Kenyans’ obsession with owning property doesn’t always lead to a handsome reward

Once upon a time a scorpion wanted to cross a brook.

On the bank he saw a frog and asked if the frog would give him a ride to the other side.

“Oh no,” said the frog, “If I carry you on my back you will sting me.”

“But why would I sting you when we would both surely perish,” replied the scorpion.

The frog eventually conceded that the scorpion had a point, and agreed to the request.

Half way across, the scorpion stung the frog, and they both began to drown.

Kenyan characteristic

“But why did you break your word and sting me, knowing it would be certain death for us both?” cried the frog. “Because it is in my nature,” said the scorpion.

I’m not sure if it is a peculiarly Kenyan characteristic, but we are obsessed, nay, possessed with property ownership.

For many of us, owning the ubiquitous plot, house or apartment is commensurate with success, achievement and self-actualisation.

But how often do we take a step back and ask ourselves if these investments would be better off liquidated and the funds placed with the Central Bank of Kenya in Government Securities?

Why you ask?

The Government as a borrower is perceived in financial circles as the safest debtor to have.

Serikali always pays. As a result, the interest paid on government debt paper is viewed as the risk free rate of return since the government as a borrower is deemed to be a guaranteed payer of its debts.

Consequently, if you ever enter into a heated debate with your banker about the interest rate they are charging you on your business loan, they will typically look you dead in the eye and start by saying: “Well, let’s unpack your interest rate of 18 per cent. Seven per cent is the interest rate for the five year Treasury bond which is the risk free rate and our opportunity cost. Add to that five per cent which is the credit risk of lending to you, three per cent operational risk for the bank and a small, negligible, tiny, inconsequential three per cent profit margin and you arrive at your 18 per cent per annum rate.”