Business and Finance

Nairobi, Kigali most expensive cities in region for expatriates

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Companies in Nairobi and Kigali seeking the services of foreign experts will dig deeper into their pockets after a survey ranked the two cities the most expensive in the region.

The 2012 cost of living survey, carried out by an international human resource consultancy firm shows that Nairobi and Kigali have become less attractive to international workers living in the region.

Dar es Salaam and Kampala were ranked third and fourth respectively.

However, Nairobi and Dar es Salaam improved in the rankings compared with last year, when their currencies weakened.

Nairobi was ranked at position 122 up from 108 in 2011, while Dar was at position 193, up from 187 last year.

Kigali and Kampala rose in their rankings with the former rising to 136 from 156 last year and the latter slightly, from 202 to 200.
The survey attributed the high cost of living to weak local currencies that pushed up inflation.

The Kenya shilling traded at a record low of Ksh 107 to the dollar last year, as did the Tanzanian shilling at Tsh 1,823 and the Ugandan shilling at Ush 2,901.

While the weakening of the currencies hurt the economies, of employees living and working outside their home countries, benefited.

“The fact that a dollar now exchanges for more shillings means that expats can be paid the same salary and afford a more comfortable lifestyle, so foreign workers are happy,” said Martin Openda, a human resource consultant based in Nairobi. “But for the local workers it’s a negative thing, because the local employer is not increasing salaries to keep up with inflation.”

Inflation is in the double digits in all the EAC economies, with the exception of Rwanda’s-latest figures show Burundi’s inflation is at 25.2 per cent, Tanzania 18.6 per cent, Uganda 18.2 per cent and Kenya 12.2 per cent. The Mercer survey is seen as the most comprehensive one on measuring the cost of living, and is designed to help multinational companies and governments determine compensation allowances for their expatriate employees.

Human resource analysts said high rankings for the EAC capitals could send investors with large numbers of expatriates back to the drawing board.

Growing pressure for higher expatriate compensation could affect ongoing efforts to cut operating costs and ultimately erode profitability.

Kenya’s commercial banks for example, have seen their wage bill rise sharply. The Central Bank in its latest banking sector report said that total salaries and wages in the banking industry rose from Ksh 47 billion ($552 million) in 2010 to Ksh 52 billion ($611 million) in 2011.

The Mercer survey used New York City as the reference city and the US dollar as the base currency, and two main factors determined the rankings.

The study monitored the performance of local currencies against the dollar between March 2011 and March 2012.


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