The textiles industry has earned a bad reputation on environmental conservation.
Kenya relies heavily on second-hand apparel imports (mitumba) that proponents say is safe for the environment because the reuse of the clothes from the US, Europe and Asia significantly reduces the carbon emissions and cuts water usage.
Again, they add, the country does not need to produce more textile because the environment-conscious consumer has been embracing secondhand and recycled clothes.
But textiles manufacturers are pushing for the increase of volumes made in Kenya, especially apparel exporters.
There is a dilemma as industries globally factor in supply chain carbon emissions. What about the raw materials involved in textile manufacturing creating toxic pollution and increasing carbon emissions? What about the heaps of unsold second-hand products choking and polluting rivers?
At Nairobi’s Gikomba market, secondhand clothes are in heaps, some sold while the rest become dead stock. Some will be resold to recycling entrepreneurs and other “useless pieces” disposed of as waste, mostly into rivers and dumping sites.
Purity Wambui, who has been doing business at the Gikomba market and imports apparel from Europe, says the waste is insignificant because they sell all they have bought.
“Even the last piece of item has to be sold sometimes at Sh20, so there is no dumping,” she said, arguing that she imports her secondhand clothes herself and if the supplier gets her poor quality items, she drops them.
But what happens to the low-quality ones? Only a few of the garments are refurbished and cut to be sold as rugs.
“Times have changed and we have quality control which helps us get quality items even though the bales are more expensive,” she says.
The failure to radically reduce second-hand clothing waste by reusing, repairing, refurbishing, and recycling has contributed to an increase in textile waste.
Ann McCreath, the founder of Kikoromeo, a Kenyan fashion heritage brand, says when it comes to the impact of the fashion industry on the environment everything is about fibre.
Natural fibres such as cotton, hemp, wool and linen, as well as artificial fibres made from materials such as viscose, made from wood pulp, are biodegradable.
However, what is mostly used in the textile industry is not biodegradable.
“A significant amount of what is sold in mitumba is polyester and so it is not biodegradable. Polyester and similar fibres are cheap and so a lot of fast fashion uses textiles of such fibres,” said Ms McCreath.
Textile waste is classified as pre-consumer and post-consumer. Pre-consumer or production waste is generated in textile manufacturing from spinning, weaving, dyeing, finishing, and even at the consumer end.
On average, about 15 percent of the fabric used in garment production is cut, discarded, and wasted resulting in landfills and choking up rivers.
A McKinsey report indicates that making one kilogramme of fabric generates an average of 23 kilos of greenhouse gases.
Post-consumer textile waste is generated by households when the owner discards it the garment. In Europe, it can be used as mitumba in other countries while in Kenya, it will find itself in water drainages or dumps.
Mitumba importers are pushing for even more volumes that can be sorted and sold to other countries at a higher price, arguing that besides the sector creating more jobs, the reused apparel reduces environmental harm.
According to a report by the Mitumba Institute and Research Centre of Kenya, 100 cotton T-shirts reused decrease global warming by 14 percent and if they are polyester/cotton trousers, it is 45 percent toxic emissions saved.
The mitumba association argues it takes 10,000 litres of water to produce a kilo of cotton. “This is approximately 3,000 litres of water for one cotton shirt, which is enough drinking water for one person for more than two years,” it said in a report.
But the Kenya Association of Manufacturers argues that a boost to the local textile industry will boost manufacturing, consequently “creating jobs and wealth for many.”
“Kenya’s textile industry is at its infant stages. Local manufacturers have embraced green growth and sustainability in their operations since they recognise the importance of environmental restoration and conservation,” outgoing KAM chief executive Phyllis Wakiaga said.
She added that Kenya is the largest exporter in sub-Saharan Africa of garments to the US under the African Growth and Opportunity Act (Agoa) and that manufacturers are turning to solar, cutting and recycling use of water and embracing a circular economy.
Ms McCreath adds that there are different processes in the textile industry, which cause harm to the environment. The major environmental effects of the textile industry are the discharge of huge amounts of chemical loads. Then there is the associated water and pollution, and the high energy consumption.
“As soon as you use an electrical machine, dyeing uses a lot of water and chemicals, stitching and ironing use energy,” she added.
During the spinning process, a lot of fluff is produced which is harmful to workers. Furthermore, textile dyeing requires chemicals that subsequently end up in the oceans.
“However, if you take handloom weaving of a natural organically grown, un-dyed fibre and hand-spin it, the emissions are practically zero as the process uses no electricity or chemicals,” says Ms McCreath.
Every year, millions of garments are produced and excesses are sold at a discount or resorting to a landfill if they are never sold.
According to the United Nations Alliance for Sustainable Fashion, it is estimated the clothing and textiles industry is responsible for between two and eight percent of the world’s greenhouse gas emissions — more than all international flights and global shipping combined.
“A problematic area in international fashion production has been MOQs (minimum order quantity). For factories to streamline their production they have obliged designers and retailers to order a specific number,” said Ms McCreath.
“Often this number has been too high for the specific consumer markets to absorb, leading to oversupply and finally ‘dumping’ of new clothing (this often comes into Kenya with mitumba),” she added.
Kenya’s second-hand clothing imports keep rising, from Sh10 billion to Sh18 billion in the last six years. A majority of households buy second-hand clothes on fair pricing, buying only new school or workplace uniforms.
Most of the secondhand clothing imports came from the US and Europe but in recent years China has overtaken them followed by Poland, Germany and UAE.
To ensure a sustainable textile industry, the recycling of second-hand clothing is crucial.
“If it were possible to sort what comes into Kenya before shipping, there could be a reduction in environmental damage. Some things in the bundles are completely unsellable and are not taken to the market stalls,” said Ms McCreath.
Also, to make the fashion industry more sustainable, there needs to be stronger “governance” of the sector, more financing for planet-friendly innovations, and a concerted effort to change consumption habits of consumers, a United Nations Environment Programme (Unep) study recently noted.
“Only a fifth of post-consumer garments are collected for either reuse or recycling. Of these, approximately 40 percent end up in the second-hand clothing market — either being sold in a charity shop in the same country as the donation was made or more often sold on the international second-hand clothing market,” the mitumba association added in the report.
Mitumba versus new clothes: Which are a bigger polluter?
Kenyan designers are turning to recycled or climate-friendly raw materials and limiting production in efforts to protect the environment.
Akoth Otieno, a knitwear designer, uses cotton and acrylic yarns mostly from Ahero and Homabay counties, and only stitches ‘made by order’ outfits.
“The fashion industry contributes highly to environmental hazards and when we control production, we can produce what is needed and avoid wastage,” Ms Otieno says.
The 28-year-old started crocheting in 2017 after going through a rough patch in life and needing a ‘distraction’.
Ms Otieno says her business started with a sale of one scarf and she recently knitted a wedding dress worth Sh72,000.
For, Ian Kaseka, another fashion designer, his role in the race to save the environment is through refurbishing old garments.
“These old clothes are mostly dumped so enlightening people that their old clothes could have a new look helps us to conserve the environment,” he said.
He founded his company, 1V1, nine years ago. He gives old clothes a new look by painting them.
“I believe that each garment has a story to tell. With this a client is willing to pay even Sh5,000 for their garment,” he adds.
Victoria Maimba, another designer, crafts jewellery by hand and sells them from Sh6,000 to Sh10,000 a piece.
The founder of Tiger Tail Twister says social media has opened an opportunity for sellers to reach global buyers who favour environment-friendly production and recycled materials if the local market is not responsive.
“Social media has ensured that one can access the international market easily hence no gatekeeping,” she said.
Designers think green over climate
- The KRA argues cases worth billions of shillings have been pending before the courts for years, hurting revenue collection.
- The taxpayers will be refunded the deposit within 30 days if the cases are ruled in their favour.
- The Bill seeks to amend the Tax Procedures Act to encourage out-of-court settlements amid complaints that the KRA is unable to collect billions of shillings pending the conclusion of suits that take years.
Tax experts have asked Parliament to reject a proposal requiring firms and individuals battling with the Kenya Revenue Authority (KRA) in courts over tax demands to deposit 50 percent of the disputed amount in a Central Bank of Kenya (CBK) account.
PriceWaterhouseCoopers, KPMG, the Institute of Certified Public Accountants of Kenya, the Kenya Bankers Association (KBA) and the Kenya Association of Manufacturers (KAM) told Parliament that the proposal is subject to abuse by the KRA, is punitive, and will scare away investors.
The Treasury, through the Finance Bill, 2022, has introduced a requirement for a taxpayer who wishes to appeal against the decision by the Tax Appeals Tribunal (TATs) to deposit half of the disputed tax with the CBK.
Currently, courts determine whether the KRA’s demands for security are justifiable and then set the amount to be given either as a deposit or bank guarantee.
The KRA argues cases worth billions of shillings have been pending before the courts for years, hurting revenue collection.
The taxpayers will be refunded the deposit within 30 days if the cases are ruled in their favour.
The professionals asked Parliament to delete the proposal and allow the courts to determine the amount of deposit an individual or firm should pay.
The Bill seeks to amend the Tax Procedures Act to encourage out-of-court settlements amid complaints that the KRA is unable to collect billions of shillings pending the conclusion of suits that take years.
The tax professionals told the National Assembly’s Finance and National Planning Committee that whereas the Bill requires the taxpayer to deposit 50 percent of the tax in dispute before an appeal at the High Court, there is no requirement on the KRA to make similar deposit when they lose and move to the High court for appeal.
The stakeholders asked MPs to delete Section 30 of the Bill, arguing the 50 percent deposit requirement will create cash flow challenges for taxpayers.
“The taxman will give us crazy claims because they want to squeeze you to raise revenues to plug revenue collection shortfall,” Mucai Kunyiha, the Kenya Manufacturers Association (KAM) chairperson told MPs.
“We propose that Section 30 of the Bill be deleted. Let us give the judge the opportunity to decide the amount of deposit. This happens when you are facing criminal cases when people seek bail.”
PWC associate director Edna Gitachu said the 50 percent deposit requirement before lodging a suit in court will affect working capital, reduce expenditure and investment.
“Payment of 50 percent of disputed tax deprives the taxpayer the right of property before trial. This is because of lengthy judicial process. Deleting it will protect taxpayers from absurd tax assessments when KRA fails to meet revenue collecton targets,” Olive Akora, Partner Tax & Regulatory Services at KPMG.
ICPAK’s Erustus Omolo said the 50 percent deposit requirement will not benefit Kenyans because the money will be locked up under special CBK account and the money will be owned by anyone.
“This clause should be struck off. One must be presumed innocent until proven guilty. If I pay 50 percent, am I 50 percent guilty?” Mr Omolo said.
The committee chaired by Gladys Wanga met various stakeholders who made submissions on the Bill.
“I want to agree with the position taken by the Institute of Certified Public Accounts of Kenya. This will visit mayhem on Kenyans as KRA will be at an advantage over taxpayers,” Luanda MP Christopher Omulele said.
Tax experts ask MPs to reject plan to deposit half of disputed bill
- Official data shows that landed cost of basic food items like wheat, cooking gas, as well as key materials used in farming and construction, have shot up by as much as 67 percent in the past year.
- An analysis of commodities shipped into the country last year based on data collated by the Kenya National Bureau of Statistics (KNBS) shows the cost of importing cooking oil rose the highest, followed by fertiliser, iron and steel.
- The emerging global geopolitical and persistent supply chain concerns have exposed Kenya’s soft underbelly as a net importer of raw materials for manufacturing basic household items.
Kenyan households and businesses are feeling the pinch of global supply constraints and weakening shilling that has increased the cost of importing essential goods, further squeezing earnings.
Official data shows that landed cost of basic food items like wheat, cooking gas, as well as key materials used in farming and construction, have shot up by as much as 67 percent in the past year.
An analysis of commodities shipped into the country last year based on data collated by the Kenya National Bureau of Statistics (KNBS) shows the cost of importing cooking oil rose the highest, followed by fertiliser, iron and steel.
