Category Archives: inflation trend in Kenya

Urban Inflation Index March 2012

2012 was expected to be an election year, which for Kenya are unfortunately marked by low economic growth, but this weekend, the electoral authority made an announcement that the next general elections would be held in March 2013.

A quotes from the above referenced post by Wolfgang Fengler, the World Bank’s Lead Economist for the region reads;

Since 1980, Kenya’s economy grew by an average of 3.4 percent. However, in election years, the average growth rate was only 2.4 percent, and growth was even below 2 percent in four of the election years. Equally challenging has been the management of post-election dynamics. Kenya achieved a modest 2.7 percent in post-election years, and three of the last six elections were followed by low-growth, especially in 2008, when post-election violence disrupted the country’s achievements of previous years.

It’s also been incredibly hot & dry in Nairobi and we all hope that the upcoming March/April rains will restore some supply balance for agriculture (food prices) and energy (hydro electricity costs)

On to the index comparing prices of basic urban commodities to three months ago, a year ago and even four years ago when the country was still dealing with the disruptive after-effects of the controversial December 2007 election.

Gotten Cheaper

Fuel: Petrol prices were reduced again last week to Kshs. 111.6 per litre (~$6.12/gallon) for Nairobi, down from Kshs 124 in December 2011. However a year ago the price was 98.8 (when the price control regime had just been introduced) and four years ago, after the election, a litre of petrol cost Kshs 87.9.

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. 97 down from Kshs 113 in December 2011. However last March it was Kshs. 80 and four years ago (Feb. 2008) it cost Kshs 52.

Other food item: Sugar: A 2 kg. Mumias Sugar pack which was Kshs. 375 in December is now Kshs 245. However a year ago it was Kshs 195, and other commodities normally bought alongside it (bread & milk) have had steady price rises this year.

Foreign Exchange: 1 US$ equals Kshs. 83 compared to 84 in December 2011. This is exactly where it was last March 2011 before the Kenya shillings began a (now controversial) slide to Kshs 107 against the dollar. In February 2008, the dollar was exchanged at Kshs 70.7.
About the Same

Communications: Telephone call and data rates are largely unchanged, but Safaricom announced new rates for m-pesa including a slight increase for some transfers, but they also reduced the minimum amount that can be sent, opening the way to micro-payments. Meanwhile Airtel, who have set the low call regime over the last two years, appear to have reached an about-turn moment with their Chairman calling review of that strategy.

Utilities: Pre-paid electricity is about Kshs 2,500 per month which is unchanged from the last review. I finally got a coherent explanation from a @KenyaPower employee on how you get hit with extra taxes if you buy more than a certain amount of Kwh units.

LPG: Cooking gas supplies seem to have resumed stability for now, but at a price of about Kshs. 3,000 ($37) for a 13kg cylinder, up from less than Kshs. 2,500 before. Personally, I ditched my total LPG cylinder for a Kenol one as Total petrol stations never seem to stock enough for customers.

Beer/Entertainment: A bottle of Tusker beer is Kshs 180 ($2.2) (at a local pub), unchanged from three months ago..but it was Kshs 120 in 2008.

More Expensive
N/A

Generally prices have come down, but life is more expensive than what it was four years ago when the last election was concluded. However there could be some slight relief in slight for urbanites as the Kenya Cabinet approved the VAT bill 2012 which removed VAT from maize, wheat flour, milk, bread and medical supplies.

Urban Inflation Index: December 2011

What a year it has been, mostly not for the better with petrol and dollar prices setting records, and accompanied by other shortages. The Kenya government started a military anti-terror expedition in Somalia, and as war expenses can drastically alter government spending budgets, it was recently decided to bring the mission to the United Nations and have them offset the war cost to some extent.

On to the index comparing prices to three three months ago and year ago!

