Kenyan stocks slip amid finance bill controversy

Kenya's stock market witnessed a decline as the NASI fell by 0.8 per cent and the NSE-20 experienced a weekly loss of 1 per cent. This drop in the market sentiment can be attributed to the ongoing controversies surrounding the recently tabled finance bill, which is one of the largest budgets in Kenya's history. The protests in Nairobi against the finance bill 2020-2024, which included several punitive tax measures, have raised concerns among investors and the general populace. These measures, such as taxing previously zero-rated items like bread and introducing higher charges on financial transactions, have led to uncertainty within the financial sector and the economy as a whole. Caleb Mugendi, Investment Manager at Genghis Capital Asset Management in Nairobi, sheds light on the current situation and its impact on the market. The Kenyan government has already put a hold on some tax proposals in response to the protests, but the implications of the finance bill continue to affect investor sentiment and market performance. The uncertainty surrounding the taxation measures, especially the VAT on transactions, has caused concerns about a potential shift towards cash transactions to avoid the increased charges. This uncertainty has also impacted the banking sector, which has invested heavily in enabling seamless mobile money transactions targeted by the proposed taxes. The wide-reaching effects of the finance bill on the economy have raised doubts about achieving the projected economic growth of close to 5% this year. The market turnover has decreased by 37.2% and is concentrated in specific sectors, with some counters being favored by foreign investors, while others experience profit-taking. The liquidity in the market remains relatively stable, with expectations of increased local investor participation towards the end of the quarter. Potential shifts in investor sentiment could occur if some of the more punitive tax measures are repealed, leading to improved confidence in investing in Kenya. Measures to broaden revenue sources without burdening the populace with excessive taxes will be crucial in restoring market confidence and supporting economic growth.