The incomparable author of the Biblical Book of Ecclesiastes, the sagacious King Solomon opined, “What has been will be again, what has been done will be repeated as there is nothing new under the sun.” According to a copy of the Financial Times I chanced upon; at the ebb of the Cold War era, the Mall was once-upon-a-time the heart & soul of suburban American Life. Here family units shopped, teenagers hung-out with their friends and even a few low-budget films were set. These malls existed in the mold of the Victorian gallerias & passages, quite famously, La Galleria Vittorio Emanuele II in downtown Milan. The shapes were elegant and replete with breathtaking apses that portrayed a utopian ideal. The spirit behind a strategically labyrinthine layout wrought enclosed spaces that though masquerading as public, were a welcome relief from the decaying suburban brick and mortar gaols that were the manifestation of the retail stores of the time. Both the scarcity & novelty of the products to be found in these malls made fickle customers abandon the small retail outlets in their street corners for the splendor of these newly-molted outfits. Their golden-era was in the 1990s when a steady increase in population brought about bustling business. Even then cracks were already festering. The malls of the halcyon days were anchored on the logic of ‘cornerstone stores’ attracting business to the less prestigious and prominent business entities. This business model that leaned heavily on the department store model of ‘anchor tenants’ drawing in the heft of the customers was eternally on shaky ground. Come the early 2000’s, disruption of the business models of yore was brought about by e-commerce, where companies like Amazon & Alibaba took full advantage of antiquated norms to blow unprepared and unadapting competitors out of the water. The Mall bubble had burst. Many are the firms that filed what in American Corporate legal parlance is described as ‘Chapter 11 bankruptcy.’ The shot-clock on the magnetism of the mall of days bygone has nonchalantly tapered to nought in the unfortunate epoch of the pandemic of our time – COVID-19. The mall in the style and shade that existed then was steeped in grandeur but painfully anaemic & cadaverous with regards to draw and corporate logic. Another publication, The New York Times in 2015 ran a piece – An Ode to shopping Malls. The prelude to this melancholic piece read, “Farewell to pleasure palaces of days past. In no dissonance to how a filmmaker’s series chronicles a lifestyle as it approaches its nadir.” That was the situation in America and Western Europe.
Reminiscent of monkey see monkey do; Kenya is firmly on the downhill slalom on the slippery slope that is the ‘mallification’ of every space for enterprise. In our heritage of splendor, the investment mantra at play today by many SACCOS, ‘Chamas’ and Investment vehicles is that if you have mobilized some sizeable heft of disposable revenue, all you have to do is acquire a huge chunk of unproductive land in the middle of nowhere, fence it, put up gargantuan water tanks before bankrolling a ceaseless media advertisement campaign to signal your intent to create a gated-community. In the essence of decongesting the City of Nairobi, a myriad such outfits bestride the landscape within the metropolitan area. After attracting a sizeable number of investors, aggressive construction of residential apartments will ensue with almost certain immediate occupation. In the foregoing, a pragmatic entrepreneur will realize that all these people will sooner rather than later yearn for a shopping centre, public services, infrastructure, amenities, recreational facilities, amusement parks & other creature comforts within proximal range. That is when an idea will burn bright inside one’s cerebral cortex. Let’s open a Shopping Mall to cater for this burgeoning community of urbanites. In the advent of the property boom attributed to the fiscal prudence of the regime of Kenya’s 3rd President, H.E. Mwai Kibaki that put money in the middle class’s pockets, we today see many such developments coming up. People have even gone as far as to uproot former lucrative foreign exchange-earners like coffee & tea in difference to real estate. This modus operandi has not merely been restrained to the residential real estate but also office space and business premises coming up at a premium. Matter of factly, concerns have been raised about an ominously gaping chasm that still sit undeveloped in Upper Hill, Nairobi as a foundation and basement where there is expected to be built Africa’s tallest edifice, The Pinnacle towers. The expectation is of a 70-story, 300-meter twin tower complex built at the cost of 20 billion Kenya Shillings comprising of a 5-Star hotel, leisure facilities, residential & office spaces as well as you guessed it, a shopping mall. Currently, the record for the tallest building in Africa is held by Carlton Centre in Johannesburg, South Africa. I personally question the logicality of this development yet many commercial skyscrapers most especially in that very locale of Upper Hill remain unoccupied many years after completion. But when foreign capital is available and is being invested to build my Capital city, who am I to complain?
