Monetary Policy Committee report indicates strong economic performance amid gnawing global pressure
The Monetary Policy Committee (MPC) met on March 29, 2022, against a backdrop of a changed global outlook with heightened geopolitical tensions, volatile commodity prices, the Covid-19 pandemic and measures taken by authorities around the world in response to these developments. The MPC reviewed the outcomes of its previous decisions and the measures implemented to mitigate the adverse economic impact and the financial disruptions.
- Overall inflation declined to 5.1 percent in February 2022 from 5.4 percent in January, mainly due to lower fuel and food prices. Fuel inflation declined to 6.5 percent in February from 8.2 percent in January, due to the effect of Government measures to stabilise fuel prices and lower electricity tariffs. Food inflation declined to 8.7 percent in February from 8.9 percent in January. Inflation is expected to remain within the target range in the near term, due to muted demand pressures and the policy interventions. Nonetheless, the Committee noted increased risk of inflationary pressures arising from the global uncertainties.
- The global economic outlook remains uncertain, reflecting the ongoing Russia-Ukraine conflict that started at the end of February, significant uncertainty about the policy responses in the advanced economies, and a spike in COVID-19 cases especially in China. Prices of commodities particularly oil, wheat, and fertiliser have risen sharply as a result of supply disruptions, adding to the already elevated global inflationary pressures. Financial market volatility has increased amid adjustments in monetary policy in advanced economies.
- Leading indicators point to a strong performance of the Kenyan economy in the first quarter of 2022, supported by robust activity in construction, information and communication, wholesale and retail trade, transport and storage, and manufacturing sectors. The economy is expected to remain resilient supported by recovery in agriculture and continued strong performance of the services sector despite the downside risks to global growth in 2022.
- The three surveys conducted ahead of the MPC meeting — Private Sector Market Perceptions Survey, CEOs Survey, and the Survey of Hotels — revealed continued optimism about business activity, employment, and economic growth prospects for 2022. The optimism is attributed to reduced COVID-19 infection rates, anticipated favourable weather conditions, and increased infrastructure spending. Nevertheless, respondents were concerned about the impact of the Russia-Ukraine conflict on commodity prices and supply chains, in addition to the increased political activity. The Survey of Hotels revealed continued recovery in the sector, with a majority expecting a return to pre-pandemic level of operations by the end of 2022.
- Exports of goods have remained strong, growing by 12.1 percent in the 12 months to February 2022 compared to a similar period in 2021. In particular, receipts from horticulture and manufactured goods exports increased by 7.9 percent and 31.3 percent respectively over the period. Receipts from tea exports declined by 0.3 percent in the 12 months to February 2022 compared to a similar period in 2021 due to the impact of accelerated purchases in 2020. Nevertheless, tea exports grew by 12.3 percent in the three months to February 2022 due to improved demand from traditional markets. Imports of goods increased by 27.8 percent in the 12 months to February 2022 compared to a decline of 12.3 percent in the 12 months to February 2021, reflecting increased imports of oil and intermediate goods. Tourism and transportation receipts have increased as international travel continues to improve. Remittances totalled USD3,840 million in the 12 months to February 2022, and were 21.7 percent higher compared to a similar period in 2021. While the current account deficit is estimated at 5.6 percent of GDP in the 12 months to February 2022, it is projected at 5.9 percent of GDP in 2022 on account of higher international oil prices.
- The CBK foreign exchange reserves, which currently stand at USD7,850 million (4.80 months of import cover), continue to provide adequate cover and a buffer against any short-term shocks in the foreign exchange market.
- The banking sector remains stable and resilient, with strong liquidity and capital adequacy ratios. The ratio of gross non-performing loans (NPLs) to gross loans stood at 14.0 percent in February 2022, compared to 13.1 percent in December 2021. NPLs increases were noted in the manufacturing, tourism, restaurant and hotels, building and construction and real estate sectors. These increases were attributable to specific challenges in the respective businesses, and banks have continued to make provisions for the NPLs.
