Greetings and welcome to the seventh Money Weekly Roundup of 2024! 

This week, Kenya Power MD Joseph Siror reacted to the gazettement of regulations aimed at ending the monopoly of the state-owned power distributor that has been making losses. Will private power producers cut it?

Meanwhile, MPs passed the Affordable Housing Bill, 2023, that now requires non-salaried Kenyans to also contribute 1.5% of their gross income monthly. This was amid a walkout from the opposition.  

As always, we’ve included some of our favourite personal finance articles in our finance tips section below.

Let’s dive in!

NEWS RECAP

What happened this week

🔌End of Kenya Power Monopoly Begins

State-owned power distributor, Kenya Power, is bracing for competition after the energy regulator, EPRA, gazetted regulations that now allow electricity producers to sell power directly to all consumers. Read More.

Despite being a monopoly, Kenya Power has been posting losses.

Here are few things to know:

• Regulatory Framework: Section 136 of the Energy Act, 2019, mandates non-discriminatory access to Kenya Power's transmission system.

• Process: Producers of wind, solar, biogas, small hydros, municipal waste, and tidal wave energy can now apply for a power retail licence. 

• “Wheeling” Charges: Kenya Power will charge producers for the use of its transmission lines to directly sell electricity.

• Benefits: Objective is to enhance electricity reliability amid consumer shift to alternative sources.

• Revenue Impact: Opening up the sector expected to reduce revenues for Kenya Power which recorded a Ksh3.2 billion net loss last year.

• Kenya Power's Response: MD Joseph Siror, welcomes regulations saying Kenya Power barely scratches the surface of power needs in the country. Read More.

• Customer Loss: Large consumers have been opting for alternative power sources due to cost and grid reliability issues.

• Adaptation Measures: Kenya Power is investing Ksh10 billion in system upgrades. MD assures the company is prepared for the new market dynamics.

• Metre Installation: Rapid Results Initiative launched to expedite metre installations. Aims to connect 400,000 new customers by June and 4 million by 2030.

• Connectivity: 256,206 new customers connected in half-year period to December 2023.

• Last Mile Connectivity Project (LMCP): 1,431,423 customers connected through LMCP, funded by government and development partners since 2016. Read More.

💼 Inside President Ruto's Ksh4.2 Trillion Budget for 2024/25

President William Ruto's Kenya Kwanza administration has formulated a Ksh4.2 trillion expenditure plan for the 2024/25 financial year, as outlined in the 2024 Budget Policy Statement (BPS) currently under review by Parliament. Read More.

Here is a breakdown of some of the projected allocations.

• National Government: Ksh2.5 trillion (up from Ksh2.46 trillion)

• Executive: Ksh2.44 billion (up from Ksh2.4 billion)

• Parliament: Ksh41.62 billion (up from Ksh40.74 billion)

• Judiciary: Ksh23.7 billion (up from Ksh22.8 billion)

• Education: Ksh666.46 billion (down from Ksh689.61 billion)

• National Security: Ksh244.42 billion (up from Ksh199.3 billion)

• Health: Ksh147.6 billion (up from Ksh138.85 billion) Read More.

• Agriculture: Ksh87.81 billion (down from Ksh98.1 billion)

• Counties Equitable Share: Ksh391.12 billion (up from Ksh385.42 billion)

• Additional County Funds: Ksh54.72 billion

• Deficit: Projected deficit of Ksh703 billion (compared to Ksh785 billion).

• Financing: Ksh377.7 billion in domestic borrowing. Ksh326.1 billion in external financing.

Higher Charges for Public Services Expected: There’s a shift towards ministries, departments, and agencies (MDAs) becoming self-sufficient, aiming to increase revenues and reduce reliance on the Exchequer. Read More.

🏠 Non-Salaried Kenyans to Also Pay 1.5% of Gross Income For Affordable Housing

All Kenyans, including salaried and non-salaried individuals, will now be required to contribute 1.5% of their gross income to the Affordable Housing Fund. This is after the National Assembly passed the Affordable Housing Bill, 2023, incorporating 49 amendments.

However, opposition leaders - who staged a walkout during voting - plan to challenge the bill in court, over lack of clear income measurement for non-salaried individuals and issues with the parliamentary process.

The Bill now proceeds to the First Reading in the Senate, with government plans to resume deductions from March salaries.

📈 Interest Rates on Bank Loans Cross 26%

Commercial banks have increased their loan interest rates to over 26% in a fresh loan repricing cycle, indicating further challenges for borrowers deemed risky, particularly in light of a rise in defaults.

Equity Bank has announced an adjustment in its base lending rate from 17.56% to 18.24%. This revision could see interest rates for Equity Bank customers shoot to over 26% after factoring in an 8.5% margin. Other banks are expected to revise their lending rates as well. Read More.

🔺Insurance Firms Raise Premiums

Insurance firms are adjusting premiums following the 16% VAT introduction via the 2023 Finance Act. This adjustment is likely to increase operating costs for businesses due to higher insurance premiums. 

Insurers are now advising customers to review their sums insured. Customers are urged to align insured asset values with expected compensation to avoid coverage gaps. Read More.

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MONEY TIPS & TOOLS

This week’s finance tips

Welcome to Money254's Money Tips! Here, we share quick and easy tips that make understanding and managing your money a breeze. We break down the tricky parts of your finances and the financial landscape, making it simple and clear for you. Stay tuned for helpful tips every week.

MONEY254 #MONEYTOK OF THE WEEK

Investing in Unit Trusts

Investing in Unit Trusts can be a strategic move towards financial growth and stability, and understanding the diverse options available is key to making informed decisions. In this week’s video, we are discussing the various types of Unit Trusts in Kenya, exploring their unique features, potential returns, and their suitability for different financial goals.

@money254hq

Types of Unit Trusts in Kenya #Money254 #Investing #Unittrusts #moneymarketfundinkenya #Fyp #Moneytok #Personalfinance

That’s a wrap for this week’s Money Weekly!

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Eric and the Money254 editorial team.