When the Kenya Revenue Authority announced revenue collection of Sh4.1 billion above the target in 2011, the Treasury was understandably convinced the taxman was on top of its game. However, the impressive figures did not last. The authority fell a cool Sh10 billion below target the following year. And the taxman was far off the target in 2013 having missed the mark by a massive Sh85.9 billion. From then on, the common story about KRA has been that of missed targets with the latest shortfall being Sh6.5 billion. The persistent failure to meet revenue projections has come with far-reaching ramifications for the economy. The country has been compelled to borrow heavily from the local and international markets, a scenario that has partly sparked the current row over controlling lending rates. Banks, struggling to obtain deposits, have been raising the cost of loans to stay afloat. Because of the huge budget deficits, the Treasury has been disconcertingly piling debts and by May it had surpassed its annual domestic borrowing target by Sh49.2 billion with net domestic borrowing touching Sh446.6 billion. How is it possible that a largely manual KRA, with fewer taxpayers, less economic activities, and fewer income sources was able to surpass the target by such a high margin in 2011? Was the Treasury target too low? Have the country’s top economists been setting unrealistic targets for KRA?. Smart Company’s efforts to reach Treasury Cabinet Secretary Henry Rotich for answers on whether the taxman is currently grappling with impossible targets...

Tanzania sold more goods to Kenya in the 10 months to October despite cutting back on consumption of locally made products. Data by Central Bank of Kenya shows that imports from Tanzania increased by 25.44 per cent to Sh13.264 billion in the January-October 2017 period compared to a year earlier. This came as Kenya’s exports to Tanzania in the period plunged to a 10-year low amid unresolved trade spats between Nairobi and Dar es Salam, hurting local manufacturers and traders. Exports to Tanzania in the period to October dropped 18.9 per cent to Sh23.38 billion with trade between the two countries remaining in favour of Kenya despite the gap narrowing. Tanzania is the fourth largest seller of goods to Kenya behind South Africa (Sh53.094 billion), Egypt (Sh28.868 billion) and Uganda (Sh27.490 billion). Kenya imported goods valued at Sh159.660 billion from Africa in the 10-month period, 43.02 per cent or Sh48.022 billion more than the same period in 2016. Kenya and Tanzania have had on-and-off trade disputes despite the two belonging to a common market which allows for free movement of goods, people, labour, services and capital within six member countries. Kenya largely imports wheat, textiles and clothing, hides and skin, oil seeds, vegetables, rice, paper and paperboard, footwear, wood, plastic and rubber, among other products from Tanzania. In recent years, traders have increasingly also been importing cooking gas through the Tanga and Dar es Salaam ports on grounds of cheaper costs and trucking it in through the Namanga border, prompting...

Three Kenyan factories have been ranked among the world’s best specialty coffee producers for 2017, putting farmers on the path to better earnings. Kabare AA, produced by the Kabare farmers’ cooperative society in Kirinyaga was ranked fourth on Coffee Review’s list of Top 30 with a score of 97 points out of 100. AA is the highest grade of Kenya coffee based on bean size and freedom from physical imperfections. Riakiberu AB came in at position 20 with 95 points. The coffee was produced by Kamacharia farmers’ cooperative society in Murang’a. And, Baragu farmers’ cooperative society in Kirinyaga was selected as the number 25 coffee of the top 30 list. The rankings were, however, a drop compared to 2016 when seven factories were ranked among the world’s best by Coffee Review, an online publication that analyses the quality of beans globally. According to Coffee Review, before roasting, this coffee from Baragu was kept for 65 days in barrels previously used to age bourbon whiskey. The review team said this coffee tied for the highest rating in a cupping of aged, casked and specially cured beans for Coffee Review’s May 2017 tasting report. The featuring of Kenyan coffee among the top in the world comes at a time when there are challenges in the sub-sector ranging from unclear government coffee policy and urban encroachment on prime coffee lands to chronically unstable weather. The famed Kenya coffee auction system and its participating cooperatives continue to produce some of the world’s most elegant...

