Kenya: We Are One

This morning, KEPSA - the Kenya Private Sector Alliance had a meeting with business and religious leaders to revive the  ‘We are One’ campaign for Kenya at a time when terror and insecurity appears to be a growing threat to the country. 

Excerpts 

• Safaricom Bob Collymore spoke about an investment banker who was comfortable traveling to Abuja for the World Economic Forum, but not to Nairobi which is now considered insecure. He then said the perception of Kenya was not good out there, and that the recently launch Kenya EuroBond was oversubscribed because it had a nice yield. He urged Kenyans to focus, not on politics, but on addressing the youth bulge and insecurity.
• KEPSA CEO Carole Kariuki urged Kenyans to help rebuild Mpeketoni, Baringo and Mandera by donating building materials or by channeling funds through the Kenya Red Cross.
• Some disclosures & concerns discussed included political (and religious) leaders who speak carelessly on national TV or who engage in double speak before different tribal and religious audiences, arming of communities, and targeting of properties of some communities. 
• University students are resisting pressure to demonstrate (throw stones) on behalf of politicians 
• The police are doing their part but what are ordinary Kenyans doing to promote peace. They were urged not to speculate on facts, and not to re-send / share propaganda that is found on social media .
• The morning ended with the national anthem, as a prayer. 

Muranga’s Shillingi kwa Shillingi

Kenyan counties are expected to raise funds for some of their activities to and this is crucial as many counties will not able to fund their operations and programs with the funds allocated to them by the national government. 

Muranga County Government has an interesting vehicle called Shillingi kwa Shillingi (translated as shilling by shilling) through which they intend to mobilize resources from Murang'a residents (and the Murang'a diaspora)  by targeting a total of 100,000 people who will save an average amount of Kshs 3,000 ($35) per month towards a goal of raising Ksh3.6 billion ($42 million) a year 

The invitation states that the ultimate objective is to match every shilling received from national government with an equal shilling contributed by the people of Murang'a through savings, hence the "Shillingi kwa Shillingi" concept ... (and the) savings will be used in development projects such as real estate, property development, commercial power generation, agro-processing, trading and any other social and economically viable projects in Muranga and beyond.

There have been newspaper and TV ads for the Shillingi program which have been careful to sidestep a caution by the Capital Markets Authority (CMA) on unlicensed investment solicitations to the public, by stating that the Shillingi contributors are members who are saving (the more they save, the more shares they get), but they are not investors who expect a dividend.

This is a novel undertaking spearheaded by the Murang'a Governor, and one which more counties should emulate once they see how it works.  The investments will be overseen by a respected audit firm, Deloitte, who have been appointed as project managers and Safaricom Business are the ICT partner who will handle SMS registration and M-Pesa collections, but savings payments can also be made through Equity, Cooperative and Jamii Bora banks.

Urban Inflation Index: July 2013

There is much debate about an upcoming VAT bill and the current government budget deficit, separation of powers, and transfer of funding responsibilities to devolved governments (even as some entities like road contractors, and teaching & health unions prefer to deal with the central government. This weekend, County Governors floated a proposal for the country to hold a new referendum, which will be the 6th Kenyan public vote in 12 years, to decide on an increase in the allocation of funds to counties from the current 15% to 40%.

The  VAT Tax Bill (PDF) seems to tax everything at 16% with only a few exemptions. Exclusions from the tax will include;  

• Supplies to the red cross, emergency relief, personal goods brought in by travelers, supplies to international and regional organizations, supplies to multilateral and bilateral donors, supplies of to diplomats and governments, oil prospecting, international air travel, and bottled water makers. 
• Services in sectors like banking, insurance, education, medical, agriculture, local transport, residential, stock brokerage, sports, arts & plays, mobile airtime, and gambling. Even though they are exempted here, banks are passing on a new tax to their customers amounting to 10% per transaction while Kenya Airways management has said that the airline will shut down if the bill is passed as it will affect operations by increasing the cost of jet fuel, aircraft purchase/leasing and landing/ parking fees.
•  Petrol, Kerosene and Natural gas are exempt but only for the next 3 years.  

On to the index that compares prices to a year ago and three years ago. 

Gotten Cheaper

None really 

About the Same 

Mobile Communications:

Communication costs are largely unchanged with slight variations in promotions for voice and data usage. The big moves are in mobile and card payments with companies seeking to increase their awareness and become the preferred payment platforms for ordinary Kenyans such as by using Safaricom's Lipa Na M-pesa and Equity Bank's Beba Pay and PayPal channeles. 

More Expensive

Staple Food: A 2kg pack of (Unga) Maize flour, which is used to make Ugali that is eaten by a majority of Kenyans daily, costs Kshs. 104 compared to 118, a year ago. But this is 46% more than the Kshs. 71 price of three years ago.

Beer/Entertainment: A bottle of Tusker beer is Kshs 200 (~$2.3) at a local pub, up from 180 last year and 160 three years ago. There have been two recent price hikes, but this may have more to do with EABL's management and procurement outlook, and the price may go up more with future taxes. 

