Thursday, October 18, 2007

High prices in a growing economy?

The Kenyan economists have said that the economy has been growing rapidly of late. I am not an economist but I want to state the facts that I know and are affecting me as a Kenyan. These facts have made me poorer as I spend more, save less and invest less. The income has remained constant (that is my salary) and the prices of essential goods that this salary is expected to buy are rising each day. I cannot invest in business to boost my income because I consume all and cannot save and invest otherwise I will go hungry, sick, naked etc. I cannot get bank loan because my employment is considered insecure because of the management structure.

Just a few months ago sugar cost Kshs.50/kg but now its Kshs.70-80/kg, wheat flour was Kshs.85 for a 2 kg pack but now its Kshs.115. Bread was Kshs.22 now Kshs.30, Milk between Kshs.20 – 25 depending on the pack and now Kshs.23 – 30. These are just a few examples that are used on a daily basis.

Prices of other products have gone up but we can choose to avoid them depending on our purchasing power. This high rise in commodity prices is affecting our pockets so much because our incomes are not rising at the same rate. I can imagine how difficult it is for poor people especially those in the slums because most of them earn very low wages of less that Ksh.200 per day.

Assuming we have a father who is the only bread winner earning Ksh.200 per day as a casual laborer, has four children, a wife and two dependants. Can someone help me to draw a one day budget for one meal for this family? Factor in the transport to work, daily rent rate and the other basics. This is how tough it is. Women selling mandazi (doughnut like snack made out of wheat)to make a living in slums must also be getting it tough.

One reason for high prices is plastic issue. I agree that plastic is a potential threat to the environment and should be dealt with. That is why the government came up with high taxes for plastics and also banned plastics that are lower than 30microns. Plastic companies now have to pay 120% excise duty on plastic bags and may end up closing down causing many to loose jobs. So what are we doing, improve environment at the expenses of standard of living? Would you eat a clean environment if you have nothing in the house? This is the economics I have failed to comprehend.

If you ask me, this is one policy the government should review because it is going to affect the common person greatly.


Anonymous said...

KTN News at 9pm also talked about the high prices of commodities pushing consumers to the edge and about new tax on plastics, what a coincidence. They said other causes are high fuel and lack of rain and pests that have affected wheat harvest. Elections is also another cause of inflation.

Jay said...

"Would you eat a clean environment if you have nothing in the house?"

I think this is a very wrong way of looking at this issue. Protecting the environment is about protecting our future ability to.... live healthy lives, grow crops etc. So, if we destroy the environment... what happens?

Something's got to give in this whole climate change issue and it surely isn't going to be protection of the environment.

Ssembonge said...

The US is also experiencing high commodity prices. Bread now cost >$2, 2% milk is at $3 a gallon, grocery prices are up too.

It may be a worldwide phenomenon.

Sue said...

Ssembonge that’s high, though US economic growth is very far from Kenya's so the drastic increase in commodity prices is felt so much in Kenya.

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