Category: Economy

Kenya Revenue Authority has been ordered to pay a sugar importer Sh566.1 million as compensation for losses suffered as a consequence of its change of date of importation of duty free sugar more than a decade ago.

The High Court further awarded Sh1 million to Transouth Conveyors Ltd as exemplary damages to demonstrate its disapproval of KRA’s conduct.

Justice Patrick Otieno said KRA, as declared by the Court of Appeal changed effective dates of importation of sugar, imposed undue duty on Transouth Conveyors Ltd’s consignment at 100 per cent and failed to release it.

“That conduct I find to be oppressive, high handed and are aggravating the courts view on the defendant,” said Justice Otieno.

Justice Otieno further said that while KRA contended that it should be given opportunity to make mistakes because it is a public body, he does not agree.

“I refuse to agree because being a state agency and public body it is bound to observe values and principles of governance,” said Justice Otieno.

Justice Otieno said KRA is bound to act reasonably and efficiently in good faith to inspire public confidence.

The court said that it was satisfied that KRA’s action was arbitrary, oppressive and justified an award of exemplary damages.

Justice Otieno said KRA had acted in a high handed manner and unlawfully thus the company was entitled to insist on fairness and application of the law to not only protect a property right but also cushion and safeguard the rule of law.

According to Transouth Conveyors Ltd pursuant to Legal Notice No.12 of March 01 2004 by the Minister of Finance, Gazette Notice No.296 of January 11 2007 and a letter dated January 12, 2007, by Kenya Sugar Board (KSB), it opened requisite letters of credit through African Banking Corporation.

The company says it then imported from Egypt, a state member of the Common Market for Eastern and Southern Africa (Comesa) Free Trade Area, 5,000 metric tonnes of raw/white sugar valued at US$1,840,000.

It also told the court that on February 02 2007, KRA put an advertisement in a local newspaper whose effect was to change the effective date of importation of the 2007/8 duty free sugar from Comesa from February 1, 2007, as had earlier been published by KSB to March , 2007.

The plaintiff said that by virtue of the defendant’s decision, its consignment of sugar was liable to be subjected to 100 per cent duty contrary to the indication by KSB in Gazette Notice No.296.

According to the plaintiff, the wrongful act by the defendant resulted to its inability to clear its consignment as the duty payable was high.

The company said that African Banking Corporation Ltd returned letters of credit opened with it on the basis of zero-rated duty to Egypt for cancellation as a result of KRA’s decision and application of 100 per cent duty on the consignment.

KRA said the declaration of Legal Notice No.12 of March 1 2004 by the Minister for Finance to allow for importation of sugar on duty free basis from Comesa was not for any sugar from the member states.

It admitted issuing press notices without any malice but maintained it was meant and had been previously used to explain and clarify the implementation of the Legal Notice.

KRA said it was entitled to clarify issues which arose between KSB and itself in reference to the Legal Notice issued pursuant to Section 118 of the Customs & Excise Act and as previously implemented by all those affected.

The taxman in denying imposing prohibitive duties on the plaintiff’s sugar contended that the company had the option of reshipping, clearing the sugar under protest or give security pending determination of a case in court.

Kenya is inching closer to getting KES44 billion credit representing the second tranche of the 38-month IMF KES251 billion ($2.34 billion) loan.

The second tranche of financing is, however, premised on the conclusion of policy reforms, including an audit of all COVID-19 related expenditures covering the 2019/20 financial year.

“In addition, the authorities’ plan to adopt a common payroll system at the national and county level should help contain spending growth and limit the scope for corruption,” the International Monetary Fund (IMF) said in a statement on May 17.

Further, the release of the funds, which now awaits IMF board’s approval in the coming weeks, is anchored on the publication of information on companies that win procurement contracts, including the names of their beneficial owners.

IMF staff commend the authorities’ decisive policy actions to contain the COVID-19 outbreak, the Washington-based institution said adding: “their actions helped to cushion the blow to the economy and maintained the momentum necessary to advance their economic reform agenda.”

The global lender, which conducted a virtual tour into the country between April 29 and May 14, noted that with the easing of the third wave of COVID-19 infections compared to high levels seen in April, a range of containment curbs have been lifted.

The institutions, which faced a barrage of attacks recently from Kenyans online for approving the KES251 billion loan, lauded the government the ongoing COVID-19 vaccination program, which the IMF credit line is designed to support to accelerate and expand vaccinations.

“They (Kenya government) met the fiscal balance target at end-March by a wide margin and had fully implemented their planned tax policy measures, although with continuing pressures from the pandemic, tax revenue yields were slightly below expectations,” said IMF.

The IMF noted that Kenya’s next financial year budget is being aligned with the authorities’ ambitious multi-year plan to mitigate debt vulnerabilities and it secures resources to support social spending.

Kenya is also developing a strategy to assess and manage risks to the budget from state-owned enterprises by leveraging on the results of ongoing financial evaluations of those firms facing the greatest pressures, added IMF.

At the same time, the IMF has cut Kenya’s growth outlook for 2021 to 6.3 per cent from a higher 7.6 per cent to reflect realism on the impact of the pandemic on the economy.

Tanzania’s new President Samia Suluhu Hassan said on Saturday the government would reduce the income tax rate by 1 percentage point to 8%, in the 2021/22 financial year beginning in July, and also planned to remove “unfriendly taxes and charges to Tanzanians”.

Hassan, who took office in March following the death of President John Magufuli, said in a Labour Day speech in the northern Mwanza region that the COVID-19 pandemic had hurt global economic growth, and that Tanzania’s economy had not been spared.

