Ghana from an African Reinassance country to a bankrupt nation

[Globalcitizen12]

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Listening to BBC and it is featuring Ghana economic problems. It looks like Ghana cannot even afford power for 24 hours. Manufacturing sector down 2% because of lack of power. Ghana currency has depreciated fast than fufu left out in Accra humidity. What caused this is drastic drop in commodity prices Cocoa, Gold, Gas and Oil. The lack of power has dropped Ghana GDP by 4%.

Mahama is calling on IMF to bail him out.

This what happens when a weak deputy president steals elections and takes on a job that the deputy cannot handle. Death of Atta Mills really messed Ghana economy and future

[Georgesoros]

Will this happen to Kenya?  Nah!!!

[Globalcitizen12]

It has happened ..

[jakoyo]

When Ghana discovered oil, they went on a borrowing and spending binge.  Spend spend spend spend. Even before they could get the oil out if the ground. Everything was pegged on oil price of $100 dollars per barrel. When oil price dropped and remained below $ 50.00 per barrel ,  shiet hit the fan. Lenders want their money. Govt has no source of income.

[RV Pundit]

Precisely. The bedrock of any economy is well diversified economy. Kenyan can withstand any shock thanks to that. Those that depend on one or two commodities..like Zambia, Nigeria, Ghana, Angola, Sudan...name them...are just one bad luck away from crisis.

When Ghana discovered oil, they went on a borrowing and spending binge.  Spend spend spend spend. Even before they could get the oil out if the ground. Everything was pegged on oil price of $100 dollars per barrel. When oil price dropped and remained below $ 50.00 per barrel ,  shiet hit the fan. Lenders want their money. Govt has no source of income.

[Globalcitizen12]

Kenya has borrowed 500 billion to finance railway line that was supposed to be used to transport commodities out of EA. Our reccurent exipenditure is out of control

[RV Pundit]

We started paying for the railway long time ago...with about 25-40b annually ...collected from railway dev levy that every importer and exporter pays.. with our revised GDP, our debts are sustainable.

Kenya has borrowed 500 billion to finance railway line that was supposed to be used to transport commodities out of EA. Our reccurent exipenditure is out of control

[Globalcitizen12]

You are saying in 15 years time Kenya will have repaid the debt

[RV Pundit]

pretty much...find out how much we have collected from "railway development levy"...RDL..if  we collect 1.5% of the import value...nearly 1.5-2 trillion...then this can be self-financing..without the need to chip in our taxes. RDL can easily collect 30-40B annually.....and that in 15 yrs....can repay the loan.It only fair that those who use the railway line to import and export stuff pay for it.....so we don't burden somebody in Mandera who care less about the railway.

You are saying in 15 years time Kenya will have repaid the debt

[MOON Ki]

We started paying for the railway long time ago...with about 25-40b annually ...collected from railway dev levy that every importer and exporter pays.. with our revised GDP, our debts are sustainable.

The Railway Development Levy came into existence in 2013 (Finance Act 2013, No. 38 of 2013).  So there have been only 2 years of collection ... not what I would call "long time ago".   Also, exporters do not pay; the act states that

The levy shall be at the rate of 1.5 percent of the customs value of the goods and shall be paid by the importer of such goods at the time of entering the goods for home use.

RV Pundit:

pretty much...find out how much we have collected from "railway development levy"...RDL..if  we collect 1.5% of the import value...nearly 1.5-2 trillion...then this can be self-financing..without the need to chip in our taxes. RDL can easily collect 30-40B annually.....and that in 15 yrs....can repay the loan.It only fair that those who use the railway line to import and export stuff pay for it.....so we don't burden somebody in Mandera who care less about the railway.

I see several issues with that optimistic scenario:

First, the 1.5% levy is only in "goods imported for home use", not on all imported goods.

Second, the levy has nothing to do with "who uses the railway"; it simply adds a tax to goods in a certain category, regardless of where they go and how they get there.  "Home goods"  that arrive in Mombasa and end up in Mandera---by road or camel---are taxed in the same manner as similar goods that end up, via train, in Nairobi.    On the other hand, as I  have noted above, exporters don't pay that levy, regardless of their use of the railway.   

Third, customs duties are in the category of "easy prediction" and "easy collection", the latter being from the fact that the importer must pay at the time of goods-entry.   KRA, by looking at past trends of whatever is imported in that category, should be able to easily make good predictions of what it can reasonably expect to collect.  And collection ought not to be a large problem; therefore the difference between "target" and "collected" ought to be small.

