Category: Business Daily

In Kenya, we have long been known as a hotbed of entrepreneurship. We piloted the explosion of business incubators and accelerators around the world for almost 20 years.

In so doing, we became an epicentre for fintech, NGO delivery innovation, low-cost quality healthcare, creative education, among many other sectors.

However, simultaneously, we are facing a growing waste management challenge nationally as we generate an estimated eight million tonnes of waste annually, which puts pressure on our natural resources and eco systems that threaten our quality of life and our precious value chains necessary for continued entrepreneurship.

Interestingly, as a result of striving to solve the waste issue, Kenya is now building a reputation as a leader in a whole new type of entrepreneurship for the developing world. The concept of circular economy is gaining measurable steam across East Africa led right here in Kenya.

Circular economy refers to business approaches that improve environmental sustainability and performance by adopting circular solutions, developing sustainable and circular businesses, expanding green business models, and creating green jobs through more sustainable consumption and production practices.

While several European countries like Denmark make great strides in large systemic cross-industry circular economy, here in Kenya we are progressing as a leader in green entrepreneurship and circular economy small business startups and scaling up ventures.

Recently, the European Union and a consortium led by HIVOS launched the SWITCH Kenya Green project that aims to develop sustainable and circular businesses through fostering access to finance and improving businesses sustainability and performance leading to sustainment and creation of green jobs.

Programme manager Ndinda Maithya hopes it will help support Kenyan micro, small and medium enterprises (MSMES) which are central to our economy but still face significant barriers in transitioning to circular economy models.

Some of these challenges include limited access to finance, technical capacity gaps, weak market systems, and policy implementation constraints.

The European Union also supports other initiatives around the green and circular economy in Kenya as implemented through the German GIZ. Additionally, the Swedish International Development Agency launched a new programme with the African Enterprise Challenge Fund to invest in and scale up green business ventures. Further, the Embassy of Finland in Kenya is focusing greater attention toward the circular economy.

Why do donors and investors choose Kenyan businesses to boost circular economy initiatives?

Jeremy Kaburu with Sustainability in Business highlights how Kenya holds a strong policy framework to support the circular economy and interested entrepreneurs. Many new startups across the country are piloting innovative solutions to plastics, organic waste, and textiles waste.

Government Spokesperson Isaac Mwaura recently reconfirmed the national government’s commitment to fostering such innovative circular economy entrepreneurship. Further, counties such as Mombasa, Kilifi, Nairobi, and Makueni are taking leadership roles in prioritising green entrepreneurship.

Jackson Koimbori with the Kenya Private Sector Alliance (Kepsa) emphasises that even the private sector and member organisations are keen to support circular economy entrepreneurs. Kepsa and Sustainability in Business run circular economy initiatives across the country.

Even Kenya’s largest bank, KCB and its KCB Foundation, have begun heavily supporting circular economy entrepreneurs with loans, training, and investor linkages.

Circular economy researcher Peter Kariithi showcases how even university incubators, like the one at USIU-Africa and others, as well as leading East African accelerators like Somo Africa are pivoting toward sustainable, social, and circular entrepreneurship.

The education commitment in Kenya even goes much deeper to the policy and government involvement. Anne Kamonjo, the Director of Greening with the State Department of TVETs highlights how vocational training across the country is now infusing green entrepreneurship and circular economy principles into institutions and curriculum.

Kenya is taking a lead. Entrepreneurs would do well to sit up and take notice. Investors, incubators, accelerators, banks, counties, and the national government are beginning to champion green entrepreneurship and the sustainable environment principles of a circular economy approach.

Let us be proud of Kenya’s global leadership role in this important emerging and growing field of entrepreneurship. Interested entrepreneurs and circular economy businesses should feel free to reach out to the above organisations for support and linkages to help turn Kenya ever and ever greener.

A piece of paper that looked more like a crumpled receipt made its way onto X not too long ago. On it, a Gen Z employee had written his resignation letter. It read: ‘I have chosen this type of paper for my resignation as a symbol of how this company has treated me. I quit.’ No signature. No notice period. In the Gen Z lingo, just vibes and an exit.

On TikTok, an employer went on record questioning why a new hire had simply stopped showing up two weeks into the job. No letter, no phone call, nothing.

The younger employees have become a headache in offices; they take unofficial leaves without asking, skip job interviews they had already confirmed, and in some cases, quit after three months of work. This, after a company has spent hours training them. They come to workplaces, only to earn money, just enough to buy an iPhone. After that, back to zero. No shame. No second thoughts.

Rewriting the rulebook

The big question employers and parents are asking is, are these young people tearing up the workplace rulebook, or are they just rewriting their own rules?

