Kenya’s biggest telecoms company Safaricom Plc said on Monday its Chief Executive Officer Robert William Collymore had died after a nearly two-year long battle with cancer.

“It is with deep sorrow that we announce the passing away of Robert (Bob) William Collymore, CEO of Safaricom Plc, which occurred at his home in the morning of 1st July 2019,” the firm said in a statement.

In May, Collymore, 61, had said he would stay in his position for an extra year. He was set to step down in August after nine years at the helm, during which time Safaricom’s share price rose by more than 400%.

The appointment of his successor was delayed as the Kenyan government, which owns 35% of the company, has insisted that a local is picked to succeed him.

“As a country, we’ve lost a distinguished corporate leader whose contribution to our national wellbeing will be missed,” President Uhuru Kenyatta said in a statement here posted on his office’s Twitter account.

“It is with deep sadness that I have this morning received news of the death of Safaricom CEO Bob Collymore after years of battling cancer. 

Collymore had travelled to Britain in October 2017 and received treatment for Acute Myeloid Leukemia, and he had since been undergoing treatment for the same condition, the company said.

“In recent weeks, his condition worsened and he succumbed to the cancer at his home in the early hours of Monday…,” it added.

Safaricom, which is 35% owned by South Africa’s Vodacom , controls about 62% of Kenya’s mobile market, with 30 million subscribers. Britain’s Vodafone has a 5% stake and the Kenyan government owns 35%.

Bob Collymore helped to build Safaricom into East Africa’s most profitable company, thanks to the popular mobile money transfer service M-Pesa and a growing customer base.

Safaricom posted a 13% rise in its core earnings for the full year to end March to 89.6 billion shillings ($875.86 million), driven by growth in M-Pesa. 

Source: (Reuters)

Kenyan judges have stopped plans to construct the country’s first ever coal-powered plant near the coastal town of Lamu, a UNESCO World Heritage Site.

The tribunal ruled that the National Environment Management Authority had failed to do a thorough environmental assessment. The Conversation Africa’s Moina Spooner asked David Obura to give some insights.

Why did the Kenyan government opt for a coal-powered fire station given the global move away from coal?

The government’s justification for the coal plant came from its “Vision 2030” goals for development, launched in 2008. Under this strategy, adequate, reliable, clean and affordable energy was highlighted as key to meeting the country’s growing demands.

The government anticipated that over the 20 years of the plan demand for energy would increase six-fold from about 1 800 MW to 15 000 MW peak load in 2030. About a quarter (26%) of the final installed capacity was expected to be obtained from geothermal, 19% from nuclear, and 13% from coal. Coal was seen as a cheaper substitute for more expensive oil, and to provide consistent baseload power.

However, cleaner fossil and non-fossil fuels are fast gaining advantage because of their improving cost to the user, measures of energy efficiency, reliability, stability of supply and low environmental impacts. And energy demand hasn’t risen as expected, remaining below 2000 MW.

Given all the above, it’s believed that vested interests are likely to be playing a role in Kenya’s push for the coal plant. The plant is owned by Amu Coal – a consortium of Kenyan and Chinese energy and investment firms. There are reports that China has positioned itself to help drive Kenya’s energy market while, in its shift to cleaner domestic energy, the country is moving its existing stock and labour abroad.

What are the particular environmental challenges that a plant like this presents?

The burning of coal will cause massive pollution to the air, fresh water and ocean.

Contributing to this is the fact that the coal intended for use, from South Africa and Kitui in Kenya, is bituminous – this means that it burns poorly and has particularly high levels of pollutants. South Africa has one of the highest emissions from coal power plants in the world, with widely documented effects on people and nature.

The plant will also dramatically increase Kenya’s national contribution to global carbon dioxide emissions.

