Business 11 May 2016.pdf

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WEDNESDAY, MAY 11, 2016 WWW.BDAFRICA.COM KSH60 | TZ SH 1,700 | UGSH2,70NO. 2348

ebs says packaging

f sweetener in namesf retailers promotes

ade in contraband

Supe≥ma≥kets stopped f≥omselling own-b≥anded suga≥

Equity’s mobilephone loanshit Sh14 billion

GEORGE NGIGI

uity Bank yesterday reported a more

an doubling of loans disbursed through

mobile money platform, Equitel, to Sh14.1

lion and a 20 per cent increase in its first

arter profits to Sh5.1 billion.

The bank said 81 per cent of its loans are

w being disbursed through the mobile

tform, allowing it to cut stationary and

ff costs.

“We have issued two million Equitel sim

ds of which 90 per cent are activated,” the

nk’s chief executive, James Mwangi, said.

The steep increase in the volume of loans

bursed through the phone also benefited

m the fact that the average size of loan

bursed through Equitel grew to Sh42,000

m Sh7,000 in December.

Equity’s loan book grew to Sh275 billion

he first quarter compared to Sh224 billion

March last year while customer savings

e to Sh299 billion EQUITY, Page 4»

BY GERALD ANDAE

Kenyan supermarkets have defied the

Kenya Bureau of Standards’ (Kebs) direc-

tive prohibiting them from repackaging

and branding sugar in their own names,

setting them up for a bruising battle with

the regulator.

Kebs, the quality assurance and stand-

ards regulator, issued the directive as part

of a renewed effort to curb the sale of con-

traband sugar in the local market and its

impact on locally manufactured stocks.

Kebs managing director Charles Ong-

wae said a number of retailers have defied

the order, exposing them to heavy penal-

ties as provided for in the law.

“It is a requirement SUGAR, Page 4»

Sugar Imports (tonnes)

2011 139,000

2012 238,000

2013 238,000

2014 192,000

2015 247,000

ECONOMIC SURVEY


2/32

BUSINE SS DAILY | Wednesday May 11, 2016

GEOFFREY IRUNGU

nya and other African countries are

to pay high premiums on foreign

ns as liquidity in the global financial

rkets tightens due to risk aversion,

International Monetary Fund (IMF)

s warned.

Kenya is among the African countries

nning to raise cash from the interna-

nal markets this year by

y of issuing another Eu-

ond estimated at Sh60

ion.

International investors

currently fleeing from

erging and frontier mar-

s to “safe harbours,” IMF

t deputy managing di-

tor David Lipton said in

peech to students at the

athmore Business School

Monday.

“Tighter financial conditions are also

ng to be a continuing fact of life. There

degree of uncertainty about financial

rket developments that is bound to

ke money harder to come by for Afri-

n borrowers,” said Mr Lipton.

Kenya recently raised over Sh280 bil-

n ($2.8 billion) through a Eurobond.

In January the yields on the country’s

year Eurobond portion had shot to

arly 10 per cent but has since fallen to

ow eight per cent. The bond had an

rage yield of below seven per cent at

time of issuance.

Mr Lipton noted that emerging mar-

s as a whole lost $200 billion in net

pital outflows last year compared to

inflows of $125 billion in the previ-

year.

Despite global concerns, the IMF ex-

ecutive said, Kenya was still likely to have

a healthy economy on the whole growing

at above the average for Africa as would

be the case for the east African region.

The global economic jitters are likely

to affect commodity exporters most as has

happened already. However the Kenyan

economy on the other hand will benefit

from lower oil prices unlike the commod-

ity exporters in Africa.

Mr Lipton urged policy

action on the part of com-

modity-exporting African

countries including reduc-

tion of fiscal deficits.

“The need for action is

most urgent among natural

resource exporters whose

policy response so far has

tended to be behind the

curve. With rising fiscal defi-

cits, falling international re-

serves, and severe financing constraints,

adjustment is now unavoidable. The re-

quired policy steps include a reduction

in fiscal deficits,…Countries that do not

export commodities, including Kenya,

are more favourably placed to weather

the slowdown,” said Mr Lipton.

He urged accumulation of foreign

international reserves. Kenya has so far

raised its reserves to five months of im-

port cover, well above the statutory four

months minimum.

Some African countries are facing ad-

verse weather conditions, said the IMF

executive, but added that the weather is

likely to favour Kenya where rains have

so far been adequate.

[email protected]

FINANCETop IMF official says international

vestors fleeing emerging and frontier markets

The need fo≥

action is most

u≥gent among

natu≥al ≥esou≥ce

expo≥te≥sDAVID LIPTON, IMF FIRST

DEPUTY MANAGING DIRECTOR

Kenya faces highe≥cost of fo≥eign loans

as liquidity tightens

BY GEOFFREY IRUNGU

Kenya accounted for the Sh280 billion

($2.8 billion) Eurobond cash in the same

manner that other countries do, the In-

ternational Monetary Fund (IMF) said

yesterday in a response to queries raised

by the Opposition Cord Coalition.

IMF first deputy managing direc-

tor David Lipton said that the cash was

moved to the Central Bank’s accounts

and then put at the disposal of the gov-

ernment to spend.

“The cash was held at the Central

Bank of Kenya accounts and then the

government was granted access. It was

put at the disposal of the government

to use. It is same method used by other

countries that raise money in that man-

ner,” said Mr Lipton.

The Sh280 billion has become a mat-

ter of considerable controversy with the

Opposition arguing that the money was

diverted and misused by some key fig-

ures in government.

Public projects

Opposition leader Raila Odinga has

claimed that a good amount of the

money never actually reached Kenya

and was diverted into people’s pockets,

and did not finance any public projects

locally.

The CBK and the Treasury have how-

ever retorted that all the money was

received by CBK and spent on various

projects.

The Controller of Budget Agnes

Odhiambo has also stated that no money

was lost, adding that she had received

documents showing

ongoing investigatio

the Auditor-General

The Treasury Sec

ich yesterday said he

reports and docume

proceeds of the Eurob

ing new to add.

Mr Rotich has m

money was lost in th

ing the eurobond pr

invited Mr Odinga to

ments in his office. M

the offer, but contin

some people lined th

billions of shillings t

the economy.

Mr Lipton and M

the media yesterday. T

been in Kenya since l

IMF backs T≥easu≥y on Eu≥obond cash de

Todays Weather Forecast Index to companies This index of businesses mentioned in today’s issue of the Business Daily is inten

significant references to companies.

www.businessdailyafrica.com

ollow your favourite

tories online, plus more on

markets, industry, policy and

gribusiness

ND US ON FACE BOOK & TWITTER

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BD_Africa

IMF....................................... 2

CRB....................................... 5

CBK....................................... 5

KTDA .................................... 6

Uchumi ................................8

KCB.......................................8

Kenblest............................... 8

Kappa oil ..............................8

Startimes.............................8

Nairobi Bottlers................... 8

Toshiba ...............................11

Canon.................................. 11

KCAA...................................15

KRC......................................15

KMA .............

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Africa Oil......

NCE...............

KenGen........Cloudy with a thunderstorm

High23°

DAY NIGHT

Cloudy with chance of rainfall

Low13°


3/32

Wednesday May 11, 2016 | BUSIN

A s Africa transitions from the

margins to the mainstream of

the global economy, technology

is playing an increasingly significant

role. Bolstering regional trends in busi-

ness, investment and modernisation is

the emergence of an IT ecosystem — a

growing patchwork of entrepreneurs,

tech ventures and innovation centres

coalescing from country to country.

Nigeria is a hotbed for start-

up activity. Facebook, Netf-

lix and SAP have recently ex-

panded in Africa. And Silicon

Valley investment is funnel-

ling into ventures from South

Africa to Kenya.

The rise of Silicon Savan-

nah

Most discussions of the ori-

gins of Africa’s tech move-

ment circle back to Kenya,

which laid down four mark-

ers between 2007 and 2010

to inspire the country’s Silicon Savan-

nah moniker: mobile money, a glo-

bally recognised crowdsourcing app,

Africa’s tech incubator model, and a

genuine government commitment to

ICT policy. In 2007, Kenyan telecom

Safaricom launched the M-Pesa mo-bile money product. It grew rapidly to

become perhaps Africa’s most recog-

nised example of technological leap-

frogging: launching ordinary citizens

with mobile phones right over bricks-

and-mortar banking into the digital

economy. Shortly after M-Pesa’s

introduction, four technologists creat-

ed the Ushahidi crowdsourcing app, a

highly effective tool for digitally map-

ping demographic events anywhere in

the world. Ushahidi has since become

an international tech company with

multiple applications in over 20 coun-

tries. In 2008, Ushahidi

co-founder Erik Hersman

hatched Nairobi’s iHub in-

novation centre after iden-

tifying the need to create a

“nexus point for technolo-

gists, investors and tech

companies”. Since 2010,

iHub has produced 152

companies and grown

a membership base of

nearly 20,000 techies.

iHub influenced Africa’s

incubator movement, in-

spiring the upsurge in tech

hubs across the continent.

