Category Archives: Kenya ICT

Future of Tech summit.

The Rest of World publication celebrated its second anniversary with an event in Nairobi featuring techies, writers and other guests and with panel talks on issues around technology in Africa.

Excerpts from the event.

  • Valuations: Panelist Ali Hussein Kassim wondered about the venture capital due diligence that placed the valuation of Flutterwave at $3 billion exceeding Nigeria’s largest bank, Zenith which has a stock market listed valuation of $2 billion.
  • Compliance: Kassim also lamented that fintech companies were doing business without engaging with regulators or undergoing KYC (know your customer), AML (anti-money laundering) and CFT (combating the financing of terrorism) steps that would keep them out of trouble. The result of this was cases like Flutterwave in Kenya, while in Ghana, Dash, a remittance firm had one of the largest pre-seed funding rounds in Africa, raising $32 million, only to be shut down a month later by the Bank of Ghana for not having a license. – “you can’t build a payment service for Africa when you don’t have a license to operate in your own country.”
  • Salaries: Whether the global tech giants that have recently set up in Nairobi are distorting employee pay scales and leading a talent war that smaller firms are losing out.
  • Appropriate Policies: Another panelist Nanjira Sambuli said techies must engage with governments about what is going on in their industry, or they would wake up and find unfavourable attempts to regulate them. She warned of the danger of the government’s copy-pasting regulations from other markets such that “that we must now opt-out of marketing messages that we never signed up for” and the excessive obsession with certifications that the government now wants to extend to informal workers. Also, in Kenya, after an umpteenth attempt, an “ICT Practitioner bill” was passed by Parliament in June 2022, only for the country’s President, Uhuru Kenyatta, to refuse to assent to it.
  • Knowing what problem you’re solving: About the spectacular year of Kune Foods from its million-dollar VC funding to its (not unexpected) demise.

One of Rest of World’s first stories was on the lending app Okash and its unorthodox collection methods. In two years, it has since published over 8,000 stories from 80 countries around e-commerce, labour, culture and social media.

More tech events are planned for Mexico City, Jakarta, and Delhi.

Kenya Tax Changes in 2022

A few weeks before Kenya’s August 2022 general election, Parliament is to debate and pass the Finance Bill which was published in April. Some measures it proposed will become effective in July 2022 and others in January 2023.

The tax proposals are to meet the country’s 2002/23 budget with a planned expenditure of Kshs 3.4 trillion which includes Kshs 2.14 trillion of ordinary revenue. The Finance Bill will need to be passed along with the Budget Estimates, Appropriations Bill and County Allocation of Revenue Bill. A recurring concern with investing in Kenya is the ever-evolving tax code that changes from year to year, adding, taking away or adjusting taxes and deductions.

Local tax advisory firms such as PWC, KPMG, and Deloitte have published summaries and interpretations of some of the tax proposals,

Excerpts

Agriculture: Removal of an exemption of clearing or planting on agricultural land.

Digital Economy: The digital service tax doubles from 1.5% to 3%. What impact will that have on e-commerce in Kenya?

Energy: Briquettes using sustainable fuel are exempted from VAT

Financial Markets Capital gains tax (CGT) goes up from 5% to 15%. Also, gains by foreign investors trading in derivatives will attract a withholding tax of 15%.

Foods: Excise duty of 15% on imported potatoes, excise duty goes up slightly on fruit juices, beer, other alcohol, wines, imported sugar, and white chocolate. Also, excise tax is added on electronic cigarettes, ice cream not containing cocoa, and liquid nicotine.

Local medicine manufacturing: in the recovery from covid-19, plants aiming to manufacture pharmaceutical products will be exempt from paying import declaration fee (3.5%) and railway development levy (2%). Also while a 25% excise duty on imported glass is imposed, it excludes those for pharmaceuticals.

Media: 15% excise tax added on advertisements by betting firms and alcohol companies.

NGOs: Trusts must now use taxpayer PINs to transact.

Sports Betting: Excise duty goes up from 7.5% to 20%.

