21st January 2022 Trade & Financial Services Round Up

January 21, 2022 - 5 Minutes Read - By Amrit Labhuram

Banks risk Sh27bn as mortgage, matatu loan defaults jump 60pc

Car and homeowners defaulted on loans totalling Sh27.8 billion in the 12 months to September last year, giving a peek into the nightmare that the two sectors have become for banks amidst the Covid-19 pandemic.

The Central Bank of Kenya (CBK) quarterly economic review shows the transport sector, which was affected by Covid-19 restrictions including curfews and cross-border lockdowns, saw a 60 percent jump in bad loans of Sh16.4 billion from a similar period in 2020.

This is after bad loans rose from Sh27.5 billion in September 2020 to Sh43.9 billion in 2021.

On their part, home owners’ defaults rose by 20 percent or Sh11.5 billion, after the defaults increased from Sh57.7 billion to Sh69.2 billion, as workers servicing mortgages from their paychecks and businesses lost their incomes as a result of the pandemic.

The data showed that the two sectors recorded the highest jumps in defaults and explains why several banks with exposure to real estate and transport have turned to auctioning properties and vehicles as default surged.

By September 2020, the sectoral distribution of bad loans showed that trade remained with the biggest stock of bad debt at Sh99.1 billion followed by personal (Sh70.4 billion), manufacturing (Sh65.5 billion) and agriculture (Sh19.6 billion).

The data reflects the impact of Covid-19 pandemic on businesses especially the matatu and taxi operators after the government imposed a night curfew and restrictions on movement into Nairobi, Mombasa and Mandera leading to grounding of some vehicles.

(Source: Business Daily) 

CA takes on Safaricom, hints at further cuts in call tariffs

The Communications Authority of Kenya (CA) says the recent cut in mobile termination rates will give smaller telecoms operators a better chance at competing with market leader Safaricom, even as it hinted at a further drop in call tariffs.

The sector regulator says in its response to a petition filed by Safaricom before the Communications and Multimedia Appeals Tribunal that it plans to conduct a more detailed network cost study of mobile termination rates (MTR), suggesting it could consider further review.

MTRs are the charges levied by a mobile service provider on other telecommunications service providers for terminating calls in its network.

The CA cut the charge to Sh0.12 per minute from the current Sh0.99 per minute after a six-year freeze, drawing legal action from Safaricom that earns the most from MTR due to its large voice market share of 68.9 percent. The capping was to start on January 1. 

Safaricom earns an estimated Sh6.5 billion annually from MTR while paying out Sh2.6 billion to rivals, leaving it in a profitable position while competitors remain in a net losing trade.

The regulator says the revised rates will give small operators greater price flexibility to compete with the market leader- Safaricom and benefit consumers.

(Source: Business Daily) 


Free zone exports grow to UShs4.2 trillion from Shs 542 billion

Export earnings from free zones grew to a record high of $1.2b (UShs4.2t) in 2020-2021 from $154m  (Shs542b) in 2019-2020, a new report has revealed.

The report, issued by Uganda Free Zones Authority shows that for two years in a row, semi-processed gold was the driver of exports in the free zone accounting for 93 percent of total export earnings at $1.1b  (UShs3.8t.)

Flower and horticulture exports ranked second to gold, accounting for 3.7 percent of exports at $46m (UShs162b) as tobacco which is partly or wholly stemmed ranked third accounting for 3.1 percent of exports at $38m (Shs133b), the report shows.

It, however, shows that wheat flour exports recorded a 65 percent decline to $1 m (uShs3.6bn) in 2020-21 from $4m (UShs14bn) registered in the financial year 2019-20.

The exports that earned the least were underground natural calcium phosphates which brought in $5,000 (UShs17m).

Mr Hez Kimoomi Alinda, executive director of Uganda Free Zones Authority, while releasing the report said positive performance in free zones in 2020-21 was driven by an increase in mineral and tobacco processing activities and exports.

(Source: The Monitor)

Covid-19 pandemic pushes 3 insurers out of business

Coronavirus pandemic has forced three insurance players to cease operations in Uganda amidst government’s decision to ease restrictions this year to salvage the economy.

Metropolitan Life Uganda, which opened shop in 2017 targeting low income earners with micro-insurance products, has since voluntarily stopped operations. However, it remains unknown the insurer that will be taking over its assets and clients.

