Salary Stub tells the story. A large deduction to cover the costs of Kenya's new funds for affordable housing and health insurance. More money was subtracted due to the jack-up contribution to the National Social Security Fund and the tax hike.
Within a few months, Kenyans, who earned 45,000 shillings per month (approximately $350), had their take-away wage reduced by 9% to $262.
Pay stubs to employees of Shining Hope for Communities, a Kenyan nonprofit organization.
June 2024
“People with a salary are crying,” said Kennedy Odede, founder of the Self-Help Association of Kibera Slums in Nairobi.
The increase in payroll taxes is one of the elements of President William Root's desperate bids to continue running the government and raise revenue to pay Kenya's incredible foreign debt.
New excise taxes have been charged on sugar, alcohol and plastic. Taxes on business profits have doubled to 3%. Government costs for money transfers and telephone and internet data services rose 15-20%. Taxes on all imports, including essentials such as wheat and cooking oil, have increased from 1.5% to 2% for those used in railway development. The exemption for retirees has been discarded. The list continues.
Tax increases are never popular. However, the impact on countries like Kenya, which have low incomes and liable debt, is particularly severe. Long-standing Harlam raurbone borrowing and spending, combined with the Covid-19 pandemic, rising interest rates and economic wallops from inflation, helped raise Kenya's debt to $80 billion.
Kenya must use almost 60% of its revenue to repay the loan. This is a common problem across Africa where many countries spend more on paying interest than on health and education.
At the same time, countries need billions of dollars to raise new funds for basic healthcare, schools, clean water, sewage systems, paved roads and climate-related disaster relief.
Acquiring the country's finances in sequence is a prerequisite for long-term growth. However, in Kenya there are limited options to make such profits. There, 40% of the 52 million people live in poverty, and it is estimated that the unemployment rate among young people is in the top 25%. Small and medium-sized businesses and subsistence agriculture make up much of the economy.
According to one estimate, 83% of the country's workforce works in jobs that are out of sight for tax collectors, including hairdressers, maids, street sellers and drivers.
In other words, the sliver, the population working for companies that record their payroll, will cover most of the tax burden.
“Because of taxes, our purchasing power has been greatly reduced,” said Elizabeth Okum, who works in the hopes of Odede, a hope for the community or nonprofit organization, started 20 years ago.
The country's economic crisis has reduced the value of shillings in relation to the dollar. In other words, import costs are rising sharply. Six months ago, 1,000 shillings ($7.73) was enough for cooking oil, flour, rice and sugar,” said Okum, chairman of Nairobi's Shovko's urban network. Now she said she could only buy the same amount of sugar and flour.
Last year, the proposed tax hike caused a fatal riot in the capital, Nairobi. More than 50 people have been killed and parts of Congress have been burned. The government temporarily retreated, but reimposed many of the additional taxes and fees a few weeks later.
The government is discussing the new loan package with the International Monetary Fund. The fund may be seeking additional guarantees that the Root administration will cut spending and increase revenue. However, you cannot squeeze a lot of water from the squeezed towel.
Behind the widespread dissatisfaction with specific policies is a deep irony about the government's ability to either pay off debt or provide essential services.
Regular reports from Nancy Gattung, the nation's auditor general, detail significant examples of corruption and mismanagement. For example, at the end of last year, the government said it could not account for more than the $1.24 billion allocated to pay its debt. In March, Gathungu reported that no government-funded Covid-19 vaccine was delivered, worth $64 million. Critics are also smothering about the luxury spending by government officials.
“Lut says he needs to pay the debt, but there is no public service to show that,” said Tatiana Gicchell, a student at Strathmore University in Nairobi. “You can't step into a government hospital and get services.”
Zicher, 21, sat outside the Java House, a coffee chain in Nairobi, and sipped a latte with her friend Jewel ndung'u. Ndung'u, 25, graduated from Strathmore two years ago and was looking for a full-time job as an analyst or developer. From September to January, she said she applied for 73 jobs. She got half a dozen callbacks and had no offers for work.
Where are the affordable homes? Where are medical services and public transport available? asked Ndung'u. Gitchell added, “The system is suddenly falling apart.”
Ndung'u said he would like to see Kenyans repay their debts directly to China, the country's largest bilateral creditor, using M-Changa, a digital funding platform.
As taxes rise, Kenyans are angry about the lack of public services. In November, many people became annoyed by the aging roads of Syokimau, several miles south of Nairobi's major airport, forcing council representatives to walk down the flooded, muddy streets.
In the southwest of Nairobi is Kibera, which is considered the largest urban slum in Africa. Its dirt streets feature shoppers, pedestrian commuters, peddlers, hustlers, students in neat uniforms, and residents filling bright yellow jerrycans with clean water from the resident tap. They navigate around mountains of garbage and occasional raw sewage, and carry bikes and bikes carrying extra-large luggage suitable for sports utility vehicles. Kibera does not have government-funded hygiene services.
The jing-packed skyline features a forest of accidental poles and wires with plasterboards, rusty roofs and false electrical connections hanging like Christmas ornaments.
Benedict Mushoka, organizer of the Kibera youth community, said the young man to him: “I won't marry youth.” Earning enough to support yourself is difficult enough, not to mention a wife and children. And the man had a degree. “You're taxing hard and we don't have a job,” Mujoka said.
At the level of debt in Kenya, there is no easy option, says Thys Louw, portfolio manager at Ninety One, a global investment firm in London. Expanding the revenue base – bringing more businesses and people who are currently not paying taxes to the system, he said. And there are too many exemptions.
In Kenya, the country reached 16.6% of the country's total production in 2022, according to the Economic Co-operation and Development Agency. The share is not uncommon in Africa, but is half the amount found in rich, developed countries.
June is a year after the riot, and talk of commemorative gatherings and further protests is bubbling. It is also when the government ends the new budget, which could include further tax increases.
Many people, like Okumu of Shofco, fear there will be more riots. People worked so hard, hoping to say, “I will see the light tomorrow.”
“But when tomorrow comes, it's still dark.”
Abdi Latif Dahir contributed the report.
