Savings and Credit Cooperative Organizations (SACCOs) are arguably the oldest form of banking in Kenya. Most of these organizations began as traditional table-banking groups with little or no formal organization but with structures of leadership, unwritten policies and a circuit of meetings in which deposits were received from members. Today, many such groups have formalized and are registered with Sacco Societies Regulatory Authority (SASRA). This development in the financial service sector has transformed Kenya’s economy through the convenience of savings and access to credit that is in SACCOs. In rural areas where agriculture creates the most number of jobs, the cooperative movement has been recognized by the government as a vital institution for mobilization of material resources for development. At a minimum, SACCOs offer savings accounts and loans. Deposit-based loans are usually sized at three to four times the amount of the member’s savings held at the SACCO. What makes the model unique is that loans are secured by the members’ deposits, and oftentimes by guarantees who also have deposits in the SACCO. The loans are fairer in their pricing and easier to access when compared to bank loans. Moreover, SACCOs pay higher interests on deposits than Banks, and members with SACCO shareholding enjoy guaranteed dividend payment annually. SASRA’s 2019 report highlighted resilience in SACCOs despite COVID-19 related constraints in the economy. For instance, total deposits held by Deposit Taking (DT) SACCOs stood at Kes.545 billion in 2020, a 13.4 % improvement on Kes.380 billion recorded in 2019. The growth reflects resilience in Saccos despite a difficult year that saw economic activates crippled by the global pandemic. Gross loans stood at Kes. 474.8 billion in 2020 from Kes.429.6 billion in 2019 being a record growth of 13.2%. The government of Kenya has been driving reforms to enhance governance, financial soundness, and sustainability of SACCOs consistent with policy developments articulated in cooperatives development policies (CDP) of 2019. Some of policy reforms that were initiated include: creation of a central liquidity facility and a shared technology platform, operationalization of deposit guarantee fund for SACCOs, establishment of SACCO Fraud Investigation Unit, and prudential supervision of non-deposit taking SACCO commodity referred to as Back Office Services Activities (BOSA SACCOs). These legal amendments have been drafted and submitted to National Treasury which has been included in Financial Bill for 2021. This is a milestone in ensuring that the capital investment in Saccos is protected.
The Constitutionality of Minimum tax provision
In a Constitutional Petition filed early this year, The High Court in Machakos declared section 12D of the Income Tax Act unconstitutional and hence null and void. Section 12D had introduced Minimum Tax as a blanket target on all taxpaying business entities at a rate of 1% on net sales regardless of whether they made losses or profits. Justice George V. Odunga while delivering the judgement on 20th September 2021 noted that the Minimum tax provision was in contravention of Article 201 (b) (i) of the Constitution of Kenya 2010 for subjecting taxpayers to double taxation hence punitive in nature. The Kenya Revenue Authority (KRA) had banked on the introduced new tax to widen its tax base. The court however noted that when the tax collector chose to widen its net for a bigger catch did not care about the effect its decision will have on Small Scale Businesses which are currently in perennial losses due to the abysmal economy caused by the covid-19 pandemic. Justice Odunga stated that;
“The minimum tax has the potential of not only subjecting the people to double taxation but also unfairly targeting people whose businesses for whatever reason are in a loss-making position to pay taxes from their capital rather than profits.”
The KRA wanted to utilize the Minimum tax to capture treacherous business entities that were avoiding taxes through the declaration of constant losses. The above tax system is however discriminatory especially on entities making losses since they will have to tax their capital as opposed to profits. The court further noted that a tax system that reduces the capital base falls short of the values of an optimal tax system.
Economists, financial experts and associations such as Retail Trade Association of Kenya (RETRAK), Kenya Association of Manufacturers (KAM), Kenya Private Sector Alliance (KEPSA), Deloitte, Price Waterhouse Coopers (PWC) and Kenya Bankers Association (KBA) had earlier on opposed the 2020 amendments to the Income Tax Act introducing Minimum tax due to its punitive nature on businesses with low-profit margins and high capital turnover. Firms in the category of fast-moving consumer goods (FMCG) have a reason to smile since they were the worst hit businesses by the new changes in the Income Tax regime due to their low-profit margins and high capital. Business entities can now operate without fear of reducing their capital to pay tax.
