Category Archives: inflation trend in Kenya

Urban Inflation Index: March 2013

Gift from Uganda during the Kenya Supreme Court hearings
March 2013 saw the highly anticipated Kenya general election. There was a lot of uncertainty in the country, and beyond on what  impact it would have on the regional economies.

There were some familiar and ominous signs. The heavy investment the government had made in electronic vote systems failed, and it was a close race with a disputed result. However, unlike in 2008, the dispute was settled in the Kenya Supreme Court, and not in the streets. 

Ahead of all this, some Nairobians engaged in some extra shopping or stocking up which some called it panic shopping – but this was actually as prudent as shopping ahead of an approaching hurricane or storm, which may veer off at the last minute.
On to the index that compares prices to 3 months ago and a year ago.

Gotten Cheaper

N/A

About the Same


Staple Food: A 2kg pack of (Unga) Maize flour, which is used to make Ugali that is eaten by a majority of Kenyans daily, costs Kshs. 105, which is down from 107 in December, but up from 97 a year ago

Other food item: A 2 kg. pack of Mumias sugar pack is Kshs 250, same as three months ago. It was 245 a year ago.

Communications: Telephone call and data rates are largely unchanged, and there have been few new mobile promotions,  with some items offered free like access to Facebook (Yu), Wikipedia (Orange), money transfer (airtel).

Fuel: Petrol prices in March were Kshs 117.6 per litre (~$6.12 per gallon) slightly higher compared to Kshs. 111.6 per litre a year ago and 112.6  last December.

Utilities/Electricity:  A pre-paid token purchase of Kshs. 500 purchase from the Kenya Power & Lighting Company (KPLC) gets about  33 units, compared to 31 a year ago. However the units are only a fraction of the bill with 4/5 of that Kshs. 500 payment going to pay for power generation debts, forex & fuel charges and even inflation. It’s odd that even as heavy rains cause floods around the country, and presumably fill hydro dams,  KPLC still procures private thermal power and bills consumers for the costs.

Foreign Exchange: 1 US$ equals Kshs. 85.63 compared to Kshs. 86 three months ago and Kshs. 83 a year ago. The shilling did not dip much ahead of the election as many had expected.

More Expensive

 
Beer/Entertainment: A bottle of Tusker beer is Kshs 200 ($2.35) (at a local pub) up  from Kshs 180 where it has been for quite a while. The price increase was driven by local brew giant  East African Breweries that’s got some debt issues.

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 Food: A 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.

Nairobi’s Future Roads

Last month at the opening of the next phase of the Office Park complex,  Engineer Arasa of the Kenya Ministry of Roads gave a talk on the future of roads in Nairobi – whose construction this year will amount to  Kshs. 153 billion (~$1.8 billion) and reach an eventual total spend of Kshs. 2 trillion over the next 15 years. 

 

Kileleshwa road with a cycle path

The biggest one has been the Nairobi-Thika Highway, financed by the African Development Bank but other roads  are the Eastern bypass (connecting Mombasa Rd to Thika Rd)  and the Northern bypass (connecting Thika Rd to the Nakuru Highway)  which are being financed by the Chinese Government. There is also the Southern bypass which is a 28KM dual carriageway road linking Mombasa Road to Kikuyu, that will be constructed at a cost of Kshs. 1.1 billion and is jointly financed by the Kenya and Chinese governments. It will have  3 flyovers (including at community, Thogoto and Dagoretti Roads) and is expected to be complete by July 2015.

There are also the missing link roads in the west of Nairobi, being financed by the Japanese Government that will connect Ngong Rd to James Gichuru, and Gitanga Rd to Waiyaki Way – both though Kileleshwa –  and both are expected to be completed in March 2013. (Note the bulldozers at the Yaya parking now) 

Others include upgrading Langata Rd to dual carriageway at Kshs 2.6 billion (with an underpass at Bomas junction) and, and there are also the Upper Hill Roads being done in two phases (Kshs 2 billion, financed by GoK), starting with the widening of Elgon, Kilimanjaro, Upper Hill, and Bunyala Roads to dual carriageway  by May 2014.

Bomas junction in the future

 

Other planned roads in the future include converting Adams Arcade – Karen – Ngong – Bomas to four lanes (with flyovers at Dagoretti Corner and Karen shopping centre)  – between 2013 – 2016 to be financed by the Chinese Govt at an estimated cost of Kshs 15 billion. Another will convert Outer Ring Rd to dual carriageway (at a cost of Kshs 6 billion, of which 3.5 billion has been sourced from ADB).