On top of air pollution, coal leaves behind residue ash when it’s burned. The Lamu Coal Plant proposes a yard that will hold about 26 million cubic metres of ash and stand 26 metres high, in places less than three metres above sea level. This may remain as a permanent mound of waste – until eroded by the rising sea. This is a huge concern on the low-lying coastline – until recently sea level was projected to rise almost one metre by 2100, but new evidence including recent ice melt in Greenland, suggests this rate could be much higher.

The judges ruled that the environmental impact assessment was bad. How are they carried out in Kenya. Who is responsible for them?

Environmental Impact Assessments in Kenya are implemented by independent experts accredited through the Environmental Institute of Kenya. They are commissioned by project developers to carry out assessments.

The National Environment Management Authority is responsible for reviewing assessments for their content and quality. It has the power to approve or deny an environmental license for operations.

A portion of responsibility therefore lies with all three – environment management authority, the experts who are paid to carry out the studies and the project developers who commission and pay for them. But ultimately the buck stops with the national authority.

What went wrong?

The court case highlighted that the environmental challenges listed above were not adequately covered by the Environmental Impact Assessment. These include:

• Detailed insights into how much pollution from coal, dust and ash the plant would produce, and how this would affect people, plants, animals and marine life;

• How much and in what directions pollution would be spread by wind and water currents;

• The impact of a changing climate, like rising sea levels, on the plant and the coal residue that it will leave behind;

• sufficient and credible mitigation actions for all these impacts.

The court’s decision shines a light on these deficiencies and calls into question the fundamental role played by the environmental authority. It’s job is to review and maintain quality control over assessments. It clearly didn’t do that in this case. This mirrors an earlier case in which a High Court decision stopped dredging for the new Lamu port, adjacent to the coal plant.

For now, the court order has given the project proponents a clear directive to do a new environmental impact assessment if they want to go ahead with the plant. It could take a year or two to complete for a project of this scale. Many Lamu residents and environmental groups hope that the project will be shelved. Even if that doesn’t happen, at least a signal has been sent that future Environmental Impact Assessments must meet necessary standards, and will face critical scrutiny to ensure they do.

David Obura, Adjunct Fellow, The University of Queensland

This article is republished from The Conversation under a Creative Commons license. Read the original article.

The Budget Statement for the Financial Year 2019/20 was read on 13^th of June 2019 by the Cabinet Secretary for the National Treasury, Hon. Henry Rotich.

The theme for this year’s Budget Statement is: Creating Jobs, Transforming Lives – Harnessing the “Big Four” Plan. This theme is probably befitting an economy that faces a paradox of high unemployment among the youth, low income and high economic growth.

Over and above that, The Government of Kenya has been on a relentless drive to rein the runaway recurrent expenditure, embezzle and fleece of public resources. The International Monetary Fund and The World Bank have been piling pressure on the government to institute reforms that require a reduction on the recurrent expenditure which have translated to government audits that have recommended a reduced size of government, recurrent expenditure on wages and salaries as well recommended monitoring of public resources to reduce misuse.

This year’s budget chose a route to achieving this uphill quest of taking expenditure to endurable limits which will in turn reduce the government borrowing. Kenya’s economy grew by 6.3% in 2018 compared with 4.9% growth in 2017 with a forecasted growth of 5.8% in 2019/2020 when the Big 4 Agenda gains momentum.

The 2019/2020 budget then in a nutshell seeks to address the following;

1. To create an enabling business environment especially for the micro small and medium enterprises and this will lead to job creation
2. Sensible and systemized spending to curb misuse of public funds
3. Priority spending on key projects to be funded by domestic resources
4. Reduction of the fiscal deficit to reduce the national debt
5. Implement reforms that will enhance efficiency thus making Kenya more competitive

To review the budget, we shall briefly delve into the raft of proposed tax measures and emerging challenges to achieving the goals envisioned in the budget statement.

