Date: 1 October 2012 Ref: ICSC 60-1-1 KEN Cost of Living Survey Report City/Country: Nairobi, Kenya Type of Survey: Place-to-place Date of Survey: April 2012 I. INTRODUCTION 1. A place-to-place cost-of-living survey was carried out by the Cost-of-living Division of the International Civil Service Commission's secretariat in Kenya in April 2012 for post adjustment purposes. The survey covered data collection and index calculations for a basket of goods and services including housing and domestic service costs. 2. As part of the exercise, a price collection was carried out in Nairobi in April 2012. The international officials in grades P-1 through D-1, stationed in Kenya at that time, were requested to provide information on their household expenditures, as well as on housing and domestic service. 3. Price data collection for an all-inclusive basket of goods and services was carried out in June 2005 in New York, the base city for cost-of-living index comparisons. Expenditure data collection covering monthly and less frequent expenditures on food, beverages, clothing and footwear, housing, domestic service, transportation, communication, furniture and household equipment, health, recreation, education, miscellaneous goods and services and out-of-area commitments was undertaken in 2010 in the eight headquarters duty stations and Washington, D.C. The expenditure data excluding housing, pension contribution, medical insurance and out-of-area expenditures, for those eight duty stations, with minor adaptations, constituted the common weights that are used for post adjustment index calculations for all duty stations including Kenya. II. DATA COLLECTION AND TREATMENT OF PRICES 4. The price collection was carried out by an independent pricing agent selected after consultation with the co-ordinator of the survey in Nairobi. The price collection covered outlets located in Nairobi. As a general rule, only prices of goods and services available in the outlets at the time of the visit by the pricing agent were collected. 5. The coordinator provided supplementary data on public transportation fares, utility, postal and telephone service rates and tuition fees. Average prices 6. Average prices were calculated for each item as simple arithmetic averages. Included in the number of items priced were duty-free alcoholic beverages available to staff in a commissary store in Nairobi. Page 1 of 8
Surveys 7. The data collection process for housing and domestic service costs and household expenditures in April 2012 involved the use of two questionnaires, which were distributed to staff members, stationed in Kenya. The survey response by type of questionnaire is presented in table 1 below. Table 1. Survey response Type of questionnaire Housing & domestic service costs Household expenditures Number of Staff Number of respondents Response Rate % Number of responses used Responses used (%) 1254 370 33 317 86 1254 37 33 314 85 8. The number of responses presented above refers to returned questionnaires properly filled and used in the calculation. A number of questionnaires could not be used because they referred to noneligible staff or were returned blank, incomplete or with inconsistent data. 9. Non-eligible respondents were staff members with less than 3 months at the duty station or living outside of Nairobi completing the housing and domestic service costs questionnaire, and those with less than 6 months for the household expenditure questionnaire; those living in hotels or boarding houses, sharing expenses of a common dwelling or with income less than 50 per cent of their family income. Weights - Common expenditures and other costs III. DERIVATION OF EXPENDITURE WEIGHTS 10. The common expenditure shares, mentioned in paragraph 3, were combined with the housing costs in Nairobi, pension contribution, medical insurance premiums and out-of-area expenditures to establish the weighting pattern for Nairobi. The common weights were adapted to the specific situation of Kenya using the expenditures reported by staff members there in grades P-1 through D-1 who responded to the survey. The major adaptation involved the proportions of the in-area and out-of-area expenditures. The final weights were redistributed based on remuneration of a staff member in Kenya at the dependency rate of a P4 step VI. Housing and domestic service costs 11. Information regarding housing and domestic service was derived from the questionnaire. 12. The following types of expenditures were included in the determination of monthly housing costs: Page 2 of 8
