June 4, 2021

Cryptocurrency – Scramble For The Invisible Gold

Filed under: Insight — KRK Advocates LLP @ 3:42 am

By Francis Mwangi and Phillip Njoroge

Introduction

On Thursday 15 April 2021 at 8:59:03 AM UTC, Bitcoin prices soared to US $ 63,216.44 per coin. This was the culmination of a series of events that elevated Bitcoin to being the fastest ever asset to hit US $1 Trillion (US $ 1,000,000,000,000.00).

In today’s capitalist society, success is measured in monetary value, and the same is best encapsulated by the market capitalization (market cap) concept. This concept is dictated by the total value of a corporation within the stock market.

Successful enterprises within this setting have a market cap range in the hundreds of millions of dollars. Global business conglomerates such as JP Morgan Chase, Walmart, Alibaba, Tencent and Facebook are within the range of hundreds of billions of dollars. However, only a handful of mega-corporations (megacorps) stand at the peak with their market cap going above the trillion-dollar market cap range. These are:

It took these megacorps, the richest in modern times, several decades (an average of 33 years) to climb up the rungs of success. However, what took the megacorps such a considerable amount of time to achieve only took Bitcoin – the leading cryptocurrency with a market cap of US $ 1.74 Trillion – a meagre 12 years. The scale of this success has baffled the public and left many to wonder:

What are cryptocurrencies, and how do they work?

By definition, a cryptocurrency is a digital representation of value that functions as a medium of exchange, a unit of account, or a store of value. It can also be defined as a digital currency in which transactions are verified and records maintained by a decentralized system using cryptography as opposed to a centralized authority.

This process of collection, verification and maintenance is more commonly known as ‘cryptocurrency mining’ (crypto-mining). The concept behind crypto-mining is that all transactions (blocks) across the cryptocurrency network must be monitored and supervised. This is facilitated through the compilation of blockchains. The incentive behind this process is that once a blockchain is compiled, a new token is awarded by the creator of the cryptocurrency. In fact, this is the only way to release new tokens/coins into the market.

However, the process of crypto-mining is complex. Mining is an entirely automated process that must be conducted using high-capacity processing computers. For this reason, crypto-mining cannot be conducted using machines that perform regular desktop functions. The hardware and software needed to set up these machines is expensive and the electricity required to run them is costly, with these machines consuming electricity valued at up to Kshs. 2 million every 10 minutes (the amount of time it takes to mine one bitcoin, for example). One can then sell these coins, if history is anything to go by, for as much as Kshs. 7 million.

The primary value that blockchain brings is that, as an open-source database, it is decentralized and the data which is inputted is almost impossible to steal, hack or corrupt. Blockchain technology stores the data in millions of computers worldwide, and before it is saved as a block, it must be verified by a network of nodes (computers). Block chaining is thus a global, safe, scalable, trustworthy database with the potential to serve inexhaustible purposes.

What is the rationale behind the ‘crypto-frenzy’ and why are cryptocurrencies so extraordinarily profitable?

Cryptocurrency trading is profitable if one plays their cards well. For example, during the Bitcoin boom of April 2021, traders who had been in the market since 2014 (when one Bitcoin cost about $500) experienced returns of about 12,800%. Simply put, these profits cannot be experienced elsewhere in the world and are the reason for the ‘crypto-craze’.

However, cryptocurrency trading is extremely volatile and may not be generally appropriate, particularly with funds drawn from retirement savings, student loans, mortgages, emergency funds, or funds set aside for other purposes. Cryptocurrency markets have been continually shrouded in doubt and uncertainty, with unusually high-risk factors and expensive running costs.

Can one legitimately invest in cryptocurrencies in Kenya?

