Kenya’s Rich Push for Higher Borrowing Rate - Money Weekly

Over the last week, a lot has happened in the world of money. Even as the cost of living continues to rise, the CBK is under increased pressure to increase the base lending rate by the rich which could boost their yields.

On employment, local manufacturers have revealed that at least 35,000 jobs are on the line if the latest inflation adjusted excise duty rate is effected.

It was also the week that saw a significant reduction in the cost of the mobile money overdraft facility, Fuliza, by Safaricom, KCB and NCBA.

For this and more, here is a look at the money news that made the headlines over the last seven days, and what it could mean for your pocket.

Kenya's Rich Pushing For Increased Borrowing Rates

Kenya's wealthy financiers have been piling the pressure on the Central Bank of Kenya (CBK) to increase the cost of government borrowing.

According to the group of wealthy private investors,  banks and pension funds, the global surge in lending rates has made local assets less attractive to them.

This explains why investors have been holding back and are seen as unwilling to lend to the government, as they lobby for higher interest rates.

However, CBK has stood firm and ignored calls that would see bond rates move beyond the 14% mark. This is because agreeing to it would make borrowing very costly for the national government.

As the cost of borrowing rises globally, developing nations that are still trying to regain pre-Covid output levels, are wary of the spiraling effects of expensive credit. 

A recent review published by the International Monetary Fund (IMF) showed that the surge in  interest rates across the world is likely to have a negative impact in the real estate industry.

It could make it hard for investors to fund new deals or refinance any existing loans. This could altogether stifle investment in the real estate industry.

President Ruto Goes After Betting Firms

President William Ruto has called on the Central Bank of Kenya (CBK) to step in and regulate sports betting companies.

Speaking on September 28, the President said that the firms were operating in an opaque space that needed to be scrutinised suggesting that they were not paying taxes.

“I am happy that the governor is bringing our online betting companies into the regulation space because we also want them to pay taxes. They are operating in an opaque space.”

During the same press briefing, President Ruto urged Safaricom, KCB and NCBA to develop cheaper loan products tailored for Small and Medium Enterprises (SMEs).

He pointed to the fact that SMEs employ almost 80% of the Kenyan population thus justifying the need to ease their access to credit. 

The three companies had earlier announced a discounted daily rate of up to 50% for the Fuliza overdraft facility as well as a 3-day grace period. The 1% access fee was, however, retained. 

Read Also: 4 Million Names to be Delisted From CRB as Fuliza Bows to Pressure

President's Promises on Cost of Credit, Housing and Retirement Savings

While presiding over the first joint sitting of the 12th Parliament on Thursday, September 29, president William Ruto reiterated his administration’s intention to find a lasting solution to the challenge of access to credit, especially by lower-income Kenyans. 

On the controversy of the National Social Security Fund (NSSF) minimum contributions and the suitability of the existing legislation for securing the retirement of Kenyans, Ruto proposed a system with a government incentive. 

Ruto says his administration will facilitate a national savings scheme with a guaranteed 50% contribution by the government i.e. for every Ksh2 one contributes, the government contributes Ksh1 such that if you save Ksh6,000 in 12 months, the government will contribute an additional Ksh3,000 bringing your annual retirement savings to Ksh9,000. 

Here is a snippet of the President’s address in Parliament addressing this, among other issues that affect your money.  

Affordable credit makes a huge difference in the rate of business growth. Access to affordable credit is like a magic formula. The current CRB approach of blacklisting debtors is zero-sum, punitive and has arbitrarily locked millions of businesses out of the credit system. It is time to shift the formula to a credit-scoring system which allows lenders to apply customer segmentation and at the same time end the stigma of blacklisting. 

Yesterday our engagement finally culminated in a reduction of cost of credit by 50% and this is a significant step towards unlocking billions of shillings needed to spur economic activity by once again expanding financial inclusion. 

My administration will allocate resources every year to the hustler fund from which MSMEs can access affordable credit to start and expand their businesses. I promised yesterday that we will leverage technology in the management and disbursement of these funds. Shortly we will bring to this house the legislation and the regulatory framework to operationalise this fund. 

This administration will unlock housing for the nation b=y doing a couple of intervention

• Provision of land for affordable housing both public and private
• Provide access to affordable and stable financing for those engaged in social affordable housing across the country 

We intend to bring to this house legislative proposals to provide a framework for a housing offtake plan which will create incentives for developers to invest more money into our housing strategy and on the strengths of the 

• A PPP funding framework is envisaged for large capital projects in order to raising access to water from 60% to 80%, Ksh500 billion is required. Govt can provide this gradually but the private sector can mobilize this all at once. We will thus adopt a PPP framework by entering into water purchase agreements with investors. I have a;lready instructed the PPP unit at Treasury to work on the regulations that will facilitate the mechanism like we have in our energy sector. This way, we will achieve water for all in less than a decade. 

Kenyan Manufacturers’ Dilemma 

The Kenya Association of Manufacturers has been urging the government to reconsider the fuel tax charges, warning that at least 35,000 jobs are currently on the line.

The September 2022 fuel price review, plus the increase in power costs by 15.7% as well as the looming 6.3% inflation adjustment on excise duty has placed manufacturers in a predicament.

They argue that shifting the cost burden to consumers by increasing the price of their products is not a sustainable strategy as it could also lead to reduced demand, as Kenyans struggle to adjust to the increasing cost of living.

This lobby group is now calling on the government to look into reducing the levies charged on fuel which constitutes almost 46% of its total retail cost.

Inevitably, the manufacturers said that they would have to trim down their workforce and terminate supply contracts as a result of the higher operating costs.

Looming Changes in Property Valuation?

