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German customs officials are attempting to track down about 6 million face masks ordered to protect health workers from the coronavirus which went missing at an airport in Kenya.

“The authorities are trying to find out what happened,” said a defence ministry spokeswoman, confirming a report first published by Spiegel Online.

The FFP2 masks, which filter out more than 90% of particles, were ordered by German customs authorities. They and the armed forces procurement office have been helping the health ministry to get hold of urgently needed protective gear.

The shipment was due in Germany on March 20 but never arrived after disappearing at the end of last week at an airport in Kenya. It was unclear why the masks, produced by a German firm, had been in Kenya.

“What exactly happened, whether this a matter of theft or a provider who isn’t serious, is being cleared up by customs,” said a government source.

Kenya’s health ministry declined to comment and a Kenyan Airports Authority (KAA) spokeswoman said the company was still assessing the situation.

Spiegel Online reported that Germany has placed orders worth 241 million euros with suppliers for protective and sanitary equipment to fight the coronavirus.

The defence ministry spokeswoman said there was no financial impact from the loss of the masks as no money had been paid.

Germany is preparing its hospitals and health workers for a big increase in admissions of patients with the virus. It has 27,436 confirmed coronavirus cases and 114 people have died, the Robert Koch Institute for infectious diseases said.

 

- Reuters

Several African governments on Sunday closed borders, canceled flights and imposed strict entry and quarantine requirements to contain the spread of the new coronavirus, which has a foothold in at least 26 countries on the continent as cases keep rising.

South African President Cyril Ramaphosa declared a national state of disaster and warned the outbreak could have a “potentially lasting” impact on the continent’s most-developed economy, which is already in recession.

Measures to be taken there include barring travel to and from countries such as Italy, Germany, China and the United States.

“Any foreign national who has visited high-risk countries in the past 20 days will be denied a visa,” he said, adding that South Africans who visited targeted countries would be subjected to testing and quarantine when returning home.

South Africa, which has recorded 61 cases, will also prohibit gatherings of more than 100 people, Ramaphosa said.

Kenyan President Uhuru Kenyatta said his government was suspending travel from any country with reported COVID-19 cases.

“Only Kenyan citizens, and any foreigners with valid residence permits will be allowed to come in, provided they proceed on self-quarantine,” he told the nation in a televised address.

The ban would take effect within 48 hours and remain in place for at least 30 days, he said.

Schools should close immediately and universities by the end of the week, he added. Citizens would be encouraged to make cashless transactions to cut the risk of handling contaminated money.

Kenya and Ethiopia have now recorded three and four cases respectively, authorities in each nation said on Sunday, two days after they both reported their first cases.

In West Africa, Ghana will ban entry from Tuesday to anyone who has been to a country with more than 200 coronavirus cases in the past 14 days, unless they are an official resident or Ghanaian national. Ghana has recorded six cases.

President Nana Akufo-Addo said in a televised Sunday evening address that universities and schools will be closed from Monday until further notice. Public gatherings will be banned for four weeks, he said, though private burials are allowed for groups of less than 25 people.

In southern Africa, Namibia ordered schools to close for a month after recording its first two cases on Saturday.

Djibouti, which has no confirmed case of COVID-19, said on Sunday it was suspending all international flights. Tanzania, which also has no cases yet, canceled flights to India and suspended school games.

Other nations have also shuttered schools, canceled religious festivals and sporting events to minimize the risk of transmission. Some 156,500 people worldwide have been infected and almost 6,000 have died.

 

Reuters

Kenya is the world’s third largest producer of avocados. It’s also Kenya’s leading fruit export, accounting for nearly one-fifth of its total horticultural exports.

But Kenya only exports 10% of its total avocado production. By comparison, Chile exports 55% and South Africa exports 60%.

Avocado is grown in several parts of Kenya and about 70% of avocado production is by small-scale growers. They grow it for subsistence, local markets, and export purposes.

The avocado export market in Kenya is dominated by five major exporters: Kakuzi, Vegpro, Sunripe, Kenya Horticultural Exporters, and East African Growers. These companies source their avocados primarily from smallholder farmers, although some firms also source from larger growers or own plantations.

