The decline of big names such as Uchumi, Kenya Airways, East African Cables, East African Portland Cement and Mumias Sugar was the first sign of struggle in corporate Kenya. [File, Standard] An increase in the number of financially crippled corporates is the new headache for banks, with some lenders in court battles to recover billions of shillings.
Firms once hailed as stable and with growing fortunes are joining the growing list of companies sweating to honour loan repayments, with the situation made worse by the Covid-19 pandemic .
Top banks have had to resort to the courts to recover their money, with some debtors put under receivership.
The decline of big names such as Uchumi, Kenya Airways, East African Cables, East African Portland Cement, ARM Cement, Kenya Power, TransCentury and Mumias Sugar was the first sign of struggle in corporate Kenya.
But the list continues to bulge with new names outside the Nairobi Securities Exchange (NSE) such as National Oil that are struggling to pay loans, with some either seeking repayment extension or defaulting.
It is a trend that KCB Group Chief Executive Joshua Oigara alluded to in an interview last November after the lender disclosed that 17.9 per cent of loans to large firms had gone for at least 90 days without being serviced at the end of September 2021.
The non-performing loans ratio for large corporates was the largest, beating that of the often vilified small and medium-sized segment at nine per cent. “It is a cycle that we find ourselves in. You can see the difficulties of some corporates listed on the NSE,” said Mr Oigara.
“Some of our corporates, especially in agricultural and manufacturing sectors, have had some difficulties. It is seasonality for corporates. It is not normal that they have high non-performing loans (NPLs). Usually, they are the best performing.” KCB CEO Joshua Oigara. [Maxwell Agwanda, Standard] But while for some corporates it is a seasonal challenge, for many it is the reality of the business environment. For instance, Mumias Sugar is now caught between a political and legal process amid debts and the existential threat has left a bad taste in banks’ mouths.
KCB, with a Sh545 million outstanding loan in the sugar miller, was the first to pull the plug.
It placed Mumias Sugar under receivership in 2019, triggering the long process that has since seen other lenders come forth to seek their money.
The miller also owes Ecobank Kenya Sh2 billion, […]