Kenya Threatened to Slip from 3rd Largest Sub-Saharan Economy
30 January 2023
Happy New Week!
IMF projects that Kenya might slip from 3rd Largest Sub-Saharan Economy
Projections by the International Monetary Fund (IMF) showed that Kenya is set to be replaced as the third-largest economy in sub-Saharan Africa by Angola and Ethiopia.
According to the IMF projections, the economies of Ethiopia and Angola are expected to expand by 13.5% and 8.6% respectively on dollar terms this year. However, it projects that Kenya will record a slower growth of 2.4%
The IMF projects Kenya’s GDP to hit $117.6 billion this year, behind Nigeria ($574 billion), South Africa ($422 billion), Angola ($135 billion), and Ethiopia ($126.2 billion).
Possible Effects of a slip for Kenya
The relegation of Kenya will weaken its hand in the race for foreign direct investment (FDI).
Kenya's power to tap investors will drop. These investors are enticed by populations with more buying power.
ECONOMY
The Central Bank of Kenya faces debt repayment pressure
A report by Business Daily revealed that a World Bank Tracker on public debt showed that Kenya’s external debt service obligations this month (combining interest and principal repayments) stand at Ksh 63 billion ($506.7 million).
As a result, (CBK) might have to use its usable foreign currency reserves for foreign debt repayment and face additional pressure to keep the import cover above the minimum threshold.
Note:
At the end of last week, The CBK official reserve stood at $7.38 billion (Ksh 917 billion) which was equivalent to 4.13 months of import cover.
The East African Community recommended import cover is 4.5 months.
Kenya’s threshold is 4 months import cover.
Significant debt repayments for January
$409.86 million (Ksh 50.9 billion) to China. This consists of interest and principal repayments.
The Eurobond interest due in January stands at $33.5 million (Ksh 16.7 billion), with the loan carrying an interest rate of 6.3%.
Ksh 2.5 billion ($20.5 million) to the Trade and Development Bank.
Ksh 2.4 billion ($19.08 million) to France.
Sh1.25 billion ($10.05 million) due to the International Development Association, the World Bank’s concessional lending arm.
ACQUISITIONS
Diageo Kenya gets approval for Proposed EABL Acquisition
Diageo Kenya, a unit of Diageo Plc (DGE.L), announced that it had received regulatory approval to buy an extra 14.97% stake in Kenya's East African Breweries (EABL.NR).
The stake, representing up to 118.4 million shares at an offer price of ksh 192.00 per share, would push Diageo's shareholding in East African Breweries by a third to 65%.
Things to note:
Diageo currently owns 50.03% of EABL
Diageo acquired majority control of EABL in 2000
DIGITAL LENDING
CBK Hold-Up Leaves Digital Lenders in Limbo
Digital lenders protested delays in getting operational licences from the Central Bank of Kenya (CBK).
An estimated 278 digital credit providers (DCPs) are still waiting for approval from the CBK after filing applications last year.
Despite not having operational licenses, the 278 firms are still allowed to conduct business pending licensing from the CBK. However, the lack of licensing has exposed the firms to credibility risks.
Why Digital Lenders urgently need licenses
As of 15 December 2022, Google declined to host mobile loan applications without CBK permits on its PlayStore. This means millions of short-term borrowers are unable to download or get an update on personal loan apps from lenders who are yet to get licences.
Investors are increasingly demanding CBK certification before investing in their companies.
LEGAL
Supreme Court Judgments last week
Last week, the Supreme Court delivered 6 Judgements. Here are summary notes of three of the decisions:
You can access official media summaries for all the cases HerePETITION NO. 26 OF 2019 (CONSOLIDATED WITH PETITION NOs. 34 & 35 OF 2019 - (on violation of human rights by previous regimes)
In this case, the Appellants sought compensation from the current Government for violation of their human rights in 1992. The appellants are a group of women who participated in a demonstration by going on a hunger strike to urge for the release of the then political prisoners. They alleged that on 3rd March, 1992 they were brutally attacked, tortured and assaulted by over 100 police officers and General Service Unit (GSU) officers
The supreme court judgment ordered the Government of Kenya to pay damages assessed at Kshs. 2,500,000.00/- to each of the appellants for the violation of their human rights by the previous regime.
MARY NYAMBURA PAUL VS. PAUL OGARI MAYAKA, SC PETITION NO. 9 OF 2021 - (The presumption of marriage)
The major issue was the concept of Presumption of Marriage. The Supreme court held that:
there exists relationships where couples cohabit with no intention whatsoever of contracting a marriage; and that a marriage is a voluntary union and that courts cannot impose ‘a marriage’ on unwilling persons.
Does the presumption of marriage still apply in Kenya ? yes. However, The court stated that the circumstances in which a presumption of marriage can be upheld are limited.
JOSEPH OMBOGI OGENTOTO v. MARTHA BOSIBORI OGENTOTO SC PETITION NO. 11 OF 2020 (on division of matrimonial property after dissolution of marriage)
The Major issue was the division of property between spouses upon dissolution of marriage.
It is important to note that in this case, the Matrimonial Properties Act could not apply because the cause of action arose before the commencement of the Act. (Commencement date: 16 January 2014)
The Supreme Court held that in cases arising before the commencement of the Matrimonial Properties Act, the principles in Echaria v Echaria [2007] eKLR would remain the basis within which matrimonial property should be distributed.
Echaria v Echaria: the Court ruled that where the disputed property is in the name of one spouse, the beneficial share of each spouse would ultimately depend on their proven respective proportions of financial contribution, either direct or indirect, towards the acquisition of the property. The fact of marriage alone does not entitle a spouse to a beneficial interest in the property registered in the name of the other, nor is the performance of domestic duties.
The court also ruled that in cases where each spouse has made a substantial but unascertainable contribution, it may be equitable to apply the maxim “Equality is equity” and regard them as being entitled to a half of the share each.
WHAT YOU MUST HAVE MISSED LAST WEEK
Safaricom announces new Chair
Safaricom's Board of Directors elected Adil Arshed Khawaja as Chairman of the Board effective January 26, 2023. Mr. Khawaja, who was appointed Safaricom director in December last year, steps in to replace former Board Chairman and director John Ngumi who stepped down from the position early this year, barely five months after his appointment.
High Court Clears the Way for Bank-Mobile money Transaction Fees
The High Court declined to extend the temporary orders that had stopped the reintroduction of Bank-Mobile money charges.
The court had issued orders on 12 January 2023, temporarily stopping the reintroduction of the charges, pending a hearing and determination of a petition challenging the reintroduction.
Kenya Power has proposed plans to increase electricity prices
Last week, Kenya Power proposed plans to increase electricity prices by 78% in April. Kenya Power is now seeking approval from EPRA (The Energy and Petroleum Regulatory Authority)
If approved, Households consuming 50 units a month will pay Ksh1,846 up from the current Ksh1,035 while homes and businesses using 100 units will pay Ksh 3,692, up from Ksh2,638.
The Competition Authority of Kenya (CAK) concluded a settlement agreement with Unilever Kenya Limited (Unilever) for alleged abuse of buyer power.
The CAK and Unilever reached a settlement agreement for alleged abuse of buyer power.
what happened: Unilever had unilaterally and forcefully revised payment terms with its small and medium sized suppliers while exempting its large and foreign suppliers
Read full report by Bowmans to access the settlement terms.