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In spite of the inter-tribal violence that destabilised the country during early 2008 and the ethnic tension that continues to simmer, the Kenyan economy has expanded rapidly over recent years. This has opened up new consumption opportunities for a small, but steadily increasing number of affluent consumers. However, many more have seen little relatively benefit from this growth and are suffering the consequences of the inflation it has engendered. For many, poverty and malnutrition remain significant issues. Meanwhile, information technology is having a marked impact on Kenyan lifestyles at every level of society.
According to Moseti, who runs a stall selling fruit at Mutindwa market in Umoja, a prosperous suburb of Nairobi, business is booming. He said: “More and more people are eating fruit, both men and women, the young and the old. People want to remain healthy.” “Most of my customers, especially men, prefer fruit salads, which we serve on small plates. A majority of women buy whole fruit,” he added.
According to Moseti, “Each plate of fruit salad (usually consisting of bananas, pineapples and mangos) goes for between US$0.34 and US$0.69, depending on the fruits one chooses.” He added that many local consumers remain price sensitive. He said: “late last year , our businesses suffered because not many people were buying fruits. The prices of most commodities were high.”
In spite of Kenya’s strong economic growth over recent years, a global report published by the charity Save the Children during February has claimed that millions of Kenyan children are suffering from chronic malnutrition. According to the report, “a significant proportion of families in communities in Kenya could not afford to feed their families a nutritious diet even if they spent all their income on food.”
Save the Children Kenya country director Prasant Naik said: “The country still lacks a strong political will to tackle child malnutrition… There is very weak coordination between the authorities and aid agencies, and funding levels have remained low.”
According to the Star newspaper, “Kenyan children are taught in school that agriculture is the backbone of the country’s economy. This often repeated phrase is constantly undermined by the country’s inability to feed its own population. Last year the country had to deal with the shame of having images of emaciated Kenyans beamed across the world during the famine, an episode that the government tried to wish away as a logistics challenge, but it was nothing short of an indictment of a failed agricultural policy.”
As part of its efforts to raise agricultural productivity, the Kenyan government is working with its Israeli counterpart in an effort to improve its use of irrigation and decrease its dependence on the capricious rainy season. “We have to pull away from rain-fed agriculture and embark on irrigation to make inroads in the war on hunger,” according to Prime Minister Raila Odinga.
According to the Corruption Perceptions Index (where ten equals “highly clean” and zero “highly corrupt”), Kenya is one of the most corrupt countries in the world. It scored just 2.2 in 2011, a figure that has changed little over recent years. This is a mark comparable to the likes of Nigeria (2.4), the Democratic Republic of Congo and Libya (both 2.0) and Iraq (1.8).
Separately, a survey conducted during late 2011 by the University of Nairobi’s Institute of Development Studies (IDS) on corruption among government officials found that 68% of Kenyans were of the opinion the police were corrupt, while 48% thought politicians were. However, the judicial system was trusted by 78% of respondents and the media by 77%. According to Dr Paul Kamau, one of those involved in conducting the survey, “People said they did not believe police could deliver services unless they had been bribed, based on their own experiences. This is consistent with previous surveys.”
With real GDP growth accelerating from 5.3% to 5.6% between 2010 and 2011, according to Euromonitor International data, signs of growing prosperity are not hard to find in Kenya. According to a Reuters report published in January 2012, “In a cafe on the terrace of a Nairobi mall, well-heeled Kenyans sip coffee as shoppers in the car park navigate between BMW X5s, Toyota Land Cruisers and Mercedes.” The proportion of Kenyan households with an annual disposable income of at least US$45,000 (at purchasing power parity- PPP) rose from 0.6% to 0.8% between 2006 and 2011.
Source: Euromonitor International from national statistics
However, this is also fuelling inflation, with the average annual rate accelerating from 4% to 14% between 2010 and 2011. With the price of such basics as sugar, electricity and gas doubling, this is hitting less affluent households the hardest. “Minimum wage-earners in urban centres are encountering a simply unprecedented squeeze,” according to Aly Khan Satchu, a Nairobi-based trader and analyst, who was speaking to Reuters. “Inflation creates a sort of reverse Robin Hood effect where the poor carry the main burden,” he said.
According to American expat Kevin Ashley, who runs a chain of coffee shops in Nairobi called Java: “People who were taking a bus to work may now walk, somebody who was driving may take a bus, and somebody who was eating in Java might now bring their own food to work.” Already elevated, Kenya’s Gini Index (a measure of income inequality, where zero equals perfect equality and 100 perfect inequality) has risen steadily over recent years, from 51 in 2006 to 53.3 during 2011, bringing it level with Nigeria in this regard.