Another Kenyan milestone was the

government’s 2010 completion of The

East African Marine System (TEAMS)

undersea fibre optic cable project.

TEAMS increased East African broad-

band and led to the establishment ofKenya’sInformation and Communica-

tion Technology (ICT) Authority.

Notable as it has become, Silicon Sa-

vannah is but one corner of sub-Saharan

Africa’s tech scene. Across the region a

Silicon Valley-inspired network is de-

veloping.

The research I’ve done with Aubrey

Hruby highlights the existence of

roughly 200 African innovation hubs,

3,500 new tech-related ventures, and

$1 billion in venture capital (VC) to a

pan-African movement of start-up en-

trepreneurs.

Increasingly, Nigeria is becoming

a centre for big tech investment and

commercially oriented start-ups. What-

ever the country’s challenges, investors

and entrepreneurs are attracted by the

prospect of scaling applications to Af-

rica’s largest population and economy.Many have set up shop in Lagos’s Yaba

district.

There you can find the headquarters

for e-commerce start-up Africa Inter-

net Group and digital payments ven-

ture Paga, located near incubators An-

dela andCo-Creation Hub.

Nigeria’s tech sector is becoming

representative of repatriate entrepre-

neurs reversing some of Africa’s brain

drain and IT reshaping the continent’s

global linkages. All three of Africa’s

most recognised e-commerce startups

— Jumia, Konga and MallforAfrica —

were founded by Nigerians who earned

their university degrees and initial pri-

vate sector experience in the US.

A noteworthy portion of the rough-

ly $600 million in VC to these entities

comes from American and European

investment firms. And the management of Jumia’s

parent, Africa Internet Group, is a mix

of repatriate Africans and MBA types

from the US and Europe attracted to

the continent’s IT oppo

development work.

From Nigeria to Kenya

to Ghana, tech innovati

to influence multiple se

agriculture, banking, hea

tainment, transport and

Having researched th

past six years, I believe t

Africa has the potential t

impact faster than anywh

in the world.

There’ll be a lot to un

prediction. To start, he

trends to watch in th

wired future.

This article is part of our

published ahead of the W

Forum on Africa that op

Rwanda today.

TOP

Nairobi’s iHub has produced 152 companies and grown a membership base of nearly 20,000 techies since 2010. FILE

R A D A R S C R E E N J A K E B R I G H T

Seven t≥ends that will shape Af≥ica’s tech indust

1. Start-ups leap into Af-rica’s informal economy

The African Development

Bank estimates that 55 per cent of

ub-Saharan Africa’s economic ac-

ivity is informal. That’s a massive

ommercial space without such

ervices as business enterprise

oftware, small business banking,

affordable third-party logistics or

nternet access. Expect VC-backedtart-ups to attempt scalable appli-

ations for nearly every corner of

Africa’s informal economy.

Much of this is already occur-

ing in Nigeria. First-time dotcoms

are sprouting up for everything

rom e-commerce logistics, online

auto sales and real-estate listings,

o airline bookings, employment

ites and credit rating services.

The opportunities are infinite,

specially as Africa’s broadband

and smartphone penetration

ates continue to improve.

3. Tech disruptingdevelopment

IT will continue

to be employed to solve

long-standing African so-

cio-economic issues. Aid-

agency grants previously

going to NGOs are already

being diverted to social-

venture focused African

tech organisations. IBM’s

Lucy Project is directed atsolving “Africa’s grand chal-

lenges” — many of which

have been relegated to

the development sector.

Cracking the continent’s

long-standing problems

will increasingly become

a commercial tech oppor-

tunity.

5. IT impacting Africa’s politics

Ushahidi played a

role in Kenya’s last two

elections. Digital media

investigative site Sahara

Reporters’ corruption

reporting has led to the

dismissal of senior Nige-

rian government officials.

Social media applications

Twitter and Facebook wereheavily utilised by civil so-

ciety organisations, oppo-

sition groups and political

parties in Nigeria’s last

presidential election. And

African technology actors

are closer to creating in-

dustry lobbying groups.

As sub-Saharan Africa

and its citizens become

even more connected to

the digital grid, expect IT

to influence how politics

and elections are done.

7 . S Afsta

corns a

Followi

only a m

fore som

comme

start-up

first big

IPOs, a

unicornhad a p

with A

Group’

man Sa

lion-do

followe

that fi

ny In

soon g

major e

ly the L

change

TECHNOLOGY From Nigeria to Kenya,

and Rwanda to Ghana, tech innovation is starting to influence multiple sectors

Technology

in Af≥ica has the potential

to c≥eate mo≥e

impact faste≥

than anywhe≥e

p≥eviously in the

wo≥ld

2. State-to-state ICTcompetition

Following the lead

of countries such as

South Africa, Bot-

swana and Kenya,

there are growing

expectations on Afri-

can governments to

flesh out ICT plansand infrastructure.

Countries such as

Ethiopia, Nigeria

and Ghana are al-

ready feeling the

pressure, conscious

of the success of

Silicon Savannah

and recent gains by

the government of

Rwanda.

4. African tech solutions with global application

M-Pesa has become a

case study for global dig-

ital payments. Ushahidi

was used in the 2012 US

presidential election. Afri-

ca’s solar powered BRCK

wifi device is bringing

connectivity to Internet

deadspots in Wisconsin.Uber is experimenting

with new service models

in Africa that company

executives tell me could

later apply to operations

globally. Commercial

drone delivery is likely

to take off first in Africa.

Most of SSA’s tech appli-

cations are developing

as solutions to local chal-

lenges, but this is creating

unforeseen opportunities

for other markets.

6. Failure

I throw this in for

balance. Among sub-

Saharan Africa’s start-ups

in particular, there will be

many failures. Most of these

ventures are operating in ICT

environments lacking much

of the baseline infrastructure

for tech — namely affordable

broadband and regular elec-

tricity. But as I’ve often point-ed out to sceptics of African IT,

failure is not necessarily a bad

thing. It shows investors and

entrepreneurs are committed

and trying. Some 90 per cent

of US start-ups fail. But that

means 10 per cent succeed. A

similar principle will apply in

Africa. The momentum lead-

ing many African start-ups to

fail will inevitably lead to the

handful of monumental tech-

nological successes.

WEF AFRICA


4/32


from Sh276 billion a

year earlier.

Mr Mwangi, however, disclosed that

uity cut back on take up of fixed de-

its after it tapped into cheap funding

m the international market during

Global Entrepreneurship Summit

t year.

The bank received Sh20 billion at an

rage four per cent per annum com-

red to average fixed deposit rate of 7.5

cent.Cheaper funding saw the bank’s net

erest income grow 37 per cent to

10.4 billion while interest from gov-

ment security rose to Sh1.2 billion,

flecting the change in strategy that

s seen the bank increase its lending

he Treasury.

Equity held Sh62 billion in govern-

nt securities as at end of March up

m Sh42.7 billion in December and Mr

wangi said the bank invested an addi-

nal Sh20 billion in April.

Lending to government, which of-

s a lower return than loans to private

rrowers, is usually an indication of re-

duced appetite for risk in the productive

sectors of the economy.

Mr Mwangi argued that the lending

to government did not mean lack of op-

portunity in the private sector, but a

conservative approach that is meant to

avoid defaults while utilising idle cash

in its books.

Equity’s cash holdings dropped to

Sh48.3 billion from Sh62 billion last

year, a development Mr Mwangi attrib-

uted to growth of agency banking that

enables agents to use own balances to

serve the bank’s customers.

Increased lending to government,

however, hit the bank’s balance sheet

as it was forced to book revaluation losses

of Sh8.4 billion associated with change in

prices of Treasury bills and bonds avail-

able for sale to the bank.The results also show that Equity

relied on improved performance of its

Kenyan operation to wipe off a 45 per

cent drop in earnings from its regional

subsidiaries. South Sudan, which deval-

ued its currency by 84 per cent last year,

recorded the sharpest profit drop of 95

per cent to Sh20 million.

Rwanda’s earnings dropped by 50 per

cent to Sh60 million, Democratic Repub-

lic of Congo was down 41 per cent to Sh70

million while Tanzania fell 12 per cent to

Sh80 million. Uganda was the only sub-

sidiary to post a growth of two per cent

to Sh90 million.

Mr Mwangi attributed the drop in

profits at Equity’s subsidiaries to in-

creased investment in branch expan-

sion and a change in loan provisioning

guidelines in Rwanda.

