Rwanda expects GMO responsibility as African scientists back Kenya

Rwanda says it is counting on Kenya to be a responsible member of the region by ensuring transparent information is shared with neighbouring EAC countries on all genetically modified (GM) seeds and food products imported.

Kigali’s sentiments must have come as a relief to the Kenyan government, coming on the back of recent support by a scientific lobby of African scientists who this week said genetically modified organisms (GMOs) are safe for human consumption and the environment.

There is public debate in Kenya after the government in September lifted a ban on GMO foods and seeds, prompting a suit that resulted in a temporary court order stopping importation.

Now Rwandan authorities have jumped into the fray, saying they want Kenya to abide by international laws such as the Cartagena Protocol to ensure others are not harmed by its actions on GMOs.

The Rwanda Inspectorate, Competition and Consumer Protection Authority (RICA) said it expects Nairobi to keep the imported products within its borders.

Be transparent

“In this regard, testing is not a very important aspect as countries are requested, under the Cartagena Protocol, to which both Kenya and Rwanda are signatories, to be transparent and to share information on transboundary movement of GMO. Both countries have competent authorities that have the mandate to implement provisions of the protocol,” the authority said.

“We believe that this particular trade will be handled through the existing regulatory framework and through the existing good collaboration between the two parties.”

The Cartagena Protocol on Biosafety to the Convention on Biological Diversity, passed in 2003 is the basic international law on biosafety, allowing countries to restrict importation of GMOs if they believe there is insufficient evidence on their safety. Countries routinely require GMO foods to be labelled as such and retain rights to restrict biosafety technologies that could harm public health.

Porous EAC borders

Tanzania, Uganda and Rwanda have raised concerns over potential infiltration of banned GMO products through the porous EAC borders, with Burundi warning that it had neither the capacity nor the technology to test for GMOs.

Rwanda said it uses a national reference laboratory for testing but does not have a GMO policy in place. Officials say this complicates regulation and gatekeeping of GMO products.

But the lobby of African scientists backing Kenya on GMOs has sought to re-assure Kenyans.

“We would like to assure Kenyans that GMO products are safe,” said Prof Ratemo Michieka, the chair of the Kenya National Academy of Sciences, at the close of a three-day conference for scientists under the Network of African Science Academies (Nasac).

The scientists recently met and discussed GMOs as a solution to the growing hunger problem in Africa at the African Science Academies 2022 held in Nairobi from November 28-30.

Enhance research

The scientists called on governments to put in place structures to enhance research and collaboration on the continent.

“Many African countries are facing declining agricultural productivity and food insecurity. The discussions during the three-day conference were focused on the latest ideas and appropriate solutions and technologies that come and enhance sustainable agriculture and food systems in Africa,” said Prof Nobert Hounkonnou, Nasac president.

In Kenya, trials on GMOs have been ongoing in laboratories and in research fields throughout the decade despite the ban.

“GMO plants have no danger whatsoever to the indigenous plants,” argued Prof Michieka.

“They can grow side by side or even mixed, with no impact at all.”

Africa lags behind in the adoption of modern food production technologies and especially GMOs. Only a handful of countries on the continent have commercialised GM crops at various levels, namely South Africa, Sudan, Egypt and Burkina Faso.

“African countries have the scientific infrastructure and the human capacity to carry out the research and give the right advice. We can’t just say don’t allow it without scientific evidence, yet we have a worsening food situation in the region,” said Prof Michieka.

source

Rwanda says it is counting on Kenya to be a responsible member of the region by ensuring transparent information is shared with neighbouring EAC countries on all genetically modified (GM) […]

Continue reading "Rwanda expects GMO responsibility as African scientists back Kenya"

Kenya’s tea ‘chokes’ under unclear policy, clashing roles

Kenya’s lucrative tea sector is running on contradictory policies, with players clashing on roles.

The East African Tea Trade Association (EATTA) wants some of the policies addressed through a law that will clarify roles and relationships between management agencies, growers, and factory boards, to enhance accountability.

EATTA chairperson Arthur Sewe said the clash in roles can be resolved by adopting the Draft National Tea Policy (2018) to guide on procedures.

“The government initiated a draft National Tea Policy in 2013. However, arising from delay approving it, EATTA contracted a consultant to review it, identify any gaps and suggest remedies. It should be implemented immediately,” said Mr Sewe.

“The key issues to be addressed are low productivity, insufficient development and transfer of technology, high cost of inputs, multiple taxation regime and poor governance,” he proposed this week.

Extreme weather events

Since September, Kenya’s tea production has dropped significantly due to erratic weather, according to records at the Mombasa Tea Auction.

Data from EATTA indicated, a dip in the volume of tea offered by over half a million kilogrammes in October and projected that production is likely to drop further in the coming years.

The lobby blames climate change that had affected small-scale farmers’ livelihoods. According to a Food and Agriculture Organisation report released in May, Kenya’s temperature was expected to rise by 2.5 degrees Celsius between 2000 and 2050.

A new policy, the association argues, would set guidelines on sustainable farming practices to help farmers and small- and mid-sized enterprises in the agricultural sector adapt to the change in weather patterns.

These include selection of the most suitable areas for tea growing, crop diversification in low production areas, efficient management of soil and water resources, catchment protection, soil water conservation and rainwater harvesting.

For years Kenya basked under the optimal climate for tea growing comprising tropical, red volcanic soils, sunny days and stable rainfall.

Other major tea-producers India, Sri Lanka and China also face rising temperatures and extreme weather events that affect production.

source

Kenya’s lucrative tea sector is running on contradictory policies, with players clashing on roles. The East African Tea Trade Association (EATTA) wants some of the policies addressed through a law […]

Continue reading "Kenya’s tea ‘chokes’ under unclear policy, clashing roles"

EAC member states not ready yet for single currency rollout

East African Community member states will have to wait longer for a monetary union. A taskforce to look into the matter has proposed to delay the implementation of the East African Monetary Union (EAMU) until 2031 from initial date of 2024, saying it is too soon considering members have not attained all requirements.

The proposed delay is an indictment on the members’ commitment to achieve EAMU, a key pillar of integration.

The EAMU is the third pillar of the EAC, others being the Customs Union and the Common Markets Protocol. The region, under EAMU, is expected to adopt a single currency by 2024.

“We have a roadmap that was supposed to be implemented between 2013, when the Monetary Union protocol was signed, and 2024. But we did not manage to implement most of the activities in that roadmap,” said Dr Pantaleo Kessy, Principal Economist, EAC Secretariat.

“According to the roadmap, the EAC convergence criteria were to be attained by 2021 and be maintained for three years in the run-up to the establishment of the Monetary Union in 2024.”

Behind schedule

However, going through each activity, shows that all the partner states – Burundi, Kenya, Uganda, Tanzania, Rwanda and South Sudan – are behind schedule.

According to the EAMU roadmap, four broad prerequisites need to be achieved ahead of the establishment of the Monetary Union and the first one includes the full implementation of the Customs Union and Common Market protocols.

However, both the Customs Union and Common Market Protocols are currently under implementation. Although much progress has been made, the protocols are not yet fully implemented.

“Partner states are at different levels of implementation and that partly slows the implementation of the EAC third pillar, the EAMU,” said Dr Kevit Desai, Principal Secretary at the EAC and Regional Ministry of Kenya.

Second, not all partner states have attained the four macroeconomic convergence criteria, for the implementation of the monetary union.

Headline inflation

These include ceilings on headline inflation of 8 percent; reserve cover of 4.5-month import; on overall deficit of 3 percent of GDP; and on gross public debt of 50 percent of GDP.

“Attainment of these criteria has been challenging to most Partner States, partly due to increased demand for infrastructure development and spending to mitigate the economic impact of the Covid-19 pandemic,” Dr Kessy explained.

“Kenya, Uganda, Tanzania and Rwanda attained the headline inflation target of less than 8 percent in 2021. But only three Partner States attained the official foreign exchange reserve target of 4.5 months of imports.”

Long past deadline

Further, three Partner States attained the debt to GDP target of less than 50 percent; while none was able to attain the fiscal deficit criterion of 3 percent of GDP (including grants).

The EAC is yet to put in place institutions that will carry out the mandate and implement the EAMU protocol.

The taskforce is made up of financial experts from EAC’s partner states’ ministries of Finance, Central Banks, capital markets, insurance and pension firms.

The East African Monetary Institute is one of the institutions expected to carry out the preparatory work for the One Single currency under EAMU which was planned to be in place by 2024.

The Council of Ministers designated July 1, 2021, as the date for the coming into effect of the EAMI, the precursor to the East African Central Bank.

But the deadline is long past.

The other three institutions proposed under the EAMU include the EAC Financial Services Commission; the EAC Surveillance, Compliance and Enforcement Commission; and the EAC Statistics Commission. Establishment of these institutions is lagging behind, partly due to lack of resources.

The fourth criteria that is still lacking behind is the harmonisation of Policies and legal frameworks to support implementation of the EAMU Protocol.

source

East African Community member states will have to wait longer for a monetary union. A taskforce to look into the matter has proposed to delay the implementation of the East […]

Continue reading "EAC member states not ready yet for single currency rollout"

Air Tanzania plane held in the Netherlands in row over land title

A plane belonging to Air Tanzania Company Limited (ATCL) has been seized in the Netherlands after a Swedish firm won a $165 million award against Tanzania due to a revoked land title in the Bagamoyo sugar project.

It is still not clear exactly which particular aircraft on ATCL’s fleet has been seized and under what circumstances.

However, on Wednesday, the government dispelled fears of the possible attachment of an ATCL plane by a Dutch court, with the Attorney-General Eliezer Feleshi saying everything was under control.

Dr Feleshi confirmed to The Citizen that a Swedish firm that won a $165 million award against Tanzania had persuaded the court to uphold the attachment of the aircraft despite the International Centre for Settlement of Investment Disputes (ICSID) having issued a stay of execution, pending annulment proceedings.

“It’s true that they went to court in the Netherlands after we had successfully appealed to the ICSID for a stay of execution. Everything is under control,” he said.

Appealed court’s decision

Dr Feleshi added that the government had already appealed against the Dutch court’s decision but declined to offer further details.

“I can’t disclose further details. Let’s be patient as the matter is in court.”

Tanzania has argued that the attachment is unlawful because it was obtained a day after the state petitioned the ICSID to annul EcoDevelopment’s award.

But the judge reasoned that the ICSID’s provisional stay of execution of the award only took effect on the date the institution registered the state’s annulment request.

EcoDevelopment, which is owned by 18 Swedish nationals, brought its ICSID claim in 2017 under the Sweden-Tanzania bilateral investment treaty.

That came after the government decided to unilaterally revoke the land title for a sugar project in Bagamoyo.

The case commenced at the ICSID, a World Bank organ based in Washington.

The land title revocation was a major blow to the Swedish company, which had for over ten years worked to develop the project and invested $52 million in a ready-to-go project for local production of sugar, renewable electricity and fuel.

source

A plane belonging to Air Tanzania Company Limited (ATCL) has been seized in the Netherlands after a Swedish firm won a $165 million award against Tanzania due to a revoked […]

Continue reading "Air Tanzania plane held in the Netherlands in row over land title"

Kenya anti-tobacco crusaders fault President Ruto’s South Korea deal

A group of advocates of tobacco use control have denounced the deal Kenya’s President William Ruto made with South Korea to enhance tobacco trade, saying it will put more Kenyans at risk of diseases linked to the farming and use of the product.

The Kenya Tobacco Control Alliance (Ketca), an umbrella body of civil society organisations fighting tobacco use in the country, said the trade deal threatens to undo the progress made in reducing tobacco farming in the country.

Ketca said the agreement between Nairobi and Seoul is not only detrimental to the health of Kenyans, but also violates the Tobacco Control Act of 2007 which “commits the government to continually phase out tobacco farming in Kenya”.

“We ask the government to immediately cancel aspects of the Kenya-South Korea agreement that touch on tobacco,” Thomas Lindi, Ketca’s chief executive, said at a press conference in Nairobi on Wednesday.

President Ruto, after his first official visit to Seoul last week, announced that Kenya “commits to work together [with South Korea] in deepening and strengthening bilateral trade – especially in tea, coffee, and tobacco,” a move contradicting the very government’s efforts to phase out tobacco farming in the country.

Major problem

“We have a major problem with this because it means Kenya will try and increase tobacco planting in the country,” Mr Lindi said.

In March 2022, the ministry of agriculture partnered with United Nations agencies – World Health Organisation, the World Food Programme and the Agriculture and Food Organisation – to initiate the ‘Tobacco-free farms’ project to help farmers shift from tobacco-farming.

The programme, piloted in Migori County, western Kenya, sought to provide farmers dependent on tobacco farming with seeds, fertilisers, and ready markets to help them shift to more sustainable crops such as maize and beans.

“The project is a major step towards attaining a healthy nation and the Ministry of Health fully supports such ventures,” said former Health minister Mutahi Kagwe during the launch of the programme.

His Agriculture counterpart at the time, Mr Peter Munya, said the project would go a long way in boosting the nation’s food security, in addition to keeping farmers healthy.

Ketca praised the move and encouraged a speedy expansion to other tobacco-growing regions, saying the government was finally honouring the requirements of the Tobacco Control Act.

Speaking to The EastAfrican in March, Ketca Chairman Joel Gitari said “Tobacco growing farmers must be given the necessary support to switch to alternative crops that have the potential to improve their health and livelihoods as well as reduce the supply of tobacco”.

“Every effort made to reduce tobacco use is good for the environment, the economy, the future and the country in general.”

Now, noting that the project has been very successful in Migori, Mr Gitari says the agreement with Seoul could avert the gains made even in Migori and prevent the extension of the project to other tobacco-growing regions.

“The government should be focusing on such positive moves instead of engaging in retrogressive activities because whatever it is doing is illegal and we’re losing the gains that we’ve made,” he said on Wednesday.

Cause deaths

According to Ketca, tobacco use and farming will directly cause the deaths of more than 9,000 Kenyans by end 2022 and at least 40,000 others will be diagnosed with various forms of cancer.

“Numerous studies done in Kenya show tobacco farming is unprofitable, leaves farmers poor and sick,” Mr Lindi said.

A recent study by the University of Nairobi and the American Cancer Centre found that farmers in Migori, Busia, and Meru counties could earn on average Ksh80,000 ($697.47) more per acre from alternative crops like vegetables, grains and cereals, backing this claim.

According to the study, farmers in the tobacco-growing regions stuck to the crop because of “the structured supply chain of tobacco incentivises production” and due to lack of a ready market for the other crops.

The lobby now wants the government to completely discourage tobacco farming and use in the country by increasing excise duty on tobacco products, banning tobacco advertising and promoting health information and warnings against tobacco use.

source

A group of advocates of tobacco use control have denounced the deal Kenya’s President William Ruto made with South Korea to enhance tobacco trade, saying it will put more Kenyans at […]

Continue reading "Kenya anti-tobacco crusaders fault President Ruto’s South Korea deal"

EA pastoralists fault governments for slow pace of land reforms

Pastoralist communities across East Africa have faulted their governments for the slow pace of land reforms which they argue have adversely affect their livelihoods as the region battles climate change.

At the East Africa Indigenous Peoples’ Land Summit held in Nanyuki, Kenya, representatives from seven countries said that while various land reform programmes had been launched to enable pastoral communities own and manage natural resources, there was lack of political goodwill to complete the processes.

For instance, in Kenya, Uganda and Tanzania, the process of community land registration has been bogged down by a myriad of challenges, which the governments appear not keen to address.

Registration of communal land is meant to empower the pastoral communities in management of natural resources, including enabling them to transact business using the titles, or to seek compensation in case of compulsory acquisition by government for mega projects. When this is not done, it means the communities cannot have legitimate claims.

Land-related challenges

The summit is seeking to identify land-related challenges for indigenous peoples and to lobby continental bodies like the African Union for desirable land reforms.

The meeting brought together representatives of nomadic herders, agro-pastoralists, hunter-gatherer and fisher folks from Kenya, Tanzania, Uganda, Ethiopia, Rwanda Burundi and the Democratic Republic of Congo.

In Kenya, the National Land Commission (NLC) is sorting more than 3,000 historical land injustice claims.

“A good percentage of these claims emanate from what we can describe as indigenous populations,” said NLC Chairman Garshon Otachi.

He noted that most communities from arid and semi-arid areas are yet to benefit from the Community Land Registration Act 2016 that gives legal ownership to communities whose land has for years been held in trust by the government.

“Only about 10 percent of communal land has been registered under the new Act six years down the line. The enactment of the 2016 Land Act was a game-changer as it offered a pathway for the management and governance of customary and indigenous land in Kenya,” said Otachi.

Extremely slow

Gemechu Berhanu, a representative from the Oromo community in Ethiopia, complained that the process of registering communal land, which began in 2021, is extremely slow and as a result, most pastoral lands are not registered.

Hunters and gatherers from the Batwa community in Burundi and the DRC accused their respective governments of kicking them out of their ancestral forests without an alternative.

“We are a population of about 117,000 and traditionally we used to eke a living out of hunting animals, gathering honey and wild fruits and moulding pots… We are no longer able to access clay which is the raw material for moulding pots,” said Gervais Ndihokubwayo.

source

Pastoralist communities across East Africa have faulted their governments for the slow pace of land reforms which they argue have adversely affect their livelihoods as the region battles climate change. […]

Continue reading "EA pastoralists fault governments for slow pace of land reforms"

Kenya Treasury says country has no room for fresh borrowing

Kenya’s National Treasury has doubled down on its efforts to swap the country’s short-term debt with longer-term issuances. 

This comes barely a week after it commenced a debt swap that will see Sh87.8 billion ($714.6 million) worth of short-term debt converted into long-term debt to ease the pressure it is experiencing from maturities. Last week, the Kenyan government floated its first switch bond since June 2020. 

