Employed Kenyans Brace for Yet Another Paycheck Deduction Starting Dec 1 - Money Weekly News

It is that time of the week again when we take a comprehensive look at the news headlines over the last seven days and dissect those that can affect your money. 

Welcome to yet another edition of Money Weekly.

Brace for yet another monthly hit on your payslip as the commencement of the Social Health Insurance Act (SHIF), 2023, was gazetted on Thursday paving way for 2.7% deductions on your gross pay into the affordable healthcare fund that replaces the now defunct National Health Insurance Fund (NHIF). 

It is the end of an era after the results of the last ever Kenya Certificate of Primary Education (KCPE) were announced on Thursday marking an end to the 8-4-4 curriculum in primary schools that has been in place for the last 39 years. 

Kenya receives a sigh of relief as the World Bank expressed that it could disburse Ksh1.8 trillion over three years. This comes after President Ruto slashed all subsidies to zero in order to satisfy the International Monetary Fund’s (IMF) conditions.

Kenyan banks are also releasing their performance reports, with a majority of them reporting increases in earnings despite the tough economic conditions in the country. Equity Group Limited, KCB Group Limited, and Co-operative Bank of Kenya are some of the banks that have released their reports. 

Onto some not-very-good news, EPRA has given KPLC the go-ahead to recover their lost revenue over a three-month subsidy tariff that President Ruto’s government mandated but did not pay for. This will see electricity bills increase for KPLC customers.

Nonetheless, Kenyan farmers have some good news, with the treasury advancing Ksh 500 million to the New KCC to buy the surplus milk and stabilise the price of milk to a minimal Ksh 45 per litre. 

In some promising news, MPs have intervened to see that Posta Kenya workers get their five-month salaries amid plans for workforce reduction come February 2024 for the parastatal.

And, do you know what skills are in most demand by Kenyan employers in 2023? A new report shows growing opportunities for TVET graduates and the significance of soft skills such as effective communication on employability. 

Let’s Dive in

November Could See the First SHIF Deductions

The Social Health Insurance Act (SHIF), 2023, officially took effect on Thursday, November 2023 heralding a new era of mandatory deductions for employed Kenyans.

This follows the gazettement of the commencement of the Act by Health CS Susan Nakhumicha in what threatens to affect the November take-home pay.

The Act, which replaces the National Health Hospital Insurance Fund (NHIF), mandates a 2.7% deduction of the gross salary of all employed individuals, with a minimum contribution of Ksh300. 

"In exercise of the powers conferred by Section 1 of the Social Health Insurance Act, 2023, the Cabinet Secretary for Health designates the 22nd of November 2023, as the date of which the Social Health Insurance Act, 2023, shall come into operation,"  the Gazette Notice Legal No 194, dated November 21, 2023 and signed by CS Nakhumicha reads.

The Act introduces three funds: the Primary Healthcare Fund, Social Health Insurance Fund, and Chronic Illness and Emergency Fund replacing the now defunct NHIF. 

SHIF will be governed by the Social Health Authority (SHA), chaired by Dr. Timothy Olweny, with notable members including COTU Secretary General Francis Atwoli and Dr. Zakayo Kariuki Gichuki. 

Regulations on the operationalization of SHIF are being developed, addressing key aspects such as the timing, commencement date, deadline, and channels for contributions. The regulations, expected to be announced soon, may affect salaries processed from November 22.

Notably, compliance with SHIF contributions is mandatory for all adult Kenyans, failure of which may result in the denial of government services. The Act empowers national and county governments to withhold services from non-compliant individuals as part of financing universal health coverage. Proof of compliance is required for accessing public services.

President William Ruto earlier on Sunday, alluding to the commencement of the deductions, announced that "free" healthcare for all Kenyans would be possible from January 2024, with a reduced minimum contribution of Ksh300 for low-income earners. 

The government will assess citizens' ability to pay, covering those unable to afford the contribution. The Act also mandates registration for non-Kenyans residing in Kenya for over 12 months, with exemptions for those staying less than 12 months. 