Big Stick Enforcement: To appeal against a tax claim, someone must deposit 50% of the amount upfront in a special account at the CBK. Also, ships, planes, and motor vehicles can have a payment claim registered against their ownership by KRA, in case their owners have not paid other taxes. The law currently only applies to land & buildings. Also, multinationals with a turnover of Kshs 95 billion ($750 million) will be required to file Kenya-specific reports within a year of their financial year-ends.

Also, see a KPMG analysis in 2021.

Nairobi Hub Spaces in 2022

Interesting times in Nairobi the last few weeks as Microsoft launched its Africa Development Centre (ADC) office. The Kenya ADC, was launched three days after another one in Lagos, Nigeria that will serve the West Africa region. Across Africa, the company now has 450 staff and engineers working at ADC’s in the two capitals.

The new office also houses the Microsoft Africa Research Institute, its first on the continent as all as a Microsoft Garage, an incubation hub, joining others located in the USA, Canada, Israel, India, and China.

Visa launched an innovation studio in Nairobi, its first in Sub-Saharan Africa to showcase payment solutions and innovations. Visa will co-create e-commerce solutions for the future with partners in the new space that was launched by Patrick Njoroge, the Governor of the Central Bank of Kenya. Visa has other innovations centres in Dubai, Singapore and USA (San Francisco) – which is its flagship “One Market”. There are already partnerships in Africa with Paga and Safaricom.

Who’s next?

It’s not just about technology; NSE-listed agricultural firm Kakuzi has launched an online “Avocademy” hub for farmers to learn about the processes of growing and managing avocado – the current “green gold” crop.

Other Hubs and co-working spaces:

Amazon announced that a new AWS Local Zone would be available in Kenya providing cloud infrastructure. Companies can use it to host their applications by connecting through Amazon local partners including Safaricom.

Google has announced that they will be opening a product development centre in Nairobi and is now hiring engineers, product managers, software engineers, user experience (UX) designers and researchers. Perfect timing as their pioneer Country Manager, Joe Mucheru will continue to serve as Kenya’s Cabinet Secretary for ICT, Innovation and Youth Affairs for the next few months.

Dominoes.

Nairobi Real Estate Moment: 2021

  • The Nairobi Expressway construction that will span from the Jomo Kenyatta International Airport to Westlands, has reached downtown Nairobi and is causing disruptions to real estate and traffic .. some changes to retail include..

  • Changes to Malls – many of which are largely idle above the first floor. Quite a bit of foot traffic there is from bank customers visiting their branches which have now been relocated to the third and fourth floors of Nairobi malls.

Other real estate stories.

