Investors win, workers lose in rollout of new inflation data

This was higher than peak levels witnessed in Tanzania and Uganda.

Tanzania and Uganda recorded peaks of 14.9 per cent and 14.8 per cent respectively over the past two years, a move that led policy analysts led by Prof Ndungu to call for a review of inflation measurement.

Both Uganda and Tanzania have been using the geometric measurement in line with 2004 recommendations from the International Labour Organisation (ILO) consumer price index manual.

This new measures has exited policy makers with the CBK governor saying that they are now nearer to the national figures.

The double digit inflation levels have helped unionisable employees squeeze high pay increments from employers.

Official data indicate that workers on average last year had a raise of 10 per cent from 8.7 per cent and 7.5 per cent in 2007 and 2006 respectively.

In addition, expatriates coming to the country were asking for hefty packages to help compensate for the high costs of living.  

This has contributed in widening the wage of bill of local firms at a time when they reporting lower profitability and also turned away potential investors fearing that the high labour expenses together with high costs of raw materials would make it difficult for them top break even.

“Unions’ position will be weakened if the rates fall since the CBA (Collective Bargaining Agreement) is mainly pegged on cost of living compensation,” says Kuria Muchiro, country manager at consultancy firm PricewaterhouseCoopers (PwC).

This is a big blow to the millions of employees covered by unions whose purchasing power is taking its worst battering in more than a decade as salaries fail to keep pace with the rising costs of living.

It’s not clear how the banking sector will react to the new numbers since last year most of them reviewed their lending rates upwards by between two and 1.5 per cent citing the high rate of inflation.  

These elevated rates have restricted access to credit especially to households, slowing down both production and consumption.