- Growth in private sector credit increased to 9.1 percent in February 2022, from 8.6 percent in December 2021. Strong credit growth was observed in the following sectors: transport and communication (24.1 percent), manufacturing (7.6 percent), trade (8.9 percent), consumer durables (14.0 percent), and business services (11.6 percent). The number of loan applications and approvals remained strong, reflecting improved demand with increased economic activities.
- The Committee noted the steady implementation of the FY2021/22 Government Budget, particularly the strong revenue performance to February 2022 reflecting enhanced tax collection efforts and increased economic activity following the easing of COVID-19 containment measures. The continued execution of the Economic Stimulus Programme and the Economic Recovery Strategy were also noted, which are expected to support the economy and cushion the most vulnerable.
The Committee noted that inflation expectations remain anchored within the target range supported by the Government’s policy interventions, and leading economic indicators show improved performance. The MPC also noted the elevated global risks and their potential impact on the domestic economy.
The Committee concluded that the current accommodative monetary policy stance remains appropriate, and therefore decided to retain the Central Bank Rate (CBR) at 7.00 percent. The Committee will closely monitor the impact of the policy measures, as well as developments in the global and domestic economy, and stands ready to take additional measures as necessary. The Committee will meet again in May 2022, but remains ready to re-convene earlier if necessary.
Safaricom launches Sharia-compliant five percent mobile loan
Safaricom has partnered with Gulf African Bank to introduce a Shariah-compliant mobile finance service that will see the bank earn a five percent profit. The bank will disburse the cash –up to a maximum of Sh20,000— and will recover the amount plus the five percent margin.
The repayment period is 30 days on the platform dubbed Halal Pesa and which is built out of the telco’s mobile money platform M-Pesa. Islamic banks do not charge interest and instead levy a margin or profit. Halal Pesa is cheaper than the cost of taking loans on M-Shwari which is a partnership between NCBA Bank and Safaricom.
M-Shwari customers pay a fee of 7.5 percent and 1.5 percent excise duty. M-Shwari also allows clients to save money while Halal Pesa specialises in financing. All M-Pesa customers can access Halal Pesa as a mini–App. Customers will initially be provided with a personalised facility limit based on their M-Pesa usage. The limit can be increased based on a customer’s usage of Halal Pesa.
(Source: Business Daily)
Farmers ask State to subsidise fertiliser prices
In Trans Nzoia and West Pokot counties, a 50-kilogramme bag of fertiliser now goes for Sh6,400, up from Sh5,200 last year while a 25-kilogramme bag of maize seed goes for Sh5,000 up from Sh3,800.
Complaints about the delay in importation of the subsidised fertiliser have increased at a time several parts of the expansive North Rift are facing food shortage due to crop failure experienced the previous planting season occasioned by drought.
Farmers are appealing to the national government to enhance and expedite the supply of subsidised fertilisers and seeds to the farming community, as many risk delayed planting.
(Source: Business Daily)
CRDB Bank targets to finance 150,000 MSMEs
Over 150,000 micro, small and medium-sized enterprises (MSMEs) in Tanzania are expected to benefit from TSh182 billion in a lending package that CRDB Bank Plc has secured from financier, Proparco. Proparco is a subsidiary of AgenceFrançaise de Développement Group (AFD Group), it provides funding and support to both businesses and financial institutions in Africa, Asia, Latin America, and the Middle East.
The two organisations signed an agreement in Dar es Salaam that will see CRDB Bank Plc receive TSh182 billion for lending to MSMEs in Tanzania. Data from the Financial Sector Deepening Trust (FSDT) shows that MSMEs contribute to 27 percent of Tanzania’s GDP. Under the agreement, the TSh182 billion comes in the form of a credit line and two portfolio guarantees.
The money will be channelled towards financing MSMEs in line with the country’s economic growth agenda, with a particular focus on women-led enterprises, and those recovering from the Covid-19 disruptions.
