A Regulated Kenyan
Category: Regulation
By: Fiona Okadia,
A look at the total income taxes collected by the government of Kenya in the Financial Year 2020/21 shows that collectively, working Kenyans paid a total of Ksh 694.1 billion for personal income taxes. While this is easy to compute, many Kenyan citizens are aware of how much of their income goes into taxes on average but are unaware of the total cost they bear due to regulations. This is because much of the regulated activity escapes public notice, yet there are regulations all around us from the time we wake up to when we go to bed. Taxes are the most salient forms of government regulation and but there are other subtle forms of regulations that affect citizens’ freedoms and economic interactions.
A typical citizen’s regulated day starts when she wakes up after her alarm goes off either via a phone or a clock purchased from the local point. The phone’s quality is regulated by the Kenya Bureau of Standards (KEBS), while the Communications Authority of Kenya (CAK); is responsible for assigning the use of the country’s frequency spectrum, type approval and accepting communications equipment meant for use in the country. That mobile phone is powered by electricity provided by a utility regulated by the Energy and Petroleum Regulatory Authority (EPRA) which regulates the generation, importation, exportation, transmission, distribution, supply, pricing and use of electrical energy.
The Kenya Bureau of Standards (KEBS) develops the standards of quality for most products in these citizens’ homes to which they must adhere. These standards apply to her bedding, sheets to the pillow, and the soft white paint used on the bedroom walls. According to the Standards Bill, 2019, KEBS is authorised to ensure that manufacturers ensure that the products have been designed and manufactured per the general safety requirements before the product is made available to the market.
When our subject reaches the food preparation area to prepare breakfast, the information on the various food labels is also regulated by the Kenya Bureau of Standards in a bid to sort out the information asymmetry problem. This problem arises as the supplier has information on the contents of the package which the consumer might not and therefore, they are required to make those disclosures. Production of the food she consumes is controlled by the Kenya Plant Health Inspectorate Service (KEPHIS) which is responsible for assurance of the quality of agriculture inputs and produce as outlined in the Kenya Plant Health Inspectorate Service Act, no.54 of 2012.
In the shower, the quality of water is regulated by the National Environment Management Authority (NEMA). It applies different minimum standards according to modes of usage be it for agricultural, domestic, industrial, or recreational purposes. On the other hand, the Water Act 2016 states that the Cabinet Secretary for Water and Irrigation is expected to formulate a National Water Resource Strategy to protect, conserve, control and manage water resources. In this line, the Water Services Regulatory Board (WASREB) published water conversation and water demand management guidelines in 2009 which state the role of consumers, among them, being the installation of water-efficient appliances. This seeks to ensure that the sanitary equipment used by households has a minimal amount of water for flushing, thereby affecting the design of cisterns in both residential and commercial areas. The toothpaste, soap, shampoos and other products found in every citizen’s bathroom are regulated by the Public Health Standards Board in consultation with the Ministry of Health.
The well-documented Legal Notice No.161 of October 2003 rules and regulations (often referred to as Michuki Rules 2003) require that all Public Service Vehicles should be fitted with seatbelts and a Speed Governor. The two bodies in charge of monitoring compliance are the National Transport Safety Authority (NTSA) and the Kenya Police Service. Depending on the citizen commuter’s route, there is the Kenya National Highways Authority (KeNHA) and the Kenya Urban Roads Authority (KURA) which are statutory bodies established under the Kenya Roads Act of 2007. The KeNHA is responsible for the development, rehabilitation, management and maintenance of all National Trunk Roads while KURA is responsible for the management, development, rehabilitation and maintenance of National Trunk Roads in the urban areas of the Republic of Kenya. The Kenya Rural Roads Authority oversees what kind of roads will be constructed in rural areas. It also looks into the development, rehabilitation and maintenance of these roads.
As outlined in Section 30 of the Traffic Act of 2015, the driver of any vehicle is obligated to have a driver’s license which is a regulation in itself. The cars that are driven on Kenyan roads are mostly imported and are therefore subjected to three major import restrictions; they must be less than 8 years old from the year of first registration; must be right-hand driven; and must be roadworthy. These regulations may be well intended but they impose a cost on citizen compliance and requires payment of fees such as the Import Declaration Fee (IDF). As a requirement, all vehicles must be insured and the body that oversees this is the National Transport and Safety Authority (NTSA), under the National Transport and Safety Authority Act,2012. The Insurance Regulatory Authority (IRA) is mandated by law to regulate the business of insurance. Further, in accordance with section 10 of the Petroleum Act 2019, EPRA is expected to calculate the maximum legal price of petroleum products by the 15th of each month. With this, a fraction of the total price for a litre of fuel is charged to the regulator under the Petroleum Regulatory Levy.
