Kenya and South Africa Address Cost of Living Concerns

African governments are implementing new strategies to address declining consumer purchasing power and bolster economic confidence. Public discontent persists across the continent despite signs of macroeconomic stabilization.

Kenya’s Economic Measures

Kenya is shifting away from subsidies and price controls, focusing instead on interventions to increase disposable income and wealth-creation opportunities. Treasury Cabinet Secretary John Mbadi recently defended proposed tax reforms aimed at shielding low-income earners, emphasizing the government’s awareness of the impact of rising prices on household earnings. The proposed reforms include zero taxation for individuals earning US$233 (Ksh30,000) or less, and a reduction in the tax rate for the subsequent income bracket from 30% to 25%.

Kenya has also introduced the Ziidi Trader platform, designed to broaden access to the capital market. This platform, launched by President William Ruto, allows Kenyans to purchase shares through their mobile phones, eliminating previous barriers such as broker intermediation and minimum investment thresholds. The reforms have reportedly coincided with increased market activity, with the Nairobi Securities Exchange’s (NSE) total market capitalization expanding from approximately US$9.3 billion (Ksh1.2 trillion) three years ago to nearly US$23.2 billion (Ksh3 trillion) last year. The government anticipates a significant increase in the number of Kenyans participating in the capital markets.

Critics have questioned the timing of these reforms, suggesting they are politically motivated as President Ruto approaches a potential second term. However, Mbadi defended the measures, stating that restoring purchasing power is a legitimate policy goal. Kenya’s National Treasury reports a reduction in the risk of debt distress and stabilization of key macroeconomic indicators, including inflation and the currency. Moody’s recent rating action, upgrading Kenya’s outlook to B3 with a stable outlook, was cited as evidence of improved fiscal credibility. Kenya’s inflation rate in 2025 reached a high of 4.6%, primarily driven by food, transport, and energy costs, while the shilling’s stability has contributed to easing price pressures.

South Africa’s Wage Increase

In South Africa, the government announced a 5% increase in the national minimum wage to US$1.90 (R30.23) per hour, effective March 2026. This increase, benefiting domestic and farm workers, is considered significant as it surpasses the inflation rate and exceeds expectations from businesses and analysts. Organized labor views the increase as a stimulus for economic growth and job creation.

However, AgriSA, South Africa’s largest farmers’ lobby, expressed concern that wage adjustments could weaken employment sustainability and accelerate unemployment, particularly within a sector still recovering from drought, climate volatility, and animal disease outbreaks. The livestock industry, which contributes 40% to 45% of agriculture’s GDP, is considered particularly vulnerable. Statistics South Africa data indicates an average inflation rate of 3.2% in 2025, the lowest in 21 years, although the annual rate for food and non-alcoholic beverages was 4.4% in December 2025.