Practically speaking, majority of Kenya’s working class today is poor. Employment is no longer a badge of stability. We are no longer living from paycheck to paycheck. Ours is a precarious balancing act of juggling salary advances, digital loans and side hustles to survive the month.
At the beginning of this year, determined to get a grip on my finances, I joined a savings group on social media with one goal: Save my way to financial freedom. To kick things off, the lead shared the 50-30-20 budgeting model where 50 per cent of one’s income goes to needs, 30 per cent to wants, and 20 per cent to savings as what would guide us. Three-quarters of the group went dormant right after. The numbers simply didn’t match the realities we are living.
The average working class today cannot afford to live by some given formula because there is nothing structured about their finances right from the start. Most people enter employment already burdened by obligations far greater than their income. For most, the mandatory six months before loan eligibility is an excruciating wait for money to take care of siblings still in school, to finally fix Mama’s home or acquire the much needed piece of land. And right here is where the vicious cycle of loans begins.
Today, every Kenyan employee starts their quest for financial freedom with the odds stacked against them. At 35 per cent, Kenya’s PAYE is among the highest in the region. With a third of their salaries going to taxes, the average Kenyan worker is left with little to get by. Take a worker earning Sh100,000, for instance. After statutory deductions, they take home about Sh68,000, if they are lucky. With the high cost of living and black tax most people can barely get back a few days after pay day.
Even worse, where the government is expected to provide services, workers have been forced to come through for themselves. While we were assured of free education, the CBC system is currently the most expensive even for public schools. Health care reforms on the other hand have left us exposed requiring patients to pay out of pocket for most services. In urban areas, one buys water from private vendors at probably three times the market price even as they grapple with the high cost or unreliably supplied electricity.
The government came up with a policy to ensure that citizens remain with at least a third of their salaries as net to save workers from pecuniary embarrassment but in reality, what is left of people’s salary is humiliating. And so Kenyans found a way to get by. After maxing out their pay slips, many have turned to salary advances, digital loans and shylocks to cover basic needs that include food and transport.
Over time, we have mastered the art of shuffling our loans to ensure there is a ‘consistent stream of income’ when all we do is borrow from one lender to pay another. To the outside world, we are the well to do middle class but the truth is the house of cards that is our finances may collapse any minute.
In such circumstances, telling people to save 20 per cent of their income almost feels cruel. Our financial discipline may be wanting but the truth is for most, the system set them to fail from the start. When you live in present day Kenya, where every single coin you earn is already claimed, there is only so much you can do.
We may want to start having a different conversation about money. Maybe it will help to teach our children healthier financial habits. We may need to break the dependency culture that is black tax. Maybe we can learn to embrace delayed gratification and instead embrace patience to achieve our goals. Or maybe, just maybe, the government can ease the burden from the people. Our economy cannot grow on the backs of exhausted, underpaid and overtaxed citizens.
Kenyans, each day wake up and show up to ‘build the nation’ but there is no dignity left to it. The truth is most of these dedicated workers are one loan recall, one medical emergency away from abject poverty.
Ms Wekesa is development communication consultant. [email protected]
By Faith Wekesa