In a new study we surveyed 790 avocado-farming households in Kenya and analysed what factors get in the way of smallholder farmers participating in export markets. We then looked at the implications this has on their farming businesses. This included labour inputs – such as hired and family labour – farm yields, sales prices, and finally, incomes.

We found that exporting more of Kenya’s avocado production could raise the incomes of Kenyan smallholder farmers. But, to do so, programmes and policymakers need to reduce the barriers that smallholders face when they want to participate in export markets. These include the costs of harvesting, transport and having liquidity. There are also farmers’ organisation transaction costs, such as membership fees and the opportunity costs of time when attending meetings.

The barriers to entry

Smallholder avocado farmers in Kenya face several big barriers to participating in export markets.

Capital and liquidity constraint: They often don’t have enough capital to meet the high costs of participation in export markets. For instance being able to buy or grow higher quality avocados. In most cases, contract farmers need to harvest the produce themselves and transport it to collection sheds or company premises. Their payment then usually arrives after a delay of one to two weeks.

Limited access to production technologies and institutional support: For instance, credit and training. This means smallholder avocado farmers are left out of important parts of the value chain.

Poor infrastructure: In rural areas a lack of good roads makes it difficult and costly to bring produce to markets in far-off areas.

The benefits of exports

We found that participating in export markets raises smallholder farmers’ incomes by nearly 39%. This is mostly on account of higher prices offered in international markets. For example, a dozen Haas avocados, distinguished by their dark green and brown skin and smaller than average avocado stone, sell for 3.5 Kenyan Shillings ($0.03) in domestic markets. But they fetch nearly double, 6 Kenyan Shillings ($0.06), in global export markets.

Smallholder farmers’ participation in export markets also increased employment opportunities within the community. International markets demanded higher quality avocados which required additional labour.

Our study found that hired labour costs increase by about 1,300 Kenyan Shillings (US$13) and smallholder farmers’ family labour inputs increase by about 15 days, if they participate in export markets.

We also found that smallholder farmers who participated in export markets were older and had received more training than those who participated in only local markets.

Additionally, participants’ farms were on average about 0.11 acres larger, with more Hass avocado trees, the favoured variety in international markets.

Those smallholder farmers who were cracking export markets were also more likely to live near an organised and established farmers’ group. These groups allow farmers to share agricultural techniques to improve their produce quality and increase yields.

The groups were more likely to focus on contract farming that grants higher prices for farmers’ produce while reducing the costs and barriers for communication between contract firms and farmers.

However, we found only a few smallholder farmers are linked to export markets through contract farming.

Connecting with exporters

The Kenyan government, recognising the potential to increase exports and boost smallholder welfare, recently started encouraging more smallholder farmers to connect with exporters. But integration with export markets remains a difficult barrier for individual smallholder farmers to overcome.

To make export markets more accessible for smallholders, the Kenyan government should increase seedling provision and facilitate avocado cultivation training programmes. Policies geared towards export promotion and encouraging innovative contract design would increase smallholder farmers’ yields and improve the quality of their produce. This would be critical for farmers to participate in export markets.

Additionally, programmes focused on improving the quality of farmers groups, making them more organised and better connected to resources and contract firms alike, would also provide an impetus to participating in export markets over the long term.The Conversation

 

Mulubrhan Amare, Research fellow, The International Food Policy Research Institute (IFPRI)

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

The upsurge of Somali piracy after 2005 led to significant international activity in the Horn of Africa. Naval missions, training programmes, capital investment and capacity building projects were among the responses to the threat. States in the region also started to focus on the dangers and opportunities associated with the sea.

Kenya and Djibouti, two states directly affected by piracy, achieved widespread reform of their domestic maritime sectors through new national initiatives and assistance from external partners. Djibouti’s President Ismail Guelleh recently commented during talks with Kenya on security and trade links that

What happens in Somalia has an immediate impact on all of us.

At its height, between 2008 and 2012, it is estimated that Somali piracy cost the Kenyan shipping industry between US$300 million and $400 million every year. This was as a result of increased costs (including insurance) and a decline in coastal tourism. It also damaged Djibouti’s maritime industry, financial sector and international trade.

The upsurge of piracy after 2005 had a number of causes. It grew from poverty and lawlessness in Somalia alongside opportunity and a low risk of getting caught. By 2013 the threat had been reduced. This was due to a combination of naval patrols, private armed guards, self defence measures on board ships and capacity building efforts ashore.