Treasury Cabinet Secretary Njuguna Ndung’u said that Kenya has little wiggle room left for fresh borrowing, a situation that has been aggravated by the multiplicity of shocks to the economy, including the ongoing drought, effects of the Covid-19 pandemic and the Russia-Ukraine war.

“Right now, we don’t have headroom for accumulating debt, so in a sense, we have to go down into liability management. When you are buffeted by multiple shocks, the reaction is often to use the resources that you have or even borrow to overcome the crisis,” Prof Ndung’u said.

A fortnight ago, President William Ruto directed Treasury not to borrow from the domestic market at rates above 10 per cent. 

Awaiting growth data

Prof Ndung’u further stated that the targeted Sh300 billion ($2.4 billion) worth of budget cuts anticipated in the Ruto government’s debut Supplementary Budget have been calibrated to ensure that it does not derail the economy’s growth momentum.

According to a circular issued by the Treasury on November 7, addressed to all Cabinet secretaries and accounting officers, the Kenyan government is pursuing aggressive rationalisation of the recurrent expenditure for the current financial year. The areas earmarked for slashes include expenditure on foreign travel and training for the remaining three quarters of the current financial year.

Prof Ndung’u said Kenya might be grappling with a recession even as it awaits growth data for the third quarter of 2022 from the Kenya National Bureau of Statistics. The economy grew by 6.8 per cent and 5.2 per cent in the first and second quarters, respectively.

“The budget cuts were necessary to try and shift resources to needy areas. It is austerity measures to try and save lives. We have to look at what is essential and what is not essential. You cannot affect aggregate demand in times of recession and that is why the budget cuts were in areas that are not essential,” the CS said.

source

Kenya’s National Treasury has doubled down on its efforts to swap the country’s short-term debt with longer-term issuances.  This comes barely a week after it commenced a debt swap that […]

Continue reading "Kenya Treasury says country has no room for fresh borrowing"

Reprieve for Rwanda as China cancels $7.1 million debt

China has offered Rwanda a $7.1 million debt relief or 50 million RMB Yuan on a loan used to build the 6.36-kilometre Masaka-Kabuga road under the Kigali urban road upgrading project.

According to a statement issued by Rwanda, the move is part of the Chinese government’s decision to cancel the outstanding interest-free loan in accordance with the agreement on economic and technical cooperation between the two countries.

“The two countries enjoy a healthy bilateral cooperation. This is evidenced by the substantial contribution of the Republic of China towards Rwanda’s development aspirations. The agreement we signed today cements this relationship,” Rwanda’s Minister for Finance and Economic Planning Uzziel Ndagijimana said on Monday after signing the debt cancellation agreement. China was represented by its ambassador to Rwanda Wang Xuekun.

Strong economic cooperation

Dr Ndagijimana acknowledged the strong economic cooperation between the two countries which has seen Rwanda benefit from China’s support in various sectors including infrastructure, energy, education and health.

China says the debt cancellation is part of the economic package announced by President Xi Jinping at the 8th Ministerial Conference of the Forum on China-Africa Cooperation.

“China hopes, by offering this financial support, to make a contribution to Rwanda’s all-round transformation and recovery from the malign impact of the Covid-19 pandemic. In the future, China will work with Rwanda for deeper practical cooperation in various fields under the Belt and Road Initiative framework to deliver more benefits to the two peoples,” Wang said in a statement.

source

China has offered Rwanda a $7.1 million debt relief or 50 million RMB Yuan on a loan used to build the 6.36-kilometre Masaka-Kabuga road under the Kigali urban road upgrading […]

Continue reading "Reprieve for Rwanda as China cancels $7.1 million debt"

Looming global recession sparks fear in East Africa region

East Africans are second-guessing what the projected global recession in 2023 could mean for them, given the International Monetary Fund says about a third of the world will be in recession, led by the globe’s largest economies including the US, China, and Europe.

The recent growth projections by the international financier puts East African countries’ prospects for this and next year better than the global average, but analysts say the region will not be spared from the coming recession.

According to the IMF’s World Economic Outlook report released last month, the global GDP growth rate will fall from six percent last year to 3.2 percent in 2022, further decelerating to 2.7 percent in 2023 as a result of disruptions caused by the eastern Europe conflict.

East Africa’s economy is, however, predicted to grow by averagely 5.2 percent this year, dropping from 6.4 percent last year, but is expected to accelerate to 5.6 percent next year, highlighting a better performance than the rest of the world.

Harder economic times

But despite this, economists and financial analysts say citizens will need to brace for harder economic times next year as the looming recession could result in mass job losses, pay cuts, and a general slump in economic activity disrupting livelihoods.

“Most of the global economies are rapidly headed towards recession and Kenya is no exception,” said Rufas Kamau, the lead markets analyst at Nairobi-based financial markets broker FXPesa.

According to Mr Kamau, Kenyans should take necessary actions to save the most they can right now to be able to stay financially stable in the event of pay cuts, and improve their work efficiency to reduce their chances of retrenchment.

“With October inflation hitting 9.59 percent and the CBK raising policy rates to 8.75 percent, the environment for economic growth becomes tougher for Kenyans as the cost of loans becomes more expensive and consumer budgets continue being suppressed by inflation,” Kamau told The EastAfrican.

“Access to credit is still tough for the SMEs as banks prefer investing in government bonds since they bear less risk and the highest returns of any asset class in the country.”

Hold on to cash

American billionaires Jeff Bezos and Elon Musk have also been very vocal lately of the looming recession, similarly advising people to hold on to their cash instead of spending on luxuries such as cars, television sets or refrigerators.

Ken Gichinga, the chief economist at Kenyan analytics firm Mentoria Economics, agrees that Nairobi and the rest of East Africa might slump into recession next year, but the effect won’t be as fast nor as vast as it will be in the more developed markets.

“The effect will be immediate in the more developed western countries which have a wider credit market, meaning that rising interest rates will impact more people and entities almost instantly,” Mr Gichinga told The EastAfrican.

“In East Africa, the dynamics are a little different. Many people won’t feel the pain of rising interest rates immediately because they don’t rely on credit and the impact won’t be immediate.”

The rising interest and inflation rates and job losses resulting from the recession in the west, Gichinga said, will eventually trickle down to the region ultimately causing “what will feel like a recession.”

Tread carefully

According to both Kamau and Gichinga, while there is no certainty that East Africa’s economy will fall into a recession next year, people should tread carefully with their finances as there isn’t a guarantee the economy will evade the coming global recession either.

Eyes are now on policymakers to employ the best tools to stabilise economies to minimise the impact pf the looming recession and help save jobs and livelihoods as the coming recession sparks fear.

Kristalina Georgieva, the IMF managing director said countries should try to get the right mix of monetary and fiscal policy measures to overcome the threats posed by the global financial conditions.

“With monetary policy stepping on the brakes, fiscal policy should not step on the accelerator,” Ms Georgieva said last week while speaking at the Asia-Pacific Economic Cooperation leaders’ summit. “We should be in a mode of alert, not alarm, and develop policies to address these risks.”

source

East Africans are second-guessing what the projected global recession in 2023 could mean for them, given the International Monetary Fund says about a third of the world will be in […]

Continue reading "Looming global recession sparks fear in East Africa region"

Road toll charges remain a hurdle to EAC cross-border trade

Road tolls have again emerged as hurdles to smooth trade between East African Community member countries as each government charges its own fees on trucks moving into its territory.

The region’s business stakeholders are however optimistic that trade in the bloc will increase by 11 percent in 2022-2023 if toll fees and domestic taxes are harmonised to prevent distortion and create a level playing field for businesses.

“We are proposing that EAC partner states charge a uniform fee of $10 per 100km on all trucks the way Uganda does,” said John Kalisa, chief executive of the East African Business Council.

“Once collected, the amount should be used for the purpose for which it was intended — that is to repair and maintain the same roads,” he added. Tolls are usually implemented to help recoup the cost of road construction and maintenance, as well as finance other infrastructure projects.

The $10 charge that the EABC has proposed translates to close to $144 for the region, down from $500.

Flat rate

he anticipated $144 levy is the flat rate across the Common Market for Eastern and Southern Africa (Comesa).

EABC is reacting to complaints by importers who have highlighted the rising cost of doing business in the region occasioned by the varying charges in each member country even as normal cross border trade returns free of pandemic restrictions.

The reopening of the Katuna-Gatuna One Stop Border Post on January 31, 2022, for instance, has seen some 160 trucks cleared daily to cross between Uganda and Rwanda, paying at least Ush470 million ($125,735) in tax collections to Uganda per month. At least 1,000 people cross here daily too.

However, the two countries are charging different road tolls.

“Rwanda charges a fixed rate of $76 for small trucks and $152 for large trucks, while Uganda charges $10 per every 100km,” said Kalisa.

“Tanzania is charging more than $156 per truck, which is very expensive,” he added.

The same applies at the Mutukula border crossing between Tanzania and Rwanda where trucks are also charged different road tolls.

“As the business community in the region we are advocating for a common standardised fee because any variation distorts trade,” Kalisa said.

Most affected

He identified Uganda, Tanzania and Rwanda as some of the most affected EAC partner states where different toll fees are distorting intra-regional trade, which is still below 15 percent.

Tanzania — which serves as a gateway to the sea for its landlocked neighbours Uganda, Burundi, Rwanda, the Democratic Republic of Congo, Zambia and Malawi — is charging Ugandan cargo trucks $500 as fees for road repairs and maintenance.

Rwanda has also threatened to levy a similar amount on Tanzanian trucks coming through the Mutukula border crossing. The two countries are in discussion over the same.

“There is a need to harmonise road tolls across the region and we are glad that the EAC Secretariat and respective ministries have been tasked to hasten harmonisation of road toll fees in the region,” said Pascal Bizimana, commissioner general Rwanda Revenue Authority, when he held talks with the EABC last week.

Mid this year, Tanzania announced plans to cut road toll by about 71 percent on Uganda-bound cargo trucks, as part of an agreement reached at bilateral talks between Presidents Samia Suluhu Hassan and Yoweri Museveni.

However, the plans are yet to be effected.

Reduce costs

The harmonisation of the toll fee is expected to reduce the cost of doing business.

Transport and logistical barriers to regional trade are estimated to cost East African economies between 1.7 percent and 2.8 percent of gross domestic product every year.

Trade liberalisation and improvements to infrastructure will help reduce these costs, creating ease in doing business across the region and in turn benefitting consumers through lower prices.

The EAC has been tasked with harmonisation of toll fee on the Northern Corridor (1,700 km long) that begins at the Port of Mombasa and serves Kenya, Uganda, Rwanda, Burundi and Eastern DRC.

The Central Corridor (1,300 km long) begins at the Port of Dar es Salaam and serves Tanzania, Zambia, Rwanda, Burundi, Uganda and Eastern DRC.

The improved infrastructure is expected to have a large knockoff effect in poverty reduction in the region through trade-induced changes in prices while reduction in border delays and costs will cut the overall cost of investment for businesses.

source

Road tolls have again emerged as hurdles to smooth trade between East African Community member countries as each government charges its own fees on trucks moving into its territory. The […]

Continue reading "Road toll charges remain a hurdle to EAC cross-border trade"

Kenya Airways targets corporate travel in new Ghana-Senegal flights

Kenyan flag carrier Kenya Airways has announced a new service linking the capitals of Ghana and Senegal starting this December 11. This is the first sign that African governments are serious in implementing the Single African Air Transport Market (SAATM).

The twice weekly service that complements the airlines’ existing schedule to the two destinations will increase options between Nairobi and Accra to nine flights a week and four to Dakar.

This comes hot on the heels of a new Nairobi-Mombasa-Dubai service, also to be launched this December, reflecting KQ’s push to get its growth plans off the ground following the two-year Covid-19 pandemic disruption.

The ease with which the Kenyan carrier will be able to pick intermediate traffic between Accra and Dakar without a reciprocal service by a Ghanaian airline to Kenya signals the beginning of a long-awaited era of open skies in Africa.

Pilot scheme

Kenya and Ghana were among the 15 African states that last week in Dakar signed up to pilot a scheme to test operation of air services under SAATM. Under existing restrictions such flights would operate under fifth-freedom rights on terms agreed on in a bilateral air services agreement.

According to Julius Thairu, Kenya Airways chief commercial and customer officer, the new connection “will offer our guests more travel and connectivity options within West Africa. Strategically, the bigger picture is to support the Single African Air Transport Market and the African Continental Free Trade Area, which are key pillars for Africa’s growth, by growing and deepening our network connections within the continent.”

KQ hopes to tap into existing demand from corporate travellers, traders as well as leisure travellers between Ghana and Senegal to support the service, which will be the first direct connection between the two west African capitals.

The proposed flights will be available twice a week. The outbound leg (KQ514) will originate in Nairobi at 21.30 local time on Tuesdays and Sundays, arriving in Accra at 12.10 local time. The leg to Dakar will commence 01.10 arriving at 04.15. The return flight KQ 515 will depart Dakar at 05.15 local time, and make one-hour a stop in Accra.

source

Kenyan flag carrier Kenya Airways has announced a new service linking the capitals of Ghana and Senegal starting this December 11. This is the first sign that African governments are […]

Continue reading "Kenya Airways targets corporate travel in new Ghana-Senegal flights"

Kenyan court quashes law allowing home buying with pension savings

The Kenyan government’s plan to accelerate its affordable housing agenda has suffered a setback in court after a judge quashed a law that allows members of retirement schemes to use a portion of their savings to purchase residential houses.

The court also stopped the implementation or enforcement of the amendments introduced to the Retirement Benefits Act No. 3 of 1997, which allowed the retirement benefits industry to help fill the housing gap.

Justice Anthony Ndung’u found that the amendment to the law was achieved through an irregular and flawed parliamentary process because MPs failed to allow public participation in the enactment process.

The amendment was introduced through the Tax Laws Amendment Act 2020, which came into effect on April 25, 2020, and the objective was to cure the large housing gap.

Boost home ownership

The Kenyan government’s aim in amending the law was to boost home ownership and lift the sluggish property market by enabling members of retirement schemes to purchase and own homes using their savings.

Changes to pension laws were also meant to make it easier for individuals to buy their first homes given that most Kenyan households are unable to raise the minimum house purchase deposit or afford the typical monthly mortgage payments.

To bring the amended law into force, former Treasury Cabinet Secretary Ukur Yatani published the Retirement Benefits (Mortgage Loans) (Amendment) Regulations, 2020 showing the rules and limits for accessing pension savings for home purchase. The regulations were published on September 14, 2020.

Pensioners were allowed to use up to Sh7 million ($57,000) or a maximum of 40 percent of their retirement savings to buy a home from an institution or real estate investors.

An institution was defined in the regulations to include banks, mortgage or financial institutions, building societies, microfinance institutions, the National Housing Corporation, institutions approved by the Retirement Benefits Authority or any other entity offering a residential house for sale.

source

The Kenyan government’s plan to accelerate its affordable housing agenda has suffered a setback in court after a judge quashed a law that allows members of retirement schemes to use […]

Continue reading "Kenyan court quashes law allowing home buying with pension savings"

Uganda seeks Kenya partnership in deal to boost tourist numbers

Uganda’s tourism players are reaching out to Kenya in a controversial bid to help bridge market access challenges for Kampala’s hospitality offers.

The players in Kampala see Kenya’s coastal exposure to the world as a starting point where tourists arriving in Kenya can go on to visit Uganda on the same visa while using Uganda Airlines as a connecting carrier.

But that could bring new threats to Kenya’s own local sites, as well as affect market share for Kenya Airways, which has for years dominated the Kenya-Uganda route.

Mutual benefit

But if this plan works, the proponents argue, Kenya and Uganda will mutually benefit, with Uganda profiting from Kenya’s networks to attract visitors. Kenya in the meanwhile will have its tourists visit Ugandan sites at a discounted price, which stakeholders say could break monotony for repeat clients who have explored Kenya.

Alex Tunoi, the regional manager in charge of domestic and Africa tourism at the Kenya Tourism Board (KTB), said they are aware of the proposed deal, but downplayed its potential to eat Kenya’s lunch.

“East Africa market has great tourism potential for Kenya; with a population of over 200 million, a growing middle class, improved infrastructure and relaxation of travel restrictions. KTB is focused on growing arrivals from the region,” he told The EastAfrican.

“Investment in these markets is bearing fruit with both Uganda and Tanzania emerging among top 10 key sources markets for the destination.”

Lucrative packages

According to the Uganda Tourism Board (UTB) Kampala will offer lucrative packages to tourists arriving at Kenya’s coastal sites to explore its natural, adventure, leisure, business and cultural attractions.

Uganda intends to balance trade with Kenya by working with coastal tourism stakeholders to tap into Kenya’s booming beach tourism.

The first package is set to go online later this year after deliberations from a conference between Uganda and Kenyan on November 17.

“The partnership will ensure thousands of tourists visiting either Kenya or Uganda move freely between the two countries. The tourists can have breakfast at the beach and lunch in a safari in Uganda,” said Paul Mukumbya, Uganda’s Consul-General in Mombasa.

“The November conference in Mombasa will explore Uganda, ‘the Pearl of Africa,’ to give overview of the tourism attractions as well as specifying the investment opportunities in the tourism sector in Uganda and Kenya,” he said.

Eased travel requirements

The two countries are banking on eased regional travel requirements for EAC citizens to improve the balance of trade by jointly promoting beaches and parks in the region.

Citizens of the two countries can use their national identity cards to cross borders while international tourists will use the East Africa single visa to tour the two destinations.

Besides, both countries belong to the one-tourism visa programme that also includes Rwanda. Tourists arriving in one country can use the same tourist visa to cross to the other.

The challenge in the past has been the transportation connectivity.

The plan now is to use Uganda Airlines to connect tourists from Mombasa to Entebbe but once Kenya Airways starts direct flights from the coastal city, Kenya Coast Tourist Association chairman Victor Shitakha says people will have more options.

