Federation of Kenya Employers (FKE) advises employers not to deduct housing levy
29 January 2024
Federation of Kenya Employers (FKE) advises employers not to deduct housing levy
In a recent development, the Federation of Kenya Employers (FKE) has warned its members, advising against deducting the housing levy from payslips following the Court of Appeal's dismissal of the reinstatement application. The Court of Appeal rejected the State's plea to suspend the declaration of unconstitutionality made by a three-judge High Court bench regarding the housing levy. FKE emphasized that it closely monitors the situation after the government decided to appeal, seeking permission to continue collecting the controversial housing levy.
Ms Jacqueline Mugo, the executive director and chief executive officer of FKE, stated, "In light of the court order, we advise our members not to deduct the levy unless the Court of Appeal rules otherwise after the hearing of the substantive appeal or in the alternative, should the government challenge the said ruling in the Supreme Court, the said Court reverses the ruling delivered today." FKE expressed its commitment to observing the developments and urged its members to comply with the current legal stance while awaiting further clarification from the Court of Appeal or potential Supreme Court proceedings.
The Court of Appeal justified its decision by stating, "Public interest, in our view, tilts favor in not granting the stay or the suspension sought. Public interest tilts in favor of awaiting the determination of the issues raised in the intended appeals.
ECONOMY
Kenya's Commercial Property Market Continues to Struggle Amidst Economic Challenges
The Kenya National Bureau of Statistics (KNBS) has released data indicating that Nairobi County's commercial property market remains in a slump, with the value of approved non-residential buildings in the 11 months leading up to November 2023 falling below pre-pandemic levels.
The statistics reveal that the value of these non-residential buildings stood at Sh31.5 billion during the review period, a stark contrast to the Sh71.5 billion recorded in a similar timeframe in 2019.
The market faced a decline in value to Sh44.8 billion in 2020 and Sh26.5 billion in 2021 before a slight uptick to Sh32.2 billion last year.
This downturn is attributed to both historic oversupply issues and heightened caution among investors, with financial institutions becoming more conservative due to the rising cost of capital and developers struggling to service loans, as highlighted in a report by property consultancy Knight Frank.
Despite the challenging landscape for commercial properties, there seems to be a silver lining in the residential sector. KNBS data suggests a positive trajectory for residential buildings in Nairobi, with approved construction values reaching Sh163.6 billion in the review period. This exceeds the Sh128.2 billion recorded in 2019, marking a recovery from the pandemic-induced dip. The contrasting fortunes between the commercial and residential markets are further underscored by Knight Frank's observation that a few office developments were completed in the past year due to historical oversupply, as investors remained cautious. Additionally, the tough economic environment has prompted small businesses to opt for smaller spaces, and some companies have embraced remote and co-working setups as a cost-cutting measure, further impacting the commercial property landscape.
COMPANIES
NKG Coffee Mills Kenya to cease operations in the country
NKG Coffee Mills Kenya, a subsidiary of Germany's Neumann Kaffee Gruppe, has declared its intention to cease operations in the country by the end of February.
The decision comes in the wake of government-backed reforms in the coffee sector, specifically the implementation of the Coffee Regulations, 2019, and Capital Markets (Coffee Exchange) Regulations, 2020. According to a statement released by the company, these regulatory changes have hindered its ability to secure a milling license, compelling the closure of its milling operations. As a consequence, the company anticipates laying off staff members due to the potential redundancy of certain positions.
The announcement was formalized in a letter from Hellen Akumu, the company's regional head of Human Resources (HR), following a meeting held on January 16 to assess the business's current operations. The letter highlighted the possibility of staff positions becoming redundant as a result of the regulatory changes and emphasized the company's commitment to exploring alternative solutions through consultations.
NKG Coffee Mills Kenya expressed its intent to finalize closure plans this month and the next, with the looming deadline of February 29 for the cessation of milling operations. The closure of NKG Coffee Mills Kenya is likely to have ripple effects on the local coffee industry, impacting both employment and the broader economy.
