Impact of pandemic on spends by the middle class in Nairobi

Apr. 8, 2023 | By MindPulse Editor | Our Thinking | 

At the onset of the Covid-19 pandemic governments including the Kenyan governments implemented a raft of measures to slow down its spread. In addition, they added in measures meant to support the populace survive through the tough times. Companies were not left behind, implementing a number of measures including lay-offs, salary cuts etc. With the salary cuts and lay offs, the middle class in Nairobi were particularly heavily impacted and had to institute survival measures including cutting costs, starting second income streams including hawking food and clothing in what is referred to as car boot sale. It became common to see high end cars selling their wares by the roadside all in an effort to make ends meet.

The suffering Nairobi middle managed to cut costs as they got tax relief from government that reduced Pay As You EARN (PAYE) charged on their salaries. The government also reduced other taxes including VAT (Value Added Tax) from 16% to 14% that helped cushion consumers. On the corporate front, Corporate Tax was also cut from 30% to 25% to support business. Households also cut their expenses and restaurants and clubs were closed hence most of the food or alcohol was consumed at home. A lot of consumers also reduced their expenses by not going to barber shops and salons, reduced cost of transport to work with most working from home, less spend on social engagements including weddings, church etc. Banks also reduced their rate on interest on loans for their clients mostly taken by the middle working class.

Official data by the Kenya National Bureau of Statistics (KNBS) indicates that the middle class in Nairobi, compared to other income groups, saw their cost of living drop significantly. This is because despite the job losses and salary cuts, they conversely spent less on transport, school fees, alcohol, eating out at restaurants, loans etc. Data from the Kenya National Bureau Statistics (KNBS) shows that inflation rates for the middle class in Nairobi have dropped by 50 percentage points from February compared to 37 and 33 percentage points for the poor and rich respectively. The difference is due to the weight that the different income groups place on different consumer items for example the rich and middle class spend more on transport than the poor, a drop in spend on transport is therefore likely to benefit the middle class and the rich than poor consumers.

This article was originally published by the Standard Media Group.

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