In another forum; ICT Champion, Socio-economic Commentator, Associate Professor of Entrepreneurship in the University of Nairobi and an acquaintance of mine, Prof. Elijah Bitange Ndemo wondered out loud why if you were to find 50 Nairobians & give each of them a million shillings to invest, unsurprisingly 10 will buy matatus, another 10 will buy plots, 10 more will import merchandise from China to sell while the remaining 20 will ‘turn up’ at the clubs and bray to their entire estate about some nebulous mongrel called ‘kuomoka’ – getting rich (sic)! In his assessment, the good don adjudged the problem to be lack of creativity in thinking out of the box. He lamented about a dearth of nous to go into manufacturing while all concept papers elucidate the need for that as a prerequisite for industrialization. He was way off the mark on this one. Many are the Industrialists, Enterprising entrepreneurs and Engineers that are churned out of our tertiary institutions annually, many brimming with the audacity of hope that their naked ambition, skill, competence, passion, talents, knowledge and even idiosyncrasies will be invaluable in the attainment of industrialization. Reiterating sentiments from Irungu Thattiah’s treatise – The Failed Presidency of Uhuru Kenyatta, Kenya is a country run by ice-cold financial mercenaries and sordid profiteers. That clearly explains why the Konza Technopolis project inaugurated auspiciously during the Former President H.E. Mwai Kibaki & Premier Rt. Hon. Raila Odinga’s time in office had been put on ice during the 1st Term of his successor’s regime. In the less than enlightened view of his successor, minuscule by means of quid pro quo could be personally gleaned for the dynamic duo; Uhuruto, in the course of the project. Conceitedness aside, this could have been an excellent launch pad for the industrialization agenda that can most definitely maximize the number of jobs for the conveyor belt of youth churned out every year by our tertiary institutions of tutelage. Credence to the Almighty that at the dawn of the 2nd Term, the Handshake between H.E. Kenyatta & Rt. Hon. Odinga, the voice of reason prevailed and that show was put back on the road. Returning to the woes of the Kenyan local Industrialist, let’s say you want to start your humble cottage industry bottling & refilling potable (drinkworthy) water for sale locally. Before earning your first shilling from the endeavour you will have to have factored in the KEBS standardization mark levy (Sh. 102,000), County Business permit fees (Sh. 18,500), Public Health Department Permit fees (Sh. 13,000), Mandatory Lab Testing (Sh. 15,000), NEMA fees (Sh. 33,000) & Excise duty (License, Bond & Stamp – Sh. 400,000), among a plethora of other taxation costs I can think of from the top of my pate. From deliberations with some of my friends, up to 55 disparate statutory corporations and regulatory agencies must get what William Shakespeare characterized in his play ‘The Merchant of Venice’ as “their pound of flesh” before an enterprise can even attain lift-off. That is some steep capital expenditure which only a few can muster. For some context, Excise duty is a tax ostensibly levied on goods and services manufactured or imported into a country as specified in the First Schedule of the Excise Duty Act of Kenya (2015). Why bottled water is deemed excisable yet it is a natural resource not ‘manufactured’ absolutely goes over my head! Woe on you if you are exporting, as a sales tax will still be levied by the KRA on your consignment. Cess will also be levied on cross-county transfer of your merchandise, non-farm-produced notwithstanding. You may find yourself coughing out a million shillings only to run a business whose earnings will be in the region of 20,000 to 40,000 shillings which is an absolute farce but as plaintively stated by Ezekiel Mphahlele in his short story, “Man Must Live!” In the backdrop of all this, anyone with disposable income for investment will ultimately find it a safer bet to invest in low-risk options like a Block of Flats in the suburbs or low-income housing estates, a Shopping Mall or Government Bonds / Treasury Bills.
