Category: Business Daily

The recurring collapse of Kenya’s corporate titans – from the retail ruins of Nakumatt and Tuskys supermarket to the governance-led downfall of Chase Bank – reveals a dangerous systemic fragility.

These are not merely private business failures; they are “public interest” crises. When institutions of this scale falter, or as seen in the current leadership paralysis at The Nairobi Hospital, they jeopardise national health security, financial stability, and the survival of vast supplier ecosystems.

The crisis at The Nairobi Hospital follows a familiar Kenyan script: a multibillion-shilling entity governed by an archaic “association” model that has failed to professionalise.

This creates a governance vacuum in which board seats become battlegrounds for control over procurement and “insider” interests rather than for institutional stewardship. Without entrenched corporate governance, these entities remain stuck in a “founder’s trap,” unable to survive the transition from a private club to a modern corporate giant.

To safeguard such critical entities, we must look at models that prioritise service continuity and financial integrity over boardroom politics.

The UK Special Administration Model ensures that when a critical healthcare or utility provider faces governance failure, the state triggers a “Special Administration.”

An independent professional is appointed to strip the board of its powers and stabilise operations. The priority is not liquidation, but ensuring the public isn’t stranded while the entity is restructured.

This is supported by rigorous independent audit oversight for “Public Interest Entities,” including mandatory audit firm rotation to prevent the “creative accounting” that masked the true state of firms like Chase Bank.

The German Constitutional Model treats large companies as “constitutional associations” with a legal obligation to serve the public interest. This includes mandatory external audits with “soft guidance” from federal regulators.

If mismanagement is detected, the state uses institutional triggers to force restructuring long before the entity reaches insolvency or requires criminal proceedings.

The role of government should thus be that of a referee, not a player.

Currently, Kenyan interventions often feel like firefighting – characterised by protracted litigation and ad hoc executive interventions.

Effective governance requires a shift toward a statutory safety net in which the Registrar of Companies or specialised health regulator can mandate professional “rescue management” and independent forensic audits for public-interest entities without nationalising them or interfering with their private ownership.

Going forward, we must move beyond temporary fixes. If we do not legally mandate board independence, periodic independent audit reviews, and real-time financial transparency for these “too important to fail” pillars, we will continue to watch our national icons crumble from within. The solution is not more politics, but more professionalisation to safeguard critical private investments of national importance.

The World Bank has cited three hurdles that Kenya must clear before it unfreezes a Sh96.9 billion ($750 million) loan ahead of June 30 amid the economic shocks triggered by the Iran war.

The multilateral lender reckons it will release the billions once Kenya passes regulations indicating the criteria it uses to determine the beneficiaries of monthly stipends offered to orphans, the elderly and persons living with disabilities.

It also wants regulations guiding the issuance of sustainability-linked bonds (SLBs) and legal backing to a policy that obligates Kenya to raise its tree cover to at least 30 percent by 2032 as part of the Forest Conservation and Management Act.

These are the terms that the World Bank offered Kenya at the International Monetary Fund (IMF) and World Bank Spring Meetings in the week ended April 17.

The country risks missing out on the sizeable loan from the World Bank’s budgetary support loan, known as development policy operations (DPO), for the second financial year if it fails to meet the three conditions.

‘Regarding the DPO, outstanding prior actions include approved regulations to the Social Protection Act, amendments to the Conservation Act, and an approved sustainability-linked financing framework,’ a World Bank spokesperson told the Business Daily.

‘In addition, DPOs require an adequate macro-fiscal policy framework.’

The World Bank froze disbursements from the same facility last year after Kenya delayed passing seven laws and four policy reforms.

Kenya has since met some of the demands, including the enactment of the Conflict of Interest Act and the Social-Protection Act.

The country had gone easy in pursuit of the World Bank and the IMF for financing to cover the months to the end of the financial year in June, buoyed by billions of shillings it has received from the Kenya Pipeline Company (KPC)’s initial public offering and issuance of new Eurobonds.