Her remarks were the latest acknowledgement of the coronavirus, in stark contrast to the denials of her predecessor Magufuli, who was Africa’s most prominent COVID-19 sceptic. Last month, Hassan announced she was forming a committee to research whether Tanzania should follow the course taken by the rest of the world against the pandemic. read more

“Due to steps I’m planning to take by removing unfriendly taxes and charges to Tanzanians, tax revenues will decline for a short period and will later increase,” she said on Saturday.

During his Labour Day address, President Uhuru delivered a highly anticipated reply to cries from many Kenyans on unlocking the country given the suffocating economy. Coming at a time when many piled pressure on the President to ease the strict COVID-19 measurements, the President lifted the cessation of movements in disease zoned areas and announced new measures.

Below is a cut off his speech announcing the new COVID-19 containment measures coming at a time when the virus is ravaging India.

Fellow Kenyans,

Let me end with some reflections on our current COVID-19 status as a nation. When I issued the second Public Order of 2021 in March, announcing the obtaining containment measures, our COVID caseload in Nairobi was 56,815.

This caseload has now gone down to below 15,000 for the month of April, signifying a 74% decrease in infections in Nairobi.

Data from our medical experts suggests the same trend in the zoned area we put on lockdown during my March 26th 2021 address. After one month of lockdown, COVID caseload within the zoned area has come down by 72%. In other areas of the Republic, the COVID caseload fell by 89% in Mombasa and 90% in Busia between March and April 2021.

Given the expert evidence we have received and on the counsel of the National Security Council and the National Emergency Response Committee on Covid-19, I have on this day issued Public Order No. 3 of 2021, as follows:

I. With regard to the Zoned Area comprising of the counties of Nairobi, Machakos, Kiambu, Kajiado and Nakuru, it is directed that the cessation of movement into and out of the Zoned area be and is hereby lifted;

II. That the hours of curfew in the Zoned Area are revised to commence at 10:00pm and end at 4:00am, with effect from mid-night on this 1st day of May, 2021, until otherwise directed;

III. That in-person and congregational worship shall resume in strict fidelity to the guidelines issued by the Inter-Faith Council and Ministry of Health. However, the attending congregation is capped to 1/3 (One-third) of the capacity of the place of worship;

IV. That the operations of restaurants and eateries in the Zoned Area shall resume in accordance with the guidelines issued jointly by the Ministry of Health and Ministry of Tourism and Wildlife. Restaurants are encouraged to utilize outdoor spaces to maximize on physical and social distancing.

For the entirety of the Republic of Kenya, it is directed as follows:

I. That all our education institutions in all levels of learning shall re-open in accordance with the calendar issued by the Ministry of Education;

II. That the resumption of sporting activities shall be guided by the regulations to be issued by the Ministry of Health jointly with the Ministry of Sports;

III.That all bars in the territory of the Republic are to operate until 7:00 P.M;

IV. All employers and enterprises are encouraged to allow employees to work from home, with the only exception being with respect to employees working in critical or essential services that cannot be delivered remotely;

V. That all hospitals are directed to limit the number of visitors for hospitalized patients to one visitor per patient per day;

VI. That the prohibition against political gatherings is extended until otherwise directed; and

VII. All the other containment measures and guidelines that are not expressly set-out in this Address remain in force, and shall be enforced dutifully.

Fellow Kenyans,

The containment measures we have
instituted today and all the interventions that
the Government has made over the last fourteen
months are geared towards responding to the unprecedented health threat that has gripped the world. We have instituted those containment measures and restrictions with no joy.

However, as a caring Government, we fully acknowledge that the responsibility bestowed upon us calls for action to secure the lives of our people.

Over the last year, we have witnessed challenges in other parts of the world, where the surge of infections has nearly led to collapse of globally acclaimed health systems. In moments like this we are all called upon to make sacrifices for one another for the collective good, it is never the intention of the Government to make life difficult or unbearable for any of our citizens.

Finally, as we prepare for the re-opening of schools, let me emphasize again that our
staying power in the fight against this pandemic is our greatest arsenal.

I say so, because, if public responsiveness to the health protocols goes up, then the possibility of further de-escalating the containment measures is within reach. Sadly, a surge of infections will necessitate an escalation of the containment measures, a possibility we all dread.

Let all step up together for our motherland; step up for our families; step up for our
neighbours; step up for our beloved Nation Kenya.

The Kenya Revenue Authority (KRA) has collected over KES21 billion from out of court in 393 cases handled between July and March, this year.

The revelation comes as more taxpayers turn to Alternative Dispute Resolution (ADR) with new applications rising by 56 per cent to 661 in the current financial year compared to the previous one.

The ADR mechanism, which was implemented by the taxman in 2015 has seen significant growth in terms of the number of cases resolved and the revenue unlocked, the watchdog said in a statement.

The Tax Procedures Act provides that under the ADR framework, disputes should be resolved within 90 days.

Unlike other dispute resolution mechanisms such as litigation in the courts of law, ADR does not require the payment of any filing fees. It is a mediation process in which a taxpayer can opt to represent himself without the need for an advocate or a tax expert.

Despite the current Covid-19 pandemic related challenges, which have impacted face to face meetings, resolution of disputes through ADR has remained unhampered as meetings are conducted virtually, said KRA.

This has further reduced the time within which the meetings are held. The average time taken to resolve ADR cases has been reduced from about 90 days in Financial Year 2019/20 to 42 days in the current financial year.

Tax collected in the month of March has gone up by 5.1 per cent to KES131 billion from KES124.6 billion at the same stage in March, last year, according to new disclosures from the Treasury.

Cumulatively, tax revenues through the nine months to March 31 now stand at KES1.037 trillion, KES432 billion shy of June’s target of KES1.47 trillion.

