India has slashed off taxes impossed on manufacturing and production in a move to attract global phone manufacturers like Apple to move production of their devices to the country.
India introduced new tax legislation which lower taxes in its manufacturing sector. The move aims at making the country more appealing to both local and international manufacturers.
“We have redone the entire architecture of taxation law as far as manufacturing is concerned. As of now, this corporate tax cut in itself is massive. Mobile phones already are a success story.” Prasad told The Economic Times
India’s Communication Minister believes that the tax cuts will attract players like Apple, Foxconn, and Flextronics planning to scale production in India.
“We are already the second biggest manufacturer of mobile phones in the world. Now, even Apple is coming in a big way, Foxconn 2 and 3 will launch base.” Prasad said.
Indian minister has said that they are setting up the country as main replacement of China as the ideal manufacturing destination for electronics.
“Apple reportedly is going to open its biggest state-of-the-art shop in Mumbai, and Samsung is withdrawing from China,” Prasad went on.
While Microsoft is heavily investing in Africa, India might likely win the deal owing to the previous production of low-cost iPhone models as well as the new tax cuts.
Apple has been very is open to the idea of shifting manufacturing from China to reduce its dependence. Moreover, RT reveals that Apple asked its suppliers to shift up to 30% of its production away from China.
Members of Urithi Premier Sacco, associated with the embattled Urithi Housing Cooperative Society have expressed their fears over its recent rebranding, claiming it was a camouflage to hide its tainted identity.
They said the rebranding was meant to confuse customers to invest their shares in a ‘sinking’ ship.
The Sacco changed name to Anchor Premier Sacco during the Sacco’s AGM Saturday, with the Chairman Pius Thuku Ndung’u stating that it was meant to allow new customers differentiate between the Sacco and Urithi Housing Cooperative.
He said it was also meant to appeal to new customers seeking financial services.Ndung’u was at pains to convince the customers who sought answers on why it has been difficult to access loans in time and its low dividend rates.
“The business environment has been difficult not only for us, but to all companies. A big number of our customers have withdrawn from the Sacco, which is a concern to us; but we hope the rebranding would increase customer confidence,” he explained.
Most of the customers who are members of both entities, sought for refund of monies they spent in buying plots through the Housing Cooperative.
Moses Kisindi, a resident of Embu who bought land through the Urithi Housing said despite paying Sh350, 000 two years ago at Ishiara area, they are yet to receive the land.
“We are losing our fortunes to the suspicious activities of these two entities. We call for investigations to prevent them from doing harm to many to more customers,” he said.
Gladys Muthoni and Catherine Njoroge feared they might lose their savings from the rebranded entity, saying they lacked confidence with the management.
“Instead of looking for other dynamics to increase asset base and valuation, like engaging in land selling, improving its technology and train workforce for better services, they have rebranded just to confuse us and other new customers,” said Muthoni.
However, the Sacco Chairman assured that the organization was on an upward trajectory, and would soon recover from the hard business environment.
He said they intend to change its structure and streamline activities to enable the Sacco expand membership and asset base.
“So many people fail to distinguish between the two. Ours is a Sacco whose functions are limited to savings and giving out loans. It is not an investment company,” he said.
He said the negative publicity that the Housing branch has received over the years has affected the Sacco, hoping that they would soon get their act together.
The Sacco had about 8000 customers and is valued as Sh560 million, though more than 3000 members were withdrawing.
A Lebanese firm tasked with laying down the Sh48 billion Mombasa-Nairobi pipeline is now suing the Kenya Pipeline Company (KPC) for Sh13.26 billion after President Uhuru Kenyatta froze payment to the construction firm after reports emerged that insiders attempted to collude with the contractor and earn Sh4.4 billion by delaying the project.
Abdallah Zakhem of Zakhem International Construction, filed the suit at the High Court against KPC seeking for compensation for the construction of the 450-kilometre pipeline. The firm has asked the court to order KPC to pay $67 million (Sh6.9 billion) for the unpaid work, $59.2 million (Sh6 billion) for delayed payment and $2.6 million (Sh267 million) as interest, the total claim is $128.8 million (Sh13.26 billion).
The scuffle began after State House allegedly blocked KPC from making further payments after the project that was supposed to be complete by February 9, 2016, after 18 months from August 2014, was delayed by two years in a scheme suspected to inflate the construction way above the agreed Sh48 billion. The delays alone would cost the government Sh4.4 billion to cover the four years’.
In yet another indictment, Director of Criminal Investigations (DCI) George Kinoti wrote to the acting managing director of KPC, Mr Hudson Adambi and asked KPC to stop any further dealings with Zakhem on the Sh48 billion contract until criminal investigations are concluded. The DCI was also investigating the Lebanese based firm over hundreds of thousands of litres of fuel that were leaked through one of the pipes it laid down.
“That kind of a tunnel cannot be done by an ordinary person, particularly the point at which one connects the hose pipe to siphon the products,” Mr Andambi had said indicating the contractor was suspect.
The Tycoon in court documents argues he is entitled to prompt payment of the sum of $126,255. 812 due since it was under contract. “The defendant’s wilful refusal to pay the sum owing and due to it is high-handed and capricious. No reason was given for the refusal and none exists in law.”
KPC has already paid the Lebanese firm Sh48.7 billion.
