By George Kamau

Kenya Airways is asking the government – its largest shareholder – for tax breaks and protection from what it terms unfair competition from other carriers as it struggles to stay afloat.

The airline’s chief executive Sebastian Mikosz, said KQ has made a presentation on policy changes they would want put in place in order to give the national carrier a lifeline.

The KQ management will meet state representatives after the presidential election rerun is done.

Top on their list is tax breaks, which are cited for the airline’s high ticket prices. The managers said taxes contributed to more than half of the ticket price.

They also noted that KQ’s major competitors such as Ethiopian Airlines and the Gulf carriers, Emirates, Etihad and Qatar, were huge beneficiaries of government incentives and protectionism and seek similar treatment.

Staffing issues

The CEO noted some countries did not have staffing issues such as those experienced by KQ as they do not allow airline staff to join labour unions and their pilots are banned from selling their services abroad.

KQ is reeling from poaching of staff, mainly pilots and engineers, by the Gulf carriers who dangle huge pay cheques free of taxes and easy access to loans.

Mr Mikosz who joined the airline five months ago said they could be forced to hire foreign pilots to temporary fill its current shortfall. Last year the airline lost 55 pilots to rivals, leaving it with 434. This is a deficit of ten pilots.

The airline plans to train its own pilots, noting that the internally-trained staff did not leave during the aforementioned exodus.

KQ has also started reviewing its network in a bid to ensure it maximise rewarding routes. The airline will from October 29 abandon the Hanoi-Hong Kong route to redeploy its aircraft to the US route it shall ply from next year.

Kenya Airways will from next month discontinue flights to Hong Kong and Hanoi route.

The discontinuation is part of a plan in which the airline is seeking greater efficiency on its network.

The route changes were first announced last week by the airline’s chief executive Mr Sebastian Mikosz.

The airline says that it plans to reroute the aircraft used to fly to Hong Kong and Hanoi to African routes.

More seats

“This network change will also allow KQ to allocate more seats across its African network where the demand outlook remains strong and capacity insufficient on certain routes,” the airline said.

Last week, the airline had also indicated that the aircraft currently used to fly to Hong Kong and Hanoi could also be used to fly to the United States once Kenya Airways commences direct flights next year.

Customers flying to Asia will be served through Kenya Airways’ partners.

The airline retains a daily flight to Bangkok and Guangzhou.

Business Daily

By The Citizen Reporter

Dar es Salaam — Petra Diamonds Limited says it has received authorisation from the government to resume diamond exports and sales from the Williamson mine.

The ban had been placed after a consignment of diamonds was impounded at the Julius Nyerere International Airport (JNIA) on August 31 on allegations of undervaluation.

“The exact timing and process for the next diamond parcel export to Petra’s marketing office in Antwerp and subsequent sale will now be finalised between Petra and the Tanzanian government,” a statement released by Petra on Wednesday said.

The government initially said it had confiscated the impounded consignment but later said the ministry of Energy and Minerals said further investigations were taking place to determine the circumstances of the undervaluation.

Criminal proceedings were launched and two government officials have already been charged in court for occasioning a Sh3 billion loss to the government.

A resolution has not yet been reached with regards to the parcel of 71,654.45 carats from Williamson that was blocked for export. The Company will provide an update on this as soon as practicable,” Petra’s statement reads in part.

By Obinna Chima with Agency Report

A Central Bank of Nigeria (CBN) requirement that companies back forward dollar purchases with naira is drying up supply of the local currency, a report by Bloomberg stated Thursday.

This is just as the chief executive officer of Financial Derivatives Company Limited, Mr. Bismarck Rewane, told THISDAY Thursday that the continuous and massive injections of cash by the central bank to fund the federal government’s expenditure through ways and means (or quantitative easing) would help reflate the economy, stressing that there was no easy way out of a recession.

Increased government borrowing has also spurred banks to invest in FGN bonds and treasury bills rather than lend to customers, and also drained cash out of the system.

Some banks demand naira deposits of as much as 1.5 times the amount of dollars sought in the 60-day forwards market to guard against fluctuations in the currency, the chief financial officer of May & Baker Nigeria Plc, Ayodeji Aboderin, said.

That is pressuring the company’s own cash flow, he told Bloomberg.

The difference is returned to the company on the delivery of the contracts, with the amount depending on how the currencies have moved.

“Money you would have used as working capital will be taken upfront by the bank,” Aboderin added.

“Last year, it was more of dollar illiquidity. This year, it is naira illiquidity.”

May & Baker, which is building Nigeria’s first vaccine plant, is responding by cutting production at its water bottling and instant-noodles units, and focusing on more profitable pharmaceutical lines, Aboderin said.

