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Kenya: Matatu Fares Set to Go Up
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The Nation (Nairobi)
3 May 2008
Posted to the web 2 May 2008
Kennedy Senelwa
Nairobi
The rising cost of fuel signals hard times for Kenyans as transport charges are set to increase.
It is also feared that the cost of living will become even higher as manufacturers pass the extra cost of diesel to consumers already reeling from the rise in the prices of basic commodities.
This week, unleaded petrol in Nairobi's central business district was retailing at Sh99.49 and diesel Sh90.49 per litre, a painful figure for fuel consumers and a sad irony for petrol companies as the figures do not translate into record profits for oil marketers.
Propelled
According to the Petroleum Institute of East Africa (PIEA), the fuel price escalation has made Kenyan motorists preferring to buy diesel propelled vehicles as the fuel is Sh10 cheaper than petrol.
"The advancement in technology has led to the manufacture of vehicles whose engines are propelled by diesel," said PIEA's General Manager George Wachira.
"The future looks uncertain from the international perspective. High prices are impacting on demand for petroleum products," said Mr Robert Shisoka who is the Lead Consultant of Hydrocarbons.
Manufacturers and service providers are likely to pass on to consumers the increased cost of fuel, forcing many motorists in Kenya to opt for discretionary driving to cope with the situation.
Many Kenyans cannot afford the fare being charged by passenger service vehicle (PSV) operators, but commuters are set to pay more in the near future due to increased cost of oil products.
Organisation of Petroleum Exporting Countries (OPEC) has declined to step up output. US dollar decline has made dollar denominated assets like oil and others relatively cheap for some investors.
Metro Petroleum says the high cost of fuel globally has far reaching ramifications and could easily put breaks on Kenya's aim for fast economic growth to create employment and reduce poverty.
"Poverty reduction is a major challenge. These gloomy prospects come at a time earnings have been generally sluggish in key sectors of Kenya's economy," said Metro's Managing Director, Bill Rotich.
Meanwhile, commuters across the country might soon be required to pay more for transport if the Matatu Owners Association and the Matatu Welfare Association makes good their threats to increase fares.
MOA chairman Simon Kimutai said this is necessitated by the high operational costs occasioned by high prices of fuel.
"Now we are at a point that we will have to pass on this cost to our clients. We are preparing a reasonable fare price within which the business would be profitable taking into consideration depreciation and the investment," said Mr Kimutai.
However, the MWA says stakeholders closely monitor the development and if the trend continues in the next month, then they establish mitigation measures.
Increments
"We know that our clients have not been spared either. The fuel prices have pushed up the price of all commodities including food, water, power and even clothing," said MWA chairman Dickson Mbugua.
Indeed manufacturers like Bidco told Saturday Nation that the products price increments are due escalating oil prices and are not unique to Kenya.
"The prices of wheat, maize, pal oil and biodiesel have skyrocketed," said Bidco MD Vimal Shah.
Mr Mbugua is, however, worried that passenger service vehicles are currently consuming 50 percent of the day's collection on fuel. According to him, the fact that 50 per cent of the vehicles in this business are on loan speaks volumes.
"We have to service the loans, vehicles, pay the crew, insurance and settle other indirect charges like in case of accidents. So, there are possibilities in to increase fares relatively to enable us continue operating," said Mr Mbugua.
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Additional reporting by Samwel Kumba
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