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  • About the Company
Name Title Officer Since
Mr Moses Dhizaala Chairman 2015
Mr B.S Dhaka Managing Director 2015

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Officials say there is need to harmonise marketing initiatives if we are to keep tourists coming again.

The revelation comes as a global ratings agency warned that the government “will continue to face liquidity pressures” due to a combination of large financing needs and an increased reliance on sources of financing with less predictable costs, in particular commercial external borrowing and short-term domestic debt.

Moody’s noted that Kenya’s first Eurobond payment of $750 million (about Sh75.9 billion) (1 per cent of forecast GDP) is due in June next year, followed by a second $2 billion (Sh202.6 billion) Eurobond maturing in 2024.

Moody’s last week downgraded Kenya’s credit scores, citing pressure from the country’s rising debts but Treasury has disputed the ratings citing “strong fundamentals.”

Treasury says it is engaging international investors that Kenya owes money to ensure looming debt obligations are managed effectively without exposing the country’s coffers to liquidity pressures.

“The risk of financing stress will increase as more commercial external borrowing, denominated in foreign currency, begins to mature over the next few years, particularly in an environment of rising global interest rates and a number of sub-Saharan African sovereigns seeking refinancing at the same time,” said Global rating agency Moody’s last week.

“A syndicated loan originally taken out in 2015 and worth $750 million was extended by six months in October 2017, with 90 per cent of investors agreeing to extend the maturity to April 2018,” added Moody’s.

“The increase in short-term domestic debt, to 9.4 per cent of GDP at the end of FY 2016/17 from 3.3 per cent of GDP five years ago.

Many hotels and recreational facilities have been grounded at the Kenyan coast due to low patronage.

Top on the cards is terrorism that has repeatedly affected the coastal region and created a sense of despondency.

Tourism has gone through turbulent times in recent years, necessitating fresh strategies for a turnaround.

There are four interlinked challenges – terrorism, political instability, poor infrastructure and inefficient service delivery.

Fortunately, the sector weathered the storms last year and posted credible results despite a heated political contest, illustrating its resilience.

But challenges still abound and even with improved earnings, we are far below the boom of those halcyon years.

As we reported this week, many hotels and recreational facilities have been grounded at the coast due to low patronage.

Businesses across the chain such as safaris, curio trade and water sports have declined, leading to job losses and increased poverty.This is the reason we acknowledge the government’s decision to waive tax on furniture imports for hotels to cushion them and help their revival and regeneration. As a major cash earner and key driver of the economy, tourism requires concerted efforts for revamp.The tax waiver is a pragmatic and desirable intervention.Even so, other critical challenges must be confronted.

Top on the cards is terrorism that has repeatedly affected the coastal region and created a sense of despondency, scaring off tourists.Although incidents have gone down in recent times due to an aggressive campaign against Al-Shabaab, the threat remains.

Second, the coast is a hotbed of combative politics that in itself creates tension and undermines hospitality.Divisive politics pitting locals against the so-called outsiders poses a serious threat to investments and contributes to decline in services.Equally challenging is the poor infrastructure.Tourism thrives on efficient transport network that allows visitors to travel from destination to another fast and affordably.Also, it requires effective services and a conducive environment that gives a better experience and feel for the visitors.Whereas the government has started on a positive note, other fundamental encumbrances such as insecurity, poor service delivery and infrastructure must be also considered.

Governments in struggling economies could start paying higher interest for money borrowed from domestic markets due to the new accounting rules.

The IFRS 9, which became effective in January, requires corporations to include a provision for T-bills and bonds to guard against the collapse of business in case the borrowing government fails to pay.

For Uganda and Kenya, the cost of holding Treasury-bills and bonds is expected to rise as corporations will require high capital reserves to make provisioning for their debt.

Sector players say if they are forced to apply the new rules to the letter, they would have to find coping mechanisms.

Governments in struggling economies could start paying higher interest for money borrowed from domestic markets due to the new accounting standards.

According to Wilson Kaindi, a senior manager at audit firm KPMG, among the factors to consider when provisioning for government debt are indicators of the state of the economy like credit rating, unemployment, poverty and inflation rates, revenue collection as well as tax- and debt-to-GDP ratio, and a country’s repayment history.