A Highlight Of The Tax Measures

Capital Gains Tax

• The rate of Capital Gains Tax is set to be increased from 5% to 12.5%. There is no indication that indexation or some form of cataloguing will be introduced to take into account the effects of inflation over time.
• Property transferred by corporates as part of group restructuring to be exempted from Capital Gains Tax to allow for seamless restructuring for operational efficiency and encourage business growth. Corporate Tax
• Framework on the implementation of the 30% rebate on total electricity costs by manufacturers introduced through the Finance Act 2018 has now been developed.
• Investors operating plastic recycling plants to enjoy a reduced corporate tax rate of 15% for the first five years.
• Introduction of amnesty covering penalties and interest, on any outstanding tax for two years prior to listing, for SMEs under the Growth Enterprise Market Segment program at the Nairobi Securities Exchange.
• The Cabinet Secretary indicated that measures aimed at the taxation of income generated from the digital economy would be introduced. The measures were not specified by the Cabinet Secretary.

Personal Income Tax

• Exemption of Income earned under Ajira Program: The Government through the Ministry of Information, Communications and Technology in partnership with academia, civil society and the private sector has set up a program known as “Ajira Digital Program” whose aim is to bridge the gap between skills available and skills demand. A major objective of the program is to enable over one million youths annually to be engaged as digital freelance workers.
• The Government has proposed that the youth registered for the program pay a registration fee of ten thousand Kenya shillings for the next three years in lieu of income tax with effect from 1st January 2020.
• The Cabinet Secretary has proposed to amend the Income Tax Act to exempt registered members from regular taxation for the specified period.

Turnover Tax

• Turnover tax, which was replaced by Presumptive Income Tax in 2018, is to be reintroduced.
• Turnover tax will apply to taxpayers whose business income does not exceed KShs 5 million per annum.
• Tax rate of 3% on the gross turnover accounted for every month.
• Turnover tax will apply in addition to presumptive income tax, which was introduced through the Finance Act 2018.

Withholding Tax

• The scope of qualifying services subject to withholding tax set to be expanded to include:
• Security services;
• Cleaning and fumigation services;
• Catering services offered outside hotel premises;
• Transportation of goods excluding air transport services;
• Sales promotion; and
• Marketing and advertising services.

Value Added Tax (VAT)

• Reduction of the withholding VAT rate from 6% to 2%.
• The Cabinet Secretary for The National Treasury to constitute a taskforce which will validate outstanding VAT refund claims for settlement within the next two months.
• Adjustment of the VAT refund formula introduced through the VAT Regulations, 2017 to ensure a full refund of input tax credit relating to zero-rated supplies.
• Zero rating of denatured ethanol.
• Introduction of VAT exemption on the following:
• Locally manufactured motherboards and all inputs used in their manufacture
• The supply of machinery and equipment used in the construction of plastic recycling plants as well as all services offered to these plants.
• Agricultural pest control products.
• Electric accumulators and separators used in the manufacture of automotive and solar batteries.

Customs Duties

• Extension of stay of application of the Common External Tariff rate on a wide range of iron and steel products at 25% or the corresponding specific rates.
• Application of 25% import duty on paper and paperboard instead of 10%.
• Reduction of import duty on raw timber from 10% to 0%.
• Proposal to retain import duty on finished timber products at 25%.
• Detailed Customs measures to be communicated through the East African Community (EAC) Gazette effective 1 July 2019.
• Kenya Electronic Single Window System Bill to be tabled in Parliament.

Excise Duties

• Introduction of excise duty on betting activities at 10% of amounts staked.
• Reduction of excise duty on fully-powered electric motor vehicles from 20% to 10%.
• Increase in excise duty on motor vehicles of engine capacity exceeding 1500cc to 25%.
• Increase in excise duty rates on cigarettes, wines and spirits by 15%.