Have you ever met someone new and immediately felt like you could talk to them for hours?
That happened the first time I met Aliko Dangote. A couple years ago, he and I ended up going to the same event in New York. A mutual friend suggested that I meet him because he knew we were both super interested in global health. So we made sure to sit next to each other at dinner.
As soon as we shook hands, it was clear we had a ton in common. We both started successful businesses in the late 1970s. For our second act in life, we both chose to start foundations aimed at improving health and education. (Today, the Dangote Foundation is the largest such organization in sub-Saharan Africa.)
More importantly, we both love to geek out over things that make some people’s eyes glaze over, like cement, fertilizer, and iodized salt. Check out this video of Aliko’s recent visit to our foundation’s office in Seattle for proof:
That first meeting sparked the beginning of a fruitful friendship. In 2016, our foundations announced a joint, five-year $100 million commitment to reducing malnutrition in Nigeria.
Malnutrition is the greatest health inequity in the world. It’s responsible for nearly half of all under 5 deaths in Nigeria (and around the world). Even if you survive to adulthood, your chances of dying are much higher, and your quality of life is greatly reduced.
One of the ways our foundations are working together to fight malnutrition is through food fortification. Kids often become malnourished when they don’t get enough micronutrients—vitamins and minerals—to digest their food properly. One way to correct this is by adding micronutrients to the food that families—especially those from low-income households—are purchasing every day.
When you go to a grocery store in the U.S., a lot of food already has this fortification. Think iodized salt, or milk that comes with extra vitamin D and calcium. By introducing additional micronutrients to the food people are already eating, you can improve health without changing any habits. Our foundations are now working together to find other staple foods and condiments that could be used to deliver more micronutrients to more people in Nigeria, like fortified bouillon cubes. (I talked with Aliko about this at our Goalkeepers event in New York a couple days ago. You can watch a video of our conversation here.)
Improving health in Nigeria is critical to making progress in sub-Saharan Africa. The country is home to nearly a quarter of all people living in sub-Saharan Africa, and that population is only going to grow in the future. By solving problems in Nigeria, you can have a huge impact on all of Africa.
Aliko Dangote understands this, and that’s why he’s committed to making progress in his home country. Melinda and I are lucky to have him as a partner (and friend!) in improving health.
In an update on the close of demonetization period that loaded on 30th September, the Central Bank of Kenya Governor announced that 217,047,000 pieces of KSh 1,000 as at June 1- 209,661,000 pieces of KSh 1,000 were received by the end of September 30.
The Governor also announced that 7,386,000 pieces of KSh 1,000 did not return. This means KSh 7,386,000,000 became worthless pieces of paper. “The value of money that did not come back is equivalent to the value lost during the Goldenberg case.” He said.
Njoroge however said, the demonetization has been successful because as CBK completed it smoothly, with AML/CFT filters firmly in place, and kept out money whose owners did not want to be subjected to the relevant checks in the system.
Governor maintained that the exercise opened a fresh phase for intelligence agencies to open investigations on suspicious activities which will continue in coming days to trail the roots and custodians of dirty money. “We cannot glorify criminals and ‘flamboyant businessmen’. We need to maintain a system that is devoid of this criminal activity.” Said the Governor.
According to CBK, the demonetisation process went well with value terms as follows:
Up to KSh. 500,000 were 62%
Up to KSh 1,000,000 were 79%
Up to KSh 2,000,000 were 92%
In number of transactions:
96% of transactions were under 500,000
99% of transactions were under KSh 1,000,000
A month after the Celsius Riga left the mombasa port with barrels of oil worth Ksh1.2 billion ($12 million) and days after the tanker arrived in Malaysia for refining, details about Kenya’s first oil sale is shrouded with mystery. The government has chosen to withhold any important details about the crude oil sale.
Since the very beginning the government operated in a fishy manner, first a day before Kenyans found out that the oil had been sold to a chinese multinational at $12 million, it had failed to name the buyer, citing ‘non-disclosure agreement.’
Tullow oil, the firm that discovered the commercial oil reserves in the Lokichar basin in the northern county of Turkana however insisted there had been a bidding process and seven bidders expressed interest. The firm has since declined to give any more details on the bidders or how much they bid.
Contradicting tullow, The ministry of Mining and Petroleum later put the number of bidders at eight. Petroleum Principal Secretary Andrew Kamau who had been promising to disclose the oil companies and even asking for time to ask the parties on whether they wished to be named, has since changed his mind, “There is no opaqueness. You know the winning bid and you know the volume. What else is important?” Mr Kamau dismissed the queries.
ChemChina UK Limited which won the crude oil bid, evacuated 240,000 barrels of crude oil from Kenya. This figure contradicted the 200,000 barrels that the government officials had initially indicated and announced during flagoff, raising more eyebrows. The fate of the 40,000 barrels worth Ksh.247 million is yet another mystery with no details confirming the amount was part of the Ksh1.2 billion.
A coalition of 16 civil society organisations under the Kenya Civil Society Platform on Oil and Gas (KCSPOG), which has been pushing for the disclosure of the Production Sharing Contracts, condemned the government for keeping citizens in the dark on the project. “Can you imagine if it was any other government asset that has been disposed without following that transparent procurement and disposal procedures? It would cause an uproar, but it remains unclear what exactly transpired before the crude oil was sold to ChemChin, unless full disclosure is made,” KCSPOG coordinator Charles Wanguhu had told Sunday Nation.
