CBK nominee backs housing levy and merger of local banks

Former National Treasury PS and new CBK Governor nominee Kamau Thugge. [Boniface Okendo, Standard]

Central Bank of Kenya (CBK) Governor nominee Kamau Thugge has thrown his weight behind the contentious Housing Fund levy proposal contained in the Finance Bill 2023.

The fund, if implemented will see Kenyans contribute three per cent of their income which will be matched by their employers to enable them own homes under the Affordable Housing Programme (AHP).

The proposal has however been met with criticism by the private and public sector unions even as the government insists that it is feasible and equally important to spur economic growth.

Appearing before the National Assembly’s Finance and Planning Committee yesterday, Thugge who is expected to replace Patrick Njoroge as the CBK boss termed the levy as a catalyst of the future, further buttressing its importance.

“The general impact of having the fund is that it will not only ensure more houses are built but will ensure there is more spending by Kenyans. The move will also attract international investors and all this will definitely spur economic growth,” stated the former National Treasury Principal Secretary (PS).

Thugge was responding to a query by the MP Kuria Kimani-led Finance committee which sought his take on the unpopular Bill, coming up for debate in the House next month.

Bigger picture

The former International Monetary Fund (IMF) economist, drawing comparisons from countries such as Singapore which implemented a similar programme 50 years ago, urged Kenyans to look at the bigger picture.

“We are starting the journey a bit late compared to other countries but it’s one that we should start. 50 years ago, we were at par with Singapore in terms of economic growth but then, it did something that we didn’t, propelling its economic growth,” he stated.

 “The fund will be a saving and not a tax meaning through its administration, there is going to be creation of employment for a lot of Kenyans with the building of houses.”

However, the ghosts of the Arror and Kimwarer dam scandal also returned to haunt the CBK governor nominee. In 2019, former President Uhuru Kenyatta’s administration stopped the construction of the twin dams in Elgeyo Marakwet County over claims of corruption.

In the dam fraud case, former National Treasury Cabinet Secretary Henry Rotich and Thugge, then his  PS alongside four others were charged with conspiracy to defraud the State and abuse office in 2019. 

On Tuesday, the grilling committee sought to know why despite charges being proffered against Thugge, they were later dropped and he was made a State witness by the Office of the Director of Public Prosecutions (ODPP). “In my view, I was wrongly charged because it was a matter that was very far away from the Treasury. How a decision was made to make me a State witness and the charges against my former boss held is a question best answered by the DPP,” said Thugge.

“I am still a State witness and the matter is still in court and I will do what is required by law,” he further remarked.

Thugge has promised to revamp the banking sector through consolidation. This, he said, reduces the risk of weak banks collapsing while strengthening the merged units to be able to compete more effectively.

The industry has over 40 banks, some of which Thugge said are weak and better off merging with the stronger bigger lenders. The ex-IMF economist said instead of having many banks, he would focus on a few strong banks with the capability to compete not just in Kenya but in the region.

Thugge, who said he’s worth Sh450 million, rooted for the floating of a dollar-denominated bond to increase the liquidity of the greenback in the market.