Safaricom Bonga Points to Settle Okoa Jahazi Debts - Money Weekly

It’s just about 10 days into March 2023 and Kenyans have not seen the last of the negative effects of inflation, UK visas for Kenyans will now take 15 working days to process, KRA continues to tighten the noose on revenue leakages and have you paid your Okoa Jahazi? Safaricom is coming for your loyalty points. 

As we do every Thursday, here's our weekly summary of the top money news from the last seven days that could impact your pocket.

Safaricom Goes for Bonga Points to Settle Okoa Jahazi Debts

Safaricom customers who fail to pay back their credit advances through the Okoa Jahazi service will now have the amounts automatically deducted from their loyalty points.

The approach aims to address defaults while also decreasing the value of billions of shillings in outstanding Bonga points, which are a liability to the telco.

As of March 2022, Safaricom had unredeemed Bonga Points revenue of Ksh4.5 billion, up from Ksh3 billion in 2015.

The Okoa Jahazi Service, according to Safaricom, enables qualified prepaid subscribers to choose to get an Okoa Jahazi credit facility each time their airtime falls below Ksh5. Subscribers are required to pay their debts within the allotted time frame or risk losing access to credit advances.

The latest development occurs less than three months after Safaricom reversed a plan to give its Bonga loyalty program an expiration date, which would have meant that consumers would lose points they had accrued before 2019.

In contrast to a November 2022 revision to the program's terms and conditions, which would have caused unclaimed points to expire on January 1, 2023, the company's most recent position is now in effect.

Safaricom had explained the decision to expire unused Bonga Points as a business move intended to encourage redemption.

For each Okoa Jahazi request, the company charges a 10% advance fee. You can access the service by dialling *131#.

CBK Freezes Top Banks’ Bid to Hike Loan Rates

The Central Bank of Kenya (CBK) has declined the proposal from major banks to increase the cost of loans for borrowers.

In order to establish interest rates once the government ceases regulating loan costs, the banking authority requested that lenders submit their updated loan pricing models.

According to Business Daily, the CBK has not yet approved six of the nine tier-1 banks that submitted their applications. These six banks finance almost half of all loans made in the country.

They are; Co-operative Bank, NCBA, KCB, Diamond Trust Bank, Standard Chartered, and I&M Bank

The six banks noted that they were forced to continue operating as though lending rate ceilings were still in effect due to the central bank's freeze.

24 of Kenya's 39 banks have been given permission by the CBK to raise their lending rates in the past based on the risk profiles of the borrowers so far. They include; Victoria Commercial Bank, Paramount Bank, Credit Bank, and the Middle East Bank.

Data from the Kenya Bankers Association (KBA), the industry lobby, shows that the only tier-one banks to receive the CBK nod are Equity Bank Kenya, Absa, and Stanbic Bank.

When compared to a base rate of 12.5%, lending rates for high-risk borrowers could increase by up to 8.5 percentage points, with loan expenses for this group of borrowers reaching 21.02%

In November 2019, the government revoked the interest rate cap that had been in place since 2016. But the CBK served as the de facto credit cost controller. Without the CBK's approval, banks have been forced to increase their holdings of government securities and limit borrowing to high-quality clients who have a smaller default risk.

The freeze has protected the bulk of debtors, notably small-business owners and workers in the informal sector.

Cereal Prices Remain Unchanged as Food Inflation Bites

In the coming months, it appears households should prepare for tougher times as the price of cereal, a staple in most nations, is anticipated to increase further due to rising domestic food prices.

The World Bank reports that domestic food price inflation is still high and widespread, with the prices of major grains largely stable since January, in its most current food security update report.

A recent assessment by the Capital Markets Authority (CMA), estimates that the price of a 90-kilogram bag of maize grain will vary depending on the source but will be between Ksh5,500 and Ksh5,600.

However, if the government's promised low-cost imports are not achieved, maize prices are predicted to increase from an average of Ksh4,800 to Ksh6,000 for a 90kg bag.

Currently, a 2-kilogram packet of wheat flour costs roughly Ksh200.

The cost of rice, on the other hand, has increased over the past three months; it now costs, on average, Ksh186 per kilo, up from Ksh160 in January.

The increase in cereal prices as a result of inflation, which has maintained the price of these commodities high, is most likely to affect Kenya, a net importer of cereals.

The Hustler Fund, which is supported by the government, now allows women and small businesses to borrow money to expand their operations.

President William Ruto announced this on Thursday last week in a bid to assist those who have historically been excluded from the credit market by commercial banks.

The President also introduced a microloan program that is aimed at 2 million Kenyans who work in the informal sector and are unable to obtain credit due to a lack of collateral.