A story is told of a horse once stuck in a pond filled with mud and could not get out. When a few herdsmen inspected the place, they saw the mud would not allow the horse to come out; it was only the strength that the horse could gain mentally and not give up that would bring him back to his feet. They then invented a plan to get their herd of horses to run around the pond to mentally inspire the stuck horse. As the horse saw his friends gallop around the pond, he mentally decided to give his last try- with all the strength he rose and finally was back to feet.
The secret is not in the mechanics of money but one’s level of thinking. Siebold expounds on 100 mindset shifts that have helped rich people accumulate wealth and shows the contrast to how the middle class thinks. Every chapter compares the “middle class” and “world-class.” These terms reference the average person versus the world-class thinker. The idea is to compare the way most people think about money in contrast to the rich. Some of his ideas are as discussed below:
The middle class focuses on saving…world-class focuses on earning; instead offocusing onhow to protect and hoard their money, world-class thinkers direct their mental energy toward accumulating wealth through serving people and solving problems. Secondly, while the wealthy direct their efforts on the most profitable areas of their business as they leverage their contacts, credibility, and resources to maximize the results of every action, middle-class thinkers believe that only hard work creates wealth. He also asserts that the masses believe making money is mysterious while world class-thinkers know that money flows from ideas.
Steve interestingly addresses the issue of formal education and specific knowledge. While the masses are convinced that master’s degrees and doctorates are the way to wealth, the rich have learnt to amass their wealth through the acquisition and subsequent sale of specific knowledge. As the masses spend a substantial amount of time entertaining themselves in a variety of activities, the rich spend time in activities they enjoy. Finally, the masses spend while the rich invest.
From the few examples above, there is nothing wrong with how the average person thinks, they only need to widen their perspectives and think like rich a rich person.
Kakuma is a fast-growing town in North-Western Kenya hosting refugees, humanitarian workers and native Turkana people. It is approximately 120km from Lodwar airport linked by a tarmac road that has been newly constructed. There are also other groups of people living in Kakuma for work and business-related pursuits. The town is mostly hot with temperatures ranging from 280 C to as high as 360 C and the land is arid with little vegetation. In such a climatic zone, one would first presume pastoralism is the only agricultural venture with sustainable returns. However, my recent visit has taught me that there are as many possibilities in Kakuma as people are living there. I spent one of my afternoons in a poultry farm that feeds hundreds of Kakuma residents and noted some key lessons from my conversation with the farm owner, Mr Raphael Ewoi.
Raphael is capitalizing on his educational background in nutrition and dietetics, training in poultry production, hydroponics, and agribusiness management to run a 2,200-capacity chicken farm. His farm sits adjacent to his home in a fenced plot where he has constructed two shelters that make a home to his birds. In his words, “chicks require moderation of heat, lighting and water to survive.” A chicken farm must therefore be well balanced to provide the right quantity of each of these three needs at different stages of a chicken’s life. “There should as well be proper feeding and a vaccination program for your chicks,” notes Raphael in emphasis to how capital-intensive chicken raring can become.
Right from hatching, through brooding to maturity, the birds need dedicated care as that given to a pet. One may choose to specialize in hatching, brooding or raring based on their gifting in handling chicks. Raphael’s Poultry farm has a ready market in Kakuma where he supplies to the neighbourhood, hotels, refugee camp and to members of NGOs who often order already slaughtered chicken. Other than chicken sales, Raphael also sells guano manure whenever he is clearing his farm. On his bucket list, Raphael is on a mission to expand his farm to accommodate 5,000 more chickens and create more jobs in his poultry farm. He believes white meat is the way to go and he is charting the way from Kakuma to the world.
Hosted By Co-Operative Bank Of Kenya On 15th July 2021
The webinar focused on addressing the place of effective business leadership, it aimed at equipping entrepreneurs with essential leadership skills necessary for any successful Micro, Small and Medium Enterprises (MSMEs). Statistics as of July 2021 show that there are 7.41 million MSMEs that have employed 14 million workers in Kenya. This means that 80% of businesses in Kenya are MSMEs granting the need for essential leadership skills for business.