Outgoing Treasury CS Ukur Yatani has called on Senators to fasttrack the passing of a law that would allow counties to review property valuation every five years.

This would be the second phase of his plan to devolve this function, following the subsidiary legislation he put forward in September 2020, that allowed for the appointment of private practitioners to conduct property valuation on behalf of the government.

Over the last two decades, property dealers had been lamenting over the inefficiency of the handful of valuers that could only be provided by the Ministry of Lands. This was remedied by allowing private practitioners to carry out the valuation process.

With the introduction of the Stamp Duty (Valuation of Immovable Property) Regulations 2020, buyers of real estate now have the choice of engaging a certified valuer or a civil servant, providing employment prospects for certified valuers outside of the civil service.

Kenya Cashes in On Regional Trade Agreements

On September 23, 2022, a consignment of Kenyan-made exide batteries worth Ksh9.3 million landed in Ghana via the Port of Tema.

This marked Kenya's official start in trading under the Africa Continental Free Trade Area (AfCFTA).

Kenya and five other countries - Cameron, Egypt, Ghana, Rwanda and Tanzania, were selected as the initial participants in the first phase of the trade arrangement.

These countries have been tasked with identifying products that can penetrate and thrive in markets among the other pilot countries.

Kenya identified the following products; tea, exide batteries, confectionery, leather bags, incinerators, beaded products, vehicular filters, textiles, sisal fibre, avocados and fresh produce.

Data shows that the AfCFTA project has created an enormous single market with a population of 1.2 billion people and a combined GDP of $2.5 trillion.

Cryptocurrency Regulation

CBK Governor Dr Patrick Njoroge has revealed that the apex bank was on the verge of introducing a regulatory framework for cryptocurrencies.

He explained that this was needed so as to avoid the chaos that was witnessed when unregulated mobile money lenders entered into the Kenyan market.

The adoption of cryptocurrency in Kenya has been on a steady upward trajectory, with the number of crypto-owners in Kenya said to be the highest on the African continent.

According to an UNCTAD policy brief, Kenya's crypto ownership as a share of the total population stands at 8.5% making it the 5th highest across the world.

Kenyans Back to Charcoal

Data from the Kenya National Bureau of Statistics (KNBS) shows that the consumption of liquefied petroleum gas (LPG) in Kenya fell by 34.8% in the first half of 2022, compared to a similar period in 2021.

The hike in LPG prices over the period has been cited as the main reason behind the drops in sales, with Kenyans seeking out alternative means such as charcoal.

The cost of filling a 13-kg cylinder increased to Ksh3,200 in June this year from roughly Ksh2,000 in June 2021.

In the past, Kerosene was seen as a cheaper alternative fuel, but the spike in its price has seen its sales drop significantly as well.

The KNBS data showed that Kerosene usage dropped 21% to 47,950 tonnes over the first half of 2022, compared to 60,750 tonnes in 2021.

In an effort to lower living expenses, the National Treasury's proposal to reduce the VAT on LPG from 16% to 8% was accepted in June 2022.

As a result, retail prices somewhat decreased to between Ksh2,800 and Ksh3,000, depending on the refilling outlet.

Others Money News: 

KRA Deadline Extension

For a second time, the Kenya Revenue Authority (KRA) has extended the deadline for companies to purchase the new internet-enabled tax registers (ETRs).

The new deadline is now the end of November 2022.

New Passport Directive and Costs

According to the Immigration Director - General Alexander Muteshi, Kenyans have until the end of November 2022 to acquire the new biometric digital passports. Those with the old generation passports will be barred from travel once the deadline expires.

Passport costs are as follows;

• 34 pages= Ksh4550/=
• 50 Pages= Ksh6050/=
• 66 Pages= Ksh7550/=
• Diplomatic= Ksh7550/=

KPA Allows ‘Free-Choice’ In Cargo Clearance

On September 26, 2022, the Kenya Ports Authority (KPA) issued a statement notifying all shipping lines that importers’ documentation of place of clearance and mode of transport for their goods shall now be at their discretion.

This means that importers are now free to choose where they want their cargo to be cleared.

The Kenya International Freight and Warehousing Association (Kifwa) welcomed the move to give importers the freedom to choose clearance and haulage routes. 

Since 2018, importers have had to contend with the compulsory use of the standard gauge railway (SGR) for ferrying cargo. 

Mobile Operators Deactivate SIM Cards

New data from the Communication Authority of Kenya (CA) shows that telcos disconnected 287,214 SIM cards between April 2022 - June 2022. 

By the end of June, the number of mobile subscriptions fell to 64.7 million from 64.9 million in March. 

Kenyans In Saudi Arabia Sent Home Over Ksh22 Billion 

CBK data shows that Ksh22.65 billion was sent back home by Kenyans living in Saudi Arabia in the first eight months of 2022.

This makes Saudi Arabia the third-largest source of remittances for Kenya behind the United Kingdom Ksh25.4 billion and the United States Ksh188.8 billion.

This comes at a time when tales of mistreatment of migrant workers in the Gulf country have been making headlines in Kenya with ministries of Labour and Foreign Affairs in the spotlight. 

The Commission on Administrative Justice (Ombudsman), in a report this week, recommended the formation of a multi-agency integrated system for all stakeholders by the Office of the President to address the protracted challenges. 

Kenya Power Going Green

Kenya Power has revealed that it plans to switch from petrol and diesel-powered vehicles and motorbikes to electric versions.

A pilot program that will see Ksh40 million spent on three electric vehicles during this financial year is already underway. 

Despite not stating a specific deadline for the switch, the state-owned power utility company maintained that reducing its carbon footprint was among its top priorities over the coming years.