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Legal and Policy highlights – Budget 2023/24

With a focus on creating an enabling environment for informal businesses, MSMEs and disadvantaged groups, one of Budget 2023/24’s focus is the creation of a sustainable legal and institutional environment. The Government is targeting growth through an inclusive business environment, better institutional service delivery and stronger accountability in public finance management.

Here are my legal, policy and institutional takeaways from yesterday’s Budget reading:

Financial sector reforms:

The financial sector has shown resilience and continues to be stable. A desire to enhance this resilience has led to increased consolidations and M&A activity including regional acquisitions in the sector. Measures taken to strengthen and incentivise the sector include:

  • Digital credit providers: Following enactment of the Central Bank of Kenya (CBK) (Digital Credit Providers) Regulations, 2022, CBK is continuing to work with agencies including the Office of the Data Protection Commissioner (ODPC) to ensure all digital credit providers are brought into the regulatory net. As of 31 March 2023, 32 providers are licensed with others at different stages.
  • Financial markets: CBK is gearing up to launch the upgraded Central Securities Depository (the ‘DhowCSD’) to improve liquidity, enhance efficiency and promote market deepening and financial inclusion.
  • National Payments Strategy 2023-25: Launch of the Strategy has led to various initiatives to improve payment services such as mobile money interoperability implementation, new Payment Service Provider (PSP) licensings and roll out of key standards in line with global best practice. In FY23/24 CBK will undertake a review of National Payment System Act 2011 and its 2014 regulations, to modernize payments in line with global trends. An interoperable payments platform will also be introduced to increase access, competition and stability.
  • Money laundering: CBK has enhanced KYC and CDD processes to strengthen AML/CFT regime in the banking sector.
  • Deposit insurance reforms: The Kenya Deposit Insurance Corporation is in the process of reviewing its current coverage limit of KES 500,000 and developing ADR mechanism to address disputes between closed financial institutions, customers and stakeholders. This will create an enabling environment for liquidity and recovery.
  • Capital markets: To support MSMEs access financing, Public Offers Listing and Disclosures Regulations have been developed to allow raising of debt and equity capital via the Nairobi Securities Exchange (NSE). In addition, the Capital Markets Investment Based Crowdfunding 2022 Regulations were gazetted to enable businesses to raise money through crowdfunding platforms.
  • LAPTRUST Imara REIT has been listed on NSE to provide investors a diversified portfolio of income generating real estate assets.

Pension Reforms:

Pension coverage in Kenya currently stands at 22% of the working population. There is need to extend this coverage particularly to the informal sector. The Government is working on a National Pensions Policy to mitigate sector fragmentation. A Kenya National Enterprise Savings (KNES) Trust scheme has also been created for the informal sector.

Public service technology streamlining is ongoing, through implementation of digital processes and public service schemes to provide user friendly platforms to allow pensioners access their statements and make inquiries.

Lastly, government continues to implement public service superannuation schemes to ease burden of payments.

Insurance Reforms:

The insurance sector has grown by KES 36 Billion in the past 2 years and attracted multinational players. To boost growth, the Insurance Regulatory Authority (IRA) has rolled out a micro-insurance framework to increase coverage for MSMEs and individuals with low incomes.

Recognising the need to motivate accountability and observance of directors and senior managers duties, the Insurance Amendment Bill, 2023 has been introduced to provide offences for management among other amendments intended to enhance IRA’s authority.

SACCO Reforms:

The SACCO sector is characterized by many small and medium sized SACCOs who find it hard to compete in deposit taking and credit markets. The SACCO Societies Regulatory Authority (SASRA) is working on amendments to the SACCO Act 2008 for the licensing of a shared SACCOs services platform. Establishment of cost sharing digital platforms will allow economies of scale for these category of players.

It was also posited that although prudential regulation to boost savings was introduced over a decade ago, no resolution mechanism for financially distressed SACCOs exists. SASRA has therefore proposed amendments to the SACCOs Act 2008 for a framework for appointment of trustees to the Deposit Guarantee Fund (DGF) for SACCOs in Kenya.

