apr 28th 2015
-
Upload
bobb-ketter -
Category
Documents
-
view
308 -
download
0
Transcript of apr 28th 2015
-
7/26/2019 apr 28th 2015
1/32
TUESDAY, APRIL 28, 2015 WWW.BDAFRICA.COM KSH60 |TZ SH 1,700 |UGSH2,700 | RFrNO. 2083
BY FRED MBUGUA
IN PORT LOUIS, MAURITIUS
Financial services firm Britam
revised its books for 2014 a mon
ter they were published, reduci
after tax profit by Sh342 millio
The reduction was reveale
days after the resignation of tw
rectors caught up in a corp
governance crisis sparked b
collapse of a Mauritius bank a
ated with the companys single
est shareholder.
Mr Dawood Rawat, the
ritian business magnate w
for fraud, money-laundering
embezzlement, and Mr Mouss
wat, his nephew, left Britams b
on April 22, according to notice
to regulators the same day.
The notices were, howeve
made public within 24 hours
quired by law. The duo repres
the interests of BAI Co (Maur
which had a 23.34 per cent st
Britam and in which Mr Dawoo
wat had a controlling stake. Th
has been placed under a conser
by the Mauritian government
evidence of overvalued asset
understated liabilities emerge
Britams revision to its fina
statements has been attributed
issue with respect to the car
value of a local associate comp
The group has two asso
Housing Finance (46.04 pestake) and Acorn Group Limit
per cent). Last week, the Mau
government said it would take
trol of Mr Rawats stake in the
yan firm as it begins a global
for assets that can be seized an
off to repay victims of his fraud
search has so far
unearthed a castle BRITAM, P
RICHARD LEAKEY
CHAIRPERSON OF THE KENYA WILDLIFESERVICE BOARD
JOHN NGUMI
CHAIRPERSON OF THE BOARD DIRECTORSOF THE KENYA PIPELINE COMPANY
WAMBUI NAMU
MEMBER OF THE KENYA TRADE NETWORKSAGENCY BOARD,
OMINGO MAGARA,
CHAIRPERSON OF THE KENYAINTERNATIONAL CONVENTION CENTRE
GACHAO KIUNA
MEMBER OF THE BOARD OF THE KENYAINVESTMENT AUTHORITY
JUDY KIBAKI
MEMBER OF THE BOARD OF THE KENYAINVESTMENT AUTHORITY
NEW APPOINTMENTS
Inflation looms
large as Kenyancurrency touches
a new low of
Sh94 againstthe greenback
Shillings fall against dollasignals ise in cost of living
Bitam nowestates pofafte exit o
two diecto
BY CHARLES MWANIKI
The Kenyan shilling continued its slide
against the major world currencies,
signalling a looming rise in the cost
of living in a country that is over-de-
pendent on imported goods.
The shilling closed yesterdays
trading at 10 cents weaker at 94.35
to the dollar, staying on a losing path
that started last month and moving
closer to breaching the psychological
mark of 95 units to the dollar as rising
demand for the dollar continued toweigh against weak inflows.
Kenya is a net importer of con-
sumer goods such as petroleum,
processed foods and clothing as well
as raw materials and machinery used
by its nascent manufacturing industry,
whose costs are expected to rise with
a weaker shilling pushing up the rate
of inflation.
A weaker shil-SHILLING, Page4
Shilling/US Dollar exchange rate April
2011-2015The Kenya shilling is exchanging at a three-and-a-
half year low to the dollar, wekened by lower dollar
inflows and a globally strengthening US currency.
BY VICTOR JUMA
President Uhuru Kenyatta yesterday
made 302 appointments to 79 State-
owned companies that largely put
politicians and allies in charge even as
it recognised a few private sector pro-
fessionals.
This is the first batch of appointments
that gives the beneficiaries three-year
directorships in the parastatals.
The long-awaited appointments, in-
formed by the findings of the Presiden-
tial Taskforce on Parastatal Reforms, aremeant to improve service delivery and ef-
ficiencies besides dealing with rampant
corruption in the State-owned firms.
The administration is pleased to an-
nounce the first batch of appointments to
State corporations in line with its trans-
formative agenda for Kenya, State House
spokesperson Manoah Esipisu said in a
statement. In JOBS, Page 4
Old guad back
in Uhuu shakeup of paastatals
-
7/26/2019 apr 28th 2015
2/32
2 BUSINESS DAILY| Tuesday April 28, 2015
near Italys capital,
Rome, and prop-
erty in places like the United Kingdom,
Croatia and Romania.
The asset seizures are part of a plan
Mauritius Prime Minister Anerood Jug-
nauth presented to parliament on Friday,
whose aim is to compensate policyhold-
ers and investors caught in the Ponzi-
type fraud affecting BAI Co (Mauritius)
and its sister company Bramer Bank. A
Cabinet meeting held just hours before
the parliamentary address agreed on
wide-ranging legal and ad-
ministrative steps that willsee the State Insurance Com-
pany of Mauritius (SICOM)
replace BAI Co (Mauritius)
as a shareholder in British-
American (Kenya) Holdings,
the single largest sharehold-
er in Britam.
A yet-to-be-appointed
national administrator for
a proposed National Property Fund and
SICOMs board of directors will decide
whether and when to sell the stake in
the Nairobi-based regional financial
services group.
The countrys Financial Services min-
ister Sudarshan Roshi Bhadain said the
sale of BAI Cos stake in Britam to inter-
ested parties was likely as the national
insurer tries to get value for Mauritian
policyholders.
The conglomerate that Mr Rawat
owned is also invested in Botswana
and Malta. Botswana regulators have
delisted BAI (Botswana), in which BAI
Co (Mauritius) holds an 80 per cent
stake, and placed it in receivership.
GlobalCapital, in which Mr Rawats
firm owns a 48 per cent stake and con-
trols a further 6 per cent, was also taken
off the stock exchange in Malta.
Kenya is isolated from what is hap-
pening, Mr Bhadain said.
Its only a 23 per cent hold-ing and theres no control
(exercised by the Mauritian
BAI conglomerate over
Britam, unlike in Malta
and Botswana).He, how-
ever, acknowledged the
risk of ripple effects from
the scandal adding: But
now the situation is go-
ing to improve because the Mauritius
government is giving the assurance
to all (Britam) investors that we are
stepping in.
Initial investigations by BAI Co
(Mauritius) conservators Andr Bon-
ieux and Mushtaq Oosman, appointed
by the Financial Services Commission,
found that there were no operational
or commercial ties between Britam and
BAI. The only (financial) link is the
investment via the stock exchange, Mr
Bonieux told theBusiness Daily, add-
ing that he and others in Mauritius with
a voice in what happens to the Britam
stake are in touch with Kenyan regu-
lators and Britam executives on what
is going on in Mauritius.
He hinted at a possible sale ofGlobalCapital, suggesting multiple
suitors.
Britam, he says, remains the jewel
in the crown of Mr Rawats crumbling
empire, and that the Mauritius govern-
ment and an administrator hired to
run his non-insurance businesses also
consider it his best investment.
Meanwhile, efforts to find and freeze
assets owned by Mr Rawat and other
beneficiaries of his scam continue. An
asset recovery unit run by Mauritian
police and public prosecutors has ob-
tained Supreme Court orders freezing
shares and immoveable assets in the
country, even as the Attorney General
seeks mutual legal assistance to seize
other assets around the world. But is
this swift response to the fraud a case
of dj vu all over again? The inter-
vention underway is reminiscent of the
resolution to a 2009 fraud scandal in-
volving British-American Investments
(Trinidad & Tobago). Known as the
CLICO scandal, after BAI (T&T) Ltds
parent company Colonial Life Insur-
ance Company, it, too, involved over-
valuation of assets and was resolvedwith a government bailout of the $100
billion conglomerate. Media reports
in several countries in the Caribbean
affected by the giant firms failure sug-
gest many policyholders got the short
end of the stick.
Bhadain says Mauritius, which
is still reeling from the discovery of
another alleged $16.5-billion Ponzi
scheme last month (Belvedere, run
by two South Africans), is keen to take
the right actions to gain a reputation
for clean business. This, he says, is
why the State wants to protect poli-
cyholders.
The State has promised capital re-
payment for all policies, including those
offered under toxic single-premium in-
vestments at the heart of the fraud, o
imposing a haircut (loss of inter
on the Ponzi scheme victims.
The Mauritian government has
taken steps to clean house, with at l
a dozen appointees to various overs
positions losing their jobs. An inte
tional arrest warrant for Mr Daw
Rawat is still in place.
Former BAI (Mauritius) chief extive Oomeshsing Rishi Sookdaw
is out on bond after being charge
a Port Louis court with aiding Raw
fraud.