(a) Rental and homeownership costs: - Rents net of subsidies for renters. - Shared maintenance costs in cases of co-operatives, condominiums, etc. - Imputed rents for homeowners - Utility costs, such as electricity, gas, water and heating. - Amortized cost of a refrigerator, stove and other facilities. - Amortized cost of repairs and repainting. - Amortized cost of non-refundable key-money. - Garbage collection. - Garage/Parking space. (b) Domestic service: The average monthly cost of a full time maid and cook in Nairobi was also added to housing costs for comparison with appropriate data for New York. Pension 13. The actual amount of pension contribution of a staff member at the P4 step 6 level was included in the overall expenditure pattern. Medical insurance 14. This referred to the actual premiums paid by the staff in Kenya for medical and dental insurance coverage. Out-of-area expenditures 15. Dollar-driven: The following expenditures were considered as fixed-dollar amounts: remittances to maintain family members abroad; other out-of-area commitments; purchases of durable goods, such as, furniture, household appliances, glassware, tableware and utensils, sports, photographic, video and audio equipment; vacations and home leave. 16. Other: This category included other expenditures incurred outside of Kenya by the staff on items or groups of items such as clothing and footwear, education etc. In addition, when the out-of-area expenditure on any particular item or group amounted to 60 per cent or more of the total expenditure on that item or group, the total expenditure was treated as entirely an out-of-area expenditure. Adapted common weights 17. As a result of the above, the common expenditure weights adapted for Nairobi together with those for housing, medical insurance, pension contribution are shown in table 2 below: Page 3 of 8
Table 2. Nairobi expenditure weights (In U.S. Dollars) Expenditure category Weight Total in-area 5,353.96 Total in-area excluding housing 3,255.41 Food and non-alcoholic beverages 729.88 Alcoholic beverages and tobacco 115.49 Clothing and footwear 214.03 Housing, water, electricity, gas and fuels 2,098.55 Furniture, household equipment and routine maintenance of the house 108.63 Health 185.94 Transport 553.66 Communication 148.74 Recreation and culture 302.06 Education 211.88 Restaurants and hotels 466.60 Miscellaneous goods and services 218.49 Pension contribution 1,037.95 Medical insurance provided by UN organization 371.47 Out-of-area 2,898.59 IV. INDEX CALCULATION Calculation of price ratios, cost-of-living comparison index and post adjustment index. Price ratios 18. In comparing average prices for individual items in Nairobi and New York, every effort was made to ensure comparability of items between the two cities. Before comparing average prices, those for Nairobi were converted to U.S. dollar equivalents at the exchange rate of 82.98 Kenyan Shillings (KES) to the U.S. dollar. Housing 19. The housing costs index was calculated on the basis of data provided by the staff for commercially-rented dwellings identified by type, i.e., house or apartment, which were further classified by number of bedrooms for both cities. 20. Included in the housing costs comparison were the average monthly gross rent, and where applicable, apportioned charges, pro-rated cost for key-money, amortized cost for repairs and repainting, average monthly costs for electricity, gas, water, heating and garbage collection and the amortized cost of a refrigerator, stove and other facilities, as well as the average monthly cost of a full-time maid and cook. Page 4 of 8
