The rising cases of Covid-19 infections over the last few weeks, as well as the reporting of the first case of the Omicron variant in the country has created fresh fears of another lockdown as we head into the festive season, which could have dire consequences for traders and businesses looking to cash in on the season.
As we wait to see how the government will handle the situation while keeping the economy alive, let’s take a look at the top money news that could affect your pocket as we head into the festive season, which is normally associated with huge spending.
Business closures and job cuts occasioned by the Covid-19 pandemic have pushed thousands of Kenyans into a debt trap, with a new survey showing that half of loans borrowed from digital lending platforms are in default.
According to the survey, which was run by the Kenya National Bureau of Statistics (KNBS), the Central Bank of Kenya (CBK), and FSD Kenya, 50.9% of the digital borrowers who participated in the survey have defaulted on their digital loans.
This comes at a time when the digital lending market in Kenya has been flooded with high interest rates from unregulated lenders, with some loans attracting as much as 520% annual interest.
However, President Kenyatta recently signed a new law putting digital lenders under the control of the Central Bank, which we covered in last week’s edition of Money Weekly.
The survey also found that 41.8% of borrowers were unable to repay soft loans borrowed from family and friends, while another 40% were unable to repay goods acquired from shopkeepers on credit terms. Another 11.3% of polled Kenyans reported being unable to repay loans advanced to them by their employers.
The high level of defaults points to the dire situation the majority of Kenyans are finding themselves in, even as a surging number of the Covid-19 cases and the Omicron variant threaten to send the country into another lockdown.
The Salaries and Remuneration Commission (SRC) has proposed a new remuneration and benefits structure that will see members of parliament and senators take home a gross salary of Ksh710,000 per month, up from the current Ksh621,250 per month.
The new pay structure will see the annual wage bill for senators and parliamentarians rise to Ksh3.5 billion, up from the current Ksh3.1 billion.
Following the increase, MPs will no longer receive some of their allowances, such as the sitting allowances paid for attending plenary sessions. Currently, MPs take home a monthly income of about Ksh1 million, with allowances making up the difference.
SRC also revised upwards the sitting allowances paid to parliamentary committees, with committee chairs set to take home Ksh15,000 per sitting, with a Ksh240,000 monthly cap. Currently, committee chairs earn Ksh10,000 per sitting, with a Ksh128,000 monthly cap.
The sittings allowances for committee vice chairs will increase from the current Ksh8,000 to Ksh12,000 per sitting, with a monthly cap of Ksh92,000 per month.
Ordinary committee members, on the other hand, will earn Ksh7,500 per sitting, up from Ksh5,000, with a monthly cap of Ksh120,000, up from the current Ksh80,000.
Other state officers who are going to enjoy salary increases under the new structure include county assembly speakers and members of county executive committees.
The salaries for the President, Deputy President, Governors, and Deputy Governors will remain the same, while those of deputy county assembly speakers will reduce by Ksh6,000. The salaries of Member of County Assembly (MCAs) will increase by Ksh1.
The proposed changes come at a time when the country is still grappling with a ballooning public wage bill and runaway debt.
A survey by FinAccess has found that 47.4% of mobile money users in Kenya have lost money in the last one year, either by erroneously sending it to the wrong recipients, or through being conned by fraudsters. This is a significant increase from just 8.4% reported two years ago.
Seven out of 10 reported sending money to the wrong person who then went ahead to use the money, instead of refunding.
Under section 35 of the Computer Misuse and Cybercrimes Act, failing to refund money sent to you erroneously is a crime that is punishable with a Ksh200,000 fine, a 2-year jail term, or both.
The survey attributes this increase in cases of mobile money fraud to the surge in the uptake of mobile transactions in the wake of Covid-19, after the government issued a directive to mobile money operators to offer free transactions for amounts not exceeding Ksh1,000.
The Central Bank of Kenya (CBK) reinstated transaction fees for transactions below Ksh1,000 from January 1, 2021. Transactions of up to Ksh100 are, however, free for all customers across the networks.
A proposal by the Kenya Revenue Authority (KRA) to retain the 16% VAT tax on cooking gas has been rejected by the National Assembly Committee on Finance and National Planning.
In a petition to Parliament, the taxman argued that reducing the tax to 8% would see the government lose out on Ksh4.02 billion in annual revenue. In rejecting the proposal, the committee however said that retaining the tax would make cooking gas out of reach for most households.
The Petroleum Products (Taxes and Levies) Amendment Bill, 2021, which proposed the reduction of VAT on cooking gas to 8%, has already been passed by the committee, and is pending approval by the House.
Refilling a 13-kilogram gas cylinder currently costs Ksh2,800 to Ksh3,000, up from an average of Ksh2,000 six months ago before the 16% VAT was introduced.
The reduction of the VAT, as well as the completion of the Kipevu oil terminal, is expected to bring about a significant drop in the price of cooking gas, boosting uptake among Kenyan households.
In his final Jamhuri Day Speech as the head of state, President Uhuru Kenyatta announced a 15% cut in the cost of electricity starting this month.
At the Mashujaa Day celebrations in October this year, the President had promised Kenyans that he’d bring down the cost of electricity by at least 33% before the end of the year.
On Jamhuri day, however, the President said that this would be implemented in two tranches of 15% each, with the first one taking effect this month, while the second phase will be implemented in March next year.
The implementation of the first tranche will see the cost of power go down to Ksh20.4 per kilowatt before the end of December from the current Ksh24 per kilowatt. The second phase will then bring the cost to Ksh16 per kilowatt.
The 15% reduction means that with Ksh1,000, you’ll now get 50 units, instead of the current 41 units. In other words, you’ll spend Ksh850 to get the same amount of units you currently get with Ksh1,000.