In spite of the tax target being cut from KES1.57 trillion, the KRA will have a difficult task of meeting the target on the back of re-imposed Covid-19 containment measures touching on five crucial Counties at the end of last month.

The government has hired a US lobbying and public relations firm as it pushes to conclude trade agreement with Washington.

Rational 360, whose partners and senior employees consist of veterans of Presidents Bill Clinton and Barack Obama administrations, will “serve as a government relations manager… which will consist generally of relationship-building with government and non-governmental officials, and communications counsel and management services”.

“The registrant will also provide PR and communications support, client consultation and technical support to the Republic of Kenya,” a filing made to the Department of Justice under the Foreign Agents Registration Act (FARA) states.

The one-year contract, which started on April 12, will see the Kenyan taxpayer fork out $600,000 (Sh64.5 million), paid at Sh16.1 million every three months.

The government will make similar payments in June, September and December

The amount does not include reimbursements “for all reasonable and customary out-of-pocket expenses incurred by the consultant in connection with performance of this agreement”.

Digital agency

Rational 360’s managing partner, Patrick Dorton, was a Special Assistant to President Clinton and Communications Director of the White House National Economic Council.

Joe Lockhart, who is a former White House Press Secretary to President Clinton, is also a partner at the PR company.

Christine Koronides, who is one of Rational 360’s vice-presidents, was chief of staff to director of the National Economic Council under President Obama.

The firm is described as a full-service strategic communications and digital agency.

Deputy Chief of Mission at the Kenyan embassy in Washington, David Gacheru, signed on behalf of the government.

The embassy previously worked with Sonoran Policy Group, LLC to “facilitate meetings and interactions with the US administration”.

Engagement with Sonoran started in 2017 and was geared towards keeping Kenya under favourable terms of the African Growth and Opportunity Act, popularly known as Agoa.

In 2019, the contract with Sonoran cost the taxpayer $1.2 million for one year.

Other public relations firms the government has hired to lobby and repair its image in the US and globally are the Podesta Group, Squire Patton Boggs, Grayling and the company of former British Prime Minister Tony Blair known as AGI (Africa Governance Initiative).

Before he became President, Mr Uhuru Kenyatta hired BTP Advisers, which worked with his campaign team to repair his image that had been dented by the International Criminal Court (ICC) indictment.

Aristotle Consultants

Following the 2007/8 post-election violence, the grand coalition government retained a lobbying firm, CLS & Associates, at a reported cost of $1.7 million (Sh183 million at current rates).

In the run-up to the 2017 elections, opposition National Super Alliance’s attempt to retain a political consultancy firm, Aristotle Consultants, did not go down well with the government.

The Jubilee administration detained and deported the firm’s CEO, American John Phillips, and a senior executive, Canadian Andreas Katsouris.

According to the contract, Rational 360’s assignment is of relationship-building, communications counsel and management for Kenya.

“Consultant will serve as the communications manager for the client in providing public relations and communications support, client consultation and technical support,” the contract says.

“We will work with the client to develop communications strategies.”

Negotiations on a free trade agreement started in 2020 during President Donald Trump’s tenure.

They have lately been muted as the administration of Joe Biden seeks to align the potential deal with the “Build Back Better” agenda.

Early this month, US Trade Representative Katherine Tai held a virtual conference with Kenya’s Industrialisation Cabinet Secretary Betty Maina.

She informed Ms Maina of plans by the US to review trade negotiations started by the Trump administration.

Source: Nation

The US has decried graft in government tenders in Kenya, saying it locked out qualified American firms from undertaking projects in the country.

The US Trade Representative’s office (USTR) claimed that some rogue public officials in Kenya manipulated tender bids to suit their interests and those of their cronies.

“US firms have had limited success bidding on government tenders in Kenya. There are widespread reports that corruption often influences the outcome of public tenders, and many of these tenders are challenged in the courts,” it said.

“Foreign firms, some without proven track records, have won government contracts when partnered with well-connected Kenyan firms,” the agency responsible for developing and promoting American trade policy added.

The US is keen on transparency in public procurement in Kenya ahead of a new free trade deal between these countries.

The graft claims by the US are likely to shine more spotlight on Kenya procurement systems which have long been linked to brazen manipulation by some State officials.

Rattled by outcry over fraud in public tenders, Kenya in January 2019 opted to migrate all public tenders and procurement transactions to the Integrated Financial Management Information System (IFMIS), an electronic tool.

The IFMIS became the technology through which government runs national finances, from planning through budgeting to procurement, payment, accounting and reporting. It helps in reporting by the Controller of Budget (CoB) on how and on what tax resources are spent nationally and in the counties. It forms one input into the Auditor-General’s own annual review and audit of these accounts.

The USTR, however, said that since the IFMIS was launched in 2014, there have been complaints about insufficient connectivity and technical capacity in county governments, apathy from county officials, and central control shutdowns.

“Moreover, IFMIS has security gaps that make it vulnerable to manipulation, including the duplication of authorised users’ identities and non-users’ ability to remotely access IFMIS,” it said. “Corruption is widely reported to affect government procurement tender processes at both the national and county levels. The Government has not implemented anticorruption laws effectively,” the agency added. Transparency in reporting of public tenders remains problematic amid resistance by some State agencies and departments to disclose information.

Mid-2018, Head of Public Service Joseph Kinyua asked accounting officers in ministries, departments and agencies to consolidate and publish tender information on a special website on the 15th of every month.

The information on the portal should include the basis of awarding the tenders, parameters of assessment, names and details of tender committee members as well as the value of each contract.

A recent report by the Public Procurement Regulatory Authority (PPRA) – the official procurement watchdog – however shows that most State agencies continued to ignore the directive during the 2019/2020 financial year where tenders worth Sh232.77 billion were published on online portal.

