Category Archives: Kenya economic growth

Strathmore Promotes Agri Export Business Opportunities

On Thursday at Strathmore Business School, there was a session to highlight some of the opportunities and challenges for Kenyan companies that wanted to get into the farm export business.

Kenya is known for flower exports, but not so much for fruits and vegetables which can be quite lucrative and are better suited to the climate here. An example was cited that a kilo of dhania (coriander) that sells for Kshs 50 per kilo in Nairobi, can fetch €3-4 euros in Europe.

Some excerpts

Export fruits and vegetables

  • Know the markets. Buyers have no obligation to buying from Kenyans. Companies have to know how to sell at expos where everyone is selling the same fruits and vegetables.
  • Kenyans are known for sending good samples, but the problem that buyers in other countries have with many Kenya companies is that they are later not consistent in quality and quantity of food exports. 
  • How to identify opportunities and threats in the news; Things like Brexit, earthquakes and climate changes and others like Muslim migration across Europe.
  • One can’t venture into exports unless they interact with the government – HCDA, Export Promotion Council, KEPHIS and others like the FPEAK, and the Kenya National Chamber of Commerce & Industry. Also, potential exporters must update themselves on changing regulations.
  • How to manage finance when upfront payments are rare, and there are international frauds who take deliveries but don’t pay. Also how to avoid the many fake consultants.  
  • The biggest challenge in this country is labour, not capital! One solution is shared labour for exporters and farms who can’t employ full-time skilled workers.
  • If one is not in charge of their own logistics, they are not in business. 

The Strathmore Business School exploring international markets program class takes place early next year and involves two modules: The first will take the class to the Fruit Logistica in Berlin, in February 2018 which is the world’s leading trade fair for the international fresh produce business where they will learn about the packaging, presentation, logistics, marketing. and other business aspects at the fair that had had 3,000 exhibitors from 84 countries and 76,000 visitors this year. Then at module two in Nairobi, they will learn about local production, logistics, local bank and financial options, obtaining global certification, branding, and other aspects of the food value chain. The deadline for applications is December 20.

Future of Financial Services in Africa and the Middle East

Technology will continue to offer great opportunities for millions of unbanked people including groups of women, Muslims and governments in Africa, Middle East and South Asia (MEASA) and new companies who design financial services in these space.

These are the findings from a report by the Economist Intelligence Unit that was sponsored by the Dubai International Finance Centre which highlights that:

  • Findings Gaps in financial services present an opportunity for financial companies—both traditional and non- traditional players.
  • Overcoming a strong preference for cash in the MEASA region will be imperative to move towards a cashless economy
  • Blockchain has the potential to change the financial architecture in MEASA, particularly for banking.
  • New business models are being developed to reach the “missing middle” of retail investors and medium-sized businesses.
  • In Islamic finance, the approach is shifting from “sharia-compliant” to “sharia-based”
  • Governments and regulators have a crucial mandate to drive financial innovation.

It notes that there is a prevalence to use cash in the three continents (to receive wages, pay school fees and for utilities etc.) and that current regulations which require the use of ID cards are a barrier for women who need ID cards and other documents to receive these services.

The 3 billion people on the three continents will be a source of demand and supply for better financial services, and governments have a role, regulators should balance prudence with innovation, and financial service providers should collaborate for everyone to benefit.

There are opportunities for wealth and private equity funds and individuals (through crowd-funding) to support the growth of new players to take on financial sectors such as insurance, whose levels of penetration can be increased through the mobile phone as has been seen for banking and Islamic financing, by promoting sharia-based products, more than ‘sharia-compliant’ ones. Technology has the ability to address financial exclusion and scale services to millions while reducing costs and creating new revenue models; this can be through smart data to improve credit scoring models and the use of bitcoin to replace money transfers (with banks and currency conversions to international dollars).

Base Titanium – Kenya’s Flagship Mine

Base Titanium was recently made a Kenya Vision 2030 Flagship Project for the mining sector and continue to share updates as part of their commitment under the Extractive Industries Transparency Initiative (EITI).

For the financial year which ended in  June 2017, they had sales of $215 million, and a net profit of $21 million, compared to a loss of net loss of $20 million the year before. They reduced net debt by $76 million during the year, then reduced it further by $12 million to stand at $87 million at the end of the September 2017 quarter. Base Titanium are still owed $21 million in VAT tax refunds and all payments are still done to the national government though Kenya’s new mining law (currently in limbo) calls for separate payments to be made to the county government and the community. They are also still paying royalties at the rate of 2.5% while accruing another 2.5% in anticipation of the government changing this to 5%.

Base Titanium now moves into a second phase of production of the Kwale mineral sands project, investing $30 million in a more intense process of increased mining capacity, as they aim to maintain production of 450,000 of ilmenite, 88,000 tons of rutile and 33,000 tones of zircon a year even as they also target to retain their safety performance record which saw no lost time injuries in the last quarter. 

Base Titanium will also shift to a different field (South Dune) at Kwale in two years when the current field (Central Dune) is exhausted and which they have commenced rehabilitating the depleted areas with vegetation. 

They are also waiting to commence more exploration in Tanzania, in December, and in Kenya, in 2018. In Tanzania, where they hold 5 prospecting licenses, they await availability of drilling rigs while in Kenya they await completion of a report by a new mineral rights board for the Cabinet Secretary for Mining to approve further exploration in Kwale. 

Base Titanium has also spent $10 million ( – about Kshs 1 billion) on the community development projects. These include educational support that has seen 1,000 get scholarships in Kwale, while in agriculture, they are working with the national and the Kwale county government to assist over 900 local farmers and groups grow crops like potato, sorghum, and even cotton that is exported to Bangladesh for garment-making.

