Category: Business Daily

The Kenya Revenue Authority (KRA) missed its tax collection target for the first half of the current financial year by Sh152.2 billion, underscoring mounting pressure on public finances.

Treasury disclosures show the taxman collected Sh1.161 trillion in the six months to December 2025, falling short of the Sh1.314 trillion required to stay on track of its Sh2.627 trillion annual target.

The shortfall means the KRA achieved 88.4 percent of its half-year benchmark, widening concerns over the government’s ability to fund operations without deeper borrowing or further spending cuts.

The miss comes at a delicate point for Treasury officials, who are grappling with elevated debt servicing costs and limited room to raise new taxes after sustained public resistance.

While the KRA posted year-on-year growth in collections, the pace remained insufficient to meet Treasury’s ambitious revenue assumptions underpinning the current budget.

The KRA’s performance in the first six months mirrors a pattern seen in the previous financial year, when the taxman also fell short of its mid-year goal.

In the half-year ended December 2024, the KRA missed its half-year target by Sh163.46 billion after raising Sh1.07 trillion against a required Sh1.23 trillion.

That earlier miss was largely attributed to the rejection of the Finance Bill, 2024, which forced the government to abandon several proposed tax measures.

Although no comparable legislative shock occurred this year, revenue mobilisation has continued to face headwinds.

Historically, collections tend to pick up in the final months of the fiscal year, driven by corporate tax payments.

The Sh2.627 trillion annual target represents one of the most aggressive revenue goals in recent years.

Failure to close the gap is set to deepen the country’s fiscal deficit, forcing the government to rely more heavily on borrowing or delay planned development spending.

Domestic borrowing has already intensified in recent years, raising concerns about crowding out private sector credit.

At the same time, external borrowing options have narrowed as Kenya grapples with high debt levels and stricter conditions in international capital markets.

The Parliamentary Budget Office (PBO) has previously cautioned against over-reliance on new taxes as a strategy for boosting revenue.

Instead, the office has urged the government to focus on strengthening tax administration and compliance.

‘Rather than relying on the introduction of new tax policies that are likely to create new tax burdens on Kenyans, the government may focus on improving tax administration through better enforcement of current tax policies, enhanced data analytics and increased use of technology to simplify tax processes and improve tax compliance,’ the PBO said in a past review.

The KRA has in recent years invested heavily in digital systems, including electronic invoicing and data matching tools aimed at widening the tax net.

Despite these efforts, compliance remains uneven, particularly among small and informal businesses that form a large share of the economy.

The President William Ruto-led Kenya Kwanza administration has repeatedly pledged to stabilise public finances while protecting development spending.

Organisations in Kenya began 2026 with a deceptive sense of cybersecurity comfort after reported cyberattacks declined 81.6 percent year-on-year during the quarter to September 2025, even as a quieter but potentially deeper risk expands through workplace use of generative AI tools.

Employees are increasingly using public generative AI platforms to draft emails, analyse data, write code and prepare reports, embedding AI into daily workflows faster than governance structures can adapt.

The rapid adoption is creating new data exposure risks that do not resemble traditional cyber threats, as sensitive information is often shared voluntarily.

Generative AI tools are, by design, data processors, meaning every prompt or uploaded document potentially transfers information beyond an organisation’s direct control and outside established security and compliance frameworks.

A global cybersecurity survey by research firm Check Point last month shows that one in every 27 GenAI prompts submitted from enterprise networks posed a high risk of sensitive data leakage, while 91 percent of organisations using GenAI tools were affected by high-risk prompt activity.

‘Sensitive corporate data is increasingly being uploaded to third-party generative AI services without adequate controls, sanitisation or oversight, often outside established security governance,’ notes Check Point.

‘With employees using an average of 11 GenAI tools, organisations need the ability to monitor and restrict what data is shared with every platform.’

Mr Anthony Muiyuro, East Africa Regional Director at Syntura, terms local firms as ‘highly vulnerable’, adding that AI adoption has outpaced internal rules, oversight and employee awareness.

According to Mr Muiyuro, many workers assume AI platforms function as private workspaces, unaware that prompts, chat histories and uploaded data may be stored, reviewed or used for model improvement.