According to Max De Pree, a leader’s first responsibility is to define reality and their last is to say thank you; in between the leader is a servant. This, therefore, means that leadership is a proactive journey that requires action which involves directing workers with the strategy that meet the business needs. Proper leadership provides room for uniqueness since every individual is varied in how they see opportunities and gaps in the market. This calls for a business leader to be first self-aware since how they show up determines their influence. Leadership is therefore very key as it is the major factor that makes everything work together seamlessly.
The presenter shared 5 levels of leadership according to John Maxwell. The levels have to do with position, permission, production, people development and the pinnacle of respect. Any business begins with a rightful vision bearer/leader (position) who then proceeds to create relationships with appropriate people (permission) to share the vision and values they have for the business with them. Once the vision is understood, the people can follow the leader to begin working based on what they see the leader do (production) to produce the leader’s desired results. From there, the leader can now train (people development) for reproduction to delegate and be able to concentrate on other things. Finally, the vision bearer leaves behind a legacy (the pinnacle of respect) because of their achievement.
Finally, the presenter shared 9 key traits of an effective business leader: Effective business leaders plan, Ability to steer the team towards the Vision, Effective Communication skills necessary for articulating ideas and goals, Ability to offer support to employees by getting involved in their lives through interacting with them, Decisiveness, Ability to delegate roles since employees have seen and learned how to carry the vision, Adaptability and learning agility, Ability to build a support network of advisors/ mentors and Self-care to promote healthy wellbeing.
Health seeking behaviour (HSB) is a sequence of remedial actions that individuals undertake to rectify perceived ill-health. It refers to action(s) by individuals who perceive themselves to have a health problem or to be ill for finding an appropriate remedy. Health behaviours (HBs) are direct factors helpful in maintaining a healthy lifestyle and do not occur in isolation. Social, cultural, and economic factors influence them. Individual choices and/or external constraints shape HBs in most cases.
Positive HSB promotes health, prevent diseases, and ensures good health outcome while the opposite increases, morbidity, and mortality.
An individual does not have to be ill, to seek healthcare. Everyone is at risk of contracting a disease condition. Take for example the case of COVID 19. The entire population has an exposure, in many ways, to this disease acquisition. However, the bigger population (including those who have experienced symptoms), may not have taken the initiative to be tested.
Medical Check-ups and preventive care are essential. Over the years, there has been an exponential rise in the number of non-communicable diseases (NCD’s) such as Cancers, diabetes, hypertension, obesity etcetera. Such require early screening to arrive at an early diagnosis, which helps to prevent life-threatening ailments. Some of the NCD’s such as hypertension have a genetic inclination and addressing preventive measures early enough is immensely important. Hypertension attributes to about 7% of deaths globally. By 2025, the number of adults with hypertension is likely to increase by about 60% to 1.56 billion worldwide and most of the cases will occur in low and middle-income countries (LMIC). Unfortunately, most cases of hypertension are asymptomatic. As a result, hypertensive patients often seek healthcare late or when they have complicated Strokes, heart attacks, heart failure, and kidney failure. WHO projects that, over the next ten years, Africa will experience the largest increase in death rates from CVDs like hypertension. Consequently, the negative economic impact of CVDs will be more on the African continent, and the cost of handling chronic illness will render many household’s poor.
Early Nutrition and medical screening have been shown to help in the early detection of various deficiencies and physiological changes that would prompt a life-threatening illness. If we perceive that we are susceptible to acquiring a disease, then we would invest our time and resources in preventive healthcare-seeking behaviour like frequent medical Screening, whether we are unwell. It is paramount to invest in health insurance covers, take our healthy babies to well-baby clinics, attend regular medical checks, and ensure we get our shots on time.