It should be noted that the risks that accompany the use of virtual currencies are generic in nature; the negative implications that apply to foreign markets apply to the Kenyan market as well. Those risks include the ones mentioned below which have led the Central Bank of Kenya to curtail the trading of cryptocurrency in Kenya by its licensees thereby pushing the bulk of cryptocurrency trading activity to offshore entities operating online.

a. Cryptocurrencies are unregulated currencies

Regulation of money supply is a crucial and important element in control of money markets as it is responsible for maintaining economic stability, controlling inflation, and informing monetary policy. For example, having more money supplied and circulating in an economy can lead to demand-pull inflation where an economy has too much money chasing few goods. For this reason, supply of money in any economy is a highly regulated affair with central banks being at the heart of any money issued in any economy.

In Kenya, the Central Bank of Kenya Act (the CBK Act) vests the sole right to issue notes and coins to the Central Bank of Kenya (the CBK) and only the CBK-issued notes and coins are recognized as legal tender. In addition, Section 19 of the CBK Act provides that all monetary obligations or transactions entered or made in Kenya shall be deemed to be expressed, recorded, and settled in Kenyan currency unless otherwise provided for by law or agreed upon between the parties. This means that unless a note or coin is issued by the CBK, it is not effective as a medium of exchange in Kenya.

As cryptocurrencies are not issued by central banks, they lack recognition as legal tender and do not fall within the regulatory ambit of the CBK: a fact which the CBK has repeatedly publicised.

b. Transactions and dealings that involve virtual currencies are untraceable and anonymous

As cryptocurrency transactions are blockchain transactions done through a decentralized network of nodes, it is not possible to oversee the entire network and as such cryptocurrency transactions are generally untraceable and anonymous. This makes cryptocurrency transactions susceptible to use by criminals in illegal transactions such as money laundering and financing of terrorism.

It is therefore possible for cryptocurrency transactions to pose a risk to the country’s internal security and undermine the process of holding accountable the persons involved in these criminal activities.

c. Cryptocurrencies are usually traded on unregulated platforms

As we pointed out earlier, the CBK has as its primary object the formulation and implementation of monetary policy directed to achieving and maintaining stability in the economy. Therefore, the CBK is mandated under the CBK Act as well as the National Payment Systems Act to license all persons responsible for monetary transactions to achieve its overall mandate of acting as the body responsible for formulating monetary policy that maintains the price stability of the issuing currency. To this end, the CBK licenses all banks, forex bureaux, mortgage finance companies, money remittance providers, microfinance banks and payment service providers.

The CBK is not alone in this endeavour. Its role is supported by other regulators such as the Capital Markets Authority (the CMA), the Insurance Regulatory Authority (the IRA) and the Retirement Benefits Authority (the RBA) who license many of the participants in the securities markets and dictate their role. In particular, the CMA licenses the platform where investments are traded, and it would not be possible for a cryptocurrency exchange to be set up without their approval.

The oversight by the regulators is not done solely for purposes of macroeconomic management. This oversight is extremely important to ensure the sanctity of financial transactions by the public is not violated thereby giving confidence to the investing public. It is indeed a key cog in ensuring that the financial sector remains vibrant, and the public is not defrauded or exploited through monetary transaction schemes.

However, as the regulation of cryptocurrencies is not within its ambit, the CBK does not issue licenses for cryptocurrency trading. Further, the CMA has not classified cryptocurrencies as investment assets and therefore participants in the investment markets are yet to fully embrace cryptocurrencies as a necessary part of their investment portfolio. As such, though it is not illegal to hold cryptocurrency as an investment asset, many of the platforms which process cryptocurrency transactions on behalf of the public can easily find themselves operating illegally if it is deemed by the CBK that their exchange of regular currency for cryptocurrency is an unlicensed foreign exchange transaction. This leaves the investing public with no recourse if an issue arises regarding a cryptocurrency transaction.

It is with the above in mind that the CBK, in its Banking Circular No. 14 of 2015 dated 18 December 2015 addressed to all Chief Executives of commercial banks, mortgage finance companies and microfinance banks, cautioned all financial institutions against dealing in cryptocurrencies or transacting with entities that deal in cryptocurrencies. Additionally, financial institutions were cautioned against opening accounts for any person dealing in cryptocurrencies.

d. Cryptocurrencies are not backed by any underlying assets and their value is purely speculative

Centralized financial institutions play a major role in regulating the economy; if the economy seems to be growing too quickly and causing prices for goods and services to become unaffordable, a central bank can increase interest rates to make it more expensive for borrowers to access money.

