EAPI Summit showcases African property opportunities

The 9th annual East Africa Property Investment (EAPI) Summit was staged in Nairobi this week after a two-year hiatus and brought together over 300 people who are involved in investments, the management and financing of commercial real estate and other property developments.

The break in between, occasioned by covid-19, did not result in a disruption of developments and construction. Indeed this week, the Nairobi Expressway was opened to the public by its operator Moja for the public to test.

The conference, with the theme of “renewed focus,” was sponsored by Absa who is one of the oldest bank groups in the country and one that is connecting with the property market. They are a founding shareholder of the Kenya Mortgage Refinance Company.

Speakers at the EAPI Summit spoke of the great demand for light industrial, cold storage, manufacturing and warehousing infrastructure on the continent which is expected to become the fastest-growing consumer region in the world. There is an attraction to having small local manufacturing closer to the local markets as opposed to importing goods manufactured in far-off places like China, whose availability and distribution could be disrupted by global events. It was noted the facilities necessary to support e-commerce on the continent were still lacking, even after Covid-19 had accelerated the emergence of e-commerce at a pace and scale that had not been projected to happen for another decade.

Another area that was highlighted at the summit is affordable housing as different countries in East Africa countries have documented growing deficits of needed units. The gaps are driven by rapid urbanization estimated at 4% a year in the region and the governments of Tanzania Kenya and Rwanda have come up with regulatory changes to support affordable finance such as by introducing mortgage refinance programs to help reduce the costs of finance to homes, while banks like Absa are also making contributions to alleviate the problem. Speaking during the opening of the Summit, Jeremy Awori, the Absa Kenya Managing Director said the bank has advanced a total of Kshs 3.8 billion to Kenya’s National Housing Corporation, through a combination of direct lending and support to three affordable housing building projects being developed by the corporation.

Awori said real estate investors need to reinvent models to match the modern trends and needs of the local communities such as sectional ownership, multi-tenant shared spaces and converting under-utilised buildings into enthusiastic venues and the bank is ready to offer financing solutions. Many financial institutions, multinationals and NGOs have relocated their headquarters and offices to secondary business districts that were previously residential.

Elsewhere, a lot is happening in the hotel space. A few weeks after announcing they will close the iconic hotel in downtown Nairobi, Hilton used the EAPI summit to announce the opening of Kwetu, a new 100-room facility under the Curio brand that will be in the Westlands area later in 2022. It will be operated under their Curio brand. The EAPI summit was held at the Kempinski Hotel, in the shadow of the giant GTC complex, which opened in December 2021 and which was a co-sponsor of the summit as it seeks tenants for its adjacent properties.

Also at the Summit, Absa Kenya which was the first bank to subscribe to the principles of the Kenya Green Building Society, received an award from the International Finance Corporation for integrating green building technologies in its designs. The two-day EAPI event had 300 attendees in person, combined with a global broadcast of all the 30 sessions to 550 other virtual delegates in 35 countries.

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.

Energy and Climate to feature at AfDB talks in Accra

The annual meetings of the African Development Bank Group (AfDB) are now scheduled to take place in Accra in May 2022. Ghana’s capital has previously been expected to host the meetings last year in a physical setting, but with covid-19 still disrupting continental travel, the meetings were held virtually, for the second year in a row.

While these are is the first-in-person annual meetings since Malabo in 2019, they will be held in a hybrid format with governors representing 54 African countries and 27 other nations who oversee the African Development Bank and the African Development Fund (ADF) meeting at the Accra International Conference Centre while other participants will join in virtually. Attendees will also celebrate the 50th anniversary of the ADF.

The 2022 annual meetings will be hosted by the outgoing Chairperson of the Board of Governors, Ken Ofori-Atta, Ghana’s Minister for Finance and the theme of the annual meetings is Achieving Climate Resilience and a Just Energy Transition for Africa. This is at a time when in South Africa, homes, highways, bridges have been damaged or swept away by floods and nearly 400 have died in what President Cyril Ramaphosa said was “a disaster of catastrophic proportions” while in Eastern Africa, the Intergovernmental Authority on Development (IGAD) has warned that rains will fail for the fourth consecutive year.

 In terms of climate finance, the AfDB will support transitions to non-coal and non-nuclear projects including hydro-generation, geothermal, gas, wind, and solar – and countries will be invited to put forward bankable projects for financing to be arranged. However, with the continent still energy-starved, countries that want to pursue coal as part of their energy-mix plans, can do so but with financing from other sources. 

The meetings will have knowledge events to promote discussion of policy and development of the continent. Some will be on building digital economies,  green jobs for youth & women in post-covid Africa and supporting resilience in agri-food systems with a focus on rural economies.

