Kenya Insights

Category: Economy

  • My Drive Is To Push Kenyans, Ruto Announces Plans To Keep Taxing Kenyans More In His Term

    My Drive Is To Push Kenyans, Ruto Announces Plans To Keep Taxing Kenyans More In His Term

    President William Ruto has announced his intention to continue raising taxes despite cries from Kenyans who feel they’re already overtaxed.

    While defending his economic plan, Ruto unveiled ambitious plans to elevate Kenya’s tax revenue to a whopping 22 per cent from the current 14 per cent.

    The President made the remarks during an engagement forum with the Harvard Business School students at State House, Nairobi on Tuesday May 14, 2024.

    Speaking during the event, President Ruto acknowledged that taxes are painful but necessary to help government reduce borrowing.

    “Its going to be difficult, I have a lot to explaining to do, people will complain but I know finally they will appreciate that the money we go to borrow from the World Bank is savings from other countries,” said Ruto.

    The president outlined a phased approach to achieve the desired increase, aiming for a rise to 16 per cent in the current year, with a long-term target of reaching between 20 and 22 per cent.

    “My drive is to push Kenya, possibly this year we will be at 16 per cent from 14 per cent. I want in my term, God willing, to leave it at between 20 and 22 per cent. It’s going to be difficult,” he added.

    Ruto pointed out that Kenya’s tax revenue as a percentage of total earnings trails behind that of peer nations on the continent.

    “Our peers in the continent are on an average of between 22 and 25 per cent, which means our taxes are way below those of our peers,” he explained.

    Ruto remained confident that the move is essential for Kenya’s economic resilience.

    “I know finally they will appreciate that the money we go to borrow from the World Bank is savings from other countries,” Ruto affirmed noting the importance of reducing dependence on external financing.

    Ruto’s remarks came barely a week after the introduction of the proposed Finance Bill 2024.

    The Finance Bill, 2024 was published on May 9 and is set to be subjected to public participation thereafter.

    The Bill contains tax proposals that the Kenya Kwanza government wants to use to raise revenue and finance its ambitious projects.

    Top on the list is the increase in the price of bread, and a mandatory tax for all motor vehicle owners in the country as the government funds the 2024-2025 budget.

    He added, “And I’m not comparing ourselves with OECD countries. Countries like France are at 45% others are higher. So I persuaded and made a case to the people of Kenya that we must begin to enhance our revenue because if we are a serious State we must be able to enhance our taxes.”

    The President also explained that the push to raise more revenue through taxes was part of ensuring that ‘we live within our means’.

    “When I came into office I told everybody to tighten up your belts. I am not going to preside over a bankrupt country. I’m not going to preside over a country in debt distress. We have to cut our spending,” he stated.

    His remarks came a few days after the controller of the budget raised concerns about wasteful spending including excessive domestic and international travels by government officials.

    Meanwhile, the closure of businesses and job losses in the private sector have been attributed to increased taxation in the country.

  • Finance Bill: Govt To Take 20pc Of Betting Stakes

    Finance Bill: Govt To Take 20pc Of Betting Stakes

    Gamblers will pay the government Sh20 for every Sh100 staked after the National Treasury proposed to increase excise tax on betting stakes to 20 percent, in the latest State onslaught to lower the appeal of betting.

    The proposal is contained in the draft Finance Bill, 2024 and if adopted by Parliament will increase the tax from the current 12.5 percent.

    The Bill is expected to be adopted by Cabinet and tabled in Parliament for debate and approval before the end of June. Currently, the government takes Sh12.50 from every Sh100 similar amount to be wagered.

    “The first schedule to the excise duty Act is amended by deleting the words twelve-point five percent and substituting thereof the words twenty percent,” the National Treasury says in the draft Bill.

    This is meant to lower the appeal of betting to millions of Kenyans, especially the youth and unemployed who have turned to gambling as a source of income.

    The government has in recent years publicly pushed for increased taxes in a bid to curb the betting craze that has made Kenya home to the highest number of youthful gamblers at 76 percent, placing the country ahead of Nigeria and South Africa.

    Adoption of the new tax rate will lower the amount that gamblers stake, in turn reducing the possible pay-out from a winning bet.

    The 20 percent rate will be in addition to a similar rate charged as withholding tax on every winning bet that the State takes.

    Betting firms are under law required to deduct the withholding tax and remit it to the Kenya Revenue Authority (KRA) by the 20th of the following month.

    Besides gamblers, the State has also set its eyes on the betting firms and last year proposed two new taxes through the Gambling Control Bill, 2023 that has since been debated in Parliament.

    These were the gambling tax which will be charged at the rate of 15 percent of a betting firm’s gross gaming revenue and a further one percent monthly levy on the same revenue.

    But the National Assembly committee on Sports proposed reduction of gambling tax to 13 percent from 15 percent and removal of the one percent gambling tax in its report tabled before the House in December last year.

    Increased taxation on the betting industry is bearing the desired impact at least in the eyes of the government. BCLB data shows that betting firms made Sh60 billion in revenue for the 2021/22 year, an 80 percent drop from Sh299 billion posted in the year to June 2019.

    Data from the Betting Control and Licensing Board (BCLB) released last year shows that gamblers spend an average of Sh2,500 to bet every month with 80 percent of the winning punters earning less than Sh30,000 per month.

    The Treasury has previously failed in bids to tax betting stakes at the rate of 20 per cent, after Parliament gave in to pressure from gaming firms and lowered the rate. The first time the Treasury proposed the 20 percent rate was in 2019.

    Excise tax on betting stake was increased to the current 12.5 percent from 7.5 percent in July last year as the State raided the industry in a bid to take away the shine from the betting craze.

  • Finance Bill: Vehicle Owners To Pay Annual Tax

    Finance Bill: Vehicle Owners To Pay Annual Tax

    Vehicle owners will start paying an annual tax of up to Sh100,000 depending on the value of their cars if Parliament endorses the proposal that looks set to increase motoring costs amid costly fuel and spare parts.

    The Finance Bill 2024 proposes the introduction of a 2.5 per cent annual tax on the value of vehicles, with the deduction set at a minimum of Sh5,000 and a maximum of Sh100,000.

    The deduction, called motor vehicle tax, will be paid on each vehicle at the time of issuing an insurance cover.

