The fall of mighty 'ndovu': Why the Sh1,000 is now just another note

Gone are the days when all a shopper needed when they got into the supermarket or open-air market - usually at the end of the month - was a Sh1,000 note.

Official data shows that in 2011, for example, Sh1,000, or ndovu in street parlance, could easily buy you 10 items, including a kilo of beef, tomatoes, English potatoes, rice, matumbo (tripe), and dry beans.

The money would also get you 300ml of soda, a packet of match-stick, a packet of Sportsman cigarettes for the smokers, and a bottle of Tusker Lager for the imbibers.

And after shopping, you would be left with Sh35, with which you could buy a kilo of common salt or use it for bus fare.

However, in June 2022, you needed an additional Sh800 to buy these items, according to the retail prices of select consumer products given by the Kenya National Bureau of Statistics (KNBS).

Of course, it is unfair to make this comparison without looking at things like wage increases and the substitution effect, where people substitute expensive goods and services for cheaper ones.

The average annual earnings per employee in 2021 was 827,441.2, according to KNBS data. This is an increase of 86.2 per cent from Sh443,322.1 in 2012.

During the recent Labour Day celebrations, President Uhuru Kenyatta directed employers to revise upwards the minimum wage for workers by 12 per cent.

"As a caring government, we find that there is a compelling case to review the minimum wage to cushion our workers against the further erosion of their purchasing power while also guaranteeing the competitiveness of our economy," said the President in his speech on May 1.

Predictably, employers were not happy, given that they are also grappling with the high cost of inputs such as fuel.

In any case, this is for those in wage employment, who are not paid better but also invariably tend to have the backing of strong trade unions to push for an increase in wages when the cost of living shoots up.

Most Kenyans (over 80 per cent) work in the ubiquitous informal sector where wages are little and erratic.

For these Kenyans, other than on rare occasions when the government comes to their rescue through such pronouncements as the maize flour subsidy that has seen the price of a two-kilogramme packet of unga reduce to Sh100, there is little they can do when prices skyrocket.

High prices have seen shopping in Nairobi turn into one of the most agonising experiences.

A spot check of the prices of basic commodities in retail stores in the capital city paints a gloomy picture of how the cost of living has skyrocketed beyond the reach of millions of Kenyans.

Some families — particularly poor households that spend a majority of their income on food — may soon opt to skip some meals as a coping mechanism to the harsh economic realities.

This is as the prices of foodstuffs, including milk, wheat flour, maize flour, rice, potatoes, and tomatoes go through the roof.

A 500ml packet of milk in most supermarkets in the city was retailing at between Sh60 and Sh65 in June, compared to between Sh50 and Sh55 a year ago.

The median price for a 2kg packet of maize flour, which is used to prepare ugali, a staple dish for most Kenyan households, was Sh150 compared to less than Sh120 a year ago.

In some supermarkets like QuickMart, Tom Mboya Street, a 2kg packet of maize flour, has been retailing at Sh167.

Data from KNBS, which collects prices around the country for a cost of living index technically known as consumer price index (CPI), showed that in May, a two-kilogramme of maize flour retailed at an average of Sh147.57 in the country, an increase of 23.8 per cent compared to last year.

In some areas, the unga retailed at a high of Sh230 last month.

Of course, this has since gone down after the government implement an Sh8 billion maize subsidy programme, which will see a 2kg packet of maize flour across the country retail at Sh100.

Since then, things have worsened after the National Treasury not only rolled back the tax relief measures but also introduced new levies.

Items such as cooking gas, airtime, internet, loans, and petroleum products have been slapped with more taxes, fueling a high cost of living at a time when many Kenyans are still reeling from the after-shocks of the Covid-19 pandemic that saw millions rendered jobless.

Moreover, the tight academic calendar where parents have to pay tuition fees for four terms rather than three in a year as was the case before has left many families with very little disposable income.