Conversely, if an economy is not growing quickly enough, central banks can reduce interest rates or create money to lower the cost of living and therefore make it easier for consumers to borrow money.

The ability of central banks to play this role is underpinned by the fact that licensed currencies are backed by assets such as foreign exchange holdings or gold which contribute to the value of the currency. This is not the case with cryptocurrencies.

Cryptocurrency trading is decentralized and the currencies themselves are not backed by any assets. Their value is dictated purely by the market forces of supply and demand. Due to this, cryptocurrencies experience high volatility in their values and investors in the same have repeatedly suffered losses due to the wild swings in the values of the cryptocurrencies.

Conclusion

The volatile, rogue and even loutish nature of cryptocurrency trading is the main pitfall of this venture. The absence of regulation as well as its attendant remedies makes the plunge into cryptocurrency trading even more daunting. Ironically, it is the discreet and unregulated nature of this market that has caused it to thrive. Considering the above, it is understandable that some countries like China, the former leading hub of this market, have banned the trade altogether.

From a Kenyan standpoint, trading in cryptocurrency is an unregulated venture which is currently not addressed in Kenyan statutes. The regulatory uncertainty increases risk tremendously given that while there is no express ban in holding cryptocurrency as an asset for investment purposes, it can be deemed illegal to use the same as a medium of exchange and one can easily find themselves on the wrong side of the law. Cryptocurrency trading should therefore be undertaken with extreme caution.

Be that as it may, central banks have begun realizing the potential of a well-regulated cryptocurrency market and some have started to create their own cryptocurrencies to facilitate this. China is known to be developing a digital currency, while Venezuela has issued one supported by its oil reserves. Acceptance and regulation of cryptocurrencies is taking hold globally, and this may well lead to a reduction in the volatility of the cryptocurrencies.

With these developments, Kenya cannot afford to be left behind. While the CBK has reasons to be concerned regarding the use of cryptocurrencies as monetary instruments, it cannot discount their value as investments. As such, if the CBK can collaborate with the CMA to recognise cryptocurrencies as investment assets and to establish guidelines on the holding and trading of the same, cryptocurrencies can end up creating wealth for the public without posing a risk to monetary stability. This has been done in Japan, and the approach is gaining popularity worldwide.

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October 23, 2020

Legal Update: Mandatory Disclosure of Beneficial Ownership Information By All Companies

Filed under: Insight — KRK Advocates LLP @ 9:47 am

Introduction 

The Registrar of Companies operationalized the Beneficial Ownership (BO) E-register on 13th October 2020. The effect of this is that all registered companies are now expected to prepare a form/register setting out all the information relating to their beneficial ownership and lodge the same with the Registrar within thirty (30) days of its preparation.

Prior to the enactment of the Companies Act, 2015, companies did not have any duty whatsoever to disclose information regarding their beneficial ownership. However, pursuant to the Companies (Amendment) Act, 2017 and subsequently the Statute Law (Miscellaneous Amendments) Act No. 12 of 2019 which introduced Section 93A, all companies incorporated or registered in Kenya are mandatorily required keep a register of beneficial owners with the relevant information relating to the said beneficial owners as prescribed by the Companies (Beneficial Ownership Regulations) 2020 (hereinafter referred to as the ‘BO Regulations’).

Who is a beneficial owner?

The BO Regulations describe a beneficial owner as the natural owner who ultimately owns or controls a legal person or arrangement. or the natural person on whose behalf a transaction is conducted and includes those persons who exercise ultimate effective control over a legal person or arrangement.