    This means second-hand cars like the Toyota Harrier and Mercedes Benz C-Class that were in February averaging between Sh4 million and Sh4.4 million in many yards in Nairobi will attract the maximum tax of Sh100,000, with the value only falling if valuation declines in subsequent years.

    “The rate of tax in respect of motor vehicle tax charged under section 12H (which introduces the tax) shall be 2.5 per cent of the value of the motor vehicle,” reads the bill in part.

    Engine capacity

    “The value of a motor vehicle shall be determined on the basis of the make, model, engine capacity in cubic centimetres and year of manufacture of the motor vehicle.”

    The only exemption from the 2.5 per cent tax includes ambulances, or motor vehicles owned by the national government, county government, Kenya Defence Forces, National Police Service, National Intelligence Service or a person exempt from tax under the Privileges and Immunities Act.

    Insurance cover

    The tax looks set to increase the cost of operating motor vehicles in Kenya, in addition to insurance cover, fuel and servicing costs. The State had last year mulled introducing a congestion charge —a fee charged on cars and motor vehicles being driven within zones marked as heavy traffic areas. The proposed tax in the Bill has not made it clear if this is linked to environmental protection.

    There are global efforts to introduce special taxes on vehicles running on diesel or diesel due to their pollution.

    Official data shows Kenya has witnessed a nearly doubling of registered motor vehicles in the past five years to 2.19 million in 2022 compared with 1.27 million in 2013. The number of newly registered motor vehicles in the same period hit 512,779, translating to an average of 102,556 every year.

    The Finance Bill makes insurers the agents of the Kenya Revenue Authority (KRA) and they will be required to collect and remit the tax within five working days after issuing a motor vehicle insurance cover.

    Escape the tax

    The Insurance Act makes it mandatory for every car on the Kenyan public road to have a minimum of a third-party motor insurance cover in place.

    Tying the motor vehicle tax with insurance means it is going to be difficult to escape the tax.

    The bill proposes a penalty of 50 per cent of the uncollected tax on insurers who fail to collect and remit the motor vehicle tax to KRA. They will then be required to remit the actual amount of the uncollected tax.

    The planned tax is in line with last year’s proposal to introduce an annual wealth tax for car owners, depending on the engine capacity and also roll out a gradual rise in the excise duty on cars running on fuel.

    The Treasury had said it was going to assess the viability of introducing the motor vehicle circulation tax as a form of wealth tax. It had indicated that this was going to be paid at the point of acquiring an insurance cover.

  • KRA Mounts Pressure On Landlords To Increase Rents

    KRA Mounts Pressure On Landlords To Increase Rents

    The Kenya Revenue Authority (KRA)  is pressuring landlords to raise rents for their properties, which is likely to add another financial burden to already financially struggling tenants.

    Last month, the Authority sent out notices to property owners expressing concerns over the constant figures declared as rental income, asking them to adjust the amount to reflect market changes.

    “The commissioner has noted that your rental income has been a constant figure or has slightly declined for the period filed,” read one of the notices.

    “We understand that rent is an appreciating commodity with economic times, and we expect your declarations for the current month will reflect that. If needed, previous return declarations can be amended. Filing Nil or a decline in rental income is highly discouraged.”

    Many landlords were shocked by the notices, especially considering that declines in declared rental income often coincide with vacancies, presenting a challenging situation for property owners as their tenants are likely to move to cheaper houses as soon as rents are raised.

    Property owners were expected to pay monthly rental income tax at the rate of 7.5% of the gross rent they collect from tenants starting in January. This rate is slightly lower than the previous 10%.

    The rental income tax is applicable for landlords earning annual rental income between Sh280,000 and Sh15 million, equivalent to at least Sh23,333 per month.

    Real estate analysts have criticised the directive, stating that raising rents for residential houses is challenging due to the absence of binding tenancy agreements in most leases, and many tenants may quickly move houses when rents are hiked.

    “What happens is that rental income in a residential area increases when you have a vacancy,” Johnson Denge, a real estate expert, told the Business Daily.

    This was corroborated by a landlord, who stated that he is only able to raise rents when somebody new moves into his house.

    “The rental income goes up when I get a new tenant, but not when they have been there for a long time. Getting a constant tenant is not easy, so I do not raise their rents,” said the unnamed property owner.

    “In the estate where I have my flats, there is a glut of flats, so rent is a constant figure. If you are the only landlord raising rent, you will automatically transfer your tenants to other properties.”

    Meanwhile, KRA has also issued notices to property owners asking them to pay a 1.5% levy on the rent received as an affordable housing levy. In the advisory issued earlier this week, the KRA clarified that property owners will pay 1.5% of the rent received and not the net of the landlord’s incomes after deducting expenses like mortgages and property management fees.

    Small businesses, whose annual sales range between Sh1 million and Sh25 million, are also required to pay the levy from their gross sales and not operating profits – a move that is likely to pile pressure on microenterprises such as barbershops and beauty salons.

  • Businesses Shun KRA’s eTIMS System

    Businesses Shun KRA’s eTIMS System

    The Kenya Revenue Authority (KRA) gave March 31, 2024 for all businesses to on-board the eTIMS system for easy verification of transaction records and specifically proof of client invoicing.

    Initially, KRA had envisaged registering a total of over 900, 000 recognised businesses, a figure they had derived from their own records.

    However, when the deadline hit, to the surprise of KRA only 49% of the registered 236,000 businesses oN the eTIMS system were actively using it. The Kenya National Bureau of Statistics (KNBS) however states in its records that over 7 million businesses existed within the country within the past year.

    KRA, through its electronic tax invoice management chief manager, Hakamba Wangwe, now says that among its options, penalties would be meted out to ensure compliance. What is baffling, however, is that Wangwe also claims that many businesses are still onboarding eTIMS by using the USSD code, the Web application on eCitizen and a newly introduced mobile app on playstore as the big VAT registered businesses remain domiciled on the eTIMS platform, even though they fail to activate usage if the system.

    In 2023, KRA had stated that every business in the country was expected to invoice at all transactions through the eTIMS from 1st April 2024 after having postponed the same from 1st January 2024. The tax authority now says it is keen to monitor all these recorded transactions for a better visibility of VAT claims by the concerned businesses.

    The tax authority, in a bid to widen the tax net, has also tried roping-in farmers, so far unsuccessfully, as political heat spilled out of control since KRA officials’ visit to avocado farmers earlier this year.