Chris Sakwa is an HR practitioner, a co-founder and co-director of HRD Ingenuity, and a lecturer at the College of Human Resource Management. He has seen it from every angle, as a consultant, a trainer, and as someone who has had to sit has seen it from every angle, as a consultant, a trainer, and as someone who has had to sit across the table from both frustrated managers and unbothered younger employees.

His first point is that this is not a simple problem with a simple answer.

‘Trying to choose one side would be an injustice,’ he says. ‘The young ones have a different approach to life, and they are challenging the status quo. And yes, the older generation is struggling with it.’

He sees it as two realities sitting side by side, not one cancelling the other out.

‘What makes Gen Z workers different from every generation that came before them is the speed at which they expect things to happen. They want results now. They are not interested in waiting for a promotion that might come in five years. They are not interested in loyalty to a company that has not yet proven it is loyal to them. When something is not working, they leave. Not next month. Now,’ says Chris.

Need to explain the ‘why’

Every office has rules, so what about the rules?

Gen Z tends to treat them as suggestions. Chris says this comes down to two things. The first is that employers have not done enough to explain why the rules exist.

‘When you do not explain the why behind a rule, they take it lightly,’ he says. ‘A policy document dropped on someone’s desk without context will feel random to someone who has grown up questioning everything. Gen Z wants to understand the reasoning. Without it, they see no reason to comply.’

The second explanation is harder for managers to hear.

Chris says the older generation has not always walked the talk. The young ones will do what they see being done. If you preach integrity but do not live it, they are watching.

‘When a manager bends the rules for themselves but enforces them on everyone else, Gen Z clocks it. They say nothing. But they remember. And eventually they stop taking the rules seriously because the people making the rules clearly do not.’

The parenting factor

Then comes the question of where all this behaviour really starts. Chris does not hesitate. He points to the parents.

‘We are talking about Gen Zs as if they fell from some other planet. Yet the truth is, they are our monsters. We created them. Many Gen Z employees grew up in homes where parents worked hard to make sure their children never went without. Struggle was something that happened to other people. The word ‘no’ was almost never said.

‘They were taught to go after what they want and cut off anything that did not serve them. So, when they arrive at a job and are told the pay is lower than expected, or that they have to sit at a desk for eight hours even after finishing all their work, it does not make sense to them. It has never made sense in their world before.’

‘They do not know that no, full stop, is a complete and acceptable sentence,’ Chris says. So when they hear it at work, they do not adjust. They walk.

Productivity vs presence

There is also the Gen Z view of time and presence. The old model was clear: come in at eight, leave at five, be seen, be loyal, wait your turn. Gen Zs have thrown that model out. Their argument is straightforward. If the work is done, why does it matter when or where it was done? Chris sums up their logic.

‘You want something done? Tell me what it is. I will finish it in two hours and leave. Did I deliver? Yes. Was the work good? Yes. So what is the problem?’

He admits it is hard to argue with that.

Covid-19 gave them their biggest proof yet. When the pandemic sent everyone home, the world did not stop. Work got done. In many places, it got done better. That handed Gen Zs a very strong card to play. Remote work, flexible hours, and hybrid setups are no longer strange requests.

Many organisations have already agreed to them, partly because Gen Zs pushed and partly because the pandemic showed it was possible.

‘If they push away the older generation, they are missing the mark,’ he says. ‘The older generation carries institutional memory and experience that cannot be downloaded overnight. Ignoring that is not boldness. It is a gap.’

From boardroom suits to crocs

Now, once the bigger rules conversation has been had, there is another one waiting quietly in the corner. The dress code.

Gen Z employees are walking into offices in sneakers, hoodies, crocs, ripped jeans, and braids styled in ways no 1990s boardroom would have recognised. Some managers take one look and see disrespect. But Chris slows that conversation down quickly.

‘When boomers were young, they had bell-bottoms, high-heeled shoes for men, too, and big afros. Their parents had issues with them. When Gen Xers came in, there were strange hairstyles. Locs, boxes and slopes. When millennials arrived, people said the same things.’

His point is direct. Every generation in their youth has clashed with the one before it over how they look. Gen Z is not an alien species. They are just next in line.

The solution, he says, is not a ban. It is a conversation. Explain to them why clients from a different generation might interpret certain looks differently. Give them room where it is possible, a dress-down Friday, a casual day at the end of the month. Let them come in with the crocs and the hoodies when there are no client meetings. And be clear about where the line is and why it exists.

‘Do not just say this is how it is done. Explain the why. When you get them to understand the why, they will probably treat it as a rule,’ Chris says.

Why companies must act

On whether managers should even bother hiring someone who might walk out after a month, Chris says yes, but with a clear head.