The insurer had since its inception recorded a slow growth in insurance premiums with the latest data from Insurance Regulatory Authority of Uganda indicating that it registered a merely 0.12% growth in  premiums to UShs 8.823 billion as at the end of fourth quarter of 2020.  This placed it in the ninth position out of the nine life insurers, with a market share of 2.7%.

Other insurance players that have ceased operations effective this year include; St. Catherine’s Medicare Limited, which operated under the Health Membership Organisation (HMO) category and International Air Ambulance (IAA), formally an HMO, whose business have been transferred to Prudential Assurance Uganda following a buyout last year.

So far, about three insurers – AIG, Lion Assurance Company and NOVA – have exited the Ugandan market in the past five years. However, new ones including GA and Kenya Re have also entered the market during the same period.

The country’s insurance industry has consistently recorded a surge in premiums with the gross written premiums increasing from merely Shs U463 billion in 2013 to UShs 1.06 trillion in 2020 on the back of government investment in infrastructure such as Karuma and Isimba Power Dams, Kampala-Entebbe Expressway and Entebbe International Airport expansion.

However, insurance penetration remains at less than 1% compared with South Africa, Namibia, Lesotho and Kenya, whose insurance penetration stands at 16%, 6.6%, 4.7% and 3.4%, respectively.

(Source: The Independent)


UK gas producer posts record earnings buoyed by Mnazi Bay plant in Tanzania

London-listed natural gas production firm, Wentworth Resources, Plc has reported record profits for 2021 thanks to positive gains from its Mnazi Bay operation in southern Tanzania following a pick up in domestic demand particularly in the industrial sector.

According to Wentworth’s interim results report for 2021, the company’s revenues for the first half of the year up to June 30 went up by 40 percent to a best-ever $11.7 million due to record levels of production at the Mnazi Bay gas field in Ruvuma region.

It said the figures placed the company in “the strongest financial position in its history” with record revenues, earning before tax, and cash-in-hand which stood at $24 million by November 30, an increase from $22.5 million on June 30, after payment of $2.6 million in final 2020 dividends and $1.32 million in interim dividends to its shareholders.

The company said it expected a 2021 final dividend of $2.64 million.

Production at the Mnazi Bay gas field averaged 80 million standard cubic feet a day (Mscf), above the 2021 target and the country’s overall gas demand for the year as production costs dropped 72 percent to $0.48 per Mscf “due to continued focus on cost efficiencies and high degree of operational leverage at Mnazi Bay,” it said.

(Source: The Citizen)

Relief as government cuts electronic tax stamp rates

The government has marginally reduced fees for Electronic Tax Stamps (ETS) in a renewed effort to cut manufacturers’ operating costs for the benefit of final consumers.

Yesterday, the government reduced the fees for Electronic Tax Stamps (ETS) in a response to concerns by manufacturers and some Members of Parliament (MPs) who have been deploring the rates, saying they are exorbitant.

The new rates, announced by Tanzania Revenue Authority (TRA) will be lower by between 0.5 and 11.26 percent compared to the previous ones, according to calculations by The Citizen.

TRA’s director for taxpayer services and education, Mr Richard Kayombo, said the decision to reduce the fees rates was meant to provide relief to manufacturers’ costs of production and consequently affordability to consumers.

(Source: The Citizen)


New directives for alcoholic beverages producers and distributors

Rwanda Food and Drug Authority has introduced directives for operators in the production, transportation and trade of alcoholic beverages.

According to a letter to industry stakeholders signed by Dr.Emile Bienvenu the Director General of FDA, packaging of alcoholic beverages in plastic containers is not allowed for any kind of alcohol.

FDA noted that alcohol can only be packaged in ways that are approved by the authorities when the product receives authorization.

The packaging of the drinks should include clear writing of the nature of the product, the producer as well as details of ingredients.

With that, producers are not allowed to pack alcohol in packaging of other producers, whether bottles or crates.

The authority also noted that vehicles involved in the distribution of alcohol should have the correct documentation which show the source and destination of the products, delivery notes, operational license as well as registration certification from FDA.

The authority also warned against any practices that could lead to the contamination of alcohol.

Traders and distributors will also be required to only buy their stock from licensed operators as well as have proof of the purchase.

In 2021, FDA announced a directive compelling broadcasters and advertisers to seek approval before promoting and advertising regulated products. The regulated products listed include human and veterinary drugs, human and animal vaccines, biological products used in clinical settings as drugs, processed food for humans and animals, food supplements, fortified foods, food fortification, poisonous substances, herbal medicines and medicated cosmetics.