Packages for bus trips

Uganda Airlines flies between Mombasa and Entebbe three times a week. However, officials say other airlines will not be locked out and they will go as far as selling packages for bus trips.

“The move will create networks and synergies and we are not in competition but we complement each other, where we shall come up with packages marketed together [and] sell both safari and beaches as one package. We are working with Kenya Tourism Board to make it happen,” said Mr Shitakha.

Kenya remains Uganda’s biggest source market for tourists in the region, accounting for 29 per cent of total arrivals in 2018, the highest figure reported before the Covid-19 pandemic, according to figures by the Tourism Research Institute.

Rising numbers

At least 95,000 Kenyans visit Uganda every three months, according to the Ugandan Consulate in Mombasa. It expects this figure to rise.

Last year, Kenya received 870,465 tourists compared to 567,848 in 2020, with the US leading as the major tourist source with 136,981 arrivals, followed by Uganda (80,067), Tanzania (74,051), the UK (53,264) and India with 42,159 visitors.

Before the pandemic, Uganda received over 1.5 million tourists in 2019 and registered over 512,000 travellers in 2020. However, the country’s tourism industry is poised for recovery with renewed emphasis on intra-African travel market as a key marketing strategy.

In 2019, the Tourism sector contributed 7.7 per cent of Uganda’s gross domestic product and created over 667,000 jobs.

Tourism data from 2019 shows that its top three Africa source markets include Rwanda (32 per cent), Kenya (24 per cent) and Tanzania at six per cent.

source

Uganda’s tourism players are reaching out to Kenya in a controversial bid to help bridge market access challenges for Kampala’s hospitality offers. The players in Kampala see Kenya’s coastal exposure […]

Continue reading "Uganda seeks Kenya partnership in deal to boost tourist numbers"

Kenya’s central bank directs lenders to forego half of $246 million digital loans

At least 4.2 million Kenyans who failed to pay Ksh30 billion ($246 million) they borrowed from banks, microfinance and mortgage finance companies digitally have been handed relief, after the Central Bank of Kenya (CBK) rolled out a framework to slash the burden by half.

The CBK on Monday said the credit repair framework, to be undertaken by commercial and microfinance banks, and mortgage finance companies until the end of May 2023, will see the lenders forego at least Ksh15 billion ($123m) the borrowers owe them as they discount the loans by 50 percent.

“Through the framework, the institutions will provide a discount of at least 50 percent of the non-performing digital loans outstanding as at end of October 2022, and update the borrowers credit standing from non-performing to performing.

“The institution will then enter into a repayment plan with the borrowers for a period of up to May 31, 2023, for the balance of the loan. Upon expiry of the framework, the credit standing of the borrowers with respect to these loans will depend on their repayment performance during the six-month period,” the CBK stated.

The CBK said the objective of the framework is to improve the credit standing of mobile phones digital borrowers who had been reported to Credit Reference Bureaus (CRBs), for failing to service loans they borrowed using mobile phones.

It covers all loans with a repayment period of 30 days and below that were listed as non-performing by end of October 2022.

“It is anticipated that the framework will enable over 4.2 million mobile phone digital borrowers, adversely listed with CRBs, to repair their credit standing. The total value is approximately Ksh30 billion, equivalent to 0.8 percent of the gross banking sector loan portfolio of Ksh3.6 trillion ($29 billion) at end of October 2022,” the financial services sector regulator stated.

The CBK said most of the affected borrowers were individuals and small businesses that were heavily impacted by the Covid-19 pandemic, which increased their inability to pay after they lost jobs and businesses.

“The adverse effects of the pandemic continue to linger for the covered borrowers. Accordingly, the framework is expected to enable this segment of borrowers to access credit and other financial services as they rebuild their lives and livelihoods,” the CBK stated.

The framework will expire on May 31, 2023, and meanwhile, the lenders have been asked to contact the borrowers and provide them with further details of the framework.

source

At least 4.2 million Kenyans who failed to pay Ksh30 billion ($246 million) they borrowed from banks, microfinance and mortgage finance companies digitally have been handed relief, after the Central […]

Continue reading "Kenya’s central bank directs lenders to forego half of $246 million digital loans"

KCB floats first Islamic bond worth $4.4 million in Tanzania

KCB Bank Tanzania has floated its first Islamic bond worth Tsh10 billion ($4.4 million) to fund its Sahl banking asset portfolio.

The Sharia-compliant paper was opened on November 9 and closes on December 5.

“KCB Fursa Sukuk provides opportunities for Tanzanian and non-Tanzanian individuals, retailers, corporations and institutions to invest in the capital markets for three years at an expected return of 8.75 per cent per annum, quarterly,” KCB Tanzania managing director Cosmas Kimaro said in a statement.

The minimum initiation investment is set at Tsh500,000 (about $218).

The bank will list the paper on the Dar es Salaam Stock Exchange after the ongoing initial public offer.

KCB joins NMB Bank and the National Bank of Commerce in offering bonds this year.

NMB floated its Tsh25 billion ($10.9 million) Jasiri bond to finance women-led businesses, with NBC’s Twiga bond targeting to raise Tsh300 billion ($131 million) for funding small and medium enterprises.

source

KCB Bank Tanzania has floated its first Islamic bond worth Tsh10 billion ($4.4 million) to fund its Sahl banking asset portfolio. The Sharia-compliant paper was opened on November 9 and […]

Continue reading "KCB floats first Islamic bond worth $4.4 million in Tanzania"

Kenyans’ visa-free stay in S. Africa comes with costs if one overstays

Kenyans planning to travel to South Africa will from January next year enjoy a visa-free stay of up to 90 days per calendar year, but those who overstay their welcome, or enter illegally will pay a huge penalty.

On Wednesday, Kenyan President William Ruto and his South African counterpart Cyril Ramaphosa witnessed an agreement that could end decades of complaints from Nairobi on immigration policies by South Africa.

It means that Kenyans will no longer need to apply for e-visas or regular visas before travelling to South Africa for business or tourism. The tradition has been that Kenyans apply for a ‘free’ visa from an agent of the South African High Commission who charges an ‘application fee’ to handle the paperwork. The visa often comes out after four working days.

With the new agreement, all Kenyans will need is an invitation and return ticket, as well as proof of vaccination for yellow fever and Covid-19; and proof of financial ability to stay in South Africa during the intended duration for tourists.

“This has been a challenge that has been with us for many years. Under the new dispensation, we can build a greater relationship,” said President William Ruto at a joint press conference in Nairobi. His South African counterpart said the deal could take business and tourism “to greater heights.”

Deportation costs

But there is a catch: Each country will bear the cost of deporting their nationals caught overstaying. This means that a Kenyan overstaying in South Africa or caught entering illegally will be returned at the cost of Nairobi. In essence, officials said this will mean the travel filters between the two countries will be stringent, sieving out illegal immigrants, criminal suspects and all those with no paperwork taking advantage of the system.

“People who abuse the system…don’t deserve to be in South Africa, and they don’t deserve to be in Kenya,” President Ruto added.

“This agreement will be implemented to ensure the bad elements that try to infiltrate our countries are dealt with firmly and decisively.”

Age-old complaint

South Africa, by easing the visa rules on Kenya, is merely responding to an age-old complaint. And President Ramaphosa’s predecessors often dodged the bullet, accusing Kenya of being a conduit for illegal migrants, mainly from Ethiopia and Somalia. But Ramaphosa’s regime has tried to ease things, including allowing those on student visas to renew their stays while still in south Africa and ending the need to travel back home for the same.

Ramaphosa also allowed Kenyans to transit through South African airports without a transit visa, but as long as they do not leave the airport. In the past, one needed a transit visa regardless of whether he or she would leave the airport or not. Until January next year, however, Kenyans will still need transit visas if heading to neighbouring countries via South Africa by land.

President Ramaphosa described the new ties as based on a “wonderful foundation that exists” between Nairobi and Pretoria.

Implemented fully

“We are committed to ensure that the agreements that we have signed now and in the past will be implemented fully,” he said before describing the visa issues as “thorny”.

“Our officials will speed up the processes to implement it. This dispensation will be available to Kenyans over a 90-day period in a given year, meaning that, yes, you can use the 90 days, ten days, 20 days or whatever. Kenyans will have a full 90 days to be able to visit south Africa and we would be able to review this and get reports from our ministers within a year and see how this is functioning,” he explained.

It means Kenyans must ensure their stay in South Africa does not exceed 90 days per year, cumulatively, to qualify for visa free stay.

“This will also be underpinned by other processes that we have agreed can take place: closer monitoring of the implementation process and also be able to have a return policy of those elements that would be undesirable to be able to be returned to Kenya.

“We are going to be monitoring this much more closely and we are setting in place various mechanisms to make sure that what we have agreed to is adhered to and that no one takes advantage of the agreement.”

source

Kenyans planning to travel to South Africa will from January next year enjoy a visa-free stay of up to 90 days per calendar year, but those who overstay their welcome, […]

Continue reading "Kenyans’ visa-free stay in S. Africa comes with costs if one overstays"

Kenya defers $699m loan repayments as debt pressure high

Kenya failed to meet KSh84.6 billion ($695.4 million) debt repayment obligations in the year to June due to a cash crunch and instead carried over the payments to the current fiscal year.

The public debt rose to KSh8.6 trillion ($70.7 billion) adding more burden on service costs, with more than KSh945 billion ($7.8 billion) used to pay domestic and external lenders in the 2021/22 financial year.

In its latest review of the progress on implementing projects under its 38-month credit scheme, the International Monetary Fund (IMF) said Kenya failed to pay 0.7 per cent of the country’s GDP to external creditors.

The IMF did not make public the identity of the creditors.

“A constrained borrowing environment meant that planned external commercial financing did not materialise. Lack of funds contributed to 0.7 per cent of GDP in unpaid obligations that were carried over to the 2022/23 financial year,” IMF stated.

Kenya’s GDP was Sh12.0982 trillion by 2021, according to the Central Bank of Kenya.

Debt pressures high

The IMF said while Kenya grew its tax revenue and cut budget deficits, the country’s debt pressures remained high.

The lender added that a mix of factors, including huge amounts spent on subsidising fuel, high inflation and disruptions in global supply chains drained Kenya’s efforts on growing revenue and cutting the budget deficit.

“Significant unbudgeted spending in the early months of this fiscal year, much of it for fuel subsidies, posed an additional challenge. There has been progress on fiscal adjustment needed to address debt vulnerabilities though pressure remains elevated,” the lender said.

The government cut the budget deficit from 8.2 per cent of the GDP to 6.2 per cent, during the year, while Kenya Revenue Authority (KRA) grew taxes from 12.6 to 13.7 per cent of GDP, crossing the Sh2 trillion mark for the first time.

External financing needs

Announcing a planned release of KSh52.7 billion ($4.3 billion) in lending to Kenya under the Extended Fund Facility (EFF) and Extended Credit Facility (ECF) in the coming weeks, the IMF said nearly half of the money would be prioritised to cover external financing needs due to the ongoing drought.

“Upon completion of the Executive Board review, Kenya will have access to SDR 336.54 million (equivalent to about $433 million), bringing the total IMF financial support under these arrangements to about $1,548 million,” a statement by IMF heads of the delegation to Kenya Mary Goodman and Tobias Rasmussen read.

“This latter amount includes proposed augmentation of access of SDR162.84 million to cover external financing needs resulting from drought and challenging global financing conditions.”

The IMF says the new government must continue with measures to grow revenue further while controlling spending in a bid to cut budget deficits.

Structural, governance reforms

“It will also be important to move ahead with structural and governance reforms. This includes completing efforts to publish beneficial ownership information for awarded government contracts, which will be a major step towards greater transparency and accountability,” the statement said.

“Reform of financially-troubled state-owned enterprises – including Kenya Airways and Kenya Power – will also be key.”

President William Ruto’s initial measures to do away with fuel subsidies and reinstate variable cost adjustments in electricity prices led to a rise in fuel and power prices.

Kenya’s treasury in the quarter that ended June tapped KSh40.87 billion ($336 million) from the dollar reserves the CBK received from the IMF in form of special drawing rights in August last year.

source

Kenya failed to meet KSh84.6 billion ($695.4 million) debt repayment obligations in the year to June due to a cash crunch and instead carried over the payments to the current […]

Continue reading "Kenya defers $699m loan repayments as debt pressure high"

Kenya Airways pilots call off strike after court order

The Kenya Airline Pilots Association has called off their strike notice following an earlier ruling Tuesday by the Employment and Labour Relations Court which ordered the pilots to resume work.

In a statement Tuesday night, Kalpa withdrew their strike notice and urged their members to resume duty on Wednesday, November 9, 2022, at 6 am.

“Members are also urged to report to the Executive Council any incident of victimisation or disciplinary action that may be taken contrary to the court’s orders,” Kalpa said.

The pilots association said they regretted the disruption and inconvenience to KQ guests and urged their members to immediately restore normalcy to operations.

Kalpa launched the strike at Nairobi’s Jomo Kenyatta International Airport on Saturday, defying a court order issued last week against the industrial action.

Return unconditionally

Labour Relations Court judge Anna Mwaure on Tuesday ordered “the Kenya Airways pilots to resume their duties as pilots by 6am on November 9, 2022, unconditionally”.

Kenya Airways later welcomed the court’s decision.

“We thank the court for the expeditious ruling that now allows KQ to resume its normal operations. We commit to complying with the court’s directions,” said a statement by Allan Kilavuka, the Group Managing Director and CEO of Kenya Airways.

Transport Cabinet Secretary Kipchumba Murkomen had also during the day also welcomed the court order.

He urged the airline not to victimise any pilot who took part in the strike.

“The past 4 days have been difficult for Kenya’s aviation industry due to the strike by the Kenya Airline Pilot Association (Kalpa). We convey our sincere apologies to travellers and cargo customers affected by the strike,” he said in a statement to newsrooms.

“I also urge the management of Kenya Airways to obey the court order barring the victimisation of any of the pilots who participated in the strike,” Mr Murkomen said.

He said a prolonged strike would have not only forced the closure of the airline which was losing over Sh300 million a day but also negatively impacted over 18,000 lives that depend on the airline.

“In the past 3 days, this strike has disrupted travel plans for over 12,000 customers across KQ network, forced the cancellation of over 300 flights and affected 3,500 other employees who were not part of it,” Murkomen said adding that the national government is committed to the well-being of the airline.

source

The Kenya Airline Pilots Association has called off their strike notice following an earlier ruling Tuesday by the Employment and Labour Relations Court which ordered the pilots to resume work. In […]

Continue reading "Kenya Airways pilots call off strike after court order"

Kenya makes public SGR contract which gives China sweeping powers

The standard gauge railway (SGR) contract signed by Kenya gives sweeping powers to its Chinese lenders, including requiring arbitration of any dispute to be held in Beijing, documents released by the government after years of secrecy have shown.

In the contract, which helped retired President Uhuru Kenyatta build what was Kenya’s most expensive infrastructure project, Kenya was bound to keep the details of the deal under lock and key, the reason why authorities, including the former Head of State, refused to make the contract public even after a court order.

The contract was Sunday made public by Transport and Infrastructure Cabinet Secretary, Kipchumba Murkomen, ending years of speculation on what the country signed.

But while Mr Murkomen shared the contract, which he said will be tabled in Parliament, details of the collateral Kenya put up—reported by the media, led by the Nation, as being the Port of Mombasa and other assets of the Kenya Port Authority—were missing.

In the documents shared by Mr Murkomen, China was to lend Kenya $1.6 billion at 2 percent interest per annum, with a 0.25 percent commitment fee.

Taxpayers paid a management fee of $4 million 30 days after the signing of the contract.

The SGR deal, the contract shows, is a 20-year loan with a seven-year grace period. Kenya was to repay the amount in 156 months (13 years), and was to dedicate 42.06 per cent of the proceeds from the railway to repay the loan.

For the Nairobi -Naivasha route, Kenya inked a $1.2 billion in a 20-year loan facility.

Kenya was required to pay $137.59 million as insurance fees.

The contract also confirms fears that Kenya had been bound to seek resolution—in case of a dispute—only in China, which experts have said gives the Asian nation a big advantage.

“If no settlement is reached through friendly consultation, each party shall have a right to submit a dispute to the China International Economic and Trade Arbitration Committee for arbitration …” the contract states.

In the deal, Kenya was bound to establish an inland container depot in Nairobi “and its mandatory customs clearance” as well as a Railway Development Fund, that China had said should be established “to be applied in priority to make repayment of loans in relation to the project”.

The contract also demanded that Kenya first approaches China to purchase any goods from the proceeds of SGR, before going to any other market.

Also read: Samia’s basket of goodies from China

The deal, which was signed by former Treasury Cabinet Secretary Henry Rotich and Li Ruogu, the President of the Export and Import (Exim) Bank of China, also precludes Kenya from sharing its details.

“The Borrower shall keep all the terms and conditions hereunder in connections with this Agreement strictly confidential. Without the prior written consent of the Lender, the Borrower shall not disclose any information hereunder or in connection with this Agreement to any third party unless required by applicable law,” the deal reads.

During his vetting in Parliament, Mr Murkomen had promised to make the SGR contract public, saying Kenyans had the right to know what the government signed on their behalf.

‘Never seen’

“I have spoken to everybody whom I thought was a person of influence in government and privy to the SGR contract but they have said they have never seen the SGR agreement. I don’t want to name those I spoke to, but once I get into the office, I will look for it,” Mr Murkomen said.

Following exclusive reporting by the Nation on the SGR contract in 2020, especially on the collateral Kenya put up, the Chinese Foreign Ministry Spokesperson Hua Chunying said: “We have checked with the relevant Chinese financial institution and found that the allegation that Kenyan side used the Mombasa Port as a collateral in its payment agreement with the Chinese financial institution for the Mombasa-Nairobi Railway is not true.”

