News and Analysis
November 22, 2024
It is that time of the week again when we take a comprehensive look at the news headlines over the last seven days and dissect those that can affect your money. Welcome to yet another edition of Money Weekly.
This week, KRA has been receiving criticism over their policy at the Jomo Kenyatta International Airport (JKIA) regarding items that tourists and returning residents are allowed to enter the country with without being subject to taxation.
The country's economy continues to strain, as evidenced by a report released by Transunion. Furthermore, the Hustler Fund budget has been halved, citing increased loan defaults.
Banks, on the other side, are urging Parliament to address the requirement to remit taxes every five days as stipulated in the Finance Act 2023 as it increases administrative workload.
On the agricultural front, Avocado exports by sea have been halted to give time for the maturation of the fruit. Meanwhile, more farmers in Kirinyaga County are switching over to sorghum farming.
On the other hand, companies such as Old Mutual, Nation Media Group, and Car and General (C&G) are all experiencing difficult times. With Old Mutual putting its headquarters building on the market and Nation Media Group and C&G issuing profit warnings.
Let’s dive in.
Recently, the Kenya Revenue Authority (KRA) has come under criticism both from netizens and some government officials. The backlash has been because of the way tax officials handle tourists at Jomo Kenyatta International Airport (JKIA) as well as a KRA response on social media that indicated personal items (new or used) worth over Ksh 75,000 (USD 500) would be subject to tax.
KRA posted a tweet, which they have since taken down, reiterating the directive. "Remember when traveling you will be allowed to carry personal or household items worth USD500 and below. Anything above the amount, shall be subjected to tax," the tweet read.
This elicited vitriol from Kenyans on X (Formerly Twitter) as they narrated their recent encounters at the JKIA. Others were expressing their disappointment with the mannerisms of the KRA officials, while others heavily criticized the tax directive.
Tourism and Wildlife CS Alfred Mutua also weighed in on the matter. While speaking at a stakeholders meeting at the Kenya International Convention Center (KICC). Mutua alleged that the reported harassment is why Kenya continues to drop from the top tourist destinations in Africa.
"We harass our visitors when they come to this country, and then we wonder why they don't come back. You go to Rwanda, they don't harass you, kwani Rwanda don't collect taxes? You go to South Africa, and they don't collect taxes? You go to Dubai, and they don't harass you. Why are they harassing our visitors here? They will never return to Kenya, and we wonder why we dropped to number four. Why are people not coming to Kenya?" the CS lamented.
Nelson Koech, Committee Chairman of the National Assembly Committee on Defence and Foreign Relations, added, “we are entering the peak tourism season and His Majesty's visit (Referring to the visit by King Charles and Queen Camilla from Britain) to Kenya is poised to give our tourism a very big boost. The KRA's passenger Terminal Guidelines could not have come at a worse time. This is not the time to be threatening those coming to Kenya.”
CS Mutua committed that he would look into the matter and address it. “ …those are some of the things we have to correct, and now you have the right leader to correct it."
In the meantime, the Senate majority leader Aaron Cheruiyot pointed to a possible solution on his X account, “the National Assembly finance committee holds the key to alleviating national shame that is the KRA searches at JKIA. By providing the necessary clarity to distinguish goods for a commercial venture and personal items”.
The revenue authority has since issued clarifications, published today as follows:
“KRA is committed to continuous improvement and is in the process of upgrading the use of technology to enhance non-intrusive inspection of baggage at all points of entry. Part of this process is to ensure that prohibited and restricted goods are screened out for security purposes.
For passenger clearance at terminals:
KRA is mandated to collect revenue on behalf of the Kenyan Government in line with Customs laws and other national and international laws regulating passenger movements.
Customs duty is paid at appointed banks within terminals or mobile banking platforms using electronic payment slips.”
The Treasury has reduced the Hustler Fund budget from Ksh10 billion to Ksh5 billion. The significant adjustment on the state-backed mobile loan comes on the back of a high default rate.