At work, a professional is entitled by contract to remuneration at the end of the month. This is based on the minimum monthly wage of Ksh.15,120 which is based on employment law by the legislature in a bid to ensure all employees live a decent life in Kenya. Additionally, the employee based in the formal sector is required to remit both National Hospital Insurance Fund (NHIF) and National Social Security Fund (NSSF) contributions every month, guided by provisions of the NHIF and NSSF Acts respectively. For public sector employees, wages and allowances are determined by the Salaries and Remuneration Commission (SRC). Many Kenyans are members of Savings and Credit Cooperative Societies (SACCOs) and their membership obligations and rights to their favourite Sacco are regulated by the Sacco Societies Regulatory Authority (SASRA) whose statutory role is to license, regulate and supervise deposit-taking SACCO Societies.
Once again, WASREB holds regulatory authority on the design of the lavatories in a commercial building which stipulates that they should be fitted with controllers that eliminate flushing when the toilet is not in use. At lunchtime, she decides to eat her favourite dish. The price of some of the foodstuffs such as maize meal flour is determined by the State Department of Agriculture’s subsidy support programs. The cost of such subsidies is measurable by looking at the tax burden, together with the opportunity cost of providing a different service to the citizens. The meat she purchases from her local butchery has been subjected to inspection as part of regulations to prevent adulterated or misbranded livestock products from being sold as food and to ensure that meat and meat products are slaughtered and processed under sanitary conditions. The Meat Control Act specifies the inspection fees and the price varies depending on the type of livestock e.g., cattle, goats, pigs, poultry, rabbits and camels. This cost is borne by both the supplier and the consumer.
After work, our subject passes by their favourite hangout joint and orders a beer, the quantity in millimetres that is in the bottle is determined by the Alcoholic Drinks Control Act (ADCA, 2010) under section 31(2)(a). Further, there are licensing requirements stipulated in sections 9 to 20 of the same law. These fees are part of the cost of the business and therefore make the consumer and manufacturers bear additional costs. Other required regulations include adhering to health inspections that are to be carried out on both the premises and for the employees of the firms providing the service.
Exposure to advertisements is instructed under article 45 of the Alcoholic Drinks Control Act, 2010 in which no one is allowed to promote an alcoholic drink with the hope of creating a false impression that it leads to social or sexual success or that the drink has a therapeutic value or has the ability to prevent, treat or cure any human disease. On the same advertisement scale, the Kenya Film Classification Board is the regulator for advertisements and is responsible for determining what time alcohol advertisements will be run on television. The recommended time is between 10 pm and 5 am and this time was settled upon by assuming that around this time minors are asleep and thus will not be exposed to this material.
Further, when she wakes up with a mild headache the next day and chooses to pop a preferred painkiller, she must remember that the Pharmacy and Poisons Board oversees the manufacture and trade of all medicines in Kenya. The Pharmacy and Poisons Board is established by the Pharmacy and Poisons Act of 2012, an Act of Parliament to make provisions for the regulation of the profession of pharmacy and the trade in drugs and poisons. The packaging of the medicine is dependent on the recommended dosage that is regulated.
As she proceeds to make a call to her work supervisor for being unable to make it to work because of the headache, the calling and Short Messaging Service(SMS) rates are influenced to a great extent by the regulations and standards imposed on the market players by the Communications Authority of Kenya.
Later, if she decides to watch television, the Kenya Film Classification Board and the Kenya Film Commission established under the Films and Stage Plays Act Cap 222 of the Laws of Kenya (1998) are the regulators of the creation and distribution of films. They do this by examining the content on screens, imposing age restrictions and advising consumers about the various films. The electricity used to power your television, radio, or any electrical appliance in the house is regulated by EPRA.