Since President Kenyatta promised on live television to make public the SGR contract in 2019, the government has been playing hide and seek with Kenyans on the matter, with the country left in the dark on just what it signed and what the Chinese were guaranteed in the process.

In January this year, the government, following a court order, cited a non-disclosure agreement with the Chinese lenders for its refusal to make the contract public. It argued that the contract contains non-disclosure clauses and its release would endanger national security and injure relations with China.

Also read: Hard times for Kenya SGR as port operations return to Mombasa

Then Transport Principal Secretary Dr Joseph Njoroge said in January 2022 court documents that agreements entered between Kenya and Chinese contractors over the construction of the SGR have non-disclosure clauses.

In the case, activists Khelef Khalifa and Ms Wanjiru Gikonyo sought to have all contracts, agreements and studies related to the construction and operations of the SGR made public. They argued that keeping the documents confidential violates the law and discourages transparency in governance.

In May, Justice John Mativo ruled that public officers have a constitutional duty to make information available to Kenyans saying that any restriction on access to information from the government must have a genuine purpose and demonstrable effect of protecting a legitimate national security interest.

“It is clear that the respondents’ attempt to hide behind the provisions of sections 3(6) & (7) of the Official Secrets Act flies in the face of Article 35, section 29 of the Access to Information Act and falls to be rejected,” ruled Justice Mativo.

The judge argued that there are no two systems of law regulating access to information held by public bodies.

Most expensive projects

Mr Khelefa and Ms Gikonyo had, in the case, argued that documents related to the SGR project and its financing have never been made public despite being one of the most expensive projects undertaken by the government.

“SGR is the largest capital-intensive infrastructure project ever constructed in the country, but despite this extraordinary expenditure of public funds, the project has been undertaken with controversy and secrecy from its inception,” they argued.

source

The standard gauge railway (SGR) contract signed by Kenya gives sweeping powers to its Chinese lenders, including requiring arbitration of any dispute to be held in Beijing, documents released by […]

Continue reading "Kenya makes public SGR contract which gives China sweeping powers"

RwandAir starts non-stop flights to London

Rwanda’s national flag carrier RwandAir has launched direct flights between Kigali and London, England, shortening the flight time for travellers between the two cities as the airline seeks to expand its service portfolio.

The new direct flight replaces the existing service between London and Kigali, launched in 2017, with one stop in Brussels, Belgium.

The inaugural flight left Kigali Sunday afternoon and landed in London Monday morning.

The carrier said there would be four direct flights weekly from Kigali to London – Sunday, Tuesday, Thursday and Saturday – with return flights on Monday, Wednesday, Friday and Sunday.

The direct flight will also help the carrier link travellers from London “via Kigali to a wealth of destinations in Africa, the Middle East, and Asia,” it said in a tweet just before the first flight left for London.

“The UK is an incredibly important market for us, and we know our customers will value the shorter flight times and increased connections that will be offered by the new service,” Yvonne Makolo, RwandAir’s chief executive, said last month while announcing the direct flights’ plan.

RwandAir is ranked among the best ten African airlines by British airline review and rating company Skytrax. It currently serves 28 routes across East, Central, and Southern Africa, the Middle East, Asia, and Europe, from Kigali International airport, its hub.

source

Rwanda’s national flag carrier RwandAir has launched direct flights between Kigali and London, England, shortening the flight time for travellers between the two cities as the airline seeks to expand […]

Continue reading "RwandAir starts non-stop flights to London"

Death toll rises to 19 after Precision Air plane plunges into Lake Victoria in Tanzania

The death toll from Sunday’s plane crash in Tanzania has jumped to 19, Prime Minister Kassim Majaliwa said, after the Precision Air flight with dozens of passengers aboard plunged into Lake Victoria while approaching the northwestern city of Bukoba.

“All Tanzanians are with you in mourning the 19 people who lost lives during this accident,” Majaliwa told a crowd after arriving at Bukoba airport, where the flight had been scheduled to land from financial capital Dar es Salaam.

Regional authorities earlier said that 26 survivors out of the 43 people on board flight PW 494 had been pulled to safety and taken to hospital in the lakeside city.

But Precision Air, a publicly-listed company which is Tanzania’s largest private carrier, said in a statement that 24 people had survived the accident, with an airline official telling AFP that the other two hospitalised patients were not aboard the plane to begin with.

“There are two people who were injured during rescue efforts who have been counted as survivors but they were not passengers,” he said on condition of anonymity.

The airline said it had dispatched rescuers and investigators to the scene and expressed its “deepest sympathies” over the accident, which occurred at around 08:53 am (0553 GMT) on Sunday.

The company said the aircraft was an ATR 42-500, manufactured by Toulouse-based Franco-Italian firm ATR, and had 39 passengers — including an infant — and four crew members on board.

Video footage broadcast on local media showed the plane largely submerged as rescuers, including fishermen, waded through water to bring people to safety.

Emergency workers attempted to lift the aircraft out of the water using ropes, assisted by cranes as residents also sought to help.

President Samia Suluhu Hassan expressed her condolences to those affected by the accident, saying: “We pray to god to help us.”

The disaster ranks among the deadliest plane crashes in the East African nation’s history.

Condolences

The US embassy in Dar es Salaam released a statement, paying tribute to “the heroic efforts of first responders, especially ordinary citizens who helped rescue victims.”

The African Union Commission chair Moussa Faki Mahamat also shared his condolences, as did the secretary general of the regional East African Community bloc, Peter Mathuki.

“Our hearts and prayers go to the families of passengers on-board a plane that crashed into Lake Victoria, with our full solidarity to the Government & people of #Tanzania,” Faki wrote on Twitter.

“The East African Community joins and sends our condolences to Mama Samia Suluhu Hassan, families and friends of all those who were affected by the Precision Air plane accident,” Mathuki said, also on Twitter.

Precision Air, which is partly owned by Kenya Airways, was founded in 1993 and operates domestic and regional flights as well as private charters to popular tourist destinations such as Serengeti National Park and the Zanzibar archipelago.

The accident comes five years after 11 people died when a plane belonging to safari company Coastal Aviation crashed in northern Tanzania.

In March 2019, an Ethiopian Airlines flight from Addis Ababa to Nairobi plunged six minutes after take-off into a field southeast of the Ethiopian capital, killing all 157 people on board.

The disaster, five months after a similar crash in Indonesia, triggered the global grounding of the Boeing 737 MAX model of jet for 20 months, before it returned to service in late 2020.

In 2007, a Kenya Airways flight from the Ivory Coast city of Abidjan to Kenya’s capital Nairobi crashed into a swamp after take-off, killing all 114 passengers.

In 2000, another Kenya Airways flight from Abidjan to Nairobi crashed into the Atlantic Ocean minutes after take-off, killing 169 people while 10 survived.

A year earlier, a dozen people, including 10 US tourists, died in a plane crash in northern Tanzania while flying between Serengeti National Park and the Kilimanjaro airport.

source

The death toll from Sunday’s plane crash in Tanzania has jumped to 19, Prime Minister Kassim Majaliwa said, after the Precision Air flight with dozens of passengers aboard plunged into […]

Continue reading "Death toll rises to 19 after Precision Air plane plunges into Lake Victoria in Tanzania"

Pilots strike clouds Kenya Airways plans to raise flight frequency

Troubled Kenya Airways is facing an operational crisis as pilots down tools protesting poor working conditions. This is amid plans by the airline to raise frequency of flights and return to old routes over the festive season to take advantage of rising traveller numbers.

The Kenya Airline Pilots Association (Kalpa) said effective 6am November 5, there would be no Kenya Airways aircraft flown by its members departing from the Jomo Kenyatta International Airport.

The association is protesting a decision to suspend contributions to the provident fund, which they claim is a contractual agreement between the airline and all employees. The pilots said KQ has unilaterally stopped both the employees’ and the employers’ contribution since 2020 and has failed to resume the retirement benefits scheme.

Pre-Covid numbers

The strike now stands in the way of KQ’s plan to recover by 2023 its pre-Covid numbers of over five million passengers, recorded in 2019, through more flights and new routes.

This week, Kenya Airways increased the number of flights for the London route throughout winter, seeking to recoup numbers lost during the Covid-19 restrictions. It now flies to London 11 times a week up from five times.

“The increased flight frequencies will cater to this route’s increased demand and provide KQ customers with increased flight options in the upcoming winter season,” the airline said.

KQ also introduced direct Mombasa-Dubai flights during the festive season, targeting to reap from the traditional high demand.

“KQ will operate daily flights with two on Wednesday, Thursday, Saturday and Sunday (morning and evening). Flights are open for booking via KQ’s website, travel agents and online travel agents.”

Left with no option

But Kalpa, which represents about 400 pilots, said the Kenya Airways management had left them with no option but to withdraw labour over unresolved grievances.

“We hoped that the management of the airline would soften its hard stance and engage in a negotiation on the issues raised. However … Kenya Airways management has not made any meaningful attempt to engage,” Kalpa’s General Secretary and Chief Executive Captain Murithi Nyaga said in a statement on Friday.

Kalpa had issued a 14-day strike notice on October 19.

Board decision

Now the carrier’s management will need to first handle the strike by its pilots.

KQ management issued a statement on Friday night saying the strike will cost the airline $2.47 million a day, terming the move by the pilots as unfortunate.

KQ Chairman Michael Joseph said the airline has been working with the Ministry of Labour and the Central Organisation of Trade Unions (Cotu) to resolve grievances raised by Kalpa.

“The board has unanimously come to the opinion that none of the grievances advanced by Kalpa merits an industrial strike and firmly holds that all CBAs (collective bargaining agreements) must align with the need to restructure the airline’s operations towards profitability and efficiency,” said Joseph, suggesting KQ’s financial situation comes first when it negotiates with pilots or staff.

‘Action is unnecessary’

“We wish to reiterate that industrial action is unnecessary at this point as it will delay and disrupt the financial and operational recovery and cause reputational damage to Kenya Airways.

“The board underlines its full support and confidence in [CEO] Mr [Allan] Kilavuka and the management in handling the matters at hand and the company.”

On Wednesday, a Kenyan Labour Court had suspended the strike notice issued earlier, even though pilots insisted they would down tools if their grievances were unmet.

The national carrier has been struggling with losses over the years.

Recently it defaulted on its aircraft purchase loans worth $841.6 million from the American Exim Bank.

The Kenyan government had guaranteed $525 million and has since offered to pay the amount. KQ disputed the figure this week, even though the National Treasury had listed it in its report.

Loan default

The airline has been focused on restructuring its fleet, including selling aircrafts and sub-leasing to other airlines in an attempt to return to profitability.

Data from the airline shows that the national carrier’s fleet size reduced in the last nine months to 41 aircrafts from 43 in December 31, 2021.

Hoteliers have lauded the decision to begin flying from the Moi International Airport to Dubai during the tourism high peak period , saying it will boost the sector.

The hoteliers have been calling for an open-skies policy to allow international airlines to land at the Coast region’s largest airport.

“The announcement of KQ’s direct flights from Mombasa to Dubai from 1 December 2022 is a welcome change and brings us a step closer to the open skies policy that all tourism stakeholders are strongly advocating for,” said Kenya Tourism Board director Bobby Kamani.

“The tourism fraternity looks forward to the resumption of flights to Mombasa by Turkish Airlines, Lufthansa and the introduction of FlyDubai, to continue the momentum,” Kamani added saying their would be value from the open-skies policy.

“It is not just for tourism by way of lower air fares but for the economy as a whole with lower freight costs and an increased interest by international investors to invest in Kenya as they see the country being more accessible than ever before.”

Mohammed Hersi, the chairman of the Diani Hospitality Owners Association, lauded Kenya Airways for resuming the Mombasa-Dubai direct flights.

“The Dubai-Mombasa four times a week flight is progressive,” Hersi said.

“We can’t wait for the following – London-Mombasa even three times a week is good enough, Amsterdam-Mombasa, Milan-Mombasa to serve Malindi and Watamu and Paris-Mombasa flights.”

Players want the airline to also begin direct flights between Mombasa and Mumbai in India and Mombasa and Johannesburg.

KQ is yet to launch to the Italian cities of Milan and Rome, previously planned for June this year, due to reduced passenger demand as a result of slower than expected recovery from the pandemic.

Tourist boom

Some airlines that have asked for licences to fly directly to Mombasa include KLM, Qatar, Turkish, Fly Dubai and Emirates. Ethiopian and Uganda Airlines already fly into Mombasa directly

“If these airlines fly to Mombasa, we will have traffic to fill our beds and further create employment,” said Kenya Coast Tourism Association chairman Victor Shitakha.

In 2021, KLM announced direct flights from Amsterdam to Mombasa. But the plans were ‘halted’ after the airline failed to get rights to fly directly to the destination.

source

Troubled Kenya Airways is facing an operational crisis as pilots down tools protesting poor working conditions. This is amid plans by the airline to raise frequency of flights and return […]

Continue reading "Pilots strike clouds Kenya Airways plans to raise flight frequency"

Africa has least default rate on infrastructure projects, say leaders

African leaders have said the continent’s investment risk has been exaggerated, making investors hesitant to put their money in its development projects.

Quoting a Moody’s Analytics report on defaults on infrastructure investments, African Development Bank (AfDB) president, Dr Akinwumi Adesina, noted that Africa has the lowest default rate on infrastructure projects in the world, at 5.5 per cent.

“Africa is not as risky as you think. Perception is not the same as reality,” Dr Adesina said at the opening of the Africa Investment Forum in Abidjan, Cote d’Ivoire, on November 2.

The biggest defaulter, according the Moody’s report, is Latin America at 12.9 per cent, followed by Asia at 8.8 per cent, Eastern Europe (8.6 per cent), North America (7.6 per cent), and Western Europe (5.9 per cent).

Recovery from Covid pandemic

“Africa has shown resilient recovery from the Covid-19 pandemic. Foreign direct investment (FDI) declined from $47 billion in 2019 to $40 billion in 2020 because of Covid. Africa recovered in 2021, as FDI rose to $83 billion, doubling the flows in 2020,” he said.

Heads of state attending the forum amplified Dr Adesina’s sentiments. They included Ghana’s Nana Akufo-Addo, Zimbabwe’s Emmerson Mnangagwa, Ethiopia’s Sahle-Work Zewde and Ivorian Vice-President Tiemoko Koné.

The leaders said that having one of the world’s largest young populations, natural resources and renewable energy potential, the continent is the investment frontier in the world.

President Akufo-Addo said the African premium risk has become a huge obstacle to development as it hampers investment. Noting that the global investment environment is difficult, he said Africa has excellent returns on investment and urged businesses to take advantage of the continent’s demographic dividend to foster growth.

Electric cars

Dr Adesina said the future of electric cars in the world depends on Africa because it has the largest sources of cobalt in the world, with massive sources of lithium in Zimbabwe, Namibia, Ghana, Mali, and Democratic Republic of Congo.

“The African Continental Free Trade Area is the largest free-trade zone in the world, connecting economies worth $3.3 trillion,” he said.

The Africa Investment Forum — Africa’s premier investment marketplace now in its fourth year — helps to connect investors to Africa. The African Development Bank, the Africa Import-Export Bank, the Trade and Development Bank, the Africa Finance Corporation, the Development Bank of South Africa, the European Investment Bank, the Islamic Development Bank and Africa50 support it.

It is aimed at mobilising investments for Africa, and showcase the continent’s bankability to the world.

Investment interests

In four years, it has helped to mobilise $110 billion in investment interests to Africa, said Dr Adesina.

“The $600 million securitised finance to support the cocoa board of Ghana has helped Ghana to grow its cocoa production by one million tonnes, with infrastructure for warehousing and cocoa processing. The landmark $24 billion liquefied natural gas project of Mozambique, which was structured and closed at the Africa Investment Forum, is the largest-ever foreign direct investment in Africa. It will turn Mozambique into the third-largest exporter of natural gas in the world and add $66 billion to its economy,” he said.

The leaders have curated investment projects in renewable energy, hydropower, gas, railways, roads, and water transport, agriculture, health, mining, fertiliser manufacturing, port infrastructure and urban green transport to woo investors.

Source

African leaders have said the continent’s investment risk has been exaggerated, making investors hesitant to put their money in its development projects. Quoting a Moody’s Analytics report on defaults on […]

Continue reading "Africa has least default rate on infrastructure projects, say leaders"

Don’t mortgage countries for loans, development banks tell Africa

Development finance institutions in Africa have cautioned governments against using countries’ natural resources to back infrastructure loans, as it amounts to mortgaging their future to creditors. Instead, they want states to explore public-private partnerships to finance their development projects.

While addressing a press conference in Abidjan, Côte d’Ivoire during the African Investment Forum, executives of eight multilateral finance institutions in Africa said most states in the continent had become heavily indebted and the volatility of the global economy was making their debt situation worse, hence the need to go slow on borrowing to explore cheaper ways of financing development.

The multilateral development banks are working with wealth funds to have them finance infrastructure development.

Repaying infrastructure loans well

Led by the African Development Bank (AfDB), the organiser of the African Investment Forum, they vouched for the continent’s creditworthiness, noting that Africa has done well in repaying its infrastructure loans.

Dr Akinwumi Adesina, the AfDB president, noted that Africa has the lowest default rate on infrastructure loans in the world, at 5.5 per cent. The biggest defaulter, according Moody’s Analytics, is Latin America at 12.9 per cent, followed by Asia at 8.8 per cent, Eastern Europe (8.6 per cent), North America (7.6 per cent), and Western Europe (5.9 per cent).

“We must begin to see infrastructure as an asset to us. The issue of the risk of investment in Africa is exaggerated. The issue is not risk but the risk-adjusted return and how you manage risk,” Dr Adesina said.

“So, we must not be de-risking bias risk. In other words, perception risk is not what we should be de-risking. But we don’t want countries taking too much debt to do infrastructure, it will only make the debt situation worse for them. So they need to open up the space to the private sector and I believe strongly we must have, at the very minimum, public-private partnerships: allow the private sector in energy, transport, medical, infrastructure and so on. Let the private sector space be expanded for infrastructure.”

