Wednesday, May 25, 2011

Kenya: Soaring Cost of Living

The buying power is about to be gravely eroded due to high inflation levels now projected to shoot to an all-time-high of 18 per cent by the end of the year. Ones hard earned money now has less value and cannot buy the same goods it used to a few months back. 
Shortages of food and fuel in Africa; Kenya in particular are sending the cost of living upwards, threatening political and social crises. Kenya has relatively advanced agricultural and industrial sectors and substantial foreign exchange earnings from agricultural exports and tourism. Yet it is a low-income country and ranks 128th among 169 countries in the United Nations Development Programme’s Human Development Index, which measures development in terms of life expectancy, educational attainment and standard of living.
Now, food prices are skyrocketing across East Africa- by some estimates as much as 30 percent since January. Small-scale vendors are also feeling the pinch. A vendor at the City Market, Howard Mutua, says the rising costs are cutting into his profits.

"By the time I take it from the farmers up to here I am using transportation which is really high. So I end up increasing my price and that also affect my customers. They are taking less."

Mutua, like most Kenyans, holds the high taxes imposed by the government on fuel imports are directly to blame for rise in basic commodities and consequently for the rising cost of living. With the government heavily taxing oil imports, the cost of petroleum in
Kenya has risen from around $1 per liter to over $1.30 in just the past few months.

"The best thing I would advise the government to do. They should tackle the fuel problem," Mutua noted.  "If they could work on that fuel problem, I think everything will be well."

But high taxes are not solely to blame for the rising cost of living.  Kenyans have been hit from all sides by rising inflation, government tariffs, import mismanagement,
Middle East conflict and climate change. As Economic analyst Robert Shaw explains, Kenya's underproduction of staple items has placed it dangerously at the mercy of local and global economic instability. Kenya produces an estimated 200,000 tons of corn each year, but consumes nearly twice as much.

"In the case of oil it is the volatility that has been taking place in
North Africa and some of the Arab countries," noted Shaw.  "On the other side of the coin, a number of these countries, including Kenya, are particularly vulnerable to those increases because they are major importers of not just oil but also food. Kenya imports three quarters of its wheat, three quarters of its rice." The price of corn has tripled since last year, forcing the government to remove the 50 percent tax on imports. On April 19, hundreds of Kenyans marched from Uhuru Park through Nairobi’s central business district and gathered in front of Parliament to demand action on the rising cost of living. This comes at a time that consumers are forced to buy basic goods like soap, sugar and oil in tiny quantities. In light of this, government response on the rise in cost of living has been slow.  Finance Minister Uhuru Kenyatta announced a 20 percent tax cut on fuel two weeks ago. The subsidy has come into effect in time for a fuel shortage across the country.  In Nairobi, roads have been gridlocked from morning till night as customers queue in front of petrol stations in the hopes of finding fuel. , Martha Karua, Member of Parliament for Gichugu said corruption and inefficiency by regulators were key parts of the crisis in Kenya. She called on government “to clean up the National Oil Corporation, the Kenya Power and Lighting Company and the Energy Regulatory Commission to protect the common man from these surging prices”.

Inflation threatens to strengthen the rise in prices. April saw a 12.05 percent inflation rate, the highest in nearly 18 months.
Kenya is not the only country in east Africa feeling the effects of global and local instability. Rising prices in Uganda have triggered protests and demonstrations over rising costs. Uganda President Yoweri Museveni has insisted there was nothing his government could do about skyrocketing prices, while vowing to suppress public protest against rising inflation.
"The prices can only go down through increased production," he said. Over the past month, the protests have been crushed with the full force of Uganda's military and police. The scenes of opposition leaders being arrested and beaten have triggered international condemnation and pushed the country to the brink of a political crisis.

Kenya is hoping to avoid the same fate, but may not be able to stem the rising tide of discontent. On Labor Day, the leader of Kenya's Central Organization of Trade Unions, Francis Atwoli, threatened strikes and protests if demands for a 60 percent increase in the minimum wage were not met. As prices continue to rise, Kenyans are watching and waiting to see if the government can head off what some are calling a looming crisis. Budalang’i Member of Parliament, Mr. Ababu Namwamba. His motion to form a select committee of Parliament to look into the rising cost of living in the country was approved by parliament Wednesday 11 May. The Parliamentary Select Committee formed to investigate the increased cost of fuel and food begins its hearings next week and has invited the public to give its views.
Cost of living is the cost of maintaining a certain standard of living. Changes in the cost of living over time are often operationalized in a cost of living index. Kenya a population of 39,802,015 according to the 2009 Census results has about 15,449,430 poor people who live in rural areas. The number of the poor, nearly half of the total population is likely to rise if the soaring cost of living in the county is unchecked.

1 comment:

  1. The problem with us Kenyans is that we look for short term solutions for long term problems.What the government needs to do is to avoid privatization of industries that mainly affect the whole population.Privatization leaves this to a few unscrupulous individuals who will not hesitate to increase prices for goods.For more on this click at :


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