Somalia has been admitted as the eighth member of the East African Community on Friday November 24, 2023, just over a year after the latest entrant, the Democratic Republic of Congo (DRC) was admitted into the bloc.

Mogadishu’s admission into the bloc was approved by the region’s leaders during the 23rd ordinary summit of the heads of state held in Arusha, Tanzania, on the same day, after successful negotiations that lasted close to a year.

The outgoing chairperson, Burundi’s President Evariste Ndayishimiye said the heads of state agreed to formally admit Somalia into the bloc, after the lengthy closed-door meeting which lasted more than five hours.

Somalia first expressed interest in joining the EAC in 2012 but was turned down due to its internal troubles with Al Shabaab and lack of a stable legal and political environment at the time. 

However, Mogadishu’s hopes of joining the regional bloc were rekindled when equally troubled South Sudan was admitted in 2016, and later DRC, which also has multiple conflicts within its borders, in 2022.

By Leonard Wanyama

Kenya’s tough economic situation needs significant creative thinking to take the country back towards prosperity.

The existing public finance management (PFM) system simply dwells on revenue cycle in a somewhat traditional way.

With constant reports of new revenue collection measures such as revised corporate taxes; reintroduced minimum taxes; reviews of value added tax (VAT); refocusing on education, insurance, petroleum, tobacco, alcohol; and introduction of vehicle plus carbon taxes, is it possible to think differently about how tax collection in public finance can be structured towards uplifting marginalised areas?

For instance, it is assumed that a high population should guarantee existence of more revenue potential hence the need for increased numbers of paramilitary agents to help in tax collection efforts.

In thinking about pathways for prosperity, the country’s PFM allocation priorities are geared towards the enhancement of service delivery and promotion of balanced development.

However, is there any possibility of including the promotion of local opportunities within this matrix?

Following taxation, revenue allocation in counties identify health services, agricultural features, population dynamics, urban amenities, basic portion, land area, rural access through roads, poverty levels as indexes of spending needs.

Yet, current circumstances demand additional thinking on how to spur enterprises, particularly in marginalised or peripheral areas.

This, as a key aspect of Kenyan policy imagination to encourage productivity that will uplift communities across the country.

This may require changes or improvements in language and definitions.

Marginalised areas should not only be understood in terms of geographical scarcity for reclamation, but also as spaces of prospected growth. 

Public finances can then be structured to propel structural economic advancement for the benefit of all by encouraging investment in distressed localities as means of dealing with questions concerning prevailing inequalities.

Above and beyond equitable contributions, marginalised areas can also be designated as ‘County Opportunity Zones (COZ)’ that serves as spaces through which investments are channeled to ensure employment creation is targeted towards low-income communities.

How different or unique would a COZ be different from other Special Economic Zones (SEZs) such as Free-trade zones (FTZ), Export Processing Zones (EPZ), Free Economic Zones (FZ/FEZ), Industrial Parks/Estates (IE), Free ports, Bonded logistics parks (BLP), Urban Enterprise Zones?

By LUKE ANAMI

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Somalia’s bid to join the East African Community seems to have come at the right time as the bloc also seeks expansion to include nearly everyone in the Horn of Africa. More than a decade since Mogadishu first filed interest, all indications are that Somalia could be the eighth member of the bloc by end of the year.

That has raised criticism as well, with some quarters terming the pace “too fast” (Somalia resubmitted the bid late last year) for a country still at war with itself and several other governance problems.

The EAC says it will not stop at Somalia and wants to have as many as 10 members by 2025, at the earliest, or before the close of the decade. This, officials say, will help countries in the region apply the rules of trade under the African Continental Free Trade Area (AfCFTA) agreement without worrying about concentric bloc memberships.

After Somalia, three more countries are expected to begin the admission process. They are all in the Horn. Ethiopia, Djibouti and Eritrea have been touted as possible candidates.

But while the desire is to encourage all countries in the neighbourhood to belong to one organisation, critics say the bloc is ignoring its basic principles.

Under Article 3 of the EAC Treaty, the criteria for the admission of new countries into the community include: Acceptance of the community as set out in the Treaty; adherence to universally acceptable principles of good governance, democracy, the rule of law, observance of human rights and social justice.

There are growing concerns that instead of strengthening and increasing intra-trade, the admission of the latest EAC partner states including South Sudan, the Democratic Republic of Congo and now Somalia is slowing down the integration process due to internal conflict in their respective countries.

The government is yet to adequately tackle pilferage and misuse of public resources to warrant an increase in the taxation, players in the civil society have warned.

