Kenya Insights

Category: Business

  • DHL Launches Dedicated Freight Service to Africa From China

    DHL Launches Dedicated Freight Service to Africa From China

    DHL Global Forwarding has launched a dedicated 100-tonne weekly air freight service for organizations and governments shipping goods from China to Africa and the Middle East.

    Capitalizing on Dubai’s strategic geographical location as the gateway to countries in the region, DHL will consolidate cargo from across China into Guangzhou and air freight them via Dubai to their various destinations across Africa and the Middle East, all within two or three days.

    “DHL Global Forwarding is bolstering logistics support to our customers in the region who need to ensure stable supply chains, especially for medical and critical supplies during this critical period,” says Amadou Diallo, CEO of DHL Global Forwarding Middle East and Africa.

    “With multiple flight cancellations that have strained worldwide air freight capacity, we remain committed to leveraging our capabilities, global network and customized solutions to ensure that goods and critical resources continue to reach people and communities in Africa and the Middle East.”

    Dubai plays a key role as a gateway between China and the rest of Africa and the Middle East. Africa is Dubai’s third-largest trading partner in volume terms and Africa’s non-oil trade with Dubai has been growing steadily over the last decade, accounting for 10.5% of the emirate’s total non-oil foreign trade in 2018.

    Named after the Nguni Bantu word, ubuntu (“humanity”) used across Africa to refer to the universal bond of sharing, UbuntuConnect refers to the China-Africa lane where the bulk of the cargo is expected to comprise of personal protective gear such as masks, gloves, hand sanitisers and goggles. Equally, part of the cargo will head to other countries in the Middle East to plug the demand gap there.

    Whilst the secured uplift from China will be in operation for four weeks, DHL Global Forwarding is actively seeking to secure routes to all of Africa and boost capacity to the Middle East and Africa in the longer term.

  • Report: Passengers To Wait For Six Months For Air Travel

    Report: Passengers To Wait For Six Months For Air Travel

    Around the world, 40% of passengers are planning to wait at least six months or more for air travel due to the global coronavirus (COVID-19) pandemic, according to a survey conducted by the International Air Transport Association (IATA).

    Meanwhile, 60% anticipate that they could return to airline travel after one to two months of containment of the COVID-19 pandemic, the IATA said in a statement.

    “Passenger confidence will suffer a double whammy even after the pandemic is contained — hit by personal economic concerns in the face of a looming recession on top of lingering concerns about the safety of travel,” Alexandre de Juniac, IATA’s director general and CEO said in the statement.

    “Governments and industry must be quick and coordinated with confidence-boosting measures,” he added.

    In countries where new coronavirus cases have fallen to low levels, there are indications that passengers are returning to their travel behavior in a cautious manner, the IATA said, but added “an immediate rebound from the catastrophic fall in passenger demand appears unlikely.”

    “People still want to travel,” said de Juniac, adding “As countries lift restrictions, confidence boosting measures will be critical to restart travel and stimulate economies.”

    “The passenger business came to a halt with unilateral government actions to stop the spread of the virus. The industry restart, however, must be built with trust and collaboration … We must start building a framework for a global approach that will give people the confidence that they need to travel once again,” he explained.

    IATA said it estimates around 25 million jobs in aviation and its related value-chains, including the tourism sector, are at risk due to the COVID-19 crisis.

    While passenger revenues are expected to be $314 billion, or 55%, less this year than in 2019, demand in the second quarter of 2020 is estimated to plummet by 80% or more compared to the same period of last year, according to the IATA.

    IATA represents some 290 airlines including Kenya Airways comprising 82% of global air traffic.

  • Netflix Subscribers Surge By 16 Million

    Netflix Subscribers Surge By 16 Million

    (AFP) – Netflix on Tuesday reported soaring profits as subscriptions surged by almost 16 million at the streaming television service during lockdowns to slow the spread of the coronavirus pandemic.

    “After record subscriber additions, Netflix is and will continue to be the media company least impacted by COVID-19,” said eMarketer forecasting analyst Eric Haggstrom.

    “Their business is a near perfect fit to a population that is suddenly housebound.”

    Netflix made a profit of $709 million on revenue of $5.8 billion in the first three months of this year, while the number of paid subscribers grew by 15.7 million from the previous quarter to total nearly 183 million, according to earnings figures.

    Strict confinement rules are keeping billions of people at home in a bid to curtail the outbreak, effectively providing an enormous captive audience to entertainment giants competing in the streaming market.

    “We’re acutely aware that we are fortunate to have a service that is even more meaningful to people confined at home, and which we can operate remotely with minimal disruption in the short to medium term,” Netflix executives said in a letter to investors.

    “Like other home entertainment services, we’re seeing temporarily higher viewing and increased membership growth.”

    Netflix expects viewing and membership growth to decline as coronavirus concerns abate and people can move about more freely.

    The streaming firm expects a net increase of 7.5 million paid subscriptions in the current quarter to June but said: “Given the uncertainty on home confinement timing, this is mostly guesswork.”

    – Turbulent times –

    The California-based company said that the long-term effects of job losses due to the coronavirus crisis on Netflix’s revenue remain unclear. The US alone has lost 22 million jobs since mid-March.

