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Fuel guzzlers, air trips weigh heavily on the rich’s pockets

NEWS
By Dominic Omondi | November 25th 2021

 

Fuel pump [Courtesy]

The luxury of driving fuel guzzlers and globe-trotting for Nairobi’s rich is getting costly due to a spike in oil prices and the weakening of the shilling.

Latest data from the Kenya National Bureau of Statistics (KNBS) shows that the cost of living for Nairobi’s affluent rose the highest in September to 4.84 per cent, from 3.81 per cent in August.

The high inflation rate–the overall increase in prices of goods and services–was due to an increase in the prices of goods and services in their shopping basket, which is dominated by cars, petrol and international flights.

For every Sh100 that the rich spend, Sh28 goes to transport compared to Sh12 for the middle class and Sh7 for the poor, according to the national statistician.

This means that with the price of crude oil rising sharply over the last few months, the rich have been hit the hardest.

NCBA Bank Chief Economist Raphael Agung’ told The Standard on phone that the heaviest weight in the consumption basket for the rich comprises of fuel and energy, with a household having two or three cars.

He said food might not take a huge chunk of the rich’s income. However, they are more likely to buy it from supermarkets where it is expensive, unlike the poor who will buy food from the roadside vendor.

The price escalation in these two purchasing points have been different, with food items in supermarkets rising faster.

“The high income group are buying kales (sukuma wiki) from a supermarket, and the low income are buying it from mama mboga,” Mr Agung’ said.

The rich might be paying the price of relying on imported consumer items including cars and petrol whose prices in the global market has risen, said Ken Gichinga, chief economist at Mentoria Economics think-tank.

Price of crude oil has been going up due to increased demand as governments around the world rolled back their Covid-19 containment measures and economic activities resumed.

The single heaviest item in the shopping basket for Nairobi’s rich, according to the computation by KNBS, is cars.

The prices of cars have been going up, due in part to a weak shilling, with 112.3 of the local currency needed to buy one dollar yesterday.

“What I have noticed is that the prices of vehicles have gone up significantly, primarily because of imported inflation,” Mr Gichinga told The Standard.

He said the impending ban on importation of vehicles over seven years old has aggravated the situation. The KNBS data indicated that the cost of living for the poor and middle class remained relatively stable during the period.

The inflation rate for the middle class in September was at 5.44 per cent compared to 5.2 per cent in August.

Prices of items consumed by the poor rose by 6.47 per cent in the month under review compared to 6.33 per cent in the previous month.

Other items that take a huge chunk of the rich’s income–other than a house–include petrol, international flight and domestic workers.  

Use of internet bundles, whose prices went up after excise duty was increased, might also have contributed to higher cost of living for the rich and middle class, said Agung’.

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