Tullow oil has been blaming the government for the failure to make its deals public.
The Kenya Revenue Authority (KRA) has initiated a probe on over 30 real estate companies in an effort to recover up to Ksh20 billion. The taxman is reviewing bank records, tax returns and other transaction details of the firms among them Banda Homes, Greenspan, Superior Homes Kenya and Nexgen Office Suites, Muga Developers and Chigwell.
Speaking about the same, Mr Edward Mbugua, a deputy commissioner in the domestic taxes department said KRA officials are working hard to have all money in tax not remitted recovered. Concerns of the real estate firms evading paying tax was raised by the Lands ministry, which processes all transfers of land and buildings.
“There is non-payment of taxes on development of huge real estate projects where the government is denied three percent withholding tax on contracts by the contractors and other real estate professionals. Most contracts also fail to declare income earned from real estate development in the annual tax return,” Mr Mbugua said.
KRA has said it is now looking to hold individual directors accountable to facilitate the collection of taxes on all gains made in constructing and selling of homes and commercial buildings that are currently being lost in fraudulent schemes. “We have unearthed elaborate schemes involving the formation of separate companies to develop homes and use of different ones to sell the same as a means of erasing the traceability of earnings from the business,”he added.
The taxman is racing to bring more people into the tax brackets and curb tax cheats and evasion in the quest to meet revenue targets that it has persistently missed in recent years.
Mr Mbugua said Kenya Power meter registrations are helping the taxman to identify landlords not remitting tax, some of who have been slapped with huge tax demands. Landlords are said to be reducing the number of units or declaring occupied houses as vacant so as to avoid paying tax.
The authority recently hired a team of auctioneers to help it track properties of individuals and companies who have failed to pay the tax due. The taxman plans to auction the properties to help clear mounting tax arrears.
Three weeks ago, Kenya Insights wrote about why the Population of donkeys in Kenya has dropped by half in less than a decade. China interests in Kenya has seen an increase in demand for donkey meat both for local consumption and skin for export to China a move that has now caused a sharp decline in the animals in Kenya.
According to Animal rights activists, the overgrown demand to feed the billion population of Chinese could soon make donkey extinct in Kenya where they play a vital role as beasts of burden mostly in rural areas.
A few weeks after, a Chinese company operating a donkey abattoir in Lodwar, Turkana County is on the frying pan for selling uninspected donkey meat and enslaving local workers.
Angry Lodwar, Turkanas, resident have now urged the police to investigate Silzha Company Limited over claims of environmental pollution and mistreatment of local workers by the Chinese bosses. The firm is located at Napetet in Turkana Central, five kilometers from Lodwar town, and is run by two Chinese nationals.
According to local authorities, Silzha slaughters an average of 30 donkeys daily and exports the donkey meat to China and other countries.
“It is more than one a year and some of us have not been paid. I don’t have any source of money. We have been patient for a long time to the extent the walls of trust have started cracking. Donkeys from Sasame, Karebur, Kokuro, and Lomanakeju in Turkana North have not been paid for since last year. We have reported the issue to police station Lodwar OB 18/20/05/2019,” Mohammed Katembo, a field Manager of Silzha Limited said.
“Life is becoming hard here because we work with no pay, my family depends on me, my children are at home because of school fees, we are tired of empty promises each and every time,” Production supervisor Lucas Ereman stated.
Pieces of donkey meat packed in trays before transportation. [Bakari Ang’ela, Standard]
There have been also a lot of concerns on the safety of the meat. “We are giving government investigative agencies one week to ensure that this Chinese company is investigated and health measures put in place to guarantee the safety of meat and food handling, failure to which we will hold demonstrations” Joseph Emuria, a resident warned.
Emuria said the slaughterhouse has led to the theft of donkeys across the county as unscrupulous people rush to supply animals to the fast-growing abattoir.
“I foresee the extinction of donkeys in future if these the Chinese donkey meat dealers continue slaughtering the animals at this rate,” said Mr Emuria.
He alleged that the company is exporting rotten meat to unknown destinations as public health officers take no action. The local residents led by their area chief Patrick Lorogoi also raised concern over increasing cases of donkey theft in the area. Lorogoi said complaints of donkey theft have been reported to the police who have launched investigations.
“We suspect that the Chinese are buying stolen donkeys unknowingly. We have established that they don’t ask for livestock movement permits, but that is a matter under investigation,” the Chief reported.
He said he has received complaints from several residents working as casual labourers in the Chinese firm who claim they have been working without payments for several months.
“There are several Chinese nationals doing manual jobs in the abattoir and we suspect they are illegal immigrants. We have asked the police to investigate them but no action has been done. We have been demanding for our pay for more than three months but they have refused to release our dues,” a worker in the abattoir who declined to be named for fear of victimization alleged.
On their defense, Liu Wenchen and Jiang Baogui, the Chinese nationals managing the abattoir denied the claims, saying they export quality donkey meat.“We package and sell all the meat to our international markets. We don’t want wastage because we buy the donkeys at high prices,” he said.
But inside, workers were busy loading donkey meat in carton boxes amid a stinking smell of meat. There are no refrigerators to store the meat awaiting export.
