From The Business Daily
May 12, 2008: A tactical manoeuvre by Pakistan into bilateral free trade arrangements with several Asian neighbours is threatening to throw its multi-billion shilling-a-year-tea trade with Kenya into a spin.
For many years, Pakistan has been the single largest buyer of Kenyan tea, taking up more than 28 per cent of its total exports worth an estimated Sh12 billion a year.
But in a surprise twist, the tea trade between the two nations has been on a slump over the last three years with analysts warning that the trend is likely to carry on.
“The trend has been noted over the years and the trade in tea between the two countries is slumping further,” Dr Amjad Iqbal, the head of trade affairs at the Pakistani High Commission in Kenya told Business Daily in an interview.
Statistics obtained from the Tea Board of Kenya (TBK) confirmed the decline, both in value and volume. For instance in 2005, Kenya exported 98 million kilogrammes of tea worth Sh12 billion to Pakistan, but this gradually shrunk to 80 million kg worth Sh10 billion in 2007.
The trend was evident over the first quarter of 2008 when Kenya tea exports to Pakistan dropped 52 per cent, confirming fears that commodity trade ties between the two countries were getting loose.
Analysts trace the weakening to a decision by Pakistan to enter into Free Trade Area (FTA) pacts with several of its neighbours under the ambit of the South Asian Association for Regional Cooperation (SAARC).
An FTA is a designated group of countries that have agreed to eliminate tariffs, quotas and preferences on most if not all goods between them.
SAFTA involves the free movement of goods, between countries through elimination of tariff and non-tariff restrictions on the movement of goods, and other equivalent measures.
A section of members of South Asian Free Trade Area (SAFTA) such as India and Sri Lanka directly rival Kenya in the tea business.
Other member nations in the SAFTA pact are Bangladesh, Bhutan, Maldives and Nepal. The SAFTA pact was signed in Islamabad, Pakistan in January 2004 during the 12th Summit of SAARC. It came into force on January 1, 2006. Member countries have up to January 1, 2016 to comply with the entire SAFTA deal.
Seeking to take an early ride on the FTA, Pakistan and Sri Lanka struck a deal soon after the pact came into force exchanging preferential market access to each others’ exports by way of tariff concessions.
Sri Lanka would be able to enjoy duty free market access on 206 products in the Pakistani market including tea, rubber and coconut. Pakistan, in return, would gain duty free access on 102 products in the Sri Lankan market. These products include oranges, basmati rice and engineering goods.
Pakistan also has an FTA arrangement with China that is also elbowing Kenya out of the vintage position in tea business. The Pakistan-China FTA was signed in November 2006 between Presidents Pervez Musharraf and Hu Jintao with Pakistan winning an overall market access at zero duty on industrial alcohol, cotton fabrics, bed linen and other home textiles, leather articles, mangoes, citrus, fruits and vegetables, iron and steel products among others.
In the deal China also promised to reduce its tariff by 50 per cent on fish, dairy sectors, frozen orange juice, plastic products rubber products, knit wear and woven garments.
In return Pakistan gave market access to China mainly on machinery; organic; and inorganic chemicals, fruits & vegetables, medicaments and other raw materials for various industries including engineering sector, intermediary goods for engineering sectors. As the new FTA arrangements take shape, Kenya’s traditional tea trade with Pakistan is already feeling the pinch.
“It is definite that one would turn to the best partners and the existing FTA arrangements are doing quite well. Much of the business is going to nations with which Pakistan has FTA arrangements,” Dr Iqbal told Business Daily. For instance, statistics from the Sri Lanka Commerce Department showed that the FTA deal had prompted growth in tea exports to Pakistan.
As at 2006, the value of Sri Lankan tea shipments to Pakistan climbed 13 per cent to $8 million, just one year after the free trade pact was penned on to paper.
“The tariff rate quota of 10,000 metric tonnes granted by Pakistan for export of tea at zero duty under the FTA would help Sri Lanka to regain its market share over time,” the Sri Lankan Commerce Department said in a statement. Pakistan is already courting upcoming tea producers in Africa such as Rwanda and Malawi for possible FTA arrangements that would ease trade ties.
“We are in negotiations with Rwanda for an FTA because their tea production is improving both in terms of quantity and quality,” revealed Dr Iqbal “I believe a similar efforts is on going with Malawi”.