The Treasury has banked Sh106.3 billion from the sale of a 35 percent stake in KPC and is also selling another 15 percent stake in Safaricom to South Africa’s Vodacom in a deal worth Sh244.5 billion.

Kenya also issued two Eurobonds of Sh290.3 billion ($2.25 billion) to fund a $415.35 million (Sh53.5 billion) buyback, leaving it with Sh237.7 billion for budget support. But with delays in receiving the Safaricom cash and transfer of the KPC billions to the infrastructure fund, the need for additional help to plug the deficit is key.

The World Bank cash flows directly to budget for use at the discretion of the State, including paying civil servants’ salaries.

Besides the DPO, Kenya has requested rapid financial support from the World Bank to help it manage the economic shocks triggered by the Iran war.

Like other nations that are heavily reliant on energy imports, Kenya is scrambling to stave off shortages of essential commodities, including petrol, while managing cost increases that could drive up inflation.

The country is the first larger emerging economy to publicly confirm a formal request to the World Bank, although others, such as Egypt, have said they have approached multilateral lenders. Rapid Response Support is a term used by the World Bank for its fast-disbursing financial ?windows and policy support that help countries respond quickly to shocks or crises.

In a sign of the risks facing Kenya’s public finances, President William Ruto signed a law on April 17 cutting value-added tax (VAT) on petroleum products to 8.0 percent from 16 percent for three months to cushion consumers from a surge in crude prices.

The condition on the eligibility criteria for cash transfers aligns with an agreement between Kenya and the World Bank that the country will improve efficiency in the delivery of social protection benefits and services.

The regulations being sought are expected to mandate the national government and counties to establish eligibility criteria using the enhanced single registry (ESR) system for the delivery of poverty-targeted cash transfers and other pro-poor social sector interventions.

The Cabinet approved the National Forest Policy, which incorporates the 30 percent target for tree cover, but is yet to make amendments to the Forest Conservation and Management Act of 2016 to incorporate the target in the law.

Kenya is yet to approve sovereign Sustainably-Linked Bonds rules, which would guide the issuance of the special bonds and improve Kenya’s climate finance credentials.

The sustainability-linked bonds are tied to achieving predetermined environmental or social sustainability targets, and the issuer or government faces penalties such as higher interest rates if they fail to meet the aims.

The government had plans to borrow $500 million (Sh65 billion) using sustainability-linked bonds by March 2026. The Treasury says it is fast-tracking the pending regulations and cited an agreement with Parliament for the passage of amendments to the Forest Management Act, which requires the nod of both the National Assembly and the Senate.

When SIC announced its withdrawal freeze early this year, the numbers seemed contradictory. The cooperative reported owning assets worth over Sh6 billion in land parcels across high-growth satellite counties and regional hubs, yet members seeking their funds were turned away.

The explanation lies in liquidity, a term members rarely discuss at annual general meetings. Liquidity denotes how quickly an asset can be converted to cash. In layman’s terms, cash in a bank account is perfectly liquid, whereas a half-built apartment complex, where contractors abandoned the site, that is frozen capital, technically an asset practically useless.

This isn’t a new story. We have witnessed cooperative failures since 2010. The pattern is identical. Their collapse follows a classic trajectory in financial mismanagement: the asset-liability mismatch. This happens when an institution’s obligations to members come due long before its investments can be turned back into cash.

When members join cooperative societies, their expectation is monthly contributions that are withdrawable upon request, accessible savings through specific liquidity products, and prompt loan processing.

The mismatch is obvious in retrospect. Collapsed cooperatives have been suspected of taking deposits to pour them into speculative real estate and paying dividends using new members’ deposits rather than actual investment returns to maintain an illusion of solvency.

Most use trusted brand names of their parent company to create a sense of shared identity. This gives new members the confidence to join. When members begin requesting withdrawals, the cooperatives fall into a liquidity trap with wealth on paper, and none available in practice.

Perhaps the most insidious is the valuation gap between what cooperatives claim their assets are worth and what they could fetch in a distressed sale.