    “In our 20+ year history, we have never seen a future more uncertain or unsettling,” Netflix executives said.

    The company’s shares danced fractionally around their closing price in after-market trades that followed the release of the earnings report.

    While the coronavirus crisis revved up membership growth, it has also strengthened the US dollar, offsetting revenue gains.

    “Netflix faces some headwinds moving forward from a poor economic environment,” Haggstrom said.

    “But a significant chunk of consumer entertainment budgets have been opened up from the closures of movie theaters, sporting events, restaurants and bars.”

    – Sidelined shows –

    Another effect has been the shutdown of show production that has postponed expenses.

    “We’ve paused most of our productions across the world in response to government lockdowns and guidance from local public health officials,” Netflix said.

    “No one knows how long it will be until we can safely restart physical production in various countries, and, once we can, what international travel will be possible.”

    Streaming television service competitors are in the same situation, but Netflix has a library with thousands of titles and an array of show launches ready for release, its executives noted.

    “Our member satisfaction may be less impacted than our peers’ by a shortage of new content, but it will take time to tell,” Netflix said.

    The Walt Disney Company in early April said its television streaming service had already won 50 million paid subscribers just five months after its launch in the US.

    Disney+ subsequently rolled out in India and eight western European countries as well.

    “I have been so impressed with Disney+ execution; my hat is off to them,” Netflix chief executive Reed Hastings said in an earnings presentation.

    “Are we kicking up our kids and family animation? You bet. We are both going to do good work.”

    The major challenge for Netflix and other leading streaming subscription services, in particular Disney+, will be “not just attracting new subscribers after lockdown, but perhaps more importantly, retaining existing ones,” said Futuresource analyst David Sidebottom.

  • Barcelona FC Is Giving Up Their Stadium Name Camp Nou To Raise Money For The Fight Against Coronavirus

    Barcelona FC Is Giving Up Their Stadium Name Camp Nou To Raise Money For The Fight Against Coronavirus

    Spanish football powerhouse Barcelona will give a sponsor naming rights to the Camp Nou stadium for the first time to raise funds for the fight against coronavirus, the club announced on Tuesday.

    In a statement, the club said its board of directors has “approved the ceding of the title rights to Camp Nou for the season 2020-2021 to the Barca Foundation to raise money to invest in research projects being carried out in Catalonia and the rest of the world involved in the fight against the effects of COVID-19.”

    The foundation will now look for a sponsor who will be able to rename the Camp Nou stadium for one season – the first time in the iconic venue’s over six-decade history.

    Camp Nou, which has a capacity of nearly 99,000, has been Barcelona’s home since 1957.

    Commercializing stadium names through sponsorship deals has been a rising trend worldwide in recent years as it allows clubs to generate extra revenue.

    Europe, along with the U.S., is the hardest-hit area in the world in the coronavirus pandemic.

    Spain has the highest number of cases – over 204,100 – on the continent and its death toll of more than 21,200 is behind only the U.S. and Italy.

    More than 2.5 million cases have been reported in 185 countries and regions since the virus emerged in China last December, with the death toll close to 172,000 and nearly 660,000 recoveries, according to data compiled by the U.S.’ Johns Hopkins University.

  • Investment Guru: Strong Dollar Won’t Survive The Coronavirus Pandemic

    Investment Guru: Strong Dollar Won’t Survive The Coronavirus Pandemic

    The U.S. dollar will not continue its current strength as both the government deficit and its monetary policies pose great dangers to the currency, a prominent international investor warned on Tuesday.

    “So far the dollar has been very strong against some currencies, up more than 20% this year, against the Brazilian real and Mexican pesos, but if you look at the fiscal deficit of the U.S. and all the money printing, I just can’t believe that it will continue to be strong,” Marc Faber, a Swiss investor said.

    The dollar could be strong for another 10 days or so, but in the long run, the U.S. monetary policies are dangerous and negative for the currency, he added.

    Saying that to date emerging markets have not rallied a great deal in the current crisis, he said there is a window of opportunity for the next two to three months to make some money in emerging markets, including in Turkey.

    Bankruptcies

    On the pandemic’s economic impact, Marc Faber said interventions by governments to stem the crisis will have serious effects.

    Western economies already faced serious problems before the virus hit, he said, and now with the coronavirus crisis things will get worse, he added.

    “The U.S. Fed started intervening in the repo market starting from September of last year. Then the coronavirus came and we had this huge intervention, monetary and fiscal measures,” he related.

    “That is cushioning the recession and depression, but I think after all the restrictions are lifted, a lot of businesses won’t be opening, a lot of people will go bankrupt and companies will default.”

    Stating that the global economy system will change drastically after the pandemic is under control, Faber said that airline revenues plunged 95%.

    He added that this situation will improve when international flight service resumes, but the previous high levels may be out of reach.

    Some people will think they no longer need to travel and would prefer to talk by video link rather than face-to-face visits with customers, he predicted.

    “People’s behavior will change,” he said

    Stating that economies in the wake of the virus will have new winners and losers, Faber said: “Platforms such as Amazon, Netflix, and Zoom have won. [Brick-and-mortar] retailers are losers.”

