Commodity

Commodities That Hit Record High Prices in 2021

The cost of living in Kenya rose in 2021 after the increase in fuel prices affected the cost of a majority of basic commodities. 

Statistics from the Kenya National Bureau of Statistics (KNBS), indicated that costly petroleum products and foodstuffs pushed up the prices of goods and services by an average of 6.91 per cent in September 2021. 

The Covid-19 pandemic also affected different sectors and left many citizens grappling with the effects. The country was fully reopened on October 12, offering hope and reprieve to businesses that were affected by measures set to curb the spread of the pandemic. 

“As we continue to build back better, we are witnessing remarkable recovery in the economy; with its rebound being attested by all leading economic indicators. They all point to a strong economic recovery beginning in the present year. 

Residents take to the streets to protest increase in fuel prices on Thursday, September 16

Residents take to the streets to protest the increase in fuel prices on Thursday, September 16, 2021

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“This rebound is as a result of the gradual reopening of the economy especially the services sector coupled with stronger global demand,” Uhuru stated on October 20, during the Mashujaa Day celebrations. 

The majority of Kenyans felt the pinch, with data from the Central Bank of Kenya indicating that an average of 41.8 per cent of borrowers defaulted on loans in 2021. 

A higher number of loans were borrowed for either sustaining businesses or purchasing household commodities. 

Fuel

Fuel and other petroleum products rose sharply to unprecedented prices in 2021. A litre of petrol went to as much as Ksh135 in Nairobi, up from less than Ksh100. 

The hike sparked a nationwide uproar, forcing MPs to discuss the issue in Parliament. 

The National Assembly Finance & Planning Committee recommended the reduction of the development levy on Petroleum and Diesel from Ksh5.40 to Ksh2.90 per litre.

Chaired by Homa Bay Woman Representative Gladys Wanga, it further championed the reduction of the Value Added Tax (VAT) charged on Super Petrol and Diesel from 8 per cent to 4 per cent.

The Treasury opposed the move, arguing that it would be detrimental to the already crippled economy. Petroleum CS, John Munyes, nonetheless assured Kenyans of minimal changes but cautioned that the fuel prices would not drop anytime soon. 

With no resolve being found on the matter, the government was forced to enter a multi-billion deal with petroleum products marketers to cushion consumers from the high prices of fuel as reviewed by the Energy and Petroleum Regulatory Authority (EPRA). 

Fuel markets were paid Ksh8.12 billion to retain the same prices for the second month running, November and December 2021. As of December 14, the commodities traded are as follows. Petrol, diesel and kerosene cost Ksh129.72, Ksh110.60 and Ksh103.54 respectively. 

Electricity 

Kenya Power Building in Nairobi CBD

Kenya Power Building in Nairobi CBD.

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Kenya Power was blamed for hiking electricity prices with the year. The high cost of fuel also affected power production. A majority of companies shifted from electricity to solar energy. 

President Uhuru Kenyatta was forced to intervene and formed a task force to review power purchase agreements between the agency and private sellers. He also selected a 21-member steering committee to implement guidelines issued by the Presidential Taskforce.

Uhuru gave it six months to reduce the cost of electricity in the country, institute and expedite reforms at the crippled government entity and ensure Kenya Power signs and enforces contract management frameworks for power purchase agreements procurements. 

On December 12 during the Jamhuri Day celebrations, Uhuru announced that the government was on the pathway to reducing the cost of electricity by over 30%.

“In honour of this pledge to the nation, and in response to the concerns over the high cost of electricity raised by both individual consumers and enterprises, I am pleased to announce to the nation that the reduction of the cost of electricity will be implemented in two tranches of 15 per cent each. 

“The first 15 per cent achieved through initial actions focusing on system and commercial losses, to be reflected in the December bills, and a further 15 per cent reduction, in the first quarter of 2022,” he announced. 

The directive came into effect on Thursday, December 16. 

Cooking Oil

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An image of various cooking oil brands on display in a supermarket.

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Cooking oil rose in early November 2021 after the National Crops and Nuts Regulations, 2020, came into force. 

The law imposes a 10 per cent to 25 per cent tax on raw materials used for oil production. These are macadamia nuts, coconuts, groundnuts, cashew nuts, castor beans and sunflowers. 

Manufacturers warned that Kenyans will shoulder the burden as they will have to pay extra costs to cover the taxes. 

Paying the taxes coupled with an additional two per cent levy per consignment imported into the country, they lamented, was unlawful and outrageous. They sought redress in court by suing Agriculture CS Peter Munya, the Agriculture and Food Authority, Attorney General Kihara Kariuki, and the National Assembly. 

Bread

Loaves of bread being baked at a bakery

Loaves of bread being baked at a bakery

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Bread prices rose up to between Ksh60 and Ksh80 in 2021 for 400mg and others respectively.  

It was the first time in four years that bread prices hiked owing to the increase in wheat costs. A tonne of wheat flour increased from Ksh25,300 to Ksh33,000 representing a 30 per cent rise.

Supermarkets and retailers, however, countered the prices and sold in-house bread at Ksh50 forcing external manufacturers to cut down their prices too, as they were incurring losses.  

The National Assembly Finance Committee, chaired by Homa Bay Woman Representative, Gladys Wanga, further amended the Finance Bill which had proposed a raft of new taxes on bread, flour (wheat and cassava), cooking items, prefabricated biogas digesters, biogas, and fuel.




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