“The authority has continued to monitor implementation of these directives through preparation of reports to Parliament and the National Treasury and Planning… Despite these, the level of compliance has continued to be poor,” the PPRA said, noting that as at June 30, 2020, only 433 procuring entities had been registered on the portal.

The report shows that about 43.47 percent of the ministries, departments and agencies (MDAs) had not complied with the executive order by the end of the last financial year.

Source: Business Daily.

By Wanjia Njoya

Imagine I go to a cyber, print my photo on a paper.

Then I come and knock on your door. You welcome me in, and then I tell you: “Here, I have printed a photo of me.”

You find that strange, but you politely tell me ‘It’s a nice photo.”

Then I tell you “Here, you must have it.”

You say “well, that’s nice, but don’t you want to give it to a family member?”

Then I get annoyed. I tell you “No! You must have this photo. And in exchange, you must give me your land, your resources, and any work you do.”

Si you’ll think I’m crazy? You’ll tell me, “I didn’t ask for your photo, but you dare demand that I pay you for something I didn’t want? With my work and my resources?”

Then I calm down and tell you, “well, look outside your window.”

You look, and you see an army of soldiers with sophisticated weapons.

Then I tell you, “either you take this photo and agree to servitude, or those people outside will shoot you and take your property anyway. At least you can use the photo to come beg for the crumbs from the food which I took from you. I’m kind like that.”

*
That is what IMF loans are. Those guys have printed dollars and created bank accounts with numbers. Those papers mean nothing. They can’t eat papers, wear papers, drive papers, etc. So to convert those papers into tangible things, they go to countries and tell clueless presidents that they will give us colored papers (dollars), but in return we must give them our work and our property.

And if we don’t? They tell us about their weapon arsenal and what they will do to us. Their weapons include media blitz, sanctions and actual bombs and tankers.

That behavior of tantrums, violence and useless trinkets has been called by the Anglos “civilization.” The IMF calls it “loan facilities.”

In unprecedented case, Kenyans who’re currently being ravaged with poverty and the undoings of the pandemic, have come out with harsh terms cautioning the International Monetary Fund(IMF) from giving the country any further loan.

The development comes only a few days after IMF had approved new three-year financing for Kenya valued at Sh255.9 billion to support the government’s COVID-19 response and address the urgent need to reduce debt vulnerabilities.

In a statement, the National Treasury said the facility, which is under the IMF’s Extended Credit Facility and Extended Fund Facility, includes an initial disbursement of Sh79 billion, due for release by June 30th 2021.

Treasury further revealed of the amount, a total of Sh33.7 billion will be released immediately and is usable for budget support.

Meanwhile, Sh44.2 billion will be released by June 30th, while the balance will be disbursed following subsequent programme reviews conducted approximately every 6 months.

Commenting on the approval of the facility, IMF’s Deputy Managing Director and Acting Chair Antoinette Sayeh said the facility will also be used to safeguard resources to protect vulnerable groups

Sayeh said the COVID-19 shock has exacerbated the country’s pre-existing fiscal vulnerabilities, but says its debt remains sustainable.

She however warned that it is at high risk of debt distress.

“To address debt-related risks, the authorities have taken action to hold the fiscal deficit and debt ratios to 8.7 and 70.4 percent of GDP, respectively, this fiscal year. Fiscal and balance-of-payments financing needs remain sizable over the medium term.”

According to the IMF, the facility would set a basis for a resurgence of growth and shared prosperity.

Kenyans who’re openly adamant about the facility are encouraging the lender to rescind the decision arguing that most of it will be lost to corruption and diverted in unintended projects that will unlikely benefit common people.

Known to be vocal on social media, thousands of Kenyans thronged the pages of IMF to express their displeasure.

“??Those money will end in few Kenyan pockets IMF you are just supporting corruption in Kenya, Kenyans will forever remain poor while few will be overnight billionaires courtesy of IMF” Vitalis Kibet commented on the IMF Facebook post that has gone viral.

“What measures have you in place to ensure that the money is strictly used for the intended recipients and purpose. Remember that we poor Kenyans will bear the blunt when the borrowed funds are misappropriated. Kindly IMF, issue very strict guidelines and conditions before releasing the funds. Lastly make thorough follow up after disbursement.Thank for standing with our country during these difficult economic times.” Robert Mwangi commented.

“Stop giving Kenyan government loans.The money is just embezzled by some few corrupt individuals hence the burden or repaying the loan is placed on common citizens. Currently we are overburdened with high taxation to repay this loans which only benefits few individuals.” Said Kelvin Lee.

“This is another round of Covid Billionaires to get their pockets fatter. And for your information,IMF,we don’t need those billions you are sending our way, I will not be held responsible for any (previous, current or future loans) you give out to our corrupt regime.” Njogu wa Nyawira said.

“Kenyans can’t suffer at the expense of Kenyatta family ,we distance ourselves from the loans you have recently approved to Kenya, kenyans lost their jobs ,the country is under lockdown,tax relief came to an end frustrations are high please.” Chemutai Nancy commented.

“We’ve been here lamenting on how this funds ends in a few individuals pockets. Seems at IMF, there’s someone getting kickbacks from these kenyan corrupt politicians.
We are the ones feeling the pinch and the pain of paying for a loan that benefitted a few politicians.
Does IMF ever take time to consider what the normal mwananchi is going through in this country?” James Martin said.

“We don’t want more loans. Kenyan citizens are already overburdened. Our government is corrupt, the money will go to individuals pockets instead of the said beneficiaries. Pls IMF listen to us.” Said Regina Matheka.