(Source: The Citizen)
Huawei-backed underwater cable launched in Kenya
China’s high-speed, multimillion-dollar, 15,000-kilometre undersea cable has reached Kenya, as Beijing advances what’s been dubbed its “digital silk road,” and Africa seeks the infrastructure it needs for better internet connectivity.
Huawei is a shareholder in the $425 million PEACE cable, which stands for “Pakistan and East Africa Connecting Europe.” It stretches from Asia to Africa and then into France, where it terminates. The PEACE cable reached the coastal city of Mombasa where the CEO of Telkom Kenya, Mugo Kibati, stated the cable would help meet the sharp rise in demand for internet services on a continent where internet adoption has trailed the rest of the world, but which is home to a growing digital population.
“This ultra-high-capacity cable will assist Kenya and the region in meeting its current and future broadband capacity requirements, bolster redundancy, minimise transit time of our country’s connectivity to Asia and Europe, as well as assist carriers in providing affordable services to Kenyans,” said Kibati. Aside from the PEACE cable, China’s proposed 2Africa cable will become one of the biggest undersea projects in the world when it goes live in 2024.
(Source: The Citizen)
Tech experts urge businesses to adopt cloud computing
Experts in the technology sector have urged local enterprises to opt for advanced systems to match the demands of the evolving business environment.
Farouk Semambya, an Information Technology (IT) Architect at MTN Uganda says cloud computing technologies allows enterprises to introduce new ways of working, and cost saving while eliminating the inefficiencies created by traditional automation.
Cloud-computing is on-demand access, via the internet, to applications, servers, data storage, networking capabilities, hosted to a remote data centre and managed by service providers. In essence, cloud computing makes everything from apps to documents available on the internet.
“All businesses need to be connected to the internet because it is now a necessity. With the internet, you can access everything. You need to be cloud-ready by surrounding yourself with tools that do the work. Get out of the mindset of having physical meetings by using the available tools, if you have a project, use Trello. The cloud is not sophisticated, so it is for everyone,” Semambya said.
(Source: The Independent)
Battling illicit trade
Ugandan companies including Unilever, Uganda Breweries Limited and BAT Uganda are carrying out sensitization workshops countrywide to weed out illicit trade. Joanita Mukasa, the Managing Director for Unilever Uganda that counterfeits destroy the country’s image in addition to costing lives. Billy Tsuma, from BAT Uganda said illicit trade vice should be addressed from the supply side. For instance, he said, 44% of the illicit cigarettes on the Ugandan market equivalent to Shs38bn was documented in the last quarter of last year.
Julius Nkwasire Mponooka, the assistant commissioner in charge of enforcement at URA said, the body welcomed all efforts geared towards fighting the vice and fits well in their wider strategy for increasing tax-to-GDP ratio that currently stands at 13%. He said URA is working with what he summarised as ‘three Es’ – education, engagement, and enforcement to deal with illicit trade.
(Source: The Independent)
Ethiopia’s tourism potential exhibited at IMTM 2022 in Israel
Ethiopia’s tourism potential was exhibited at the International Mediterranean Tourism Market (IMTM) 2022 held on 29th to 30th March, 2022 in Israel. The exhibition was opened by Isaac Herzog, President of Israel, who said it was of significant value in showing tourist attractions in various countries. Ethiopian Embassy in Israel, in collaboration with Ethiopian Airlines, presented an exhibition with visual aids, showing various tourist attractions, both tangible and non-tangible heritage, in Ethiopia. The Ethiopian Embassy also said it expressed its readiness to facilitate necessary support for Israelis that want to visit Ethiopia.
USD 100m deal signed for 50W Geothermal Project in Ethiopia
TMGO (TM Geothermal Operations PLC) has signed a $100 million deal with Mitsubishi Corporation and SEPCOIII Electric Power Construction Co., Ltd. for the first phase of a 50W geothermal power project in the Arsi Iteya area in Ethiopia.