Fourth (if I recall correctly):  KRA's target for 2013/2014 was Sh 20 billion; for 2014/2015 it was  Sh 22 billion.   I believe both targets were missed and "collected" was less (although not by huge amounts).   So:

- I don't see how "RDL can easily collect 30-40B annually" when it is barely managing to get easily predictable and easily collectable amounts that are well below that range.

-  A substantial improvement over current rates cannot be achieved through "better collection", because there is almost no room there.   On the other hand, KRA cannot make Kenyans suddenly import 1.5 to 2 times what they require for "home use".

[RV Pundit]

Thanks for the nitty grity. I am more the big picture guy and it good to have guys nit picking the little salient points..with ample helping of Mr. Google. You're of course wrong when you use the total projected tax to allude that RDL has fallen short of projection. It has always overshot its projection. We are collecting anything close to or more than 30B annually from RDL..and if we stick to it..we can repay the chinese debts without breaking a sweat.

http://www.cnbcafrica.com/news/east-africa/2014/07/16/kenya%E2%80%99s-railway-levy-collection-exceeds-target/

We started paying for the railway long time ago...with about 25-40b annually ...collected from railway dev levy that every importer and exporter pays.. with our revised GDP, our debts are sustainable.

The Railway Development Levy came into existence in 2013 (Finance Act 2013, No. 38 of 2013).  So there have been only 2 years of collection ... not what I would call "long time ago".   Also, exporters do not pay; the act states that

The levy shall be at the rate of 1.5 percent of the customs value of the goods and shall be paid by the importer of such goods at the time of entering the goods for home use.

RV Pundit:

pretty much...find out how much we have collected from "railway development levy"...RDL..if  we collect 1.5% of the import value...nearly 1.5-2 trillion...then this can be self-financing..without the need to chip in our taxes. RDL can easily collect 30-40B annually.....and that in 15 yrs....can repay the loan.It only fair that those who use the railway line to import and export stuff pay for it.....so we don't burden somebody in Mandera who care less about the railway.

I see several issues with that optimistic scenario:

First, the 1.5% levy is only in "goods imported for home use", not on all imported goods.

Second, the levy has nothing to do with "who uses the railway"; it simply adds a tax to goods in a certain category, regardless of where they go and how they get there.  "Home goods"  that arrive in Mombasa and end up in Mandera---by road or camel---are taxed in the same manner as similar goods that end up, via train, in Nairobi.    On the other hand, as I  have noted above, exporters don't pay that levy, regardless of their use of the railway.   

Third, customs duties are in the category of "easy prediction" and "easy collection", the latter being from the fact that the importer must pay at the time of goods-entry.   KRA, by looking at past trends of whatever is imported in that category, should be able to easily make good predictions of what it can reasonably expect to collect.  And collection ought not to be a large problem; therefore the difference between "target" and "collected" ought to be small.

Fourth (if I recall correctly):  KRA's target for 2013/2014 was Sh 20 billion; for 2014/2015 it was  Sh 22 billion.   I believe both targets were missed and "collected" was less (although not by huge amounts).   So:

- I don't see how "RDL can easily collect 30-40B annually" when it is barely managing to get easily predictable and easily collectable amounts that are well below that range.

-  A substantial improvement over current rates cannot be achieved through "better collection", because there is almost no room there.   On the other hand, KRA cannot make Kenyans suddenly import 1.5 to 2 times what they require for "home use".

[MOON Ki]

You're of course wrong when you use the total projected tax to allude that RDL has fallen short of projection. It has always overshot its projection. We are collecting anything close to or more than 30B annually from RDL..and if we stick to it..we can repay the chinese debts without breaking a sweat.

What gives you the idea that I am using total tax to discuss the RDL?  Overshot what projection?   And where do you get Sh. 30 billion annually?

Let's take the most recent financial year.    The figures will be found in the treasury document Quarterly Economic and Budgetary Review, Fourth Quarter, Financial Year 2014/2015 (Aug 2015).   Go page 18, and look at Table 5.   For RDL:

- Target for 2014/2015: Sh. 22.9 billion
- Actual for 2014/2015:  Sh. 18.4 billion

For 2013/2014, the target was Sh. 20.1 billion, collected was Sh. 19.7 billion.

[RV Pundit]

You had not provided any link. I have been reading about RDL (in news) since 2013  and everytime I see it passing it projections. This year it projected to collected 26B. If we keep collecting at that rate of progression, we damn should repay the railway line in 20yrs without touching taxes.

What gives you the idea that I am using total tax to discuss the RDL?   And where do you get Sh. 30 billion annually?

Let's take the most recent financial year.    The figures will be found in the treasury document Quarterly Economic and Budgetary Review, Fourth Quarter, Financial Year 2014/2015.   Go page 18, and look at Table 5:

- Target for 2014/2015: Sh. 22.9 billion
- Actual for 2014/2015:  Sh. 18.4 billion


For 2013/2014, the target was Sh. 20.1 billion, collected was Sh. 19.7 billion.