    “Some big retailers will never be able to open their shutters again,” he predicted.

  • Covid-19: Oil Is Trading Below Zero Across U.S. For The First Time In History

    Covid-19: Oil Is Trading Below Zero Across U.S. For The First Time In History

    (Reuters) – U.S. crude oil futures collapsed below $0 on Monday for the first time in history, amid a coronavirus-induced supply glut, ending the day at a stunning minus $37.63 a barrel as desperate traders paid to get rid of oil.

    Brent crude, the international benchmark, also slumped, but that contract was nowhere near as weak because more storage is available worldwide.

    While U.S. oil prices are trading in negative territory for the first time ever, it is unclear whether that will trickle down to consumers, who typically see lower oil prices translate into cheaper gasoline at the pump.

    As billions of people around the globe stay home to slow the spread of the novel coronavirus, physical demand for crude has dried up, creating a global supply glut.

    Traders fled from the expiring May U.S. oil futures contract in a frenzy on Monday with no place to put the crude, but the June WTI contract settled at a much higher level of $20.43 a barrel.

    “Normally this would be stimulative to the economy around the world,” said John Kilduff, partner at hedge fund Again Capital LLC in New York. “It normally would be good for an extra 2% on the GDP. You’re not seeing the savings because no one is spending on the fuels.”

    The May U.S. WTI contract fell $55.90, or 306%, to settle at a discount of $37.63 a barrel after touching an all-time low of -$40.32 a barrel. Brent was down $2.51, or 9%, to settle at $25.57 a barrel.

    “It’s like trying to explain something that is unprecedented and seemingly unreal,” said Louise Dickson, oil markets analyst at Rystad Energy. “Pricey shut-ins or even bankruptcies could now be cheaper for some operators, instead of paying tens of dollars to get rid of what they produce.”

    Refiners are processing much less crude than normal, so hundreds of millions of barrels have gushed into storage facilities worldwide. Traders have hired vessels just to anchor them and fill them with the excess oil. A record 160 million barrels is sitting in tankers around the world.

    U.S. crude stockpiles at Cushing rose 9% in the week to April 17, totaling around 61 million barrels, market analysts said, citing a Monday report from Genscape.

    The spread between May and June at one point widened to $60.76, the widest in history for the two nearest monthly contracts.

    Investors bailed out of the May contract ahead of expiry later on Monday because of lack of demand for the actual oil. When a futures contract expires, traders must decide whether to take delivery of the oil or roll their positions into another futures contract for a later month.

    Usually this process is relatively uncomplicated, but this time there are very few counterparties that will buy from investors and take delivery of the oil. Storage is filling quickly at Cushing in Oklahoma, which is where the crude is delivered. [EIA/S]

    “The storage is too full for speculators to buy this contract, and the refiners are running at low levels because we haven’t lifted stay-at-home orders in most states,” said Phil Flynn, an analyst at Price Futures Group in Chicago. “There’s not a lot of hope that things are going to change in 24 hours.”

    Prices have been pressured for weeks with the coronavirus outbreak hammering demand while Saudi Arabia and Russia fought a price war and pumped more. The two sides agreed more than a week ago to cut supply by 9.7 million barrels per day (bpd), but that will not quickly reduce the global glut.

    Saudi Arabia is considering applying oil cuts as soon as possible, rather than starting from May, a Wall Street Journal reporter said on Twitter, citing sources.

    Brent oil prices have collapsed around 60% since the start of the year, while U.S. crude futures have fallen around 130% to levels well below break-even costs necessary for many shale drillers. This has led to drilling halts and drastic spending cuts.

    MORE DATA SPARKS GLOBAL ECONOMIC CONCERNS

    Weak global economic data also pressured prices. The German economy is in severe recession and recovery is unlikely to be quick as coronavirus-related restrictions could stay in place for an extended period, the Bundesbank said.

    Japanese exports declined the most in nearly four years in March as U.S.-bound shipments, including cars, fell at their fastest rate since 2011.

    U.S. oilfield services giant Halliburton Co on Monday reported a $1 billion first-quarter loss on charges and outlined the largest budget cut yet among top energy companies.

  • Developments In The Suit Seeking Exhumation Of Siaya Covid 19 Victim

    Developments In The Suit Seeking Exhumation Of Siaya Covid 19 Victim

    The  High  Court has ordered that the Siaya county government be enjoined as a respondent in a petition seeking to exhume the body of a victim of Covid 19.

    The Siaya High Court Judge, Roseline Aburili also adjourned the hearing of the petition to April 24, 2020 to allow the lawyer for the family to amend the petition and enjoin the County Executive Committee Member for Health and Sanitation on behalf of the Siaya county government, as one of the respondents.

    Justice Aburili, in her ruling delivered in a Siaya Court  on Friday, noted that since public health was a devolved function, it would only be fair to have the county government brought in.

    The ruling followed an application by Deputy Chief State Counsel, Janet Lang’at on behalf of the Attorney General, who told the court that she required more time to respond to the petition by the family of the late James Oyugi Onyango who sought for exhumation and autopsy of the late Kenya Ports Authority employee.

    The family, through lawyer Otieno Ambala, has sued the Ukwala location chief, the Cabinet Secretary for Health and Attorney General, among others and wants the court to order the respondents to bear the cost of both the exercise and the petition.

