Power Utility Distributor Extends Internet to Homes

The fibre to the home partnership between electricity distributor Kenya power and telecommunication services providers like Safaricom is a novel approach to cost cutting efficiency and universal access. 

On cost efficiency, apparently it costs about KSh 7,000 to bury a meter of fibre optic cable, but the cost of hanging the internet cables on power poles is significantly lower.  Kenya Power also says that it will make savings by using its existing labour force to connect fibre cables to homes. 

See more here.

Retail Distribution Services in Kenya

This is an interesting piece on the retail distribution services sector and the inflow of foreign brands into Kenya.  The growing retail sector has attracted international brands such Foshini Group, French supermarket chain Carrefour and fast-food companies like Pizza Hut, Subway and Burger King.  

Read more here.

Kenyan Crude Oil Headed to the EU?

Despite the oversupply of oil, low prices and high transport costs, Kenyan crude oil from the Turkana region is apparently headed for the EU. Civil Society is apparently calling first for the construction of a pipeline to transport the oil but seems the oil will be transported by trucks and trains which is costly.

Read more here.

Conference and Business Tourism Services in Kenya

This is an interesting piece. 

Apparently Kenya hosted 243 global and continental meetings in 2016 which attracted multi-billionaires and many Heads of State and government to the country.  In addition to conference tourism, Kenya is also seem as a business services hub by institutions seeking to access the greater EAC region and beyond.

Read more here.

EPZs and SEZs

The transformation of the policy, legal and regulatory framework of Export Processing Zones (EPZs) in Kenya will see them converted to Special Economic Zones (SEZs) and replicated in all 47 counties in the country. See more here.

The SEZ concept has evolved globally to include a wider range of economic activities with the aim of accelerating growth and development as opposed to only focusing on manufacturing for export. SEZs have been adopted in other countries such as China, Mauritius, Egypt and India and have widened the range of activities included in the economic zones to also accommodate companies with a domestic market orientation and those in the services industry. In Kenya the SEZ will widen the domestic market to include the EAC. 

The move from EPZ towards economic zones in Kenya will require the current EPZ Act to be amended. Further, there will be a need for the harmonization of the new Act with other government Acts and policies that may be hindering investment and effective investor facilitation in the zones.  A sound legal and regulatory framework is a necessary first step for a successful zone program, particularly one designed around private sector development and operations.

According to previous article found here on SEZs, China used a number of policies to ensure that technology transfer would take place domestically through the SEZ, through joint ventures between foreign investors and local firms and that strong domestic players would emerge. In fact, 100% foreign owned firms were a rarity among the leading players in the industry in China and the goverment can be applauded for a determined effort to capture and acquire domestic capabilities to build modern industries. 

According to the World Export Processing Zones Authority (WEPZA) zones have generally failed to have a catalytic effect in most African countries in part because they have been disconnected from wider economic strategies; they are often put in place and then left to operate on their own, with little effort to support domestic investment in the zones or to promote links, training, or upgrading. Unlocking the potential of zones appears to require clear strategic integration of the program as well as active government leadership to facilitate the positive impact of the zone.  According to the WEPZA, in Africa few, if any, appear to treat the zone programs as an important pillar of wider economic growth, industrialization, and trade strategy.

In addition, high-level, active government commitment to zone programs is a significant contributor to their success. This support must be consistent over the long term: The evidence from even the most successful zone programs suggests that it normally takes 5–10 years after zones launch (thus, possibly 15 years or more from when a project was first conceived) before a zone begins to show signs of success. In analyzing the East Asian successes with economic zones, the role of political leadership— in terms of both vision and active support along the path of planning, implementation, and operation—is clear. African zone programs have largely failed to secure this kind of consistent and active commitment from senior political leaders. 

 

In cclosing, successful programs such as those in Mauritius, Malaysia, and China use their zones as part of a group of instruments designed to promote wider economic policy reform, diversification, and upgrading. They also have strong governmental leadership.

For previous post on EPZs in Kenya see here

Mpesa Security Risk

According to the Ministry of Finance a technology disaster affecting Mpesa mobile transfer systems is now classified as a potential threat to the Kenyan economy (classified as a fiscal risk) causing loss of revenue- excise and corporate tax by firms running the systems. Mpesa represents a form of branch-less banking which was facilitated through a "special" license from regulators, despite concerns by regulators about non-branch banking in the interface between technology and the banking sector. This adds to the current state of financial insecurity.  Safaricom has apparently put in place several security systems to guard against such threats of disruption which could impact the Kenyan economy.

M-pesa plays a critical role in the Kenyan economy, a contribution that stands at a GDP of over 40%. For instance some Sh 2.8 trillion was transacted through mobile money last year, making it a crucial source of excise tax revenue for the government.  Other materials on Mpesa can be found on this site.

