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The East African : Nov 17th 2014
60 NOVEMBER 15-21,2014 BUSINESS, MARKETS AND FINANCIAL ANALYSIS THE MARKET WHISPERER NSE 20 Share Index Kenya EQUITY MARKETS (WEEKLY CHANGE IN BENCHMARK INDEX) USE All Share Index Uganda 5,139.37 1.27% (CUMULATIVE MOVEMENT) DSE All Share Index Tanzania 2,586.32 -0.38% 1,898.00 4.17% RSE All Share Index Rwanda 133.13 -0.61% JSE All Share Index South Africa 50,476.84 0.43% NGSE All Share Index Nigeria 35,381.02 6.75% food industry through the proposed acquisition of a majority stake in Ennsvalley Bakery from Nas Holding Ltd. The flour maker plans to Flou≥ mille≥ ≥etu≥ns to the baking oven F lour miller Unga Group is set to return to the spend $5.9 million on the transaction, which will see the Nairobi Securities Exchange-listed firm re-enter the baking business after its sale of Elliots Bakeries 15 years ago. In statement to its share- holders, the company said that the transaction will help to diversify its business from milling maize and wheat grains to the wider food industry. “The company recent- ly reviewed its long-term strategy and made the decision to shift from being just a miller of wheat and maize grains and to become a significant player in the wider food industry — specifically to be a provider of nutritious food,” it said. The shift in strategy is expected to enable Unga to improve its gross margins, which have been dwindling over the years due to fierce competition in the mill- which makes bread, cakes, doughnuts, cupcakes and cookies, has opened 15 instore bakeries within the Nakumatt chain of supermarkets, mostly in Nairobi and Mombasa, under the The shift in strategy is expected to enable Unga to improve its gross margins, which have been dwindling over the years due to fierce competition. brand Sprinkles. It also has bakeries in Tuskys, Naivas and Uchumi supermarkets in Nairobi, the Coast and Western regions. Most Kenyan supermar- Bread at a supermarket. Flour miller Unga Group is set to return to the food industry through the proposed acquisition of a majority stake in Ennsvalley Bakery. Photo. File ing industry. It could also prompt further investments in its distribution logistics, providing a route for other value added products derived from wheat and maize to reach consumers. Under the terms of the acquisition, Unga will invest $7.6 million in Ennsvalley Bakery; $5.9 million in equity and $1.7 million in debt, to support the bakery’s expansion that is estimated to cost $8.1 million. Nas Holding will also raise its proportion of the shareholder loan for expansion. The shareholder loans are to be repaid over a period of five years at an interest rate of 15 per cent per year. Since 2007, Ennsvalley, kets have their own instore bakeries that provide freshly baked products. Ennsvalley also has to contend with established firms like Broadway, Mini Bakeries, Kenblest and Elliots. Early this year, Tiger Brands, a South African firm, acquired Rafiki Mills and Magic Oven Bakeries for $25 million. URA st≥ong-a≥m tactics ≥isk tax avoidance backlash UGANDA’S TAx collections grossed Ush2,838.41 billion ($1 billion) between July and October, but still fell short of target by $170,543 despite aggressive enforcement methods employed by the taxman. The collections reflected the slow growth experienced in many sectors and offered a weak outlook on corporation tax returns expected next month. Stringent measures adopted over the past seven months however have led to fears that voluntary compli- ance, the preferred tax collection method because it minimises costs, could be undermined. One such measure, the advance payment of 30 per cent of disputed assessments before a suit is filed in court, generated $9 million from an aggrieved financial services provider. Tax experts warn that given the steep hurdles to resolving tax disputes, affected taxpayers may be compelled to employ measures meant to avoid payment of taxes to minimise their costs of doing busi- ness. Tax avoidance — exploiting loopholes in the fiscal regime to pay less to revenue authorities — unlike evasion, failure to declare or pay accruing taxes, is legal. On a positive note, international trade taxes at $502.9 million had a performance rate of 99.37 per cent, a result of gains from the rollout of the Single Customs Territory in February. Reduced growth across several sectors translated into modest revenue performance in the first four months of 2014/15. The manufacturing sector, oil and gas and the energy sector yielded lower returns on dividends, Pay As You Earn and value added tax on account of slow growth and new investments undertaken since the beginning of this year. In contrast the telecommunica- tions and sugar sectors posted remarkable returns on excise duty following new tax measures announced in June. Published at Nation Centre, Kimathi Street, and Printed at Mombasa Road, Nairobi by Nation Media Group, Box 49010, GPO Nairobi, 00100. Registered at the GPO as a newspaper. Nairobi Office, Tel: 3288000, 211448, 337710, Fax 214531, 213936. Dar es Salaam Office. Tel: 2119657/8. Kampala Office, Tel: 232771, 232772. Fax 232781 Download free QR Readers from the web and scan this QR (Quick Response) code with your smart phone for pictures, videos and more stories Kenya backs Uchumi cash call with $3m CROSS-LISTED UCHUMI Supermarkets is leaving nothing to chance with its ongoing $9.95 million rights issue. With CEO Jonathan Ciano a persuasive salesman on morning radio breakfast shows, Kenya’s East African Affairs Minister Phylis Kandie cast the official vote of confidence with an announcement that parliament had approved the $2.93 million that the government needs to take up its rights. Opt to sit out Extolling Uchumi’s impact on the East African job market, its tax contributions and provision of an outlet for local suppliers, Ms Kandie encouraged the East African investment community to look for opportunities to buy the shares should the existing owners opt to sit out. With Uchumi’s history of rob- bing Peter to pay Paul, a vicious cycle the rights issue is expected to break, the vote of confidence should assuage investor fears over gearing ratios.
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