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Treasury to rebase GDP after new Eurobond tap

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Treasury to rebase GDP after new Eurobond tap


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Treasury Cabinet Secretary Ukur Yatani at the launch of the 2020 Economic Survey at the Treasury Building in Nairobi on April 28, 2020. PHOTO | EVANS HABIL | NMG

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Summary

  • The government said the rebasing will give an accurate reflection of the structure and size of the Kenyan economy.
  • Kenya rebased its economy in September 2014, revising the base year to 2009 from 2001 previously, which grew the GDP per capita from $994 to $1,256 and catapulted the country to middle-income status.
  • Borrowing has pushed total Kenyan debt to Sh7.4 trillion which is 69 percent of the GDP from 48.6 percent in 2015, making it unsustainable.

Kenya has kicked off its fourth Eurobond offer with a promise to review the size of the economy later in the year through a rebasing similar to the one conducted in 2014.

The expected resultant higher GDP figures will help improve Kenya’s debt-to-GDP ratios and can, therefore, be applied by the country to justify the capacity to carry a larger debt load.

In a preliminary offer document for the issuance of a Eurobond whose roadshows the Treasury kicked off on Tuesday, the government said the rebasing will give an accurate reflection of the structure and size of the Kenyan economy.

Kenya rebased its economy in September 2014, revising the base year to 2009 from 2001 previously, which grew the GDP per capita from $994 to $1,256 and catapulted the country to middle-income status.

Overall, the exercise pushed the size of the economy up by 25.4 percent, putting the GDP figure for 2013 at Sh4.75 trillion from the earlier estimate of Sh3.8 trillion.

According to the latest National Economic Survey from the bureau of statistics, Kenya’s economy was valued at Sh9.7 trillion as at the close of December 2019.

“The rebasing in 2014 allowed the Government to account for changes in the production structure, relative to product prices and products. These measures have led to changes in the size of GDP, growth rates, contributions by sector, and related indicators that use GDP. The next rebasing is expected to take place later in 2021,” the Eurobond document states.

The rebasing in 2014 helped Kenya overtake countries such as Ethiopia, Tunisia, and Ghana and claim position nine in the list of largest economies in Africa from the previous 12th slot. The country also jumped about 10 spots globally from position 87, overtaking nations such as Guatemala, Bulgaria, Costa Rica, and Lebanon.

If the rebasing is done this year, it will be the seventh time Kenya’s economy will be undergoing the exercise, with previous ones in 1957, 1967, 1976, 1985, 2005, and 2014.

“The UN Statistical Commission recommends that countries rebase every five years. Rebasing enables economic estimates to better account for the current structure of the economy and sectoral growth drivers and to better reflect the performance of the most important parts of the economy,” adds the Treasury in the Eurobond document.

The Treasury has picked global financial services firms Citi and JPMorgan as lead underwriters for the Eurobond IV loans, while I&M Bank and NCBA Group will be the local financial managers advising the government on potential issuance.

Rebasing also carries significant implications concerning the type of financing they can access on the global markets.

The 2014 rebasing lifted the country to lower middle-income economic status and effectively locked it out from accessing most concessional financing available to low-income economic countries.

Syndicated loans

It, however, gave it access to more commercial funding that saw Kenya accumulate Eurobonds and syndicated loans which accounted for about 26 percent of external public debt at the end of 2020.

Eurobonds account for 70 percent of Kenya’s commercial debt ($6.1 billion), while syndicated loans represent 27 percent (about $2.5 billion).

The borrowing has pushed total Kenyan debt to Sh7.4 trillion which is 69 percent of the GDP from 48.6 percent in 2015, making it unsustainable.

Kenya plans to borrow an additional Sh929 billion in the next fiscal year and may benefit from the optics of a larger economy by bringing down the debt ratios.

Even though the move is seen as a way of increasing the economy’s capacity to carry more debt, the Treasury says the exercise will help provide more clarity about balance of payment data used to evaluate the value of the currency, imports, and exports which have returned errors over the past few years.

