Common cents

A few posts back I talked about the sweet high that was -and still is- sugar in Kenya. I compared it's retail price to that of South Sudan and informed you on how the sugar industry was running out of time to meet COMESA's conditions that will enable cheaper sugar.

Update: An application was made to extend COMESA protection. From what I've heard, they've been granted that extension til 2014. Quite unfortunate for us as we've been left at the mercy of the sugar millers.

Just when we speculated that life would somehow get better, the banks raised their rate yet again. Lending rates are now averaging 22% i.e. for every Kshs. 10,000 you borrow, you're paying back a total in excess of Kshs. 12,200. Those who had an ongoing debt payment plan are facing yet another increase in interest rates. According to the BusinessDailyAfrica, the Monetary Policy Committee's decisions were a carbon copy of the IMF’s recommendations made public a day earlier and which rooted for a tightening of monetary policy to limit credit to the private sector and to stop further slide of the shilling. This conclusion was made this past Monday (October 31, 2011). I find it sad that a whole country's money supply policy will revolve around recommendations that are not of our own making. We obviously need to reduce the circulation of our local currency, but to peg it to interest rates and Reserve Ratios is sappy. There has been little use of Open Market Operations.....specifically, government selling securities so that they reduce money flow.

A recently created tool is the Term Auction Facility, TAF in short. This basically allows banks to bid for a fixed reserve from the Central Bank. Instead of loosely dishing money to them in hopes that demand of foreign exchange decreases, CBK can have them bid against each other to see how much they're willing to pay to have those dollars with them. It can also be in the form of assets.Wouldn't they rather have a commercial bank hand in a chunk of the local currency in circulation than have them hoard it? Wouldn't this reduce money supply without stressing citizens and every other Kenyan student as much?? Or is the idolizing of profits that important that they forgot the poor citizens whose Kshs. 30 contributes more to the economy than the rich man's Kshs. 2.5M?

NB: Open Market Operations refers to the purchase and sale of government securities such as bonds, etc. Buying them off the government means you've given them your money in exchange for a given annual interest and repayment to you of principal amount on the final year. In short, you help decrease money currently circulating.

        Monetary Policy is a means via which the Central Bank of any country controls the supply and circulation of money in an economy. It's their mandate as allocated by their respective central governing body.

Mboco For Christmas

The short rains have been punctual this time round. They're finally here and from the looks of it, mostly fall during the night. I've heard a few theories like "Wangari Maathai's spirit is watching over us" and "The universe is weeping over Maathai's death". I don't take kindly to superstitious beliefs and it's sad that people found time to make jokes about one of Kenya's late heroines.

There's been a lot of speculation of how food prices and costs of electricity will now fall coz it's raining....pffft! Short rains definitely increase water supply to the relevant production factors, but that doesn't means that it will have an immediate effect. Beans for example, can take 85 - 90 days before harvest. That's essentially from now until Christmas week. Mboco for Christmas anyone?? If rain be the sole influence on food prices, then earliest price decrease should be expected in Mid Jan through Feb. This isn't to say farmers out there shouldn't plant like crazy. Planting maize now, for example, will increase its supply by Feb thereby decreasing one of the input costs for millers. That means Ugali will be more affordable then...if the millers behave themselves.

 Ugali avec kachumbari et fried goat

(Sourced from Google)

DO NOT, if anything, rely solely on weather forecasts. Our meteorologists have a tendency of making vital information available a tad bit late. I'm yet to confirm whether our National Disaster Operations Centre still exists as they've been a bit silent....a bit! October 2011 saw Turkana face floods and immediate reactions by various ministries to "save" them - a task that cost millions. The same happened last month in Western Kenya and parts of Nakuru. Had measures been taken during these periods to use the flood to our advantage by creating a dam to store the water and irrigate land, we'd be facing lower food prices by Dec....thus amplifying our holiday experience.

As for electricity, whatever increase there is in water supply is probably being channeled to areas with shortage and other areas of expansion. Unfortunately, what they said about electricity being cheaper next year June seems more of a reality right now....if this be the only contributor you're considering. It's an unfortunate cycle we've been following for years. Food prices increase during non-rain seasons then decrease around Jan, but never returning to the original  price. Making demands for immediate reduction of costs solely based on these short rains will be unfruitful. You'll end up eating Mboco for Christmas.

NB: Mboco is pronounced Mbo-sho. English name is runner beans

All that power

"No one man should have all that power" - Kanye West

I was reminded of this song earlier today when I woke up to the news of yet another increase in the cost of electricity in Kenya. It has gone up to Kshs 8 per unit and reasons given are basically the weakening of the shilling which has driven petroleum costs up and the drought that saw shortage in electricity supply. I've b****ed about a lot of stuff, but this move by the power regulators will certainly take the cake. Why?

Electricity forms part of the basic basket for not only households but manufacturers. Unlike sugar and flour, this kind of increase affects ALL commodities. A rise in input costs certainly translates to an equal if not higher increase in that of the output...in Kenya anyway. All costs will be passed onto the consumers, as explicitly announced by the Kenya Association of Manufacturers last week. Which means that your current household budget -after weeks of adjusting- is STILL inadequate.