Other products include human and veterinary medical devices, tobacco and tobacco products, labels, packages, and raw materials used in the manufacture of regulated products as well as laboratory and cleaning chemicals and pesticides.

FDA also conducts regular inspection on the factories of alcoholic beverage producers. For instance, over the New Year festivities, the agency ordered the withdrawal from the Rwandan market of a banana-based alcoholic alcoholic drink called Umuneza, owing to adverse effects associated with its consumption. 

(Source: The New Times) 


Ethiopia obtains $283m from mines exports in 6 months

Ethiopia’s Ministry of Mines and Petroleum announced $283 million has been secured from mines exports during the past six months. The ministry made the announcement after a review meeting of its six-month performance.

Million Mathewos, State Minister at the ministry, noted the mining sector has a significant role to play in ensuring sustainable development in Ethiopia. In light of this, he said, institutional reform has been conducted and continuous works are set in motion to ensure increased production in the sector.

The mining sector holds a huge potential that will help secure more forex, as well as replace imported mining products with local ones, the state minister related.

The $283 million is obtained from the export of gold as well as other products.

Moreover, the Ministry said it has provided support for industries in the sector, and consequently witnessed a rise of up to ten thousand tons in production at some production factories.

During the meeting, it was noted that Ethiopia spends up to $275 million to import coal, and efforts are underway to replace this with local production. The Ministry of Mines and Petroleum has signed six billion birr worth coal mining project agreements with eight companies recently.

(Source: 2merkato)

Ethiopia-Djibouti Railway Revenues Rise to $86m in 2021

The Ethiopia-Djibouti Railway (EDR) said it has secured $86.13 million in revenues in the year 2021, showing an increase of 37.5 percent compared to the previous year.

In the year 2021, the 756km long railway has transported 77,357 containers between Ethiopia and the Djibouti Port. 

EDR mentioned the implementation of a railway safety regulation in Ethiopia’s Somali region since August 31, 2021, among other contributing factors, as the reason for the rise in revenues. In 2020, the railway had suffered various incidents of vandalism and theft, they recalled. In 2021, however, no significant security-related incidents have occurred, the officials said.

The railway’s refrigerated train service helps Ethiopia export its fruits and vegetables to the international market. The railway’s freight services also transport fertilizers, wheat, edible oil, and vehicles.

Opened in January 2018 replacing the old metre-gauge railway, the Ethiopia-Djibouti Railway is Africa’s first fully electrified trans-boundary railway.

EDR currently transports around 25 percent of Ethiopia’s export and import freight to and from the Port of Djibouti, which is the entry point to over 90 percent of Ethiopia’s total international trade.

(Source: 2merkato)


Finance ministry announces allocation of funds in new budget for reconstruction projects in East Sudan

he official spokesman of the Ministry of Finance and Economic Planning, Dr. Ahmed Al-Sharif, has announced allocation of funds in the new budget for fiscal 2022 to complete the projects of reconstruction in East Sudan implemented by the East Reconstruction Fund, stressing commitment of the ministry to complete implementation of projects whose implementation rate reached more than 70% as part of state appropriations of self-resources.

The official spokesman for the ministry expected that the Kuwait fund for development would respond and start pumping funding to complete projects for reconstruction of East Sudan in the states of Red Sea, Kassala and Gedaref.

Al-Sharif indicated that a delegation from the Ministry of Finance and Economic Planning, headed by Director of International and Regional Finance Institutions Department, is now conducting a field visit to the eastern states to see the progress of implementation in grant and loan projects financed by the Kuwait fund for development to identify the level of achievement and the obstacles that accompanied implementation and to propose possible solutions, in order to be able to make an integrated report to be submitted to the management of the Kuwait fund and to discuss with it how to complete the shortfall in important development projects in the fields of health, technical education, electricity and water.

Al-Sharif indicated that the visit will end next Tuesday in preparation for submitting an integrated report after completion of visits by other teams to the states of Sudan, which have interventions from the Kuwait fund that include Northern, White Nile, Gezira and some states of Darfur in addition to Eastern Sudan.

(Source: Sudan News Agency)

Sudanese-Turkish cooperation in field of standards and metrology discussed

Director General of the Sudanese Standards and Metrology Organization (SSMO) Dr. Sami Bala Ibrahim discussed today with the Turkish Ambassador to Khartoum, Irfan Neziroglu aspects of   joint cooperation between SSMO and its counterparts in Turkey.

