Behind the numbers: The reality for low-income earners hidden in Kenya’s growth data

There was a hilarious but poignant song back in the day in which a poor man recounted his ordeals in the city of Nairobi.

With the price of almost every basic commodity going up, he had had enough of the capital city. His solution? Kurudi ocha (to go back to his rural home).

Years later, the sentiment rings true. Stacy Atieno, 24, says she feels like going back to the safety of her rural home in Homa Bay County. She is currently a salesperson in Nairobi, and lives in Umoja Estate.

The city, she says, is a farm of rocks, and she has had enough of trying to get something out of the rocks.

Her job is to promote ground and instant coffee for a coffee processing firm in various shopping malls in the city. She takes home a salary of Sh8,000 every two weeks.

Feed the family

This is all she has for her family. All last year, she struggled to provide for her ailing mother and school-going younger brother on a monthly salary of Sh16,000.

Ms Atieno forks out at least Sh750 a day to feed her family. A breakfast of milky tea and a 500-gramme loaf of bread costs Sh150, while lunch and supper leave her Sh600 poorer. The family’s meals largely comprise ugali, sukuma wiki, rice and beans, with beef featuring once in a while.

She also pays her brother’s school Sh300 a month for water, as well as Sh2,000 a term for tuition, and Sh1,500 per term for exams.

Last year, things got really difficult when illness struck. Her brother was bedridden with anaemia and malaria. The family has no medical insurance, so Atieno had to shoulder the Sh10,000 bill.

Her brother’s health that month came at the expense of some meals.

For her bus fare from Umoja to the city centre, Atieno spends Sh160 a day. She goes to work six days a week. While at work, she normally has a lunch of chips and a sausage, which costs her Sh150. This budget alone adds up to Sh7,440 a month.

With her expenditure on essential items exceeding her monthly pay, mobile credit facilities have come to her rescue.

“My expenses are more than my income, but I live on debts. In fact as we speak, I owe [Safaricom-Commercial Bank of Africa product] M-Shwari Sh12,000,” she told Business Beat.

Atieno may paint 2015 as a year of despair and despondency, but Government figures do not.

According to the Kenya National Bureau of Statistics (KNBS), last year the economy registered impressive growth of 5.6 per cent, up from 5.3 per cent in 2014. It shrugged off what was generally a difficult year for the global economy.

In short, the economy churned out goods and services worth around Sh6.2 trillion in 2015, up from Sh5.4 trillion the previous year, according to Economic Survey 2016.

Each of the 44 million Kenyans, including Atieno, presumably produced, on average, goods and services worth — or a GDP per capita of —Sh140,961 in 2015. This is an increase from Sh124,710 the previous year.

Kenyan’s income

Moreover, the country’s gross national income (GNI), or total output by citizens both in and outside of the country in a year, registered nominal growth of 15.3 per cent to stand at Sh6.2 trillion in 2015.

This means that in a month, each Kenyan’s income was about Sh11,664, as Kenya’s GNI per capita stood at Sh139,972.

Even more impressive was the performance of a very significant macro-economic indicator — inflation, or the general increase in the prices of basic commodities in a year.

Inflation eased from 6.9 per cent in 2014 to 6.6 per cent in 2015 as Kenyans’ ability to purchase various products improved.

However, the ease in inflation means nothing to Atieno, a holder of a diploma in supplies management. To her, there was no such thing as an “ease in inflation”.

And while her employer increased her salary following a presidential directive in 2015 on minimum wages, she was told the increment went to National Hospital Insurance Fund (NHIF) and National Social Security Fund (NSSF) contributions.

Skilled and semi-skilled employees, including househelps, cooks, herdsmen and drivers, got on average Sh7,284 in 2015 up from Sh6,503 in 2014. Less than what Atieno earns.

It was even more difficult for a general labourer, miner, stone cutter, turnboy, waiter, cook and night watchman, who got Sh6,970 a month for their toils, according to the survey.

But it was a good year for the rich, or those “very few Kenyan households who own a car or truck [5 per cent) and 7 per cent, respectively],” according to KNBS’ 2014 Demographic and Health Survey (KDHS).

Motorists reaped the benefits of reduced prices of crude oil in the international market.

The year was so good for the rich that the number of ultra-high net worth individuals (UHNWI) in the country increased, according to Knight Frank’s Wealth Report 2016, thus supporting World Bank’s assertion that extreme wealth increases with GDP in Africa.