This misunderstanding is widespread since generative AI is largely viewed as a productivity tool, rather than a system that changes how corporate and customer data is shared.

As a result, many organisations still rely on perimeter security controls and non-disclosure agreements that were designed for predictable internal data flows.

‘Most Kenyan enterprises are not adequately prepared. While a few large banks, telcos and multinationals are beginning to define AI usage policies, many firms have no clear guidance on what workers can or cannot share with AI tools,’ he says.

‘Governance is often reactive. There are limited controls around data classification, no clear auditability of AI usage and minimal staff training on AI-related data risks. Well-intentioned workers can unknowingly expose confidential information.’

The risk is particularly acute in financial services, government, logistics, healthcare and education, where sensitive personal, operational and strategic data is routinely handled by employees.

In many of these places, there is no visibility into which AI tools employees are using, what information is being shared or whether sensitive data is leaving the organisation.

Mr Muiyuro says criminals are positioning themselves to exploit the shift by targeting systems and leveraging data unintentionally exposed.

According to the expert, attackers are likely to harvest leaked credentials, internal files or customer information that employees feed into public AI tools.

‘Criminals are also using generative AI to scale and localise attacks, including phishing messages written in culturally familiar language or impersonating trusted institutions,’ he says.

The combination of leaked internal data and AI-assisted social engineering increases the effectiveness of scams, particularly against SMEs and digitally expanding firms.

GenAI further lowers the barrier for attackers, allowing small groups or individuals to launch personalised, convincing attacks at scale without the resources previously required for such campaigns.

Experts advise local companies to begin by defining clear, practical rules on what types of data may be used in AI tools and what information is off-limits.

These rules must be embedded into daily workflows and communicated in plain language, rather than buried in lengthy policy documents.

‘Beyond controls, organisations must enable and encourage responsible AI use, not suppress it. Employees should feel confident using AI tools within clearly defined guardrails that protect data, customers and the organisation’s reputation,’ Mr Muiyuro says.

‘This starts with clear practical guidance on what AI tools are approved, what data can be used and what is off-limits – communicated in plain language rather than legal policy documents. Organisations should provide secure, enterprise-grade AI platforms, reducing the temptation for workers to use unsanctioned public tools.’

The Court of Appeal has upheld the dismissal of a senior cashier at Nairobi City Water and Sewerage Company (NCWSC) over the loss of Sh1.2 million in unbanked cash collection.

Emphasising that honesty is fundamental in employment, particularly in financial roles, the court ruled that misconduct eroding trust renders dismissal lawful.

“If the employee acts dishonestly in dealing with the finances, we do not find any difficulty in stating that the employer is within his rights to terminate the employment,” the judges ruled.

They dismissed an appeal by Stephen Ndolo against NCWSC, upholding his termination as lawful and fair.

The case stemmed from events in August 2013, when Mr Ndolo, serving as Cashier Verification Supervisor, was responsible for collecting and depositing daily cash and cheque receipts.

An internal audit later revealed that Sh1.2 million collected by Mr Ndolo had not been banked for three months. The company summoned him from leave to account for the discrepancy.

He claimed he disbursed the funds as an I.O.U. (“I Owe You”) imprest to two individuals, who claimed they were the company’s employees sent by the managing director to collect funds for staff activities at Kasarani.

He stated that they presented an I.O.U warrant bearing what resembled the director’s signature and recorded the transaction before proceeding on leave.

NCWSC dismissed his explanation, alleging fraud. Investigations confirmed that the authorisation letter was forged, the recipients were unaffiliated with the company, and the transaction was not reflected in official records.

Additionally, Mr Ndolo failed to surrender the imprest or account for the funds before his leave and declined several requests to return and clarify the matter once the loss was discovered.

Following disciplinary proceedings, NCWSC dismissed him for gross misconduct. Mr Ndolo contested the termination in court, arguing it lacked justification and due process.

He applied for a declaration that the termination was unlawful and compensation of Sh11 million in the form of general damages for wrongful dismissal, allowances during suspension, service, and notice pay.

The Employment and Labour Relations Court ruled against him, finding he neglected his duty of care in handling finances and that termination procedures complied with legal requirements.