Build Africa’s capacity

The lenders have committed to collaborate with African governments to build the continent’s capacity for agriculture, renewable energy and manufacture of electric cars.

On agriculture, they are going to support special agro-industrial processing zones across Africa to turn agriculture into a wealth sector.

On electric cars, the banks are looking to fund value chains for the minerals making parts and batteries such as nickel, cobalt and lithium.

“We will put our resources together, technical resources in terms of technical assessment, our project development capacity here, our co-financing capacity here with others to be able to develop value chains for the batteries on the continent and attract investors to manufacture the cars,” Dr Adesina said.

Solar energy

On energy, the institutions plan to invest $20 billion to build 10,000 megawatts of solar across 11 countries, which will provide electricity for 250 million people.

“There is overconcentration of solar panel manufacturing in the world. So as Africa tries to maximise and optimise renewable energy — we have 11 terawatts of solar — so we decided collectively, that we will support designing, support and planning for the manufacturing of polysilicon and solar panels,” Dr Adesina said.

The institutions are AfDB, Africa50; Africa Finance Corporation, Africa Export-Import Bank, Development Bank of Southern Africa, European Investment Bank, Islamic Development Bank and Trade and Development Bank.

They are also pushing the International Monetary Fund (IMF) to channel the special drawing rights (SDRs) cash through them for use in infrastructure development.

“The world is going through all kinds of challenges right now. The big one, of course, is climate change, Covid-19, the war in Ukraine and what it has done in terms of energy costs, in terms of food prices, inflation… we have a big financing gap for infrastructure and there’s not a whole lot of money on the table to support developing countries. One of the ways to actually deal with this is the special drawing rights,” Dr Adesina said.

The IMF in 2021 issued $650 billion of special drawing rights, which is the highest it has ever issued. But Africa only got $33 billion out of that amount.

The multilateral lenders have been making a case for the SDRs to be given to them to fund growth and poverty reduction programmes on the continent.

“I commend the efforts of IMF for their resilient trust that they have, which is great. However, the SDR transactions will be one-to-one while multilateral development banks like ourselves can actually invest the SDR money. Now, for us, $1 of SDR will become $4 for the country. So, if you got $10 billion, that becomes $40 billion; $20 billion becomes $80 billion. So that’s the leveraging impact. That is very important for the SDR to complement the efforts of the IMF.

“And I think that this is important because as we look at global challenges, we have to ask ourselves: What is the best way to optimise the global financial architecture starting from the IMF down to multilateral financial institutions? If we leverage the SDR four times, that is money we can use to recapitalise and support the Development Bank of South Africa, the Africa Finance Corporation, Africa50, Trade Development Bank, Islamic Development Bank and others.”

But they called for transparency and accountability in the expenditure of infrastructure finance.

“It’s not just how much money you’re putting into infrastructure; it’s the efficiency of that expenditure.”

source

Development finance institutions in Africa have cautioned governments against using countries’ natural resources to back infrastructure loans, as it amounts to mortgaging their future to creditors. Instead, they want states […]

Continue reading "Don’t mortgage countries for loans, development banks tell Africa"

Tanzania exports cashew nuts to US as focus shifts to value addition

A consignment of processed cashew nuts from Tanzania to the United States left the country on Monday as the East African nation seeks to move away from exporting raw nuts to value-added ones.

The eight-tonne cargo of processed cashew nuts was dispatched to New Orleans, Louisiana via the Julius Nyerere International Airport in Dar es Salaam.

In October this year, a 20-foot container carrying 7.5 metric tonnes of branded consumer packaged cashew nuts left Mtwara for the US.

The exporter is Ward Holdings Tanzania Limited (WTH), a subsidiary of Ward Holdings International, a Michigan-based global market development and investment company.

While flagging off the cargo, Tanzania’s Deputy Minister for Agriculture Anthony Mavunde said WTH is supportive of the government’s plan to ensure that by 2025, 60 per cent of Tanzania’s cashew nuts are processed locally.

Currently, the country processes less than 10 per cent of its cashew nuts, with the remainder being exported raw.

More jobs for youth

“If our plan succeeds, it will mean increasing new industries and creating more jobs for our youth,” he said.

Mr Robert Adrian Raines, the American embassy representative, said the shipment represented the growing business relationship between Tanzania and the US. 

“This step will boost the wellbeing of cashew nut farmers and promote their crop,” he said.

WHT President Godfrey Simbeye described the occasion as a “historic moment of cashew nuts grown, harvested, and consumer-packaged in Tanzania being exported directly for the first time from farmers in Tanzania to the US marketplace”.

Mr Simbeye assured the gathering, which included business leaders, that Ward Holdings International is a reputed American market maker, which is “committed to the advancement of Tanzanian interests through industrialisation of its agriculture industry and high-value crops”.

Source

A consignment of processed cashew nuts from Tanzania to the United States left the country on Monday as the East African nation seeks to move away from exporting raw nuts […]

Continue reading "Tanzania exports cashew nuts to US as focus shifts to value addition"

Uganda’s HiPipo named among top digital innovation champions

The Global Business Leaders Magazine has named Uganda’s financial technology company HiPipo among this year’s world’s top 20 companies accelerating innovation in the digital financial services market.

Hipipo, which was the only African company on this American magazine’s list, was specifically applauded for championing digital innovation and financial inclusion across Africa under their ongoing Include Everyone programme.

“With a keen interest in women empowerment, HiPipo’s events help reduce the barriers perpetuating the gender gap by providing women with technical and business skills in digital financial services. It enables sustainable and inclusive growth and drives financial inclusion by advocating for reducing widespread interoperability issues leading to the exclusion of poor and vulnerable groups in the financial system,” the magazine noted.

Retail payment systems

Through the implementation of various initiatives, the company supports the creation of domestic and cross-border instant retail payment systems that enable wide economic growth.

The firm is also facilitating the delivery of affordable and innovative financial products to poor and vulnerable groups by advocating for use of digital financial services to support the establishment of sustainable and inclusive growth. It is also supporting fintechs and their collaborators to make it easier and cheaper for customers to engage with the formal financial inclusion ecosystem.

Other companies on the world’s top 20 list include Naborforce, Helpware, Proximity Space, Gulf Data Hub, SMT Energy and Motus Inc. The rankings looked at companies at the forefront of digital innovations across the world, with special emphasis on inclusion.

Championing inclusion

HiPipo CEO Innocent Kawooya said that appearing on such a list was a testament to the company’s 18-year journey of championing inclusion for everyone.

“It is always refreshing to see our work appreciated by reputable organisations such as the Global Business Leaders Magazine. These are indeed fruits of a dedicated team determined to change lives of people especially (those) found at the bottom of the pyramid,” Kawooya said.

Founded in 2005, HiPipo was started by a team of young enterprising minds who came together with the desire to change and excitement about billboard charts and people awards.

Promoting local music

It began by promoting local music using digital means and awards. The firm eventually started the HiPipo Music Awards in 2012.

Through their Include Everyone programme, the company first organised the Digital Impact Awards Africa in 2013, which eventually led to initiation of other programmes focused on low-income digital users, special interest groups such as women, PWDs, rural organisations and small formal and informal businesses.

Headquartered in Kamwokya, a Kampala suburb, HiPipo has conceptualised and actualised several sector-changing initiatives to put Africa’s digital innovators on the required pedestal, helping them solve problems.

These include the 40-Days-40-FinTechs and FinTech Landscape Exhibition, the Women-In-FinTech Hackathon, Summit and Incubator and one of the continent’s most distinguished awards for digital innovation – the Digital Impact Awards Africa.

Main innovations’ beneficiaries

Mr Kawooya said that these initiatives and their related activities, publications and implementations have put HiPipo among the most important conveners of the various players in the fintech and digital financial services space, with its actions and advocacy geared towards having the unbanked and the marginalised as the main beneficiaries of these innovations.

As a result, the company has attracted partners and top funders like the Bill and Melinda Gates Foundation.

“In future, we strive to continue doing our best. We are planning to implement and scale initiatives on the continent that increase the number of African women in leadership positions through efforts such as the Women-In-FinTech Hackathon, Summit, and Incubator. With financial exclusion persisting in Africa due to various reasons, HiPipo is aiming to accelerate its advocacy for the demand of creating instant and inclusive payment systems across Africa,” Mr Kawooya said.

Source

The Global Business Leaders Magazine has named Uganda’s financial technology company HiPipo among this year’s world’s top 20 companies accelerating innovation in the digital financial services market. Hipipo, which was the only […]

Continue reading "Uganda’s HiPipo named among top digital innovation champions"

Africa’s cryptocurrency market marches to its own beat

Majority of Africans in the crypto scene use cryptocurrencies for economic and commercial purposes, deviating from the trend observed in developed markets, where crypto assets are mainly used to diversify portfolios.

Trends indicate that many African youths that are unemployed or lacking economic opportunities are turning to cryptocurrencies to build and preserve wealth, while in other countries, such digital assets are used only to multiply existing wealth.

This trend reflects in the volume and nature of transactions recorded in Africa, which significantly deviates from the rest of the world, according to cryptocurrency research firm, Chainalysis’s latest Geography of Cryptocurrencies report, released last week.

In sub-Saharan Africa, small transactions, less than $1,000, accounted for 80 per cent of all transfers recorded on crypto exchanges and wallets in the past year, which is greater than any other region globally, the report reveals.

Trading ‘to make ends meet’

According to Adedeji Owonibi, founder of Convexity, a Nigeria-based blockchain consultancy, these ‘small-scale’ crypto traders are actually trading “to make ends meet.”

“We don’t have big, institutional-level traders in sub-Saharan Africa. The people driving the market here are retail,” he said in an interview, adding that cryptoasset have come to the rescue of many ‘highly educated’ Africans that cannot find jobs in the market.

“It’s a way to feed their family and meet daily financial needs.”

P2P transactions

The dramatic surge in peer-to-peer (P2P) transactions – which allow crypto users to trade directly with one another – also distinguishes the African market from the rest of the world and points to the prominence of small transactions in the continent.

P2P exchanges made up six percent of all cryptocurrency transactions in Africa, while in the next closest region, central and southern Asia, which also consists mostly of emerging markets, the share was only 3.1 percent.

Paxful, one of the continent’s leading P2P platforms, has registered a dramatic surge in transactions over the last year. In Kenya, it recorded a 140 percent rise, according to Ray Youssef, the platform’s chief executive.

According to the Chainalysis report, P2P transactions could be much more than estimated, as there are also informal dealings through group chats, for instance, that have been reported in countries like Kenya and Nigeria.

At the same time, the use of cryptocurrencies in commercial activities and remittance is also taking shape in Africa, powering crypto adoption, occasioned by dwindling local currencies and expensive transaction costs among established money transfer platforms.

Drop in rank

In the aftermath of the Ukraine crisis and other economic shocks, the report shows, many businesses that rely on international suppliers turned to crypto as a means of payment, as rapidly depreciating currencies put the dollar out of reach for several small and medium-sized enterprises.

High costs of cross-border transactions, which are sometimes as high as 20 per cent of the transaction value, is also incentivising the use of cryptocurrencies for remittance to African countries over conventional methods.

With remittances to Africa projected to grow 4.2 percent this year, according to the World Bank, the use of cryptocurrencies for that purpose is expected to grow as long as the underlying challenges persist.

“We expect cryptocurrency usage in sub-Saharan Africa to continue growing as long as residents face issues crypto has proven it can solve such as preserving savings through economic volatility and enabling cross-border transactions in places with strict capital controls,” Chainalysis said in the report.

Despite the rising number of ‘small-scale’ crypto activity, sub-Saharan Africa accounts for only 1.7 per cent of the total value of cryptocurrency received globally in the last year, with many countries in the continent dropping in rank in the crypto adoption index.

Source

Majority of Africans in the crypto scene use cryptocurrencies for economic and commercial purposes, deviating from the trend observed in developed markets, where crypto assets are mainly used to diversify […]

Continue reading "Africa’s cryptocurrency market marches to its own beat"

Nairobi moves to lift barriers on Ugandan milk, poultry products

Only the work rate of President William Ruto’s new technocrats can fulfil Kenya’s pledge to unban Uganda’s poultry and milk products into its market by unbinding the restrictions imposed last year to protect local producers.

Last week, while at a function at the Kenya Association of Manufacturers (KAM), President Ruto gave the strongest hint that he would open up the Kenyan market to Ugandan products and do away with the protectionism exhibited by his predecessor’s regime.

“Uganda should bring cheaper milk here because they can produce it more cheaply. We should (also endeavour) to add value to our milk,” he said.

The idea, the Kenyan leader argues is to allow in goods from neighbours in exchange for their opening up to ensure Nairobi benefits from the provisions of the Africa Continental Free Trade Area (AfCFTA), which it can exploit instead of quarrelling.

Value addition

“We should be adding value (to our milk), producing butter, powder for sale in the DRC, Central Africa and West Africa and we import cheaper milk from Uganda for our consumption,” said Ruto.

“Why should we quarrel with Uganda? It is because we have refused to take our rightful place in our continent. We should have taken action earlier but allowed Uganda to occupy this space. We must (therefore) have a different conversation.”

Kenya will, instead, task the Kenya Development Corporation to help producers improve the value of their products and target the broader market offered by AfCFTA.

“We now have the market infrastructure for us to take over the market in our continent. The reason our continent imports milk, powder and food is because Kenya has not taken its rightful place.”

Trade Remedies Act

But the immediate task of lifting the ban will bank on the bureaucracy involved. As is the tradition, presidential declarations do not amount to policy until the local technocrats turn around the way of doing things, in writing.

“The ban on Ugandan milk was not imposed by us (Trade) but by another ministry (Agriculture). Only they can lift the ban,” said Johnson Weru, Kenya’s Trade Principal Secretary.

“There is a specific process under the Trade Remedies Act of 2017. We have not prescribed any action under the Act and will have to sit down with Uganda under a bilateral arrangement.”

The PS hinted that trade, Agriculture and EAC Cabinet ministers will hit the road to ensure the trade bans of Ugandan milk are lifted by the end of 2022.

Road to unban milk products

Kenya’s Trade Cabinet Secretary Moses Kuria has already met and held discussions with his Ugandan counterpart Frank Tumwebaze, on the road to unbanning the milk products this week. On Thursday, Mr Kuria formally took office, providing certainty to the Ministry charged with trade policy.

But EAC issues fall under a different docket handled by new Cabinet Secretary Rebecca Miano. Successful unbanning will depend on priorities the three ministries will focus on.

The plan to lift the ban is informed by Dr Ruto’s policy and plan to open up trade in the region to increase intra trade within the EAC, which is currently below 20 percent.

Volumes matter

Trade hostilities between the two EAC partner states began brewing in December 2019, when Kenya stopped importing Ugandan milk, particularly the Lato brand. And in July 2020, Kenya followed up with a ban on Ugandan sugar, against an earlier agreement to increase Uganda’s sugar exports to Kenya.

Kenya averted the ban on the export of its agricultural produce to Uganda after Nairobi agreed to lift restrictions on imports of poultry products from the neighbouring country at the end of last year.

The bilateral talks in December discussed and resolved trade issues touching on poultry, eggs, sugar and fish.

But immediately he took over from President Uhuru Kenyatta, Dr Ruto wants to have the ban on Ugandan goods totally lifted.

Open up more markets

The East African Business Council Kenyan chapter welcomed the move by president Ruto saying it will open up more markets for Kenyan goods as well.

“The point is for neighbours to trade with each other. It is the volume of that trade that matters rather than who is selling more eggs, milk or beans to the other, otherwise we will never grow. We must open up the market so that everybody can trade freely,” said Mucai Kunyiha, EABC board member and former chairman of KAM.

“People must also be able to trade in what they are competitive in because if we have expensive milk in Kenya, then you can’t sell it to Uganda. Conversely, since Uganda has cheaper milk, we must allow them to sell to us.”

The move is likely to see milk retail cheaply on Kenyan shelves where a litre milk costs Ksh78, the highest in recent times.

Struggling dairy farms

However, he warned that it could also impact negatively on Kenya’s dairy farms that are struggling.

“We have two levels of impact. We have two levels of producers, there are producers who are not competitive in Kenya; these will be outcompeted by the regional products which is a negative impact to some people,” Kunyiha explained.

“But on the positive scale, East Africa commerce grows, because that is the whole point of regional trade. Open markets are useful for us.”

“EAC intra-trade is between five to 10 percent of each country’s capacity and needs to be boosted. However, as we worry about Uganda, what about milk from Brazil, milk powder from New Zealand?” he posed.

Source

Only the work rate of President William Ruto’s new technocrats can fulfil Kenya’s pledge to unban Uganda’s poultry and milk products into its market by unbinding the restrictions imposed last […]

Continue reading "Nairobi moves to lift barriers on Ugandan milk, poultry products"

East Africa’s economic recovery falters on debt, fiscal deficits

The increasing risk of debt distress, widening fiscal and current deficits and limited economic diversification plans in the economies of East Africa, have combined to weaken prospects for growth this year.

The African Development Bank forecasts the region’s GDP at four per cent this year, before recovering to 4.7 per cent in 2023, helped by the reopening of the economies after the Covid-19 containment measures.

However, countries are yet to achieve their pre-Covid growth levels, according to the bank’s East Africa Regional Economic Outlook 2022 released last week.

According to the report, the projected strong growth is not uniform across the wider eastern African region, with top performers being Ethiopia, Kenya, Rwanda, Seychelles, Tanzania, and Uganda.

Invasion of Ukraine

The Russian invasion of Ukraine, which has increased global food and energy prices, could further slow the economic recovery, according to AfDB.

The report reviews economic performance of 13 countries (Burundi, Comoros, Djibouti, Eritrea, Ethiopia, Kenya, Rwanda, Seychelles, Somalia, South Sudan, Sudan, Tanzania, and Uganda) over the past year with short to medium-term projections.