Gotten Cheaper:
Foreign Exchange: 1 US$ equals Kshs. 84 compared to Kshs 95.6 three months ago and 80.5 a year ago. That snapshot does not capture the roller coaster quarter the shillings has hard, dropping to an unprecedented level of Kshs. 107 to the dollar (and being ranked as one of the worst performing currencies in the world) before the Government instituted an interest rate hike and cut back liquidity to the banking sector. While the shilling was in free fall, and few could explain why, a World Bank blog post revealed that Kenya’s exports were (at the time) not enough to meet the country’s fuel bill, (Three years ago it cost Kshs 79 /$)

Staple Food: Maize flour, which is used to make Ugali that is eaten by a majority of Kenyans daily. A 2kg pack costs Kshs. 113, down from a record high of 119 in September, but still almost double the Ksh.s 69 cost in December 2010 (Three years ago it cost Kshs 97)

Other food item: Sugar : A 2 kg. Mumias pack which was Kshs. 385 in September is now 375, but still almost double the Kshs 195 of last December. In other news Kenya seems to have applied for another extension of a COMESA import cap, denying consumers the option of cheaper sugar imports to protect the largely uncompetitive local producers who have trouble ensuring adequate supply of sugar into supermarkets.

About the same:
Communications: These are largely unchanged though Safaricom announced a modest price increase by of voice call tariffs (which Orange are itching to follow) and @Kahenya says that corporate m-pesa tariffs have also been increased.

Beer/Entertainment: A bottle of Tusker beer is Kshs 180 ($2) (at a local pub) , unchanged from three months ago. The alcohol sector has a lot of competition now with the new brands being launched (Miller Genuine Draft) and others revived/getting new marketing pushes (Redds, White Cap Light, Heineken, Windhoek, Sierra) in a realignment of brands and owners between East African Breweries (EABL) and SAB Miller.

More Expensive
Fuel: A litre of petrol was Kshs. 124 up from 117.7 in September and 94.3 last December. Two days ago, in reaction to threats of transport operators to go on strike during Christmas week, the Energy Regulatory Commission (ERC) announced the first ever price reduction since the introduction of the price control regime – and for Nairobi the cost of petrol will be Kshs 119 (~$6.2 per gallon) till January 15 2012. (Three years ago it cost Kshs 92.7)

Utilities: Pre-paid electricity is about Kshs 2,500 per month (up from the regular purchases totaling 2,000). There are rolling blackouts as seen in the ads run by the Kenya Power company, spreading the shortfall across the country.

LPG – Cooking gas has been in short supply in different parts of the country, with many sellers in Nairobi not having any stock to sell for weeks. Those that do are selling them at increased prices – e.g. cylinders that used to costs Kshs 2,500 for 13KG, are selling at between Kshs 3,200 – 5,000 if you can find them.

First World Problems in a Third World Country

Ory (@kenyanpundit) reigned some of us with a recent comment that people are complaining on twitter about a lack of parking at the Junction Mall in Nairobi, while there are people near there who don’t have enough food to eat.

I realized that it’s something that happens a lot. Today I spent the whole morning searching for cooking gas (LPG) which has been in short supply in Nairobi for about a month. Is that a superficial or a genuine subject worth ranting about?

Other common complaints on twitter include:
– Not having tap water or being caught in darkness when the electricity distributed by Kenya Power goes off (including both at Jomo Kenyatta International Airport – JKIA)
– MPesa downtime which are almost a weekly routine with Safaricom
– Bad service issues at the bank or with an internet service provider
– A delayed Kenya Airways flight
– Newly done roads that develop potholes within a few weeks
– Companies that don’t respond to email
– Satellite TV that cuts off when it starts raining
– The increasingly bad traffic (and bad driving styles) around Nairobi

These are hardly life altering situations to tweet or complain about – and seem like trivial first world problems in a third world country. But they are unnecessary inconveniences for busy people with plans and appointments who have become accustomed to things like having regular electricity & internet connectivity, the ability to send money by phone at any time to any corner of the country, the convenience of boarding a flight to Mombasa and arriving in time for a court case or business appointment & return to Nairobi the same day, not having to pay a bribe or tip to get good customer service from a government or private office etc.

They have expectations of service that, when not met cause a un-anticipated re-deployment of resources usually precious time e.g. six hours driving around town, burning (sometimes scarce) petrol in search of (LPG) cooking gas or having to call in a previous favour to accomplish a routine matter.