“We are not happy with the manner in which the Chinese are doing the donkey meat business. We have reported this matter to relevant government officers but our concerns have fallen on deaf ears.” A donkey keeper Geoffrey Lokuruka said.
Turkana Central sub-county Police Commander David Mburukwa said police are investigating six Chinese labourers working in the abattoir after complaints that they were in the country illegally.
“For now, we are not looking into the complaints raised by locals working in the abattoir because that is a labour issue and can be handled by other organs,” Mburukwa said.
However, company manager Liu Wanchen said the firm was facing financial challenges and promised that they will be paid soon. Ironically, Liu acknowledged that they usually export spoilt meat to avoid unnecessary losses because they buy animals at higher prices.
Turkana Veterinary Doctor Benson Longo’r told The Standard the county was also investigating the abattoir for failure to adhere to health standards and Kenyan rules. He said the county department had previously warned the management against dealing in uninspected donkey meat.
“There are times we have stopped the company from slaughtering some sick donkeys that according to our assessment, their meat would be unfit for consumption,” he said.”Let them pack spoiled meat but they will not get transportation permit,” he warned.
Earlier this month, Kenya reached an agreement to continue trading with Britain under preferential terms even after the UK still hold talks on how they will exit from the European Union. The deal that allowed the UK to provide duty-free, quota-free access to Kenyan goods exported to the UK. The two-year deal is set to give the UK government time to work on new trade agreements to replace the current European Union pacts.
Stephen Barclay the UK’s Brexit Secretary traveled to Brussels on Friday, amid growing pessimism on the continent over whether a new withdrawal deal can be agreed. The EU’s chief negotiator, Michel Barnier, told diplomats on Thursday that the UK’s proposed alternative to the Irish backstop was unworkable.
But according to the BBC Brussels reporter Adam Fleming, Stephen’s briefing were relaxed and mostly understated as he would put it, “ the briefing were downbeat.”
According to Downing Street, the progress has been made but there were still significant obstacles to reaching a Brexit deal. The European diplomats thought the chances of finalizing a new Brexit deal by a crucial EU summit on 17 October were getting smaller as time goes.
The UK is scheduled to leave the EU on October 31, although MPs have passed a law requiring Prime Minister Boris Johnson to seek an extension to that deadline from the bloc if he is unable to pass a deal in Parliament or get MPs to approve a no-deal Brexit, by October 19.
Mr. Barclay and Mr. Barnier discussed alternatives to the Irish backstop, which aims to avoid a hard border on the island of Ireland after Brexit. The policy is unacceptable to many Conservative MPs, and Mr. Johnson has insisted a revised Brexit deal must include the abolition of the backstop.
Ahead of Friday’s meeting, Mr. Barnier said the UK government’s proposed solution to the backstop would put the single market at risk.
Bernier stated that the UK’s ideas so far involved managing different rules for Customs and products on either side of the Irish border, rather than keeping them the same across the whole island.
The European Parliament’s Brexit co-ordinator, Guy Verhofstadt, who met Mr. Barnier on Thursday last week, said the UK’s proposals to resolve the Irish backstop issues fall short.
As the Brexit talks continue to flip flop, Kenya industrialists and business moguls believe that there are huge opportunities for Kenya when the UK leaves the EU
Kenya is already a major trading partner in a couple of key areas: fresh vegetables (80% of Kenya’s exports go to the UK) and black tea (also 80% of Kenya’s exports to the UK). But, other industries are blocked by the EU. Take, for instance, Kenya is unable to sell beef directly to the EU. Brexit could offer Kenya access to a major beef-consuming market if Kenya could ensure that it meets the safety standards which the UK government would set.
“Brexit enables us to break out of the EU’s old-fashioned viewpoint about trade with Africa, which based almost entirely on commodities, to exploring much more diversified relationships with African countries viewed as partners in science and technology, entrepreneurship, education, tourism, finance, manufacturing, etc.” A source told the media
The EU discourages industrialisation by imposing tariffs on processed products, for example. This means the incentive is only to cultivate raw goods, rather than, say, manufacturing or higher-level production.
At the moment, many African countries are looking to China as a trading partner, but Chinese projects, just as many Africans would attest, have often been not taking notice of fair labour or environmental standards.
Airtel and Telkom Kenya planned merger plans are seriously dangling as EACC launches investigations into the merger details affecting the completion deadline agreed between the two companies.
Airtel and Telkom, that are without doubt Kenya’s second and third-largest telecommunications firms respectively, had set tomorrow, September 27, as the final date by which they were to have negotiated and signed the merger agreement that they first announced in February.
The Ethics and Anti-Corruption Commission, however, instructed regulators to suspend the merger pending the conclusion of investigations into how the transaction was conceptualized, and how the Treasury ceded further ownership of Telkom Kenya to Orange, the French multinational which later sold its stake to private equity fund Helios. The Treasury has a 40 percent stake in Telkom Kenya, initially a fully State-owned corporation, while Helios controls 60 percent shareholding.
“There is no chance it (the merger) will happen by Friday and there is no guarantee that Airtel will agree to a new signing date especially with the uncertainty of the ongoing investigations,” said a source familiar with the ongoing transaction.
