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How key sectors dragged down economy in 2019 : The Standard

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FORECAST:  Despite Treasury’s optimism, analysts say GDP growth is unlikely to hit six per cent in 2020

Last year might go down as among the worst the Kenyan economy has experienced in recent past.

When the National Treasury publishes the numbers for 2019 in a few months, few will be shocked by the fact that economic growth last year will only have slightly outperformed 2017 – which was equally bad.
The economy is projected to have grown at between 5.4 and 5.6 per cent in 2019, better than what was witnessed in 2017, but the latter year having had to contend with the high-pitched political noise that culminated in the General Election in August and a repeat presidential election in October.
Data collated from different government agencies shows how badly the economy was hurting last year, explaining the high number of job losses, a string of profit warnings and the Kenya Revenue Authority missing its tax collection targets in the half year to December.

SEE ALSO :From banks to farms, economy bleeding jobs

According to the quarterly economic reports by the Kenya National Bureau of Statistics (KNBS), nearly all economic sectors reported slower growth while some posted negative growth.
In an update on Tuesday, Treasury said KRA missed its half-year tax collection target by Sh88.3 billion, netting Sh857.8 billion over the period to December.
KRA failed to hit the target for all the tax categories, with the biggest miss registered under income tax.

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KNBS data shows that aside from construction and tourism, all other sectors posted a slowdown over the nine months to September compared to a similar period in 2018.
Construction was driven by investments in infrastructure by the government as opposed to the real estate sector, which too suffered different challenges including difficulties in accessing credit.

SEE ALSO :Why weatherman’s reports are clouded in inconsistencies

The standard gauge railway’s phase 2A was among the key infrastructure projects and it was at the centre of the sector’s growth. Even then, growth over the three quarters was only marginally higher (at 6.5 per cent) than in 2018 (6.3 per cent).
Other key sectors to the economy including agriculture and manufacturing suffered. A mix of factors that ranged from poor rainfall over the March – May long rains season as well as turmoil in key export markets for Kenyan products such as tea and cut flowers contributed to the poor growth.
These include the UK that is in the process of exiting the European Union, Iran that has been hit by US sanctions and devaluation of Pakistan currency that saw the country import less tea.
“The slowed performance was mainly on account of delayed rains that characterised the (first) quarter under review and curtailed agricultural production” said KNBS in the quarterly GDP updates.
The statistics body further said the agricultural sector’s growth in the third quarter was hampered by a notable drop in production of key crops.

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Earnings from tea, fruits and vegetables – critical foreign exchange earners – as well as sugar cane declined over the period.
One of the pointers to a struggling manufacturing sector was the marginal increase in power consumption. Between January and October, power consumption rose by 2.7 per cent to 7,400 gigawatt hours from 7,206GWh the previous year.
The marginal growth could be a pointer to the tough economic times that businesses went through in the course of 2019, with many power intensive firms slowing down on electricity usage.
Cement production, for instance, dropped to 3.9 million metric tonnes in the period to August 2019, compared to over four million tonnes produced over a similar eight-month period in 2018.
There were also significant layoffs within the year as companies took measures to cut costs. Firms sent home workers or announced plans to restructure their operations as profits thinned.

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They included Telkom, Stanbic, East Africa Portland Cement and East African Breweries.
Others were Air Afrik, Finlay Flowers, Sportspesa, Betin, Andela.
Despite the misses, Treasury is optimistic that the economy will rebound this year to grow at six per cent but revised the growth for 2019 to 5.6 per cent on account of lower than expected growth in agriculture.
Analysts however note that this could be too ambitious and the best the economy can do in 2020 would be 5.8 per cent.
“We project 2020 GDP growth to come in between 5.6 per cent and 5.8 per cent, supported by improvement in private sector credit growth… stable growth of the agricultural sector and public infrastructural investments,” said analysts at Cytonn.


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AfDB Unveils $10 Billion Package for COVID-19

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The AfDB (African Development Bank) has unveiled a $10 billion COVID-19 Response Facility to governments and the private sector, that seeks to enable regional member countries to mitigate impacts of the global pandemic.

Africa is facing enormous challenges in responding to the coronavirus pandemic effectively. The African Development Bank Group is deploying its full weight of emergency response support to assist Africa at this critical time. This Facility will help African countries to fast-track their efforts to contain the rapid spread of the virus.

Akinwumi Adesina, AfDB President 

The funding will be distributed as follows:

  • $5.5 billion for sovereign operations in AfDB countries
  • $3.1 billion for regional operations for member countries of the African Development Fund
  • $1.35 billion for private sector operations.

Already, the bank successfully sold a three-year $3 billion bond as part of its efforts to offer financial supports to countries and businesses fighting against the global COVID-19 pandemic. Thereafter, it became the first bond from AfDB to list on London Stock Exchange, and the largest to be admitted to London’s Sustainable Bond Market.

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Early this week, AfDB approved a $2 million emergency funding for the World Health Organization (WHO) to help African countries fight the COVID-19 pandemic impacts.

See Also:

AfDB Sells $3 Billion “Fight COVID-19” Bond

Africa to be Hit Hard by COVID-19, Says McKinsey

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OPEC and Russia Agree to Cut Oil Production by 10M BPD –

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OPEC and Russia have agreed to cut oil production by up to 10 million barrels per day effective May 1, 2020. However, oil prices recorded sharp declines after the announcement as the markets expected production cut by at least 20 million BPD.

Both Russia and Saudi Arabia will cut output by about 22-23% from a level of 11 million BPD to about 8.5 million BPD in May and June. OPEC+ further revealed that production cuts would ease to 8 million BPD between July and December and relaxed further to 6 million BPD between January 2021 and April 2022.

However, the full impact of the output cut on the market will be understood on Friday when G-20 ministers hold a meeting on Friday. Apparently, Saudi Arabia is leading persuasions to get the United States involved in a production cut.

In the last few weeks, oil prices have tumbled to record lows hasted by coronavirus pandemic and flooding of the market with oil from Saudi Arabia and Russia.

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Oil firm contests Sh2.2b tax bill : The Standard

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Africa Oil has moved to the High Court to challenge a Sh2.2 billion tax demand made by the Kenya Revenue Authority (KRA) on unpaid value-added tax (VAT) dating back almost 10 years.
This follows a ruling by the Tax Appeals Tribunal (TAT) in an appeal filed two years ago by the Canadian-based oil firm challenging the move by KRA to recover more than Sh4.5 billion in backdated taxes.
KRA was seeking Sh2.3 billion in income tax on the sale of Africa Oil stakes in three blocks made between 2012 and 2016, and another Sh2.29 billion in VAT transactions made in 2011, 2012 and 2016.

SEE ALSO: Troubles at Tullow put in doubt Kenya oil export promise

Africa Oil accuses KRA of making wrongful decisions in computing its tax bill and failing to account for the full value of losses brought forward.
The tribunal threw out KRA’s demands on income tax and ordered that the Sh2.29 billion VAT be reviewed to exclude assessment in respect to 2011 and 2012, a move Africa Oil has vowed to contest in court.
“Africa Oil is pleased that TAT has ruled in favour of the firm with regards to the corporate income tax assessments,” said the company in a statement. “Also, the firm notes TAT’s ruling in favour of KRA with regards to the VAT assessments that amount to $22 million (Sh2.2 billion).

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“However, Africa Oil maintains its position that the VAT assessment is without merit and has appealed.”


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