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SACCO STAR 48
Playing Around With A Shrinking Pay Slip
I had an extremely rude introduction to taxation. And I was not prepared at all.
As a swashbuckling young man in college, I moonlighted as a freelance journalist, basically scrounging around Nairobi for stories to sell to the newspapers. The pay wasn’t good, but for a young man, whose needs were limited to a good amount of tipple, buying my girlfriend some ice cream, and buying a good shirt occasionally, it was enough.
One day, I was inspired and worked myself like a horse. We used to be paid per the number of articles published. I had ten articles published and in my head, I knew I had made a kill. My life was going to change tremendously. So, when I went to the ATM expecting a certain amount, only to find about a third of it—a tidy sum, if that—was missing, I was aghast.
Armed with my newspaper clippings, the fury of scorned gods, and the anger of a monster, I stormed the accounts department of the newspaper ready for a war. The man who received me verified my claims and indeed I was entitled to what I was asking for. Then he went through my pay slip in the system (we only received the cash, not the pay slip) to establish the source of the discrepancy.
“You are a freelance, right?”
“Yes, I am,” I said, impatiently.
“And this is the first time you have made more than Sh 24,000, right?”
“Yes!” I said, disgusted at his very personal questions.
“Well, from the look of things, the money you are asking for went to taxes. Once you make more than Sh 24,000, you are eligible to pay taxes…”
That stopped me cold. I felt violated. Insulted. Cheated. I hated it. But then, it hit me I was an adult, and just like death, taxes had become a certainty of life.
Soon, I was to get my first permanent job (are there permanent jobs anymore, really?) and I remember the quiet, almost reticent HR lady giving me some forms to fill in and I was asked who my next of kin was and when I asked why, I was told, ‘just in case you die, someone has to inherit your pension, and of course NHIF is mandatory.” And just like that, I was introduced to ‘statutory deductions’-those payments the government usually taps at the source.
Next, I got a good job with an even bigger salary. When the salary was touted to me at the interview, I was over the moon. I was too financially illiterate to know the difference between gross and net. And I didn’t know how big a bite the government was to make off my pay slip. When the first salary came, I was beside myself with grief at how much the government had taken. And a few months later, NHIF and NSSF rates were ramped up higher for my income bracket. Adding the Higher Education Loans Board deductions, and SACCO subscriptions, I was now earning half my stated gross salary.
That is how I became an adult. I started to understand why the uncles I considered stingy were not necessarily parsimonious. I started to understand why employed people lived a certain predictable lifestyle. Why they saved every coin. On transport, on shopping, on luxurious spending.
Soon enough, my spouse, who was in a higher income bracket became ruthless with the family budget. Out went the superfluous and frivolous supermarket shopping, and in came the bulk buying of domestic goods from Indian or Somali wholesalers upon which she could save up to half what we used to spend while shopping in a supermarket.
Today, we find ourselves in the same space. As the government sinks its teeth even deeper into our pie, we have to be creative. The housing levy and other tax measures will shrink our income even further. Never before have Kenyans been so taxed to the point they can’t breathe. What is even more galling is that the taxes are coming at so many levels and you see the work of your sweat chip away mercilessly and helplessly. Take fuel, for instance, the most overtaxed commodity and electricity. It gets worse and worse.
So, what are we to do?
We must adopt negative coping mechanisms. That means cutting down on expenditure, more so, on unnecessary goods and services.
Personally, it means I may have to cut down on the streaming services and be realistic on how many TV programs I want, and how many I can watch realistically. I have been spending a fortune on my barber, and now I have to drop the massages and stick to a simple shave and trimming. My leisure budget will be faced with serious austerity measures. If drinking from home and watching football matches from home will help to save, so be it. Luxury foods like meaningless cups of tea, meaningless beer, and meaninglessly expensive fashion have to be suspended.
That is the only way we can give the pay slip some relief and be able to save something for the rainy day.
What is going to be your strategy?
How Policy Innovations Can Strengthen Cooperative Businesses in Kenya
By Maureen Gitau
Registration of cooperative businesses is a challenging issue for policymakers and stakeholders in the cooperative sector. Under Schedule Four of the Kenyan Constitution, cooperative development is a fully devolved function, meaning oversight for cooperatives was transferred from the national government to county governments, including the transfer of powers and funding. Devolution is important because it ensures that decisions are made closer to the local people, communities and businesses they affect. Some counties have taken up the registration of cooperatives at the county level, resulting in challenges related to dual registration, lack of clear guidelines on the registration of cooperatives doing business in more than one county, and how to maintain cooperative registries at both the national and county levels.
To manage these concerns, the National Cooperative Development Policy, 2019 — approved by Parliament as Sessional Paper No. 4 of 2020 — provides that the national government is responsible for the registration and cancellation of cooperative societies. These registration issues are critical and call for policy innovations that make it possible for cooperative businesses to thrive. There is a dire need to institute novel procedures for the documentation and data management of cooperative businesses’ registries.
Christiansen J. & Bunt L. (2012) advocate for the need to make the best possible use of public resources to create better outcomes for the population rather than merely ensure ‘service delivery.’ The intention of devolution, or decentralization, to bring services to the people is not enough when marred by inconsistent procedures and processes. The inconsistencies are made worse by a lack of access to information, thereby disincentivizing compliance. There is a need to come up with solutions that are characterized by an empathic relationship with the concrete situation of the citizen — in this case, cooperatives.