    The Tax authority says they are still in talks with all cadres within the farming fraternity and beyond to get all Kenyans to pay taxes.

    Why businesses are not boarding

    However, most businesses are yet to on-board. There are a number of reasons that they say are beyond their control.

    Virginia, who sells locally manufactured hardware goods says she trades with a majority of other businesses who are not on-boarded as yet. There are other traders who complain on the number of things required to register one-self on the eTIMS platform.

    Recently, when making a purchase from a second hand car dealer from a very tiny shop, situated within a corridor, at the back of Kirinyaga street, I heard the shopkeeper turn down a generous order from a fellow trader because he insisted he could not generate an eTIM invoice. He had not on-boarded because they were asking for so many things and his level of knowledge was not much help.

    Julius, a small trader who runs an eatery attached to a green grocery kiosk known locally as “kibandasky.” His joint is frequented by informal sector workers deep in Kangemi area. At a recent meeting, he was at pains describing how the eTIMS system is a micromanagement of their businesses and he does not see in it any particular benefit for his small business, so he has not on-boarded.

    If anything he says he would have to employ someone extra to ensure he generates invoices whenever he makes a sale to other traders selling further afield so it adds a cost to his small business which he cannot absorb.

    I spoke to a doctor who said he simply cannot onboard the system. He says the eTIMS system expects that every consultation registered at his clinic equals money having been paid yet that is not always the case as not all clients pay promptly and others end up not paying at all! They have raised the issue through their medical professional organization and hope an amicable solution will soon be reached.

    Elephant in KRA’s room

    The real work still remains with KRA, to not only carry out more advocacy on the role of every citizen in supporting the state in delivering important common services but also in ensuring that the large population yet to get into the tax bracket are given a reason to be proud of paying their taxes.

    The urban Kenyans are ever suspicious that their hard earned money is what they see every other day embezzled by well-placed government officials while those on far flung places in the corners of the country still feel they are marginalized and neglected, so why support negligence, despite the advent of devolution.

    Many people in the country are still unaware of the concept of paying tax beyond what they pay the county government at the local livestock market when they sell their cattle to take their children to school. The KRA needs to connect more with the citizenry from the highest to the lowest in society in its collection of taxes, and it should avoid coercing them in a bid to making them comply.

    Many Kenyans still need more tax education, better tax facilitation and above all a tax system that is averse to punishment when seeking tax compliance but look for innovative ways to nudge Kenyans to pay tax for realistic and better services and enrich their lives.

    There are those sophisticated tax cheats who owe millions of billions in taxes, fines and prosecution should be directed towards them even as first time small tax payers are facilitated and celebrated for their baby steps.

  • Kenya Power Cuts Electricity Costs By 13.7pc Starting This Month

    Kenya Power Cuts Electricity Costs By 13.7pc Starting This Month

    Kenyans will now enjoy cheaper electricity bills after Kenya Power announced a 13.7 percent power cost cut starting this month.

    The utility firm links the drop to the strengthening of the Kenyan shilling against the American dollar as well as a decline in fuel prices.

    According to the company, the fuel cost charge and foreign exchange fluctuation adjustment, which comprise the key variable components of the electricity bill, were reduced by 37.3 percent between March 2024 and April 2024.

    For example, the fuel cost charge was reduced from Sh4.64 in March 2024 to Sh3.26 in April 2024, and from a high of Sh4.93 in January 2024.

    On the other hand, the forex adjustment charge was reduced from Sh3.68 in March 2024 to Sh1.96 in April 2024 and from a high of Sh6.85 in January 2024.

    “We are happy to note that the reduction has given reprieve to our customers and we are optimistic that the prevailing macro-economic environment and the improved hydrology, which enables us to dispatch less thermal power, will sustain the benefit to our customers,” Kenya Power Managing Director & CEO Joseph Siror said.

    A customer under the Domestic Customer 1 (DC1) tariff band (those consuming less than 30 units per month of electricity) will pay Sh629 in April 2024 compared to Sh729 for similar units in March 2024, representing a 13.7 percent reduction.

    Similarly, a customer under the Domestic Customer 2 (DC2) tariff (averaging 31–100 units per month) will pay Sh1,574 in April 2024 compared to Sh1,773 in March 2024, representing a 11.2 percent reduction.

    Those under the Domestic Customer 3 (DC3) tariff band (averaging more than 100 units per month) will pay Sh3,728 in April 2024 compared to Sh4,127 in March, representing a 9.7 percent reduction.

  • Guinea-Bissau Revamps Trade Ties With Kenya, Endorses Raila’s AU Bid

    Guinea-Bissau Revamps Trade Ties With Kenya, Endorses Raila’s AU Bid

    Kenya and Guinea-Bissau are implementing far-reaching policies that will boost trade between the two countries.

    President William Ruto said while the current trade volume between the two countries is low, there is potential for improvement.

    He cited the African Continental Free Trade Area Agreement that is poised to enhance commerce.

    President Ruto said Kenya and Guinea-Bissau are keen on implementing the Memorandum of Understanding that established a Joint Commission for Cooperation (JCC) signed in 2022.

    He explained that enhanced collaboration between the private sectors of both nations will significantly boost trade volumes.

    He made the remarks on Friday during a press briefing following bilateral talks with his Guinea-Bissau counterpart President General Umaro Sissoco Embalo.

    President Ruto who is on a state visit to Guinea Bissau was decorated with Guinea-Bissau’s highest medal by President Embalo at the presidential palace.

    He said the JCC will facilitate cooperation in areas of mutual interest, including security, agriculture and livestock, fisheries and the blue economy, as well as environment and forestry.

    President Ruto pledged to initiate direct flights between the two countries.

    He noted that this will bolster trade and strengthen people-to-people cooperation.

    On the blue economy, he stated that Kenya and Guinea Bissau will collaborate in the sustainable management of fisheries, protection of marine biodiversity, innovative strategies to combat sea pollution.

    He said he will work with President Embalo to push for reforms in the African Union.

    He also stated that it was crucial to centralise the position of the Pan-African Parliament as the people’s representatives to provide oversight over the Executive and ensure accountability within the organisation.

    “It will also be necessary to operationalise the African Court of Justice as a means to creating institutions for making the AU a fit-for-purpose organisation,” he added.

