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.
First, a quick brief of some of the top money news from over the last one week.
Safaricom fully purchased M-Pesa Holding Company Limited from Vodafone; Airtel reviewed its mobile money transfer rates from Airtel to other mobile money transfer services, and Tala has appointed a new General Manager.
The motor vehicle industry is experiencing record-low sales since the pandemic; the Kenya Revenue Authority (KRA) failed to meet its first quarter target by Ksh79 billion, and commercial bank interest rates reached an 81-month high.
Meanwhile, the Social Health Insurance Act was signed by President William Ruto into law as a petitioner heads to court to block its implementation. That is as ICT Cabinet Secretary Eliud Owalo announced a Kenyan-assembled smartphone will soon hit the market at an affordable price.
The CBK is issuing a Ksh50 billion bond, and investors are reaping returns from small-cap companies listed on the NSE. Vivo Fashion Group joined NSE’s incubator and accelerator program, Ibuka, while Kuramo Capital started a women-focused fund called Moremi Fund.
Let’s dive in.
Safaricom is now the exclusive owner of the M-Pesa Holding Company Limited, the trustee for customer funds under the M-Pesa trust arrangement. Safaricom has finally bought the Kenyan-pioneered brand from its parent company, Vodafone Group PLC, in a process initiated in April 2023. M-Pesa is a mobile money transfer with substantial customer deposits.
Still, on mobile money transfer, Airtel Money has revised its money transfer fees to accommodate the 15% excise duty introduced by the government. Nonetheless, transferring money from Airtel to Airtel remains free. An example of the rate change is transferring between Ksh 101 - 500 to another network that used to cost Ksh 22 but now will be charged at Ksh 25. Similarly, transferring between Ksh 501 - 1000 has been revised upwards by a shilling.
As the shifts are happening in the mobile money transfer world, Tala, a fintech credit provider, is switching up its leadership. Tala has since appointed Annstella Mumbi as the General Manager, a role she has served in an Interim capacity since May. Mumbi joined Tala in 2020 as the Country Growth Manager, and she has nearly a decade of experience across different roles in different companies, including Unilever and Moringa School. She will lead Tala towards becoming a full-service financial services provider in Kenya.
Barely a week since its enactment, the Social Health Insurance Act is already facing headwinds in the form of a High Court petition by Dominic Oreo - a human rights defender - challenging its implementation.
The Act was signed into law by President William Ruto on October 19, alongside the Primary Health Care Act, 2023, the Digital Health Act, 2023 and the Facility Improvement Financing Act, 2023.
These are meant to provide the legal and institutional framework for the rollout of Universal Health Coverage (UHC) - which includes the scrapping of the current National Health Insurance Fund (NHIF).
Oreo argues that the mandatory deductions of 2.75% are excessive given the current tax burdens. He also questions the reliability of premium contribution stipulated in the Act arguing that revenue collection in the informal sectors remains vague.
“It is unclear and unsustainable how the proposed social health insurance scheme will be financed through premium contributions which are unreliable for healthcare resource mobilisation in a country with poverty and informal labour markets,” he argues.
The petitioner is also concerned that some NHIF employees will lose their source of livelihood as they will not be absorbed in the new system. He also emphasises the clarification of the role of county governments.
“These laws will transform healthcare in Kenya; they will save lives, empower communities and make us a stronger and healthier nation,” said President William Ruto while signing them into law.
As the government is ironing out the health sector, it is falling behind when paying retired public service workers. In its first quarter of the fiscal year 2023/24, the government has fallen short of Ksh16.44 billion in paying its retired public service members. In the three months through to September, the government paid out Ksh30.83 billion, while the prorated target was Ksh47.27 billion.
The motor vehicle sales industry is being impacted by the harsh economic conditions the country is experiencing. Data from the Kenya Motor Industry Association (KMIA) shows that new vehicle sales have plunged to the lowest since 2019.
In the first nine months of the year, sales fell by 11.68%, equating to 8,715 units sold, compared to the same period last year, which saw 9,868 units sold. This has been attributed to a weakening shilling, elevated inflation and increased credit costs.
The effect in the industry is being felt all across, with the market leader, Isuzu East Africa, recording an 11.35% drop in sales. Other major dealers, such as Simba Corp and Tata Holding, also recorded a decline in sales apart from CFAO (which merged Toyota Kenya and DT Dobie), which noted a 6.07% growth in sales.
After a two-month delay, ICT Cabinet Secretary, Eliud Owalo, has announced the release of locally assembled smartphones. The phones are assembled by a consortium of companies, including Shenzhen TeleOne Technology, Safaricom and Jamii Telecommunications.