The CSOs under the umbrella of Okoa Uchumi now want the state to review its expenditure before implementing the new taxation proposals in the Finance Bill 2023.

According to the CSOs the government will gain more by plugging leaking in various revenue streams and cutting down on expenditure than increasing taxes.

Among the measures the lobby want reviewed is the increase of Value Added Tax on petroleum products from the current eight percent to 16 percent saying this will further worsen the cost of living in the country.

They also objected the proposed increase to 35 percent Pay As You Earn for those earning a monthly income of Sh500,000 and above per month and instead want the tax band to be pushed to those earning over Sh1 million monthly

Kenya Human Rights Commission program manager Annet Nerima said that under the taxation proposals in the VAT category, the lobby rejected eight  out of the 11.

Okoa Uchumi says the proposal to remove the VAT exemption on the supply of maize (corn) flour, cassava flour, wheat or meslin flour and maize flour containing cassava flour will raise the cost of living for many Kenyans.

“The coalition members however oppose a number of the proposals that are problematic and inconsiderable of the  current economic situation,” said Nerima

Under the Excise Duty Proposed Amendments a total of eighteen (18) amendments were considered by members.

Out of these, the coalition endorsed thirteen (13) of them for ‘their consideration of the current cost of living in the county.

“Members oppose a total of five and recommend that the national assembly reject these.”

“The excise duty on Mobile money transfer services to be increased from 12% to 15% of the excisable value-members oppose this proposed amendment because it may lead to reduced transactions, thus reducing excise duty collection,” added Action Aid Kenya National Program Manager Lina Moraa.

In the Income Tax Proposed Amendments 13 out of 17 amendments were considered and endorsed by the Coalition.

They now want the legislators to reject the introduction of 10 percent PAYE tax on the first Sh24,000 without relief, recommends retaining but with 100 percent relief as it is currently with the justification that the relief will cushion low-income earners from the high cost of living.

Their objection to some of the proposals come at a time that the government is hard pressed to increase its revenues.

It is estimated that for every Sh100 the government collects as revenue, more than Sh65 goes to service the national debt.

This has further been worsened by the fact that for the first three quarters the Kenya Revenue Authority (KRA) in the revenue collection for the 2022/2023 Financial Year have been below target.

Out of the targeted Sh2.07 trillion for the current fiscal year, Sh1.57 trillion has been collected. Almost 25 percent below the target amount.

The CSO argue that The high debt burden, the unmet revenue collection and a large budget deficit require fiscal consolidation and revenue mobilisation.

By ANTONIO M.A. PEDRO

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The confluence of shocks – the cascading impact of the Covid-19 pandemic, the war in Ukraine and severe natural disasters – have eroded Africa’s development gains, resulting in a staggering 149 million previously non-poor Africans now facing the risk of falling into poverty.

The growing number of new poor and vulnerable people is making it harder to close the gap between the rich and the poor. Moreover, Africa currently accounts for the largest share of the world’s poor. This inevitably has a far-reaching impact on achieving the sustainable development goals and the vision of the Africa we want.

The crisis, however daunting, presents an opportunity for the African ministers of finance, planning and economic development assembling in Addis Ababa from 15-21 March 2023, to make concerted efforts on providing concrete solutions. The theme, fostering recovery and transformation in Africa to reduce inequalities and vulnerabilities, should yield long term actions to move the continent forward on a path of prosperity.

First, there is need for real action on reducing the high cost of trade. This can ease the burden on access to affordable goods for poor, hard-hit households that are losing out on health, education, and meaningful opportunities. It is also time to expedite the implementation of the African Continental Free Trade Agreement (AfCTA) as a powerful lever for poverty reduction.

The AfCFTA’s promise cuts across all economic sectors, presenting a new pathway for broad-based growth. In the agri-food sector, which is critical to overcoming vulnerabilities associated with food insecurity for the over 300 million affected Africans, ECA estimates show that the sector will yield additional US$ 43.3 billion in trade revenue by 2045 if the agreement is expedited.

Additional opportunities abound in sectors such as pharmaceuticals, vehicles and transport equipment, metals, and textile, apparel and leather products.

 Second, climate action must be mainstreamed in policy development and implementation.  We are living through the devastating impact of climate events that have led to the migration and displacement of some 85 million people in the region.

Increasing temperatures have already contributed to a reduction by a third in average agricultural productivity growth, while the continent’s 38 coastal countries are facing climate-related threats to their blue economies.

The climate crisis is not a fringe issue. It accentuates poverty through its impact on lives, livelihoods, and economies. Governments can finance development through innovative green financing, such as investing in nature-based sequestration which can provide up to 30% of the world’s sequestration needs. At 120 USD per tonne of carbon, up to US$ 82 billion per year can be mobilized from nature-based carbon credits in Africa.