At least one other unidentified
official is facing a similar fate, relia
sources say, even as a government m
ister confirmed the police and ot
investigative bodies were looking
wider range of suspects. My gov
ment (has) saved the country from
unimaginable financial disaster,
Jugnauth said, as he announced
plan to sell BAI properties to pay p
cyholders. If we had not made d
sions, our financial system would h
tumbled as in Trinidad & Tobago.
From Page 1
Bitam educesafte-tax pofit
by Sh342 million
TOPNEWS
Mr Andre Bonieux, a senior partner at PricewaterhouseCoopers and
one of two conservators of BAI Co (Mauritius) Ltd. COURTESY
Mr Roshi Bhadain, Mauritius Minister for Financial Service
Good Governance and Institutional Reform. COURTESY
The only link is
the investment
via the stock
exchange
ANDRE BONIEX
BAI CO CONS ERVATOR
BY BRIAN WASUNA
Attorney-General Githu Muigai
wants the High Court to dismiss a
Sh4.2 billion ($47.5 million) claim by
13 Ugandan and Rwandese firms for
losses they suffered in the 2007-2008post-election violence.
Prof Muigai says in court papers
that the government notified vehicle
operators of the dangerous state of
Kenyan highways leading to both the
Busia and Malaba borders, in addi-
tion to providing security convoys to
motorists plying the affected routes.
The firms, however, say their trucks
were looted and destroyed by the dem-
onstrators while ferrying goods.
The transporters sued the govern-
ment in 2009 for negligence, demand-
ing Sh4.2 billion compensation for
special damages. They have also asked
for general damages, an amount they
say should be calculated at the courts
discretion.
The government issued advance
warnings to operators of motor vehi-
cles operating along the Nakuru-El-
doret-Busia-Malaba highway and pro-
vided armed security. If the plaintiffs
suffered economic loss, all of which
is denied, it was not occasioned byany negligence of the government,
says the AG.
The 13 firms and three business-
men claim that the government,
through the police, failed to accord
their trucks adequate security, which
led to the loss of their property in the
chaos. They have also faulted the gov-
ernment for opening the highway for
use in clash-prone areas.
They claim they lost $22.9 million
(Sh2.03 billion) along with the trucks
and goods that were being transport-
ed across the country.
But Prof Muigai says the govern-
ment deployed both police officers
and Kenya Defence Forces person-
nel to maintain law and order on the
affected routes. He adds that the ch
was a spur of the moment that co
not have been foreseen by the Sta
The post-election clashes
tween December 2007 and Febru
2008 were spontaneous and as s
any damage to the plaintiffs, conot reasonably be foreseen. The g
ernment in discharge of its duty
ployed extra police officers and Ke
Army officers to the affected rou
he added.
Intraspeed Logistics, Kamp
City Traders Association, KATRA
Uganda and Mugenga Holdings w
the owners of the 22 heavy duty tru
destroyed in the chaos.
They have been joined by Do
Enterprises, Willex Uganda, SEB
Uganda, KPI Limited, Bunyonyi
faris, Seven Hills Impex, Uganda
ricultural Tools, Board City, Bi
Uganda and businessmen Suleim
Bateganya, David Musana and Art
Turyahikayo.
AG opposes bid by fims seekingSh4.2bn post-poll violence payou
Index to companies
This index of businesses mentioned in todays issue of the Business Daily is
intended to include all significant references to companies.
Britam.............................................1,2
NHIF...................................................6
Telkom ...............................................7
Kengen...............................................7
Tata....................................................7
CMC ...................................................7
TOYOTA..............................................7
TransCentury....................................8
Mumias............................................10
NSE...................................................10
Naivas..............................................15
New KCC ..........................................16
Devki steel.......................................19
Stanlib .............................................19
Apex steel........................................19
Brent oil ...........................................21
www.businessdailyafrica.com
Follow your favourite stories online, plus more on
markets, industry, policy and agribusiness
FIND US ON FACE BOOK & TWITTER
businessdailyafrica BD_Africa
-
7/26/2019 apr 28th 2015
3/32
Tuesday April 28, 2015|BUSINESS DAILY
The big mans black Mer-
cedes S600 with the
vanity licence plate
BA1 has not been seen in
weeks making the dash from
his home in Curepipe to the
SSR International airport at
one end of Mauritius or Port
Louis at the other.
Dawood Rawat, whose
friendship with the countrys
previous Prime Minister hasbeen described by a current
Cabinet minister as toxic,
is on the run. Once chairman
emeritus of the British Ameri-
can group of companies, he is
now a fugitive accused of profit-
ing from an elaborate scheme to
cook the books at BAI Co (Mau-
ritius) that saw liabilities played
down and assets overvalued.
While Mauritian authori-
ties concede some of the
former Britam directors com-
panies were clearly in trouble,
it wasnt until his
failure to make a
cash injection
led to Bramer
Banks suspen-
sion that a cri-
sis was touched
off, revealing the
true extent of his
deception.
We found
there was a huge
fraud case, Financial Services,
Good Governance and Institu-
tional Reform minister Roshi
Bhadain told theBusiness Dai-
lyduring an interview in Port
Louis on Friday.
Policyholders money which
had come into the insurance
company had been passed outthrough various subsidiaries in
Mauritius. Some of the funds
taken (from) new investors
were being used to repay old
ones and the interest rates that
they were giving were high, in
some cases going up to 10, 12
and even 14 per cent (well above
the average of three to four per
cent). It had all the hallmarks
of what is commonly referred
to as a Ponzi scheme.
According to a confidential
report from the firms
conservators, as at December
31 last year, BAI Co (Mauritius)
Ltds assets were substantially
overvalued at 33.6 billion
rupees (Sh89 billion) and
were only worth about Rs17.2
billion (Sh45 billion). The total
liabilities, estimated at Rs26
billion by BAI, were worked
out to be Rs28 billion (Sh74
billion). Of this, Rs23 billion
(Sh61 billion) were the result
of the controversial Super
Cash Back Gold scheme that
government officials say wasbeing run like a Ponzi scheme.
The value of key subsidiaries
like Iframac, Courts and the
Apollo Bramwell Hospital
were also revised downwards
with by the conservators.
As a result the firm was not
in a position to meet its obliga-
tions, even if it had not lost Rs6
billion (Sh15 billion) loaned to
Bramer Bank when the liquidity
crisis led to the loss of the banks
licence. The interim document,
BAI Co (Mauritius) conserva-
tor Andr Bonieux
says, shows a clear
trail of bad invest-
ments through sub-
sidiaries involved in
everything from car
dealerships to a pri-
vate hospital. Britam,
the 4.5 billion rupee
jewel in the crown,
stands in contrast
to distressed assets
like Iframac and the Apollo
Bramwell Hospital.
BAI Co also has a profitable
toehold in Equity Bank and
Housing Finance through its
Kenyan investment vehicle.
The main problem was the
underperformance of BAIs sub-
sidiaries, said Mr Bonieux,listing the largest distressed
investments as Iframac, the
Apollo Bramwell Hospital
and Bramer Bank.
And, of course, some of the
insurance products they were
selling were (being offered) at
too high a rate.
Under Mauritius law, insur-
ance firms are barred from in-
vesting more than ten per cent
of their assets in related parties.
But as at December 31 last year,
BAI Co (Mauritius) had 58 per
cent of its assets tied up in strug-
gling related firms.
This was down from a high
of 85 per cent in 2009.
The companys regular in-
surance products such as its
various life cover, education
and pension schemes held by
some 135,000 people were
okay. The poison lay in three
single-premium investment
products, the most popular of
which was called Super Cash
Back Gold and offered unsus-
tainable annual returns of up
to 14 per cent.
The involvement of Rawat
relatives in the management of
many of these subsidiaries, as
well as other holding compa-
nies, is also a red flag.
Seaton Investments, BAI
(Mauritius) Ltds loss-making
holding company, was headedby Mr Dawood Rawats daugh-
ter, Adeela-Feistritzer Rawat. Its
board was stacked with male
relatives with the only per-
son not a blood relation be-
ing Adeelas husband Claudio
Feistritzer.
Adeelas sister Laina headed
a division at BAI, and the failing
Apollo Bramwell Hospital was
headed by their sister-in-law,
Valerie Rawat. (BAIs ultimate
holding company, Bahamas
registered KLAD Investment,
is named for family members
Kerima, Laina, Adeela and
Dawood.) The path to recov-
ering from this crisis almost
certainly involves selling the
best-performing assets in
this case Britam. We have to
make sure serious bidders come
to the table. There must be a
proper bidding process, Mr
Bonieux said.
Id certainly like to do that
with full transparency for BAI
policyholders and manage-
ment (and shareholders) in
Britam. It has to be planned.
There is no rush. But, having
said that, I dont think there is
a strategy to keep Britam for
a very long time. Bhadain,
whose relatively new Ministry
champions good governance,
says the crisis and Mauritius
response are an opportunityfor change.
