Category Archives: Kenya economic growth

Kenya relaxes Covid-19 restrictions

Kenya will relax some of the restrictions that have been progressively building since the first case of Coronavirus was announced in the country in early March.

Speaking in Nairobi today, President Uhuru Kenyatta said the decision to re-open the country was a balance between a health crisis and an economic crisis. He mentioned that while the country was not quite ready, a “reasonable levels of preparedness” to reopen had been attained.

He called on citizens to be responsible and to engage in minimal contact and movements and to delay “non-essential up-country travel.” They should also avoid interacting with the elderly and the ill

Some of the changes will be:

  • The restriction of movement in and out of Nairobi, Mombasa and Mandera counties will end on July 7. The Government will then study patterns of infection over the next three weeks.
  • Local air travel resumes on 15 July.
  • International air travel resumes on August 1.
  • Churches can re-open with a maximum of 100 attendees and each ceremony will be not more than an hour. Also the ill, and no one under 13 years or over 58 years will be allowed to attend.
  • The evening curfew across the country, restrictions on wedding & funeral numbers, and a ban on political gatherings were all extended by another 30 days.

The President said it was not enough for the Government to pump resources into the economy using stimulus instruments, and that such efforts will go to waste if the people do not co-create solutions with the government.

He called on businesses to create new business models to find opportunities presented by the crisis. He cited the textile industry in Kenya, which had ramped up manufacturing, and emerged as a net exporter of PPEs (personal protective equipment) to the region and he called on other industries to emulate this.

A frank assessment

EDIT: A day later, Prof George Magoha, Kenya’s Cabinet Secretary in the Ministry of Education, announced that the 2020 school calendar year will be considered lost due to COVID-19. He proclaimed that they had shelved a proposal to open for candidate classes in September. Instead, there will be two Form One class cohorts in the 2021 academic calendar, all learners in Grade 1 to 4; Standard 5 to 7; and Form 1 to 3 in 2020, will remain in their current classes in 2021 and there will be no KCPE and KCSE examinations in 2021.

M-Pesa App eases cash management and reporting for SMEs

In June 2020, Safaricom launched a new app for business owners that is a serious tool that enables them to do true real-time cash management, accounting and business banking on their mobile phones.  

Perfectly timed during the Coronavirus when businesses are moving shopping online, and paying more with M-Pesa over cash, the new Lipa Na M-PESA Business App allows business people to set up and manage multiple tills at different locations, keep track of cash and integrate payments from different tills.

By using the app, business owners get immediate updates on sales and receipts, giving them visibility of how different stores are performing and should reduce pilferage and leakage from cash sales handled by employees at different locations.

Payments collected through mobile money can be used to settle supplier bills, pay daily casual salaries or be sent to the bank, all using the app. A big plus is that businesses can obtain instants overdrafts to complete crucial payments, and this follows in the runaway success of “Fuliza”.

Crucially the Lipa Na M-PESA Business App creates a digital data trail, marries accounting and banking as they can now export their periodic statements to other systems like Excel or an accounting system for easier and faster reconciliation. This is expected to ease the record-keeping and payment efficiency of business owners, 170,000 of who currently use Lipa Na Mpesa and who can receive payment from 24 million M-PESA users across the country. 

Business owners can apply online for the new M-PESA business till numbers or to add to their existing ones. The requirements asked for from different entities, from sole proprietors to partnerships, companies and churches, are listed on the site. Decisions on applications will be made within 24 hours of providing all documentation, with new till numbers provided to successful applicants. Other status decisions such as pending, or rejected, with reasons given, will also be in the same period.

The Lipa Na M-PESA Business App is now available in the Google Android store and on USSD (*234#), while the iOS version will be out later.

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.

Safaricom 2020 results with CEO transition

Safaricom PLC announced its financial results at a unique event, streamed online, that featured its incoming and outgoing CEO’s.

Overall revenue grew 5% to Kshs 251 billion as M-Pesa revenue grew 12% to Kshs 84 billion with mobile data growing 12% to Kshs 40 billion. Voice and SMS revenue declined. Profit before tax increased to Kshs 105.77 billion up 17% from the previous year, and the company will pay out Kshs 56 billion as dividends to shareholders, up from 50 billion in 2019.