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.

Corporates Loving Golf

Historically, golf has been considered to be a costly sport in Kenya with difficulty in accessing equipment kits and membership clubs to play at. But now golf is enjoying increased corporate attention and bank sponsorships in the post-covid period. Some of these initiatives had begun in the period before the shutdowns in 2020, but the increased need for individuals to exercise in open spaces boosted more interest in hiking, cycling, jogging, and golfing. Golf clubs were previously seen to be losing touch with young people, and many of the new initiatives are designed to turn this around. 

Some ongoing corporate golf partnerships are:  

  • Kenya has been a multiple winner of Africa’s Best Golf Destination at the annual World Travel Awards and the Kenya Tourism Board is keen on using golf to promote tourism both by local and international travelers. Golf is played year-round in Kenya and the country has easy connections to other tourism facilities. KTB cites a consultancy research report that golf travelers spend 2.5x more than leisure travelers and stay for longer periods 
  • Absa Kenya has a long-running sponsorship of the Kenya Open Golf tournament which, with the support of the Government that aims to boost tourism into the country, is known as the Magical Kenya Open and is part of the European Tour. The 2022 edition tournament was played in March at the Muthaiga Club and was won, for the first time, by a Chinese golfer, Ashun Wu.
  • This year, Kenya Airways joined as a corporate partner and had aircraft fly past over Muthaiga on two days of the tournament and, as an official sponsor offered discounted rates to golfers and fans while ferrying in PGA officials working at the tournament. 
  • NCBA has the NCBA Golf Series with ten tournaments around the country that was in Kitale last week and will next be in Kampala, Uganda.  In 2021, the series had 13  tournaments that attracted 1,700 golfers. Some juniors golfers who participated won qualification to two international events – the Rome Classic (Italy) and the Big Five (South Africa).  
  •  The Safaricom Golf Tour has received sponsorship of Kshs 100 million, for a 14-leg tournament that will involve outreach to local communities and make the sport more accessible – it will rope in corporate and amateur players, juniors (play on Sundays), caddies (compete on Mondays) at the different legs. It aims to find new talent for the sport, especially young golfers, and winners of different legs will feature at the finale at Vipingo Ridge in August. The Vipingo Ridge course was launched in 2010 and continues to host several leading international golf tournaments. 
  • Also on the European Tour is the Magical Kenya Ladies Open which is played at the Vipingo course. The Kenya Tourism Board (KTB) is the main sponsor of the tournament which this year featured 90 golfers from 25 countries. The tournament also got a Kshs 20 million sponsorship from Safaricom’s M-Pesa who held a junior golf clinic.
  • Crown Paints and Prime Bank are part sponsors of the US Kids Foundation golf series along with Safaricom and NCBA. The three-year program will be run through the Junior Golf Foundation (JGF) to promote golf development through the training of up to 40 coaches across the country and supports local golf tours to introduce more young people to the sport. It has held events at Limuru and Muthaiga and will have more at Karen and Royal (Nairobi) all leading to a finale at the Muthaiga Golf Club in May 2022.
  • Kenya Ports Authority will have tournaments in different cities of its operations – Nairobi, Mombasa, Kisumu. 
  • The Tannahill Shield one of the largest amateur golf tournaments in the country is ongoing at the Royal Nairobi Golf Club this Easter Weekend. It is sponsored by Jamii Telecom, Rentco and Chipper Cash, a remittance company. 
  • In 2021, Absa Kenya sponsored the Savannah Tour Classic a new event created for the European tour in the recovery from Covid and was staged ahead of the Kenya Open. 
  • The Johnnie Walker Classic golf series resumed after eight years, sponsored by EABL’s The Johnnie Walker Classic golf series resumed after eight years, sponsored by EABL’s Kenya Breweries. “Road to Gleneagles” will have amateur and professional golfers compete at 20 clubs across the country ahead of the finale in May 2022 where the winning team will receive an all-expenses-paid trip to play at the Gleneagles in Scotland which is one of the top golf courses in the world. For the professionals, participation will help them to improve their competitiveness for the European tour events played in Kenya. 
  • Insurance companies including ICEA and Liberty (a Stanbic affiliate) also support golf as do other companies in the sector. 
  • EDIT: Amateur golfers are invited to enter the Race to Vipingo Ridge by registering and submitting scores achieved during “club nights” at their home clubs between 18 April and the end of June for a chance to win a chance to play in the finals at Vipingo Ridge, with their transport and accommodation careered for. Note, there is an entry fee for the qualifying rounds.
  • EDIT: NMG has the Nation Classic Golf Series again for 2022.