Interest rates on loans have also soared to as high as 25 per cent, more than double the rate May & Baker is comfortable paying, he said.

Nigerian inflation eased to 16.01 per cent last month after reaching a record 18.7 per cent in January.

The currency rule, introduced in February, is one of a series of measures aimed at managing dollar flows after a decline in the price and output of crude oil, which accounts for about two-thirds of government revenue.

The CBN sells dollars directly to lenders on an almost weekly basis, which then supply these to their customers.

According to the chief executive officer for Stanbic IBTC Holdings Plc, Yinka Sanni, by depositing cash with lenders, companies are able to assure the regulator that they have the money to buy the currency,

The amount of naira required depends on the customer’s balance sheet strength, he said.

“It is within the rules. It is a product that is acceptable and endorsed by the regulator,” Sanni said.

“No bank is doing anything outside the rules. If they were, the CEO would have been cautioned by the central bank,” he stated.

Speaking on the central bank’s quantitative easing, Rewane disclosed that the central bank last year spent N950 billion funding the federal government.

“This year, so far it has exceeded N1 trillion. So, if you are spending N1.2 trillion a year to fund the federal government, that means you are creating liquidity and you have to mop up the liquidity.

“The cost of that mop up is about 18 per cent of that money. The total fiscal deficit of this country is about N2.7 trillion in a year and now you are spending another N1 trillion.

“So it is one of those things that we are going to see to take the economy where it ought to be. There are no easy answers,” Rewane said.

According to him, the central bank has to keep lending to government to keep the government’s expenditure funded and to keep the currency at the level at which it is.

“It is part of the paths out of a recession. There is no easy way out. That is the price you pay to ensure productivity.

“But in the end, I believe they should allow the direction of the interest rate to change from going upwards to actually going down,” he said.

Also, a banking analyst at Afrinvest West Africa Limited, Omotola Abimbola, said the central bank’s efforts have in many ways helped stabilise the foreign exchange market.

“But the unintended consequence has been that banks have restricted credit extension to the private sector due to the high yields on government securities as well as low risk appetite,” Abimbola added.

Growth in credit extended to the private sector slowed to 0.9 per cent this year through July, compared with 19.8 per cent in 2016, according to central bank data.

Policy makers need to tackle a lot more than dollar liquidity to bolster economic growth and reduce the country’s dependence on oil, Abimbola said.

This would include easing monetary policy by lowering interest rates from a record high, addressing infrastructure shortcomings, and improving the productivity of state institutions, he said.

Nigeria’s economy expanded 0.55 per cent in the three months through June, ending five straight quarters of contractions that saw gross domestic product shrink 1.6 per cent in 2016, the first drop since 1991.

The improvement came after oil output increased and authorities boosted the supply of foreign currency needed by manufacturers to import supplies.

Flour Mills of Nigeria Plc, the country’s biggest miller by market value, is planning to issue as much as N40 billion in bonds next year and is also considering a rights issue to enable it to deal with funding challenges arising from a scarcity of naira and high interest rates, its Managing Director, Paul Gbededo, said.

“Continued tightening in the market will keep interest rates high,” an analyst at Vetiva Capital Management, Pabina Yinkere said.

“High interest rates increase the probability of default and make banks cautious in growing loans, particularly to SMEs. If banks do not lend it affects overall economic activity and stalls growth,” he noted.

Negotiations to determine the increase of minimum wages and minimum employment conditions for the Namibian construction sector have reached a deadlock, the Construction Industries Federation of Namibia (CIF) announced on Thursday.

In a statement release early on Thursday, the CIF indicated that it has started a process of consultation with its members for a negotiation mandate on future minimum wage increases and minimum employment conditions for selected job categories.

As from 1 January 2017, the gazetted minimum wage in the construction sector is N$16.04 per hour, which is the result of two big increases of 10% each, of the minimum wage of N$13.26 in 2014/2015, and the minimum wage of N$14.59 in 2016, respectively.

According to the CIF, MANWU demands a minimum wage increase of 13% for 2017/2018 and a further increase of 13% for 2018/2019. In addition, demands listed by the union include an increase of minimum employment conditions, which – if agreed – would be new additions to the Collective Agreement, and would have serious cost implications for the employer. The total of MANWU’s initial demands constituted an increase of over 70%. These demands included inter alia: a housing allowance, a meal allowance, a transport allowance, an extension of the statutory maternity leave of 12 weeks to 14 weeks for the industry and negotiating with Nam-mic for loans for employees.

“With regard to the minimum wage increase, the CIF, representing employers in the construction sector, feels it would be irresponsible to increase the minimum wages during the current economic downturn, in particular as the construction sector is hit the hardest and the entire supply chain is experiencing large-scale retrenchments, and as it is not clear when the economy and specifically the construction sector will revive,” the federation stated.