By August 2023, the default rate was at 29%. Despite the concerns and the reduced budget, the government remains optimistic about managing risk and cultivating a savings culture.
Hustler Fund was designed to provide affordable credit to low-income earners and small businesses through mobile money service providers at an 8% interest rate as part of the Kenya Kwanza coalition Bottom-Up economic approach.
Meanwhile, the Public Service Commission (PSC) has presented a report in Parliament that shows that in the first year of President Willian Ruto’s government, a total of 9,281 new staff were hired to fill various roles across government ministries, agencies, and parastatals.
Most of these new employees were hired by the National Social Security Fund, the Kenya Revenue Authority, and the Independent Policing Oversight Authority.
Elsewhere, State-managed water service providers are facing challenges in repaying loans borrowed by the National Treasury on their behalf.
Among 17 firms, 13 are yet to settle their debts totaling Ksh123.13 billion in the last financial year, with only Ksh2.07 billion repaid. This represents a default rate exceeding 98%. Some debts date back to pre-devolution eras, hindering repayment as counties contest obligations.
The strain in these loan repayments exacerbates financial woes within an industry grappling with high water theft and wastage.
A survey report by TransUnion paints a mixed financial outlook for Kenyan consumers in Q2 2023. Despite 79% of Kenyans expecting increased household income, 41% experienced decreased income in the last three months. 39% anticipate an increase in bills and loans, while 42% expect difficulty paying current bills and loans.
Sixty-two percent adjusted by reducing discretionary spending, 55% plan further discretionary spending cuts, and 44% expect reduced shopping. Additionally, 47% foresee decreased big purchases like cars and appliances.
Job loss, wage reductions, and decreased small business revenue contributed to income decline, signifying anticipated financial strain.
To corroborate with this report is a survey by the Kenya National Bureau of Statistics that highlighted an escalating closure of small businesses. The survey showed that between 2011 and 2016, the rate of small businesses shut down was roughly 440,000 yearly.
However, the Department of MSMEs Development is intensifying intervention measures to address the issue.
Meanwhile, amid the income reduction turmoil, unionized employees at BAT Kenya Plc have it better than most. Recently, BAT Kenya set a minimum basic pay of Ksh57,812 for its unionized staff. Additionally, BAT provides various allowances such as leave, housing, meal, and acting allowances, offering premium benefits compared to standard industry practices. The collective agreement that established these provisions is renegotiated every two years.
On a more positive note, Unilever Kenya aims to procure Ksh7.6 billion (48 million Euros) in raw materials locally by 2025. The company targets to source 70% of its material needs from the domestic market. Unilever has already exceeded its 2023 goal, having sourced 49% (Kshh4.4 billion or 28 million Euros) locally.
Unilever seeks community impact through job creation and economic empowerment through collaborating with local entities like the Kenya Association of Manufacturers. Additionally, the company is investing in equity, diversity, and inclusion, planning to spend Ksh1 billion (6.5 million Euros) on supplier diversity initiatives. Furthermore, partnerships with the SME Support Centre is seen to underscore their commitment to entrepreneurship, financial literacy, and e-commerce training.
The Kenya Bankers Association is urging Parliament to review the Finance Act 2023, which demands banks, among other high-risk tax sectors, to remit taxes every five days. The bankers argue that the regulation creates operational difficulties as it adds to the administrative burden and requires additional technological investment.
On the other hand, KCB Group is on a mission to stabilize liquidity. Increased loan provisions and non-performing legacy debts impacted the bank's profitability as the bank reported a 15.5 billion net profit, which marks a 20% drop.
KCB has undertaken a substantial increase in operating expenses, loan loss provisioning, staff restructuring costs, and a significant write-off of loans, which were part of the initiatives to address the bank's high-risk, non-performing loans.
