'Hustlers' to Pay SHIF With Govt Loans - Money Weekly News

It is that time of the week again when we 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.

This week, the government presses gas on the implementation of the Social Health Insurance Fund (SHIF) after releasing the draft Social Health Insurance (General) Regulations, 2024. In the regulations, the government plans to extend loans to non-salaried individuals who will not be able to pay their contributions upfront.

The push to operationalise SHIF comes amidst a backdrop of multiple challenges in the healthcare system that commentators argue could easily sabotage SHIF's goal to have universal healthcare. A recent survey of facilities shows Kenya's health care system is under-equipped and understaffed.

In yet another controversial government project, even after the Court of Appeal halted the deduction of the 1.5% housing levy, President William Ruto insists that the project will go on. Backed by the National Assembly Majority Leader Kimani Ichung’wa, the Kenya Kwanza administration says that a bill is already being expedited to address the sections of the levy declared unconstitutional.

Elsewhere, Directline Assurance has given a directive to its Matatu clients to digitise their operations, including passenger manifests, through digital payment systems. 

In agriculture, Horticulture export earnings in Kenya increased by 6.5% in 2023 while Farmers from Nyeri and Kiambu counties pocket the lion’s share of the first Ksh2.9 billion tranche of the Coffee Cherry Advance Revolving Fund.

For this and much more. Let’s dive in.

'Hustlers' to Pay SHIF With Govt Loans 

The government’s proposed way of ensuring broader healthcare access, inclusivity, and affordability within the Social Health Insurance Fund (SHIF) is providing loans to non-salaried individuals who do not have the means to cover their 2.75% of gross income SHIF contributions.

According to the draft SHIF regulations, 2024, all Kenyan citizens, both salaried and non-salaried, should make SHIF contributions. The salaried individuals will have their SHIF contributions deducted directly from their salaries by the employer.

For non-salaried Kenyans, they will have to pay the same contributions based on their gross income. However, the non-salaried individuals' payment will be an annual lump sum that will be due 14 days before the start of a new cover. 

Hence, the government plans to offer loans to the homesteads that will not be able to raise the lump sum. These loans will be offered in partnership with the Ministry of Cooperatives and Micro, Small, and Medium Enterprises (MSMEs) Development.

The inevitability of the loan option is ensured by the draft regulations that authorise the government to deny access to public services for Kenyans whose contributions will not be up-to-date.

Despite the push by President Ruto’s Government to have SHIF functional, there are even bigger challenges to be addressed in Kenya’s healthcare system if Kenyans are to enjoy the promised services under the new regulations.

A study commissioned by the Ministry of Health (MoH) and the Kenya Medical Practitioners and Dentists Council (KMPDC) to investigate the state of hospitals in the country casts uncertainties on whether Kenyans will enjoy these services unless the government invests heavily in the healthcare system.

Here are some of the findings from the study.

• Service accessibility - only 2% of surveyed health facilities offered all 16 basic outpatient services, including minor surgical services, immunisation, and basic laboratory tests.
• Maternity Services - Less than half of the hospitals provided maternity services and only a third offered emergency obstetric care.
• Emergency Services - 60% of hospitals lacked blood transfusion services, only 54% had oxygen sources, and only 49% had access to functional ambulances. Furthermore, only 5.8% had an accident and emergency unit.
• Newborn health services - Access to newborn health services was at 12%, hindering maternal and newborn health outcomes.
• ICU and HDU services - only 1.8% of the surveyed health facilities offered High Dependency Unit (HDU) services, while just 1.3% can help patients requiring Intensive Care Unit (ICU) services.
• Pharmacy services - Pharmacy services were provided by 57% of facilities, but only 6% had the full basket of essential medicines
• Renal Services - Renal services were available in only 2% of facilities
• Health Workforce - Inadequate health workforce, below WHO recommended norms
• Facility Density - The density of facilities in several counties was wanting, with one facility for every 10,000. 