On appeal, Mr Ndolo attributed the loss to weak internal controls rather than dishonesty, noting he faced no criminal charges.

He said that crucial information had been suppressed, including the non-production of CCTV footage and other requested documents to shield broader institutional failures, so as to blame him for the loss.

He also cited the absence of formal I.O.U guidelines, stating that he was not the custodian of I.O.U. vouchers and that the cash office lacked specimen signatures of senior officers, making it impossible for him to verify the authenticity of the I.O.U. or signatures.

However, the Court of Appeal rejected these arguments, clarifying that civil cases require a lower standard of proof than criminal proceedings.

The bench highlighted Mr Ndolo’s senior role and duty to safeguard company funds, questioning whether he exercised due diligence given the substantial amount, unfamiliar recipients, and failure to verify authorisation.

Concluding he had not, the court cited the principle of mutual trust in employment, stressing that dishonesty in financial roles breaches this bond.

The court stated that in a situation where the employee is charged with handling and accounting of finances, “honesty is key.’

“The decisive factor is whether dishonest conduct destroys the employment relationship,” the judges stated, finding Mr Ndolo’s actions fell short of his responsibilities and resulted in financial loss.

The court also upheld the fairness of the disciplinary process and noted Mr Ndolo’s failure to substantiate his claims.

East Africa offers dynamic investment opportunities across diverse sectors which come with regulatory obligations that investors cannot afford to overlook.

Chief among these is the local shareholding requirement, a rule that mandates a minimum percentage of ownership in a company or project to be held by local citizens or entities.

This requirement traces its roots to post-independence economic policies that aimed at reducing foreign dominance, retaining wealth within local economies, and fostering indigenous industries.

While the region has evolved significantly since then, local ownership rules remain firmly embedded in regulatory frameworks, though they vary widely across jurisdictions and sectors.

Kenya, widely regarded as East Africa’s ‘Silicon Savannah,’ exemplifies a balanced approach.

The country seeks to maintain market openness while safeguarding local interests through sector-specific ownership thresholds. In insurance, at least one-third of an insurer’s paid-up capital must be held by Kenyan citizens or partnerships involving them, while insurance brokers face a stricter 60 percent threshold, limited to East African Community citizens.

Telecommunications operators must ensure that 20 percent of their shares are held by Kenyan citizens within three years of licensing.

Mining companies, on the other hand, are required to list at least 20 percent of their equity on the Nairobi Securities Exchange within three years of commencing production.

Aviation imposes even tighter restrictions, demanding that 51 percent of voting rights be held by Kenyan citizens unless exemptions apply for public interest or humanitarian operations. Pension scheme administrators must also maintain at least 33 percent Kenyan ownership, except where the applicant is a bank or insurance firm.

Moving south, Tanzania has adopted a more protectionist stance to shield domestic sectors from foreign dominance. In the extractive industry, projects exceeding $100 million in capital investment must allocate 30 percent ownership locally through a public offer. Service providers in this sector must form joint ventures with Tanzanian firms holding at least 20 percent equity.

Oil and gas operations require a minimum of 25 percentlocal participation, and even where goods or services are unavailable locally, foreign providers must partner with local firms holding at least 25 percent equity. The Insurance sector mirrors Kenya’s model with one-third local control for insurers, but brokers face a two-thirds requirement.

Media and shipping sectors also impose restrictions, limiting foreign ownership to less than 50 percent in print media and mandating over 60 percent local ownership for shipping companies.

Ethiopia recently liberalised its financial sector, but foreign ownership remains capped. Individuals may hold 7-10 percent of a bank’s shares, while foreign entities can own up to 10 percent, subject to an aggregate limit of 49 percent.

Other sectors, including transport, shipping, advertising, and media, impose caps ranging from 25 percent to 49 percent, often requiring partnerships with local firms. In mining, equity participation shifts from local citizens to the state, which retains a minimum 5 percent free carried interest and may negotiate for additional stakes.

Uganda’s local shareholding requirements are concentrated in the extractives sector, where oil and gas projects involve state participation through production sharing agreements.