Pursuant to the BO Regulations, a person qualifies as a beneficial owner if the person:

  1. holds at least ten percent (10%) of the issued shares in a company either directly or indirectly;
  2. exercises at least ten percent (10%) of the voting rights in a company either directly or indirectly;
  3. holds a right, directly or indirectly, to appoint or remove a director of the company; and
  4. exercises significant influence or control; directly or indirectly, over the company. In this case significant influence means participation in the finances and financial policies of the company without necessarily having full control over them.

Steps of Filing Beneficial Ownership Information of a Company with the Registrar of Companies

  1. The company should take reasonable steps to identify any person it knows or has reason to know is a beneficial owner of the company.
  2. The company should give notice to the person it has identified as being a beneficial owner of the company requiring the person to provide the following information within twenty-one (21 days) from the date of the notice;
    • copy of his/her National Identification Cards, Passports or Birth Certificate;
    • copy of his/her PIN Certificate;
    • his/her telephone number, email address and occupation;
    • the nature of ownership or control the beneficial owner has in the company;
    • the name of shareholder (if any) holding shares on behalf of the beneficial owner; and
    • the name of the director appointed by the beneficial owner.
  3. The company should prepare Form BOF1 which contains the information set out in (2) above and lodge the same with the Registrar of Companies within thirty (30) days of preparing the said Form.

What happens in the event a Company believes it has beneficial owners but cannot identify or trace them?

The Company should simply notify the Registrar of Companies of the challenge to identify or trace its beneficial owners so that the Registrar can note the same in the register of Beneficial Owners.

What happens in the event a Beneficial Owner fails to provide the Company with Beneficial Owners details to enable to the Company Prepare and Lodge Form BOF1?

 The company should issue a warning notice stating that it is proposing to restrict the relevant interest of the beneficial owner.

The effect of the said restriction is:

Where the Company has issued a warning and imposed a restriction it shall note this in its register and lodge it with the Registrar.

Are there Limitation on the use and disclosure of beneficial owners information by the Company and Registrar?

Yes!

The use and disclosure of the beneficial ownership information is limited by law. The BO Regulations prescribe that as a general rule, beneficial ownership information shall not be made available to the public.

The rationale for this is to safeguard the beneficial owners’ confidentiality and to preserve their right to privacy.

The implication of this however is that a company’s beneficial ownership information shall not be readily available to any member of the public by way of conducting a company search. The Registrar would only issue such information to a competent authority upon written request to the Registrar of Companies.

A Company on its part, is only allowed to use or disclose information about the beneficial owner for purposes of communicating with the beneficial owner concerned, or in order to comply with either a court order or the Company (Beneficiary Ownership Regulations) 2020.

What are the timelines for the preparation and lodging of the Beneficial Ownership Register?

The Regulations do not seem to impose any specific deadlines as to the timelines within which a company is required to prepare its beneficial ownership register.

However, a company should prepare such register as soon as possible as it is obliged to keep a register of beneficial owners in its offices failure to which the company may be liable for committing an offence which attracts a maximum fine of Kenya Shillings Five Hundred Thousand (Kshs.500,000/=).

Once the register is prepared, the company must lodge the register with the Registrar of Companies within thirty (30) days.

What is the Rationale of Disclosing the Beneficial Owners of a Company?

The rationale for disclosure of beneficial ownership information is in the interest of creating an accurate public disclosure regime that provides transparency in the beneficial ownership and control structures of companies. This aids in not only promoting investor confidence and good corporate governance practices but also in uncovering tax evasion schemes, money laundering practices, corruption schemes, terrorist activities and other illegal activity involving either one or more companies.

Are there internal arrangements that stand to be affected by the BO Regulations?

Yes.

Some of the arrangements that are likely to be affected by this new requirement include nominee shareholders who will now be required to disclose the real details of their principal who is the true beneficial owner.

Companies that use chains of corporate vehicles will also now be required to disclose their real owners.

Holders of multiple voting rights shares exercising at least 10% of the voting rights will now be disclosed.

Conclusion

In view of the fact that the Beneficial Ownership E-register has been operationalized, companies need to comply with the BO Regulations by lodging their beneficial ownership information with the registrar the earliest possible to avoid the hefty penalties that come with non-compliance.

