NAIROBI: Kenyan farmer Anne Lidonde will plant more spinach than usual this year thanks to the collapse in global oil prices.
The middle-aged mother of two is one of the more obscure beneficiaries of a falling oil price which the International Monetary Fund (IMF) predicts will depress growth rates for sub-Saharan Africa to 4.9 per cent.
This is almost 1 per cent lower than previous forecasts, with key economies such as Nigeria relying on oil sales for revenues.
Kenya, like all bar one of its neighbours in east Africa, is dependent on oil imports rather than exports. The big fall in crude oil prices has resulted in savings not only in petroleum products, where prices have fallen less precipitously than crude, but also for products that rely on fuel inputs.
Oil accounts for most inflationary pressures across the region, according to the African Development Bank, so the oil crash has resulted in lower prices for food and household goods.
“Everything is down: petrol charges are down, unga [maize flour] is down, fertiliser is down. I’m ploughing the savings back into the farm,” said Ms Lidonde as she boarded a minibus taxi that slashed fares by 20 per cent this month.
Inflation across Kenya fell to 5.53 per cent in January, down from 6.02 per cent the month before, according to the latest figures from the Kenya National Bureau of Statistics.
This means most food prices are still rising especially in the drought-affected scarce season that lasts until the April rains but the cost of some staples is falling.
Average petrol prices fell 8.9 per cent in a single month, and maize flour by 2.9 per cent the largest monthly drop for any foodstuff, and hugely significant for the millions of Kenyans who rely on ugali, a cooked maize-flour dough, as their staple.
The impact is likely to be most felt in some of the region’s smallest, landlocked economies more than 1,000km from the coast, such as Burundi and Rwanda.
“Forty per cent of the cost of our imports and exports is down to transport, so we stand to benefit more than any other country in our region,” says John Rwangombwa, governor of Rwanda’s central bank. “Pump prices have already reduced by 22 per cent year to year. We expect it to have a positive impact on our growth figures.”
The drop is likely to provide a boost at the macro level for others, too. Kenya and Tanzania, which both spend about $4bn a year on oil imports equivalent to 8.2 per cent of gross domestic product in Tanzania are likely to save more than $1bn each on their import bills.
“Lower oil prices will be good for [east Africa’s] current accounts, many of which are dire, at over 10 per cent,” says David Cowan, Africa economist at Citi.
The World Bank says it is still calculating the likely impact of the oil price on the region’s current account deficits and growth prospects, but expects “substantial” savings.
Geoffrey Mwau, economic secretary at Kenya’s finance ministry, raised a note of caution, saying: “Despite the oil price drop, the shilling is still not that strong, so we don’t see a lot of benefits in terms of imports. That’s because the dollar is strong for a variety of reasons.”
The price collapse has also delayed plans by cash-strapped oil explorers for Kenya and Uganda to become crude exporters and grow state revenues, despite finds running to 2.3bn barrels.
Mr Cowan pointed out that the full extent of the price drop was unlikely to be passed on to consumers.
“The last few years have been pretty difficult profit-wise. Quite a lot [of importers, manufacturers and traders] may seek to rebuild profit by keeping up their margins.”
