Kenyans cut down on essentials as cost of living shoots through the roof

Maurice Ouko, a fisherman on Lake Victoria who owns four boats, has not bought any new clothes for his four children for over a year.

From the Sh20,000 he makes in a month from his trade, he spends Sh4,000 on rent, Sh500 on electricity, Sh300 daily to feed his family and still gives his two children Sh120 as allowance every day when they go to school.

This sums up to Sh15,000, minus the cost of purchasing water whose price has increased to Sh20 for a 20 litre-jerrican up from Sh5 a few months ago. His family is basically surviving on a negative financial position, a rat race that seems to be netting more participants each day.

In years gone by, Ouko would make up to Sh50,000 a month thanks to a huge demand for fish. Now, his family consumes the Sh20,000 he makes monthly. A surge in the cost of basic commodities has forced the family to make fish their staple meal.

“Because we have a baby just about 10-months old, medical expenses are bound to rise, so I still save some money for that,” he says.

Stagnant wages

As debate on the high cost of living continues, millions of Kenyans are being forced to cut down on essentials like health to survive. Inflation, a weakening shilling and a slow growth in wages is increasingly eroding their purchasing power.

With inflation at a 58-month high of 11.5 per cent due to a surge in food prices, stagnant wages and banks significantly cutting down on lending, it appears all economic fundamentals are conspiring to turn Kenya into a nation of broke citizens.

Picture this. Increase in wage earnings for those on a payroll last year dropped to 3.1 per cent from 4.5 per cent in 2015, according to the Economic Survey released three weeks ago.

Struggle to survive

With inflation averaging 5.8 per cent during the same time, it means those who are employed spent more to survive than the increase in their annual income, which means they have become poorer.

A push by banks to have the law on interest rates repealed in order to increase access to credit, which they argued would have helped improve the circulation of money in the economy, hit a dead end on Wednesday after Deputy President William Ruto said it would not happen.

“Yes, there has been a slow down and partly because there has been expectation there will be change of policy. But I’m sorry if that is what is being sought -- it is not going to come anytime soon,” said Ruto in a TV interview.

“Our position is that the financial institutions we have in Kenya should cut down on their ‘fat’, they should cut on their expenses. They should change their business model,” he insisted.

For farmers, it is even worse as a bad season has left most of them on the brink of becoming paupers until the next harvesting period. In Eldoret, Jackson Korir harvested 40 bags of maize last season instead of the usual 80 from his four acre parcel. “Depending on the market pricing, I am expected to earn Sh112,000 for 40 bags. That is before all the costs incurred in the planting process, chemicals, laborers, transportation and shelling are factored in, which means I might pocket less than Sh20,000 from the produce,” he says.

As a result, he has been forced to cut down on spending and even leased half of his farm.

“We no longer watch paid up TV channels because we can’t afford monthly subscriptions. To pay school fees for my four children this term, I leased part of my farm,” he says.

According to the World Bank, the average Kenyan household requires Sh99 per member to cover daily costs. This figure is slightly higher in urban areas at Sh113 and Sh90 for rural households.

A survey released recently by Twaweza East Africa however says four out of 10 citizens have in the last three months gone without food due to lack of money.

“As a result 70 per cent have been forced to take at least one measure to adapt to the current financial pressures, including eating less than they should (72 per cent), less healthy food (74 per cent) or consuming less variety of food (76 per cent),” it said.

“When facing cash constraints, half of all households (49 per cent) respond by cutting spending. Smaller numbers try to get through the tough times by calling on loans, either by obtaining supplies on credit (21 per cent) or by borrowing money (14 per cent),” it said.

Food and transport costs have a significant weighting in the basket of goods and services used to measure inflation. The rich spend a huge chunk of their income on transport, the middle class on utilities and rent while food makes the bulk of the poor’s budget, according to the Kenya National Bureau of Statistics (KNBS).

Keroche Breweries Chief executive Tabitha Karanja’s main worry is how to prevent her business from going under as they have been forced to increase the prices of some of their products. She has also canceled a number of business events and travels she had planned because she could not afford to travel out of the country at this time.

“People think when cost of goods and services rise, it is only low income families that are affected. Truth is, it affects everyone,” she says.

But as she ponders how to grow her company in difficult times, Alali Osanya, a teacher at Kakamega Primary School, disappointed his wife by recently declining to grow their family size, a decision that has put them at loggerheads.

“I told my wife that we cannot add more children to the three we have since we will not manage to cater for their needs. As a teacher, I always survive on bank loans whose interests are unbearable,” he says.

“At the moment, I can’t afford to buy bread, milk or sugar and we eat meat on rare occasions. If I spend on meat, my kids will drop out of school,” he says.

On Labour Day, President Uhuru Kenyatta announced an 18 per cent increase in minimum wage while setting the minimum taxable pay at Sh13,475. The Cental Organisation of Trade Unions (Cotu) had asked for a 22 per cent rise citing inflation.

—Report by Vincent Achuka, Silah Koskei, Nathan Ochieng, Dalton Nyabundi and Mercy Orengo

newsdesk@standardmedia.co.ke