CBK Bonds Hit a Record 21% Return in the Secondary Market as Broke Kenyans Abandon Insurance Policies

In today’s money news, Insurance policyholders in Kenya withdrew Ksh13 billion in 2023, a 2.5x increase from Ksh5.15 billion in 2022, according to the Insurance Regulatory Authority (IRA). The withdrawals, driven by economic hardships, marked the highest cash-out in two years. According to the Business Daily while partial withdrawals surged by 55%, policy surrenders dropped by 16%, as customers avoided penalties for abandoning policies. Rising living costs, mandatory deductions like the National Social Security Fund (NSSF) and National Health Insurance Fund (NHIF), and reduced disposable incomes contributed to the trend. The IRA reports that nearly half of policyholders skipped premiums as inflation and financial pressures intensified.

In other news in the Business Daily, Kenya has joined a key global treaty under the Organisation for Economic Co-operation and Development (OECD) to curb tax evasion and profit shifting by multinational corporations. By implementing the Base Erosion and Profit Shifting (BEPS) Convention, Kenya aims to address loopholes in double taxation agreements often exploited to avoid taxes. This move reinforces Kenya's commitment to fair taxation and aligns with global efforts to ensure corporations pay taxes where they generate profits.

Teleperformance has launched a new center at the Two Rivers International Finance and Innovation Centre (TRIFIC) in Kenya, aiming to create 4,000–5,000 jobs. Located in the Special Economic Zone (SEZ), the hub will offer advanced services such as customer experience management and data analytics, boosting Kenya’s status as a global outsourcing destination. According to Capital Business, this expansion, which adds to Teleperformance’s 1,400-strong workforce in Kenya, capitalizes on the country’s skilled labor, linguistic expertise, and cost-effective solutions. TRIFIC SEZ, owned by Centum Investment, is strategically positioned to attract multinational firms seeking growth in Africa.

The Energy and Petroleum Regulatory Authority (EPRA) is set to regulate cooking gas prices and implement an Open Tender System (OTS) for LPG importation to lower costs and boost clean energy adoption. The move aims to increase household LPG penetration from 24% to 70% by 2028 and double per capita usage to 15kg annually. A new pricing formula, similar to that used for fuel, will guide maximum retail prices, while infrastructure upgrades, including a common-user facility in Mombasa, will support the transition. The initiative seeks to end market monopolies, attract investment, and promote economic and environmental benefits as reported in the Star.

Investors in a 6.5-year infrastructure bond issued in December enjoyed returns exceeding 21% from the secondary market. The BusinessDaily reports that the bond, which had a face value of Ksh100, has proven lucrative due to its attractive yield, underscoring the strong demand for long-term investment instruments in Kenya's debt market. This marks another milestone in the local bond market, providing an appealing option for those seeking stable and significant returns amidst economic uncertainties.

Private investment in Kenya's Public-Private Partnership (PPP) projects plummeted by 91% to Ksh4.3 billion in the financial year ending June 2024, down from Ksh46 billion the previous year. The significant decline marks the second consecutive year of reduced PPP funding, following a peak during the Nairobi Expressway's development. The Treasury's target of mobilizing Ksh50 billion in the current financial year faces further strain after the cancellation of Adani Group-backed contracts. Officials attribute the underperformance to delays in undisclosed projects but remain optimistic about recovery. The slump signals mounting challenges for Kenya's infrastructure funding amid tightened fiscal conditions as reported in the Business Daily.