Economy growing despite increased taxes

Kenyans were better off between April and June, amid the gloom that has greeted the punitive tax measures by President Uhuru Kenyatta, the Kenya National Bureau of Statistics (KNBS) figures show.

The overall size of the economy – calculated by summing up all goods and services produced at a given period, or gross domestic product (GDP)- expanded by 6.3 per cent in the second quarter of 2018, signaling better standards of living for Kenyans.

This compared well to a slower growth of 4.7 per cent in the same period in 2017, according to KNBS statistics. As a result, each Kenyan is estimated to have produced goods and services worth Sh24,767 during the three month period, a slight increase from Sh24,407 that each Kenyan produced in the similar period last year. The 6.3 growth is the fastest quarter two growth since 2013 when GDP expanded by 7.5 per cent in the same period. KNBS attributed the robust growth to improved production in the agricultural sector, the country’s economic mainstay in which millions of Kenyans eke out a living.

Agriculture–farming and livestock–recovered from a drought-laden 2017 to grow by 5.6 per cent compared to 0.8 per cent growth realised in the same quarter of 2017, with Kenyans enjoying impressive production of maize, tea, coffee, milk and sugar cane. “The quarter in review was characterised by favorable weather conditions across the country.

As a result, agricultural production improved significantly compared to the same quarter of 2017,” said KNBS in a statement. Growth in the agricultural sector had a multiplier effect on the manufacturing sector with agro-processing activities increasing during the period under review. Processing of liquid milk and production of butter increased by 12.2 and 48.4 per cent, respectively.

There was also increased production of bread, biscuits, sugar, beer and stout as manufacturing grew by 3.1 per cent from a contraction of 0.2 per cent. Hospitality and food service and Information and Communication grew at the highest at 15.7 per cent and 12.6 per cent respectively in the quarter under review.

However, sectors such as finance and insurance, construction, transport and storage experienced a decelerated growth in this period. As a result of the improved growth, Kenyans are said to have enjoyed lower prices of basic consumer products, especially foodstuff, as the rate of increase in prices of goods and services in the economy, technically known as inflation, estimated at 3.98 per cent during the quarter under review compared to 10.8 per cent in the same period of 2017.

But with the new tax measures, the honeymoon might as well be short-lived. Latest data released by KNBS shows inflation rose by 5.7 per cent in September from 4.04 per cent in August, as consumer grappled with high fuel prices occasioned by the 16 per cent valued added tax on petroleum products.

This tax has since been halved to eight per cent. Consumers have, after all, not been able to enjoy this latest reprieve with most traders still charging prohibitive prices for products that are abundantly supplied. On Wednesday, Agriculture Cabinet Secretary Mwangi Kiunjuri, directed millers and traders to sell a two-kilogramme unga at Sh75. The CS warned that the Government would take “necessary action” against traders who continued “exploiting Kenyans” by charging a higher price.

Mr Kiunjuri said the high prices continued being charged despite the country experiencing bumper harvests that might see surplus grain for the first time. He noted that some supermarkets in Nakuru County were selling a 2kg packet of maize flour at Sh70, Nanyuki at Sh100 and Nairobi at between Sh82 and Sh94, in what he said could be collusion between players in the value chain. “As much as it is a free market, every responsible Government must ensure that it protects its people,” said Kiunjuri at a press conference that was attended by millers under the United Grain Millers Association. The latest GDP figure is good music to the Treasury. The Exchequer expects the economy to grow by between 6.1 and 6.2 per cent as the country recovers from last year’s drought, elections and slower credit uptake.

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