    He thanked the President of Guinea Bissau for accepting to support Kenya’s candidature for the position of AUC Chairperson for the 2025-2028 period.

    “Kenya’s candidature is informed by the role we play in enhancing and sustaining the Pan-African agenda. We hope to work with all member States in the African Union’s endeavour to achieve Agenda 2063,” he said.

  • CBK Projects The Shilling To Maintain Its Strength

    CBK Projects The Shilling To Maintain Its Strength

    The Central Bank of Kenya (CBK) says the country’s debt has dropped by Ksh 1 trillion on account of strong shilling and investor optimism.

    According to CBK Governor Dr Kamau Thuge, the Kenyan currency has gained more value over the US dollar after the country managed to offset the $1.5 billion Eurobond debts in February.

    A combination of feeble shilling and worsening balance of payment created a cocktail of crisis in Kenya’s fiscal space increasing overall public debt by Ksh 1.93 trillion as of December 2023.

    This saw the total stock of public debt jump to record levels of Ksh 11.1 trillion, raising concerns over the country’s debt sustainability.

    However, investor nerves were calmed in January when the government settled the Eurobond debt that was due on February, 10.

    This has managed to stem a steady slide of the Kenyan shilling, which was trading at 160.1 against the US dollar.

    Dr Thugge says the Kenya shilling is now trading at 130, and the regulator expects the local currency to continue with its value correction in the coming weeks.

    Thursday, the shilling closed the trading day at 131 against the Dollar.

    The CBK governor is also raising concerns over the rise in non-performing which has breached the 15pc mark, for first time in over a decade.

    Banks have seen a surge in bad loans due to the economic meltdown.

    The governor noted that Kenya expects a disbursement of $1 billion  from the International Monetary Fund (IMF) to boost foreign reserves, which stands at 3.77 months of import cover.

  • Kenya And Tanzania Agree To Remove Trade Barriers

    Kenya And Tanzania Agree To Remove Trade Barriers

    Kenya and Tanzania have signed a landmark deal aimed at eradicating trade barriers between the two nations.

    The agreement will enable Kenya to resume exporting key commodities to Tanzania such as tea, as well as facilitate the clearance of Konyagi and timber from Tanzania.

    The milestone was achieved during the 8th Joint Trade Committee Meeting, co-chaired by Trade Cabinet Secretary Rebecca Miano and her Tanzanian counterpart Stephen Dyabato.

    Miano noted that 56 out of the 68 identified trade challenges have been successfully resolved, a testament to the collective commitment to seamless trade between Kenya and Tanzania.

    “This significant milestone underscores our commitment to fostering closer cooperation and collaboration with Tanzania to unlock business opportunities, drive economic growth, and enhance the prosperity of our people,” said Miano.

    Consequently, 14 key issues were addressed, including the harmonization of levies, fees, charges, and other trade-related conditions.

    Both countries further reiterated their resolve to address any trade-related issues with a forward-looking approach, aiming to surpass the USD 1 billion annual trademark.

    The meeting, held in Kisumu from March 18 to March 22, came after directives from Presidents William Ruto and Samia Suluhu Hassan to resolve trade barriers between the two East African nations.

  • EPRA Reduces Fuel Prices In Kenya

    EPRA Reduces Fuel Prices In Kenya

    The Energy and Petroleum Regulatory Authority (EPRA) has reduced pump prices in its monthly review published Thursday.

    Effective midnight, a litre of super petrol will reduce by Ksh 7.21 while diesel will be Ksh 5.09 cheaper.

    Kerosene consumers will also see a Ksh 4.49 reduction per litre of the fuel.

    The authority says the average landed cost of super petrol between January and February 2024 went up by 5.6pc from $666.16 per cubic metre in January to $703.49 in February.

    The price of diesel also went down by 0.76pc from $728.03 to $722.49 as that of kerosene registered a1.65pc increase to $730.35.

    The latest review mean consumers in Nairobi will pay a maximum of Ksh 199.13 per litre of petrol, Ksh 190.38 and Ksh 188.74 for a litre of diesel and kerosene respectively.

    In Mombasa, a litre of petrol, diesel and kerosene will retail at a maximum of Ksh 195.97, Ksh 187.21 and Ksh 185.58 respectively.

    A litre of petrol will cost a maximum of Ksh 198.97 in Kisumu, diesel Ksh 190.59 and kerosene Ksh 188.96.

  • Government Shifts All State Advertisements To KBC

    Government Shifts All State Advertisements To KBC

    In yet another significant blow to the local media industry, the government has decided to withdraw advertisements from privately-owned radio and television stations, directing that all government adverts exclusively run on Kenya Broadcasting Corporation (KBC).

    This directive, coming just a month after a similar move targeting print media, signifies that independent radio and television stations will no longer receive government revenue, except for The Star newspaper, which circulates the MyGov publication exclusively every Tuesday.

    The move has sparked uproar within the Media Owners Association, the Kenya Editors Guild (KEG), the Kenya Union of Journalists (KUJ) among other media associations which accuse President William Ruto’s government of unfairly targeting the media industry which is already struggling.

    Under the new directive, all Ministries, Departments, and Agencies (MDAs) under the national government, as well as independent commissions and public universities, are mandated to advertise through the state-owned broadcaster.

    According to Broadcasting and Telecommunications Principal Secretary Edward Kisiangani, this decision is part of a broader strategy to ensure efficient public sector advertising services and aligns with the government’s policy of revitalizing public sector entities and ensuring fair public-private partnerships.

    In a memo dated March 7, Kisiangani emphasized that KBC’s extensive national network coverage guarantees advertisers nationwide reach.

    The government aims to modernize KBC to become the premier national broadcaster in Africa, positioning it as the leading source of information in Kenya.

    Addressed to principal secretaries, CEOs of state corporations, regulatory bodies, independent commissions, and vice-chancellors of public universities, the memo notifies recipients of the new policy and requests compliance.

    All advertisements to be aired must be cleared by the Government Advertising Agency, responsible for coordinating all public sector advertisements.

    He said the communication adheres to Treasury’s Circular No. 09/2015, centralizing public sector advertising, aimed at cost-cutting through coordinated procurement processes for maximum service levels at minimal costs.

    Given the substantial pending bills owed to media houses by the government, Kisiangani stressed the need for strategic measures to address the situation.