Historically, most states in the Horn of Africa have struggled with limited capacity to address maritime insecurity. Their naval assets, training, human resources, institutional and judicial structures, monitoring and surveillance have all been critically underfunded.

But the international response to piracy – and the investments and partnerships that emerged – have helped some states to improve in these areas.

More importantly perhaps, since the decline in piracy attacks, Kenya and Djibouti have been paying more attention to policies around maritime governance and “blue” economic development. This relates to sustainable use of ocean resources for economic growth, job creation and ocean ecosystem health. The refocus marks a shift from traditional investments related to land based conflict and land borders.

In a recent article, I examine how Kenya and Djibouti reformed their domestic maritime sectors following a decline in acts of piracy. The study sheds new light on the limitations and challenges facing domestic maritime sectors in Africa as well as some of the innovative approaches taken.

A key point is that blue economic growth is not possible without addressing security threats at sea. This includes building a robust maritime security sector, improving ocean health and regulating human activity at sea in a more sustainable way.

International partnerships

Many of the new developments in the region have been supported by international partners. The Djibouti Navy and Coastguard work closely with the US Navy. Together, for example, they are developing capacity for stopping and searching suspicious vessels. This is important in countering the illicit trafficking in people and smuggling of migrants through Djiboutian waters.

Djibouti has also benefited from Chinese direct investment, which accounts for nearly 40% of the funding for its major investment projects. Chinese state-owned firms have built some of Djibouti’s largest maritime related infrastructure projects. These include the Doraleh Multipurpose Port, a new railway connection between Djibouti and Addis Ababa, and the opening of China’s first foreign military facility.

This is a clear example of Beijing prioritising its growing economic and security interests in Africa. And advancing its “massive and geopolitically ambitious” Belt and Road Initiative.

Kenya, too, has received international assistance and investment. This includes support to set up the Regional Maritime Rescue Coordination Centre in Mombasa. Organisations like the International Maritime Organisation have led training for staff from the centre and for the Kenyan Navy.

The United Nations Office on Drugs and Crime has provided law enforcement training for the Kenyan Maritime Police Unit. It also opened a new high-security courtroom in Shimo La Tewa, Mombasa, for cases of maritime piracy and other serious criminal offences.

National refocus

At a national level, there is evidence of a fundamental shift towards building a more secure and sustainable domestic maritime sector.

For example, Kenya has created a new coastguard service. Its job is to police the country’s ocean territory and to ensure that Kenya benefits from its water resources. The country has new naval training partnerships, maritime capacity building projects and an implementation committee to coordinate “blue economic” activities. These include fisheries, shipping, port infrastructure, tourism and environmental protection.

For its part, Djibouti has rapidly developed its maritime sector and recognised the financial benefits of leasing coastal real estate. The country has an ambitious development plan titled “Djibouti Vision 2035”. This sets out its aspiration to become a maritime hub and the “Singapore of Africa”. It’s trading on the fact that it has a similar strategic position along one of the world’s busiest shipping lanes.

All of these approaches require robust laws and regulations governing human activities at sea. They also call for a capable and flexible coastguard and navy to enforce these regulations and secure coastal waters against threats such as piracy, fisheries crime and the illicit smuggling of drugs, weapons and people.

The way forward

There are lessons in the Horn of Africa experience for other regions of Africa facing similar maritime insecurities. One example is the Gulf of Guinea.

The first lesson is that there’s a need to convince coastal states with weak maritime capacities of the untapped potential of the blue economy. Even reputational damage can harm tourism, development and investment in coastal regions. This was clearly illustrated in the case of Kenya.

Blue economic growth needs a safe and secure maritime environment for merchant shipping in particular. It can also help alleviate poverty in coastal regions, provide alternatives to criminal livelihoods, and allow local communities more ownership of issues that affect them.

Ultimately, maritime security and blue economic growth need to be considered as a unified policy issue.The Conversation

 

Robert McCabe, Assistant Professor, Coventry University

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

Over the past 10 years mobile-based lending has grown in Kenya. Some estimates put the number of mobile lending platforms at 49. The industry is largely unregulated but includes major financial players. Banks such as Kenya Commercial Bank, Commercial Bank of Africa, Equity Bank and Coop Bank offer instant mobile loans.

