Category: Business Daily

The share of expenditure on salaries in county budgets rose to a three-year high in the 12 months to June 2025, highlighting the deepening struggles by the devolved units to free up cash for development projects.

An analysis of the expenditure by the 47 devolved units shows that 46.8 percent (Sh470.74 billion) of their budgets was spent on paying salaries and allowances in the year under review. The last time this share was higher was in the year to June 2022 at 47.4 percent.

The Auditor-General has called out the Central Bank of Kenya (CBK) for breaching the law by deducting Sh3 billion upfront from debt collected on behalf of the exchequer as its agency fees in the fiscal year ended June 2025.

Auditor-General Nancy Gathungu said CBK’s management was in breach of the Public Finance Management Act in deducting its agency fees, worth Sh3 billion, at source and remitting only the net proceeds to the exchequer.

Amid the shifts in economic conditions, businesses continually prioritise efficient cash management to preserve capital, generate returns while maintaining access to the funds. Business cashflow management requires balancing revenues with ongoing operational needs.

Revenues often fluctuate with seasons, industry cycles, or project timelines, whereas expenses such as payroll, supplier obligations, and statutory payments remain constant. Ensuring that funds are availed at the right time without lying idle is thus a major consideration in financial planning.

Liquidity is not only about meeting obligations but also maintaining the agility to take advantage of opportunities as they arise, whether that is securing inventory at favourable terms, investing in short-term growth projects or cushions against unplanned expenses. Current accounts are convenient for daily transactions but often offer negligible returns. With the inflation in July 2025 standing at 4.1 percent, the funds held in current account experience gradual loss in its real value.

Fixed deposits can be used as better yielding alternative for surplus cash, with the interest currently averaging at 8.37 percent as of June 2025, but are far less flexible as funds remain locked out to maturity.

Committing resources to longer-term financial instruments can further lock in much higher yields, yet this comes at the expense of quick access should business emergencies arise. As a result, businesses must carefully weigh the trade-off between returns and liquidity, while ensuring the capital is preserved.

Money market funds (MMFs) provide a strategic approach to managing surplus cash, allowing businesses and institutions to build working capital, invest short-term reserves, and cushion against inflation.

An MMF is a collective investment scheme that pools funds from investors and invests in short-term instruments such as Treasury bills, fixed and call deposits, and high-quality commercial paper.

Specifically designed to preserve capital while delivering steady returns and near-term liquidity, MMFs also diversify exposure across government securities, bank deposits, and corporate debt, reducing reliance on a single counterparty.

Additionally, unlike long-term financial instruments, MMFs provide quick access to funds, helping businesses cover payroll, pay suppliers, and handle unexpected expenses without disruption.

Beyond ensuring liquidity, MMFs provide businesses with competitive returns that track short-term interest rates, making them a reliable cash flow tool in shifting economic conditions.

Positioned at the short end of the yield curve, their performance closely follows interest rate cycles. When the central bank tightens the monetary policy, short-term securities reprice upwards, lifting MMF yields. When policy rates are cut to stimulate activity, MMF returns adjust downward but still remain higher than most savings accounts.

Yields on short-term securities throughout 2025 have generally trended downward with the 91-day Treasury bill currently at 7.98 percent per annum (p.a) and the 182-day at 8.03 percent p.a.

The Capital Markets Authority’s robust and transparent regulatory framework has further reinforced investors’ confidence in MMFs. For instance, according to the Capital Markets (Collective Investment Schemes) Regulations, 2023, MMFs must maintain highly liquid portfolios with a maximum weighted average tenor of 18 months or less, ensuring ready liquidity.

Additionally, trustees and custodians provide independent oversight, ensuring adherence to investment guidelines and investor protection.

Together, they create a governance structure that protects investors and enhances confidence in the MMF market. By ensuring safety, liquidity, and steady returns under a strong regulatory framework, MMFs have emerged as a strategic tool for Kenyan businesses to optimise cash flow while preserving capital.

According to the CMA’s Q2 2025 CIS Report, industry assets under management grew by Sh207.1 billion over six months – from Sh389.2 billion on December 31, 2024, to Sh596.3 billion on June 30, 2025 – representing a 53 percent growth.

With Money Market Funds (MMF) accounting to nearly two thirds of this AUM, this trend signals that investors are increasingly adopting MMFs as a primary savings and investment channel.

This dominance can further be mirrored in the market by licensed fund managers such as Madison Investment Managers Limited, which has grown its assets under management to over Sh23 billion across products including its MMF, Fixed Income Fund, and segregated funds.

According to Managing Director Rebecca Tiba, the rising popularity of MMFs demonstrates investors’ growing preference for these CMA-regulated short-term investment instruments.

Whether you’re managing household expenses, running a business or executing large-scale projects, MMFs offer an excellent way to earn on your cash before it’s utilised. They’re not just an investment but also a financial tool for smarter cashflow management for entrepreneurs, corporates and everyday savers.

I recently visited Raila Odinga (now deceased) at his private office in Kileleshwa. He had invited me to discuss the government’s recent decision to lease sugar companies – and to reflect on some of the major projects taking shape in Kisumu.

