Category Archives: Kenya parliament

Kenya Tax Changes in 2017

Tax changes that become effective on January 1, 2017, as a result of the finance bill signed by the president on 13 September 2016

PAYE brackets have been expanded by 10% and the relief also increased by 10%. (now Kshs 15,360)
VAT on service charge has been removed, provided that the service charge does not exceed 10% of the price of the service
A taxpayer can apply for a refund of overpaid tax within a period of 5 years from the date which the tax was paid. Any amount not refunded within 2 years will accrue interest rate of 1% per month.
Withholding tax on winnings from betting and gaming has now been abolished and replaced by a betting tax of 7.5% on the gaming revenue, lottery tax at 5% on the lottery turnover, a gaming tax at 12% on gaming revenue and a prize competition tax at 15% on the cost of entry to a competition

Extracts from a report by the Grant Thornton Kenya team.

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Mining Moment: Kenya Mining Forum

Excerpts

Kenya’s Mining Cabinet Secretary, Dan Kazungu; Kenya has a $30 million budget for an aerial mineral survey, and will also start a mineral data bank & audit unit

Kenya has gold, coal, iron, copper, titanium, niobium, fluorspar, limestone, CO2 (carbacid in Kiambu), gypsum and gems.
In April, the cabinet approved a mining & mineral policy, and in May, Kenya repealed the 1940 mining act and replaced it with a new progressive law. The mining act 2016 aligns itself to 3 documents – the 2010 Constitution, Kenya Vision 2030 and the AU Africa mining guidelines
Mining was an environmental ministry department until Jubilee made @madinikenya an economic transformation pillar.
The new application laws are simple, clear, predictable and transparent for a level playing field. They engaged the industry and there will be no more single-person decisions. Committees will give feedback on mining requests in 3 months with reasons, and if mining applications are for worth more than $500 million, it has to go through Parliament.
Intra-Africa trade can also include legally-trade minerals i.e make Kenya a trading hub (not a smuggling one)!

Patrick Obath: How can Kenyans get more mining information? Right now it’s only in the gazette which hardly anyone reads.

Central field at Base Titanium, Kwale, Kenya.

Martin Ayisi: Kenya law now recognizes artisanal mining . . can have impact like Mali where they produced 23 tons of gold worth $742 million in 2015

Kenya government can now award some mineral rights by tender, as opposed to the first -come, first-served way.
Prospecting consent is guaranteed by law .. the challenge is when to apply for formal permission.
Mining investors hate when governments change the rules midstream.
Kenya is creating a national mining corporation but there have not been success stories in Africa. Nevertheless, they will take on lessons from Ghana and Zambia and learn from those.

Dominic Rebelo: Miners are concerned that at the end of licenses, all assets go to the Government (immovable ones go to the national government, and movable ones to the county government) ..some investors will scale back operations and sell-off (strip) assets to preempt this before their licenses end.

Mining companies and mining support companies will be licensed and have comprehensive disclosure & progress report requirements. This is to lock out briefcase ones, or people who sit on licenses for speculation.
Large mining companies are to list 20% in 3 years, but stock exchanges require 5 years of profit – there may be a need to create a special stock exchange for mining companies. Also, the government gets 11% for free (10% equity + there’s 1% stamp duty to be paid).
If a mining investor finds a strategic mineral, they have to stop operations indefinitely & declare the find. There needs to be certainty of what is defined as a strategic mineral, and a defined process of getting a mineral on or off that list.

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How banks are innovating around interest rate caps

With the capping of interest rates at 4% above the CBK rate comes an opportunity for banks to innovate and protect their income streams. They can do this through increased focus on mobile-based short term credit facilities as well as non-funded income streams.

More people can now afford loans. However, banks are reluctant to offer loans to existing customers who previously met their criteria. More requirements need to be met by customers in order to access the same services. Customers now have a tough time accessing credit cards and (un)secured loans. Perceptions on risk determine who gets the facility with riskier clients getting the short end of the stick.

An F-Type Jaguar at RMA Motors, Kenya

Fixed and call deposit facilities are also now accessible to fewer people. New requirements such as that you need to hold an account for a certain amount of time with the bank in order to access fixed deposit services are restricting customers. Long tenures for fixed deposits have also been halved. Call deposits have been put on hold in some cases.

Banks are moving towards shielding themselves from the risk of default that will be brought about by a flood of people who can now afford to take out a loan. Collateral will become a requirement for credit facilities that did not have this requirement before. This is based on the real assumption that there will be a significant degree of default from this windfall.