“In Tanzania, we doubled our branch-

es from six to 13 while in DRC we opened

additional 19 branches. Kenya can afford

us a luxury to show an increase in prof-

its even as we grow the subsidiaries,”

he said.

Management said it was not consider-ing acquiring a lender in the Kenyan mar-

ket, noting that the process consumed

a lot of resources and time to integrate

merged operations.

There has been speculation of mergers

and consolidation in the Kenyan bank-

ing sector following turbulence that has

mostly affected small lenders.

KCB is in the process of conducting

a due diligence on Chase Bank, which

is under statutory management, while

I & M is wrapping up the acquisition of

Giro Bank.

Data from Central Bank of Kenya

shows the banking sector did not grow

in the first quarter of th

pening for an industry

ently posted double d

past five years.

The CBK data show

rose to eight per cent

book including at Eq

has a non-performing

per cent.

The turbulence in th

try has been associate

collapse of Dubai Bamost recently Chase

weight of massive fr

insider lending.

Equity Bank has Sh

sider loans, which man

been taken by execut

bank said it has a polic

to non-executive direct

business with them. Ex

can access car loans a

Mwangi said he does

with the bank.

CBK has called for

sider loans in the indu

[email protected]

Equity Bank’s mobile phone loans hit Sh14 billionom Page 1

Equity Bank’s quarter oneprofit after tax (Sh Bn)

SOURCE: COMPANY REPORTS

Sh2.3bn

Sh5.1bn


5/32


VINCENT AGOYA

awmaker who had a warrant of arrest

ued against him last week was yester-

y charged with fraud.

Charles Mutisya Nyamai, the MP

Kitui Rural, presented himself be-

e a magistrate and denied the charge

of obtaining 706 building poles worth

Sh7 million from a businessman by false

pretences.

The arrest warrant was lifted but the

court enhanced his bond terms up from

a Sh50,000 cash bail police had granted

him to Sh100,000.

Mr Nyamai is said to have obtained

the poles from Elijah Kimani of Gamu

Wood Work. He is alleged to have issued

a bouncing cheque for the payment of the

consignment.

According to the prosecution Mr Nya-

mai committed the offences on diverse

dates between May 28, 2014 and June 3,

2014 in Nairobi County.

The lawmaker has b

alternative bond of Sh50

ty of a similar amount. H

July 26. The court orde

appear for a mention in

the progress of an out o

that his lawyer Nicholas

was being negotiated.

Kitui Ru≥al MP cha≥ged with Sh7 million f≥aud in poles

ECONOMY & POLITICSRICES I RESULTS I DATA

Charles Nyamai in court. PAUL WAWERU

Pa≥liament u≥ to disband c≥e≥efe≥ence bu≥eBY EDWIN MUTAI

Parliament has been petitioned

to amend the Banking Act to

stop the use of credit reference

bureaus (CRBs).

Peter Kimani Runo, the peti-

tioner, also wants the National

Assembly’s Finance, Planning

and Trade committee to com-

mence proceedings to change

any other relevant laws.

Kenya licensed its first CRB

in 2010 in what was expected to

lead to lower commercial lend-

ing rates by improving credit

information availability in the

banking sector.

Soaring costsBut despite the presence of a

credit information pool, com-

mercial banks are yet to pass on

the benefits, critics say.

“The petitioner avers that

Credit Reference Bureaus

have listed more than 700,000

individuals in their database as

defaulters,” Justin Muturi, the

National Assembly Speaker told

MPs while communicating the

petition to the House.

Mr Runo claims that the list-

ing of loan defaulters is causing

a lot of anguish to the listed in-

dividuals as they are unable to

access financial facilities from

local banks and other financial

institutions.

Prior to CRBs introductions,

banks maint

credit refere

was major co

to soaring c

to incomple

formation.

“In the p

tioner prays

Assembly th

mental comm

Planning an

the process

Banking Act

evant laws t

Reference B

turi said.

Accordin

Bank of Ke

lenders mak

accurate cre

The CRB

and dissemi

formation to

Credit bu

in making

to more peo

lenders and b

risk and frau

The cre

sharing was e

risk premiu

of credit.

Creditinfo

Bureau limi

ence Burea

t/a TransUn

Credit Refer

ited are the o

registered by

of Kenya

NEVILLE OTUKI

nya has been ranked as the eleventh most

werful military in Africa amid increased

ending by the country on military hard-

re.

Global Firepower, an agency that assesses

litary strength of nations, ranks Kenya’s

litary as the best in East Africa based on its

anpower, equipment, geographical location,

istics and finance.

Kenya has an active arms stockpile of 76

ttle tanks, 591 armoured fighting vehicles,

self-propelled guns, 25 towed artillery, 132

craft, 17 fighter jets, and 62 helicopters, ac-

rding to Global Firepower. The rankings put

RC, Sudan and Ethiopia ahead of Kenya.

“Going beyond military equipment totals

d perceived fighting strength, is the actual

anpower that drives a given military. Wars of

rition favour those with more,” it says.

Kenya had 24,150 fighters in the military

t year and an additional 5,000 reserve

rsonnel.

Egypt, which receives bil-

ns of dollars in US military

, tops the list of Africa’s fear-

me armies, followed by Alge-

, Ethiopia, Nigeria and South

rica in that order.

Egypt had 470,000 person-

l in military last year and

asted 4,624 tanks, 13,949

moured fighting vehicles,

9 self-propelled guns, 336 fighter jets,

60 towed artillery and 1,481 multiple-

unch rocket systems.

The rankings come amid increased spend-

g by Kenya on arms acquisition.

Kenya splashed Sh96.3 billion ($954 mil-

n) on modernising its weapons last year,

from Sh82.7 billion ($819 million) in 2014,

cording to Stockholm International Peace

search Institute (SIPRI), an arms trade

onitoring agency.

This made Nairobi the region’s second

largest spender on arms last year, after South

Sudan. “Regardless of strength in numbers,

war is still driven by financing as much as

weapons.”

In East Africa, Kenya Defence Forces was

placed ahead of Uganda and Tanzania, which

took positions 16 and 17 respectively on the

continent.

Forces from Uganda, Kenya

and Ethiopia are fighting Soma-

lia-based Al Shabaab militants in

the war-torn nation under UN-

sponsored Amisom.

Countries that are ranked

ahead of Kenya include Nigeria,

Morocco and Angola.

“The Global Firepower ranking

is largely on each nation’s potential

conventional war-making capability across

land, sea and air,” the agency says.

It adds that a country’s score is not sim-

ply based on its size of arms stockpile “but

rather focuses on weapon diversity within the

number totals to provide a better balance of

firepower available.”

Nuclear stockpiles are not taken into ac-

count.

“Nato allies receive a slight bonus due to

the theoretical sharing of resources.”

Kenya’s security organs have recently raced

to boost their military firepower and intelli-

gence to combat emerging threats like terror-

ism, arms smuggling and drug trafficking.

Deadly attacks

The military in 2014 bought 18 self-propelled

guns and 15 armoured personnel carriers

(APC) from Serbia at Sh2.6 billion, accord-

ing to Sipri.

Last year, Kenya expanded its APC stockpile

with the purchase of 30 carriers from China at

Sh7.9 billion to be used by police for patrols.

The country, which has in recent years

suffered deadly gun and bomb attacks from

Al-Shabaab, expects to receive a Sh1 billion

pilotless aircraft from the United States in

September after making an order.

The unmanned aerial vehicle (UAV), popu-

larly known as a drone, will enable Kenyan se-

curity organs to conduct real-time surveillance

on suspected terrorists alongside other major

crime scenes inside Kenya’s borders.

[email protected]

Kenya milita≥y ≥anked 11th mostpowe≥ful in Af≥ica as spending ≥ises

SURVEY Global Firepower rates Egypt the best followed by Algeria and Ethiopia

Wa≥s of att≥ition

favou≥ those with

mo≥e

GLOBAL FIREPOWER

Kenyan troops on patrol: The agency says war is driven by

financing.FILE


6/32


OUMA WANZALA

Ethics and Anti-Corruption Com-

ssion (EACC) report has poked

es in the storage of textbooks in

blic schools.

The report titled ‘‘Examination into

Disbursement and Utilisation of

e Primary Education Funds,’’ ob-

ves that despite the State releasing

nds to schools to construct storage

ilities, most have not.

The confidential report says some

ools bought one wooden cupboard,

ich is kept in the head teacher or

puty head teacher’s office.

“In other schools, metallic cabinets

available though not locatable while

others there are no storage facilities,”

erves the EACC report dated Septem-

r 2015.