For more specific and comprehensive legal advice on this matter kindly contact our offices at the earliest opportunity.

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July 17, 2020

d) Equal distribution rights between parents of the deceased

Filed under: Hidden Insight — KRK Advocates LLP @ 10:07 am

The Bill also sets out to ensure equal rights between parents of the deceased. The current position is that the father has first priority unless he is not alive then interests will be vested to the mother. The new regime will see to it that both parents shall have equal priority rights in the distribution of the estate.

Traditionally, mothers had been side-lined owing to traditional patriarchal stereotypes that enabled men to be prioritized above women. This shift in the law will ensure that mothers of the deceased who die intestate are entitled to receive an equal share to their husbands in the event the deceased did not leave behind a wife or children.

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c) Effects of Re-marriage to succession of the Deceased’s Estate

Filed under: Hidden Insight — KRK Advocates LLP @ 10:04 am

Section 35 of the LSA currently provides that a widow’s right to inheritance shall determine upon re-marrying.  The LSA Bill seeks to eliminate this gender bias by replacing the word ‘widow’ with ‘spouse’. Specifically, the Bill provides that a spouse loses their lifelong interest in the deceased’s estate when they re-marry. This effectively applies to both men and women thus eliminating the differential treatment of men and women on the issue of termination of the right to inheritance upon marriage.

Some scholars have argued that the termination of the right to inheritance upon re-marriage infringes Right to Marriage as provided under Article 45 of the Constitution of Kenya. This is because that particular provision may affect one’s choice in deciding whether or not to re-marry since that re-marriage comes at the risk of losing the right to inheritance.

Other scholars have argued that the proposal to strip a spouse their interests if they remarry is to protect the estate from a reckless widow/widower where minors and other dependents are involved.

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b) Communal Land Protection

Filed under: Hidden Insight — KRK Advocates LLP @ 10:00 am

Section 32 of the LSA provides that land situate in West Pokot, Turkana, Marsabit, Mandera, Wajir, Garissa, Tana River, Narok, Samburu, Isiolo, Lamu and Kajiado shall not be divided subject to the law of succession Act.

This section in the LSA was included so as to protect communal land rights of communities situated in these areas from any form of privatization including through succession claims by individuals. By including community land recognized under Article 63 of the Constitution of Kenya into the law on succession, the Bill is taking proactive steps towards eliminating historical injustices and disputes that arise due to private ownership of what initially was community land.

However, we believe that further steps such as registration of community land at the Lands Registry should be undertaken to ensure better protection of community land as provided for under Land Registration Act 2012.

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a) Dependency and Gender Equality

Filed under: Hidden Insight — KRK Advocates LLP @ 9:55 am

The proposed amendments to section 29 of the LSA amplify the principle of gender equality, noting that the current Act contains elements of discriminatory treatment. For instance under the LSA, the husband who claims an interest in the wife’s estate is required to prove dependency yet the same is not required from the wife.

Section 29 (c) of the LSA provides that “where the deceased was a woman, her husband if he was being maintained by her immediately prior to the date of her death.  This means that for widowers to be entitled to their wives estate, they have to first prove to the courts that they were being maintained by the deceased wife immediately prior her death.

In contrast, the category of wives and former wives bear no such burden with the courts automatically acknowledging their claims to their husbands’ estate. Currently, the only qualification for a former wife is to prove that she did not receive any of the deceased’s assets during the dissolution of the marriage. However, this will change when the President assents to the Bill because the Bill seeks to eliminate former wife’s automatic rights in the former deceased’s estate by providing that she first needs to satisfy the courts that she was being maintained by the deceased prior to his death.

This proposed amendment to section 29 of the LSA will eliminate the existing gender bias against widows that asserts men as the providers of households thereby making it difficult for widowers to access their wives estates in succession matters.

The interesting bit however is that though the proposed amendments seek to realize gender equality, section 31 of the LSA also acknowledges that the application of customary law in Kenya has not been deleted. This is still a major setback because most customary norms favour men as opposed to women especially with regard to whether married women can inherit or not.

