It’s Boom Time for Sacco Members - Money Weekly

It’s only five days until March already! As payday approaches and you are probably now well settled into 2023, how much percentage in dividends did your Sacco pay for 2022? 

In this week’s edition of Money Weekly, we take a look at some of the best performing Saccos as far as dividend payouts are concerned, the war on tax cheats by KRA that could net you too if you are unaware, a big 30% relief for pensioners and, what’s happening in farming? 

As we do every Thursday, let’s dive into our weekly summary of the top money news from the last seven days that could have an impact on your money.

It’s Boom Time for Sacco Members

As a result of increased profitability in 2022, members of Savings and Credit Co-operative Societies (Saccos) have had a reason to smile for the last two months as Saccos declared dividends.

The majority of Saccos that have reported results have increased their rebates and dividends due to increased earnings, higher loan repayments, and less economic uncertainty.

The industry's participants have reported rising revenues, with Nyati Sacco paying the highest dividend payout of 21% on its share capital and 11.3% on member deposits in the fiscal year 2021/2022, making it the best dividend payment last year.

Harambee Sacco reported Ksh5.01 billion in income for the fiscal year that ended on December 31, 2022, an increase of roughly Ksh800 million from Ksh4.22 billion in 2021. As a result, the Sacco increased the dividend rate on members' share capital from 8% to 10% in 2022.

Safaricom Investment Cooperative shareholders have also approved a dividend payout of Ksh176.9 million, or 7% per share, an increase from the 4.7% per share paid in 2021. This payment was made following the Society's announcement of a gross profit of Ksh542.9 million, up from Ksh396.3 million in 2021.

Tower Sacco, which announced a 13% payout on deposits and a 20% payout on share capital, is another Sacco that paid out dividends to members after publishing impressive results.

Nation Sacco announced 9.5% on deposits and 18% on share capital.

Kenya National Police DT Sacco, whose board of directors yesterday recommended a dividend payout on a share capital rate of 17% amounting to Ksh552 million on deposits at a rate of 11% or Ksh2.7 billion, up from 10.8% or Ksh2.4 billion paid in 2021. The society's annual revenue increased by 12.9% to Ksh7.9 billion last year from Ksh7 billion the previous year.

Solution Sacco, headquartered in Meru declared 15% dividends on share capital and an interest of 12.% on savings. 

Following the unforgiving waves of the Covid-19 pandemic, which disrupted members' ability to borrow and repay on time, several Saccos resumed payouts in 2021 after a two-year hiatus.

Kenyan Saccos usually pay dividends at intervals determined by the members. Payments can be made monthly or annually, but most are made annually.

Read Also: 7 Things to Do First When You Get a Large Sum of Money

30% Tax on Lump Sum Pension Payments Suspended

The High Court has suspended the recently enacted 30% tax on lump sum withdrawals of retirement benefits. 

The tax was introduced through a 2020 amendment to the Finance Act, which sought to tax provident plans that give lump sum retirement payouts to those 65 and older.

In a petition to the High Court, two pension organisations said that the controversial law was passed without the public's input and that it unfairly taxed retirees.

They claimed that the law would destabilise business models and the operation of pension schemes, leading to the loss of employment as members would forego saving through pension plans since the tax incentives were no longer available.

Lump sum payments were previously tax-exempt, but with the amendment, any withdrawal of funds by members of a retirement benefits scheme is now subject to tax at the same rates as pension withholding taxes.

Any withdrawal amount exceeding Ksh1.6 million is subject to 30% tax, while the first Ksh600,000 is tax-free. Following withdrawals of Ksh400,000 are taxed at 10%, 15%, and 20%, respectively. Members of unregistered schemes who withdraw their funds are tax-free because the funds were already taxed at the time of contribution and investment.

The High Court's suspension, pending the outcome of the petition, provides relief to the affected pensioners. The case will be mentioned on March 2.

Read Also: 7 Reasons Why Retirement Planning is Important

KRA Seeks Sniffer Dogs to Find Cash Hidden in Bags

The Kenya Revenue Authority (KRA) will soon use trained sniffer dogs at border and airport crossings as part of its most recent campaign against tax evasion and money laundering.

According to the authority's Customs and Border Control Directorate, plans are underway to start training dogs to sniff out cash they would drugs or weapons.