According to data from the World Bank, about 1.4 billion adults globally remain unbanked. Many of these are low-income people in rural areas, especially women and youth and those with little or no financial literacy support.

Financial exclusion exacerbates rural poverty and erodes the capacity of individuals and households to withstand shocks.

Indeed, regions in Africa have been impacted by major climate, political and health-related shocks which not only restrain efforts for wider financial inclusion but also threaten the economic and social development gains achieved in reducing poverty among rural communities.

However, there is a silver lining. Over the last decade, financial inclusion has continued to gain traction and supports many of the United Nations’ Sustainable Development Goals (SDGs).

It is a critical component in reducing poverty and improving the standard of living of millions of people left out of financial systems.

Account ownership in developing economies, for example, grew from 63 percent to 71 percent between 2017 and 2021, driven by services like mobile money.

In addition, a renewed focus on leveraging innovation in the private sector such as those using digital technology to deliver financial products and services, or credit risk models for smallholder farmers has led to more for-profit businesses supporting the provision of relevant financial products and services for low-income people.

In the last eight years, the Mastercard Foundation Fund for Rural Prosperity has been working with 38 such businesses (referred to as Fund participants) and through their work, has reached over 5.3 million people in 15 Sub-Saharan countries in Africa, who now use innovative credit, savings and transaction-based products and services.

This has contributed towards the growth in the number of people actively participating in the continent’s financial system, and ultimately changing livelihoods.

The $50 million Challenge Fund focusing on financial inclusion was established in 2015 by the Mastercard Foundation and has supported businesses working across a wide range of sectors such as agriculture, renewable energy, finance, technology and logistics.

Financial inclusion refers to all initiatives that make formal financial services Available, Accessible and Affordable to all population segments. This requires particular attention to specific portions of the population that have been historically excluded from the formal financial sector either because of their income level and volatility, gender, location, type of activity, or level of financial literacy. In so doing, there is a need to harness the untapped potential of those individuals and businesses currently excluded from the formal financial sector or underserved and enable them to develop their capacity, strengthen their human and physical capital, engage in income-generating activities, and manage risks associated with their livelihoods.

What we mean by financial inclusion of women throughout the decade is to seek strengthened financial services and capacity building, especially for women living in rural areas, to gain access to technology and to use it to increase productivity in all industrious sectors and with tailor-made financial products for the women and have access to formal as well as reliable means to save, access and borrow money. Studies have shown that women invest 70 percent of their financial resources in the social welfare cost of the family, particularly education and the health of children, while human investment ranges from 30 percent to 40 percent.

Going forward, women and girls are keen on not only managing funds at the various public and private institutional set-ups but also owning the funds. There is nothing small about women, therefore, we are thinking big and looking at how women can have more control over their earnings and savings as well as managing and owning large amounts of funds.

We must be able to make significant progress in improving the lives and livelihoods of millions of women and young girls around the continent, and that means that we are leaving no one behind because when you empower a woman, you empower the family and the community at large. There is evidence of that trickledown effect. For that reason, in February 2020, African Women Leaders Network launched the African Women Leadership Fund, demonstrating their commitment to move from commitment to action. With a target of $100 million, the launch pooled over $20 million from the leaders present, the private sector, and more commitments will see that fund grow.

According to the World Bank, more than 70 percent of African women are excluded by financial institutions or cannot receive financial services, such as a savings or current account, loans, credit and other institutional services, with adequate conditions to meet their needs.

The overall goal of this new African Women’s Decade is that every woman must be able to work, be paid and participate in her country’s economy. This will involve examining the regulatory, legislative and policy context to determine the changes needed to foster the financial inclusion of women and assist financial institutions in adopting approaches tailored for them as a separate market segment.

Furthermore, as declared by the AU Heads of State and Government during the 33rd AU Summit in February 2020, one of the main objectives of this new African Women Decade is the development of market access by enhancing new credit solutions for women, generating access to infrastructure in downstream processing and distribution, and training them in agro-industrial technology.

Finally, in addition to access to financial products, technologies and services, achieving financial inclusion for women would require overcoming sociocultural norms and gender barriers.

A recent press release by Kenya Revenue Authority (KRA) Board Chairman Anthony Ng’ang’a Mwaura is causing a great deal of consternation within the tax community in the country.

For one, such as myself, who has had a baptism by fire in tax advocacy, the statement’s use of words interchangeably- as synonyms- without reference to relevant legislation is a mistake.