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July 13, 2020

The Law of Succession (Amendment) Bill, 2020: A welcome review of the legislation relating to Succession in Kenya

Filed under: Insight — KRK Advocates LLP @ 5:45 am

By Marion Ogeto, Ann Wangui and Sharon Ndinda (Legal Assistants) with assistance from Joyce Muriithi (Associate)

Introduction

The Law of Succession Act (Cap 160 Laws of Kenya) (“the LSA”) has been operational for decades following its enactment in 1981. Prior to the enactment of the LSA, succession matters were governed by a plethora of laws including the African Wills Act (testate succession – where the deceased has a will) and customary law (intestate succession – where the deceased has no will) for Africans. There was also the Hindu Succession Ordnance (intestate succession) and the Hindu Marriage and Divorce Ordnance (testate succession) governing Hindus and the Mohammedan Marriage, Divorce and Succession Act for Muslims. The LSA was therefore enacted in order to consolidate these laws into one system.

Given that the LSA has been operative for many years, it was imperative to revise the Act to bring it into conformity with fundamental societal developments especially gender equality.  To this end, the Senate has proposed amendments to the LSA which are outlined in the Law of Succession (Amendment) Bill 2020 (“the Bill”). The overall effect of the amendments proposed by the Bill is to ensure gender equity is observed in the law of succession in Kenya.

The Proposed Amendments

Some of the proposed amendments captured in the Bill include amendments to the following provisions of the LSA:

  1. Dependency clause – section 29, which presently provides the definition of dependents, is to be amended to provide that husbands need not prove dependency as is required under the LSA. The provision would therefore allow either spouse to inherit as a matter of right;
  2. Community land clause – section 32, which presently provides for the property excluded from the intestacy provisions in Part V of the LSA, is to be amended to include community land under Article 63 of the Constitution of Kenya thus community land shall be governed by the existing customary law of the respective community;  
  3. Re-marriage clause – section 35, which presently provides the manner of distribution of property where the deceased has left one spouse and children, is to be amended to provide either spouse will lose their interest on inheritance if they re-marry. This is different from the current Act where only the widow loses her inheritance interest upon re-marrying;
  4. Equal distribution rights between parents clause – section 39, which presently provides the manner of distribution where a person dies intestate and has no surviving spouse or children, is to be amended to provide the first recipients as the parents of the deceased in equal share as opposed to the current provision whereby the father was to receive first before the mother.

An analysis of the effects of the Amendments to the Law of Succession Act (LSA) 1981

The amendments seek to address some of the most pertinent issues that contribute to succession law disputes in Kenya, including:

In particular, the following concerns are addressed by the Bill:

a) Dependency and Gender Equality
b) Communal Land Protection
c) Effects of Re-marriage to succession of the Deceased’s Estate
d) Equal distribution rights between parents of the deceased

Conclusion

Overall, the effect of the amendments has been to embrace the principle of gender equality espoused under Article 27(4) of the Constitution of Kenya into the law on succession in Kenya. It is indeed appalling that the LSA as currently enacted still perpetuates gender biases and differential treatment that is prejudicial to women for the most part. The Amendments to the LSA are therefore a very welcome move to the extent that they promote gender equality.

However, further revision of the Act may be needed to consider the questions of dependents raised above and the termination of the right to inheritance upon re-marriage.