It goes on: “In those schools, pur-

ased books are recorded in a register

the deputy head teacher and then is-

d to respective subject teachers, who

in turn lock the books in their cabinets

in the staff room. At the end of the term,

the books are all stored in the deputy

teacher’s office. These expose the books

to the risk of break-in and theft.”

The EACC report notes that its team

was informed of break–ins and theft of

books in several schools in Nyeri and

Embu counties.

Classification systemIt was also observed that storage areas in

most schools were disorganised, poorly

illuminated and very dusty.

“In some instances, tattered books

were kept in cartons or scattered all over

the store. In others, books and materi-

als were not systematically organised by

subject or other predictable classifica-

tion system,” it adds.

Firewood and broken furniture’s

were also kept in the same store in some

schools while in a few cases, the same

stores also served as kitchens.

“This poses a severe risk to instruc-

tion materials in the event of a fire

outbreak. Poor storage of instruction

materials shortens their shelf-life. This

coupled with lack of proper records of

the stored items creates a fertile ground

for the loss of materials,” it adds.

The EACC team also noted that in

some schools, books kept in stores were

not stamped long after they had been

delivered, contrary to the law which re-

quires that every copy is stamped and

a unique serial number written in the

space provided for the stamp.

It also noted that some schools do not

properly maintain records of delivery

notes and other documents used to sup-

ply leaning materials to schools.

“This makes it difficult to compare

orders with the deliveries made and con-

firm that there are no variations and is

a loophole that can be exploited to pay

for items not actually delivered,” states

the report.

Proper prioritisationThe EACC observed that no contingency

measures had been put in place by the

Ministry of Education to mitigate the

effects of disasters such as floods and fire

citing Kisumu county where schools are

located in flood prone areas.

In Bungoma County, the team was in-

formed that the district schools audit of-

fice burnt down destroying all records.

In both cases back-up copies had not

been maintained in a separate location,

thus making it difficult to reconstruct

information.

The team also noted massive pro-

curement of story books in some schools,

yet they had not attained a sufficient

levels of text book to pupil ratio and in

most classes several students were sill

sharing books in core subjects.

“The Education Principal Secretary

(PS) should ensure proper prioritisation

of instructional materials purchased by

the schools. For every school, a strategy

should be implemented to ensure ade-

quate supply of books for all classes and

in all subjects,” states the report.

[email protected]

EACC ≥epo≥t pokes

holes in schoolsextbook sto≥age

EDUCATION Ministry asked to ensure adequate supply of books to schools

ents buy textbooks ahead of schools re-opening.FILE

CONOMY &POLITICS

BY NGARE KARIUKI

Not all the unsafe buildings in Huruma

will be demolished after the seven-day

“grace period” ends next week.

Public Works principal pecretary (PS)

Paul Mwangi said that 12 of the 70 build-

ings marked for demolition are “salvage-

able” and a committee had been set up to

look into ways to make them safe.

“If there is a way some of the build-

ings can be strengthened, either through

additional reinforcement, it makes more

sense to take that option,” he said yes-

terday.

The PS seemed to have taken a less

radical approach compared to last week

when he said demolitions would go on

whether or not owners obtained court

orders barring them.

“This time, we have to demolish them,

whether they move to court or not, be-

cause we keep losing people,” he said last

Tuesday. But yesterday he said that after

consultation, he came to the conclusion

that some buildings may be made safer

through reinforcements to key sections

of the structures.

A six-storey buildin

lapsed over a week ag

rainfall killing at leas

135 were rescued from

residential block.

The PS held consul

the National Youth Ser

to discuss the way for

the deterioration of

industry.

Other stakeholder

included the Nation

tal Management Age

Registration of Archit

Surveyors of Kenya, t

struction Authority, th

government and Wat

Authority.

Mr Mwangi said a s

will also be set up to a

way to relocate residen

that are set to be demo

“We are waiting fo

two committees regar

ings must come down

we can salvage and sec

have teams on the gro

suspect buildings,” he

State softens stance on plademolition of unsafe city bui


7/32


CORPORATE NEWSRICES I RESULTS I DATA

Kundan Singh International workers on Voi-Mwatate Road in 2013: Tsus

pushing to sell two of the contractor’s vehicles in a loans default duel.FI

BY BRIAN WASUNA

Motor dealer Toyota’s associate company

Tsusho Group has joined the list of credi-

tors seeking to auction assets owned by

Moi-era contractor Kundan Singh Inter-

national following the firm’s failure to

repay a car loan.

Tsusho wants the High Court to allow it

to auction the two vehicles valued at Sh7.2

million if Kundan Singh cannot settle the

due loan balance.

The contractor that grew and thrived

on several road construction

projects during the Moi era

was placed under receivership

in February last year by the

Bank of Africa, KCB and I&M

banks after failing to repay a

total of Sh7.1 billion it owes

the lenders.

Tsusho Group says it fi-

nanced the purchase of the

two vehicles it wants to auction in 2011,

and that KSC has failed to repay the loan.

It says the firm’s receiver managers have

illegally refused to hand over the vehi-

cles. The company which finances vehi-

cle buyers insists that the cars are still its

property.

KSC went into receivership just

months after the Ethics and Anti-Cor-

ruption Commission (EACC) accused

it of colluding with Michael Kamau, the

former Transport Cabinet Secretary, to

alter designs for the Sh2.6 billion Kap-

tana-Kapsokwony-Sirisia Road with the

aim of stealing project funds.

“The refusal by KSC International to

hand over the vehicles is illegal and should

not be allowed to stand because the re-

ceiver is only obligated to possession of

the property of a company and manage it

for the benefit of the creditors and in this

case the vehicles are not the property of

KSC,” Tsusho says.

The financing contr

with KSC provided that

be registered to the con

upon full repayment of

KSC is yet to respond

Joseph Sergon has ord

appear before him tom

directions.

Toyota in its suit say

of receiver managers w

its financing contract w

shouldn’t be stopped fr

terms of its deal.

“The v

passed to K

fendant ha

purchase p

quired to d

ment,” Tsu

BOA ha

luri Venka

receiver m

constructio

and I&M have appointed

Oketch Onyango and H

to manage KSC’s affair

Sh7.1 billion they are ow

KSC is also facing a

mand from the Kenya

ity (KRA) which also

the firm’s assets to rec

has however challenge

a separate suit.

The High Court has

from auctioning KSC’s a

struction firm’s suit is d

Kundan Singh borr

sums to secure fundi

billion-shilling constr

had won, including th

Scheme (Sh7.3 billion)

Road (Sh2.2 billion) an

International Airport in

(Sh1.8 billion).

KSC has faulted slow

government for the loa

The ≥efusal by

KSC Inte≥national

to hand ove≥ the

vehicles is illegal

TSUSHO GROUP

Toyota fi≥m joins lis

c≥edito≥s seeking auof Moi-e≥a cont≥acto

DAVID HERBLING

ment maker Bamburi is reviewing

tenure of one of its directors who

s been mentioned in multiple graft

egations.

The LafargeHolcim Kenya subsidi-

says it is examining allegations made

ainst board member Chris Kisire who

tured in President Uhuru Kenyatta’s

amous ‘List of Shame’ linked to his

nt at Mumias Sugar Company.

He was last month relieved of his role

hief finance officer (CFO) at National

nk of Kenya (NBK), having been on

pension since April 2015 when he

s named in Mr Kenyatta’s graft dos-

r tabled in Parliament.

Mr Kisire - an ally of former Presi-

nt Daniel Moi’s personal secretary

hua Kulei – has recently featured

the damning Panama Papers af-

r that detail how the wealthy use

shore firms to evade tax and avoid

nctions.

“Bamburi Cement is reviewing the

eged integrity issues raised and the

urse of action, as per the evidence

nd, will be in full compliance with

applicable laws and/or regulations,”

firm said in a statement to the Busi-

s Daily.

Mr Kisire, 50, has been serving as

on-executive director of Bamburi

ce October 2004. He is also a mem-

r of Bamburi’s audit committee. He

resents the interests of Mr Kulei, who

ns a 12 per cent stake in Bamburi Ce-

nt that is controlled 58.6 per cent by

sse conglomerate LafargeHolcim.

CBK deputy governor Sheila

Mbijjiwe also serves as a director of

Bamburi. The Constitution bars public

servants who are paid from taxpayers’

money from taking up any other gain-

ful employment.

President’s dossier

The Capital Markets Authority is seek-

ing far reaching powers to vet the ap-

pointment of chief executives, chief

finance officers and directors who

serve in the audit committees of listed

companies, in proposed amendments

aimed at strengthening Kenya’s code of

corporate governance.

“We want to strengthen our fit and

proper assessment of certain individu-

als in management,” said the CMA boss

Paul Muthaura in an interview.