Bärbel Kirchner, consulting general manager of the CIF explained: “According to research conducted by the CIF in June 2017, 47% of employees in the industry have lost their jobs. The situation is likely to have worsened since then. Yet, despite large-scale retrenchments since September 2016, the CIF, for now, very reluctantly made an offer of an increase of 2.5% of the minimum wage, in response to the outrageous demands of the 13% by MANWU and their very extensive list of demands.

“In fact, since we have commenced with the negotiations, the situation has worsened. We started negotiating in April 2017 when we had made an offer of minimum wage increase of 2.5% for when a new agreement would be promulgated. The situation is far less hopeful now than it was in April, however in order to honour what already had been agreed and in order to keep negotiating in good faith, we have not retracted that offer. Moreover, it is important to note, any increase would only become relevant once a Collective Agreement would be promulgated in the government gazette. The industry is also adamant that any agreed increase would not be back-dated.

“We are very disappointed that our industry, in addition, is now also facing such demands from MANWU, who is representing workers in the industry.

“Revenues in the industry are extremely low, if not non-existent. Many employers keep their teams employed with the hope of work and projects in the near future. If minimum wages were to increase even further, then many will not be able to continue keeping members of their teams employed. It can have devastating effects, especially if you think, that eight dependents will be affected for every job that will be lost. Many SME’s in our sector will also be badly affected.

“It simply must be in everybody’s interest to keep as many people employed and not to hike up the increase of only a few remaining employees. We must remember, what we are negotiating is the minimum wage increase for the respective categories for semi-skilled and artisans for the entire industry. If we are to concede to the demands of MANWU, it is likely that many workers will lose their jobs”.

Under current economic conditions, the CIF feels it is more realistic to agree to demands that are for the larger construction businesses a matter-of-course, such as provision of drinking water and separate toilets for male and female employees, and the promotion of health and safety education for employees.

Other demands of the union further included an extension of shop steward days from currently seven to a total of 10 days, an increase of pension fund contributions, an increase in Service Allowance and increase in the Living Away Allowance.

MANWU’s original proposal/demands were presented on 15 April 2016. However, in 2016, the CIF had on several occasions raised their concern with MANWU about the timing of their proposal to negotiate for construction wage and substantive proposal increments, in particular as it was soon after the implementation date of the previously negotiated and gazetted two-year collective agreement (gazetted on 31 December 2015).

Negotiations had commenced in April 2017, after the CIF had sought a mandate from its members. Meetings were held on the following days: 7 April 2017, 21 April 2017, and on 9 June 2017. As the two parties were not able to move forward, MANWU had declared a dispute of interest. After two conciliation meetings at the Labour Commissioner’s Office, on Tuesday, 5 September 2017 and on 15 September 2017, a certificate of an unresolved dispute was issued.

The federation and the union meet again this Friday 22 September to negotiate strike or lockout rules in accordance with the Labour Act, 2007; the Code on Good Practice on Industrial Action, 2009; and the Code of Good Practice on Picketing, 2009.

By Staff Reporter

FINANCE Minister Patrick Chinamasa has denied claims that soaring prices of basic commodities could spike country inflation, insisting price increases would end the year at a manageable three percent.

The minister said this in parliament this past week as under-fire central bank governor John Mangudya also moved to distance the premier bank from any culpability in the price hikes.

Fears are mounting that the country’s volatile economy could soon implode under an unsteady pricing regime which has seen commodities priced differently depending on whether one was paying in cash or through electronic cash transfers.

This has further been evidenced through panic buying among locals throughout the week after retailers abruptly increased prices of basic commodities.

Legislators demanded answers Wednesday from the Treasury boss on why the economy was beginning to show signs of distress as evidenced by sudden prices increases.

One of them was Zanu PF Zvishavane-Ngezi MP, John Holder who said prices of basic commodities were going up “at a very high rate”.

“If we look at sugar, rice, flour and green soap, the price for rice has increased from $1.80 to $2.63, flour from $1.71 to $2.10, brown sugar from $1.85 to $1.95.

“What policy has government put in place to control inflation since we see this happening nowadays,” Holder said.

But a cornered Chinamasa, apparently desperate for time to think over the mess, refused to commit himself to an immediate response, preferring to address the matter in a ministerial statement he promised to deliver this week.

Ministerial Statement

Earlier, he told MPs that government was keeping the country’s inflation well under check.

“I think the question will be dealt with more comprehensively under my Ministerial Statement because it covers very much the issues of inflation.