Developers of the proposed Africa’s largest wind power plant in Kenya’s coast have opted to construct only a small fraction of the Sh253 billion mega-project after officials rejected its full capacity. Sweden-based VR Holding AB said they would build only eight per cent capacity of the planned 600-megawatt wind farm or just 50 megawatts. The firm had last year expressed interest in building a 600-megawatt project in the Indian Ocean waters bordering Ras Ngomeni in Malindi, but Ministry of Energy officials turned down the request citing lack of a framework for renewable energy projects of that scale. Kenya’s low electricity demand also informed the rejection of the offshore wind park, prompting the firm’s executives to move the project to neighbouring Tanzania in October, which shares the Indian Ocean coastline. “We will gladly work with the 50 megawatts as the government suggested and then hope to upgrade,” said Victoria Rikede, an executive at the company. “Tanzania is on and I’m really happy with the turn of events.” In rejecting the mega-project, Ministry of Energy officials reckoned that a huge power plant would leave the country with excess power that will only force consumers to pay billions of shillings annually for electricity not used. This would dim the government’s quest to deliver cheaper power through renewable sources. The authorities, upon receiving the application, had instead directed the Swedish company to construct a smaller capacity project of 50 megawatts. “The company was to give us a proposal for a smaller capacity plant of 50...

The first consignment of 52 export containers ferried on the standard gauge railway (SGR) arrived at the Mombasa port on Monday. Kenya Railways managing director Atanas Maina said most of the containers were exports by logistics firm Bolore Africa. “Bolore has 48 containers loaded with coffee and French beans while the others belong to three companies and contain wood carvings and animal skins,” he told the Business Daily in a telephone interview. Commercial operations of the freight train service started on Monday last week after six months of testing. The first train left Mombasa with a full load of 216 containers. However, the second train was delayed following a lack of enough cargo. The corporation has since announced it had entered into agreements with Kenya Ports Authority (KPA) and Kenya Revenue Authority (KRA) to direct more cargo on the trains. This would entail changing documentation for Nairobi and upcountry cargo to be destined to Nairobi Inland Container Depot. Mr Maina said Transport and Infrastructure secretary James Macharia at the weekend approved a three-month promotional tariff that would allow shippers to receive their cargo and containers returned to the port at a flat rate. “The promotional tariff of $645 (about Sh66,435) and $843 (Sh86,829) for a 20-foot and 40-foot container respectively includes railage and other handling charges by the shippers including the return of empty containers by Kenya Railways to Port Reitz Railway Station or the port,” he said. Clearing and forwarding agents, as well as importers, had raised concern that return of...

The World Bank’s latest Doing Business Report reveals improved rankings for many countries in the East African Community (EAC), such as Rwanda and Kenya, climbing up 15 and 12 places, respectively, from last year. This development has had a positive impact on the East African container trade market, which continued to see improvements in both imports and exports. Mads Skov-Hansen, Managing Director at Maersk Line Eastern Africa – a member of A.P. Moller-Maersk – says that the container trade growth experienced over the third quarter of 2017, however, has been limited by the political uncertainty that surrounded the recent elections in Eastern Africa’s economic hub, Kenya, which spilled over into other key countries served by the Northern Corridor, such as Uganda. Despite these political influences, the A.P. Moller-Maersk 2017 Third Quarter East Africa Trade Report reveals an improvement in aggregate trade levels over the last quarter, resulting in overall year-on-year growth of 3% for the region. “It’s always difficult to analyse a specific period during an election year. We typically see significant trends play out which may mean that the results captured are not actually a true indicator of real growth experienced,” says Skov-Hansen. IMPORT GROWTH DRIVEN BY CARS AND TEXTILES These trends are particularly relevant to note with regards to imports. “During an election year, imports tend to see a boost just before the election day, as people tend to stock up on basic commodities. There is then usually a drop in imports immediately after, as people hold back...

The value of Kenyan cut flowers fell in the 12 months to May even as Ethiopia raced up the ladder in new global markets. According to the Kenya Flower Council (KFC), Kenya exported flowers worth Sh23.6 billion at the end of the year to May, down from Sh35.1 billion. This was despite a marked increase in the quantities exported, which rose from 60,074 tonnes to 71,951 tonnes. “The figures were not so bad given the noise of the election year,” said KFC Chief Executive Jane Ngige. After a period of rapid growth between 2000 and 2010, flower exports rose from 40,000 to 120,000 tonnes, equivalent to an annualised growth of almost 12 per cent. But exports have fallen back to a growth of less than two per cent, as Ethiopian flowers benefit from massive subsidies and lower production costs. “We are partners with Ethiopia in the export business but of course they are competition. I think what is important is quality. Kenya has a secured market as well,” said Ms Ngige. Official statistics In 2016, Kenya exported flowers worth Sh71 billion by producing 133,000 tonnes while a year earlier statistics from Horticultural Crop Directorate indicated that 121,346 tonnes of flowers worth Sh62.9 billion were produced. In 2014, official statistics indicate that the flower industry earned the country Sh54.6 billion, with export volumes totalling 136,601 tonnes. Ethiopia, on the other hand, has become a major force in global floriculture in the past two decades, with its flower exports currently focused on...

