Njaanuary is for the poor, the rich are still on holiday

With most Kenyans emerging from Christmas having splurged a fortune on the festivities, Njaanuary is here.

But the ‘njaa’ (Swahili term for hunger) in Njaanuary is for the poor, the rich are still on vacation.

An analysis of consumer prices in January for the different income groups in the last six years to 2018, reveals an interesting pattern where affluent residents of Nairobi have it easy while the poor - and by extension the middle class - grapple with a relatively high cost of living.

So tough are things in January that Kenyans have christened it ‘Njaanuary’- portmanteau of the words ‘January’ and Swahili word ‘njaa.’

Financial strain will not be indiscriminate. Despite spending a fortune in December, with a number of them taking vacations in such highly romanticised holiday destinations as Bahamas, Hawaii, Seychelles and Zanzibar, the rich won’t be joining the poor in crying this month.

Official figures from the Kenya National Bureau of Statistics (KNBS) shows the rest of Kenyans - from a mechanic in Kibera slums through an insurance underwriter in Fedha Estate Nairobi to a maize farmer in Trans Nzoia - will have to maneuver a minefield of financial difficulties.

Inflation rate

In the last six years, inflation, the rate at which prices increase over time (one year in this case)- for low-income residents of Nairobi taking home a monthly income of Sh23,671 averaged 8.1 per cent, higher than the national average of 7.7 per cent.

However, inflation among the rich with a monthly income of more than Sh120,000 and living in Nairobi’s suburbs of Kilimani, Riverside, or Kilileshwa- increased by an average five per cent in the same period.

For the middle class with an income of between Sh23,000 and 120,000 and residing in estates such as Donholm, South C and Nairobi West, prices of products they consume the most has increased by an average of six per cent.

Besides poor planning that sees low income households spend most of their income eating, drinking and travelling during the festive season, experts insist that a good chunk of products consumed by the poor tend to rise sharply between December and January. This leaves them with little to spare on school fees and textbooks when schools open.

Almost everyone indulged in December, but the hardship in January will not be similar. The price of international flight for the rich, local flight for the middle class and country bus fares for the poor all went up in December, according to the national statistician.

Traveling from Nairobi to Kisumu, a distance of 350km, using country buses cost passengers an average Sh1,246 in December last year compared to Sh1,059 in the same period in 2017, according to KNBS.

The price of local flights increased by 18.4 per cent during this period to Sh21,230 from Sh17,926 while the price of international flight increased by nine per cent to Sh120,546 in December 2018 up from Sh110,674 in December 2017.

“The upsurge in the transport, food, clothing and foot ware prices was attributed to increased demand that was associated to Christmas festivities,” said KNBS.

In December, notes Dr Scolastica Odhiambo, an Economics lecturer from Maseno University, people tend to spend without the propensity to bargain.

Unfortunately, according to Deepak Dave, founder of Riverside Capital Advisory, some of the money spent in December is borrowed money whose payment in January will add up to the cost of living by the poor.

Besides receiving a higher and regular income, the rich will also plan for their vacation well in advance, mostly six months before the festive period. Most of them tend to save for the festivities.  “For example, they will book for their flights and vacation six months in advance,” explains Dave.

Generally, a poor person is almost helpless against the vagaries of January. Not only are their consumer products such as food unstable, they also tend to buy them small quantities from dukas (shops) and mama mboga (vegetable vendor).

The rich and the middle class will buy in bulk from supermarkets.

For transport from the country side in January, for example, a poor household of six for example, will use public means during this period paying Sh2,000 per head to and fro their rural homes. And, the poor tend to have bigger families than the rich, explains Deepak Dave, a financial analyst. “The effects of this expenditure spills over to January,” says Odhiambo.

Thus, in January, in addition to paying for high cost of food- which takes over 40 per cent of their income- rent and transport, life gets trickier for the poor city dwellers whose budget is inflated by a spike in the cost of tuition fees, text books and uniforms as schools re-open. The going is also tough for Kenyans in other regions whose inflation increased by 7.9 per cent in the period under review.

Poor people, according to Odhiambo, are heavily weighed down by what she describes as “back-to-school economy.”

“In January there is high demand-pull inflation due to school high cost of uniforms, school fees, textbooks and schools buying food for students, competing with other consumers in the economy,” she explains.

That is not the case with the rich. “The rich and middle class are incrementally pockets of less hit by increase in school fees,” says Jibran Qureishi, the Regional East Africa Economist at Stanbic Bank.

The difference in spending pattern can also be traced to the different weighting of the products in the basket of consumer products for the different income groups, known as consumer price index (CPI) or the cost of living index. CPI looks at basket of goods and services that are consumed by the different income groups and track the changes in prices over time.

“For the rich, uniforms, textbooks, tuition fees and food, which tend to vary during this period, is but a small fraction of their income,” says Dave.

Gerishon Ikiara, a lecturer at University of Nairobi, notes that in January tenants tend to change their residences. “Probably because they were not happy with their landlord. For the new houses, they will have to pay deposits, which is an additional cost,” explains Mr Ikiara.

Mr Qureishi adds that during this month landlords revise the rent rates, pushing up the cost of housing.

But the rich do not suffer such variability, even for rent which is one the products they consume the most. “More housing units for the rich are being built thus stabilising or lowering rents and prices of houses,” says Ikiara.

Revise the rent rates

Even as schools compete with the rest of the economy for the little food, supply of food during this month is also just low. Ikiara says that there are areas where food will not be adequate, especially if the November rains were not good. Normally, it is not until March that the country gets its first harvest of maize from the short rains.

Moreover, new taxes put in place by the Government kick-in in January, and most of them tend to affect the poor the most. For example, starting this month, the Government will begin taxing mama mboga and  artisan through a new tax known as presumptive tax.

In January, people tend to spend without propensity to bargain. Also the spending pattern for the different income groups tend to be different. The poor spend in small units while the rich and middle class spend in bulk

People are advised to plan for the festive season so as not be hit by Njaanuary: shop earlier and save more the festive period. “Save and live within your means. Plan for the whole year and have a budget you stick to,” says XN Iraki, lecturer at University of Nairobi.

But Qureishi doubts if exhorting the poor to save will work: “If there is nothing to save what do you save?”

Dave thinks people should spend ahead of time to escape the debilitating effects of Njaanuary. “You need to predict your consumption patterns and work on them during the course of the year,” says Dave.

“At a micro-economics level, the state should hasten the construction of the SGR line for the Western circuit so that people there can enjoy the lower transportation costs,” says Odhiambo.