The affordable phone, projected to be priced at about $40 (approximately Ksh6,000), aligns with the government's effort to transform the digital economy. Nevertheless, Mr. Elid Owalo did not disclose the specifications of the phone and the initial quantity.
In other creation news, Terrenus Distribution East Africa has partnered with Laboratory and Allied and with support from Goodlife Pharmacy to produce a saliva-activated toothpaste known as Eezi Oral Hygiene. These toothpaste tablets are made in Kenya. They are waterless, cost-effective and function as good as regular toothpaste. They are available in daily, weekly or monthly packs.
Speaking of personal hygiene products, PZ Cussons, the producer of the Imperial Leather brand products, is investing Ksh35 million in Kenya over the next three months to expand its market share. The Managing Director, Sekar Ramamoorthy, is betting on the growing purchasing power in rural areas outside Nairobi. He adds that the Millenials, Gen Z and Gen-Alphas form part of their broader consumer base target.
The first quarter of the financial year 2023/24 has not started well for Kenya Revenue Authority (KRA) as it missed the revenue target by Ksh79 billion. The KRA Commissioner General - Humphrey Wattanga attributed the missed target to slow economic growth, tax exemptions of food-related items, government entities failing to remit pay-as-you-earn (PAYE) and low oil imports.
KRA also noted that economic challenges such as high inflation and reduced purchasing power significantly contribute to non-compliance.
In addition, the authority has announced that it will freeze the bank accounts and block the Personal Identification Numbers (PINs) of taxpayers who abuse the 10-month tax amnesty program. Enforcement of these preventative measures might go as far as issuing travel bans and collecting owed money from the taxpayers’ banker and prosecution.
The amnesty waives accumulated penalties and interest for taxpayers with no principal tax arrears up to December 2022. The KRA aims to collect over Ksh51 billion from the tax pardon.
The average commercial bank borrowing rate reached an 81-month high of 13.83% in August.
The increase in interest rates puts commercial banks in a precarious position as, as much as they stand to profit significantly from the rate increase, they also risk overburdening their customers, which would lead to loan defaults.
The consumer acutely feels the increase in interest, and they might have to sacrifice even further to service the loans or take longer than anticipated to pay back the loan.
The Central Bank of Kenya (CBK) aims to raise Ksh50 billion through a new six-and-a-half-year infrastructure bond (IFB1/2023.6.5). The bond is expected to highlight investors' confidence in the Kenyan economy.
Meanwhile, in the Nairobi Securities Exchange (NSE), investors who have invested in small-cap companies (companies with valuations below Ksh4 billion) have reaped over Ksh25 billion in returns. This profit comes after large-cap stocks such as Equity, Safaricom, KCB, and East African Breweries lost value, which can be attributed to exposure to foreign investors, currency depreciation and rising interest rates.
Staying with the NSE, Vivo Fashion Group is the newest to be admitted to the Ibuka incubation and acceleration program by the NSE. The move is meant to restructure Vivo’s business to align with its short-term and long-term goals as well as ready itself for debt or equity capital market transactions. Vivo is the largest ladies’ fashion brand operating in Kenya, Rwanda and Uganda.
Meanwhile, Kuramo Capital is launching a fund to support female-led enterprises. Over the next ten years, the Moremi Fund will dispense Ksh22.4 billion to female entrepreneurs and fund managers. The fund will provide capacity building, mentoring and technical assistance as part of its accelerator platform.
A Kenya National Bureau of Statistics survey revealed that, on average, Kenyans spend only four and a half hours daily on productive activities. Men spend more time than women on income-generating activities, averaging 352.6 minutes daily compared to women’s 200.9 minutes. However, women spend five times more time on unpaid work than men.
According to the Communications Authority of Kenya, Kenyan organisations have experienced a 55.4% drop in cyber attacks over the three months through to September. The improvement in cyber security is attributed to cybersecurity awareness campaigns, capacity-building efforts and increased adoption of digital signatures.
Diaspora remittances were reduced by Ksh2 billion in September, marking the second consecutive month on a decline. The reduced inflow of remittances has had little impact on forex reserves, and the Central Bank maintains that the remittance inflow is still strong and supports the current account and foreign exchange market.
Kenya’s service export is significantly driving economic growth as skilled labour export in the technology and finance sectors increases. The World Bank indicated that innovative service exports, especially in telecommunications and finance, are contributing to higher remittances, reaching Ksh616 billion over the past 12 months up to August 2023.