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The East African : October 26th 2013
60 OCTOBER 26 - NOVEMBER 1, 2013 BUSINESS, MARKETS AND FINANCIAL ANALYSIS THE MARKET WHISPERER EQUITY MARKETS (WEEKLY CHANGE IN BENCHMARK INDEX) NSE 20 Share Index Kenya 4,935.91 0.34% (CUMULATIVE MOVEMENT) DSE All Share Index Tanzania 1,809.04 4.79% USE All Share Index Uganda 1,633.00 3.09% JSE All Share Index South Africa 44,993.61 0.86% NGSE All Share Index 37,479.39 Nigeria - 0.37% EGX Share Index Egypt 6,171.21 3.08% Retaile≥s eye financial secto≥ to g≥ow ≥evenues K enyan retailers want to gatecrash the bankers’ party. Last week Nakumatt, the region’s largest retailer, announced plans to start offering hire purchase as well as forex services starting next year, adding that it may also start selling insurance products to its clients. While the scale of the product offering suggested by the company is the biggest so far, other retailers have also launched services geared at gaining a share of the country’s financial market. Uchumi and Naivas already have deals with financial service companies to sell products on their behalf. In August, Uchumi Supermarkets entered into an agreement with UAP Insurance Ltd that will see the retailer sell insurance products, receiving an administration fee from UAP for the service. The lowest priced pack- age available at Uchumi Supermarkets will be a personal accident cover whose rates start at Ksh200 ($2.29) for a Ksh100,000 ($1,140) cover valid for one month. Uchumi also ranks as one of M-Pesa’s biggest agents. Fur- Diamond Trust Bank CEO Nasim Devji using the recently launched Nakumatt Global Prepaid Smart Card, which will allow customers to load their cards with money and make payments. Pic: DIANA NGILA ther, the company’s board is said to have okayed a foray into agency banking. Last year, chain store Na- kumatt Holdings also signed a deal with MasterCard. Existing customers with Nakumatt loyalty cards will now have their cards replaced with MasterCard prepaid cards into which they can load money for payments at any point of sale terminal that accepts Master cards. This deal will see Nakumatt earn commissions for every transaction done using the card anywhere. Naivas has also entered into a similar deal with Chase Bank, introducing a prepaid card that allows customers to top up and shop at any Visa outlet. The card has an “e-coin facility” enabling customers’ change to Expanding into the financial segment offers retailers a chance to attract customers be loaded directly onto the card as money. The move into the financial services is critical for two reasons. First, customer trends are changing and increasingly a shopping trip to the supermarket goes beyond the actual buying. A survey by TNS, a research firm, says that over the past five years whereas supermarkets and hypermarkets in Kenya have expanded by 39 per cent, traditional shopping outlets like shops have shrunk by 29 per cent. The main reason is that the middle class wants the experience provided by the mall, where they can shop, bank and pay utility bills under the same roof. Thus an expansion into the financial segment offers the retailers a chance to attract customers. Second, a foray into the sec- tors offers these retailers an opportunity to grow their margins. Currently, Kenyan retailers make an average of $2.5 for every $100 of sales. Selling of insurance products or changing foreign currency should help them grow their net earnings. Will new keg tax spu≥ illicit b≥ew sales in Kenya? YOU KNOW something is brewing when the beer makers and anti-alcohol activists unanimously agree that beer prices need to come down. Regional brewer, East African Breweries Ltd (EABL) and the chair of the Kenya National Authority for the Campaign Against Alcohol and Drug Abuse (Nacada) agree that the government needs to scrap the new tax on Senator Keg beer. Under the VAT Act that came into effect last month, the government introduced tax on the low-end beer, at a rate of Ksh35 ($40.22) per litre, which though lower than the Ksh70 ($80.45) it charges on normal beers, has had a marked effect on pricing and by extension consumption patterns. A barrel of Senator Keg is now selling at Ksh6,544 ($75.21) up from Ksh3,146 ($36.16), a 108 per cent increase. The price change has forced retailers to double their prices. Excise duty remission When Keg was first introduced in 2004, the government gave the brew a 100 excise duty remission in the hope that this advantage would be passed to consumers through cheap pricing and eventual help eradicate illicit brews. By 2009, it was reported that Senator had man- aged to attract about 44 per cent of customers away from the informal alcohol market with its clean and cheap alternative. Given that most low-end consumers tend to be price conscious, the new tax could push them to trade down to cheaper illicit brews. It’s at this point that EABL — concerned about revenue for its biggest brand by sales — and Nacada — concerned by what they see as a counterproductive legislation — agree. The new tax, it seems, is not good for drinkers’ health, neither is it healthy for business. 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 Uganda misses tax ta≥gets UGANDA’S taxman remains on the ropes as latest figures indicate that the Uganda Revenue Authority posted a Ush26.65 billion ($11 million) deficit for the third quarter of 2013 despite surplus collections recorded in July and August. The development suggests a sudden dip in revenue performance during September, with tax refunds being blamed for the shortfall, among other things. The taxman collected Ush1,826.69 billion ($722.3 million) between July and September against a target of Ush1,853.34 billion ($732. 8 million), with domestic taxes posting a larger deficit of Ush16.21 billion ($6.4 million) compared with a Ush3.58 billion ($1.42 million) shortfall in international trade taxes. The taxman is betting on stronger enforcement of tax obligations among small businesses within urban centres and new transfer pricing rules to pull off a better performance in the next quarter, a sentiment shared by tax experts.
October 21st 2013
November 3rd 2013