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Rising commodity prices add pain to households

Business
 Vendor at the Eldoret main market Uasin Gishu County. [File, Standard]

Even before I sat properly on the boda boda, Justin Lumelo, the rider, was agitated about the price shown on the ride-hailing app.

“How much is the app showing?” he asked. “Sh176,” I replied.

Lumelo sighed and then clicked distastefully: “Do these people (ride-hailing firms) know how much fuel costs?” 

The rhetorical question was also the opening remark for a rant from a typical Kenyan frustrated with the increasing cost of living amid stagnated earnings.  

“How are we expected to manage in this kind of economy? Everything is just expensive,” lamented Lumelo.

As a boda boda operator, he says, the increasing costs of doing business have forced him to operate a hybrid model. The offline operations ensure he has the necessary cash flow at hand.   

His frustrations mirror that of many Kenyans who live from hand to mouth as the country’s economy battles increasing inflation, spiking cost of commodities, depreciating shilling and hiked interest rates among other macroeconomic incidents that keep the cost of living high.

While the inflation rate for June this year as released by the Kenya National Bureau of Statistics (KNBS) has eased by 0.1 per cent, it is still above the 7.5 per cent upper target.

As such, consumers like Lumelo may not see the benefit of inflation dropping from eight per cent to 7.9 per cent. This is because while some items in the food basket have witnessed a drop in prices, others are rising.

For example, in March 2023, when the inflation rate was 9.2 per cent, the price of a tin of Irish potatoes (popularly known as waru) was Sh250. Until a few weeks ago, the price eased to Sh200 before dropping further to Sh100 and now it can be bought for Sh80.

“Back then, we bought a sack at Sh7,000. We are now buying at Sh3,000,” said Rose Mageto, a trader based at Kware market, Kajiado County.

The short rains the county has experienced to some extent, have had some effect on several food products that are traded raw or in their primary form.

It is, however, not the same scenario on other products. 400 grams of bread retails at Sh65. This is Sh5 more than the usual Sh60. Ripe bananas now for between Sh10 to Sh15 per piece,

A 1.5kg of bread is inching closer to the Sh250 mark for legacy brands like Festive.

 The increase is partly informed by the price of sugar which is yet to go below Sh200 a kilo. Supermarkets, however, seem to have found a way of managing their production costs that they can sell 1.5kg of bread for barely Sh200.

Cleanshelf Supermarkets sells its brand at Sh215 while Naivas at Sh199. This increase in prices also affects items that to the eyes of Kenyans, did not expect any upward price adjustments.

This is where items like the 1.5 grams sachet of Nescafé fall which now retails at double its initial Sh5 price.

Royco cubes pack of 40 pieces that used to retail at Sh135 now goes for Sh140 with an introduction of a smaller pack of 28 pieces that go for Sh100.

KNBS Director General Macdonald Obudho explained that the 7.9 per cent inflation is largely due to food prices.

“The inflation was largely due to an increase in prices of commodities under food and non-alcoholic beverages (10.3 per cent) and housing, water, electricity, gas, and other fuels (9.4 per cent) and transport (9.4 per cent) between June 2022 and June 2023,” read the statement from KNBS.

The KNBS data shows that while in June 2022 the price of a kilo of Irish potatoes was Sh84, today it is Sh101.

Sugar has also gone up to Sh204 from Sh129 in 2022.

Loose maize grain retail at Sh86 a kilo compared to Sh65 in June 2022 while fortified maize flour is Sh202 vis a vis Sh177.

“Notable, the prices for carrots, onions (leeks and bulbs), tomatoes and maize grain-loose increased by 9.0, 7.3, 6.4 and 5.5 per cent, respectively between May 2023 and June 2023. During the same period, prices of potatoes, avocado, kales (sukuma wiki) and cabbages declined by 6.1, 4.6, 2.7 and 0.3 per cent, respectively,” Mr Obudho adds in the KNBS statement.

 Steadily climbing

In June 2022, the inflation rate in the country also stood at 7.9 per cent before steadily climbing to a high of 9.5 per cent in November 2022.

National Treasury and Economic Planning Cabinet Secretary Prof Njunguna Ndung’u, while presenting the budget statement for 2023/24, noted how inflation has remained above the 7.5 per cent upper bound target since June 2022.

This, he attributed to high food and energy prices following adverse weather conditions and high global oil prices but has also been compounded by a pass-through effect from domestic currency depreciation.

This is what informed the Central Bank of Kenya(CBK) through its Monetary Policy Committee to increase the Central Bank Rate to 9.5 per cent in March 2023.

“This monetary policy action together with improved agricultural production occasioned by the long rains and supported by the fertiliser subsidy programme, and the ongoing importation of key food items particularly maize, cooking oil, rice and sugar under the duty-free window is expected to ease the domestic prices of the basic food items,” said the CS.

The Central Bank Rate has since been increased to 10.5 per cent which is expected to play a significant role in inflation amid the easing food prices as a result of rains.

Due to the increased cost of commodities, particularly food items, more Kenyans have changed their shopping habits and they no longer go for brand but price.  

A recent survey by Nielsen IQ (NIQ), a global consumer intelligence firm, found that more than half of Kenyans have just enough for food, shelter and other basics.

The survey also found that the majority of Kenyans, due to the increased cost of living, believe that the economy is in a recession. This was represented by 89 per cent of respondents while 49 per cent believe the economy will be in a recession in a year’s time.

Some of the factors that informed these responses in housing challenges, geopolitical conflict whose effects have been felt in the country, brain drain, unemployment, low wages, and volatile interest rates, and that include the housing crisis.

The survey, State of FMCG & Consumers in Kenya: Navigating the new world of uncertainty, informed that as a result of this cost of living, many shoppers look for discounts.

“(Some) 53 per cent of consumers are shopping more at discounts stores as they look for value and lower priced goods whilst 37 per cent of the consumers are shopping in bulk at wholesale outlets,” the survey reads.

As a trader, whose business is hawking roasted maize at Kware market, Kajiado County, using a customised wheelbarrow charcoal stove, Nicholas Njenga wits how he is considering not milling maize anymore for the purposes of preparing ugali, a staple food in the country, now that even the price of fuel has been adjusted to accommodate 16 per cent Value Added Tax (VAT) as per the Finance Bill 2023.

“It is cheaper if my family eats roasted maize or boiled,” he says. “You know it is better for rice to be expensive than maize flour.”

While he acknowledges that prices have eased, that he is able to sell a full roasted maize cob for sh40, this was not the case some few months ago, a sign oblivious to him, that inflation is easing nevertheless.

“There was no a Sh10 portion of roasted maize then. Full-roasted maize used to go for Sh60. So imagine, how many portions of Sh10 did you have to sell for one roasted maize to make Sh60? We just hope for things to get better soon,” he said.

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