Rwanda, by contrast, offers one of the most liberal investment climates in the region, with minimal local ownership restrictions. The only notable limitation lies in insurance, where no individual or affiliated entity may own more than 25 percent of a private insurer’s shares unless classified as a financial or public institution.

The Democratic Republic of Congo enforces local participation primarily in the banking sector. Under OHADA commercial law, at least 45 percent of every bank’s ownership must be held by local or minority shareholders.

This directive has significantly disrupted foreign operations, prompting major international and regional banking institutions to reevaluate their ownership structures and market strategies to ensure compliance.

Local shareholding requirements remain a common policy tool across East Africa, reflecting governments’ efforts to ensure that the benefits of foreign investment are equitably shared with local populations.

For investors, success lies in understanding each jurisdiction’s thresholds, sector priorities, and exemption pathways, and in.

Byron Nguithiki is an Associate at Ernst and Young LLP (EY). The views expressed herein are not necessarily those of EY.

For organisations, sustainability involves value creation over time. It covers a range of outcomes that deliver benefits to shareholders and other stakeholders.

Organisations are also well positioned to deliver a sustainable competitive advantage over the long term. Among the various benefits of embracing sustainability, efficiency stands out because it maximises output and is often described as doing more with less. A very relatable outcome for most organisations.

Through sustainability, organisations can achieve similar benefits, including sustainable resource use, reduced waste and pollution, operational and energy efficiency, circularity, and cost containment.

In addition, the impact of technology on an organisation cannot be ignored in these areas, particularly when evaluating how emerging technologies drive efficiency.

As competition grows fiercer and more intense across industries, efficiency is one of the fundamental pillars of value creation that sustainability can deliver to organisations. One critical component of success for organisations this year is efficiency, and they should apply sustainability to achieve these goals by considering the following.

Organisations should conduct a baseline assessment of the resources used or required for productivity. This includes energy consumption, human resources, infrastructure, natural capital, and time.

Organisations should then perform a benchmarking exercise to assess how they stack up against similar operations in the market, including global best-in-class, and assess whether they have the right configuration to achieve their desired future operating model. This exercise will reveal two distinct gaps.

First, the inefficiencies that may exist within current operations, after careful study, and second, the investment required to position the organisation favourably for the future from a competitive perspective.

Organisations can then map out a detailed roadmap with clear milestones to address these gaps, with a view to positioning themselves for success.

The importance of data during this entire process cannot be overemphasised. Organisations will have to analyse accurate and complete data to aid their decision-making and should employ internal assurance processes to provide comfort on the accuracy and completeness of the data.

Another important element across the efficiency drive using sustainability is the application of technology. Organisations should consider how technology increases productivity, reduces costs, and drives operational efficiency.

Baselining exercises required for sustainability reporting should not end at compliance but be seen as the beginning of a journey towards achieving efficiency for long-term competitive advantage.

The global trading system is quietly undergoing one of its most consequential transformations in decades. Headlines often focus on tariffs, sanctions, and diplomatic standoffs, but beneath the political noise, businesses are doing what they have always done best: adapting.

As geopolitics increasingly shapes economic policy, the world’s trade map is being redrawn-not by ideology alone, but by efficiency, resilience, and demand.

What is striking about this shift is that it is not a clean break from globalisation, as some critics suggest. Instead, it is a recalibration. Supply chains are becoming longer in some places, shorter in others, and more diversified almost everywhere.

Companies are spreading risk across regions, building redundancy into logistics, and seeking partners that can offer scale, reliability, and cost-effectiveness in an uncertain world. This is not deglobalisation; it is globalisation under pressure.

At the heart of this transformation is the growing influence of geopolitics on business decisions. Export controls, sanctions regimes, and strategic industrial policies have turned trade into a tool of statecraft.

For multinational firms, this has elevated political risk from a background concern to a boardroom priority. Yet while governments debate, markets move. Trade routes adjust, investment flows pivot, and new commercial corridors emerge, often faster than policymakers anticipate.

One of the most visible outcomes is the reconfiguration of manufacturing and trade networks toward the Global South. Southeast Asia, the Middle East, Africa, and Latin America are no longer peripheral players; they are becoming central nodes in global production and consumption. Infrastructure investment, industrial upgrading, and expanding consumer markets are pulling trade southward, reshaping patterns that once revolved almost exclusively around transatlantic and transpacific flows.

