Category Archives: inflation trend in Kenya

Prepaid Electricity in Kenya

Kenya Power & Lighting Company (KPLC), the national distributor of electricity is converting customers in many parts of the country from post-use billing and payment to a (prepaid) pre-usage payment.

One KPLC challenge for many years has been revenue collection, but that has changed since signed they signed up banks and supermarkets like Uchumi (some at a cost of ~ Kshs 50 per bill paid) and other outlets where customers can pay.

Changes

Payment: You can buy electricity tokens from some KPLC offices, but it is easier to pay by mobile money Safaricom’s ‘M-Pesa’ or ‘Airtel Money’ zap. You load money into M-Pesa, send it to KPLC, and in about an hour you get a 20 21-digit number that you punch into the meter for an immediate update of electricity credits.

Prepaid electricity unit installation.

Orientation: None at all! One day you come home and find workmen in the corridor doing a lot of re-wiring (at first I thought the landlord was installing fibre to the block, but it turned out to be KPLC’s sub-contractors) and the next day, you come home and find the watchman with a booklet for you to read and study on the pre-pay system! The booklet has been quite useful, but it omitted a process where you have to call KPLC to link your old meter and new meter numbers – in order to activate the new meter.

Cost: None to the customer, and the brochures say the cost of usage should be the same, and so far I’m on par at about Kshs 500 ($6) per week.

The meter also has some commands that you can use to check out your usage at any given time (a fluctuating 80W) and usage since installation – 100Kwh in three weeks. What I miss (for tracking inflation is a breakdown of usage, fuel surcharges and other taxes that form anywhere from 1/3 to 1/2 of every bill, and

[edit] cost of collection which may vary from Airtel to Safaricom) i.e it cost Kshs 20 to pay by M-Pesa
In order to pay by M-Pesa, you have to know your meter number. (so save it in your phone)
The cost of electricity has gone up by ~45% in a month i.e in mid-April a ‘unit’ of electricity cost Kshs 9.8 and in mid-May, it’s Kshs 14.2.

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Urban Inflation Index: March 2011

Comparing changes in the three months ago since December 2010 and just for memories sake, inflation last year and two years ago in March 2009.

2011 has been an interesting year, with Middle East & north Africa instability, rain shortfall expected, noisy politicking in the country, but still banks have been posting record profits, IPO’s are over-subscribed, and companies continue with regional expansion plans to conquer Eastern and Central Africa.

changes in the last three months

Gotten cheaper

Communications: While the cost of calling has stabilized at ~Kshs 3 ($0.036 per minute) it remains to be seen if this is sustainable for all the mobile companies in the long run. Quality is suffering with issues like erratic internet service, busy lies, undelivered SMS, m-pesa downtime etc.

Airtel continues to outsource, Yu chugs along with low price and no flash, Orange launch new unique products (iko pesa with Equity bank) but does not push it through with coherent marketing muscle, as does Airtel. Market leader Safaricom has lost a little market share, and has the additional weight of being the only listed mobile operator with few happy shareholders and friend & foe are either studying or chipping away at its M-pesa whose spectacular success has not been replicated by the company (Vodafone) or in any other country.

SMS costs have come down from Kshs 3 to Kshs 1 finally, and the area of interest is mobile data in urban area where mobiles are taking up ground that few ISP’s have been able to cover. For comparison, for Kshs 250 ($3) you get 80MB on Safaricom, 200MB on Orange and 300MB on Airtel.

Unchanged

Utilities: At Kshs 1,750 ($21), last month’s electricity bill from KPLC is almost the same as 1,800 three months ago, and two years ago, respectively, while it was 1700 in March 2010. This is however expected to go up later this year, with rain shortfalls projected and the country mainly dependent on hydro electric power generation.

Other food item: 2 Kg Mumias Sugar is Kshs 195, unchanged over the last year, but which was at 165 two years ago. However bread and milk are up in urban areas.

