Kenyans at the mercy of rain as food prices hit the roof

Kenyans have been left at the mercy of the sky with the hope that the long rains that have just started pounding parts of the country will lead to a reduction in the cost of living, which has skyrocketed to levels last seen in 2012.

A packet of milk now costs between Sh55 and Sh60, maize flour (Sh150), beef (Sh420 per kilo), three tomatoes (Sh20) while a bunch of sukuma wiki has shot from Sh5 to Sh10 in most markets in Nairobi according to a spot-check by Weekend Business.

Last month, a packet of milk was Sh50, beef (Sh400), maize flour (Sh125), four tomatoes (Sh20) while Sh5 could still afford you a small bunch of sukuma wiki.

In Kibera slums, Jackline Nyaboke, a shopkeeper, says she is getting increasingly frustrated by the number of people she has to tell the amount of money they have given her cannot buy the same amount of goods as before. “The talk here is that the Government has raised the price of goods in order to source money for elections,” she tells Weekend Business.

Having meals a luxury

“Like right now there is no difference between posho milled unga and packaged maize flour in this shop. The kadogo economy is simply not working because those who used to purchase things in small bits now want to purchase the same using credit,” she explains.

According to her more people have moved to rice as a substitute for ugali and eggs as a substitute for sukuma wiki since the two food items which are largely associated with the poor are now un-affordable. A kilo of Sindano rice at her shop is Sh116, while an egg costs Sh6.

Still in the sprawling slum, Millicent Akoth, a mother of five says having meals has become a luxury in her house. “Sometimes I am afraid to come to my house and find the children awake since I don’t know which lies I would tell them on why there is no food,” she says.

But with the Central Bank of Kenya (CBK) short of raising its hands in surrender and a government struggling to contain the situation with very little success but with a lot of rhetoric, Kenyans have basically been left on their own to deal with the high levels of inflation.

On Tuesday, the Government announced it was releasing one million bags of maize from its strategic reserve to millers at a price of Sh3,000 with the expectation that it would reduce the price of unga from Sh150 to Sh115.

Flanked by Agriculture Cabinet Secretary Willy Bett and Cereal Millers Association Chairman Nick Hutchinson in press conference that was largely meant to give the public a show of confidence, Treasury CS Henry Rotich also announced that millers have already began importing duty free maize.

During the press conference, the two cabinet secretaries were hard pressed by reporters to explain why the Government was only reacting to the maize prices when all the other food items are equally expensive but they deflected most of the questions. “Looking at the forecast we hear that there are rains in various parts of the country. Should the rains come we expect prices will stabilize,” said Rotich.

“Milk is a commodity that fluctuates with weather. What happened this season is most of our processors converted from milk into powder but we are monitoring the margins and what we see is that they are affordable,” answered Bett when asked about the price of milk.

Then on Wednesday, the Ministry of Irrigation announced it was releasing maize flour milled at the Government owned Galana Kulalu Irrigation scheme which is going to be sold for Sh75 per packet in the coastal regions for two days.

Despite the shows by government, indications are that the Treasury and CBK- institutions mandated with controlling inflation, have seemingly thrown up their hands in frustrations if the rains fail to come and traders make a kill out of Kenyans’ desperation for food.

Latest data from the Kenya Bureau of Statistics (KNBS) show inflation had hit 10.28 percent, a level last seen in 2012 and way above the Government preferred 7 per cent ceiling. “Between February and March 2017, Food and Non-Alcoholic Drinks’ Index increased by 3.18 per cent. This was mainly attributed to increases in prices of several food items including, spinach, maize flour, milk, potatoes and maize grain,” said the bureau in a statement released last week.

Inflationary pressure

“This increase in food prices was partly contributed by prevailing drought conditions. The year-on-year food inflation stood at 18.56 per cent in March 2017,” it said.

CBK, whose one role is to control inflation, says it has little leg-room for addressing the high cost of living. When CBK Governor Dr Patrick Njoroge was asked whether the regulator would intervene to save Kenyans from the high inflation two weeks ago in London by international business wire service Bloomberg, his response was hands off.

“Nobody knows if the long rains will come in time, and be adequate,” he said. “Last time any of us played God, we failed,” he added.

When he was hired in July 2015, CBK Governor Patrick Njoroge vowed to target inflation and lending rates as his two key priorities which he said had to be contained. During that month inflation stood at 7 percent which is within CBK’s preferred ceiling of 7.5 percent.

True to his word, within weeks after Njoroge’s swearing in, CBK raised its benchmark interest rate to 11.5 per cent from 8.5 per cent in order to stem the depreciation of the shilling which had reached a low of 107 to the US Dollar and control upward inflationary pressure.

Raising interest rates has a dampening effect on economic growth due to reduced investments and consumption but it was a painful decision CBK said it had to do. And it worked. Boosted by low oil prices, inflation gradually fell to month on month to a low of 5 percent in April last year while the Shilling strengthened to 100.3 the following month.

Because Kenya is a net importer, the strength of the Shilling has a direct relationship with the country’s inflation rate. A strong shilling means the cost of importing goods becomes lower since they are bought using dollars on the international market.

However, since April last year a lot of factors beyond the control of CBK that have a direct impact on the cost of living started playing against it.

Oil prices, which had hit a low of $38 per barrel started rebounding while an aftermath of the 2015 El Nino phenomenon has caused a prolonged drought and a strengthening US dollar due to an interest rate hike in the world’s super power has hit all the world currencies hard.

Yesterday, Brent Crude was retailing at $51 on the international market, the shilling was trading at 103 to the dollar while the long rains which are expected to ease some pressure on the cost of foods have just started.

Dr Joy Kiiru, an Economics lecturer at the University of Nairobi, said that just as in the price of oil, there is nothing that monetary policy can do to address the high prices of food.

Make a kill

“This has been complicated by the fixing of the interest rate through the Banking Amendment Act which denies the monetary policy committee (MPC) space for maneuver,” she says. “The solution to the high prices lies squarely with the millers and wholesalers. Unfortunately, these people see in this development an opportunity to make a kill out of this maize shortage,” she says.

Worse, the weatherman has warned that the current rainfall which is expected to ease the situation will be lower than average in most places.

“Depressed rainfall is expected over most parts of the country, especially the Eastern sector. However, rainfall over some few parts of Western Kenya is likely to be near normal,” says Peter Ambeje, the Acting Director of Meteorological Services.