Interest on T-Bills & Bonds Continues to Fall; What it Means for Investors

𝐅𝐫𝐢𝐝𝐚𝐲, 𝐃𝐞𝐜𝐞𝐦𝐛𝐞𝐫 𝟏𝟑, 𝟐𝟎𝟐𝟒

In today’s money news, investors in Treasury bills and bonds are facing steep losses as returns on government securities plunge, driven by successive cuts to the Central Bank of Kenya's (CBK) benchmark rate since August. The Business Daily reports that Treasury bill yields have dropped significantly, with the 91-day paper falling from 15.7% in October to 10%, while the 182-day and 364-day rates also declined. The rate cuts, aimed at spurring economic growth, have made Treasury securities less attractive to depositors, shifting preference to other investment options.

Sanlam Kenya shareholders have approved a Ksh3.25 billion rights issue to recapitalize its balance sheet, reduce long-term debt, and strengthen working capital as reported by Capital Business. The move will allow early repayment of a loan from Stanbic Bank Kenya, cutting interest costs and improving financial flexibility. With support from its parent company, Sanlam Allianz Africa, the initiative is fully underwritten, ensuring success. Shareholders also approved an increase in share capital to Ksh3.72 billion, with up to 1 billion shares to be issued. The healthier balance sheet aims to drive sustainable growth and focus on diversified non-banking financial services.

The Business Daily reports that Kenya has attracted Ksh140.7 billion in investment inflows into public-private partnership (PPP) projects since 2013, with landmark projects like the Ksh88 billion Nairobi Expressway leading the way. The PPP model enables private investors to fund infrastructure developments, recouping costs through user fees or agreements, such as toll charges on the expressway until 2047. Current projects include housing for the Kenya Defense Forces and a 35-megawatt geothermal plant. With 32 projects in the pipeline and a target of Ksh70 billion in private capital for 2024/25, PPPs are critical for Kenya’s infrastructure goals amid growing debt constraints.

In a report by the Standard, Kenyan businesses face a tough 2025 as high operating costs, increased taxation, and reduced consumer spending weigh on growth prospects, according to the CBK's November 2024 Market Perceptions Survey. Over 1,000 CEOs highlighted potential job losses and declining business activity in early 2025, with many firms planning cost-cutting, product diversification, and expanded marketing to mitigate challenges. While agriculture shows promise due to favorable weather, sectors like manufacturing, retail, and trade struggle with high costs and weak demand. A stable shilling, lower inflation, and expected rate cuts may offer some relief, but liquidity constraints and rising production costs remain key hurdles.

The Business Daily reports that President William Ruto has expressed confidence in the renewal of the African Growth and Opportunity Act (Agoa) trade pact, easing concerns over potential disruptions following the recent US elections. Speaking at the Kenya Private Sector Alliance's 20th anniversary, Ruto assured that the US remains supportive of the agreement, which allows tariff-free access to US markets for eligible African countries. Kenya, a key Agoa beneficiary, has exported $6.5 billion worth of garments duty-free under the pact since 2000. The current treaty, set to expire in 2025, has bipartisan backing and remains critical for Kenya's trade prospects.

The Standard reports that the IMF has urged the Kenya Kwanza government to intensify anti-corruption efforts and enhance public financial management to rebuild trust and create fiscal space for critical investments. Deputy Managing Director Nigel Clarke, after meeting Kenyan leaders during his visit, highlighted the challenge of heavy debt servicing limiting resources for social services. The IMF emphasized governance reforms and transparency as key to economic resilience and unlocking delayed funding under its financial program. Strengthening accountability frameworks, Clarke noted, is essential for fostering public confidence and achieving Kenya’s development goals.

Kenya's recent strides in value addition and import substitution are exemplified by Devki's new projects in West Pokot and Taita Taveta. These factories, focusing on clinker production and iron ore pelletization, highlight the importance of leveraging natural resources for industrial growth, job creation, and export opportunities. Experts emphasize that investing in local mineral processing, energy resources like oil and coal, and artisanal mining could bolster Kenya's economic resilience. Such initiatives align with the 1960s industrialization blueprint that nearly positioned Kenya as an economic powerhouse. Strategic resource exploitation remains vital for sustainable national wealth as reported by Business Daily.

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