Read Also: Why Your Salary This Month May Get Extra Deductions

Results of the Last Ever KCPE

The top candidate in this year’s Kenya Certificate of Primary Education (KCPE) examination scored 428 out of 500 marks.

This was revealed by Education Cabinet Secretary Ezekiel Machogu who on Thursday released the results of the 1,406,557 candidates who sat the 2023 KCPE exams.

Speaking at the new Kenya National Examination Council (KNEC) headquarters in South B, Nairobi, CS Machogu noted that 8,525 candidates scored over 400 marks, representing 0.60% of the 2023 class, while 352,782 candidates had between 300 and 399 marks, which is 24.92% of the cohort.

Score Distribution:

• 0.60% scored over 400 marks.
• 24.92% scored between 300 and 399 marks.
• 48.49% scored between 200 and 299 marks.
• 27.05% scored between 100 and 199 marks.
• 0.15% scored less than 99 marks.

Gender Distribution:

• 51.3% of the class were male candidates.
• 48.7% were female candidates.

Subject Performance:

• Female candidates performed slightly better in English, Kiswahili, and Kenya Sign Language.
• Male candidates performed slightly better in Math and Science.

Exam Integrity:

• Only 2 candidates were involved in cases of exam malpractice.

Opportunity for Absentees:

• 9,354 candidates who didn't take the exam have the opportunity to do so in January.

The 2023 KCPE examination which was administered between October 30 and November 1, marks the end of the 8-4-4 education system in primary schools.

The 8-4-4 has been in place for 39 years since 1985 when it replaced the 7-4-2-3 system. The 2-6-3-3-3 competency-based curriculum (CBC) introduced in 2017 replaces the former system.

“All education indicators show that the cohort is undergoing quality learning and teaching. I wish to assure the country that all the curriculum materials are in place to support the learners,” CS Machogu said on Thursday.

Read Also: How to Check KCPE 2023 Results Via SMS & KNEC Portal

World Bank to Loan Kenya Ksh 1.8 Trillion

The Kenyan government can breathe a sigh of relief after the World Bank Group revealed a $12 billion (Ksh 1.8 trillion) loan package for Kenya was expected to be disbursed over the next three years. 

"The World Bank is fully committed to support Kenya in its journey to become an upper-middle-income country by 2030," a statement from the global lender reads in part.

The Ksh 1.8 trillion is subject to approval by the World Bank’s executive directors and other factors that might influence the bank's lending capacity.

"Subject to the World Bank Executive Directors approval of new operations, and to factors which may affect the bank's lending capacity, this implies a total financial package of $12 billion over the three years."

The $12 billion will comprise money Kenya currently has from the International Bank for Reconstruction and Development, the International Development Association, the Multilateral Investment Guarantee Agency, and the International Finance Corporation.

The money will likely be channelled into many sectors, including energy, health, transport, and water.

This relief comes amid liquidity challenges in the country and uncertainty over access to financial markets ahead of a $2 billion Eurobond maturity.

Read Also: World Bank to Loan Kenya 1.8 Trillion - Money News Brief

Govt Cuts Subsidies Zero

On the other hand, in order to adhere to loan conditions by the International Monetary Fund (IMF), the Government appears to have cut subsidy spending to zero.

Initially, the budgeted subsidy sending for the first quarter of the 2023/2024 Financial Year was Ksh24.87 billion, which would mainly have been used to subsidise fertilisers, but the spending did not materialise. 

This allocation was a steep reduction from what the government spent in a similar quarter in the 2022/2023 financial year. The government then spent Ksh43.91 billion on maize flour, electricity, fuel, and fertiliser subsidies.

All the other subsidies had come to an end except the fertiliser subsidy, as fertiliser was not considered a consumption subsidy. Rather, it was considered a production input key to lowering the cost of food production.