Miscellaneous Fees and Levies

• Manufacturers of paints and resins to receive a refund of anti-adulteration levy paid on kerosene used as their input.
• Reduction of Import Declaration Fee on raw materials and intermediate goods from 2% to 1.5%.
• Increase in Import Declaration Fee on finished goods from 2% to 3.5%.
• Increase in Railway Development Levy on finished goods from 1.5% to 2%. Remission available for approved manufacturers.
• Introduction of export levy on tanned or crust hides and skins at 10%.
• Continuation of Revenue Enhancement Initiatives such as:
  • Scanning of containers to detect concealment;
  • Regional electronic cargo tracking system;
  • New debt collection strategy;
  • Resolution of tax disputes; and

  • Enhanced investigative capacity

Emerging challenges: The Realities of Playing the Balancing Act

Deficit and Resource Mobilization: One of Kenya’s recurring challenge is the growing budget deficit which forces the country to borrow internationally. In 2018 for example, Kenya recorded a Government Budget deficit equal to 6.70 percent of the country's Gross Domestic Product. This has been noted to be very alarming.

Currently, there is an estimated deficit of Sh607.8 billion, an increase from Sh562 billion. The government is likely to borrow more in the next fiscal year to bridge the deficit as Kenya Revenue Authority (KRA) is expected to miss this year’s revenue collection target by Sh118 billion, a move likely to plunge the country into further debt. Treasury Cabinet Secretary Henry Rotich has set a revenue target of Sh2.2 trillion while KRA is expected to collect approximately Sh1.9 trillion. The government might also heighten the tax regime to fill this budget deficit. 

Tax Efficiency and Public Participation

Kenya’s tax efficiency and universal suffrage in the tax policy making process has been routinely tested and shows that not much is being achieved. An example can be drawn on the presumptive tax issue.

Finance Act 2018 replaced turnover tax with presumptive tax to persons who are issued with a single business permit by a County Government applicable at 15% of the single business permit fee in a move to widen revenue collection in the informal sector.

The Finance Bill 2019 however, proposes to reintroduce turnover tax for businesses whose turnover does not exceed KES 5 million citing, the revenue collection will not be commensurate to the revenue earned by the business. It is however worthy to note that, presumptive tax will still be maintained as minimum tax. The lack of coordination between the local governments and national governments in tax collection and administration as well as failed tax measures shows that there is need for a policy on public participation in the tax policy making and administrative process.

New Frontiers: Taxing the Digital Space (e-commerce)

Kenya has experienced a surging growth in e-commerce. This is not only evident from the major e-commerce trading platforms, but the number of individuals selling goods and their services on social media platforms such as Instagram, Twitter and Facebook.

In a public notice, the taxman said it had noted that some taxpayers carry on online business but they do not file returns or pay taxes on the transactions. It is however important to note that the Kenya Revenue Authority has not developed rules to guide the taxation of e-commerce.

The rules will be interesting to watch due to the challenges the digital space offer in terms of jurisdiction. e-commerce makes it easier for businesses to be conducted without having to create an entity which would otherwise be subject to tax. Thus, will the taxman tax the entities based on the presence of their servers to determine tax residence or place of actual sale? The rules will be interesting to watch.

Conclusion: Most Kenyans felt a disconnect between their experience and the growth in the economy in 2018. This is mainly because a significant portion of growth arose from government spending and initiatives and capital intensive sectors including large scale agriculture, forestry and fishing, transport and storage and wholesale trade. This led to a disproportionate change in employment. Further, constrained access to credit experienced by the private sector led to SMEs borrowing at very high rates outside the banking system and poor performance by firms led to thousands of job cuts, resulting in a reduction in consumer spending.

This informed the theme of the budget. It will be interesting to see the effects of the budget on common citizens as well as Medium and Small enterprises. A judgment as to whether the taxman’s obligations and the entrepreneurs rights to associate in business can only be properly arrived after the end of the financial year. Taxation has to have a cause and its consequences may be far from the cause.

By Edwin N. Kimani

*The writer is a Lawyer and the managing partner at Avikele Services, a professional services firm offering legal, tax, accounting, business development and consulting services to enterprises of all sizes and industries.

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