He said tea exports from Rwanda to the Pakistani market had climbed impressively and now accounted for about eight per cent of the total market share compared to six per cent three years ago.Malawi today enjoys seven per cent of the total Pakistani tea market share compared to five per cent in 2005. “Kenya should see the sense in this and enter an FTA with Pakistan. Our proposal for an FTA has been pending with the Kenya Government since 2001. Seven years is not a long time and we are hopeful,” Dr Iqbal said.
Analysts however said though Kenya had the provisions to negotiate an FTA with Pakistan it would be difficult to find one that doesn’t infringe on the current FTA it has with other member countries of the Common Market for Eastern and Southern Africa (Comesa).
“The WTO does not bar a nation from entering more than one FTA arrangement but any such new arrangements must not be better than the existing ones because that would be tantamount to short-circuiting those already in existence,” a senior official at the Trade Ministry in Nairobi told Business Daily.
But apart from the threats of Pakistan’s new FTA partners, Kenya faces another major hurdle in protecting its prime tea market next year should the East African Community (EAC) change the import duty currently charged on Pakistani rice shipments into the country.
For many years, Kenya and other EAC nations pegged the common external tariff (CET) on rice imports from Pakistan at 75 per and an extra 35 import duty in line with the provisions of the harmonised community description and coding system. But in a surprise move, Kenya, Tanzania and Uganda unsuccessfully tried to start charging all rice imports at 75 per cent duty from January 1, 2005.
This drew the wrath of Pakistani rice exporters who then pressured their Government to arm-twist Kenya into deferring the duty or slap them with a reciprocal raise in the import duty of tea.
Faced with a limbo over its tea exports Kenya sweet-talked other members of the EAC into deferring the new import tariff for another two years. The deferment is set to expire by June next year, raising fresh fears that trade between the two countries could be hard hit should the tariff structure for rice change.
Kenya Tea Development Agency (KTDA) managing director Lerionka Tiampati said urgent consultations were needed between EAC members states to avoid hurting bilateral trade ties like those between Kenya and Pakistan. “If it (changes in rice import tariff) were to happen, it would be really bad on us. I hope it does not happen,” he told Business Daily. Mr Tiampati felt Kenya should negotiate another extension with its EAC partners.
Dr Iqbal said though the EAC import tariff issue was futuristic, failure to address it on time would have great impact on the bilateral pact of Kenya and Pakistan. “We hope that Kenya will ensure regular and sufficient supply of rice to its consumers when this time comes.
Kenya produces about a third of its annual rice demand of 250,000 tonnes with a bulk of the shipments coming from Pakistan alone. Statistics showed that IRRI-6 rice shipments to Kenya accounted for about 70 per cent of the Pakistan market share.
Monday, May 12, 2008
Kenya tea loses its flavour in Pakistan
Another brand change for Celtel
May 12, 2008: Just when Kenyans are getting comfortable with the Celtel brand, consumers and marketers will have to once again change their perceptions as it switches its name to Zain later this year.
The remaining months of 2008 promise to be significant for the Kenyan operation.
The company is preparing its Nairobi office to become Celtel Africa’s headquarters, shifting from Amsterdam by June this year. It will also be welcoming a new CEO who will oversee the name change from Celtel to Zain.
This will be the third shift for the brand in as many years, following a decision by Celtel’s parent company Zain, to have a common corporate trading name in all the countries within its operations.
In 2004, the Dutch-owned Celtel International bought Vivendi’s stake in the company. In 2005, Celtel was bought by Arab-based MTC, which changed its trading name to Zain late last year. Sameer has maintained an ever-decreasing stake in the company over the last few years.
With each change, a new marketing and branding process has taken place, with Celtel Kenya ranking among the top five big spenders in advertising in the years it has been operational in the country.
“The re-branding of Celtel to Zain is now in progress and the other fifteen African companies should be re-branded in the third quarter of the year,“ said Chris Gabriel, Celtel’s CEO for Africa.
Zain has a presence in 22 countries, spread throughout Africa and the Middle East. The Middle Eastern operations started the shift last year, when it was expected that Celtel Africa operations in 15 countries would remain under the same brand name to ensure continuity.
With over 28 million subscribers, representing two-thirds of the Zain Group’s total subscribers, the decision to re-brand Celtel to Zain was announced in February this year.
This came just after the Kenyan operation had completed an aggressive, huge marketing drive to cement the name in the minds of consumers.
Gabriel says that the shifting of the headquarters to Nairobi in June is motivated by the fact that Nairobi is fast becoming a commercial and regional hub for the telecommunications industry.