‘I would have both the loyalist and the rebellious Gen Z. The loyalist gives me stability and institutional memory. Gen Z gives me fast results. The question is how I manage each one.’

He believes in mentorship that goes both ways. Managers learning from Gen Zs. Gen Zs learning from managers. Not one side doing all the teaching.

What he is pushing for, at the end of all of it, is for organisations to stop pretending the old playbook still works and to update their HR policies to match the workforce that is actually showing up.

Gen Z is growing as a share of that workforce every year. They are not going anywhere. And the Alphas, the generation coming right after them, are already close behind.

‘Work ethic is being challenged,’ Chris says. ‘It is no longer about being present and being seen. It is about delivering value. We need to reconsider what we have termed work ethic, because the world is moving.’

Nobody has figured out what the Alphas will bring. But if the Gen Z conversation has taught us anything, it is that the next one will arrive whether we are ready or not.

The court has faulted multinational tea producer Ekaterra Tea Kenya over what it described as a humiliating and physically intrusive search of a female employee accused of stealing a packet of milk, ruling that her dismissal after 26 years of service was unfair.

The Employment and Labour Relations Court said the company failed to prove that Ms BW, a quality analysis clerk at Limuru Tea Estate, had stolen company property. Her name is being withheld for legal reasons.

In its ruling, the court said the allegations against the employee were unsupported by evidence and criticised the manner in which the investigation was conducted.

“The court notes that the respondent… subjected the grievant to a search… an act the court finds discriminatory and degrading,” the judge said.

Ekaterra Tea Kenya Plc, formerly owned by consumer goods giant Unilever, is part of the global Lipton Teas and Infusions group, which is controlled by private equity firm CVC Capital Partners.

Ms BW joined the tea estate in 1996 as a general worker and rose through the ranks to become a quality analysis clerk. By the time of her dismissal in 2023, she had served the company for 26 years without any previous disciplinary record.

The dispute arose from an incident on February 13, 2023.

Ms BW told the court that she had purchased a packet of milk while running personal errands before reporting to work and intended to consume it later during her shift.

She worked in the quality analysis room, where milk was routinely used for tea tasting and sample preparation.

According to court records, an assistant production manager questioned whether the packet of milk belonged to the company. Ms BW denied the allegation and maintained that the milk was hers.

She said a shift manager subjected her to a search of her private parts to determine whether she had concealed the packet of milk, an act the court later found discriminatory and degrading.

More than four months later, on June 23, 2023, the company issued her with a show-cause letter accusing her of breaching its Code of Business Principles.

She responded three days later, denying any wrongdoing. A disciplinary hearing followed on June 30, which she attended in the company of a shop steward.

Evidence test

The Kenya Plantation and Agricultural Workers Union sued on her behalf, arguing that the company had failed to establish that the milk originated from its stocks.

The union said no witness testified to any theft during the disciplinary proceedings. It also argued that no batch register, photographs or inventory records were produced to support the allegation.

Ekaterra defended its decision, saying managers reasonably believed Ms BW had attempted to steal company property in breach of workplace rules.

The company’s investigator testified that milk had gone missing on previous occasions. However, he acknowledged that no register linking the disputed packet to company supplies had been produced in court.

The investigator also did not identify the person alleged to have been stealing the milk. He further testified that employees were not required to declare food brought from outside under any policy presented during the proceedings.

‘The reasons for termination are not verified. There is no concrete proof that the packet of milk was stolen,’ the court said.

The judge added that the company had acted disproportionately and in breach of due process.

The court further held that even if the employee had committed a minor infraction, dismissal would still have been excessive punishment.

‘And even if she stole one packet of milk to drink, she could have been warned… since that was a misdemeanor and not an act of gross misconduct,’ the court said.

The court declined to reinstate Ms BW, citing the breakdown of the employment relationship.

Instead, it awarded her two months’ salary in lieu of notice amounting to Sh47,400 and 10 months’ compensation for unfair termination worth Sh237,000.

The court also ordered the company to pay gratuity in line with the collective bargaining agreement.

‘The court is of the considered view that the grievant was unlawfully and unfairly terminated, the reasons advanced for her dismissal being untenable,’ the judge said.

KCB Group fired 60 employees last year as it stepped up its war on fraud, with the staff linked to schemes targeting the lender and its customers.

The lender had parted ways with 34 employees in 2024 for similar reasons.

KCB disclosed that it wrote off Sh760,000 due to fraud and forgeries last year, compared with Sh4.5 million in 2024, according to its latest sustainability report.

The bank recorded 201 fraud incidents last year and thwarted attempts valued at Sh141.1 million.