These lending services have been made possible by the ballooning financial technology (fintech) industry.

Since the early 2000s, Kenya has been touted as a centre of technological innovation from which novel financial offerings have emerged. Mobile company Safaricom’s M-Pesa is a well-known example. It is no surprise, therefore, that technology and unregulated lending have developed together so strongly in Kenya.

The digital loan services appear to be bridging the gap for Kenyans who don’t have formal bank accounts, or whose incomes are not stable enough to borrow from formal financial institutions. These services have improved access to loans, but there are questions about whether the poor are being abused in the process.

Who borrows and why

A survey released earlier this year showed that formal financial inclusion – access to financial products and services – had increased from 27% of Kenya’s population in 2006 to 83%. M-Pesa was launched in 2007.

Mobile money services have benefited many people who would otherwise have remained unbanked. These include the poor, the youth, and women.

The next logical step was to make loans available. The first mobile loans were issued in 2012 by Safaricom through M-Pesa.

In 2017, the financial inclusion organisation Financial Sector Deepening Kenya reported that the majority of Kenyans access digital credit for business purposes such as investing and paying salaries, and to meet everyday household needs.

Some of their findings are illustrated in the figure below.

Unpacking the digital lending story

The implications of these findings are two-fold. Digital credit can help small enterprises to scale and to manage their daily cash flow. It can also help households cope with things like medical emergencies.

But, as the figure shows, 35% of borrowing is for consumption, including ordinary household needs, airtime and personal or household goods. These are not the business or emergency needs envisaged by many in the investment world as a use for digital credit.

Only 37% of borrowers reported using digital credit for business, and 7% used it for emergencies. Many in the development world thought this figure would be much higher.

Second, the speed and ease of access to credit through mobile applications has caused many borrowers to become heavily indebted. In Kenya, at least one out of every five borrowers struggles to repay their loan. This is double the rate of non-performing commercial loans in conventional banking.

Despite their small size, mobile loans are often very expensive. Interest rates are high – some as high as 43% – and borrowers are charged for late payments.

The mobile-based lending business model depends on constantly inviting people to borrow. Potential borrowers receive unsolicited text messages and phone calls encouraging them to borrow at extraordinary rates. Some platforms even contact borrowers’ family and friends when seeking repayment.

It’s not always clear to customers what they will have to pay in fees and interest rates or what other terms they have agreed to. The model has been accused of making borrowers unknowingly surrender important parts of their personal data to third parties and waive their rights to dignity.

Concerns and remedies

There are concerns about how the business model may make people even more vulnerable.

The most prominent is the debt culture that has become a byproduct of mobile-based lending: borrowers fall into the trap of living on loans and accumulating bad debt.

So, what can be done to improve the system so that everyone benefits?

First, even though digital loans are low value, they may represent a significant share of the borrowers’ income. This means they will struggle to repay them. Overall, the use of high-cost, short-term credit primarily for consumption, coupled with penalties for late repayments and defaults, suggests that mobile-based lenders should take a more cautious approach to the development of digital credit markets.

Second, some digital lenders are not regulated by the Central Bank of Kenya. In general, digital credit providers are not defined as financial institutions under the current Banking Act, the Micro Finance Act or the Central Bank of Kenya Act.

Mobile lending platforms are offered by four main groups: prudential companies (such as banks, deposit-taking cooperatives and insurance providers), non-prudential entities, registered bodies and non-deposit-taking cooperatives as well as informal groups such as saving circles, employers, shop keepers and moneylenders.

Under current law, the Central Bank of Kenya regulates only the first two members of this list. So they should both be subject to the interest rate cap that was introduced in 2016. But some of the regulated financial institutions that also offer digital credit products have not complied with the interest rate cap, arguing that they charge a “facilitation fee”, and not interest on their digital credit products.

Third, and closely related to the point above, is the issue of disclosure. Borrowers often take loans without fully understanding the terms and conditions. Disclosures should include key terms and all conditions for the lending products, such as costs of the loan, transaction fees on failed loans, bundled products (services offered and charged for in tandem with the loan) and any other borrower responsibilities.

Fourth, with 49 digital lending platforms it is imperative that the lenders are monitored and evaluated for viability and compliance. Many mobile lending platforms are privately held (and some are foreign-owned) and are not subject to public disclosure laws.