Fraud happens, he said,
citing Enron and Lehman
Brothers in the United States,
and BCCI, the Maxwell Affair
and Polly Peck in the United
Kingdom. It has been dealt
with swiftly. The Finance
Minister decided the Nation-
al Commercial Bank was go-
ing to take everything on board
and safeguard the interests of
(Bramer Banks) depositors
and employees. We reassured
(BAIs 135,000) regular policy-
holders that the government is
going to secure their policies.
Then we started a massive ex-
ercise to understand what had
happened, who was responsible
and why it happened.
The result was a decision to
fire the chief executive of thFinancial Services Commis
sion, the head of the Financia
Reporting Council, and a ten
person national committee on
corporate governance.
The name of the game is t
learn from these (crises) an
bring appropriate legislation t
make sure the loopholes peop
are using to abuse the system
are closed down, Bhadai
says. Changes to the Insu
ance Act are being proposed
for instance, to clarify the defi
nition of related companies an
prevent the sort of transaction
that brought down Mr Rawat
empire. Is that sort of thing posible in Kenya? British-Amer
ican Insurance (Kenya) Man
aging Director and Regiona
Director of Insurance Steven
Wandera points out that Keny
has tight restrictions on relate
party transactions in the insur
ance industry, with the limit a
five per cent and no ambiguit
over what counts.
Local regulators, he add
are conservative over how a
sets and liabilities are valued
requiring the former cover th
latter. The Insurance Regula
tory Authority also insists o
independent directors and in
vestment committees, and ap
proves all products offered.
R A D A R S C R E E N F R E D M B U G U A
How Dawood Rawats deception was unavelledFRAUD Most of his relatives were
running distressed assets blamed for
losses running into billions of rupees
Mr Dawood Rawat is now a fugitive. FILE
TOPNEW
We found
thee was a huge
faud case
ROSHI BHADAIN,
FINANCIAL SERVICES
MINISTER
-
7/26/2019 apr 28th 2015
4/32
4 BUSINESS DAILY| Tuesday April 28, 2015
ling, however, has the
impact of making Kenyan exports more
affordable and should therefore help
drive volumes, besides translating to
better earnings for every dollar.
Analysts, however, said overreliance
on imports means the economy could
wipe out any benefits the
importers may get from a
weaker shilling, leaving
consumers in a worse po-
sition.
Taking all the market
factors into consideration,a weaker shilling would in-
crease inflationary pressure
and ultimately result in a
higher cost of living, said
Ecobank Kenya country
treasurer Bobby Otieno.
Reduced inflows from
tea and tourism sectors,
payment of dividends by multinational
companies and a reduction of inflows
via forex bureaus with the crackdown
on terrorism financing have significant-
ly impacted the forex reserves.
Inflation stood at 6.31 per cent in
March up from 5.61 per cent in February
a figure that is still within the Central
Bank of Kenya (CBK) target of between
2.5 and 7.5 per cent.
In addition to the expected rise in the
cost of living (inflation), a weaker cur-
rency has a wider impact on the econ-
omy, especially on interest rates.
If inflation goes up above the CBKs
target margins, the CBK will be forced
to increase the base rate. This will in
turn increase the cost of credit to the
private sector and ultimately slow down
the rate of growth, said Commercial
Bank of Africa senior dealer Joshua
Anene.
Kenya imported goods
worth Sh1.618 trillion in
2014, up 15 per cent or
Sh210 billion more com-
pared to Sh1.408 trillion
in 2013, according to theKenya National Bureau of
Statistics (KNBS).
The value of imports
rose only marginally by
Sh32 billion or 6.5 per cent
from Sh504.3 billion to
Sh537.1 billion meaning
that Kenyas trade deficit
widened by Sh177.7 billion to Sh1.08
trillion.
The imports were mainly in form of
capital goods for infrastructure projects,
fuel and manufactured goods.
The KNBSs producer price index
(PPI) for the first quarter of 2015 also
shows that the overall cost of produc-
tion for manufacturers increased by
1.52 per cent compared to a decrease
of 1.23 per cent recorded in the fourth
quarter of 2014.
The main contributors to the first
quarter increases were manufacture of
food products (up 1.79 per cent), manu-
facture of beverages (up 2.52 per cent)
and manufacture of rubber and plastic
products (up 2.85 per cent), the KNBS
says in the PPI report.
Costs associated with food and non-
alcoholic beverages have the biggest
weighting in the monthly inflation
index at 36 per cent and account for
up to 40 per cent of the producer price
index.
Consumers have been enjoying some
respite on inflation helped by low cost
of petroleum products arising from a
recent dip in global crude oil prices.
Consultancy firm Pricewaterhouse-
Coopers (PwC) put the total savings on
oil import bill in the past year at $200
million (Sh18.5 billion).
Oil prices have, however, rebounded
since January when a barrel was priced
at an average of $46 to an average of $65
a barrel today, meaning pump prices are
likely to rise in the Energy Regulatory
Commissions next two review cycles.
The shillings quick slide towards
the 95 units to the dollar has also gone
against the general expectation that
this exchange rate would only be real-
ised progressively towards the end of
the year raising the possibility that
the shilling may drop further than the
projected levels.
We had not forecast that we would
get to 94 so early in the year and we have
breached that level quite easily. This
means we could see the exchange rate
anywhere between 95 and 98 to the dol-
lar by year-end, said Mr Otieno.
Dealers said the shillings weak
ing is also driven to some extent by
mestic factors and not just the doll
global strengthening.
Last week the dollar lost so
ground to other world currencie
development that was not felt in
Kenyan market.The CBK has, however, come i
reassure the market that it is clo
monitoring developments in the for
exchange market and that it will c
tinue to use appropriate monetary
icy instruments to minimise excha
rate volatility.
The bank has adequate foreign
change reserves in excess of 4.5 mon
of imports to cushion the exchange
against these short-term shocks
volatility, the CBK said in a statem
issued on Tuesday last week.
The bank intervened in the ma
yesterday with dollar sales as the s
ling dropped to an intra-day leve
94.40/50.
It is the eighth time the CBK hatervened in the market in recent tim
to minimise volatility through the
of dollars as the shilling deprecia
to cross a key psychological limit.
regulator has, however, not sou
to determine the direction of the
change rate.
The shilling has in the past been s
as overvalued to the dollar and so
economists have advised the author
to allow it to depreciate gradually.
Last July as the shilling hit 88 u
to the dollar, Francis Mwega, a C
monetary policy committee m
ber, said in a research paper that
local currency was overvalued by
per cent.
The World Bank put the cum
tive overvaluation over a decad
33 per cent.
Cost of living setto ise as shilling
hits Sh95 to dollaFrom Page 1
Shoppers at a supermarket in Nairobi. The cost of living is likely to rise due to anincreasingly weakening shilling. FILE
TOPNEWS
If inflation goes
up above the
CBKs taget
magins, the CBKwill be foced to
incease the base
ate
JOSHUA ANENE
CBA SENIOR DEALER
making the appoint-
ments, the administra-
tion has tapped into the wisdom, ex-
perience and knowledge of our senior
citizens, while embracing the energy,
enthusiasm and innovation of our
young people.The list of the appointees that was
gazetted yesterday includes John
Ngumi Standard Banks head of East
Africa investment banking who will
chair the Kenya Pipeline Company for
three years. Polycarp Igathe, the CEO
of Vivo Energy (formerly Shell), is the
new chairman of the Anti-Counterfeit
Agency while James Ndegwa is the
new chairman of the Capital Markets
Authority (CMA), replacing Mr Kungu
Gatabaki who left last year. It was not
immediately clear whether this indi-
vidual is also the chairman of NIC Bank
who has a similar name.
Richard Leakey, the renowned con-
servationist, who served as managing
director of Kenya Wildlife Service, is
back at the agency as its chairman.
Marsden Madoka who has been serving
as Kenya Revenue Authority chairman
got another big appointment, replac-
ing Danson Mungatana as chair of the
Kenya Ports Authority (KPA).
Mr Kenyatta also appointed scores of
politicians and their relatives in an ap-
parent move to widen his political base,
especially in areas where his coalition
received relatively few votes in the last
General Election.
Musikari Kombo, a western Kenya
politician, was among the big winners
having been appointed the chairperson
of the Water Services Trust Fund for
three years effective April 17.
Judy Kibaki, a daughter of former
president MWai Kibaki, joins the
board of the Kenya Investment Au-
thority alongside TransCentury CEO
Gachao Kiuna and Mombasa politician
Taib A. Taib.
Wenwa Akinyi Odinga, the sister
of Cord leader Raila Odinga, joins the
board of the Kenya Medical Research
Institute while Margaret Saitoti, the
widow of former Internal Security
minister George Saitoti, is among the
new directors appointed to the board
of the National Oil Corporation.
Mr Esipisu said the governm
made an effort to ensure the appo
ments are inclusive in terms of co
munities, age, gender, and people w
disabilities.
The appointments reflect the facKenya, with all 47 counties represen
in honour of the diversity of all peo
and communities of Kenya, he sai
They also comply with the con
tutional imperatives on the appo
ment of women, youth and pers
with disabilities.