Another user Odhiambo Kaumah from the sampled comments said, “ Sadly, it is a new era in the idea of International (Monetary) Bodies as agents of Economic Independence in Third World Countries. IMF has become an accomplice in the increasing destruction of economic strength of countries like my Kenya. The claims in Objectives 2, 3 & 4 are the exact opposite of what you are doing. We are sinking deep into debts and our assets and or resources are no longer ours. There is no big difference between taking a loan from IMF and a country say China or USA. It is all coming down on us because these monies do not translate to reasonable economic growth and development. In short, there is no translatable socio-economic benefit to an individual taxpayer. Corruption is taking it down! And it is not only internal, some of these monies are to lobby for more loans from countries that are out to seek an era of economic colonization. We are tired. Do not add us more trouble.”

Some of the comments from Twitter.

It's like your aim is to keep poor countries in debt forever. Instead of pushing for Kenya to reduce unnecessary spending, you give more loans that can't be accounted for. IMF is becoming an enemy of development in many countries now.

— Philosopher (@Philosopher254) April 3, 2021

Dear @IMFNews ,the fact that we made a grave mistake by electing him, doesn't mean you too be part of our problem, aiding corruption in Kenya by approving huge loans to the looters makes us question your motive..Reverse your money ,stop burdening citizens..

— Elsinki (@ChebetSamitui) April 3, 2021

Kindly, we can't breath here in Kenya because of overtaxation to pay these loans. Kindly @IMFNews @IMFLive , stop all the loans to the corrupt Kenya government officials. It is choking us!! All these monies and misappropriated and we are forced to pay through taxes. Please!!

— Teacher Sam (@yaddae) April 3, 2021

Keep these loans to yourselves, will you? These funds benefit politicians and ruling elites only …… with repayment burden falling on all Kenyans. You are enabling them and are effectively part of the problem!

— Mwirigi (@Mwirigi__) April 3, 2021

Please @IMFNews cancel this thing asap. Kenyan debt is choking us. By the way did @JackMa tell you that these people you are loaning sold his donations? That money you are lending them will not reach the Kenyan soil. Please spare us more pain. Spare our kids and the unborn. https://t.co/qIz4STlwi4

— Peter Matunda (@PeterMatunda2) April 3, 2021

Advocate Charles Kanjama also added his voice, echoing the similar tones, “Surely IMF, money is fungible, period. Your money will facilitate BBI and elections, one way or another.”

Alarmed with the complaints, IMF expressed concerns that the heightened political activities as the country prepares for a possible referendum and General Election might scuttle Kenya’s belt-tightening plans.

Flagging the buildup of political activities as one of the risks to the Sh262 billion programme that its Executive Board approved on Friday, the IMF emphasised that it is only by adhering to the agreed austerity path of increasing revenues and cutting non-essential spending that Kenya would be able to overcome the spending temptations that accompany the electioneering period.

In Kenya, heightened political activities, especially during the pandemic have been known to make investors jittery. A lot of them have taken on a wait-and-see approach, a situation that has denied the economy much-needed liquidity.

But the electioneering period has also seen increased expenditures as government officials seek to woo voters with projects or even handouts.

Kenyans are currently faced with two political processes — a possible referendum where citizens vote for the amendment of the 2010 Constitution.

There is also a General Election next year.

Already, an analysis by the Parliamentary Budget Office (PBO) has shown that implementation of the constitutional changes will see taxpayers shoulder an additional Sh20 billion annually.

An analysis on the estimated cost of the Constitution (Amendment) Bill, 2020 by the PBO indicates that the Sh19.5 billion will be taken up by the additional constituencies and an expansion of the Executive among other changes that will result in a bloated budget.

The establishment of the youth commission might not come at a hefty cost in its first year, with PBO assuming the amendments will be completed before 2022.

However, in three years after it is rolled out to counties, the cost of having the commission will rise steeply.

The last time Kenya had a programme with the IMF, it ended in acrimony after she breached some of the conditions including keeping the debt levels down.

Part of the reasons for the breach was a spike in expenditures in the run up to the 2017 elections.

“Public debt has been increasing at a relatively fast pace since 2013, with slippages in the run-up to the 2017 elections pushing debt up to a projected 60.7 per cent of GDP by June 2018,” said IMF in a staff report in 2018.

Besides the impact of the extensive drought, the IMF cited the “election-related expenditures” as some of the factors that contributed to the country “missing the performance criteria on the primary fiscal balance for end-December 2016 and end-June 2017.”

In the Financial Year ending June 2017, the budget deficit — the difference between what the government has collected in tax revenues and what it spends — increased to 8.4 per cent of the gross domestic product (GDP).

There were a lot of election-related expenditures including the government putting aside some money for the importation of maize, giving Mumias Sugar Sh1 billion bailout when it needed more than Sh10 billion.

All these and many other expenditures saw the government’s fiscal balance balloon.

As a result, the 24-month precautionary facility that Kenya had signed with the IMF on March 14, 2016 was terminated.

It was a Stand-By Arrangement (SBA) and an arrangement under the Standby Credit Facility (SCF), with a combined value of Sh300 billion.

Kenya never got to use the facility as it was just like insurance, but the consequence of not having the arrangement in place would manifest itself later on when the country went to the international capital market to issue a Eurobond.

Additional reporting by The Standard.

(Reuters) – Kenya’s President Uhuru Kenyatta has set up a team to review power purchase agreements signed over the years by the state power distributor, which has been making losses in the recent past.

Energy consumers in the East African nation often complain of high electricity charges, with some of the costs being attributed to idle capacity charges to compensate power generators for electricity generated but ultimately not used.

The review team will carry out its work over six months, the president said in a legal notice seen by Reuters on Wednesday, and no new contracts will be entered into during that period.

Kenya Power, the distributor, swung into a pretax loss of 7.04 billion shillings ($64.44 million) for its financial year to the end of last June.

