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High prices take the shine off tourism as Kenya slips in ranking

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Concerns about high pricing and bad environmental practices have hit Kenya’s tourism competitiveness ranking for 2019, a new report shows.

Kenya slipped two spots to 82nd position compared to the previous year, according to a Tourism Travel Competitiveness survey by the World Economic Forum (WEF).

The country was early this year on the spotlight after recurrent outbreak of cholera killed six people, none of them tourists — prompting the government to raise an alert in five counties — Narok, Kajiado, Nairobi, Garissa and Machakos — besides slapping a ban on roadside eateries.

Several restaurants including, outdoor catering service firms and a hospital were affected by the disease, which is spread by ingesting contaminated food, causing acute complications that can kill within hours if not treated.

Nairobi also reported an outbreak of cholera in 2017 with at least four people killed and dozens more treated, causing authorities to shut down some restaurants.

Apart from concerns about hygiene, Nairobi has been steadily climbing as one of the most expensive destinations in the world over the years.

The exchange rate of the Kenyan shilling, which has generally held stable against the US dollar, has also played a significant part in the ranking that sets Nairobi apart as the costliest in East Africa and 14th in Africa.

The WEF Tourism Competitiveness survey, which covered 140 countries, shows Kenya also lags in tourist service infrastructure and ICT readiness, resulting in its decline in the overall enabling environment ranking.

Despite being dubbed a “Silicon Savannah”, Kenya ranked 106 globally in ICT preparedness, which measures not only the existence of modern hard infrastructure (i.e. mobile network coverage and quality of electricity supply), but also the capacity of businesses and individuals to use and provide online services.

Kenya gained ground in the safety and security segment by 10 points — showing improvement in costliness of common crime and violence as well as terrorism, and the extent to which police services can be relied upon to provide protection from crime. However, tourism numbers saw a decline during the first half of 2019.

Latest tourism data shows that visitors fell from 927,797 to 921,090 for the first half of the year.

This may be attributed to the terror attack that happened at Riverside14, a mixed-use development in Nairobi in January.

PwC Hotels Outlook: 2019—2023: South Africa — Nigeria -Mauritius — Kenya — Tanzania, had predicted a short-term dampening on demand to travel to Kenya, projecting a 13.6 percent decline in 2019.

“In Kenya, the period of peace and security was interrupted in early 2019 by a terrorist attack that may lead to a drop in tourism and guest nights.

Thereafter, assuming confidence in overall security is not impacted, Kenya’s appeal as an adventure destination, with more flights, and new hotels will continue to grow,” reads the PWC report.

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“Thereafter, we project a pickup in tourist arrivals beginning in 2020. For the forecast period as a whole, we project arrivals to increase at a 1.3 percent compound annual rate to 2.16 million in 2023 from 2.025 million in 2018,” forecasts the report.

Prioritisation of tourism and travel remains a strong point for Kenya where it ranked 21st globally.

“By making clear that the sector is of primary concern, the government can channel funds to essential development projects and coordinate the actors and resources necessary to develop the sector.

Signalling the stability of government policy can affect the sector’s ability to attract further private investment,” reads the report.

There has been increased investment in the segment especially by international chains signing up for new properties in a race for the business tourism segment.

Nineteen hotels are expected to come to Kenya shortly, with a total of 3,453 new rooms in the pipeline, according to a report by Lagos-based consultancy W-Hospitality Group.

This coupled with natural resources, which include UNESCO natural World Heritage sites, a measure of the quality of the natural environment which proxies the beauty of its landscape, the richness of the fauna in the country as measured by the total known species of animals, and the percentage of nationally protected areas, which proxies the extent of national parks and nature reserves. Kenya ranked 18 in the category.

Despite Kenya’s decline in overall ranking in the WEF report, the hotel market in Kenya benefited from an increasing number of foreign tourists as travel advisories were lifted and the country enjoyed a period of peace and security.

“Access to improved drinking water and sanitation is important for the comfort and health of travellers. In the event that tourists do become ill, the country’s health sector must be able to ensure they are properly cared for, as measured by the availability of physicians and hospital beds,” explains the report.

“In addition, high prevalence of HIV and malaria can have an impact on the productivity of the tourism and travel labour force and play a role in discouraging tourists from visiting a country.”