Women, youth and disabled
rently form 31 per cent of the top p
astatal management and their shar
expected to rise once the reorganisa
of the firms, including further appo
ments, is concluded.
The 302 appointees will be expec
to make a public declaration on figh
corruption, Mr Esipisu said. Their
ing is the first outcome of the refo
study that took nearly 18 months.
Old guad back in Uhuu shake-up of paastatalsFrom Page1
Polycarp Igathe, Chairperson of the
Anti-Counterfeit Agency Board
Wenwa Akinyi Odinga , member of the
Board of the Kenya Medical Research
Institute
Margaret Saitoti, member of the Nation-
al Oil Corporation of Kenya Board
-
7/26/2019 apr 28th 2015
5/32
Tuesday April 28, 2015|BUSINESS DAILY
-
7/26/2019 apr 28th 2015
6/32
6 BUSINESS DAILY| Tuesday April 28, 2015
BY NEVILLE OTUKI
Kenya is set to cut charges on money
sent home by citizens living abroad
from September in yet another meas-
ure aimed at boosting remittances that
have become an important source of
hard currencies.
Treasury secretary
Henry Rotich said the
new rates are contained
in a policy document on
remittances that the Cen-
tral Bank of Kenya has
crafted in partnership
with the African Insti-
tute for Remittances.
We have analysed
the cost of transferring
money from the diaspora
to Kenya to identify areas in which we
can lower charges such as taxation
and transfer fees, Mr Rotich told the
Business Dailyyesterday.
Kenyans abroad have often cited
the high cost of sending money back
home through official channels as an
impediment, prompting a strategy re-
think by the government.
Mr Rotich said the downward re-
view is expected to further drive down
the cost of money transfer.
The cost of sending cash in the
country is estimated at 9.2 per cent
of the value of the transfer,
which is higher than the glo-
bal average of 8.96 per cent.
The volume of cash flows
from Kenyans abroad has
been growing over the
years, hitting Sh140.9 bil-
lion last year.
Apart from supporting
household consumption and
real estate growth, diaspora
remittances have stabilised
the shilling amid dwindling fortunes
of traditional foreign exchange earn-
ers like tea, coffee, horticulture and
tourism.
Mr Rotichs policy announcement
comes hot on the heels of a diaspora
conference early this month in Nai-
robi where President Uhuru Keny-
atta promised to institute mecha-
nisms of cutting costs on diaspora
remittance.
The government also hopes that
the increased competition among
commercial banks jostling for a pie
of the remittances business will result
in lower sending fees.
Foreign Affairs secretary Amina
Mohamed on Sunday asked Kenyans
in the US to widen their investment
back home, saying the government
would start offering preferential duty
waivers on their businesses.
We are exploring possibilities of
preferential duty waivers and other
concessions for diaspora businesses,
said Ms Mohamed in a statement from
the US.
The fiscal incentive plan comes
even as use of mobile money transfer
for international cash transfers is gain-
ing prominence in the country since
it is flexible and cheaper.
According to GSMA the global as-
sociation of telecoms operators the
average cost of sending Sh9,336 ($100)
via mobile money is Sh375 ($4) less
than half the average cost of sending
money globally through traditional
money transfer channels.
Safaricom has partnered with
traditional service providers, West-
ern Union and MoneyGram to move
money into Kenya via M-Pesa.
Teasuy to cut taxes
on diaspoa cashfom SeptembePLANRotich says downward review is
expected to further reduce cost of transfer
Treasury secretary Henry Rotich. He said the government would reduce taxes on
diaspora cash to spur greater cash flow volumes into the country. FILE
We have
analysed the cost
of tansfeing
money fom the
diaspoa...
HENRY ROTICH
Employes wantnew NHIF atespegged on basic paBY WAINAINA WAMBU
The Federation of Kenya Employ
has asked employers to base the n
rates for National Hospital In
ance Fund (NHIF) on basic rat
than gross pay.
The new rates, which come into
fect at the end of this month, requ
workers earning Sh5,999 to
Sh150 which is the lowest deduct
and those earning above Sh100,
to pay Sh1,700.
FKE chairman Linus Gitahi
the decision by NHIF to base its n
rates on gross pay was confusing.
This paradigm shift of bas
statutory payments on gross ea
ings is misguided and punitive
both employers and employees,
Gitahi said.
The self-employed will now re
Sh500 up from Sh160. The rates pr
ously ranged between Sh30 and Sh
for salaried workers.
Mr Gitahi added that NHIF sho
ensure that the implementation of
new rates is not challenged.
We must consider that once
annual period of claim expires it
comes a saving for the NHIF and
no future benefit to the contribu
he said.
The federation is set to meet w
NHIF to discuss the issue. In the m
time, it has advised members to bthe deductions on basic pay and
the gross pay.
Federation of Kenya Employers
chairman Linus Gitahi. JEFF ANGOTE
Thee tonnes of ivoy fom Kenya seized in ThailandMore than three tonnes of elephant
ivory have been found at a Thai port
stashed in a container shipped from
Kenya, customs said yesterday, the
second huge haul of tusks from Africa
in less than a week.
The discovery, which would be worth
millions of dollars on the black market,
was destined for Laos where the illegal
ivory trade flourishes.
Some 511 pieces of ivory, weighing
over three tonnes, was found on April
25 in a container marked as tea leaves
transported from Mombasa, Kenya,
and on to Laos, Thai customs said in a
statement. Scores of whole tusks- some
nearly two metres long- were among the
pieces seized.
A record four tonnes of African el-
ephant ivory was seized at Bangkoks
main port on April 20, in a container
that arrived from the Democratic Re-
public of Congo and was also destined
for Laos. Once in neighbouring Laos,
authorities believe the ivory would
likely be sold on to buyers from China,
Vietnam or back into Thailand, coun-
tries where ivory ornaments are coveted
despite fears the trade is pushing wild
elephants to extinction.
Laos is increasingly being used as
a major transit point for such large vol-
umes of illicit ivory and other wildlife
products, Chris Shepherd of conserva-
tion group Traffic told AFP.
The increase in large-scale seizures
is of great concern. Whether the ivory is
coming from freshly killed elephants, or
from stockpiles of ivory in Africa, needs
to be investigated, he added.
Conservationists say poaching and
conflict has destroyed large numbers of
African elephants, prompting experts
to warn the species could be wiped out
within decades. Thailand has launched
a crackdown on the ivory trade amid
mounting international pressure.
-AFP
BY BRIAN WASUNA
The High Court has stopped bank-
ruptcy proceedings against suspend-
ed Labour secretary Kazungu Kambi
over a Sh304 million loan owed to De-velopment Bank by a firm associated
with him.
Justice Eric Ogola issued the order
following an application in which Mr
Kambi has denied culpability in the
debt owed to Development Bank by
Riva Oils Company.
The bank says Mr Kambi and two
other directors, Ezekiel Karisa and
David Tuitoek, had guaranteed the
loan to Riva Oil Company which had
operations in Tanzania, Uganda, and
Zambia.
In the application, Mr Kambi saysthe lender never informed him of the
High Court judgment ordering him
and the other directors to settle the
outstanding loan amount.
Mr Justice Ogola has also stopped
Development Bank from asking Mr
Kambi to settle the debt until his ap-
plication is determined.
Development Bank successfully
sued Riva Oils in 2013 for Sh304 mil-
lion after the oil firm, Mr Kambi, Mr
Karisa and Mr Komen failed to defend
the suit. Mr Kambi filed the suit against
Development Bank after it initiatedbankruptcy proceedings against him
for failing to pay the debt.
A temporary stay of execution of
the judgment delivered on April 2,
2013 and any subsequent proceed-
ings is hereby issued pending the
hearing of this application on May 18.
By that time all the parties in this suit
shall have responded to this suit,
Justice Ogola said.
The firm borrowed Sh250 mil
in 2007 and the sum had accrue
Sh304 million in 2010, which
bank is demanding with interes17 per cent yearly pushing the d
to Sh390 million. Mr Kambis law
Philip Nyachoti said his client was
aware of the judgment ordering R
Oils and its directors to pay Deve
ment Bank the outstanding loan he
it was unfair to institute the bankru
proceedings.
Cout stops bankuptcy poceedings against Kambi
ECONOMY & POLITICS
Mr Kazungu Kambi,suspended Labour
secretary. FILE
-
7/26/2019 apr 28th 2015
7/32
Tuesday April 28, 2015|BUSINESS DAILY
BY EDWIN MUTAI
Former employees of Telkom Kenya
want Parliament to investigate the
board of the telco over failure to pay
compensation to 997 retrenched staff
in 2006.
In a petition filed in the National As-
sembly dated April 24, the former em-
ployees are also seeking
Parliaments intervention
to have lawyer Mohamed
Nyaoga and company sec-retary Ngana Ivy answer
to claims of conflict of
interest, misconduct and
an attempt to defraud pe-
titioners through misrep-
resentation.