Mary M’Mukindia in mid-April quit

the board of Unga Ltd, four months after

she was named in a bribery scandal. She

is alleged to have received hefty bribes

from BAT to influence a tender award

at the Kenya Revenue Authority.

Mr Kisire left Mumias Sugar in Au-

gust 2013 after barely one year in office,

at a time when a KPMG forensic audit

report revealed an illegal sugar import

syndicate by the miller’s top managers.

He had served as the CFO.

He then joined the NBK but the Pres-

ident’s dossier forced him to step aside

after which he formally quit the mid-

sized lender in April. Mr Kisire is said

to be currently in charge of Broadland

Overseas SA, registered in Panama.

The firm lists Mr Kulei as chairman

while other directors are named as Tho-

mas Kulei, who is based in the UK, and

Grace Kipyator Kemei.

Mr Kisire holds a Bachelor of Com-

merce (Accounting) and an MBA both

from the University of Nairobi.

He is also currently the CEO of The

Sovereign Group, an investment vehicle

associated with the former president

Daniel Moi’s family and close busi-

ness allies.

[email protected]

Bambu≥i ≥eviews di≥ecto≥ Ch≥isKisi≥e’s tenu≥e afte≥ g≥aft claims

TRACK The former Mumias Sugar CFO featured in Uhuru’s ‘ List of Shame’

Mr Chris Kisire. Bamburi is reviewing his

tenure, a month after the NBK relieved

him of a CFO post. FILE

LILIAN OCHIENG’ AND OMAR

ULANGA

e new Communications Authority

Kenya (CA) board has identified as a

priority the breakdown of barriers

ainst mobile money transfer across

fferent telecoms networks.

The seven-member board was in-

gurated yesterday after prolonged

angles that strained operations at the

ulatory agency for over two months.

onsists of Levi Obonyo, Paul Kukubo,

ugambi Nandi, Kentice Tikolo, Davis

Cheruiyot Kitur, Christopher Guyo Huka

and Patricia W Kimama.

“It’s now upon the mobile providers

to meet and agree on the rates and tar-

iffs to enable the mobile money inter-

operability, otherwise we have already

initiated the process,” said the ICT Sec-

retary Joe Mucheru as he ushered in

the new board.

The guidelines follow a push by Air-

tel to have Safaricom compelled to open

up its M-Pesa system to rivals, which

initially failed due to a lack of policy to

guide the regulator.

At the moment, it is possible to send

money across networks, but the proc-

ess is costly compared to sending cash

within a network.

An Orange subscriber, for instance,

has to send money to an M-Pesa user

who will receive a short text message

notifying them of the cash.

But the Orange subscriber will have

to go to get an M-Pesa agent or Orange

agent to withdraw the cash. This is be-

cause the cash hangs as a text message

and is not received directly into the mo-

bile money wallet.

Regulato≥ seeks to ease t≥ansfe≥ of mobile cash


8/32


OTIATO GUGUYU

humi Supermarkets has called for

nch meetings with creditors and sup-

ers in an attempt to forestall court cases

t are petitioning for its closure.

The retail chain says it wants to avoid

ngthy court process, initi-

d by seven of its suppliers

king to declare them insol-

nt over a part of their debt,

t has thrown a spanner

o their plans for revival.

In a meeting held yester-

y at the office of Interna-

nal Trade principal secre-

y Chris Kiptoo, Uchumi’s

nagement and a section of

retail chain’s creditors re-

ved to meet seven suppliers

o have filed for winding up

business in a bid to reach

onsensus to withdraw the

ition.

“I know we will succeed, I have talked

he seven suppliers to make them un-

stand the path they have taken will not

good for anyone,” Uchumi boss Julius

ngetich said. Uchumi owes suppliers

Sh3.6 billion, with another Sh2.5 billion

debt owed to banks against a total asset

base of Sh6.1 billion — which puts it in a

negative net assets position.

The litigants, imports and supply firm

Ceccagnoli Italiano Ltd, Kenblest Group,

Githunguri Dairy, Kappa Oil, Insync, Star

Times and Nairobi Bottlers

are owed just over Sh300 mil-

lion by Uchumi.

The retailer has convinced

some suppliers to convert

part of the debt to equity.

The troubled supermar-

ket met some suppliers last

week who agreed to oppose

the winding up petition.

Association of Kenya Sup-

pliers chairman Kimani Ru-

gendo told the Business Dai-

lythat two of the companies

that have filed the suit had

agreed to pull out in principle,

without revealing their identity.

The suit is a do or die for one of Kenya’s

oldest retailers which is currently under

a cash crisis after some of the lenders who

were willing to finance its revival grew

cold feet. Lang’ata Supermarket is partly

charged to United Bank for Africa (UBA)

under a Sh250 million short-term facil-

ity to pay suppliers. The bank said it was

willing to offer more support if the wind-

ing up suit is dealt with.

The Kenya Commercial Bank (KCB),

which holds the charge to Ngong Hyper

Supermarket that Uchumi has already

sold at Sh1.4 billion, is unwilling to allow

proceeds of its sale to reach the retailer.

“We need to talk to KCB, money from

Ngong Hyper has began to flow and no

other bank is willing to give us money

because of the petition,” said Mr Kinget-

ich. KCB, which is owed Sh900 million,

is holding onto Sh400 million from the

Ngong’ Hyper sale.

The Industrial and Commercial Devel-

opment Corporation (ICDC), which is an

Uchumi shareholder, has indicated that

it will not exercise the option of recover-

ing its debt without first offering help

as part-owner.

Uchumi also wants support from the

government in terms of a bridging loan

structured like the Sh678 million offered

when the retailer was p

ership a decade ago. Th

the biggest show of com

through Dr Kiptoo tha

surance of the retailer’s

before committing fun

“When I was prepar

ing a figure we needed

other shareholders we

as government we hav

stake, and all the meas

dilution,” said Mr Kipt

The PS said that Tre

retary Henry Rotich h

a cabinet memo to disc

of a bailout subject to a

from shareholders.

“The CS Treasury h

the memo which mea

cated money in the ledg

to consult so that whe

we can present some

Mr Kiptoo.

Industrialisation C

had earlier indicated th

first have to look at thei

to shareholders wher

will play its role as a sh

considering what else

Uchumi said that w

sets, a debt swap, closu

branches and staff lay

comeback.

dotiato@nationmedi

Uchumi meets c≥edito≥s in bid to fo≥estall clos

International Trade principal secretary Chris Kiptoo. He met Uchumi’s management and a

section of the retail chain’s creditors yesterday. DIANA NGILA

TROUBLED Retailer owes suppliers Sh3.6bn and banks

h2.5bn, which puts it in a negative net assets position

I have talked

to the seven

supplie≥s to make

them unde≥stand

the path they have

taken will not be

good fo≥ anyone

JULIUS KIPNGETICH

UCHUMI BOSS

BY DOREEN WAINAINAH

Electronic commerce firms Ringier Af-

rica and One Africa Media have entered

a joint venture to woo more users onto

their platforms.

The Rupu and BrighterMonday holding

companies have merged to form Ringier

One Africa Media (Roam), targeting the

growing number of online business and

classifieds in the region.

“The joint focus of Roam will be to

serve its users across Africa with best-in-

class marketplace platforms. Combining

the group’s strengths will help our users

reach a larger audience with their offers

and find what they are looking for easier

and faster,” said Ringier Africa general

manager Leonard Stiegeler.

As millions more Africans come on-

line to connect and conduct commerce,

predominantly via mobile phones, Roam

will amalgamate is car, real estate and jobs

as well as classifieds businesses.

In Roam, the leadership of the groups’

classifieds companies will be joined to-

gether and One Africa Media’s CEO Jus-

tin Clarke will become the acting CEO of

the new group.

“We have been looking for the right stra-

tegic partner with a similar broad vision

for classifieds in Africa and who has a deep

understanding of how t

complex continent as w

commitment to stay the

very large but early stag

known Ringier Africa f

we have both pioneered

parallel and are really ex

hands at last,” Said Mr C

Ringier Africa is behi

me and One Africa Med

day, BuyRentKenya and

Global Management an

largest investment.

The competition fo

merce market has bee

tracting global investo

dominance in the budd

French telco Oran

nounced the acquisitio

lion (€75 million) equit

ca Internet Group last m

was aimed at accelerati

market share of Jumia

platforms under the gr

Other services offer

Internet Group includ

marketplace (Kaymu),

food delivery (Hellofoo

ing (Jovago), as well as

ads for general merch

real estate (Lamudi), jo

vehicles (Carmudi).

