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Kenya will leverage on derivatives market to lure foreign investors

by Ronald Njoroge NAIROBI (Xinhua) -- Kenya plans to leverage on the newly launched derivatives market to lure more foreign investors into the capital markets, an official said on Thursday.

Geoffrey Odundo, CEO of Nairobi Securities Exchnage (NSE), told journalists in Nairobi that the derivatives market offers sophisticated financial instruments that can widen the scope of capital market products available in the country.

"We anticipate the newly launched NEXT derivatives market will pull more foreign investors into the capital markets because it will enhance investors’ portfolio performance by availing risk management tools in the wake of increasing asset price volatility," Odundo said.

A derivatives market involves the trading of financial instruments like futures contracts, stocks, indices, commodities, currencies, exchange rates, or the rate of interest.

Kenya’s NSE is the second African exchange to launch a derivatives market.

The launch follows a successful six-month pilot phase conducted to test the functionality of end-to-end transactions of futures contracts in a live environment, Odundo said.

With the derivatives market, the capital market will enhance its liquidity as investors will be able to make profit whether the markets are down or up, he said.

Kenya is keen to enhance its position as Africa’s regional financial hub that can serve the rapidly expanding African economies, Odundo said.

The national development blueprint, Vision 2030, also recognizes the role of a vibrant financial sector in mobilizing both foreign and domestic resources to fund economic development, he noted.

The NSE will now offer index futures and single stock futures on selected indices and stocks, Odundo said said.


Kenyan government to retain at least ten percent stake in commodity exchange

NAIROBI (Xinhua) -- Kenyan government will retain a shareholding of at least ten percent in the commodity exchange that is expected to be launched early next year, a government official said Tuesday.

Chris Kiptoo, principal secretary of Kenya’s Ministry of Industry, Trade and Cooperatives, told a trade forum in Nairobi that 21 agricultural products have been cleared to trade at the commodity exchange with minerals and metals to be introduced later on.

Kiptoo noted that the exchange will help stabilize prices of agricultural products, especially perishable ones which tend to fluctuate according to harvest seasons.

The official said up to 30 percent of Kenya’s agricultural harvest is currently lost as farmers’ produce cannot reach market on time.

"Once the commodity exchange is launched, farmers will be able to store and receive receipts for their produce in government warehouses that will uphold the quality of their harvest," said Kiptoo.

Kenya forex reserves surge by U.S. 742 million dollars on World Bank loan

NAIROBI (Xinhua) -- Kenya’s foreign exchange reserves have increased by 742 million U.S. dollars after the east African nation received a World Bank loan.

Central Bank of Kenya (CBK) data showed on Tuesday that its forex reserves stood at 9.765 billion dollars at the end of last week, from 9.023 billion dollars as of July 4.

This marks a second significant jump in the east African nation’s foreign currencies in under two months after the its forex reserves hit an all-time high of 10.06 billion dollars at the end of May following the proceeds of 2.1 billion dollars from Eurobond sold in April.

The World Bank in May approved a 750 million U.S. dollars credit for budget support and the funds were released to Kenya last week.

"The usable foreign exchange reserves remained strong at 9.765 billion dollars, an equivalent of 6.2 months of import cover.

This meets the CBK’s statutory requirement to endeavor to maintain at least 4 months of import cover," said the central bank in its weekly bulletin.

Kenya retail sector expanding as macro-economic environment improves

NAIROBI (Xinhua) -- Kenya’s improving macro-economic environment is boosting the retail sector, with supermarkets leading businesses that have recorded expansion since the year started.

Analysts have noted that the 6.3 percent growth rate of the country’s economy in 2018, which is 1.4 percentage points higher than that in 2017, has ensured that citizens have more disposable income, giving a boost to the retail sector.

Most of the international and local retailers in the east African nation are recording a boom, with the businesses opening new branches in the country and stiffening competition.

Naivas is the latest retail chain to open a new branch on the outskirts of Nairobi as it fights for the fast-growing middle-income market.

The local retailer opened its 53rd outlet in Ongata Rongai, a growing middle-income town in Kajiado County on the outskirts of the capital Nairobi.

"The continued expansion of local retailers is supported by the improving macroeconomic environment, increased disposable income as a result of an expanding middle class thus creating demand for goods and services," according to Cytonn, a Nairobi-based investment firm.

The firm noted that with gross domestic product per capita growing at 10.3 percent per annum over the last four years, from 125,756 Kenyan shillings (1,250 U.S. dollars) in 2014 to1,860 dollars in 2018, the retail sector is expanding.

According to Cytonn, the capital Nairobi’s satellite towns hold the future of the expanding retail sector.

"These towns are increasingly presenting a viable opportunity to retailers due to low rental charges of 1.2 dollars per square feet as compared to the city centre average of 1.7 dollars," said Cytonn.

"Kenya’s retail sector has been vibrant over the past few years, and would continue to attract interest from renowned international retailers as well as the robust expansion of local retailers," said Cytonn.