Revenue collection debates are generally a “minds” discussion as opposed to a “hearts” conversation.

This, therefore, makes the choice of words -such as refunds, exemptions, waivers, abandonments, reliefs, incentives, or payments- have very specific legal meanings for purposes of clear interpretation.

Moreover, broader public understanding is key to ensure compliance with the law or else any confusion opens an opportunity for tax avoidance and evasion.

Such incidents further complicate an existing challenge of connecting the “technical language barriers” between tax practitioners, academics, legislators, journalists, activists, and citizens.

How then can we bridge the communication gap between the niche group of legal or accounting professionals and a wider audience of interested parties that continues to grow?

Local, national, regional, continental, and global tax issues must be fused to the relevant political or policy agenda in order for them to make sense. A concept in and of itself, will not make sense if not linked to individual needs it must address.

Consequently, speaking politics intelligently must correspond to talking about policy contextually and vice versa. 

Essentially if the idea of a “tax suspension” is the beginning of translating what a “Hustler Revenue Collection Plan” is, then it must clearly be so on account of existing law.

Otherwise, the leadership and management of the KRA will come across as underhandedly perpetuating the extension of current political schisms. This goes contrary to making tax simpler and more relatable.

Tax is a representation of interests, an understanding of governance, an application of sanctions, pursuit of economic justice, and a platform for civic education.

Its communication must recognize this because it is at the heart of state formation and its transformation, hence it must not be taken so casually, especially within the context of constructing more responsible citizenship.

Subsequently, Board Chairman Mwaura’s statement will have a negative impact on policy consistency, revenue collection, institutional development, mobilization of taxpayers, and the historical record of KRA, not to mention the next quarter’s targets.

On the reliability of policy, reports have thronged the news cycle as to industry concerns on how the statement unleashed unpredictability on account of the vagueness it projected.

Meanwhile, in a country suffering from serious tax apathy such a statement further erodes citizens’ confidence in an institution that has consistently been viewed as an unresponsive and punitive government agency.

Likewise, the plans to convert KRA from an authority to a service are likely to be questioned as a disingenuous public relations exercise that is likely to gobble up massive resources without establishing any practical or beneficial change for citizens. 

Debt sustainability is fundamental. It is the fabric that keeps economies intact.

In fact, history has taught us that if any country is to become a global superpower, military superiority alone will not get the job done. It requires economic capability to dominate the global stage.

Alas, that is why Africa has for the largest part of the developments been left out of the global decision making stage.

This did not happen by chance. Africa has found itself in a tight corner, where economic dependency immediately took over from colonialism.

After years of suffering under colonial masters, where all aspects of life were dictated by foreigners, the continent failed to fully emancipate itself and exert total autonomy.

This led to what later became known as neocolonialism. And today we find ourselves in peculiar circumstances where decisions for development are being made on our behalf under the disguise of cooperation.

It is for these reasons and more that we urge the Tanzanian government to exercise the utmost prudence when deliberating on applying for a loan from either commercial banks, international organizations, or foreign countries.

It is good to have ambitions for growth. Granted, building an entire economy does not come cheap. However, the cost of the ambitious plans should not outweigh the benefits; this is a basic principle.

As economic policy professor Stefan Dercon once said, “Africa should not embark on too many big, capital-intensive infrastructure projects simultaneously.” Doing so will strain resources and make the government resort to borrowing more in order to complete the projects.

With Tanzania’s national debt rising by close to Sh7 trillion in one year, the indicators, at least as shared by the government, are that the debt remains sustainable.

However, what should be of paramount importance is ensuring that the borrowing spree is not stretched too far as to overwhelm the national capacity when it comes to repaying what we owe.

With some suggesting that Tanzania is in fact on the brink of debt distress, it becomes even more prudent for the government to exercise caution when it comes to borrowing.

Indeed, concessional loans are more appealing than private sector commercial loans. They attract a paltry of the interest.

But, if left unchecked, these loans can also weigh down an economy due to the subtle nature of the interest rate and the long grace periods.

The harsh economic conditions in Kenya have pushed everyone, including the government and the private sector, to be uptight with their money. Everyone wants to make more money and spend less. That is true of taxes.

Individuals and businesses often use tax minimisation strategies to reduce their tax burden and maximise profits.

While tax avoidance is legal, some view it as unethical, calling for everyone to pay their fair share of taxes.

For Kenya Revenue Authority (KRA), tax avoidance and tax evasion are two sides of the same coin. The tax agency has become increasingly sophisticated in its attempt to detect and pursue tax avoidance cases.

So, should firms and individuals make use of legal tax minimisation strategies?