The number of fraud incidents was higher in 2024 at 339, with the value of blocked attempts standing at Sh212.9 million.

Commercial banks have invested heavily in technology to detect and prevent fraud, which exposes them not only to financial losses but also reputational damage in a sector heavily reliant on trust.

‘We have implemented advanced security measures, including biometric authentication, document verification, selfie matching, and enhanced digital onboarding processes,’ KCB said in its sustainability report.

‘Real-time monitoring of digital transactions further enhances fraud detection and mitigation.’

KCB Kenya blocked fraud worth Sh100.8 million last year, while its Rwanda operation prevented losses of Sh40.3 million.

Kenya accounted for 50 of the 60 employees dismissed, with 188 of the fraud attempts reported in the country. Rwanda had the second-highest number of attempts at seven.

Five employees were dismissed in Rwanda, followed by Tanzania and South Sudan with two each and Uganda with one.

Insider risk

Staff involvement in fraud remains a major headache for banks, with some lenders resorting to ethics audits to root out misconduct.

Last year, Equity Group sacked about 2,000 employees following an ethics audit that flagged suspicious transactions between staff and customers.

The investigation focused on employees who received money from customers or other entities linked to the bank, including colleagues, through their salary accounts at Equity or their registered M-Pesa numbers.

‘Fraud losses declined materially over the past three years, a reflection of the maturity of our digital control environment,’ Equity said in its annual report.

The lender did not disclose the value of fraud cases blocked or losses incurred in its reports.

Banks have increasingly invested in technology, including artificial intelligence tools, to guard against threats from both staff and outsiders.

Earlier this year, Equity’s management disclosed that its systems had detected and blocked a major fraud incident in Rwanda estimated at Sh430 million.

‘As I said 98.2 percent of our transactions are on the internet. That is the risk. There is nobody who can go to the road to drive and say they will never have an accident. So, what I need to do is to up the game of my staff and as you saw, all the transactions were reversed because it was detected immediately,’ Equity Group chief executive James Mwangi said after the Rwanda incident.

Digital threat

Digital fraud has become a major concern in the financial sector as fraudsters seek to exploit the increased uptake of branchless transactions.

Commercial banks have been forced to take insurance cover and hold provisions against fraud, underlining how the risk is hurting their businesses beyond actual losses incurred when fraudsters succeed.

‘The significant losses recorded during the year were financial crime risk related due to mobile, cards (debit and credit) and internet banking external fraud events,’ said Standard Chartered Bank Kenya.

The bank said it had invested in fraud risk management systems such as ThreatMetrix (TMX), a digital fraud detection and prevention tool, and other automated solutions to help curb the menace.

‘Fraud (particularly phishing) remains an area of concern. The bank has deployed several automated solutions to detect incidences of fraud resulting in a significant drop in the number of fraud incidences,’ Standard Chartered added.

An increasing number of young Kenyan professionals are choosing to invest in apartments rather than land. The reason? Unlike land, which may remain as dead capital for years, apartments promise higher returns.

For decades, the older generation of Kenyans has mainly focused on one investment: land. Quite a number have been storing their wealth in the form of plots in city outskirts, intending to sell in tough times. But the younger generation has steered clear of land, and is buying apartments to either live in, or rent out.

Johnson Denge, a real estate expert, says that when it comes to young people, the decision to invest in land or apartments is usually driven by investment logic, taking into account factors such as liquidity, lifestyle and market conditions, adding that the current market favours apartment buyers.

Mr Denge adds that the demand has also been spiked by short-term rental opportunities.

‘There is also a short stay market in Nairobi which attracts young people to opt for apartment investments [where they buy and rent out on platforms such as Airbnb],’ he says.

‘Apartments are turnkey ready, which makes them easy to rent either for long stay or short stay, easy to manage under management companies, located in areas with amenities and disposable income and reduced entry barriers,’ he adds.

He also lists behavioural and structural shifts, such as the use of positive peer pressure and the ease with which information can be accessed, particularly through social media. Listings have also become commonplace and relaxed planning rules allow for a high supply.

‘The cost varies with the market, with as low as Sh70,000 per square meter in low to upper lower markets and satellite towns, and as high as Sh200,000 per square meter in upmarket areas like Westlands, Nairobi,’ Mr Denge says.

In absolute terms, ‘You can get a studio apartment for as low as Sh1.8 million, a one-bedroom at Sh2.5 to Sh4 million and a two-bedroom at Sh4 to Sh7 million in relatively well serviced metropolitan markets,’ he adds.

However, he notes that most first-time buyers are still in the sub-Sh10 million bracket.