This shift is also changing the nature of trade itself. Intermediate goods-components, machinery, and industrial inputs-now dominate cross-border commerce. Rather than finished products moving in one direction, value is created across multiple countries before reaching consumers.

This fragmentation of production rewards economies with strong industrial ecosystems, efficient logistics, and the ability to deliver at scale. It also blurs traditional notions of trade balances, as exports increasingly reflect shared value chains rather than national gain or loss.

In this environment, some economies play a structural role that is often discussed in political terms but better understood through market logic. Their vast manufacturing bases, integrated supply networks, and capacity to deliver affordable, high-quality goods make them indispensable to global production-even as others seek to diversify away from overdependence.

The result is a paradox: efforts to reduce risk do not eliminate central players from the system; they often reinforce their importance as hubs within more complex networks.

For developing countries, the redrawing of the trade map presents both opportunity and responsibility. On the one hand, access to competitively priced industrial inputs and technology accelerates industrialisation, lowers production costs, and improves export competitiveness.

On the other, success depends on domestic policy choices-investing in skills, infrastructure, and governance to move up value chains rather than remaining assembly points. Where these conditions are met, geopolitical shifts can act as a catalyst for long-term growth.

Consumers, too, are stakeholders in this transformation.

Affordable goods sourced through efficient global supply chains have played a quiet but critical role in containing inflation and sustaining living standards, especially during periods of economic stress.

When trade becomes more fragmented or politicised, it is often households-not governments-that feel the cost first. This reality explains why markets consistently resist abrupt decoupling, favouring gradual adjustment over disruption.

What emerges from this moment is a clear lesson: geopolitics can influence trade, but it cannot fully override economic fundamentals. Demand still matters. Cost still matters.

Reliability still matters. Countries and firms that align with these fundamentals continue to attract partners, investment, and market share, even amid political headwinds. Conversely, attempts to force trade patterns against market logic tend to produce inefficiencies that ripple across the global economy.

The redrawing of the trade map, then, is not about winners and losers in a zero-sum sense. It is about adaptation in a more complex, multipolar world. Those who view trade through a purely political lens risk misunderstanding its resilience.

Those who recognize the quiet power of markets how they absorb shocks, reroute flows, and integrate new players-are better positioned to navigate what comes next.

In the end, globalisation is not ending; it is evolving. And while geopolitics may set the constraints, it is economic reality that continues to draw the lines.

Kenya’s energy transition story is often told with a sense of triumph. Solar panels glint on rural rooftops, electric motorcycles weave through city streets, and clean cooking solutions steadily replace smoky kerosene stoves.

These images signal progress and ambition. Yet beneath this success narrative, a quieter concern is emerging. As the country accelerates towards a green future, the cost of access is slowly drifting beyond the reach for the very people the transition was meant to serve.

Clean energy has arrived with a new kind of financial pressure.

Rising electricity tariffs, upfront connection costs, and credit-driven clean energy products increasingly weigh on households already stretched by the cost of living. In the language of transition, Kenya risks creating a new form of energy debt, one that is less visible but just as restrictive.

Despite significantly expanding access to modern energy and positioning itself as a continental leader, about a quarter of Kenya’s population still lacks reliable access.

Through the Ministry of Energy and Petroleum, programmes such as the Kenya Off-Grid Solar Access Project (KOSAP) have extended electricity to 14 previously underserved counties. However, millions of households still remain beyond the grid and beyond reach.

To close this gap, the private sector has stepped in with innovation. Solar home systems and clean cooking products are distributed through the familiar lipa mdogo mdogo model enabled by mobile money.

Companies such as M-Kopa have shown how low-income households, many operating in the informal economy, can access energy assets without formal banking.

This approach has powered homes, small businesses, and schools that would otherwise remain in the dark. The same model, however, exposes new vulnerabilities. Household incomes are unpredictable and increasingly shaped by climate shocks. Droughts, floods, and failed harvests interrupt earnings. When income drops, repayments stall.