Out of the 87.5 billion shillings cost of sales incurred during the period, 47.5 billion shillings, or 54%, was capacity charges paid to power producers, officials said.

Under the typical power purchase agreement, a power producer gets paid for any electricity produced, even if it is impossible for Kenya Power to sell it to consumers due to excess capacity and other reasons.

Kenya Power buys most of its electricity from state-controlled Kenya Electricity Generating Company.

It has also contracted numerous independent power producers, which normally require power purchase agreements before securing financing to set up generation plants.

($1 = 109.2500 Kenyan shillings)

Greetings Kenya Insights,

I hope this finds you well.  I am an employee of  oneof Mohammed  Jaffers group of  company Proto energy limited  or Pro gas to be precise. They recently  opened a  branch in  Nakuru  on August 2020. We were  innocently  recruited  and told that we would work for 3 months probation  then receive a contract afterwards little did we know we were  being  lured to a trap.

The first three months were  hectic.  Reporting  to work  by 6:45AM and leaving as late as 7:30PM all this at a pay of 400 shillings  with no overtime.  The working  conditions  were very poor as we had no Personal protective  equipment such as overalls and  safety  boots or gumboots. We were even forced to  continue  filling operation  inside  the  terminal  during  rainy times even though the terminal rains inside  it and at times  floods with water. After the first  three month August  to October out hopes  were high as probation  was now over little  did we know it was chasing the  smoke.

Before the  complete  threee months were  over, we were handed  a one week ‘Assessment  off‘ to assess if we  qualify for  contract. Little did we know it was just a plot to  discontinue  our 3 months  so that no one would claim  working for a  whole  3 months  and hence  claim a contract as per the  labour  laws.  After the  assessment  we were  told that we are renewed  casual  for  another  3 months probation we were gutted  but had to go on.Our three months now November  to January  are now over,thet did the same ‘assessment  off’ prank again . Efforts to  ask for  any contract  have fallen on deaf ears. Our manager  claiming  that it was not on this  years budget  hence we have to  wait  till 2022.

We have  endured  7 months of  hell. Workers  have gotten injured  and no one cares. You are either given permission  to take yourself to  hospital  at your own cost or sometimes  forced to stay and work  with no medical  attention. We once tried to  leave  work on the required  time  but orders were  issued to the  security  officers to  lock the  gate till all the cylinders were  loaded.  People  left work as late as 7:45 with no overtime.

We report to  work from Monday to  Saturday  with only  Sunday as an unpaid  offday. Any day youmiss to report no matter how  sick you  are  or no matter how  injured(sick off) you  are unpaid. This in justice  and  slavery  is not going to  stop anytime soon as the plant  manager’s  are all foreigners.  A Philippines international  and an Indian  who happen to  be very rude.This is just but to mention a few of what  we go through.  Help us get justice.  Please.  Better pay, contract  and  better working  conditions.

The Central Bank of Kenya (CBK) has extended the loan repayment for customers whose loans were performing before 2^ndMarch 2020 for another three months to 3^rdJune 2020.

The move follows expiry of the one year loan repayment period granted bv the regulator on borrowers which elapsed on 2^nd March 2021.

“Specifically, banks will from March 3, 2021, asses the performance of all restructured loans that were performing before March 2, 2021. The period for determining the performance of all restructured loans will begin on March 2,2020 but went into arrears after that date,” CBK stated.

According to CBK, total loans restructured since March 2020 amounted to Kshs. 1.7 trillion by the end of February 2021 accounting for 57% of the banking sector gross loans.

“Over 95% of the outstanding restructured loans are being repaid in accordance with the restructured terms.”

CBK introduced emergency loan restructuring measures in March last year to cushion borrowers from adverse effects on COVID-19 pandemic and ease pressure of meeting their loan obligations with their banks.

CBK says the measures which saw banks extend repayment period for loans performing before the pandemic struck, issuance of moratorium on principal or interest and waiver on interest fees helped mitigate job losses while helping borrowers and lenders navigate through the pandemic.

Kenya in June signed a secret Sh139.5 billion (1.06 billion euros) loan deal with a Belarusian and Canadian companies to build mobile clinics and upgrade hospitals in the counties amid fears of a sharp rise in coronavirus cases.

The US Securities Exchange Commission (SEC) has disclosed the deal between the Treasury and Canadian firm Kallo Inc over the multi-billion shilling deal to upgrade Kenya’s health infrastructure to help contain Covid-19.

The deal was signed in June last year in the wake of rising coronavirus cases that forced the government to impose restrictions, including a daily night curfew, closure of schools and pubs as well as curb of movement in and out of four counties, including Nairobi.

Under the deal, Belarus-based Techno-Investment Module (TIM) provided financing for project labelled the Kallo Integrated Delivery System (KIDS), whose details remain scanty and were not made public in Kenya.

Yesterday, the Treasury said it needed more time to respond to the Business Daily questions, including whether Parliament was made aware of the debt agreement and if Kenya received the loan.

Kallo Inc says on its website that KIDS provides a comprehensive healthcare infrastructure using both mobile clinics and fixed hospitals supported by a global telehealth system.

“On June 26, 2020, the company finalised contracts with the Republic of Kenya and Techno-Investment Module Limited for a project contract and a finance contract,” the SEC filings of March 3 indicate.

“Under the terms of the agreement, Kenya is seeking to borrow the sum of 1,068,932,543 euros from TIM and the funds are to be used primarily to build phase one of a planned National Healthcare Infrastructure in the Republic of Kenya to be undertaken by Kallo Inc.”

The loan is a 20-year facility charged at two percent plus Libor [London Interbank Offered Rate], which currently stands at negative 0.4 percent, the filings show.

