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The East African : Apr 6th 2015
The EastAfrican 38 GROWTH ENTERPRISES MARKET SEGMENT Regulators now want a revamped GEMS They p≥opose tax amnesty on past omitted incomes fo≥ companies seeking to list on the bou≥se, and me≥ge≥ of segments By JAMES ANYANZWA The EastAfrican measures to revamp the underperforming trading platform for small and medium-sized enterprises (SMEs), which has attracted only four companies in the more than two years since its launch. The Capital Markets Author- K ity and the Nairobi Securities Exchange are also in negotiations to extend the tax benefits offered to large companies to the SMEs, to encourage small and family-owned businesses to sell part of their shares to the public. “We are extending the tax bene- fits from the Main Investment Market Segment and the Alternative Investment Market Segment to the Growth Enterprises Market Segment (GEMS),” CMA acting chief executive Paul Muthaura told The EastAfrican. The incentives include tax am- nesty on past omitted incomes for companies seeking to list on the bourse, provided they make full disclosure of their assets and liabilities and undertake to pay all future due taxes. Newly listed companies also en- joy preferential corporate tax treatment at 30 per cent for local companies and 37.5 per cent for foreign companies. However, in the case of a newly listed company with at least 30 per cent of its issued share capital listed, the tax rate shall be 25 per cent for five years, starting immediately after the year of income following the date of such listing. Where at least 40 per cent of a newly listed company’s issued share capital is listed, the tax rate will be 20 per cent for five years while for a company with at least 20 per cent of its issued share capital listed, the tax shall be 27 per cent for three years. enya’s stockmarket regulators have recommended radical The CMA, NSE, Central Deposi- tory and Settlement Corporation stockbrokers, investment bankers, commercial banks, oil and gas companies, potential issuers and other key stakeholders have recommended a tax amnesty on past omitted incomes of potential issuers on the GEMS. They also want the GEMS merged with the Alternative Investment Market Segment (AIMS), arguing that there is no clarity on the difference between the two. “The sense is that AIMS requires less disclosure than GEMS — which is unlikely to be sustainable in the longer-term,” said Luke Ombara, manager in charge of policy and market development at CMA. The stakeholders also recom- mended that market makers support the liquidity of GEMS shares. They noted that market makers (who have been recommended to initially be the nominated advisors — Nomads) will provide two-way quotes (bids and offers) of GEMS company shares to ensure that the shares, which would otherwise be unavailable due to low free float, are available for buyers and can easily be offloaded by sellers. “This will not only reduce the volatility of the share prices but will greatly boost liquidity,” said CRITERIA In Kenya, to list on the GEMS requires minimum fully paid up capital of $109,890 and at least 100,000 shares in issue. The company must be a public company registered under the Companies Act and must be solvent with adequate working capital. The company must have been in operation for at least one year. It must have at least five directors of which a third should be non-executive. BUSINESS APRIL 4-10,2015 Uganda insu≥ance g≥owth falls to 13pc By HALIMA ABDALLAH Special Correspondent INCREASE IN stamp duty and the introduction of value added tax returned to haunt Uganda’s insurance industry, lowering its growth in 2014. According to figures from the Uganda Insurers Association (UIA), growth slowed from 17 per cent in 2013 to 13 per cent last year. But premium income remained robust, growing 12.8 per cent over the same period. Gross premium income increased from Ush406 billion ($135 million) in 2013 to Ush458 billion ($152.32 million). The UIA now says the introduc- tion of these taxes has made insurance products more expensive and less attractive to the general public. “As it currently stands, about 40 Two years since GEMS was launched at the Nairobi Securities Exchange, it has attracted only four companies. Picture: File Mr Ombara. They recommended the intro- duction of tax incentives relevant to companies seeking to list on the GEMS and a clear clarification on the current situation on tax waivers. Under the proposed arrange- ment, Nomads will be required to undergo specialised training and certification