Why you should brace for higher cost living

Less than a year ago, Nairobi resident Olivia Madigo would spend Sh1,500 on a week’s shopping.

She would buy a 400gm loaf of bread at Sh50, a 500ml packet of milk at Sh50 and 2kg of sugar at Sh210. The prices have gone up to Sh60, Sh55-Sh60 and Sh270, respectively. 

A two-kilo packet of maize flour that retailed at an average of Sh90 in July last year has gone up to Sh148 in May.

According to latest government data, the cost of living in Kenya shot up to a seven-month high in April at 6.47, the inflation rate driven mainly by skyrocketing prices of food and fuel.

Local vendors have been raising their prices to keep up with the increasing inflation rate.

At Kangemi market, sellers are increasing prices of basic food commodities, citing high cost of transport resulting from the high price of fuel.

Vegetable seller Vincent Nyakwari told the Star on Thursday high transportation costs have forced him to increase prices, which he said are already sending customers away.

He sells a kilo of kale and kunde (cowpeas leaves) at Sh60 each, which is Sh20 higher than April prices.

“Customers don’t understand we are paying more to bring the goods from farms. Food cannot be cheap if fuel costs are high,” Nyakwari said.

Like a number of vendors in Nairobi, Nyakwari gets his vegetables from Mwea in Kirinyaga.

“I have to part with between Sh6,000 to Sh7,000 monthly, just for transport but it cost at most Sh4,500 last year,” Nyakwari complained.

He has been selling vegetables for six years and says the soaring fuel prices is threatening his business. His plight is shared by many vendors in the market.

Harriet Achieng, a fish vendor in Uthiru, said increasing prices of fish was not received well by her customers even though they understood the economic hard times.

“The rising fuel costs. Yes, but also the rising cost of everything. It’s just very hard,” she said.

Achieng gets her fish from Migori and also cites high transportation costs.

Last weekend, motorists faced another hit at the pumps as government announced monthly retail prices to June 14.

A litre of super petrol now retails at Sh150.12 in Nairobi, up from Sh144.62. Diesel is going for Sh131, up from Sh125.50.

A litre of kerosene retails at Sh118.94, up from Sh113.44 until June 14.

Without the partial government subsidies, consumers would have paid Sh176.47 for a litre of petrol. Diesel would sell for Sh174.94 and kerosene, mostly used for lighting and cooking, would trade at Sh169.26. 

The Consumer Federation of Kenya has said there is little expectation Kenyans will be relieved from the high cost of living any time soon.

Cofek secretary general Stephen Mutoro, in a phone interview with the Star, said consumers should prepare for high costs of food, fuel and other commodities for a while.

“If only 50 per cent of maize inputs were realised in 2021, this year things will most likely be worse because of the high costs of fertiliser and other farm inputs,” Mutoro said.

The shortage of maize and wheat is increasing and farmers and manufacturers say this will lead to a food crisis unless urgently addressed.

The Kenya Association of Manufacturers and other lobbyists have said the shortage will steeply drive up the prices of these commodities and further aggravate inflation.

Kenya imports 60 per cent of the grain deficit mainly from Ukraine and Russia where the ongoing war has disrupted the importation supply chain.

Economic analyst Abraham Murui said disruptions caused by Covid-19 left the country in a vulnerable state as loss of livelihoods led to reduced purchasing power.

“A lot of our food production is fuel-related. This means as long as the cost of petroleum, diesel and kerosene is high, the cost of production and sourcing as well as supply chain will remain high,” Murui said.

He said the food supply chain has also been disrupted by ‘cartels’ that have fresh produce but refuse to sell in urban centres because of price hoarding.

Last month, the International Monetary Fund warned that the steep rise in fuel and gas prices will push inflation to levels last witnessed during the global recession in 2008. 

The lender said elevated inflation is expected to persist longer than envisioned in an outlook released last October. It said ongoing supply chain disruptions and high energy prices will continue in 2022. 

“The cost of living will be severe in the developing countries, especially in Sub-Saharan Africa, because of poor agricultural yields, high import costs due to weak currency and supply chain disruptions due to emerging Covid-19 variants,” IMF said. 

Apart from the high fuel prices, Kenyan households have been grappling with rising food prices caused by high fertiliser prices and drought.

The weak shilling against the US dollar has also impacted the cost of imports, leading to high commodity prices.

Commodities with significant price rises include cooking oil, which has more than doubled in two months.

Between March and April, prices of milk went up by Sh5 per litre, currently retailing at an average of Sh64.

Ukraine and Russia are also major global sources of fertiliser ingredients.

This has reflected on shelve prices in the local market where prices of bread for instance have increased by Sh5, with a 400gm loaf now going for Sh60.

Recession concerns

Even so, the high cost of living is not just in Kenya, the importance of these commodities to the global economy has led the annualised inflation rate to reach its highest point in decades in many countries: 9 per cent in the UK, 8.3 per cent in the US and 7.4 per cent in the Eurozone.

Singapore’s inflation rate was at a 10-year high of 2.9 per cent year-on-year in March.

The country’s official data showed the increase was driven by higher inflation for food and services.

This month, Sri Lanka was hit with a major fuel crisis that left the nation down to its last day of petrol. Nationals were forced to join the lengthy fuel queues that have galvanised weeks of anti-government protests.

Sri Lanka currently faces a budget deficit of $6.8 billion (Sh792 billion), or 13 per cent of its GDP.    BY THE STAR