The 150 million people strong EAC Common Market has opened a window for cross-border expansion, nurturing homegrown multinationals that now straddle the region.
Kenyan companies have been the most adventurous, with their cross-border advances returning a mixed bag of fortunes.
Some firms have recorded huge successes while others have rued the decision to venture outside their home markets. Fast-growing sectors such as financial services, manufacturing, retail, transport and ICT have provided launch pads for those itching to venture outside their comfort zones.
“The spirit of the Common Market Protocol encouraged Kenyan companies to venture into the region but most realised the situation on the ground was quite different. Despite the challenges, Kenyan companies have benefitted specifically when it comes to free movement of persons, labour and capital,” said Meshack Kipturgo, managing director of logistics company, Siginon Group.
EAC countries have to a large extent domesticated the Common Market Protocol making it easier for private companies to establish cross-border operations, but some have gone against the agreement on areas like free movement of people and land use that remains restricted.
Some of the notable Kenyan companies with regional operations include KCB, Equity, DTB and NCBA banks, East Africa Breweries Ltd, Bidco Oil Refineries, Brookside Dairy, Siginon Group, Nation Media Group and Britam.
For most of these companies, the search for revenue growth opportunities and stiff competition in the domestic market both from local companies and global conglomerates coming into the region forced them to seek new opportunities regionally.
Efforts to harmonise taxes, creation of one-stop border points, common investments in infrastructure projects and other initiatives have turned the EAC into a fertile expansion territory.
Some companies, particularly banks, have cross-listed their shares in neighbouring bourses including Dar es Salaam Stock Exchange, Uganda Securities Exchange and Rwanda Stock Exchange to create a sense of local ownership, improve visibility and enlarge their investor base.
However, low or no trading due to shallow depth of the stock markets, high stockbrokerage fees, clearing and settlement costs, and other charges have discouraged other companies to consider cross-listing.
Some of those that have crossed boundaries have struggled to sustain operations of the new subsidiaries, majority of which have taken years to break even and start contributing to the overall bottom line.
This reality is well depicted by Kenyan banks with regional operations. According to data by the Central Bank of Kenya, regional subsidiaries of Kenyan banks recorded $106.5 million rise in profit before tax in 2018 compared with $80.6 million in 2017, a 31.5 percent increase.
Rwanda presented the best-earning capacity for Kenyan banks despite having fewer subsidiaries, while Uganda topped the list of loss-making units.
For companies like ARM Cement, the pitfalls of regional expansion have been catastrophic. This because the company’s demise is directly linked to a botched attempt to conquer the regional cement market using an expansion strategy crafted on borrowing short-term commercial loans to finance long-term projects.
World Bank pushes G-20 to extend debt relief to 2021
World Bank Group President David Malpass has urged the Group of 20 rich countries to extend the time frame of the Debt Service Suspension Initiative(DSSI) through the end of 2021, calling it one of the key factors in strengthening global recovery.
“I urge you to extend the time frame of the DSSI through the end of 2021 and commit to giving the initiative as broad a scope as possible,” said Malpass.
He made these remarks at last week’s virtual G20 Finance Ministers and Central Bank Governors Meeting.
The World Bank Chief said the COVID-19 pandemic has triggered the deepest global recession in decades and what may turn out to be one of the most unequal in terms of impact.
People in developing countries are particularly hard hit by capital outflows, declines in remittances, the collapse of informal labor markets, and social safety nets that are much less robust than in the advanced economies.
For the poorest countries, poverty is rising rapidly, median incomes are falling and growth is deeply negative.
Debt burdens, already unsustainable for many countries, are rising to crisis levels.
“The situation in developing countries is increasingly desperate. Time is short. We need to take action quickly on debt suspension, debt reduction, debt resolution mechanisms and debt transparency,” said Malpass.
Kenya’s Central Bank Drafts New Laws to Regulate Non-Bank Digital Loans
The Central Bank of Kenya (CBK) will regulate interest rates charged on mobile loans by digital lending platforms if amendments on the Central bank of Kenya Act pass to law. The amendments will require digital lenders to seek approval from CBK before launching new products or changing interest rates on loans among other charges, just like commercial banks.
“The principal objective of this bill is to amend the Central bank of Kenya Act to regulate the conduct of providers of digital financial products and services,” reads a notice on the bill. “CBK will have an obligation of ensuring that there is fair and non-discriminatory marketplace access to credit.”
According to Business Daily, the legislation will also enable the Central Bank to monitor non-performing loans, capping the limit at not twice the amount of the defaulted loan while protecting consumers from predatory lending by digital loan platforms.
Tighter Reins on Platforms for Mobile Loans
The legislation will boost efforts to protect customers, building upon a previous gazette notice that blocked lenders from blacklisting non-performing loans below Ksh 1000. The CBK also withdrew submissions of unregulated mobile loan platforms into Credit Reference Bureau. The withdrawal came after complaints of misuse over data in the Credit Information Sharing (CIS) System available for lenders.
Last year, Kenya had over 49 platforms providing mobile loans, taking advantage of regulation gaps to charge obscene rates as high as 150% a year. While most platforms allow borrowers to prepay within a month, creditors still pay the full amount plus interest.
Amendments in the CBK Act will help shield consumers from high-interest rates as well as offer transparency on terms of digital loans.
Scope Markets Kenya customers to have instant access to global financial markets
NAIROBI, Kenya, Jul 20 – Clients trading through the Scope Markets Kenya trading platform will get instant access to global financial markets and wider investment options.
This follows the launch of a new Scope Markets app, available on both the Google PlayStore and IOS Apple Store.
The Scope Markets app offers clients over 500 investment opportunities across global financial markets.
The Scope Markets app has a brand new user interface that is very user friendly, following feedback from customers.
The application offers real-time quotes; newsfeeds; research facilities, and a chat feature which enables a customer to make direct contact with the Customer Service Team during trading days (Monday to Friday).
The platform also offers an enhanced client interface including catering for those who trade at night.
The client will get instant access to several asset classes in the global financial markets including; Single Stocks CFDs (US, UK, EU) such as Facebook, Amazon, Apple, Netflix and Google, BP, Carrefour; Indices (Nasdaq, FTSE UK), Metals (Gold, Silver); Currencies (60+ Pairs), Commodities (Oil, Natural Gas).
The launch is part of Scope Markets Kenya strategy of enriching the customer experience while offering clients access to global trading opportunities.
Scope Markets Kenya CEO, Kevin Ng’ang’a observed, “the Sope Markets app is very easy to use especially when executing trades. Customers are at the heart of everything we do. We designed the Scope Markets app with the customer experience in mind as we seek to respond to feedback from our customers.”
He added that enhancing the client experience builds upon the robust trading platform, Meta Trader 5, unveiled in 2019, enabling Scope Markets Kenya to broaden the asset classes available on the trading platform.