Media has traditionally been a communication platform in diverse dimensions including advocacy, news sharing, entertainment, education, and awareness creation. Media Coverage in Kenya has grown with the increase in vernacular radio stations and the rise of social media since 2009. Today, social media has replaced radio as the first channel of information sharing and as the most widely used platform thanks to a mobile phone penetration rate of more than 70% and a high broadband subscription. Television broadcasting was hit by the digital migration of 2014 where content producers were allowed the latitude to air their production without necessarily owning a television station provided an agreement is reached between producers and broadcasters. A decrease in the circulation of newspapers since 2013 is also a trend that threatens print media despite being a stable revenue earner from the advertising business.
While social media uptake continues to spike in a country where the population mean is 20 years, the topography is not without obstacles. Among the obstacles that need to be addressed in social media are skills gaps among content producers, resource shortage in acquiring the right infrastructure and a policy gap to regulate the social media space which is highly infested by fake news, plagiarism, and incompetence. Other obstacles are little or no evidence-based research, forensic analysis, data-driven journalism, and excess attention on politics at the expense of other subjects like health, economy, culture and the environment.
Ownership of media in Kenya has continuously grown especially in seeing over 17,000 bloggers rise with prominent sites. Among these bloggers, at least a third of them are dependent on the enterprise for a living. Mainstream media ownership however is in the hands of few where HH Prince Karim Agha Khan, Moi’s family, S.K Macharia, Kenyatta’s family, Patrick Quarcoo, Late Chris Kirubi’s family, Raila Odinga and Wiliam Ruto are some of the leading shareholders in Kenya’s most prominent media houses. Kenya also hosts international media entities and is a regional bureau of top international news organizations. The big media houses are employing adaptive mechanisms to industry changes by integrating hybrid content production models for online audience advertisers. Media houses are pursuing newsroom convergence where journalists are required to be multi-skilled with thorough research competencies that meet multimedia needs. Technology is on constant upgrade across the media industry in Kenya as it is the greatest force shaping media execution.
Export trade begins when a country has produced more goods and services than its domestic demand. It is penetration into new markets away from home. This does not come without challenges as many trade agreements need to be entered before goods and money is allowed to flow from source to a foreign market. It is therefore a game of industrial development, building of trade relationships with other countries and creation of sound policies to regulate cross – border trade. The starting point is production of goods and services at surplus amounts. At the production stage, a country needs to tap into areas of strength in order to maximize output. Since international trade is competitive, focus in producing goods for exports should be on industries that give the country a competitive advantage over its competitors. In this column, I hold the view that Kenya is performing below average in producing goods for export.
Kenya’s prominence in the community of nations is ever rising with outstanding performances in sports and regional influence. The country also boosts of rich cultures, phenomenal wildlife, epic scenes of the rift valley, great lakes and sandy beaches along the Indian Ocean which attract tourists in significantly large numbers. This prominence can be utilized in promoting “Made in Kenya” brands if they existed. Sadly enough, so little in supermarket and retail shop shelves is made in Kenya. Today Kenya imports almost everything including sugar, maize, chicken, eggs, fish and pineapples. For decades, Kenya has enjoyed balance of trade surplus with its leading trading partners in the region except for the recent increase in imports from Uganda and Tanzania without reciprocating the same in exports.
According to world integrated trade solution (WITS) website, Kenya’s imports are majorly consumer goods at 63.43% of total imports whereas capital goods and raw materials only account for 5.47% and 19.60% of total imports respectively. Kenya holds potential in exporting already processed agricultural produce, refined minerals and services including education, health and financial services. With the ongoing efforts to set-up a manufacturing factory for Covid-19 vaccines, Kenya opens another chapter of producing pharmaceutical drugs for local and export markets. The country’s strategic location in the Eastern Africa region can be tapped in increasing export sales. This will be facilitated by the ongoing infrastructural developments such as LAPSSET linking Kenya with its neighbors. Kenya needs to draw lessons from Dubai which has successfully diversified its export revenue and has now mobilized the world to trade with her.
From being awarded Nigeria’s second-highest honour to being the richest man in Africa 10 years standing, Aliko Dangote seems to be an ever-expanding brand; an empire all by himself. Industrious (quite literally), innovative and entrepreneurial are a few words to describe him, especially since we keep discovering greater depths to his abilities and vision.