The emerging global geopolitical and persistent supply chain concerns have exposed Kenya’s soft underbelly as a net importer of raw materials for manufacturing basic household items.
The rising cost of importation has hit households hardest, prompting some of them to postpone or scale down projects.
Families and businesses that had lined up housing projects are among the hardest hit, with landed cost of iron and steel climbing 50.30 percent last year to an average of Sh90,980.70 per metric tonne compared with Sh60,472.70 the year before.
And there’s no respite for the property developers with the import price for cement clinker, a key material in making of the building material, continuing to rise further after jumping 45.51 percent to Sh6,264 per tonne last year.
This has seen cement makers increase the final cost of the key building material by at least 10 percent per 50-kilo bag to more than Sh800 on average from Sh600 pre-Covid. This is further raising the cost of construction.
“If you know any product for which the price went down in the last three to four months, I would be happy to see that product which is cheaper now than what it was last year. There’s no product [whose price has dropped], I believe, because we are in a really high inflation environment,” Seddiq Hassani, the chief executive of Bamburi Cement #ticker:BAMB told Business Daily.
“The freight costs have also increased by more than 30 percent and we all know what is happening in the fuel market.”
The farmers have not been spared. The average landed cost of fertiliser last year averaged Sh51,168.10 per metric tonne, a 56.05 percent jump from Sh32,788.80 in the prior year, according to the KNBS data, sourced from the Kenya Revenue Authority.
This means a 50-kilo bag of the farming input was priced at Sh2,558.41 when it landed at the port of Mombasa compared with Sh1,639.44 in 2020.
On the other hand, the import price for a kilo of insecticides and fungicides went up 10.99 percent to Sh711.19, further piling pressure on cost of farm inputs before government levies, distribution costs and traders’ margins are included.
The largest jump was, however, recorded in the landed cost of vegetable oils and fats that climbed 67.39 percent per kilogramme to Sh130.40 last year from Sh77.90 in 2020.
This was largely on the back of a spike in global cost of edible vegetable oils such as crude palm oil, sunflower, soybean and corn oil last year, with the prices of final products such as cooking oil, soaps and cosmetics with glycerin going through the roof.
Palm oil, largely sourced from Indonesia and Malaysia, make up about 60 percent of global edible vegetable oil exports.
Palm oil production in Malaysia has been hurt by labour shortages and floods, soybean in Argentina and Brazil by drought, while the war in Ukraine has halted sunflower oil production.
“We have tried to minimise cost to consumers by being creative and innovative with other parts of the supply chain, but overall we have had no choice but increase the prices by about 10 percent,” Rajul Malde, the commercial director of Pwani Oil, the makers of products such as Fresh Fri cooking oil and Sawa soaps, told Business Daily on April 25.
“All forms of soaps — laundry, bar, beauty and medicated — and some cosmetics which use glycerin are all affected [by the rise in global prices of vegetable oil like crude palm oil].”
Families are further feeling a pinch on their budget from runaway prices of fuels like petrol and liquefied petroleum gas which had risen by nearly half in the year through last December.
A kilo of liquefied propane and butane — the main components in cooking gas— last year cost 45.09 percent more to Sh69.50 from Sh47.90 in the prior year.
This means the landed cost of refilling a 13-kilo LPG cylinder bumped to Sh903.50 from Sh622.70 a year earlier, excluding taxes, margins, distribution costs and other expenses.
KNBS data shows the average cost of refilling a 13-kilo cooking gas cylinder in the retail market went up 38.18 percent in the year through April to Sh2,866.
Other key commodities whose import prices have gone up from last year include wheat flour that climbed 34.20 percent to Sh58.01 per kilo from Sh43.23 in 2020.
The jump in wheat import price started even before Russia waged a fierce war on its former colony Ukraine, cutting off supplies from the two countries.
That has further exacerbated the cost of the key commodity whose final product is used in baking bread and cakes as well as making chapatis.
Russia accounted for 1.8 percent (Sh38.64 billion) of Kenya’s nearly Sh2.15 trillion import bill last year — comprising wheat (Sh17 billion), iron & steel (Sh9.67 billion), fertiliser (Sh6.57 billion) and others (Sh5.41 billion), according to the Central Bank of Kenya.
The CBK data further showed Ukraine made up a measly 0.9 percent (Sh19.32 billion) of the country’s imports — composed of wheat (Sh14.3 billion), soybean (Sh1.93 billion), legumes (Sh966.12 million) and others (Sh1.93 billion).
“There’s no question that the cost of living throughout the globe has shot through the roof as a result of Covid-19 and consequently … conflicts that are ongoing in Ukraine and Russia,” President Uhuru Kenyatta said on May 1 during the Labour Day celebrations.
“But we here in Kenya have taken measures that we consider sustainable. We know people would want more, but we can only do that which is sustainable …and can afford to cushion the vulnerable, including workers, and our farmers, especially on the cost of inputs.”
The Treasury has allocated Sh5.7 billion for fertiliser subsidy to benfit small-scale farmers in the ongoing main crop planting season after supplies from Russia were cut off because of sanctions, with a further Sh1.5 billion budgeted for the October-December short-rains period.
On the other hand, the Treasury had released Sh49.164 billion by April 14 under oil pump prices stabilisation scheme which started April last year to reduce the price of the essential commodity whose cost has been exacerbated by the Russia’s war on Ukraine.
The piling inflationary pressures as a result of rising cost of basic commodities largely on the back of global supply constraints and weakening shilling have been cited by Treasury Cabinet Secretary Ukur Yatani as posing a downside risk to Kenya’s economic recovery from Covid-19 knocks this year.
“The external challenges coming from Eastern Europe and fuel [cost] challenges are going to slow the pace of growth in 2022,” Mr Yatani said last Thursday.
7.5 percent growth
“Inflation has gone up as a result of the [US] dollar prices, increase in energy and that has now been complicated by what is going on in Eastern Europe. Actually, there’s scarcity of grain, especially wheat and also edible oil … and all these impact negatively on the pace of growth of the economy.”
Kenya’s economy recovered from 0.3 percent contraction in 2020 to grow 7.5 percent, but growth is forecast to slow down to below six percent.
Global supply woes hit Kenyan consumer with costly imports
- US trade officials jetted into the country on Sunday to iron out pending concerns by President Joe Biden’s administration that have delayed the deal.
- Ahead of the talks, an influential US House of Representatives committee head backed the fast-tracking of the talks, piling pressure on the Biden administration to conclude the negotiations.
- Pressure is from US lawmakers to conclude the negotiations and pave the way for business and investments.
Kenyan trade officials and their American counterparts resumed talks on a proposed free trade pact that holds the potential of boosting exports to the world’s largest market, but one that critics fear could expose local firms up to unfair competition from American companies.
US trade officials jetted into the country on Sunday to iron out pending concerns by President Joe Biden’s administration that have delayed the deal. High on the worries of American negotiators are issues such as intellectual property practices, corruption in local tendering, and the prohibition of genetically modified organisms (GMO).
Ahead of the talks, an influential US House of Representatives committee head backed the fast-tracking of the talks, piling pressure on the Biden administration to conclude the negotiations.
The talks were initiated by Biden’s predecessor Donald Trump. They have however faced delays after the Biden administration sought more time to scrutinise the negotiated pact.
But pressure is from US lawmakers to conclude the negotiations and pave the way for business and investments.
“We must prioritise trade with Africa. A comprehensive free trade agreement with Kenya that includes market access provisions will be a necessary component,” Richard Neal of the House of Representatives was quoted saying by US press in late March in opening remarks during a House Ways & Means Committee hearing in which the panel probed US Trade Representative Katherine Tai on the Biden administration’s 2022 trade policy agenda.
“Kenya has shown a willingness to embark on a free trade agreement in the negotiations with the United States,” he said. “We should embrace it.”
Ms Tai consequently said the latest Kenya talks will lay ground for a decision on the fate of the deal.
“We’ve exchanged a set of ideas back and forth, and I will be happy to report back -- and have my team report back to yours -- on that trip,” she was quoted saying recently.
Kenya Trade Cabinet secretary Betty Maina confirmed the talks started in earnest on Tuesday.
Kenya wants to do a deal with Washington before the expiry of the Africa Growth and Opportunity Act (Agoa), which allows sub-Saharan Africa states to export thousands of products to the US without tariffs or quotas until 2025.
Nairobi has remained upbeat on the future of the talks even as the Biden administration maintained that the objectives of the bilateral pact should be recast to recognise Biden’s agenda with some of the aims of the negotiations set by the Trump administration likely to be dropped.
Protect American firms
The new administration had for instance said it wants to make sure that the objectives of the negotiations are consistent with Biden’s $4 trillion revamp of the American economy that focuses on a muscular industrial policy with an eye on fighting climate change.
His policy mix includes increasing corporate taxes to fund innovation and buy American products to expand jobs; tax incentives and penalties to encourage US firms to keep and create jobs in the US as well as $2 trillion investment in clean energy.
Biden’s plans signal that the US will be keen to protect American firms in the quest to shore up manufacturing and seek a larger share of the global trade currently in the hands of China while pushing for bilateral trade deals.
Amid Biden’s new priorities, a recent report pointed out the barriers US firms face in trading or doing business in Kenya giving a glimpse of the burning issues at hand.
The US government, for instance, slammed Kenya for its failure to approve imported GMO foods and crops saying the measure is restricting US exports to Kenya.
The United States Trade Representative Office (USTR) said in its annual report that approval by Kenyan authorities could boost agricultural purchases from the US by Kenya.
US is the world’s biggest producer of GMO crops and its farmers have been lobbying hard for end of restrictions before the deal is inked.
But since November 2012 Kenya has been reluctant to approve the importation or planting of GMO food crops, amid an ongoing debate about their safety despite several advantages such as resistance to drought, pests, and higher yields.
The move has restricted the sales of new products from US companies such as DowDuPont Inc, Bayer AG, Monsanto, and Syngenta AG which have been seeking new markets like Kenya.
“Kenya’s ban has blocked both US Government food aid and US agricultural exports derived from agricultural biotechnology,” the USTR said in its annual trade barriers list published in late March.
The US also decried graft in government tenders in Kenya, saying it locked out qualified American firms from undertaking projects. The US is keen on transparency in public procurement ahead of a new trade deal.
“US firms have had very limited success bidding on Kenyan government tenders. There are widespread reports that corruption often influences the outcome of public tenders, and many of these tenders are challenged in the courts. Foreign firms, some without proven track records, have won government contracts when partnered with well-connected Kenyan firms or individuals,” said the USTR.
The National Treasury has tried to insulate public tendering from graft. Early this year, it announced new tools in the Integrated Financial Management System (Ifmis) to enable suppliers lodge and monitor claims for tender payments remotely, removing human interaction with State officials who have in the past been on the spot for demanding bribes to facilitate payments.
The upgraded features, which come into force on February 14, allow suppliers to receive purchase orders generated from Ifmis via email as well as submit invoices and track their payment status through a government portal.
But according to the US report, American companies have expressed concerns about Ifmis “due to insufficient connectivity and technical capacity in county government offices, apathy from county government officials, central control shutdowns, and security gaps that render the system vulnerable to manipulation and hacking.
US firms also slammed what they see as persisting trade barriers when they import into the country.
They, in the report, raised concerns about the length of time required for Kenyan Customs to release shipments, as well as use of excessive formalities.
“Many US companies have commented that Kenya’s one stop customs clearance system does not operate as intended, and that pre-arrival processing of electronic documents is ineffective. Other US companies have raised concerns about the inconsistent application of classification and valuation decisions, as well as unnecessary transit inspections,” the report said.
“US industry has also expressed frustration with inadequate de minimis (too small to be meaningful or taken into consideration) relief from customs duties and taxes for express shipments. Kenya’s customs law appears to reward customs officers for aiding in the seizure of goods up to the value of the imports that have been seized.”