“Previously, there was no need for provisioning, since government debt was considered risk-free,” he said.

This changed with the 2008 financial crisis, and the realisation that companies can collapse over keeping debt that was previously considered secure.

T-bills For Uganda and Kenya for example, the cost of holding Treasury-bills and bonds is expected to rise as corporations will require high capital reserves to make provisioning for their debt. The two countries have been struggling to pay their debt, which has been on the rise.According to experts, Kenya is more likely to pay high interest, as global rating agency Moody’s recently downgraded the country’s credit score to B2 from B1.Uganda’s auditor general said the nominal interest payments to total government revenue increased to 16 per cent in 2016, exceeding the 15 per cent cap agreed in the public debt management framework.

Pic: The KivuWatt’s methane gas power production plant on Lake Kivu in Rwanda (NMG).

The country is cited among those with expensive and unstable power. The Senate Committee on Economic Development and Finance found that work on some power substations had stalled including Shango-Birembo for the Rwanda-Uganda link, Rubavu-Bwishyura and Kibuye for Rwanda-Democratic Republic of Congo.

Rwanda’s total demand currently stands at 125MW, a five per cent increase from last year.

Kigali was betting on clean-cheaper power importation from Uganda, Kenya and Ethiopia to increase its generation capacity for domestic consumption and exports.

Rwanda’s Senate is concerned about stalled projects meant to connect the country to East Africa’s power pool, and meet the rising energy demand.

The Senate Committee on Economic Development and Finance found that work on some power substations had stalled including Shango-Birembo for the Rwanda-Uganda link, Rubavu-Bwishyura and Kibuye for Rwanda-Democratic Republic of Congo.

“Many projects have been abandoned, some have stalled,” said Perrine Mukankusi.

The senator asked the Ministry of Infrastructure to step in and save the country from losing the money invested, and fasttrack the projects to address the country’s increasing power demand.

Rwanda’s total demand currently stands at 125MW, a five per cent increase from last year.

The senators also found that work on the Rwanda-Burundi substations had not been commissioned.

Power importation

Senator Everiste Bizimana expressed doubt that the country would manage to increase the current generation capacity from 208.3MW to 563MW.
Kigali was betting on clean-cheaper power importation from Uganda, Kenya and Ethiopia to increase its generation capacity for domestic consumption and exports.The country is cited among those with expensive and unstable power which compromised the competitiveness of the country in doing business, as per the 2018 World Bank Doing Business report.Testimonies in the Senate report show that industries are operating below capacity and counting losses due to power shortages.“We wish to run the two factories we have here at a go, which consume six megawatts, but we receive only three megawatts, which normally goes down to two megawatts by evening,” Abhilash Shrivastava, a manager at the Imana steel factory is quoted.

Kenyan banks have been unwilling to lend to the private sector, preferring the government through risk-free Treasury-bills and bonds.

Analysts say that new interest rate framework should be developed to ensure that banks respond to monetary policy signals from CBK since they have been reluctant to do so even before the interest rate caps.

The Banking (Amendment) Act of 2016 came into force in September of that year.

Kenya’s Parliamentary Budget Office has proposed a review of the interest rate cap law to boost lending to households and businesses, and give the Central Bank the freedom to use its policy rate to control money supply, inflation and exchange rates.

Improving monetary policy

The Central Bank is unable to adjust the central bank rate (CBR) as it will simultaneously change deposit and lending rates, leading to volatility and instability in the financial markets.

“The interest rate controls have affected the flexibility of the key monetary policy tool, the CBR itself,” said the Parliamentary Budget Office in a report released last a week ago.

“This law may require further streamlining to ensure that the profitability of banks is not compromised and to improve Monetary Policy flexibility.”However, analysts say that while the proposal to lift the cap is important, a new interest rate framework should be developed to ensure that banks respond to monetary policy signals from Central Bank since they have been reluctant to do so even before the interest rate caps.“CBK’s monetary policy instrument was not effective because there was no linkage between CBR and lending rates and so the banks could not respond even if CBK adjusted its policy rate,” the analyst said.

CBR
The Banking (Amendment) Act of 2016 came into force in September of that year. It fixed lending rates at four percentage points above the CBR, and a floor on term deposit rates equal to 70 per cent of the CBR. Since then, CBK has retained its policy rate at 10 per cent.