But even as the retail chains expand, they face competition from informal retail stalls and kiosks, which have over the years dominated the market and still do, according to Ernest Manuyo, a business lecturer at Pioneer Institute in Nairobi.

"Only 30 percent of Kenya’s retail market is formal.

"Which means the kiosks still hold a huge market and the fact that they are readily accessible and some offer credit makes them appealing to consumers," he said.

Kenya leveraging on technology to deepen financial inclusion

NAIROBI (Xinhua) -- Kenyan President Uhuru Kenyatta said his government will continue leveraging on new technologies to deepen financial inclusion and enhance service delivery.

Kenyatta who officially opened a regional financial forum in Nairobi on Monday evening said the country has already registered impressive successes in the deployment of technological solutions in various sectors of the economy.

"Riding on mobile phone financial services, access to financial services in Kenya has more than tripled from 26 percent in 2006 to 82 percent in 2019," said Kenyatta during the inaugural Afro-Asia FinTech Festival.

Kenyatta called on Africa and Asia to work together to build more robust digital economies, adding that Kenya is open to work with other governments and private bodies in leveraging innovations for technology-driven financial inclusion.

He added that the country will continue leveraging on technology to enhance its tax collection through online platforms of iTax and e-Citizen.


Kenya will prioritize domestic savings to fund development projects

NAIROBI (Xinhua) -- Kenya plans to prioritize use of domestic savings to fund development projects, a government official said on Thursday.

Nelson Gaichuhie, chief administrative officer at the National Treasury and Planning, told journalists in Nairobi that use of local resources is a cheaper source of finance as compared to local and foreign loans.

"The government will enhance fiscal incentives to encourage the expansion of the national savings rate," Gaichuhie said during the launch of NEXT Derivatives trading at the Nairobi Security Exchange.

He said that a high investment rate will be dependent on the ability of the country to mobilize domestic savings.

According to government data, the country’s saving rate stands at approximately 12 percent against a target of 30 percent.

Gaichuhie added that the government is exploring a number of reforms that will accelerate the savings rate in the country.

In 2017, the east African nation launched a mobile based government bond to raise local funds to finance infrastructure projects.

Gaichuhie observed that the capital markets offers a viable alternative to raise both short and long term funds.

"The capital markets also provide an avenue to promote domestic savings by offering high returns on investments," he added.

The Kenyan official revealed that the NSE has one of the most advanced infrastructure and vibrant markets in Africa.

"If well utilized the capital markets can be a key driver economic growth and development," he said.

Gaichuhie said that Kenya’s capital market faces a number of challenges that affect other emerging market such as limited listing and a narrow investor base.


Kenya to focus on Africa to drive export growth

NAIROBI (Xinhua) -- Kenya plans to focus on the African continent to drive export growth, an official said on Thursday.

Jaswinder Bedi, chairman of Export Promotion Council (EPC), told journalists in Nairobi that Kenya has a competitive advantage in manufactured goods as compared to most other African countries.

"We see an opportunity to expand our export volumes by focusing on sale of manufactured goods to the rest of Africa," Bedi said.

Government data indicates that in 2018 approximately 40 percent of Kenya’s exports went to other African markets.

"Most of Kenyan exports to Africa are value-added goods while exports to the rest of the world are mostly raw materials," Bedi said.

Kenya is likely to reap enormous benefits once the African Continental Free Trade Area (AfCFTA) is fully operational and tariffs are removed, he said.

"At present non-tariff barriers in the form of product standards present a huge challenge to the expansion of Kenya’s outbound trade in Africa," Bedi said.

According to the EPC, poor transport infrastructure also hinders the growth of Kenyan exports to the rest of Africa.

"Merchandise from Kenya often becomes uncompetitive when transported to landlocked countries in the continent," Bedi said.

Kenya’s export now accounts for 8 percent of its gross domestic product (GDP), against a target of 15 percent.

The majority of Kenyan exports are agricultural products with little value addition, Bedi said.

Kenya plans framework to bloc imports that threat local industries

NAIROBI (Xinhua) -- Kenya plans to put in place a legal framework to curb imports of goods that threaten local industries, a government official said on Thursday.

Chris Kiptoo, principal secretary at the Ministry of Industry, Trade and Cooperation, told journalists in Nairobi the legal and regulatory framework will soon become operational to prevent unfair import competition.

"The objective is to curb dumping of cheap imports in order to catalyze the industrialization in Kenya," Kiptoo said.

The east African nation has set a target of expanding the contribution of the manufacturing sector to the overall economy, at less than 9 percent now, to 15 percent in 2022.

"Kenya is prioritizing the manufacturing sector due to the critical role it plays in job creation and wealth creation in the country," Kiptoo said.

The ministry of industry says Kenya has huge natural resources in agriculture and mineral sectors that can be processed to produce goods that have high demand in global markets.

Kiptoo said economic liberalization in the 1990s led to the collapse of the country’s once vibrant industrial sector due to an influx of cheap imports.

"We are now prioritizing the revival of industries especially in the textile, leather, furniture and agricultural sectors in order to expand the country’s industrial base," he said.