Finally, changes to the current digital credit system across all the lending categories – prudential, non-prudential, registered and informal entities – are needed. An obvious failure of the system allows borrowers to seek funds from several platforms at the same time, creating a “borrow from Peter to pay Paul” scenario. At the same time the country’s Credit Reference Bureau has been faulted for occasionally basing its reports on incomplete data.

Credit reporting systems need to be stronger. They should get information from all sources of credit, including digital lenders, to improve the accuracy of credit assessments. Efforts to make the system work better should consider whether digital credit screening models are strong enough and whether rules are needed to ensure first-time borrowers are not unfairly listed. There could also be rules about reckless lending or suitability requirements for digital lenders.The Conversation

 

Victor Odundo Owuor, Senior Research Associate, One Earth Future Foundation, University of Colorado Boulder

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

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.The Conversation

 

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 13th 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.

 Kenya Expected Growth

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. 

Kenya 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.

Contact: This email address is being protected from spambots. You need JavaScript enabled to view it. / Tel: +254727363338

The second largest Ebola virus disease outbreak on record is currently raging in the Democratic Republic of the Congo (DRC) with over 2,000 cases and more than 1,400 deaths recorded. Uganda, which shares a long and porous border with DRC, registered its first confirmed cases and two deaths and, earlier this week, a suspected case in Kenya fortunately turned out negative.

While the epidemic has been mostly contained in the DRC, the potential and risk of spread is high. Given that Kenya shares a porous border with Uganda – and is a busy international travel hub – is Kenya ready to handle an outbreak? The Conversation Africa’s Moina Spooner asked Abdhalah Ziraba to share his insights.

How prepared is Kenya to handle an Ebola Virus Disease outbreak?

We saw Kenya’s Ebola response spring into action when there was a suspected case in Kericho, western Kenya. The patient was quickly isolated, samples were taken, and all potential contacts were traced. Major health facilities in the region were alerted and prepared to handle any reported cases. Kenya’s Health Cabinet Secretary was quick to issue statements to reassure the public. These actions show that all players are alert.

Kenya has been preparing for this. There’s a national ebola preparedness and response contingency plan tasked to monitor the situation, make sure enough personnel are trained and respond to suspected cases. Under this plan, there’s a rapid surveillance and response team who get dispatched to support health facilities that report any suspected Ebola case.

There are also experts on the ground. During the 2014 outbreak in West Africa, a Kenyan team of 170 people was dispatched and they spent about six months helping to bring down the epidemic. These individuals are part of Kenya’s Ebola mitigation teams that have now been mobilised to all major entry points.

Kenya appears prepared, but a lot more can be done.

There needs to be more awareness messaging for the general public – like Uganda has done in its border districts. Tighter screening at all borders (especially along the border with Uganda) is crucial, too. Primary health care workers – even those in private facilities – need to be able to pick out suspected cases. It is not clear to what extent low level health care workers have been sensitised on managing and reporting suspected cases.

All health facilities also need to be provided with a minimum of supplies to help them manage suspected cases. And in the event of a confirmed case, the ministry should consider providing an experimental vaccine to all front-line health care workers, as the DRC and Uganda are doing. That’s because health care workers are at a higher risk of exposure to the virus in any outbreak.

Who are the main players involved in managing the risk?

Healthcare providers are key. How quickly an outbreak is spotted and controlled depends on their ability to identify a case and manage patients while protecting themselves, and others, from infection.

The general public is vital too, especially when it comes to reporting cases early and managing the crisis. But they need to be equipped with the right information. In the past, in places where epidemics were poorly understood, they quickly flared up due to misconceptions about where the disease came from and the mode of transmission. People also continued with cultural practices that increased exposure – like the washing of dead bodies before burial.

Political leadership is critical in making decisions regarding resource mobilisation, distribution and to maintain order. A serious outbreak can lead to panic and the breakdown of security. This would affect those seeking health care; hinder service provision; and fuel misinformation.

Other leaders – community, cultural and religious – can also play a critical role in educating the public, and clearing up misconceptions that often fuel the spread of an epidemic.

International players – like the World Health Organisation – give vital support when it comes to technical and financial resources. Without these an outbreak could quickly become an epidemic. These actors must be engaged with from the planning stage.