An engineer by training, Raila was in his element talking about manufacturing. His eyes lit up as he recounted how, as a young engineer, he had set up an LPG manufacturing plant from scratch – working out of a modest shed allocated to him by the Kenya Industrial Estates.

There are no forests of bulky, suited, neckless bodyguards when Dr Abraham Korir Sing’Oei arrives. His arrival is, in fact, the antithesis of power. Which means he doesn’t arrive, he shows up. With only one car, I’m told.

Impeccably suited and striding through the hotel with an easy, officious elegance, save for the lapel pin of the flag, he could easily pass for an auditor, an investment banker, or a corporate executive. In truth, he is a lawyer, an international law expert and convener of the Open Government Partnership for Kenya.

According to the 2023 Tax Expenditure Report, the total expenses increased to Sh393.6 billion in 2022, which was equivalent to 2.94 percent of the gross domestic product (GDP). This was an increase from Sh292.9 billion in 2021, equivalent to 2.44 percent of the GDP.

Notably, domestic value-added tax (VAT) was the largest contributor to the tax expenditures at 36.94 percent with corporate income tax following with 19.87 percent while VAT on fuel contributed 16.38 percent.

According to the Medium-Term Revenue Strategy for 2024-25 to 2026-27, the ordinary revenue collection as a percentage of GDP declined from 18.1 percent in 2013-14 to 14.1 percent in 2022-23. This is due to, among other reasons, an increase in tax expenditure and low tax compliance.

Over the past decade, the Treasury and legislators have introduced a wide range of goods and services to either the exempt or zero-rated categories.

The enactment of the VAT Act, 2013 elicited a lot of reaction from business circles and consumers alike.

Amid the outcry from certain sections of the economy it was lauded as a major milestone by the government in simplifying the tax laws.

The complexity of the repealed Act mainly caused by the long list of exempt and zero-rated goods and services was a major headache for businesses. Lest we forget, the long list was because of numerous amendments made over the years.

Businesses had to contend with endless changes to the classification of goods and services in the VAT Act, with some of them occasionally being caught up on the wrong side of the law, and as a result, suffering unwarranted penalties and interest. The cost of doing business was consequently high due to unpredictability in the VAT status of certain goods and services.

The principle of simplicity in taxation states that a tax should be formulated in a simple language that is easily understood by all who are subject to it. It should not be subject to multiple interpretations and constant change. To keep it as simple and clear as possible, a tax must have minimal exemptions.

In the current ever-changing global economy, certainty cannot be guaranteed. Businesses, however, need some level of certainty to be able to make long-term investment plans and decisions. A stable, predictable and reliable taxation system is critical in fulfilling the principle of certainty in taxation.

While it is inevitable that certain targeted tax measures will once in a while be taken due to changes in government priorities, economic circumstances as well as social considerations, the Treasury should be slow to use tax changes as the easiest available policy tool.

Whereas policy changes that are meant to cushion mwanachi from high cost of living, there is a need to focus on bold measures that will improve the overall economy and reduce the cost of doing business. Short-term measures are popular but do not provide the much-needed impetus to grow into a middle-income country by 2030 as envisaged in Vision 2030.

The national tax policy sets out broad parameters on tax policy and related tax matters. It also provides broad guidelines on tax administration and the general tax system. The policy proposes comprehensive review of tax laws every five years. This is in addition to the development of a framework for granting tax incentives.

The adoption of the recommended policy of reviewing tax laws every five years would give the government a chance to monitor the impact of specific tax policies and incentives.

On the other hand, businesses would operate in a more predictable tax environment thus enabling them to make long-term plans.

Political instability and civil unrest have overtaken economic volatility as the biggest threats to Kenyan businesses in 2026, forcing firms to reallocate budgets towards physical security and crisis preparedness, a new global survey shows.

The World Security Report 2025 by security firm Allied Universal and its local arm G4S, found that 45 percent of Kenyan chief security officers (CSOs) now rank political instability as their top concern, while 43 percent cite civil unrest, both well above regional averages.

The Nairobi County has been directed to constitute and implement a County Physical and Land Use Planning Consultative Forum within six months, to enable residents to present their views on development.

A County Physical and Land Use Planning Consultative Forum is established in each of the 47 counties to coordinate and integrate various projects. It serves as a platform for comments and review on development plans, ensuring projects comply with regulations and promoting sustainable development.

A bench of three judges of the Environment and Land Court further directed the county to formulate and gazette the County Physical and Land Use Development Plan and the Local Physical and Land Use Development Plan f

NCBA Group valuation at the Nairobi bourse has increased by Sh22.65 billion in three days, amid news that the lender is the acquisition target of South Africa’s Standard Bank Group.

The lender closed on Thursday valued at Sh137.16 billion compared with Sh114.5 billion on Monday -before the news which Standard Bank has neither confirmed or denied. The multinational said it cannot comment on ‘market speculation.’

President William Ruto is leading Kenyans in paying their final respects to the late Raila Odinga, as the opposition leader lies in state in Nairobi ahead of his funeral service on Friday and burial on Sunday.