  

Fuel: At Kshs 109.52 per litre (~$5.73/gallon), petrol prices in Nairobi are slightly cheaper than the Kshs 117.6 per litre a year ago but about 20% more than the Kshs 90.9/litre  of three years ago. Petrol, Kerosene and diesel prices are set by the government and even with the prospect of oil discovery, the major retailers are going through some turbulent times with both listed Total and Kenol reporting losses. 

Foreign Exchange: 1 US$ equals Kshs 87.15 compared to 84.25 last June and  80.6 three years ago  in March.

Other food item: A 2 kg. Mumias Sugar pack is Kshs 250, which is up from Kshs. 237 a year ago, and Kshs 200 three years ago.

Others

Factors likely to affect the the cost of living include:

- Consumers are likely to see an electricity cost increase due to debts for generation of hydro power.

- The National Social Security Fund is proposing  a 4400% increase  in monthly contributions (for the highest earners) from Kshs 400 per month to 18,000 (~$210)

 - A new 1.5% levy on all imports was effected on July 1, to fund a future standard gauge railway between Mombasa and Kisumu. 

Urban Inflation Index: March 2013

Gift from Uganda during the Kenya Supreme Court hearings

March 2013 saw the highly anticipated Kenya general election. There was a lot of uncertainty in the country, and beyond on what  impact it would have on the regional economies.

There were some familiar and ominous signs. The heavy investment the government had made in electronic vote systems failed, and it was a close race with a disputed result. However, unlike in 2008, the dispute was settled in the Kenya Supreme Court, and not in the streets. 

Ahead of all this, some Nairobians engaged in some extra shopping or stocking up which some called it panic shopping - but this was actually as prudent as shopping ahead of an approaching hurricane or storm, which may veer off at the last minute.

On to the index that compares prices to 3 months ago and a year ago.

Gotten Cheaper

N/A

About the Same

Staple Food: A 2kg pack of (Unga) Maize flour, which is used to make Ugali that is eaten by a majority of Kenyans daily, costs Kshs. 105, which is down from 107 in December, but up from 97 a year ago

Other food item: A 2 kg. pack of Mumias sugar pack is Kshs 250, same as three months ago. It was 245 a year ago.

Communications: Telephone call and data rates are largely unchanged, and there have been few new mobile promotions,  with some items offered free like access to Facebook (Yu), Wikipedia (Orange), money transfer (airtel).

Fuel: Petrol prices in March were Kshs 117.6 per litre (~$6.12 per gallon) slightly higher compared to Kshs. 111.6 per litre a year ago and 112.6  last December.

Utilities/Electricity:  A pre-paid token purchase of Kshs. 500 purchase from the Kenya Power & Lighting Company (KPLC) gets about  33 units, compared to 31 a year ago. However the units are only a fraction of the bill with 4/5 of that Kshs. 500 payment going to pay for power generation debts, forex & fuel charges and even inflation. It's odd that even as heavy rains cause floods around the country, and presumably fill hydro dams,  KPLC still procures private thermal power and bills consumers for the costs.

Foreign Exchange: 1 US$ equals Kshs. 85.63 compared to Kshs. 86 three months ago and Kshs. 83 a year ago. The shilling did not dip much ahead of the election as many had expected.

More Expensive

 
Beer/Entertainment: A bottle of Tusker beer is Kshs 200 ($2.35) (at a local pub) up  from Kshs 180 where it has been for quite a while. The price increase was driven by local brew giant  East African Breweries that's got some debt issues.

Urban Inflation Index December 2012

Five years after the last election that derailed Kenya's image as stable economic regional powerhouse, it’s political season again with just two months to the next general election. How does the cost of living compare to a year ago and three years ago? 

Gotten cheaper

None really

About the same 

Fuel: A litre of petrol is Kshs 112.6  (~$5.96/gallon) - compared to Kshs. 124 a year ago and 83.5 three years ago. The government controlled price of petrol (as well as Diesel at 105.7 and kerosene at  86.4) somewhat  mirrors the international price of  murban crude oil ($111.8 in December 2011, and $76.1 in December 2009)  rightly shifting the discussion on price controls  to other areas like the high price of cargo transport within Kenya and the East Africa region (about the same price as shipping from Asia or Europe) and the impact on local good prices.

Beer/Entertainment: A bottle of Tusker beer is Kshs 180 (~$2.10)  The price of beer is more expensive than 140 3 years ago, but it seems to have stabilized with the influx of beer and other alcoholic companies capitalizing on the affluence' or consumption habits of urban Africans and  companies like Martini, Jameson, Heineken, Smirnoff, Castle and Pepsi bottling in Kenya, are now doing their own marketing, distribution and extravagant event promotions. 

Martini mixing session  at the Tribe Hotel

Staple Food: A 2kg pack of Maize flour, which is used to make Ugali that is eaten by a majority of Kenyans daily costs Kshs. 107. This compares to 113 a year ago and 83, three years ago. 