The shift from NHIF to SHIF is anticipated to reduce out-of-pocket expenditure by patients from 24.3% to less than 10%. However, only 40% of facilities were previously accredited by NHIF due to government delays in settling claims. SHIF will, therefore, need to accredit more facilities to achieve this goal.

To address this, the plan is to engage private medical insurance providers and claim-settling agents for the Social Health Insurance Fund (SHIF) to handle claims. Insurers and agents will act as intermediaries between healthcare providers and the Social Health Authority. This is intended to expedite the claims management process, addressing delays experienced under NHIF.

Kenyans might start paying 2.75% of their gross monthly income for the new Social Health Insurance Fund (SHIF) from March. Salaried employment will be 2.75% of gross salary, with a minimum monthly payment of Ksh300. Non-salaried households’ contributions will be determined by means testing, with a minimum monthly payment of Ksh300. SHIF replaces the National Health Insurance Fund (NHIF) and promises extensive coverage, including overseas treatment.

Meanwhile, National Social Security Fund (NSSF) deductions will increase from this new month of February. The new deduction plan was initiated in 2023 and will gradually raise rates over a period of five years. The lowest rate will jump from Ksh360 to Ksh420, while the highest contribution will bump from Ksh1,080 to Ksh1,740.

President Ruto Remains Undeterred as Court Stops Housing Levy

President William Ruto remains undeterred and insists the affordable housing plan will continue despite the Court of Appeal directing the state not to collect housing levy deductions. He emphasises that there is an ongoing process of creating a law to guide the affordable housing plan and requests time for completion, after which the government intends to appeal the case.

“For the avoidance of doubt, I want to tell them that we were in the reprocess of creating a law to guide the process and they should have given us time.” The President said. 

On the other hand, the National Assembly Majority Leader Kimani Ichung’wah says he respects the court ruling but announces plans to create a new law to implement the housing levy.“Soon, we will create a new law that will ensure the affordable housing projects are implemented.”

High Court had declared the legislation null and void in November 2023, prompting the government's appeal. Initially, the government was allowed to continue deductions for 45 days, which expired on January 10, 2024.

Afterwards, the Kenya Revenue Authority, the Attorney General, and the Speaker of the National Assembly obtained a High Court order allowing deductions until the Court of Appeal's conclusive ruling.

A three-judge bench has since ruled in favour of suspending deductions pending the determination of legality, citing potential difficulty reversing actions if the law is later found illegal.

Other Governemnt News in a Snapshot

• Transport Cabinet Secretary (CS) Kipchumba Murkomen, during the launch of the Kenya National Highways Authority strategic plan for 2023 to 2027, announces plans to charge road users for using major roads in Kenya.

"I believe that we can toll the road from Athiriver to Namanga, I believe that it is possible to toll the road from Galleria to Rongai to Ngong and back to Karen Shopping Centre. I believe also that it is possible to expand and toll the road of Kiambu road,"

He also hinted at the possibility of increasing the road maintenance levy fund, which is currently charged at Ksh 18 per litre.

• The government continues to be burdened by penalties and fines from contract breaches, unlawful dismissals, and human rights violations by government officials. During the first year of President Ruto in office, court awards against State ministries, departments, and agencies surged by 16.5%, reaching Ksh 18 billion.  These awards contribute to the national and county governments’ pending bills.

• Over 400 informal settlement schemes in Kenya are set to receive Ksh 1.7 billion in multilateral donor funding for low-cost housing and infrastructure improvement. The funding is provided by the World Bank (Ksh 24.1 billion) and the French Development Agency (Ksh 7.6 billion) to address infrastructure, water, lighting, and social inclusion in 33 counties.
• The Unclaimed Financial Assets Authority (UFAA) has exceeded its re-unification targets by Ksh500 million, reducing the owed amount to Kenyans to Ksh63 billion, comprising Ksh33 billion in cash and ].7 billion shares worth Ksh30 billion. In the year ending June 2023, Kenyans traced and recovered Ksh4.5 billion in cash from UFAA, against the Ksh4 billion target set for the year.