Kenya added five individuals to its list of ultra-wealthy individuals last year, taking the tally of those worth Sh2.8 billion ($30 million) countrywide to 115.

General prices

Further, inflation for the upper income group in Nairobi dramatically went down to 2.6 per cent in 2015 from 6 per cent in 2014, according to the survey.

This was in stark contrast to the urban poor’s inflation. The general prices of goods for lower income Kenyans like Atieno increased to 6.9 per cent in 2015 from 5.8 per cent the previous year.

Kwame Owino, the chief executive officer of the Institute of Economic Affairs, said the rich buy a different set of products from the poor.

“Poorer people spend a lot of money on food. So if the price of food increases, then it affects their income more,” he said.

He added that while the rich buy a lot of food, it makes up a small portion of their income.

Atieno said in 2014, she used to buy a half-litre packet of milk at Sh45. This went up to Sh50 in 2015. A 400-gramme loaf of bread cost Sh45 in 2014 and increased to Sh50 last year. Potatoes, which she used to buy at Sh50 in 2014 cost Sh100 in 2015.

“Almost everything, except rice which went down slightly, went up. This includes onions and tomatoes,” said Atieno, adding fish and margarine to the list of products whose prices increased over last year.

According to the national statistician, the increase in the prices of products that make up the food and non-alcoholic beverages basket was highest for vegetables. Their consumer price index shot up by 32 per cent, while for fruits increased 21.9 per cent, fish and seafoods 9.6 per cent, meat 6.7 per cent, and milk, cheese and eggs 6 per cent.

However, the Government figures suggest things got a little better for Kenyans as average earnings increased by 9 per cent in 2015 from 7.5 per cent in 2014, while inflation was at 6.6 per cent in 2015.

But the reality is far from being as rosy. Indeed, given that a Kenyan household has on average four members, according to KDHS, there are many other Kenyans for whom the going got tough.

The economy generated a total of 841,600 jobs — of which 128,000 were in the modern sector and 713,600 in the informal sector — during the period under review, according to the survey.

A World Bank report released this year, however, says this kind of growth is “not enough to make a sizeable dent in unemployment and underemployment”.

However, Mr Owino said he has heard people say that economic growth has not percolated down to people like Atieno, but he does not understand how this conclusion is arrived at.

“People feel [that the economy is not trickling down to Wanjiku], but is this real? It has to be measured and I have no evidence for that,” he said.

But he was quick to note that the trickle-down impact depends on which sectors actually grew, a point supported by Scholastica Odhiambo, an economics lecturer at Maseno University.

Owino also noted that poor people’s income is not growing fast enough for them to be able to afford sufficient food.

“It is an income problem — not necessarily a food-price problem,” he said.

But how does the economy increase the poor’s income without triggering inflation? Inflation (higher prices) generally leads to the agitation for higher salaries. The costs of a higher wage bill, however, are passed on to consumers through higher product prices, and the cycle continues.

Currently, employers, through their umbrella body Federation of Kenya Employers (FKE), and workers, through trade unions, are at each other’s throats, with the latter demanding an increase in minimum wages to cushion workers against inflationary pressures.

FKE has countered the demands by saying 2015 was a difficult year for its members, and as such, increasing the minimum wage would be counter productive. Employers argue increased minimum wages could result in an increase in the cost of goods.

Minimum wage

Dr Odhiambo agrees that increasing the minimum wage could be counter-productive, as some employers will stop employing.

The trouble with such a situation is that consumers would then begin to defer purchases to when they have money, denying firms a revenue stream and further eroding profits.

Moreover, increasing minimum wages means pumping more money into the economy, which could easily result in a spike in inflation as the demand for products increases.

Odhiambo says that the best way to make it better for the employees is to reduce taxation on incomes. But can a cash-strapped Government afford this?

Mureithi Wanjiku, a nursing graduate who has started a small business selling chips and soft drinks, knows how much harder things can be in the city compared to his rural home in Kirinyaga.

“Here, you pay for everything, including going to the toilet,” he said.

He started his business this year, and the income stream has yet to get to the point where he can comfortably pay all his bills. Making ends meet gets even more difficult when price of potatoes increases and people avoid buying sodas due to the cold weather.

Still, Mr Mureithi is hopeful things will get better. He is banking on this year’s growth — projected at 6 per cent, according to Treasury Cabinet Secretary Henry Rotich — trickling down to the common mwananchi, translating into more discretionary income that can be spent his way.

The increased cash, he said, would help him add baked goods to his shop, and perhaps create jobs for a few of the country’s millions of unemployed youth.

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