Category Archives: guest post

How competition agencies should reorganize themselves to mitigate the impact of Covid-19

The Covid-19 pandemic has occasioned an unprecedented humanitarian and economic crisis across the World whose impact will be felt for quite some time. 

All stakeholders, including Governments, regulators and other State agencies, have to implement their mandates to ensure that markets remain open, functioning, and competitive. They also need to develop and implement policies that ensure the impact of this crisis is short-lived, while also mitigating its effects.

Recently, heads of Competition agencies across Africa congregated virtually under the auspices of the African Competition Forum (ACF) to deliberate on how we can prepare ourselves for an uncertain future. The meeting also recognized the critical role competition agencies play in ensuring that markets continue functioning competitively.

Competition agencies have in recent weeks attended to infractions like price gouging, abuse of dominance, cartelization, and abuse of buyer power. The purpose of such conduct is private gain at the expense of consumer welfare and, in the current emergency, is antagonistic to containment efforts.

In order to continue playing their role in the post-pandemic era, it was noted that Competition agencies should reconfigure their operations from at least four perspectives; organizational, regulatory capacity, enforcement priorities, and policy advisory role. 

Competition agencies should be prepared to work with limited resources due to decreased Government revenues, even as demand for their mandates expand. As a matter of priority, agencies should review their strategic objectives and refocus their interventions in favour of fewer but highly impactful activities. 

They should also enhance collaboration and cooperation with regional Competition agencies and, nationally, with respective sector regulators. 

Competition agencies should also entrench a culture of Enterprise Risk Management (ERM) and Business Continuity Management (BCM). At the Competition Authority of Kenya, implementation of ERM and BCM, coupled with the digitization of our core mandate processes in mid-2019, is enabling the organization to weather this storm with minimal disruption to service delivery. 

However, automation begets risks such as cyber-attacks and breach of client confidentiality and therefore specific measures should be taken to insulate an automated organization.

From a regulatory perspective, it is critical that agencies review their laws to ensure that they are results-oriented, while at the same time flexible to deal with emergencies. The Competition Act No.12 of 2010 has enabled the Authority to attend to supply chain and consumer protection challenges. 

Agencies should also align their interventions with the country’s industrial policy. For instance, Competition agencies need to think about how they can ‘lower their guns’, albeit momentarily, to support a certain threshold in the growth of our Nation’s industrial capacity.

Competition agencies are likely to experience an upsurge in joint venture applications and distress mergers, more so from the airline industry. It is also expected there will increased merger activity in the online and e-commerce space.

On the flipside, killer mergers could also increase where dominant incumbents seek to acquire upcoming competitors, more so in the digital economy which has become indispensable in the pandemic. Towards this, the Authority has realigned its workforce to enable critical review of all merger applications, but within the law.

Further, the Authority is finalizing investigations in the retail sector regarding allegations of a few supermarkets failing to pay their suppliers on time, which is against abuse of buyer power provisions under the Competition Act. Unfettered supply of essential commodities to consumers is paramount during a pandemic.

Lastly, the Covid-19 pandemic has seen some countries revert to price controls. As competition agencies, we need to advise our governments that price controls are counterproductive since they ultimately harm consumers, more so by facilitating the proliferation of black markets. Quality and the safety of goods is also not guaranteed.

Fortunately, the Kenyan government has attended to the market distortions during this pandemic through the forces of supply and demand. Specifically, the Government has ensured that essential supplies in the market are available.

Regulators should not strive to go back to the pre-Covid-19 dispensation, in terms of how we organize and manage our agencies, but instead, let us embrace the new normal way of doing things that is far from normal.

Mr. Wang’ombe Kariuki is the Director-General, at the Competition Authority of Kenya. He is on Twitter at @wang_kariuki.

The End of Social Conventions?

For weeks, investors and the business community have been rattled by massive  disruptions to global supply chains, as factories shut down in China. Everyone from BMW and Mercedes to Apple is feeling the squeeze on account of the coronavirus.

But economies and businesses are not the only ones dealing with disruption. 

Social conventions are adjusting in unprecedented ways.

Yesterday, Italy shut down ALL schools and contemplated banning kissing in an attempt to thwart the spread of the coronavirus pandemic.  The kissing ban may not be necessary. Italians are already voting with their feet and keeping their cheeks at a very safe distance from friends, family members and others.

But Italy is not alone.