The crisis isn’t an isolated failure, it is a warning about the entire investment cooperative sector in Kenya. We have witnessed dozens of saccos establish investment arms mostly christened housing cooperatives where they invest in speculative real estate development.

The appeal is understandable. Kenya’s property market has seen explosive growth, particularly in counties following devolution. With members struggling to purchase land and housing, saccos saw an opportunity. They use pooled savings to purchase land cheaply, develop it, and sell to members at affordable rates. The returns dwarf traditional lending margins.

These projections often ignore the reality that land banking requires holding costs for years and sub-division requires regulatory approvals that can stall for months. Construction requires continuous injection of capital, and through it all, members continue contributing monthly, expecting their savings to remain accessible.

The government has responded to mounting cooperative sector failures with a proposed regulatory overhaul for deposit-taking saccos. The recommendations are designed to have all saccos regulated, Sasra’s oversight tightened and the Deposit Guarantee Fund (DGF) operationalised to ensure saccos can self-sustain.

The Cooperative Bill 2024, currently advancing through Parliament, further strengthens this framework by establishing a cooperatives tribunal to resolve disputes, introducing criminal penalties for mismanagement, and mandating annual member education on rights and obligations.

While these safeguards offer a robust shield for savers in deposit-taking saccos, they arrive as cold comfort for members of investment cooperatives as they operate in a regulatory grey zone.

Members holding shares in cooperatives hold uninsured equity, not deposits. The liquidity rule mandating cash reserves applies only to regulated deposit-taking institutions. Cooperatives operating under the under-resourced Commissioner of Cooperatives bypass Sasra’s surveillance entirely, creating a regulatory blind spot where problems fester unseen until collapse.

Before committing savings, ask whether the cooperative could meet sudden withdrawal demands of at least 15 percent without liquidating core assets. If the response requires completing projects first or awaiting market recovery, you are facing a liquidity trap.

Even when provided with internal valuations of land and property, members should request third-party valuation reports from recognised firms.

Since investment cooperatives lack the statutory liquidity protection that deposit-taking Saccos enjoy, members should demand transparency about cash reserves specifically earmarked for withdrawals.

To protect cooperative members, specific reforms are necessary. First, expand DGF coverage to include investment shares held in cooperatives above a certain threshold, creating a backstop for members who currently absorb all institutional risk.

Second, mandate regular liquidity disclosures so prospective members see actual cash reserves before committing capital, aligning with the Cooperative Bill 2024’s emphasis on informed consent.

Third, all cooperatives should fall under Sasra oversight, regardless of their technical classification, eliminating the blind spot where oversight currently fails.

Fourth, fast-track the Cooperative Bill 2024 to give members accessible dispute resolution when projects stall or funds are unaccounted for.

Between April 15 and 18, the Nuclear Power and Energy Agency (NuPEA) and KenGen engaged in a high-level consultative workshop with the leadership of Siaya County.

This forum served as a critical platform to align the proposed 3,000-megawatt nuclear power plant with both local interests and international standards.

As the project moves toward a groundbreaking ceremony next year and a scheduled commissioning in 2034, it is essential to examine the technical, economic, and social frameworks that will define this 100-year venture.

The project’s economic impact is structured in two primary phases. During the peak of construction, the site will act as a massive employment hub, requiring nearly 30,000 workers.

This will provide a significant short- to medium-term stimulus to the local labour market and service sectors. Upon commissioning in 2034, the plant will transition into a stable operational phase, offering approximately 4,000 permanent, high-skilled positions.

Given that modern nuclear plants are engineered to operate for close to 100 years, the facility represents a century-long anchor for the regional economy, providing generational career stability and professional development.

A cornerstone of this partnership is the Free, Prior, and Informed Consent (FPIC) framework. This ensures a deliberate and transparent engagement process where the concerns of the Siaya people are integrated into the project’s execution.

Regarding land and settlement, the project will adhere to strict legal safeguards. Any land acquisition will follow the Constitutional mandate of prompt, fair, and adequate compensation.