The merger was the pride of the two telcos and a lifeline by increasing their subscriber base, reducing their average operating costs and increasing their economies of scale. In turn, these were expected to increase the competitive edge of the merged entity against Safaricom.
Sources involved in the negotiations have stated that if the deadline is missed, this could possibly lead Airtel to walk away from the deal, weakening the two operators’ chances of challenging Safaricom’s dominance of the market on the one hand and making it difficult for them to leverage their respective strengths in the merged entity on the other.
“A board meeting has been called next week where the issue of the merger will be discussed with a view of negotiating new timelines with Airtel,” said another source with knowledge of the matter.
EACC last month instructed the communications regulator and the Competition Authority to suspend their approval of the merger to allow investigators to review a 2012 restructuring that whittled down the government’s stake in Telkom Kenya. The investigation has been going on without clarity on when it will be completed.
Acting Safaricom Chief Executive Officer Michael Joseph stated through a statement to the media that the company is not opposed to the merger between Airtel and Telkom Kenya as it has been alleged before but raised three concerns among them the Ksh.1.3 billion debt the two companies owe the Telco giant.
“While we are supportive of industry changes that seek to deliver greater choice and value to consumers, we have raised valid concerns that we hope the regulator will consider and address as part of the approval process. The first is the debt owed by the two operators, amounting to KES 1,297,448,468.88, incurred for the provision of various services including interconnection, co-location and fibre services. This debt is due and payable, based on the agreement to provide services entered into with the two entities as distinct operators,” reads the statement.
Telkom Kenya, which has been making losses for the past ten years, has been surviving on asset sales, making the merger urgent for its survival. Airtel Kenya, on the other hand, is keen to grow its revenues by leaning on the economies of scale expected from the merger. EACC has been questioning both former and current officials on how the government shareholding was diluted during a restructuring in 2012.
Telkom was privatised in 2009 when France Telecom bought a 51 percent stake from the government, which held on to the other 49 percent. Between 2009 and 2016, France Telecom invested $900 million (Sh90 billion) into the business while the governed put in $100 million (Sh10 billion).
In 2015, France Telecom sold its stake to Helios, a Private Equity firm that agreed to put money into the business on condition that the regulator would review mobile termination rates (MTR), a fee charged on calls and texts completed on rivals’ networks. Helios was also promised regulatory interventions on inter-operability and national roaming services. In exchange, the government, got a 10 per cent stake that raised its shareholding to 40 per cent under the Helios deal and also got interest in 40 percent of shareholder loans advanced by France Telecom to the company.
Helios has reportedly invested $50 million (Sh5 billion) that went into network rolling, rebranding, T-Kash (mobile money service) and leveraging debt. The government on its part gave Telkom a 4G license valued at Sh2.5 billion, a payment in kind for its commensurate stake. Despite the investments, Telkom Kenya is still deep in the red, a factor it attributes to the high costs of running the mobile telephone business.
Management consultancy firm McKinsey, which studied the viability of the business last year, concluded that its mobile business unit could neither keep up with the required investments in technological advancement nor carry the costs and compete with global players with economies of scale and with operations in more than one country. The study recommended a merger with Airtel and regulatory interventions to allow the firm to compete.
The report said that even with a significant inflow of shareholder funds, the mobile business structure was untenable. Telkom was making about Sh3 million per base station but incurring twice as much in costs. Both Airtel and Telkom are running 1,600 base stations each. Safaricom, with 5,000 bases stations, serves 31.8 million subscribers and makes 20 times Telkom’s revenue, which brings down its average operating costs.
A merger between Telkom and Airtel would result in a combined 17.3 million subscribers and 3,200 base stations, but which would be cut down to about 2,500 once the two companies bring down those in close proximity to each.
The merged entity would also have an edge with economies of scale in procurement, sales, and distribution. For instance, while Safaricom normally leverages on Vodafone and Airtel on its mother company while making capital expenditures, Telkom has to go to the market alone, missing out on quantity discounts.
What happens to be taken as a threat to Safaricom, the merged firm between Airtel and Telkom is probably going to be a superior network with a bandwidth of 77.5 for its approximated 17. 3 million subscribers while Safaricom, Kenya’s leading firm, will have 57.5 percent spectrum for its 31.8 million subscribers.
The merged entity will take up the mobile subscribers, fiber and part of Telkom’s enterprise business that is not linked to government and security services, base stations and the distribution network. Telkom Kenya could shrink to about a tenth of its size, and be left with managing services for government and security organs.
It will also be allowed to keep real estate whose valuation is estimated at about Sh10 billion. However, sources say that if the merger is not concluded in good time, Telkom’s thinning real estate portfolio is unlikely to sustain the company over the long term given its accumulated losses and mounting debt. A move to destabilize the merger has been blamed fully on Safaricom And CAK.
With proposed austerity measures failing to cutting costs and the Jubilee government looting and splurging all tax-payers money, President Uhuru Kenyatta’s administration whose thirst for debt can not be quenched now plans to borrow about Sh1.84 trillion more before his term ends in August 2020.
Treasury chiefs project in draft Budget Review and Outlook Paper projects that total debt which was nearly Sh5.81 trillion this June will jump to Sh7.65 trillion in the year ending June 2022. The administration which has seen the biggest graft cases ever, inherited slightly more than Sh1.89 trillion in June 2013 from the PNU government and will have borrowed at least Sh5.76 trillion to implement the president’s manifesto in the 10 years of power.