21. The average housing costs by number of bedrooms for the commercially-rented houses and apartments in Nairobi were compared with similar average costs for commercial housing in New York to obtain cost ratios. The housing costs index was calculated using standardized weights for field duty stations and then used for the major group "Housing costs". Details of the calculation are given below. Type of dwelling Number of bedrooms Rent Table 3. Housing costs Nairobi, April 2012 (In U.S. Dollars) Utilities Facilities Other Domestic Service Security Average housing cost House 1 1,094.64 90.27 7.44 14.90 147.59-1,354.84 House 2 1,669.15 156.07 13.84 10.10 147.59-1,996.75 House 3 2,112.29 277.71 29.41 33.58 147.59-2,600.58 House 4 2,187.86 360.70 29.63 51.52 147.59-2,777.30 House 5 2,820.28 387.11 70.26 51.11 147.59-3,476.35 Apartment 0 1,361.79 - - 11.11 147.59-1,520.49 Apartment 1 1,253.14 41.76 6.39 13.32 147.59-1,462.20 Apartment 2 1,602.12 139.03 18.63 26.06 147.59-1,933.43 Apartment 3 1,404.27 208.94 19.81 19.99 147.59-1,800.60 Apartment 4 1,669.54 203.79 33.27 24.07 147.59-2,078.26 Table 4. Housing costs index Nairobi, April 2012/New York, June 2005 (In U.S. Dollars) Type of dwelling Number of Number of New York Index Nairobi total bedrooms Renters total Nairobi/New York House 1 6 2,609.80 1,354.84 5191.35 House 2 8 2,875.78 1,996.75 6943.33 House 3 19 3,685.75 2,600.58 7055.76 House 4 52 4,548.47 2,777.30 6106.01 House 5 44 5,239.83 3,476.35 6634.47 Apartment 0 5 2,214.20 1,520.49 6866.98 Apartment 1 9 2,944.32 1,462.20 4966.15 Apartment 2 36 3,349.32 1,933.43 5772.59 Apartment 3 39 3,607.01 1,800.60 4991.93 Apartment 4 10 3,763.91 2,078.26 5521.53 Total 228 59.95 Page 5 of 8
Education 22. The index was based on a comparison of tuition fees between schools attended by the children of staff in Nairobi and in New York. Out-of-area expenditures 23. The index for out-of-area expenditures, including dollar-driven, was based on the application of a special index recommended for use by Advisory Board on Post Adjustment Questions. Medical insurance 24. The index for medical insurance was a comparison of the average premium paid by the staff in Kenya with that paid by those at the same level in New York. V. SURVEY RESULTS 25. A summary of the relationship between the cost-of-living in Nairobi in April 2012 and that in New York in June 2010 is shown below. Details of indices and weights are shown in the annex. Page 6 of 8
Table 5. Summary results of comparison of living costs in Nairobi in April 2012 and in New York in June 2010 (Exchange rate: KES 82.98 = US $1.00) Expenditure category US $ weight % Weight Index Total 9,661.97 100.00 86.27 Total Excluding housing 7,563.42 78.28 93.57 Total in-area 5,353.96 55.41 75.14 Total in-area excluding housing 3,255.41 33.69 84.93 Food and non-alcoholic beverages 729.88 7.55 96.16 Alcoholic beverages and tobacco 115.49 1.20 107.68 Clothing and footwear 214.03 2.22 90.06 Housing, water, electricity, gas and fuels 2,098.55 21.72 59.95 Rental for housing 1,661.31 17.19 Other housing costs 32.12 0.33 Utilities 238.46 2.47 Facilities 29.31 0.30 Domestic Service 137.35 1.42 Furniture, household equipment and routine 108.63 1.12 82.76 maintenance of the house Health 185.94 1.92 76.91 Transport 553.66 5.73 87.09 Communication 148.74 1.54 109.74 Recreation and culture 302.06 3.13 86.01 Education 211.88 2.19 49.30 Restaurants and hotels 466.60 4.83 78.59 Miscellaneous goods and services 218.49 2.26 79.79 Pension contribution 1,037.95 10.74 102.73 Medical Insurance 371.47 3.84 44.16 Out of Area 2,898.59 30.00 106.33 PAI 138.49 26. The results of the comparison showed that the cost-of-living index for Nairobi in April 2012 was 86.3 on the base New York, June 2010 = 100 at the exchange rate of KES 82.98 to the U.S. dollar. When that index was rebased to the base, New York January 1996 = 100, it resulted in a post adjustment index of 138.5. Page 7 of 8
Updating 27. Updating the latter index (138.5) to August 2012 for implementation in October 2012, based on the movement in the local CPI between April 2012 and August 2012 and using the adapted common expenditure weights and the change in the out-of-area index, resulted in an index of 136.2 at the latest exchange rate of KES 85.00 per US dollar. Implementation 28. Based on the survey results, the post adjustment index (136.2) was implemented effective 1 October 2012. This index did not trigger a change in the post adjustment classification of multiplier 43.2. The existing pay index is 143.2. Page 8 of 8