The geothermal power project is expected to be completed in two years. Making use of Ethiopia’s potential in geothermal energy will provide an additional power source for the country, Takele Uma, Ethiopia’s Minister of Mines and Petroleum said regarding the signing of the deal.
Zemen Bank partners with Mastercard to launch Ethiopia’s first prepaid contactless travel card
Zemen Bank has announced a partnership with Mastercard that will see the introduction of the first-ever Mastercard branded prepaid contactless travel card in Ethiopia. Zemen Mastercard prepaid travel cards will enable cardholders to use cards with either of the two major currencies, U.S. Dollars and Euros, based on their travel destination.
“We are delighted to see this product address our customers’ needs for overseas travel, without the need to carry cash,” Dereje Zebene, Zemen Bank’s CEO, remarked, emphasising the benefits of the new card and acknowledging the decision of the National Bank of Ethiopia to allow banks to start issuing travel cards. In addition to the two main currencies, Zemen Bank revealed its intention to work in the future with Mastercard to issue cards for other currencies based on popular customer destinations, to add convenience and avoid currency conversion costs.
“Zemen Bank is known for introducing banking technologies in the country and we are proud to again be the pioneer to issue the contactless prepaid travel cards in partnership with Mastercard. We envision that this will pave the way for more e-commerce payments too, as customers are also able to book their flights and hotels using their cards,” Mr. Dereje added.
Ethiopia-Turkey Trade and Investment Forum
The Ethiopian Embassy in Ankara, Turkey, held a two-day trade and investment forum in collaboration with the Industrialist Businesswomen and Businessmen Confederation of Turkey (SANKON). Over 100 members of the Turkish business community, as well as over 25 business people from Ethiopia took part in the trade and investment forum.
In his opening remarks, Adem Mohammed, Ethiopia’s Ambassador to Turkey, highlighted the strong relationship between Ethiopia and Turkey, noting Turkish investors are the second-largest foreign investors in Ethiopia, engaged in various sectors and creating employment for thousands.
Meeting on increasing agricultural production and productivity
The Governor of the Gash Barka Region, Ambassador Mahmud Ali Hiruy, stated that strong effort is being exerted in cooperation with government institutions, the public and members of the Defence Forces, to boost agricultural production and productivity as well as to introduce efficient water and land utilisation in the region.
Ambassador Mahmud made the statement at a meeting conducted in Mensura with area administrators, members of the regional assembly, representatives of the public and government institutions and national associations, as well as village coordinators and Army Commanders.
Ambassador Mahmud further stated that alongside the implementation of the charted-out development programs, sustainable awareness raising campaigns have been conducted with the objective of boosting production and productivity as well as efficient use of water resources and land management.
(Source: Ministry of Information Eritrea)
The Democratic Republic of Congo Joins EAC as its 7th Member
The Democratic Republic of the Congo (DRC) joined the East African Community (EAC) earlier this week becoming the 7th Partner State. The Summit of EAC Heads of State at their 19th Ordinary Summit held on Tuesday, 29th March, 2022 admitted DRC following recommendation by the Council of Ministers. The Chairperson of the Summit, H.E Uhuru Kenyatta, Kenya’s President, informed the meeting that DRC had met all the set criteria for admission as provided for in the Treaty for the establishment of the EAC. “We have concluded the regional processes for admitting new members as provided for in our rules of procedure,” said President Kenyatta. “Admitting DRC into EAC is historic for our Community and the African continent at large. It demonstrates the agility of the Community to expand beyond its socio-cultural boundaries to new people and trade-centered partnerships and collaboration, thus increasing trade and investment opportunities for the citizens,” added the Chair. President Kenyatta said that he was looking forward to the DRC signing the Treaty of Accession before the stated date of 14th April, 2022.
