Forget dialogue, cost of living not about to come down any time soon

National Dialogue Committee co-chairs Wiper leader Kalonzo Musyoka and Majority Leader Kimani Ichungwah at Bomas after signing the Bipartisan Talk agreement.  [Dennis Kavisu, Standard]

We return to the report of the National Dialogue Committee (Nadco).  But first, here is a test. 

As the New Year approached, two unrelated “data events” happened in Kenya. The first was Tifa’s publication of its year-end opinion poll on Kenyans’ reflections of 2023. The second was the latest data release on inflation by the Kenya National Bureau of Statistics (KNBS).

One big story from the pollster was that Kenyans felt significantly worse off in 2023 than in 2022 on three sentiments: cost of living (87 per cent felt worse off); economic conditions (81 per cent) and employment opportunities (65 per cent). For all three sentiments, urban fared worse than rural.

On the cost of living, negative sentiment across five regions was worse than the average (Nyanza – 92 per cent, Nairobi and Coast – 90 per cent, Eastern – 89 per cent, Western – 88 per cent) while it was better than average in three (Rift – 83 per cent, Central – 82 per cent, North Eastern – 81 per cent).  The poll concludes that the cost of living was the issue that most bothered Kenyans in 2023.

From KNBS, inflation came in at 6.6 per cent in December, a fall from 6.8 per cent the previous month and far lower than the 9.2 per cent when the Kenya Kwanza administration assumed office.

In other words, for the specific basket of goods and services that KNBS uses to compute the Consumer Price Index (CPI), prices rose overall by 6.6 per cent between December 2022 and December 2023. The devil is always in the detail, so within that number, food inflation was 7.7 per cent, fuel inflation was 13.7 per cent and core inflation (non-food, non-fuel) was 3.4 per cent.

In more technical terms, that 6.6 per cent change in the CPI (which is how inflation is measured) is ordered and weighted in three components – transport rose by 11.7 per cent; housing, electricity, water, gas and other fuels by 8.3 per cent and food and non-alcoholic beverages by 7.7 per cent.

The closest that Kenyans get to these data averages is price changes in the goods and services basket – also averages - that KNBS publishes.  So, on food items, a kilogram of carrots was up by 47.7 per cent, sugar by 35.4 per cent, tomatoes by 27.2 per cent, beef with bones by 14.4 per cent and Irish potatoes by 4.2 per cent.  On the other hand, a two-kilogram pack of wheat flour fell by 4.5 per cent, fortified maize flour by 14.4 per cent and sifted maize flour by 14.9 per cent. This is a small sample of food items, but what does it tell us about our “cost of food”, beyond maize?

On energy/fuel items, electricity (50 Kw and 200 Kw usage) went up by 36.4 per cent and 27.7 per cent respectively, kerosene/paraffin went up by 36 per cent, diesel by 24.1 per cent, petrol by 19.6 per cent and LPG/gas by 1.7 per cent. So, were the low-income/poor hit hardest in 2023?

To repeat, these are prices averaged from multiple locations across Kenya (and income settings in Nairobi). The average data (6.6 per cent) says the Kenya Kwanza administration has slowed the rise in - not reduced - prices in general with some benefits accruing in, say, reduced maize prices.

So here is the test. Do we believe the pollsters or the statisticians or both at the same time? After all, the former is presumably based on “lived experiences” while the other is about “general prices”. Although not strictly comparable, both can be decomposed – qualitatively and quantitatively – into changes in living standards, shopping baskets and disposable incomes then taxes and levies. From these positions, we might have pursued a better cost of living debate. Because, to continue from the previous column, cost of living took up significant Nadco time. At least 40 verbal submissions were made, while its 50 pages cover a fifth of the final report.

Political speak

As the dialogue was first being framed, it was ironic that Azimio wanted the cost of living at the top of the table when this was not where “maandamano” began while Kenya Kwanza wanted it off the table despite it being one of six outcome objectives in their election manifesto.  So the cost of living was collapsed into sub-item 1 (Article 43 of the Constitution, Cost of Living and Related Matters) out of 4 sub-items under issue 2 (Outstanding Constitutional Matters) of the 5 dialogue issues.

The short story that follows is simple. Stakeholders made written and oral submissions and presentations, as did Azimio and Kenya Kwanza. In the other parts of the dialogue (electoral justice, new funds and offices etc.), Nadco would make committee observations followed by committee recommendations. In this case, Nadco made its observations, Azimio responded to Nadco's observations and Kenya Kwanza responded to Azimio's observations. There is disagreement between the two sides of the divide – first on the diagnosis, and then on the solution.

Moving forward, the Nadco recommendations begin with an Azimio demand to revert VAT on fuel back from 16 to 8 per cent, and to scrap the affordable housing levy. Both demands are refuted by Kenya Kwanza.  What emerges is a list of 30 recommendations/sub-recommendations which conflate constitutional, policy, legal and administrative matters with tenuous cost of living links.

Here is a snapshot. Rationalise expenditure in the next 3 years (especially travel and hospitality). Enact new anti-corruption laws. Increase the equitable share allocation to counties and finalise the transfer of all devolved functions. Merge NCIC, NGEC and KNCHR into one constitutional body. Adopt zero-based budgeting. Decongest prisons. Fast-track review and payment of pending bills.

Operationalise the PBO Act (for CSOs to mobilise resources for “community” programmes). Develop agriculture and manufacturing policies to reduce import reliance. Expand the scope of social protection and use technology. Update data on persons living with disabilities.  Increase cash transfers to older persons. Provide food in schools and build boarding schools in ASALs.

Don’t establish new state corporations. Audit the existing ones.  Reduce road maintenance and anti-adulteration levies (by 28 and 17 per cent respectively).  Establish the National Economic and Social Council in law. Finalise the classification of all roads.  Amend the law to allow county government representation in regional development authorities.  Enforce the PFM law and supporting regulations for compliance with the development spending floor and wage bill ceiling. 

Develop a policy on productivity, wealth creation and shared prosperity. Fast track the Economic and Social Rights Bill.  Invest in modern water harvesting technology for irrigation agriculture.  Comprehensively review the National Tax Policy and tax regime by February 2024.  This final recommendation might be the most significant.  It is also the only one with a specific timeline.

As part of the overall Nadco report, this is what Parliament will consider when it resumes in February.  It is not clear which parts of either Azimio or Kenya Kwanza support the report (and these recommendations). “Global economic dynamics” is now a cost of living talking point in official speeches.  Meanwhile, both Azimio and the Church are calling for proactive steps to address the same cost of living in 2024. Taxes on the one hand, and corruption on the other, are at the centre of this clamour in the face of an administration that claims to be “living within its means”.  The latest we read from Azimio is a possible “return to the streets” if these issues are not addressed.

Before this, we must first improve our cost of living framing towards real concerns: deteriorating living standards, shopping baskets and real incomes.  Its flip side: the cost of politics, corruption and government which adds to the cost of credit, doing business and consumer prices.

But if this is where we are today, what was the point of Bomas – from a cost-of-living viewpoint?