The firm’s Chairman Nicholas Ng’angá welcomed the new CEO Peter Ndegwa who has been in office for a few weeks now and thanked Michael Joseph who had been appointed interim CEO following the demise of Bob Collymore in July 2019.

Ng’angá asked that the country’s regulatory period, after Coronavirus, be designed to support the revival of businesses, not one that increases taxes for consumers and businesses, noting that the company had paid Kshs 111 billion in taxes and fees to the government during 2019.

Michael Joseph said that in his second stint as CEO they had simplified offers to customers and mobile data had double-digit growth while gaining market and increasing data revenue. Safaricom and Vodacom have acquired the M-Pesa brand from Vodafone and will roll out M-Pesa across Africa with new products and lower costs. Safaricom is also pursuing one of the new licenses in Ethiopia.

Sateesh Kamath, the Chief Financial Officer, said the results were adjusted for the one off-gain of acquiring M-Pesa and that service revenue still grew in the year, despite the decline of the sports betting and the reduction of tariffs the company had undertaken to support consumers during Coronavirus. He said that they plan to introduce more use cases to cannibalise M-Pesa “withdrawal” revenue and instead grow customer e-balances in the long run, while Joseph said that they plan to roll out a unit-trust investment product.

Peter Ndegwa, the incoming CEO, announced that the company would roll out a device financing offer to enable Kenyans to access 4G smartphones, with affordable data, by paying as little as Kshs 20 per day. He concluded by saying that Coronavirus made it impossible for the company to provide forward guidance on earnings and capital expenditure for 2021 and that they would do that at a later date.

KPMG on Geopolitical Risks and Opportunities

KPMG’s Audit Committee Institute series organized a breakfast session in Nairobi today that assessed the risks posed by global events & trends and the potential opportunities that could emerge. The session took place at a time when countries and industries around the world are gripped by concerns and efforts to contain the spread and impact of the Coronavirus.

Sophie Heading, KPMG Global’s Head of Geopolitics, who is on a tour to speak in different capitals around East Africa mentioned that geopolitics now affects the developed world as much as it does for developing countries. She said that US domestic governance is the number one political risk across the world, and that while there has been a shift in leadership away from the US & Europe (G-7 nation) towards China, currently we are in a G-Zero world in which there is no clear leader.

She referenced three distinct areas of technology, trade and trust in which geopolitics could be traced along, and the opportunities they presented for different African countries.

Excerpts

  • Technology: Advances bring geopolitical power and this is likely to spread to other markets – as seen in the battle between the US and China over spectrum (5G), data, and platforms. China is looking to reshape the Sub-Saharan Africa technological space while the US wants to protect its security interests and intellectual property.
  • Trade: The US and China have decided to decouple and go separate ways and other countries will have to choose who to align with. Both are seeking new alliances, investors, partners, suppliers, staff etc. but this is also at a time that other key markets are increasing their regulations in terms of capital, policies, taxes and data, etc. Foreign aid used to be a tool that Western states used to influence economic events in Africa, but with the Chinese model of financing infrastructure being so successful, she expected that there will be a drop in aid from the West as it is no longer seen as being effective.
  • Trust: There is social discontent across the world as young populations feel that government systems are not meeting their needs. This is different in developed nations versus it is in developing ones. But because of their debt levels, most nations now have less policy flexibility to address their internal issues. Also with global growth having slowed down to about 3%, and which may reduce further to as low as 1.5% with the Coronavirus outbreak, any such interventions may widen the social wealth divides within countries.

She said that there is more need to pay more attention to environmental, social, and governance (ESG) issues. This is something that Europe, and the private sector, have championed, but which other governments have not, while the US, China and India have all stepped back on the environmental front.

She cautioned that Nairobi, which is the second-biggest hub in the region for impact investing, but without the Kenya government signalling its interest in championing of ESG issues, may lose out on future investment and client opportunities.