26 February 2011

Kenya: Alarm As Food Prices Go Through the Roof

Nairobi — Food prices are among the highest in the world in Kenya where an average urban family can spend up to 45 per cent of its total household budget to eat.

The trend is worrying because rising expenditure on food is negatively affecting and heavily draining incomes that could have gone towards education, clothing and investment.

The situation is also threatening to push more Kenyan households into poverty.

According to the United States Department of Agriculture, Kenya is second only to Pakistan in the amount an average household spends on food.

In Pakistan, 46 per cent of an average family's household expenditure goes toward food.

The report is a confirmation that rising prices for basic food items are pushing households into an expenditure crisis.

Bad times

Prices of basic necessities like cooking oil, flour, and kerosene have increased by up to 50 per cent in less than a year, signalling bad times ahead for many low-income families that may soon find it difficult or impossible to put a plate of ugali on the table.

Also affected by the rising prices are commodities like sugar and wheat products that are consumed by most Kenyan families.

"We are yet to see the full extent of the price increases," said Nyongesa Wekesa, the officer in charge of data at the Kenya National Bureau of Statistics (KNBS).

"The shortage of rain in the country will push up the prices of most household consumables even further," he said, signalling maize flour as one of the commodities whose price may not come down soon.

"We are likely to suffer the crisis of high (flour) prices until the next harvest season," he said.

The bureau's Consumer Price Indices (CPI) and inflation rates for January showed that prices of basic commodities had risen sharply.

The CPI measures the weighted aggregate change in retail prices paid by consumers for a given basket of goods and services.

The statistics were generated through data collected from selected retail outlets in 25 data collection zones located in 13 urban centres.

According to the statistics, the CPI increased by 1.09 per cent from 109.38 in December 2010 to 110.57 in January 2011.

The food and non-alcoholic drinks' index went up by 0.91 per cent between the months of December 2010 and January 2011.

"This was attributed to cost increases recorded in respect of a number of food products including sukuma wiki, fresh packeted milk, maize grain and potatoes," said KNBS.

The prices of these items went up by between 2.6 per cent and 10.1 per cent. In Nairobi supermarkets, three litres of cooking oil now costs Sh505, up from about Sh370 less than six months ago.

Other commodities whose prices have gone up are wheat flour which costs Sh127 for a 2kg packet, up from Sh101, a packet of milk for Sh32 up from Sh28 as well as maize flour between Sh77 and Sh93 up from Sh65 for a 2-kg packet during the same period of time.

Cost of housing

Equally, the cost of housing, water, electricity, gas and other fuel went up by up to four per cent between the months of December 2010 and January2011, mainly on account of increases in the price of oil and rent for most residential houses.

According to a World Bank report released last week, rising food prices have driven an estimated 44 million people into poverty in developing countries since last June.

The bank said food costs continue to rise to near 2008 levels.

"Global food prices are rising to dangerous levels and threaten tens of millions of poor people around the world," said World Bank Group President Robert B. Zoellick.

"The price hike is already pushing millions of people into poverty and putting stress on the most vulnerable, who spend more than half of their income on food."

India, one of the world's most populous countries, witnessed a mass demonstration against rising inflation.

According to news reports, tens of thousands of people protested in New Delhi against surging prices, heaping pressure on the government to help the poor in next week's budget.

According to the latest edition of Food Price Watch, the food price index rose by 15 per cent between October 2010 and January 2011. This is 29 per cent above its level a year earlier and only three per cent below its 2008 peak.

Among grains, said the World Bank, global wheat prices have risen the most, doubling between June 2010 and January 2011.

Sugar and edible oil prices have also gone up sharply, the World Bank said.

The price of other food items essential to dietary diversity in many countries has risen affecting vegetables in India and China and beans in some African countries.

In 2008 a drastic rise in flour prices forced the Kenya government to introduce two sets of maize flour packets that were sold at different prices to consumers.

But the plan, under which maize flour was to sell at Sh52 to the poor and Sh72 to the non-poor, collapsed because it was too complicated to implement.

The deal was struck between the government and millers who agreed to lower maize flour prices that had hit a high of Sh120 for a 2-kg packet.

The scheme, seen by some as the best way to cushion poor consumers hard hit by global economic realities, eventually collapsed, and prices remained just below Sh100 for a while.

This time no government official has raised the alarm over rising food prices that threaten the 46 per cent of the population living below the poverty line.Kenya has nearly 40 million people, a majority of them at a young age when they require good nutrition.

After the 2008 experience, the Kenya Institute for Public Policy Research and Analysis proposed that the government establish a voucher system for designated categories of people based on need to enable them to purchase basic food needs.

"They (vouchers) will be supplied to specifically targeted people in a deliberate move to cushion them against the high prices," said the institute's expert on macro-economics Dickson Khainga.

He said such groups would include poor households or disabled people.

Such a system, he argued, had worked in developed countries and could be expanded to target certain basic commodities whose prices are running beyond the reach of low-income citizens.

This is the thinking that moved the government to regulate fuel prices, although the current average of Sh98.5 for a litre of petrol and Sh91 for diesel in Nairobi is one of the key drivers of inflation.

According to Moses Ouma, a demographer, Kenya's high population is putting pressure on limited food resources, suggesting contingency plans might be necessary to avoid riots like those sweeping other parts of the world.

"Unless we are careful, we will start facing uprisings from food-hungry people in the country," he said.

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