The sad thing about this is that (at least in Kenya) politics is the missing link, and people here become accustomed to have low expectations about political class (Sonko) and their decision making. This is a fatal assumption as the 2007 election period showed and as we grapple with unnecessary & expensive challenges of infrastructure, distribution, under-employment, inflation, corruption, taxation, the solutions require the adherence of the political class to leave the third world

Urban Inflation Index: September 2011

One year after the euphoria of a new constitution, the direction of the economy is uncertain as seen in the weakening Kenya shilling, tangles in implementation of the constitution, and rising food prices. It has been a year of some price controls in the fuel, and possibly in the food sector whose parliamentary price control bill was signed into law last week by the President.

Comparing prices to six months ago and last year. On to the index

Gotten Cheaper: Nothing really.

About the same:

Communication: All Kenya’s mobile phone companies have call rates of about Kshs 3 shillings ($0.03) per minute to call across networks. It is unclear what will happen with call rates, as the smallest company in the market, Yu, launched free daytime phone calls, Airtel Kenya lost a CEO, and Safaricom has indicated that they may raise their call rates, as has happened in Uganda with MTN . The real battle is in data, where prices have not really dropped but companies are offering more speeds for less. The market here is divided between the companies with 3G (Orange & Safaricom) who compete on speed, and those without 3G(Airtel & Yu) who offer cheap internet rates of about Kshs 50 (~$0.5) per day for unlimited use.

Another communication developments that, in a way, lower the cost of business include the launch last week at G-Kenya of GKBO, which encompasses free website creation tool, domain registration, and site hosting for small companies by Google in Kenya.

Utilities: The bill on pre-paid electricity is still at about Kshs 2,000 ($21) per month, and getting about 30 – 35 units per buy via M-Pesa. However that is expected to go up after notice was issued for rates to go up 22% per kwh unit. So what alternatives are there? In a somewhat timely move, Samsung launched the NC215, a solar powered netbook laptop last week. It gives 1 hour of power for every 2 hours of charge in the sun, has a 15-hour battery life, and is able to charge other devices by USB even when it is off.

Also got a gift of a solar phone charger (T2126 Hemera from Hirsch) that works quite well; it takes about 12 hours to charge in the Sun or 2 hours via USB, has a flash light and can charge a variety of phone models.

But when you look at the rapid advances in laptop batteries and cell phone batteries over the lasts decade, you get the feeling that there has been a lag in the pace of solar devices, and that more solar based solutions and advances should be emphasized.

More Expensive

Fuel: A litre of petrol fuel, which is regulated by the Government, now costs 117.75 (~$5.6 per gallon) in Nairobi. Regulated fuel has proven to be more expensive than unregulated fuel, and while this can be attributed to the weaker shilling and fluctuating oil prices, the formula used to arrive at the price remains vague, and the limit on margins (stipulated buying and selling price of petrol, diesel, kerosene in each town) appears to have hurt small oil industry companies, more than large ones. However, among the listed companies, Kenol appears to have weathered the regulatory regime better than Total, by having diverse operations in other countries in East and Central Africa that remain unregulated.

Staple Food: Maize flour, which is used to make Ugali that is eaten by a majority of Kenyans daily. A 2kg bag which cost Kshs. 80 six months ago, and Kshs 65 a year ago, is now Kshs 119, the highest it has been in the short history of this index.

Other food item: Sugar : A 2 kg. Mumias pack which has hovered at about Kshs 200 for the last years, now costs Kshs. 385 (90% more than last year) and . The sugar sector has really gone full circle causing many to questions its relevance, recurring shortages shortage (why all factories close at the same month for maintenance), why sugar is grown in a food producing area and how many items we can consume without having to use sugar as a sweetener e.g. tea without sugar, or use of honey as a substitute.

Foreign Exchange: 1 US$ equals Kshs 95.6 compared (now 96.8) to Kshs 80.8 a year ago (and 83 in June 2011) – a loss of almost 20% in a year. It’s unclear of this has been a concern to the Central Bank which has made other confusing policy moves as related to interest rates at a time of mounting government debt and their laxity has enabled banks to spot and take advantage of an arbitrage opportunities to trade with government money.