This is happening at a time when customs officers have apprehended both domestic and international individuals who were in possession of substantial sums of cash that the government believes to be illegal.

If the plan is put into action, Kenya would be able to breed these specialised sniffer dogs, joining countries like Germany that have made use of them and successfully utilised them to sniff out money in one of their airports.

According to Ms. Lilian Nyawanda, the Commissioner for Customs and Border Control at KRA, sniffer dogs will be trained to more effectively detect cash, at a breeding facility the tax administration is setting up in Loitoktok. 

Before the end of June of this year, KRA's officials will travel to North Macedonia in South-Eastern Europe to obtain training on the breeding of these dogs.

The KRA estimates that the process will be completed in two years.

Read Also: Frequently Asked Questions About Filing KRA Tax Returns

Less than 20,000 Farmers Have Bought Subsidised Fertiliser.

Fertiliser subsidies have only been given to less than 20,000 farmers in the North Rift and Western regions.

As of February 16th, just about 17,014 farmers had received 192,127 sacks, according to Agriculture Principal Secretary Kello Harsama.

According to him, farmers from 12 counties stand to gain from the subsidy fertiliser utilised throughout the lengthy planting season. 

The counties are Trans Nzoia, Nandi, Kericho, Bomet, Narok, Elgeyo Marakwet, Migori, Nakuru, Homa Bay, Kakamega, and Bungoma.

According to Harsama, farmers purchase fertiliser through the e-voucher program, a procedure created by Safaricom and the Ministry of Agriculture, for Ksh3,500 per 50kg. He also stated that across the 12 counties, more than a million farmers have been enrolled in the program.

“838,561 vouchers have been issued by Safaricom. The voucher redemption is currently being done at NCPB depots in the 12 Counties. So far, Kenya National Trade Corporation (KNTC) which is the procuring entity has dispatched 326,192 bags of fertiliser to the National Cereals and Produce Board (NCPB) depots and farmer cooperatives,” he said.

He noted that the government intends to distribute six million 50kg bags, or 300,000 metric tons, of planting fertiliser.

The Ministry of Agriculture and Livestock Development is in charge of the multi-agency fertiliser subsidy programs, which are also backed by NCPB, KNTC, the Presidency, Kenya Railways, security agencies, and the relevant county governments.

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Returns on Savings Fall Below Inflation First Time in Five Years

For the first time in five years, bank fixed deposit rates fell below the inflation rate, resulting in a negative return for high-net-worth savers.

According to Central Bank of Kenya (CBK) data, the fixed deposit rate was 6.76% last year, up from 6.3% the previous year.

Inflation reached a multi-year high of 7.64% last year, up from 6.1% in 2021, due to a severe drought that drove up food prices, high energy costs associated with Russia's war in Ukraine, and a weak shilling that made imports more expensive.

This has resulted in a negative 0.88% return on savings for investors who have been making money from bank deposits over the last five years.

What this means is that since prices for a wide range of products and services have risen more quickly than profits on short-term investments, the savings will be able to purchase fewer goods and services in the market.

Read Also: Inflation is Your Biggest Enemy in 2023: 6 Smart Ways to Invest Your Money

A fixed deposit of Ksh1 million at the beginning of the year was worth Ksh991,200 by the end of the year.

Fixed deposits, which offer higher rates than savings accounts, have increased by 40% over the last five years, reaching Ksh1.63 trillion at the end of November 2022.

Firms including Safaricom and KenGen, have profited from the returns increasing their interest income revenues.

Treasury bond yields reached 14.1% while 1-year treasury bills surpassed the 10% mark for the first time since early 2019.

Read Also: Is Investing in Government Bonds a Good Idea? (Pros & Cons)

According to real estate firm HassConsult, investment in land, particularly in Nairobi's satellite towns such as Athi River, narrowly outperformed inflation last year, with an average return of 9% on rising demand.

Land in the city trailed inflation by 1.23%. Last year, the Nairobi Securities Exchange (NSE) returned a negative 23%, with investors losing Ksh606 billion.

Inflation is expected to fall within the State target range of 2.5% -7.5% in the first half of this year, according to the CBK. In January, inflation fell for the third month in a row to 9%, down from 9.6% in October.

Read Also: Rising Inflation: Where Should You Keep, Invest Your Money?