    Lawyer Lang’at had told the court that the Attorney General was only served on Wednesday at night and that the office did not have time to contact the county government of Siaya for details and support documents, given that health was a devolved function.

    “It was not possible to get witness statements and relevant material to draft response within eight hours,” she told the court.

    The family lawyer, Ambala  together with the Law Society of Kenya advocate, Sam Onyango pleaded with the court to take cognisance of the fact that the matter was urgent and required to be disposed of expeditiously.

    Ambala said that delays in determining the matter may affect the results of the autopsy and biopsy that the family was praying for.

    He further prayed to the court to allow him amend the petition and include the county executive committee member for health as the fourth respondent.

    Justice Aburili ordered that the family lawyer amends the petition and serves it to the Attorney General and other respondents within the next three days.

    “The petitioner is granted leave to amend the petition to enjoin the CEC health and serve the respondents within three days, weekend included,” she ruled.

  • Covid-19: Apple Releases Budget iPhone SE Priced At $399

    Covid-19: Apple Releases Budget iPhone SE Priced At $399

    (Reuters) – Apple Inc on Wednesday released a smaller iPhone priced at $399, cutting the starting price for the company’s smartphone line in a move to broaden its appeal to budget-conscious customers as the coronavirus hobbles the global economy.

    The lower-cost model could also attract more consumers to Apple services, a growing driver of revenue. Shares of Apple fell 1.1%, less than the 2.8% decline of the S&P 500 index.

    The iPhone SE, available April 24, is the second generation of a previous value model. It will start at $50 less than what was previously the cheapest iPhone available, the $449 iPhone 8, which will be retired. The SE comes with a 4.7-inch display and the same processor chip as Apple’s most advanced phone, the 11 Pro. The SE lacks 5G capability and Apple’s facial recognition system to unlock the device, instead relying on a fingerprint sensor similar to older models.

    The announcement comes as the United States and much of the world is reeling from the novel coronavirus, although U.S. political leaders have begun to talk about ending stay-at-home orders and restarting the economy, hoping record deaths and falling hospitalizations represent a peak.

    Every previous iPhone has been unveiled in a polished presentation in front of fans, but large events remain banned in Apple’s home base of Santa Clara County, California, where public officials ordered the first lockdowns in the United States to slow the spread of the novel coronavirus.

    Apple’s cheaper phone reflects the coronavirus-driven economic downturn and job loss.

    The cheaper phone enters a cut-throat market for value phones, especially in China, where Apple derives about 17% of sales. While the new iPhone adds features such as wireless charging and a high-end camera, it lacks connectivity for 5G, the next generation of mobile data networks. In China, rivals such as Xiaomi Corp (1810.HK) last month announced models with 5G features starting at about $425.

    With wavering hardware sales, Apple has been investing in subscription services such as its Apple TV+ streaming television service, Apple Music and iCloud. The new SE will come bundled with a one free year of the streaming television service, similar to Apple’s flagship devices released last fall.

    Apple said in January that it had 1.5 billion active installed devices and 480 million subscribers to both its own and third-party paid services, compared with 1.4 billion devices and 360 million subscribers a year earlier.

    The company also set out a goal to reach 600 million paid subscribers by the end of calendar 2020.

    The coronavirus has created a volatile start to the year. Sales in China, the first nation hit by the virus, plunged, then rebounded as the country began to reopen. Sales of 500,000 phones in February rose to 2.5 million phones in March, according to government sales data there.

    Apple will begin selling the new model online while its stores around the world are closed, except those within its greater China sales region. Apple will start taking orders for the phone on its website on Friday, with delivery of devices expected to start April 24.

    Apple gets about 31% of its sales from its elegant stores and website, with 69% coming from partners such as mobile carriers and other retailers. Apple said partners would decide whether to sell the phones in their physical stores. Many of Apple’s resellers are trying to guide customers toward online sales. Major partners such as Best Buy Inc have reduced their hours, and AT&T Inc has closed about 40% of its U.S. retail stores.

  • KWS Scraps New 300pc Park Entry Fees Raise For Local Tourists

    KWS Scraps New 300pc Park Entry Fees Raise For Local Tourists

    Cabinet Secretary for Tourism Najib Balala has rubbished claims that the Kenya Wildlife Service (KWS) had resolved to raise park fees by 300pc due to coronavirus as published in the local dailies. The CS further stated that the new rates have also been suspended until further notice due to the Coronavirus.

    In a public statement released on Tuesday, Balala said the news was misleading as the new KWS parks fees spike were announced late last year and gazetted to take effect in July 2020 and have nothing to do with the global pandemic.

    Park charges to Nakuru and Amboseli parks had been increased by 50pc from Sh1,000 to Sh1,500, Nairobi Park had seen a 300pc spike from Sh500 to Sh1,500 during peak seasons. During off-peak season, Kenyans would pay Sh800.

    Meru Park, Aberdare, Mt Kenya, Tsavo charges had also risen from Sh350 to Sh1,000 during peak season and Sh400 off-peak.