‘They are mostly in units below Sh10 million. This is mainly driven by access to financing. The Kenya Mortgage Refinance Company (KMRC) facility of single-digit interest rate and up to 25 years is a major catalyst,’ Mr Denge says.

But the demand is strongest along established and emerging nodes.

‘We have seen movement on traditional trunk nodes of Mombasa Road, Ngong Road, all the way to Ngong and Lang’ata. Recently, there has been a lot of interest in Ruaka, Kiambu Road, Kabete and the other satellite towns.’

Despite the rising demand, many buyers still make costly mistakes.

‘They include lack of due diligence on the title or ownership, hidden costs like service charge, lack of due diligence on neighbourhood character, and not inspecting shared amenities.’

He adds that infrastructure is also often ignored.

‘One needs to inspect shared infrastructure, for instance, there might be lack of a sewer, which will mean more costs in non-solid waste management.’

Beyond the purchase price, buyers in most cases also underestimate the total acquisition costs.

‘Mainly closing costs, which can be five percent to 10 percent of the value, including legal fees, stamp duty, running costs or service charge and letting fees if it is acquired for rental income.’

What buyers must know before committing

While market dynamics explain why young Kenyans are buying apartments, the legal structure determines what they are actually buying. But what should you really know before buying an apartment?

With glossy billboards and polished property listings promising modern living – tight security, a gym downstairs, and a parking space with your name on it – it is easy to rush into a purchase fuelled more by the dream of escaping rent than by a clear-eyed assessment of what ownership actually entails.

Prudence Mwende, an advocate as well as a property and conveyancing specialist, says that most buyers make mistakes at the earliest stage of engagement with developers.

‘The letter of offer is the first document you need once you interact with the developer,’ she says.

‘There are particular documents you are supposed to ask for. You can ask for these yourself, or you can get independent legal advice so that an advocate requests these from the developer’s advocate. Basically, the title documents are among the first documents you should ask for so that you can be able to do due diligence.’

She adds that approvals are just as important as the title itself, which will require you to have independent legal advice to verify them. Another important but overlooked question, she says, is what ownership structure the buyer will eventually hold. The advocate explains that apartment ownership depends on the development structure.

‘Depending on the structure of the development, it may involve a sectional title, a lease, or a sub-lease. It is important to understand the document itself and also the rights and obligations attached to it.’

Sectional title vs sub-lease

According to Ms Mwende, a sectional title is just like the equivalent of a title deed when you are buying a standalone house or land. She explains that it gives direct ownership of an individual unit.

‘It allows an individual apartment unit to be owned separately and registered in the owner’s name. It identifies a specific unit and records the owner’s interest together with common property.’

Common property includes shared spaces such as corridors, lifts, parking areas, gyms, swimming pools, staircases and gardens.

Buyers also receive a ‘unit share’ in this shared property, depending on their ownership.

She explains that sub-leases operate differently.

‘A sub-lease is an interest derived from a master lease and is therefore subject to the terms and conditions of that lease structure.’

A master lease is the main lease over the land on which an apartment development is built. It is usually held by the developer or property owner. This means the apartment owner has rights to the unit, but those rights are subject to the terms, conditions, and duration of the underlying master lease.

For instance, if a developer holds a 99-year lease over a piece of land, an apartment buyer may receive a sub-lease that derives from that 99-year lease.

Which ownership structure is better?

In her opinion, a sectional title has stronger protection and clarity.

‘Sectional title has an advantage because you are getting individual ownership compared to a sub-lease.’

It has grown to become the common structure and is also more useful when it comes to financing.

‘It can act as security when getting financing from banks. It is like having full ownership, similar to a logbook when you buy a car. Before, sub-leases were common, but since the Sectional Properties Act 2020, there is greater clarity and certainty in ownership.’

Consequently, apartment ownership also comes with shared responsibility.

‘There is better governance whereby the Sectional Properties Act establishes an owners’ corporation framework.’

This structure ensures that all owners manage the property.

In the same context, Ms Mwende explains that most apartment developments are leasehold. Lease hold refers to the tenure of ownership rather than the document, while freehold ownership has no fixed expiry period, which is common for standalone houses. She notes that most urban apartments are structured as leasehold.

‘Most developments in Nairobi are leasehold due to structure and investor considerations, especially for foreign investors.’

Off-plan purchases

Ms Mwende says that off plan purchases might have a higher risk because you are purchasing based on what the developer is telling you they will deliver. You are not physically verifying the property.

‘Previous projects and delivery history are very important because they show whether the developer is likely to complete the current project successfully.’

Buyers should also pay close attention to contracts.

‘We are very keen on the sale agreement because it governs construction timelines, payment schedules, completion obligations and remedies in case of delay.’