The petitioners claim
that the respondents
fraudulently, through
misrepresentation, led
them into abandoning a claim of
Sh3.2 billion severance pay and set-
tle for an out-of-court sum of Sh1.4
billion as compensation following the
retrenchment. The settlement was ini-
tiated by Telkom Kenya and resulted
in loss of close to Sh2 billion which the
petitioners agreed to forfeit on assump-
tion that Telkom Kenya truly intended
to settle the matter immediately, states
the petition which will be tabled in the
House this afternoon.
The Constitution requires Speaker
Justin Muturi to promptly re-
lay any petition from mem-
bers of the public to MPs.
The petitioners state thatit later occurred to them that
the settlement deal was a
fraud and outright misrep-
resentation by the board,
directors and advocates.
There is also a case of
conflict of interest wherein
Mr Mohammed Nyaoga, who
is a member of the board of
Telkom Kenya and also an
advocate, was instructed to act on the
matter on behalf of Telkom and person-
ally steered the negotiations leading to
the settlement deed, the petitioners, led
by John Ochanda, say. They want the
Justice and Legal Affairs Committee
chaired by Ainabkoi MP Samuel Chep-
konga, a former Communications Com-
mission of Kenya chief executive officer,
to summon 12 individuals among them
suspended Investment Secretary Esther
Koimett and former KenGen managing
director Eddy Njoroge.
Mr Njoroge is the chairman of Tel-
kom Kenyas board of directors. The
former employees also want Vincent
Lobry, Telkom Kenya chief execu
board members Daniel Delestre, G
Ries, Oliver Froisat and Ashif Ka
to appear before MPs over the s
ment of retrenched staffs dues.
The petitioners also want Tre
Secretary Henry Rotich summ
by virtue of being the holder of t
per cent government shares in Te
Kenya after dilution of the share
ing from 49 per cent in favour of F
Telkom on December 31, 2007.
Interrogated by MPs
Attorney General Githu Muiga
principal adviser of the governm
is also listed among those to be i
rogated by MPs.The petitioners have also enjo
Telkom Kenya as respondents.
They also want the House to i
tigate claims that the telco is a
to collapse and that France Tel
which owns 70 per cent of the
pany, is in the process of being so
third parties.
They want the House to take m
ures to protect the governments i
ests in the firm and ensure that it f
its obligations to the petitioners.
Ex-Telkom staff want boad pobed ove etiement cashRETRENCHMENT Petitioners say they were misled
into abandoning a Sh3.2 billion severance pay claim
National Assembly Speaker Justin Muturi. Retrenched Telkom Kenya employees
petition will be tabled in the House this afternoon. FILE
CORPORATENEWSNEWS I REVIEWS I ANALYSIS
The settlementwas initiated by
Telkom Kenya
and esulted in
loss of close to
Sh2 billion ...
PETITION BY FORMER TELKOM
KENYA EMPLOYEES
BY MUGAMBI MUTEGI
Tata Africa Holdings has opened a
new dealership in Nakuru that will
exclusively sell agricultural equip-
ment manufactured by Chicago-
based firm John Deere.
Tata Kenya, a subsidiary of In-
dias Tata International, says the
new dealership is targeting farm-
ers in the South Rift region,a sig-nificant contributor to the countrys
food basket.
Demand for agricultural equip-
ment like tractors is mainly driven
by farmers, the private sector, national
and county government.
The roll-out will see the intro-
duction of a new business centre in
an area that has substantial agricul-
tural activities where agricultural
machines are used to facilitate and
improve efficiency in food production
through mechanisation, said Tata in
a statement.
John Deere manufactures plows,
tractors, fertiliser spreaders, self-pro-
pelled sprayers and combine harvest-
ers among several other highly spe-
cialised farming equipment.
Tata Kenya has held the dealer-
ship rights for John Deere equip-
ment since 2012.
Government-sponsored agricul-
tural projects like the Galana-Kulalu
irrigation scheme at the Coast and
large scale projects by individual
farmers have increased demand for
farming equipment.
This demand has seen automotive
firms like Toyota Kenya venture into
the business, with last years launch of
the Yanmar and Case tractor brands
in a diversification strategy aimed at
cushioning it from a sluggish saloon
car market.
Other firms in the tractor business
include CMC Motors which sells the
New Holland and Bobcat brands and
FMD East Africa which deals in the
Massey Ferguson brand.
The new John Deere facility will
see competition in this sector in-
crease, as manufacturers jostle forcustomers.
In February, John Deere signed a
deal with Chase Bank to offer opera-
tor training, business training and ag-
ronomic skills as well as affordable
credit to equipment purchasers.
The dealerships commercial,
after-market, technical support and
service teams are committed to en-
suring that all customers enjoy and
maintain real machine uptime so
that they can enjoy proper return on
their investment, said John Deere in
a statement.
The John Deere solutions for land
preparation, seeding, crop care and
harvesting introduce complete solu-
tions for the farming future.
Tata opens Nakuu dealeshipfo John Deee fam machiney
Uasin Gishu Governor Jackson
Mandago (second left) and Tata official
David Nyoike look on as Charles Boittries out a John Deer tractor at the
re-launch of the farm machinery in
ldoret town in 2013. FILE
BY SAMMY LUTTA
A Turkana-based airline has been
launched to connect Kitale and Lod-war towns, a route where motorists
are frequently attacked by bandits.
Operated by Phoenix Aviation, the
airline will have two flights a week be-
tween the Wilson Airport in Nairobi
and the North Eastern territories.
The 12-seater plane plying the
route belongs to the Turkana Basin
Institute (TBI), an organisation that
was founded by renowned paleoan-
thropologist Richard Leakey.
Airline operations manager
Patrick Eyoko said every Monday
and Friday the plane will fly from
the Wilson Airport then to Marsabit,
Ileret, Loiyangalani, Lodwar, Kitale
(final destination) and on return it
will go back to Lodwar, Marsabit and
return to Wilson airport. Mr E
said they will also provide pr
charter services across East A
for $1,350 (Sh127,102) per hourcharges are based on a half-full p
it will cost $140 (Sh13,181) per a
senger from Kitale to Lodwar,
the operator-in-charge who po
out that the fare could drop dep
ing on demand.
TBI is a scientific research in
tion that studies fossils in the Tu
basin which together with Nat
Museums of Kenya and Turkana
ty government erected a Turkan
Monument that will be both a to
and a historical site for Kenya.
The introduction of Air Tur
comes after a 35-seater Safarilin
line flight was launched in Septe
last year to tap the opportunity
was created by discovery of oil
Tukana ailine launched to
connect Kitale and Lodwa
Phoenix
Aviation w
operate th
aeroplane
Lodwar. FI
-
7/26/2019 apr 28th 2015
8/32
8 BUSINESS DAILY| Tuesday April 28, 2015
BY VICTOR JUMA
Investment firm TransCentury is set
to launch a rights issue whose pro-
ceeds will be used to repay $80 million
(Sh7.5 billion) convertible Eurobond
it issued in 2011.
The decision, communicated to in-
vestment analysts, is aimed at boost-
ing the companys cash position.
The cash call will seeshareholders pump in
nearly double the com-
panys current market
capitalisation of Sh4.5
billion, with those sitting
out the rights issue facing
significant dilution.
TransCentury will un-
dertake a rights issue be-
fore end of 2015 to finance
the repayment of the outstanding 2011
bond of approximately $80 million,
said Standard Investment Bank (SIB)
in a note to investors.
The company confirmed the rights
issue plans.
SIB noted that debt conversion into
equity is unlikely because of Trans-
Centurys depressed stock price and
the current weakening of the shilling
against the dollar.
The bond conversion is set at be-
tween Sh40 and Sh49.6, but the stock
price has dropped to lows of Sh16.1 or
a third of its listing price of Sh50.
The exchange rate is also fixed
at Sh80.49 to the dollar, but this has
deteriorated to the current average
of Sh94.
It is these major deviations in the
two factors that has seen the firm opt
for the rights issue ahead of the bonds
maturity on March 25, 2016.
The bond has an annual interest
rate of six per cent besidesan additional six per cent
to be paid at the end of its
life for investors who will
not have converted their
portion into shares.
Only a small portion
of the debt was converted
into shares amounting to
6.9 million units in 2011,
with the investment firm
having set aside a total of 150.9 million
shares to accommodate a potential
full conversion.
Conversion of the debt into eq-
uity would have eased pressure on
TransCentury which has little cash
on hand.
The firm ended 2014 with a nega-
tive cash flow of Sh454.7 million, with
most of its assets held in the form of
property, equipment and receivables.
TransCentury is expected to publish
details of the rights issue, including
the expected gross proceeds and pric-
ing of the new shares, in the coming
months.
