Cities fare far better than rural areas in spending power

There are wide disparities in the purchasing power of individuals and families living in different counties, a domestic consumption analysis by Nation Newsplex and the Institute of Economic Affairs (IEA) reveals.

Residents of Nairobi have the highest spending power. With an average monthly consumption per person of Sh19,625, the average person living in the city spends more than twice the national average of Sh9,237.

In contrast, with a monthly average spending per person of Sh2,705, the spending power of the average resident of Wajir, the lowest-ranked county, is less than a third the national average.

The huge inequality in the consumption and spending power among people in different counties is manifested in the fact that 33 counties - 70 per cent of counties - have per person spending averages that are below the national average.

With a consumption average of Sh7,802 per person, the average resident of Homa Bay, which is halfway in the consumption ranking (median), spends 16 per cent less than the national average. Spending in the median county being significantly below the national average indicates inequality among counties.

Mombasa, with a per person spending of Sh15,629, Kiambu (Sh13,898), Kisumu (Sh11,827) and Nakuru (Sh10,720) round off the top five.

Consumption per person was highest in counties with a high population density, high urbanisation rate, high rainfall and low poverty index. This is because there are more opportunities for wealth generation and employment in urban areas, while high agricultural productivity relies on high rainfall.

HARSH ENVIRONMENTS

Nairobi and Mombasa have an urbanisation rate of 100 per cent, way above the national rate of 32 per cent. Kiambu is 62 per cent urbanised, while Kisumu and Nakuru are 52 per cent and 46 per cent urbanised, data from the Kenya National Bureau of Statistics show.

The average annual rainfall in the top five counties is 1,146mm compared with an average of below 680mm in the bottom five counties. This means that the average rainfall in the top five counties is almost double that of the bottom five.

Inversely, counties with the least spending power are mainly affected by harsh environments and are generally low-income regions with a high poverty index. Wajir, whose residents have the lowest monthly purchasing power, has an urbanisation rate of 15 per cent.

It follows Mandera with a consumption per person of Sh3,491 and an urbanisation rate of 18 per cent. In third place from the bottom is Turkana, whose average citizen spends Sh3,768 per month, then Samburu with Sh4,797 and West Pokot with Sh4,889.

An analysis by the IEA found a correlation between purchasing power and poverty levels. The bottom five counties are among the eight poorest, with poverty indexes ranging between 88 per cent and 66 per cent.

In contrast, the top five counties in spending power have poverty indexes ranging from 22 per cent to 40 per cent.

When Newsplex examined consumption per household, the ranking of the counties did not change much. In consumption levels per household in each county, Nairobi still leads with Sh62,529 per household per month. It is followed by Mombasa with Sh54,640, Kisumu (50,542) and Lamu (48,426). Kiambu rounds off the top five with Sh48,077.

AN OUTLIER

Lamu is an outlier because it does not have the characteristics of other top spenders. Lamu residents have a high purchasing power despite the county’s low population density (426 people/km2), below-average rainfall (609mm) and low urbanisation rate (20 per cent).

The average family in Nairobi consumes three times as much as the average family in Wajir, the county with the least purchasing power. The other bottom five counties in terms of consumption per household are Turkana, Marsabit and Samburu. These counties are mainly semi-arid, low-income regions.

Thirty-two counties have a consumption per household below the national average of Sh40,678. The consumption per household in the county in the middle, Nyeri (Sh35,507), is 13 per cent below the national average.

One out of six shillings spent on domestic consumption in Kenya is by a Nairobian. The county spends more than the next three counties combined. The top three counties in terms of total consumption in 2015 in nominal terms are Nairobi (Sh844 billion), Kiambu (Sh309 billion) and Nakuru (Sh236 billion).

The bottom five counties in terms of nominal total consumption are Lamu and Samburu with Sh14.7 billion each and Tana River, Isiolo and Marsabit with Sh19.6 billion each.