In France, where “La bise” is an age-old ritual, kissing friends has always been a rather complicated affair, especially for uninitiated foreigners. Rather than shaking hands, waving hello or hugging, you simply  lean forward, touch cheeks and kiss the air while making a sound with your lips. 

Friends in France tell me that ‘La bise’ could soon go the way of the dodo if the virus known as “COVID19” remains unrelenting.

Here in Abidjan in Côte d’Ivoire, as in many other parts of the world, social conventions are rapidly changing. Unlike the French double blise, Ivorienes, conduct a rapid triple kiss. But they too have become extremely economical with their cheek and air kisses. 

At the African Development Bank, where we have rapidly put a coronavirus contingency plan in place, kisses and handshakes are quickly giving way to fist and elbow bumps, or to no contact at all. Many understandably  prefer an adoring “keep your hands to yourself” stance.

Across town, it is not uncommon to see men and women now tap their feet rather than touch cheeks or shake hands. What first started out a few weeks ago as a  comedic viral video in Asia, has since mushroomed into a full-blown practice in some communities. 

I’ve already been offered the foot of friendship’ several times, so I can testify.

Last night, I was having dinner with a colleague at Indian By Nature, a lovely restaurant off of Boulevard de Marseille in the Marcory district that is a favourite hangout for many in the expatriate community.

Three things struck me. 

One, very visible neon yellow alcoholic hand sanitizers were on full display all around the restaurant. You couldn’t miss them.

Second, everyone … waiters, chefs, and owners kept their hands and cheeks to themselves. 

And third, it would seem that the hand-clasped Hindi ‘Namaste’ greeting could soon become a globally preferred and much safer social norm, in a world battling with a pandemic that has already spooked the media and business world for good reason.

Social conventions have always been arcane arbitrary rules and norms that govern behaviours from kissing, hugging, shaking hands, to bowing. In the age of increasing pandemics, it would seem that old conventions are quickly giving way to the new and the not so new.

For now, stay safe and Namaste!

Dr. Victor Oladokun, is the Director of Communication and External Relations, African Development Bank.

Rethinking tax incentives in Kenya’s investment promotion efforts

A recent court ruling declaring the Kenya-Mauritius Double Taxation Avoidance Agreement (DTAA) void has sent Kenya back to the negotiating table with Mauritius. The court’s judgment is based on the fact that the DTAA was not properly ratified under Kenyan law. Kenya’s government argues that the treaty promotes investment and jobs; however, critics such as the Tax Justice Network Africa (TJNA), which filed this suit, argue that DTAAs rarely lead to any benefits for developing countries. TJNA argues that instead, they result in massive revenue leakage for African countries which outweighs incoming foreign direct investment (FDI).

Should countries, therefore, abandon the use of DTAAs? The answer more than likely lies in the middle: to bring real benefits to the economy and promote local market potential, countries should balance between the use DTAAs and other tax incentives such as special economic zones (SEZs).

Kenya’s DTAA with Mauritius was signed in 2014 with the hope of boosting foreign direct investment, but the benefits of the agreement were poorly defined from the outset. Similar to any policy, DTAAs must be rooted in clear and measurable objectives supported by equally clear policy levers to ensure that revenue generated from the resident country is not leaked through tax avoidance schemes like profit-shifting. Studies show that DTAAs signed between countries with asymmetric investment positions are less likely to lead to any benefits for developing countries. In the Netherlands, for example, DTAAs led to forgone revenue of at least USD 863 million for developing countries in 2011.

Given Kenya’s current budget deficit of USD 3.75 billion, it is critical that efforts to attract FDI such as DTAAs do not cannibalise local efforts to improve tax revenue. Numerous studies show that countries rarely achieve substantive FDI levels to make up for the revenue losses these DTAAs cause. The failed Kenya-Mauritius DTAA is not the first time a tax agreement with the island nation has been subject to controversy: in 2017, India reviewed its DTAA with Mauritius after reports showed that it had opened room for tax avoidance resulting in revenue leakage of about USD 600 million annually. In 2016 alone, Mauritian firms injected more than USD 50 million into the Kenyan economy, a 72 percent increase from 5 years prior. If the Dutch and Indian examples are any indication, Kenya could be losing far more. Lost corporate revenue is income that Kenya urgently needs to meet its development objectives. A shift to other tax incentives whose impact is more ascertainable may be more effective for many developing countries.