Kenya is currently the US 96th largest goods trading partner, according to the USTR report.
The volume of trade between the US and Kenya grew by 36 percent to Sh143.82 billion last year compared to Sh105.69 billion in 2020.
The US is the largest export destination of Kenya’s apparel, accounting for over 90 percent of garment exports every year. Of the total US imports from Kenya, nearly 70 percent is apparel, making the sector the single largest stakeholder in the proposed Free Trade Agreement.
Inside the burning issues as Kenya-US trade talks resume
- The long-running litigations pitting local companies in Kenyan and foreign courts might paint a bad picture to financial institutions.
- The contentious nature of the cases and the uncertainties surrounding the loan recovery process could force some of the creditors to review their lending policies.
- World Bank’s Ease of Doing Business in Kenya Report 2018 noted that dispute resolution was a major component in the measurement of doing business.
Protracted legal disputes between Kenyan companies and multilateral financial institutions could put local businesses under sharp scrutiny affecting their ability to access much-needed long-term capital.
The long-running litigations pitting local companies in Kenyan and foreign courts might also paint a bad picture to financial institutions such as the World Bank, International Finance Corporation, East African Development Bank, African Development Bank, PTA Bank and Afri-Exim Bank.
The contentious nature of the cases and the uncertainties surrounding the loan recovery process could force some of the creditors to review their lending policies, locking out indigenous enterprises from cheaper, long-term project financing.
Victor Njenga, an insolvency practitioner, says cases, where there is a contract, should be straightforward and need not unnecessarily drag in court for long. The advocate says courts just need to enforce the contractual rights where there is a debt.
However, he adds, that is not the case because litigants tend to file one application after another, delaying the matter in court for many years.
World Bank’s Ease of Doing Business in Kenya Report 2018 noted that dispute resolution was a major component in the measurement of doing business.
The report measured the enforcement of contracts using the time and cost for resolving a commercial dispute through a local first-instance court.
It also assessed the quality of judicial processes by evaluating whether Kenya had adopted a series of good practices that promote quality and efficiency in the court system.
Mark Kotonya, another advocate, agrees saying as things are, creditors- both local and international might be discouraged going by the trends in the loan recovery process.
“We can do better because the situation at the moment doesn’t work in our favour,” he says.
The lawyer said creditors work with statistics and they have to do a lot of due diligence before entering into transactions.
Mr Kotonya says the court system is not entirely to blame because some parties have perfected the art of delaying matters through numerous applications. He suggests that judges should be firm and enforce the civil procedure rules on expeditious disposal of cases.
Notable case involves a company linked to former Jubilee secretary-general Raphael Tuju and the East African Development Bank (EADB) over a debt of Sh1.6 billion.
Mr Tuju’s company — Dari Limited — has been embroiled in numerous court cases starting in the UK, before moving to Kenya for enforcement and recently before the regional court — East African Court of Justice, where he has sought immunity from the decision of the High Court in Kenya.
The former Cabinet secretary is further seeking damages of Sh3.1 million from the EADB, accusing the lender of “killing” his dream of acquiring and developing a multi-billion shilling estate.
EADB is a regional development finance institution serving its three member states of Kenya, Tanzania and Uganda. The major objective of the lender is to provide financial assistance to promote the development of the member states.
Mr Njenga says whereas the repayment of the loans is a positive indicator and encourages the lender to release more money to businesses, where a borrower doesn’t want to settle the amount, gives a negative impression to the lenders.
In 2006, the International Finance Corporation (IFC), the commercial lending arm of the World Bank, was involved in a loan dispute with a Kenyan horticultural firm Redhill Flowers, and another company, Gimalu Estates Limited, linked to former powerful operative in President Moi’s regime, Mr Samuel Gichuru.
Apart from court cases involving high-profile individuals and companies, at least 20 Kenyan firms have recently been blacklisted by the World Bank and the African Development Bank (AfDB) for alleged financial improprieties and quality concerns linked to procurement contracts awarded by the two institutions over the last two years.
In February 2021, AfDB banned a Kenyan civil engineering firm, Global Interjapan Kenya Limited, from participating in its contracts over tender irregularities in a Sh7 billion irrigation project.
Africa Development Professional Group, a consultancy, was locked out of World Bank projects for alleged fraud. Others include Aerospace Aviation, Beta Trading Company, Techno Brain Kenya Limited and Sony Commercial Agencies.
Lawsuits come with increased legal and reputational risk for multilateral and regional banks which are governed by treaty instruments establishing them and regulating their operations.
At the heart of such legal tussles is the enforcement of treaties and other international legal instruments as well as judgments by foreign courts in the local jurisdiction where the parties operate.
The Constitution states that treaty or convention ratified by Kenya shall form part of the law of Kenya. This means the Convention on Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters is applicable in Kenya.
There is also the Treaty Making and Ratification Act of 2012 that governs treaties Kenya has entered into with other States and international organisations.
As parties to such treaties, governments are expected to facilitate expeditious resolution of disputes as part of their obligation of ensuring smooth function of treaty-based institutions.
In her ruling in the Tuju case in January 2020, Justice Wilfrida Okwany noted that the Foreign Judgments (Reciprocal Enforcement) Act requires Kenyan courts to recognise and enforce judgments of UK courts.
The judge held that the UK judgment could be enforced against Tuju’s company.
“I find that contrary to the judgment debtor’s position on the issue of public policy, the failure by this court to recognise, register and enforce the impugned judgment may give rise to the undesirable conclusion, in the eyes of other democratic states that observe the rule of law, that the repayment of loans is against public policy in Kenya or that Kenya is a country that does not observe its own laws, in this case, the Act,” she said.
She noted that the English court judgment cannot be impeached by the court as suggested by Tuju’s lawyers.
“This court is at a loss as to how a valid judgment for the enforcement of a contract between private individuals and entities can be construed to be inconsistent with the Constitution or other laws of Kenya; inimical to the national interest of Kenya; or contrary to justice and morality,” said the judge.
EADB later appointed receivers to manage Dari’s assets in a bid to recover the amount owed, but Tuju moved to the Court of Appeal and stopped the takeover.
Mr Tuju maintains that the bank’s move was meant to frustrate his plan of repaying the debt.
“We find that the insolvency proceedings and the enforcement notices are all anchored on the UK judgment, which arises from the debt instrument, that is, the facility agreement dated 10th April, 2015 executed by the parties. Therefore, unless the order of stay of execution and proceedings is granted, the appeal will be rendered nugatory,” said Justices Hannah Okwengu, Patrick Kiage and Agnes Murgor.
The Tujus argued that they are likely to be subjected to insolvency proceedings and likely to be committed to civil jail over the disputed debt.
The court also heard that the bank would not suffer any prejudice because it holds security over the property in Karen.
The dispute stems from a loan agreement his company — Dari Ltd borrowed the bank on April 10, 2015, under which it agreed to give Dari a $9.3 million (Sh943.9 million) loan. Part of the deal to fund the acquisition of a property in Karen known as Tree Lane and for development and construction of residential units.
Mr Njenga notes that the case in UK took about four months and it was concluded but that has not been the case here in Kenya as the matter has dragged on for three years.
Kenyan firms’ wars with global lenders risk access to loans
- The financial institutions, which are mostly owned and financed by governments, have been keen to curb corruption in their projects, which run into billions of dollars annually.
- Arising from the huge number of Kenyan firms that have been blacklisted, the AfDB recently revealed plans to hire quality assurance experts to enable greater transparency and oversight of its funded projects.
Last November, the World Bank and the African Development Bank (AfDB) blacklisted more than 20 Kenyan companies over fraud and quality concerns in projects funded by the multilateral lenders.
The firms were blocked following claims of fraudulent practices for projects they have funded in Kenya and the region.
The financial institutions, which are mostly owned and financed by governments, have been keen to curb corruption in their projects, which run into billions of dollars annually.
The firms include the Africa Development Professional Group, which was debarred for 21 months and will be ineligible to participate in any World Bank-financed projects during the period.
The AfDB on its part had listed blacklisted firms including Aerospace Aviation, Beta Trading Company, Global Interjapan (Kenya) Limited, Eva-Top Agencies, Madujey Global Services, Mactebac Contractors Limited, Techno Brain (Kenya) and Sony Commercial Agencies.
Others are Inotec Co. Limited (Kenya branch office), Sino-Kenya Engineering Group Company Limited, Rockey Africa Limited, Reef Building Systems Limited (Reef), Ultimate Engineering Limited, Express Automation Limited and Kenya Power contractor Chint Electric.
Arising from the huge number of Kenyan firms that have been blacklisted, the AfDB recently revealed plans to hire quality assurance experts to enable greater transparency and oversight of its funded projects.
As part of its efforts to improve its cooperation with anti-corruption and law enforcement agencies, AfDB’s Office of Integrity and Anti-Corruption last year negotiated and signed a memorandum of understanding (MoUs) with the Kenyan Ethics and Anti-Corruption Commission.
“The MoU will serve as framework for collaboration on corruption prevention, training and information sharing,” said AfDB then.
It is not all gloomy, however as World Bank had announced in February that it would finance more than 250,000 small and medium enterprises in Kenya this year, to help them recover from the impact of the Covid-19 pandemic.
The funds issued under the global bank’s International Development Association are expected to address financing challenges faced by the sector despite constituting 98 percent of all businesses in Kenya.
The financing will be issued under the Supporting Access to Finance and Enterprise Recovery project and will be facilitated through microfinance banks, savings and credit co-operative society and digital lenders.
World Bank, AfDB crackdown shines spotlight on SMEs
- A few months ago, Nairobi consumers used to buy kamande, a type of lentil eaten as protein in many homes, at Sh180 per kilogramme.
- During long periods of failed rains, low harvests push up prices of the few supplies available in markets.
- The food items are not in season currently, meaning that the few farmers who are harvesting are selling them at high prices.
In the past few months, inflation has swerved around retail stores hitting almost all food items, from flour, cooking oil, and milk to eggs.
Now it has reached the vegetables, lentils, and beans markets.
Prices have started skyrocketing and demand is gradually reducing as consumers seek alternatives or reduce purchases.
A few months ago, Nairobi consumers used to buy kamande, a type of lentil eaten as protein in many homes, at Sh180 per kilogramme. Then the price went up to Sh200. Now some sellers are asking for Sh300 a kilo.
“The problem is we rely on importers to sell to us kamande which comes mostly from Canada and there has been a shortage, pushing the price to Sh250. Prices of brown and green grams (ndegu) have also increased by Sh30 to Sh180 per kilo,” says Rahab Wangui, a seller at Nairobi’s City Park market.
During long periods of failed rains, low harvests push up prices of the few supplies available in markets. Experts say the price jump is normal because it is being dictated by market forces.
The food items are not in season currently, meaning that the few farmers who are harvesting are selling them at high prices.
Increased fuel prices, coupled with high production expenses such as fertiliser and labour, have added to the cost of transporting the produce to markets.
Butter beans, chickpeas, and tomatoes are among the items becoming significantly more expensive for the average Kenyan consumer.
“I used to sell them for Sh150 a kilo (both butter beans and chickpeas) but now I sell them at Sh200,” Ms Wangui says, adding that currently most of the butter beans that she sells come from South Africa and Italy.
The latest Economic Survey shows beans production has been dropping over the years. In 2018, Kenyan farmers harvested 9.3 million bags of beans but two years ago it dropped to 8.6 million bags.
Peter Chege, also a seller at the City Park Market in Nairobi’s Parklands says the biggest price driver is the drop in local production as farmers try to stabilise after the pandemic disrupted their sources of income, forcing others to abandon farming. Global production has also been disrupted by the Ukraine-Russian war.
For kamande, local production is very low, forcing sellers globally to rely on markets such as Canada, Australia, and India.
In Africa, the crop is grown commercially in Ethiopia, Sudan, and South Sudan. Research shows that kamande grows best in hot areas and it is tolerant to drought conditions, meaning that it can do well in Nyanza and Eastern Kenya.