Kenya was given a three-year grace period freezing payment of part of the loan, whose payments, including principal and interest, were to be done quarterly from 2023.

Techno-Investment Module Ltd was expected to pay the Sh139.5 billion loan directly to Kallo Inc once Kenya issued a guarantee technically called a standby letter of credit.

A standby letter of credit (SLOC) is a legal document that guarantees a bank’s commitment of payment to a supplier in the event that the buyer defaults on the agreement.

It helps facilitate international trade between companies that don’t know each other and have different laws and regulations.

The agreement exposes Kenya to legal suits and compensation should it turn down the loan, echoing the controversy over billions of shillings paid out to a firm linked to the Anglo Leasing scam, which involved state contracts worth Sh70 billion awarded to non-existent firms.

In 2014, the Treasury reached a negotiated settlement of the long-running legal dispute with one of the 13 Anglo Leasing companies, clearing the main hurdle that had delayed plans to raise the first Eurobond.

SEC filings show that Canadian firm Kallo Inc is expected to make payments to a firm called Magnitudo for supplies related to Covid-19.

The Business Daily failed to get details of the firm Magnitudo through an Internet search.

“Upon receipt of an invoice from Magnitudo for their B-SAFE National COVID-19 Lockdown Management, B-TEST National COVID-19 Screening, Local facemask manufacturing, and Essential PPE Supply, Kallo will transfer the amount due as per the Financial Proposal,” Kallo Inc says in Form 8-K filling — a report that companies must file with the SEC to announce major events that affect shareholders.

Firms are required to make filings with the powerful SEC if their securities are publicly traded in America, raised funds in the US or have shareholders required to file corporate actions with regulators in Washington.

The Canadian firm expects to receive Sh21 billion from the Treasury deal despite the company’s alert that it had never undertaken projects similar to the one being implemented in Kenya.

It is not clear from the filing how the remaining Sh118 billion from the loan was to be shared.

“In accordance with the Finance Contract, Kallo Inc may receive up to four payments of 40,261,253 Euros in consideration for the goods and services that the Company is to provide under the Project Contract,” the company said in the report.

“While we believe that our KIDS system offers significant value in integrating a nationwide healthcare system in counties lacking such a system, we have no prior experience in installing, operating, or maintaining the KIDS system or any such a system in any country. As a result, we cannot assure you that we are able to achieve any financial success in conducting the business required in installing, operating or maintaining the KIDS system whether in the Republic of Kenya or elsewhere.”

The loan deal was inked at a time when Kenya had received grim predictions on the expected Covid-19 cases and deaths, which were expected to overwhelm the country’s rickety health infrastructure.

(BD)

Auditor General Nancy Gathungu has raised the red flag over contaminated maize worth Sh1.34 billion at the Strategic Food Reserve Trust Fund (SFRTF) after it was left to go bad.

Gathungu has disclosed that a review of records of stocks at the National Cereals and Produce Board (NCPB) had shown that the Ministry of Health had ascertained that out of the 6 million bags of maize that was in stock as at June 30, 2019, maize in 176,265 bags valued at Sh342.5 million was found to contain high aflatoxin levels and was, therefore, not fit for human consumption.

In addition, she said that maize stocks held in Kisumu and Moi’s Bridge silos were found to have been damaged by heat as a result of having been stored in the silos for more than two years.

The silos in Kisumu had 39,905 bags while the Moi’s Bridge silos had 525,818 bags, all valued at Sh998.74 million.

The report also reveals that though stock summary records at the Nakuru depot as at June 30, 2019, had indicated that there were 387 bags of imported maize valued at Sh626,940, physical verification disclosed that there was no stock of imported maize at the depot.

“Though the Fund gave authority to NCPB to sell the maize at Sh780 per bag, the initial cost was Sh1,778 per bag thus resulting in a total loss of Sh560, 599,554, excluding storage and fumigation charges,” Gathungu says.

The report comes at a time when farmers are complaining that their maize rots in stores for lack of space in the depots.

In January, NCPB faced challenges buying maize from farmers after most growers opted to sell the crop to private millers and traders who offer better prices and make prompt payments.

This is after the board offered Sh2,500 per 90 kg bag yet millers were buying the same at Sh2,700.

Past scandals involving maize have seen top government officials prosecuted over loss of funds at the NCPB after they were accused of being part of the conspiracy.

Former Agriculture PS Richard Lesiyampe and former NCPB managing director Newton Terer were among suspects charged in court over various graft allegations involving maize. The case is still pending in court after they denied the charges.

Budget utilisation And in the report for the financial year that ended in June 2019, Gathungu also raises concern over storage costs, other general expenses as well as procurement of maize by the Fund worth billions of shillings which she says cannot be accounted for.

On the procurement of maize, she says that although the Fund budgeted to purchase 2 million bags of maize from local farmers for the 2018/2019 crop season at a price of Sh2,500 per 90 kilogramme, all amounting to Sh5 billion, the Fund only purchased 417,951 bags of maize of 90 kilogramme each at a total of Sh1 billion which translated to a budget utilisation of only 20 per cent.

Out of the Sh5 billion, an expenditure of Sh979.7 million was to be met from sales proceeds of old stocks of maize, while the balance of Sh4 billion was to be financed through exchequer issues.

On storage costs, Gathungu noted that although the statement of financial performance reflects an expenditure of Sh432.77 million on fumigation and storage charges for the year ended June 30, 2019, invoices that were verified during the audit to support the transactions indicated a closing stock of 3,414,518 bags of 90kg each which is equivalent at 6,146,132 bags of 50kg each while supporting schedules to the financial statements disclosed a closing stock of 6,279,685 bags of 50kg each.