Elect≥onic comme≥ce fi≥ms m

in bid to tap mo≥e online sho

CORPORATENEWS


9/32


Browsing through The Economic

Survey 2016, one sees an econo-

my with most of the key sectors

arginally growing and with a macr-

conomic environment that is mostly

ble. The monetary policies have evi-

ntly stabilised the exchange rate and

flation, while runaway interest rates

on the mend.

Informal sector jobs are growing

ile the social indicators (education

d health) are positive. However at 5.6

cent growth rate in 2015 the economy

till far from reaching the peak of its

tential.

The positive impact of low global oil

ces on the economy over the past two

ars is quite evident with an improved

lance of payment, reduced inflation

d, of course, low energy cost inputs.Petroleum consumption rose by about

per cent from 3.9 million tonnes in

14 to 4.7 million tonnes in 2015. The

import bill dropped by 26 per cent

m Sh309 billion in 2014 to Sh229 bil-

n in 2015.

Was it an ‘opportunistic’ economic

owth assisted mainly by low oil pric-

If the answer is in the affirmative we

ed to focus on ways to drive sustainable

al’ growth even when oil prices revert

high levels, as they will do.

In respect of electricity, demand grew

an impressive 9.7 per cent while in-

lled generation capacity increased

m 1,723 megawatts (MW) in 2013 to

63 MW in 2015.

This is an indication that theretched” target of 5,000MW by 2017

s challenged the energy gurus to keep

pply ahead of demand. This way there

ufficient buffer for electricity supply

ensure that no socio-economic devel-

ment shall ever stall or delay waiting

power. The latent electricity demand

at energy economists talked about is

adually surfacing as supply and distri-

tion expand.

At 6.2 per cent growth in 2015, agri-

ture was one of the good performers

th increased produce and values. How-

er this was mostly due to good rains,

h international prices and low energy

cost inputs, items not within our influ-

ence. Agriculture being Kenya’s “core”economic sector should be growing in

double-digit figures if we are to meet

our national GDP growth targets. It is

the sector with the highest capacity and

potential to achieve long term national

prosperity.

However to walk the talk, the na-

tional and county governments will need

to routinely allocate sufficient budgets

for agriculture. Produce

marketing systems should

be expanded and made ef-

ficient to motivate farmers

and herders.

Manufacturing per-

formed lowly at 3.5 per cent

in 2015, and this is despite

low cost of energy inputs.This is another productive

sector with huge trans-

formational potential to

the economy. We have ob-

served ongoing activity to

set up basic capacity and

institutions for small and

large-scale industrialisation which is the

logical starting point.

There is also evidence that manufac-

turing is now focusing on bottom-up

value addition of the other productive

sectors like agriculture , livestock, for-

estry, and minerals.

The fertiliser factory coming up at

Eldoret is a major score for manufactur-

ing and agriculture as it capitalises on acaptive fertiliser demand while substi-

tuting imports.

The ongoing efforts to create capac-

ity for leather product industries are ac-

knowledged. The Baringo County work

on an abattoir for donkey meat exports

is an ingenious value-adding project for

herders.

However, caution is advised on the

revival of the Webuye-

based Pan Paper Mills,

which may not be envi-

ronmentally or economi-

cally sustainable unless

alternative feedstock

is developed. A good

sustainable alternative

feedstock is the fast-maturing bamboo

which will certainly do

well in Western Kenya

with out-growers creat-

ing more jobs.

Construction and

building sectors regis-

tered the most significant growths (13.6

per cent) with the single largest infra-

structure project SGR making a huge

contribution.

However, it is in the buildings (mostly

private) that we need to ask some genuine

questions. Are we diverting most of the

capital and credit from the productive

sectors (manufacturing and agriculture)

into buildings which many consider safelong term investments?

There is talk of industrialists closing

down their factories in Industrial Area

to invest in real estate and malls, an in-

dication that something has gone wrong

in manufacturing.

The same stories will be told of giving

priority to buildings over agriculture.

Targeted planningFinally, whereas The Economic Survey’s

focus on historical actual economic per-

formance, we need to turn our attention

to more organised and targeted economic

planning for the future. Many argue that

the Vision 2030 is more or less out of date

with fewer and fewer policy implement-

ers using it as a reference document.Of late it has been projects and

programmes based more on election

manifestos, and this may miss essential

national development targets and socio-

economic synergies.

We should be drafting a new Vision

2040 which focuses on emergent develop-

ment priorities and which takes into ac-

count the dual national/county planning.

Such a plan should be ‘ring-fenced’ from

frequent political changes and should

advise election manifestos.

Mr Wachira works with Petroleum

Focus Consultants,

Email: [email protected]

PINIONS I REVIEWS I ANALYSIS

From left: Planning and Devolution secretary Mwangi Kiunjuri, Kenya National Bureau of Statistics acting director- general Zachary

Mwangi and chairman Terry Ryan during the release of the Economic Survey 2016 in Nairobi recently.SALATON NJAU

ECONOMIC SURVEY If 2015 rosy figures were ‘opportunistic’, assisted by

low oil prices, country must agonise about achieving sustainable growth

Re-enginee≥ development using a Vision2040 cove≥ing national, county p≥io≥ities

Many a≥gue that the Vision2030 is mo≥e o≥

less out of date

with fewe≥ policy implemente≥s using it as a≥efe≥ence

ORGE WACHIRA

VOLUTION

DEAS & DEBATE

Hillary Clinton

US presidential

Other Voice

William G. Naggaga (Dai

On May 12, President Musev

for his fifth term in office as a

Uganda. He previously serve

1996) as an un-elected pres

year Bush War that saw the

the military junta of Gen Oke

NRM assumed power on Jan

promised Ugandans a funda

Museveni will have ruled for

completes his fifth and prob

Gretchen Helmke ( Reut

Latin America was synonym

instability throughout the 20

spectre of military coups fad

political crises — like the on

Brazilian President Dilma Rothe region.

If Rousseff loses her looming

over claims of illegal accoun

18th elected Latin American

(excluding Haiti) forced to le

other than the ballot box. An

president since Fernando Co

under threat of impeachme

Yoweri Musev

Uganda Presiden

Dilma Roussef

Brazil President

E.J. Dionne Jr (Washingt

The first rule in elections is: G

get. By that measure, Hillary

put the old Obama coalition

Donald Trump will expand th

opportunities among nonw

produce Clinton landslides a

groups have good reason to

the man who has demeaned

Republicans for Clinton beco

American politics, an allianc

well-educated voters — plu

The members of the party o

Clinton will see that against

and even, conservative cho


10/32


V alue addition through manufacturing

has been a major focus of economic

policymakers across the world, and at

times with remarkable success, most famously

in East Asia. Initial ‘Asian miracles’ in places

like South Korea have since been eclipsed by

the meteoric rise of manufacturing in China,

which has grown its exports by 18 per cent

a year over the past 10 years, compared to a

global average of seven per cent .

Most countries generally seemed to follow

a basic pattern, initially establishing manu-

facturing credentials in light manufactur-

ing, such as in textile and apparel, but then in

time moving on from such products to higher-

value-added and more complex products. As

they moved on and up, they opened space for

other countries to move into the initial entry

products, following the so-called ‘flying geese’

model of division of labour.

There have been noticeable absences

though, with not all regions having movedinto manufacturing. This is partially the case

with Central and South America, but most

strikingly with Sub-Saharan Africa.

What can be done to support countries in

their quest to deepen their manufacturing sec-

tors, and extract the jobs and technological de-

velopment that this can offer? How can they

develop the kinds of deep and comprehensive

manufacturing ecosystems that have enabled

China to maintain investment despite fast-ris-

ing labour costs?

Addressing this challenge requires a com-

prehensive approach, touching on a variety of

areas that all need improvement if a country’s

manufacturers are to have a fighting chance of

making it in a competitive global economy.

The work starts with the need for strategic

clarity, developing the knowledge to create a

vision for change and a clear business case that

justifies and drives action. This also requires

developing platforms for public-private dia-

logue and inter-firm co-ordination, so as to

facilitate vertical coordination throughout a

supply chain.

Businesses can’t grow without money.

But, along with capital, investment also often

brings access to new markets, technology and

skills. Therefore, creating an investor-friendly

framework to attractive and retain investors

– all investors, foreign and domestic alike – is

critical. The seed of Bangladesh’s large and

hugely successful apparel sector came from a

joint venture between a local firm, Desh Gar-

ments, and Daewoo of Korea in 1977. Of the

128 Desh staff members taken to South Korea

for training, 115 of them moved on to set up or

run new apparel factories, launching what has

become a key pillar of Bangladesh’s economy

and a vital source of jobs.In countries with challenging investment

climates – which is the case for many coun-

tries that are struggling to punch into manu-

facturing – industrial parks and zones hold

the promise of delivering a business environ-

ment in which firms can more competitively

manufacture products in the near term, while

longer-term actions to fix the general invest-

ment climate are worked through.