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The Consolidated Bank of Kenya, on the other hand, is facing auctioneers. Mbusera Auctioneers have identified items such as reception desks, coffee tables, photocopying machines and printers, 50 executive office chairs, 100 computers, gas cookers, and water dispensers, among other items, from the banks Koinange Street Branch to recover Ksh4.5 million owed to former cashiers and customer service personnel who were sacked for flouting operations procedures.
The Kenyatta International Convention Center (KICC) has won the bid to host the 2025 International Conference on Business Models in Agriculture (IBMA). The conference is expected to attract over 1500 delegates. It aims to address poverty in the agricultural sector and promote sustainable agricultural development and the sharing of agricultural production concepts to drive significant positive changes for underdeveloped economies.
In the meantime, the Kenyan government has halted the export of Hass, Pinkerton, Fuerte, and Jumbo avocados. The halt only applies to fruits transported by sea from November 3. The move is to ensure the fruits mature adequately, protecting the country's lucrative export market. The decision followed a maturity index survey in major production zones.
Meanwhile, Kirinyaga County farmers are shifting to sorghum cultivation. The move has been attributed by East African Breweries Limited (EABL), working with farmers under contract to grow sorghum. EABL reported that sorghum produce from Kirinyaga exceeded expectations compared to other regions engaged in contract farming. Currently, EABL has engaged over 2,500 farmers, up from 1,500 farmers last season.
Years of losses and increased borrowing have amplified Old Mutual Holdings' costs; hence, Old Mutual aims to reduce its investment property portfolio by selling its Old Mutual Tower in Nairobi's Upper Hill at its carrying value. The 31-storey tower was valued at Ksh5.5 billion in 2022.
Additionally, The insurer intends to issue 1.75 billion preference shares of Kshh5 each to the parent entity to settle a Ksh8.8 billion debt owed to its Cape Town-based parent company. These shares offer a 21% annual return and have priority in receiving dividends over ordinary stockholders.
Similarly, a challenging business landscape influenced by increased fuel prices, Shilling depreciation, rising interest rates, and higher taxes might see Nation Media Group’s profits reduce by 25%. This comes after their digital footprint grew by 14%, reaching 59.5 million users compared to 52.2 million last year.
At the same time, Car & General (C&G) earnings for the 15 months ending December are expected to drop by 25%. In the six months to March, the company's profits had dived by 84.6%. The downturn was attributed to various factors, including foreign exchange losses, weakened motorcycle sales due to poor economics, increased finance costs, and additional expenses in Tanzania.
International Housing Solutions (IHS) Kenya has signed a deal with Mi Vida Homes for 200 eco-friendly rental units in the '237 Garden City' project along Thika Road. The agreement ensures a ready market for Mi Vida's units, promising timely, quality, and environmentally conscious housing while fulfilling IHS’ aim to ease housing challenges, focusing on affordable, dignified living. The project is awaiting regulatory clearance.
Meanwhile, The Law Society of Kenya (LSK) aims to construct a Ksh4.1 billion mixed-use development in Nairobi at Gitanga Road and South C on 2.2 acres. The Gitanga Road site will accommodate the LSK Secretariat, available offices for sale or lease, parking space, and a restaurant. At the same time, the South C property will have residential, hospitality units, and an office block.
President William Ruto has announced a planned rollout of new digital ID cards for Kenyans by December 2023. The "Maisha Namba" cards will allow transactions using iris and fingerprints and offer swift access to online government services, the president said. These changes will incorporate electronic cards and registers and legitimise the Unique Personal Identifier (UPI).
The Changamka Kenya Shopping Festival was held at the Kenyatta International Conference Center (KICC) aimed to bolster the local manufacturing sector under the Buy Kenya Build Kenya initiative. The event featured 200+ exhibitors, encouraging consumers to purchase locally-made goods at discounted prices.
Bolt Kenya’s operating licence has been renewed for the next financial year. This is after it was able to address the National Transport and Safety Authority’s (NTSA) licensing concerns, which involved complaints of alleged non-compliance with regulations, including excessive commission charges and illegal imposition of the booking fee, alongside safety issues regarding driver and rider well-being.
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