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Market Report – 11th June 2021

- June 15, 2021 - 0 comments

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Feature of the week:

The Treasury CS Tables KES 3.0 Trillion Budget for FY2021/2021 in Parliament

The Cabinet Secretary for the National Treasury and Planning has proposed a KES 3.0 trillion (excludes debt redemptions) budget for FY2021/2022, 8.6% higher than KES 2.8 trillion in FY2020/2021

The table below highlights key expenditure items (in terms of uses) compared to the previous budget. Ministerial recurrent expenditures takes the highest allocation with interest and pensions seeing the highest growth year on year.

Expenditure Projections FY2021/2022 FY2020/2021 Change % allocation in FY2021/2022 % allocation in FY2020/2021
KES Bn KES Bn %    
Recurrent expenditure 1,272.40 1,254.40 1.4% 42.0% 45.0%
Development expenditure 669.6 633.1 5.8% 22.1% 22.7%
Interest and Pensions 697.5 586.5 18.9% 23.0% 21.0%
Civil servants pension contributions 20.8 N/A N/A 0.7% N/A
Counties 370.0 316.5 16.9% 12.2% 11.3%
Total expenditure 3,030.03 2,790.40 8.6% 100.0% 100.0%


In terms of sector allocations, most areas saw an increase in allocation (in absolute terms) with the exception of the education sector, environment protection and economic affairs.


All amounts in KES Billion FY2021/2022 FY2020/2019 % change % Allocation in FY2021/2022 % Allocation in FY2020/2021
Energy, Infrastructure and ICT 383.3 363.3 5.5% 12.7% 13.0%
Health 121.1 111.7 8.4% 4.0% 4.0%
Education 503.9 505.1 -0.2% 16.6% 18.1%
County governments 370.0 316.5 16.9% 12.2% 11.3%
National security 162.3 154.5 5.0% 5.3% 5.5%
Agriculture & Food Security 73.9 62.5 18.2% 2.4% 2.2%
Environment Protection, Water and Natural Resources 101.3 104.6 -3.2% 3.3% 3.8%
Economic and Commercial Affairs 18.05 28.6 -36.9% 0.6% 3.7%
Interest Payments, Pensions &Civil servant pension contributions 718.3 586.5 22.5% 23.7% 21.0%
Social Protection, Culture, Recreation 61.8 70.1 11.8% 2.0% 2.5%
Public Administration & International Relations 299.7 289.3 3.6% 9.9% 10.4%
Governance, justice, law and order 216.7 197.7 9.6% 7.2% 7.1%


The government’s “Big 4 Agenda” was allocated KES 142.1 billion, a 10.8% increase compared to the previous budget (KES 128.3 billion).

Revenue projections for FY2021/2021 are set at KES 2.1 trillion. The table below highlights the key sources revenue

All amounts in KES Billions FY2021/2022 FY2020/2021
Income tax 833.8 685.1
VAT 473.0 480.7
Excise 240.6 242.3
Import 118.2 106.0
Other taxes 108.1 119.2
Appropriations in Aid 263.0 259.3


Proposed tax measures in the FY2020/21 budget include:

  • Custom duty
  1. The following measures have been proposed with an aim to protect the local industry:
    • 0% import duty on iron and steel products extended for one year
    • 0% import duty on vegetable products such as potatoes, peas and tomatoes


  • Value Added Tax (VAT) measures which are focused on exemptions on goods such as:
  1. Equipment for generation of solar and wind energy
  2. Goods used in power generation under Power Purchase Agreements (PPAs) that were signed before April 2020
  • Bread
  1. Health products and technologies to support the health sector
  2. Assets transferred to Real Estate Investment Trusts and Asset Backed Securities
  3. Goods used in geothermal, oil and mining projects


  • Excise duty measures including;
  1. Rebates on internet data services purchased in bulk for resale
  2. Introduction of excise duty on nicotine pouches(KES 5,000 Per Kg)
  • Excise duty on betting a 20.0% of amount wagered


  • Income tax
  1. National Health Insurance Fund (NHIF) to qualify for insurance relief
  2. A change in the thin capitalization rule from debt-to-equity to interest deduction up to a maximum 30.0% of Earnings Before Interest Tax, Depreciation and Amortization (EBITDA)
  • Tax rebates on employers engaging TVET graduates as apprentice

The fiscal deficit for FY2021/22 is expected to decline to KES 929.7.6 billion (7.5 % of GDP) from KES 976.2 billion (8.7% of GDP) in the FY2020/21. The fiscal deficit will be financed through net external financing worth KES 271.2 billion (2.2% of GDP) and net domestic financing of KES 658.5 billion (5.3% of GDP).


Whereas there are some measures to provide some sort of relief to citizens, we feel like the budget largely kept to the “fiscal consolidation” theme and more so towards raising government revenues. This will probably come as a disappointment to Kenyans given that the country is already experiencing higher inflation from fuel and food prices.

Although the budget anticipates a slightly smaller deficit, the current macroeconomic environment on which the revenue projections are based remains highly uncertain due the COVID-19 pandemic. We could see revenue shortfalls, a higher deficit and more borrowing.


Equities Market Summary:

Nairobi Securities Exchange Performance

 The All Share Index (NASI) and the NSE 20 Share Index rose by 1.5% w/w and 0.2% w/w to close the week at 172.33 and 1,911.92 respectively.  The market was characterized by an increase in market turnover (1.5% to KES 2.7 billion) and volume of shares traded (93.1% to 137.2 million shares). NCBA registered the highest turnover (KES1.4 billion) and was the top mover of the week with a price gain of 1.2% w/w to KES 26.30. There were also price gains on other banking counters with notable price increases on Absa (3.3% w/w to KES 10.10), HF (3.0% w/w to KES 3.76) and Equity (2.8% w/w to KES 44.05).  Safaricom edged up by 1.9% w/w to KES 41.25. We expect the uptrend in the market to continue as economic activities pick up. However, the risk of another surge in COVID-19 infections remains due to weak adherence of the containment measures and slow roll-out of the vaccines. Key trading partners like Uganda have re-instated stringent measures which further delay a full economic recovery (to pre-pandemic levels).



EABL – Long-term Buy

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