Boda boda operator Vincent Shamwako in Umoja estate is a happy man as he gives this writer a ride along Kangundo Road in Nairobi’s fast-paced Eastlands area.
The 35-year-old father of three has been in the trade for more than seven years.
He describes last year as the toughest since he went into the boda boda business, as fuel prices hit a historic high, crossing the Sh200 per litre mark.
Prices have, however, have come down, easing pressure on motorists, transporters and other consumers of petroleum products, helping bring down the cost of living.
The drop in fuel prices has been pegged, among others, to the government-to-government deal that saved the dollar shortage situation in the country and stabilised supply.
This has helped ease inflation, the measure of the cost of living, which hit a high of 9.2 per cent in March last year.
It has significantly dropped to 5.7 per cent as recorded by the Kenya National Bureau of Statistics’ March data.
For Shamwako, this has eased pressure on his household budget and he believes government interventions have started paying off.
“For me it’s about unga, fuel prices and basic commodity prices. I think we are headed in the right direction,” Shamwako said. “However, the cost of education still remains high.”
Mary Moraa, a vegetable vendor at Marikiti Market in Nairobi, also feels things are moving in the right direction, despite high taxation.
The Hustler Fund, she says, has helped her run her business smoothly, even as the private sector in the country continues to cite high operating costs and taxation.
“I borrow Sh2,000, buy my stock, sell and repay in the evening, remaining with my profit,” the 50-year-old mother of four told the Star.
She is among the seven million Kenyans who are benefiting from the Hustler Fund launched by President William Ruto in November 2022. Plans are underway to make it sharia-compliant to deepen financial inclusion in Kenya.
“We will also adjust other government financial instruments to comply with the Islamic law,” President William Ruto said during an Iftar dinner.
He said the move will make more funds available to drive the country’s development.
Kimani, a 20-year-old University of Nairobi student, does part-time photography in Nairobi’s Central Business District.
He is optimistic the economy will stabilise, attract more investments and create job opportunities for the youth, despite geopolitical tensions including the Russia-Ukraine war and the Middle East crisis.
“As youths, we face a lot of challenges, especially unemployment, but if President Ruto lives up to his word on the digital economy and other interventions, then there is hope,” he said.
A recent spot check by the Star depicted the capital city as one of the most expensive places to live, followed by Mombasa and Kisumu.
A large number of Kenyans have in recent times relied on loans, credit cards, digital lenders and prior savings to cover their expenses.
The Consumer Federation of Kenya (Cofek) says Kenyan households should remain patient and give the government time to fix the economy.
“The President knows the expectations of Kenyans and he is working on a sustainable solution to the economic challenges,” Cofek secretary general Stephen Mutoro said.
He is not in for a quick fix.
So far, the country’s inflation has dropped for three consecutive months from 6.9 per cent in January to 6.3 per cent in February, and then 5.7 per cent recorded in March, driven by lower food costs and fuel cost reduction.
Prices of maize flour loose, maize flour-sifted, sugar and fortified maize flour dropped by 9.6, 5.8, 5.3 and 5.1 per cent, respectively, between February 2024 and March 2024.
“During the same review period, the price of kerosene went down by 2.3 per cent. In addition, prices of 200kWh and 50kWh of electricity dropped by 0.3 per cent and 0.4 per cent, respectively, during the period,” KNBS director general Macdonald Obudho records in the latest inflation data.
The transport index decreased by 0.6 per cent between February and March 2024, attributable to a drop in prices of petrol and diesel by 3.5 per cent and 2.6 per cent, respectively.
However, the public transport sector is yet to pass on the benefits to the public. The fares remain high.
The Central Bank of Kenya expects a strong economic performance in the first quarter of 2024, reflecting robust activity in the agriculture and service sectors, particularly accommodation and food services, and information and communication.
The government has been keen to reduce the cost of living mainly by increasing production, with incentives such as subsidised fertiliser for farmers.
CBK governor Kamau Thugge said, “The economy is expected to remain strong in 2024. It is supported by the resilient services sector, robust performance of the agriculture sector, continued implementation of government measures to boost economic activity across priority sectors in line with the Bottom-up Economic Transformation Agenda (BETA), and improved global growth outlook.”
Last month, CBK’s Monetary Policy Committee (MPC) retained the base lending rate at 13 per cent, as part of monetary policies to tame inflation and further stabilise the shilling, which has since gained at least 18 per cent against the US dollar, to average Sh130.
It concluded the current monetary policy will ensure overall inflation continues to decline towards the 5.0 per cent mid-point of the target range.
“The MPC will closely monitor the impact of the policy measures as well as developments in the global and domestic economy and. It stands ready to take further action as necessary in line with its mandate,” Thugge said.
The committee will meet again in June.
The government has, however, been challenged to create a more conducive environment for businesses to grow, which will create employment.
Low spending and purchasing power, rent, school fees and transport costs are among key issues affecting households.
Businesses are also struggling with high taxation, according to the Federation of Kenya Employers (FKE), which says doing business has become “unsustainable” since the enactment and implementation of the Finance Act 2023.
The employers view is that the changes have had an overall negative impact on cash flows and the financial positions of enterprises in various ways.
These include direct impact on the payroll, impact on demand for general wages review and the risk of business closure and increased laying off of employees.
“Every day we receive notifications from employers of their intent to declare redundancy,” Olaka said during the briefing at Waajiri House.
The key taxes that need to be reviewed, according to FKE, are the VAT on petrol, PAYE and corporate tax.
There was also the introduction of income tax on repatriated income and digital asset tax (DAT) payable by persons who derive income from the transfer or exchange of digital assets.
The federation proposes VAT on petrol revert to eight per cent as it was before enactment of the Finance Act 2023, noting the increase to 16 per cent has a regressive effect on the economy.
Employers also want corporation tax reverted to 25 per cent from 30 per cent, to help attract investment and allow corporates to have money to plough back into their business and create more employment.