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Rising Prices…The New Normal

So, if you’ve been paying attention to the news (or to your pocket book) you’d have noticed that prices on essential goods like food and gasoline are rising worldwide.  In sub-saharan Africa, they are finally beginning to feel the pinch.  In the Middle East (which is comparatively richer than many parts of sub-saharan Africa) they felt the pinch much earlier and when they couldn’t afford to pay for bread, revolutions erupted.

Now, I’ve been following the debate in Kenya on rising prices and the reactions by politicians are not making sense to me.  They are now caught between a rock and a hard place, i.e. if they reduce taxes on gasoline, kerosene, food or whatever, how will they be able to fund this bloated coalition government?  On the other hand, if they leave the exorbintantly high taxes in place, it could lead to riots and other disruptive events.

However, the fundamental problem that countries like Kenya are going to face is one I’ve mentioned here before and it is a growing population and a low productivity country.  The current population is around 40 million.  Now, let’s say in ten years, that number increases to 50 million.  How will the country produce the needed 10 million jobs to buffer this population increase?  This is exactly what landed Egypt into trouble.  It has a population of 80 million and the country really made nothing.  Like Kenya, it’s economy was largely dependent on land — On things like tourism and in Egypt’s case the Suez Canal (In Kenya’s case, it would be farming).

A friend keeps telling me that it’s very important to pay attention to the trends because it will forewarn you of trouble in the future and allow you to plan accordingly.  So, again, it’s not about democracy and constitutions and all that nonsense.  For countries like Kenya, it’s about population growth and the inability of these countries to transform themselves into bastions of productivity.  i.e. they have to start making things like cars, drugs, clothes…something! or else, there’s going to be trouble in the future (& no…banks do not make things)

Your thoughts….

12 comments for “Rising Prices…The New Normal

  1. FGaita
    August 4, 2011 at 1:20 am

    Yes we need to diversify into manufacturing.But before we do that we need massive investment in energy,infrastructure and skilled Labor.Who is gonna put up a factoring with the constant power rationing in Kenya? For infrastructure,at least something seem underway for now.Good news that they’re also talking of High Speed rail,that’s a good thing since we haven’t done anything with the Railroad since 1898 when the Mbsa to UG rail was built.We also need lots of Polytechnics not the kind of Universities springing up.

  2. Gaita
    August 4, 2011 at 1:11 am

    But talking of Production,we need heavy investment in energy, infrastructure and skilled labor,do we have it? Who’s gonna put up a factory in a Country still ridden with constant power rationing? They’re now talking of building high-speed rails,at least that will be since 1898 when the Msa to UG railroad got built.About skilled Labor,instead of focusing on polytechnics to teach students how to build things,the Country is full of substandard universities rolling out mostly MBA s.

  3. Tony W
    July 8, 2011 at 5:47 am

    Hi my friend, nice post but have you considered the speculation going on in commodities. If your going to blame anyone blame Wall Street the likes of Goldman Sachs manipulating and increasing on commodities Maize while lowing Kenyan (/all East African shillings) to the lowest point in history. So when it does not rain for one or two seasons the system does not have room to adjust. But I agree with you, it is going to be hell to pay for those politicians soon.

  4. Kimani Mbogo
    June 8, 2011 at 9:19 am

    I agree that production will definitely be a step in the right direction but lets look at what it involves.Inorder for production to increase, the appropriate infrastructure needs to be in place which means government needs to increase spending & with KRA not being able to meet its targets, the government will most likely borrow destabilising the interest rates & with the archaic govt procurement procedures local currecy will be tied up in treasury weakening the KES further………..
    BOTTOM LINE: It’s a gloomy picture for Kenya :sad: & Kenyans should brace themselves for tough times ahead. It took us a while to get us into this mess it will take us a while to get out of it

