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Urban Inflation Index December 2012

Five years after the last election that derailed Kenya’s image as stable economic regional powerhouse, it’s political season again with just two months to the next general election. How does the cost of living compare to a year ago and three years ago? 
Gotten cheaper
None really
About the same 
Fuel: A litre of petrol is Kshs 112.6  (~$5.96/gallon) – compared to Kshs. 124 a year ago and 83.5 three years ago. The government controlled price of petrol (as well as Diesel at 105.7 and kerosene at  86.4) somewhat  mirrors the international price of  murban crude oil ($111.8 in December 2011, and $76.1 in December 2009)  rightly shifting the discussion on price controls  to other areas like the high price of cargo transport within Kenya and the East Africa region (about the same price as shipping from Asia or Europe) and the impact on local good prices.
Beer/Entertainment: A bottle of Tusker beer is Kshs 180 (~$2.10)  The price of beer is more expensive than 140 3 years ago, but it seems to have stabilized with the influx of beer and other alcoholic companies capitalizing on the affluence’ or consumption habits of urban Africans and  companies like Martini, Jameson, Heineken, Smirnoff, Castle and Pepsi bottling in Kenya, are now doing their own marketing, distribution and extravagant event promotions. 
Martini mixing session  at the Tribe Hotel
Staple FoodA 2kg pack of Maize flour, which is used to make Ugali that is eaten by a majority of Kenyans daily costs Kshs. 107. This compares to 113 a year ago and 83, three years ago. 
Other food item: A 2 kg. pack of Mumias sugar pack is Kshs 250. This compares to Kshs. 375 a year ago and Kshs. 200 three years ago. It’s unclear if the COMESA exemption for Kenya will continue, which limits the amount of regional sugar that can be imported at lower tax rates, but the country has attracted interest and an investment from a large Mauritius producer into a private sugar company at Kwale.
Communications: These are largely unchanged though there have been modest increases in the costs of mobile money transfers (Safaricom’s M-Pesa), internet data (Orange) and call rates (Airtel, Essar) . 
At the release of Safaricom’s half year results  about a month ago the company Chairman declared that there had been a recovery (end) from the damaging price wars as they recorded an increase in their half year pre-tax profits of 113% to about $135 million with M-Pesa now accounting for half their non-voice revenue. However , the Kenya government now seems intent on latching an excise tax on mobile money transfer transactions – bumping up that cost for users. 
More expensive

Foreign Exchange: 1 US$ equals Kshs. 86 compared to 84 a year ago and 75.6 three years ago. This is expected to dip even further given Kenya’s low exports and growing debt and deficits with new government structure. 
Outlook: 

It’s likely that by the next quarterly review, Kenya will have had a successful general election with a clear winner or be facing international sanctions for electing accused war criminals or have a close disputed election that may lead the country to disintegrate like in 2008 or be preparing for a second run-off round of Presidential elections. Regardless of these  scenarios, the next quarter will also see the country emerge with a larger, more expensive government with new levels  of administration and devolved authorities – as a result of the constitution adopted in 2010.

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