What Next After eTIMS Deadline? - 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:

• What comes next after the electronic Tax Invoice Management System (eTIMS) onboarding deadline? Kenya Revenue Authority (KRA) insists that there will be no extension, but they will continue with efforts to ensure every business is compliant.
• Companies continue to announce their financial reports alongside their dividends to shareholders. This week, Stima Sacco, Britam, and Acorn Properties released their reports.
• The NSE receives a boost after the Financial Times Stock Exchange (FTSE) Russell Index lifts restrictions imposed because of the dollar shortage.
• The shilling is gaining against most international currencies, inflation is falling but the prices of commodities remain high compared to the same period last year.
• Kenya plans to diversify borrowing through three international bonds to China, Japan, and the Middle East, named Panda Bond, Samurai Bond, and Sukuk Bond, respectively.

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

Read Also: Issues With KRA’s New Tax Order, eTIMS - Money Weekly

What Next After eTIMS Deadline?

The eTIMS registration period elapsed on March 31. Since then, the Kenya Association of Manufacturers (KAM) has sought an extension of the period to July 31, but the taxman maintains that there will be no extension.

Up until the deadline, KRA had managed to onboard 202,291 taxpayers out of the targeted 915,000. This represents a 22.1% performance rate. Businesses not onboarded with the eTIMS system will face three major hurdles.

1. They will not be able to transact with other businesses that will require an electronically generated invoice.
2. They will not be able to claim their expenses without the eTIMS-generated invoices.
3. As punishment for non-compliance, they will be required to pay twice the tax due.

However, KRA is still working with industries and taxpayers to ensure that the remaining 712,709 taxpayers are onboarded.

Part of the efforts KRA is putting in place include:

• Rolling out reverse invoicing. This will be done on a case-by-case basis.
• Plans are underway to roll out buyer-initiated invoices for micro & small businesses
• For bulk eTIMS invoicing, KRA is working with Mobile Network Operators for large-volume businesses. 
• KRA is also considering offering incentives to taxpayers who will insist on eTIMS-generated invoices during their transactions.

Furthermore, KRA is still engaging different industries to understand their challenges and craft tailored solutions for each. Specific examples include the tea and coffee industries. Exemptions from the punishment for failure to onboard will also be handled on a case-by-case basis.

However, despite Section 23 of the Tax Procedures Act dictating that all businesses must issue eTIMS invoices, KRA insists that their efforts are currently focused on business-to-business (B2B) transactions as opposed to business-to-consumer (B2C) businesses. Meaning, mama mbogas and street vendors can relax for a while.

Despite the aggressive push by the tax authority, the regulations that are supposed to support its efforts are yet to be gazetted. KRA is still making the necessary adjustments as they consider taxpayer feedback.

Read Also: Living Under KRA’s New e-tax System

More Dividends As Companies Announce Their Financial Reports

Stima Sacco members will be enjoying a 15% dividend payment and an 11% rebate on their deposits as the Sacco reports growth. In the year ending December 31, Stima Sacco grew its loan book by 9.3% from Ksh41.3 billion to Ksh45.2 billion, the balance sheet by 10% from Ksh53.8 to Ksh59.15 and revenues from Ksh7.4 billion to Ksh8.9 billion.

Similarly, Acorn Investment Management Limited has more than doubled its dividend payout from Ksh192 million in 2022 to Ksh480 million in 2023. This is despite the real estate investment trust (REIT) reporting a drop in profits by about 54% to Ksh765 million from Ksh1.4 billion. Investors are set to receive a total of Ksh0.77 per unit in dividends.

Britam investors, on the other hand, will not be enjoying dividends as the financial services firm failed to declare year-ending December dividends despite the company doubling its net profit. Britam announced a net profit of Ksh3.3 billion, a 97.5% jump from Ksh1.6 billion in 2022. The company said that it plans to plough back the money in the business.

NSE Wins After Restrictions Lift Despite Continued Exit By Foreigners

The Financial Times Stock Exchange (FTSE) Russell Index has lifted restrictions put in place against the Nairobi Securities Exchange (NSE) in 2022 after investors reported difficulties in accessing the dollar for the local forex market. The improvement in the forex market and increased dollar supply have led to the global index provider lifting the restrictions.

This comes as the NSE announced a Ksh18.4 million profit in the year ended December 2023.

Despite the positive outlook on the NSE, the departure of foreign investors continues for the third consecutive month. In January and February, investors took out Ksh106 million and Ksh1 billion, respectively. March saw the highest selloff this year, amounting to Ksh1.2 billion.

The foreign investors' departure remains a mystery, as the NSE has been posting competitive returns in the first quarter of the year.

Read Also: Legal Battles, Ultimatums: Kenya’s Housing Levy Saga - Money Weekly

Shilling Gains, Inflation Drops, But Prices Still High

In the two months to the end of March 2024, the Kenyan shilling had gained 19% against the USD. The strengthening of the Kenyan shilling is a plus for the citizens since Kenya is a net import country. The gain means that importers are now paying around Ksh30 less for every dollar worth of imports.

Additionally, according to the Kenya National Bureau of Statistics (KNBS), the March inflation level stood at 5.7%, which is lower than 6.3% in February and 6.9% in January.

Despite the recovery in inflation in the first three months of the year, prices of goods and services remain relatively high compared to the same period last year.