We must live in cognizance of the fact that a mall is not and can never be a substitute for a factory or industry. In the interest of full disclosure, a mall built for a rough estimation of US $50,000,000 can only host like 500 individual business units due to space considerations. A factory worth the same amount can directly employ up to 10 times that number and indirectly keep suppliers who are farmers, fuel companies among other cadres of attendant business interests and professionals whose enterprises are tidally-locked to the fate of that factory in the green. That multitude will ultimately have money in their pockets to be able to expend buying groceries; paying for healthcare; school fees; paying for transportation on motorcycles, Tuk-Tuk or taxis; keep afloat the owner of the local pub; eat in the small joint run by ‘mama pima’ & even the perfunctory 10/- for the ‘Mutura’ guy! All this cash flow will directly lead to more money in the pocket of the man at the bottom of the financial pyramid and by extension a vibrant economy. Let’s now look at the business model of a hypothetical mall. A typical mall is a capital-intensive project launched on the substratum of massive, high-interest loans acquiesced from various financial institutions. On completion, more often than not exorbitant amounts of rent are charged on the individual stalls or stores located there-in. Due to this extractive business model, not just any Tom, Dick and Harry will be accorded the chance to trade in these units. Vetting to ensure only photogenic occupants are allowed will be done by merciless Public Relation gurus in the guise of protecting the image albeit brand name of the entire establishment. Profiling will be the order of the day as the not-so-attractive stalls will be located in the blind-spot of the mall while the more swaddling ventures will act as the totem pole for that particular shopping mall. Needless to say, your ethnic looking ‘mama mboga’ (vegetable vendor), ‘dera’ to boot, will not make the cut in lieu of having a face akin to that only a mother could love, battered by the vagaries of natural attrition and a lifetime of ceaseless toil and disappointment. Most malls have a disdain for wenches sitting cross-legged in their hallowed corridors and esteemed passageways selling agricultural produce. They would prefer having this sort of merchandise in the shelves of an anchor premium Supermarket brand that is the lifeblood of that mall in the first place. Instructive is that many of the stores in the malls around Nairobi are foreign-backed, with the bulge of their sales revenue either wired to some tax haven somewhere or exported outside our frontiers. I will give an example of the newly-minted and aptly-named Two-Rivers Mall, built on the bank of two rivulets that bestride Nairobi and Kiambu counties or in phraseology attributed to one geriatric despot from a neighbouring state, “The Water is in Nairobi but the Mall is in Kiambu!” When the emporium in question was launched around this same time in 2017 taking advantage of the tingle of Valentine’s Day, a company where I have vested interests was tapped to conduct a site survey geared at an ICT installation for one of the stores therein. I was lucky to be the personnel chosen to conduct the survey but between you and me, yours truly had input on that decision. In the foregoing and after long deliberations and executive rendezvous, I surmised that the particular investor for whom we were to work was actually from the land of Beşiktaş and Galatasaray.
Long story short, our local capital may be insufficient to run a business liquid enough to generate revenue to cover rent of up to Sh. 100,000 monthly. The tragedy of all this is the discernment of the fact that unfiltered inflow of foreign investment more often than not undercuts the local investors thereby hampering emerging economies. Today in Kenya both large and small Civil Engineering works most poignantly related to building of the mushrooming shopping malls all over are conducted by the China State Construction Engineering Company.
It is no surprise that Kenyan Civil Engineers now work as foremen, artisans, technologists while others have even abandoned the field completely. Could the attainment of Vision 2030 for Kenya driven by its autochthonous professionals merely be a pipe-dream nay political haberdashery? But I digress. Let’s now cast our gaze far and wide to the South-Eastern Asian Economic Tigers, one being Singapore. An often overstated anecdote is one of Singapore being at the same economic level as Kenya at the time of independence in 1963. Indeed, Kenya & Singapore have a shared heritage as for thousands of years even before the advent of Graeco-Roman civilization, evidence is rife that East Africa was in commerce with South-East Asia. Singapore has suffered many years of dominion first under China, then Japan when it attained military superiority over most of the orient and eventually in 1946 after the levelling of Hiroshima & Nagasaki, to Britain. Singapore as part of Malaysia was under the royal crown of the British from 1946 until when they broke from Malaysia and declared independence in 1965. There was of course the natural jostling for leadership until up stepped Lee Kuan Yew who was a capable and visionary leader whose enlightenment enabled him draw greatly from the lessons of history. His most famous and utilitarian maxim was, “No Country can ever become a major economy without first becoming an Industrial power.” The Graduate of the London School of Economics and later a First–Class Honours’ Degree Holder in Law & Political Science then went about instituting sound policy and meaningful ideology on creating and supporting all sorts of industry in that improved the standing of Singapore greatly on the World stage. He put forward egalitarian strategies that leaned heavily on meritocracy and multiculturalism to aggressively coruscate the image of Singapore as a manufacturing and industrial powerhouse to the entire globe. Today the economic prospects of Kenya & Singapore are as distinct as night is from day. People today travel from all over the world as medical tourists to access the best Medicare in Singapore. Many are the goods bearing the ‘Made in Singapore’ label even in our very own kitchen cabinets.
