Welcome to yet another edition of Money Weekly. This week a new law was passed that allows the National Treasury to put up for sale through IPOs state-owned companies such as the Kenya Ports Authority and sugar millers without Parliamentary approval, revenues from e-Citizen crossed the Ksh2 billion mark following the consolidation of government paybill numbers into one as Kenya seeks a new loan to pay off the Eurobond that is maturing in eight months.
In Banking, for the very first time since the launch of M-Shwari a decade ago, deposits on the mobile lending platform have declined - by nearly half. This is as the value of loans on the platform and Safaricom’s overdraft facility, Fuliza, increased - indicating a rising dependency on credit amid the rising cost of living.
Defaults in the manufacturing sector are a cause of headaches for banks as they have risen by 48% now accounting for one fifth of total defaults in the banking sector. Energy prices, currency depreciation, and a high cost of doing business in Kenya are some of the factors associated with the difficulties manufacturers are facing servicing loans.
Let’s dive in.
Following the signing into law of the Privatisation Bill, 2023, the National Treasury has now been granted powers to sell state-owned companies without needing to seek Parliamentary approval.
In a statement following the presidential assent, State House indicated that the law sought to shorten the approval processes for the sale of government assets.
"It is intended to remove the bureaucratic processes in the privatisation of non-strategic or loss-making government entities,'' the statement reads in part.
Despite the existence of a Privatisation Act since 2005, only the privatisation of Safaricom (2008) and the Kenya Wine Agencies Limited - KWAL (2014) have been executed by the Privatisation Commission.
Under the new law, the National Treasury CS will appoint members of a new Privatisation Authority without Parliamentary oversight. This authority will privatise eligible stated-owned firms through Initial Public Offerings (IPOs) at the Nairobi Securities Exchange (NSE).
Some of the government-owned entities lined up by the Privatisation Commission for privatisation include; the Kenya Pipeline Company, the Kenya Ports Authority, the Kenya Tourist Development Corporation, the Consolidated Bank, the Development Bank of Kenya and the Agrochemical and Food Corporation. Chemilil, South Nyanza, Nzoia, Miwani and Muhoroni sugar companies are also set to be sold.
In the 90s and 2000s, through the World Bank-led Structural Adjustment Programmes (SAPs), several government-owned companies were privatised including Kenya Airways, Firestone, Mumias Sugar, General Motors and Uchumi Supermarkets.
In the first month of the implementation of President William Ruto’s directive for all state departments to use a single paybill number, revenue raised via the e-Citizen self-service portal crossed the Ksh2 billion mark for the first time ever.
In August, following the closure of over 1,448 paybill numbers that were being operated by various government agencies, e-Citizen raised Ksh2.4 billion in revenue with September revenue declining slightly to Ksh2.3 billion.
This is, in part, attributable to increased applications for identity cards and clearance certificates as Kenyans sought to participate in mass recruitments to the military and admission to higher learning institutions.
In comparison, April recorded Ksh1.4 billion (the lowest), July (Ksh1.5 billion), while at the start of the year in January, Ksh1.6 billion in revenue was collected via e-Citizen.
As the June 2024 repayment date for the $2 billion Eurobond nears, Kenya has started talks with the International Monetary Fund (IMF) and the World Bank seeking a new loan to make the payment.
A report published by the Business Daily indicates that the government was leaning towards multilateral lenders as hopes for refinancing the loan that matures in eight months are low following the tightening in the global markets.
The manufacturing sector is turning out to be a headache for commercial banks as defaults associated with manufacturing firms rose by 48% in the year ending June 2023.
The CBK’s quarterly economic review shows that a whopping Ksh38.2 billion in bad loans was added by manufacturers over the period. As a result, manufacturing now accounts for 20% of all non-performing loans in the banking sector.
Some of the factors associated with this rise in default include increase in energy prices, currency depreciation which has led to expensive imports, and a high cost of doing business.
Manufacturing is the second biggest formal employer accounting for about 352,600 jobs. Last year, the sector contributed 7.8% of the country's total economic output.
For the first time since mobile lending platform, M-shwari, was launched in November 2013, deposits have fallen by nearly half.
Disclosures made by Safaricom in its latest sustainability report show deposits dropped by 44.1% in the year ending March 2023 to Ksh416 billion from Ksh745 billion previously.
This means while Kenyans were saving about Ksh2.04 billion daily on M-Shwari in the previous period, liquidity handicaps occasioned by the rising cost of living has nearly halved daily deposits to about Ksh1.14 billion.
Conversely, and perhaps unsurprisingly, the value of loans issued through M-Shwari increased by 6.3% to Ksh91.5 billion as compared to Ksh86.1 billion previously.
On Fuliza, Safaricom’s overdraft facility, the value of loans rose to Ksh701.5 billion from Ksh502.6 billion previously, a 39.6% increase pointing to a growing dependence on credit.
The Co-operative Bank of Kenya joined its Kenyan counterparts Equity and KCB among the top 30 biggest lenders in Africa according to an annual report released last week.
The Banker’s Top 100 African Banks 2022 shows Co-op bank gained six places to rank at position 30. This is after having grown its Tier 1 capital by 6.3% to Ksh110.7 billion ($753 million).
Equity Bank, ranked at position 20 in Africa recorded the highest Tier 1 capital growth of 19.7%. KCB, NCBA and DTB Bank are the other Kenyan banks that made it to the top 100 in Africa. Standard Bank of South Africa retained its position as the continent’s largest lender.
Data from the Central Bank of Kenya’s 2022 Financial Sector Stability Report shows microfinance banks are struggling to attract borrowers.
Last year, the loan book in the sub-sector shrunk 1.95% to Ksh39.3 billion from Ksh40.1 billion previously.
Over the period, the total assets of microfinance banks fell to Ksh70.4 billion, a 4.8% reduction as compared to the same period previous year. This has been attributed, in part, to competition from digital lenders and commercial banks.