Happy New Year!!
Google agrees to settle $5bn lawsuit over 'incognito' mode
Google has agreed to settle a consumer privacy lawsuit that seeks a minimum of $5 billion in damages, alleging that the tech giant tracked the data of users who believed they were privately browsing the internet.
The focal point of the legal action was Google's Chrome browser's "incognito" mode, which the plaintiffs argued provided users with a misleading perception that their online activities were not being monitored by the company based in Silicon Valley.
Despite this assurance, internal Google emails presented during the lawsuit revealed that individuals using incognito mode were indeed being monitored by the search and advertising giant for purposes such as measuring web traffic and facilitating ad sales.
According to a court filing, the judge verified that Google's attorneys have reached a preliminary agreement to settle the class-action lawsuit, initially filed in 2020, asserting that potentially "millions of individuals" had been impacted. The plaintiffs' legal team aimed to secure a minimum of $5,000 for each user allegedly tracked by Google Analytics or Ad Manager services, even in private browsing mode and not logged into their Google accounts.
While this could have amounted to at least $5 billion, the final settlement figure is expected to fall short of that amount. However, the specific settlement sum was not disclosed in the preliminary agreement between the involved parties.
TAX
Consumption taxes growth declined to an eight-year low
According to data released by the Kenya National Bureau of Statistics (KNBS), tax collections from various products experienced a meager growth of 2.8 percent in the third quarter, concluding in September 2023. This marks the lowest expansion observed since a comparable quarter in 2015. The only other recent instance of such sluggish growth was recorded in 2020, during the peak of the economic slowdown caused by the Covid-19 pandemic.
KNBS categorizes taxes on products as payments per unit of goods and services produced, encompassing value-added tax (VAT), excise duty on airtime, taxes on beverages and tobacco, and levies on petroleum products.
The Kenya Revenue Authority collected Sh217.3 billion in consumption taxes during the latest review period, showing a slight increase from Sh211.3 billion reported a year earlier.
This data sheds light on the challenges faced by the taxation system in maintaining substantial growth in the specified period.
The deceleration in tax collections is further supported by information from the National Treasury, revealing that tax collections for the first quarter of the 2023/24 financial year exhibited the slowest pace of increase since 2018, excluding the pandemic-affected year.
CAPITAL MARKETS
Nairobi Securities Exchange Witnesses Significant Wealth Erosion in 2023
The Nairobi Securities Exchange (NSE) experienced a substantial 27.5% decline in paper wealth, amounting to a staggering Sh547 billion during 2023. Investors faced a challenging year as the bear run continued its adverse impact on equities portfolios.
Market data reveals that the NSE concluded the final trading day of 2023 with a market valuation of Sh1.439 trillion.
This marked a notable drop from its valuation of Sh1.986 trillion at the close of 2022. The unsettling decline in paper wealth underscores the economic challenges that investors navigated throughout the year, prompting a reassessment of investment strategies and risk management.
The Nairobi All Share Index (NASI), a comprehensive indicator tracking the performance of all stocks on the exchange, mirrored the overall market downturn with a corresponding 27.5% fall.
Moreover, the NSE 20 and NSE 25, representing the top 20 and 25 listed firms, witnessed contractions of 10.4% and 24% respectively. The NASI index concluded the year at 92.11 points, while the NSE 20 and NSE 25 closed at 1,501.16 and 2,380.16 points, adding further nuances to the complex landscape of the financial markets in Nairobi.
CAPITAL MARKETS
Banks cautious on loans repricing in New Year
Commercial banks are confronted with challenging decisions as they step into the New Year, grappling with the dilemma of either transferring the heightened cost of funds to customers or maintaining lending rates at relative stability to prevent a surge in loan defaults.
Throughout 2023, the market experienced three successive increases in interest rates mandated by the Central Bank of Kenya (CBK), with the most recent adjustment occurring on December 5. This development adds a layer of complexity for both borrowers and lenders, particularly considering the alarming rate of loan defaults that had reached levels not witnessed in 16 years.
In the wake of these interest rate hikes and growing concerns about loan defaults, banks find themselves at a crossroads. Many have proactively increased their provisions for potential loan defaults. However, the impending challenge lies in the delicate evaluation of how much of the central bank rate (CBR) increase, from 10.5 percent to 12.5 percent, can be passed on to customers without discouraging them from fulfilling their loan obligations.
Furthermore, banks are closely monitoring the pricing dynamics of government securities, which may entice them to curtail lending to the private sector. The allure of capitalizing on the government's robust appetite for debt could prompt banks to divert funds towards treasury bills and treasury bonds. This intricate balancing act poses the risk of some banks delaying the comprehensive repricing of loans in alignment with the CBR, now at its highest level since September 5, 2012.
ENERGY
Globeleq set to Construct Menengai Geothermal Plant after Sh18bn funding
UK-based renewable power company Globeleq has achieved financial closure for its $117 million (Sh18.34 billion) geothermal plant in Menengai, marking a significant milestone that sets the stage for the commencement of construction in the upcoming weeks. The announcement, made by the firm on Thursday, brings an end to the delays that previously hindered Globeleq from meeting its target of initiating the construction of the 35-megawatt plant in the latter half of 2023.
Globeleq had entered into a financing agreement with three financiers, including the African Development Bank (AfDB), in December 2022. However, the financial closure process faced obstacles as the Kenyan government experienced delays in meeting certain undisclosed conditions. With the financial breakthrough now secured, Globeleq is poised to move forward with the construction, contributing to the expansion of renewable energy infrastructure in the region.
Globeleq CEO Mike Scholey extended thanks to various partners and stakeholders, including GDC, the senior lenders at AfDB, Finnfund, Southern African Trade and Development Bank, the engineering procurement and construction contractor Toyota Tsusho Corporation, and the off-taker, Kenya Power.
WHAT YOU MIGHT HAVE MISSED
Ethiopia and Somaliland signed a Memorandum of Understanding (MoU) on economic cooperation
Ethiopia and Somaliland inked an initial agreement marking a significant development in their bilateral relations. The accord grants Ethiopia access to the Red Sea port of Berbera, a strategic move that diversifies Ethiopia's maritime trade routes beyond its reliance on neighboring Djibouti.
Prime Minister Abiy Ahmed announced the successful negotiation during a signing ceremony in Addis Ababa with Somaliland President Muse Bihi Abdi. The Memorandum of Understanding (MoU) solidifies the commitment, and President Abdi disclosed that Ethiopia is set to become the first nation to formally recognize Somaliland's independence in the near future.
Additionally, the accord involves a unique aspect where Somaliland is slated to receive a stake in the state-owned Ethiopian Airlines. While details remain scarce, this inclusion hints at broader economic cooperation between the two entities.
Electronic Tax Invoicing for Non-VAT Registered Persons
Starting 1st January 2024, any business expenditure lacking a valid electronic tax invoice through eTIMS will NOT be eligible for income tax deduction. However, onboarding to eTIMS for non-VAT registered taxpayers will be open until March 31, 2024.
Legal: List of Court Cases to watch in 2024
a. Housing Levy - Appeal against the declaration that the housing levy is unconstitutional (in the Court of Appeal)
b. Petition to cap taxes on salaries at 20% for individuals and 30% for corporates ( In the High Court)
c. Privatisation: Legal suit challenging the government’s plan to privatize 11 state corporations and the ports of Lamu and Mombasa ( In the High Court)