Consumers bear the pain of steep rise in living cost

A reprieve for households on the cost of maize flour is not expected until September when harvesting of this season’s crop is expected to start. GRAPHIC | BD TEAM

What you need to know:

  • A steep rise in prices of basic commodities could lead to a clamour for higher wages with workers looking to match the growth in their expenses to their payslips.

Kenyans are paying up to 20 per cent more for basic items like electricity and maize flour following significant price increases over the last four months.

Other essential items whose prices have been rising include diesel, petrol, kerosene, sugar and meat, bringing many household budgets under pressure.

The increases come even before the market factors in the full impact of the recent spike in interest rates and the depreciating shilling.

Consumers in Nairobi may soon also have to dig deeper into their pockets for the most important utility of all — water.

The Water Services Regulatory Board (Wasreb) is set to meet before the end of September to decide if to raise the cost of water for city residents by 93 per cent.

The increases have been blamed on the cost of crude oil on the international market and the continued weakening of the shilling against the US dollar.

The rise in maize flour prices has been attributed to a shortage of the grain as millers ignore stocks allocated to them by the National Cereals and Produce Board (NCPB) over quality concerns.

All signs point to a continued rise in the prices of these items, which will hit lower income and middle class households hardest.

“It’s unfortunate because these increases, in some cases, are cartel-driven and will affect a lot of people whose wages are unable to keep up,” said Stephen Mutoro, the Consumer Federation of Kenya chief executive.

“Besides these items, manufacturers are likely to raise prices of other manufactured products, citing the weak shilling and the high cost of fuel.”

Data from the Kenya National Bureau of Statistics (KNBS) indicates that the cost of a two-kilogramme packet of maize flour rose from an average Sh94.38 in March to Sh113 in July.

Maize flour is a significant household purchase as it is used to make ugali, Kenya’s staple food.

A litre of petrol that was retailing at Sh90.34 in March was in July going for an average Sh99.45. Similarly a litre of diesel has risen to Sh85.51 from Sh77.16 in March.

Consumers who use 50 kilowatt-hours of energy every month had to spend Sh507.62 last month, while a similar amount of power cost Sh494.28 in March.

The price of kerosene, which is used in many poor households for lighting and cooking, also went up with a litre costing Sh63.69 from Sh56.71 in March.

The price of a branded two-kilogramme packet of sugar has increased by about Sh20 over the last three months to Sh250 in supermarkets, while unbranded sugar is selling at Sh240 in kiosks.

Meat, another key household food item costs more, with a kilogramme going for an average Sh393.58 in July, up from an average Sh387.96 in January.

Infant products have also gone up with a pack of 64 disposable nappies, which were priced at Sh1,695, rising to a current price of Sh1,850. The price of a popular babies’ body wash has also gone up from Sh580 to Sh620.

The rise means that households will have to spend more on maize flour, transport and energy to power their homes.

It will also decrease the amount of discretionary income available for families to invest and spend on other items like entertainment.

Nairobi’s middle class, on average, spend 12.4 per cent of their income on transport and 22 per cent on food. Poor homes spend the largest share of their income on food at 42.5 per cent, rent and utilities (18.2 per cent).

A steep rise in prices of these and other household items could lead to a clamour for higher wages with workers looking to match the growth in their expenses to their payslips.

The steady increase in the price of electricity has dashed the promise of cheaper power which providers had indicated would be reflected in consumer bills once water levels in hydro-electric power dams rose.

In last month’s review, the fuel charge component was raised to Sh2.51 per unit from Sh2.31 per unit in June while the forex charge also increased to Sh0.89 per unit from Sh0.60.

The rise in fuel adjustment levy, which is linked to the amount of power generated from expensive diesel, has defied the recent rains. The rains were expected to increase the share of hydropower generation and further cut the use of expensive thermal power plants.

The rise in the cost of power has been linked to the shilling’s downward trend with the local unit also responsible for higher fuel prices.

“The mean monthly US dollar to the shilling exchange rate depreciated by 1.31 per cent from Sh96.86 per dollar in May to Sh98.13 in June,” said the Energy Regulatory Commission (ERC) during its last review of fuel prices, reflecting the impact of the volatile shilling on household budgets. These prices could rise even further in the next review if the shilling continues to fall as has been predicted.

So far, the unit continues to defy the raising of the Central Bank Rate from 10 per cent to 11.5 per cent and the Kenya Banks’ Reference Rate (KBRR) to 9.87 per cent from 8.54 per cent earlier this month.

Analysts at investment bank Renaissance Capital say that the unit is overvalued by a fifth and is headed for 110 to the dollar by December.

Motorists are also bracing for another increase of up to Sh6 in road maintenance levy for every litre of petrol or diesel consumed.

The levy was gazetted late last month and will now be included in the pump prices beginning August 14 when ERC reviews the prices of fuel. The impact has already started to trickle down to commuters with matatu fares rising.

A reprieve for households on the cost of maize flour is not expected until September when harvesting of this season’s crop is expected to start, with millers ruling out possibility of lowering costs before then.

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