Support in this area goes beyond helping

governments establish a sound regulatory

framework for zones: It includes ensuring

that they market-test their viability and involve

the private sector wherever possible. This will

help avoid the all-too-comm

zones” with low occupancy

Time and cost to market

in manufacturing. Countri

cheap and efficient trade log

requires a clear governmen

an open and competitive tr

tor and efficient customs se

One complaint that I’ve h

ing apparel brand, is that the

were once held up in the Ken

ess for more than a week. If

were to continue, Kenya w

of the running as a manufa

Finally, technology has a

heart of manufacturing, sta

troduction of water-power

18th-century England and e

ta’s pioneering of “just-in-ti

ing in the 1970s. Many bu

tell you that a key challeng

technology lies in access to

This is true, but only to a ce

The arguably harder w

engineering of business pr by the deployment of new t

requires a strong and const

man-resource base, from th

senior management.

Therefore, ensuring t

cation and vocational-trai

are informed by what the m

them, and equipping them t

a demand for skills, plays a

in establishing the critical

foundations on which firm

ductivity.

Adamali is a regional

World Bank Group

The essentials of a manufactu≥ing ecosyAREF ADAMALI

MANUFACTURING

VIEWS FROM ABROAD Opinions f≥om a≥ound the wo≥ld

War on poverty bearing fruitsResults of the new Ubudehe Social Categorisation

study by the government indicate that over half of

Rwandan families are perceived as well-off. They fall

under Category Three of the

classification and comprise

53.7 per cent of all households

in the country’s 5.7 million people. The report is good

news for Rwandans and a big vote of confidence in

the government’s poverty eradication programmes.

However, going forward more focus should be put on

the 376,192 households which live in extreme poverty.

A review of the poverty eradication policies should be

done focusing on this category of Rwandans because

they need to be supported most.

May Machar return herald peaceDr Riek Machar was sworn in as first vice president of

South Sudan last Tuesday afternoon. The passing of this

political rite hopefully marked the beginning of an end to

years of bloodletting in this, our

youngest northern neighbour.

Life in South Sudan has

been brutish to put it mildly. The horrors as have

been witnessed there should never happen in these

enlightened times; the Nuer and Dinka communities

have suffered immense mutual atrocities in this fight.

South Sudan was only recently accepted into the East

African Community. It has a duty to remain true to the

ideals which the EAC’s founders envisaged would make

our region a beacon of hope in the restive Great Lakes.

Khan: A vital victorySadiq Khan was elected mayor o

His victory is a vote for intelligen

is the first Muslim to be elected t

the first

mayo

capita

ugly affair, punctuated by dog w

smears. London’s voters rightly

We hope voters elsewhere will p

to such manoeuvres. More impo

voters were equally quick to dism

looked instead at the entire pictu

result has been a resounding vic

opportunity for the ambitious p

DAILY MONITOR

KAMPALA

THE NEW TIMES

KIGALI

THE JAPAN TIMES

TOKYO


11/32


Toshiba’s top-level overhaul is a

setback in an otherwise solid

clean-up. On May 6, the scan-

-hit group named two new bosses,

ther ideal. The rejig is a sharp re-

nder of the continuing weaknesses

Japan’s culture of corporate gov-

ance.

New Chief Executive Satoshi Tsu-

kawa distinguished himself build-

up Toshiba’s medical unit, which

s both successful and untainted by

.3 billion accounting scandal that

erged last year.

Those are big pluses. But Toshiba

has just sold out of healthcare. Bring-

ing in an outsider with more exper-

tise in the remaining core businesses

of energy, infrastructure or memory

might have made more sense.

Incoming Chairman Shigenori Sh-

iga is also problematic. He chaired

Westinghouse Electric while the US

nuclear unit booked writedowns

worth $1.3 billion – charges that

Toshiba did not flag at the time, in

violation of Tokyo disclosure rules.

More generally, an outsider is

more likely to provide a robust chal-

lenge to management.

But while this is best practice in

some other markets, Japan’s newly

beefed-up corporate governance

code does not push companies to

go this far.

Furthermore, outgoing CEO Masa-

shi Muromachi will remain an advis-

er. It could be argued that a company

in wrenching transition benefits from

extra continuity. But the principle is

not a good one.

After all, the continuing presence

of former bosses helped get Toshiba

into its current mess.

Such “ghosts in the boardroom”,

as reform advocate Nicholas Benes

dubs them, make it harder for Japa-

nese companies to change course

decisively.

It is a shame because crisis has

otherwise sparked real change at

Toshiba. It has slimmed down the

board and ensured that outside di-

rectors now dominate.

A sale of the medical unit, for

a punchy $5.9 billion to Canon in

March, helped shore up a wobbly

balance sheet before the close of its

financial year.

Other sell-offs, notably in white

goods, also sharpen the conglomer-

ate’s focus.

But big headaches remain, includ-

ing what to do about a huge expo-

sure to liquefied natural gas. Fluff-

ing the leadership overhaul now is

unhelpful.

The author is a Reuters Breakingviews

columnist

Toshiba bungled leade≥ship ove≥haul afte≥ scandalENTIN WEBB

VERNANCE

W hen Kenya hosts the 14th

session of the United Na-

tions Conference on Trade

d Development (UNCTAD XIV) in

y, all eyes will be on how it will tackle

numerous challenges facing global

de, especially among the developing

nomies.

As the first UN ministerial confer-

e of the post-2015 era, it will represent

arting point to translate heightened

bitions and commitments of the in-

national community into concretens of action. The meeting will also

ost Kenya’s image, which in the re-

nt past was slapped with travel bans

owing terrorist attacks, affecting

rism industry.

The objective of the conference has

solemn duty of translating the new

velopment agenda into concrete ac-

ns that benefit all countries.

UNCTAD’s key goal is to ensure

balisation does not isolate poor

untries from achieving the Millen-

m Development Goals (MDGs). The

ncy also contributes to sustainable

velopment in view of new interna-

nal challenges needs to be addressed

a priority basis.

The crucial issues, namely climateange, energy and migration, must

reflected in UNCTAD’s future work

the organisation to stay relevant in

ponding to the current and future

eds of developing countries.

There are still far too many nations

d people being left behind. It is es-

tial to acknowledge the tremendous

gress achieved today.

At the same time, however, it is im-

tant to remember and recognise that

still have a long way to go in reaching

degree of development that would

ect the vision of prosperity for all.

verty and inequality, both between

and within nations, remain a pervasive

challenge. Most of the dramatic reduc-

tions in poverty since 1990 occurred in

a few large emerging countries.

The world is still far too divided be-

tween large areas of poverty and dep-

rivation, on the one hand, and pockets

of prosperity, on the other. Worldwide,

over one billion people continue to live

in extreme poverty, under unacceptable

conditions for any fellow human of be-

low $1 a day.

Narrowing the inequality and pros-

perity gaps is critical and will require

more concerted efforts. At the same

time, current global economic condi-

tions are more challenging than at the beginning of the millennium.

Recent years were marked by the

outbreak of the greatest financial and

economic crisis the world economy

has faced in the post-war period. The

ramifications of the crisis continue to

haunt us today.

As shown by the recent crisis, finan-

cial instability and economic volatility

pose a threat to the improvements in

prosperity that have already been

achieved. With growing interdepend-

ence between countries, financial crises

due to lack of proper regulation may

quickly propagate through contagion

across the global economy, threatening

well-being in all countries.

Large and predominantly specula-

tive capital flows continue to put at risk

the debt sustainability and macroeco-

nomic stability of a number of devel-

oping countries. Similarly, some 70 per

cent of developing countries – and 85

per cent of Least Developed Countries

(LDCs) – are heavily exposed to vola-

tile commodity markets, leading to

large fluctuations in foreign exchange

revenues.Climate change and environmental

degradation are today probably the big-

gest growing threats to our way of life,

our economies and indeed humanity.

The increase in global average tempera-

tures and destruction and elimination of

earth’s biological resources affect all of

us, regardless of income levels.

They even pose an existential threat

to some countries. It remains an urgent

challenge to find the political will to deal

with negative externalities and provide

incentives for producers and consum-

ers to move towards less carbon-in-

tensive production and consumption

patterns.

There is a tremendous challenge

of decoupling economic growth from wasteful resource use and greenhouse

gas emissions without imperiling eco-

nomic progress. Otherwise, future

shared prosperity will remain an elu-

sive goal.

To achieve the sustainable develop-

ment goals, it is essential to build pro-

ductive capacity and provide economic

transformation. Eradicating poverty by

2030 requires a massive acceleration in

the development of productive capaci-

ties, especially in LDCs.

