Kenya Economy is growing - some people won't like this

[Globalcitizen12]

hk,
I just do not understand Kenya economic policy.. How do you tax real estate heavily for example and expect full compliance? it makes sense why capital goods cannot be zero rate for a decade until we achieve some sort of industrial growth momentum

[hk]

hk,
I just do not understand Kenya economic policy.. How do you tax real estate heavily for example and expect full compliance? it makes sense why capital goods cannot be zero rate for a decade until we achieve some sort of industrial growth momentum

At least now the real estate income is being taxed at a flat rate of 10% and now kra is collecting a lot more than before when it was 30% of net income.
If companies aren't encouraged to spend on capital goods, our productivity will remain low.

[Globalcitizen12]

I thought it was 30% of Gross..10% is reasonable

[Globalcitizen12]

Answered my own question it was 30% of Net income. so now it is 10% of gross which is lower..

http://www.kra.go.ke/notices/pdf2015/FAQs%20-%20Residental%20Rental%20Income%20Tax%20-%2015.12.2015.pdf

[hk]

Interest read on kenya tech scene
https://www.wsj.com/articles/kenyas-tech-hub-gets-a-makeover-1491903007

By Matina Stevis | Photographs by Nichole Sobecki for The Wall Street Journal
NAIROBI, Kenya -- After a decade of buzz that brought bold headlines but few profits, Kenya's "Silicon Savannah" technology hub is retooling to put income before activism.


A homegrown African tech community is rising in this city: bootstrapped but profitable businesses using technology and the internet to solve commercial problems connecting the biggest names in tech and finance.

International Business Machines Corp. is training hundreds of Kenyan coders in Nairobi each year; Visa and Mastercard are turning to Kenyan fintech companies to crack the local market.

Last month, Facebook Inc. and Alphabet Inc.'s Google started a strategic alliance with the iHub, an incubator and co-working space at the heart of Kenya's tech scene, to reach and train app developers there. The Silicon Valley companies will tap local talent for coding and product development; they also will train Kenyans in artificial intelligence, cloud computing and machine learning -- reinforcing the region's role as the center for technology in Africa.

"It is true we had some companies that were more excited about headlines and about what new widget would solve the problems of the world," said Patrick Njoroge, Kenya's Central Bank Governor, in an interview last month. "What we've been pushing is for companies to focus on a particular problem. It's more sustainable."

Since the late 2000s, the startup community in this sprawling East African city welcomed top U.S. and European graduates, who were lured by adventurous opportunities and millions of dollars in no-strings-attached grants from Western donors. Newspapers queued up to profile startups using technology to spur African development in sectors as diverse as farming and transportation. Luminaries including former U.S. President Barack Obama and Facebook CEO Mark Zuckerberg visited the hub to trumpet its potential.

But beyond the buzz, few companies turned a profit and many died a quiet death, investors say. Funding has plummeted, with the total raised by Kenyan startups falling to $10.5 million last year from $47 million in 2015, according to data-collection platform Disrupt Africa.

Now, in the wake of the bubble, a less flashy but more successful model is emerging for startups in Silicon Savannah.

The iHub in Nairobi began as a social movement in 2010 and is now transforming itself into a for-profit company that collaborates with the likes of Facebook, Google and Microsoft. The U.S. companies will use the iHub as a center for their training and talent spotting. The recognition caps a long journey for the incubator founded by the group of activists behind Ushahidi, a platform created during riots in 2008 that collected testimonies, recorded incidents over their phones and geo-located them using Google Maps.

Both Ushahidi and the iHub were largely funded by grants from foundations such as the Omidyar Network. For the iHub, the model became increasingly unsustainable last year as it faced cash flow problems, said its former Chief Executive Kamal Bhattacharya, who took it over after a career at IBM and became chairman of iHub board this month.

The incubator last year received $2 million in funding from Invested Development, a U.S.-based fund, that allowed the company to reorient its business. Mr. Bhattacharya raised prices for services and added multi-month contracts to the firm's revenue stream. The company has posted $1.5 million in annual revenue on average for the last three years.

Data collection remains patchy in Kenya, but the iHub reckons more than 100 startups have used its services over the past seven years, and more than 1,000 people have worked at startups during the same time. It now employs about 30 people full-time and has handled more than 50 projects in the last 12 months.

Kenya last year was the second-biggest tech hub in Africa in terms of the number of startups that secured funding, trailing only South Africa. But the average amount raised per startup last year declined by 85% compared with the year prior, Disrupt Africa data shows, from $2.6 million in 2015 to just $10,500 in 2016, relegating it to sixth place by this criterion behind Nigeria, Ghana, Egypt, Morocco and South Africa.

One fundamental change here is the type of investor attracted to Kenyan tech businesses. Angel investors -- often themselves successful businesspeople or returned from the Kenyan diaspora -- private equity and specialized technology funds are becoming more involved, just as Western donor agencies and charitable foundations are becoming less active, according to investors and technology entrepreneurs.