The government has come out to defend this extragavant borrowing, saying the country must invest in its infrastructure, including roads and railways.
Kenyans should prepare for tougher times ahead to meet the demands of debt repayment as the country’s appetite for loans is projected to remain high even with the treasury warning of hard times as debt burden grows. Earlier this year the African Development Bank (AfDB) in a new research warned of the rapid build-up of costly public debt in the past five years which has put the Kenyan economy at the risk of turbulence.
This increase in debt has seen Kenya commit more than half of taxes to repaying loans, In the year ended June, Kenya spent Sh826.20 billion on debt repayment, that is 57.37 percent of the Sh1.44 trillion tax collected in the period. With corrupt officials looting the borrowed money and half the remaining tax leaving little to no cash for development promises, Uhuru’s manifesto is just one of those new resolutions lists people make and forget immediately.
The president’s austerity plan took a major hit as public servants’ wages and allowances continued to eat deeply into the countries development expenditure. Data from the Controller of Budget shows the Presidency, which comprises the offices of the President and the Deputy President, spent Sh190 million in the nine months to March 2019 and Sh197 million in twelve months to June. During his travels, the President is usually accompanied by officials and security details who draw hefty amounts in travelling allowances.
Mr Kenyatta has pushed for austerity measures since joining office, promising deeper cuts on non-essential items like travel and entertainment, however, the budget on foreign travel has been on an upward trajectory since he took office. The president had at some point even asked top State officials to take 20 per cent pay cut in part of efforts to tame high recurrent expenditure. Critics have described the austerity measures as just talk aimed at hoodwinking investors.
The CoB data shows the overall spend on domestic travel was Sh420 million in the first nine months of 2018/19 compared to when Mr Kenyatta and Mr Ruto’s increased domestic travel during the campaign period the previous year to Sh432.5 million up from Sh181.6 million in the same period a year earlier.
The data also shows that Members of the National Assembly spent Sh1.6 billion on overseas trips, more than twice the Sh719 million they spent in the 2017/18 financial year. MPs’ also increased their salaries and allowances by Sh2 billion to reach Sh11.2 billion during this period the report states. So Much for Austerity.
The country’s fiscal deficit (the difference between revenues and expenditure) has widened to 7.4 per cent of GDP, seeing the country’s stock of public and publicly guaranteed debt surge to Sh5.81 trillion. The last few weeks saw the government freeze hiring for the next three years in austerity measures to reduce the country’s wage bill. Acting Treasury Cabinet Secretary Ukur Yatani also said the Government would cut unnecessary expenditure, such as foreign trips and advertising by Government departments to bridge the fiscal deficit.
The Treasury has in the past four years struggled to implement austerity measures prompted by the under performance in revenue collection amid rising expenditure. the Treasury continues to warn against expenditure on these non-essential items.
Kenya and five other countries in Africa have been named leaders in expansion of Africa’s share in the global digital economy in a new research. The research which was conducted by Mastercard Center for Inclusive Growth in collaboration with The Fletcher School at Tufts University in the US, says the six countries are harnessing “the true potential of technology to drive inclusive growth, in a period of changing global market demands.”
The six countries were examined against three primary variables — ease of creating digital jobs, resilience of governance and infrastructure and foundational digital potential.
“The ultimate aim of the research was to help countries across Africa optimise their burgeoning digital evolutions, in order to accelerate economic development. These six countries were selected based on their size, economic growth, the median age of residents, quality of governance and digital momentum,” states the report.
Kenya which has been at the forefront of the African digital revolution for the past 10 years and currently has over 80 percent internet penetration made it to the list (Kenya, Egypt, Ethiopia, Nigeria, Rwanda, and South Africa) after the report acknowledged the country has been looking into leveraging various segments of digital economy such as taxi hailing services, e-commerce and blockchain to create job opportunities and spur growth.
The report titled Getting Lions to Leapfrog: Can Digital Technologies Deliver on Africa’s Delayed Promise of Inclusive Growth? used Kenya, Egypt, Ethiopia, Nigeria, Rwanda, and South Africa as case studies to provide insights on key drivers that could accelerate digital inclusion across Africa.
According to another study by the United Nations Conference on Trade and Development (UNCTAD), four countries, among them Kenya, control 60 pc of Africa’s digital economy. Kenya, Egypt, Nigeria and South Africa are leveraging data and various platforms to collectively control the lion’s share of the continent’s digital entrepreneurship activities.
The UN agency, however, warned that the growing digital wave on the continent risked being extremely affected if Kenya moves forward with its plan to start taxing mobile applications and internet usage in an effort to grow tax revenues. The plan could also hurt the growth of online businesses as well as suppress start-ups.
“While this kind of taxation may be attractive to governments, it can be counterproductive if it results in a decline in economic activity by reducing the number of active internet users,” states the report.
The report titled Value Creation and Capture: Implications for Developing Countries, warned of numerous implications should these developed countries implement interim and permanent measures to tax the digital economy.
Kenya Airways which is riddled with corporate greed is now cutting down on flights due to pilot shortages it said in internal communication reported by Reuters on Tuesday.