Furthermore, any necessary resettlement will be conducted strictly under Kenyan resettlement laws, prioritising the protection of livelihoods and the maintenance of social cohesion. This project will deliver the real nuclear dividend to the people of Siaya. The integration of a 3,000MW plant into the regional grid will offer several systemic advantages.

The nuclear project in Siaya will naturally necessitate the upgrading of local road networks, the establishment of modern educational facilities, and the construction of state-of-the-art hospitals that will serve the highly skilled and well-paid workers who will provide services during construction and ultimately during its operation.

Secondly, there is the matter of energy stability. By providing a stable, consistent baseload, the nuclear plant will effectively eliminate the electricity blackouts common in the western Kenya.

Upon construction of the plant, it is also expected that the host community will enjoy subsidised power and affordable power for emerging industries.

Under constitutional mandates, Siaya County and its people can expect a reasonable share from the revenue to be generated from the sale of electricity from the nuclear plant.

A structured revenue-sharing model from electricity sales will provide the county government with a dedicated fund for local development projects.

The unanimous support from the Siaya County Executive and Assembly, alongside the commitment to sign a Memorandum of Understanding (MoU) and pass necessary laws, establishes a clear legal and cooperative path forward.

The Siaya nuclear project is not merely an energy solution. It is a long-term infrastructure investment designed to anchor Kenya’s industrial future for the next century.

APA Apollo Group has posted a 43.2 percent rise in net profit to Sh2.78 billion for the year ended December 2025 on the back of increased investment revenue.

The APA Apollo Group, also called Apollo Investments Limited, comprises APA Insurance (Kenya and Uganda), APA Life Assurance, APA Microinsurance, Apollo Asset Management and Gordon Court.

The group’s insurance service result – difference between premiums received and claims paid out and spending on reinsurance – dropped by a third to Sh821.88 million from Sh1.23 billion. However, net investment income rose 45 percent to Sh6.42 billion from Sh4.43 billion, leading to the growth in net profit.

“Our 2025 performance reflects a deliberate strategy centred on profitable growth, strong partnerships, and putting our customers at the heart of everything we do and delivering on our promise to protect what matters most to our customers,’ Ashok Shah, the Apollo Group Chief Executive Officer, said.

‘We have built momentum across the group by working collaboratively, investing in our capabilities, and maintaining discipline in execution.”

APA Life, which is the subsidiary that handles long-term business such as deposit administration and life covers, posted 58.8 percent growth in net profit to Sh441.66 million from Sh278.1 million as revenue from insurance services and investment grew.

Net profit for the short-term business, called APA Insurance, saw a 37.1 percent rise in net profit to Sh1.44 billion from Sh1.05 billion, helped by a rise in insurance service revenue and investment income.

APA Microfinance, the unit that handles micro-covers of premiums of up to Sh40 a day, saw its net profit more than double, rising to Sh9.56 million, up from Sh4.61 million.

Mr Shah is scheduled to retire as Apollo Group CEO at the end of June 2026 and handover the mantle to Risper Ohaga, who is presently completing her tenure as chief financial officer and executive director at East African Breweries PLC.

“As we look ahead, our focus remains on scaling through innovation, deepening customer relationships, and leveraging technology and data to deliver smarter, more inclusive insurance solutions,” said Mr Shah.

APA Apollo is in the process of acquiring two insurance companies in Tanzania – Meticulous General Insurance and Metro Tanzania Life Assurance Company – as it moves to increase its share of underwriting businesses outside Kenya.

The insurer, which already has a subsidiary in Uganda and an associate in Tanzania, has already informed Tanzania’s competition watchdog of the intention.

The insurer plans to complete the deals through AIL Holdings Tanzania, which is a non-operating holding company incorporated in the country as a wholly-owned subsidiary of Apollo Investments.

The deals will see APA deepen its operations in the short-term and long-term insurance business in Tanzania. Currently, APA owns a 34 percent stake in Reliance Insurance Tanzania, which is a general insurer.