Defaults rise, companies price in risk, and costs increase. What began as an affordable solution quietly slips out of reach, widening inequality in energy access.

Policy and regulation must carry more of the burden in addressing these challenges. Strong oversight by institutions such as the Energy and Petroleum Regulatory Authority is necessary to balance commercial viability with social equity.

While blanket price controls risk undermining innovation and investment, well-designed structural interventions can achieve better outcomes.

Measures such as tax exemptions and zero-rating for clean energy products can reduce costs for consumers. Supporting local manufacturing of solar components and batteries would lower import dependence while creating jobs.

As Kenya pushes towards universal clean energy access by 2030, justice must remain central to the transition. Clean energy should lift people, not burden them.

True success will be measured not only by how many panels are installed, but by how many households can afford to keep their homes lit and their lives powered with dignity.

Kenyan companies are facing a surge in cyberattacks at a scale never witnessed before. While reported cyber incidents declined in the third quarter of 2025, data from the Communications Authority of Kenya shows that the National KE-CIRT/CC issued nearly 20 million cyber threat alerts, a 15.53 percent increase from the previous quarter.

The spike exposes an uncomfortable reality. Even though organisations are investing in stronger systems and monitoring tools, cybercriminals are innovating at a faster pace and exploiting vulnerabilities across every sector.

Financial institutions and large corporates are frequent targets, but no sector is immune. The recent breach involving M-Tiba- a mobile health wallet used by over four million Kenyans, illustrates the scale of exposure.

A hacker known as ‘Kazu’ claimed access to a 2.15 terabyte database containing roughly 17.1 million files, including sensitive personal and medical information, which he offered for sale on the dark web. The incident underscores a simple truth that any organisation that holds personal data or provides digital services is at risk.

When a breach happens, the company’s response in the first few days largely determines whether it maintains credibility or enters a full crisis. The immediate instinct of most companies is to contain the technical problem.

While that reaction is understandable, and in many cases urgent, it cannot be the only priority. Containment should happen alongside clear legal, communication and compliance steps. Ignoring the nontechnical aspects of breach management often leads to bigger reputational and regulatory consequences.

Kenya’s Data Protection Act places strict obligations on organisations that control or process personal data. A data controller must notify the Office of the Data Protection Commissioner (ODPC) within 72 hours of becoming aware of a breach. A processor on the other hand must inform the controller within 48 hours.

If the breach exposes personal information, the business may also need to alert the affected individuals, unless strong safeguards such as encryption were in place. These timelines are short, which is why companies need to prepare long before a breach happens.

A credible response requires coordination across the entire organisation. Technical teams must identify the source of the breach and seal the vulnerabilities. Legal and compliance teams must check that the company’s disclosures meet statutory requirements.

Corporate communications must craft messages that reassure customers and demonstrate responsibility to regulators. Companies that fail to align these functions tend to suffer twice. They face immediate sanctions, and they lose trust in the long term.

Once initial notifications are made, regulators expect more than simple forms. The Act requires organisations to show that it understands what went wrong, who was affected, what the impact was, and the steps being taken to prevent a repeat incident.

For businesses in regulated sectors, scrutiny does not stop with the ODPC. Banks can expect questions from the Central Bank. Listed companies may need to engage the Capital Markets Authority.

Companies in critical infrastructure may interact with ICT regulators and the national computer incident response teams. Managing these parallel obligations requires a level of coordination few companies rehearse until they are already under pressure.

There is also the question of accountability. If internal investigations show that an employee acted maliciously or that an external fraudster exploited the system, the organisation may need to consider criminal action. Here, the business steps into the role of complainant, balancing the need for justice with the imperative to protect its reputation.

A poorly managed prosecution can attract as much publicity as the breach itself, and businesses must balance the pursuit of justice with the need to protect their reputation.

The consequences of mishandling a breach are significant. The ODPC can impose administrative fines of up to five million shillings or up to 1percent of a company’s annual turnover, whichever amount is lower. In addition, individuals whose information was exposed may claim compensation.

As recent determinations by the ODPC have shown, the office has been imposing hefty compensation awards against entities which mishandle breaches.