“However, I must say that as at end of August this year, inflation is at 0.14% and we anticipate that maybe by the end of the year, it will be around 2 to 3%, which still remains the lowest inflation within the SADC region,” Chinamasa said.

The country’s economy took a big knock for the first time since the central bank went against strong public sentiment to introduce bond notes in 2016 on a promise the currency would trade at par with the United States dollar, the country’s de facto currency since 2009.

There were reports the sudden price hike was triggered by a clandestine decision by the central bank to mint and further release loads of bond notes into a forex rich black market to mop up scarce foreign currency.

This forced a tumble in the value of the bond note and a knock-on effect on prices.

But Mangudya said in a central bank statement weekend, claims of looming scarcity in basic commodities and the printing of more bond notes was false and intended to cause “panic and despondency” into the economy.

“The Bank also wishes to advise that neither it nor the Ministry of Finance and Economic Development did not and will not print bond notes to buy U.S dollars from the streets as suggested in social media and other reports.

“Such malicious statements are counterproductive and are meant to sabotage the economy that is on the rebound on account of the good agricultural outturn, strong performance of the mining sector and the recovery of the manufacturing sector,” he said.

By Gerald Andae

Kenya has amassed sugar stocks to run for the next five months, raising hopes for stable prices of the commodity for the rest of the year.

The Sugar Directorate said traders and millers imported 300,000 tonnes of sugar last month alone ahead of the August 31 expiry window of a duty waiver on cheap sugar from Brazil.

The August imports are an equivalent of the country’s six-month sugar demand. The country consumes about 50,000 tonnes of sugar monthly.

Agriculture and Food Authority (AFA) director general Alfred Busolo says the imports, coupled with local production is sufficient to service demand between now and February next year.

“We now have enough stocks of sugar in the market and this should last the country the next five months and help to lower the cost further,” said Mr Busolo.

Mr Busolo pointed out that local production has improved, attaining 20,000 tonnes a month and boosting domestic supplies.

The Treasury had scrapped duty on imported sugar from outside the Common Market for Eastern and Southern Market (Comesa) in May following a severe shortage of the commodity in the country that saw a kilo of sugar cross the Sh200 mark.

The increased imports, mainly from Brazil, have helped pull down sugar prices to about Sh100-110 a kilo.

“Basically, Comesa sugar is very expensive compared with the ones that traders have been importing from Brazil,” Solomon Odera, head of the Sugar Directorate said.

Mr Odera says a tonne of sugar from Brazil costs $400(Sh41, 200) per tonne against $700(Sh72, 100) for the same quantity of sweetener sourced within Comesa states.

Stakeholders had raised concerns that Kenyans were staring at higher prices of the commodity in the coming months after the duty window on imports outside Comesa came to an end on August 31.

By Staff Reporter

THE government-owned Post Office Savings Bank (POSB) says is ready to accept goats and other livestock as security for loans.

CEO Admore Khandlela was speaking at a Small to Media Enterprises Development Forum organised for local entrepreneurs by the bank in Harare on Thursday.

He said parliament is in the process of finalising the Movable Property Security Interests Bill to pave way for the introduction of the new bank lending model.

“When you look at it (Bill), it’s actually simplifying the whole process of doing business. I know people joked so much about it before the Bill was actually being crafted but it’s now out,” said the POSB boss.

The use of cows, goats and sheep as collateral was first suggested by Finance Minister Patrick Chinamasa in parliament in April this year as part of efforts aimed at reviving the country’s credit-starved economy.

Chinamasa told MPs that the assets would “include any property such as machinery, motor vehicles, livestock, and accounts receivable”.

The proposal however, met with a lot of anxiety by locals who felt the country’s governors were fast running out of ideas to manage a stubborn economy run down by poor policies and high-level corruption.

Zimbabwean banks are desperate to lure a largely unbanked Zimbabwean population into the formal banking system.

But they come unstuck when most of the money spinning business owners operating at small scale are still without immovable properties to register in order to access elusive bank credit.

In his remarks, Khandlela said his bank was amenable to the envisaged break from tradition.

“I don’t know how many of us have seen it (Bill); that you can now use your goat, any of the movable assets.

“I know people literally even talked about goats. Yes, it was a joke but it’s fact. If you have animals out there, it’s happening in Australia by the way. In Ghana, in Kenya, those things are happening and they are working.

“Although some banks may resist because it’s happening against traditional factors, some of us have had experiences; we won’t bother much with that. We will actually move with it and time will actually catch up with it.”

When the use of livestock comes into fruition, Khandlela said, banks would easily log onto a website that would indicate if a goat that has been pledged as collateral security by a client was not being used for the same purposes with different lenders.

He said the animals pledged would most probably have an electronic chip pinned on their bodies to allow lenders to track the assets.