  • Kenya’s Economy Estimated To Lose Sh1Trillion Due To Coronavirus

    Kenya’s Economy Estimated To Lose Sh1Trillion Due To Coronavirus

    The dwindling Kenyan economy is now estimated to make a Sh1 trillion ($10 billion) loss due to the viral COVID-19 disease a new report by management consultants McKinsey & Company will show.

    The countries GDP is expected to take a dip due to the lack of revenue from tourism and exports like flowers.which will, in turn, disrupt the supply chain for key inputs in machinery and chemicals. “The biggest impacts in terms of loss to GDP are reductions in household and business spending (50pc), disruption to supply chain for key inputs in machinery and chemicals (30 pc) and tourism (about 20pc),” says the report.

    The last time this happened was during the Late 2nd President Moi’s tenure where the Goldenberg scam led to the loss of at least Sh105 billion ($1 billion).

    The new report says that economic growth will slump to 1.9pc from the current 5.2pc. The Central Bank of Kenya last month said it was expectingthe economic growth in the country to be 3.4pc a drop from an initial estimate of 6.2pc.

    Kenya has so far recorded 110 positive coronavirus patients and 3 deaths and is now beginning to feel the financial strain caused by the pandemic that has caused close 50,000 deaths and over 1 million infections all over the world.

  • KRA Records 2pc Drop In Tax Collection

    KRA Records 2pc Drop In Tax Collection

    The struggling Kenya Revenue Authority (KRA) has recorded a 2pc drop in tax collection in January and February 2020 the latest data from the Treasury indicates.

    The taxman collections reduced from Sh219.56 billion to Sh216.06 billion in the first two months of 2020 reflecting the subdued business activity amid fears the Coronavirus (COVID-19) pandemic will take a hard toll on the economy.

    The drop further reflects lower revenue collections from businesses struggling with lower sales and workers plagued by stagnant pay in an economy that is now more than ever threatened by recession.

    Treasury Secretary Ukur Yatani projects the underperformance in revenue collection to take a massive nosedive in the three months to June as effects of travel and mass gathering as well as the night curfew imposed last week to curb the spread of coronavirus start to weigh on the economy.

    “We are looking at underperformance, as a result of just Covid-19, of about Sh70 billion… in terms of revenue for the remaining three months,” Mr. Yatani said.

    The Central Bank of Kenya (CBK) which had estimated the economy would expand by 6.2pc now says it expects the economy to expand by 3.4 pc as the virus disrupts supply chains and domestic production.

  • Kenya Is Now In An Economic Crisis CBK Governor Says

    Kenya Is Now In An Economic Crisis CBK Governor Says

    The Central Bank Of Kenya Governor Patrick Njoroge has warned Kenyans to strap up as the country moves into a deep economic hole due to the global coronavirus pandemic. The CBK says economic growth has now officially come to a slump.

    “As a result of the pandemic, economic growth is expected to decline significantly in 2020 from a baseline estimate of 6.2 pc to possibly 3.4pc, arising from reduced demand by Kenya’s main trading partners, disruption of supply chains and domestic production,” said Njoroge in a statement.

    Some of the sectors that are suffering in the country include tourism, aviation and export markets, which rely heavily on the foreign markets.

    The shilling has also hit a record low of Sh106.5 against the dollar due to the reduced inflow of foreign exchange reserves. “The foreign exchange market has recently experienced some volatility largely due to uncertainties concerning the impact of Covid-19 and a significant strengthening of the dollar in the global markets,” said Njoroge.

    In an effort to help the cash strained government the CBK resulted in injecting into the Treasury Sh7.4 billion to help deal with the effects of the virus. This is the cash that was rendered worthless after its holders failed to beat the September 30, 2019 deadline to exchange them with new Sh1,000 notes.

    The CBK says it has assembled a good amount of its monetary arsenal as it is ready to pump more cash into the economy, further CBK’s Monetary Policy Committee (MPC) has lowered the Central Bank Rate (CBR) and slashed the cash reserve ratio (CRR) both by 1pc a move Dr Njoroge says would release Sh35.2 billion in additional liquidity into the economy.

     

  • High Court Bars KRA From Keroche’s Accounts In The Sh9B Tax Battle

    High Court Bars KRA From Keroche’s Accounts In The Sh9B Tax Battle

    The High Court has rejected the Kenya Revenue Authority’s bid to overturn a stay order issued by the High Court on Friday stopping its agency notice to collect Ksh 9Billion from Keroche Breweries bankers.

    Justice David Majanja also dismissed KRA’s bid to have Keroche provide security for its Ksh 9billion demand.

    The court observed that KRA’s demand could destroy the Breweries business yet the company is exercising its right to appeal against the two decisions by the Tax Appeals Tribunal.

    In order to do justice to the parties, the court instead ordered a stay of the enforcement action and directed Keroche Breweries to pay KRA Ksh 500M within 30 days.

    The Judge also ordered that the tribunal release their decision issued on 9th March 2020 withing 48 hrs and all proceedings within 7 days. The case will be mentioned on 23rd April 2020 for directions.

    Keroche Breweries through its lawyers had argued that KRA’s agency notice on its bankers -ABSA and Equity Bank – was tantamount to collapsing the brewery.