The proliferation of malls has taken on epidemic proportions as now we even find malls competing for the same population demographic which is farcical to put it generously. Within the Nairobi – Kiambu nexus is an area served by the divergent and nearly parallel Limuru and Kiambu Roads sliced by a transversal thoroughfare, the Northern By-pass. A small area of about 25km2 (5 x 5 Km) – which I am in no conjecture about as I have personally taken the time to walk the distance, is served by nearly 6 adjacent malls scarcely abut of each other. In Ridgeways, we have the old Nakumatt Ridgeways Mall on one side of Kiambu Road meanwhile within Wi-Fi range, across the road another investor found it prudent to open the pristine Ciata City Mall. About 2 km down the same road is Quickmart Mall, Thindigua. Reverting back to the junction and taking the Northern By-pass, you will soon find yourself marveling at the megalithic Two-Rivers Mall (Touted as the Largest Mall in East Africa by floor space). Traversing through the Two-Rivers will take you to Limuru Road and within a slug’s crawling distance (a mere 400 Metres up the road) is the Rosslyn Riviera Mall. 3 Kilometres further upstream and you are face to face with the vintage Village Market Mall. The melodrama of this scenario is in the stiff competition between the Malls all serving the same market segment meaning any new entrant will only act to cut into the competitive advantage of the next store. The Law of Diminishing Returns will sooner rather than later set in. In the situation described above where one venture is encumbered by the misfortune of being a mere half-a-kilometre from the biggest mall in the region, then there will certainly be premium tears for its prospects! A spot check of the Rosslyn Riviera mall shows 1/3 occupancy among the stores and a parking lot so empty that it virtually entreats an adjacent church to take up its space to create a façade of vibrancy. All these malls were most assuredly opened to ride the wave of the Diplomatic Corps, Foreign missions and UN staff from Gigiri, Nyari, Kasarini and Runda Estates adjunct to the rapidly growing middle-income areas of Ridgeways and Ruaka. Truth of the matter is that the probability of meeting the same families and perhaps individuals in these establishments at different times of the same weekend is high.
The convenience of malls is in finding a multiplicity of establishments under a one-stop-shop. A single mall may be home to several Supermarkets, Banking facilities & Branches, Boutiques, Beauty & cosmetic stores, Barbershops, Hair salons, Photo Studios, Art Galleries, movie theatres, shoe shops, Forex Bureaus, Tile & Carpet Centres, Furniture stores, Curio shops, Multicultural Restaurants & Trattorias, Bakeries, Confectionary stores, Cafes, Delicatessens, Food Courts, Juice parlors, Amusement parks, Gaming arcades, Pet-food store, Telecommunications & ICT service and accessory vendors, Hardware stores, a Gym & Fitness Centre, Spa, Tour & Travel operators, Real Estate & Property Development firms, Carwashes et.al. The drawback is that the other individual stores outside the mall will encounter constrained business yet they have the propensity to each employ more people cumulatively compared to just a single mall.
Another peril of mall culture is in promoting Consumerism. Shopping Malls and the culture of not just Social Media Influencers but also egotistical slay queens are a match made in heaven. The mass market will be enthused to buy something merely because it has been endorsed by some so-called Social Media personality. The walls of a few prominent malls in Nairobi are decked with celebrities of all form, shapes and sizes promoting some item of apparel, some merchandise or other. The infatuation with a mercantile mindset ultimately kills our own will to innovate. In borrowing a leaf from successful business moguls, you needn’t be preoccupied with the price point or value of your goods/business but instead the problem-solving aspect of the entire endeavour. Impressionable teenagers and young adults are prone to fritter their time hanging out in shopping malls, taking snaps for flaunting on the ‘Insta’ while building castles in the sky about getting their 15 seconds of fame and being the next online influencer which is abhorrent. Kenya is cutting itself a negative niche of becoming a dumping ground for foreign products, many retrograde as a result of emphasizing consumption and laissez-faire economic structures at the expense of production. We should be agog in the consciousness that the wallowing of Africa in the morass of poverty has actually directly yielded the glory of some foreign civilizations. Calamitously, we are losing the next generation of thinkers, creatives, innovators, solution-architects and industrialists by failing to create policy, ideology and even a deliberate campaign to promote Kenya’s industrialization. Apparatchiks at the Ministries of Tourism, Culture and Industrialization wax lyrical about slogans like ‘Buy Kenyan Build Kenya.’ However, they exert not a whimper of effort to bring to fruition this agenda. In fact, a few bureaucrats after receiving kickbacks from some foreign entity will meekly look the other way as local enterprise is petered out of existence. A myriad of foreign-backed entities that adorn our shopping malls for instance LC Waikiki apparel store, Shoprite, Carrefour inter-alia market goods from their parent nations which Kenyans can actually produce to cater to local demand. Poignant Question: Where is the market for Kenyan goods? That said, recent developments have portended that every economic situation that was not anchored on sound economic footing had its lot exacerbated by the Covid-19 viral pandemic. Malls were not spared as the lockdowns and social distancing measures meant that fewer customers walked through their doors which tapered to a trickle the direr the situation became. With the constrained revenues, I can only commiserate with those who still have to fork out these exorbitant rates for rent.