She stresses that timelines must be realistic and enforceable since construction projects can encounter unforeseen challenges, so contractual positions must be very clear.

‘Apartment ownership may seem easier from the outside, but legally it is more complex than standard land purchases because you are buying within a larger development with shared rights, obligations and governance structures.’

Are apartments better than land?

‘The answer is not straightforward because the two are sub-asset classes that present different opportunities depending on the investment goal,’ Mr Denge says

He contrasts the two.

‘Land remains one of the most reliable sub asset classes with data showing appreciation in double digits in markets such as Juja, Ruiru, Ngong, Kikuyu and Kisumu. Land also has long-term wealth creation with low maintenance costs, low entry barriers and the ability to hedge inflation. It requires prudence in investment to ensure you buy a good title.’

Apartments, however, offer income ‘An apartment guarantees medium-term cash flows. They say we are no longer making land, and this scarcity is what is driving value in land investment,’ he says.

Mr Denge adds that he expects corrections in some markets.

‘In the near term, we will see price correction in apartments, especially in mature markets, mainly driven by oversupply.’

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Agribusiness firm Del Monte Kenya Limited has won a Sh270 million tax dispute with the Kenya Revenue Authority (KRA) over deductions linked to foreign exchange losses arising from Sh3.9 billion in shareholder loans.

The Court of Appeal ruled that companies can deduct foreign exchange losses incurred when settling foreign-currency loans through the issuance of shares rather than cash payments.

The decision upholds earlier High Court findings in favour of the fruit juice producer and dismisses an appeal by the KRA Commissioner of Domestic Taxes.

The court found that Del Monte was entitled to deduct Sh401.3 million in foreign exchange losses arising from the settlement of shareholder loans through a debt-to-equity conversion.

The ruling preserves tax assessments challenged by Del Monte after KRA disallowed the deductions and sought to recover an additional Sh270.7 million in taxes arising from the debt restructuring.

Loan dispute

The case centred on foreign currency loans obtained by Del Monte from a related company, Del Monte International Incorporated, a Panama-incorporated entity, beginning in 2001.

The loans comprised $28.2 million (Sh3.6 billion) and £1.46 million (Sh253.5 million), bringing the total to about Sh3.9 billion. The facilities were unsecured and interest-free.

According to the judgment, Del Monte used the funds to finance ordinary business operations, including paying suppliers, purchasing raw materials and meeting salary obligations.

As the Kenya shilling fluctuated against the US dollar and pound sterling over the years, the company recorded foreign exchange gains and losses when translating the outstanding balances into shillings in its financial statements.

The gains and losses remained unrealised because the loans had not been repaid. By the end of 2008, the outstanding debt stood at $28.25 million and £1.46 million.

In 2009, the loans were assigned to Del Monte Kenya Holdings. Del Monte subsequently settled the obligations by offsetting a small portion against intercompany receivables and converting the balance into 41,625 ordinary shares issued to the related company.

The transaction triggered realised foreign exchange losses amounting to Sh401.3 million, which Del Monte claimed as deductible expenses in its tax computations for the year ended December 2009.

KRA later audited the company’s accounts for the 2009 to 2011 income years and rejected the deductions, arguing that losses arising from the debt-to-equity conversion were capital in nature and therefore not deductible under the Income Tax Act.

The Tax Appeals Tribunal (TAT) partly agreed with the tax authority in 2016. It found that while the conversion extinguished the debt and realised the foreign exchange losses, the portion linked to the issuance of shares constituted capital expenditure.

Del Monte successfully challenged that finding at the High Court in 2019, which ruled that foreign exchange losses incurred through the conversion of debt into equity were tax deductible under Section 4A of the Income Tax Act.

The Court of Appeal has now endorsed that position.

‘We also uphold the findings of the TAT and the High Court that realisation of the loan does not only occur when the debt is paid in cash, but it is also possible for a debt to be extinguished through payment in kind or exchange of goods and services, conversion of debt to equity or even amortisation against receivables between parties,’ the judges said.

Wider impact

The appellate judges held that the foreign exchange losses arose from the value of the loans themselves and not from the issuance of shares used to settle them.

‘The foreign exchange losses arose from the value of the loan and not at the time of issuance of the shares,’ they said.

The court added that converting the outstanding loans into equity extinguished Del Monte’s liability and, for the purposes of Section 4A of the Income Tax Act, amounted to realised foreign exchange losses that had to be recognised as deductible expenses.

‘We uphold the submission made for the respondent that conversion of the outstanding loans into equity resulted in payment of the loans, meaning that the respondent’s liability was extinguished,’ the judges said.