More Expensive

Staple Food: Maize flour which is used to make Ugali that is eaten by a majority of Kenyans daily. A 2 kg. Unga pack at Uchumi today costs Kshs. 80 – and while this is 23% higher than Kshs 65 three months ago, many have forgotten that a year ago it was 84 and two years ago Unga cost 96 shillings!

Fuel: A litre of petrol is currently Kshs 98.8 [~$5.40] (up 15%) compared to 84.9 last March and two years ago it was Kshs 75 shillings per liter. It’s been three months now since price control regime was introduced and petrol has crept up from 94 to 95.8 and now 98, with a return to the above 100 mark expected in the next review, but by which time the formula may be discarded. Meanwhile, Kenol and the Energy Ministry have toned down their war of words, but National Oil Corporation of Kenya cannot escape the news with questions of its capacity to undertake increased petrol responsibilities that the Government keeps allocating to them.

Foreign Exchange: The US dollar trading at Kshs 83.0, and news reports that this is a 17 year low for the Kenya shilling (CBK site goes back about seven years and show a range of 61 to 83). This compares to December when it was Kshs 80.5 and a year ago at 76.6, but two years ago it was at Kshs 80.07.

Entertainment: Tusker beer is Kshs 170 ($2) at the local pub – up from last year’s 150. The Mutuho Law is likely to blame for putting a damper on bar profitability, by setting drinking hours from 5 to 11 PM on weekdays and (starting at 2PM on weekends) and there are creative ways around this as observed by more sales of alcohol at supermarkets who can sell it from 10AM

Rent: Is up 25% from this year, after the last increase which was two years ago of 40%, however the landlord has not made any investment in the property or changed the service to justify these, but has probably done that elsewhere.

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Making Agriculture Cool

Kenya is traditionally been perceived as an agricultural country, with and a lot of government initiatives are focused on rural areas and food production. Yet trends show that Kenyan populations is getting more urban, and younger, as shown in the 2009 cencus. John Githongo wrote in this article – we have to rethink what Kenya is. Three-quarters of Kenyans are under 30 and want to live in towns, but we are ruled by farmers and trapped by land disputes.

Land is an emotive complex issue that underlies agriculture and food production. As seen with the recent Tatu City, a $3 billion new city project, to which Maina T asks about the wisdom of using the most arable land in Kenya for buildings, on red soil which is more productive food wise.

The urban population does not grow food, has little interest in agriculture. They want to make live in cities (like Nairobi which generates over ½ the country’s GDP) and build applications for mobile phones that do A, B, C, D etc. One way to increase interest is to agriculture relevant to a young population, farmers employing new techniques new crops, not just traditional maize and beans.

In the technology space, there has been a shift, deliberate or not towards rewarding innovations and projects in the field of agriculture including:

– Apps for Africa was won by i-cow a voice-based mobile phone application that helps dairy farmers manage breeding and feeding of cows leading to better yields.
– The Chase Bank /Enablis Business Plan competition in which agri-business proposals overtook ICT both in the number of entries received and list of top 100 picked. Of these 35% of the entries submitted came from Nairobi and 30# were from people aged 18 – 25 years.
– Finally M-farm, an information resource for farmers scooped the top prize in last week’s IPO48 entrepreneur contest.

The best way to make agriculture cool is for it to make money, but by also making agriculture relevant for the youth – using best practices, new technology, and high profits (tea sector), Kenya won’t go the way of Nigeria – a country capable of agricultural production but which almost all urban foods are imported, not from the rural side, but from other countries

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Urban Inflation Index September 2010

Tracking changes from three months ago – in June and one year ago

Quarterly Review – Young population: The results of the Kenya’s national census done in 2009 were released last month and the results are still being interpreted. Politicians obsess on tribal numbers, economists caution on birth rates, while businesses can look to demographics like the number of mobile phone owners, the number of youth in the country, along with other intriguing findings such as the population of Kibera (largest slum in Africa) being 1/3 of previous claims, and remote Mandera is the 4th most populated constituency in Kenya (after Embakasi, Kasarani and Juja which are all in Nairobi environs). It confirms other findings like the Safaricom 2010 A/R which notes that “…with the North Eastern
region’s economy growing by over 200%, owing to improved security & enhanced economic activities, the area is no longer ‘served’ from Nairobi.”