  • Why Landlords Are Struggling To Get Tenants For Their Apartments In Ongata Rongai

    Why Landlords Are Struggling To Get Tenants For Their Apartments In Ongata Rongai

    By Paul Letiwa

    In Ongata Rongai, in the outskirts of Nairobi, landlords with newly constructed apartments are facing a huge challenge as vacancy rates soar.

    The situation has reached a critical point as they struggle to attract tenants, and existing ones grappling with tenants moving out.

    A good example is a new apartment complex located in the Olekasasi area, where construction was completed in mid-January this year.

    Despite being ready for occupancy, only three tenants have moved in. The property manager interviewed express his frustration, noting that while there have been inquiries from potential tenants, only the three have followed through to sign lease agreements. The apartment has 20 units.

    House agents in the area attribute this trend to a combination of factors, primarily stemming from the challenging economic climate.

    Many tenants, facing financial constraints, are opting for more affordable housing options. This shift towards cheaper rentals has left newer, higher-priced apartments struggling to find occupants in parts of Rongai like Masai Lodge area, Church Road, Kandisi, Acacia and new rental buildings along Kimani Road among other areas.

    According to Godfrey Manoti, Managing Director of Inka Realtor homes and properties, the lack of job opportunities has exacerbated the situation.

    With limited employment prospects, majority of tenants in Rongai are either downsizing to more affordable accommodations or delaying relocation altogether.

    “The recent vacancy rates in Ongata Rongai are reflective of the broader economic struggles facing our community,” says Manoti.

    “As tenants contend with financial constraints and job uncertainty, the demand for rental properties has significantly decreased since mid-last year.”

    Most landlords, who rely on rental income to sustain their investments, are facing financial strain, on the other hand property management companies are also feeling the impact, struggling to meet overhead costs amidst dwindling revenue streams.

    In response to this dilemma, landlords in and property managers in Rongai are exploring various strategies to attract tenants.

    Some are offering discounted rental rates or incentives such as flexible lease terms or complimentary amenities. Others are investing in marketing efforts to enhance visibility and appeal to potential tenants.

    However, despite these efforts the road ahead remains uncertain for Ongata Rongai’s rental market. The persistence of economic challenges, coupled with shifting tenant preferences, poses ongoing obstacles for new landlords and property managers alike.

  • Attorney General Bars KRA From Collecting Housing Levy

    Attorney General Bars KRA From Collecting Housing Levy

    Attorney General Justin Muturi has advised the Kenya Revenue Authority (KRA) to stop collecting the Housing Levy from Kenyans, terming the move unconstitutional.

    In a letter to the KRA Commissioner General, Muturi referred to rulings by the High Court and the Court of Appeal which confirmed that there is no legal provision for its collection or administration.


    The Housing levy was introduced by an amendment to the Finance Act and required both employers and employees to contribute a non-refundable levy of 1.5 per cent to the National Housing Development Fund.

    Last year, the High Court banned the levy following a petition by Busia Senator Okiya Omtatah and one Eliud Matindi, a Kenyan living in the USA.

    Omtatah, who rejected the levy even before it was passed by Parliament, argued that some sections of the Bill violated the constitution. He said the executive has no right to impose the three per cent levy on Kenyans.

    “Articles 209 and 210 of the constitution state clearly that taxation can only be done as provided by the legislation. That power cannot be donated to any other organ,” he said at the time.

    Aggrieved by the ruling, the government appealed and lost its case after the Court of Appeal last month refused to extend a stay that had allowed the government to continue collecting a 1.5 per cent levy to fund affordable housing.

    Following the ruling, KRA wrote to the AG seeking advice on the contentious matter on February 12.

    The AG in his response dated February 21, cited the two courts’ decisions and advised against the collection of the levies.

    “The upshot of this is that there is no legal basis on which the Housing Levy as provided in Section 84 of the Finance Act, can be implemented. Therefore, our considered opinion is that as of the date of the delivery of the ruling of the Court of Appeal, i.e. January 26, 2024, there is no legal provision that enables the collection and administration of the Housing Levy,” the AG directed.

  • How Uganda Got Delisted From The FATF Grey List

    How Uganda Got Delisted From The FATF Grey List

    Uganda has been delisted from Financial Action Task Force (FATF) Grey List after four years of implementing reforms needed to combat illicit financial flows.

    The East African Community (EAC) member state was placed on the list in February 2020 due to strategic deficiencies in Anti-Money Laundering and Countering Financing Terrorism (AML/CFT) measures.

    According to Uganda’s Financial Intelligence Authority (FIA), Uganda has implemented a series of rigorous reforms and demonstrated substantial progress in aligning its AML/CFT framework with International standards.

    “Uganda’s exit from the FATF Grey List is a testament to our unwavering commitment to fostering a transparent and secure financial environment. It reflects the concerted efforts of our Government and Regulatory Authorities to strengthen our AML/CFT framework and safeguard our financial system from illicit financial activities,’ said Samuel Wandera, FIA Executive Director.

    Among key reforms the country has undertaken during the four years period include adoption of the Countering of Proliferation Financing Strategy which has helped in enhancing the use of Mutual Legal Assistance and maintaining comprehensive statistics.

    Uganda also developed and implemented a risk-based supervision of the financial and Designated Non Financial Business and Professionals (DNFBP) sectors, ensured that Law Enforcement Agencies and Judicial authorities apply the ML offence consistent with the identified risks as well as establishing procedures to trace and seize proceeds of crime.

    Wandera said the country also sought regional collaboration with other anti-money laundering organizations with the aim of combating illicit financial inflows.

    “Government of Uganda has been actively working to strengthen the effectiveness of its Anti-Money Laundering/Countering Financing of Terrorism (AML/CFT) regime to implement the action plan agreed to, with the FATF which comprised of 22 Action items,” he added.

    The exit from FATF Grey List now means Uganda can now enhance its attractiveness to investors and facilitate greater access to International Financial Markets.

    Kenya last week landed on the list with National Treasury saying the country has been compliant in some areas though facing challenges in others.

    In a bid to seal loopholes exploited by criminals engaged in illicit financial flows, Treasury said key achievement has bee the enactment of AML/CFT Amendment Act 2022 which has helped address key legal and compliance deficiencies.