According to the World Bank, interest rate caps undermine monetary policy transmission and implementation, with implications for CBK’s independence and its ability to steer the economy.

The U.S has made a fresh call for the East African Community not to phase out imported used clothes and leather products locally known as “Chagua”, but Rwanda says the U.S should not shift goals on what was agreed by the parties in 2015 when the African Growth and Opportunity Act (AGOA), pact was renewed.

How it all started

In 2015, the East African Community (EAC) Heads of State adopted a three-year gradual process to phase out the importation of second-hand clothes and footwear to promote textile, apparel and leather industries in the region and instead focus on evolving domestic industries.

This move, was deemed to make EAC textile and leather factories self-sufficient to serve the local and international markets, including AGOA market which had kept the window wide open for African exports into the American market same year.

Despite Kenya rescinding on the decision at a later stage, Rwanda, Uganda and Tanzania have remained “solid” on their stance to phase-out second hand clothing.

The government of Rwanda deliberated on a strategy to develop the textiles, apparel and leather industrial sectors and a blueprint was consequently designed on how to implement such a strategy.

A draft 2017-2019 strategy for the transformation of textiles, apparel and leather industrial sectors aim to increase the quality and quantity of textile, apparel and leather for both local and foreign markets.

Rwanda’s strategy estimated that, if everything is implemented, this could create 25,655 jobs, increase exports to $ 43 million and decrease imports to $ 33 million by 2019 (from $124 million in 2015). The impact on trade balance will result in savings of $ 76 million over the 3-years period.

As a result, in 2016 Rwanda increased taxes on used clothes from $0.2 to $2.5 per kilogramme, while taxes on used shoes increased from $0.2 to $3 per kilogramme.

In the 2017/18 Budget estimates, the Government also eased taxes on inputs under the Made-in-Rwanda initiative, which is expected to facilitate growth of the local textile industry.

However, during a teleconference last week, Harry Sullivan, the U.S. Bureau of African Affairs Acting Director for Economic and Regional Affairs told The New Times that the regional move to reduce on the importation of second-hand textile and leather products from the U.S. and other countries “will not” help the region achieve its primary target of rebuilding local textile sector-which had started booming in the early 1980 and 90s.

“While we understand the East African Community’s desire to build a domestic textile sector, we firmly believe that the EAC’s ban on imports of used clothing will not help achieve that,” Sullivan said.

“First, it’s job-destroying. The proposed ban will hurt an estimated 300 thousand men and women that work in the used clothing business all across the East African Community and it will also negatively impact at least 40,000 U.S. jobs in the used clothing sector in the United States,” he added.

On the proposed phase-out of second-hand clothes, Sullivan argues that the move would “limit” EAC citizens of variety in choice.

He questions whether the consumers of used clothing will be able to afford the new apparel being made in the EAC market.

He added that rather than banning imported used clothing, the most effective domestic growth strategy for the local fashion and apparel industry would be to build its brands and markets for the growing middle class, which prefers to buy new apparel in shopping malls and other places anyway.

Mount Kenya University (MKU) through its Kigali campus has entered into a memorandum of understanding (MoU) with the national carrier of Rwanda, RwandAir, to design relevant market-driven programmes targeting the airline’s staff.

The Kenyan institution of higher learning says it will, following the pact, train RwandAir staff leading to the award of Bachelors degrees as well as Masters in air travel and hospitality industry.

MKU chairman Simon Gicharu said in a statement the university will create required industry linkages, mentorship and internship and bolster trade relationships and opportunities between Kenya and Rwanda.

“We note the airline’s ambitious commitment to growth and offering quality service that has made it stand out as the airline of choice in the region. We want to be part of the airline’s continuous growth by offering quality training to its staff,” said Mr Gicharu.

Air transport has in the recent past become very competitive forcing airlines to explore partnerships that can boost the capacity of their employees and attract more travellers to its fold.

RwandAir flies from its hub at the Kigali International Airport. It has a fleet of 12 aircraft including two wide-body Airbus A330 acquired in 2016.

The airline currently flies out to 23 destinations across East, Central, West and Southern Africa, the Middle East, Europe and Asia.