According to the IMF review of fuel taxes remains an option for countries seeking to deal with the high fuel prices and surging inflation in the region but this will depend with the countries’ internal revenue and expenditure policies.

Harsh, unpopular prescriptions

The fund has also backed elimination of fuel subsidies, prudent management of public resources, complete reforms of inefficient and loss-making state-owned enterprises and balanced funding plan tilted towards concessional loans to help navigate the biting economic crisis.

“The options to consider those taxes (fuel taxes) are things that countries can consider. Countries have the options to consider the domestic tax systems and reform measures taking into account the specific government policies. It is a sovereign decision they can make,” said Catherine Pattillo, the fund’s Deputy Director-in-charge of African Department.

Rising crude prices

EA’s pace of economic recovery from the pandemic faces new threats from rising crude prices and the Russia-Ukraine war that has disrupted global supply chains leading to higher food and energy prices, depreciating currencies, and falling forex reserves.

Currency depreciations have resulted in higher energy and wheat prices in local currency terms compared with the price in dollars. Also, consultants at Deloitte say EA countries are going through difficult period that will see economic decline this year, driven by political instability and unreliable rainfall that has adversely impacted agricultural yields.

The economists in the report “Resilience through tough times” show that the region’s GDP has been heavily impacted by political instability in Kenya and Ethiopia, the major economic growth drivers in the region, and reduced agricultural sector growth.

EA’s inflation is forecast to increase to 8.6 per cent in 2022 from 7.7 per cent in 2021 driven by elevated global food and energy prices, amid Russia’s invasion of Ukraine.

According to the World Bank’s latest Commodity Markets Outlook report released last week the weakening of currencies of most developing economies is driving up food and fuel prices in ways that could deepen the food and energy crises.

Elevated prices of energy commodities that serve as inputs to agricultural production have been driving up food prices, with food inflation in Africa averaging between 12 and 15 per cent.

Globally, energy prices are forecast to still be 75 per cent above their average over the past five years , next year while the price of Brent crude oil is expected to average $92 a barrel in 2023 — well above the five-year average of $60 a barrel.

“The forecast of a decline in agricultural prices is subject to an array of risks,” said John Baffes, Senior Economist in the World Bank’s Prospects Group.

Globally, inflation is expected to increase to 9.2 per cent in 2022 from 5.3 percent in 2021 largely attributable to the high energy and food inflation that is a result of negative spillover stemming from the Russia-Ukraine conflict.

Source

The increasing risk of debt distress, widening fiscal and current deficits and limited economic diversification plans in the economies of East Africa, have combined to weaken prospects for growth this […]

Continue reading "East Africa’s economic recovery falters on debt, fiscal deficits"

Troubled carrier KQ defaults on $841m aircraft acquisition loan

Kenya Airways has defaulted on a $841.6 million loan from the American Exim Bank for purchase of aircraft, the National Treasury has said.

In its latest Annual Debt Management Report (2021/2022 fiscal year) that the loss-making national carrier secured the loan with a security from the national government but failed to repay.

Of the 841.6 million, the government guaranteed $525 million.

“Kenya Airways defaulted on both the guaranteed portion of the loan amount as well as the non-guaranteed portion,” the National Treasury says.

“The National Government is in the process of novating the debt to be finalised during 2022/2023 fiscal year.”

Original contract extinguished

Novation is the process by which an original contract is extinguished and replaced with another, under which a third party takes up rights and obligations duplicating those of one of the parties to the original contract. This means that the original party transfers both the benefits and burdens under the contract.

KQ’s loan from the Exim Bank of USA was meant to purchase seven aircraft and one engine.

“The Covid-19 pandemic containment measures adversely affected the airline business globally including KQ. Government intervention included, among other financial support, the settlement of the guaranteed debt extended to KQ,” National Treasury’s director in charge of debt management, Dr Haron Sirma told The EastAfrican.

KQ chief executive Allan Kilavuka however disputed the Treasury figure when reached by The EastAfrican.

“The value you quote for the US Exim facility is not correct; $485 million is what relates to the US Exim guaranteed debt. I don’t have the context… maybe they have included other guarantees, not just the US Exim facility,” he said.

Negotiated moratoria

He said that due to Covid-19, when it reduced operations, KQ negotiated moratoria.

“The airline is yet to get back to full operations and has requested GOK (Government of Kenya) to support on the guaranteed loan to avert the possibility of the loan going into default.”

Treasury says it will closely monitor contingent liabilities arising from state-owned enterprises, as they pose major fiscal risks to the economy.

KQ is 48.9 per cent owned by the government and a group of 10 local banks which own 38.1 per cent of the shares.

Other shareholders include KLM Royal Dutch Airline (7.8 percent), employees (2.4 percent) and other shareholders at 2.8 per cent.

Push for restructuring

The government has been pushing for the restructuring of the airline on the back of state bailout plan.

Under the plan the airline is required to reduce its network, operate a smaller fleet and possibly reduce its workforce further.

As a result the airline has focused on restructuring its fleet including selling planes and sub-leasing to other airlines in an attempt to return to profitability.

Data from the airline shows that the national carrier’s fleet size narrowed in the last nine months to 41 aircraft from 43 in December 31 2021 after two leased aircraft (Embraer 190) were returned to the lessor following the expiry of their leases.

Of the 41 aircraft, 18 are owned/financed by the airline itself while 23 are on lease arrangement.

Its fleet size dropped to 39 in the year 2017 from a high of 52 in 2015, before rising to 43 in 2021.

Renegotiating lease contracts

The airline is renegotiating aircraft lease contracts with the lessors as part of a string of austerity measures to reduce operating costs.

Other measures rescue measures include engagement with principal shareholders (government) for financial support, engagement with key suppliers and financiers for moratoria, freeze on non-critical spending and implementation of temporary salary cuts for staff.

KQ has also increased focus on cargo business and has already converted two passenger aircraft to cargo freighters.

Source

Kenya Airways has defaulted on a $841.6 million loan from the American Exim Bank for purchase of aircraft, the National Treasury has said. In its latest Annual Debt Management Report […]

Continue reading "Troubled carrier KQ defaults on $841m aircraft acquisition loan"

Kenya’s KCB Bank now eyes Ethiopia financial market

Kenya’s KCB Bank on Thursday expressed its desire to engage in the Ethiopian financial sector, becoming the latest bank to show such an interest in Africa’s second most populous country with an estimated population of 120 million people.

The expression of interest comes after a delegation of senior executives from KCB Bank, including the bank’s CEO, finance officer and secretary, visited the Ethiopian Investment Commission (EIC) in Addis Ababa where they held talks with Ethiopian finance officials.

The delegation commended the Ethiopian government’s recent decision to open up the financial sector to foreign investors.

Temesgen Tilahun, Deputy Commissioner of EIC, briefed the delegation about the investment policies, recent economic reforms and the objective of opening up the financial sector to foreign investors.

Landmark decision

In September, Ethiopia’s Council of Ministers passed a landmark decision to open up the country’s banking sector to foreign investors.

The first ever move was a part of the government’s economic reform that is opening previously state-controlled sectors to foreign investors.

The National Bank of Ethiopia (NBE) has been working on amending the law and regulatory system in a bid to change the banking policy.

According to the prime minister’s office, opening the sector to foreign investment is expected to support banking services in Ethiopia and would take the country’s economic link with the international market to “a higher level”.

Bring efficiency

The move would also bring about competitiveness and efficiency in the financial sector while boosting the inflow of foreign capital and job opportunities, the council observed.

According to NBE, the financial sector has shown strong growth in the last four years, during which the number of commercial banks increased from 18 to 30, and their branches reached 8,944 from 5,564 as of June 30, 2022.

The total assets of banks also grew from 1.3 trillion Birr ($242 billion) to 2.4 trillion Birr ($446.8 billion), registering a 92 per cent growth. 

Their cumulative annual net profit has jumped by 122 per cent to 49.9 billion Birr ($9.3 billion) in the recently concluded financial year as compared to 2019.

Get ready for competition

The fact that Ethiopia has closed its doors to foreign banks has benefited the sector until now, Prime Minister Abiy Ahmed told lawmakers in February.

“But after this, banks need to prepare themselves with modern ways and information technologies,” he added.

KCB’s interest to enter the Ethiopian finance sector also comes as Kenyan banks are threatened by another crisis triggered by the deteriorating economic environment and the persistent Russia-Ukraine military conflict after demonstrating strong recovery from the economic falling-out effects of the Covid-19 pandemic.

KCB has over 125 years of experience in the banking sector and is operating in seven East African countries, according to EIC.

Source

Kenya’s KCB Bank on Thursday expressed its desire to engage in the Ethiopian financial sector, becoming the latest bank to show such an interest in Africa’s second most populous country […]

Continue reading "Kenya’s KCB Bank now eyes Ethiopia financial market"

Weakening economy pushes Kenyan banks to brink of fresh crisis

Kenyan banks are teetering on the brink of another crisis triggered by the deteriorating economic environment and the persistent Russia-Ukraine military conflict after demonstrating strong recovery from the economic fallout effects of the Covid-19 pandemic.

The lenders, who were handed a severe blow by the Covid-19 pandemic, started 2022 on a strong footing, posting double-digit profit growth in the six months to June 30, with majority announcing resumption of dividend payment to shareholders.

The lenders’ growth in profitability was largely buoyed by increased revenues from banking transactions (non-interest income) and interest income from heavy investments in government securities.

On average the industry’s gross earnings rose 9.3 percent to Ksh62.6 billion ($517.35 million) from Ksh57.3 billion ($473.55 million) in the period, according to data from the central bank.

However, the impressive performance came under a weakening economy whose growth in the second quarter (April-June) of the year fell to 5.2 per cent compared to 11 per cent in the same period last year.

Risks in the economy

The industry lobby Kenya Bankers Association (KBA) said risks in the economy – including skyrocketing inflation, weakening currency, falling forex reserves and falling revenue collections – could filter into the banking sector dampening prospects for the entire year.

Kenya inflation for September rose to 9.2 per cent from 8.5 percent in August fuelled by fuel and food prices.

Meanwhile the shilling has plunged to a record low of Ksh121 against the US dollar, exacerbating imported inflation and pushing the cost of servicing foreign debts beyond the roof.

Revenue targets

The Kenya Revenue Authority has a failed to meet its prorated revenue targets three months into the 2022/2023 fiscal year largely due to the deteriorating business environment and inflationary pressures that have forced consumers to cut on spending.

Cumulatively, the taxman has collected Ksh465.2 billion ($3.84 billion), or 22.5 percent of the original estimates of Ksh2.07 trillion ($17.1 billion) and 89.8 percent of the prorated estimates of Ksh518 billion ($4.28 billion).

President William Ruto’s administration ascended to power on the platform of economic recovery and empowerment of the economically disadvantaged majority.

The president has ordered expenditure cuts of up to Ksh300 billion ($2.47 billion) and austerity measures to ride the economic tsunami.

Concessional borrowing

Last week, National Treasury Cabinet Secretary nominee Njuguna Ndung’u told a vetting panel that he would resort to concessional borrowing to pay off expensive domestic debts in an attempt to improve the country’s finances.

American rating agency Fitch in September said Kenyan lenders face rising asset-quality risks from weaker global and domestic conditions, but expected them to deliver strong returns in 2022.

“Kenyan banks’ sector outlook is negative, mirroring the negative outlook on Kenya’s sovereign rating. Operating conditions have worsened due to high inflation, risks to growth from global shocks and the harsh domestic drought,” the agency said

The asset quality of the lenders has deteriorated, with non-performing loans ratio at 14.7 percent during the six months to June 30, much weaker than the regional average.

“We anticipate continued asset-quality pressures, mainly from the small and medium-sized enterprises (SMEs) and retail loan books, which is likely to push up credit costs and increase risks to the banks’ performance,” said Fitch.

Higher rates

In September, the central bank increased the benchmark lending rate to 8.25 percent from 7.5 percent signalling a regime of higher interest rates as the regulator attempted to fight inflation compounded by the government’s move to abolish subsidies on food and fuel.

As a result several lenders such as Standard Chartered Bank Kenya, Housing Finance, Stanbic bank (Kenya) and NCBA Group have notified customers that their cost of loans will rise from October.

According to Fitch the rising rates and yields on government securities could be positive for the lenders’ pre-impairment operating profit, which will provide a large buffer for likely higher credit costs.

According to the central bank, the total lending increased by only 3.3 percent in the first half of the year to Ksh3.5 trillion compared to Ksh3.4 trillion in the same period last year, attributable to an increase in credit granted for working capital and loans granted to individual borrowers, analysts at Cytonn Investments Ltd said.

Fitch-rated Kenyan banks remain constrained by Kenya’s sovereign rating (B+/Negative), reflecting the concentration of their activities in the country and high sovereign-related exposure.

The large banks continue to build on their domestic franchise strengths through regional expansion in pursuit of diversification.

Source

Kenyan banks are teetering on the brink of another crisis triggered by the deteriorating economic environment and the persistent Russia-Ukraine military conflict after demonstrating strong recovery from the economic fallout […]

Continue reading "Weakening economy pushes Kenyan banks to brink of fresh crisis"

Kenya’s electricity consumption drops on higher prices

Electricity consumption in Kenya fell last month as users began feeling the pinch of higher energy prices on discontinued subsidies and a weakening shilling.

Data from the Energy and Petroleum Regulatory Authority (Epra) shows power use declined to 1.099 billion kilowatt-hours (kWh) in September from 1.11 billion units that were consumed in August after power prices were increased for the first time in 10 months.

Electricity use is one of the major barometers of how the economy is performing, with lower uptake signalling reduced economic activities such as manufacturing.

“Total units generated and purchased (G) including hydros, excluding exports in September 2022 (was) 1,099,340,544kWh,” said Epra Director-General Daniel Kiptoo in a gazette notice on Friday.

Fuel cost component

The drop in power consumption comes after EPRA increased the fuel cost component of the power bill by 46.6 percent leading to a sharp jump in prices.

The energy regulator raised the fuel cost charge (FCC) to Ksh6.79 ($0.056) per kilowatt-hour (kWh) of electricity up from Ksh4.63 ($0.038).

Epra also nearly doubled the Foreign Exchange Fluctuation Adjustment (Ferfa) to Ksh1.36 ($0.011) up from 73 cents ($0.006) to cater for the weakening of the Kenyan shilling against the greenback.

This was the first time Epra has adjusted the rates since December.

The new prices came after the government ended its subsidy on electricity.

Further, consumers are also paying more for electricity this month after Epra raised the FCC for the second month in a row thus higher bills.

Epra has increased the FCC to Ksh7.09 ($0.058) per kilowatt-hour (kWh) up from Sh6.79 last month.

The latest rise in the fuel component of electricity brings that cost element close to its record high in a month of Ksh9.03 ($0.075) per kWh that was set in June 2012.

Epra has also raised Ferfa by 8.8 per cent to Ksh1.48 ($0.012) per unit up from Ksh1.36 ($0.011) per unit last month after the Kenyan shilling continued to weaken further against the US dollar.

“Pursuant to Clause 1 of Part III of the Schedule of Tariffs 2018, notice is given that all prices for electrical energy specified in part II of the said Schedule will be liable to a fuel energy cost charge of plus 709 Kenya cents per kWh for all meter readings to be taken in October 2022,” said Mr Kiptoo in the notice.

Drop in cost of fuel

Higher power prices come despite a significant drop in the cost of fuel as the government moves to recover the money that had been used on the electricity subsidy since December.

The landed cost of petrol dropped by 10.6 per cent per cubic metre between August and September.

Meanwhile, the landed cost of diesel fell by 6.87 per cent while that of kerosene dropped by 1.82 per cent.

The higher power prices will further push up inflation, which hit a 63-month high of 9.2 per cent in September.

Source

Electricity consumption in Kenya fell last month as users began feeling the pinch of higher energy prices on discontinued subsidies and a weakening shilling. Data from the Energy and Petroleum […]

Continue reading "Kenya’s electricity consumption drops on higher prices"

Uganda, Rwanda to beat Kenya in dollar millionaires growth

Kenya will trail Uganda and Rwanda in terms of growth in the number of super-rich individuals with investible assets worth more than $100 million over the next decade, due to more conducive business environments in the two East Africa Community states.

Kenya is projected to post a 55 percent growth in the number of centi-millionaires over the next 10 years to 2032, trailing Rwanda at 70 percent and Uganda at 65 percent, said a report by research firms New World Wealth and Henley & Partners.

Globally, Vietnam, India and Mauritius are expected to post the fastest growth in centi-millionaires in the decade at 95 percent, 80 percent and 75 percent, respectively.

The report said Kenya remains strong in wealth creation partly due to well-developed and neutral news media outlets that form investment decisions.

“It is important that most major outlets in a country are neutral and objective. A well-developed financial media space is especially important as it helps disseminate information to investors,” the report says.

Besides a favourable financial media, Kenya remains a favourable holiday destination for the centi-millionaires. The country is ranked the 9th top holiday destination for the mega-rich, with the Hamptons in the US, leading the pack.

Read: Tanzania has the only dollar billionaire in East Africa: report

“American centi-millioanires travelling to Kenya for the annual migration boosts the nation’s tourism industry, with luxury hotels and lodges such as Giraffe Manor (the most Instagrammed hotel), Kichwa Tembo tented and Angama Mara cashing in to accommodate the moneyed guests” Maryanne Maina, the chief executive officer of Swan Maison Concierge Paris, said in a comment in the report.

A separate report by New World Wealth and Henley & Partners last month ranked Nairobi fifth in terms of the number of dollar millionaires. The report showed Nairobi has 5,000 high net worth individuals (HNWI).

The report showed Nairobi is also home to 240 multi-millionaires, who have a net worth of more than $10 million, and 11 centi-millionaires, who are worth more than $100 million. It, however, does not have a dollar billionaire.