Unclaimed Financial Assets Reforms:

Unclaimed Financial Assets Act, 2011 does not allow for claimants to designate their beneficiary of choice meaning a claim must be paid to the claimant. Proposed amendments are underway to allow claimants to designate beneficiaries.

Competition Reforms – Ease of Doing Business and Consumer Protection

The Competition Authority of Kenya (CAK) will now exempt the MSME sector from merger notifications.

CAK will also gear up on audits to protect MSMEs from abuse of buyer power. The Authority will implement codes of practice to ensure MSMEs, particularly in the retail and insurance sectors, are protected from powerful buyers. The Authority will further prioritise investigation of cartels, abuse of dominance, excessive pricing and predatory pricing practices and address issues of price fixing by professional services players to ensure a level playing field.

On consumer protection, CAK will prioritise investigation of issues in utilities, pharmaceuticals, digital finance, e-commerce, insurance, aviation and health and safety of goods. It will address these issues by refunds and other remedies for consumers affected by fraud and other malpractices.

Public Sector Reforms

  • Staff rationalisation: The CS highlighted that government’s priority is to address the payroll burden on the Exchequer to deal with statutory obligation payment delays and pension liabilities. The State Corporation Advisory Committee (SCAC) is to embark on staff rationalisation to maintain a 70:30 technical staff and support staff ratio. In addition, Treasury will only approve budget for approved hires in state corporations.
  • Procurement reforms: The Government’s priority is to review procurement policies and procedures to enhance good governance and achieve efficiency given limited financial resources. In this regard, the proposed E-Government Procurement (E-GP) pilot is still in progress and plans are to roll out by December 2023. The goal is to manage all government procurement and asset disposal processes digitally. The Access to Government Procurement Opportunities (AGPO) portal also being re-engineered to improve prompt payment and liquidity access.
  • Privatization reforms: The Privatization Bill, 2023 recently approved by Cabinet seeks to repeal the Privatization Act, 2005 by streamlining procurement processes for restructuring of State-Owned Enterprises (SOE). The Bill, once enacted, is expected to enable SOEs to achieve their full potential.
  • Reforms in KPLC and KQ aimed at improving efficiencies and reducing costs: For KQ, the strategy is to turnaround the airline to become a ‘Pan-African Carrier’ to enhance profitability and reduce dependency on budget support. To enhance KPLC’s financial sustainability, a restructuring of the balance sheet is ongoing with focus on huge loan balances, payables, and receivables. A 4-point action plan has been formulated focusing on: (i) Transfer of all transmission asset/lines to KETRACO (ii) Settlement of rural electrification schemes operations and maintenance costs and entering commercial contracts for costs (iii) A turnaround strategy that includes reduction of system losses (4) A new governance structure to give private sector fair representation.
  • Better management of pending bills: As of 31 March 2023, Government’s pending outstanding bills and payments stood at KES 537.2 Billion. Delays in settling payments has led to deterioration of financial position of business including MSMEs and disadvantaged groups. National Treasury has prepared a Cabinet Memorandum requesting Cabinet to approve the constitution of a Committee to analyse all outstanding payments and advise how they will be settled. Strict compliance with the Public Finance Management Act, 2012 going forward will be keenly enforced.


Following pandemic recovery, shocks from global conflicts, spiking prices of key commodities, inflationary prices and global monetary tightening policies, the legal and institutional framework proposed under the Budget 2023/24 – in line with the Government’s Bottom-up Strategy – is intended to create an enabling environment for informal sectors, MSMEs and disadvantaged groups. However, given the current economic landscape, businesses should continue to plan, prepare and streamline their financial, operational and compliance strategies to enhance resilience.

Credits: Caroline Wanja Kipkulei

Manager, PwC Kenya, Legal Business Solutions.

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