    They further complained that the TAT was yet to avail a copy of its decision to enable Keroche to exercise its right to appeal.

    The case will be mentioned on 23rd April 2020 for directions.

    What started out as a Ksh 1.1 billion tax demand on November 29, 2006, has now grown nearly tenfold and threatens to ground Kenya’s largest indigenous brewery.

    Keroche’s fate now lies with the court system, which has for nearly 15 years kept the taxman at bay.

    The Court of Appeal eventually ordered KRA to issue a reasonable notice with supporting documents.

    The taxman then issued demands for excise duty (Ksh 467,704,167), VAT (Ksh 388,594,657) and corporate and withholding tax (Ksh 737,333,959).

    It is these demands, totalling Ksh 1.5 billion, that Keroche has been battling at the Tax Appeals Tribunal and which KRA says have grown to Ksh 9.1 billion.

    Keroche’s fight with KRA, however, is just half the battle, as it is also fighting competitor East African Breweries Ltd (EABL) in two other lawsuits.

    In the latter cases, Keroche has accused EABL of illegally branding beer bottles and keg containers and then using authorities to harass its distributors and suppliers.

    It argues that the bottles and containers are universal and hence no company can claim exclusive use.

  • Scramble For Naivasha: Of Keroche And Danish Brewing Company

    Scramble For Naivasha: Of Keroche And Danish Brewing Company

    Keroche and KRA are entangled in a fierce war. The KRA is set to collect Sh9.1 billion in taxes from Keroche Breweries Limited with regard to products manufactured and marketed by the company. This follows a win by the KRA in six appeals filed by Keroche before the Tax Appeals Tribunal in 2015 and 2017, respectively.

    Experts have already warned that the huge cash demand could send the only surviving indigenous brewer hurtling down the precipice.

    While Tabitha would be moving to court to challenge the tribunal’s decision, KRA has moved quickly to freeze her banks accounts thereby freezing the operations of the company.

    At a time when unemployment rates in Kenya are at an all time high, its immoral for KRA to deliberately kill a struggling company that has employed many Kenyans. The consequences of imminent closure of Keroche would be devastated families,l, suppliers of raw materials and all those in the value chain would be affected in what eventually would be felt in the economy.

    Its within Keroche’s is mandate to pay taxes and now that we’re here, the only thing we need to address is how to keep the company running rather than closing it. One would wonder how Keroche got away with all this for all that long and ask where KRA was.

    KRA and Keroche need to work out a payment plan, Sh9B fir a company with an estimated turnover of Sh6B is unrealistic.

    Danish Brewing Company

    As Keroche puts up a fight for survival, few meters away a brewery plant is being set up in what many have pointed an accusing finger as a factor behind Keroche’s woes. Could it be true that there’s an elaborate plot to kill Keroche for the Danish brewing company to takeover the existing market?

    Danish Brewing Company East Africa, a subsidiary of US firm Bounty Global Management Company founded in 2015, is set to begin production of Carlsberg, Tuborg, Holsten and Kronenbourg beers in Kenya.

    The US $45 million (KSh 4.59 billion) investment will involve the construction of a modern plant in the Naivasha Industrial Park situated around 100 km from Nairobi. At full capacity the plant will produce 12-15 million cases of beer annually (around 1-1.3 million hl) and will employ 350 people.

    A signboard of the firm erected in Naivasha.

    In 2015, Carlsberg entered the beer market in Kenya after signing an exclusive distribution contract with Centum Group, which operates as an affiliate of the Kenyan government-owned Industrial and Commercial Development Corporation and which is listed at the Nairobi Securities Exchange (NSE). Centum targeted the premium beer market, by importing the beer mainly from Denmark and selling it in the local market through its 100% subsidiary King Beverage Ltd. The company also said it had plans to set up a beer bottling plant, depending on sales volumes.

    However, in August last year after being 4 years in the market, Centum sold 100% of the shares in the company for USD1.3 million (KES 130 million) to Danish Brewing Company. “The strategic intent by Centum was to grow volumes of the business, initially under an import model and later under local production.

    However, due to various industry challenges, including competition from gray products and parallel imports of similar products, it was evident that the business would not be able to scale up volumes to warrant the further investment by Centum into local production,” said Centum in a statement in August. Two months earlier, Centum already announced to sell all its shares in two Kenyan Coca-Cola franchise bottlers; Almasi Beverages Limitedand Nairobi Bottlers to Coca-Cola Beverages Africa (CCBA) for USD 192.5 million (KES 19.5 billion). Centum is associated with Chris Kirubi who’s a substantive shareholder of the company.

    Beer market leader in Kenya with five production sites for beer and spirits is East Africa Breweries Limited (EABL), a subsidiary of Guinness.

    There has been silent tones that the foreign company is being favored. Danish Brewing Company E.A Limited, is set to be the first anchor tenant at the Naivasha Industrial Park.

    Under the 2019/20 budget, the government allocated a total of Sh1.1 billion to go towards the development of textile and leather industrial parks, the Naivasha Industrial Park and the Cotton Development subsidy.

    Construction works at the Sh6.9 billion industrial park began early last year after President Uhuru Kenyatta opened the Mai-Mahiu SGR Terminus.