What are the biggest risks Kenya faces?

The spread of the Ebola virus is made worse when there’s a lot of movement of people within – and between – countries. Kenya has wide and porous land borders with its neighbours. Many people cross the borders without being formally screened and documented.


Read more: How Africa's porous borders make it difficult to contain Ebola


Also, while there are thermal cameras at all official border points, there is a small risk that infected people would come into the country before getting the first symptoms. The time-lag between getting infected to showing symptoms ranges between two and 21 days.

Has Kenya had outbreaks before? How well did it manage them? What lessons were learnt?

While Kenya has never had a confirmed Ebola virus case, there has always been a risk. And so Kenya has taken proactive measures, including maintaining some form of surveillance.

The problem has been the consistency with which these measures have been applied. For example, the thermal cameras haven’t always been active or passenger travel history questionnaires consistently collected. As long as there’s an outbreak nearby, the country should always be alert.The Conversation

 

Abdhalah Ziraba, Associate Research Scientist, African Population and Health Research Center

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

Kenya’s Treasury Secretary has tabled a budget that is aimed at addressing five challenges. These are the creation of an enabling environment for businesses, the prudence and efficiency of government spending, the mobilisation of domestic resources, the reduction of the fiscal deficit and stabilisation of debt and the implementation of reforms to make the Kenyan economy more competitive.

The Conversation Africa’s Moina Spooner asked Tim Njagi for insights into whether it’s achieved this.

How well does the 2019/20 budget address these challenges? Please give details.

To some extent the Treasury Cabinet presented a budget that tried to address the challenges listed above. Kenya needs to be competitive to continue to attract investments.

Key proposals in the budget aimed at improving competitiveness included the 30% rebate to manufacturers on the cost of electricity, reduction of VAT withholding tax (from 6% to 2%), expediting VAT refunds and pending bills (and ensuring that suppliers to government are paid within 60 days), facilitating faster clearance of cargo at ports, and some protection measures for manufacturers – like increases in the railway development levy. The government also plans to prioritise locally manufactured products in its procurement.

But some areas of concern remain. These include the mobilisation of local resources, reduction of the fiscal deficit and stabilisation of the national debt.

As at December 2018, the Kenya Revenue Authority missed the revenue target by KSh61 billion (about US$598million). This deficit will likely double by the end of the financial year, later this month. The National Treasury has proposed a number of strategies to try to contain expenditures, including adopting zero-based budgets (a fresh budget with each cycle), a freeze on new projects, restructuring and realigning externally funded projects with the national agenda, and reducing the recurrent expenditures.

It is likely that the government will have to borrow more to address the increasing fiscal deficit, currently at 5.6% of the GDP.

The National Treasury has tried to suggest measures that will reduce recurrent expenditures – like reducing the increasing government wage bill, domestic and foreign travel expenditures. But this is unlikely to work. The wage bill has increased by an average of Ksh 46 billion (about US$450 million) over the last six years due to an increase in the number of employees and salaries.

The government must increase human resource planning and management and implement other recommendations proposed in the comprehensive public expenditure review report – like implementing a robust payroll system to prevent leakages and ensure better forecasting.

In addition to this, measures to improve fiscal responsibility should be cascaded to county governments where there’s a lack of fiscal discipline and wasteful expenditure is high.

How well does the 2019/20 budget speak to the country’s economic development agenda?

It speaks to it very well. The 2019/20 budget prioritised the “Big Four” – the economic agenda of President Uhuru Kenyatta’s administration – manufacturing, housing, health care and food security. About 15% of the total budget was allocated towards these.

On food security, the allocation to the agriculture, rural and urban development sector increased from 1.6% of the total budget in 2018/19 to 3%. A significant rise.

On universal health care, the allocation rose by 0.3% to 3.1%.

The government also made a significant allocation (about US$174 million) to housing for its employees and partnered with other stakeholders – like the World Bank – to make mortgages affordable for other citizens through the Kenya Mortgage Refinance Company.

As mentioned earlier, the budget has good proposals for improving the business environment and competitiveness. But, it’s important to verify whether the government is implementing measures to make spending more efficient. For instance, a low hanging fruit would be to further develop agro-based industries – which Kenya has already done quite well – a model which was successfully implemented in Ethiopia.

