President Kenyatta’s speech avoids high cost of living

President Uhuru Kenyatta delivers the State of the Nation address to a joint session of Parliament in the National Assembly on March 31, 2016. PHOTO | RAPHAEL NJOROGE | NATION MEDIA GROUP 

By JAMES ANYANZWA

IN SUMMARY

• Kenya’s President Uhuru Kenyatta last week delivered a State of the Nation address enumerating his government’s achievements but steering clear of the rising cost of living, which has been exacerbated by heavy taxes on essential commodities and the increased cost of borrowing from commercial banks over the past three years.

Kenya’s President Uhuru Kenyatta last week delivered a State of the Nation address enumerating his government’s achievements but steering clear of the rising cost of living, which has been exacerbated by heavy taxes on essential commodities and the increased cost of borrowing from commercial banks over the past three years.

The president focused on the major achievements realised by his government in the energy sector, security, health, education, agriculture, transport and infrastructure, ICT, social protection, Foreign policy and in dealing with the corruption that has dented the image of the Jubilee government.

“We are a nation on the path of progress, a nation on the move that is rapid and impressive enough to attract the attention of the world,” the president said.

But a cross-section of the economists told The EastAfrican that the economy has stagnated and the cost of living has escalated due to increased taxes and high interest rates, crowding out the private sector from productive investments.

The Kenyan economy has grown by an average of 5.6 per cent in the past three years against a target of 10 per cent.

“The cost of living is very high. Prices of essential commodities have gone up sharply. The common man is in a miserable position,” said Samuel Nyandemo, senior lecturer at the University of Nairobi’s School of Economics.

According to Dr Nyandemo, increased taxes, high energy costs, and high interest rates have increased the cost of doing business in the East African nation.

“The major issue is the slow rate at which the economy is growing. We need to see growth driven by positive productive investments,” he said.

READ: Treasury, CBK pass the buck over missed cost of living target

In 2013 Kenya amended its value added tax (VAT) law, which saw over 361 goods that were initially tax exempt attract 16 per cent VAT.

The country introduced a 16 per cent VAT on major basics commodities such as milk, bread, books and other learning materials in an attempt to raise more revenue.

“We have not seen the reduction in prices of basic commodities that Jubilee promised during their campaigns,” said Kariithi Murimi, an economist and chief executive of Value Directors Ltd.

Mr Murimi added that the planned increase in agricultural productivity through the one million-acre Galana Kulalu irrigation scheme is yet to translate into lower food prices.

“I have a strong feeling that will not be realised even this year,” he said. Consumers’ pain increased when the government effected a new excise tax regime on December 1, 2015  that saw taxes on bottled water, fruit juices and soft drinks go up by Ksh7 ($0.06)  from Ksh3 ($0.02)  to Ksh10 ($0.09) per item.

The new VAT Act (2013) reduced the number of goods and services that are zero-rated and tax-exempt in order to simplify tax administration and resolve the challenges of VAT refund
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