Part of the money raised from the
cash call, together with an undis-
closed new borrowing, will be used
to finance energy and road projects
among others.
Besides the fundraising, the com-
pany also announced that it had
teamed up with a partner to raise
its stake in its subsidiary Civicon to
78 per cent.
Its interest in Civicon, an engineer-
ing firm, previously stood at 62 per
cent. We view this transaction posi-
tively, SIB said of the Civicon deal.
Civicon business has a strong
pipeline of signed projects (double
current signed and running projects of
Sh7.7 billion) which we view as positive
for future revenue growth for Trans-
Centurys engineering division.
The investment firm made a net
loss of Sh2.2 billion in the year ended
December compared to a net profit of
Sh626.4 million the year before.
The performance was partially
driven by the Sh1 billion loss in-
curred in divesting from Rift Valley
Railways.
The companys revenues also
dropped 13 per cent to Sh10.2 bil-
lion in what it attributed to delayed
projects.
TansCentuy linesup ight issue to pay
Sh7.5bn EuobondCASH CALL Shareholders expected to pump
in nearly double firms market capitalisation
TranCentury CEO Gachao Kiuna reviewing the ongoing construction works at
the GZ Industries Aluminium Cans Factory near Emali. TransCentury is planning
a rights issue. FILE
COUNTYBUSINESSCORPORATENEWS
TansCentuy
will undetake a
ights issue befoe
end of 2015
SIB NOTE
BY SANDRA CHAO-BLASTO
Cigarette manufacturer British Ameri-
can Tobacco Kenya (BAT) wants theMinistry of Health to provide details of
graphic health warnings to be printed
on packets ahead of a June deadline.
BAT says it has written to Health
Secretary James Macharia and the To-
bacco Control Board requesting the
information, but none of the parties
has responded.
As a result, Simukai Munjanganja,
the firms head of legal affairs says in
court documents that BAT is unable to
comply with provisions of the Tobacco
Control Regulations 2014.
The first respondent has failed to
provide the information sought on
the basis that the regulations have
been tabled before the Parliament,
he said.
The Health ministry is yet to re-
spond to BATs application.
The cigarette maker argues that
the tabling of the regulations before
parliament does not stop the ministry
from providing it with a digital storage
device and guidance documents on the
application of the pictograms.The digital storage, BAT says would
give clarity as to the size of the health
warnings that the packets should carry
and how to apply them.
BAT made the revelation even as
it maintained that its is still opposed
to the regulations, terming them un-
constitutional.
Shut down
The firm has moved to the High Court
seeking to halt implementation of the
rules that are expected to come into
force by June 5 on grounds that the cost
of complying with will be enormous
and would may eventually force some
firms in the industry to shut down.
Under the new regulations players
in the industry will be required to pay
a Solatium Compensatory Contribu-
tion every financial year amounting
to two per cent of the value of tobaccoproducts that have been manufactured
or imported.
The firm says that the contributions
are oppressive as tobacco manufactur-
ers are already exposed to other taxes
adding that they had paid Sh14 billion
in taxes in the last financial year.
The Solatium contribution will
have a significant effect on the pe-
titioner putting at risk further in-
vestment and the more than 80,000
direct and indirect employment op-
portunities generated in Kenya, ar-
gues BAT.
The new graphic images are meant
to discourage smoking of cigarettes.
The matter will be mentioned be-
fore Justice Mumbi Ngugi on May 6.
BAT seeks photos of gaphic health wanings
A man smokes a cigarette. BAT is
fighting new tobacco regulations. FILE
Milk deliveieto Booksideean Muangafames Sh250m
BY WAINAINA WAMBU
Milk processor Brookside paid Sh
million to Muranga dairy farmers
year, a 10 per cent jump in their ea
ings from the previous year.
Brooksides director of milk p
curement John Gethi said the co
pany partnered with the Muran
County government to collect
milk from farmers.
The county government, thro
the Muranga County Creameries,
lects milk from farmers, chills i
Brooksides cooling stations at M
gua in Muranga and Othaya in
neighbouring Nyeri County.
Key driver of economies
Dairy is clearly becoming the le
ing generator of family income
Muranga County. We have respo
ed to this reality by partnering w
the county government in raw m
collection,
we have also set up milk collec
booths at Kahuro, Murarandia,
gunduini, Gitiani and Karangi c
tres where farmers can deliver th
milk, said Mr Gethi.
The county government
Muranga has worked hard to
sition dairy as a key driver of ru
economies. We intend to retain
position as the preferred market
farmers milk in the area.
Brooksides sustained campa
to have contracted farmers ad
modern herd management me
ods had led to growth in raw m
supply, he said.
Training has had an impact
The increase in earnings shows t
our dairy training courses have
an impact on production volumes
intend to increase the number of tr
ing courses so that more dairy fa
ers benefit from knowledge on ani
husbandry, said Mr Gethi.
Brookside has set up a demons
tion farm in Maragua where farmlearn best practices in dairy prod
tion.
About 160,000 farmers coun
wide supply the firm with milk.
The firm increased raw milk pr
by Sh2 last month to Sh40 for e
kilo delivered.
Brookside, he said, will conti
encouraging clean milk productio
ensure that the product bought fr
farmers for processing is free of
hibitors and contamination.
He also urged farmers to con
livestock diseases by regular vacci
tion, especially of infectious disea
such as mastitis, which he said low
milk production in sick animals.
-
7/26/2019 apr 28th 2015
9/32
Tuesday April 28, 2015|BUSINESS DAILY
BY THOGO JOSEPH
Acouple of years ago, a student
from a high school in Nairobi
presented a memorable so-
liloquy during the National Schools
Drama Festivals which had the presi-
dent in stitches.
The narrative which sought to bring
to light the benefits accruing from dev-
olution, tells the story of a fictional
character, Sylvester Ogwamfumbe,
who moves to Nairobi from his rural
village prospecting for greener pas-
tures only to find that life in the city is
not what it is made out to be.
After enduring untold and humili-
ating hardship in Lower Karen, the
disillusioned young man decides to go
back to his Nyamthoi county to start a
new life.
The story ends with
the young man boasting
about how his business
ventures have taken
off, the types of clothes
that is wearing and the
different countries he
has visited as a result
of taking advantage of
the opportunities pre-
sented by devolution in
his county.Devolution has
brought previously
non-existent develop-
ment and opportunities
closer to citizens. Within the de-
volved structure, Kenyans can now
participate in the planning and im-
plementation of development agenda
in their region.
It is perhaps drawing on this that
at last weeks Governors Conference
in Kisumu, President Uhuru Kenyat-
ta launched the Lake Basin Economic
Blueprint; a development master plan
initiated by 10 counties which identi-
fies strategic areas of focus to realise
their growth potential.
The blueprint, which has been de-
veloped with the support of Deloitte
East Africa, identifies seven strategic
pillars of growthagriculture, tour-
ism, health, education, financial serv-
ices, ICT and infrastructure.
The challenge will be to breathelife into these documented ambi-
tions which are on paper and bring
them to fruition.
This can be done through establish-
ment of an agricultural commodities
exchange, creation of a lake region
tourism circuit, set up of specialty
hospitals in each county, creation of
educational centres of excellence, es-
tablishment of regional banks, crea-
tion of a lake-region ring road as well
as improving ICT infrastructure.
This road map is designed to har-
ness and steer development efforts by
leveraging on existing assets in the re-
gion, addressing constraints and defin-
ing key steps that leaders and citizens
of the region can take to realise the
shared vision.
It is, therefore, anticipated that the
development projects will be spread
across the different counties Bom-
et, Bungoma, Busia, Homa
Bay, Kakamega, Kericho,
Kisii, Kisumu, Migori,
Nyamira, Siaya, Trans
Nzoia, and Vihiga.
Partnerships among
these counties and the cen-
tral government is essential
and would create a practi-
cal framework through
which the county govern-
ments efforts can be pooled
to harness the abundantnatural resources, build
on existing strengths and
address challenges.
These projects will re-
quire the county governments to
sit-down-and-break-bread with the
central government and the private
sector to ensure that the blueprint
becomes reality.
The Constitution authorises the
central government to levy or provide
exemptions in relation to income tax,
value added tax, import and export
duty and excise duty while county
governments are only allowed to
levy property taxes, entertainment
taxes and other taxes authorised by
statute.
It unlikely that the 13 county gov-
ernments will have enough from these
taxes to finance the projects. They re-
quire assistance from the central gov-
ernment which should be in the form
of either additional revenue allocation
or additional targeted tax incentives
aimed at encouraging private sector
participation, or both.
With alleged misappropriation
of amounts disbursed by the central
government plaguing the devolution
system, perhaps the targeted tax in-
centives might be the better option to
ensure that the envisaged benefits are
realised at the grass roots level.
Already, the current law allows de-
duction of tax on interest from infra-
structure and social services bonds.Interest income accruing from
such listed bonds used to raise funds
for infrastructure and social services
is exempt from tax provided that the
bonds have a maturity of at least three
years.