Prices of traditional vegetables have also risen with herbs doubling. Farmers blame the poor rains which have affected vegetable production.
“Traditional green leafy vegetables, such as managu (African nightshade), and sukumawiki have also seen a steady increase in price from Sh20 to Sh30 per bunch. Herbs such as coriander, commonly known as dhania used to go for Sh5 a bunch but now goes for Sh10,” says Chege.
For sellers who have maintained the prices to keep customers, they have had to reduce quantities to stay afloat.
There is also a shortage of chives, a herb, which has led to an increase in price from Sh80 to Sh100 per kilo. Bitter gourd, commonly known as bitter melon now goes for Sh200 per kilo from Sh150, whereas okra has gone up by Sh50 to Sh150 per kilo.
Tomato prices have also gone up, data from the Ministry of Agriculture shows, and now retail at Sh150 per kilo at maximum, from Sh80 a few months ago.
Climate change impact
Climate change has played a big role.
“The sun has been too hot and as such growing veggies like coriander has been a challenge as this type of crop grows best in the cold season,” explains Chege.
Hot weather causes vegetables such as coriander to bolt quickly and reduces its foliage development.
With the increase in prices, consumers struggling with skyrocketing household budgets have reduced their purchases of most food items.
In most homes, overall income declined during the pandemic, forcing them to only spend on essentials. And with the proportion of income taken up by food purchases, any periodic price spikes in basic commodities squeeze poor people’s spending power.
“Nowadays people don’t buy dhania as much as they used to. We started seeing a drop in several consumers asking for them when Covid-19 hit, a period when many people lost their sources of income. And the buyers are reducing further as prices go up,” says Chege.
“Vegetables are not as easy to come by nowadays so we have been forced to gradually increase the prices, and even when we do get them, the suppliers sell them at a high price. For instance, they used to sell us tomatoes at Sh50 per kg now they have increased to Sh70, yet we used to resell a kg at Sh70,” he adds.
Carrots, which have a reputation for being difficult to grow, have finally given farmers good money. Those supplying them to markets are selling Sh80 per kg from Sh50 previously.
The price of cabbage has left many Kenyans considering other vegetable alternatives after it rose to Sh70, yet during the glut season, it drops to Sh5.
The rising prices of many foodstuffs such as vegetables and lentils that have been supporting the nutrition of millions across the country pose a fresh challenge in the war against malnutrition and hunger.
According to Chege, there is a low supply of cabbages yet the demand remains high because it is favoured by many households. Broccoli, which used to go for Sh100 per kilo now goes for Sh200. Eggplants and avocados too have increased in price.
Skyrocketing vegetable, cereal prices paint bleak food security picture
- The taskforce formed by The Actuarial Society of Kenya (Task) and Financial Sector Deepening (FSD) Africa, and funded by the UK government through UK Aid, seeks to manage financial threats.
- The insurance sector is highly exposed to economic shocks because of insuring companies with high levels of ESG risks.
- Elias Omondi, the Task chairman, says insurers are still in the infancy stage of understanding ESG issues and their application.
Actuaries have formed a task force to train insurers and other professionals on environmental, social, and governance (ESG) risks.
The taskforce formed by The Actuarial Society of Kenya (Task) and Financial Sector Deepening (FSD) Africa, and funded by the UK government through UK Aid, seeks to manage financial threats.
The insurance sector is highly exposed to economic shocks because of insuring companies with high levels of ESG risks, for instance, in the oil and gas industry, huge carbon emissions emitters, and causing damage to soils, water, and vegetation.
Elias Omondi, ESG Taskforce chairman, says insurers are still in the infancy stage of understanding ESG issues and their application. Therefore, the actuarial task force will identify and monitor risks and opportunities related to ESG issues and address uncertainties that may arise.
“We have come up with workstreams that will deal with training and awareness on what ESG risks are and what opportunities arise. We are also engaging policymakers and regulators on issues they need to look at to influence financial changes,” said the chairman of ESG Taskforce.
Actuaries analyse financial costs of risk and uncertainty to determine the premiums of policies. The professionals have raised the alarm on risks that may be thrown to the insurers if companies do not comply with ESG issues, threatening the firms’ returns and continuity.
Corporate governance and social risk factors affect insurers’ customer and employee base, hence impairing their financial strength. Climate disasters can also lead to increased higher claims with higher severity and frequency.
As a result, the ESG taskforce will research physical risks that relate to events such as drought and floods; and transitional risks related to policy and technological changes.
The research will also include liability risks arising from those who will need to be compensated out of a shift to practices that comply with the new guidelines.
“Most insurers do not consider the impact on the environment when it comes to underwriting decisions. Most will be thinking about getting money and premium and forget about what will happen,” Mr Omondi said.
“This is what we want to start inculcating in their minds. They need to know there are risks that whenever they protect a particular front, they might be destroying the environment.”
Some companies especially listed firms were already ahead of the curve in ESG reporting processes due to a shift in investor focus.
Investments in new technology, renewable energy sources, replacing processing plants or manufacturing processes for cleaner alternatives, planting of trees to offset emissions or social programmes like sanitation and water are expected to come with high financial costs and a hit on the firms’ balance sheet.
The taskforce chairman says the companies cannot shield their balance sheets by overlooking ESG integration.
“We can’t wait until there is nothing to insure. You can just continue doing the same thing. At the end of the day, there will be no environment, people, or resources to ensure. So we have to look at how then we balance this out,” he said.
The ESG taskforce is also pushing for tax incentives to cushion companies.
“If these (ESG) policies are implemented there may be shocks within the company’s processes. Out of integration of ESG, they should be some benefits that come their way like tax relief, green government bonds and interest rate higher,” he said.
Regulators set up climate task force to help actuaries
- Supply chain disruptions caused by the Covid-19 pandemic as well as Russia’s invasion of Ukraine in late February have curtailed shipments of key fertiliser components.
- In face of the global shortages, the price been rising with every passing day, jumping as high as Sh6,000 per 50-kilogramme bag, nearly double the price a year ago.
- Some farmers have found an answer in organic fertiliser, which is not only cheaper but also easily accessible and environment-friendly compared to the synthetic type they have been using.
The sustainability of crop farming has increasingly come into question in the past few weeks as fertiliser prices skyrocket.
Supply chain disruptions caused by the Covid-19 pandemic as well as Russia’s invasion of Ukraine in late February have curtailed shipments of key fertiliser components such as Nitrogen, phosphorus, and potassium from the two countries, which are among the world’s biggest suppliers.
In face of the global shortages, the price been rising with every passing day, jumping as high as Sh6,000 per 50-kilogramme bag, nearly double the price a year ago.
Farmers have been forced to make tough choices — either dig deeper into their pockets to access this indispensable farm input that is crucial for better yields and pest management, or minimise on their costs by cutting on the acreage they put under production.
Some large-scale farmers, especially in the North Rift, have reportedly opted for the latter option, which analysts warn will worsen the country’s already precarious food security situation.
But for small-scale farmers, the choice is not so black-and-white. Being more dependent on the farming ventures for family sustenance, they need to put every bit of the small acreage they have under production and all the input they can get to guarantee better yields.
Such farmers have found an answer in organic fertiliser, which is not only cheaper but also easily accessible and environment-friendly compared to the synthetic type they have been using.
One of them is Scolasticah Wambui, who farms maize, beans, as well as vegetables such as kales, spinach, and cabbages’ in Gakonye, Kiambu County.
Mrs Wambui says that she stopped applying synthetic fertilisers on her plants since she could not afford the products. That their application was also making her soil toxic played a role in the shift.
On her two-acres farm, for example, she used buy five 50-kilogramme bags of fertilizers for about Sh3,000 each before prices shot up, meaning that she was paying around Sh15,000 a year. Today, to buy the same input, she would need at least Sh30,000.
“If I buy fertiliser with that price then it means my earnings will drop by nearly a quarter if market prices remain constant,” she tells the Business Daily.
Instead, she now uses Mazao Flourish, a liquid organic fertiliser which costs her Sh500 per acre, saving her a lot of money. The fertiliser is made from living organisms and microorganisms that control plant diseases as well as boost yields.
She is full of praise for the fertiliser, saying she has seen it help minimise disease damage from several soil borne fungi whilst helping her plants overcome environmental stresses through increased root development.
Real IPM, the firm behind the Mazao Flourish brand works with farmers to create awareness, stressing on the low-hanging yields and income boost benefits.
“I wish I would have known about organic fertiliser earlier. I have never harvested such good yields from my land for the last 10 years.”
"From the produce I sell, I am now able to comfortably cater for all my household needs, but not limited to school fees and medical expenses and still save from my profits” Mr Wambui adds.
Moses Bikokwa, a French beans farmer also from Kiambu says that his farm production has increased by more than 20 percent since he shifted to organic fertiliser.
“I am able to harvest so much more from the same piece of land. For instance, last season, I harvested an extra 300kgs of French beans from my one acre farm.”
Likewise, he is saving around 30 percent in farm input cost that he would otherwise have incurred from synthetic fertilisers.
The biggest challenge for bio-fertiliser is the attitude change, which contributes to the slow adoption by farmers.
They have been using the same farming methods for such a long time and it takes quite some time to convince them to adopt new farming techniques.
Real IPM General Manager Samuel Ngugi tells the Business Daily that the tide is however starting to change as other farmers see the real benefits from the early adopters.
Mr Ngugi says their product reduces fertiliser usage by 25 percent besides increasing yields by up to 25 percent.
"Our technology is working, and we are working in collaboration with our partners to ensure all farmers benefit from it,” Mr Ngugi says.
Unlike synthetic top dressing, Mr Ngugi reckons that farmers can save between 30-40 percent in farm income losses by using eco-friendly enrichers.
"Farmers need not to worry about the soil acidity as Mazao Flourish is a biological mixture of beneficial microbes, which are living organisms that promote growth by increasing the supply of primary nutrients to the plant," Mr Ngugi adds.
The company, which is based in Thika, Kiambu, also operates in Tanzania, Uganda, Ethiopia, Ghana, Mozambique and South Africa.
It has employed over 100 Kenyans in the supply chain.
The firm, which has reached out 10,000 farmers through its network of agro-vets and distributors nationwide, produces 5,500 liters of bio-fertilisers per week, making an annual production of 286,000 liters.
Demand for organic manure is also set to rise after the Ministry of Agriculture capped sales of subsidized fertilizers at 20 bags, meaning big-scale farmers will have to look for alternative manures.
Expensive fertiliser pushes farmers to organic farming
- The report by the Global Alliance for the Future of Food warns that the promotion of industrialised food systems at the expense of environment-friendly agricultural production systems like agroecology is aggravating biodiversity loss.
- The report is compiled from studies of agroecology practices and programmes in Kenya, Malawi and Senegal.
- In 2022, the economy is projected to stabilise at 6.0 percent supported by recovery in agriculture, industry and services sectors.
A new report has called on African countries to give priority to sustainable farming practices in their national policies and budgets to ensure food and nutrition security and build resilience against climate shocks.
The report by the Global Alliance for the Future of Food warns that the promotion of industrialised food systems at the expense of environment-friendly agricultural production systems like agroecology is aggravating biodiversity loss, deforestation and greenhouse gas emissions.
“The industrialised food system is one of the greatest stressors to the health of the planet, causing 80 percent of biodiversity loss and generating almost a quarter of global greenhouse gas emissions. Alternatively, agroecology, regenerative practices and indigenous knowledge are avenues that can lead to sustainable food systems and repair the relationship between people and nature,” the alliance says.
“However, the evidence supporting these practices, although abundant, is not prioritised in government policies or budgets, due to the limited frames of traditional analysis. Scepticism ends up holding back the urgent transformation of food systems.”
The report is compiled from studies of agroecology practices and programmes in Kenya, Malawi and Senegal.
The agricultural sector is the largest contributor of Kenya’s GDP and employs the highest population.
In 2022, the economy is projected to stabilise at 6.0 percent supported by recovery in agriculture, industry and services sectors.