[RV Pundit]

Railway Development Levy (RDL) is an interesting one. Introduced last year to raise funds for the railway project, it has undoubtedly been a runaway success. Indeed it is the only tax that has consistently exceeded target in the last year
Read more at: http://www.standardmedia.co.ke/article/2000124205/why-kenya-revenue-authority-fails-to-meet-its-tax-targets

[MOON Ki]

You had not provided any link. I have been reading about RDL (in news) since 2013  and everytime I see it passing it projections.

I don't know what you have been reading or where.   I will go by the actual figures from the Treasury; if you want to dispute them, please go ahead and provide a basis.   You can find the report here:

http://www.treasury.go.ke/downloads/category/28-quarterly-budget-review.html

This year it projected to collected 26B. If we keep collecting at that rate of progression, we damn should repay the railway line in 20yrs without touching taxes.

What does the Sh. 26 billion mean?    In 2013/2014, the target was Sh. 20.1 billion and collected was Sh. 19.7 billion.  In 2014/2015, the target went to Sh. 22 billion, collected was Sh 18.4 billion.   So targets are going up but less is being collected!

[MOON Ki]

Railway Development Levy (RDL) is an interesting one. Introduced last year to raise funds for the railway project, it has undoubtedly been a runaway success. Indeed it is the only tax that has consistently exceeded target in the last year
Read more at: http://www.standardmedia.co.ke/article/2000124205/why-kenya-revenue-authority-fails-to-meet-its-tax-targets

(As always, I "admire" the "determination" you show once you've made up your mind.)

That newspaper article indulges in hyperbole without giving any figures.   The Treasury report, to which I have provided the link, provides the actual figures.   I'll go with  real figures from the Treasury over fantasy  from The Standard.

[Kadudu]

Taxes are never good for business. They only make the end products more expensive. Ask traders and manufacturers in Kenya today, the taxes on all products are are on an all time high. Manufacturing is becvoming very expensive in comparison to neighbouring countries.

Railway Development Levy (RDL) is an interesting one. Introduced last year to raise funds for the railway project, it has undoubtedly been a runaway success. Indeed it is the only tax that has consistently exceeded target in the last year
Read more at: http://www.standardmedia.co.ke/article/2000124205/why-kenya-revenue-authority-fails-to-meet-its-tax-targets

[RV Pundit]

Sounds like little details. Focus on the big picture. For once. 18.99 versu 21B is called nitpicking. That is not very important. What is important is that RDL is essentially paying off SGR. A little pain on every importer but the economy is getting a brand new  railway which will reduce the cost of goods eventually. Right now our transport cost alone constitute nearly 50% of the cost of goods....against 15% which is the world average.

You had not provided any link. I have been reading about RDL (in news) since 2013  and everytime I see it passing it projections.

I don't know what you have been reading or where.   I will go by the actual figures from the Treasury; if you want to dispute them, please go ahead and provide a basis.   You can find the report here:

http://www.treasury.go.ke/downloads/category/28-quarterly-budget-review.html

This year it projected to collected 26B. If we keep collecting at that rate of progression, we damn should repay the railway line in 20yrs without touching taxes.

What does the Sh. 26 billion mean?    In 2013/2014, the target was Sh. 20.1 billion and collected was Sh. 19.7 billion.  In 2014/2015, the target went to Sh. 22 billion, collected was Sh 18.4 billion.   So targets are going up but less is being collected!

[RV Pundit]

Not all products. But certain products, cars, beer, cigaretters, bottle waters,. But certainly under Jubilee INFLATION has come down. Cost of Unga & Sugar has been stuck there and has actually reduced. Cost of electricity is down (that should have manufactures smiling) and now electricity is become more reliable.

Money has to come from somewhere.................. taxes and levies...or well aids, grants.

We need to build better roads, more rail lines,  and generally more infrastructures (power, water, sewage);

GoK is devolving 250B every year..directly from Consolidated Fund...that is going to counties..who are now doing things unimaginable a few years ago.

Taxes are never good for business. They only make the end products more expensive. Ask traders and manufacturers in Kenya today, the taxes on all products are are on an all time high. Manufacturing is becvoming very expensive in comparison to neighbouring countries.

[MOON Ki]

Sounds like little details. Focus on the big picture. For once. 18.99 versu 21B is called nitpicking.

It has always overshot its projection. We are collecting anything close to or more than 30B annually from RDL..and if we stick to it..we can repay the chinese debts without breaking a sweat.