Environmental sustainability continues to be a major challenge for the country, which has been struggling with rampant deforestation and increased pollution of its water bodies.

According to the World Bank data, in 2015 Kenya’s forest area was 44,130 km2 or 4,413,000 hectares.

The country is losing 50,000 hectares of forest each year through deforestation.

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Chinese firm wins Sh740m Kenya Power meters tender

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PATRICK ALUSHULA

By PATRICK ALUSHULA
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Chinese firm Shenzhen Star Instruments Company has won a Sh746.2 million tender to supply single phase prepayment meters to Kenya Power..

The electricity distributor reveals in the tender awards that the Chinese company, with local directors, will deliver the meters as the utility firm continues connecting more people to the grid.

Electricity sales revenue for customers on prepaid metering is recognised when customers buy electricity units and then adjusted for the estimated amount of unconsumed power based on the consumption rate over a period of time.

The cash-strapped firm expects to add more customers through the return of its Last Mile Connectivity Project (LMCP) that links homes to the national grid under a subsidised programme.

The award comes barely two weeks after inviting bids for supply of nearly 200,000 post-paid meters, signalling that it favours a mix of prepaid and post-paid meters.

This is in contrast to earlier plan to completely switch to prepaid meters to reduce mounting customer debt.

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Shenzhen Star had in 2017 bid for another tender worth Sh1.25 billion to design, supply and install an advanced metering system to Kenyan Power but lost to rival Chinese firm ZTE Corporation.

The directors of Shenzhen Star are listed as Ronald Kingeru Kaburia, Netfast Communications Ltd and Vigelo and Gelo Construction Ltd.

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Mr Kaburia, who is in charge of Shenzhen Star operations in Kenya, said last year that the firm would build a manufacturing facility at Tatu Industrial Park beginning fourth quarter of 2019.

Kenya Power’s LMCP was launched in 2015 to scale up connectivity in rural and peri-urban areas by providing subsidy for grid extension to enable customers get electricity supply at affordable cost.

This has seen more people join the grid.

However, the monopoly’s performance has dwindled in recent years despite rising customer numbers.

It has issued back-to-back profit warnings as earnings tumbled to 10-year lows.

It now expects net profits for the year ending June 2019 to be more than 25 percent lower than the Sh1.92 billion after-tax profit posted in the prior year.

The firm said this was due to an increase in non-fuel costs in line with the company’s long term strategy to grow cheaper and cleaner renewable energy.

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IMF, World Bank to conduct an assessment of Kenya’s financial sector

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Discussions have begun with the authorities about the possibility of
the International Monetary Fund(IMF) and the World Bank conducting a
comprehensive Financial Sector Assessment Program (FSAP) of Kenya in 2020.

This FSAP will review potential vulnerabilities in both commercial banks and other financial institutions including Savings and Credit Cooperative Societies, Insurance and Reinsurance Companies and the Stock Exchange.

According to a Fiscal Transparency Evaluation Update on Kenya prepared by the IMF, recent events in Kenya’s economy and banking sector have contributed to the deterioration in Kenya’s financial soundness indicators.

It mentions that intervention was required to cover deposits in three
commercial banks which defaulted in 2015 and 2016. These are Dubai Bank,
Imperial Bank and Chase Bank.

The update notes that Kenya’s banking sector has performed comparatively worse than other East African Community(EAC) member states, excluding Burundi. It attributes the higher non-performing loans ratio relative to other countries, to the interest rate cap that was imposed on Kenya’s banking sector in September 2016.. This law has since been repealed.

According to the Kenya Financial Sector Stability Report, there was an increase in Gross Nonperforming Loans (NPLs) by 19.69 per cent to  KSh.316.7 billion in December 2018 from KSh. 264.6 billion in 2017.

As a result, the ratio of gross NPLs to gross loans rose from 12.3 per cent by end  2017 to 12.7 per cent by the end of 2018. 

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Banks tightened lending standards and increased investment in government securities to mitigate credit risks. Automation of operations and the adoption of financial technologies elevated operational risks and increased the vulnerability of the banking sector to fraud and cyber-crime in 2018.

Banks tightened internal control systems, sensitised customers on fraud and undertook ICT vulnerability assessments and penetration tests to mitigate operational risks. The CBK has also strengthened the AML/CFT risk assessment frameworks to address this risk.