However, globally it is already one of the economic sectors with the largest environmental impact.
In line with growing population, global demand for food and changes in dietary habits, there has been additional pressure on agricultural activities, making them unsustainable.
Global Alliance for the Future of Food is calling for better practices such as efficient application of fertilisers and better manure management without causing any food shortage.
A study of the Soil, Food and Healthy Communities (SFHC) programme in Malawi showed that the agroecological practices used by farmers have increased household food security and nutrition.
The report also seeks to debunk the notion that indicators used in traditional agriculture such as yield per hectare or scalability are insufficient to prove the capacity of agroecology to feed the community through sustainable food systems based on equity and not just large-scale food production.
Another study done in Senegal found that agroecology was as productive as conventional agriculture once soil fertility is restored.
The Kenyan pastoral system of leaving the grazing land to regenerate and the government's move to secure customary land tenure rights have been cited as one of the practices aimed at enhancing sustainable natural resource management.
The report cautions that countries will be unable to respond to the major global challenges if they do not take into account such evidence in their decision-making about the future of food and solutions.
“Agroecology, regenerative approaches, and indigenous foodways are systemic solutions that are already delivering positive health and nutrition outcomes, a sense of purpose and dignity, social justice and climate action, across Africa and for millions of people worldwide,” says Lauren Baker, senior director of programmes at the Global Alliance for the Future of Food.
“With this new material in hand, donors and researchers alike will be able to leverage the transformative power of agroecology, indigenous and regenerative practices and accelerate change at a time when it is needed more than ever.”
The report coincides with the proposal by Kenya’s Treasury in its 2022/2023 budget statement to issue Sh147 million for the Climate Smart Agricultural Productivity Project and Sh850 million to enhance drought resilience and sustainable livelihood.
About Sh1.5 billion will be given for the small-scale irrigation and value addition project.
The food and nutrition sector will receive Sh46.7 billion in the budget.
The initiatives are aimed at increasing agricultural productivity and enhancing resilience to climate change risks in targeted smallholder farming and pastoral communities in Kenya, and support smallholder farmers to sustainably produce and market various commodities.
“As part of the Big Four Agenda, the government is implementing measures and interventions to achieve food and nutritional security for all Kenyans. These measures include: supporting large-scale production of staple food; expanding irrigation schemes; increasing access to agricultural inputs; and supporting small-holder farmers to sustainably produce and market commodities,” Treasury Cabinet Secretary Ukur Yatani said.
New report makes a case for sustainable farming
- As politicians get busier crisscrossing the various terrains searching for votes, some are bound to commit electoral offences.
- Although Kenyans encounter some of these offences daily, they tend to be more prevalent during the election period.
- The Election Offences Act was enacted to guard against poll offences and empowers the Director of Public Prosecutions (DPP) to order investigations and prosecute such offences.
The August 9 General Election is fast approaching. As politicians get busier crisscrossing the various terrains searching for votes, some are bound to commit electoral offences.
The election-related offences include voter bribery, hate speech, violence, offensive conduct that might cause a breach of peace, wrongfully inducing voters to boycott the elections, false claims by persons employed in the Public Service, abuse of office, unauthorised administration of oaths and even murder.
Although Kenyans encounter some of these offences daily, they tend to be more prevalent during the election period.
Both the Independent Review Commission (IREC), popularly known for its Kriegler Report, which was formed after the 2007-08 post-election violence, and the Waki Report, traced misuse of language during the campaigns and negative ethnicity, as some of the reasons that led to the violence.
This time around, Big Brother is watching and all institutions mandated with ensuring that the forthcoming elections are held in a peaceful environment are on alert for potential trouble.
The Election Offences Act was enacted to guard against poll offences and empowers the Director of Public Prosecutions (DPP) to order investigations and prosecute such offences.
In the past, the prosecution has lost cases in which politicians and, in some instances, voters had been accused of election offences.
There have been many cases of voter bribery and mass transfer of voters, while others continue campaigning well beyond the Independent Electoral and Boundaries Commission deadline. Getting a conviction, however, has been difficult.
Recently, a Nakuru court rejected charges against Kapseret MP Oscar Sudi because the prosecution failed to show that he was in a public place and that his utterances were likely to cause a breach of peace.
Mr Sudi had been charged with two counts of hate speech and offensive conduct but he was set free because the prosecution did not adduce evidence to prove that the alleged hateful message stirred ethnic hatred.
The court noted that there were no witnesses who stated the effect of those words on them or that the utterances were likely to resort to violence.
During the 2013 election contest between current Makadara MP George Aladwa and Benson Mutura, a witness — Daniel Nyakundi — admitted in a petition Aladwa filed that he had been bribed.
Although the witness said many others were influenced and voted more than once, presiding judge Richard Mwongo ruled that the admission was insufficient to prove an offence.
The judge, however, directed the arrest of Mr Nyakundi, who was jailed for two years, after pleading guilty to bribery.
In the 2017 polls, in Wajir, many people were assisted to vote due to the high incidence of illiteracy, especially in Wajir East Constituency. But in doing so, the officials were accused of influencing the voters, a matter that was raised in court as it constitutes an election offence.
Although the allegation was refuted, the trial court found that the presiding officers had not complied with the procedure for assisting voters, which required that a note be made in the voter register next to the names of the persons assisted indicating the fact of the assistance and the reasons.
The court, however, did not make any specific finding or recommendation of alleged offences nor was there an evaluation of whether the commission of offences was proved to the required standard.
And without a recommendation to the DPP, as required, it was unclear what action was to be taken against the presiding officers who were indicted.
In yet another election, in the Mombasa governor race, the court noted some polling clerks had signed Forms 35A purporting to be ODM and Jubilee Party agents, which they attributed to fatigue.
Since there was no justification for signing Form 35A under the guise of being political party agents, the court recommended to the DPP to institute investigations and determine whether the polling clerks should be charged with an electoral offence.
Now, to ensure that the failures experienced in the past are not repeated, DPP Noordin Haji recently launched a Compendium on Electoral Justice.
Mr Haji said the development of the outline was informed by an analysis of the cases handled by his office, arising from the previous elections, which identified the urgent need for a paradigm shift in the prosecution of related offences.
“The compendium is, therefore, intended to address the identified gaps and ensure consistency, accountability, transparency and integrity in the investigation and prosecution of electoral and related offences,” Mr Haji said.
He noted that election offences can subvert the democratic will of the people and constitute a serious security threat to the people’s rights and values such as democracy.
“Safeguarding such rights and combating election offences requires not only trained and well-organised prosecutors but also prosecutors who are supported and protected by their governments. This is also possible when there are policies and guidelines in place to guide prosecutors,” he said.
The role of the DPP under the Election Offences Act is to direct investigations on the offences, commence prosecution within 12 months of the election, and compile reports of cases relating to infringements of the law countrywide.
The reports provided will enable the National Council for the Administration of Justice (NCAJ) to constitute specially gazetted magistrates for election offences.
The DPP said his office has already established the Hate Speech and Election Justice Division, reviewed the template charge sheets for poll offences, developed a checklist on the admissibility of electronic evidence and reviewed the reporting template tool for election and related offences, for capturing data.
Mr Haji said regional coordinators have been identified as focal point prosecutors, who will be responsible for compiling reports and data of election offences and forwarding them to the DPP through the Hate Speech and Election Justice Division.
“At the ODPP, we are committed to ensuring that the perpetrators of electoral offences are effectively prosecuted and punished,” he warned.
On her part, Chief Justice Martha Koome said the fair, efficient, timely, and effective settlement of electoral disputes is a crucial component of having a successful electoral process.
Just like the ODPP, the Chief Justice said the Judiciary is also enhancing its elections preparedness.
“We have put in place the Judiciary Committee on Elections that has developed and is implementing a comprehensive election preparedness work plan to ensure that the institution is positioned to discharge its mandate optimally. We have already embarked on training of judges and judicial officers on electoral offences and connected matters,” she said.
The CJ said she has gazetted 120 magistrates to serve as special magistrates to hear and determine matters relating to the Election Offences Act. Under the Act, Election Offences courts are mandated to hold sittings on a day to day basis until the completion of the trial.
In February, Justice Koome directed the magistrates handling hate speech matters under the National Cohesion and Integration Act to finalise all pending cases within four months.
The Chief Justice also said the Judiciary is working on a plan to implement special hate speech courts in the hot spot areas to ensure expeditious resolution of such matters.
“The confidence in our electoral justice system is key given that in its absence, the public might resort to extra-legal means of settling election and six election-related disputes,” she said.
How Haji plans to fight election offenders in the run-up to August 9
- For the first time in years, the price of eggs has shot up by 25 percent, threatening the fight against hunger and malnutrition in poor households.
- Eggs have been a popular food and source of high-quality protein in many homes because they could be produced and bought at affordable prices.
- Low-priced eggs have benefited both the nutritional status of poor consumers, reduced child malnutrition and the livelihoods of small-scale poultry producers.
Four years ago, many Kenyan entrepreneurs would afford to keep poultry and earn from the business. But not anymore. A poultry farmer would spend about Sh580 to raise a day-old chic until it is mature enough to lay eggs or sold for meat.
But now they would need at least Sh850 to bring it up.
The exorbitant prices of animal feeds have seen a high number of farmers sell off their stock, with no immediate plans of replenishing it. The closure of poultry enterprises has sparked a shortage of eggs and meat.
For the first time in years, the price of eggs has shot up by 25 percent, threatening the fight against hunger and malnutrition in poor households.
Eggs have been a popular food and source of high-quality protein in many homes because they could be produced and bought at affordable prices. Low-priced eggs have benefited both the nutritional status of poor consumers, reduced child malnutrition and the livelihoods of small-scale poultry producers.
A research done by the International Livestock Research Institute (ILRI) in 2016 shows that eggs, meat and milk were widely consumed by poor Kenyans, with these animal-source foods making up nearly 40 percent of their food budget.
“Half of this (the food budget) is spent on dairy products,” the research noted.
But with an increase in the cost of buying eggs and rearing chicken, not many poor households can afford to buy an egg for Sh15 or Sh465 for a tray as the market responds to the supply woes and increased demand by households and restaurants.
Poultry farmers say consumers should tighten their belts because it is about to get worse as more and more entrepreneurs find it hard to sustain their businesses.
Wairimu Kariuki, chairperson of Kenya Poultry Farmers Association says very few farmers have been left with chicken as a majority of them closed their businesses.
“When feeds became a problem, farmers could no longer sustain their businesses, creating a shortage in supply at the market,” says Ms Kariuki.
She adds that feeds are the backbone of any successful enterprise in poultry farming and a lack of it or extremely high prices renders the business useless.
Kenchic, one of the region’s largest poultry firms, says their production has also gone down by 30 percent on the back of the current woes facing the sector.
Many supermarkets and restaurants rely on large-scale producers like Kenchic to supply them with eggs and chicken, and a drop in production means that soon supermarket refrigerators and hoteliers will have no chicken to sell or will further increase the prices.
“The outlook for this year is not any better and we expect the situation to remain the same for the whole of 2022,” says Apollo Gichane, Kenchic regional sales manager.
Dr Gichane says production cost in the industry remains high at the moment and that farmers are struggling to keep the birds.
He says Kenchic has had to start training farmers to help them to learn efficient ways of taming the high cost of production. The farmers are taught how to make their own feeds using maize, sunflower and soy cake.
“At least 70 percent of the total cost of production in poultry farming comes from feeds. We are training farmers to be efficient in their poultry enterprise,” he says.
However, as farmers make their own feeds, there is also the challenge of buying maize and sunflower cake whose prices have increased. The farmers are competing with cooking oil makers to buy the few sunflower seeds grown locally.
Much of these supply woes are attributed to the Russia-Ukraine war. Ukraine is the highest producer by volume of sunflower seeds.
Kenya relies on the supply of these ingredients from Zambia, a key source market, which last year banned the export of soya and sunflower meals to protect its local market.