Beer/Entertainment: A bottle of Tusker beer is Kshs 180 ($1.9) (at a local pub) a slight increase from compared to Kshs. 170 a year ago. However beer has become out of reach for many poorer Kenyan who have resorted to drinking unsafe local brews, which in some unfortunate cases have resulted in blindness or even death.

Urban Inflation Index: June 2011

Comparing changes to three months ago, last year and June 2009 in an interesting quarter with price swings in food, currencies and fuel.

Less Expensive:

Nothing really that’s being measured

About the Same:

Communications: Cell phone rates are still low, and while Safaricom appear to have survived the Airtel-initiated price war, recording a marginal full-year profit drop of 12% down to ~$220 million on increased revenue of 12% to ~$1.1 billion, the government is getting anxious about the price wars and impact on mobile companies and tax revenue.

Last week, Kenya’s President seemed to direct for an end to the mobile price wars in Kenya. Also Essar’s Yu Mobile has denied they are considering an exit from the Kenyan market while Safaricom and France Telkom (Orange) are about to sign a tower sharing agreement.

More Reading – The Economist has an interesting article on the India mobile phone market which may explain the vision the direction that Bharti Airtel is taking in Africa.

Other food item: Sugar (2 kg. Mumias pack) is at Kshs 190; a year ago it was 200, and the year before was 175. It will likely stay the same until the COMESA sugar import ceiling ends in 2012.

More Expensive:

Fuel: A Litre of petrol fuel is now Kshs 114.93, which is 26% higher than a year ago and 58% higher than two years ago. The fuel sector is characterized by accusations and allegations every other week about favouritism, manipulation of prices & shipments, corruption, capacity etc. – all while the price continues to rise.

Staple Food: A 2 kg. Unga pack (maize flour), which is used to make Ugali that is eaten by a majority of Kenyans daily today costs Kshs. 130 at Uchumi. This is 83% higher than the 71 of a year ago – and two years ago it was 92, the year before it was 73. The price fluctuations may have some artificial influence by maize farmers holding on to their crop in the hope of a better price from the Government and millers. Shrugging this off, the Government today waived tax on maize that will be imported between June and December 2011 to avert a food disaster in the country.

Foreign Exchange: 1 US$ equals Kshs. 89.37 compared to 80.6 last year and 77.9, two years ago. It is reported to have not seen such lows since 1994 when Goldenberg scandal exploded and shook the Kenyan economy. However, while focus is on the US dollar (which this month exchanges for less than a Canadian dollar) other currencies are also at levels not seen in years – like the Sterling Pound at 146, Euro at 129, and South Africa Rand at 13.

Utilities: Electricity: Many customers of KPLC have been converted to pre paid electricity and the only to get a breakdown of costs is by buying a token at a Kenya Power office. It’s much more convenient to re-load or top up electricity by mobile phone payments (M-pesa or Airtel money) and a payment of Kshs. 500 obtains 29 units of electricity – compared to 51 units for the same amount two months ago, – implying that electricity costs 43% more!
Meanwhile the city’s other major utility provider, the Nairobi Water Company also plans to convert some of its customers to a pre-paid billing system to stem illegal connections and improve revenue collection.

Entertainment: A bottle of Tusker beer (at a local pub) costs Kshs. 140 ($1.55). However, the recommended retail price of a Tusker bottle went up to Kshs. 95 in April (after last being hiked by 38% to Kshs. 90 after the June 2010 budget speech) and beers currently sell for between Kshs. 150 – 220 in most Nairobi pubs.

Tusker was re-launched in a new bottle in April, but that rebrand has received mixed reviews with some patrons calling the bottle a Probox after a Toyota station wagon that has a similar boxy shape.

EABL is also in the process of severing ties with SAB Miller a rival South African brewer, after many years of a cease fire & cross ownership – and they are expected to soon renew their beer battles in both Kenya and Tanzania.