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Thursday, 20th September 2018
3:31:56pm

Economy

Articles related to economy

Kenya’s president has proposed hiking taxes on mobile money transfer services and other money transfer services, documents sent to parliament  this month showed, amid a tussle in government over how to boost revenues without hurting the poor.

Uhuru Kenyatta proposed increasing the excise duty on mobile money transfer fees from 10 percent to 12 percent, documents reviewed by Reuters showed. Parliament is set to debate and vote on the measure on Thursday.

The latest proposal comes as Kenyatta, re-elected last year after an extended and bloody election, seeks to implement planned tax hikes and other measures in this year’s budget that were designed to fund a range of government development goals including universal healthcare and affordable housing.

Lawmakers and some members of the public have resisted the measures, particularly a new tax on petroleum products. Kenyatta said on Friday the tax is necessary, but that he wanted to cut it to 8 percent from 16 percent.

Kenya’s biggest mobile phone operator Safaricom said in June it is opposed to a proposed tax rise on mobile phone-based transfers, arguing that it would likely mostly hurt the poor, most of whom do not have bank accounts and rely on mobile transfer services such as Safaricom’s M-Pesa.

M-Pesa, which Safaricom pioneered in 2007, now has around 25 million users in the East African nation of 45 million, handling billions of shillings in daily transfer volumes. The model has been copied in other regional markets and beyond.

Last month, lawmakers voted to delay the hike in fuel taxes for two more years, but the national revenue authority started collecting the tax anyway, triggering a strike by fuel transporters and public anger. 

They also voted to retain an interest rate cap that the International Monetary Fund has said must be scrapped or modified in return for a new standby arrangement. The existing standby arrangement expired this month.

Kenyan businesses and ordinary people routinely complain of a heavy tax burden.

Early this month, the Kenya National Chamber of Commerce and Industry (KNCCI) said the government could widen the tax base and increase the rate of tax compliance to 50 percent from the current 17 percent.

It also urged the government to cut expenditure, reduce wastage of public funds and deal with corruption, which some past studies have found account for the loss of up to a third of the government’s annual budget.

-Reuters

London-based emerging market fund Gemcorp Group said on Monday it had extended a $250 million loan to Zimbabwe to help the country import essential goods like electricity, fuel and medicine, the company’s CEO said.

The southern African nation is facing its worst shortages of cash dollars since it dumped its own currency in 2009 in favour of the U.S. currency. This has made it difficult for companies, including mines, to pay for imports.

Zimbabwe’s backlog for foreign payments is more than $600 million, according to the central bank.

Gemcorp was formed in 2014 by Atanas Bostandjiev, a former executive of Russian investment bank VTB Capital, part of banking group VTB.

“With this facility, we are financing and coordinating the delivery of essential goods to help support the Zimbabwean economy,” Bostandjiev said in a statement.

Zimbabwe’s new Finance Minister Minister Mthuli Ncube said the loan was a show of confidence in an economy buffeted by a serious liquidity crisis and unemployment above 80 percent.

The former British colony became a pariah under Robert Mugabe’s nearly four-decade authoritarian rule after it began to default on loans from foreign lenders like the International Monetary Fund and World Bank.

Mugabe was forced to resign after a coup in November, paving the way for Emmerson Mnangagwa, who went on to be elected president in a disputed vote held on July 30.

Without loans from global lenders, Zimbabwe has struggled to attract credit lines and external investment required to reboot its economy.

In May this year, Britain’s development finance institution CDC became the first British company to extend a direct commercial loan to Zimbabwe in more than two decades, making made available a $100 million facility to private firms through Standard Chartered Bank.

“The granting of the facility by Gemcorp is a strong signal by foreign investors of their growing confidence in Zimbabwe. I expect more investors to follow suit,” Ncube said in a statement. 

Ncube last week said he would accelerate plans to pay $1.8 billion arrears to the World Bank and the African Development Bank to rebuild investor confidence.

-Reuters

Moody’s said on Thursday there was little chance it would strip South Africa of its investment grade credit rating this year - giving some respite to President Cyril Ramaphosa after the economy moved into recession.

But the agency - the last of the top three ratings firms to have Pretoria’s long-term foreign-currency debt at investment grade - said it was critical that South Africa keep its finances tight if it wanted to keep that rating in the longer term.

South Africa entered recession for the first time since 2009, data showed last week, a particular blow for Ramaphosa who has said he is trying to revive the economy after years of stagnation under former president Jacob Zuma.

Moody’s said the recovery in South Africa’s economy would be slow - slower than the Treasury’s estimate of 1.5 percent growth for 2018 after a surprise contraction in the first two quarters.

“Growth is going to be below 1 percent, to what extent it’s difficult to say,” Lucie Villa, Moody’s lead analyst for South Africa, told the agency’s annual Sub-Saharan Africa conference, referring to this calendar year.

But she brushed off talk of a possible downgrade at a review scheduled for next month.

“South Africa has a stable outlook ... there is little chance of a rating action,” she said.

Finance Minister Nhlanhla Nene told the same conference that South Africa was committed to prudent fiscal policy aimed at stabilising the ratio of its debt to gross domestic product.

Nene also said the government was working on a package of measures to stimulate economic growth by reprioritising existing resources.

“The focus on trying to improve on the side of growth because that creates space for us to spend,” he said.

RECESSION

Since the recession shock last week, economic data has pointed to a mixed start to the third quarter.

Retail sales for July showed an expansion in activity, but mining data and business confidence figures have been weak.

Africa’s most developed economy needs faster economic growth if it is to reduce high unemployment - currently at 27 percent - a hot-button issue ahead of national elections in 2019.

Villa said two ratings strengths for South Africa were that its government debt had a long maturity and that relatively little of the debt was foreign-currency denominated.

She said Moody’s would pay close attention to next month’s budget statement to assess the government’s commitment to fiscal consolidation.

Plans by the ruling African National Congress (ANC) to nationalise the Reserve Bank were not “rating-relevant,” assuming the bank’s mandate would not be affected, Villa added.

The central bank has said any change of ownership would not affect its mandate or independence.

-Reuters       

South African power utility Eskom said on Monday that it had less than 20 days of coal supplies at 10 of its 15 coal-fired power stations, posing a threat to national power supplies. 

“Out of our 15 coal-fired power stations, 10 of them have less than 20 days. Clearly this is contrary to what the regulator has prescribed,” Eskom spokesman Khulu Phasiwe said.  

Cash-strapped Eskom is critical to Africa’s most industrialised economy as it supplies more than 90 percent of its power and is one of its most indebted state firms.

-Reuters

President Cyril Ramaphosa said on Tuesday there was no reason to believe that any country would impose sanctions on South Africa over the government’s plans to redistribute land to address racial disparities in ownership.

Ramaphosa announced in late July that the ruling African National Congress (ANC) plans to change the constitution to allow the expropriation of land without compensation, as whites still own the majority of South Africa’s land.

U.S. President Donald Trump waded into South Africa’s high-octane land debate last month when he asked his Secretary of State Mike Pompeo to study South African “land and farm seizures” in a late-night tweet.

Some analysts have since speculated that Trump’s government could impose economic sanctions on South Africa to express its disapproval with the ANC’s land reform agenda.

“We have no reason to believe that any country would impose sanctions on South Africa for any actions that we take, actions that are constitutional, that are lawful and consistent with international law,” Ramaphosa said in parliament while answering a question from an opposition party on his government’s land reform plans. 

Ramaphosa added that the government was ready to discuss its land reform plans with any country. He repeated that land reform would follow a parliamentary process and that the government would not tolerate “land grabs”.

-Reuters

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