Read Also: No Govt Services Without SHIF Card as Subsidies Cut to Zero - Money Brief

Ksh800B Needed Annually for Climate Action

Additionally, the World Bank has said that Kenya has to find alternatives to finance its climate action investment, including looking into the private sector. Kenya has a Ksh 9.4 trillion climate financing commitment but is currently only willing to finance 13% of the amount.

According to the Notre Dame Global Adaptation Initiative, Kenya ranks 41 in the world's most vulnerable countries. With its primarily rain-fed agricultural sector, a slowdown in structural development, and levels of informality in the economy, Kenya is highly exposed to climate change. 

It will need Ksh810 billion of additional financing per year to be able to support its climate action sufficiently.

Kenyan Banks Release Their Q3 Results

KCB Group PLC reported a Ksh30.7 billion net profit for the nine months leading up to September 2023 up from the Ksh30.6 billion profit posted over the same period in 2022. Deposits increased to Ksh1.7 trillion pushing up the balance sheet past the Ksh2 trillion mark to Ksh2.1 trillion, a record high for the region. 

The balance sheet growth was attributed to the acquisition of DRC’s Trust Merchant Bank (TMB) in December 2022 and a rise in customer deposits. In addition, the loan book grew by 32% to Ksh964.8 billion, and the revenue grew by 22.2% to 73.1 billion. Nonetheless, KCB registered a rise in operating costs due to legal claims, Trust Merchant Bank acquisition, and restructuring costs. 

Read Also: KCB Group Reports Ksh30.7B Profit in Quarter 3, 2023

Equity Bank Group, on the other hand, achieved a 5% growth in net earnings to Ksh36.2 billion in the first nine months, which has been attributed to stable performance in its subsidiaries outside Kenya. Equity BCDC (DRC subsidiary) posted 142% net profit growth to Ksh11.4 billion, while the Tanzania subsidiary posted 136% growth in net earnings.

Nevertheless, Equity Bank Kenya reported a 20% decline in profit after tax to Ksh19.3 billion, which marks the first profit drop in seven years. The decrease is attributed to high non-performing loans, indicative of economic challenges in Kenya.

Another bank that reported an increase in profits is the Co-operative Bank of Kenya. Co-op Bank posted a 7.5% increase in profits, reaching Ksh18.4 billion in the nine months ending September. Co-op Bank’s growth has been fueled by higher interest income from loans.

The lender grew its loan book by Ksh42.9 billion to Ksh378 billion, and its deposit base grew to Ksh432.8 billion. The bank's subsidiaries, including Kingdom Bank and Co-op Consultancy, contributed to the positive growth of the bank.

Despite an increase in the gross non-performing loans, the operating costs reduced due to lower loan provisions.

The banks' performance is good news to investors with bank shares as they are likely to reap well in dividends come March. 

Read Also: Co-op, Equity Banks Register Profit Growth in Q3, 2023

Kenya Power to Recover Sh6.5bn Tariff Gift Via Bills

Kenyans need to brace for even higher electricity bills after the Energy and Petroleum Regulatory Authority (EPRA) approved Kenya Power to recover Ksh 6.5 billion in lost revenue when President William Ruto extended a temporary tariff cut by three months to April 1, 2023.

Initially, the tariff cut was supposed to run for 12 months up to December 31, 2022, during President Uhuru Kenyatta’s regime, where funds to compensate the power distributor had been allocated. However, when then newly-elected President Ruto extended the relief, his government did not provide for compensation funds. 

Kenya Power plans to recover the amount through pass-through mechanisms. The recovery comes amid rising fuel costs and currency depreciation.

Staying with EPRA, the government is proposing to expand the regulatory authority’s mandate to include crude oil regulation. In aligning with the Kenyan ambition of becoming an oil producer, the government is amending the Energy Act of 2019 to grant EPRA legal powers to regulate the oil sector. 

The move is seen as a rectification of a legislative gap, given that EPRA has been regulating the sector but lacked explicit legal backing.

