Auctioneers come calling as individuals, businesses face it rough
The Jubilee Party headquarters in Pangani, Nairobi. The building is set to be auctioned.
One Sunday morning in 2020, Ms Victoria Aketch, a pastor, received a brief text saying her car had been auctioned. The vehicle had been donated to her by church members.
She put the vehicle on the road as a taxi when churches were ordered shut to stop the spread of coronavirus.
Pastor Aketch hoped the taxi business would enable her to feed and educate her four children.
“My son was in his final year at the university and needed to clear fees. I approached a bank for a loan but it only offered Sh50,000. A friend suggested that I use the vehicle as collateral,” Pastor Aketch says.
“After valuing the car, the bank loaned me Sh250,000.”
She agreed to pay the loan in monthly instalments of Sh7,000.
After paying the loan for just two months, the country’s economy shut down to stop the spread of the deadly virus.
Large and small businesses, including Pastor Aketch’s, ground to a halt.
Barely three months after taking the loan and struggling to repay, the lender notified the pastor that her car would be auctioned.
True to its word, the bank sent auctioneers to impound the vehicle two weeks later.
“I didn’t know the car would be taken and sold that fast for I was still doing all I could to repay the loan. I received the text of the car having been auctioned when I was in church,” she says.
And just like that, Pastor Aketch’s livelihood went up in smoke in the blink of an eye.
“How was I to feed my children? Where would I get school fees? It is three years down the line, but I am still in pain,” the pastor says.
Unfortunately, Ms Aketch is not alone in this.
When Ms Lucy Mbiyu took a bank loan to venture into taxi business in 2015, she had big dreams.
That year, US-based online ride-hailing company – Uber – had just launched in Kenya, opening new frontiers for many drivers. The business, Ms Mbiyu hoped, would offer her handsome daily returns and enable the repayment of the loan smoothly and in the shortest time possible.
Three years later, Ms Mbiyu’s dream evaporated as her car was auctioned by the bank.
“The online taxi business was just picking up in Kenya and things were looking great. When I took the loan, I was sure of making enough money and repay it,” Ms Mbiyu told the Daily Nation.
“Indeed, in the first half year after joining the transport business, I was able to comfortably give the bank Sh32,000 for the loan every month.”
Soon, more ride-hailing firms would join the business, attracting thousands of drivers.
With competition heating up, the companies began slashing fare prices and continued to raise commissions, squeezing drivers’ earnings.
The taxi firms also introduced smaller cars, which became a hit among many Kenyans as they were cheaper, dealing a blow to Ms Mbiyu and other drivers who had larger vehicles that guzzled more fuel.
That is when she started witnessing her earnings drastically drop every month. She could no longer afford to service the loan, which was competing with rent, utilities, children’s school fees and other needs.
The bank finally came calling and auctioned the vehicle.
“Business was good in the beginning, and I was repaying the loan. But I could not keep up with the re-payment later and my car was auctioned. I have accepted whatever happened and moved on,” she says.
More people are losing vehicles, pieces of land, houses and household items as banks and other lenders go after overdue loans.
The pandemic, which hit Kenya in March 2020, destroyed individual incomes and businesses, leading to record loan defaults.
It threatened the existence of Micro and Small Enterprises (MSEs), which constitute 98 per cent of the country’s economy, according to official reports.
The Finaccess MSE Covid-19 Tracker Survey, released in December 2021 by the Central Bank of Kenya, tracked more than 600 businesses across the country between February 2020 and July 2021.
It found out that 35 per cent of the enterprises that were active in February 2020 had gone under by July 2021.
“In July 2021, some 38 per cent of micro-businesses had recovered, with average revenue at the same level or higher than pre-Covid times but the remaining are still earning less than pre-Covid times. Meanwhile, business closures increased in 2021, with 35 per cent...no longer involved in any activity in July 2021,” the report says.
The survey – the first official record of the impact of Covid-19 in Kenya’s informal sector – showed a rise in business closures between March and July 2021, with more considering it a bad year due to reduced clients.
The impact of the devastation is being felt around the country.
CBK data shows that gross non-performing bank loans rose by 27.2 per cent, from Sh333.3 billion in December 2019 to Sh424.1 billion in December the following year largely due to the pandemic.
With trade, transport, aviation, manufacturing and other major sectors of the economy reopening in 2021, cash flow challenges eased for many businesses, helping them start repaying loans.
The period saw bad loans grow by just 0.6 per cent to Sh426.8 billion in December 2021.
However, 2022 proved to be a tough year as economic growth slowed down as jitters persisted over the outcome of the August 9 General Election.
The uncertainty saw bad loans rise sharply by 18.5 per cent in the 11 months to November, with gross loans hitting a record Sh505.9 billion.
Individuals are also facing rough times, with the high cost of living, unemployment and other crises putting them on the wrong side of landlords, banks, saccos, shylocks and online lenders.
Government suppliers have also complained about auctioneers knocking on their doors as pending bills continue to pile up.
Devolved governments owed suppliers Sh153 billion by last year, a steep rise from Sh93 billion the previous year.
The government reduced the amount to Sh49 billion last year, from Sh61 billion in 2021.
Many of those who supplied goods and services to the government are desperate, with a number re-sorting to suicide as they cannot keep up with loan repayments.
The high cost of living highlighted by runaway inflation is making life even more difficult for borrowers.
The nation’s worst drought in 40 years, the depreciation of the shilling against the American dollar and other major currencies and soaring prices of commodities like wheat and gasoline due to the Russia-Ukraine conflict have fuelled global inflation.
An episode that aptly captures the dire economic situation of Kenyans is the Kisumu landlord who put a notice in newspapers, auctioning undergarments and other personal items of a tenant who vanished with rent arrears of more than Sh100,000.
It was among hundreds of notices in newspaper announcing planned auctions of multimillion-shilling properties as lenders go hammer and tongs on defaulters.
Notable properties that have been listed for auction include the iconic 112-year-old White Rhino Hotel in Nyeri County and Jubilee Party’s former headquarters in Pangani, Nairobi, which was put on auction by Stanbic Bank.
Mr Alvin Muganda has been in the auction business for about 20 years.
He says this is one of the toughest periods he has witnessed in his career.
“The situation is not as tough as it was in 2020. Things have improved a little but it is still bad. You can take a piece of land, vehicle or even a house for auction but end up selling nothing by the time the sun goes down,” Mr Muganda told the Daily Nation.
He says auctioneers are being made to sell expensive items and property at throwaway prices in a bid to attract clients.
According to Mr Muganda, household goods are the only items finding buyers at the moment due to their relatively low prices.
“The market is very tough. When financial institutions and other lenders see that you have not sold their property, they take it to another auctioneer,” Mr Muganda says.
“If that also fails, they have no option but to renegotiate the loans with the borrower because they have little or no choice.”
Mr David Muteru, the vice-chairman of the Digital Taxi Forum that lobbies for online taxi drivers, sees light at the end of the tunnel.
He says auctions of Digital Taxi Forum members’ vehicles have reduced in recent months.
“The curve is flattening. The auctions are not as many as was the case in 2020 and 2021. If you visit ve-hicle yards now, they are not as full as they were a year ago,” Mr Muteru says.
He hopes the reforms in the online ride-hailing business will bring better fortunes to drivers.