Leading Matatu Insurer Demands Digital Manifests to Curb Fraud

Directline Assurance is pushing for the digitisation of operations data, including passenger manifests, for Matatu operators in Kenya. It requires all public service vehicles (PSVs), starting February 1, insured by the company, to implement a digital passenger manifest system using digital fare payment.

As a leading PSV insurance underwriter with up to 65% market share, Directline is leading in the number of claims in the general insurance business. It aims to streamline the claims process, and enhance accountability in the industry.

In other news, EABL is being forced to resort to short-term loans to adhere to the government’s demand for alcohol manufacturers to remit excise duty within 24 hours. The change from monthly to daily remittances was effected by the Finance Act 2023. EABL now says it has to borrow up to Ksh2.2 billion monthly, negatively affecting working capital in light of the high interest rates.

Meanwhile, Kenya will receive a Ksh233 million grant from TradeMark Africa to boost grain product export. This grant is part of Trade Mark Africa’s US Agency for International Development’s Economic Recovery and Reform Activity program. The funding aims to strengthen the competitiveness of export-oriented staple food value chains in East Africa. It will also help curb low production rates, poor post-harvest management, and climate pressures.

This is coming at a time when fresh produce exporters in Kenya are facing higher costs and delayed market access as EU retailers, including Lidl, cut back on air freight to reduce carbon emissions. According to a 2021 study, about 98% of Kenya's fresh produce is shipped by air, making the transition to sea exports a significant challenge.

Economists Forecast Kenya’s Growth at 5.2%

Leading banks, consultancies, and think tanks have slightly raised Kenya's growth prospects, with a consensus forecast from 14 global firms projecting GDP growth of 5.2% in 2024. 

Kenya's growth forecast ranks seventh among major economies in the sub-Saharan region, trailing Ethiopia (6.1%), Uganda (5.5%), and Tanzania (5.4%).

Still, on the Kenyan economy, the government emphasises the economic potential of labour migration for both the government and Kenyan individuals working abroad. Remittance inflows reached an all-time high of $4.19 billion (Ksh681.5 billion) in 2023, surpassing major exports like tea, coffee, tourism, and horticulture. 

A labour desk at JKIA has been established to ensure the smooth and secure migration of workers abroad. The government is also conducting bilateral labour agreements that have been signed with four countries, and talks are ongoing with 19 others to ensure the rights, good pay, and safety of migrant workers.

Elsewhere, Kenya is one of four countries considered for the African Urban Sanitation Investment Initiative (AUSII) project, funded by the African Development Bank and the Bill and Melinda Gates Foundation.

The project aims to improve access to clean water for the urban poor, focusing on countries with readiness for a smooth rollout, including Ghana, Kenya, Zambia, and Sierra Leone. The $6 million grant is set for the project's initial rollout, supporting business innovations providing affordable, sustainable sanitation services for urban dwellers.

NCBA, Co-op, Stanbic Win Ksh100 Billion State Pensions Deal

NCBA, Co-operative, and Stanbic banks have secured a deal to manage over Ksh100 billion in pension contributions for the Public Service Superannuation Scheme (PSSS). The three banks outbid eight other registered custodians for the contract, including Bank of Africa, Equity, I&M, KCB, National Bank of Kenya, Prime Bank, SBM, and Standard Chartered.

• PSSS assets under management have reached Ksh105 billion
• The scheme has over 422,000 members
• Civil servants contribute 7.5% of their gross salaries, matched by a 15% contribution from the government.
• Civil servants, including teachers employed by the Teachers Service Commission (TSC) and members of the disciplined forces.

The custodian banks will provide services for three years, renewable for an additional three years, based on mutual agreement and performance.