While state-owned National Bank of Kenya(NBK) has been acquired by
Kenya Commercial Bank(KCB) Group, the IMF report indicates that the
deteriorating financial condition of NBK had strained the aggregate position of
the banking sector.

At the height of its financial woes, NBK was the second-highest contributor to non-performing loans (NPLs), accounting for more than for 12 per cent of total NPLs.

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Chinese company spent Sh1.3 billion on 5 SGR engineers : The Standard

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An SGR passenger locomotive engine pulls passenger wagons from Mombasa in 2017. [File, Standard]

China Road and Bridge Corporation (CRBC) splashed over Sh1.3 billion on maintaining five Kenya Railways engineers supervising the construction of the Standard Gauge Railway, tender documents show.

Among the items bought for the five, together with their helpers who were also Kenya Railways Corporation (KRC) staff, were fat allowances, mobile phones and airtime.
Housing and offices for the engineers was budgeted at Sh544 million besides the personal remuneration in the country’s biggest infrastructure project yet.
Collectively, the engineers attached to the five camps along the different sections were provided with Sh385 million that would cover overtime and supervision costs.

SEE ALSO :Kenyans to pay billions to use JKIA-Westlands road

Ordinarily, seconded employees would still be on their usual salaries from their employer.
Tender documents for the Sh372 billion-worth line connecting Mombasa and Nairobi have provided a rare peak into the costing of the controversial project.
Nduva Muli, the then KRC Managing Director, entered two contracts with the Chinese contractor in July and October 2012 for Sh220 billion and $1.15 billion (Sh115 billion), respectively, which were then collectively worth Sh316 billion.

For More of This and Other Stories, Grab Your Copy of the Standard Newspaper.  

The documents, which have been under lock and key, have surfaced in a petition filed by rights activist Okiya Omtatah at the Court of Appeal.
He has petitioned the court to declare the two tenders awarded for the construction of the line and the other for supply of rolling stock irregular.
Further, Omtatah is praying for the judges to rule that the loans taken to fund the SGR be recovered from the individuals who negotiated the loans and not from the Exchequer.
He has cited various incidents where the costs were overly inflated in the bill of quantities (BQs) used by CRBC in the tendering process.
It is in the BQs where the anticipated costs worth Sh1.3 billion for maintaining the supervising engineers is captured.
The single largest cost item worth Sh72 million was budgeted for the payment of “attendant staff” of the engineers, possibly in salaries or allowances.
CRBC planned to spend some Sh42.9 million on “payment of overtime to the engineer’s junior staff”.
The contractor also budgeted another Sh30 million in lump sum pay to engineers as superintendence costs and a further Sh30 million to cover miscellaneous expenses.
That is beside a further Sh7.6 million, which would be set aside to pay for temporary accommodation, likely in instances when they cannot make it to the provided houses in the camps for the night.
Construction of the SGR was done in sections over the 480-kilometre stretch with different teams, each with a supervising engineer from KRC, working on the respective parts.
Engineers were allowed a host of staff, including drivers for the 4X4 pick-up trucks they were assigned and trainees.
CRBC planned a Sh12 million kitty from where the allowances of trainee counterpart from KRC or any other relevant government officer would be paid from.
Telephone costs for the engineers were budgeted at Sh5 million, including 20 mobile phones each costing Sh50,000, fixed telephone lines to their residences on site connected at Sh120,000 and the Sh3.6 million in airtime.
Residences for the KRC staff were constructed from a budget of nearly Sh200 million, with the senior-most temporary officials’ homes built at Sh3 million. Monthly maintenance costs for the accommodation of the engineers’ home was projected at Sh12,274.
It is unclear what the maintenance costs of the residences would include but might consist of cleaning and housekeeping.
A total of Sh48 million was budgeted for maintenance of the KRC staff accommodation for the period of the railway construction.
Costs of keeping the supervising engineers on site are among the outstanding cost items in the tender documents, which also show that CRBC would build a 60-cubic-metre water tank at Sh4.8 million and purchase washing machines at Sh160,000 apiece. 

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China Road and Bridge CorporationKenya Railways engineersStandard Gauge RailwayKenya Railways Corporation

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