Will cash reclaim its king position as Kenyans slow down on e-payments on increased levies?

The gloomy operating environment has left merchants and buyers with no choice but to return to cash deals. PHOTO | SHUTTERSTOCK

Whoever coined the adage ‘cash is king’ must have possessed a great deal of foresight as its reality keeps unfolding despite several attempts by a range of economic players to engineer a coup.

The renewed aggression has been aided by a rise in transaction charges on mobile money platforms.

Merchants and buyers who spoke to Business Daily say the gloomy operating environment has left them with no choice but to return to cash deals.

Read: Tax cheats ditch mobile payments to beat KRA

Veronica Mwangi, who operates an electronics shop along Nairobi’s Moi Avenue, explains a dilemma she finds herself in, as she seeks to protect her customers from high transaction fees, while at the same time taking caution not to narrow her profit margins.

“This is Sh4,500 that has just been paid via the business till number and you can see that already Sh24 has been deducted even before the funds hit my account. I’ll thereafter be charged extra fees when I send the money to the bank,” she explains while displaying the transaction message.

“We are encouraging customers to come with cash because even if I shift from the till number to the paybill option, I’ll be transferring the burden to the customer while I’ll still incur charges from my end,” she says.

Business operators are also seeking to dodge monitoring from government authorities such as the Kenya Revenue Authority (KRA) who traders say use sales volumes as a basis to compute taxes payable.

For Jack Njenga, a clothes seller based along Kimathi Street in Kenya’s capital, the resolve is clear; either pay cash or send payments to his personal mobile wallet account. “Things have changed and we can’t sustain the normal operations that we’ve been used to. I’ve pulled down my till and paybill numbers and anyone who wishes to make purchases here will either pay in cash or send payments to my telephone number. Sadly, I’ve lost several customers through this insistence, but it is the hard corner that we’ve been squeezed into by circumstances,” says Mr Njenga.

In October, KRA flagged the growing number of business owners who were ditching mobile merchant payment accounts and reverting to cash in droves, coming a month after the authority deployed some 1,400 revenue service assistants with paramilitary training to enhance tax compliance amongst traders.

At the time, KRA said it had noted a trend where businesses which used to get payments through Lipa na M-Pesa buy goods till numbers, were now asking customers to pay cash.

“It is already noted that [closure of Lipa na M-Pesa merchant accounts] is what is happening in the market. We are working on strategies on how we can work around this,” noted KRA’s chief manager in the domestic taxes department Caroline Rotich, warning that the authority would seek information from Safaricom on traders who had opted out of the M-Pesa buy goods and Pochi la Biashara tills in a bid to catch tax cheats.

“Working together with Safaricom to facilitate integration, we will get information on these drop-outs so that from there we can do follow-ups and compliance checks,” Ms Rotich said.

In recent days, news headlines have been awash with reports of businesses ditching till and paybill numbers as means of payments in favour of cash, in an effort aimed at ring-fencing against profit contractions.

“Dear esteemed customers, due to the increased cost of transacting via mobiles and banks, we will not be using pay bills or buying goods as of October 1, 2023. Kindly pay cash or withdraw. We sincerely apologise for any inconvenience,” reads a notice put up in a liquor store along River Road in Nairobi.

Read: KRA to mine data from telco systems to net tax cheats

The move from electronic payment started when the State imposed a policy to charge a three percent turnover tax on small traders with annual sales revenues of between Sh1 million and Sh25 million, starting in July. Previously, one percent was charged on gross sales of between Sh1 million and Sh50 million.

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