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May 27, 2020

PR&MB 2020 – Penalties and Offences

Filed under: Hidden Insight — KRK Advocates LLP @ 7:47 am

The Bill establishes various offences and provides penalties. These include

  1. A person who obstructs a public officer in the discharge of the person’s functions under this Act; or (b) refuses to comply with any direction given by a competent authority in the furtherance of provisions under this Act, commits an offence and is liable on conviction to a fine not exceeding one million shillings or to imprisonment for a term not exceeding one year, or both.
  2. A person who commits an offence under subsection (1) and the offence results in the loss of life shall, on conviction, be liable to imprisonment for a term not exceeding five years. Penalty for false claim.
  3. A person who knowingly- (a) makes a claim which the person knows or has reason to believe to be false, for the purpose of obtaining any relief, assistance, repair, reconstruction or other benefit from a public office; or Makes or circulates a false alarm knowingly or warning as to a pandemic or its severity or magnitude leading to panic commits an offence and is liable on conviction to a fine not exceeding one million shillings or to imprisonment for a term not exceeding one year, or to both.
  4. A person who, being entrusted with any money or materials, or otherwise being in custody of money or goods meant for providing relief during a pandemic- (a) misappropriates the money or goods; (b) appropriates the money or goods for the person’s own use; (c) compels another person to misappropriate the money or goods; commits an offence and is liable on conviction to a fine not exceeding ten million shillings or to imprisonment.
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PR&MB 2020 – Information Technology and Business

Filed under: Hidden Insight — KRK Advocates LLP @ 7:43 am

National and county governments shall put in place social safety schemes designed to support vulnerable persons, vulnerable households and informal sector workers whose incomes have been disrupted by the pandemic. The Bill has not however defined the scope of vulnerable persons nor the procedure for identifying them. Some of the economic safeguards to be enforced include unconditional cash transfers to support the identified groups. Kenya currently already has safety net programmes for certain groups such as the elderly, orphaned children and persons with disabilities.

However there is a significantly large group of Kenyans who are not in existing social safety net groups. As such, cash transfer programmes to these groups seems to be a difficult challenge. Going forward, it appears that Kenya should have a more comprehensive social net programme. These programmes should be existent even in times when the county is not facing a pandemic.

The Bill also charges the National and County governments with providing for the waiver of water and electricity charges for identified vulnerable persons and households; and adjustment of tariff rates in order to reduce utility charges to individuals and businesses; and withhold disconnections for non-payment of utility bills.

Suspension of Rates and Licenses

The Bill provides that county governments may suspend fees payable on renewal of trade licenses and payment of property rates during the pandemic.

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PR&MB 2020 – Labour Relations and Social Safety

Filed under: Hidden Insight — KRK Advocates LLP @ 7:34 am

It is no doubt that the pandemic has caused significant disruption of employment. The Bill provides that where a pandemic adversely affects the ability of an employer to pay salaries or wages:

  1. Notwithstanding the provisions of the Employment Act, an employer shall not terminate a contract of service or dismiss an employee;
  2. An employer shall not coerce an employee to take a salary cut.

The Bill further adds that despite subsection (1), where an employer is unable to meet his obligations to pay salaries or wages, the employer shall permit an employee to take leave of absence without pay for the duration of the pandemic.

The spirit of the Bill is to ensure that no employee loses their job or is forced to take a salary cut due to the pandemic. The Bill also seems to attempt to oust the provisions Employment Act which is the primary Act with regards to employment. There is therefore an outright conflict with regards to the two pieces of legislation as the Employment Act allows for termination of an employee provided they are given sufficient written notice.

Social safety net and economic safeguards

National and county governments shall put in place social safety schemes designed to support vulnerable persons, vulnerable households and informal sector workers whose incomes have been disrupted by the pandemic. The Bill has not however defined the scope of vulnerable persons nor the procedure for identifying them. Some of the economic safeguards to be enforced include unconditional cash transfers to support the identified groups. Kenya currently already has safety net programmes for certain groups such as the elderly, orphaned children and persons with disabilities.

However there is a significantly large group of Kenyans who are not in existing social safety net groups. As such, cash transfer programmes to these groups seems to be a difficult challenge. Going forward, it appears that Kenya should have a more comprehensive social net programme. These programmes should be existent even in times when the county is not facing a pandemic.

The Bill also charges the National and County governments with providing for the waiver of water and electricity charges for identified vulnerable persons and households; and adjustment of tariff rates in order to reduce utility charges to individuals and businesses; and withhold disconnections for non-payment of utility bills.

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