    “The National Treasury is actively engaged in this process and anticipates minimal effects on the country’s financial stability and the cost of conducting business in Kenya,” said Prof. Njuguna Ndung’u, National Treasury Cabinet Secretary.

  • EXPLAINER: Kenya Added To The International Money Laundering Grey List And What That Means

    EXPLAINER: Kenya Added To The International Money Laundering Grey List And What That Means

    The Financial Action Task Force, FATF, international crime watchdog on Friday added Kenya and Namibia to its ‘grey list’ of countries that need increased monitoring, due to inadequate curbs against money laundering and terrorism financing.

    “At this Plenary, the FATF added Kenya and Namibia to the list of jurisdictions subject to increased monitoring,” the finance watchdog said in a statement.

    Kenya’s Treasury had already said earlier on Friday that it had been put on the ‘grey list’. It said it was fully committed to implementing the FATF’s action plan and that the move would only have ‘minimal effects’ on the East African nation’s financial stability.

    A report from the FATF last year said Kenya mainly faced risks from flows of money linked to terrorism financing from both inside and outside its borders, while cryptocurrencies posed further risks.

    There are several militant groups operating in the region around Kenya, including the al-Shabab group in neighboring Somalia, which is linked to al-Qaida and has launched several attacks in Kenya in the past.

    Namibia’s Financial Intelligence Centre said earlier on Friday that putting the southern African nation on the ‘grey list’ could have negative impacts on its foreign direct investment.

    What ‘Grey List’ Mean For Kenya

    The decision has serious implications for the country, more specifically its financial services sector as well as its ability to attract investment.

    Grey listing refers to a country being placed on a list of countries under increased monitoring by the Financial Action Task Force (FATF), the global money laundering and terrorist !nancing watchdog. The FATF evaluates each member country’s implementation and effectiveness of measures to combat money laundering and the !nancing of terrorism.

    Kenya has been placed on FATF’s grey list because it does not have suf!cient mechanisms in place to monitor and combat money laundering and terrorist financing activities.

    The country undertook to work with the FATF to identify strategies and time frames to improve its monitoring mechanisms. Specifically, it undertook to work with the FATF on eight speci!c topics. These include increased investigation and prosecution of money laundering and terrorist !nancing activities.

    It’ll also enhance its capacity to identify, seize and con!scate the proceeds of such crimes.

    Senior Banker and Economist Mohamed Wehliye alludes that lawyers are part of the problem that Kenya is facing, “One of the reasons we’ve been grey listed by FATF is because lawyers have been diluting AML/CTF legislation. 1st, they did monkey business with MPs to remove themselves from purview of AML/CTF laws. Later they agreed to self regulate as opposed to being full reporting agents.” He said.

    “We are now grey listed and the whole country suffers because greedy lawyers want to conceal transactions in ‘clients accounts’ for the corrupt & all sorts of thieves. Being grey listed means we are now seen as a wash wash country run by lawyers!” He continued.

    “An analysis of SWIFT data between 2004 and 2014 indicated that Grey-Listing by FATF appears to lead to a reduction of up to 10% in payments received by the listed country from the rest of the world. As a country where remittances are number 1 FX eaner, this will hit us hard!” Wehliye warned.

    “Recent study by IMF in 2021, which used machine learning techniques, also found that there was a significant effect of Grey-Listing on capital inflows, with a decline on average of 7.6% of GDP when the country is added to the Grey List. This isn’t good for our ailing currency.”

    “The results also suggest that FDI inflows decline on average by 3.0% of GDP, portfolio inflows decline on average by 2.9% of GDP, and other investment inflows decline on average by 3.6% of GDP. The regime needs to immediately start a project to remove Kenya from the list!” Concludes Wehliye.

    Kenya also needs to improve its terrorist financing risk assessment to inform its strategy to counter the !nancing of terrorism activities. In addition, it needs to ensure the effective implementation of targeted !nancial sanctions, and create effective mechanism to identify individuals and entities targeted by such sanctions.

    Though the FATF does not explicitly require increased due diligence, grey listing will nevertheless in effect require increased due diligence. Banks dealing with cross-border !nancial “ows and companies wanting to invest in Kenya will have to vet their clients and the sources of client income better before they invest.

    This can be costly and, therefore, discourage investment. The increased risk associated with Kenya could also result in higher interest rates and cost of capital.

    The higher costs that domestic and international companies will incur when they trade or invest across Kenyan borders will put upward pressure on the cost of living of ordinary South Africans.

    However, of probably even more significant to ordinary Kenyans is that the grey listing will likely deter foreign investment, which is needed to stimulate economic growth and job creation.

    What needs to happen for the grey listing to be lifted?

    Kenya needs to work with the FATF to identify strategies and time frames to improve its monitoring mechanisms. It must then implement these improvements at the latest by January 2025. This might require improved legislation and better monitoring mechanisms to red-flag potential money laundering and terrorist funding flows.

    Although the country recently made a belated effort to improve its legislation to avert being grey listed, it will need to do more. Doing so will require a dedicated focus from the government to pass additional relevant legislation, fund the investigative authorities to combat money laundering and terrorist !nancing activities, and ensure the effective and speedy prosecution of individuals and institutions undertaking such crimes.

    With the recent history in Kenya of state capture for private gain by individuals, some of whom are themselves probably guilty of money laundering, the onus will be on the government to show that it is serious about implementing effective legislation and mechanisms to combat money laundering and terrorist funding.

    Thus, to get out of the rut of grey listing the country will have to fight the rot of money laundering and terrorist funding. The jury, or in this case the Financial Action Task Force, is still out on whether it will succeed in doing so.

    What to expect 

    In February 2024, Kenya made a high-level political commitment to work with the FATF and ESAAMLG to strengthen the effectiveness of its AML/CFT regime. Since the adoption of its MER in September 2022, Kenya has made progress on some of the MER’s recommended actions including by making amendments to its AML/CFT legislation to bring its framework in closer compliance with the FATF recommendations and establishing a case management system to better manage its international cooperation requests. Kenya will work to implement its FATF action plan by:

    (1) completing a TF risk assessment and presenting the results of the NRA and other risk assessments in a consistent manner to competent authorities and the private sector and updating the national AML/CFT strategies; (2) improving risk-based AML/CFT supervision of Fls and DNFBPs and adopting a legal framework for the licensing and supervision of VASPs; (3) enhancing the understanding of preventive measures by Fls and DNFBPs, including to increase STR filing and implement TFS without delay; (4) designating an authority without delay; (4) designating an authority for the regulation of trusts and collection of accurate and up-to-date beneficial ownership information and implementing remedial actions for breaches of compliance with transparency requirements for legal persons and arrangements; (5) improving the use and quality of financial intelligence products; (6) increasing ML and TF investigations and prosecutions in line with risks; (7) bringing the TFS framework in compliance with R.6 and R.7 and ensure its effective implementation; and (8) revising the framework for NPO regulation and oversight to ensure that mitigating measures are risk-based and do not disrupt or discourage legitimate NPO activity.