In a finding likely to resonate beyond the Del Monte dispute, the court reaffirmed that tax statutes must be interpreted strictly and that tax obligations cannot be imposed through implication.

‘The taxing authority cannot exercise its powers based on generalized opinion, implication or conjecture. The taxpayer, on the other hand, must know with specific clarity what it is he is surrendering in terms of tax,’ the judgment said.

Rejecting KRA’s argument that the losses should be treated as capital expenditure, the judges said Section 4A expressly governed the taxation of realised foreign exchange gains and losses.

‘The method or mode of realisation, capital or revenue, appears immaterial in the wording of Section 4A of the Act,’ the court said before dismissing KRA’s appeal.

As the June income tax filing season reaches its peak, many taxpayers are encountering an unexpected shift in compliance.

Filing a return is increasingly becoming less about declaring taxable income based on their own records and more about reconciling figures generated by the Kenya Revenue Authority’s (KRA) systems.

The introduction of prepopulated income tax returns was welcomed as a step toward modernising tax administration. The promise was straightforward: that taxpayers would benefit from returns pre-filled with information already available to the Commissioner, reducing errors, easing compliance burdens and improving efficiency.

However, the final implementation has taken a different form. Instead of the envisaged pre-population, the KRA has introduced a validation mechanism that compares taxpayer-declared incomes and expenses against data held within its systems, drawing from multiple sources, including eTIMS invoices, withholding tax filings and customs data captured through the Integrated Customs Management System (ICMS).

To support taxpayers, portions of this data are available for download via iTax, accompanied by user guides on how to align returns with KRA records. Certain items such as depreciation, airline passenger ticketing and staff costs are excluded from validation, while all others are subject to system checks at the point of filing.

On paper, this appears structured and logical. In practice, the experience has proven far more complex.

Taxpayers and practitioners continue to report material discrepancies between business records and the KRA’s data. Instances of duplicated sales transactions have resulted in inflated income amounts.

Expense information is often incomplete, particularly where the underlying data sources do not capture the full range of deductible business costs. Yet these same figures are being used as the benchmark against which taxpayers’ returns are validated. The result is a compliance process that places taxpayers in a frustrating position.

Businesses already invest heavily in maintaining accounting records, operating financial systems and engaging auditors to ensure that financial statements are accurate and independently verified. These processes are designed to produce reliable figures for tax reporting.

Nonetheless, even where accounting records and audited financial statements are accurate and properly supported, returns may still be rejected because they do not align with system-generated figures.

In the looming shadow of the return filing deadline, taxpayers are now having to incur additional costs to enhance their systems or otherwise outsource digital solutions in relation to tax technology in hopes of procuring timely tax reconciliations.

These challenges undermine the compliance efforts and costs traditionally borne by taxpayers prior to the point of filing a return.

More concerning is the limited transparency within the validation process itself.

When a validation error occurs, taxpayers are typically presented with a single aggregated figure representing their expected income or expense position.

However, the error message provides little information that would assist taxpayers in resolving the discrepancy. It does not show the corresponding amount declared in the return, the variance between the two figures, or any indication of transactions that may be driving the mismatch.

Worse still, in some instances, the amount displayed as the expected total turnover or expense position varies from the data available for download on iTax.

From the user guides shared, KRA has indicated the variance in expenses could relate to entries in the download data such as duplicates and self-supply transactions that are excluded from the total downloaded figure before validation.

This creates an obvious problem. If the system excludes certain transactions when validating a return but continues to display the unadjusted downloadable totals in its validation message, taxpayers are effectively being shown figures that do not represent the amount actually being validated against the return, therefore rendering the taxpayer’s reconciliation process futile.

Somewhere in Meru County, a smallholder farmer named Murimi is making a calculation he knows all too well. The long rains are here. His soil is prepped and ready. Yet, the certified seeds and fertiliser he needs might as well be locked behind a vault.

It isn’t a lack of drive or land holding him back; it is simply that he cannot access affordable credit. Left with no real choice, Murimi will either turn to informal shylocks charging extortionate rates, or he won’t plant a single seed this season.

Either way, he loses. And so does Kenya, a country currently bleeding roughly Sh250 billion every year just to import food.

Murimi’s dilemma is quietly playing out in millions of shambas across our rural landscape every single season. We often pay lip service to how vital agriculture is to our economy. The numbers from the Kenya National Bureau of Statistics bear this out, showing the sector employs over 40 percent of our workforce and anchors roughly 22.5 percent of our GDP.

Yet, when it comes to actual financial backing, farming gets the crumbs left on the table. Financial Sector Deepening Kenya points out a glaring anomaly: agriculture receives a measly three to four percent of total private sector credit.