The circulation of money in the economy to enable the purchase of any of these items is regulated by the Central Bank of Kenya (CBK). Therefore, as a citizen paying with Ksh. 1000 notes and not Ksh.40 notes is a result of the institution’s regulatory decision. If she decides to take make an application for a bank loan to service a mortgage, the interest rate charged on loans by commercial banks is often influenced by the Central Bank Rate(CBR) that is set by CBK. Section 36(4) of the Central Bank Kenya Act stipulates that the Central Bank shall publish the lowest rate of interest it charges on loans to banks.
Our imaginary citizen in this piece would, directly and indirectly, encounter more than 15 different regulators in a day. With every regulation, there is a regulator overseeing its implementation. Regulators such as the Kenya Bureau of Standards exert authority on thousands of products that one engages in while some such as NTSA only regulate one service area. On the other hand, one product can be regulated by various regulators. Looking at the example of shampoo where its contents are regulated by KEBS and the plastic container used for packaging is regulated by the National Environmental Management Authority (NEMA), illustrates how much regulations have a duplication effect. However, measuring the full costs of government regulations is difficult as these costs bear both monetary and non-monetary components. The monetary costs are the amounts of money that one pays to the regulator which is incorporated in the total cost of the product or the non-monetary that leads to inconveniencing the market players and one’s economic decisions such as if one prefers a 4-litre shampoo bottle they are limited to only purchasing what is allowed by the regulators. Also, all these regulatory authorities receive resources to effectively carry out their duties or roles.
The ostensible reason that governments regulate is to be able to protect both the consumers and suppliers in the market by correcting for market failures that arise due to information asymmetry, abuse of monopolies, negative externality and the nature of public goods. It is clear that the range of regulations that citizens encounter is not always limited to these four reasons that justify regulation. It appears that the decisions to regulate tend to be political thus affecting both consumers and producers. Lobbying is common in markets where producers make a particular product in a specific way, persuading lawmakers to make that the national standard. The consequence of this is limited competition. These costs and repercussions would have been avoided in the event that the regulations were not in place. An optimal regulatory environment should endeavour to balance social, environmental and economic interests, and in the process help to improve citizen public confidence in government institutions and the regulations thereof. In conclusion, regulation is pervasive in Kenya, and it has direct and hidden costs. Therefore, regulatory policies should have strict standards to justify additions and also reduce the regulatory footprint as a reform measure.
More Blogs
Unintended Consequences of Excise Tax on Tobacco and Nicotine Delivery Products in Kenya
In principle, Excise taxes are levied on goods and services whose consequences are considered socially undesirable. Most developing countries, including Kenya, rely on excise taxes for revenue. Furthermore, it can be used to achieve public health goals by discouraging the consumption of harmful products such as alcohol and tobacco, thereby addressing negative externalities of that […]
An Alternative Medium-Term Strategy for Kenya’s Central Bank
The Central Bank of Kenya Act, (Cap 491) created the Central Bank as one of its autonomous agencies. The Central Bank’s mandate is to develop Kenya’s monetary policy, foster price stability, print money, and carry out other tasks assigned by a parliamentary act. The Constitution stipulates that the Central Bank of Kenya shall not be […]
The 13th Parliament’s Must-Do List for Efficient and Effective Legislative Function
The 12th Parliament has had its share of successes and setbacks. The sheer volume and diversity of legislation passed by the 12th Parliament demonstrate the effort made by legislators and committees in enacting both consequential and inconsequential government policies. The problem with increased volume is that it adds legal obligations to the already existing legal […]
How China Escaped The Poverty Trap (Part 6)
What Are Six Policy Lessons that Prof. Yuen Yuen Ang Thinks China’s Experience has Offered the World? Yuen Yuen Ang identifies six policy lessons that China has offered the world. The six lessons are Experiment, within boundaries, Induce incremental changes broadly and in an interconnected way In the first case, define success narrowly. Give all […]
How China Escaped Poverty Trap: Lessons for Kenya (Part 5)
What Might The Kenyan Supreme Court Decisions Have to Do With Economic Growth? This entry is part of a series exploring the propositions made by Yuen Yuen Ang in her book “How China Escaped the Poverty Trap”. Yuen Yuen Ang’s arguments hinge on principles of the Darwinian coevolutionary model applied to economic theory. Kenya is, […]
A Regulated Kenyan
| Post date: Wed, Nov 30, 2022 |
| Category: Regulation |
| By: Fiona Okadia, |
A look at the total income taxes collected by the government of Kenya in the Financial Year 2020/21 shows that collectively, working Kenyans paid a total of Ksh 694.1 billion for personal income taxes. While this is easy to compute, many Kenyan citizens are aware of how much of their income goes into taxes on average but are unaware of the total cost they bear due to regulations. This is because much of the regulated activity escapes public notice, yet there are regulations all around us from the time we wake up to when we go to bed. Taxes are the most salient forms of government regulation and but there are other subtle forms of regulations that affect citizens’ freedoms and economic interactions.