Some interesting point in the talk were:

  • Though stats show that 47% of Nairobians walk to work, the Roads Ministry hopes the new roads will address several challenges such as unregulated public transportation, encroachment on road reserves, (past) low investment in roads, inefficient junctions and the already present traffic. They also know that more & better roads may result in more traffic e.g. Thika Road which used to handle 70,000 vehicles per day, will have 100,000 per day by the end of the year.
  • Thika Road will be a toll road.
  • Another missing link road may include a flyover at the City Mortuary junction.

Urban Inflation Index: June 2012

The budget speech was read earlier this month and while the big news was about the tax authorities now targeting landlords (who have always been required to pay tax, but don’t), there’s also a draft Value Added Tax (VAT) bill that’s expected to lead to some price increases including of some food items. Here’s a  recap of the  2012 Kenya Budget Highlights (PDF) by financial firm Deloitte.

On to the index – comparing changes to March 2012, a year ago and three years ago.

Gotten Cheaper
 
Other food item: Sugar: A 2 kg. Mumias Sugar pack which is Kshs. 237, down from Kshs. 245 in March . It was 190 a year ago and 175 three years ago.

About the Same 

Foreign Exchange: 1 US$ equals Kshs. 84.25 compared to 83 in March. Many people expect the shilling will invariably drop again due to the current account deficit the country has. Last June, the dollar exchanged at 89 and three years ago it was at 78.

Communications: Cell phone rates are relatively unchanged with mobile operators just trying to get more usage from customers. This month Safaricom sent text messages encouraging more use of facebook, twitter,  and Buni.com  & imdb.com (where you can watch TV & movie clips ).

Beer/Entertainment: A bottle of Tusker beer is Kshs 180 ($2.2) (at a local pub), unchanged from three months ago. There have been no price wars despite the link new beer entrants on the market, and one newspaper wrote last week that, in order to  get more tax from beer, the government is going to adjust beer prices every three months.
Utilities:

Pre-paid electricity is about Kshs 2,500 per month which is unchanged from the last review.

LPG: Cooking gas supplies seem to have resumed stability for now, but at a price of about Kshs. 3,000 ($37)
   
More Expensive
 

Fuel: Petrol prices in Nairobi are Kshs 117.6 per litre (~$6.25 per gallon) compared to 111.6 in March and 114.9 in June. Three years ago, the price was 40% cheaper at Kshs 72.5 per litre. Niti Bhan advises that it’s important to also track the price of kerosene as that has a significant bearing on millions of households compared to petrol. Read her blog here and an interesting column that showed that cooking gas  LPG cooking gas is cheaper than kerosene (but requires a large cash investment, which is out of reach for many) 
Staple Food: A 2kg pack of (Unga) Maize flour, which is used to make Ugali that is eaten by a majority of Kenyans daily, costs Ks118, up from Kshs. 97  in March 2012. A year ago it was Kshs 130 and three years ago it was 92 per bag.

New African Consumer

Today in Nairobi McKinsey & Co, and TBWA released a report on The New African Consumer. It’s one that trends towards rapid urban driven growth with people having with more discretionary spending power,  and one not based on resources. The top states with the highest consumption per capita, and accounting for 75% of all of Africa are SA Egypt, Nigeria, Morocco, Algeria, Sudan, Tunisia, Libya, Ethiopia and Kenya. Crucially most of the growth (80%) will come from people who earn more than $10,000 per month.

It’s a useful road map for companies looking to understand future trends in Africa and offer lessons such as be online (Africa had more Google ad clicks than Western Europe), brands & quality matter, distribution is king, data is scarce, respect country differences & act local, prepare for talent shortage, and expect to iterate (have dynamic execution).

Konza station

The report should lead to a bigger debate, one based on future sustainable economic trends. The same report points out that more babies were born in  Nigeria than all of western Europe. So more studies need to be done in that regards to answer where will the increased African population work? Where will they learn and get medical care? Who will build houses for them? How will they commute? Who will grow food for them as more will reside in large urban centres? Will they be able to cross borders in such of improvement in any of these challenges? That’s the next set of questions & opportunities to balance out with the insightful trends in this report.