Post Election Economic Forecasts in East Africa

Kenya goes for a repeat presidential election on October 26. The country conducted general elections on August 8, but the Supreme Court invalidated the presidential election in which the electoral commission (IEBC) had declared incumbent President Uhuru Kenyatta as the winner, and instead ordered a fresh election be done within sixty days.

August also saw two other major elections in Africa; On August 4, Rwandans re-elected President Paul Kagame as he was the choice of 99% of the nearly seven million voters. Meanwhile, in Angola, elections were held on August 23. President Jose dos Santos was not in the running as he was stepping down and they were won by João Lourenço, the Minister of Defense and Vice-President his party.

Elsewhere: Togo is to have a referendum on a bill that limits the term of the President; also a bill has been introduced in Uganda’s parliament to remove a 75-year age limit for the President (Yoweri Museveni is 73 now), and Liberia is to have an election on October 10 that will usher in a new President after Ellen Johnson-Sirleaf, who in 2005 became Africa’s first elected female leader,

The Institute of Chartered Accountants in England and Wales (ICAEW) published a report they did with advisory firm Oxford Economic on Africa economic insights for Q3 of 2017.

some excerpts

Kenya: The leaders who take office in Kenya after the October 26 presidential poll will need to reign in expenditure to improve the economy’s prospects according to ICAEW.

Old Pic from the State House FB page

The report states that the new government will need to take a number of steps to revive the economy following the October 26th vote. A start would be to rethink the regulatory cap on commercial interest rates, which has starved small and medium enterprises of funding. Reining in expenditure, in order to ensure government debt does not get out of hand, would improve the economy’s future prospects. Furthermore, the newly elected government will need to lead the charge against corruption.

Rwanda: President Kagame’s re-election is expected to result in the continuation of business-friendly policies to boost entrepreneurship.

Tanzania: The operating environment in Tanzania is becoming increasingly complicated due to President Magafuli’s economic nationalism.

Ethiopia has lifted a state of emergency that was in place for 10 months, and there is a risk that social unrest may keep disrupting the state led development that has produced the country’s economic boom. Still, real GDP growth is forecast to come in at the very impressive rate of 7.1% in 2017.

Nigeria, & Angola: The two big oil producers, Nigeria and Angola, have continued to deal with the effects of a much lower oil price: foreign reserves are hard to come by, which complicates the operating environment for all firms, especially those that need imports. In both countries inflation is falling but still high, interest rates remain high and the governments have been cautious with their spending, meaning government expenditures have not contributed to the economy.

Ghana: Ghana’s continued participation in the International Monetary Fund (IMF) Extended Credit Facility (ECF) programme has been characterised by significant uncertainty ever since the New Patriotic Party (NPP) took the reins by defeating the National Democratic Congress (NDC) in the 2016 elections. Real GDP growth is expected to exceed 6% in 2017, driven by higher oil output and a recovery in consumer demand. International reserves also received a healthy boost due to robust foreign appetite for longer dated government securities. Finally, authorities have made significant progress with the implementation of the banking system roadmap. There are several reasons, to think that the operating environment is set to improve.

Ivory Coast, Ivory Coast is experiencing similar problems as a consequence of a fall in cocoa prices, and political risk sporadically takes the form of mutinies by soldiers, but its economy is still set to grow by 6.9% in 2017.

South Africa: South Africa continues to hold back growth in Southern Africa, although the regional giant has emerged from recession with positive quarterly GDP growth in Q2.

Senegal: Senegal is forecast to boast comparable output growth (6.8%) – thanks mostly to infrastructure spending undertaken as part of the Plan Emerging Senegal (PSE).

Zambia is forecast to show real GDP growth of 3.3% thanks to improved performances in the agriculture and industrial sectors.

The ever-stable Botswana and Mauritius are expected to record stable growth of 4.1% and 3.8%, respectively. The smaller economies in the region continue to feel the effects of a severe drought last year, and South Africa’s weak economy.

Kenya Tea Trade Monopoly Pricing Rejected

The Competition Authority of Kenya has rejected an application for exemption by the East African Tea Trade Association (EATTA) to set brokerage commission and warehouse prices. EATTA, which operates the weekly Mombasa Tea Auction, had sought to be exempted from the provisions of section 21 and 22 of the Competition Act No. 12 of 2010 (the Act) on some of its activities for an indefinite period.

The rejection was premised on:

  • The setting of broker fees and commissions under the auspices of the EATTA was a hardcore contravention under Section 22 (1) (b) of the Act as it is a form of price fixing;
  • The setting of brokerage fees was beneficial to the brokers with no express benefits to consumers and tea producers;
  • The Kenyan brokerage fees were higher compared to those in Sri Lanka and India and have remained unchanged for a long period of time;
  • Warehousing is an important element in the tea value chain and that fixing of warehouse fees would undermine innovation and improvement of value preposition to customers given that warehousemen will be assured of the minimum fees set by EATTA. This the Authority concluded that it will encourage inefficiencies in warehousing thus impacting on the trade negatively.

However, the Authority allowed, for a period of three (3) years), the trading to be permitted amongst membership.

Extract from the Kenya Gazette

Other

  • Kenya’s largest foreign exchange earner isn’t tea or tourism but diaspora remittances – @coldtusker
  • During tea processing, 4 kilos of green leaf are required to make one kilo of tea – @dailynation
  • Kenya has the largest tea auction in the world with plans for a tea futures market to get predictability for farmers – Stuart – @INTLFCStone