  • Crackdown Launched On Coffee And Tea Firms Manipulating Weighing Machines

    Crackdown Launched On Coffee And Tea Firms Manipulating Weighing Machines

    Both the National and Kiambu County Governments have launched a crackdown on public and private coffee and tea companies that allegedly manipulate weighing machines to defraud farmers

    This comes after an outcry from farmers who raised complaints about the use of faulty machines being used to weigh their produce.

    Speaking during a press briefing at his county’s headquarters office, Governor Kimani Wamatangi said the investigations on the matter were being carried out by officials from the weights and measures unit under the Department of Trade in the county government.

    The probe has also included officers from the national government whose aim is to seize manual and digital scales that had been calibrated to facilitate the fraud.

    “We are committed to restoring integrity in the agricultural sector. Farmers deserve their rightful share of profits from their hard work, not a select few profiting at their expense,” said Wamatangi.

    The governor further cited that the crackdown is already a success, as several employees from three factories in the Githunguri and Lari areas were already in custody awaiting trial for the scam estimated to have cost farmers millions of shillings in lost income.

    “This is a grave case of fraud… the investigations have availed that farmers have been losing three kilogrammes out of every 20 kilogrammes delivered. This means that if a farmer is delivering 200 kilogrammes of green tea, they have been losing about 30 kilogrammes,” Wamatangi said.

    Wamatangi also announced a widening of investigations into the coffee sector where farmers have registered fraudulent concerns as well.

    “The county Weights and Measures unit which is mandated to ensure fair trade practices and consumer protection is working tirelessly to safeguard farmers’ interests by cracking down on illicit practices. Our next focus will be the coffee sector, which faces similar challenges,” he added.

    James Wainaina, a tea farmer in Githunguri, said they were happy that the government is investigating the issue as the scam has been going on for a long time

    “For a long time now, factory clerks have been colluding with some corrupt farmers to tamper with the scales and secretly transferring the stolen number of kilogrammes to them to be paid in return,” reported Wainaina.

    County governments are mandated to undertake verification of weighing and measuring equipment in trade and also inspect weighing and measuring instruments and pre-packed goods to ensure compliance with the Weights and Measures Act.

    Further, the devolved units are required to conduct investigations of complaints as well as prosecutions of offenses arising from the Weights and Measures Act Cap 513 and Trade Descriptions Act Cap 505.

  • Taxpayers To Foot Sh11.8B In Penalty Interests From Unpaid Bills By State Firms

    Taxpayers To Foot Sh11.8B In Penalty Interests From Unpaid Bills By State Firms

    Taxpayers will have to pay additional Ksh 11.8 billion in penalty interests arising from unpaid bills held by various state corporations and agencies.

    According to the National Government Budget Implementation Review Report for the first six months of the 2023/24 fiscal year to December 2023, penalty interests saw pending bills rise by 11.6pc to Ksh 447.3 billion from Ksh 400.7 billion reported over the same period in 2022.

    “The State Corporations’ pending bills include payments due to contractors/projects, suppliers, unremitted statutory and other deductions, and pension arrears for Local Authorities Pension Trust. The highest percentage of the State Corporations’ pending bills (Kshs.209.42 billion as of 31st December 2023) was for Contractors/ Projects (Development),” said CoB.

    During the period under review, the report by the Controller of Budget also reveals that total National government pending bills also rose 12pc.

    “The total outstanding National government pending bills as of 31st December 2023 amounted to Ksh 538.82 billion, compared to Ksh 481 billion reported on 31st December 2022,” stated CoB.

    Of the total outstanding bills, State Corporations make up 83pc while Ministries, Departments and Agencies (MDAs) make up 17pc or Ksh 91.2 billion.

    MDAs’ pending bills are mainly historical pending bills comprising Kshs.62.9 billion (68.83per cent) for recurrent expenditure and Kshs28.51 billion (31.16 per cent) for development expenditure.

    In the first six months of FY 2023/24, the amount paid for pending bills by MDAs was Kshs.29.69 billion, comprising Kshs.23.64 billion for recurrent and Kshs.6.05 billion for development expenditure.

    The office has also flagged Ksh 5.61 billion which will be ineligible for clearance.

    The National Health Insurance Fund (NHIF) registered the highest increased in outstanding bills at 155.9pc in six months after surging to Ksh 87.7 million from Ksh 33.9 million in June last year.

    State agencies under the Ministry of Roads and Transport held the highest stock of pending bills with Ksh 178.4 billion out of which Ksh 5.6 billion was in interest penalties.

    State corporation under the Ministry of Energy and Petroleum followed by the amount of outstanding bills at Ksh 87.6 billion out of which Ksh 2.9 billion was penalty interest while institutions of higher learning under the ministry of Education had pending bill amounting to Ksh 62.9 billion out of which Ksh 7.3 billion was for penalty interest.

    State corporations under health ministry reported pending to the tune of Ksh 20.6 billion comprising Ksh 19.2 billion as principal amount and Ksh 1.5 billion as penalty interest.

    “The category of pending bills with the highest increase under State Corporations was the National Health Insurance Fund that increased by 155.9PC from Kshs.33.89 million as of 30th June 2023 to Kshs.87.73 million as of 31st December 2023,” CoB noted.

  • Kenyans Are Not Overtaxed, Treasury PS Says

    Kenyans Are Not Overtaxed, Treasury PS Says

    The National Treasury on Tuesday rebuffed arguments that Kenyans are being taxed to an excessive degree.

    While reiterating that there is a need for the country to raise its own revenues for development, Treasury Principal Secretary Chris Kiptoo said there is a need to carry out more education and awareness to demystify claims that Kenyans are being overburdened by taxes, as that was the case.

