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The East African : Dec 19th 2015
52 DECEMBER 19-25,2015 BUSINESS, MARKETS AND FINANCIAL ANALYSIS THE MARKET WHISPERER EQUITY MARKETS (WEEKLY CHANGE IN BENCHMARK INDEX) NSE 20 Share Index Kenya 3,989.95 -0.13% (CUMULATIVE MOVEMENT) DSE All Share Index Tanzania 2,300.02 -3.69% USE All Share Index Uganda 1,791.00 0.90% RSE All Share Index Rwanda 130.56 -0.03% JSE All Share Index South Africa 48,766.33 1.07% NGSE All Share Index 26,537.36 Nigeria -2.69% Will Balala’s incentives fo≥ cha≥te≥s fly? D o charter flights hold the key to reviving Kenyan tourism? That question has come to the fore after Tourism Cabinet Secretary Najib Balala announced an incentive scheme targeting charter flights for international tourists. From next month until June 2018, charter operators will enjoy waivers on landing fees so long as 80 per cent of the passengers terminate at Malindi or Mombasa; the landing points for the country’s beaches, marine parks and safari excursions inland. Each passenger disembarking in Kenya will also enjoy a subsidy of $30 per seat. The operators must also commit to ply the Kenya route for at least two years. The government estimates that a single charter flight of 290 passenger capacity can help to inject Ksh1.65 billion ($16.5 million) into the local economy each week; the trouble is that the frequency has dropped from 30 a week to just three in a couple of years, with insecurity the main contributor to the decline. Now, the government is ready to forgo Ksh1.2 billion ($12 million) with the new incentives, just short of the blanket waiver of the $100 visa fee that the industry has been agitating for. Tourists on the beach in Kilifi County, Kenya. Picture: File However, analysts point out that another incentive targeting domestic tourists announced by President Uhuru Kenyatta in May last year lapsed in July without any tangible impact. A key weakness was that allowing employers to deduct money spent on workers going for a holiday as a tax expense overlooked the dynamic that people do not go for breaks on their own. The outcome would have been dif- ferent if the deduction were allowed on individual incomes for family or group getaways, including team building activities. That lesson may have informed the new dual incentive — one for operators and the other for passengers. While questions like what fre- quency a charter operator can guarantee in the face of depressed spending in key tourism markets remain, this is a bold effort to go The government is ready to forgo Ksh1.2 billion ($12 million) with the new incentives” beyond the abstract marketing campaigns seen so far. With 70 per cent of tourist travel in Africa being by air because of poor road and rail connections, it is the kind of initiative that the Northern Corridor partners — Ethiopia, Kenya, Rwanda, South Sudan and Uganda — should take to bring fares down and bolster trade as a first step towards freeing up the regional airspace. Now Deacons and Woolwo≥ths pa≥t b≥ass ≥ags CHRISTMAS WILL be a parting time for clothing retailers Deacons Kenya and Woolworths of South Africa. Deacons agreed on December 17 to back out of a joint venture it formed with the South Africa retailer just three years ago. The company will sell 49 per cent of its interest in Woolworths Kenya to Woolworths Holdings Mauritius for an undisclosed sum, with the proceeds being ploughed into oper- ations and acquisition of new franchises, stores and brands. Woolworths already owned 51 per cent in the venture. The sale will affect nearly a quar- ter of Deacons’s net assets. As of December 2012, Woolworths products accounted for about a third of its Ksh2.42 billion ($24.2 million) sales. The transaction is curious be- cause, in 2012, the two companies formed a joint venture — with Wool- worths justifying it, saying it no longer wanted to operate through “increasingly complex and expensive” franchises such as the one it had with Deacons. Contract row In Tanzania and Uganda, it formed joint ventures for sale of its brands with Tanzania businessman Ali Mfuruki. A supply contract row had preceded the joint venture, derailing Deacons’s plans to list on the Nairobi Securities Exchange. Woolworths already runs food courts in its South African stores and full control of the Kenyan operation portends a move in that direction. Significantly, the path the com- pany has charted — franchise, joint venture and a now fully fledged subsidiary with established outlets — looks a promising avenue for companies seeking to penetrate difficult markets. 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 CBK unhappy with vi≥tual cu≥≥ency VIRTUAL CURRENCIES pose a new challenge for central banks in the region in another classic case of markets front-running regulation. BitPesa, a Kenya Bitcoin trad- ing facilitator owned by a new government minister no less — Information and Communications Cabinet Secretary Joseph Mucheru — has prompted the Central Bank of Kenya to warn against unregulated transactions that could expose users to losses. The company however said it was licensed by the UK’s Financial Conduct Authority, it was open to CBK regulation and it had registered 4,000 users. It will be remebered that cen- tral banks issued similar warnings when mobile money payment systems such as M-Pesa took off, serving the cause of financial inclusion globally. With the admission that virtu- al solutions exist, central banks should be working round the clock to bring order to the segment.
Dec 12th 2015
Dec 26th 2015