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The East African : Aug 4th 2014
40 PUTTING KENYA ON THE GLOBAL FINANCIAL MAP Coming: Body to oversee financial hub The autho≥ity will license companies and come up with ≥elevant checks to actualise the Nai≥obi cent≥e By PETERSON THIONG’O The EastAfrican K enya’s President Uhuru Kenyatta has approved the formation of the Nairobi Financial Centre Authority (NFCA) through an executive order, as part of a plan to position the country’s capital as a key financial hub. The draft law, signed by the presi- dent and seen by The EastAfrican, gives the NFCA the power to license companies that will operate under the centre, and come up with relevant legal, regulatory and institutional checks to actualise the centre, launched in December last year. The Nairobi Financial Centre will be headed by a CEO, appointed by the board, who must have at least 12 years’ experience in senior management and a master’s degree in international finance, financial markets, investment or economics. Finance Secretary Henry Rotich told The EastAfrican that the new body will be tasked with formulating and implementing policies to accelerate the creation of the financial centre. “We have appointed an interim secretariat to be based at the Treasury... the authority will come up with the policies to guide the creation; consultations both locally and internationally are ongoing,” said Mr Rotich. Over the past three years, Kenya has been moving to position its capital on the global financial map, establishing the Nairobi arbitration centre, applying to be allowed to host a yuan clearing house as well as signing a series of double taxation agreements with other countries. “A financial hub will bring about a well-functioning financial system and thereby ease the flow of capital and investments. There will be an element of increased competition The EastAfrican BUSINESS AUGUST 2-8,2014 EA unveils code on axle load By GITONGA MARETE Special Correspondent TRANSPORT sector players in East Africa have developed a selfregulatory charter intended to curb overloading, which has been the source of conflict between government agencies and transporters. The charter, to be signed later this month, has outlined key performance indicators and responsibilities of each agency. According to the Northern Cor- THE BENEFIT An application to be allowed to host a yuan clearing house is among Kenya’s efforts towards becoming a financial hub. Picture: AFP in the financial sector and as such improved services and diversity in product offering. The cost of doing transactions will ease, positioning the country as a more attractive global investment hub,” said Roy Akala, KCB director of operations. Major financial hubs such as Mauritius and London have globally respected arbitration centres on top of extensive double taxation agreements with other countries. The Nairobi financial centre has signed double taxation agreements with Nigeria, Mauritius and Qatar. The country wants to leverage on its position as a regional services hub for transportation, tourism and financial services to position itself as the gateway for capital into the EAC region and Africa as a whole. Mr Akala, however, cautioned that the regulatory environment needs to be strengthened if Nairobi is to become a key financial hub. “The cost of doing transactions will ease, positioning the country as a more attractive global investment hub.” “There must be tax and regula- tory incentives to financial sector players. There has to be an assured stable political and security situation. The infrastructure environment has to be up to speed to allow for ease of doing business,” he said. On the hosting of a clearing house for the yuan, Kenya has approached China with a proposal. “We only developed a proposal... the modalities on how it can be done depend on the Chinese government,” Central Bank Governor Njuguna Ndung’u told The EastAfrican in an earlier interview. Singapore was last year picked as the first regional financial centre outside China to have a yuan clearing house, with several other cities, including London, Frankfurt and Luxembourg pursuing the opportunity to host offshore yuan clearing banks. If Kenya’s wish is granted, it will be the first yuan clearing house in Africa, a big win for the country. It will enable trade deals and allow the country to receive aid in the currency. The country is negotiating for an MoU with the City of London, the independent body promoting UK-wide financial and related professional services, that will see the Kenya’s financial market is one of Africa’s largest, but it is small by global standards, and has relatively low liquidity. The country’s securities exchange also remains relatively small. FINANCIAL CENTRE: The formation of a financial centre authority as well as an arbitration centre are expected to enhance Nairobi’s appeal. DISPUTE RESOLUTION: Multinational companies setting up shop in Nairobi or foreign companies doing businesses with local firms normally include clauses in their contracts that any disputes be settled via arbitration in destinations such as London or Mauritius. latter help attract companies and assist in developing the regulatory environment. The national steering committee, tasked with spearheading the creation of an International Financial Centre in Kenya has delegated the co-ordination of the engagement with TheCityUK to the Capital Markets Authority in conjunction with the Principal Secretary to the National Treasury, who chairs the Committee. “The Capital Markets Authority is awaiting further guidance from the steering committee on the content of the Memorandum of Understanding,” said Antony Mwangi, CMA head of corporate affairs. Bilate≥al ag≥eements to fast-t≥ack one-stop bo≥de≥ posts By EMMANUEL MUGA Special Correspondent EAST AFRICA partner states are fast-tracking the setting up of one-stop border posts through bilateral agreements, though these require changes in national laws to allow sharing of Customs processes. The lack of legal clarity on the matter has seen the Holili border post, which was recently completed, remain idle, even after Tanzania and Kenya agreed to sign a bilateral agreement. While Tanzania has approved the accord, the Ministry of East African Affairs said the Kenyan Cabinet is yet to approve it. The East African Community Legislative Assembly passed the One-Stop Border Posts Bill in April 2013, but it has not been assented to by the Heads of State summit. Theo Lyimo, a director at Trademark East Africa, who are the financiers of the project, said bilateral agreements will be used until domestic laws are changed and the Customs Union Management Act is in force. Under the integrated border post, immi- gration and Customs officials from neighbouring EAC member countries share offices to ease the clearance procedures for travellers and goods. For instance, people entering Kenya will bypass Tanzania Customs and immigration offices at Holili and proceed to Taveta where the officers will work side by side with their Kenyan counterparts. Likewise, those entering Tanzania will bypass Taveta and stop only at Holili where officials of both countries will work side by side. The Tanzania-Burundi Customs posts at Kobero and Kabanga has already been merged and are being used as a pilot project. “Experiences at Kabanga/Kobero will be used as lessons for other border points,” Faraja Mgwabati, a communication consultant at Tanzania’s EAC Ministry said. A one-stop border post is also in operation along the Rwanda/Burundi frontier, while construction work is ongoing on the Tanzania-Rwanda border at Rusumo. Work is scheduled to be completed in November. The new one-stop border post at Holili between Kenya and Tanzania. Pic: Laban Walloga ridor Transit and Transport Coordination Authority (NCTTCA), a regional body, compliance with axle load limit within the region is below 75 per cent. NCTTCA has been monitoring the performance of the Northern Corridor, including compliance at weighbridges, through the Transport Observatory Project (TOP). “From the TOP indicators, there is overloading on our roads despite laws being in place,” said Donat Bagula, NCTTCA executive secretary. He said in order to protect roads, NCTTCA, the World Bank and the Kenya Transporters Association came up with a programme that is intended to enhance self-compliance with regard to vehicle weight limits. “The self-regulatory charter is anchored in the East African Community Vehicle Load Control Bill 2013, which provides a framework to be applied within the region,” he added. The EAC Load Control Bill, passed in May 2013, harmonises the gross vehicle weight limits to 56 tonnes. Measurement is based on axle load, with the maximum for a single axle being 10 tonnes. Initially, Kenya had a maximum allowable weight of 48 tonnes, Tanzania had 56, while Uganda, Rwanda and Burundi allowed a maximum of 52 tonnes. The different weights were a source of conflict and confusion among the Northern Corridor states. In the past, industry players have blamed overloading on the lack of a co-ordinated approach.
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Aug 11th 2014