Kenyan insurers have been deepening their presence in the region, including ICEA Lion Group, Britam, Jubilee Holdings, CIC Insurance Group, and GA Insurance.

There was a time when access to financial services in Kenya meant long queues and limited options. Today, financial inclusion has expanded at an unprecedented pace, powered by mobile technology and digital credit. Money is now faster, closer, and more accessible than ever before.

Beneath this progress lies a more complex question: how resilient are Kenyans when access has improved, but financial pressure has intensified?

Insights from Tala’s latest MoneyMarch report shed light on this reality. If access was the defining story of the past decade, resilience is the defining story of now. Kenyans are more financially included than ever, yet increasingly stretched.

About 89 percent of households report that rising costs are directly affecting their budgets. Over the past six months alone, one in five Kenyans report that their financial situation has worsened significantly, reflecting the mounting pressure on households.

The challenge is not just rising costs, but their composition. Essentials such as food, rent, and utilities now dominate household spending.

Financial pressure is being driven primarily by the cost of living, accounting for 49 percent, while income instability contributes 26 percent. With employment declining by five percent and even side hustles dropping by three percent, the traditional buffers that households rely on are slowly eroding.

In response, Kenyans are adapting in ways that reflect both urgency and resilience. Fifty-nine percent report actively cutting back on expenses, demonstrating a conscious effort to manage limited resources.

At the same time, savings have increased slightly by three percent, suggesting that even under strain, there is still an intentional effort to build financial buffers.

However, one of the most telling shifts is in how Kenyans are using credit. Traditionally, credit has been associated with opportunity, whether to expand businesses, invest in education, or fund long-term growth.

Today, that narrative is evolving. Nearly half of Kenyans, at 46 percent, are now supplementing their income through loans, marking an increase from the previous year.

Borrowing has become more targeted, with a noticeable rise in loans for medical expenses, underscoring the growing reliance on credit to manage emergencies rather than pursue opportunity. This signals a critical shift from credit as a ladder for growth to credit as a lifeline for survival.

Kenyans have always found ways to navigate hardship, drawing on community, innovation, and an enduring spirit of perseverance. Today’s Kenyan consumer is more cautious in spending, more strategic in borrowing, and more reliant on digital tools.

There is a growing shift toward prioritising essentials and making short-term decisions, while still holding on to long-term aspirations.

As we look ahead, the future of financial progress in Kenya will no longer be defined solely by access, but by resilience. For years, success has been measured by how many people can access financial services or credit.

The next phase will be measured by how well households can withstand financial shocks, how sustainably they can manage debt, and how effectively they can rebuild after setbacks.

This shift demands a more holistic approach to financial services, one that goes beyond access to prioritise protection and trust. It requires solutions that support customers not only in moments of need, but also in their journey toward long-term financial stability.

Kenya’s financial story is evolving. It is not only about inclusion but also about endurance. Ultimately, the true measure of progress will not be how many people can access money, but how many can withstand losing it and still find a way to rise again.

Kenyans are not just surviving this moment. They are actively redefining what financial resilience looks like in real time.

A court has decided that a long-running family dispute over land pitting the late business tycoon Mohan Galot against his nephews will now be heard in Thika instead of Nairobi.

The Environment and Land Court (ELC) in Nairobi agreed with one side of the family that the case should be moved because the land in question is in Kiambu County, where Thika is located.

The judge said it made sense for the case to be handled there since there is a court in Thika that deals with the same kind of issues.

‘It is for this reason that I will allow the application for transfer to the Thika Environment and Land Court,’ said the court.

The judge also noted that the case has dragged on for too long and ordered that it should be handled quickly.

The matter will come up before the presiding judge in Thika ELC on May 5, 2026, for directions on how it will proceed.

The dispute was originally filed by the late Mohan Galot against his brothers and nephews, and is linked to another earlier fight over control of family businesses.

The land is more than 20 acres and has been home to the family for over 40 years. Some family members claim that although the land is in Mohan’s name, he was holding it trust on behalf of the bigger Galot family.