“There have also been significant efforts to improve the compilation of Kenya’s balance of payments data in recent years, including through technical assistance provided by the IMF. However, errors and omissions in the balance of payments data persist and may complicate the assessment of such data”, the document says.

Kenya initially borrowed on set ceilings until 2014 when the Jubilee administration changed to borrowing as a proportion of the GDP.

In 2014, the government was forced to approach Parliament to increase the external borrowing ceiling by Sh1.3 trillion to Sh2.5 trillion and pushed up the total debt to Sh2.4 trillion.

They would have had to do every year, but the new government enacted the Public Finance Management Act of 2015, giving parliamentary oversight role over the budget while the Treasury drove the revenue-raising agenda.

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KQ resumes Mumbai flights after 4 months

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KQ resumes Mumbai flights after 4 months


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A Kenya Airways aircraft at JKIA. FILE PHOTO | NMG

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Summary

  • Kenya Airways will on Thursday resume flights to Mumbai, ending a four-month hiatus that was occasioned by increased cases of Covid-19 in the Asian state.
  • The airline in a notice to its customers yesterday said it will resume its operations on the route on September 16, 2021 with the first flight departing Jomo Kenyatta International Airport at 7am to arrive in Mumbai at 3:45 pm.

Kenya Airways #ticker:KQ will on Thursday resume flights to Mumbai, ending a four-month hiatus that was occasioned by increased cases of Covid-19 in the Asian state.

The airline in a notice to its customers Monday said it will resume its operations on the route on September 16, 2021 with the first flight departing Jomo Kenyatta International Airport at 7am to arrive in Mumbai at 3:45 pm.

The airline will then resume full operations on the route on September 20, flying three times per week on the Indian route, which is one of the most lucrative destinations on its network.

Passengers on the route will part with Sh46,000 ($419) for one-way air ticket on economy class seats from Nairobi to Mumbai- prices that are relatively the same compared to what it was charging before the Covid-19 pandemic.

“Welcome back onboard! Fly from Nairobi to Mumbai starting Thursday 16th September with normal schedules resuming from Monday 20th September 2021,” said the airline in a notice to its customers yesterday.

KQ Suspended passenger flights to and from Mumbai on April 30 until further notice, following a government directive on travel between India and Kenya due to a Covid-19 crisis in that country.

The airline said on Friday that passengers who had booked tickets after May 1, the date of the last flight from Mumbai to Nairobi, will have to change their plans.

Affected passengers, KQ said, could also take vouchers for the value of their fare for future travel within 12 months.

India has seen soaring infection rates in the recent days, since the discovery of a new virus variant. Last month, India put on lockdown one of the states following a spike in cases of Covid-19.

Other countries that have banned flights to India include France, the UK Bangladesh, Oman and Hong Kong that have banned travel to and from India or asked their nationals coming from the Asian country to isolate themselves in government-approved hotels.

India has so far detected 33,264,175 corona virus cases with the number of deaths hitting 442,874 as at September 13.

A large number of patients from Kenya also travel to India every year for specialised medical treatment, especially cancer care, helping to drive medical tourism in the densely populated country that boasts affordable and easily accessible healthcare.

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Lower import volumes push mitumba prices to new highs

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Lower import volumes push mitumba prices to new highs


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Man pulls a cart loaded with second-hand clothes at Gikomba Market in Nairobi. FILE PHOTO | NMG

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Summary

  • Traders paid Sh100,527 on average per tonne of the used clothes, popularly called mitumba, compared to Sh96,286 the previous year.
  • Kenya Bureau of Standards (Kebs) banned importation of the clothes from late March through mid-August in a bid to contain the spread of the life-threatening coronavirus infections.
  • Findings of the Economic Survey 2021 suggests dealers shipped in 121,778 tonnes of mitumba in 2020, a 34.02 percent fall compared with 2019 and the lowest volumes since 2015.

The average price of a tonne of second-hand clothing items imported into the country crossed the Sh100,000 mark for the first time last year on reduced volumes in the wake of safety protocols and guidelines to curb spread of coronavirus.