If the goal of DTAAs is to increase foreign investment in Kenya, they must be considered in conjunction with the broader ecosystem of policy instruments that can be used to increase tax revenues to achieve Kenya’s four priority pillars for economic growth. The government hopes to raise the manufacturing sector’s share of the GDP from 9% to 15%, and create 1.3 million jobs in this sector by 2022. To achieve this, governments should explore specific tax incentives that can provide direct benefits to these areas, such as special economic zones, which aim to maximise the “cluster effects” of activities through knowledge and supply chain integration, centralised access to critical infrastructure like roads and electricity, as well as enhanced support from local government.

Kenya, in making strides to use other tax incentives such as Special Economic Zones, should borrow lessons from its neighbours on reaping full benefits from SEZs. Rwanda, for example, has successfully leveraged SEZs to promote growth. In 2016, the Kigali Special Economic Zone (KSEZ) employed 2% of the country’s permanent employees, and accounted for 2.5% of all VAT reported sales. In Kenya, the government has already designated Mombasa, Kisumu, and Lamu as the future SEZs but to maximise their impact and avoid the development of enclaves, it is essential that firms in these SEZs interact with firms outside the zones and that the government ensures knowledge and best practices developed are shared across the economy.

Tax incentives alone will never be the sole factor attracting investors — to increase FDI, Kenya must continue to demonstrate strong market potential by providing business support and trade facilitation services. KPMG finds that Kenyan products are among the top four countries in Africa that score above the global average in terms of competitiveness on the international market; however, it still takes an average of 22 days to start a business — compared to 6.5 days in Egypt and 14 in Ghana — and poor availability of market data can complicate efforts at local expansion. To improve the country’s competitiveness, the Kenya Investment Authority should improve the availability of data for investors by working more closely with the Kenya Bureau of Statistics. Reducing business costs, for example, by bringing down the cost of imports for required goods or improving data quality to support manufacturing and value-added services will always outweigh lowering taxes.

The DTAA ruling prompts a careful re-examination of how to increase FDI without incurring unintended knock-on effects like tax avoidance. To do this, Kenya must enhance its capacity when negotiating bilateral agreements, and enact policies to support proper implementation of these agreements. In its use of tax incentives, it is critical that the scales are always tipped in Kenya’s favour. The impact of each incentive employed must be clear and measurable to ascertain that its benefits outweigh any associated costs.

A guest post by Bathsheba Asati and Faith Nyabuto of the Botho Emerging Markets Group. 

See also: The Kenyan Guide to Mauritius for business travelers.

Africa: Sports as a Business and a Brand

At the ongoing Africa Cup of Nations in Egypt, the visual imagery of almost-empty stadiums is a powerful narrative. But not the kind that African sports, African football, or corporate sponsors deserve.

The empty seat syndrome suggests that football fans are voting with their feet, or better still with their backsides. Fans are choosing not to watch live football events, and instead are opting in increasing numbers for the ‘intimacy’ of their crystal clear digital flat TV screens, or not all.

Before Egypt’s stunning 0-1 loss to South Africa in the round of 16, the host country was the only team able to attract 70,000 fans. Other than when Mo Salah and the Pharaohs have been on the field, most stadia across Egypt have at best attracted an average of 5,000 to 7,000 fans.

Official broadcast camera crews have done a creative job minimizing the visual gaps of empty seats. But wide camera angles reveal the obvious … a lack of attendance and public enthusiasm, in spite of the presence of some of the biggest names in world football on the field.

In European football leagues, where many of the stars in Egypt ply their trade, fans pay mega bucks to see the likes of John Mikel Obi, Ahmed Musa, Sadio Mane, Ryahd Mahrez, Nicolas Pépé, Wilfred, Zaha, and Kalidou Koulibaly.

Which is why the empty seats in Egypt are both stunning.

Admittedly, Egypt bailed CAF out and should receive well-deserved credit for coming to the rescue and hosting the African Cup of Nations, with barely 6 months notice, when the original hosts were sanctioned due to shoddy preparations.

Nevertheless, the lack of attendance in Egypt speaks volumes high ticket costs; the timing of matches bang in the middle of work days; the difficulties faced by national team supporters in obtaining entry visas to Egypt; and challenges with the Confederation of African Football’s complicated online ticket purchasing system.