    Land for the industrial park is situated where the SGR and the Inland Container Depot will meet.

    If we’re to theorize then would it be right to say Keroche is being pushed away to create a market and takeover of Keroche which is now left with few options including selling or shutting down.

    Some questions that have been flying around like who owns the Naivasha land where the dry port was forced to and now the industrial park? Could EABL be having a hand in Keroche’s woes given it’s the only closest market rival with some claiming that major political family recently bought shares in EABL and determined to dominate the market.

  • Keroche Ordered To Pay KRA Sh9B After Losing Protracted Dispute

    Keroche Ordered To Pay KRA Sh9B After Losing Protracted Dispute

    The KRA is set to collect tax of Kshs 9,116,835,985 .00 from Keroche Breweries Limited with regard to products manufactured and marketed by Keroche breweries Limited. This follows a big win by the Kenya Revenue Authority in the six (6) Appeals filed by Keroche before the Tax Appeals Tribunal in 2015 and 2017 respectively.

    In three of the Appeals, the contention was the manufacturing process of Vienna Ice Brand of Vodka. The brewer argued that, Vienna Ice brand of Vodka was not a distinct product from Crescent Vodka since Vienna Vodka was produced by diluting Crescent Vodka which process did not amount to manufacture.

    KRA relied on the Compounding of Denatured Spirits Act Cap 123 and argued that the process undertaken by Keroche Breweries was compounding within the meaning of the Act. Compounding of spirits also amounted to manufacture of new product within the definition of Customs & Excise Act, CAP 472 (now repealed).

    In the other three appeals, the contention was with regard to classification of pineapple based wines. The Brewer had argued that what they produced was fortified wines which should be classified under HS Code 22.04 which attracted lower excise duty rate of 40%. Their position was that the classification was specific for any fortified wine.

    KRA’s position was that HS code 22.04 was reserved for wines based on grapes and the Keroche’s fortified wine was purely fermented pineapple as such is to be classified under HS Code 22.06 which is for any other fermented beverage. HS code 22.06 attracted a higher excise duty rate of 60%.

    The Tax Appeals Tribunal in its’ judgments delivered on 9th March, 2020 held that:
    1. Keroche Breweries Limited was involved in the compounding of spirit which amounts to manufacture within the meaning in Excise Duty Act, 2015 and Customs and Excise Act, CAP 472 (repealed)as such Vienna Ice was a distinct product for which Excise Duty was payable;
    2. With regard to Fortified wines produced by the Brewer, the Tribunal guided by the World Customs Organization explanatory notes on HS code found that HS code 22.04 was for grape based wines and the correct classification was HS code 22.06 as the Keroche’s wine is a mixture of fermented pineapple and alcohol.

    The Tribunal however faulted the Authority for levying interest and late payment penalties for the period the disputes were being litigated at the High Court and the Court of Appeal which had directed that the matters be heard at the Tax Appeals Tribunal.

  • Kenya To Enjoy Drop In Fuel Prices As Russia, Saudi Arabia Clash

    Kenya To Enjoy Drop In Fuel Prices As Russia, Saudi Arabia Clash

    Saudi Arabia, the world’s top oil exporter, launched an oil price war over the weekend after an alliance between Saudi Arabia and the Organization of the Petroleum Exporting Countries (OPEC) ended due to the coronavirus crisis.

    Saudi Arabia and Russia had orchestrated supply cuts of 2.1 million barrels per day since. Saudi Arabia wanted to increase the number of barrels to 3.6 million through 2020 to take account of weaker consumption a move OPEC did not appreciate.

    After OPEC failed to strike a deal with its allies, led by Russia about these oil production cuts, Saudi increased production and cut prices, sending the markets into turmoil.

    The plunge in oil prices, however, comes as good news to net oil importers, Kenya included as it is indicative of future downward adjustment to pump prices.

    The Energy and Petroleum Regulatory Authority (EPRA) is set to adjust its maximum pump prices on Saturday with all indicators pointing to a downward review to costs.

    Kenya, however, depends on Opec and Russia not to sort out their differences and agreeing on cutting production in the coming few days, should the oil war end, it would mean that Kenyans will not benefit from the biggest crude oil price drop in four years.

  • Telkom Gets Sh8 Billion 36-Terabyte Cable Internet

    Telkom Gets Sh8 Billion 36-Terabyte Cable Internet

    A new broadband infrastructure set to usher in the fastest Internet in the region landed in Mombasa on Friday.

    Djibouti’s main telecommunications company, Djibouti Telcom, the leading telecommunications company in Somalia, Somtel and the government of Kenya through Telkom Kenya witnessed the landing of “DARE 1” (Djibouti African Regional Express) at Nyali Beach Mombasa.

    Speaking during the occasion Friday, Maritime and Shipping affairs PS Nancy Karigithu said the 36TB (Terabyte) fibre cable, projected to run approximately 4,000km interconnecting Kenya to Djibouti, is an important milestone within the submarine cable space.

    Karigithu said the DARE I will have direct benefits to Kenya with the eventual gains realized on cost for the end customer and the economy through the faster and affordable Internet, with the majority of the existing East African submarine broadband infrastructure nearing its 20-year shelf-life.

