It's the economy-stupid

KNBS released figures, percentages and some other things called bp points. I hear that they measure inflation. Don't worry though, all those things are stupid, they don't add up. Economy, economics or even econometrics- don't ask me the difference, i don't know-are words which are based on estimations and so many assumptions.

More seriously, the Kenya economy expanded by 4.3%y/y, don't ask me what is that y/y, may be it means yes yes or even why why, it can also mean year to year, but am not sure. This expansion is an estimate, after all how do you measure everything in the country. In the 1st quarter, January to March, the economy expanded by 5.2%, another estimate and for the second quarter last year it was 4.4%, estimate estimate.

The Kenyan media-am always in problems with this media-read the numbers, showing them on the screen and on the front pages of the dailies. Some people were happy that the numbers were positive, its a growth after all. The reporters did not go to length to explain to the 95.8% audience which has limited knowledge on economics and finance issues what these figures meant (that 95.8% is an assumption, the % should be bigger, i assumed that the people who work in the financial services sector, a 4.2% of the GDP, know something about the numbers)

I have read about economic projections, usually done months or years prior, and economics briefs, released months later and i always wonder when the numbers are useful, i bet there is no time, its the economy, stupid. We are expected to grow by 5.7%, and for the first half we have averaged 4.75% (okay, that is simple, at least, take 4.3%, add 5.2% then divide by two) so it means that the economy has to expand by 6.65% to achieve the projection, am not so rosy.

Now now now.....to the common mwananchi, what are these percentages? what do they mean? take your income, everything you make by the end of the month, let's say 20k, for simplicity. It it expands by 4.3% it means that you have 20,860, at least now you can afford a new jacket. It is a good thing, isn't it?

But wait a minute, if when your 'product' or income was 20k, you were only using two products, let's say food and rent. The price of food was 200/= and you consumed 75 units of such making it 15000/= total and a 5000/= rent. Now the price of food has gone up by 8%, meaning that a unit of food is 216/=, 75 units becoming 16200 and the land lord hikes the rent by 500/=, so now the total expenditure is 21,700, you are short of 900 shillings.

That is not the real situation, however. The rich consume less that 1% of their income and invest the rest in ventures like real estate, land, the stock exchange and mutual funds. For example, Safaricom share rose by 27% since mid-June to 8.90 shillings. If you net off the inflation, that is still some 19% growth, a factor which contributes to the overall growth of 4.3% after a period, like our second quarter in question. In case you are wondering how the 19% goes down to 4.3%, just note that some shares lose value over a period. For your information, shares lose value only when the common Mwananchi buys them (Safaricom shares only gained when the multitude panicked, gave up and sold to the rich at a loss)

The economy can be compared to a class of 20 students, where 5 are very bright such that they score more marks than the rest 15 combined. They drag the mean score up and the headmaster is always happy 'what a good class he has'. The painful truth is that majority are dunderheads.


Enough of economic sense, those are just my cents.Next time.........