One of the nephews, Ganesh Galot, argued that the case should be heard in Kiambu because the land is there, all the parties live there, and there are other related cases already in a local magistrate’s court. He said moving the case would save time and money for everyone involved.

However, Avin Galot, who represents Mohan’s estate, opposed the move. He argued that the land belonged solely to his late father and accused the other family members of trying to take it away from the estate. He also said that some of the people involved live and work in Nairobi, so location alone should not determine where the case is heard.

Mohan Galot, a well-known businessman in the clothing, alcohol, and real estate sectors, died in June 2025 in London while undergoing treatment. He was the face of Galot Industries and led companies such as Manchester Outfitters, later known as King Woollen Mills.

Before his death, he had been in a long legal battle over the control of the family’s businesses. In 2024, a panel of three judges ruled in his favour, saying he had the authority to appoint or remove company directors.

His nephews-Pravin, Rajesh, and Ganeshlal-had accused him of pushing them out of the companies unfairly.

The family business dates back to 1954, when it was started by their father, Lachman Pusharam Galot, as a clothing company. It later expanded into real estate and alcohol production, with Mohan joining as a partner while his brothers were also brought into the business.

Kenya is sitting on a vast but largely untapped mineral base stretching from coastal rare earth deposits to gold belts in the west, and battery minerals in the north, findings of a government-sponsored geological survey suggest.

A large-scale airborne geophysical survey completed in 2022 identified about 970 anomalies-geological signals that indicate the presence of commercially viable mineral deposits, many of them buried deep underground.

Government officials say the country is now deliberately aligning its mining strategy with surging global demand for metals used in electric vehicles, renewable energy systems, and high-end electronics. This, if actualised, will mark a shift from a historically underdeveloped mining sector to one targeting high-value, future-facing resources.

Secretary for Geological Survey Enoch Kipseba said the government is prioritising follow-up work in areas likely to host minerals that are in high demand globally, particularly those classified as critical or strategic.

‘We are doing that prioritisation, and mainly focusing on the critical minerals… some of them were declared as strategic minerals here in Kenya,’ Mr Kipseba said. ‘Some minerals are now sought after a lot. These are mainly critical minerals or green energy minerals.’

The emerging mineral map shows a country divided into distinct resource corridors, each tied to strategic minerals increasingly sought after in the wake of the global shift to clean energy and advanced manufacturing.

At the Coast, Kwale County anchors one of the country’s most strategic mineral zones. In addition to the already exploited titanium sands, the Mrima Hills deposit hosts rare earth elements and niobium minerals essential in the production of electric vehicles, wind turbines, electronics, and high-strength alloys.

In western Kenya, a gold-rich belt running through Migori, Kakamega, Vihiga and Siaya has attracted growing investor interest, with exploration pointing to commercially viable deposits.

Gold is key in supporting industries ranging from jewellery to electronics, while also serving as a store of value. However, production remains dominated by artisanal miners, highlighting the gap between resource potential and large-scale extraction.

Further north and east, Kenya’s least explored regions are gaining attention for battery and transition minerals potential.

The survey found evidence of potential deposits of graphite in Turkana, Samburu, Kitui and Taita-Taveta, which are critical for lithium-ion batteries used in electric vehicles and energy storage systems, while occurrences of lithium, nickel and beryllium could underpin renewable energy infrastructure and advanced electronics.

Copper deposits identified in counties including Kitui, Meru and Kajiado add to the country’s strategic mineral base, given that the metal plays a central role in electrification and green energy systems.

Perhaps the most notable discovery is coltan, a mineral used in the production of electronic components such as capacitors found in smartphones, computers, and other advanced devices. Its identification in Kenya signals a possible new entrant into a market largely associated with countries like the Democratic Republic of the Congo.

However, Mr Kipseba cautions that bringing coltan to market requires strict adherence to international traceability standards designed to ensure minerals are sourced responsibly.

‘It is a mineral that is not easy to start a business with… There is an international protocol which we need to follow, so that it is known that Kenya is a producer,’ he said.