Price control: A price control bill was rejected by the President who referred it back to Parliament for amendments.

Costly Health Insurance: The National Hospital Insurance Fund set in motion a plan to roll out a rather expensive health plan by increasing mandatory deductions from 320 per month to up to Kshs 2,000 ($25) for anyone earning over 100,000 ($1,200) per month. The matter has been challenged in court and the agency has been accused of not consulting widely with other health sector players and employers in a bid to revive earlier health bill

On to the index

Gotten Cheaper – Staple Food: Maize flour, which is used to make Ugali that is eaten by a majority of Kenyans daily. A 2 kg. Unga pack at Uchumi today costs Kshs 65 compared to Kshs. 71 three months ago and 84 a year ago.

Communications: All Kenya’s mobile phone companies have call rates of about Kshs 3 shillings per minute to call across networks. Exactly a year ago Safaricom has launched super ongea tariff, which promised rates of as low as 0.8 shillings, but from a base of Kshs. 8 within network. What has changed? The arrival of airtel in Kenya who will pursue a low cost high volume model though outsourcing of services among other measures. i.e. today it was announced in India that they will sell their African mobile base stations to a subsidiary company (Bharti Infratel) that will re-sell them to private equity funds.

Even as Kenyans have celebrated the new chap call rates, Airtel have ruffled many feathers in the last month, forcing Safaricom and the other smaller mobile companies to match the very low tariffs, and this has been called unsustainable by some, a dis-incentive to investors by others, and even a situation which may result in a mobile operator closing shop. Two years ago, Safaricom had launched ‘ongea tariff’ which was a Kshs 10/= rate

About the same – Utilities: Latest electricity bill is Kshs 1,700 ($21 for a month) up from Kshs 1,450 on June, but better than 1,900 a year ago when there was drought in the country.

Other food item: Sugar : A 2 kg. Mumias pack is Kshs 200, unchanged over the last year. Two years ago, it cost 145, a price we may see next year when the COMESA regional sugar quotas are done away with. Already, leading sugar company Mumias has diversified into electricity co-generation, bottled water, and soon, ethanol production.

Foreign Exchange: 1 US$ equals Kshs 80.8 compared to 80.6 in June. BUT, Two years ago it was Kshs 67.

Beer/Entertainment: A bottle of Tusker beer is Kshs 170 ($2.1) (at a local pub) compared to Kshs. 160 three months ago. However it is tough to find a perennial location to keep track in Nairobi’s fast changing pub scene, where even Nairobi’s favorite sports pub Hooters closed last month. What needs to happen is a combination of Murua’s Tusker Index with this interactive beer map from the Czech Republic!

More Expensive – Fuel: A litre of petrol fuel (at local petrol station) is now Kshs 94.5 ($5.25 gallon) up from Kshs 90.9 per litre in June. The back and forth petrol war continues between leading oil distributor Kenol and the Ministry of Energy officials who include the Kenya pipeline company, the Kenya oil refinery and the energy regulatory commission about the issue of preferential allocation of space and who owes who more. On their side Kenol can count on some political muscle, the fact that they blew the whistle on Triton Oil before it collapsed, they are the country largest corporate taxpayers. High prices at the pump are not unusual, as two years ago petrol was retailing at Kshs 101

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Urban Inflation Index June 2010

Tracking changes from three months ago Mar’ 10 and one year ago – Jun’ 09

The World Cup is on going in South Africa and helpful guides for price comparison have been provided for comparison. Also the Kenya budget speech for 2010-2011 was read by Uhuru Kenyatta the Finance Minister and has been trumpeted as a trillion shilling budget despite a deficit of resources.