• Transport costs are up 9.7% compared to March 2023. 
• Kerosene, diesel, and petrol prices have risen by 29%, 17.3%, and 10.9%, respectively obver the same period.
• Electricity and water prices have also significantly risen. 
• Onions, sugar, and mango prices have gone up by 65.5%, 21.3%, and 21.2%, respectively.

The decelerating inflation has impacted the Central Bank of Kenya’s monetary policy decision to retain the base lending rate at 13%. 

In February, the committee met and increased the base lending rate from 12.5% to 13%. Because of the reduced inflation and the recovery of the shilling against the CBK has maintained the lending rate.

Read Also: KRA’s New Tax System for Small Businesses - Money Weekly

Kenya Plans Chinese and Japanese Bonds

Kenya is planning to tap into other markets by selling bonds to reduce western capital markets reliance and fund the Ksh326 billion deficit in the 2024/2025 financial year budget. These bonds include the Panda bond in China, the Samurai bond in Japan and the sharia-compliant Sukuk bond in the Middle East.

Nonetheless, Kenya's credit rating remains 'B', which reflects the country's large funding needs, high domestic financing costs, external financing risk, and challenges to fiscal consolidation. 

These factors are a result of weak governance, a narrow revenue base, high interest payments, and costly external debts.

Here is a snapshot of Kenya’s debt situation.

• In the year ending June 2024, Kenya’s external financing requirements will amount to $5.5 billion (Ksh719 billion).
• In the 2025 fiscal year, Kenya is targeting to borrow $4 billion (Ksh523 billion) externally.
• At the end of fiscal year 2023, half of Kenya’s debt was denominated in foreign currency.
• External loans from commercial banks amount to Ksh417.73 billion.

That notwithstanding, Kenya has secured $1.2 billion (Ksh156.9 billion) from the IMF and syndicated loans. The World Bank is also expected to release $1 billion (Ksh130.75 billion) in April and the IMF to release another $1.1 billion (Ksh143.82 billion) before the end of 2024.

Read Also: Govt Cuts Ministries’ Budget By 10 Per Cent

Insurance Troubles

The Competition Authority of Kenya intervened for garages and forced at least seven insurance companies to remit delayed payments. The insurance company's delay in payments was viewed as flouting the Abuse of Buyer Power (ABP) rules.  

The insurance companies settled payments amounting to about Ksh24 million. According to CAK, there are 168 motor vehicle garages registered under the Kenya Motor Repairers Association (Kemra), which are insured by 38 insurance companies. This is seen to cause a power imbalance between garages and insurers, hence the abuse of buyer power.

Meanwhile, small insurance firms are struggling to implement the new reporting standards, which started in January last year. The new standards are aimed at increasing transparency while reporting in order to have a clear picture of a company's financial position and risk.

According to estimates, it will cost small insurance firms between Ksh60 million and Ksh70 million to implement the new standards. Some of the challenges small firms are facing include inadequate or a lack of actuarial departments, logistical problems, and inadequate data infrastructure and technology.

Read More: Battles in Kenya's Housing Levy Saga

More News in a Snapshot

• Curbing Unbilled Water Consumption Losses: The government and other players in the water industry have launched the Non-Revenue Water Center of Excellence. This facility will help curb water losses that amount to Ksh11.2 billion through illegal connections, meter reading inaccuracies, meter errors, and unmetered connections. The facility is expected to achieve this by helping in adoption of measures such as leak detection systems, smart metering, and asset management strategies.
• Coffee Licensing Dispute: The county government of Kiambu has issued coffee milling licenses to Sasini PLC Mill and Kofinaf Company Limited. This move, according to National Coffee Co-operative Union Chief Executive Festus Bett, contravenes the 2019 Crops Regulations, which bar any coffee buyer or any other entity associated with it from holding a commercial miller, broker, roaster, agent, or warehouseman license. Both Sasini and Kofinaf have associated companies holding the coffee buyer licenses. 
• Backlogs Surge at Small Claims Courts: The small claims courts, mandated to resolve civil, commercial, and personal injury cases with less than Ksh1 million in subject value, have experienced an overwhelming surge in cases. Seventy-seven percent (20,792) of the cases filed in the three years to June 2023 were breach of contract-related, while 6,277 cases were personal injury related and 92 were commercial suits. 
• Cargo Crisis Over Container Height Rule: Several trucks are stuck in Mombasa awaiting special cargo permit from Kenya National Highway Authority (KeNHA) for their 40-foot-high cube containers. KeNHA has issued a directive in line with the East Africa Community (EAC) Vehicle Load Act 2016, which prohibits vehicles higher than 4.3 meters high from using the road unless with a special license. The 40-foot-high cube containers are 4.5 meters high.
• Growth Expected in Hospitality, Tourism Sectors: A survey by the Kenya National Chambers of Commerce and Industry (KNCCI) has highlighted industries that most people are confident will grow in the second quarter of 2024. The hospitality and tourism sectors showed the most confidence, while mining, financial services, and healthcare showed moderate confidence.
• Kenyans Continue to Prefer Second-hand Items: Kenya spends at least Ksh400 billion annually on second-hand clothes, despite government efforts to boost the local textile industry. Ex-UK shops are popping up in major towns, selling household items, toys, bicycles, and furniture, among other products. The auto industry also shows the trend, with only 850 new vehicles sold in February and 563 in January, against an average of between 8000 and 12,000 monthly imported second-hand vehicles.