Kenya yet to achieve World Health Organization
recommended tobacco taxation rate - new study

NAIROBI (Xinhua) -- Kenya’s tobacco taxation rate is still below the recommendation set by the World Health Organization (WHO), a study released on Thursday has revealed.

The study that was conducted by National Taxpayers Association (NTA) indicated that Kenya is yet to adopt a taxation regime that could help reduce consumption of tobacco.

"The government should introduce a uniform tax rate to gradually achieve the 70 percent share of tax in the total retail price of cigarettes," Boaz Munga, a lead researcher of the study.

He said that uniform taxation performs better on account of increasing cigarette prices, increasing cigarette excise revenue and the total tax share in cigarette prices.

"Uniform tax would result in a larger reduction in the number of smokers and larger reduction in the consumption of cigarettes," said Munga.

He urged the government to avoid frequent amendments in the tax structure to create a simple system that deters tax evasion.

Munga called on all stakeholders to be involved in reorienting tobacco control policy to protect consumers rather than tobacco firms.

"The reorientation should be in line with international conventions and protocols for which Kenya is a signatory, "said Munga.

Munga urged the government and stakeholders to engage in education and awareness campaigns to enable the country achieve its adopted voluntary target to reduce tobacco use by 30 percent by 2025.

Irene Otieno, national coordinator of NTA said that Kenya is obliged to protect present and future generations from the devastating health, social, environmental and economic consequences of tobacco consumption and exposure to tobacco smoke.

She said that even though Kenya has increased tobacco taxes, the prevailing rates which account for about 52 percent of the retail price, still fall below the recommended WHO minimum of 70 percent.

"Our taxation should reach the WHO recommended standard so that the increasing Non communicable Diseases (NCDs) can be managed by health professionals." said Otieno.

The study found that tobacco is likely to impact on Kenya’s national development agenda negatively given that it kills more than 6,000 individuals annually, worsens poverty, and impacts negatively on productivity.

According to the ministry of health, it is also estimated that 5 percent of all deaths from noncommunicable diseases in Kenya result from tobacco use, while 55 per cent of all deaths from cancers of the trachea, bronchitis, and the lung are attributable to tobacco use.

The study was examining cigarette taxation in Kenya and how it affects cigarette consumption.

It analyzed the probable effects of recent cigarette tax policy changes on both tax revenue and cigarette consumption.

World Bank and Kenya launch entrepreneurship project

by Peter Mutai NAIROBI (Xinhua) -- Kenya and World Bank on Tuesday launched an initiative aimed at providing a platform for Kenyan youths to use their talents in developing innovative solutions to drive manufacturing.

Betty Maina, principal secretary for industrialization at the Ministry of Industry, Trade and Cooperatives said that Kenya Industry and Entrepreneurship Project (KIEP) will strengthen innovation ecosystem as part of implementation of the Kenya industrial transformation program.

"The project marks an important milestone towards the ongoing digitizing and transformation initiatives for Kenya’s global competitiveness that is expected to create additional jobs for the youths," Maina said at the launch in Nairobi.

Maina revealed that the five billion shillings (about 50 million U.S. dollar) project that is co-funded by the World Bank will also create industry platform to link startups, traditional industries and international networks in select private sector firms for the next six years.

She added that the project will also aid small and medium enterprises (SMEs) in improving their managerial and technical capabilities in order to better compete at both local and international markets.

The official said that KIEP will help enhance intra-Africa trade through increased productivity and competitiveness of Kenyan firms.

"The development of private sector is the key to growth, job creation and youth empowerment in the developing countries," Felipe Jaramillo, World Bank country director for Eritrea, Kenya, Rwanda and Uganda said.

Jaramillo said that SMEs are a pillar for the development of national economies and requires necessary support.

He urged the government to adopt digital economy as a blueprint for supporting ecosystem to elevate the project to the next level.

"With proper application of innovation, productivity and digital solutions, Kenya can be the leader in Africa in trade related matters," Jaramillo noted.

KIEP is based on the Kenya Vision 2030 that seeks to transform Kenya into a newly industrialized, high middle-income nation.

The project will benefit 33,050 individuals and 2,393 firms, including students, SMEs, and local startups.

Kenya plans to boost exports to combat widening trade imbalance

NAIROBI (Xinhua) -- Kenya on Wednesday decried its widening trade imbalance noting that it could affect growth of domestic industries.

Chris Kiptoo, principal secretary of the Ministry of Industry, Trade and Cooperatives said in Nairobi that imports are currently three times the level of exports.

"We hope to bridge the trade deficit through growing exports by at least 25 percent annually," Kiptoo said during the opening ceremony of the eighth edition of the International Flower Trade Expo.

The three-day expo is a platform to bring together flower growers, exporters, breeders, cargo agencies in the flower value chain.

Kiptoo said that the horticultural and textiles sectors are one of the best performing industries in the country because they posted double digit growth in exports last year.

The official added that Kenya hopes to leverage its existing bilateral and multilateral trade agreements to boost exports.



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