In May 1923, the East African Standard published a report from a bank AGM.
Mr. Robert Williamson, the deputy chairman of the National Bank of India addressing shareholders at the annual meeting yesterday, made a brief reference to the position in East Africa today and in the course of his remarks, suggested considerable improvement in the prospects for both trade and agriculture.
Mr. Williamson said the export trade of the country was more active and its products such as maize, coffee, and hides had found a ready market. The Uganda cotton crop, although it would not realize the original estimate of about 100,000 bales, would be fairly large and should assist in the off-take of imported goods through the buying power produced from its sale.
“The repeal of the Kenya income tax and revision of customs duty should also improve matters. There are,” he added, “certain political disturbances locally almost inseparable from the growth of a young country with a mixed population such as Kenya has, which we all trust are capable of adjustment. The outlook in this direction is promising as deputations from the districts are coming to London to interview the Secretary of State for the Colonies.”
A dividend for the six months ended December 31st, last at the rate of 20% per annum was agreed to.
The National Bank of India was the top bank in colonial Kenya. It is the oldest bank in the country and is today known as KCB.
The Africa Digital Media Foundation (ADMF) has published a comprehensive report on the state of the creative sector in Kenya and the needs, challenges, and ambitions of its participants. ADMF started the study with a questionnaire that was widely circulated and completed the research in July 2020 using online forums and tools.
Summary of their findings:
There is a willingness in the Kenya creative entrepreneurs to make things better for everyone.
Success breeds success and the creative population is divided between those that have made it (and keep grabbing jobs and clients) and those that have not (less- established creative entrepreneurs who may have few years of experience, little commercial and financial success)
All want opportunities to learn more; they accept that technology evolves and new products require new skills.
Banks don’t understand; formal credit and financing options aren’t considered viable options by creatives; their financing is limited to sourcing from friends and family.
Almost everyone had a story about doing work and not receiving payment as agreed from the client.
Other interesting findings in the report:
Top engagements are in TV/video production, writing/journalism, graphic design, animation and finally photography (all have more than 10%). Some small categories with 1% are gaming, event planning and jewellery.
There is 50/50 split between those that have formally registered their business and those that haven’t. Of the non-registered ones, some can’t afford to lose some of their income in taxes while others do not see the benefit in registering a business, paying taxes, and accessing the supposed benefits that taxpayers enjoy, such as NHIF and NSSF.
23% work in the sector part-time. Their other sources of income are teaching (7) and 4% each for farming and events equipment rental.
Also, read more about ADMF, and its sister institution, the Africa Digital Media Institute (ADMI). Some of the courses open for enrollment in 2021 including certificates in video game development, music production, video production, digital marketing, and Rubika 2D animation as well as diplomas in Rubika video game design, sound engineering, animation & motion graphics and film & television production.
This week, the East Africa Venture Capital Association (EAVCA) organized a talk about Mauritius that’s facing a European Union financial transactions blacklist.
Mauritius has set itself up as a financial hub that attracts and deploys investments across Africa. It has become the place of choice to operate through and 90% of investments into East Africa are done through Mauritius (60% are from the EU). The significance of this is that one panelist said that the Mauritius ban was worse than COVID.
Mauritius has complied with 35 of the 40 clauses (including the big 6 important ones), and 53 of the 58 recommended actions on Anti-Money Laundering (AML). There’s high-level commitment to correct the remaining ones, led by the Prime Minister, and the nation has a timetable to address the outstanding issues in 2021.
The blacklist prohibits European investments in new funds in Mauritius, with the ban also affecting all European Investment Bank (EIB), funding, investments, lending and operations. The ban is not retroactive, so they have agreed on a grandfather period, till 31 December 2021, during which funds can continue to operate and by which time they hope the country will be removed from the list. But from October 1 2020, European funds can’t make new invests in funds structured in Mauritius. They have two options – focus on funds not established in Mauritius or invest through parallel structures (institutions that are set-up to co-invest along with funds in Mauritius)
No African country will benefit from Mauritius troubles as there are few alternatives to that country. Malta and Ghana have also been listed – so likely bases are now Dubai, or within the EU (Netherlands, Ireland, Luxembourg, France) itself.
Kenya and Mauritius have been working on a taxation treaty for 8 years. Kenya has signed 14 tax treaties (including with Canada, France, Germany, India, Norway, UK, Zambia and South Africa), most before 1987, but none had raised as much attention as the proposed Mauritius DTA, as it is which is a low-tax country. Uganda and Rwanda already have Mauritius DTA’s. Kenya’s Parliament opened public participation on a new Kenya-Mauritius treaty for the avoidance of double-taxation in terms of cross-border transactions (property, profits, royalties, dividends, technical fees etc.) and the deadline for comments is October 5 202. But the treaty does not apply to most Kenyan investment firms as a 2014 KRA law change requires 50% of ownership to be in another state to qualify.