Of the various measures announced in the budget, what stood out for you? And why?

I have a keen interest in food security so was watching out for those.

There are a number of familiar proposals – like bailing out the sugar industry and monies for crop diversification. There are also a number of unclear programmes – like the National Value Chain Support Programme whose details are vague, and whose functions are now said to have been devolved to county governments.

While the intention is not bad, these expenditures have a low return on investment.

For example, studies have shown that the government sugar mills would be better off if they were privatised.

The Coffee Cherry revolving fund – set to provide an advance payment to coffee farmers at a modest interest rate – is another expenditure that is unlikely to lead to the revival of the coffee industry. The coffee industry has performed poorly over the past 20 years, current production is the same as it was in the 1970s. Some farmers are now abandoning the crop for other profitable commodities.

I commend the zero-rating of agricultural chemicals, reducing the price of agro-chemicals, but more incentives are needed to enhance productivity within the agricultural sector. Allocations should be based on efficiency. For example, the country spent an average of 22% of the agriculture budget on input subsidies, but only 2% of the agricultural budget on extension (farmer knowledge and skills) between 2013 and 2017. Providing inputs at low prices has not translated into any significant improvement in yield performance.

As an alternative, more spending on extension services will mean that farmers have more knowledge and can better use the inputs (like fertilisers) that they have access to.

Government has adopted zero-based budgeting. What are the expected benefits of zero-budgeting for Kenya? And what are the risks?

Zero-based budgeting means making a fresh budget with each cycle. This implies that there are no incremental/carry over costs. Everything is assessed afresh and justification for resourcing made.

One of the immediate benefits is that budgets will be evaluated in line with proposed activities. This works very well with programme based budgets – which the government is trying to implement – as the budget has to be justified for each project. This improves efficiency since funds will only be requested for activities that ministry departments and agencies will implement. The traditional approach has sometimes led to lobbying for funds, even when the justification for the funding is weak.

It will also help to weed out ineffective programmes and activities and allow the government to channel funds to efficient areas.

But a zero-based budget needs careful and detailed planning. This means that the ministries and agencies must allocate human resources to devote time to planning and budgeting. Missed activities would imply missed budgets and gaps in service delivery and performance. Kenya has the human capacity to do this. But it needs to be committed to it.The Conversation

 

Timothy Njagi Njeru, Research Fellow, Tegemeo Institute, Egerton University

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

International mobile phone call traffic fell by 3.4 per cent in 2017 to 437.8 million minutes last year — the lowest since 2010.

International mobile phone call traffic from Kenya hit an eight-year low on increased use of Internet-based platforms like WhatsApp and Skype, fresh data shows. 

Official Economic Survey data shows that the traffic fell by 3.4 per cent in 2017 to 437.8 million minutes last year — the lowest since 2010.

Internet-based platforms are gaining popularity as subscribers turn to affordable and quality options to the traditional mobile calls.

“The total international traffic has been declining in the last three years partly due to availability of Over the Top (OTT) communication platforms that allow users to make free voice and video calls, following the removal of regulatory barriers,” the report says.

OTT are platforms that rely on the internet to make calls, videos and texts offering, which many callers find affordable. Mobile phone subscribers can make international calls through WhatsApp using 50MB that costs Sh20 ($0.20c) on average and can last nearly 10 minutes.

Sh5 ($0.05c) per minute

Calls from Nairobi to the US, China and India remain the cheapest, with rates of Sh5 per minute, putting the cost of a 10 minute call at Sh50($.50c).

International calls to Germany, Switzerland, France and Italy range between Sh40 ($.40c) and Sh50($.50) a minute, making WhatsApp a cheaper calling option.

International calls made through the fixed telephone, however, nearly doubled in two years from 2017 to hit 15.8 million minutes last December, the report further shows.

Short Messages Services (SMS) sent outside the country fell to a six-year low of 35.9 million texts. In 2013, subscribers sent a total of 49.4 million SMSs, which was the highest in the period.

International SMSs received rose by 11 per cent to hit 45.9 million last year, up from 41.3 million in 2017.

Stiff competition for the local Internet market between telecoms operators has led to reduced cost of data bundles, making Internet-backed calls outside the country cheaper.

 

- BUSINESS DAILY

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