the life expectancy of Fortune 500 brands was estimated to be 75 years, now it is less than 15 years.
Economic woes call for new world of authentic diversified leadership
We live in times of unprecedented uncertainty. The global economy is facing a myriad of economic and related risks. Some risks are old, some new. For example, we have the return of inflation, negative supply shocks, and the risk of stagflation. Economies have a build-up of private and public debt leading up to significant debt crises globally.
Resetting personal and business strategies, goals in the New Year
A new calendar year marks new beginnings. As individuals and businesses set new goals to accomplish during the calendar year, it is important to reflect on how the short-term goals align with the overall personal or professional strategy. Business mogul Morris Chang famously said, “Without strategy execution is aimless, without execution strategy is useless”. The Kenyan economy is slowly showing signs of recovery although businesses are yet to realize the pre-pandemic levels of business.
Recession creeps up in the wake of soaring energy and food bills
In 2020, Kenya succumbed to the economic effects of the pandemic and declared the first recession in two decades. There was hope for recovery in 2021. However, recovery to date has been slow. This is not a unique situation to Kenya as the world is grappling with an economic downturn. Many economists have suggested ways to lift economies out of recession, however, the solution is not linear or simple.
Place of infrastructure spending during an economic recession
The growth of any economy is determined by many factors. Amongst the critical factors are infrastructure and industry. Infrastructure investment has historically been a key driver for economic growth. The Government plays a key role in sparking demand. When economies invest in infrastructure, businesses are enabled to produce and deliver more commodities. The Kenyan economy is slowly showing signs of recovery from the pandemic.
What next for world after food, climate and pandemic shocks?
Global hunger has been on the rise since 2014. Over the past two years alone, the number of people without regular access to food has more than doubled. As per UN reports “some 800 million people already go to bed hungry every night”. During the COP27 summit in Sharm el-Sheikh last month, some key discussions took place with a great focus on transforming energy and food systems.
Service industry holds the key to growing robust economies
Three major contributors to economic income are agriculture, industry, and services. The latter has been growing in importance over time and expansion here has always been an indicator of economic health. The services sector contributed about 54.41 per cent of the Kenyan GDP last year.
Co-operation among nations holds key to quicker global development
Since World War II globalisation of the world economy has progressed at a fast rate. This became possible due to expansion in economic activities, especially international trade. The main theme of globalisation is the evolution of a unitary political and economic space. Regionalism is an inherent part and represents regional linking and cooperation, most of the countries in proximity.
Cost of Living: Fix food security, woo as many foreign investors as possible
Ronald Reagan famously said the “Government’s view of the economy could be summed up in a few short phrases. If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidise it.” This sounds simple to do, however, many nations have taken swift actions and implemented policies during these uncertain times and, in some cases, to the detriment of the population. A majority of us look at the government for the focus it gives to spending patterns.
Why banks take operations global
The progress and growing integration of the world economy has been supported by the equivalent growth of the global banking functions as different commercial banks started following their customers beyond national territory. Alongside home-grown lenders, Kenya hosts a lengthy list of international lenders each offering an extensive range of services. Likewise, some Kenyan banks have also started expanding across the East African region, and internationally, including China.
Chasing complex growth rate strategy to prosperity
If we look around the world, we will find that some economies are growing at a rapid rate while others are lagging. Among the slowest-growing economies in the past decade are Yemen, Croatia, Brazil, Serbia, Libya, Venezuela, and Ukraine. Most of these regions are characterised by high unemployment, political instability, insecurity, corruption, or misallocation of limited resources.
Learning the art of juggling foreign exchange woes while on tight rope
Former governor of the Reserve Bank of India Raghuram Rajan said “monetary policy is like juggling six balls…it is not interest rate up, interest rate down. There is the exchange rate, there are long-term yields, there are short-term yields, and there is credit growth.” Where the exchange rate is concerned, foreign exchange risk is a key factor to consider. Foreign exchange risk is the losses an international financial transaction may incur due to currency fluctuations.
Equilibrium rule technocrats need for ease of implementing policies
Economic policies are designed to stabilise the economy. Whenever recessionary or inflationary pressures destabilise the economy there are tools of fiscal and monetary policy that are used to influence economic outcomes. The global economy is yet to recover from the recessionary pressures. While policymakers are under pressure to enact policies, introducing them must be carefully thought through.
Times of economic uncertainty need policies that bring stability
Economic fluctuations are present in all walks of life. Every country faces economic changes which affect mainly three areas namely growth, stability and distribution patterns in the economy. These three areas have always been the major source of attention for government officials. Growth can be defined as an increase in real national income in the country. Stability is the absence of fluctuations in the income, price, and unemployment levels in the economy.