In reaction to some changes noted here, Kenya’s Parliament on June passed a price control bill that seeks to regulate the retail price of among other things – maize flour, sugar, rice, wheat flour, kerosene, diesel, petrol, and cooking fat.

Gotten Cheaper
Staple Food: Maize flour, which is used to make Ugali that is eaten by a majority of Kenyans daily. A 2 kg. Unga pack at Uchumi today costs Kshs. 71, which is 15% cheaper than Kshs 84 in March and 92 a year ago [a 2.5kg pack in South Africa is ~kshs. 111]

About the same
Communications: priceshave remained about the same despite it being an eventful few weeks;
– Safaricom had another exemplary year of profits and performance – returning a turnover of $1.05 billion (Kshs 84 billion) and will pay their shareholders dividend of $100 million (Kshs 8 billion). They are the exception in the sector where their rivals loss making – Zain (Africa) was acquired by Bharti Airtel and will undergo its fourth brand change in eight years, while Orange averted a messy divorce with the Kenya Government by way of a sweetheart deal that may shake up the sector. They and newcomer Yu will all benefit from a government decision to lower the cost of a 3G communications license from $25 million to $10 million.
– Communications costs remain about the same for voice and SMS (who can keep up with Yu and Zain’s promotions) and the big push has been in the area of data. Safaricom latest push is for 10MB for 8 shillings ($0.10) and continues a recent trend that pushes down the cost of data with cheaper phones (Nokia E63 is now 15,000 (about $187 down) from 23,500 a year ago) and hardware, financing (Loans for laptops).
– Unfortunately Safaricom has rubbed some local developers the wrong way entering into a Mxit partnership and again with an innovation forum that has caused some controversy.

Utilities – Electricity: Latest bill is Kshs 1450 ($18) which is down from 1,700 (~$22) in March and about the same as 1,550 a year ago. Heavy rains at the end of the last quarter have seen Kenya dams fill and a power generation shift from diesel back to hydro – the Government says this will result in reduced power bills at the end of the year, but the rains have slackened of late. In the bill, consumption is kshs 500 with a fuel levy cost of 400, while a year ago consumption was also 600 with fuel levy cost of 500

Other food item: Sugar (2 kg. Mumias pack) is at 200, and no change in the last few month. COMESA liberalization is set to happen in 2011, and is expected to expose the market to unrestricted imports from the region, bring down the retail price of sugar in urban areas, but leaving sugar farmers from western Kenya with high input costs at a disadvantage. The middlemen men still run this sector and around the period of Uhuru’s budget speech was being read, there was no sugar (from any company) on the shelves at Uchumi. [2.5kg in SA is Kshs 191].

More Expensive
Beer/Entertainment: A bottle of Tusker beer (at local pub) is Kshs. 160 ($2) most up from 150 in March at most places I know and 130 from a year ago. There was an immediate price hike effected by dominant brewer East African Breweries (EABL) when the Minister read his speech in early June; however some bar owners complain that this should have computed at 5 shillings per bottle (beer retails in ½ litre), but EABL passed on an additional 5 shilling increase to customers under cover of the tax hike. The price of coca cola has also gone up as the excise tax on carbonated soft drinks, wines and spirits was also pushed up 8%.

Fuel: A Litre of petrol fuel (at local petrol station) is now Kshs 90.9 per litre (~$5.1 per gallon) , 7% up compared to Kshs 84.9 in March and 25% higher than it was (72.5) in June 2009.

Foreign Exchange: 1 US$ equals Kshs 80.6 compared to Kshs. 76.6 in March and 77.94 a year ago as the Kenya government has indicated that it will not (can it afford to) intervene to support the shillings from sliding.

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Bankelele

Nairobi writer on Banking, Finance, Technology, and Investments

Category Archives: inflation trend in Kenya

Prepaid Electricity in Kenya

Urban Inflation Index: March 2011

Making Agriculture Cool

Urban Inflation Index September 2010

Urban Inflation Index June 2010