According to a report published by the African Development Bank during February 2012, M-Pesa (“M” stands for “mobile” and “Pesa” means “money” in Swahili), a popular mobile-phone-based money-transfer service in Kenya, is fuelling inflation. It is doing this by increasing the pace of monetary transactions, which effectively results in more cash in circulation, leading to a situation where the demand for goods and services outstrips supply. According to the Central Bank of Kenya, while the mobile money transfer service does not actually contribute to money supply growth, it increases the frequency with which the same amount of cash is availed of in the market.
According to Safaricom (a subsidiary of Vodafone), the operator of M-Pesa, over KES314 billion (US$3.8 billion) was transferred via this service between April and September 2011. The service has prospered by gaining the confidence of “traditional savers,” who formerly held most of their cash at home “under the mattress,” according to Dr Samuel Nyandemo, an economics lecturer at the University of Nairobi, who was speaking to Business Daily Africa.
A growing number of Western retail chains, such as UK-based Marks & Spencer and Spain-based Inditex (best known for its flagship Zara brand), are rumoured to be eyeing the Kenyan market. In particular, they are attracted by the purchasing power of its most affluent consumers, whom some have dubbed “black diamonds.” This term originated in South Africa but is increasingly used in reference to other sub-Saharan markets.
Typical of this breed is Okoro, a Nairobi-based Nigerian professional in her late 30s who says she spends an average of about US$500 a month on clothing and footwear. Speaking to Reuters, she said: “At my age, my mother had nine of us… She would not pay what I pay for shoes… The reality for Africa is that we are the new breed.”
With internet access widening rapidly, there is now a critical mass of urban consumers in Kenya who use social media. Over the coming decade, this is set to revolutionise how consumers interact with brands. Social media strategist Mark Kaigwa said companies must prepare for this: “Think of it as a room with loads of people in it talking about your brand. The conversation is happening and will happen whether or not you are in the room. You might as well take part.”
According to data from Facebook and Twitter, there are around a million Facebook users and 70,000 twitterers in Kenya. According to Euromonitor International data, the number of internet users in Kenya jumped from 2.8 million to 5.1 million between 2006 and 2011. “KES2,000 (US$20.20) per month for fast uncapped internet is great value for money,” said Vitalis Ozianyi, a communications and technology analyst.
Moreover, real annual value sales of smartphones doubled between 2007 and 2010, to US$811 million. Over the same period, real annual value sales of feature phones were largely static, at around US$1.6 billion.
Source: Euromonitor International from trade sources/national statistics
This growth is largely due to the fact that smartphone prices are falling, as are the data tariffs offered by mobile telecommunication companies: Safaricom currently offers virtually unlimited mobile internet access for as little as KES10 (US$0.12) a day.
While very few Kenyans are obese (just 1.2% of adults in 2011), the proportion who are overweight is gradually increasing, rising from 13.5% to 14.5% between 2006 and 2011. Collins Ochieng, a senior official at the Kenya Wildlife Service, has called on his countrymen to change their habits: “Instead of clubbing, meat roasting and beer consumption… Kenyans should appreciate the benefits of nature and sample activities such as hiking, biking, camping, rock climbing, bird watching or even visit the beach,” he said.
Children are also beginning to be affected. Speaking to Radio Netherlands Worldwide, Dr. Mary Limbe, a paediatrician at the Aga Khan University Hospital in Nairobi, Kenya, said she is seeing a growing number of obese children: “The lifestyle of children has changed in a lot of ways. In the past, children would walk to go to school and play a lot, but now they are picked up and dropped off,” she said.
According to a study conducted by Hass Consult, property prices in Kenya rose by around 30% being 2004 and 2009. Meanwhile, rents for prime residential properties in Nairobi rose by 13% during the 12 months to September 2011, according to The Knight Frank Global Rental Index.
Joram Kiarie of S&L, the mortgage subsidiary of Kenya Commercial Bank, says the Kenyan housing market has done well because the cost of constructing a property in Kenya is cheaper and it is also easier to get mortgage financing compared to other East African countries, such as Tanzania or Uganda.
However, some are concerned that rising property prices are not sustainable. According to Samora Kariuki, a research analyst at NIC Securities, a lot of credit has been issued on the assumption that higher property and land prices will ensure that borrowers are always in positive equity and can therefore borrow more money. He added: “credit-based asset prices are driving economic growth, rather than improvements in productivity. You then get a disconnect between income growth and asset price growth, which will lead to a correction in asset (house) prices.”