Rwanda has experienced exponential growth on the back of booming construction industry especially in the hospitality industry. In 2016, Rwanda opened a 2,500-seater conference centre and two five-star hotels, Radisson Blu and Marriott, in its capital, Kigali.

The Rwandan national carrier will fly directly from Kigali to Cape Town International Airport, with a stop-over in Harare, four times a week from 16 May 2018.

In the press release by Rwandair, its CEO, Chance Ndagano, said: “This is yet another big milestone for RwandAir as we continue to expand our network.Our aim is to provide to our customers seamless and better connections on the continent and beyond. Abuja and Cape Town come in as a boost to the different economies in terms of tourism and trade on one hand, and enhance bilateral partnership between our countries on the other hand”.

This comes after a few weeks Kenya Airways also announced direct flights from Nairobi to Cape Town. The Cape Town Air Access initiative, a partnership between Wesgro, the City of Cape Town, the Western Cape Government, Airports Company South Africa, Cape Town Tourism and South African Tourism, agrees that this will greatly assist in boosting tourism, trade and investment between the Cape and Rwanda. It will also help link the Western Cape with Zimbabwe, with a stop-over in the country’s capital.

Between 2016 and 2017, there was a 16% growth in two-way passengers between Zimbabwe and Cape Town. This was largely due to a 36% increase in two-way passengers from Victoria Falls. Harare, however, only increased by 1%. This new stop-over in the capital will therefore assist in boosting travel between Zimbabwe and the Cape significantly.

Pic: GDC’s Olkaria steam well at Menengai, Nakuru. (NMG)

Power producer KenGen and Geothermal Development Company (GDC) have clashed over steam outlook as Kenya races to grow its stock of green energy.

KenGen claims its most productive well in Naivasha’s Olkaria has a capacity to produce 30 megawatts of electricity, making it the largest in Africa.

“As far as we’re concerned our 30-megawatt well in Olkaria is the largest in Africa,” Mr Abel Rotich, KenGen’s geothermal development director said during a media tour in Olkaria fields.

However, Mr Paul Ngugi, a manager at GDC, claims the agency’s Well 1A, with a capacity of 30.6 megawatts, in Menengai, Nakuru, is the single largest in Kenya and Africa.

GDC is fully owned by the government. It is mandated to drill exploration wells in search of steam on behalf of investors to derisk the venture before handing them to power producers who pay for the steam that they convert to electricity for onward sale.

GDC has seven rigs while KenGen, which drills and produces electricity, has three operational rigs.

35-megawatt search

GDC will sell its Menengai steam to American firm Ormat Technologies, local company Sosian Energy and Mauritius-based Quantum Power, each of which plans to separately construct a 35-megawatt plant each.

KenGen, listed on the Nairobi Securities Exchange and 70 per cent owned by the government, will pipe steam from its 30-megawatt well, alongside dozens of other smaller wells to generate electricity at the158-megawatt Olkaria V power plant under construction. The plant will be completed by July 2019.It took the power producer 46 days to drill the 30-megawatt well at a cost of $4.5 million (Sh455 million) in 2013. It costs an average of $5 million to sink a geothermal well, reaching depths of up to 3.5 kilometres.An average well yields five megawatts, meaning drillers save cash when they strike high-yielding production wells.Kenya is currently ranked the ninth largest producer of geothermal electricity in the world and the leader in Africa with a capacity of 630 megawatts, according to Renewables Global Status report 2017.

The Addis Ababa City Road Authority had constructed on the aggregate a 384.8 km long road across the city in the course of the last six months, which accounts 89 per cent of the plan.

Authority Communication Director Tiumay W/gebrael said that the authority had undertaken the construction of asphalt roads, pedestrian walks, drainage and cobblestone alleys across the city in the stated period.

The outlay, 6.3 billion Birr ($239m) is totally covered by the city administration. Of this 5.3 billion Birr is for capital budget while half billion Birr is for road maintenance, he added.

He noted that the constructions had been carried out in collaboration with the city’s Water and Sewerage Authority, the Ethiopian Electricity, and Ethio-telecom.

As Addis Ababa is the seat of various international organizations, institutions and the African Union, the government is exerting its utmost effort to make the city modern and safe for living, Tiumay said.