Due to over-reliance on hydroelectricity and diesel run generators, the energy sector is now looking into investing in wind, thermal and nuclear energy to meet consumer demand. What I don't understand is why they're not considering solar power...and why the hell nuclear energy is even on the list. Kenya lies along the equator hence receives sunlight for the most of the year. Solar panels are therefore our best fit. Greece manufactures them in the thousands of products. Given their current crisis, I'd say we have more bargaining power and could buy from them at a cheaper price. The EU is currently being wooed into investing in Greece's energy sector since it faces over 300 days of sunlight in a year...yet they ain't even along the equator like us!!

Fellow Kenyans, let us invest in solar panels now and take some weight off Kenya Power's shoulder.God knows we can't stand inefficiency coupled with increased charges.

Patriotism I

I love my country, love iiiit, love iiiiiiiiiit! There's many things I believe can be done better to improve our status and decrease our annual losses. I'd do anything to save my country provided it's within reason.
Sugar has been the cream of most conversations in Kenya for the past month, and for good reason. 1kg of sugar goes for between Kshs. 200 - 220 ($2.00 - $2.40) up from Kshs.75 in January. Reasons given by millers range from shortage in sugar cane supply to increased pay to farmers. As part of the consumer basket, it has obviously decreased disposable income for most households. Whereas a 2kg pack had a budget of Kshs. 150, we now have to spend between Kshs. 400 - 450 (roughly a 3-fold increase). All this I attribute to lack of accountability. Lemmi explain;
The Kenyan government owns 5 sugar mills of which 4 are producing below half their capacity. These very mills have a debt of Kshs. 50 billion which is yet to be cleared since 2007 when protection for the local industry was given via a COMESA agreement. Of all the mills in Kenya -8 in total if I'm not mistaken- Mumias Sugar Company is the most efficient but still produces way below its capacity. Kenya in total requires about 12 factories with a total labor force of about 40000+ to meet its current sugar demand. We've had close to 5 years to improve our milling technology such that more sugar can be produced from one tonne of sugar cane. This change is yet to be seen, and I'm surprised there's been no media coverage or follow-up on whether the millers have been keeping to the COMESA agreement. 5 years down the line and little to no change has occurred. Our sugar millers also rely heavily on farmers to supply their raw materials. I really don't understand why they can't PRODUCE THEIR OWN sugar cane. It's like how parents will call for you when you're busy just to change the channel or give them the remote...fcuking ridiculous!!!
I won't delve into suitable technologies coz that's just another headache. I'm glad the protection COMESA offered to the sugar industry is coming to an end in March 2012. Our new neighbors, South Sudan, produce sugar in excess and I'm told can currently retail it in Kenya at Kshs.40 - 50 ($0.50 - $0.60) per kg. As usual, a few politicians are already looking to extend the protection offered to Kenya in order to protect the sugar milling industries. Wouldn't it be better though, to import and retail sugar at Kshs. 50/kg and increase our disposable income? God knows I can use that extra Kshs. 300 to improve my lifestyle. South Sudan is also not proficient in milk production. I've seen a couple of STUPID FARMERS pour their milk in protest of purchase prices. Hows about we export milk to South Sudan in exchange for sugar?? I am a Kenyan student and damn patriotic to my country. I WILL to stab the sugar industry if it means the potential for growing my country is higher.

Accomplished one of my 2011 goals :)

Straight to the point....I finally opened a bank account. One that I'll actually use. I had one before but I figure it's been closed due to inactivity (2 years of no transactions). If any of you jacked me within that period, you would have found a few notes in my socks and other areas. Lakini sasa....tough luck!

"He's only opening a bank account now?" Yes, yes I am. I've always been against the notion of keeping my money in another institution's hands only to be charged for either withdrawing my own money or simply keeping it there. Alas, it's necessary. As much as there are 5 layers of security to get through before you reach the 600 bob under my pillow, a bank somehow feels safer.

Bank accounts differ from bank to bank. Here are some common types:

1. Checking account: Commonly known as current account and used for daily transactions at a fee. Withdrawal can be done at any time and there's no limit (unless you intentionally put one or are withdrawing more than what you have). No interest on deposits. Use it preferably if you're in business.
2. Certificate of deposit account: Commonly known as fixed account. Earns a relatively high interest on deposit (which is made once and for a fixed period of time). You cannot withdraw until its maturity. In Kenya, most banks require a minimum deposit of Kshs 500,000. The longer the period, the higher the interest earned.
3. Savings account: These are meant to encourage a saving culture. Fair interest is earned on deposits and one can only withdraw a given maximum and a given number of times in a month. The trick is to find a bank that offers a rate that will help you beat our 16+ % inflation.

With the introduction of M-banking (transactions via one's mobile phone...at a fee) and E-banking (Remote banking transactions via internet...at a fee), banking has become more efficient if not quite enjoyable. Having an ZAP, YUcash, Orange, MobiKash or M-PESA account really helps with this. Research on the various student accounts available in your area. Sit through those tasteless bank account advertisements. God knows some are better than their actual service. Till next time...