Dr. Ibrahim said   that a memorandum of understanding would be signed between the two sides in the field of standards and metrology in upcoming days to facilitate movement of imports and exports between Sudan and Turkey.

The SSMO Director General praised the Turkish role in supporting SSMO capacity building programs.

On his part, the Turkish Ambassador reaffirmed his country’s readiness to exchange experience and upgrade technical capacity building in the field of standards and metrology between SSMO and its counterparts in Turkey.   

(Source: Sudan News Agency)


UK Announces $10 Million To Tackle Impact Of Drought In Somalia

The funding is expected to support almost 500,000 people in Somalia to access clean water and afford food supplies.

This kind of early preventative action is crucial, as was learned from the 2016/17 drought in Somalia when early action and funding led by the UK helped to narrowly avoid a famine.

Climate change is driving extreme weather events across the region, worsening pre-existing drought, while poor governance and ongoing conflicts in Somalia are displacing vulnerable communities and destroying livelihoods.

On a visit to East Africa, UK Minister for Africa, Vicky Ford MP, said: “For countries in East Africa, climate change is not a future problem – it is driving a humanitarian emergency right now. Catastrophic droughts and floods, paired with ongoing conflicts and poor governance in Somalia, South Sudan and Ethiopia, are creating a perfect storm in East Africa which risks pushing hundreds of thousands of people into famine.”

The UK is a long-standing supporter of Africa’s adaptation to climate change, with around half of the UK’s £2.7 billion adaptation budget between 2016 and 2020 spent in Africa.

(Source: Radio Dalsan)

EU concerned by the looming expiry of anti-piracy mandate off Somalia

Somalia is embroiled in a political crisis as tensions soar between its president and prime minister. With parliamentary elections slated to end on February 25, the political environment remains uncertain.

This has led to concern in the EU about the future of anti-piracy operations off the Coast of Somalia, where the EU leads the long-running Operation Atalanta maritime security mission.

Last month, the UNSC (United Nations Security Council) – in partnership with the Somali government – voted to extend all international navy missions for an extra three months. These include Operation Atalanta, also known as EU NAVFOR Somalia; the US-led Combined Joint Taskforce-Horn of Africa; and NATO’s Operation Ocean Shield.

As the expiry period approaches in March, one of the naval missions to be affected will be EU NAVFOR, which has been fighting piracy in Somalia’s waters for the last 14 years.

Despite the steady decline in pirate attacks since 2011, EU officials believe that the three months extension is insufficient to build long-term structures for maintaining stability in the region. However, internal information contained in an EU foreign-service paper – first reported by the EU Observer – shows that Somalia’s government is noncommittal on continued international naval operations within its waters.

If the UN resolution expires in March, then Operation Atalanta will lose its legal basis to operate off the coast of Somalia. Besides counter-piracy, the operation provides protection to WFP (World Food Programme) vessels taking aid to refugees in Somalia.

The EU contends that without access to Somalia’s territorial waters, the capacity for EU NAVFOR to carry out counter-piracy activities in the region will be crippled.

(Source: Radio Dalsan)


NAEWDV: Commendable rehabilitation programme

The National Association of Eritrean War Disabled Veterans stated that the association has conducted praiseworthy activities aimed at improving the socio-economic status of members.

Speaking to Erina, the head of rehabilitation and restructuring, Mr. Abraham Kifletsion indicated that the association, beyond organizing training programs with a view to developing the capacity of members, is also providing free of charge health care services.

The training programmes that have been provided include driving, sculpture, weaving, bee and livestock farming, as well as computer technology and construction.

Stating that trainees are provided with loans to enable them to initiate small-scale businesses, Mr. Abraham said that from 2016-2018, over 58 million Nakfa loans have been distributed to 2,722 members and over 2.1 million Nakfa in 2021 and called on beneficiaries to repay their loans in time.

Furthermore, he indicated that the association has distributed over 2.5 million interest-free loans to 227 disadvantaged war-disabled women veterans from all regions.

Mr. Abraham further noted that the association in cooperation with partners has established various income generation and sports facilities in various regions including mills and gymnasiums.

The optical center established in 2019 is also providing commendable service, Mr. Abraham added.

(Source: The Ministry of Information)

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