    The 36 Terabyte(TB) capacity is five times faster than the current 5 TB in the country, thus creating an opportunity for automation of services at faster speeds with reliable internet.

    DARE1 is an eight-course fibre-optic undersea cable which will sufficiently address internet connectivity in the country to a higher notch. The new fibre optic cable is the fifth cable in the country.

    Karigithu added that the new cable gives an immense opportunity for the youth in this country to enhance their skills in technology, giving them an avenue to search for employment as well to work online.

    The cable is built with the 100 Gbps wavelength technology which is adaptable to future technology.

    DARE 1 will provide affordable and abundant internet bandwidth to Kenya and the Great Lake countries from June 2020.

    The PS said the new cable will also provide resilient and secure network connectivity to Kenya at affordable fees with plans to expand to remote areas in the country through community information Hubs.

  • US Firm Corteva Agriscience Ditches Kenya For Zambia

    US Firm Corteva Agriscience Ditches Kenya For Zambia

    New York Stock Exchange-listed agricultural company Corteva Agriscience has revised plans to set up shop in Kenya five months after it named Nairobi as its regional hub for Eastern, Central and Southern Africa countries and instead opted for  Lusaka, Zambia for its seed production business.

    The firm said Zambia will be its chosen seed production hub for the region, supplying seed to countries like Kenya, Tanzania, Rwanda, Uganda Ethiopia and Zimbabwe In a statement issued last week.

    “Clearly Zambia is on the move, and a very, very important site for Corteva Agriscience. For us, quality seed and making sure farmers get the best product is most important, and this site is testament to that. We are in the business of enriching the lives of our farmers,” the firm’s president for Africa and Middle East Prabdeep Bajwa said.

    The firm now says Nairobi will serve as the region’s distribution unit and operations head office.

    The firm had in September last year announced plans were underway to set up the regional base in Kenya and the U-turn perhaps reflects on the bad state of running businesses in the country.

    Foreign firms incorporated in Kenya have been complaining of frustration from the Kenyan government with high taxation and the lack of good policies.

  • Broke KPLC To Lease Idle Land To Boost Revenue

    Broke KPLC To Lease Idle Land To Boost Revenue

    Loss making Kenya Power and Lighting Company (KPLC) will commercialise its garage and lease out idle land in an attempt to boost its revenues.

    “We have a transport section and we want to open that as a public garage since it is idle at the moment. We also want to lease out idle land,” said Managing director Bernard Ngugi “The garage sits on huge land and we will liaise with insurers to give us an opportunity to repair vehicles. Going by the growing numbers of vehicles on roads, it is a potential business.”

    The garage business will be handled by Kenya Power International, a subsidiary that was created four years ago as part of business diversification strategy to create alternative revenue streams.

    The monopoly has also put up for lease all the idle pieces of land it holds.  KPLC has six pieces of land in Mombasa, two in Nakuru and Eldoret and several others in Nyeri and Nairobi.

    The boardhas also been contemplating fibre business expansion, “The fibre business gives an average of Sh500 million and we want to incrementally improve on this investment to increase leasing to the telcos. We still believe it is lucrative business and we have started injecting in new capital,” added Mr Ngugi.

    The move to diversify comes at a time Kenya Power’s net profit for 6 months to December 2019 fell 71.8 pc to Sh693 million marking third straight year of profit decline.

    The company also recorded a 92 pc decline in net profit to Sh262 million down from Sh3.27 billion in the financial year ended June 2019.

  • Amana Capital Clients Will Not Be Allowed To Withdraw Their Money

    Amana Capital Clients Will Not Be Allowed To Withdraw Their Money

    Amana clients will not be redeeming their money to give the investment firm time to find solutions in the wake of its liquidity challenges, The Capital Markets Authority (CMA) has said while placing a 28-day freeze on the withdrawal of funds from Amana Capital.

    “The Capital Markets Authority (CMA) has given a no-objection to a 28-day moratorium to enable the fund manager, Amana Capital Limited (ACL), work with its Trustee, NatBank Trustee & Investment Services Limited, to improve its liquidity position to meet redemption obligations to unit holders with investments in the Amana Shilling Fund,” CMA satated in a statement.

    CMA says the move will give ACL time to realise strategies to improve its liquidity position to meet redemption obligations to unitholders with investments in the Amana Shilling Fund.

    This will only add inconvenience to clients who have not been able to recall their capital at Amana’s shilling fund as it has remained frozen for the last two years.

    Amana Capital had injected Sh275 million in commercial paper, up to 20 pc of its assets in Nakumatt Holdings.

    Nakumatt defaulted on the short-term loans among other classes of creditors, sparking major write-offs among banks, suppliers, insurance firms and high-net-worth individuals.

    CMA’s move comes just days after it ordered money market funds to provide details of how and where they were investing clients’ cash as well as the terms of the deals after it came to light that some investments were gambling and losing investors billions of shillings.

    “We have issued circulars clarifying when they do their quarterly fillings to disclose which investments in classes, for example you do not just make a return saying; Cash, Sh1 billion, we want you to be very specific, what is in deposits, what is in cash. As we review we also ask you to explain more on the terms of those assets as you disclose them,” CMA acting chief executive Wycliffe Shamiah said.