As at April 26, 2020, 355 persons had tested positive for Covid 19 in Kenya. The official figures released by the Government in the past two weeks indicate that the number of infections is growing by the day.
In order to prevent further spread, the government has imposed stringent measures which have affected business in nearly all sectors of the economy and led to a slowdown in economic activities. Governments across the globe are putting in place measures to alleviate the pain and struggle caused by these measures to the economies. Recently, the US Congress passed a new Covid-19 relief package totalling $484bn (Kshs. 52 trillion), the fourth aid bill in response to the pandemic. Likewise, albeit on a comparably small scale, Kenya has introduced a raft of fiscal and other measures to cushion the economy.
One such move is by way of a Bill in the Senate, called the Pandemic Response and Management Bill, 2020. The Bill sponsored by Nairobi Senator Johnson Sakaja, who is the chairman of the Senate special committee on Covid-19, primarily seeks to provide a legal framework for a coordinated response and management of activities during a pandemic and to provide temporary measures and relief during a pandemic. The Bill contains among others, the following proposals:
Formal Declaration of pandemics and establishment of response structures
When the covid-19 broke out, it immediately became clear that Kenya lacked a comprehensive legal framework guiding its response and management to pandemics. Thus, resort was had to the Public Health Act and executive directives to put in place structures to deal with the pandemic. This may no longer be the case in the event of a future pandemic as the Bill proposes a more coordinated process which starts with a formal declaration of a pandemic by the President upon the recommendation of the Cabinet Secretary in charge of Health. In addition, the Bill provides for the establishment of a National Pandemic Response Committee upon declaration of a pandemic which would report to Parliament on a regular basis. Furthermore, it allows for the establishment of county pandemic response committees and a Pandemic Response Fund and provides various socio-economic protective measures discussed below.
Recognizing the financial impact that a pandemic could have on the public, the bill suggests that where a pandemic is such that it affects the economic or purchasing power of the public, the Cabinet Secretary responsible for matters relating to finance may, with the approval of Parliament, introduce tax measures to cushion the affected persons for the duration of the pandemic. This proposal seems to be playing catch up in light of the Covid-19 pandemic as the Cabinet Secretary in charge of Finance has already published a raft of fiscal measures in this regard, some of which were ratified by Parliament in the Tax Laws (Amendment) Act, 2020.
Loans and Mortgages
With respect to loans and mortgages, the Bill recommends that where a pandemic has a negative impact on the capacity of the borrower to meet contractual obligations entered into prior to the declaration of a pandemic, the parties shall renegotiate the repayment modalities. While this has been encouraged by the Central Bank of Kenya upon consultation with the Kenya Bankers Association, it is clear that any relief with respect to the repayment modalities shall be dependent on the agreement between the parties and the Banks are not bound to agree to any terms different from the parties’ existing terms. Furthermore, in a rather controversial proposal that is likely to be fought by the Banks, the Bill proposes to prohibit the imposition of penalties on defaulters as well as listing of defaulters by credit reference bureaus. Similarly, it prohibits charging of fees, interest or any other penalty for nonpayment or late payment of obligations during the pandemic period.
As regards commercial contracts, the Bill prohibits the commencement of levying of execution, the enforcement of security over property used for the purpose of a trade, business or profession, the repossession of any goods used for the purpose of a trade, business or profession and the termination of leases or licence of immovable property in connection with non-payment of rent or other monies. Notably, this proposal was also introduced in the Tax Laws (Amendment) Bill but was not carried through to the final version that was passed by Parliament and assented to by the President.
Tenancy Arrangements – Delayed Performance encouraged
With respect to tenancy arrangements, the Bill proposes that where a pandemic has affected the financial capacity of a tenant to meet their obligations, both parties are required to, subject to a prescribed notice by the tenant, enter into an agreement on how the tenant shall meet their obligation at the end of the pandemic. This does not relieve a party from its obligations to pay rent but merely postpones it to a period after the pandemic.
Employment and Leave of Absence without pay
In a proposal that will likely receive a lot of opposition, the Bill proposes that even where a pandemic adversely affects the ability of an employer to pay salaries or wages, an employer is barred from terminating the contract of service, dismissing the employee or coercing an employee to take a salary cut. Most employers who have been planning to do this to cushion businesses from interruptions caused by the pandemic, will likely oppose this proposal. However, the Bill now seeks to formally recognize unpaid leave by requiring an employer to permit an employee to take leave of absence without pay for the duration of a pandemic. This proposal had also been introduced in the Tax Laws (Amendment) Bill but was dropped in the final drafts.
Waiver of utility Bills, Rates and License Fees
Lastly, the Bill proposes that during the pendency of a pandemic, the national and county government agencies should waive water and electricity charges for identified vulnerable persons and households and in consultation with water and electricity service providers adjust tariff rates in order to reduce utility charges to individuals and businesses. They may also withhold disconnections for non-payment of utility bills. County governments may also suspend fees payable on renewal of trade licenses and payment of property rates during the pandemic.
As earlier noted, this Bill identifies several measures aimed at cushioning vulnerable persons from the ravages of a recession caused by pandemics. It also empowers various Cabinet Secretaries to, with the approval of Parliament, develop measures to cushion employers and employees, lenders and borrowers, as well as landlords and tenants during a pandemic. While some of the proposals are welcome, there is need for the Senate to consider the input of various stakeholders as some of the proposals are drastic. It is also hoped that the respective Cabinet secretaries will come up with more sustainable and viable measures in the wake of pandemics like the present one. We shall keep you updated on the progress of the passage of the Bill.
Article by Enock Mulongo