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No More CDF Money for New MPs - Money Weekly
No More CDF Money for New MPs - Money Weekly
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No More CDF Money for New MPs - Money Weekly

Money254
Eddy Mwanza
August 11, 2022
A bursary award ceremony at Likuyani Constituency in 2021. A significant chunk of the average Ksh100 million allocated per constituency from the now-defunct NG-CDF went to education-related expenses including the improvement of school infrastructure and school fees assistance in the form of education bursaries.
A bursary award ceremony at Likuyani Constituency in 2021. A significant chunk of the average Ksh100 million allocated per constituency from the now-defunct NG-CDF went to education-related expenses including the improvement of school infrastructure and school fees assistance in the form of education bursaries.

It has been a slow news week primarily due to the fact that the country ground to a halt as Kenyans took to the polls on August 9, 2022, to elect the next president.

However, there were still several highlights in Kenya’s world of business and finance that made all the major headlines, with government suppliers issued with a payment delay warning by the Central Bank of Kenya key among them.

It was also a week that saw the famous Constituency Development Fund (CDF) declared illegal.

For this and more, let us look at all the major money news in Kenya over the last 7 days, and how it ties to your wallet.

CBK Alerts Govt Suppliers of Payment Delays

On August 10, the Central Bank of Kenya (CBK) issued a report that directed all government suppliers at both the national as well as county level to brace themselves as there may be lengthy payment delays.

This was attributed to the ongoing regime changes across the country.

CBK, in its Kenya Financial Stability Report July 2022, further projected that there could be a surge in loan defaulters as a result of the payment delays.

The majority of the nation's outstanding bills, totalling more than Ksh574 billion, are owed by parastatals, ministries, counties, and other state agencies, with government suppliers recently revealing their intention to file a class action lawsuit.

Alarm Over Increased Borrowing by Parastatals 

The Central Bank of Kenya issued yet another warning over the last week, this time touching on increased borrowing by state agencies.

According to the apex lender, these agencies are borrowing billions and directing the funds towards salaries, wages and operational costs.

It went on to explain that using long-term debt to finance operational costs was a recipe for disaster while placing parastatals high on the list of potential loan defaulters.

By June 2021, state agencies had accumulated Ksh157.22 billion of government-guaranteed debt, with nine entities alone accumulating Ksh104.84 billion of non-guaranteed debt.

NBK Ksh1.1 Billion Kitty For WASH-sector Projects

On August 5, the National Bank of Kenya (NBK) announced that it had secured an additional Ksh1.1 billion to be used in its Water, Sanitation and Hygiene (WASH) Financing programme.

The fund is aimed at micro, small and medium enterprises (MSMEs), including vendors, technology providers, and various WASH suppliers.

During the pilot phase, NBK looks to provide two financial solutions. A short-term ‘Jenga Biashara Loan’ of up to EUR 40,000 (approximately Ksh5 million) to micro and small enterprises for a maximum period of 5 years.

Kenya’s New Vehicle Exports Rise 55% in Half-year

137 new car units were exported out of Kenya over the last 6 months by new vehicle dealers in the country, a figure that is 55.6% higher than what was recorded over the same period last year.

Kenya Motor Industry Association (KMI) data shows dealers such as Isuzu East Africa, Inchape Kenya and Scania East Africa were able to move their products mainly to neighbouring Uganda and Tanzania.

Notably, of the 137 units moved, Isuzu had the lion’s share (110).

According to Kenyan firms that are invested in the local vehicle assembly sector, there is a need to harmonise the rules and incentives in order to unlock the full potential of Kenya’s automotive sector.

CDF Unconstitutional

On August 8, just a day before the general election, the Supreme Court took centre stage as it nullified the Constituency Development Fund (CDF) Act (2013).

The five-judge bench led by Chief Justice Martha Koome ruled that the Act was illegal as it violated the constitutional principle on the division of revenue between the two levels of government. 

“The CDF Act 2013 offends the division of functions between the national and county governments, offends constitutional principles on the division of revenue. 