The cost of soya has doubled to Sh130 from Sh65 a kilogramme in August last year, while sunflower meal went up from Sh25 to Sh35.
The price of a 70-kilogramme bag of dairy meal has gone up from Sh3,400 in December last year to Sh3,500 currently, chick marsh is retailing at Sh4,300 from Sh4,200 while layers is now selling at Sh3,900 from Sh3,800.
Some farmers have also turned to black soldier flies, which are made by converting organic waste, picked from food markets, into fast-growing, protein-rich larvae of black soldier flies, which are eaten by the chicken.
The larvae contain 35 to 45 percent of protein, which is crucial in the growth of the birds. But the chicken still needs a high intake of carbohydrates. Carbohydrates, which mainly come from maize, make up the biggest component of a poultry diet.
The recent jump marks the highest price to have ever been recorded in the country with millers warning that the cost will continue to go up if the current standoff on the importation of yellow maize is not resolved.
Animal feed manufacturers have been allowed to import yellow maize with some minimal levels of genetically modified organism (GMO) after the Ministry of Agriculture reviewed an earlier directive that made it hard for processors to import.
In the review to be gazetted soon, the government has agreed to lower the requirement on imports of duty-free yellow maize to 99.1 percent, implying that contamination levels of up to 0.9 percent will be permitted.
The directive that had been issued on importation of this maize last November required processors to ship in maize without any traces of GMO, a move that saw millers fail to ship in even a single bag of the produce.
Livestock PS Harry Kimtai says the move will help in lowering the cost of production as well as the cost of animal products in the market.
“We have had to review to give a reprieve to farmers who have witnessed the high cost of production in the country,” he says.
Mr Kimtai also said feed manufacturers have been allowed to import GMO cotton seed cake from any part of the world to boost the production of feeds in Kenya.
Cotton seed cake, together with other ingredients like sunflower cake, which are key protein supplements have been in a short supply not only locally but also in the regional market where Kenya sources most of its stocks.
Millers had written to the government in February wanting it to review the requirement to allow traders to ship in the produce.
Treasury secretary Ukur Yatani removed import duty on eggs for hatching to boost the supply of chicken products.
The Treasury recommended a waiver of the 25 percent excise duty on imported eggs, which had cut the production of day-old chicks. However, even with an increase in production of chicks, feeding them remains a headache.
Traders are already feeling the pinch citing the sharp increase in price on the shortage locally as farmers cut on their stocks, traders are staring at the closure of businesses.
Their alternative source market — Uganda — supplies few volumes amid tight surveillance at the Kenya-Uganda border to stop the smuggling of the eggs.
“We are not getting enough supplies from farmers as we used before and the shortage that we are experiencing now is what has pushed up the price,” said James Ng’ang’a, a trader in Nairobi, in a past interview.
The price of layers marsh has been on an upward trend since last year with a 50-kilogramme bag of Unga Limited retailing at Sh3,100 a bag from Sh2,500 last year in March, pushing up the cost of production at farm level.
Kiambu Farmers’ Cooperative Society coordinator Zachary Munyambu said out of the group’s 750 members, only 430 are still in business with the rest having shut down.
“Poultry farming has now become unsustainable, farmers have closed their businesses, cutting on supplies of eggs in the market,” said Mr Munyambu.
He said most of the members are operating below their capacity due to the current challenges in animal feeds.
Mr Munyambu said all has not been well for the farmers who had been enjoying affordable feed prices in the last four years because the cost of raw materials for making animal feeds has become scarce and expensive.
“About 280 members have closed their poultry farms and most affected are women, youth and retirees,” he said.
“Farmers with more than 1,000 birds can hardly manage to run their business. Currently, most of them are leaving the business,” he said.
He said the poultry industry is slowly dying should action not be taken, Kenya may be forced to start importing not only feeds but also animal by-products such as eggs and meat.
Mr Munyambu, who has been practising poultry for the last 18 years has cut down the number of his birds from 3,000 previously to about 1,000 due to the high cost of production, and so is Chris Mwangi who is now keeping 200 birds from 3,000 previously.
“The duration of keeping the birds lengthened because of a reduction in the amount of feeds that I used to feed them. This means that they had to take longer to mature, hence subjecting us to losses,” said Mr Mwangi.
Costly eggs threaten war on malnutrition in poor households
- Of the top five listed lenders by market capitalisation, Equity Holdings has offered its shareholders the biggest capital gain since 2009 with its value up by a factor of 3.62 times.
- In the period, the blue-chip heavy NSE 20 share index has dropped 42 percent of its value, from 3176 points to 1853 today.
- The analysis takes into account the last time one of the five lenders — Co-operative Bank — listed at the end of 2008.
If you invested Sh100,000 in shares of each of Kenya’s five largest banks at the end of 2009 and held onto the haul to date, you could have made anywhere between Sh11,000 and Sh262,000, depending on the lender you chose.
Shares of large banks stocks have proven to be among the most resilient at the Nairobi Securities Exchange (NSE) #ticker:NSE in the past decade, largely defying the prolonged bear run that set in from 2015 and hurt share prices across board.
Of the top five listed lenders by market capitalisation, Equity Holdings #ticker:EQTY has offered its shareholders the biggest capital gain since 2009 with its value up by a factor of 3.62 times.
This means that an investment of Sh100,000 in the share in 2009 would be worth Sh362,205 today.
It is followed by KCB #ticker:KCB with a gain of 3.11 times, Co-operative Bank #ticker:COOP at 2.42 times, Standard Chartered #ticker:SCBK at 1.24 and Absa Kenya #ticker:ABSA at 1.11 times. These returns exclude the billions of shillings the lenders have paid their shareholders in dividends over the years.
In the period, the blue-chip heavy NSE 20 share index has dropped 42 percent of its value, from 3176 points to 1853 today.
The analysis takes into account the last time one of the five lenders — Co-operative Bank — listed at the end of 2008.
In the intervening period shareholders of the banks, as is the case with some other blue-chip stocks, have also enjoyed bonus share issuances, seen their stocks split and enjoyed some of the more consistent dividend payments seen at the bourse.
The present market capitalisation of the lenders today thus takes into account the bonus share issuances, which are awarded on pro-rata basis depending on the number of shares one holds.
Share splits in the likes of Absa, Equity, and KCB have also helped improve their liquidity at the stock market, backing more active trading on the stocks which helps with price discovery.
Their listing on the MSCI index has also helped give them the visibility and credibility to attract foreign investor interest, providing a base of demand for their stocks that keeps the share prices elevated.
Foreign investors prefer liquid, blue-chip counters that can support their large ticket trades easily.
The lenders, alongside Safaricom and EABL #ticker:EABL , are the most traded counters on the foreign desk, which accounts for about 55 percent of all traded turnover at the NSE.
The ability to stay afloat in a turbulent market has also been helped by the growing profitability of banks, which have now supplanted manufacturing firms as the most profitable local companies behind only Safaricom #ticker:SCOM .
Safaricom holds the record for net earnings in a single year for a Kenyan company with the Sh73.7 billion it made in the year ended March 2020.
The telco’s policy of paying up to 80 percent of net earnings has helped its share price rise from lows of Sh2.55 in 2009 to the current Sh35.50.
Equity Group reported a net profit of Sh39.1 billion in 2021, a record for the lender and the industry, while KCB also made its highest ever net profit at Sh34.1 billion in the period.
Overall, tier one lenders made a record cumulative net profit of Sh141 billion in 2021, aided by higher interest income from government securities, and non-funded income.
This ability to extract income from the economy even when they aren’t growing their lending to the private sector at an optimum level has meant that investor perception of the sector’s resilience remains positive, thus making their shares attractive.
Banks are also gaining positive investor sentiment from the expectation of stable and sizeable dividend distributions, in a market which has had little joy in terms of capital gains since 2015 due to factors such as political noise, Covid-19 and general investor apathy.
Tier one lenders have announced dividends totalling Sh51.7 billion for the year ended December 2021. They paid Sh18.8 billion in 2020, under tough operating conditions due to Covid-19 which saw them hold on to capital as a buffer against the uncertainty.
In terms of distribution, the lenders have paid between 19 percent and 80 percent of their net earnings in dividends for the period.
Lenders such as Equity and KCB have also enjoyed an aggressive expansion in their balance sheets due to regional expansion, as well as flight to the stability of large banks by depositors following the collapse of Dubai, Imperialm and Chase banks in 2015 and 2016.
Equity and KCB have reaped the most from their regional forays, expanding their balance sheets beyond the Sh1 trillion mark.
Equity’s balance sheet is now worth Sh1.304 trillion, helped by its acquisition of Congo DRC lender Banque Commercial du Congo (BCDC) in 2020.
The Congolese subsidiary, which is now known as EquityBCDC, has added about $2.5 billion (Sh288 billion) to Equity’s balance sheet and is now the lender’s most profitable regional subsidiary.
KCB closed a major regional acquisition last year after acquiring a majority stake in Rwandese lender Banque Populaire du Rwanda (BPR) from London-listed financial services firm Atlas Mara Limited. The lender’s balance sheet rose from Sh987.8 billion in 2020 to Sh1.139 trillion last year.
Equity tops banks’ shareholder returns over the past decade
- Nairobi City Water and Sewerage Company Limited (Nairobi Water) can supply 525,000 cubic metres daily to the residents against a demand of 850,000 cubic metres, leaving a deficit of 325,000 cubic metres.
- But even as the firm grapples with the growing supply deficit, it faces crippling revenue loss with half of the water flowing through its pipeline going unbilled.
- A report by Auditor-General Nancy Gathungu for the financial year ended June 30, 2020, shows the company produced 176.04 million cubic metres of water out of which only 86.35 million cubic metres were billed to customers.
Nairobi’s water problems have become so prevalent that the majority of residents now take it for granted that their taps will be dry and that they will be buying the precious commodity from predatory bowser operators.
The over four million residents of the capital have had to put up with water rationing since April 2017, with some estates going without water for weeks at a time, if not months.
Nairobi City Water and Sewerage Company Limited (Nairobi Water) can supply 525,000 cubic metres daily to the residents against a demand of 850,000 cubic metres, leaving a deficit of 325,000 cubic metres.
But even as the firm grapples with the growing supply deficit, it faces crippling revenue loss with half of the water flowing through its pipeline going unbilled.
A report by Auditor-General Nancy Gathungu for the financial year ended June 30, 2020, shows the company produced 176.04 million cubic metres of water out of which only 86.35 million cubic metres were billed to customers.
The balance of 89.69 million cubic metres or 51 percent of the total volume produced represents non-revenue water. This was double the allowable loss of 25 percent, under Water Service Regulatory Board guidelines for non-renewable water.
“The significant level of non-renewable water is an indication of inefficiency and a lack of effectiveness in the use of public resources and, may negatively impact the company’s profitability and its long-term sustainability,” said Ms Gathungu.
Despite efforts to cut water losses, the city has always struggled to meet the threshold set by the regulator, pointing to longstanding and deep-rooted malpractices, as well as inefficiencies at the utility.
Before the big jump in 2020, the non-revenue water had fluctuated between 34 and 42 percent from 2014 to 2019. The losses rose in 2020 despite a decrease in the production of 3.06 million cubic metres — from the 180.1 million cubic metres produced in the year to June 2019.
“This is attributed to the closure of the Ngethu treatment plant in May 2020 for some days due to high turbidity, and the washing away of the Sasumua transmission line in the Aberdare Forest during the April 2020 long rains,” said Nairobi Water managing director Nahashon Muguna.
In monetary terms, the urban utility firm lost a staggering Sh4.75 billion in revenue from unbilled water — due to water theft, faulty metres and illegal connections.
Under the current Nairobi Water tariff structure, domestic, industrial consumers, and government institutions pay a fixed flat rate of Sh204 for units up to six cubic metres consumed.
Units of water used between seven and 60 cubic metres for domestic consumers attract a levy of Sh53 per cubic metre.