Other food item: A 2 kg. pack of Mumias sugar pack is Kshs 250. This compares to Kshs. 375 a year ago and Kshs. 200 three years ago. It’s unclear if the COMESA exemption for Kenya will continue, which limits the amount of regional sugar that can be imported at lower tax rates, but the country has attracted interest and an investment from a large Mauritius producer into a private sugar company at Kwale.

Communications: These are largely unchanged though there have been modest increases in the costs of mobile money transfers (Safaricom's M-Pesa), internet data (Orange) and call rates (Airtel, Essar) . 

At the release of Safaricom's half year results  about a month ago the company Chairman declared that there had been a recovery (end) from the damaging price wars as they recorded an increase in their half year pre-tax profits of 113% to about $135 million with M-Pesa now accounting for half their non-voice revenue. However , the Kenya government now seems intent on latching an excise tax on mobile money transfer transactions - bumping up that cost for users. 

More expensive

Foreign Exchange: 1 US$ equals Kshs. 86 compared to 84 a year ago and 75.6 three years ago. This is expected to dip even further given Kenya's low exports and growing debt and deficits with new government structure. 

Outlook: 

It's likely that by the next quarterly review, Kenya will have had a successful general election with a clear winner or be facing international sanctions for electing accused war criminals or have a close disputed election that may lead the country to disintegrate like in 2008 or be preparing for a second run-off round of Presidential elections. Regardless of these  scenarios, the next quarter will also see the country emerge with a larger, more expensive government with new levels  of administration and devolved authorities - as a result of the constitution adopted in 2010.

Urban Inflation Index: June 2012

The budget speech was read earlier this month and while the big news was about the tax authorities now targeting landlords (who have always been required to pay tax, but don't), there's also a draft Value Added Tax (VAT) bill that's expected to lead to some price increases including of some food items. Here's a  recap of the  2012 Kenya Budget Highlights (PDF) by financial firm Deloitte.

On to the index - comparing changes to March 2012, a year ago and three years ago.

Gotten Cheaper
 

Other food item: Sugar: A 2 kg. Mumias Sugar pack which is Kshs. 237, down from Kshs. 245 in March . It was 190 a year ago and 175 three years ago.

About the Same 

Foreign Exchange: 1 US$ equals Kshs. 84.25 compared to 83 in March. Many people expect the shilling will invariably drop again due to the current account deficit the country has. Last June, the dollar exchanged at 89 and three years ago it was at 78.

Communications: Cell phone rates are relatively unchanged with mobile operators just trying to get more usage from customers. This month Safaricom sent text messages encouraging more use of facebook, twitter,  and Buni.com  & imdb.com (where you can watch TV & movie clips ).

Beer/Entertainment: A bottle of Tusker beer is Kshs 180 ($2.2) (at a local pub), unchanged from three months ago. There have been no price wars despite the link new beer entrants on the market, and one newspaper wrote last week that, in order to  get more tax from beer, the government is going to adjust beer prices every three months.

Utilities:

Pre-paid electricity is about Kshs 2,500 per month which is unchanged from the last review.

LPG: Cooking gas supplies seem to have resumed stability for now, but at a price of about Kshs. 3,000 ($37)
   
More Expensive
 

Fuel: Petrol prices in Nairobi are Kshs 117.6 per litre (~$6.25 per gallon) compared to 111.6 in March and 114.9 in June. Three years ago, the price was 40% cheaper at Kshs 72.5 per litre. Niti Bhan advises that it’s important to also track the price of kerosene as that has a significant bearing on millions of households compared to petrol. Read her blog here and an interesting column that showed that cooking gas  LPG cooking gas is cheaper than kerosene (but requires a large cash investment, which is out of reach for many) 

Staple Food: A 2kg pack of (Unga) Maize flour, which is used to make Ugali that is eaten by a majority of Kenyans daily, costs Ks118, up from Kshs. 97  in March 2012. A year ago it was Kshs 130 and three years ago it was 92 per bag.

New African Consumer

Today in Nairobi McKinsey & Co, and TBWA released a report on The New African Consumer. It’s one that trends towards rapid urban driven growth with people having with more discretionary spending power,  and one not based on resources. The top states with the highest consumption per capita, and accounting for 75% of all of Africa are SA Egypt, Nigeria, Morocco, Algeria, Sudan, Tunisia Libya Ethiopia and Kenya. Crucially most of the growth (80%) will come from people who earn more than $10,000 per month.

It’s a useful road map for companies looking to understand future trends in Africa and offer lessons such as be online (Africa had more Google ad clicks than Western Europe), brands & quality matter, distribution is king, data is scare, respect country differences & act local, prepare for talent shortage, and expect to iterate (have dynamic execution).

 

The report should lead to a bigger debate, one based on future sustainable economic trends. The same report points out that more babies were born in  Nigeria than all of western Europe. So more studies need to be done in that regards to answer where will the increased African population work? Where will they learn and get medical care? Who will build houses for them? How will they commute? Who will grow food for them as more will reside in large urban centres? Will they be able to cross-borders in such of improvement in any of these challenges? That’s the next set of questions & opportunities to balance out with the insightful trends in this report.