Beyond these direct penalties, businesses may face the cost of system overhauls, forensic investigations, service interruptions and reduced investor and customer confidence. The reputational damage alone can take years to repair.

Trying to keep a breach quiet is one of the riskiest decisions a business can make. The law requires transparency, and in a digital environment, concealment rarely holds.

The companies that recover most effectively are those that use these incidents as a turning point. They strengthen their systems, update their crisis plans and reinforce a culture of compliance throughout the organisation.

Data breaches are no longer a question of if but when. For Kenyan businesses, the difference between a temporary setback and a lasting reputational wound, lies in how leadership responds.

The first72 hours demand speed and coordination. The weeks that follow require transparency, accountability and strategic engagement with regulators, customers and law enforcement.

Organisations that prepare now will weather future incidents. Those that delay, risk paying through fines, compensation awards, loss of customers and long-term reputational harm. In today’s data-driven economy, strong breach management has become a hallmark of corporate resilience.

There is a quiet scandal unfolding within Kenya’s tax administration, and it is costing the country billions of shillings. It does not involve new tax laws, parliamentary drama, or high-profile policy shifts.

It is happening silently, procedurally, and largely out of public view-through the unsupervised application of alternative dispute resolution (ADR) at the Kenya Revenue Authority (KRA).

ADR was introduced as a progressive mechanism intended to resolve tax disputes efficiently, reduce litigation, and promote fairness.

In practice, however, it has evolved into a major point of revenue leakage. What was designed as a safeguard for public revenue has, in many cases, become a conduit through which that revenue quietly drains away. The pattern is now familiar.

The KRA raises an assessment-often grotesquely inflated. Not necessarily because such liability genuinely exists, but because shock and fear are effective tools of coercion. The objective is not enforcement; it is leverage. Once the taxpayer is driven into ADR, the figures begin to collapse in ways that defy law, logic, and fiscal prudence.

By the time a consent is filed at the Tax Appeals Tribunal (TAT), an assessment that once threatened the very survival of a business has miraculously disintegrated-sometimes to a fraction of its original value, sometimes to nothing at all. Nil.

How does a lawfully issued tax assessment simply evaporate without consequence? The answer lies in opacity. ADR negotiations are conducted behind closed doors. There is no judicial supervision, no public scrutiny, and no meaningful institutional oversight.

When the resulting consent is presented to the tribunal, the court does not interrogate its substance. It merely records what the parties have agreed.

Even where the compromise appears fiscally reckless or plainly indefensible, the Tribunal has little option but to adopt it.

This absence of oversight creates fertile ground for corruption. The real bargaining is often not about establishing the correct tax liability. It is about private arrangements that benefit individuals while depriving the State of lawful revenue. Inflated assessments create room for ‘concessions’. Concessions create room for inducements. And inducements quietly convert public funds into private gain.

This is precisely why the Ethics and Anti-Corruption Commission (EACC) must examine how ADR consents at KRA are arrived at. Who initiates exaggerated assessments? Who negotiates their collapse? Who authorises consents that wipe out colossal liabilities? And who ultimately benefits?

If the National Treasury is serious about revenue mobilisation, it need not invent new taxes or further burden already compliant taxpayers. It needs to seal this single loophole.

Addressing corruption at the assessment and ADR stages would raise billions in additional revenue-simply by enforcing integrity within existing systems. Few policy interventions offer such high returns at such minimal cost.

Leadership must come from the Directorate of Budget, Fiscal and Economic Affairs at the National Treasury. Legislative reform is unavoidable.

ADR should not be abolished-it remains a valuable and legitimate tool. But it must be supervised. Clear monetary thresholds must be established. Independent reviews must be mandatory. Judicial oversight must be introduced. Comprehensive audit trails must be enforced.

ADR must serve the Republic, not private enrichment.

Consider a common scenario.

A taxpayer is assessed KES 10 million. Through ADR, the correct liability is established at KES 6 million. Instead of collecting the lawful amount, the assessor allegedly demands a KES 4 million bribe. The taxpayer pays KES 2 million unofficially, the file is closed, and the State loses KES 4 million outright-while corruption thrives.

This is not an isolated incident. It is a system. And systems do not reform themselves.