A typical citizen’s regulated day starts when she wakes up after her alarm goes off either via a phone or a clock purchased from the local point. The phone’s quality is regulated by the Kenya Bureau of Standards (KEBS), while the Communications Authority of Kenya (CAK); is responsible for assigning the use of the country’s frequency spectrum, type approval and accepting communications equipment meant for use in the country. That mobile phone is powered by electricity provided by a utility regulated by the Energy and Petroleum Regulatory Authority (EPRA) which regulates the generation, importation, exportation, transmission, distribution, supply, pricing and use of electrical energy.
The Kenya Bureau of Standards (KEBS) develops the standards of quality for most products in these citizens’ homes to which they must adhere. These standards apply to her bedding, sheets to the pillow, and the soft white paint used on the bedroom walls. According to the Standards Bill, 2019, KEBS is authorised to ensure that manufacturers ensure that the products have been designed and manufactured per the general safety requirements before the product is made available to the market.
When our subject reaches the food preparation area to prepare breakfast, the information on the various food labels is also regulated by the Kenya Bureau of Standards in a bid to sort out the information asymmetry problem. This problem arises as the supplier has information on the contents of the package which the consumer might not and therefore, they are required to make those disclosures. Production of the food she consumes is controlled by the Kenya Plant Health Inspectorate Service (KEPHIS) which is responsible for assurance of the quality of agriculture inputs and produce as outlined in the Kenya Plant Health Inspectorate Service Act, no.54 of 2012.
In the shower, the quality of water is regulated by the National Environment Management Authority (NEMA). It applies different minimum standards according to modes of usage be it for agricultural, domestic, industrial, or recreational purposes. On the other hand, the Water Act 2016 states that the Cabinet Secretary for Water and Irrigation is expected to formulate a National Water Resource Strategy to protect, conserve, control and manage water resources. In this line, the Water Services Regulatory Board (WASREB) published water conversation and water demand management guidelines in 2009 which state the role of consumers, among them, being the installation of water-efficient appliances. This seeks to ensure that the sanitary equipment used by households has a minimal amount of water for flushing, thereby affecting the design of cisterns in both residential and commercial areas. The toothpaste, soap, shampoos and other products found in every citizen’s bathroom are regulated by the Public Health Standards Board in consultation with the Ministry of Health.
The well-documented Legal Notice No.161 of October 2003 rules and regulations (often referred to as Michuki Rules 2003) require that all Public Service Vehicles should be fitted with seatbelts and a Speed Governor. The two bodies in charge of monitoring compliance are the National Transport Safety Authority (NTSA) and the Kenya Police Service. Depending on the citizen commuter’s route, there is the Kenya National Highways Authority (KeNHA) and the Kenya Urban Roads Authority (KURA) which are statutory bodies established under the Kenya Roads Act of 2007. The KeNHA is responsible for the development, rehabilitation, management and maintenance of all National Trunk Roads while KURA is responsible for the management, development, rehabilitation and maintenance of National Trunk Roads in the urban areas of the Republic of Kenya. The Kenya Rural Roads Authority oversees what kind of roads will be constructed in rural areas. It also looks into the development, rehabilitation and maintenance of these roads.