Official data paints a stable macroeconomic environment. Inflation - the overall increase in prices of goods and services remains within the range of between five per cent and 7.5 per cent.

Gross Domestic Product (GDP) - the sum of all goods and services produced in the country - hit double digits in the first quarter. And unemployment - which takes into account those who are unemployed and are actively looking for work - is below 10 per cent.

“The macroeconomists are very proud to parade numbers… but the point is, we don’t eat numbers,” says Dr Joy Kiiru, a senior economics lecturer at the University of Nairobi.

“Even if the economy grew by 20 per cent, for example, and you are jobless, your local health centre doesn’t have medicine and you will have to pay for it… there is nothing for as a human being in terms of access to goods and services,” adds Dr Kiiru.

Development economists, unlike macroeconomists, look at access. For example, although the numbers show a lot of people are employed, most of them eke out a living in the informal sector where they are poorly paid, have no access to quality healthcare, can’t afford nutritious food and take their children to crowded schools.

Although the proportion of the Kenyan population living below the overall poverty line (they spend less than Sh3,252 in rural and peri-urban areas and less than Sh5,995 in core-urban areas) was 36.1 per cent, multidimensional poverty, which also looks at access to goods and services, has been on the rise.

The latest data from KNBS showed that multidimensional poverty rose to 53 per cent in 2018 from 46 per cent in 2016.

Due to the introduction of the 16 per cent value-added tax (VAT) on liquefied petroleum gas (LPG), the retail price of a 13-kilogram cylinder has jumped by more than a fifth to an average of Sh2,611 by the end of November 2021, official data shows.

In some areas, the cooking gas is retailing at a high of Sh3,000, defeating the government’s objective of shifting households from dirty fuels like charcoal and kerosene.

There is no respite for the poor households in major urban areas as prices of kerosene and charcoal - their substitutes for gas - have also been going up.

The average retail price of a 13kg LPG had been trending downwards, by 4.6 per cent to Sh2,047 in 2020 from a high of Sh2,507 in 2015.

But this one is also set to go down after the National Assembly slashed VAT on cooking gas to eight per cent.

The government has also increased excise duty on telephone and internet services from 15 to 20 per cent as it moves to squeeze money from taxpayers to finance a hefty budget, including heavy debt repayment.

As a result, the price of calling and browsing has gone up, pouring cold water on the nascent digital economy. Official data shows that wages have risen faster than prices of basic commodities, thus removing the sting from the pain of increased cost of living.

For a lot of Kenyans, food still takes up a huge chunk of their income, which means that they are susceptible to the gyrations in food prices.

Dr Timothy Njagi, a research fellow at Tegemeo Institute, notes that prices of foodstuffs have been negatively impacted by the changes in weather patterns, with the country relying on rain-fed agriculture for its foods. Cyclical patterns affect beans and tomatoes the most.

But there have also been times when the government has contributed to the spike in prices of food, says Dr Njagi.

For example, between 2016 and 2018, the government introduced 16 per cent VAT on agrochemicals. Tomatoes, one of the largest consumers of agrochemicals, was hit heavily.

Beef prices have also generally been going up. “Beef is manually processed. But during the pandemic, they let go of workers, so there were supply challenges,” says Dr Njagi.

One of the food commodities that has risen faster in the last 10 years is matumbo, which has won over a lot of Kenyans due to its taste (if well prepared) as well as its price.

A kilo of matumbo was going at Sh260 in 2020, an increase of 61 per cent from Sh162 10 years earlier.

A kilo of beef with bones, on the other hand, has risen by 53 per cent from Sh285 to Sh437 in the review period.

The weight of beef in the shopping basket for the middle class - technically known as the consumer price index (CPI), or the cost of living index - in Nairobi has also gone up.

Tomatoes, rice, potatoes, and matumbo have also increased significantly in the review period.

Oftentimes, the price changes are due to unpredictable weather patterns such as now when poor rains have left over two million people in 23 counties at risk of dying from hunger.