Last month, Kenya’s President announced proposals to cushion residents from impacts of the Coronavirus that has affected many industries and companies by disrupting supply chains and reducing consumer spending. He cited measures such as reduction of income taxes, and Value-Added Tax (VAT goes down from 16% to 14%), that have now taken root in April 2020.
But the details of the proposal are now clear with the publication of the tax laws amendments. They are contained in a 97-page bill that is to be tabled at and debated at a special session of Kenya’s National Assembly (Parliament) on Wednesday, April 8, for their approval.
KPMG East Africa has nicely summarized some of the proposals in the bill, picking through the details. Some notable items are:
VAT: Items that were previously exempt including bread, milk cream, vaccines, and medicaments, move from the zero list to the VAT exempt list, and this may push up their costs.
Items that previously did not incur VAT but which will now be charged 14% include agricultural pest control products, tourism park fees, LPG, helicopters, mosquito nets, equipment for solar & wind energy, museum exhibits & specimens, tractors, clean cookstoves, insurance services, and helicopter leasing which previously did not attract VAT.
For investors: VAT is now charged on the transfer of a business as a going concern, as well as on assets transfers to real estate investment trusts (REIT’s) and asset-backed securities.
Income tax: Is reduced across different bands with those earning below Kshs 24,000 per month exempted from paying income tax, while the tax rate for top earners goes down from 30% to 25%.
Non-residents will pay 15% withholding tax on dividends they receive, an increase from the current 10%.
Corporate tax: This reduces from 30% to 25%.
Businesses earning between Kshs 500,000 to Kshs 50 million a year are to pay turnover tax, which will now be reduced from 3% to 1% of income, monthly. The previous upper limit was Kshs 5 million. It is now mandatory for businesses to keep records of all their transaction for 5 years
Anti-industry moves?: An electricity rebate for manufacturers has been ended, VAT has been introduced on goods used to build large industrial parks, and there will also be reductions of building investment allowances.
Kenya Revenue Authority: When KRA appoints banks as revenue collection agents, they are to remit collections to the Central Bank of Kenya within two days.
Removes a requirement that KRA publishes tax rulings in newspapers.
KRA may pay rewards of up to Kshs 500,000 for people who give information leading to tax law enforcement (i.e whistleblowers).
The National Assembly will also consider regulations of a new Covid-19 Emergency Response Fund that the President announced on March 30. They will also dispense with appointments to the CDF board and the Teachers Service Commission, and consider any bills from the Senate.
So while Parliament debates this under the rush of emergency provisions, most of the clauses are financial items unrelated to Coronavirus.
Standard Bank (Stanbic) Group Kenya released their Macroeconomic update in which they are cautiously optimistic about Kenya’s growth through the private sector. The presentation in Nairobi was done by Jibran Qureishi, the Regional Economist – Africa at Stanbic.
Stanbic economists believe that global growth will fall in 2020 and 2021 as central banks in advanced economies are tapped out and their ability to stimulate economies is limited. Chinese growth will slow to sub 6% in 2020 and be about 5.5% in 2021. Meanwhile, the US cut its rates three times last year but investments are still falling as the trade war with China has hurt growth.
For Kenya, Stanbic expects 5.9% GDP growth in 2020, up from 5.6% in 2019. Three things that held back private sector over the last two years were interest rate caps, delayed payments by government and congestion at the Inland Container Depot (ICD) Nairobi.
Government policies should focus on private-sector driven economic growth. There is growth but where are jobs? Growth in the wrong place. 90% of new jobs are the informal sector and also in the service sector but these will not create a middle-income economy.
Tourism was resilient, earning $1.5 billion last year, but the potential is much larger and this depends on how much private investment the sector can attract. Kenya gets 2 million arrivals but Mauritius, Morocco, Egypt and South Africa get about 10 million in bad years.
Ambitious tax revenue targets embolden the government to spend more and tax revenue targets are still much larger than average collections.
If the government does not fix fiscal issues, this will lead to unpredictable tax rules which could hamper productive sectors
A move back to concessionary loans and away from commercial loans for the first time since the (President) Kibaki years is a welcome step.
The Standard Gauge Railway (SGR) may still get extended to Uganda but the government will have to build new ICD. It is not that China does not have money, but they are asking questions they should have asked 7-8 years ago.
Kenya traditional manufacturing has been an import-substitution model which has not really worked around the world. Better to shift from being protectionist and instead work towards growing exports which (excluding tea and remittances) have been stagnant – at $6 billion a year
Don’t focus on manufacturing too much and neglect agriculture, as a big part of that will come from agro-processing and adding value to agricultural produce.
Charles Mudiwa the CEO of Stanbic Kenya spoke of how the bank has aligned to the government’s agenda. They are a shareholder in the Kenya Mortgage Refinance Company, and 20% of their lending goes to manufacturing with another 9% going to agriculture & food security.
Stanbic was the lead arranger for the Acorn green bond that was listed on London’s LSE today. The bank also has a DADA program to promote women financially (with a goal to lend Kshs 20 billion) and is also supporting financial literacy training to musicians and Uber drivers.