“The CDF Act 2013 offends constitutional principles on public finance and offends the constitutional principle of separation of powers,” reads an excerpt from the ruling.

In March this year, MPs allocated themselves an additional Ksh4.9 billion as they rushed to implement constituency projects ahead of the August 9 General Elections.

Under the Act, each constituency would receive at least Ksh100 million annually for community development projects.

The fund has been an important campaigning tool for about the last two decades. Several cases of misappropriation of public funds have been associated with the fund with millions of shillings being gobbled up either through theft, substandard projects or misapplication of education bursaries - a key feature of the fund.   

Civil Servants Take Ksh6.2bn Home Loans

By June of last year, the State had given civil servants loans worth Ksh6.2 billion to build or buy homes.

These loans were issued through the Kenya Commercial Bank (KCB) Group and Housing Finance (HF) Group.

The government launched this housing program in 2015 as a way to attract and retain top talent that were having their heads turned by perks in the private sector.

Defaults on mortgages by public servants grew to 379.77million in the financial year ended June 2021.

Health Insurers New Plan For Cheats

The Association of Kenya Insurers (AKI) on August 9, announced that it was in the process of looking for a strategic partner to help create a health insurance database that is aimed at weeding out fraud cases more efficiently.

This partner/consultant is expected to create an airtight system with the ability to flag any suspicious activity.

For example, AKI wants the system to have a mechanism in place that sets off a trigger alert anytime the upper limit – in terms of medical fees, is reached.

“The system should be able to flag and share information on high-cost claims, the limit will be determined from time to time and also share coded data on terminated members/clients history by ensuring that legal conflicts are avoided,” AKI stipulated in its tender document.

Insurers believe that the new system will make it easier to detect fraud at both the underwriting and claims level.

Copyrighted Memes

Use memes without authorisation at your own risk. 

On August 5, the Kenya Copyright Board (KECOBO) grabbed the headlines after it issued a statement warning against copyright infringements when it comes to using memes.

KECOBO made it clear that the creation and use of memes for commercial reasons, and without permission from the copyright holders, is not allowed.

Companies were encouraged to carry out due diligence prior to reproducing any memes lest they find themselves facing lawsuits.

KECOBO’s Executive Director Edward Sigei further clarified that while meme usage on social media is tolerated, its creation and use for commercial purposes could attract a significant civil liability.

Betting Industry Not So Lucky? 

Kenya’s betting industry is reportedly experiencing a slump, as data published by Business Daily showed.

The average amount spent by punters in a day dropped to Ksh900, compared to the Ksh2,500 average recorded in 2019.

The percentage of betting enthusiasts who rely on their slips to pay daily bills such as rent and utilities also declined by half to 11%. 

Safaricom financials show that for the year ending March 2022, punters pushed Ksh169.1 billion through its Mpesa platform for betting purposes.

This is an industry valued at more than Ksh5 billion by the Betting Control and Licensing Board

Other Money News

  • Safaricom, Airtel and Telkom to start offering free credit – The Communications Authority of Kenya has said that these telcos will be compelled to offer free credit in case of any outages on their systems. The move is aimed at pushing mobile operators to offer reliable services to customers.
  • Election boom ends for branding companies, helicopter rentals and road show trucks – Big money was made during the election period with helicopter leases going for Ksh150,000 per hour, while roadshow truck owners raked in an estimated Ksh100,000 per day during the period.
  • VirtualPay gets CBK licence to operate in Kenya – CBK has given the payment services provider a green light to begin operations in Kenya. VirtualPay has a presence in Mauritius and the United Arab Emirates (UAE), and operates across a range of industries, including financial services, online retail and trading, hospitality and travel. Its entry into the Kenyan market is expected to step up competition for users with Safaricom's M-Pesa, Pesapal, PayU, Amazon, and Paypal among others.

Eddy Mwanza is Creative Consultant living and working in Nairobi, Kenya. His areas of focus are Content Creation, Creative Writing, Research and Photography. When he is not writing in his favorite coffee shop, Eddy spends most of his time reading, cooking, and traveling. He is also a sports fanatic. Connect with Eddy on LinkedIn.

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