As outlined in Section 30 of the Traffic Act of 2015, the driver of any vehicle is obligated to have a driver’s license which is a regulation in itself. The cars that are driven on Kenyan roads are mostly imported and are therefore subjected to three major import restrictions; they must be less than 8 years old from the year of first registration; must be right-hand driven; and must be roadworthy. These regulations may be well intended but they impose a cost on citizen compliance and requires payment of fees such as the Import Declaration Fee (IDF). As a requirement, all vehicles must be insured and the body that oversees this is the National Transport and Safety Authority (NTSA), under the National Transport and Safety Authority Act,2012. The Insurance Regulatory Authority (IRA) is mandated by law to regulate the business of insurance. Further, in accordance with section 10 of the Petroleum Act 2019, EPRA is expected to calculate the maximum legal price of petroleum products by the 15th of each month. With this, a fraction of the total price for a litre of fuel is charged to the regulator under the Petroleum Regulatory Levy.
At work, a professional is entitled by contract to remuneration at the end of the month. This is based on the minimum monthly wage of Ksh.15,120 which is based on employment law by the legislature in a bid to ensure all employees live a decent life in Kenya. Additionally, the employee based in the formal sector is required to remit both National Hospital Insurance Fund (NHIF) and National Social Security Fund (NSSF) contributions every month, guided by provisions of the NHIF and NSSF Acts respectively. For public sector employees, wages and allowances are determined by the Salaries and Remuneration Commission (SRC). Many Kenyans are members of Savings and Credit Cooperative Societies (SACCOs) and their membership obligations and rights to their favourite Sacco are regulated by the Sacco Societies Regulatory Authority (SASRA) whose statutory role is to license, regulate and supervise deposit-taking SACCO Societies.
Once again, WASREB holds regulatory authority on the design of the lavatories in a commercial building which stipulates that they should be fitted with controllers that eliminate flushing when the toilet is not in use. At lunchtime, she decides to eat her favourite dish. The price of some of the foodstuffs such as maize meal flour is determined by the State Department of Agriculture’s subsidy support programs. The cost of such subsidies is measurable by looking at the tax burden, together with the opportunity cost of providing a different service to the citizens. The meat she purchases from her local butchery has been subjected to inspection as part of regulations to prevent adulterated or misbranded livestock products from being sold as food and to ensure that meat and meat products are slaughtered and processed under sanitary conditions. The Meat Control Act specifies the inspection fees and the price varies depending on the type of livestock e.g., cattle, goats, pigs, poultry, rabbits and camels. This cost is borne by both the supplier and the consumer.
After work, our subject passes by their favourite hangout joint and orders a beer, the quantity in millimetres that is in the bottle is determined by the Alcoholic Drinks Control Act (ADCA, 2010) under section 31(2)(a). Further, there are licensing requirements stipulated in sections 9 to 20 of the same law. These fees are part of the cost of the business and therefore make the consumer and manufacturers bear additional costs. Other required regulations include adhering to health inspections that are to be carried out on both the premises and for the employees of the firms providing the service.
Exposure to advertisements is instructed under article 45 of the Alcoholic Drinks Control Act, 2010 in which no one is allowed to promote an alcoholic drink with the hope of creating a false impression that it leads to social or sexual success or that the drink has a therapeutic value or has the ability to prevent, treat or cure any human disease. On the same advertisement scale, the Kenya Film Classification Board is the regulator for advertisements and is responsible for determining what time alcohol advertisements will be run on television. The recommended time is between 10 pm and 5 am and this time was settled upon by assuming that around this time minors are asleep and thus will not be exposed to this material.
Further, when she wakes up with a mild headache the next day and chooses to pop a preferred painkiller, she must remember that the Pharmacy and Poisons Board oversees the manufacture and trade of all medicines in Kenya. The Pharmacy and Poisons Board is established by the Pharmacy and Poisons Act of 2012, an Act of Parliament to make provisions for the regulation of the profession of pharmacy and the trade in drugs and poisons. The packaging of the medicine is dependent on the recommended dosage that is regulated.
As she proceeds to make a call to her work supervisor for being unable to make it to work because of the headache, the calling and Short Messaging Service(SMS) rates are influenced to a great extent by the regulations and standards imposed on the market players by the Communications Authority of Kenya.
Later, if she decides to watch television, the Kenya Film Classification Board and the Kenya Film Commission established under the Films and Stage Plays Act Cap 222 of the Laws of Kenya (1998) are the regulators of the creation and distribution of films. They do this by examining the content on screens, imposing age restrictions and advising consumers about the various films. The electricity used to power your television, radio, or any electrical appliance in the house is regulated by EPRA.