It should not be so. This after all, is the most important event in Africa’s sports calendar. At least, it used to be before England’s Premier League, Spain’s La Liga, Italy’s Serie A, and Germany’s Bundesliga captured our collective imaginations.

The end result is that where once 30,000 to 70,000 fans a week watched highly competitive domestic football leagues across Africa, the empty seat syndrome has been the norm for almost two decades. It is not unusual to have less than a thousand fans in a stadium that seats 30,000.

The lack of fan attendance has obvious economic and financial implications across the sports value chain for team owners, sports federations and confederations, players, sponsors, advertising and marketing agencies, merchandisers, vendors, and local communities who once counted on fan attendance to boost fledgling economies.

What’s responsible for the increasing slide in fan attendance?

1. Poor facilities
2. High ticket costs
3. A lack of reliable transportation to and from venues. As well as sufficient and secure parking.
4. Increasingly crude behaviour and violence at event locations.
5. Technology. Mobile phones and Apps that carry events live as well as a plethora of entertainment alternatives. In other words, once big events are no longer the main gigs in town.

So, what can be done to reverse the trend? Here are 5 quick suggestions.

1. It can no longer be business as usual. Africa must run sports as a professional business. This includes the right infrastructure, training facilities, attractive pay scales for professional athletes who now consider anything less than a European league appearance, a professional failure.

Regrettably, as with Africa’s overall propensity to simply export raw materials instead of adding value to what we produce, we are doing the same with football and many other sports. Africa has a tremendous abundance of potential talent that for the most part (with the exception of South Africa, Kenya and Ethiopia) we add little or no value to. Instead, millions of genetically blessed athletes are simply waiting or begging to be ‘found’ on the cheap by European and American sports teams. Why? Simply because we fail to see diamonds in the rough and because we are unable to add value to the potential of what for now seems to be rough stones.

2. Modern and professionally maintained facilities: In sizzling hot Africa, we must invest in covered stadia. When I can sit in front of my big screen TV in my air-conditioned living room, why would I want to subject myself to temperatures that I swear have gone up a number of notches in recent years?

3. Sport is a spectacle. This includes everything including pre-event and half time entertainment to keep fans with short attention spans upbeat and engaged.

4. Give back to the fans: Essentially, engagement in the 21st century must change. It’s time to give something back to fans rather than fleecing them at every opportunity with sub-standard services and products. It would seem to me that sports teams could offer something as simple as raffle draws that reward fans with extra game tickets, signed player jerseys, visits with select players, or products from local sponsors. Professional marketing firms can come up with an endless list.

5. Make sports big and make it a win-win proposition:  Real Madrid F.C. and Barcelona F.C. for example, are not owned by a few rich individuals. Instead, they are owned and supported by thousands of shareholders known as ‘socios.’ Across Africa, it’s time to change the numbers game – in ownership, money, and attendance – by giving fans a seat at the table.

These are just a few quick ideas. However, the running of sports in general and football in particular as a business and a brand proposition, will require honest analysis, political and financial will, and a collective approach.

It must be if Africa is to unlock its sports potential and turn millions into billions.

Dr. Victor Oladokun, is the Director of Communication and External Relations at the African Development Bank

Guide to Baku, Azerbaijan

Getting There: Qatar Air was the best, and the only real option picked by our travel agent. We booked tickets early and they cost about $1,000 for a round trip. The flights are Nairobi-Doha and Doha-Baku and total time and the total journey time was about eight hours. Our layover in Doha was short and we had to sprint through the airport to get our connecting flight. Fortunately, we had received boarding passes for the Baku-leg in Nairobi, but in the rush, we lost some documents.

In the weeks prior to departure, there was some confusion about how to obtain a visa to enter Azerbaijan. The country has an e-visa page, but the pull-down menu of country choices does not list Kenya. Some other travellers going for the race chose South Africa as the nearest country to complete the e-visa application but we chose to wing it.

The Formula One race is a big business deal in Baku, and there was a Presidential directive on the internet that the Government of Azerbaijan would offer visas on arrival for F1 fans coming to attend the race. We had arrived early for check-in for our flight in Nairobi which was a good thing as we had to haggle with the Qatar Air staff and make some calls as they checked a book register of passengers. Eventually, they allowed us to proceed and board. There was no issue in Doha, other than the sprint across to catch the connecting flight.