The Summit took the decision to admit DRC into EAC after adopting the report of the Council of Ministers that had recommended the same. Welcoming his country’s admission into the EAC, DRC President Felix Tshishekedi termed it a historical day for DRC, stating that it paves the way for the harmonization of the country’s policies with those of the EAC. President Tshishekedi said that DRC was looking forward to increased Intra-EAC trade and reduction of tension amongst the EAC Partner States. “It is the desire of DRC to see the creation of a new organ in the EAC that is solely focused on mining, natural resources and energy that will be based in Kinshasa, Democratic Republic of Congo,” he said.
In his remarks, Uganda’s President, Hon. Yoweri Museveni said that DRC joining the Community was an event of great significance, adding that he had personally been waiting for the last 60 years for DRC to reconnect with EAC. “DRC has strong historical, social and cultural links with EAC Partner States. It is the onus of the EAC to now work on restoring peace and stability in Eastern DRC, a fete we can achieve by working together,” he added. On his part, President Paul Kagame of Rwanda hailed the EAC Council of Ministers and the Summit for fast-tracking the entry of DRC into the EAC. “I call upon EAC Organs and Institutions to accelerate the integration of DRC into the Community. Rwanda is committed to support the process,” he stated.
Speaking at the event, Tanzania’s President H.E Samia Suluhu Hassan observed that DRC has a long historical relationship with EAC. President Samia expressed hope that DRC would ratify the Treaty of Accession to ensure full integration of her people into the bloc and reaffirmed Tanzania’s commitment to the integration process in East Africa.
On behalf of Burundi’s President H.E Evariste Ndayishimiye, Vice President Prosper Bazombanza hailed DRC President Felix Tshishekedi for the admission of his country into the Community. “EAC projects and programmes are vital and their implementation critical for the integration process. As we move towards the Political Federation, we need to strengthen our efforts to protect our borders against terrorism, piracy and other trans-national crimes,” said the VP, as he reiterated Burundi’s commitment to constructively contribute to promoting peace and stability in the region.
Speaking on behalf of South Sudan President H.E. Salva Kiir Mayardit, Hon. Barnaba Marial Benjamin, the Minister for Presidential Affairs, hailed the entry of DRC into the EAC. Hon. Benjamin said that his country had fallen behind in its contributions to EAC due to the prolonged armed conflict in the country and the Covid-19 pandemic. “The President has cleared the way for all outstanding contributions to the Community,” said the Minister, even as he praised efforts to employ South Sudanese nationals into EAC Organs and Institutions.
Addressing the Summit, EAC Secretary General Hon. (Dr.) Peter Mathuki, said that the admission of DRC into the EAC comes with increased GDP and expanded market size making EAC a home to over 300 million people, which would be mutually beneficial to the people of both EAC and DRC by providing employment and investment opportunities that come along with this new development. “The EAC now spans from the Indian Ocean to the Atlantic Ocean making the region competitive and easy to access the larger African Continental Free Trade Area (AfCFTA),” said Dr. Mathuki. “With lower tariffs on goods and the removal of trading restrictions among Partner States, we anticipate that goods and services will move more freely. With a larger market, manufacturers in the EAC, whether large, or SMEs, will benefit from economies of scale, making them increasingly efficient and competitive,” he added. The Secretary General invited the Private Sector to work closely with the Public Sector to tap the benefits of the entry of the central African nation into the bloc.
Further, Dr. Mathuki said that DRC’s entry also requires integrating the EAC’s trade infrastructure, intermodal connectivity, One-Stop Border Posts (OSBPs), and trade systems to reduce trade time and costs, adding that enhancing trade facilitation will enable formal and informal cross-border trade along the region’s transport corridors. Upon ascension to The Treaty establishing the East African Community and depositing of the instrument of acceptance with the Secretary-General, DRC will join EAC’s cooperation in all the sectors, programmes and activities that promote the four pillars of EAC Integration. Collaboration in these areas will help us achieve the Community’s objectives as set out in Article 5 of the EAC Treaty.