ENERGY
Tullow Oil to Maintain Annual Spending on Kenya's Oil Project Amid Capital Expenditure Trim
Tullow Oil, the British oil exploration company, has announced its intention to retain its annual spending on Kenya's oil project at Sh1.6 billion ($10 million), signaling a sustained commitment to the project that has faced setbacks since its discovery in 2012. In a recent trading update, Tullow revealed plans to reduce its overall capital spending from $380 million to $250 million across its global operations, citing a temporary drilling hiatus in Ghana. Kenya's budget for this year remains consistent with the previous year and constitutes four percent of Tullow's total planned capital expenditure.
The oil project in Kenya has encountered challenges, with the exit of TotalEnergies and Africa Oil Corp last year, both holding a 25 percent stake. Despite becoming the sole partner in the project, Tullow expressed flexibility in seeking a strategic partnership and confirmed ongoing discussions with various interested parties. The withdrawal of the two firms disrupted progress on the final field development plan (FDP), which outlines the project's development strategy, production forecasts, costs, and environmental and social impact management. Tullow had submitted the FDP for approval in March last year, but the departure of partners led to delays in obtaining the necessary approvals from the Energy Ministry and the Energy and Petroleum Regulatory Authority.
TRANSPORT
Directline Assurance Mandates Cashless Payments for Public Service Vehicles to Curb Fraudulent Claims
In a bid to tackle fraudulent claims arising from passenger injuries and deaths, Directline Assurance, the leading provider of public service vehicle (PSV) insurance, has mandated all operators of matatus under its coverage to adopt cashless fare platforms, including M-Pesa, starting February 1. The move is anticipated to not only curb insurance-related fraud but also provide a significant revenue boost to banks and telecommunication companies supporting digital payment methods. Directline Assurance, holding the largest share of the PSV insurance market, has introduced a passenger manifest system to verify third-party claims. This system aims to furnish evidence that individuals making injury or death claims were genuinely present in the vehicles involved in the reported accidents.
Directline Assurance is set to implement a comprehensive solution to enhance the authenticity of claims, requiring all PSVs insured by the company to register with a cashless passenger manifest system. The insurer will facilitate the consolidation of this system, emphasizing its commitment to promoting transparency and efficiency in the insurance sector. Starting February 1, 2024, Directline Assurance will exclusively issue policies to PSVs with registered digital payment methods from recognized gateways, such as M-Pesa.
WHAT YOU MUST HAVE MISSED
KAA plans auction of 90 abandoned planes
The Kenya Airports Authority (KAA) announced it will auction 92 abandoned aircraft and components at four airports countrywide, which it says pose a safety risk. In a gazette notice, Vol. CXXVI—No. 8, KAA directed owners of the planes lying uncollected at the Jomo Kenyatta, Wilson, Lokichoggio and Malindi airports to claim them within 30 days or have them auctioned.
The planes include those owned by national carrier Kenya Airways, Jubba Airways, 748 Air Services, Fly540, Fly Sax, National Airways, and African Express.
BasiGo partners with AVA to assemble 1,000 electric buses
Kenyan electric mobility startup BasiGo has partnered with the Associated Vehicle Assemblers Ltd (AVA) to assemble its buses in Mombasa as demand for electric vehicles is forecasted to rise in the coming years.
The companies project to make over 1,000 electric buses in the next three years, creating over 300 jobs in manufacturing, charging, maintenance, and financing.
Under the deal, AVA will assemble 33-seater buses as the company seeks to phase out 25-seater buses used in its pilot project.
Kenya plans 30 industrial parks more in push for value-addition
The government is embarking on an ambitious plan to construct an additional 30 County Aggregation and Industrial Parks (CAIPs). Trade and Industrialisation Cabinet Secretary, Rebecca Miano, announced this initiative as part of the government's strategy to double foreign direct investments to Sh1.6 billion in the current year. The establishment of these aggregation hubs is expected to play a pivotal role in augmenting value addition across various value chains, ultimately fostering increased productivity in the manufacturing sector.
The government's commitment to this endeavor is evident as construction has already commenced on the initial target of 18 County Aggregation and Industrial Parks. With the new addition, the program is set to encompass a total of 48 industrial parks, marking a significant expansion of the initiative.