Ritesh Barot: Burden of increasing living cost
Henry Hazlitt, co-founder of the Foundation for Economic Education famously said “inflation is not only unnecessary for economic growth. As long as it exists, it is the enemy of economic growth.” The global cost of living continues to rise owing to soaring food and energy prices.
Deficit financing that energises growth
Carmen Reinhart, Chief Economist of World Bank, famously said “transparency of debt, credit, and terms of borrowing can help with creditor co-ordination and speed up debt reduction efforts.” Kenya’s fiscal deficit stands at approximately Sh1 trillion, which is roughly 8.1 percent of GDP. Usually, fiscal deficit takes place due to revenue deficit or an upsurge in capital expenditure.
Ensuring business survival by managing working capital
Closure and loss of profits have become a reality for many companies in Kenya in the post-Covid-19 phase. As per the Business Pulse Survey, close to 65 per cent of Kenyan firms are still experiencing a decline in demand, cash flow, and available finance since 2020. According to statistics, “In the period from July 2021 to February 2022, 1,365 companies closed operations in Kenya.” What leads to this situation?
Good strategy creates dynamic firms
Every organisation has a strategy, which must be controlled and evaluated in order to accomplish the vision. Strategy control process is the course of action for determining what is being accomplished and enabling a manager to take a corrective measure in case of any failure or deviation so that performance remains on course.
How rising lending rates curb expansion, investment plans
Economist and finance author Aaron Brown famously quoted “you need a strategy, and a trade or investment decision can be evaluated only in the context of that strategy.” Investment in simple words is acquiring assets such as stocks, bonds, machinery, buildings, and so forth to build wealth, for income and appreciation.
Ritesh Barot: Can government spend to trigger growth in demand?
Over time, every capitalist economy goes through cycles that have periods of growth and periods of economic contraction or recessions. These cycles continue, however, the overall trend of an economy is generally upward. The global economy has seen tremendous growth over the last hundred years, albeit, through the experience of booms and busts.
New cycle of political economy after polls
Today’s General Election has four presidential candidates. The Kenyan economy is at the centre stage of their manifestos. With the rising inflation and high cost of survival at a time when the economy is yet to emerge from the blow dealt by the Covid-19 pandemic, the concerns for the voters are plenty. These concerns are related to their incomes, job, food security, shelter, healthcare and access to essential services.
How utility and finance determine buyer interest in certain products
Karl Marx famously said “nothing can have value without being an object of utility.” Utility is a term in economics that refers to the total satisfaction or benefit from consuming a good or service. Economic theories centred around rational choice generally assume that consumers will endeavour to maximise their utility.
Lessons from industrial revolution
The world today is at the mercy of oil producers, rich countries have invested intensively in developing countries and are practicing neo-imperialism, there is a global outcry for food security especially post Russia-Ukraine war as well as effects of climate change, and we are at the brink of an agricultural revolution. If we look at the background of the industrial revolution we could realise that history in a subtle manner, repeats itself.
Focus on improving customer experience for business growth
Customers are the lifeblood of a business, without them, there would be no exchange of goods and services for money. At the same time, the internal workforce is integral to the effective running of the business. Without a satisfied workforce, the services provided would suffer, resulting in loss of customers, especially in these competitive times. Since the onset of the Covid-19 pandemic, the business environment has changed.
Setting business goals and understanding behaviour
Businesses are considered to operate in imperfectly competitive markets. As information is not complete, uncertainty prevails. This type of assumption about the firm is more realistic. Each group within businesses, be it, owners, managers, workers, consumers, and suppliers will have different utility functions. Owners will seek to maximise profits, managers will seek better salaries, and workers will seek higher wages and better work conditions.
Dreaming of a dollar-free world
The international monetary system defines the rules, customs, instruments, and instructions for managing international payments. The system defines the exchange rate regime to be followed in the world. The world has a history of different monetary arrangements. Significant ones are two, the gold standard and the Bretton Woods agreement. However, both collapsed giving way to the floating exchange regime. In 1880 the gold standard started operating.
Improving trade relations for economic growth
International economic issues have taken centre stage in recent years. Several global conventions take place to address issues related to trade and policies. Nations have become more interdependent than ever. Though the growth in international trade and investment has been there for a long time, in recent years the interdependence has grown significantly.
Nations need to evade the debt trap
It takes years for a tree to grow but moments to be felled, likewise, debt and economic crises can obstruct and reverse decades of gains in per capita incomes and thwart efforts of poverty reduction in developing countries. The existence of debt has both social and financial costs. According to UN Development Programme, “heavily indebted poor countries have higher rates of infant mortality, disease, illiteracy, and malnutrition than other countries in the developing world”.
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