State Releases Ksh500m for Buying Excess Milk

On to some good news for the farmers, the New KCC aims to stabilise milk prices at a minimum of Ksh45 per litre. This is after a request to the treasury for Ksh1.5 billion, which the Treasury just released Ksh500 million. The released funds will be used to buy the surplus milk, which will be processed into milk powder to be stored as part of the strategic food reserve and to prevent wastage.

Elsewhere, Pyrethrum farmers are set to benefit from a US-Kenya trade partnership. The partnership will benefit over 90,000 small-scale pyrethrum farmers who have been contracted by Kentegra Biotechnology Holding, which is a US-based company.

US Ambassador Meg Whitman praised Nakuru County's commitment to agriculture, emphasising the potential of the pyrethrum sector for livelihoods. This is because Kentegra is constructing a processing plant in Naivasha, with plans to sign contracts with farmers in pyrethrum-growing regions in the country.

The African Development Bank (AfDB), through the Africa Fertiliser Financing Mechanism has, in other news, committed to facilitating the distribution of over 7,000 tonnes of fertiliser to Kenyan small-scale farmers through a partial trade credit agreement of Ksh304.9 million and grants funding of Ksh33.3 million. The funds will be directed through Apollo Agriculture Limited to benefit at least 100,000 smallholder farmers through the three-year program starting next year.

MPs Intervene as Posta Kenya as Employees Go For 5 months Without Pay

The Postal Corporation of Kenya plans to lay off 504 employees in February 2024. This is in a bid to reduce its costs due to declining revenues and increased competition. Additionally, Posta still needs to pay its employees for five months accumulating salary arrears of over Ksh500 million. 

The Parliament's departmental committee on Communication, Information, and Innovation has sought urgent intervention and recommended adding Ksh800 million to the State Department for broadcasting and telecommunications for Posta Kenya's salary arrears and critical operational expenses.

Still, on reducing the workforce, CIC Insurance has initiated a staff rationalisation programme targeting to reduce its employees by 75, which is about 10% of its workforce. The move is part of optimising capabilities, eliminating duplication, and driving cost efficiencies and involves a Voluntary Early Retirement Programme with a benefit package for applicants. 

Switching gears to employability, three organisations, the Federation of Kenya Employers (FKE), Africa Digital Media Institute (ADMI), and Nexford University, have carried out a survey that reveals a shift in Kenya's workforce demand.

Some of the skills that are in demand currently include information technology (28.4%), finance and business management (27.4%), engineering (19.2%), transportation, distribution, and logistics (18.6%), and legal (18.2%). Other relevant social skills that were highlighted in their report were effective communication (49.1%) and critical thinking (41.7%).

Other News in a Snapshot

• The alcohol sector in Kenya is facing tough times in which the stakeholders threaten that the regulation and taxation in the sector could lead to its collapse. Chairman of London Distillers Kenya Limited, Mohan Galot, highlighted the upfront payment of excise duty and increased taxation on spirits, making it challenging to sustain operations.
  
  Similarly, The Bar Hotels and Liquor Traders Association of Kenya (BAHLITA) has expressed concern over Alcoholic Drinks Control Bills introduced in counties like Nyeri and Meru, warning that they would negatively impact the alcoholic beverages sector and harm the hospitality industry. The Bills, associated with Deputy President Rigathi Gachagua's initiative against alcoholism, propose restrictions on transportation, opening times, and advertising of alcohol.

• TikTok is signalling its in advanced stages of establishing a presence in Kenya by announcing plans to hire a country-based communications specialist. The move follows a virtual meeting between TikTok's global CEO, Shou Zi Chew, and President William Ruto in August. Chew pledged to review and monitor content, set up a Nairobi office, and hire more locals. 
• Kenya Revenue Authority (KRA) is demanding tax details from law firms for interest earned on billions held in client accounts, triggering a backlash from the Law Society of Kenya (LSK). LSK argues that KRA is wrongly pursuing members, emphasising that interest from client accounts is given to clients, and the taxman is unfairly treating it as income for lawyers.