Kenya has the special distinction of having had an Economics virtuoso as a President emeritus who served between 2003 – 2013. Today to find the solution to most quandaries that rollick us economically as a nation, an important question to ask ourselves is: How would Mwai Kibaki have handled this situation?
- State Censure of new shopping malls in areas already experiencing a glut of the same – As one given to paroxysms of insight, I would ask the government to put a moratorium on the creation of new malls all the while creating a conducive environment for local investment in Industry. I’m not calling for the shutting down of existing ones or stopping the ones that will certainly be needed on new developments like the Tatu City Project & the Konza Technopolis.
- Additionally, the regime of multiple taxation on products & vital inputs just has to stop adjunct to streamlining federal taxes with the new reality that is the need of the nascent devolved units also to tax to generate revenue.
- The exorbitant licensing fees to our statutory corporations have to be abated with a keen eye on the small cottage industries being set up by budding entrepreneurs. Instructive to note, financial institutions should take the cue from what Irungu Thattiah describes in Volume 1 of his book, ‘The Failed Presidency of Uhuru Kenyatta’ of the Mwai Kibaki regime that worked primarily with lenders who prioritized the Small, Medium Enterprises and startups as cashflow among these establishments is what drives economic growth in a country like ours. The truth of the matter is that only indigenous Kenyans can ever have vested interests in building Kenya. In this regard; incentives, subsidies & an all-out regimen of protectionism should be put in to safeguard our dreams of industrialization.
- Creation of both Government-funded and Privately-backed Special Economic Zones (SEZs). Industrialization is a capital-guzzling & long-time investment. Lamentably, many banks in Kenya are so risk-averse as to deny the much-needed capital investment that is definitely the life-blood of enterprises in their infancy. Commercial banks will require serious prodding from State with regards to both policy and edicts. The archetypal characteristics of Special Economic Zones is that the enterprises started here do enjoy rebates, inter alia:
-Low Corporate Tax.
-Duty & VAT Exemption.
-Stamp Duty Exemption
-Withholding Tax Exemption.
Indeed for the Naivasha SEZ, a kilometre from the newly-minted dry port, the state has already gazetted a subsidized power tariff of as low as US 5 ¢ per Kilowatt-hour consumed according to what I surmised from the CEO of the SEZA – The Special Economic Zones Authority, Mr. Meshack Kimeu. As I deduced from the Business News on Citizen TV on the 18th February 2021, the economic regulations of SEZs tend to be conducive so as to attract Foreign Direct Investment (FDI) from outside our boundaries.
And this is not an alien concept as the same is already at play in Rwanda & Ethiopia.
Some of the earmarked premises for new shopping malls in areas already having a high density should be converted into SEZs, Industrial parks and value-addition units as these invariably employ infinitely more people than malls anyways.
Kenya today finds herself at a cul-de-sac. Do we continue allowing for the unregulated mushrooming of malls or do we engage in protectionism for retail stores and individual businesses to widen our taxation revenue base? Do we place our lot with mallification or do we go all out into Industrialization? I may not be a thoroughbred Economist but pragmatism dictates that barriers to entry should now be erected pertinent to curbing the over-enthusiastic slide into the mall culture. We need to build the resilience of multiple ventures to enhance the diversification of the offerings not just on the commercial front but also at the Kenyan marketplace and stem the tide of consumerism.