Will the cost of living really come down for ordinary Kenyans?

What goes up, must of necessity come down. That is the law of nature. Unfortunately, the rule does not appear to apply to the cost of goods and services in Kenya. Like helium-filled balloons, the prices of essential commodities easily rise to the skies, leaving us gazing with amazement from the ground, but never returning — at least not visibly. That is why the recent announcement by the President that we may soon see the cost of living come down, is a most welcome prospect.

Speaking at the commissioning of the Olkaria IV Geothermal Power Plant in Naivasha recently, President Uhuru Kenyatta announced that the 140 MW project was set to significantly increase the total power supply in the country and thereby, drastically reduce the cost of electricity. Launching the largest geothermal power plant in the world, the President considered the project as one of the key pillars of the Jubilee infrastructure strategy aimed at reducing the cost of living for Kenyans.

In a report released sometime in March this year, the alarm was sounded that Kenya risked losing out to other countries as an investment hub in Africa. The report cited the Worldwide Cost of Living 2014 survey that ranked Nairobi as Africa’s most expensive city. The survey, which was conducted by the Economist Intelligence Unit (EIU), sampled eight Africa cities. Nairobi emerged the most expensive city in Africa ahead of Abidjan, Casablanca, Lusaka, Cairo, Lagos, Johannesburg, Pretoria and Algiers in that order.

Though several factors have been identified by analysts that make Kenya uncompetitive in the continent, the main culprit has been named as the cost of doing business, with many industry players raising the flag over runaway power tariffs. Thus it is reported that a number of manufacturing firms have quit Kenya citing high cost of production. Hence the reduction of electricity cost could actually significantly impact business and manufacturing in Kenya, and thus spur economic growth across the board.

My fear, however, is that even though the cost of electricity may actually begin to come down with the improved electricity generation infrastructure, the cost of goods and services may remain above the clouds. It is a very sad reality that in Kenya, gains made from such government initiatives often stay in the pockets of the big boys and never trickle down to Wanjiku.

We have seen it in the oil sector where, prior to the introduction of regulation, oil companies were quick to raise pump prices whenever the cost of importing and/or refining oil went up. Unfortunately, no such speed was ever seen when the costs came down. It often took threats from the government to see the prices shed a few cents. It was not until there was a public outcry that Parliament was eventually forced to enact legislation for price regulation to shield wananchi.

The story has been the same in the banking industry that has for a long time resisted control to bring down the cost of lending money. Just like in the oil sector, the government has recently been forced to institute some mild regulation in fixing interest rates.

Under the new Kenya Bank Reference Rate (KBRR) introduced by the Central Bank of Kenya (CBK), banks are required to use base rates set by the CBK when pricing loans. Whereas the CBK was upbeat that this would boost the supply of credit to the private sector, many observers remained skeptical, and have thus far been proved right. Few banks, if any, have reduced their lending rates significantly.

In the mobile sector, we celebrated when the government seemed to put in measures to enhance competition in the industry to bring the cost of telephony down. Though the cost of actual making of calls has reduced noticeably, the players have devised other ways of recouping their profits — thanks to Kenyan’s queer habits. Thus the company returning the highest profits — no, the best taxpayer — in Kenya is from this sector.

Consequently, my hope is that as the gains from Olkaria IV begin to trickle into the engines of business and manufacturing, the impact will be felt by ordinary Kenyans through cheaper goods and services.