Traders paid Sh100,527 on average per tonne of the used clothes, popularly called mitumba, compared to Sh96,286 the previous year.

Kenya Bureau of Standards (Kebs) banned importation of the clothes from late March through mid-August in a bid to contain the spread of the life-threatening coronavirus infections.

Findings of the Economic Survey 2021 suggests dealers shipped in 121,778 tonnes of mitumba in 2020, a 34.02 percent fall compared with 2019 and the lowest volumes since 2015.

Last year’s drop was the first dip since 2011 when 76,533 tonnes were shipped in compared with 80,423 tonnes the previous year, the official data collated by the Kenya National Bureau of Statistics (KNBS) shows.

The import bill for the merchandise amounted to Sh12.24 billion, a drop of 31.11 percent, or Sh5.53 billion, year-on-year.

TIn imposing the temporary ban on used clothes, Kebs had applied a standard which prohibits buying second-hand clothes from countries experiencing epidemics to ensure disease-causing microorganisms are not imported into Kenya.

Higher quality and relatively lower prices for mitumba has continued to drive demand for used clothes at expense of locally-made products amid higher margins enjoyed by traders largely operating in informal markets.

The lucrative second-hand clothing market has seen traders from China —a key source market for the merchandise —open shops in Gikomba, Kenya’s largest informal market for mitumba, in recent years to cash in rising demand.

Earnings from exports of articles of apparel and clothing accessories fell 5.32 percent to Sh32.92 billion last year compared with 2019, data indicates.

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Court backs Atwoli union in horticulture membership feud

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Court backs Atwoli union in horticulture membership feud


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Cotu boss Francis Atwoli. FILE PHOTO | NMG

Summary

  • A trade union that is led by the long-serving Central Organisation of Trade Unions (Cotu) boss Francis Atwoli has survived an attempt to stop it from representing over 60,000 workers in the horticulture industry.
  • Newly registered Kenya Export, Floriculture, Horticulture, and Allied Workers Union (Kefhau) had filed as a case in the Employment and Labour seeking to bar the Atwoli-led Kenya Plantation and Agricultural Workers Union (KPAWU) from representing workers in the industry.

A trade union that is led by the long-serving Central Organisation of Trade Unions (Cotu) boss Francis Atwoli has survived an attempt to stop it from representing over 60,000 workers in the horticulture industry.

Newly registered Kenya Export, Floriculture, Horticulture, and Allied Workers Union (Kefhau) had filed as a case in the Employment and Labour seeking to bar the Atwoli-led Kenya Plantation and Agricultural Workers Union (KPAWU) from representing workers in the industry.

Mr Atwoli is the secretary-general of KPAWU. The rival union claimed KPAWU had encroached on its area of workers’ representation.

Justice James Rika, however, dismissed the claim and ruled that the dispute should have been taken through conciliation, and was therefore presented in court prematurely.

He also stated that Kefhau must go beyond its registration and recruit sufficient members from the employers, to be granted recognition and organisational rights.

“Registration on its own, does not afford the claimant (Kefhau) recognition. Until there is proof that Kefhau has satisfied Section 54 of the Labour Relations Act, the status quo must be maintained,” said the judge.

“Kefhau must recruit at least 50 percent plus one, of the unionisable employees in the floriculture and horticulture industry, members of the Agricultural Employers Association to be considered for recognition,” he stated.

He noted that there is a Recognition Agreement and CBA, binding Mr Atwoli’s union and Agricultural Employers Association, affecting 73 Flower Growers Group of employers, and over 60,000 employees.

“It is objectionable for Kefhau to be allowed organisational rights, and the legitimacy to receive trade union dues and agency fees, from over 60,000 employees, just on the strength of registration as a trade union,” said the judge.

Kefhau wanted the court to declare that it is the sole trade union, which is allowed by its constitution to carry out activities in the export floriculture and vegetable industry, and an order restraining Mr Atwoli’s from representing workers in that area.

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