“My trip to Gikomba is becoming increasingly expensive,” says Mrs Everlyn Yabunga, who runs a grocery business in Nairobi’s Huruma Estate.
“I used to pay Sh40 daily for bus fare, but I now have to fork out Sh60. A bundle of sukuma wiki at the market is now Sh50, up from Sh20 in December. This has really affected my business,” she adds.
Mr Samuel Karanja, a taxi driver in Rongai, Nairobi, says that for the past three months, oil prices have made it difficult for him to manage his daily trips. “I used to pay Sh300 a day for fuel from Rongai to Nairobi, but I now spend about Sh500. It becomes even more difficult because I have to give a standard amount of money to the owner of the car every day,” says the driver who uses a leased vehicle for his business.
Mrs Yabunga and Mr Karanja’s situations are not unique. This is what most Kenyans are going through as the rate of inflation threatens to shoot through the roof.
The prices of most commodities at the local retail shop are skyrocketing and the trips you make to the grocery store are getting more costly. It is no wonder that things are looking gloomy for many Kenyans.
You may have noticed that as the months pass, the amount of shopping you get in your basket for, say Sh5,000, reduces. What you bought for that amount now costs you about Sh6,000 and above. That is inflation or what is described as increase in the general level of prices of goods and services over a period of time.
On Monday, KenGen announced that power prices would go up because of rising fuel costs. And, as if to make matters worse, the sustained rise in global crude oil prices will ensure that tomorrow’s announcement of the new range of petroleum prices will be higher rates.
And as expected, a rise in electricity and fuel costs leads to an increase in the cost of production and subsequent rise in unfavourable inflation, which is passed on to you, the consumer.
A further increase in inflation, according to analysts, will force the Central Bank of Kenya to review its benchmark rate upward, which will have a direct impact on business access to credit.
Food prices are also expected to be on an upward trend for the next couple of months because of the gap between the onset of rains and harvest time.
A recent survey by the Kenya National Bureau of Statistics has shown that inflation accelerated for the fifth straight month in March, bringing pressure on CBK to raise interest rates further.
The inflation rate, says KNBS, climbed to 9.19 per cent from 6.54 per cent in February and prices in the month rose by 2.28 per cent. Food costs increased by 15.1 per cent from last year.
The shilling has depreciated by as much as 6.3 per cent against the US currency this year, falling to a 17-year-low of 86.15 a dollar on March 14, on higher demand from oil importers as global crude prices surge.
The continued rise in oil prices could raise inflation further and as we found out, the maximum retail price of petrol in Nairobi rose for the third straight month in March, climbing 2.8 per cent to 101.9 shillings a litre, while most locally produced food items like eggs and bread have shot up by almost 30 per cent.
Away from the gloom and doom, how can you stay afloat, save money, and invest wisely in these circumstances? Mr Clement Maina, a financial analyst in Nairobi, says inflation is one of the greatest eroding factors of one’s future financial plans.
“A rise in inflation can destroy any future financial (retirement) plan if not addressed early in the planning process. Make no mistake about it, when you combine market losses with inflation, you have a toxic mix,” he says.
For ordinary shoppers, he adds, one can beat inflation by becoming creative in one’s purchases. “Start by saving your money at the beginning of every month, set spending limits, and stick to them. To be flexible, you can adjust spending amounts between categories.”
Ensure that you have a budget and stick to it as much as possible.If inflation seems to be overwhelming your budget, he advises, cut out unnecessary expenses.
“You can work out at the gym of your apartment complex and cancel your gym membership. You can save on fuel by taking advantage of public transport a few times a week. You may also want to switch to a less expensive grocery store to save some money.”
Mr Francis Onderi, an investment adviser, says investing in times of inflation requires a shift in one’s mental patterns since prices no longer serve as a reference of value.
“When it comes to beating inflation, few asset classes can better stocks. Buy stocks from good and stable companies. But know that during hard times, profit-making in stock investment may be minimal,” he says.
Although stocks carry a significant risk, especially if one is attempting to build his or her own portfolio, you can minimise this risk by choosing to go for equity mutual funds, he adds.
Property is also a preferred avenue of investment in such times as prices tend to rise upwards in line with the increase in cost of construction.
“Real estate provides a flexibility that you can use to protect your wealth and diversify from volatile commodities. The most surprising thing is how buying now can save you so much later.
“There are plenty of choices available to ensure that the value of your savings or investments will be maintained, which is why you should not build your future on the moving sands of inflation,” he says.
However, inflation does not have to be all bad, says the expert. “An increase in prices has many disadvantages, but they also represent opportunity. It is up to you to take the necessary measures so that change affects your investments in the right direction,” he says.