Born in 1957 in Nigeria, Dangote rose from a wealthy Muslim family. His father passed when he was 8 years old, after which he was raised by his maternal grandfather, the son of West Africa’s richest man then. Despite his wealthy background, what Dangote reaped most from his upbringing was a wealthy man’s mindset, as opposed to his money. As a primary school child, he would buy and sell sweets to other children just to make money. Driven by this passion, he went on to pursue a degree in business studies and administration from Al-Azhar University in Egypt.
At 21 years old he went back to Lagos, Nigeria, and was able to convince his uncle to loan him capital that he used to start a trading business. And thus began the Dangote empire. Over the years, he would import in wholesale and sell a variety of products, including cement, sugar, rice, flour and iron. He then studied manufacturing in 1996 and towards the beginning of a century started putting together his manufacturing plants. He bought a government cement factory that he has established to become Sub-Saharan Africa’s largest of its kind, now part of Dangote Cement. His other businesses include Dangote Sugar and Nascon Allied Industries, all a part of the Dangote Group, the largest conglomerate in West Africa.
Unlike many businessmen, Dangote has made it his purpose to invest, re-invest and build in Africa. His businesses are the number one single source of employment in Nigeria and this will be the case as he expands through the Sub-Saharan territory. He has also stood out as a philanthropist, partnering with the Bill and Melinda Gates Foundation to eradicate polio in Africa. An interesting fact to also note is the kind of diversification he is willing to undertake to facilitate growth. Armed with the skill and resources, he targets the industry and takes it by its horns. ‘Go big or go home’ might even be a mantra he keeps reciting to himself. And to young ambitious entrepreneurs, he might say ‘Just Start’.
Kenya’s corporate scene was transformed significantly in 2015 following the amendment of the company’s act. This saw many listed public companies change their names with most now ending with the term ‘Plc’. Another newly introduced amendment, the first in East Africa was share buybacks. This clause gave leeway for companies to buy their shares in the open market. What followed was several companies amending their articles allowing them to buy their shares as early as 2017.
In the recent past, two closely related entities announced their intentions of buying up to 10% of their issued shares in the next 18 months. This brings us to the question, are Kenyan companies ready for stock buybacks? In my opinion, NO! Kindly follow my way of thinking to fully understand the basis of my assertion.
Firstly, we are a developing economy which means that the government and companies are competing for funds in the capital market. This provides the necessary funds for investment in infrastructure and growth. As such funds are hard to come by for some firms forcing them to rely heavily on retained earnings. Should a firm dig into its retained earnings to buy out its shareholders, they expose themselves to liquidity risk in an environment where the cost of borrowing is high. Therefore, stock buybacks are not ideal.
Another reason is that investors like gees that lay golden eggs. They will therefore invest in stocks of innovative firms that plough back some of their profits into research and development, guaranteeing future income in form of dividends and capital gains. Buying out your shareholders simply means that you are not innovative enough to leverage future opportunities that come with technology. Of the two firms buying its stocks, one has for long relied on an old business model. This has seen its revenues and profits decline in recent years as social media went for their primary source of revenue.
Since stock buybacks are a form of financial engineering, a firm’s investment ratios significantly increase after exercising this operation. As such, holdings of remaining shareholders increase as well. The earnings may remain flat, while their price multiples increase with little or no value-added in the form of advanced technology, increased market share, better earnings, and new investments.
Also, share buybacks will at one point give rise to agency problems. Since most managers’ performance is pegged on aspects such as the stock price, most will implement buybacks to access their bonuses. They may also use leverage to finance these buybacks thus exposing investors to financial risks.
To sum up my opinion, our operating environment is very fragile and any major shocks expose most firms to uncertainties that may cause liquidity challenges. Share buybacks are therefore not sustainable for most of our listed firms. A Story is told of the US aviation industry. As everyone knows, airlines are susceptible to liquidity challenges and lower profit margins. On the contrary, these major airlines have spent their free cash flows, (to a tune of $45bn) on stock buybacks since 2014. When the coronavirus pandemic hit, they sought bailouts to the tune of $50bn in taxpayers’ money. They got away with it. Is our government ready to bailout such firms should things go south because of using their cash to buy out their investors? Your guess is as good as mine.