  • An EFG Hermes report on Nairobi real estate found the demand for affordable houses has a disconnect that has seen prices are softening in Nairobi – at high-end residential (-27% below 2017 peak), and commercial properties (-13% off-peak). Also, the tough Nairobi office market is very visible (vacancy rates of 22% compared to 9% in 2011) with exposure to some financing banks including KCB and Housing Finance.
  • Orbit Group and Grit Group have partnered on a 25-year $53.6 million sale & leaseback transaction for a light industrial (warehouse and manufacturing) property on Mombasa Road, supported with a $25 million loan from the IFC. Orbit Products Africa, controlled by the Sachen Chandaria family, is a leading contract manufacturer for brands in personal care and home care products and its clients include Reckitt Benckiser, Unilever, Colgate and Henkel. They will expand the plant by an additional 14,741 m2 warehouse space and improve it to modern FMCG industry standards to achieve an IFC EDGE green building certification on completion. As part of the deal, $31.5 million will be a “perpetual note”, raised from Ethos Mezzanine Partners GP and BluePeak Private Capital and additional proceeds from this will be invested in the St Helene Private Hospital in Mauritius, an idea that was conceived by Catalyst Principal Partners. Grit Real Estate Income Group is listed in London and Mauritius 
  • A Knight Frank report, the “Africa Logistics Review” finds that Nairobi had the best real estate market between 2018 and 2021 for prime warehousing and logistics.  “Nairobi recorded the highest increase in average prime rents across Africa, from USD 4.70 psm in 2018 to USD 6 psm ” – and developers have grown over 170,000 square meters in the last five years. Kenya has the highest concentration of special economic zones (SEZ) in Africa (61 of the 180 SEZ’s). The country is also making good progress to grade A warehousing and in growing a real estate investment trust (REIT) ecosystem.  Also because of high land values in Nairobi, developers have sought towns/areas beyond traditional industrial hotspots Read more.
  • Speaking of REITs .. Acorn Project (Two) LLP, the Issuer of the Acorn Medium-Term Green Note (MTN) Program, closed the final tranche on 16th July 2021, raising Kshs 2.096 billion against the target of Kshs 1.438 billion representing a subscription rate of 146%.  As part of this transaction, the Acorn green bond was converted into the Acorn Student Accommodation Development REIT (ASA D-REIT). Read more.
  • The Architectural Association Of Kenya reported on development challenges within the Nairobi metropolitan area. A decade after an electronic construction-permitting system covering Nairobi, Mombasa, Kiambu, Machakos, Kisumu, Kajiado and Kilifi was deployed with the support of the World Bank Group, it is plagued by frequent disruptions and system downtime. In Nairobi, the system has not been operational for more than three months of 2021 and in a survey of AAK members, 46.7% of the respondents indicated that they had to wait for over 6 months for their applications to be processed or granted approval.
  • Kenya’s Lands Ministry is doing a digitization of title deeds through a National Land Information System (NLIMS), referred to as ArdhiSasa with a goal to have all land records digitized by the end of 2022.  The Lands Cabinet Secretary indicated that the Ministry has scanned and digitized 30 million documents in Nairobi.
  • A Cytonn Real Estate report on properties in the years 2020 found that “residential units in Thindigua, Syokimau and Rosslyn recorded the highest returns to investors and land asking prices recorded an overall annualized capital appreciation of 2.3%.” According to the report, Gigiri was the best performing office node in FY’2020, followed by Westlands and Karen, In the retail sector, Westlands and Karen were the best performing nodes while in hospitality, Westlands-Parklands was the best performing node. Read more in the report.
  • Cytonn is now doing a restructuring and has applied to wind down two funds – the Cytonn High Yield Solutions LLP and Cytonn Real Estate Project Notes LLP through administration and has invited creditors to submit their debt claims, with proof, to Kereto Marima who is the appointed administrator – by November 29, 2021.
  • Hotels are not doing well with many iconic sites closed or on sale due to Covid-19 and the resultant curfews and travel bans that have affected the flow of tourists into Kenya.
  • Many hotels expect a steady recovery once the curfew is lifted (which happened in October 2021). See a survey of hoteliers by the Central Bank of Kenya.

Some hotels that are gone: Intercontinental and the Nairobi Dusit/ D2 which recovered after the January 2019 terror attacks only to succumb in the Covid-19 aftermath.

Some hotels currently closed: Mt Kenya Safari Club, Norfolk, Radisson Blu.

Some hotels on sale: Outspan, Treetops (should the Queen buy the hotel ahead of her 100th birthday?), Fairview and Country Lodges, Jumuia (Nakuru).  

Real Estate Moment: Property Management Tools in Nairobi

Everyone is a member of a housing estate in Nairobi, from Spring Valley to Kibera and other neighbourhoods above and beyond. They all have to deal with things like security, service charges and garbage collection, to others like painting common areas, noise & smoke disturbances and shared parking spaces.

How do residents manage? Often it takes a few keen dedicated people, usually long-term residents in the area, who volunteer their time to marshal and organize the other residents who are largely passengers. They spend a lot of time organizing and resolving matters and chasing and collecting monthly payments from their fellow residents.

What tools can they use to help in these time-consuming and unwelcome but necessary tasks? I put up a query on Twitter and these are the top ones shared back, in no particular order.

  • Verus Africa: Their platform is the only one that is cloud-based and caters for residential as well as commercial real estate management. (Ok. They are also my relatives😂).
  • Try Smartkodi (how it works video here) .. SmartKodi is an all-in-one property management software that does everything from lease management, automated rent invoicing and receipting, utilities tracking and management, a comprehensive accounting system and so much more! Talk to us.
  • We built Gated specifically for estate management.
  • @kodipoint at @tenzilabs we are piloting a similar product.
  • Check out RentPay.
  • Nyumbani – talk to us.
  • Sapama.
  • Check out Safaricom bill manager.
  • Check out Kodisher by @mwangisk (who) can give more details about it.
  • KCB Group have a property management portal as well.