Mr Muguna explained that the utility had a revenue collection target of Sh10.4 billion in the financial year, but collected Sh8.3 billion, translating to a performance of 81 percent.
But even revenue from the legally consumed water was not realised in full, with the Sh8.3 billion, representing 97 percent of the actual Sh8.6 billion billed in the period under review.
The firm has recorded mixed success over the years in collecting all its billed revenue.
In the year ending June 2015, it beat its billed revenue by Sh10 million to collect Sh 6.72 billion but then fell into a deficit of Sh237 million in the year to June 2016, when the firm billed Sh8.274 billion.
In the year to June 2017, collection hit Sh8.54 billion against a target of Sh8.4 billion, followed by an intake of Sh8.16 billion against a target of Sh8.27 in 2018.
In the financial year ended June 2019, the firm brought in Sh8.74 billion against a target of 8.745 billion.
Mr Muguna admitted to the incidents of unaccounted for water but says the firm is working to put in place measures to reduce the losses.
The main mitigation measure the firm is pursuing is the disconnection and/or regularisation of all illegal connections across the city.
Further, he argued that the unaccounted-for-water is also a result of leakages in connection pipes, overflows at storage facilities, metering inaccuracies and an inefficient billing system.
As a remedy, Mr Muguna said, the firm would install accurate flow meters to replace all mechanical meters for high consumers, replace faulty meters, disconnect or regularise illegal connections and ensure timely repair of leakages and pipe bursts.
In addition, the firm is carrying out a census, tagging and geo-referencing of all meters to improve reading and billing.
In 2019, City Hall netted more than Sh16 million in penalties and court fines for illegal water connections in the capital after the county government launched a major crackdown on cartels perpetuating the vice.
Penalties for individuals arrested over illegal water connections amounted to Sh12.9 million while Sh3.19 million was in court fines.
City Hall said the operation saw 1,834 illegal water connections unearthed, leading to the arrest and prosecution of 232 people, with a further 893 illegal connections regularised.
Most of the illegal connections are found in lower-income areas such as Githurai, Zimmerman, Kasarani, Mwiki, Kiamaiko, Huruma, Kariobangi, Mathare North, and Kayole as well as Tassia, Baba Dogo, Embakasi, Kware ward and Imara Daima.
The crackdown followed a call by Nairobi County Assembly in 2018 for the utility firm to strengthen reinforcement units to help deal with the cartels operating water supply business illegally besides formulating policies that would encourage punitive measures to be taken on any person vandalising the company’s property.
Further, the assembly told the utility to expedite installing metres that are easily monitored and tamper-proof to curb revenue loss.
The firm was also told to install bulk metres in informal settlements and look for innovative measures like having private people man and operate water supply to the residents.
The assembly also urged the firm to acquire a water billing software programme that cannot be manipulated and would help in detecting overpayments and underpayments immediately after the readings are posted to the system.
In early 2019, Nairobi Water awarded Giza Systems Integration (K) Limited a Sh122.7 million contract for the supply, delivery, installation, testing and commissioning of customer management and billing system.
The new billing system was to enhance the growth of the firm’s billing and collections and also enhance controls in revenue management.
The system was planned to go live in April 2020 but that did not happen until four months later in August 2020.
To boost revenue, Mr Muguna said the firm hopes to implement a new billing tariff to replace the old one, which has been in place since November 2015.
He said the company had applied for a tariff review like the one in use has remained constant despite the prices of goods rising.
“We are already implementing the non-revenue water reduction strategies, which are being fast-tracked to improve our revenue growth,” he said.
The firm has put in place mechanisms to enhance billing and revenue collection through the use of technology and surveillance.
“Revenue performance is continually monitored and discussed monthly with the heads of departments.”
Nairobi loses Sh4.8bn in unbilled water use
- Candidates who dodge acute exposure of Kenya to risks of debt distress ignore the smugness of ‘let-someone-else-figure-it-out,’ that we could be in for a hard landing.
- A collaboration of political leaders and CBK must rise to actions that, though initially painful and unpopular, can return Kenya to the track of long-term prosperity.
An economist friend currently equates Kenya’s economic prospects to those of a Character in Hemingway’s novel, The Sun Also Rises. When asked how he went bankrupt, he answers – “Gradually…then suddenly.”
In the 2022 electoral commitments, the macroeconomic assessment of the economy and policy-mix choices to be made (between fiscal and monetary sides) are pivotal.
Candidates who dodge acute exposure of Kenya to risks of debt distress ignore the smugness of ‘let-someone-else-figure-it-out,’ that we could be in for a hard landing. Tough policies are never everyone’s cup of tea. A collaboration of political leaders and CBK must rise to actions that, though initially painful and unpopular, can return Kenya to the track of long-term prosperity.
CURRENT AVOIDANCE HIDES THE TRUTH: The economy must be rebuilt to reignite growth and employment. No promises will change the image of the Standard, Saturday, March 26, 2022. It captured in a cartoon a decrepit Kenya as a car wedged high on a tree.
To lower it and start pushing it to a garage, I suggest priority repairs of two gears: coordinated policy-mix; and rebuilding the budget process.
POLICY MIX: All sector prospects which COVID-19 worsened will hinge on economic recovery, in turn, contingent on the headline macro-pivots we make. Long-term evidence shows in recovery, positive results can emerge with policy credibility as the Kibaki Presidency demonstrated during 2002-2011.
Not to detract from Uhuru’s credit for implementing Constitution 2010 and devolution, Kibaki repaired a broken economy not once but twice. On his table dropped two main macro-policy crises.
Moi’s handover in 2002 contained an economy despoiled to a shell during 24 years by (Uh-huh…, you guessed it) power reposed in dictatorship, money, and ethnicity.
Taking over an economy buried to its neck in public debt- 64.1percent ratio to GDP with much borrowing squandered or stolen, Kibaki’s key plank was to taper the debt, grow GDP and rebuild tax revenues from the resulting upswing in output.
When the 2008-2009 global financial crisis threatened his recovery trajectory, he executed a lesson on how to re-build an African economy from the ashes towards growth and employment again.
Both phases used standard macro-policy tools. In the latter case, it was an easing of both fiscal and monetary policy.
The year 2022 finds us back to the drawing board. Kenyan’s must call out the mediocrity of leaders who wobble in creating a macroeconomic policy path that can take us out of the current economic mess.
Extreme repairs and extreme competences are required to rescue the economy. Appointments of top public officials into big government based on patronage are a no, no, however passionately leaders wish to purchase voiceless acquiescence.
Certainly, no, no to government that avoids the meritocracy and expertise teeming (and needed) in Kenya.
Kibaki left the current regime a public debt of Sh1.89 trillion, (below 40 percent of GDP, having tapered it from Moi’s 64.1 percent of GDP).
Moi having trashed GDP growth rate to 0.5 percent by 2002, Kibaki grew it to 8.4 percent by 2010 and was financing about 90 percent of the national budget from the National Treasury. This sidelined loans from either Bretton Woods institutions or Eurobond.
In the current regime, gross public debt increased to an estimated 79 percent of GDP at end-2021. Public debt ballooned to a projected Sh8.59 trillion, up by Sh6.7 trillion- over 354 percent of the public debt Jubilee found in Kibaki’s books.
Even discounting inflation and COVID, if the debt had truly been applied to maximize output, Kenya would be far better off today. But audits from the Auditor General and unanswered queries on the debt- Eurobond, SGR, Pandora saga, etc.- are ridden with questions suggesting leakages.
These consign Kenya’s future generations to debt repayments without the benefits of debt spent to expand our economic frontier.
I have in the past demonstrated in this column how the policy mix between fiscal side and the monetary side was articulated in each of Kibaki’s crises, and how it succeeded to return growth to the private sector. How do we discover the appropriate policy mix relevant for 2022?
There is a limited number of options based on prevailing economic weaknesses. Kenya’s highly unsustainable fiscal deficit must be reduced while reversing the slump/recession that threatens long-term prospects.
Appropriate policy fits the choice of a tight fiscal policy and smaller government.
We have a GDP gap (potential uncaptured output going into 2022 and 2023) and room for innovative fiscal consolidation while unleashing a looser monetary policy in a mix that redresses deficit pressures while transferring growth of output from government to the private sector i.e., replenish private investment and a measure of consumer spending to replace big Government spending.
For this, we must strengthen and work with a monetary authority (CBK) whose room for monetary policy transmission has itself been compromised by FinTech’s.
Capital injections externally take a big bite from regulated commercial banking compromising liabilities that should help intermediation (not small-time borrowing for gambling). Loans can be expanded to the private sector, and adjustment to a sustainable deficit can be achieved.
However, we must avoid IMF-style counter policy mix that tightens both fiscal and monetary policies. It would be highly inappropriate, a double error deepening economic slump, reducing investment and consumer spending. It is called austerity.
Historically the power of the above mix – easier monetary policy and tighter fiscal policy- was strongly demonstrated by Democratic Party President Bill Clinton in the USA. He found in his US Presidency in 1992 a historic fiscal deficit of 4.5 percent, the second-highest in USA since World War II.
He had turned the deficit to a surplus by 1998 in a strategy of fiscal tightening aided by monetary easing by Alan Greenspan who headed the Fed.
Demand was effectively shifted from government spending (or tax cuts of the earlier Republican President Reagan) to an uptake of private sector investment and consumer spending to drive growth, employment, and rising government revenues.
It is thus a “switching” policy mix whose main effect is to shift output momentum from government to the private sector.
A different mix applies if the coming regime were to target and succeed with policies triggering a boom in Foreign Direct Investments. Government lowers taxes, increases concessional borrowing and even County transfers and at the same time, and facilitates domestic and foreign investors to drive the investment boom.
The work of CBK in this case is to raise interest rates to fight consequent inflationary pressures.
For, in the face of the inflows, the effect of government loosening spending, in this case, is to channel and induce “crowding in” expenditures that ‘enable’ boosting of the demand for goods and services, from which it reaps revenues to begin resolving it’s public debt crisis. Growth, employment, and sustainable public finances would ensue.
The power of this mix was demonstrated in both Germany and the USA. It is a trade-off of growth with high interest rates. During a large investment boom and/or large fiscal transfers (such as County Revenue allocations), economic activity, employment, and growth increase, but this could stoke inflation and fiscal deficit pressures initially.
To mitigate inflation, the central bank tightens monetary policy. The German Unification while in EMS was the prime example. Starting from early 1990s, the unification transfers and investment boom in the two Germanys stoked demand/output in the two zones.
The Bundesbank tightened monetary policy and Germany ended with high growth and high-interest rates briefly. In a similar interplay during 1980s, the Reagan/Volcker policy mix rejuvenated growth in a triumph of political and economic leadership where the Fed raised rates to counter inflation.
REINING IN PUBLIC FINANCES AT OP: A pressing priority is to control hemorrhaging public finances. In a presidential system, budget execution normally is aligned to the pre-election agenda.
Budget execution is similarly aligned to the winning candidate for the Presidency. That is why a Parliamentary Budget Office (PBO) exists to engage on the budget with the President.
Absence of an Office of Management and Budget (OMB) remains a monumental gap in the Presidency, with the consequence that the President laments theft from public coffers at the rate of Sh2 billion per day from afar while lost for answers and powerless to stop the rot.
To his credit, he tabled a solution on November 23, 2015, endorsing an OMB thus:
“I am tasking the Chief of Staff and Head of Public Service to design an Office of Management and Budget under the Presidency. The Presidency will produce a President’s Budget working with the Parliamentary Budget Office,” adding,
“This will ensure that I drive priorities, oversight, and reduce influence-peddling in budgeting, while ministries and departments concentrate on implementation and service delivery. I am of the mind fellow Kenyans that we in government should take better care of your money before we ask you for more taxes.”
The OMB should be an early priority for the next regime.
Raise bar higher for economic agenda ahead of 2022 polls
- The prices of essential items, including soap, cooking gas, and cooking oil, have risen by up to a third in the past 12 months, straining household budgets.
