Consumer confidence in Kenya continues its rebound from the all-time low of April. The July increase was driven by both increases in the index of future expectations as well as the index of current conditions.
Inflation at an all-time low since September 2019, boosting consumer confidence and spending.
While there is optimism, consumers and retailers aren’t on the same page. Due to the pandemic, retailers think e-commerce is the way to go, but consumers remain nervous about online purchases and continue to buy offline.
In July, KASI CCI saw a 22% increase in the index of consumer sentiment as it rose 6 points from -21 to -27. While still on the negative side, it’s comforting to see that the index has begun to recover from its all-time low levels of April. This increase was led by a 5 point increase in the index of consumer expectations from -17 to -12 and an 8 point increase in the index of current conditions which rose from -51 to -43.
While consumers take solace in the restarting of the economy, analysts fear that Kenya closed down too soon and is now reopening in haste.
Kenya was one of the first countries in Africa to close down, self-isolate, and impose strict quarantine measures while COVID-19 cases were still in single digits. While these measures worked to squander cases, it took a toll on the economy. Job prospects hit a record low, consumer confidence hit the ground and people were barely making enough to put food on the table. Thus, in July Kenya began restarting economic operations with internal travel starting on the 6th of July and international flights scheduled to resume on the 1st of August.
This stimulated economic activity that led to the increase in sentiment surrounding job prospects, household income and ability to meet regular expenses, the KASI sub-indices rising by 7, 9, and 5 points respectively. Furthermore, consumers also expressed some optimism regarding making discretionary purchases as a 9 point increase was seen in the sub-index measuring optimism surrounding making large purchases such as furniture and electronics.
On the other hand, analysts and health officials express their concern as Kenya saw a very concerning rate of spread. Less than a week after travel restrictions were lifted, infections crossed a value of 10,000, the following two weeks the cases climbed further to 15,000. The concern here was that it took 15 weeks to register 5,000 cases but only took 4 weeks to register an additional 15,000. On the 31st of July, Kenya stood at 20,636 confirmed cases. While consumers are gaining optimism about their financial health, they have expressed concern regarding their physical health due to COVID-19. This is reflected by the KASI COVID Pulse Fear index which climbed 5 points to 66.
Inflation is at its lowest since September of 2019 and consumers are taking notice. However, sales are not increasing significantly enough for businesses to stay afloat.
At a record low of 4.4% inflation, Kenyans are optimistic about spending this month. Aside from feeling more confident about making large discretionary purchases, consumers are also starting to spend more on products such as hair care, skincare as well as clothing. This data, collected under KASI’s COVID Pulse dataset, displays a start of a shift towards spending on more non-essentials items rather than the trends being observed of spending being only on necessities.
At the same time, an increase in spending and consumer demand has not been significant enough and has been affecting the survival of some large businesses in Kenya. In light of the difficult economic situation, two large chains, Shoprite and Tusky’s, have had to close down their store. For Shoprite, this is their 2nd shut down in four months. The COVID-19 pandemic has had a significant impact on consumer habits but also spending behavior.
Another industry that has taken a particularly large hit would be alcoholic beverages. Aside from extending the nightly curfew as a measure of controlling the virus, the government has placed a 30-day ban on the sale of alcohol in restaurants and eateries. With the sudden surge of cases, it was noticed that a lot of cases was found among young Kenyans socializing in environments where alcohol is served. It is expected that the industry will continue to face headwinds due to choppy demand. KASI Category Momentum index is showing a slowing momentum for alcohol beverages in July.
Retailers focus on improving online platforms but that’s not where efforts should be placed. Consumers are adapting to the pandemic by changing their offline shopping habits.
Major suppliers in the African economy have turned towards building up their infrastructure to support e-commerce. Twiga Foods in Kenya has partnered with Jumia to widen its reach and Pan-African payments giant, Flutterwave, has begun coordinating an online platform for merchants to set up online businesses that it will power payments for. Despite firms gearing towards moving operations online, our consume insights seem to be telling a different story.
When asked about their shopping habits that have changed, only 4% responded saying that they have begun using online platforms. The majority of consumers have adapted by bulk buying, going to stores at non-peak hours, reducing store visits, and only visiting stores that sell products in bulk. As of now, it looks as though preparing for online service may not be as important as fearing to ensure supply meets the demands of consumers coming to shop in bulk.
By Tanya Gandhi, Economic Intelligence Group at KASI.
About the methodology
KASI Consumer Confidence Score (KASI CCI) is a composite index compiled from a seven-question survey that runs monthly via our consumer polls in the countries covered. The data output is based on a fresh, randomly selected representative sample of city dwellers aged 18-64. Released the first week of every month, KASI CCI provides a focused view on consumer perceptions in seven African urban centers (Ghana, Nigeria, Kenya, South Africa, Cameroon, Ivory Coast, Tanzania) where most spending in the continent is concentrated.
For each question, the final metric will be a ‘balance measure’ of the percentage of positive responses minus the percentage of negative responses. The overall metric will be an average across all the questions.
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