How Kenya Kwanza regime has made life harder for all Kenyans

President William Ruto displays a sword of power handed over to him by outgoing President Uhuru Kenyatta after swearing in at Kasarani stadium on September 13, 2022. [Denish Ochieng, Standard]

Alarmed by a raft of taxes the Kenya Kwanza administration planned to introduce, Kenyans christened President William Ruto “Zakayo”.

That was around May, last year, when Kenyans had a collective awakening of interest in their finances. The controversial Finance Bill 2023 was undergoing public participation, with many faulting measures meant to drain their dried-up pockets.

And amid the biting costs of living, Kenyans were not as eager to listen to National Treasury Cabinet Secretary Njuguna Ndung’u’s budget day speech. They already knew what it contained. More pain. Little respite.

Indeed, many have had a rough year, which started with the controversial Affordable Housing Levy, an unpopular tax that claims 1.5 per cent of gross incomes for salaried workers.

Many stakeholders faulted the levy, initially set at three per cent of the basic pay.

An opinion poll by Trends and Insights for Africa found that seven in 10 Kenyans opposed the housing tax, which Ruto had touted as the surest way of enhancing employment.

The Federation of Kenya Employers (FKE) warned that the housing deductions would increase business costs and burden employees, who would see their payslips shrink.

But Ruto, who had embraced his new name, was adamant that for his policies to succeed, Kenyans had to feel some squeeze. With persuasion and, to some extent, threats, the levy sailed through Parliament after a public participation exercise deemed by most to be “cosmetic”.

“I am looking out for Members of Parliament who will oppose our plans for the citizenry,” warned the Head of State.

His insistence on the levy surprised many as it had not featured in his manifesto and seemed like one of the many hand-me-down policies from former President Uhuru Kenyatta’s Jubilee administration.

Government officials struggled to pitch the levy, at least coherently, initially sold as a fund that doubled as a pension scheme.

“It quickly evolved, in a few successive weeks, to become a tax and that caught a lot of people off guard,” says Ken Gichinga, chief economist at Mentoria Economics.

“This became a huge deduction on the payslip and it reduced disposable income and that is why the economy is becoming weaker because people have lost their purchasing power,” he adds. 

Like Uhuru who suffered defeat in court, Ruto faced a setback last November when the High Court quashed the levy, suspending its implementation in January.

The president has since enacted a law that legitimised the housing levy, subduing protests including literal ones that featured the slogan “Zakayo shuka (Climb down Zacchaeus)”. A case challenging the new law is still in court.

The housing levy has recently faced controversy, amid revelations that Sh20 billion worth of funds meant to construct houses were invested into Treasury bills and bonds.

“When you collect money from workers then you hear it has been put in financial instruments by the State department, does that signal a problem, a lack of strategy or a problem of low absorption of funds in the housing project?” Nyaribari Masaba MP Daniel Manduku posed days ago in Parliament.

Gichinga argues that the planning for the housing levy appears poor given the arising challenges of absorption.

Ruto did not earn the name Zakayo for the housing tax alone. The commander-in-chief has pursued reforms in healthcare insurance as passionately as he has championed his housing agenda.

From the outset, Ruto had set in his crosshairs on the National Health Insurance Fund (NHIF), which he criticised as having weak structures. In its place, he has established the Social Health Insurance Fund, which will slash 2.75 per cent from workers’ gross pay. In January, the High Court lifted orders barring the implementation of Ruto’s health insurance plan, previously put on hold.

But Kenya Union of Clinical Officers Chairperson Peterson Wachira argues that if the fund functions as designed, Kenyans would consider the 2.75 per cent deduction “a saving”.

“If you can guarantee that with 2.75 per cent they will not have to worry about exhausting their cover and that they would access the critical, chronic and emergency package, as well as assure that the government will pay hospitals on time, they will be saving,” says Wachira.

A hustler hawking chicken baskets in Kakamega town on May 19, 2024. [Benjamin Sakwa, Standard]

Then there are the increased contributions towards the State pension scheme, the National Social Security Fund (NSSF). Ruto has insisted on increasing NSSF contributions, surmounting a court challenge against upward reviews.

In the past year, the NSSF deductions have increased from a flat rate of Sh200 to Sh1,080. The government plans to increase these rates gradually to six per cent of employees’ earnings.

The Kenya Kwanza administration has made life harder in other ways. By doubling VAT on petroleum products and shunning subsidies, fuel prices soared to record heights. This saw Kenyans grapple with higher commodity prices as companies faced higher operating costs.

The effect was job cuts and a freeze on hiring as firms struggled to stay afloat amid a swelling wage bill occasioned by increased mandatory deductions.

Tripling the turnover tax for small businesses from one per cent to three per cent, undoubtedly, unsettled some.

The hustlers, who Ruto promised a utopia, were not the only ones crying. High earners – the dynasties in Ruto parlance – were also hit hard. Kenyans earning between Sh500,000 and Sh800,000, were slapped with a 32.5 per cent income tax, with the higher earners required to part with 35 per cent.

Ruto has remained unrelenting in pushing unpopular policies. He was largely quiet amid a clap back from avocado farmers in Mt Kenya over the State’s plan to have them pay taxes for their produce, letting the region’s leaders take the heat.