ADR is a powerful instrument when properly governed. When left unchecked, it becomes a conveyor belt for corruption and a direct threat to fiscal stability. Kenya cannot afford this silence.

For transparency.

For accountability.

For the protection of national revenue.

ADR at KRA must be supervised-and urgently so.

Picture this. At 7pm on a weekday evening, a Grade 7 pupil sits at their home study table surrounded by books, a tablet and a pile of printed worksheets.

One assignment requires researching a local environmental issue and presenting it using pictures and charts. Another could involve a creative arts project that needs coloured paper, glue and markers. A third task must be typed, uploaded online and submitted before midnight.

As the child works through their homework, the parent is required to print documents at a nearby cyber café, load mobile data for online research, and buy stationery needed for assignments. This is just a glimpse of the life of a Competency-Based Education (CBE) parents like Raymond Musungu.

‘Education expenses start building up from upper primary and shoot up in junior secondary,’ he says the parent who has two learners under CBE. With his eldest child who studied under the 8-4-4 system, the expenses, he says, were manageable, with the heaviest financial burden kicking in at secondary and university levels.

‘With CBE it is front-loaded pressure,’ he says describing the financial differences between the two education systems.

This front-loaded pressure is pushing parents to reassess how they plan for education costs.

According to financial advisers, some parents are reconsidering the adequacy and timing of their education savings as expenses accumulate earlier than they once did.

Dennis Mworia, Britam Life Assurance general manager, says the most visible shift has been how parents structure their education savings rather than whether they save at all.Under the 8-4-4 framework, education-related pay-outs were typically spread over four years before maturity. Under CBE, costs are incurred earlier, particularly around the transition into junior secondary, prompting a need for earlier access to funds.

‘The key difference is largely in the structure of pay outs, with fewer but earlier releases compared to the old system,’ Dennis says.

More policies, longer planning

Junior secondary has emerged as a particularly cost-intensive phase, driven by subject-based learning, practical assessments and additional learning materials that parents must cover. As a result, families can no longer rely on savings plans that only release funds at traditional secondary school entry.

To manage this, financial advisers say some parents are spreading their education savings across different timelines to match education stages more closely, rather than relying on a single lump sum later in the child’s schooling.

While there is a perception that CBE has made education insurance more expensive, Dennis argues that rising coverage amounts are largely a response to inflation rather than changes in the education system itself.

For parents who began saving when their children were younger or when the 8-4-4 system was still dominant, inflation has reduced the real value of earlier plans.

Financial advisers increasingly recommend periodic reviews to identify gaps caused by rising costs or structural changes in the education system. These reviews are particularly relevant for families considering alternative curricula, such as Cambridge, which can significantly alter funding needs.

Beyond savings structure, education planning also plays a role in household risk management. Eliud Kavogi, Eliud Kavogi, a Senior Financial Advisor at Kenindia Assurance in Nairobi, says education savings are more resilient when combined with risk protection.

Education-focused savings plans are often structured as endowment policies linked to life insurance, meaning that savings continue even when a parent is no longer able to contribute due to death, disability or serious illness.

A key feature in such arrangements is the waiver of premium. If the parent experiences a qualifying life event, future contributions are covered, allowing the education plan to continue as scheduled. This ensures that a child’s education funding does not collapse at the same time the family loses income.

Depending on policy terms, some plans also provide immediate financial support to the family while maintaining future education pay-outs. Coverage may also extend to disability and critical illness, helping families maintain education savings during periods of medical or income stress.

The best practice

Financial advisers generally agree that earlier planning provides greater flexibility. Starting education savings when children are young allows families to spread costs over a longer period, reducing pressure during high-expense years.

CBE has further reinforced the importance of aligning savings timelines with education milestones, as costs now arise earlier and more gradually rather than peaking sharply at secondary school entry.

However, balancing education planning with other financial needs remains critical. Advisers recommend that parents regularly review their overall financial position to ensure that education savings do not crowd out essentials such as medical cover, emergency funds or day-to-day living expenses.

‘Carry out a comprehensive review of your current financial state and future goals. Live within your means and ensure that your earnings can cover the current needs plus be able to save for future large expenses such as higher education for all your children,’ Dennis says.