Mr Kipseba said the nationwide airborne geophysical survey used magnetic and radiometric sensors to detect underground variations, including metallic and radioactive minerals such as iron ore, uranium and thorium-many of them buried and previously unknown.

‘These anomalies point to areas where mineral concentrations differ from the surrounding geology… most of those were buried,’ he said.

The findings are now guiding a second phase of exploration known as ground-truthing, where geologists and geochemists conduct field sampling, drilling and laboratory analysis to determine the exact minerals present. The ongoing verification has covered more than 30 counties to confirm mineral occurrences and assess their extent.

‘This [airborne geophysical] survey is not showing exactly what minerals are in specific places-it shows the anomaly. So we send our geologists to conduct further exploration… including drilling and sampling what is underground,’ he said.

Beyond the high-value resources, Kenya also holds extensive industrial minerals that underpin domestic industries. Soda ash production at Lake Magadi remains a key export earner, while limestone, gypsum and fluorspar deposits support cement and manufacturing sectors across the Rift Valley and other regions.

Iron ore deposits in counties such as Taita-Taveta, Tharaka-Nithi and West Pokot further point to the potential for local steel production, although large-scale development has yet to take off.

The government is now betting on this growing pool of geological data to attract investors, by making detailed survey findings available to the private sector at an undisclosed fee in a bid to spur exploration and development.

The Kenya Revenue Authority (KRA) will, from next month, block exporters from manually declaring zero-rated goods in a move aimed at tightening scrutiny on value-added tax (VAT) refund claims.

Under the new system, the taxman has linked the Integrated Customs Management System (iCMS) directly to the iTax platform. This means all export data captured through iCMS will be automatically prefilled in VAT returns filed on iTax, leaving no room for manual adjustments by exporters. The iCMS allows submission of export and import documents through a single-window system.

The move will integrate export documentation, invoicing and tax filings into a single platform, marking a shift to fully data-driven tax reporting.

‘Validated export values will be automatically prefilled in the VAT return upon issuance of the relevant export documents by Customs,’ KRA said in a notice to exporters.

Refund scrutiny

The reform targets a long-standing weakness in the VAT system, where goods and services sold to foreign markets – though zero-rated – often generate significant input VAT refund claims.

KRA has previously blamed manual declarations for creating discrepancies between customs records and VAT filings, exposing the authority to inflated or fraudulent claims.

Under the new framework, exporters and their clearing agents will, from May, be required to capture key identifiers at the documentation stage, including the exporter’s PIN and valid invoice numbers generated through the Tax Invoice Management System (TIMS).

TIMS enables VAT-registered businesses to electronically generate, validate and transmit tax invoices in real time.

The tax authority says only export transactions properly linked to these details and validated in iCMS will be recognised in VAT returns.

This means any mismatch – whether in invoice numbers, PIN details or export values – could result in omission from VAT returns, potentially blocking refund claims.

The change applies to exports to foreign markets, the Single Customs Territory, as well as transactions involving Export Processing Zones (EPZs) and Special Economic Zones (SEZs).

System shift

The integration also extends to exports of taxable services, which will now be prefilled in VAT returns based on invoices generated and transmitted through TIMS/eTIMS within the relevant tax period.

This expands KRA’s visibility beyond goods to include service exports, an area that has grown rapidly with the rise of digital and cross-border business models.

The timing of the reform comes against a backdrop of policy tension over VAT refunds.

In August 2025, the National Treasury blocked KRA from implementing provisions of the Finance Act 2025 that would have allowed businesses and individual taxpayers to offset tax liabilities using excess tax credits, citing risks to revenue performance.

The proposed changes had amended Section 47 of the Tax Procedures Act to allow taxpayers to offset overpaid taxes against obligations such as VAT on imported goods from July 1, 2025.

The measures were intended to ease cash flow pressures on businesses, building on reforms introduced in 2021 that allowed overpayments to be applied to outstanding tax liabilities and future obligations, including Withholding Tax, VAT and Pay As You Earn (PAYE).