- Kenya National Bureau of Statistics (KNBS) data show that inflation rose from 5.08 percent in February to 5.6 percent in March on the back of a sharp increase in the prices of the essentials.
- Normally, the impact of rising consumer goods is dulled by salary increases. However, the increments by firms have not matched the rate of inflation.
Judith Wairimu, a single mother of six, has earned a living washing clothes in the sprawling Karagita slum in Naivasha for over seven years.
And even though her earnings were meagre, she was always able to provide her children with three meals a day. But not anymore!
Like her, many fellow poverty-stricken slum dwellers in Karagita where thousands of flower workers reside, are feeling the pinch of the high cost of food and other commodities, which have skyrocketed globally.
And Ms Wairimu, the sole breadwinner in her family, said she is unable to afford their upkeep.
“I am unable to buy cooking gas because its price has gone up beyond my reach,” she said capturing the feeling across many Kenyan households that have been pushed into a tight corner by ever rising costs of goods.
No longer able to bear with the cost pressure, Ms Wairimu recently resorted to using firewood for cooking. She is well aware of the safety to her family’s health the move portends, but said she has no choice.
“I have to choose between buying cooking gas or buying food. Life is difficult for us at the moment,” she added.
Kenyan families around the country have increasingly found it difficult to put food on the table in the face of unprecedented high prices.
These families are looking to Cabinet Secretary Ukur Yatani to soften a severe cost-of-living squeeze.
“The government has to do more to help us as we struggle with the rising cost of living,” said Ms Wairimu.
The prices of essential items, including soap, cooking gas, and cooking oil, have risen by up to a third in the past 12 months, straining household budgets.
Kenya National Bureau of Statistics (KNBS) data show that inflation rose from 5.08 percent in February to 5.6 percent in March on the back of a sharp increase in the prices of the essentials.
Cooking gas recorded the biggest jump with a 13-kilogramme cylinder increasing 38 percent over the past year to an average of Sh2,866 in March, followed by cooking oil (35.15 percent), bar soap (20.88 percent), sukuma wiki (20.18 percent), and wheat flour (17.68 percent).
“Prices of food items in March 2022 were relatively higher compared with prices in March 2021,” KNBS said on Thursday last week.
Normally, the impact of rising consumer goods is dulled by salary increases. However, the increments by firms have not matched the rate of inflation.
The average earnings for workers in the private sector grew at the slowest pace in a decade in 2020 as pandemic-hit firms moved to slash salaries and adopt unpaid leave policies to contain costs.
Companies raised average monthly pay by 3.82 percent to Sh67,490 in the year ended June 2020, a steep drop from the 8.16 percent raise to Sh65,006 the year before.
This has forced many households, especially in the low-income segment, like Ms Wairimu’s to reduce their shopping basket as they look up to the government to ease their burden.
Despite several requests for comment on the measures lined up to relieve the pain of Kenyans , the National Treasury remained mum.
But analysts said one way the Treasury Cabinet Secretary (CS) can ease pain for households is by cutting taxes for workers and reducing tax on essential items.
In the case of cooking gas, costs of imports first jumped in the wake of the imposition of value-added tax (VAT), the recently following the Russian invasion of Ukraine, and coupled with the search for higher margins by dealers, these have pushed prices to their highest level in Kenya’s history.
“Sadly we remain an economy where the structural inequality within, and weak terms of trade without, mean our poor are hit disproportionately by economic volatility,” said Deepak Dave a senior advisor to Adventis Capital.
Unlike petrol, diesel, and kerosene prices, which are adjusted on 15th of every month and stay in place for one month, cooking gas prices are not controlled, leaving reducing tax as the only option available to Mr Yatani to ease the burden on Kenyans.
Cooking gas has become the preferred energy source for households in major towns due to its convenience and because it is cleaner than other cooking fuel.
Official data from the 2019 census shows that 53 percent of households in urban centres rely on it for cooking compared to 5.6 percent of those in rural areas.
“The range of options is limited to using lower duties, excise, and cess that are within Treasury’s control to reduce prices directly; this passes the burden back to a government with little fiscal capacity, but it is something,” said Mr Dave.
“However trying to shift that burden, the net loss, onto retailers and suppliers will just create shortages.”
Still, the government can offer reprieve by increasing the money in people’s pockets, which essentially means offering a tax cut or stipend.
“Or the Central Bank of Kenya (CBK) can try what has been tried in other countries, which is depress the exchange rate artificially to ease import costs, which is a strategy guaranteed to fail beyond a week or two, but is probably the only no-cash-cost option,” Mr Dave added.
The shilling has been under pressure against the American dollar, setting up the country for more expensive imports and debt servicing distress.
The CBK quoted the shilling at 114.95 to a dollar last Wednesday.
The costs of imports are tipped to rise further amid higher food and energy prices – a fallout from the war in Europe along with supply shortages – according to financial and economic experts.
Social safety net
The World Bank Group, and the International Monetary Fund have asked developing countries like Kenya and to strengthen the social safety nets to protect the most vulnerable citizens like Ms Wairimu.
“Governments should move quickly to contain economic risks. Building foreign exchange reserves, improving financial risk monitoring, and strengthening macro-prudential policies are vital first steps,” said Indermit Gill – the Vice President for Equitable Growth, Finance, and Institutions at the World Bank.
“It’s already clear that higher food and energy prices—along with supply shortages—will be the immediate inflictor of pain for low- and middle-income economies.”
But offering the social safety nets, as the Bretton Woods Institutions are urging, may be hard for a county that in a tight fiscal space with debt repayments taking up a big chunk of the revenues generated.
Fuel price subsidy
To ease pressure on consumers, lawmakers have already allocated Sh10 billion to the fuel subsidy plan.
Moving the Supplementary Appropriation Bill, Budget and Appropriation Committee chairman Kanini Kega said the shortage has been unprecedented and asked Members of Parliament to approve the allocation without delay.
“The crisis that we see in the world has not spared Kenya. Fuel prices in Kenya are a bit lower than in Uganda due to the fuel subsidy. In Uganda, a litre goes for Sh160 while in Kenya at Sh134,” Mr Kega said.
Mr Yatani will read the Sh3.31 trillion budget for the financial year starting July two months earlier than traditional time, paving the way for lawmakers to approve expenditure before their term ends.
Mr Yatani is expected to deliver the Budget Statement for the financial year 2022/23 early this month, marking the last expenditure plan for President Uhuru Kenyatta who will leave office after the August 9 elections.
Will Yatani Budget ease mounting consumer pain on Kenyan households?
- Dental fluorosis was a condition synonymous with residents of areas around Baringo, Nakuru and Naivasha due to the high fluoride levels in water sources.
- In Nairobi, children in middle-class estates, especially areas grappling with water scarcity, are struggling with tooth discolouring and decay.
- The water demand in Nairobi is at 850,000 cubic metres per day while the supply is 525,000 cubic metres, leaving a deficit of 325,000 cubic metres per day.
Every time Dorothy Achieng’s nine-year-old sees a dentist she pays Sh7,500. The dentist visits started when the child was two years old and her teeth started discolouring.
A resident of Nyayo Estate, Nairobi, she says managing fluorosis in her child — a dental condition caused by water containing high levels of fluoride that causes teeth staining and decay — has cost her more than Sh150,000.
“At first, the doctor assumed poor dental hygiene and consumption of sweets. When the discolouration worsened, her teeth got a permanent, brownish colour and were brittle; I was told that my daughter has irreversible fluorosis. It was caused by drinking water with high levels of fluoride,” she says.
“Although the stained and breaking teeth haven’t affected her self-esteem, I’d have to look for about Sh500,000 for cosmetic dentistry when she is of age,” adds Ms Ochieng’.
Dental fluorosis was a condition synonymous with residents of areas around Baringo, Nakuru and Naivasha due to the high fluoride levels in water sources. But this is now changing.
In Nairobi, children in middle-class estates, especially areas grappling with water scarcity, are struggling with tooth discolouring and decay.
The perennial water shortage has increasingly forced homeowners and residents to turn to use of borehole water under limited supply from Nairobi City Water and Sewerage Company.
The water demand in Nairobi is at 850,000 cubic metres per day while the supply is 525,000 cubic metres, leaving a deficit of 325,000 cubic metres per day.
Just as other underground water sources, borehole water is known to have high levels of fluoride and in some places, it carries excessive and dangerous amounts of the element.
Scientists say most of Kenya’s underground water contains fluoride levels that are higher than the 1.5 milligrammes per litre recommended by the World Health Organisation (WHO).
Thomas Munyao, a paediatric and orthodontic dentist with Ivory Dental Care, says that dental fluorosis is caused by drinking water with high fluoride levels and in Nairobi, it is from boreholes.
Dr Munyao explains that areas mostly affected by the problem are metropolitan towns, including Ngong, Rongai, Embakasi, parts of Westlands, Kilimani, Syokimau and Kileleshwa due to the sudden rise of the number of apartments.
He avers that there are increasing cases of dental fluorosis in Nairobi due to water scarcity resulting from population increase, making sinking boreholes a priority.
“Major sources in Nairobi include borehole water, unknown water sources, especially the water bowser,” he points out.
On average, he says, dental consultation, done frequently, can range between Sh1,000 and Sh3,000 for proper assessment and treatment planning. The cost goes up when a child’s teeth are cleaned and X-rays done.
The doctor explains that treatment varies depending with the degree of fluorosis, age of the patient, desires of the patient and materials to be used.
Dr Roy Gucha, a dental specialist, adds that masking – which is using a white filling to cover the brown stains on the teeth – costs Sh5,000 per tooth and is available for children under 15 years because their jaws are yet to fully mature.
For those above 15 years, more permanent restoration procedures exist including crowning or porcelain veneer.
“One crown goes for Sh38,000 for the front teeth and if not severe, we can do whitening or bleaching Sh30,000 for both upper and lower jaws,” he says.
He adds that with the schools having closed, the number of children seeking dental care have increased.
During the weekends, he says, his dental clinic used to handle between four and five visits on average and two during weekdays with fluorosis being the most common case. However, the numbers have increased with the children now on holiday.
“We expect more of the cases with schools having closed although the numbers will decrease as schools reopen,” he says.
Although fluoride is not known to affect the development of the foetus during pregnancy when consumed in moderate levels, overexposure to the mineral can have effect on the foetus from the first six weeks of pregnancy when the teeth and bones are being formed in the womb.
The risk, explains Dr Munyao, is made worse by the fact that there are no obvious signs and symptoms of the condition and one is only able to detect the problem once the teeth grow.
Low awareness has contributed to severe cases of flourisis in children in these Nairobi estates. Even as a child develops teeth, few families go for dental check-up and postnatal clinics rarely check the teeth.
“A child can get fluorosis right from birth. If the mother is exposed to water that is highly concentrated in fluoride, studies have shown fluoride has the ability to cross the placenta barrier,” says Dr Munyao.
Ms Ochieng’ says if she knew water in Nyayo Estate has high levels of fluorosis, she would have installed a reverse osmosis machine, from the time she was pregnant, to protect her child.
Dr Gucha says overexposure to fluoride right from birth to the moment they get their first permanent teeth — around six years of age — is detrimental to a child.
He explains that low levels of fluoride can strengthen teeth, but higher levels can make the teeth begin fracturing, denying you a beautiful smile.
This is damaging to the self-esteem of children, especially teenagers (adolescents) because of discrimination due to the brownness of the teeth.
For adults, the effect is less unless the levels are too high that is toxic to the body but such levels are not found in borehole waters.
The effects of dental fluorosis is beyond just the browning of the teeth, as it also affects one’s bone structure and density, leading to defects and skeletal weakness.
“If you grew in areas with water with high levels of fluoride then there are high chances that you will get fluorosis. It will affect babies and children below the age of six. However, those exposed to it after developing permanent teeth are less affected,” he points out.
Water shortage hits Nairobi with teeth staining headache
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