Kenya has 8,500 dollar millionaires, according to the Africa Wealth Report 2022, which was released by the same firm in April. This means that Nairobi is home to 59 percent of Kenya’s HNWIs, underlining its status as Kenya’s economic hub and richest city.

However, no African city made it to the list of the top 20 cities globally that have the highest number of dollar millionaires, which was dominated by US cities.

Henley & Partners Chief Executive Juerg Steffen noted that 14 of the Top 20 wealthiest cities in the world are in countries that host formal investment migration programmes, and actively encourage foreign direct investment in return for residence or citizenship rights.

Source

Kenya will trail Uganda and Rwanda in terms of growth in the number of super-rich individuals with investible assets worth more than $100 million over the next decade, due to more conducive […]

Continue reading "Uganda, Rwanda to beat Kenya in dollar millionaires growth"

South Sudan’s oil sector pulls in more deals

South Sudan’s oil and related sectors are still attracting enthusiasts in spite of the publicised problems, including on revenue sharing.

Two weeks after the South Sudan Oil and Power Conference (SSOP) in Juba, firms have been publicising their deals from the forum meant to drive business and investment in the country’s oil production.

Several agreements on financing, oil exploration and production, oil refinery and infrastructural development were inked, according to a prospectus from the petroleum ministry.

In one of the deals the South African Nile Orange Company was offered the Jonglei State oil.

“We believe the project with Strategic Fuel Fund will now move forward as we anticipated for a very long time. We agreed that a team of technical personnel will visit Jonglei State to talk to the people on the ground,” said Petroleum Minister Puot Kang.

However, details of this and other agreements were not made public.

More deals

South Sudan’s Kush Bank signed a deal worth $75 million with AIS Capital Advisors for power distribution and management.

Leonard Mathu, managing director of AIS Capital Advisors, said the agreement will create “a domestic value chain that enables us to control costs, deliver power at stable rates, and without interruption.”

South Sudan is the major oil producer in the East African region but its near-total dependency on the oil has made the resource a curse. Due to fees and obligations owed to oil firms, South Sudan’s 170,000 per barrel production per day means it only earns value worth 50,000 barrels of oil per day, with the rest paying up advance payments or contractual obligations.

Yet critics also charge the revenue that arrives is also stolen. In August, President Salva Kiir fired Central Bank Governor Moses Makur Deng and Finance Minister Agak Acuil over empty coffers.

The South Sudan Oil and Power Conference, in its fifth year, welcomed a larger audience of global and South Sudanese energy professionals and leaders, taking advantage of easier post-pandemic travel.

This year’s event emphasised the important role that energy companies play in ensuring growth of the economy, and personal and professional growth of citizens.

Source

South Sudan’s oil and related sectors are still attracting enthusiasts in spite of the publicised problems, including on revenue sharing. Two weeks after the South Sudan Oil and Power Conference […]

Continue reading "South Sudan’s oil sector pulls in more deals"

African airlines operating below capacity

African airlines are still operating below 40 percent of their routine capacity in spite of easier restrictions on movements following the Covid-19 pandemic.

The local airlines only served 39.5 percent capacity of the domestic market, carrying about a third of the expected passenger numbers.

About 30 percent of all passengers carried were travelling from one African country to another.

The data from the African Airlines Association (AFRAA)’s September update shows that African airlines had resumed traffic on 99.2 percent of routes they operated in before the pandemic.

The review shows eight African airlines have exceeded the number of international routes they operated before Covid-19 outbreak. These include Ethiopian Airlines, Egyptair, Nouvelair, Air Cairo, Air Arabia Maroc, Asky Airlines, Air Arabia Egypt and Nile Air.

Some improvements

“There are improvements in airline capacity in the month of September in sub-Saharan Africa as the region is reopening and easing movement restrictions linked to the Covid-19,” reads part of the report.

“In Europe, there are renewed fears of the occurrence of an 8th wave of Covid-19 infections, especially in the UK where a rise in the number of new cases is growing but reduced number of cases in Africa have helped in increasing number of airlines operations,” it says.

In Africa, AFRAA estimates $3.5 billion revenue loss for 2022, equivalent to 20 percent of 2019 full year revenues.

The projected revenue loss due to Covid-19 for the third quarter of 2022 is approximately $800 million.

Meanwhile jet fuel price continues an upward trend. Year to date, global average price per barrel is $142. The impact on global airlines fuel bill is estimated at $131.6 billion for the full year.

Source

African airlines are still operating below 40 percent of their routine capacity in spite of easier restrictions on movements following the Covid-19 pandemic. The local airlines only served 39.5 percent […]

Continue reading "African airlines operating below capacity"

Tea volumes at Mombasa auction dip as drought ravages the region

The volume of tea auctioned at the Mombasa bourse has gone down significantly, with officials warning the trend may worsen in the next decade due to erratic weather.

Latest figures from the East African Tea Trade Association (EATTA) show the volume of tea offered on the auction dipped by almost 500,000 kilogrammes in the last trade, the second time in a row the quantities have declined in less than a month.

EATTA managing director Edward Mudibo said the decline in volume of tea offered for sale at the Mombasa auction was as a result of ongoing drought.

“Kenyan tea contributes about 60 percent of tea traded in the auction followed by Uganda at eight percent. Rwanda, Burundi and Tanzania come third, fourth and fifth respectively. The total volume traded for Sale 39 was 407,913 kilos less than Sale 38, which was as a result of ongoing drought,” said Mudibo.

During the last sale at the auction, the average price increased to $2.27 from $2.25 in the previous sale.

Demand was reduced for the 181,340 packages (12,077,628kg) on offer, with about 120,480 packages (7,952,000kg) being sold, and 33.56 percent of packages remaining unsold.

Last month, Rhoda Ruto, a senior researcher at Kenya Agricultural and Livestock Research Organisation’s Tea Research Institute warned that tea production will be affected by increased temperature as a result of global warming.

“More effect of climate change on crops will be felt in Kenya’s tea sector as an increase in temperature beyond 23.5 degrees Celsius would significantly reduce yields of the cash crop,” she said.

Climate change has the potential to significantly affect smallscale farmers’ livelihoods.

Extremely low temperatures also affect tea production, with frosts cutting yield per bush.

Ruto, however, noted that climate change will enhance the suitability of tea production in areas where the crop is today not grown, especially the higher altitudes around Mount Kenya.

Kenya’s temperature will rise by 2.5 degrees Celsius between 2000 and 2050, according to a report by the Food and Agriculture Organisation (FAO). The country will experience extreme rainfall events, especially in the Rift Valley region.

Kenya’s yearly and monthly rainfall and mean air temperatures are expected to increase moderately by 2025, according the report, which will impact the very taste of tea.

Tanzania has also witnessed a decline in tea production over the past three years according to recent data.

Statistics from data aggregation portal Statista show that Tanzania produced 20,400 tonnes of tea in 2020/2021, a five-year low compared to 27,000 tonnes (2016/2017), 34,000 tonnes (2017/2018), a peak of 37,200 tonnes in 2018/2019 and 28,700 tonnes in 2019/2020.

Tanzania affected

According to the Tanzania Public Tea Company (Tatepa), a leading exporter of tea from Tanzania, production is being effected by weather patterns.

The firm said in a report that its subsidiary, the Wakulima Tea Company (Watco), decreased production due to climate constraints and as a consequence it made financial losses.

“During the year tea production decreased by three per cent as compared to 2018. This was due to weather conditions in 2019. The average selling price of $1.67 per kg was lower than last year’s price of $1.90 kg. The lower price was due to lower world prices,” said the firm.

Tatepa made a loss before tax of Tsh715 million ($305,444) in 2019 compared to 2018 where it garnered a profit of Tsh898 million ($383,621).

The listed firm also experienced bad debts amounting to Tsh452.9 million ($193,508) and disposed of its Kyimbila Tea Packing Company, also on a loss basis that year.

Tatepa is involved in growing, processing, blending, marketing and distributing tea. It three subsidiaries are Watco, Kibena Tea and Chai Bora.

While Watco and Kibena grow and process the commodity, Chai Bora is involved in blending, packaging and marketing of packed tea for local and export.

Tanzania exports fermented and partially fermented tea to Britain, South Africa, Russia, Pakistan and Poland among other countries.

Other major tea-producing countries including India, Sri Lanka and China are also facing rising temperatures and extreme weather that could affect their tea production, the FAO report noted.

Kenya is the largest producer of black tea in the world while China leads in green tea production.

Source

The volume of tea auctioned at the Mombasa bourse has gone down significantly, with officials warning the trend may worsen in the next decade due to erratic weather. Latest figures […]

Continue reading "Tea volumes at Mombasa auction dip as drought ravages the region"

Kenya-Ethiopia power buy deal to vary after five years

Kenya will buy power from Ethiopia at 6.5 US cents per kilowatt for the next five years before it can be allowed to renegotiate.

Ethiopian Electric Power (ECC) has revealed a clause in the power purchase agreement that says Kenya Power can only seek a review of the tariff after that period.

Kenya signed a 25-year deal with the Horn of Africa’s nation to start importing electricity from next month in a bid to edge out the expensive power from the national grid and ensure buffers to meet peak demand.

The clause allowing tariff renegotiation is a key plank for the State-owned utility to get cheap energy that will then be passed on to consumers in the form of lower bills.

“Ethiopia would sale this electric power at a price of 6.5 US cents per one-kilo watt for the coming five years having the room of negotiation table concerning tariff adjustment which was requested by Ethiopian Electric Power after five years,” reads a communique by ECC. This means that the earliest the talks to review can happen is 2027.

Read: Ethiopia to become Kenya Power’s second biggest source of electricity 

High tariffs charged by independent power producers have squeezed Kenya Power’s ability to lower the cost of electricity.

Kenya Power was unable to effect a second cut of 15 percent on power charges following failure to broker a deal with power producers to lower the wholesale tariffs.

The first cut of 15 percent was gazetted at the start of this year and allowed homes and businesses to enjoy lower bills before it was reversed last month.

Kenya Power buys the bulk of electricity from Kenya Electricity Generating Company (KenGen) at Sh5.3 per kilowatt-hour but other IPPs have priced their power as high as Sh195 for the same unit.

KenGen accounts for 70 percent of the electricity supplied to Kenya Power with the 21 IPPs supplying the balance.

The room to renegotiate lower tariffs is key to Kenya Power’s efforts of providing cheaper electricity and easing pressure on homes besides offering investors attractive rates in a bid to make local products more competitive.

Electricity prices jumped 15.7 percent last month reversing the January cuts of equivalent value that were gazetted by the former administration of President Uhuru Kenyatta.

The jump pushed a kilowatt hour to Sh25.3 for domestic consumers who use more than 100 units a month.

Source

Kenya will buy power from Ethiopia at 6.5 US cents per kilowatt for the next five years before it can be allowed to renegotiate. Ethiopian Electric Power (ECC) has revealed […]

Continue reading "Kenya-Ethiopia power buy deal to vary after five years"

IMF warns of looming recession in 2023 as shocks persist

The International Monetary Fund has warned that a global economic recession could be apparent next year if the war in Ukraine and other economic shocks persist in the near term.

The projections for the growth rate of the global output (Gross Domestic Product) this year remain 3.2 percent as earlier predicted, down from 6 percent in 2021, and is forecast to reduce further to 2.7 percent in 2023.

Read: Brace for impact, some of East African woes are self-inflicted

The global slowdown is a result of the Russian war in Ukraine, rising costs of living caused by persistent and relentless inflation pressures, and the reduced economic activity in China due to consistent lockdowns, dimming the global growth prospects, IMF said.

“The 2023 slowdown will be broad-based, with countries accounting for a third of the global economy expected to contract this year or next,” said Pierre-Olivier Gourinchas, IMF’s chief economist and research director.

“The worst is yet to come, and for many people, 2023 will feel like a recession. Despite the slowdown, inflation pressures are proving broader and more persistent than anticipated.”

Read: East Africa’s economic recovery prospects facing headwinds

Global inflation is expected to peak at 9.5 percent in the third quarter of 2022, and is broadening beyond food and energy, IMF said.

Should the war in Ukraine persist, inflation continue to broaden and the dollar continue to appreciate, IMF says, there is a 25 percent chance GDP growth could drop to below two percent and a 10 percent chance it could reduce to 1.1 percent.

Read: Africa facing recession, a first in 25 years says World Bank

“Increasing price pressures remain the most immediate threat to present and future prosperity by squeezing real incomes and undermining microeconomic stability,” Mr Gourinchas said.

The growth rate in Sub-Saharan Africa is projected to drop to 3.6 percent in 2022 down from 4.7 percent last year.

SOURCE

The International Monetary Fund has warned that a global economic recession could be apparent next year if the war in Ukraine and other economic shocks persist in the near term. […]

Continue reading "IMF warns of looming recession in 2023 as shocks persist"

CBK opens talks with telcos on separation of mobile money business

Kenya’s Central Bank has started negotiations with telecommunication firms with a view to separating mobile money activities from other businesses to enhance governance and minimise shocks on bank-related transactions.

The regulator said Tuesday that it has engaged Payment Service Providers (PSPs) to ensure that the activities under CBK’s supervision are appropriately ring-fenced from other business lines.

“This will allow the PSPs to protect their CBK-regulated activities from shocks emanating from the other business activities, strengthen governance, enhance resilience, and focus on improving its services to customers,” said CBK in a statement Tuesday.

According to CBK, separation of mobile money business from other businesses by telcos will facilitate realisation of a secure, fast, efficient and collaborative payment system that supports financial inclusion and innovations that benefit Kenyans.

The vision is enshrined in the National Payments Strategy (2022-2025).

The CBK statement comes after Airtel Networks Kenya Ltd (ANKL) completed the separation of its mobile money business from the telecommunications business.

This was effected by a separation and transfer of the mobile money business to the new entity Airtel Money Kenya Limited (AMKL), a journey that started in 2019.

“CBK welcomes this milestone,” the Bank said.

The completion of this restructuring enables AMKL to ring-fence its operations and focus exclusively on its mobile money business.

“Significantly, this sets the foundation for AMKL to enhance governance over its mobile money business, strengthen its operations, and offer better services to its customers,” according to CBK.

CBK licensed AMKL as a Payment Service Provider (PSP) in line with the National Payment System Act 2011 on January 21, 2022, and also granted a transition period to complete the transfer.

Both AMKL and ANKL are incorporated in Kenya as separate subsidiaries of Airtel Africa Plc (Airtel Africa).

Airtel Africa, which is listed on the London Stock Exchange (LSE), is headquartered in Dubai, United Arab Emirates, and has operations in 14 African countries.

In July this year, Airtel Africa sold 25.77 percent stake in its local mobile money business as part of a continental deal that saw the telco raise $550 million from four institutional investors.

As a result, the multinational’s interest in Airtel Money Kenya Ltd dropped to 74.23 percent in the year ended March from 100 percent a year earlier.

Similar changes in ownership of the mobile business were also witnessed in markets such as Rwanda, Tanzania and Zambia.

Airtel Money Kenya is now run and regulated by the Central Bank of Kenya as a stand-alone business.

Safaricom is also facing mounting pressure to spin off its lucrative M-Pesa business but the telco is reluctant, arguing that the service benefits from the existing synergies with other offerings including voice, data and SMS.

SOURCE

Kenya’s Central Bank has started negotiations with telecommunication firms with a view to separating mobile money activities from other businesses to enhance governance and minimise shocks on bank-related transactions. The […]

Continue reading "CBK opens talks with telcos on separation of mobile money business"

MOTOKI: Kenya should resist pressure to subsidize consumption as it only helps the wealthy

Motoki Takahashi, the adviser at JICA, spoke to Vincent Owino about Kenya’s priorities for economic reforms.

***

Kenya has a new administration. What should be the government’s economic policy priorities to speed up economic growth and development?

President William Ruto should emphasise the importance of small and medium-sized enterprises (SMEs) development, and formalisation of the informal sector. These will be the key drivers of economic progress. The new administration should prioritise the development of manufacturing SMEs. They should also protect the intellectual property rights of SMEs, to foster innovation and safeguard the welfare of innovators. Security and infrastructure should also be high on the agenda. Without these, SMEs cannot thrive. The new leadership should also endeavour to protect the rights of the labourers.

Are these the pillars that fostered Japan’s rapid economic growth and development?

Yes. History indicates that Japan did not progress when labour movements faced difficulties and oppression from the government. But the workers fought for their rights and that fostered development. I hope that the Kenyan government will not suppress labour unions. They should be given a space to protect themselves and fight for their rights. Only then can there be real development. Besides that, financing for small businesses and innovations is important to foster growth. This should be done by the public and private sectors.

Public debt is a major problem in Kenya. What can be done about it?

It is justifiable to ask the government to slow down on borrowing externally because the world’s interest rate is rising, making it expensive to finance their outstanding debt. The infrastructural development experienced because of the borrowing in the past 10 years is good, but the big issue is in paying back. Management is important and the country should be careful what composition its public debt is. It’s advisable for Kenya to take more concessional loans from international financial institutions and developed countries, which charge low interest rates, as opposed to loans from emerging powers whose interest rates are relatively high.

The IMF has advised Kenya against subsidies. What do you think should be the policy on subsidies?

Subsidizing production is a better idea than consumption subsidies that Kenya has done in the past. A production subsidy is an investment in the future. For example, feeding school children is a subsidy and it is an investment in the future. The leadership should resist pressure to subsidize consumption, because this mostly only helps the rich.

SOURCE

Motoki Takahashi, the adviser at JICA, spoke to Vincent Owino about Kenya’s priorities for economic reforms. *** Kenya has a new administration. What should be the government’s economic policy priorities […]

Continue reading "MOTOKI: Kenya should resist pressure to subsidize consumption as it only helps the wealthy"

Burundi eases curbs on foreign currency

Burundi’s falling forex reserves are placing the country in dire straits, needing an urgent reboot of its monetary policy as it also faces high inflation.