before they engage in determining share prices while defunct companies on the NSE and poor quality stockbrokers whose interests are not well-aligned with those of markets users will be removed. Other recommendations are cre- ating a dedicated GEMS department and staff at NSE, reviewing the regime for secondary issues by GEMS companies, developing the over-the-counter (OTC) market as a stepping stone to GEMS and con- sidering options to attract listings from particular sectors. The GEMS companies will also be allowed to report their financial performance half-yearly and recruit less qualified company officers. So far, the companies listed on the GEMS are Atlas Development & Support Services Ltd, Flame Tree Group Holdings Ltd, Home Afrika Ltd and Kurwitu Ventures Ltd, all with a combined market capitalisation of $88 million. Tanzania’s Enterprise Growth Market (EGM) has only two listings. These are Maendeleo Bank and Swala Oil& Gas (Tanzania) Plc. Four more listings are expected this year. In October 2013, the DSE intro- duced the EGM segment to enable small and medium-sized business to access the capital market. Machine≥y, logistics fi≥ms expand into EA CHINESE HEAVY machinery maker Sany and global logistics giant Deutsche Post DHL are planning to invest in infrastructure in the region. Sany has appointed Bemuga Heavy Equip- ment —a subsidiary of Bemuga Forwarders Ltd — as its dealer for Uganda, Rwanda and Burundi while Deutsche Post has said it is keen to expand operations given the region’s growing investment in infrastructure. “We are anticipating increased activities in the construction sector especially roads, as the economies of the three East African countries improve,” said David Xiao, Sany’s managing director for Central and Southern Africa . Mr Xiao said Uganda’s plan to develop its oil and gas sector will also increase the need for construction machinery. Rwanda’s economy is projected to grow 7.5 per cent whereas Uganda and Burundi’s economies are projected to grow at 6.2 and 5.4 per cent, respectively. Sany — which sells machines such as exca- vators, truck cranes, and rough terrain cranes — has had operations in Kenya and Tanzania since 2007. China’s heavy machinery sector has been facing hard times since 2011. To offset flat demand, Chinese heavy machinery makers are shifting their focus to emerging overseas markets, with an eye on business from big-ticket infrastructure projects like construction of highrise buildings and roads. Bemuga chairman Dr Ben Mugasha said the new developments will enable local contractors participate in large government tenders. Deutsche Post is aiming to maintain its aggressive expansion strategy, which has seen the company grow its global retail presence from 300 outlets to over 3,800 in the past three years. “We are expecting to see strong growth in Kenya, Ethiopia, Tanzania, Uganda and Rwanda. The region is working incredibly hard on developing a number of critical trade boosting areas such as projects to improve the roads, ports, railways and critically, the Customs border environment,” Charles Brewer, the company’s managing director in-charge of Sub-Saharan Africa told The EastAfrican. “East Africa holds huge growth potential for Deutsche Post as we continue to invest in infrastructure, build our customer base and deliver more value for both businesses and general consumers.” By Isaac Khisa and James Anyanzwa A poster advertising an insurance product in Uganda. Picture:File per cent of the premium that a client pays is accounted for by taxes. For an industry that is still struggling with penetration, this is a step back,” said UIA spokesperson Faith Ekudu. With the exception of life prod- ucts, all other insurance products have been affected by the stamp duty and VAT. In the case of VAT, the personal insurance lines continue to pay more because the insured cannot claim for VAT refunds whereas corporate and other business clients can claim VAT refunds. The industry was expected to sustain the momentum it achieved in 2013, backed by product diversification spurred an expected surge of activity in the oil and gas sector. In 2013, for example, eight com- panies launched agricultural insurance products aimed at providing risk solutions to a largely agrarian economy. The short-term projection shows that the industry expects to increase penetration to 1.3 per cent in 2016 against 0.85 per cent in2013 and 0.66 per cent a year earlier. Overall, Uganda’s insurance industry has been on a positive growth curve owing to long-term investments in research and development.
Mar 30th 2015
Apr 13th 2015