New Year: Why families have to dig deeper into their pockets

Survey shows that up to 25 per cent of Kenyans live on under Sh5,000 per month, which translates to less than Sh200 a day

By  DANIEL WESANGULA

The financial pressures facing the majority of Kenyan families are captured in the first wide-ranging survey to be released in the New Year.

The study conducted by polling company Ipsos Synovate and commissioned by The Standard on Sunday reveals that economic conditions had gone from bad to worse over the past three months for 60 per cent of those polled.

 The survey results showed that 19 per cent said their conditions had remained the same while only 20 per cent said their financial well being had improved.

The findings will offer little comfort for families grappling with the financial pressures of the New Year — among them back-to-school requirements this weekend — after a year marked by high consumer prices.

 The new study shows that up to 25 per cent of Kenyans live on under Sh5,000 per month. This translates to less than Sh200 per day.  The same study shows that 8 out of 10 Kenyans have a monthly expenditure of Sh25,000 and below.

 This is inclusive of what they spend and what they save afterwards and that a quarter live in utter poverty spending less than Sh5,000 by the end of every month.

Gross earnings

As much as 45 per cent of gross earnings by working Kenyans goes into food, the survey further reveals.

For instance data by the Kenya National Bureau of Statistics (KNBS) shows that the cost of food and other general items went up 2.87 per cent in September. The price of books and magazines went up by 6.62 per cent. Other items that went up include electricity and cooking gas all of which are day-to-day essentials.

The surge in prices of the items was largely due to the enactment of the VAT Act 2013, that imposed 16 per cent VAT on essential commodities that included processed milk. The new tax came into effect on September 2.

“The implementation of the VAT Act and seasonal factors affecting supply of common food crops were the main causes of rise in the food index,” said a statement from the statistics agency.

As a result of this inflated cost of living, up to a quarter of Kenyans are going to bed hungry with up to 47 per cent of Coast residents confessing to going to bed, or knowing someone who goes to bed hungry.

Western, Nyanza and Eastern also recorded high numbers of those sleeping hungry with 39 per cent, 36 per cent and 32 per cent of residents saying they have or know someone who sleeps hungry.

Free education

Away from food, the next big expense in Kenyan families is school fees, which consumes 15.2 per cent of the budgets.

Clothes and rent come in third at 6.5 and 6.4 per cent respectively. Despite an existing government directive of free primary and secondary education, many public national and provincial schools have not benefited from subsidised education. Most schools in this category charge as much as Sh50,000 above the Education ministry guidelines, which offer a government subsidy.

The introduction of the subsidy came with a recommendation from the Education ministry that public day schools should be free and boarding ones to charge a maximum of Sh18,627 a year. This replaced an earlier guideline that had largely been ignored by schools for years, which recommended that national schools charge Sh26,900, provincial and district boarding Sh22,500 and day Sh19,000 annually.

Economic policy advisor Elizabeth Waiguru says that due to the pressures of life, very few individuals are able to save any of their monthly income.

 “Up to 80 per cent of the population lives one paycheck to another. If they were to be stretched out of their comfort zones, most will be stranded or opt for high interest rates,” Ms Waiguru says.

Also from the study, 60 per cent of those polled said that their economic condition over the past three months has gone from bad to worse. Nineteen per cent say their conditions have remained the same. Only 20 per cent said their condition has improved.

By region, economic conditions for people at the coast seem to have plummeted the most with up to 80 per cent of those polled saying life has become tougher for them. Western and Nyanza are the third most affected with worsening economic conditions.

The least affected areas are Central, Rift Valley and North Eastern with only 45 per cent, 46 per cent and 62 per cent saying their economic situation has worsened respectively.

And Kenyans brace up for another year, things might even become tougher, Waiguru warns.

“There seems to be no let up in the assault on the wallet. Many of those employed are already doing a side business to supplement their earning and at least put something aside,” she says. The Ipsos poll says that those who can afford to save only put aside 2 per cent of their income.

However, there are major differences is spending cultures between high earners and low-income workers but the major one being on food and education expenses.

Those in lower income spend a half of their income on food while those in higher incomes spend only a quarter. Those in higher income also invest slightly over a third of their income on education compared to their lower income counterparts who do only about a fifth.

But all is not lost, a majority of those polled report cutting down on expenditure to try and save more. The most cost cutting has been reported on the food budget which many people have reduced by as much as 13 per cent from previous months.

Cost of medical care has also been drastically reduced as people look for cheaper alternative medical facilities.

Despite the fact that a huge chunk of the family budget goes to food and households, the little income that remains after all is said and done is also sought after.

More than 50 per cent of those polled admitted to spending money outside their nuclear families with a huge amount of reserve cash ending up paying for the daily needs of close relatives.

Forty-eight per cent of those polled say they support other periodic needs such as school fees, medical expenses and clothing.

In this regard, Coast comes out as the most generous county with up to 64 per cent of those polled saying they lend a hand to other family members outside their immediate circle.

Nairobi and Rift valley tie at second place with 53 per cent of those polled playing a significant role to other relatives.