alexa Kenyans shackling themselves to severe debt - Daily Nation

Kenyans shackling themselves to severe debt

Kenyans can no longer live on their income

The data is saying that we risk being trapped by debt

An analysis of household consumption trends shows that on average, Kenyans can no longer live on their income and have resorted to draining their savings to survive.

For more than three years now, Kenyans have been spending more than they earn, exposing themselves to an increasingly onerous debt burden, a Nation Newsplex review of government consumption data reveals. The data was analysed in collaboration with the Institute of Economic Affairs (IEA).

Data from the 2016 Economic Survey, which was published in May, shows the consumption rate was 102 per cent of income in 2013, 103 per cent in 2014 and 102 per cent in 2015.

Consumption is the amount of money spent on goods and services not including investments. When consumption goes above 100 per cent of income, it means that people are not saving any money but are spending what they had saved earlier or borrowing to make ends meet.

A comparison of savings with borrowing data from the Kenya National Bureau of Statistics reveals this very clearly. On one hand, net national borrowing accelerated from Sh190 billion in 2010 to Sh579 billion in 2015. On the other hand, savings rose from Sh83 billion in 2010 to Sh121 billion in 2011, but then plummeted below zero from 2013 onwards.

The data is saying that we risk being trapped by debt. The problem with borrowing and using savings for consumption is that, unlike investment, consumption has no returns.

IEA CEO Kwane Owino says the dis-saving was probably driven by high oil prices, which then created a rise in the cost of living. “If wages are stagnant, then people need much more money to afford the same things such as food and other necessities,” he says.

The average consumption per person rose from about Sh60,000 per year in 2010 to Sh70,000 in 2015, an analysis of data from the 2016 Economic Survey reveals. This is an overall growth rate of 17 per cent in the five year period, or about 2.8 per cent per year.

At first sight, this does not appear bad. However, when compared with the Gross Domestic Product (GDP), that is, the value of goods and services produced in the country, it turns out that consumption has been growing faster than GDP.

The data shows that per capita consumption was 76 per cent of GDP in 2010 and this ratio increased steadily to about 80 per cent from 2013 onwards. Obviously, it is desirable to have consumption lower than GDP, but the narrowing of the gap is worrying.


Furthermore, compared with the more vibrant economies of the world, a consumption rate of 80 per cent of GDP is quite high. Global data from the World Bank shows that in the same period, Brazil’s consumption rate rose from 60 per cent to 63 per cent while in Russia it rose from 48 per cent to 53 per cent.  

India’s rate fluctuated from 57 per cent to 59 per cent, China saw its rate fall from 38 per cent to 37 per cent, while South Africa’s rate rose from 60 to 61 per cent.

Unlike these so-called BRICS nations (Brazil, Russia, India, China and South Africa), consumption ranged between 54 per cent and 59 per cent in the more mature economies of Europe and North America. So it is quite clear that Kenyans are consuming too much.

In the East African Community, Kenya consumes a higher proportion of GDP than her neighbours.

A look at World Bank data by Newsplex and the IEA also shows that, in Africa, Botswana had the lowest consumption as a proportion of GDP, 46 per cent in 2014. Liberia’s 134 per cent was the highest rate, both in Africa and the world.

Consumption in Tanzania slowed down from 68 per cent of GDP in 2011 to 65 per cent in 2014, while in Uganda it varied slightly from 75 per cent to 74 per cent. In Rwanda it fell from 78 per cent to 74 per cent while rising in Burundi from 72 per cent to 77 per cent.


There seems to be a contradiction between these two sets of data: one says we are consuming less than we are producing while the other says we are consuming more than we earn.

There is no disagreement because what you produce should always be more than what you earn; otherwise, your employment is not sustainable!

The corresponding monthly consumption figures range from Sh5,000 in 2010 to Sh5,870 in 2015. Now these might seem too low but when we bear in mind that they are spread over the entire population – from the youngest baby to the oldest mzee – we begin to see the proper perspective.

Breaking down the numbers further, it turns out that average daily consumption rose from about Sh167 in 2010 to Sh191 in 2014. This was equivalent to about $1.96 in 2010 and $1.94 in 2015, using the respective exchange rates for the two years.