In the early stages of its implementation, the Standard Gauge Railway (SGR) was perceived as any other grand public investment that would add to the stock of infrastructure, improve transportation and ease the cost of doing business for the private sector. The modern railway system, which has been glorified and vilified in equal measure, is entrenching itself as the nerve centre of shared industrial growth and economic prosperity. Those who see President Uhuru Kenyatta’s flagship project as a 472km railway line on which the Madaraka Express passenger trains operate between Nairobi and Mombasa, are missing the big picture. The SGR is the transport solution and experience that has been missing since the Kenya-Uganda railway over a century ago opened up East Africa by stimulating the growth of businesses and trading centres along the Northern Corridor transport system. MANUFACTURING The Kenya Railways project, which started commercial operations in May, has established backward and forward linkages with the economy. It will tug along the manufacturing sector and stimulate domestic and international trade. Manufacturing, one of the President’s ‘Big 4’ pillars of development in his second and final five-year term, will be the greatest beneficiary of the SGR. Though the sector is the engine of growth, it has suffered for decades from inefficiencies at Mombasa Port, which was until the SGR, the country’s most important infrastructure asset. Industries have protested about the losses they incur daily at the port, which is the playground of cartels and corruption that cripple the Northern Corridor. MOMBASA...

Anxiety is growing as transporters ponder the impact of changes heralded by an upgraded Nairobi Inland Container Depot (ICD) that President Uhuru Kenyatta launched on Saturday. Mombasa county officials led by Governor Hassan Joho have raised concerns over what they see as the national government’s plot to migrate “coastal jobs” upcountry while a section of industry players in Nairobi say the ICD will compound the city’s congestion problem. But officials maintain dry ports such as the Nairobi facility is the way to go as the country looks to improve its doing-business ranking. “The ICD is just an extension of (rather than an alternative to) the Mombasa Port,” Commissioner of Customs and Border Control Julius Musyoki said. “Nothing really changes as only goods with pre-arrival clearance; those checked, analyzed and found to be clean will go to the ICD.” Under the standard gauge railway (SGR) freight plan, cargo moved by trains will be offloaded at the facility for clearance by the importers or their agents before they are evacuated by trucks to final destinations. The Kenya Ports Authority (KPA) says 40 per cent of its yard containers will be allocated to the SGR. At an average throughput of one million containers, the ICD could be handling about 400,000 containers per year. The upgrade has lifted the facility’s carrying capacity to 450,000 units, up from 180,000. The government also intends to build other ICDs in Naivasha, Eldoret and Kisumu in part of the efforts to boost cargo movement. Mr Joho, whose family...

Kenya Railways has started talks with shippers and cargo owners in a spirited search for business that will meet the capacity of the upgraded Internal Container Depot (ICD) and standard gauge rail line in the heat of competition from truckers. Atanas Maina, the KR managing director, says they are selling efficiency and reliability of the SGR to win business from the roads to the rails. “We are discussing with the shippers and cargo owners to see how best we can work together to increase the volumes of cargo that is ferried through SGR,” said Mr Maina. When launching the ICD on Saturday, President Uhuru Kenyatta said they were targeting 30 to 40 per cent of the cargo that is ferried by road to move to SGR. There have been fears that the ICD terminal in Embakasi might fail to meet the required volumes of cargo because of the charges that the firm will be levying on freight. The terminal has a capacity of 450,000 containers. Road transporters have been charging an average of Sh80,000 per twenty foot equivalent units (TEUs) container from the coastal city to Nairobi’s Nairobi Inland Container Depot (ICD), but there are others who have been charging as low as Sh60,000 for the same. KRC will charge $500 (Sh50,000) to transport the same size of container between the two cities. Truck owners, who argue that they would have preferred using SGR if the rates were favourable to them, say there is an aspect of last mile, which...