Tormented Kenyans: What Sh1000 could buy 10 years ago now costs Sh1600

Shopping basket at a supermarket. [Courtesy]

When the Central Bank of Kenya unveiled new banknotes in 2019, the image of elephants that had earned the older Sh1,000 note the nickname of ‘Ndovu’ was not as pronounced in the new notes. With the simple change, the Sh1,000 lost its symbolic grandness.  

Official data shows that in 2011, Sh1,000 could easily buy 10 items - say a kilo beef, tomatoes, English potatoes, rice, matumbo and dry beans. You could also add in your shopping basket a 300ml bottle of soda, a matchbox, a packet of cigarettes - for the smokers - and a bottle of Tusker Lager for those who consume such beverages. What’s more, after your shopping, you would be left with Sh35 that could come in handy as bus fare.

In 2020, however, you needed an additional Sh627 to buy the same items, according to retail prices of select consumer products given by the Kenya National Bureau of Statistics (KNBS).

Remember that 2020 was a Covid-19 year and the prices of various commodities remained muted because shopping was restricted by social distance rules aimed at curbing the pandemic.

In addition, some of the taxes were slashed in a move aimed at offering relief to those who had been negatively impacted by the pandemic. This ensured that prices of various goods and services remained relatively stable at a time when over 1.7 million Kenyans had been rendered jobless. Since then, the National Treasury rolled back the tax reliefs... and introduced new levies.

Now, cooking gas, airtime, internet, loans and petroleum products have been slapped with higher taxes, leading to a rise in the cost of living at a time when a lot of Kenyans are still reeling from the aftershocks of the pandemic.

In addition, a tight academic calendar - which requires parents to pay school fees for four terms a year rather than the traditional three - has left many families with dwindling disposable income.

Official data, however, paints a picture of a stable macro-economic environment. Inflation - the overall increase in prices of goods and services - has remained at between five and 7.5 per cent.

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

In 2011, Sh1,000 could easily buy 10 items - say a kilo beef, tomatoes, English potatoes, rice, matumbo and dry beans. [Courtesy]

“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 have to pay for your medicine… there is nothing for you in terms of access to goods and services.” 

Development economists, unlike macro-economists, look at access. For example, although the numbers say that a lot of people are employed, most of them are in the informal sector where they are poorly paid, lack access to quality healthcare and rarely afford nutritious food. Their children also attend crowded  and poorly-resourced schools.

Although the proportion of the Kenyans living below the overall poverty line stands 36.1 per cent, multi-dimensional poverty, which also looks at access to goods and services has been on the rise. Anyone who spends less than Sh3,252 per month in rural and peri-urban areas and less than Sh5,995 in urban areas is categorised as living below the poverty line. The latest data from KNBS shows that multidimensional poverty rose to 53 per cent in 2018, up from 46 per cent two years earlier.  

Due to the introduction of the 16 per cent value-added tax (VAT) on cooking gas, the retail price of a 13kg cylinder had jumped by more than a fifth to an average of Sh2,611 by end of November 2021, according to official data. In some areas, cooking gas is retailing at a high of Sh3,000, defeating the State’s bid to reduce the number of households using dirty fuels like charcoal and kerosene.

There is no respite for poor households in major urban areas as prices of kerosene and charcoal - their substitutes for gas- have also been going up. 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 wananchi to finance a hefty budget, including heavy debt repayment. As a result, the price of calling and browsing has gone up.

To the government’s credit, official data shows that wages have risen faster than prices of basic commodities, thus removing the sting from the increased cost of living.

For a lot of Kenyans, however, food still consumes a huge chunk of their income, which means they are susceptible to any slight movement in food prices. And with the county of Nairobi saying it will start charges cess on livestock products from February, Nairobians should expect to pay more for their meat and related products. Beef prices were already going up even before the announcement.

Another commodities whose price has risen fast in the last 10 years is matumbo, a popular substitute for meat. A kilo of matumbo cost Sh260 in 2020, an increase of 61 per cent from Sh162 ten years earlier.

'Matumbo' on sale at a butchery in Kisii, May 2021. [Sammy Omingo, Standard]

Timothy Njagi, a research fellow at Tegemeo Institute, notes that prices of food have been negatively impacted by the changes in weather patterns, with the country relying on rain-fed agriculture to grow food. These 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 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 hardest hit. 

Prices of tomatoes, rice and potatoes have also increased significantly in the review period. Often, the price changes are due to unpredictable weather such as now when poor rains have left over two million in 23 counties at risk of dying from hunger.

Taxes have also been responsible for an increase in prices of alcohol, with a 500 ml of Tusker Lager retailing at Sh184 in 2020 up from Sh110 two years earlier. Airtime has also become more expensive. But it has also turned into a cash cow for the government, with the Treasury increasing taxes on it. 

On average, a typical Kenyan spends more on airtime than on maize and wheat flour and bread combined, according to KNBS’s latest review of the Consumer Price Index. Mobile phone airtime is the single largest expenditure item, although food combined has a heavier weight. For every Sh100 spent by a typical Kenyan, Sh5.50 will go towards buying airtime compared to about Sh4 used to buy wheat and maize flour and bread.