“Although the management explained that the difference of 133,553 bags was the closing stock of the unsold imported maize, the accuracy of the reported expenditure on fumigation and storage costs could not be confirmed,” she added.

With regards to the payment of arrears of farmers, Gathungu noted that although the fund received Sh2.1 billion to cater for payments of debt owed to maize farmers for earlier deliveries and was also given Authority to Incur Expenditure (AIE) of Sh1.4 billion making a total receipt of Sh3.6 billion, examination of records indicated that an amount of Sh2.6 billion was spent on farmers’ arrears for 2017/2018 crop season leaving a balance of Sh931 million that has not been accounted for.

2,500 What the board offered per 90kg bag yet millers were buying the same at Sh2,700.

(PD)

Summary:

• The IMF team and the Kenyan authorities reached staff-level agreement on a 38-month program to help the next phase of the country’s COVID-19 response and a strong multi-year effort to stabilize and begin reducing debt levels relative to GDP.
• The economy is picking up from an unprecedented shock suffered as a result of the COVID-19 pandemic. Notwithstanding the recovery, uncertainty remains in a durable return to the path of strong, sustainable, and inclusive growth.
• The authorities have already begun reversing some of the earlier extraordinary measures introduced at the outset of the shock, while maintaining others. Building on the steps already taken, the program would support the authorities’ efforts and provide resources to protect vulnerable groups.

Washington, DC – February 15, 2021 : A staff team from the International Monetary Fund (IMF) led by Mary Goodman conducted virtual missions to Kenya from December 9 to 17, 2020 and from February 4 to 15, 2021 to undertake negotiations on a combined 38-month program under the Extended Fund Facility (EFF) and Extended Credit Facility (ECF) arrangements.

At the end of the mission, Ms. Goodman made the following statement:

“I am pleased to announce that the Kenyan authorities and the IMF mission team have reached agreement on economic and structural policies that would underpin a 38-month program under the EFF and ECF arrangements for about US$2.4 billion. The staff-level agreement is subject to IMF management approval and Executive Board consideration, which is expected in the coming weeks. The program will support the next phase of the country’s COVID-19 response and the authorities’ plans for a strong multi-year effort to stabilize and begin reducing debt levels relative to GDP, laying the ground for durable and inclusive growth over the years to come.

Kenya was hard hit at the onset of the COVID-19 crisis, but growth has been recovering since mid-2020 and heading into 2021 . The authorities’ forceful early actions cushioned the pandemic’s economic impact, and real GDP growth is projected to have contracted by just -0.1 percent in 2020. Inflation remained within the central bank’s target band, reaching 5.7 percent in January, while financial sector vulnerabilities have been contained and the banking system remains well capitalized overall. The external sector proved resilient against the backdrop of the shock, with horticultural exports and remittances performing well. The reopening of schools and removal of pandemic containment measures are expected to underpin a growth rebound to 7.6 percent in 2021, even as some sectors of the economy face continuing headwinds.

The Kenyan authorities have begun to roll back some of their extraordinary economic support measures. With the pickup in activity, the earlier temporary personal and corporate income tax cuts as well as the reduced VAT rate were discontinued at end-December, shoring up tax revenues. To maintain the cushion for the low income earners and for Micro, Small and Medium Enterprises (MSMEs), the Authorities did not reverse the personal relief on income tax and the lower turnover tax (1%) for small businesses introduced in April 2020. Many households and businesses continue to benefit from the temporary debt relief agreements reached with their banks, and borrowers accounting for a total of 54.2 percent of loans had entered such rescheduling agreements by end-2020. Overall, the authorities’ decision to pause fiscal adjustment this year will allow accommodating health, social, and development spending to support the recovery, complemented by accommodative monetary policy.

The mission team agreed with the authorities on a program to support the next phase of their COVID-19 response. The authorities’ program aims at reducing debt vulnerabilities through a multi-year fiscal consolidation effort, centered on raising tax revenues and tight control of spending, which would safeguard resources to protect vulnerable groups. It would also advance the structural reform and governance agenda, including by addressing weaknesses in some SOEs and ongoing efforts to strengthen transparency and accountability through the anticorruption framework. Finally, it would strengthen the monetary policy framework and support financial stability.

The program charts a clear path to reduce the vulnerabilities crystallized by the COVID-19 shock. Building on steps the authorities have already taken, the strong multi-year consolidation effort will deliver a primary balance that would stabilize debt as a share of GDP and put it firmly on a downward path over the course of the program. This will free up resources for private investment, setting a strong footing for durable growth coming out of this global shock. The program will also form a strong basis for support from other development partners.

COVID-19 continues to pose risks for the global economy and for Kenya. Risks generally remain to the downside, and projections are subject to extraordinary uncertainty. Accordingly, the program incorporates flexibility, including by recognizing near term uncertainties about tax yields due to challenges from the COVID-19 shock in key sectors like hospitality. As the authorities evaluate risks in the SOE sector, the program will support their plans over time to develop a strategy to address weaknesses in vulnerable SOEs within the scope of the limited available fiscal space. The team looks forward to close engagement with the authorities to evaluate the evolving landscape over the course of this year and achieve the program’s goals.

The mission team is grateful to the authorities for the candid and constructive discussions and their strong efforts to ensure success of the upcoming program.

The team met with Cabinet Secretary for the National Treasury and Planning, Mr. Ukur Yatani; Governor of the Central Bank of Kenya (CBK), Dr. Patrick Njoroge; Head of the Public Service, Mr. Joseph Kinyua; the Principal Secretary for the National Treasury, Dr. Julius Muia; Deputy Governor of the CBK, Ms. Sheila M’Mbijjewe; and other senior government and CBK officials. Staff also had productive discussions with representatives of the private sector, civil society organizations, and development partners.