We need to increase productivity

within and across sectors. We need

to diversify economies by shifting re-

sources from less productive and envi-

ronmentally unsustainable sectors to

more productive and sustainable ones.

We must also do this in such a way as to

create enough higher-quality jobs and

economic opportunities to allow eve-

ryone to generate incomes above the

poverty line.

We cannot build productive capac-

ity and transform economies without

investment. Resource mobilisation to

bridge an annual investment gap of at

least $2.5 trillion is a daunting challenge, but it is achievable. It will require public

and private resources, as well as domes-

tic and external resources.

Resource mobilisation for invest-

ment also requires better harnessing

of private resources, domestic and for-

eign, through effective regulation and

facilitation, and by developing new fi-

nancial vehicles and incentives suited

to building productive capacity and

transforming economies.

Similarly, FDI now constitutes an

important source of external financ-

ing for developing countries and can,

if harnessed correctly, play an important

role in raising incomes and enhancing

productive capacities and employment

opportunities.However, tax avoidance practices

by transnational corporations, as well

as the tax exemptions that countries

sometimes offer in order to attract

investments, substantially curtail

government revenue in developing

countries.

It is imperative that such practices

are properly tackled at the national, re-

gional and global levels, while ensuring

that efforts do not undermine existing

and future investment flows.

NDIRANGU NGUNJIRI

Nairobi

LettersThe editor welcomes brief letters on topical issues. Opinions expressed here are not necessarily those of

the editor or publisher. They may be edited for clarity, space or legal considerations.

Send via e-mail to [email protected]

Trucks carrying goods at the Namanga

border crossing. FILE

Nairobi meeting should address key trade challenges


12/32


BY KIARIE NJOROGE

The Kenyan manufacturing sector has in recent years

been fraught with challenges including subdued

product demand in key export markets, high pro-

duction costs and competition from cheaper producing

rivals especially in Asia.

The exclusive Export Processing Zones (EPZ) are among

the segments that for years suffered a downturn due to a

high demand for cheaper second-hand clothes and uncer-

tainty over preferential entry of products into the US market

under the Africa Growth and Opportunity Act (Agoa).

But a decision by the US Congress in June 2015 to extend

the Agoa by another 10 years has triggered fresh enthusiasm

in the EPZ business. Though the Act originally covered the

eight-year period from October 2000 to September 2008,

amendments by then US President George Bush in July

2004 extended it to 2015.

Several Kenyan products, notably apparel and agricul-

tural produce, are big beneficiaries of this arrangement

which has lifted import duty on all eligible products and

granted preferential market access upon compliance with

Rules of Origin.

Latest statistics in the Economic Survey 2016 showed

that the EPZs recorded a 12.1 per cent growth in sales last

year underlining a resurgence of the sub-sector that is ex-

pected to be a key pillar of Kenya’s development.

The EPZs recorded growth in all key fronts including

employment and investment-- offering support for the

government’s plan to establish a variant of these zones-

the Special Economic Zones (SEZ).

The growth was mostly driven by apparel exports un-

der the Agoa .

“In 2015, enterprises operating under the Export

Processing Zone (EPZ) programme recorded increase in

employment, exports, imports, and expenditure on local

goods and services,” The Economic Survey 2016 states.

Assu≥ance of p≥efe≥ential US ma≥kTRADE Since the extension of the Agoa pact last year, local

anufacturing firms have received a new lease of life withne of the biggest Export Processing Zone set for expansion

NEWS INDEPTH

12% Latest statistics in t

Survey 2016 showed t

recorded a 12.1 per ce

sales last year

47 billion The Economic Surve

that investment in EPZ

doubled in the last five

from Sh26 billion to Sh

2000 The programme had

growth until 2000 wh

deal was made.

pparel Performance Indicators under AGOA

2011 2012 2013 2014 2015 % Growth

umber of Enterprises 18 22 22 21 21 0

mployment 25,169 28,298 32,932 37,785 41,548 10

pital Investment Sh (bn) 6.85 10.73 13.46 15.05 14.48 -3.8

ports Sh (bn) 20.94 22.3 24.24 30.24 34.58 14.4

urce: Export Processing Zones Authority

ton processing at Rupa

ton Mills, EPZ Athi River.

product is exported to

US market under Agoa

gramme. FILE


13/32


NEWS IN

“Total EPZ sales went up by 12.1 per cent from Sh57.2 billion

014 to Sh64.1 billion in 2015. The number of local employees

reased by 8.7 per cent to 50,523 persons in 2015. The bulk

mployment was in the garment/apparel enterprises with

otal of 41,548 persons mainly due to expansion of existing

parel, and agro-processing firms.”

EPZs in Kenya date back to 1990 when the legislation estab-

hing them was passed with a view to stimulating employ-

nt and growing exports.

Investors were given a number of incentives including a

year corporate tax holiday and 25 per cent tax thereafter, 10-

ar withholding tax holidays and stamp duty exemption.

They also get 100 per cent investment deduction on initialestment applied over 20 years and VAT exemption on in-

strial inputs.

The programme had a sluggish growth until 2000 when

Agoa deal was made. By 2011, the number of gazetted zones

d risen to 44 with a further 13 established since bringing

total to 57. A further four EPZs have been gazetted since

nuary this year.

But their performance has been termed disappointing and

government last year moved to create the SEZs.

At the expiry of their contractual period, existing investors

he EPZs will be required to start paying taxes in line with

nya’s taxation laws.

They will also have a choice to either move or re-apply

esh to be considered for investments in the SEZs under

ngent conditions.

The Economic Survey 2016 shows that investment in EPZs

has nearly doubled in the last five years rising from Sh26 bil-

lion to Sh47 billion.

Workers at an EPZ

factory in Athi River

sew garments. FILE

This growth however has mostly

enterprises under the Agoa deal wh

Sh34.6 billion of the exports and emp

ple last year.

This number however pales to

the government hence the establish

which are projected to provide hund

of jobs.

Kenya is in the process of setting u

Mombasa, Lamu and Kisumu. The K

aimed at growing export trade with

Community (EAC) and the Great Lak

Another SEZ will also be set up clo

mal plants in Olkaria. Manufacturers

offered discounts on power bills becau

mission costs from the geothermal pl

the industrial hubs.

The SEZs shall be subject to a redu

of 10 per cent for the first 10 years a

the next decade.

Connective infrastructureUnlike the EPZs which are limited t

commercial and service activities, the S

long non-exhaustive list of activities. T

ness processing outsourcing, manufact

ing; livestock marshalling and inspect

deboning, value addition; and service

facilitate tourism and recreation sect

The World Bank however says th

the SEZs will depend on provision of p

ture, both within the zones and conn

outside world.

“Although the infrastructure of a zo

is equally important to develop the con

ture between the SEZs, cities and por

Among the factors that have previo

success of the EPZs was a poor transpand high electricity costs.

Currently, the government is work

cost of transport with the Standard Ga

and the improvements at the Mombas

further ease the export-oriented busi

New lease of life With last year’s extension of the Ago

EPZs have received a new lease of life.

er which is managed by the EPZ Auth

recorded new demand since last year

expanded to host more enterprises. Of

operating in Kenya, 44 are located in

Last year, the EPZA completed an

dustrial go-downs each measuring 1

and eight units each measuring 7,60

der the expanded textile and appar

“Textile City”.“The ongoing projects are part of

plans to realign the textile and appare

contribute significantly to the country’s

through expansion of sustainable te

EPZA said in a recent newsletter.

China which has for a long time

leading apparel manufacturer is ad

economy leaving countries like Ken

Analysts predict that China will shed

jobs at the bottom end of the manufa

tween now and 2030.

This opportunity coupled with A

frastructure and cheaper power bode

and SEZ sub-sectors’ growth.

[email protected]

EPZ Performance Indicators

2011 2012 2013 2014 2015

Gazetted Zones 44 47 50 52 57

Enterprises

operating

79 82 85 86 89

Employment-

Locals

32,043 35,501 39,961 46,221 50,253

Expatriates 421 428 472 517 597

Total Workers 32,464 35,929 40,433 46,738 50,850

Total Sales Sh

(bn)

42.44 44.27 50.29 57.19 64.11

Imports 21 .44 24.97 27.41 29.46 30.68

Local

Purchases

6.29 8.02 7.72 8.17 9.04

Investment

(Cumulative)

26.46 38.53 48 44.21 47.25

Source: Export Processing Zones Authority

te≥ms lifts Kenya’s EPZ business


14/32


Botswana will target an avgrowth rate of 4.4 per cen

years under a medium-ter

framework from 3.8 per ce

nance minister said on Mo

But the targeted growth ra

enough to address the sou

try’s development chall

Business 11 May 2016.pdf

Documents

Transcript of Business 11 May 2016.pdf