The Government first introduced the individual micro-enterprise loan product for lending between Ksh10,000 and Ksh200,000. The program targets both individuals and groups operating in the informal sector.

A 7% interest rate, either pro rata or daily, will be applied to these loans.

KRA to Monitor Real-time Sales of Beer, Petrol, and Airtime

The sale of items subject to excise tax law, such as beer, juice, airtime, cigarettes, and petroleum, will be monitored in real-time as the taxman works to stop tax leaks.

According to George Obel, deputy commissioner of domestic taxes, excisable goods will be added to the Kenya Revenue Authority's (KRA) Tax Invoice Management System (eTIMS).

This will allow the authority to gain real-time access to complete trading information from businesses and close the gap where businesses previously paid fewer taxes.

With plans for a full roll-out in early May, KRA has been testing eTIMS with 298 Value Added Tax (VAT) registered taxpayers who have received 908 invoices.

By minimising the expense of procuring numerous tax invoicing devices, such as electronic tax registers, eTIMS would help businesses cut compliance costs, argues KRA.

He added that real-time invoice transmissions will enhance the accuracy of invoice declarations and the comparison of filed returns and paid invoices.

Excise duty, which brought in Ksh252 billion in the fiscal year 2021–2022, is the third-largest tax revenue source. In the current fiscal year, it is anticipated that this number will increase to Ksh297 billion.

The goal of digitising tax invoicing is to close revenue leakages that cost the government billions of Shillings annually.

Public Service Jobs have Increased by 27% in 5 Years.

Despite various initiatives to reduce headcount through hiring freezes, the number of public-service jobs has increased by 27% in the five years to June 2022, according to a new report.

The Public Service Commission (PSC) reported an increase in sector jobs to 252,007 from 198,119 in 2017/18, undermining public service consolidation plans and denying government savings from a lower wage bill.

The PSC also claims that the expansion contradicts the intended outcome of the government's tremendous investments in technology, which were supposed to result in fewer employees.

To correct the bulge, the PSC is expected to summon the boards of 15 institutions with excess staff this month.

The largest increase in new positions was for constitutional commissions and independent offices, which went from 1,452 in the fiscal year 2017–18 to 4,711 in the fiscal year that concluded in June 2022, an increase of 224%.

The number of people employed by state corporations and partially autonomous governmental organisations has risen by 31.8% to 104,888, while the number of people employed by ministries and departments has increased by 15.7% to 99,628.

The number of jobs placed by statutory commissions and authorities rose by 21% to 1,808, while the number of technical, vocational education, and training institutes increased by 14% to 14,124.

Public universities, however, defied the trend and fell from 29,501 to 26,848 by 9%.

A portion of the overcrowding in the public sector can be attributed to organisations whose employee counts exceed optimal staffing levels.

For example, the PSC has flagged 15 institutions for having excessively high numbers.

The Kenya Tsetse and Trypanosomiasis Eradication Council, the State Department for Post-Training Development, the Kenya Medical Supplies Authority (Kemsa), University Education, and Devolution were five of the 15 institutions that were over-staffed by more than 50%.

Additional organisations with excess personnel include the Coast Water Works Development Agency, Kenya Re, Gender, and Transport.

Kemsa has 754 employees, compared to a requirement of 341.

According to the PSC, staffing levels will be determined by the economy's ability to support the wage bill.

Staffing levels beyond the ideal range are projected to pressurise the government fiscal operations with recurrent spending exceeding expectations by Ksh106.8 billion in the six months leading up to December 2022.

UK Visa Processing Time for Kenyans Reduced to 15 Days

The UK has opened a new visa application centre in Kenya, reducing visa processing time from six weeks to 15 working days.

According to Jane Marriott, the British High Commissioner to Kenya, the printing of UK visas will now take place in Nairobi.

Approximately 40,000 Kenyans visit the UK each year, and the improvements made to the application centre will benefit not only those Kenyans who travel to the UK but also the entire East African region, according to the High Commissioner.

Before the Covid-19 pandemic, Kenya received 191,000 visitors from the United Kingdom; this figure dropped to 152,000 in 2021, according to Marriott. Over 162,000 Kenyans live in the United Kingdom, many of whom work as nurses and students.

According to Marriott and Dominique Hardy, Head of Visit Visas and International Network at UK Visas and Immigration (UKVI), who announced the launch of the Super Priority Visa service in Nairobi, customers who purchase this service may receive a response to their application within 24 hours.

Hardy believes that those who frequently travel to Kenya for work or who may encounter emergency travel scenarios would benefit the most from this.

The centre furthermore provides a Priority Visa Service, which might take up to five business days to process.