apr 28th 2015

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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

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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.

[email protected]

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

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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


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.

[email protected]

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

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5/32


7/26/2019 apr 28th 2015

6/32


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.

[email protected]

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

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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.

[email protected]

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

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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.

[email protected]

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

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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

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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


7/26/2019 apr 28th 2015

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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

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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

apr 28th 2015

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