Given that smallholders grow 75 percent of the food on our plates, this financing freeze isn’t just a frustrating economic bottleneck-it is a full-blown development emergency.

The system is broken, not the farmers. It is tempting for urban commentators to frame this as a problem of financial illiteracy or a rural fear of taking risks. That narrative is completely backward. Kenya’s smallholder farmers are incredibly savvy economic managers. They rotate crops, diversify fields, and stretch household budgets with a precision that would put corporate treasurers to shame.

The plain truth is that our formal banking system was simply never built for them. Look at the structural barriers. Under current central bank rules, commercial loans handed to smallholders and agro-dealers carry a staggering 100 percent risk weight. In plain terms, if a bank lends Sh10,000 to a small agri-enterprise, it must tie up an equivalent Sh10,000 of its own regulatory capital as a safety cushion. Why would a bank bother?

Furthermore, standard loan products are designed around the tidy, predictable monthly cycles of salaried employees. Agriculture operates on a completely different biological clock. A farmer cannot start making monthly loan repayments four weeks after borrowing money; they need a grace period that respects the gestation of a dairy cow or the growth cycle of maize.

The good news is that Kenya isn’t starting from scratch. We already have home-grown, brilliant innovations proving they can work. The challenge right now isn’t inventing something new but aggressively scaling what we already have.

To begin with, Kenyan lenders have to stop treating smallholders as isolated, high-risk gambles. If a lender looks only at a single farmer’s modest acreage and meager balance sheet, the answer will always be “no.” But everything changes when you look at the wider value chain.

By forging tripartite partnerships with milk processors or coffee cooperatives, the financial risk shifts away from the individual farmer and onto the structural strength of a reliable corporate contract. The lender finances the inputs, the farmer grows the crop, and the buyer channels the harvest proceeds directly back to clear the debt.

Suddenly, an unpredictable gamble becomes a stable, bankable business. We can take this a step further by layering AgTech and digital insurance on top of these networks.

Mobile money pipelines and alternative credit algorithms can easily bypass the heavy, expensive brick-and-mortar setups that keep banks from expanding into rural areas. And when you wrap these digital loans in index-based weather insurance you create a genuine safety net.

If a severe drought hits, the insurance steps in to cover the balance. The farmer isn’t financially ruined, and the lender doesn’t inherit a toxic write-off.

Then there is the Warehouse Receipt System, a potent but historically underused tool. While it officially launched in 2021, the government recently stepped things up by rolling out an automated Electronic Warehouse Receipt System Central Registry.

This digital platform lets farmers deposit their harvest into certified warehouses and use those electronic receipts as formal collateral for bank loans. Instead of being forced to dump their produce at harvest-time lows just to get quick cash, farmers can secure a loan to tide them over while waiting for market prices to recover.

Early data shows this infrastructure can slash post-harvest losses from a devastating 40 percent down to just 10 percent. The system is live and working; it just needs aggressive promotion to turn it from a quiet pilot into a mainstream credit tool.

As the mandatory adoption of the IFRS Sustainability Disclosure Standards draws near, some organisations are adopting a pragmatic approach: a climate-first reporting strategy in the first year. It is one of the transition reliefs provided for in IFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information).

The relief allows the organisation to report only on climate-related risks and opportunities and omit non-climate sustainability risks and opportunities in the first annual reporting period.

This approach helps to lessen the burden and cost of compliance for organisations as they embrace the new sustainability standards. Adopting a climate-first reporting approach implies that such organisations would be applying IFRS S2 (Climate-related disclosures) in their first year.

However, organisations must remember that the relief for climate-first is only applicable in the first year.

Therefore, they would need to prepare to discuss and disclose climate and non-climate sustainability risks and opportunities from their second year of reporting.

Some considerations organisations must make when adopting a climate-first reporting approach include the following.

First, organisations must perform a materiality assessment. This is crucial for many reasons, including helping organisations identify additional material non-climate sustainability risks and opportunities. It also ensures they can begin preparing for disclosures on additional non-climate topics starting in their second year of sustainability reporting.

Organisations can also assess the availability and quality of data on these other material topics, with the aim of closing any data gaps and improving data quality. Therefore, a climate-first reporting strategy should not neglect other materiality topics that make up the organisation’s comprehensive value creation story.

Secondly, organisations must ensure that their sustainability roadmap is grounded in the business case for sustainability rather than a compliance-only mindset. Failure to take a business-lens approach to sustainability adoption could result in greenwashing claims because the substantive work required to embed sustainability, from strategy to operations, does not receive the right level of attention.

Other considerations are putting in place the right governance structures, technology, and people to support the sustainability implementation journey. The climate-first reporting relief is an opportunity to prepare beyond climate.