Kenya 29th Unhappiest Nation in the World - News Brief

Welcome to today's money news brief from Money254:

• Kenya now ranks the 29th unhappiest nation in the world according to the latest World Happiness Report.
• The Kenya Revenue Authority (KRA) is anticipated to miss its tax target by Ksh300 billion, raising concerns about fiscal stability.
• Kenya's business environment has received poor rankings, indicating challenges for investors and businesses operating in the country.
• Additionally, Kenya trails behind South Africa and Nigeria in venture capital deals, pointing to potential hurdles in securing investment for local startups and businesses.

Let’s dive in.

The happiness levels of Kenyans experienced a downturn in 2023 for the first time in five years, as per the World Happiness Report 2024. 

Ranking 114 out of 143 countries, Kenya dropped three places from the previous year. Young people ranked highest in happiness, while the upper middle-aged group reported the lowest levels of unhappiness. 

Nevertheless, Kenya outpaced neighbouring countries like Uganda and Tanzania in the happiness index. Finland continued to hold the top rank as the happiest nation in the world for the seventh consecutive year. 

Economic challenges, including inflation and new taxes, are seen to have contributed to household frustrations, although the study didn't specify reasons for the decline in happiness. 

Read Also: Govt Report Ranks Highest Paying Job Sectors in Kenya - Money Weekly

Increased deductions to the National Social Security Fund and the imposition of a housing levy added to economic strain, reflecting broader concerns about financial stability and quality of life.

Kenya Happiness Summary

• Young people rank highest in happiness (position 109 globally).
• Upper middle-aged group ranks lowest (position 123).
• Lower middle-aged and elderly exhibit similar happiness levels (position 119).
• Kenya ranks ahead of her neighbours in the region including Uganda (117), Tanzania (131), Ethiopia (130), Egypt (127), and Zambia (134).

Top Happiest Countries in the World 2024

1. Finland

2. Denmark

3. Iceland

4. Sweden

5. Israel

6. Netherlands

7. Norway

8. Luxembourg

9. Switzerland

10. Australia

11. New Zealand

12. Costa Rica

13. Kuwait

14. Austria

15. Canada

16. Belgium

17. Ireland

18. Czech Republic

19. Lithuania

20. United Kingdom

Read Also: Issues With KRA’s New Tax Order, eTIMS - Money Weekly

KRA Likely to Miss Tax Target by Ksh300 Billion

The Parliamentary Budget Office (PBO) has warned that Kenya's tax revenue is likely to fall short by Ksh330 billion, attributed to underperformance since July 2023 when the Finance Act, 2023, came into effect.  

In the first eight months of the 2023/24 financial year, KRA has collected 55% of the Ksh2.49 trillion target leaving the authority in a race to gather Ksh1.12 trillion in just four months. 

This shortfall, 13.2% of the annual target, could hinder funding for critical development projects and job creation efforts. Factors contributing to the revenue decline include increased taxation, such as doubling VAT on fuel, and reduced expenditure on development projects due to fiscal constraints. 

To offset deficits, the government plans significant borrowing, with Ksh1.7 trillion targeted from local and foreign markets. 

Meanwhile, KRA reports show it has succeeded in averting tax losses via seizure of illicit goods worth over Ksh2 billion through extensive operations targeting items such as alcohol and cigarettes.

Read Also: KRA Urges Kenyans to Take Advantage of Tax Amnesty Window

Kenya’s Business Environment Ranks Poorly

Despite being ranked among places with a weak business environment, Kenya shows potential for improvement according to the Economist Intelligence Unit (EIU). 

The report ranks Kenya at sixth position among the most improving geographies in the business environment between 2019 and 2023, driven largely by investments in infrastructure and the passage of the Privatisation Act in 2023. 

The government has been implementing significant fiscal policy changes aimed at narrowing the fiscal deficit and stimulating economic growth. The World Bank projects a 5.2% growth rate for Kenya's economy in 2024. 

On a global scale, Singapore, Denmark, and the US are predicted to have the best business environments over the next five years, with advanced economies dominating the top ten. Meanwhile, Venezuela remains the worst country to do business despite slight improvements following its economic collapse.

Kenya Trails SA, Nigeria In Venture Capital Deals

Kenya accounted for 14% of total venture capital deals in 2023, valued at Ksh83.8 billion, trailing South Africa and Nigeria. 

Nigeria leads with 19% of deal volume, followed by South Africa at 18%. Egypt closes out the “Big 4” with 11% of the deal volume. 

Morocco is gradually emerging as a significant player with 24 deals worth $17 million or 4% of the deal volume. Funding challenges have been forcing some startups to downscale or shut down, leading to over 1,000 job cuts across Africa. 

Despite challenges, Africa remains important for venture capital investors, particularly in Fintech and IT sectors. Survival strategies include scaling down operations to prioritise profit.

Read Also: 9 Jobs That Pay in Dollars in Kenya

Startup Market Dynamics and Challenges

• Funding drought forcing some startups to downscale or shut down.
• Notable closures include Sendy, WhereIsMyTransport, and 54gene.
• Challenges include lack of follow-on funding, market penetration difficulties, and governance misconduct allegations
• Fintech and IT sectors are attracting most investment.
• Some startups have had to scale down operations to survive. Examples include: Copia Global, Paystack.
• Founders may need to make tough decisions to remain afloat and prioritise profit.