In addition, expenditure of a capital
nature incurred for the construction
of public schools, hospitals, roads or
any such social infrastructure is tax
deductible, with prior approval of the
Finance minister.
There is also the 150 per cent invest-
ment deduction which is available to
investments exceeding Sh200 million
outside Nairobi, Mombasa or Kisumu
as well as industrial building deduc-
tion on capital expenditure incurred
on the construction of industrial build-
ings like hotels and schools.
All these incentives should be on
the lake regions doing-business-
guide when marketing the blueprint
as an investment opportunity to the
private sector.
The question to the private sector is
what can you do for your county? It is
not what your county can do for you.
However, one may argue that
these incentives have been in place
for a while now and have done little
to stimulate up-take by the private sec-
tor. Perhaps it is time to come up with
different industry-specific and result-
oriented incentives.
Focus should perhaps shift to focus
intangible incentives, for example, tax-breaks for the services industry. In this
case, services provided in relation to
the blueprint.
These additional incentives should
be formulated through a combined ef-
fort of county governments and the
central government and should ad-
dress the unique aspects of the lake
regions operating environment.
These Lake Region 13 have thrown
down the gauntlet for the other 34
counties who now have to go to the
drawing table.
Mr Thogois a tax expert at Deloitte.
The views expressed in this article are
personal.
E-mail: [email protected]
IDEAS& DEBATEOPINIONS I REVIEWS I AN ALYSIS
A trader weighs fish. Counties in the lake region are set to benefit from a joint
economic plan. FILE
INVESTMENT Joint economic plan will only translate to development with adequate cash
Moe incentivesneeded to luecounty investos
Incentives
should be
fomulated
though a
combined
effot of county
govenments
and the cental
govenment
Barack ObamaUS President
Other Voices
Anne-Marie Slaughter
(Project Syndicate)
Whatever Americas Republican Pa
tries to claim during the 2016 presi
tial election campaign, Obamas po
of engagement has worked, enabli
to shape events in even the most c
countries. So why do pundits conti
to debate Americas supposedly de
ing global influence? One answer is
domestic political dysfunction has
verely handicapped the president.
Andray Abrahamian (Reuters)
Recent rumours about North Kore
textbooks exhorting a young Kim J
Uns prowess as a driver and sailor
sparked a renewed cycle of blogs a
articles musing on just how weird
Korea is. Why is their propaganda s
odd, we ask. Do they believe it all?
hard to know whether they are evetrue or not. It seems unlikely that N
Korean textbooks really are claimi
Kim could drive at age three, as thi
pretty much physically impossible
beating an adult in a sailing race w
9-years old? Sure, why not?
Kim JongNorth Korean leader
Ranj Alaaldin (Guardian)
The leader of so-called Islamic Stat
(Isis), Abu Bakr al-Baghdadi, has re
edly been seriously wounded and i
longer in control of the jihadi organ
tion following an air strike in weste
Iraq. The development, once confir
should be welcomed. But the inter
tional communitys efforts to defea
Isis still have some way to go. Elimi
ing Baghdadi will, above all, underm
Isiss aura of invincibility, somethin
that has allowed it to recruit interna
tional jihadis.
Abu Bakr al-BaghdadiIsis leader
-
7/26/2019 apr 28th 2015
10/32
10 BUSINESS DAILY| Tuesday April 28, 2015
When government stepped
into the fertiliser business,
through importation and
distribution, the idea was to ensure as
many farmers as possible had access to
this all important component of crop
production at subsidised rates. Ironi-
cally, it has left all the players frustrated
and is has taken a toll on food security in
the country. From the government itself,
the private players and the farmers, eve-
ryone seems to be on edge.
For government, its cardinal role is
always to be actively involved in the en-
tire fertiliser value chain from importa-
tion, distribution, and ensuring the fer-
tiliser get to the intended users in time
for planting. But government seems to
have performed dismally on this front.
Right from poor handling of importation
which either leads to delays to impor-
tation in lower quantities that cannot
match the demand, the cycle has been
predictable in every harvest.
In fact, a report by Bridgenet Africa
placed delayed fertiliser distribution to
farmers as one of the causes of the 2009
drought that placed over 10 million Ken-
yans under food relief and led the then
President Mwai Kibaki to declare it a na-
tional disaster. Then there are the leaks
and pilferage in the distribution chain,which the government has equally failed
to arrest. Key players here include the
greedy middlemen and cartels who buy
the subsidized fertiliser then repackages
it and sells it exorbitantly to unsuspecting
farmers. It has become commonplace to
hear that farmers especially in food bas-kets that should be supplying the bulk of
the countrys food narrate how they have
never seen or come across any subsidised
fertiliser and in fact have gone on to buy
their own following multiple delays in
planting as they waited for the govern-
ment subsidy. The subsidy has never
benefited the very same people it set
out to benefit; the small holder farmers.
The litany of woes by the farmers goes to
show how the government has lost grip
of one of the most crucial aspects in food
production.But the business of govern-
ment involvement in fertiliser production
has equally had a negative effect on the
private sector players involved in fertiliser
distribution. While the private sector ap-
preciates the crucial role of subsidised
fertilizer to farmers, it beats logic when
the same fertilizer is the cause of our
food security woes since it is not achiev-
ing the intended purpose. Government
only supplies 30 per cent to the fertiliser
to the farmers. But the millions of small-
holder farmers in the country peg their
hope on that subsidised fertilizer which
they eventually dont get.
A simple two-pronged approach
would work for the benefit of all. Gov-
ernment if keen on fertiliser distribution
should take and own the whole process a
100 per cent guaranteeing farmers timely
and hassle free access to the fertiliser. The
second approach which is more tenable
and practical would be for the govern-ment to step out of the fertiliser distri-
bution chain and only be involved at the
policy level. This would mean creati
favourable environment for private p
ers to import, package and distribute
fertilizer at reduced rates. Incentives
reduced taxes would also inspire prisector players to slash their prices for
benefit of the smallholder farmers.
The subsidised fertiliser costs Sh1
for CAN and Urea while the private c
panies sell them at between Sh1,90
Sh2,500. Studies have shown that the
sidised fertilizers serve a paltry 20
cent of the farmers leaving a stagge
80 percent unattended. Here is where
government needs to do its math. Pri
companies can easily come down to
Sh1,500 subsidised price but the inc
tives are conspicuously missing.
Another added advantage with
private sector being involved is the
and harmonised distribution ch
nel through stockists and distribut
Such channels have proven effectiv
the sale of other agro inputs.
History has shown how liberalis
the market achieves results. In early
after the elimination of retail price c
trols, import licensing quotas, fore
exchange controls, and the phase-ou
external fertilizer donation program
that disrupted commercial operati
Kenya has witnessed rapid investmen
private fertiliser distribution netwo
with over 15 importers, 600 wholesa
and 10,000 retailers now operating in
country. Full liberalisation would m
elimination of government involvem
in the fertiliser supply chain and let
the market forces and healthy comp
tion prevail.The writer is the PR and communicat
manager, Elgon Kenya Limited
Fetilise secto must be fully libealised
NELSON MAINA
AGRICULTURE
Iran wont play by the rulesThe announcement last month of a preliminary
agreement between
the US and Iran has led
some to believe that Tehran will now enter the
international system as a responsible actor.
But such optimism ignores the fact that Irans
current government still bears the imprint of a
long imperial history and long-standing Persian
regional ambitions. Iran is a country seeking
to assert its dominance in the region and it will
not play by the rules.
Social media and child abuseA record number (1,421) of minors were
abused after making
contact with unknown
adults on social media, a new report from the
National Police Agency has stated.
The reality of the online world, where people
can attempt to contact anyone, is one
where children and minors need to carefully
scrutinise unknown people. For many young
people, the Internet appears to be a virtual
world.
UKs warped logic on migrantsThe British governments response to the
boatloads of refuge
trying to make it ac
the Mediterranean was driven by a warped
logic. Tory minister Baroness Anelays claim
last year that supporting search and rescue
missions for sinking vessels was a pull fac
encouraging more migrants to attempt the
dangerous crossing convinced others in th
EU. It has taken more than 1,000 deaths ov
two weeks to force a reverse in EU policy.
THE JAPAN TIMES
TOKYO
VIEWS FROM ABROAD Opinions fom aound the wold
THE GURDIAN
LONDON
NEW YORK TIMES
NEW YORK
-
7/26/2019 apr 28th 2015
11/32
Tuesday April 28, 2015|BUSINESS DAILY
-
7/26/2019 apr 28th 2015
12/32
12 BUSINESS DAILY| Tuesday April 28, 2015
The 28 Ethiopian migrants of Christian
faith murdered by the Islamic State
(IS) on April 19 in Libya had planned
to cross the Mediterranean Sea in search of
work in Europe.
