2007 Budget A to Z

6.5 to 7% economic growth expected in 2007/08 and the budget will focus on strengthening the financial sector, reducing the cost of doing business, enhanced productivity and fixing infrastructure.

Some measure mentioned in the budget speech today (only heard 1/2 of it) include:

alcoholduty up on spirits, wine and some beer
auto spares Reduce import duty 25 to 10% for oil filter, but with increased excise duty on imported used spares
Banks minimum share capital increased from 250 million to 1 billion (over the next 3 years) and benchmarks will be set up to be adhered to
battery to protect local battery companies, a duty imposed on imported recycled batteries
Cigarettes tax up
east African investors get the same treatment as Kenyans, – i.e. withholding tax of 5% on dividends and improved allocation chances (will be treated same as Kenyan in pool expanded form 25 to 40%)
energy rural electrification to be continued as mini grids will be set up in large towns. 8 billion has been allocated to deal with (anticipated?) energy shortages so they don’t hamper manufacturing processes and the government will also complete the oil pipeline to Uganda and refurbish the refinery at Mombasa (even though other shareholders have refused to chip in)
Educationincreased funding for free secondary education, implement increased teacher salary agreement and hire 7,000 new teachers
hawkers 400m to be spent to construct a market for them in Nairobi
ICT 1 billion ($15 million) for TEAMS which is expected to be completed in mid-2008. Also a national fibre optic network will be in place to reduce the cost of communications. In addition a 200m ($3m) endowment fund for innovation and research will be set up and the private sector invited to top it up.
insurance companies minimum share capital raised. For Long term (50m to 150m), general (100m to 300m) and composite from (150m to 450m) – within 3 years.
leasing: Zero rate leasing of some equipment and removal of withholding tax requirement
licenses for businesses – eliminate 205, reform 371 others
Medical equipment duty removed
milkZero rate milk powder to promote local processing and value addition
mineral water tax imposed
police 25,000 new officers to be hired
plastic bags tax imposed while thin plastic bags are banned to improve the environment.
Privatization 36.1b shillings ($0.5 billion) expected from privatization: Telkom Kenya (get a strategic partner this month), Safaricom IPO on the NSE, more shares sold of Kengen (when price corrects) and National bank [these shares could be offloaded to 3rd parties and not through the exchange]
Pyrethrumextracts are zero rated to promote local insecticide production
real estate duty exemption for developed of low cost housing (but not in slums). Also pension savings can now be used as security for home loans (not just as down payment)
retirees monthly pension benefits will be exempt from tax. Also social security will accept voluntary contributions from those whose employers don’t take part
sugar development levy removed from imported industrial sugar
textiles removed import duty
trade import duty reduced from 2.75% to 2.25% for all goods from all outside east Africa and none from within east Africa
transportation removed TLB from non passenger commercial vehicles,
Tourism 2 million visitors expected this year and as benefited the local air and hotel sectors. Will develop eco and lake tourism and will create resorts in Mombasa, Turkana and Isiolo.
universities (private) duty removed on goods and services supplied to them
VAT refunds to speed up refunds (which business community has complained about), will become automatic for those companies with a proven track record
women a 2 billion shilling ($30 million) women enterprise fund to be set up – starting with 1 billion this coming year, and call on corporates to assist the fund.
youth fund allocation increase by 250m to 1.25 billion with a goal of taking it to 2 billion

10 thoughts on “2007 Budget A to Z

  1. MainaT

    Banks-tx for the update. NBK thought this was going to be an offload into the NSE. The banking sector will now become very interesting NIC, CFC and similarly-sized banks will have to merge or do more rights issues. Any word on Kenya Re? What are duties on tobacco and alcohol i.e. are they likely to impact EABL and BAT? Finally, I hope TZ and Ug will reciprocate re allocations

  2. 3N

    thanks bankelele for the brief summary.

    did the budget allocate any funds to hiring and training specialized prosecutors for corrupt related trials?

  3. Anonymous

    i think they should privatise Kenya Pipeline, KPA (maybe bribe workers iwth shares) KPA especailly given the fact that the arabs are building ports all over africa. mombasa may become irrelevant.

  4. Mashatall

    I was really hoping that the asset backed securities will be signed into law soon, as this would open up the mortgage sector and thus real estate.Seems like the CMA is still sleeping on the job, while RBA is doing a superb job of lobbying the govt. on behalf of pensioners. CMA should get its act together and become more serious in pushing the capital markets agenda, the days of sitting around and waiting for Mbaru or some other investment guru to come up with new ideas is long gone.They are charged with developing the capital markets, and they should be playing that role. Whats the use of hiring a private firm to do research when they have a whole research and policy analysis division? I have never heard of RBA hiring consultants to come up with recommendations for the pensions sector, they engage the local pension players and use their research division to come up with the necessary regulations.come on CMA, do us proud !!

  5. irena

    My hits for the budget was
    a) Cigarettes tax up- I’m sure BAT are not smiling anticipating declining sales in months to come
    b)East African Investors
    c)Hawkers Market- Not sure what the timeline is on this one but I’m sure we will find out
    d)Youth and women development -True these are very important people.
    e) Funding for displaced individuals

    More rural initiatives funding i.e in remote Kenya or does that fall under the already allocated is it District/rural development fund?
    Security: Even though the govt is increasing the number of police officers but I think there should have been an allocation on revamping police station/posts so they are well equipped to curb crime. It is one thing to hire as many cops , it is another to have the necessary gear to do their job well

    Overall an a ok budget…

  6. irena

    Oh another Hit plus on the budget which to me was very signigicant was the reduction of licensing regulations. That is major in increasing the number of biz ventures and the heavy regulations that has been place was such a hindrance. This was definitely a hit on this years budget.

  7. bankelele

    MainaT: I don’t more than a few mergers happening because the Minister mentioned that many banks are already above 700m in share capital. Kenya Re, is now or never – I’m getting tired of waiting. Ug was fair with Stanbic, but TZ have not been sharing

    3N: Judiciary and KACA advertised for such specialized staff (last year I think), but nothing was mentioned this time round

    Mashatall: CMA asleep. They got power to levy financial penalties(which I thought they already had), but they seem to have forgotten the asset backed securities proposal.

    irena: he mentioned rural electrification but (IMHO)infrastrucutre repair is the most important thing for rural kenya along with security

  8. Mimmz

    Good Summary Banks!

    I have heard a lot about this being an election budget. Perhaps it was. But because I’m a firm believer in Keynesian economics, I don’t see what other step the government could have taken to continue and expediate growth. I love the government deficit growing thus! I’m personally ranking this budget at like 9.5 plus out of 10. Why not 10? because nothing is ever perfect.

  9. alexcia

    @ Mimmz,

    Hope you really enjoy the party because you will pay for it later

    @ Banks

    The East African thinks this budget will cause lots of inflation.
    A permanent kes 100 B plus deficit even after the one time sell off of our prized assets!!!

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