"The Peace Corps volunteers of the past came back to Kenya as impact-tech investors," says Agosta Liko, founder of the profitable fintech company PesaPal, in describing Kenya's tech scene during the initial years.

Mr. Liko, who avoided taking donor grants for his business that helps people pay for anything online using mobile money or credit cards, is hopeful that experienced entrepreneurs and homegrown startups will have more of a role.

"Many of us have been working hard and quietly for many years," Mr. Liko said. "The most important thing is that a number of Kenyan technology businesspeople are now becoming mentors and angel investors for new startups here."

Write to Matina Stevis at matina.stevis@wsj.com

This is a good thing. There was alot of hype early on with number of companies getting awards and ngo money. At least now start ups are focusing on solving problems and making money.

[RV Pundit]

Thanks HK -being second to South Africa is clearly impressive - still some way but kenya tech scene is very vibrant - let hope Konza and laying of fiber/infrastructure continues - I am thinking 20yrs from now - with those kids armed with laptops this early - kenya might become global leader in tech.

[hk]

This is bellwether of kenya economy http://www.businessdailyafrica.com/corporate/Safaricom-net-profit-rises-18-3-per-cent-to-Sh45bn/539550-3920732-jyy6ol/index.html its interesting how data is growing as the overall economy becomes digital.

[RV Pundit]

Pretty impressive. 212B in revenues. And 45B net profit.

This is bellwether of kenya economy http://www.businessdailyafrica.com/corporate/Safaricom-net-profit-rises-18-3-per-cent-to-Sh45bn/539550-3920732-jyy6ol/index.html its interesting how data is growing as the overall economy becomes digital.

[Omollo]

One of the things I still want to keep on my Bucket List when I prepare it, is to visit the tower from which Emperor Nero sat and watched as a fire engulfed Rome. He is said to have written one or two poems about it.

I have contemplated writing a long essay (fictional of course) about it over the years.

The country is burning to the ground. People are starving and we blame drought. Predictably, the drought ended in many parts a while ago and in others it is ending with floods. Again more people are dying of the floods.

Yet we are busy trading figures about how the economy is doing well?

The prices of basic foodstuffs have are nearing Mars and we say the economy is doing well? The price of sugar is 60 shillings in Somalia and even lower in Uganda, Tanzania and brace for it... war torn South Sudan!!! Yet it is now 400 shillings in Kenya and rising but to some "The Economy is growing!!!"

Reminds me I was in the US and watched George Bush Snr visit a supermarket and pull out a bunch of hundred dollar notes to pay for something in the supermarket. The idea was to present him as the everyday guy. It backfired. Unemployment was on the rise and people were hurting. Economists were saying:

"The Economic fundamentals are right and the growth figures for the last quarter highly encouraging..."

That is the year I stopped taking anybody calling himself an economist seriously! Their trade and that of astrologers is differentiated by name and label. To borrow their own words:

The fundamentals are uncannily similar"

[Omollo]

[RV Pundit]

Maize and Sugar farming in kenya is hopeless; It need to be fully liberalized; let the chips fall wherever but all duty free imports of sugar and maize. I am sure our maize and sugar farmers can find something else to do.

That is one sector that is screwing the poor people hard.

[Omollo]

Maize and Sugar farming in kenya is hopeless; It need to be fully liberalized; let the chips fall wherever but all duty free imports of sugar and maize. I am sure our maize and sugar farmers can find something else to do.

That is one sector that is screwing the poor people hard.

I am glad you have embraced my point of view. When I said this you were up in arms.

I think whether coffee or tea, the farmers can choose to sell their holdings to pave way for amalgamation of the small-holder uneconomic pieces in to viable commercial farms. The first step is to guarantee that the land would not be sold to property developers but for agriculture. It should be made almost impossible to change the usage. This is the policy in most developed countries. They demand real academic / professional qualifications for one to run a farm. As a reward they benefit from well directed subsidies but not at the expense of productivity. Thus one gets rewarded (with subsidies) based on productivity. That leaves room for uneconomical pieces to be sold off.

Some of the villages in Kenya are unsustainable. They need facilities such as hospitals, access to water, infrastructure etc.

Instead of guaranteeing people land - a hangover from independence - we should move to the 21st century and guarantee housing. Thus people should move from these villages to urban centres where they would enjoy the collective services. This has nothing to do with ujamaa. It is a policy to free prime land for agriculture / food production while providing better living conditions for people.

I have no problem is large commercial farmers take over the villages and apply mechanization and modern technology to improve food production.

If we carry on with the Squatter-Mentality where land thieves gather around a big farm and share it out and we lack the courage to kick them out, the entire country will become one big slum. And when in 100 years the population growth is tamed, we shall end up like Italy - hundreds of dead cities and towns occupied by rats and illegal African immigrants running away from dictators.

[hk]

Normally urbanization is driven by increased productivity in rural areas. Where excess labour is pushed to urban areas to engage in other productive activities. This isn't happening in africa so far. Full liberalisation of all agriculture sector will lead to consolidation of small holders who'll be forced to increase production or opt to produce something else.