However, the Treasury pushed back, warning against modifications to iTax that would operationalise the offsets.

‘The National Treasury has clarified to KRA that offsets under Section 47(1)(a) should apply only to taxes borne by the taxpayer and not the tax liabilities of third parties withheld by taxpayers, such as Withholding VAT and Withholding Income Taxes,’ the Treasury said at the time.

It added that withholding taxes are administrative obligations, not liabilities of the withholding agent.

The Central Bank of Kenya (CBK) has opened the sale of a Sh10 billion switch bond that is offering higher return to holders who accept the swap, after the last such issuance flopped when investors were asked to take a rate haircut.

At the same time, the CBK has reopened three other bonds for the May 2026 monthly sale, targeting Sh80 billion as it races to fill the Treasury’s expanded domestic borrowing target of Sh998 billion.

In the switch offer-the fourth one done this year-the CBK has asked holders of a 10-year bond that matured in July 2027 the opportunity to move to a 20-year bond that matures in 2041. The 10-year bond pays annual interest of 12.96 percent, compared to the 20-year’s rate of 13.44 percent.

By offering higher return on the 20-year paper, the CBK is hoping to avoid a repeat of the flop of the April 13 switch bond auction, where investors agreed to swap just Sh1.75 billion against a target of Sh20 billion.

In that sale, the CBK asked investors to swap from 10-year paper that matures in August into a 15-year bond that comes due in 2033. The 10-year paper has been paying holders 15.04 percent in annual interest, while the 15-year pays 12.65 percent.

Speaking earlier in the week, CBK Governor Kamau Thugge attributed the poor performance of the April 13 bond to a wait and see approach from investors, due to the geopolitical uncertainty around the Iran war.

‘In the previous ones we did relatively well, but right now there’s a wait and see approach since too many things are happening. That’s why there was underperformance in the latest one,’ said Dr Thugge.

He added that the CBK remained committed to future swap bond sales, terming them a legitimate tool of liability management that helps to stretch out repayments and cut the government’s debt refinancing risk.

According to analysts, the market has taken cue of the potential inflationary pressure due to the war, and is now adjusting its rate expectations upwards. This led to the rejection of the lower paying paper in the sale.

Earlier switch sales done in January and March had both been oversubscribed. They offered higher rates on the destination bonds at a time when interest rates were falling.

Beyond testing the appetite for switch bonds, the CBK has selected papers with relatively high coupons for reopening in May, pointing to an attempt to entice the market at a time when investors are increasingly wary of rising inflationary pressures stemming from spillovers of the war in Iran.

The sale comprises a pair of 20-year papers that were first issued in 2012 and 2019, and a 25-year bond that was first put to market in 2021. The 2012 bond has a coupon of 12 percent, the 2019 paper 12.87 percent, and the 25-year pays 13.92 percent.

Documents seen by the Business Daily show that in addition to the three bonds, the State will also reopen a further two papers in May, targeting an additional Sh50 billion, taking the month’s total targeted issuance to Sh130 billion.

The second auction will see the CBK reopen a 15-year paper from 2019 and a 20-year bond from 2021.

The planned reopening of five papers comes against the backdrop of total revenue collection having stood at Sh2.04 trillion in the first three quarters of the current financial year, falling behind the prescribed target by Sh84 billion.

The revenue shortfall now leaves the government grappling with elevated funding pressures with Supplementary Budget I having increased the domestic borrowing target by 57.3 percent to Sh998.6 billion.

However, Dr Thugge sought to allay fears that the higher borrowing target will push interest rates upwards, saying the CBK has already borrowed a net of Sh850 billion domestically, meaning only about Sh150 billion is pending to hit the new target.

I believe with that, we can meet that borrowing target without adding a lot of pressure on interest rates,’ Dr Thugge told Business Daily in an interview.

Earlier in the year, the CBK had frontloaded on the domestic debt, taking advantage of higher investor demand for government securities and a liquid money market.