The cost of living in Kenya has been rising steadily over the past three to four years and there does not seem to be any let up. I was in the supermarket the other day and I realized that cooking oil has risen by 100% over the past 18 months. Now, if that is the case for one commodity, can we say that it is now twice as expensive to be a Kenyan today as it was two years or so ago? Probably not but it is definitely more expensive. The shilling continues to languish in the doldrums with a low of 95 to the green buck recorded today. The Central Bank of Kenya seems unable to mitigate this while the Governor, ever the technocrat, has stacked his chips on the market “normalizing” itself due to “macroeconomic factors” and other such BS. So, why do we have to keep on “digging deeper” into our pockets while the people in charge leave us to the mercy and whims of the market?
Two things, speculators and economy.
Let me start with the economy. We like to pride ourselves as being the larges economy in East Africa, maybe even in East and Central Africa. This is epic, but on a global scale, it is like two mice in a burrow measuring their “tools” while a herd of elephant graze above them. Our economy is tiny. Weighing in at a mere 100 billion dollars, three Bill Gate’s can buy out Kenya (figuratively). So, when the Governor of the Central Bank comes and tells us that “macro-economic” factors will sort out the economic woes of the Kenyan people, it’s just a bunch of intellectual sounding BS. We, as an economy, have not reached that depth or size for the economy to just right itself without any specific measures. Why do you think Greece is self mutilating? It’s because in the larger Europe, Greece cannot be open to all fiscal pressures and still survive. It’s like living next to a rich neighbor and expecting to live the same standard of life that they do. You cannot.
So, what about speculators? The president the other day said something very telling that may not have registered as anything important to the media. He said Kenyans need to be protected from international speculators. This may not sound like anything big but let’s put this is perspective. Supposing the Kenyan GDP is roughly $100 billion and market capitalization at the bourse (NSE) is 1 trillion KES or roughly $10 billion. If an international speculator with a fund of maybe $5 billion (50% of NSE and 5% of GDP) decides to come and speculate, what do you think will happen to the market. Let me give an example. If this speculator came and said they wanted to sink $1b in the NSE, what would that do to the market? It would run amok. We saw this happen when the suspected pirate funds came into the country and were sunk into the real estate market; real estate prices shot up, and they still are. Historically, the more liquidity is pumped into the market, the more inflation goes up. Unfortunately, this money being pumped into the market is not diffusing actoss the market, but remaining in the hands of a few, with the masses having to bear the brunt of the effects.
My final take, the government must realize that we are not yet even half a century old in the global playing field. In historical terms, we are just infants that have been thrown out to play with the grownups. It’s a rough and merciless world out there and if these guys don’t protect the Kenyan economy, we are only seeing the beginning of a disaster unfolding.