  5. Kimani Mbogo
    June 8, 2011 at 9:18 am

    I agree that production will definitely be a step in the right direction but lets look at what it involves.Inorder for production to increase, the appropriate infrastructure needs to be in place which means government needs to increase spending & with KRA not being able to meet its targets, the government will most likely borrow destabilising the interest rates & with the archaic govt procurement procedures local currecy will be tied up in treasury weakening the KES further………..
    BOTTOM LINE: It’s a gloomy picture for Kenya & Kenyans should brace themselves for tough times ahead. It took us a while to get us into this mess it will take us a while to get out of it

  6. Julius
    May 10, 2011 at 10:27 am

    Production..production.. is the only song that will make Kenya economically stable. Services will never develop the economy. We trash production yet the mzungus are coming here to invest in it and make huge profits while we fight cut throat competition and dwindling margins in services.

  7. Julius
    May 10, 2011 at 10:01 am

    I also concur that Kenya must produce tangible things to prosper. The service business is not very profitable but Kenyans like venturing there because of hype and the love for easy money. i.e. they read about giant tech companies in the US that mint billions by selling intangible services then we just copy blindly. The US production business is much bigger that her service industry. all the strong economies started with production then moved to services. For us, we want to skip a stage and move directly to services yet there is no food, fuel, water etc. We must produce these things first so that the service industry can have a strong foundation.

  8. Anonymous
    May 5, 2011 at 1:42 am

    What baffles me is that, despite the well established fact that product businesses are so much more profitable than service businesses, Kenyans still flock to do service business. We are truly addicted to services. No wonder we are pumping billions into BPO, when there are other golden opportunities for technology to bring us into an era of production

    The problem is that we as Kenyans have a love of doing “deals”, as if deals are what will make Kenya grow.

    Unfortunately, that’s completely misplaced and we’re paying dearly for it. Even the PNU and ODM thieves in government are into deals and not production.

    As KE keeps on lamenting ad nauseam, our society is not geared towards production.

  9. Anonymous
    May 5, 2011 at 1:40 am

    What baffles me is that, despite the well established fact that product businesses are so much more profitable than service businesses, Kenyans still flock to do service business. We are truly addicted to services. No wonder we are pumping billions into BPO, when there are other golden opportunities for technology to bring us into an era of production

    The problem is that we as Kenyans have a love of doing “deals”, as if deals are what will make Kenya grow.

    Unfortunately, that’s completely misplaced and we’re paying dearly for it. Even the thieves in government are into deals and not production.

    Like KE keeps on lamenting ad nauseam, our society is not geared towards production.

  10. KenyanLyrics
    May 4, 2011 at 7:04 pm

    What baffles me is that, despite the well established fact that product businesses are so much more profitable than service businesses, Kenyans still flock to do service business. We are truly addicted to services. No wonder we are pumping billions into BPO, when there are other golden opportunities for technology to bring us into an era of production

  11. Anon
    May 2, 2011 at 1:48 pm

    That place is a ticking time bomb. Tick..tock..I hope the politicians can hear that loud and clear. And for the middle class in Kenya who have no clue what’s going on, it’s time to wake up and smell the coffee…

  12. Anonymous
    April 30, 2011 at 3:03 am

    So, again, it’s not about democracy and constitutions and all that nonsense. For countries like Kenya, it’s about population growth and the inability of these countries to transform themselves into bastions of productivity.  i.e. they have to start making things like cars, drugs, clothes…something! or else, there’s going to be trouble in the future (& no…banks do not make things)

    KE,

    For our political class, it was never about the constitution / economy but a way for the corrupt elite to hold / gain power.

    On the other hand, the elite have become massively engaged in drug running. Maybe they misunderstand “drug production”, ama?

    Anyway, things have not yet become bad (for them) yet. The bad season’s gonna kick in soon and none of them are prepared. They’ll be completely caught by surprise. Did you happen to catch the government’s offer to Mpesa the worst hit cash to sustain themselves while cutting certain taxes? What an absolute joke yet the new constitution is bloating an already bloated government by a 100%.

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