The circulation of money in the economy to enable the purchase of any of these items is regulated by the Central Bank of Kenya (CBK). Therefore, as a citizen paying with Ksh. 1000 notes and not Ksh.40 notes is a result of the institution’s regulatory decision. If she decides to take make an application for a bank loan to service a mortgage, the interest rate charged on loans by commercial banks is often influenced by the Central Bank Rate(CBR) that is set by CBK. Section 36(4) of the Central Bank Kenya Act stipulates that the Central Bank shall publish the lowest rate of interest it charges on loans to banks.
Our imaginary citizen in this piece would, directly and indirectly, encounter more than 15 different regulators in a day. With every regulation, there is a regulator overseeing its implementation. Regulators such as the Kenya Bureau of Standards exert authority on thousands of products that one engages in while some such as NTSA only regulate one service area. On the other hand, one product can be regulated by various regulators. Looking at the example of shampoo where its contents are regulated by KEBS and the plastic container used for packaging is regulated by the National Environmental Management Authority (NEMA), illustrates how much regulations have a duplication effect. However, measuring the full costs of government regulations is difficult as these costs bear both monetary and non-monetary components. The monetary costs are the amounts of money that one pays to the regulator which is incorporated in the total cost of the product or the non-monetary that leads to inconveniencing the market players and one’s economic decisions such as if one prefers a 4-litre shampoo bottle they are limited to only purchasing what is allowed by the regulators. Also, all these regulatory authorities receive resources to effectively carry out their duties or roles.
The ostensible reason that governments regulate is to be able to protect both the consumers and suppliers in the market by correcting for market failures that arise due to information asymmetry, abuse of monopolies, negative externality and the nature of public goods. It is clear that the range of regulations that citizens encounter is not always limited to these four reasons that justify regulation. It appears that the decisions to regulate tend to be political thus affecting both consumers and producers. Lobbying is common in markets where producers make a particular product in a specific way, persuading lawmakers to make that the national standard. The consequence of this is limited competition. These costs and repercussions would have been avoided in the event that the regulations were not in place. An optimal regulatory environment should endeavour to balance social, environmental and economic interests, and in the process help to improve citizen public confidence in government institutions and the regulations thereof. In conclusion, regulation is pervasive in Kenya, and it has direct and hidden costs. Therefore, regulatory policies should have strict standards to justify additions and also reduce the regulatory footprint as a reform measure.
More Blogs
Unintended Consequences of Excise Tax on Tobacco and Nicotine Delivery Products in Kenya
In principle, Excise taxes are levied on goods and services whose consequences are considered socially undesirable. Most developing countries, including Kenya, rely on excise taxes for revenue. Furthermore, it can be used to achieve public health goals by discouraging the consumption of harmful products such as alcohol and tobacco, thereby addressing negative externalities of that […]
An Alternative Medium-Term Strategy for Kenya’s Central Bank
The Central Bank of Kenya Act, (Cap 491) created the Central Bank as one of its autonomous agencies. The Central Bank’s mandate is to develop Kenya’s monetary policy, foster price stability, print money, and carry out other tasks assigned by a parliamentary act. The Constitution stipulates that the Central Bank of Kenya shall not be […]
The 13th Parliament’s Must-Do List for Efficient and Effective Legislative Function
The 12th Parliament has had its share of successes and setbacks. The sheer volume and diversity of legislation passed by the 12th Parliament demonstrate the effort made by legislators and committees in enacting both consequential and inconsequential government policies. The problem with increased volume is that it adds legal obligations to the already existing legal […]
How China Escaped The Poverty Trap (Part 6)
What Are Six Policy Lessons that Prof. Yuen Yuen Ang Thinks China’s Experience has Offered the World? Yuen Yuen Ang identifies six policy lessons that China has offered the world. The six lessons are Experiment, within boundaries, Induce incremental changes broadly and in an interconnected way In the first case, define success narrowly. Give all […]
How China Escaped Poverty Trap: Lessons for Kenya (Part 5)
What Might The Kenyan Supreme Court Decisions Have to Do With Economic Growth? This entry is part of a series exploring the propositions made by Yuen Yuen Ang in her book “How China Escaped the Poverty Trap”. Yuen Yuen Ang’s arguments hinge on principles of the Darwinian coevolutionary model applied to economic theory. Kenya is, […]