In the first two weeks of last month, the airline cancelled 91 flights, of which 68 flights it claimed were due to pilot shortages, the airline says it will be forced to cancel more flights in the weeks ahead due to the shortages. Kenya Airways has 435 pilots against the required 497.
The company says it is seeking to recruit atleast 20 new pilots for its Boeing 737 jets on two-year contracts, givng existing pilots ample time off. Ten of the existing pilots will be promoted to the airline’s Boeing 787 fleet.
“The projected impact of the crew shortage is $50 million annually, which could have been avoided,” Kenya Airways has said.
The troubled national carrier frequent cancellations of the airline’s cargo freighter has led to cargo customers opting out, the report stated.
The Kenya Airline Pilots Association, many of whose membership is drawn from the airline were quick to point fingers at the carrier for not recruiting enough pilots on time.
“It is no secret that Kenya Airways has one of the lowest rates of pilot recruitment in the world,” Murithi Nyagah, the association’s secretary general, said in a statement issued on Tuesday.
The companies future looks even more doomed as this adds to its mounting debts and losses. Last month it reported a first-half pretax loss of 8.56 billion Kenyan shillings, more than double that seen in the same period of 2018. The carrier could be nationalised if the government adopts a recommendation made by Parliament.
“Nationalisation is not what we want to be but it is what we need to be in order to be where we want to be,” said board chairman Michael Joseph Joseph who blamed taxes slapped on the national airline for its poor performance.
Nationalisation is expected to help cut costs to enable KQ grow revenues and make a turn around.
The association representing Kenya Airways pilots has lambasted the airline’s management for blaming the Pilots for the massive losses that KQ has experienced over the past few years.
The Kenya Airlines Pilots Association (Kalpa) stated today that the loss-making KQ would still have reported losses even if pilots gave their services for free.
KQ management last week blamed the current CBA for allowing pilots to call in sick without proof, leading to numerous cancellations, and high salaries paid to the pilots for its financial woes.
“KQ should stop looking for scapegoats in pilots. Should pilots offer services for free, KQ would still declare losses,” Kalpa general secretary Nyagah Murithi said.
The association also blamed the KQ management for increasing frequencies without having the right crew size. This, according to KALPA chair, has contributed to frequent flight cancellations.
Kenya Airlines Pilots Association now want the government to address the pilot and crew shortage at the airline at the same time supporting the nationalisation of the airline if it will save KQ.
“If you are going to nationalise, it should not be tied down like other state corporations,” Nyagah said.
The Kenya Revenue Authority only netted Ksh91 million on luxury vehicle purchases in the year to June in a failed bet on the high-end car market to boost revenues. Treasury Cabinet Secretary Henry Rotich had decided to go after extravagant motorists, hitting fuel guzzlers with more excise duty. The excise duty on engine capacity beyond 2,500cc was increased to 30 per cent from 20 percent charged previously.
“The revenue implication for the increased rates of excise duty on vehicles above 2500 cc has been Sh91 million,” Maurice Oray, KRA deputy commissioner for corporate policy told Members of Parliament last week.
The government implemented the tax measures in September following the passage of Finance Management Act 2018 claiming the aim was to discourage direct importation of the cars and instead promote local motor vehicles assembly and create jobs.
After the tax hike, car dealers passed on the increase in excise taxes on the expensive cars onto customers in the form of higher pricing, cutting down sales. This year, sales of new luxury cars fell by 50 percent in the six months to June industry data shows. BMW, Mercedes and Land Rover declined to 69 units against 137 in the six months of 2018.
Experts had previously made it public they did not expect that segment of the market was that big to make much of an impact on Kenya Revenue Authority’s coffers. “With the new tax measures, a car valued at Sh1 million will attract an additional sh241,000 in taxes, including import duty, excise duty and value-added tax (VAT).” Charles Munyori of Car Bazaar said.
Kenyan markets have become tougher for upcoming retail chain stores. In the past few years, the Kenyan market has seen a massive drop of supermarkets including government-owned Uchumi with Ukwala, that, apparently Choppies liquidated being the most recent to start closing its doors after selling empty shelves for a while.
Now, the Botswana-based Choppies Supermarket has terminated contracts of over 200 workers effectively by the end of this month after it emerged that the struggling retailer plans to exit the Kenyan market.
According to Termination letters signed by the company’s Human Resource Manager Joshua Were cited redundancy in carrying out the exercise. The letter dated August 31, 2019 indicates that there are ongoing talks with the Kenya Union of Commercial Food and Allied Workers (Kucfaw) for a favorable compensation package for the affected workers.
“This termination is due to the reduced business which has been running for several months which you are aware of, and the company is unable to sustain the current wage bill, noting that the business has gone down and is taking time for a full recovery,” read the letter in part.
The affected workers have been advised not to report to work even as they serve a one-month notice ending on September 30.
“During the notice period, you will not be required to report to work, but your September salary will be paid in full up to 30/09/2019 plus one-month notice. You will also be issued with a certificate of service,” added the letter.
Through another notice which accompanied the letter, the affected employees have been asked to clear with the company through their respective branches before September 15 when they are set to receive their pay. This comes after the loss-making retailer had already notified its shareholders of plans to exit the Kenyan market four years after venturing into the local market through the acquisition of Ukwala stores for Sh1 billion.
The retailer held an extraordinary general meeting last Wednesday, where it announced that it had listed its Kenyan assets for sale besides classifying its 12 stores as distressed.
