High cost of living made 2018 tough for many Kenyans TIFA

Kenyans found 2018 to be a tougher year compared to 2017 on account of a higher cost of living according to a survey carried out by research firm Trends & Insights for Africa (TIFA).

Forty eight percent of respondents found 2018 worse off in contrast to the preceding 2017 while 36% found 2018 to be better off. The remaining 15% recorded no changes in their year on year sentiments.

A majority of 58% of Kenyans attribute the high cost of living across 2018 as their greatest challenge ahead of unemployment at 14% and bottlenecks in credit access at six percentage points.

An analysis into the public’s realization of their year resolutions further compounds the grim picture of 2018 as most Kenyans missed out on their set targets.

Out of the top two resolutions; setting up a business – at fifty two percent and getting a new job at thirty three percent – only 11% of respondents with the employment ambitions achieved the fete while 28 per cent managed to setup business enterprises.

A lukewarm overview of 2018 can be directly linked to the state’s austerity measures to increase revenue through additional tax measures, a move well documented by the legislation of the 2018 Finance Act in September.

The government, for instance moved to establish a 15 percent presumptive tax on business licenses for small and medium enterprises (SMEs) while Parliament removed Value Added Tax exemptions on petroleum products to introduce the VAT charge at a rate of eight percent.

The impact of the revenue-raising measures resulted in an increased cost of major commodities to include petrol, transport and energy prices mid-year.

The measures similarly dampened optimism for a good year and went against expectations informed by the end of a protracted electioneering period and a lengthy drought across 2017.

Key economic indicators however defied the negative outlook with the economy expanding by 5.7 and 6.3 percent in the first and second quarters of 2018 from a dismal 4.8 and 4.7 percent over a similar period in 2017 according to data from the Kenya National Bureau of Statistics.

Economist Aly-Khan Sachu finds the sharply contrasting picture of higher living costs for the citizenry in the midst of a notable growth in Gross Domestic Product (GDP) to be an indicator of a lack of inclusive growth.

“So far African GDP growth has been skewed towards the top end, we are yet to see the trickle down effect happen,” Mr. Sachu said in an interview.

“We are hitting the end of the road with the tax increasing strategy. People are getting to the limit. Take a look at the streets of France for example. It’s like a lemon; it comes to a point where you can’t squeeze the lemon anymore. If we did scenario analysis on reducing tax we would collect more. This has been done in other countries,” Mr. Khan added.