Commenting on the killings to Fana
Broadcasting Corporation (FBC), Ethiopian
government spokesperson Redwan Hussien
urged potential migrants not to risk their
lives by using dangerous exit routes.
Husseins call sparked anger among hun-
dreds of Ethiopian youths and relatives of
the deceased, who took to the streets in the
capital Addis Ababa this week before the
demonstration was disbanded by the police,
local media reported.
Protestors cited the governments luke-
warm response to the massacre of Ortho-dox Christians for their outrage, theAddis
Standardreported.
Later in the week, during a public rally
organised by the government in the capital,
violence again broke out between security
forces and protesters resulting in injuries
and the detention of over a hundred pro-
testers, local and international media re-
ported.
Almost two-thirds of Ethiopians are
Christians, the majority of those Orthodox
Copts who say that they have been in the
Horn of Africa nation since the first century
AD as well as large numbers of Protes-
tants. In the widely-reported incident in
Libya, IS militants beheaded 16 Ethiopian
migrants in one group on a beach and shot
12 in the head in another group in a desert
area. Eyasu Yikunoamilak and Balcha Be-
lete, residents of the impoverished Cherkos
neighbourhood in Addis Ababa, were among
the victims, it was learnt, along with three
other victims from Cherkos.
Seyoum Yikunoamilak, elder brother of
Eyasu, told FBC that Eyasu and Balcha left
their country for Sudan two months ago en
route to reach the United Kingdom for work
to help themselves and their families, but
this was not meant to be.
I used to talk to them on phone while
they were in the Sudan, Seyoum said in
grief.
But I never heard from them since
they entered Libya one month
ago.
Eyasu had previously beena migrant worker in Qatar
and had covered his friends
expenses with his savings to
reach Europe, said Seyoum.
In defiance of the warning
of the government spokes-
person, Meshesa Mitiku, a
long-time friend of Eyasu and
Balcha living in Cherkos, told
the Associated Press on April
20: I will try my luck too but
not through Libya. Here there
is no chance to improve your-
self. Mesheshas intentions came even af-
ter learning about the fate of his friends.
Ethiopian lawmakers declared a three-day
national mourning on April 21. The govern-
ment also expressed its readiness to repatri-
ate all migrants in dangerous foreign coun-
tries, the Washington-based VOA Amharic
radio reported.
The rally earlier in the week came one
month before Ethiopia holds parliamentary
elections, the first since the death of long-
time leader Meles Zenawi, and current prime
minister Hailemariam Desalegn is expected
to face little if any opposition challenge.
We will redouble efforts to fight terror-
ism, Foreign ministry spokesman Tewolde
Mulugeta said in response to demands for
action from protesters.
Ethiopia is trying to create jobs so that
people do not fee l the need to leave to find
work, he added. Were trying
to create opportunities here for
our young people. We encouragethem to exploit those opportuni-
ties at home.
Nevertheless, disenchant-
ment marked by asserted claims
of repression, inequality and un-
employment has spurred a series
of protests against the regime
over the last few years.
These and other issues have
prompted the exodus of Ethio-
pian migrants to Europe, ac-
cording to several observers.
The idea that the majority of
Ethiopian migrants relocate due to eco-
nomic reasons appears flawed, contends
Tom Rhodes, East Africa Representative
of the Committee to Protect Journalists, in
an email interview with IPS. Rhodes also
GOVERNANCE Disenchantment marked by claims of repression inequality and youth
unemployment spread in a country celebrated for its impressive growth in the recent past
Swelling Ethiopian emigation castsdoubt on touted economic miacle
NEWS INDEPTH
maintained that the violation of fundam
tal freedoms is closely tied with poverty a
economic inequality.
In an email interview with IPS, Ya
Hailemariam, a former senior researc
for the Ethiopian Human Rights Coun
agreed. Pervasive repression and denia
fundamental freedoms has led to frustrat
alienation and disillusionment among m
Ethiopian youth.
Citizens have the right to peacefully p
test, said Felix Horne, East Africa researc
with Human Rights Watch.
Its no surprise given the steps gove
ment takes to restrict peaceful protests t
disenfranchised youth would use the rare
portunity of an officially sanctioned pu
demonstration to express their frustratio
Thats the inevitable outcome when th
are no other means for them to express th
opinions.
The main opposition parties say thatgovernment has failed to create job opport
ties, making migration inevitable. The regi
they charge, favours members of the rul
Ethiopian Peoples Revolutionary Democr
Front and creates economic inequality.
Recently dubbed an African tiger, Eth
pia is one of Africas most populous nati
with 94 million people (Nigeria has 17
million).
It has been celebrated for its modest e
nomic growth over the last years. But
average unemployment rate (the numbe
people actively looking for a job as a perce
age of the labour force) was stuck at 20
per cent from 1999 to 2014. The regime
locates state resources and job opportuni
to members of the ruling party who are
ganised in small-scale and micro enterpris
Pevasive
epession
and denial of
fundamental
feedoms has led
to fustation and
disillusionment...
YARED HAILEMARIAM
ETHIOPIAN RESEARCHER
-
7/26/2019 apr 28th 2015
13/32
Tuesday April 28, 2015|BUSINESS DAILY
noted Horne. The CPJ representative agreed.
Ethiopian government authorities tend to
reward their political supporters and ethnic
relations with lucrative political and business
positions at the expense of ingenuity in the
business sector.
In its 2015 report, the World Bank shared
this discouraging view. Some 37 million Ethio-
pians one-third of the countrys population
are still either poor or vulnerable to falling
into poverty, the bank said, adding that the
very poorest in Ethiopia have become even
poorer over the last decade or so.
The UN Food and Agricultural Organisa-
tion (FAO) has estimated that about 29 per
cent of the population lives below the na-
tional poverty line. This explains Ethiopias
rank at 174 out of 187 countries on the UN
Development Programme (UNDP) Human
Development Index. The Oakland Institute,
a US-based non-governmental organisation
that spotlights land grabs, was recently de-
nounced by Ethiopian officials for its latest
report We Say the Land is Not Yours.
According to the government, the in-
stitute used unverified and unverifiable
information.
In a reply to the Ethiopian Embassy in the
UK on April 22, the Oakland Institute chal-lenged the governments claim that ongoing
development was improving life standards
in the country.
The institute maintained that the govern-
ments development endeavours are destroy-
ing the lives, culture, traditions, and liveli-
hoods of many indigenous and pastoralist
populations, further warning that the strat-
egy was unsustainable and creating a fertile
breeding ground for conflict.
Tragic newsMore than half of Ethiopias farmers are cul-
tivating plots so small as to barely provide
sustenance. These one hectare or less plots
are further affected by drought, an ineffec-
tive and inefficient agricultural marketing
system and underdeveloped productiontechnologies, says FAO.
Several studies indicate that this phe-
nomenon has induced massive rural-urban
migration. According to Yared Hailemariam,
state ownership of land has contributed to
poverty and inequality.
People dont have full rights over their
properties, so they lack the motivation to
invest, he stressed. The ruling regime in-
sists that land will remain in the hands of the
state, and selling and buying land is prohib-
ited in Ethiopia.
Yared also pointed out that the ruling party
owns several huge businesses which has cre-
ated unfair competition in the economy.
The partys huge conglomerates have
weakened other public and private busi-
nesses he told IPS. Only the ruling partys
political elite and their business cronies are
benefiting at the expense of the majority of
the people.
The tragic news of the massacre in Lib-
ya came amid news of xenophobic attacks
against Ethiopian migrants in South Africa
last week including looting and burning of
properties. Unknown numbers of Ethiopian
economic migrants are also trapped in the
Yemeni conflict, according to state media.
- IPS
NEWS INDEPT
Prime Minister Hailemariam Desalegn. Some 37 million Ethiopians are either poor or vulnerable
to falling into poverty. AFP
People (left) protest last week in Addis
Ababa over the killing of 28 Christian
migrants by Islamic State militants. Above:
Ethiopians mourn in Addis Ababa over
the killing of relatives and friends by the
militants. AFP
EU militay mission to tacklesmuggles faces ough seas
MIGRAT I ON A F P
Illegal migrants rest after arriving at the Tunisian port city of Zarzis on Saturday. European leaders have
agreed, at a special crisis summit, to take a series of steps to tackle the migration headache.AFP
The Mediterraneans worst mi-
grant shipwreck has spurred the
EU to plan a military mission
against people smugglers, but
it will be hard to implement and
risks reinforcing the image of an
uncaring Fortress Europe.
After more than 700 people
drowned in last weekends trag-
edy off the Libyan coast, Euro-
pean leaders agreed at a special
crisis summit to take a series of
steps to tackle the problem.
But while measures such
as tripling funding for search
and rescue missions is simple
enough, it is the plan to capture
and destroy the smugglers ves-
sels before they can be used that
will cause future headaches.
If it goes ahead, it would be
the first time the EU has carried
out such a military operation.
Rights groups have already
criticised the proposal, wi