Why Kenyans went on Christmas spending spree despite hard times

Kenyans celebrating this year's Christmas at Jomo kenyatta Public beach (Pirates) in Mombasa County on Wednesday 25th December 2024. [Kelvin Karani, Standard]

It is Christmas week when consumer spending gets into the centre-stage of the world economy. At the heart of this seasonal frenzy of consumer spending is a mythical being known as Santa Claus or Father Christmas.

History.com in an article updated on December 9, 2024 traces the origins of this legendary patron of Christmas to Santa Claus, otherwise known as Saint Nicholas or Kris Kringle from the third century.

According to History.com, St Nicholas was a monk believed to have been born around A.D. 280 in Patara, near Myra in modern-day Turkey. He was admired for his piety and kindness, giving away all his inherited wealth through traveling to the countryside helping the poor and sick.

His feast is celebrated on the eve of the anniversary of his death on December 6. Traditionally, this day was considered a lucky day to make huge purchases or to get married.

Today, Santa Claus is thought to be a jolly man in red who brings gifts to good girls and boys on the eve of Christmas. It is the commercial side of this legendary tradition among Christians that has been passed on from one generation to the next that has historically puzzled economists. This commercial side of Christmas is equally highly practiced among non-Christian leaning economies like China and Islamic countries.

Over the years, economists have not only focused on the seasonality of consumer spending on the last quarter of the year, but have also used the analogy of Santa Claus to develop economic models or to study global finance.

For instance, the 1970 Nobel Memorial Prize winner in Economic Sciences, Paul Anthony Samuelson used what he called Santa Clause economics to formulate mathematical models with empirically unrealistic assumptions. He referred to mathematics as the natural language of economists. In 1996, he was awarded the National Medal of Sciences in the United States of America for his contributions to mathematical foundations of economics.

In an article posted on December 19, 2024, the Ecole de Commerce et de Management à Paris (EMLV) Business School in Courbevoie, France, he argues that seasonal consumer spending around the Christmas period transforms markets into bustling hubs of activity. The World Trade Organisation (WTO) estimates that international trade volumes increase by about 15 per cent on the fourth quarter of the year.

According to the EMLV article, holiday spending is a reliable indicator of consumer behaviour and confidence about the economy. While holiday spending is traditionally believed to have beneficial economic impacts, especially around holiday-related industries by creating temporary employment and increasing sales volumes for businesses, they do also have negative impacts on things like currency fluctuations and stretching of the limits of global supply chains due to increased consumer demands.

That notwithstanding, macro-economists and micro-economists have had varied views around Christmas related consumer spending. Macro-economists view the seasonal increased consumer spending around Christmas to have positive effects of key indicators like employment, trade and foreign flows and stimulation of consumer demand among others. Micro economists, on the other side, argue that the seasonality indulgence by consumers may overall lead to a decline in the general welfare of the society.

Difficult year

This leads us to the fundamental question of this article on the implications the Christmas season in a year that many Kenyans generally agree has been a difficult one economically.

To put matters into context, emerging evidence a week before Christmas indicates that there has been a lot of job losses as businesses adjusted their operations to new taxes and disruptions of economic activity by the Gen Z protests.

President William Ruto seemed to acknowledge this by constituting a 10-man task force to evaluate the causes of exit of many multinational businesses in the country, and confirming trade reversal in favour of Tanzania within the East Africa Community.

Further, the National Treasury and official data have confirmed negative Foreign Direct Investment flows into Kenya over the recent past, compared to significant gains by her neighbours Ethiopia, Tanzania and Uganda. This is after the Kenya Kwanza policy wonks consistently denied the cries of Kenyans that their economic policies are either not working or have caused more harm.

On the week of Christmas, the President’s top economic advisor, Dr David Ndii, responded after someone shared the report on job losses on his X handle, that that was a necessary price for Kenyans to pay in exchange of stabilisation policies. The implied meaning by this response is that the government’s priority has been on stabilisation of the economy, that has come at a heavy cost to households and businesses.

While this appears as an inevitable trade-off at the policy level, the problem on the part of the government arises because Kenyans voted for Dr Ruto due to his promise that he would alleviate their economic suffering under the Jubilee administration. When considered in totality, Kenyans opted for the UDA candidate over Azimio’s Raila Odinga because of his promise to end their economic suffering once he took the oath of office, famously quoted as ‘nikiweka Biblia chini hivi’.  

So as Kenyans enjoy their third Christmas under the Ruto administration, questions abound as to what to celebrate. In theory, Kenyans appear to have travelled to their villages and for holidays like during any other Christmas before. This is evidenced by the traffic snarl-ups across major highways, especially the Nairobi-Nakuru highway.

I travelled to Mombasa on December 8 and 15. There were no SGR tickets and for the airliners, the ticket prices were crazy. My air ticket to Mombasa on 15th cost almost Sh60,000. Somebody posted on X that tickets to Kisumu were going for Sh50,000 on this Christmas week. This implies that there has been heightened travel demand to the coastal city, a popular holiday destination around Christmas, and of course to Kisumu City a.k.a. Dalla, famous for the lakeside people’s love for the fine things in life under local lingua.

As a consequence, many people are questioning whether the experts' claims of hard economic times in the country is a reality or an hoax. From an economic perspective, the fact that majority of Kenyans appear to have enjoyed their Christmas season the usual way does not negate the evidence and lived reality of hard economic times for two main reasons.

The first reason is based on the legendary traditions around Christmas. For many households, especially in the rural areas, Christmas is the season when people buy gifts like clothes and enjoy more costlier food menus. The income distribution data confirms low household incomes across many communities in the country, especially in the rural parts. Thus, no matter the hard economic times, Christmas holiday still remains the only season to indulge. This practice is not about to end any time soon.

The second reason is a phenomenon from behavioural economics called herding behaviour. This phenomenon is used to explain many irrational consumer behaviours in economics, where people do things that economic theory cannot explain. This is a behaviour where people do things simply because others are doing it.

Thus, there should be no automatic interpretation that the increased spending habits mean that the economic situation has suddenly improved over Christmas. Predictably, like any other year before, we shall see the cry of parents over the cost of back-to-school shopping for January 6, 2025, when schools are due for opening. This has always been the case, year-in-year-out.

For now and from this column, let us enjoy and indulge, but lets not forget our obligations for January 2025. I take this moment to say ‘Think You’ to my faithful readers and sincerely wish you a blessed 2025, Inshallah.