EAC Non Tariff Barriers

This is a useful statement by the H.E President Uhuru to EALA on removal of non tariff barriers (NTBs) in the EAC urging increased collaboration between EALA and the private sector.

EALA recently passed binding legislation on NTBs in the EAC, legislation which will need to be assented to by EAC Heads of State. Termed the East African Community Elimination of Non-Tariff Barriers Bill, 2015 ", it gives legal effect to Article 13 on the establishment of the East African Customs Union. The law uses the WTO categories of non tariff barriers as set out in its schedule. The Act shall take precedence over any other laws Partner States may enact affecting NTBs. The legislation can be found here.

Current Acts of the EAC Legislative Assembly can be found here.

Some thoughts on Brexit and EPA

Tanzania seems to be more or less backing out of the EAC EPA with the EU over the Brexit vote among other economic reasons. The UK as a state is a signatory to the EPA agreement in addition to the European community and other EU member states. Hence the EPA agreement is of a bilateral character in relation to the UK. However EPAs are also  mixed agreements concluded ‘of the one part’ by the EU and its Member States and, ‘of the other part’, the ACP signatory. In this regard the rolling over of EU FTA arrangements so that they continue to apply to the UK and the ACP signatory only after Brexit shouldn't be difficult for ACP signatories to negotiate with the UK. Some call it negotiating for EPA equivalence with the UK. This kind of “rolling over” of treaty obligations is a familiar process in international law and shouldn't be a bottleneck for Tanzania or the ACP Member States in the short to medium term. However it may involve and allow for renegotiation of at least some of the EPA provisions.

See previous EPA post below.

Renegotiation of NAFTA, TPP and future of US EU Trade Negotiations

Some of you may recall that President Obama's campaign called for the renegotiation of NAFTA particularly on labor and environmental issues. That was done and apparently the 12 member Trans-Pacific Partnership (TPP) represents a renegotiation of NAFTA by holding Mexico to fully enforceable labor provisions. In addition Mexico is also developing parallel labor reforms, including to better protect collective bargaining and reform its system for administering labor justice. TPP has been a signature economic objective of Democratic President Barack Obama.

However President elect Donald Trump has also called for the renegotiation of NAFTA including the scrapping of the (TPP) agreement and imposition of tariffs on China, blaming all for taking away U.S. jobs.  Some have asked ask why not renegotiate the TPP instead of NAFTA? 

Meanwhile Canadian Prime Minister Justin Trudeau has said that he is willing to reopen NAFTA while Mexico has indicated that discussion of NAFTA is OK but not renegotiation.  NAFTA was concluded in 1994 and is a well established agreement that requires member states to give 6 months notice to withdraw. If President elect Donald Trump is to keep his word, Trump’s administration will invoke the president’s unilateral trade retaliation authority as leverage to resolve problems created through negotiated settlements.

Another trade deal likely to take a backseat is the Trans Atlantic Trade and Investment Partnership between the U.S and European Union. Admittedly, negotiations are slow and were made more complicated after the UK this past summer voted to leave the EU. Given Trump’s criticism of free trade agreements, at a minimum there is likely to be a long pause for reflection before the new Administration decides to endorse negotiation of this mega-deal.

For more on Donald Trump's trade views see here.  His vision is "Negotiate fair trade deals that create American jobs, increase American wages, and reduce America's trade deficit.|"

Tanzanian MPs Vote Against the EAC EPA and Suit Filed at EACJ

Tanzanian MPs have voted against the country signing the EAC Economic Partnership Agreement. Tanzania’s reluctance to endorse the EPA, after 10 years of negotiations, is based on three issues — chinese driven industrialization policy and revenue losses in the 2016/17 national budget.  Tanzania is also concerned by Britain’s decision to quit the EU, saying Britain is its main trading partner and it makes no sense to enter into a deal with the European bloc without London. 

Apparently President Magufuli could still ignore the MPs’ advice and push for the signing of the EPA. Will see what happens.

Meanwhile a Tanzanian national has filed a civil suit with the East African Court of Justice (EACJ) to stop the EAC and remaining members  states of the EAC Burundi, Ugandan and South Sudan from signing the EPA. (Rwanda and Kenya have already signed). The EACJ's major responsibility is to ensure the adherence to law in the interpretation and application of and compliance with the EAC Treaty. Article 30 of the EAC Treaty allows the court to have reference to civil suits by natural and legal persons. The suit filed in October 2017 says that further signature will allow ratification and regional application of the agreement, which will most likely undermine industrialization policies and tariff regimes and displace EAC products from the market.

See more here.