Banks have also started investing more in Treasury Bills that are risk free and offer roughly the same return that they would by loaning funds to individual customers. This may be a short term move as banks wait for the waters that have been stirred up to settle. It is telling that the 364-day T-Bill is getting the most attention.

Mobile applications that increase accessibility and convenience for bank customers are currently not a significant source of funds. However, they offer an opportunity for lenders as they try to leverage on the volume of loans they have the potential to advance. MShwari-type loans could be the answer to protecting the banks’ funded income. More banks will be willing to join in advancing MShwari-type loans. This will keep people with low credit quality within the formal banking industry. Since most of them are from the unbanked population, they will be afforded some protection from predatory lending by shylocks as has been feared. Only people from selected (read known and established) companies are able to access the same loan facilities that were available to everyone. Likewise, entrepreneurs classified as less risky won’t see a significant change in their access to the facilities that they are used to. Banks have had to cut down on staff that was needed to sell credit facilities. With MShwari-type loans, some of these jobs can be saved.

More focus will be given to non-funded income streams that exist such as prepaid cards. Prepaid cards are touted as a secure way to carry cash. KCB and NIC Bank are two institutions that have put a lot of effort in making these cards mainstream.

Bankers also have the option of contesting this legislation using KBA. They can do this if they can prove that the new rates are making their business unprofitable. This could see interest rate revisions on new and existing credit facilities once in a while. An unseen consequence of this is the Monetary Policy Committee might lose its independence since they have to take into consideration bankers.

In summary, more focus will be given to customers who meet new requirements set by banks. Innovations will also be necessary to drive income growth going forward. After all, operating in white water creates opportunities in making great leaps.

Newton Kibiru, Business Development at Grant Thornton Kenya

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Banks Yield (Capping Kenya Bank Interest Rates Part V)

Yesterday, CFC Stanbic became the first bank to extend the capping of interest rate loans to apply to existing loans.

While most banks had announced they would adjust loan rates for new facilities to a maximum of 14.5%, they were waiting to see what the Central Bank (CBK) would say about existing facilities.

But within the space of a few hours, the Kenya Bankers Association announced this was extended to existing facilities. Other banks like Cooperatie Bank, KCB Group, and Diamond Trust also announced the extension of the new rate cap to existing loans and (edit) Barclays too.

“…Consequently, the KBA wishes to announce that its members have agreed to prospectively reprice existing loans, which will see existing customers enjoy the benefits of the new law once it is operationalised. Each KBA member bank will therefore notify their customers on the process and new terms as the industry engages with CBK on the implementation.”

The big banks are leading, but there’s still silence from a few large ones (~~Barclays~~, Equity) and most of the smaller ones, except Transnational and (edit) GT Bank. KCB also clarified that the new interest rates do not affect mobile (phone) loans. i.e m-pesa loans

The reduction in loan interest rates will mainly have the effect of enabling people to pay off their loans faster than originally scheduled. The above banks have all invited their loan customers to visit branches to discuss the repricing of loans. New loan agreements will have to be drawn if they choose to adjust their loans, as some banks had issued fixed rate loans. Loan installments may or may not change, and the difference will depend on the size of the original loan.

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Kenya Interest Rates Part IV – Coop Bank Leads

Ever since the banking amendment act was passed by parliament virtually all banks have announced reductions of interest rates to comply with the last KBRR – and all have reduced by 0.97% effective August 25.

Coop Bank branch

But yesterday Cooperative Bank (Coop Bank) was the first to reduce its rates to 14.5% (the Central Bank Rate plus 4%). In a statement from the bank CEO, this new rate will apply for all new loans or credit facilities. The modalities of the new law that was signed by the president this week, have not been outlined (such as if the rate is retroactive), but virtually all bank share prices have nose-dived over the last two days, with some banks pulling back on unsecured new credit facilities to customers.

Coop Bank is Kenya’s third largest bank, with a loan portfolio of Kshs 220 billion (~$2.18 billion).

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Bankelele

Nairobi writer on Banking, Finance, Technology, and Investments

Category Archives: Kenya parliament

Kenya Tax Changes in 2017

Mining Moment: Kenya Mining Forum

How banks are innovating around interest rate caps

Banks Yield (Capping Kenya Bank Interest Rates Part V)

Kenya Interest Rates Part IV – Coop Bank Leads