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Christmas this year is set to be an unusual one for many Kenyan workers as multi-layered factors continue to weigh down purchasing power ahead of January’s re-opening of schools on the back of inflationary pressure.

Traditionally, the week before Christmas is associated with higher spending, circulation of money in the economy, higher consumption of both basic and luxury consumer goods, and travel, all of which give local tourism a major boost.

This year, like the previous two, the economy is still battling the downturns caused by the Covid-19 pandemic, which eroded incomes for many workers and their families. The shocks have been made worse by prolonged drought and the Russia-Ukraine conflict, which has affected global supply chains for commodities such as wheat, used to make meals like chapati, which are popular around Christmas.  

Data from the Tourism Research Institute shows that whereas there was a sharp contraction of tourism earnings in 2020, the sector enjoyed a brief respite last year. However, despite jitters over elections, and a new administration seeking to find ways to ramp up tourism, the sector has recorded more gains this year, shrugging off the losses it suffered at the height of the global pandemic.

Last week, the Energy and Petroleum Regulatory Authority (EPRA) retained last month’s retail prices of fuel, which are still elevated, and which have led Public Service Vehicles to raise fares for long distance routes originating from major towns such as Nairobi and Mombasa.

“In the period under review, the maximum allowed petroleum pump prices for super petrol, diesel and kerosene remained unchanged. The government will utilise the Petroleum Development Levy to compensate oil marketing companies for the difference in cost,” EPRA managing director Daniel Kiptoo said in the latest review.

Many urban workers traditionally travel to their rural homes to spend the Christmas holidays with their extended families. In 2022, however, some of those interviewed by People Daily indicated that they are unwilling to travel due to raised fares and also because they lack disposable income to spend on Christmas goodies for their families.

“The prices we are experiencing right now will limit a lot of people from travelling due to the poor economy,” said Wambui Muniu, who works and lives in Nairobi. “These PSV operators only want to make a lot of profit by hiking fares.”

High consumption

Key sectors of the economy — such as transport, manufacturing and retail ­— are reluctant to pass on any price reduction to consumers, especially during this Christmas season, which is often associated with high consumption and more liberal spending on non-essential goods and services.

The cost of air travel, rail and road transport has gone up due to increased demand. By mid-November, the Standard Gauge Railway (SGR) had a few seats remaining between December 1 and January 4 as travellers scramble for space in their quest to enjoy Christmas holidays at the Coast, a tradition for middle class and wealthy urban workers and professionals and their families.

Travel up country is also set to go up and fares charged by PSV operators such as Easy Coach and Guardian Angel have been revised upwards to about Sh1,800 per person, up from the pre-holiday season average of Sh1,400 for destinations between Nairobi and Western parts of Kenya, such as Kakamega and Kisumu.

Residency charges in resorts and beaches have also gone up to reflect increasing demand, and while this will give the hospitality sector a much needed boost as it recovers from various blows, including the pandemic and ban on physical interactions, it is likely to hurt holiday makers, who are already scrimping as they save up ahead of opening of schools in late January.

Traditionally, New Year terms require parents and guardians to buy new books for their transitioning learners and new uniforms, in addition to raising money for school fees and travel. With the pioneer Grade Seven class starting in either January or February, parents and guardians are expected to cough up more to pay for the new Competence-Based Curriculum, especially in private schools.

School fees

The Ministry of Education has also indicated that it will drop subsidies for boarding schools in the new school calendar, meaning that parents and guardians will have to pay more for learners joining Form One or those transitioning to other secondary school classes.

This could translate to lower spending during the festive period.

Responding to the rising cost of goods and travelling frenzy, some Kenyans took to social media to announce that they were cancelling travel plans during the festive season to cut back on their expenditures ahead of the long January.

In the New Year, those who pay for goods and services through digital platforms, will face higher charges after the Central Bank of Kenya (CBK) said it would reinstate the higher transaction fees on money transfers between bank accounts and mobile money wallets. This is likely to affect parents and guardians who pay for school fees digitally. Also to be affected are those who send money via mobile phone to their parents and dependants.

This implies that households will be hard pressed by a rising cost of living at a time when mobile cash transactions are set to increase during and after the festivities. Inflation has been rising over the last two years, hitting a high of 9.7 per cent in October before cooling to 9.5 per cent last month.

Consumers Federation of Kenya (COFEK) has urged CBK to reconsider the directive to ease the financial burden on ordinary citizens. “Reconsider the reinstatement of M-Pesa fees on bank-M-pesa transfers beginning January 1, 2023. Wanjiku is still squeezed with high cost of living. Fuel, electricity, food, prices are up and school fees,” the lobby said in a social media post.

Rising inflation has left many households channelling a bigger chunk of their incomes into buying food items and other basic necessities, leaving little for recreational expenses. The squeeze will be felt over the next two weeks due to the Christmas and New Year holidays

Data from the Kenya National Bureau of Statistics (KNBS) shows that food, energy costs and transport account for about 57 per cent of household budgets, indicating that these have the biggest impact on fluctuating prices and families’ buying power whenever inflation surges.