Nairobi has now taken the somewhat unenviable lead as Africa’s most expensive city to live in according to a new survey by the Economist Intelligence Unit (EIU).

The report indicates a sharp increase in the cost of living in Kenya compared to eight African cities that were sampled in the survey owing to a soaring rise in consumer prices which has been attributed to the introduction of Value Added Tax (VAT) on many more items.

WORLDWIDE COST OF LIVING 2014

The Worldwide Cost of Living 2014 survey listed Côte d’Ivoire’s Abidjan as the second most expensive city, followed by Morocco’s Casablanca, Lusaka (Zambia), Cairo (Egypt), Lagos (Nigeria), Johannesburg (South Africa), Pretoria (South Africa) and Algiers (Algeria).

The EIU study did not include Luanda, Angola’s capital which has for many years been cited by numerous reports as Africa’s most expensive city, since the country’s economy is still recovering from a 27-year civil war that saw most sectors of the economy destroyed.

Kenya is considered an ideal business hub in East Africa but these statistics puts the country at a risk of losing out to other cities. Kenya’s inflation rate stood at 6.68 percent in February 2014 and another recent report by the World Bank’s Doing Business 2014 report showed that Kenya’s position in the list of ‘ease of doing business’ had dropped to position 129 from 122 last year.

THE PROBLEMS WITH NAIROBI

The country ranks poorly in the following areas, which contribute in making Kenya less favourable for investment in the continent:

• ease of obtaining electricity connection;
• protecting investors;
• ease of dealing with construction permits;
• easy registration of property;
• making it easy to access credit;
• making it easy to pay taxes.

IMF $420 MILLION LOAN AND KENYA’S VAT BILL 2012

The enactment of the VAT ACT 2013 which imposed 16 per cent VAT on essential commodities including processed milk and newspapers in the country is connected with the famous (or infamous) Sh35.7 billion loan that the International Monetary Fund (IMF) approved to Kenya’s treasury in 2012.

Allegedly, one of the conditions for the loan laid down by the IMF required that the VAT BILL 2012 be passed into law as it would be key in instituting reforms to the country’s taxation regime and hence make Kenya’s investment climate competitive. In Africa, consumption taxes are said to be the cause of the difficult compliance times in paying taxes.

“If we really want to improve Kenya’s competitiveness, we have to address the fundamental problems that make VAT so onerous to comply with and therefore a threat to Kenya’s investment climate competitiveness,” KRA commissioner general John Njiraini said sometime back.

The Kenya Forum believes the report is not far from the truth because as it is Kenyans are finding the high cost of living in the country totally unbearable as majority of the population struggle to afford even the most basic commodities.