A co-operator in Kenya should be able to register a cooperative business in the shortest time possible, have access to information with clear guidelines and rules as to how to register, and do so on a platform where making payments towards the registration is easy and secure. This is easier said than done, though, as it not only poses a new way of working, budgeting and decision-making for policymakers but also a new way of thinking about how to incorporate innovations in policies.
In 2014, regulatory and legal reforms aimed at enhancing and promoting the ease of doing business in Kenya realized it was important to make the country’s business sector more competitive by streamlining and automating the business registration process. These reforms targeted the incorporation and insolvency of companies in Kenya with a view to creating an environment where businesses can thrive. The success of doing business in Kenya through the Business Registration Services (BRS) online platform provides a precedent for similar reforms in the cooperative sector.
Rather than maintaining the status quo, can public interventions create explorative processes that uncover and make use of untapped potential? The national government can reduce the cost of doing business by developing and adopting simplified processes that improve access to services and create new channels for revenue collection. In trying to resolve the issue of registering cooperatives and increasing compliance, is there an opportunity to develop a digitized registration system? A digital system could help reduce duplication, ensure prioritization and tracking of applications, and minimize political interference in the registration process.
Reforms cannot operate in a vacuum. Sector stakeholders need to have an open public-private dialogue on how this idea can be implemented. Advances in digital government-to-business (G2B) processes have the potential to automate and organize information much more dynamically, which would strengthen cooperative businesses, eliminate unnecessary red tape and simplify complicated administrative procedures and processes. This re-envisioned digital registration system would allow the Government of Kenya to play a more facilitative role in full view of the cooperative database at both levels of government as well as through shared decision-making.The writer is a Policy&Legislative Affairs Officer for Global Communities’ Cooperative Leadership, Engagement, Advocacy & Research (CLEAR) Program. The article was first published by Global Communities https://globalcommunities.org/blog/
How does a Cooperative arrive at an ideal board of directors’ composition?
By Mary W Kiema
As a group sets out to form an enterprise, their main concern is to meet their common needs through a business model that is suitable for most of them. Their requirements for the association will be formulated depending on the anticipated nature of the business. The form of business will inform the appropriate rules and subsequent regulations required. The interim governing body at this stage will be composed of some of the founder members who will be responsible for setting up the ground rules.
In Cooperatives, the objects and membership requirements are contained in the bylaws. These by-laws are specific to an individual Cooperative society. A financial Cooperative for example will provide bylaws that attract members who have the capacity to save, borrow and repay promptly.
A marketing Cooperative will reach out to the producers or developers of the desired products. At this point the most important assignment is to get numbers regardless of their gender or age provided that they can meet the membership conditions. As the Cooperative takes shape and begins to generate the desired results, the focus is directed to other areas of concern a simple scan through the composition of the membership of a number of Cooperative Societies, shows the dominance of the male gender. This is further evident at the board of directors level and in apex bodies. Attention has been drawn to this state of affairs and certain interventions are being explored to address this.
As a requirement, a Cooperative Society observes the principle of open and voluntary membership. This means a Cooperative can attract members from diverse walks of life. These members have a right to democratically control their enterprise. The implementation of this democratic member control principle sometimes yields results that go against the tenets of inclusion. The outcome may sometimes generate discussions that are geared towards attaining the desired status. This will only happen for an enterprise that is deliberately aiming at achieving an ideal position in governance. For most, the disparity goes without being attended to until it is pointed out from within or without.
Since the promulgation of the Constitution of Kenya 2010, the matter of gender balance has continued to elicit a lot of discussion. The constitution being supreme, all other laws including the Cooperative laws are expected to align.
Enterprises that are private and opt for democratic member control grapple with the challenge of balancing between democracy, appropriate representation and inclusivity. The desire is to not only have all stakeholders sufficiently represented in the decision-making but also to have an effective organ at the top. The growth and complexity of the Cooperative societies have also further complicated the equation. The qualification requirements for board members go beyond one being a member. To qualify for a board position, some Cooperatives require one to have a certain number of shares and amounts in deposits and to have attained a certain level of education or specific professionalism. This may be interpreted as an avenue for eliminating a particular category from leadership. With all these hurdles, how does a Cooperative arrive at an ideal board of directors’ composition?
This governance challenge is not an easy one to resolve but it may be the missing link towards addressing issues that have remained in the background for a long time. As the ground is being levelled to bring all players into the fold, some interventions will be required. The absence of youthful members in the movement may be attributed to their inability to ascend to the decision-making table. The board of directors are drawn from members, therefore, for youth and women to be on the board they must first be found in the membership. With enough numbers, the electoral zones may be created in a manner that will give all eligible members a chance to serve at the top.
Among the interventions evident include the formation of women and youth networks. Some of these networks have developed elaborate programs to equip the participants with an array of leadership skills that are geared at enhancing inclusivity in institutions. The emphasis is on youth and women because they have been seen to have been left behind although these skills are required across the board. The situation is slowly changing with more women taking up jobs at all levels and being able to participate with others in the management of the organization they belong to. The youths are also encouraged to form workers’ Cooperatives where they can contribute their skills as they grow their unique enterprises.
Apart from achieving the right composition in terms of demographics, the main concerns have lately turned to the effectiveness of the board. Some skills are wanted among the board. It is for this reason that the issue of accommodating independent directors who have specific skills keeps coming up. One step at a time with the right intentions, an ideal situation will be achieved.
The writer is a consultant on Co-operative Business Model, a member of the Kenya Society of Professional Cooperators and founder of the SACCOprenuers group on Facebook
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