Yesterday, some of the affected employees said they ought to have been given their dues before being shown the door. According to an employee, the company’s management hasty decision to issue the termination letter before meeting the union leadership was questionable.
“Once you clear and leave, you are no longer an employee, and the company may delay paying the dues or even give less pay since we have not discussed how much to expect,” said an affected employee who sought anonymity.
Kucfaw General Secretary Bonface Kavuvi said the company had only notified them of the intention to reduce staff numbers, and they had scheduled a meeting with the company management to discuss the matter further.
“The company wrote to us informing us of their intention to declare some workers redundant, and we responded to the letter, prompting the meeting scheduled for Wednesday. It is from the meeting that we are going to question the notice,” said Kavuvi.
Kavuvi, however, declined to give out more details on the pending issues to be discussed following the termination, saying the union would give an official position after the meeting.
My Opinion is that the loss-making retailer should not sink down with hardworking peoples cash. Kenyans woke up very early to go and work and it’s not their mistake that Choppies made losses. Union officials should not be greedy and if they fail workers and the retailer goes with their money, they all should sue or take legal action against union officials. Kenya Insights has also been informed that majority of the affected employees had allowance arrears that were not addressed in the termination letters.
Choppies supermarket which started in Botswana is planning to leave the Kenyan retail market after only 4 years.
The retailer has struggled to grow market shares in the competitive retail market owing to huge competition from rivals some of which have merged.
On Wednesday in an Extraordinary General Meeting (EGM) with shareholders the company stated that it had listed its Kenyan assets for sale. It also classified 12 of its stores as distressed.
Choppies had earlier announced plans to treble the number of its stores in the next three years before its downfall due to financial difficulties.
This year alone the retailer which was the anchor supermarket in Kiambu mall shut down after experiencing stockouts amid rising operation costs. The company also shut down its Bungoma outlets.
The retailer has been hit by a myriad of challenges in a couple of countries as its struggles to even pay suppliers.
Senate has finally dropped its push for additional budgetary allocation to counties a move that has seen billions of shillings to the devolved units unlocked and averting a looming shutdown of the almost broke 47 County governments.
A team that the Senate had picked demanded more allocation be given to the county government and had sworn not to give it up only to make an about-turn to accept the Sh316.5 billion previously offered by the National Assembly and the Treasury.
Governors had said county governments services had been crippled due to accumulated billions of shillings in overdue debt owed to contractors and suppliers. CoG Chair who is also the Kakamega Governor Wycliffe Oparanya had warned of an imminent shutdown had the two-month stalemate over the Division of Revenue Bill, 2019 persisted beyond this week.
Senators effectively retreated from a hardline stance of demanding Sh335.6 billion for the 47 devolved units.
“The country is faced with the real prospect of a shutdown of services at the counties. For this reason…the Senate has made the painful but patriotic decision to advise our negotiators at the ongoing mediation process to agree to the allocation of Sh316.5 billion as the equitable share of nationally raised revenue to the allocation to the counties,” the Senate said in a joint statement read by Leaders of Majority and Minority Kipchumba Murkomen and James Orengo respectively.
The standoff between the National Assembly and the Senate over the allocation has paralyzed activities in the counties, leading the Council of Governors (CoG) to announce a complete shutdown from September 16. The standoff has caused a prolonged cash crisis in the counties that led to strikes over salary delays with a number of county governments failing to pay salaries to date.
Governors have been cussing the Senate terming them as The financial crunchers that had disrupted key operations, including development projects started and some assimilated by the respective county governments.
Governors had been accusing the Senators of crippling their progress so that they can get something to grill them with to satisfy their ego by stalling projects hence triggering variation of contracts and demand for hefty interest on delayed payments.
The duel also affected suppliers of goods and services, resulting in low sales for goods such as construction materials like cement. Essential services such as provision of health care have also been affected following the grandstanding between the two Houses that have been claiming superiority.
In an acrimonious informal meeting dubbed the Speakers’ Kamukunji, the Senate said the process of passing the Division of Revenue Bill, 2019 has been arduous.
“The Senate is cognisant that we are fast approaching the end of the first quarter of the financial year and counties are yet to receive their share of nationally raised revenue. This would have a disastrous effect on critical sectors such as agriculture and health,” the Senate said.
Two realtor reports released in the last one week cast a dark shadow over the real estate industry that was promising in previous years.
In the first half of 2019 local developers took a hit as their earnings continued to dip.
According to Knight Frank’s Kenya Market 2019 report, prime residential prices fell by 1.8 pc which contributed to a 6.7 pc decline in the year to June. This was a sharp contrast to the 0.4 pc decline recorded in the first half of the previous year.
This is good news for tenants as rents of prime residential properties dropped by 1.7 pc in the year to June. Agents attribute the decline to oversupply of high-end developments in some locations forcing them to lower their rates.
The last three years have seen an increase in the number of middle to high-end residential homes in areas such as Kilimani, Kileleshwa, and Westlands, Ruaka, Athi River and Juja thus contracting developers’ profit margins as competition hots up.
“These factors have transformed the market in favour of buyers and tenants, which has been exacerbated by multinationals continuing to downsize while there are fewer expatriates relocating to Kenya, impacting negatively on the niche market,” says Knight Frank.