    “We seemed to have lost this story around taxation where people are saying we are overtaxed. I don’t think we are, especially if you do a comparison with other countries,” noted the PS

    Speaking during the Kenya Kwanza retreat chaired by President William Ruto in Naivasha, Nakuru County, Kiptoo reiterated that compulsory contribution to state revenue is good for the country and ought to be embraced by all and sundry.

    “Every weekend everybody is paying for Harambee (Fundraising) and is doing so willingly. If you don’t struggle to give for fundraising, how come when it comes to paying taxes we have to struggle? We need patriotism because paying taxes is good for us,” he said

    According to the PS, many people in Kenya are not paying taxes as required by the law. He says, that records show that there are 20 million Kenyans who have a registered Personal Identification Number (PIN), yet there are only 8.5 million who are active, and even from the 8.5 million, not all are paying taxes.

  • Why Fuel Prices Are Set To Go Up Again

    Why Fuel Prices Are Set To Go Up Again

    The state has tripled the petroleum regulatory levy on every litre of fuel purchased.

    The Ministry of Energy last week increased the levy from Sh0.25 to Sh0.75 per litre, as revealed by the recently published Energy (Energy and Petroleum Regulatory Authority Petroleum Levy) Regulations, 2024.


    The increase, effective February 15, 2024, aims to fund the operations of the Energy and Petroleum Regulatory Authority (EPRA).

    Energy Cabinet Secretary Davis Chirchir emphasised the need for the adjustment, stating, “These regulations shall… come into operation on February 15, 2024,” while also revoking the Energy Act (Petroleum Regulation Levy) Order, 2018.

    The Petroleum Regulatory Levy is just one of nine taxes and levies imposed on fuel, including excise duty, road maintenance levy, petroleum development levy, railway development levy, anti-adulteration levy, merchant shipping levy, import declaration fee, and value-added tax (VAT).

    Interestingly, the move went somewhat unnoticed, as overall fuel prices saw a reduction of Sh1 per litre. However, this reduction may not provide much relief to consumers, given the significant increase in the Petroleum Regulatory Levy.

    First review in 6 years

    This marks the first review of the levy in six years, with the last revision occurring in June 2018 under then-Petroleum Cabinet Secretary John Munyes.

    The petroleum levy accounts for a substantial 80.7 per cent of EPRA’s total revenue, contributing Sh1.21 billion out of Sh1.51 billion in revenue during the year to June 2021.

    Kenyans, who consumed 4.649 billion litres of fuel in 2023, will now face higher costs at the pump due to the increased levy.

    Despite EPRA reducing fuel prices last week to Sh195.47 per litre of diesel and Sh206.36 per litre of super petrol in Nairobi, further hikes could be on the horizon if proposals by the Kenya Roads Board (KRB) come to fruition.

    KRB’s latest strategic plan suggests raising the Road Maintenance Fuel Levy (RMFL) by Sh5 per litre. Rising costs of maintaining roads, influenced by expensive fuel prices and escalating costs of road construction materials like tar and bitumen, are driving the proposed increase.

    The RMFL, currently set at Sh18 per litre of petrol and diesel, allocates Sh3 to an annuity fund and the remaining balance to road maintenance, rehabilitation, and development. KRB data indicates a substantial increase in the periodic maintenance cost per kilometre by the Kenya National Highways Authority (KeNHA) from Sh3.94 million to Sh6.06 million in the current fiscal year.

    Explaining the rationale behind the proposed increase, KRB noted, “There has been an increase in periodic maintenance costs by about 35 per cent attributable to the uptake of roads with failed payments and an increase in the price of construction materials mainly due to the rise in fuel prices.”

    Over the past five years (2018–2022), KRB has spent Sh309.74 billion on road maintenance, rehabilitation, and development programmes, excluding the Road Annuity Fund. Various entities received the funds, with KeNHA getting Sh128.37 billion, KeRRA receiving Sh84.95 billion, KURA securing Sh35.24 billion, KWS obtaining Sh31.36 billion, and county governments receiving Sh26.69 billion.

  • KRA Fail To Meet Half Year Revenue Collection Target By Sh186B

    KRA Fail To Meet Half Year Revenue Collection Target By Sh186B

    The Kenya Revenue Authority (KRA) collected a total of Ksh 1.27 trillion in the first half of the financial year 2023/24 ended December 2023.

    New data from the National Treasury indicates that shows the half year collection was below target by Ksh 182.4 billion mainly on account of a shortfall in ordinary revenues of Ksh 186.2 billion.

    Despite the missed target, year-on-year revenue collection rose 10.7pc when compared to the same period in 2022.

    Treasury says shortfalls in revenue performance and liquidity constraints have hurt execution of various government programmes in the current year.

    “Expenditures were below target by Ksh 360.9 billion on account of below target disbursements towards both recurrent expenditure and development expenditures,” said Treasury.

    Overall fiscal deficit including grants amounted to of Ksh 182.4 billion equivalent to 1.1pc of GDP against a target of Ksh 363.7 billon equivalent to 2.3pc of GDP.

    In January alone, exchequer revenue in January grew to Ksh 170.3 billion though this was below target of Ksh 198.2 billion.
    “In the month of January, revenues recorded a growth of 11.3pc with custom taxes recording a growth of 15.8pc and domestic taxes 13.5pc.”

    Of the Ksh 360 billion treasury received from domestic and external sources for budgetary support, resources from the International Monetary Fund (IMF) amounted to Ksh 92 billion while those from the Trade Development Bank (TDB) amounted to Ksh 59.3 billion.

    Treasury processes debt repayments amounting to Ksh 163.5 billion of which Ksh 69.3 billion was domestic debt and Ksh 94.2 billion being external debt.

    Transfers to education programmes amounted to Ksh 49 with basic education receiving Ksh 31.3 billion and higher education Ksh 17.7 billion.

    In January, county governments received disbursements amounting to Ksh 31.8 billion as outstanding exchequer requests topped Ksh 294.1 billion.

    In the FY2024/2025 which commences in July, treasury projects total expenditure to amount to Ksh 4.18 trillion. This will be financed by total revenues which are projected to reach Ksh 3.4 billion and ministerial appropriation-in aid amounting to Ksh 486.9 billion.