Russia-Ukraine conflict and how it affects Kenya
28 February 2021
Good Morning. Last week, Russian president Vladimir Putin ordered a “special military operation” in eastern Ukraine.
More coverage below on how the conflict directly affects Kenya economically.
FOREIGN EXCHANGE RATE
The Russia-Ukraine conflict and how it directly affects Kenya
The ongoing armed conflict has sent global oil prices soaring and restricted wheat exports worldwide.
How does this affect Kenya?
a.) Oil prices
The global oil prices surged past $100 (£74) a barrel to hit their highest level for more than seven years after Russia launched the invasion of Ukraine.
The rise in global price of oil will lead to the soaring prices for all Kenyan imports, contributing to further inflation through costly transport and electricity.
The global oil prices will also push Kenya’s pump prices upward and overwhelm the current State-backed subsidy that has kept fuel prices unchanged for the past five months.
b.) Wheat imports
Russia and Ukraine are the major exporters of wheat in the world. Kenya ships in approximately 75% of its annual demand from the 2 countries.
Global wheat and corn prices surged more than 5% as a result of the conflict.
The war will likely cause disruption in wheat shipments making the grains more costly in Kenya.
c.) Tea
Russia is the fourth-biggest buyer of Kenyan tea, having imported tea worth Ksh 6.2 billion in the 11 months to November 2021.
The disruption of trading would lead to a massive gap in tea export from Kenya.
d.) Financial Markets
In the global financial markets, Wall Street and European stocks fell while traders bought up low-risk government debt. Gold, which is considered a haven asset in times of uncertainty - jumped 3% to its highest price in more than a year.
Foreign investors rushing to safer assets and bonds will drastically reduce the flow of foreign investors to the Nairobi Securities Exchange (NSE). A major blow to the NSE since Foreign investors account for 58% of trading.
On Thursday, Investors at the Nairobi Securities Exchange (NSE) lost Ksh 92 billion as global stocks plummeted. The dollar index rose 1.4 % due to demand for the reserve currency. This puts further pressure on the Kenyan shilling.
ENVIRONMENT POLICY
Environment audit fees for real estate developers likely be re-introduced
The Budget and Appropriations Committee of the National Assembly wants the Ministry of environment to re-introduce the Environmental Impact Assessment (EIA) licence processing fees in the financial year starting July.
The committee argues that the re-introduction of fees would reduce NEMA’s (National Environment Management Authority) reliance on taxpayers for its operating costs.
Background
Environmental audit fees were scrapped in 2017 as an incentive for investors who sought to venture into real estate.
The audit fees were at a rate of 0.1% of the project value.
EMPLOYMENT LAW
Right of employees to disconnect - The employment amendment Bill 2021
Should employees respond to work related communication outside working hours? The Employment amendment bill introduces private time rights for employees inorder to protect the employee’s time outside working hours.
The aim of the bill is to mitigate the instances of work burnout and erosion of personal rest time.
Major provisions of the bill
Employees are not obligated to answer any work-related communication outside the mutually agreed hours of work as stipulated in the contract.
Employees cannot be penalised for opting not to respond to work-related communication outside the hours of work.
If an employee responds to communication outside the working hours, then they should be compensated.
The right to disconnect can be waived in the following circumstances:
where a work emergency has arisen. (the term ‘emergency’ has not been defined in the bill)
For designated essential service providers under section 81 of the labor relations act.
QUESTION
Do you think this law can remedy the work culture in competitive, high-performance industries where employees feel compelled to work beyond work hours in-order to meet targets ?
MUSIC
Artistes now entitled to 52% of daily revenue from skiza tunes
Members of parliament passed the Copyright amendment bill 2021 which entitles artistes & copyright owners 52% of generated revenue from skiza tunes.
Initially, 16% of daily revenue was allocated to artistes, 25% to the Kenya Revenue Authority and 51% retained by the telecommunication service provider.
With the passing of the bill,
Artistes and copyright owners are now entitled to 52% of daily revenue, 16% is allocated to the Kenya Revenue Authority and the Telecommunication provider retains 16%.
INSURANCE
Insurance regulatory authority to investigate how insurance companies set their premiums
Last week, the Insurance Regulatory Authority stated that preliminary evidence revealed that policyholders are being overcharged by insurance companies.
An example of this is that in January, a number of insurance companies announced an increase of up to 50 per cent of premiums. As a result, the authority seeks to hire a consultant to conduct an actuarial study to determine the appropriate premium rates. Interested consultants are to submit their applications by March 9.
The consultant will be required to:
a. Make recommendations on the need for any reviews or changes in legal and regulatory framework of the rating of insurance premiums.
b. Develop insurance product premium rating policy guidelines
ELECTION
The High Court temporarily suspended the law requiring parliamentary seats aspirants to have university degrees
Last week, Justice Anthony Mrima suspended section 22(1) (b)(I) of the Election Act, pending the hearing of a petition filed by four residents of Narok, who argue that the section is discriminatory because it sets a bachelors degree as the minimum academic qualifications for lawmakers.
The petitioners stated that the degree requirement failed to take into consideration other qualifications recognised under the Kenya Qualifications Framework Act of 2014 and the Regulations passed in 2018.
The Independent Electoral and Boundaries Commission (IEBC) was directed to clear aspirants who want to contest but do not have degrees.
The petition will be heard on March 17WHAT YOU MIGHT HAVE MISSED THIS WEEK
Kenya’s Debt ceiling raised by Members of Parliament - Members of parliament pushed an amendment to the 2022/23 Budget Policy Statement (PBS) directing the Treasury to amend the law and raise Kenya’s debt ceiling to accommodate the huge budget deficit.
Treasury is expected to raise the debt ceiling from the current Ksh 9 trillion upwards.
FIFA suspends Kenya from all football activities over government interference - In a letter dated 24 February, FIFA suspended Kenya indefinitely from all football activities including development programmes, courses or trainings from FIFA/CAF.
Further, Members of the Associations of FIFA are prohibited from entering into any sporting contact with the Football Kenya Federation.
Central Bank of Kenya (CBK) to link lipa Na Mpesa to other service providers - The Central Bank of Kenya (CBK) is set to launch a national payment system that will force Safaricom to accept cash from rival firms such as Airtel on its Lipa na M-Pesa platform.
The payment system is CBK’s attempt to curb the dominance of Safaricom’s mobile money service and Lipa na M-Pesa,
Lipa na Mpesa handled payments worth Ksh 970.2 billion last year.Nairobi City County workers protest poor working conditions - On Tuesday, More than 12,000 Nairobi city County workers downed their tools to protest delayed salaries and poor work conditions, including non-functioning lifts and toilets, lack of a steady supply of water and uncollected garbage.
After a two-hour meeting with officials, the city staff union announced a truce allowing for the reopening of entrances to City Hall and City Hall Annex that had been blocked by the protesting workers.
Ethiopia to drop restrictions on foreign banks - Ethiopia announced that it will open up opportunities for Kenyan banks to launch subsidiaries, roll out fully-fledged banking operations in their country.
No PCR test requirement to enter Dubai for vaccinated travellers - Dubai has scrapped the PCR test requirement for vaccinated travellers.
Vaccinated Dubai-bound travellers will only need to present an approved COVID-19 vaccination certificate that contains a QR code.
Wearing of masks continues to be mandatory in all public indoor venues in the emirate but is optional in outdoor areas.
Win for Avocado farmers - China announced that Kenyans could now export fresh avocados to China. This is after 4 years of lobbying.
Initially, the avocados had to be frozen as a condition for export.