On arrival at Heydar Aliyev International Airport (GYD) in Baku, there was a special desk section for F1 fans with special ushers around, dressed in F1 garb, ready to assist. You showed your ticket, paid a $26 fee and were issued with a 30-day single-entry visa. Note: We had bought our tickets through the official F1.com site and they arrived two weeks before the race, delivered from the UK by DHL to Nairobi.  

For other fans who already had applied for and got e-visas online, they could walk up to airport machines and get served.

After getting an e-visa, you then proceed to the immigration area.  There, they ask a few questions about the purpose of your trip and you also have to provide an email and phone number (we gave Kenyan ones).

if you intend to stay for more days in the country, you have to register online within 10 days of arrival and even the hotel you are staying at can process this

Getting Around: Baku is a small city and we walked end-to-end across it on different days. There was no need for taxis as it’s a very walkable city with lots of sights. We took a taxi from the airport that cost 50 Manat for a distance of about 40 kilometers using an unofficial cab (the official airport ones charge 70 Manat) and that was the only ride we hailed. All cabs are old Mercedes cars. As you walk around, note that weather changes were quite abrupt from sunny to cloudy. days were ok, but the nights were chilly.

Where to Stay: We had made a reservation at the Viva Boutique using Booking.com which we had made a while back and the rate was about $120 (200 Manat). They cost much more if you have booked late. Hotels tend to block off and charge higher fees for Grand Prix weekends. This room which would now be about  400 Manat on race day while other hotels would charge about 800 Manat. 

The hotel is not far from the track and we walked to different events of the race weekend.

We had arrived a few days before the race and had made an Airbnb reservation for the first few days. The homeowner had offered to pick us from the airport, and we had even negotiated an amount for this. But after clearing immigration, the Airbnb host was not answering his phone and we got worried. So we went to the hotel and negotiated for extra nights.

What to Eat: Restaurants are many, from local ones to others serving common international cuisines such as London Pub, McDonald’s and Starbucks.  Local restaurants had many dishes which we did not try. They have chicken served in many different styles and we ate a lot of chips and bacon.

Staying in Touch: It’s usually advisable, when visiting a new country, to get a local phone SIM card, in order to avoid roaming rates that are very expensive. We got Azercell lines from a booth at the airport that cost about $20, and which came with lots of minutes, SMS and 10GB data bundle that lasted the whole trip. This enabled lots of phone chats, browsing, and sharing of images and videos from the Baku trip with friends. However, like in a few other countries, you can’t make phone calls on WhatsApp – a VPN is advisable for that.

Shopping & Sight-Seeing: The local currency is called the Manat. It’s quite strong $1 = 1.70 Manat (so a Manat is ~$0.6 or ~EUR 0.5). Credit cards work well here for most purchases, but it is always a good idea to call your bank before you travel to any country.

Sights to see on the streets of Baku are the full-grown trees, especially in the old city section. The buildings also have interesting architectural designs, walling and engineering of tiles on newer buildings.

Baku is a small town. Malls are modest in size. There are kiosks that are rather expensive, compared to the supermarkets.  By Monday, after the race, malls were quite empty.

One popular tourism attraction is Yanar Dağ, (“burning mountain”), a natural gas fire which blazes continuously on a hillside on the Absheron Peninsula on the Caspian Sea near Baku. Tourist charges to visit are 2 Manat each.

Race Day:  The race is at 4:10 PM, which is late compared to other F1 races, and Baku is an hour ahead of Nairobi. 

We had great seats across the pit lane that cost about $500 and it was a fun vantage point. The race itself was kind of anti-climatic given the dominance of the Mercedes team who recorded their fourth consecutive 1-2 finish in 2019, and pre-race favourites Ferrari again seemed lost. The stage was set on Friday, during practice, when one of the cars from team Williams ran over a manhole cover which had come loose. This cause extensive damage to the car and the session had to be stopped. Other teams, including Ferrari, had their practice time limited as a result and this may have contributed to their Sunday pace.

During the weekend, we did the pit-walk to view cars up close in the garages. Many F1 races now put on huge musical concerts to entertain fans from across the world who have come to attend, and this year Baku had American rap star Cardi B performing on Sunday night, after the race.

Odd Points: You can exchange foreign currency with no questions asked and no need to show any identification (ID) in Baku.

A guest post by @asemutwa who travelled to watch the Formula 1 Socar Azerbaijan Grand Prix 2019 race in Baku.

Also see this other race trip report.- Guide to Abu Dhabi.