This week, the Central Bank rescinded a two-year ban on individual recipients of forex from withdrawing cash in the original currency as part of efforts to “modernise” the country’s foreign policy and allow more flow of forex through private entities.

“The Bank of the Republic of Burundi is lifting, from today, the restrictions on the conditions for the settlement of instant transfers received from abroad, introduced on March 16, 2020,” Dieudonne Murengerantwari, Bank of the Republic of Burundi governor, said on Friday.

Since 2020, Burundi had barred forex bureaus and banks from dishing out foreign currencies to individuals. Those receiving money from abroad were forced to accept local currencies, even when the money had been wired to their foreign currency accounts. The bank now says all forex bureaus can reapply for licences to relaunch operations.

“Approval will be conditional on the signing of an act of commitment to compliance with the regulatory framework of exchange offices,” Murengerantwari said.

The bank announced changes in the wake of a report by the International Monetary Fund indicating that Burundi’s current account deficit is projected to widen this year due to increased imports for fuel, consumer and capital goods.

The high commodity prices have pushed inflation up, which stood at 19.6 percent in August, and compounded the country’s vulnerable external position.

Burundi is expected to continue grappling with the challenges of balancing social and development spending with the need to maintain macroeconomic stability and address debt vulnerabilities.

The IMF recommended a change in the current monetary policy stance while addressing inflationary pressures.

Burundi’s foreign exchange reserves fell to 1.6 months’ worth of imports at the end of July, down from 2.2 months’ worth of imports at the same time last year. IMF attributed this to increased import bill “not matched by capital inflows.”

SOURCE

Burundi’s falling forex reserves are placing the country in dire straits, needing an urgent reboot of its monetary policy as it also faces high inflation. This week, the Central Bank […]

Continue reading "Burundi eases curbs on foreign currency"

Tanzanian gas pipeline to cut cost for Kenyans

The Kenyan government has announced plans to speed up construction of the proposed gas pipeline from Tanzania in an effort to cut prices of cooking gas.

President William Ruto on Monday said the 600-kilometre pipeline that Kenya will use to import gas from the Mtwara plant in Tanzania is a priority item, a pronouncement that looks set to end a delay of over one year.

The pipeline whose cost is estimated at Ksh132 billion ($1.1 billion) is part of a Memorandum of Understanding on Cooperation in Natural Gas Transportation that former President Uhuru Kenyatta signed with Tanzanian President Samia Suluhu in May last year.

Importation of gas from Tanzania will offer Kenya an alternative to lowering the cost of cooking gas.

“We will expedite the gas pipeline from Dar es Salaam to Mombasa and eventually to Nairobi so that we can use the resources that we have in our to lower energy tariffs both for commercial and domestic use in Kenya,” Mr Ruto said on Monday in a joint briefing with Ms Suluhu.

“We will ensure that what the Government of Kenya is required to do will be done in a timely, efficient and effective manner so that in the shortest time possible we can access the gas resources that you have in your country.”

The project to be funded through Public Private Partnership (PPP) will, upon completion, allow Kenya tap the vast natural gas deposits of Tanzania and lower the cost of cooking gas and also electricity prices.

The 13-kilogramme cooking gas has shot up to Sh3,400 while the six-kilogramme is going for Sh1,500 at the back of global rally in crude prices and the re-introduction of the six percent Value Added Tax on the commodity.

Kenya re-introduced 16 percent VAT on cooking gas in July last year and coupled with the global jump in cost of crude, led to a surge in prices of the commodity.

The tax was halved this year after a public uproar but oil marketers have failed to pass on the tax reduction to consumers.

Unlike diesel, super and kerosene, prices of cooking gas are not controlled by the State leaving consumers at the mercy of oil dealers.

SOURCE

The Kenyan government has announced plans to speed up construction of the proposed gas pipeline from Tanzania in an effort to cut prices of cooking gas. President William Ruto on […]

Continue reading "Tanzanian gas pipeline to cut cost for Kenyans"

Uganda’s fuel smugglers: The Opec Boys (anti-)heroes of the marginalized?

Smuggling in the Ugandan border region of West Nile has a long and chequered history. It straddles the fine line between legitimacy and legality.

Governance and conflict researcher Kristof Titeca has studied smuggling in the border region since 2003. He explains the dynamics.

What’s the history of smuggling in Uganda’s West Nile region?

The term smuggling often brings strongly negative connotations, and is often associated with criminality and violence. However, smugglers aren’t always associated with these negative connotations by the communities in which they are embedded.

The West Nile region in Uganda illustrates this dynamic. This area is located in northwestern Uganda, and borders the Democratic Republic of Congo (DRC) and South Sudan.

When colonialists introduced the borders demarcating Uganda, Zaire/Congo and Sudan, this divided ethnic groups but didn’t stop the interaction between them. Continued untaxed trade – or smuggling – was considered legitimate.

In addition, smuggling – both then and now – is viewed as a survival mechanism.

For example, during successive wars and rebellions affecting the region, many people fled across borders. When former Ugandan president Idi Amin (a West Niler) was ousted from power in 1979, the residents of West Nile feared revenge and fled to eastern Congo and southern Sudan. Similarly, violence in southern Sudan in the early 1990s, and in more recent times, forced many (South) Sudanese to flee to northern Uganda. Smuggling constituted an important livelihood for many during these times, and laid the basis for contemporary trading networks and practices.

Smuggling is also linked to people feeling marginalised or oppressed. And the West Nile region feels marginalised by the Yoweri Museveni regime.

Also Read: How Epra lost war on fuel marking job

Smuggling in this border region has to be understood in this context: as a way of making ends meet despite of – and in opposition to – a regime perceived to marginalise them. Smuggling is regarded as legitimate employment. And an important form of social mobility, a rags-to-riches story present in the wider social imaginary of the population.

How pervasive is smuggling in Uganda?

Data from the Bank of Uganda and Uganda Bureau of Statistics shows that in 2018, Ugandan informal exports – or smuggled products – were worth US$546.6 million. For their part, smuggled imports were worth US$60 million.

But these numbers are an underestimation as they are based on data from official border posts, which excludes goods smuggled through many unofficial smuggling routes.

Moreover, the data shows that for the DRC – which in 2018 accounted for almost half of Uganda’s informal trade value – informal export and import figures are almost always higher than the formal ones.

What does the story of the Opec Boys tell us?

The Opec Boys – a term used to refer to fuel smugglers operating in the region – are a telling illustration of the dynamics of smuggling in the West Nile.

In my research, I have studied the Opec Boys at different moments in their history over the last 20 years.

Their roots can be traced to the late 1970s and early 1980s. This was when much of the population of north-western Uganda fled to neighbouring DRC and Sudan after the overthrow of the Amin regime.

During this time, a number of exiled young men made a living from smuggling fuel. They didn’t stop doing so upon their return to Uganda. They started an organisation that came to be known as the Opec Boys. Many other young men returning to their home areas, with no education or assets, were drawn into this fuel business.

They would sell smuggled fuel in jerrycans on street corners in the region’s major urban centres. There was a general shortage of petrol stations in the area, and their fuel was cheaper. The Opec Boys got their smuggled fuel in different ways: some smuggled it themselves from Congo, others used “transporters” who were mostly young(er) boys on bicycles, smuggling the fuel via back roads to avoid security officials. Others bought their fuel from truck drivers, who equally smuggled their fuel into Uganda.

The Opec Boys were the most important supplier of fuel in the area until the late 2000s. Around this time, the increased number of fuel stations, and the changing tax regime in DRC pushed many of them out of business. While they still exist, their activities are less prominent.

What did they come to represent?

The Opec Boys were considered an important social-economic and political force in two major ways.

First, they came to constitute an important manifestation of what sociologist Asef Bayat’s calls “un-civil society”. This is an unconventional, uninstitutionalised form of civil society. It operates through ad hoc, direct and sporadic action through which it represents the interests of the urban informal sector. This definition applies to the Opec Boys.

Particularly during the 1990s and 2000s, they would – led by a charismatic leader – come to the defence of actors within the urban informal sector, such as market vendors or motorcycle taxi riders. They, for example, intervened when urban authorities wanted to forcefully remove streetside kiosks by blocking roads and organising protests.

Second, in doing so, they are an illustration of historian Eric Hobsbawm’s “social bandits”. This is through their links to the population and their composition – young, unemployed men, and (certainly in their early phase) often ex-rebels considered “natural material for banditry”.

Their smuggling activities provide employment to, and absorb, a potentially dangerous group: low-skilled, landless young men. In a region with a history of rebel groups, this is seen as an important stabilising factor, allowing for the voicing of discontent through trading activities rather than illegality.

For these reasons, attempts to take formal action against smuggling in the West Nile region often lead to demonstrations and riots.

In February 2022, for instance, riots erupted in Koboko town. These were directed against Uganda’s tax collecting agency – the Uganda Revenue Authority.

Protestors set the authority’s offices on fire after tax collectors allegedly hit and injured a suspected fuel smuggler (the authority denied this happened). The smuggler was reportedly carrying 320 litres of fuel in sixteen 20-litre jerrycans from the DRC. During the riots, one person was shot dead and several others wounded.

Months earlier, the shooting of a suspected smuggler also led to violent demonstrations.

However, this doesn’t mean all smuggling is romanticised. Smuggling in goods such as drugs or weapons is looked at very differently, and doesn’t have the same legitimacy and popular support.

In sum, smuggling is looked at as more than a strictly economic activity; it’s a social and political one. In local social imaginaries, it’s seen as an act of resistance, a way to fend for oneself in difficult circumstances.

SOURCE

Smuggling in the Ugandan border region of West Nile has a long and chequered history. It straddles the fine line between legitimacy and legality. Governance and conflict researcher Kristof Titeca has studied smuggling in […]

Continue reading "Uganda’s fuel smugglers: The Opec Boys (anti-)heroes of the marginalized?"

EAC drafts guidelines on transferring pension within member countries

Workers in the East African Community member countries could soon transfer their pension savings from one country to another, guaranteeing no losses even when one moves jobs.

This is part of a proposal for the bloc to harmonise and make pension funds attractive to workers who until now have been saving in state-sponsored or private schemes in countries where they work.

Retirement savings

The urgency of reform was touched off last week by Kenyan President William Ruto, who tabled proposals to reform Kenya’s National Social Security Fund (NSSF).

One such proposal is to make it mandatory for anyone with a regular income to contribute to the fund for their pension irrespective of their contractual terms, as well as making employers liable to match the regular contributions by employees.

“We intend to overhaul our social security infrastructure to make it inclusive. To encourage those excluded to save, I will be proposing a national savings drive to encourage those in the informal sector to set up their retirement savings plan,” said President Ruto in an address to the joint house of parliament two weeks ago.

For every Kenyan who will save Ksh6,000 ($49.65) per month, the president said, the government of Kenya will contribute an additional half of that every month.

At the regional level, the East African Community is expected to publish a report on the social protection laws and policies that will inform and guide the legal process for the portability of social security benefits as directed by EAC ministers of Labour.

On October 6, stakeholders in labour regulation met to discuss the portability of workers’ retirement savings within the EAC.

Benefits

A draft on the EAC co-ordination of social security benefits that is being validated in each partner state will provide rules and procedures for the co-ordination of social security benefits.

These benefits fall within the framework of the free movement of workers and self-employed persons in order to contribute towards improving their standard of living and conditions of employment.

The draft proposes that employment benefits such as maternity, employment injury/occupational disease, health and sickness benefit, family benefit, and unemployment benefit shall be applicable according to the legislation of partner states; and shall not be portable.

However, it is President Ruto’s calls for enhancing Kenya’s NSSF contributions that have ignited calls for reforms in the labour sector.

Kenyans save a flat rate of Ksh200 ($1.65) per month in the scheme, which Ruto argued is too low to build savings that would offer decent living upon retirement.

In Tanzania, the law provides for savings of 10 percent of one’s gross earning and the employer contributes a similar amount to the NSSF.

In Kenya, the NSSF is a social security provider for Kenya’s workers in the formal and informal sector. But for many years since its formation, NSSF only serves those in formal employment, which is about three million people.

The draft EAC policy proposes that the processing and payment of a legitimate claim shall be completed in a period not exceeding45 days after the date of receipt of the said benefit application.

Policies

Where the claim cannot be paid within the stipulated period, the institution shall notify the relevant Competent Institution and explain reasons for the delay.

“There is a need to promote labour migration in the region, through the harmonisation of labour laws, enhancement of the use of ICT in collection, analysis and dissemination of labour market information, and data and statistics on migrants,” said Simon Chelugui, Kenya’s Cabinet Secretary nominee for Labour and Social Protection, and Cooperative.

Chelugui chaired the EAC Labour ministers’ committee who came up with the draft proposals.

“EAC partner states may in future have to consider honorary consul services in key labour destination countries to improve the provision of necessary consular assistance and protection of the social, economic, labour and human rights of EAC migrant workers,” he added.

The Kenyan leader is promising to overhaul that completely so that it can work for all Kenyans including those in the informal sector who form the largest population outside the pension sector.

He may have to work on the institution’s credibility as NSSF’s history has been marred by scandals and ill-conceived investment policies.

Critics are worried that President Ruto’s call for more contributions without the requisite legal regime to protect the funds from theft is just another way for those in government to interfere with the management of NSSF funds.

“That is not the case right now. You know pension is protected. If I take it and keep it you can’t reach it,” said Anthony Omerikwa, managing trustee of NSSF, defending the leadership direction the fund has taken in the recent past.

“Currently, the contribution and people who are in the ambit of NSSF are around 2.9 million. But those people in the informal sector are about 18 million. The way to get them on board is two ways; make it statutory and thus incentivise contribution. That awareness is also not there. We are moving into ‘space’ for citizenry who not only want to spend more but they also want to spend what they don’t have. We are moving into a new deep credit space.”

Critics of the NSSF also argue that efforts by NSSF to convert it from a National Provident Fund Scheme to a Social Insurance Pension Scheme have been hampered by lack of a clear legal and lack of political will.

If converted as a social insurance scheme, the new NSSF will operate as a mandatory National Social Insurance Pension Scheme, serving as workers the 1st pillar of social protection.

“We have a draft bill in place. It is very important so that Kenya start saving. The employer matches for those in employments; for those in voluntary scheme, the government matches. You remember the 1 to 2 ratio and I think that will expand the saving space and also facilitate the government to do so many things that it needs to do,” said Omerikwa.

“We already have the NSSF Act of 2013. But we also need mandatory contributions by people from the informal sector and so we need a voluntary provident fund within the NSSF Act. Both of hose components are very important for us as a country, which calls for a law that will guide the pension industry,” said Sandeep Raichura, Group CEO of Zamara, a pension and investments firm.

“Whether you are in casual, contractual or permanent employment there is a mandatory contribution. It has to be an automatic contribution by the employer as well. It has to be made compulsory irrespective of your employment status.”

Compliance

Everyone with an income should be registered as a contributing member and a law enacted to ensure compliance.

“The truth of the matter is that the money we are paying to NSSF cannot even run or sustain the administrative work at NSSF. They require more funds and we as Cotu had agreed on that,” said Francis Atwoli, Secretary General of Cotu (K). “So what the president is saying is what we had endorsed sometimes back.” Atwoli said permanent jobs are on decline, thereby reducing contributions towards NSSF.

“They are about 6 to 7 million of people on permanent jobs. But the rest of Kenyans are in the informal sector on contractual and casualization jobs. Of these categories majority of Kenya workers are seasonal and those categories of workers are not contributing to NSSF because they are not on a check off system.”

He added, “My proposal was that we had already agreed that for those people who are not on the check off system be paying directly to NSSF, to open and boost their own accounts.”

According to the International Labour Organisation (ILO) Country Director for Tanzania and EAC region, Wellington Chibebe, Africa has a high informality rate which currently is estimated at 82.9 per cent.

“When measured in terms of gender, the informality rate of women at 86.6 percent is higher than that of males, which stands at 80 per cent. Africa’s informality rate translates into 379 million people being in informal employment. The problem of informality is higher in Sub-Saharan Africa than in North Africa at 84.9 percent and 70.8 per cent in North Africa,” said Mr. Chibebe.

“Informality” is a term used to describe the collection of firms, workers, and activities that operate outside the legal and regulatory frameworks or outside the modern economy.

Mr Chibebe revealed that the social protection expenditure in Africa amounts to less than 5 percent of GDP compared to a global average of 12.9 per cent, thus adding to the reasons as to why the region is in need of a common social protection legal framework.

The draft EAC policy proposes that the processing and payment of a legitimate claim shall be completed in a period not exceeding forty-five (45) days after the date of receipt of the said benefit application.

Where the claim cannot be paid within the stipulated period, the Competent Institution shall notify the relevant Competent Institution and explain reasons for the delay.

“There is a need to promote labour migration in the region, through the harmonization of Labour laws, enhancement of the use of ICT in collection, analysis and dissemination of labour market information, and data and statistics on migrants,” said Simon Chelugui, Kenya’s Cabinet Secretary for Labour and Social Protection, and Cooperative CS nominee.

Hon Chelugui chaired the EAC Labour ministers who came up with the draft proposals.

“EAC partner states may in future have to consider Honorary Consuls services in key labor destination countries to improve the provision of necessary consular assistance and protection of the social, economic, labor and human rights of EAC migrant workers,” he added.

SOURCE

Workers in the East African Community member countries could soon transfer their pension savings from one country to another, guaranteeing no losses even when one moves jobs. This is part […]

Continue reading "EAC drafts guidelines on transferring pension within member countries"

And if you Join the experience?

It doesn't cost anything to try. Join our community today and take part in the latest discussions revolving around civic space.

This is an open online forum that seeks to re-inforce the capacity of civic actors in East Africa to counter shrinking civic space by sharing information, human resources and successful strategies.

© 2022 Protection of Civic Space in East Africa

Translate »