This comes as the Kenyan government orders a special audit of the financial books of the Kenya Union of Savings and Credit Co-operatives (Kuscco) for alleged involvement in illegal deposit-taking business. Kuscco has faced financial difficulties, and the audit aims to determine if members' funds were misappropriated.

Horticulture Earnings Grow 6.5% on Higher Volumes

Horticulture export earnings in Kenya increased by 6.5% in 2023, reaching Ksh156.69 billion, compared to Ksh147.1 billion in the previous year. The growth was driven by a 19.6% increase in export volumes, with 468,438 tonnes shipped, up from 391,507 tonnes in 2022.

The Netherlands remained Kenya's largest horticulture market, with Ksh42.78 billion worth of fresh produce sold in the European Union country. Other significant markets included the UK (Ksh22.41 billion), France (Ksh20.24 billion), United Arab Emirates (Ksh9.14 billion), and Germany (Ksh7.91 billion).

Emerging markets for Kenyan horticulture products include China, India, and Kazakhstan, with Kazakhstan replacing Russia as an alternative market in Central Asia.

Cut flowers contributed the largest share of earnings, totalling Ksh73.45 billion, followed by vegetables at Ksh50.87 billion and fresh fruits at Ksh32.37 billion.

Meanwhile, Kenya has not yet started exporting mangoes to the European Union (EU) more than two years after lifting the self-imposed ban on shipments, citing low demand for locally grown apple variety mangoes. Kenya banned mango exports to the EU in 2012 due to concerns about fruit fly infestations, but the ban was lifted in September 2021 after controlling the fruit fly menace.

In other news, farmers from Nyeri and Kiambu counties are the biggest beneficiaries of the first Ksh2.9 billion tranche of the Coffee Cherry Advance Revolving Fund. The disbursements are part of the Ksh 4 billion approved by the Cabinet in October 2023 to support coffee farmers, with the aim of increasing farmers' earnings to Ksh80 per kilogram of cherry from the initial Ksh20/kg as an advance payment. The Ksh2.9 billion payout has benefited 221,382 farmers across 24 counties, with Nyeri accounting for about 30% (65,252) of the farmers.

Mechanisation Shaves 267 Jobs at Sasini

Agricultural firm Sasini PLC reduced its workforce by 267 jobs in 2023, citing increased farm mechanisation that has enhanced efficiency and reduced costs. Staff numbers at Sasini fell to 2,300 in the 12 months leading up to September 2023 from 2,567 in the previous year.

Non-management staff, primarily employed in the farms, decreased to 2,130 from 2,401, while management staff increased by four to 170. Mechanised tea harvesting and the use of drones for applying fertilisers have contributed to increased efficiency, cost containment, and improved tea quality.

Other News in a Snapshot

• The Capital Markets Authority (CMA) has approved the application for an Over-the-Counter (OTC) trading licence by the East African Bond Exchange (EABX) in Kenya. The move sets the stage for competition between the Nairobi Securities Exchange (NSE) and EABX in the bond market, where annual turnover has averaged Ksh734.0 billion between 2020 and 2023. An OTC market allows traders to interact without going through a formal securities exchange, working through bilateral negotiations between traders electronically.

• Smartphones assembled at the Safaricom factory in Athi River will be up to 30% cheaper than imported ones, the telco says. The local assembly plant, East Africa Device Assembly Kenya Limited (EADAK), started operations in October and is a joint venture between Safaricom, TeleOne, and Jamii Telkom. The plant can produce about three million devices per year, with plans to increase production depending on demand.

• Kenya has the seventh-highest population of tobacco users aged 15 years and above in Africa, with 3.1 million users as of the end of 2022. This represents about 5.7% of the national population, with males dominating the habit at 89%. Kenya is ranked seventh in Africa, with South Africa, Algeria, the Democratic Republic of Congo, Madagascar, Nigeria, and Ethiopia having higher numbers of tobacco users.