The example of distributors troubles in today’s Daily Nation is a good example of decline in spending at micro-economic levels. To impute that spending does not spur economic growth is absurd. To say that money “saved” from reduced demand driven spending on mobile calls from a bustling sturdy Kes 150billion industry and economic arm will automatically be directed to another (make me buy more tomatoes, sodas, beer e.t.c) is simply nonsense and quite dim-witted. As Kenyatta said, ignorance is anyone’s principal foe as it is clearly being illustrated here. This is a huge industry with a huge economic impact if you have ever bothered to listen to any recent report on Kenya’s economic growth.

Note, apart from distributors, agents, retailers (shopkeepers)and so on, there will be a knock on effect to advertising, then to media, newspaper vendors, gamblers (who see sense in sending 70/- sms’s to 6969 but not in buying airtime to communicate), to internet and I.T, electronics and many other areas. The funny thing is within a country; all economic activities are somewhat interconnected, that’s why tourism growth/fall for example affects all and sundry not just hotels. Add this to reduced taxes then you might get a clearer picture of what is unfolding, then add the drought to this and the back office jobs (from accountants to hawkers) that airtel has transferred to India (which some here celebrate) and maybe the blind might begin to see what is ahead. Battles for economic survival have to be fought from all fronts.

What of investment and interest rates, which affect economic growth, what does this drop in spending portend? When people demand stuff (100 Billion in airtime), someone has to stock this airtime, distribute e.t.c. These people several times need financing for stock, vehicles, salaries, which banks give, because it will be easily recovered, but because of the high demand for credit by these investors (traders/distributors/advertisers), the rates fall as banks compete, the banks make money. But when the 90billion spending slows, borrowing drops, banks raise rates, more people default banks put their money in government securities and government starts cutting rates to spur spending which has been reduced by a major drop in economic activity, to dot. Economies do not grow out of a vacuum, this one will hit all. Ndemo is right, Muganda is right, Chaliwong is right, Collymore is right (ni masomo).

That's a tough one for govt. How do you control de-escalating prices

Govt. has only one choice here and that is to seal the leaks and only by prosecuting thieving Ministers and govt. officials. They also should allow ministries to return surpluses to Treasury without victimisation because I know that's where most wastage occurs.

So your telling me if fuel went to 50/= per litre, Kenya would suffer?

Oh boy, I've heard it all today!

@Much Know, Good analysis. However only onesided. Youve not detailed where the savings will go to. And that is if at all, dont you also agree that people will call more and that has effects. Particularly on data, a reduction leads to much greater usage and which has myriad extrapolated effects on the economy and very much longterm.

Perhaps it could be interesting to find out comparable statistics on how much profits % telco sector generates relative to GDPs in comparable economis. But overall, I think what is happening in Kenya is just a an earning redistribution in the industry which had to happen at one time or another. I believe almost

Thank you Thimioni.

I was gasping for breadth at the insinuation that 8% is inconsequantial in revenue terms.

That said though, I fear that service quality is likely to suffer. For those who discount the issue of persons employed by Safcom (ok, telecomms industry as a whole), have they considered how the Kenyan social scen is organised. In Kenya, if you emply one person, you have secured trickle down or transfer earning to many more. Check why M-PESA is popular and why it is difficult to get float in urban areas around end month.