The company will be working on a new strategy which will boost its business growth in the region, with the aim being to provide customers with affordable and quality services.
The first operations to be re-branded were those from Kuwait, Bahrain and London. In Sub-Saharan Africa Celtel operates in Burkina Faso, Chad, Democratic Republic of Congo, Republic of Congo, Gabon, Kenya ,Tanzania, Uganda, Zambia, Malawi Madagascar, Niger, Nigeria and Sierra Leone.
Wednesday, May 7, 2008
Norwegian firm quits Tanzania over corruption
May 7, 2008: A leading engineering consulting firm has pulled out of Tanzania over corruption.
The Norwegian firm, Norconsult AS, has also sacked its Tanzania managing director after audit reports by PricewaterhouseCoopers linked its business to corruption.
“We do not accept any kind of misconduct or corruption. As a consequence, we cease our activities in Tanzania,” said the global president, Mr John Nyheim.
The firm was in charge of government and donor funded projects running into billions of shillings.
Mr Nyheim said the audits done over the last one year revealed that about Sh332 million had been used in irregular payments adding that the company failed to adhere to the international code of ethics.
“It has been established that in the past several irregular cash payments have been made from Norconsult’s partly owned subsidiary in Tanzania, totalling about Sh156 million (Norwegian Kronor 650,000),” he said.
He also noted that last year, Sh176 million ($146,500) had been paid out from the project office in Dar-es- Salaam, as petty cash. This transaction involved a World Bank water and sanitation project. The Bank sighted the anomaly and sought an audit for the project, an investigation that unearthed more irregularities.
However, the Norconsult boss absolved his company from blame saying none of its employees took part or was aware of the reported irregular payments at the Dar-es- Salaam office.
The decision to halt its lucrative contracts in Tanzania comes after The Citizen, a publication of the Nation Media Group, reported that the Norwegian company had been operating in the country for a decade without official registration.
The Engineering Registration Board confirmed the report saying the firm did not obtain official registration from the Business Registration and Licensing Agency until 2008.
Norconsult AS’s local partner and managing director, Francis Kifukwe declined to comment. Mr Nyheim said the Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime had been notified about the embezzlement and is expected to take legal action.
Norconsult does a full review of all international activities to detect misconduct emphasising that its aim is to help bodies like the World Bank fight corruption.
“Norconsult is also reviewing the internal procedures for evaluation of co-operating parties, bidding, contracting, execution, financial control and accounting in order to prevent corruption in connection with our assignments,” Mr Nyheim said.
The shutting down of the Tanzanian office by a firm that has several offices spanning across several countries is likely to unearth more corruption cases in the region.
Tanzanian authorities are reported to have started probing the Dar office of Norconsult for tax evasion amounting to Sh2.4 billion for the period between 2002 and 2007.
“It has come to our knowledge that Norconsult AS has neither filed statutory returns nor paid any taxes from 2002 to 2007 despite being registered as a taxpayer with TRA,” Tanroads notes in a March 25, 2008 letter.
Local projects in which the company has been involved in recent years include the Sengerema-Busagara road (Sh35.7 billion), Geita-Sengerema road (Sh39.5 billion) and the Unity Bridge is southern Tanzania. Others are the Rongai-Kamwanga road (Sh14.5 billion), Marangu-Rombo Mkuu road (Sh23.3 billion) as well as the Tarakea-Kamonaga and Mwika-Kilacha roads.
The projects also include the World Bank-funded Dar es Salaam Water Supply and Sanitation Project, a joint venture with a local and a Dutch firm that was signed in July 2003.
A Norwegian publication, Development Today, says the $6.7 million project might lead to Norconsult’s blacklisting by the Work Bank.
What raises the eyebrows of those who have been aware of the company’s dubious activities is how it could have taken the relevant public organs and donors for a ride for that long. They question how a company could undertake public and donor-funded projects worth billions of shillings without paying a penny in taxes since 1991 without being detected.
“These people are said to have a minimum turnover of between $3 million and $4 million annually in the country. If the allegations against the company are true, then it means that many hands have been greased and taxes amounting to billions of shillings not paid,” a tax expert consulted on the matter noted.
Clinton beaten into a pulp, fails to gain on Obama...again!
(Africa Headlines: Zimbabwe Crisis: Real or Feigned? Click Link for More)
Following two of the toughest weeks of his 15-month campaign, Obama regained his footing, denying the former first lady the game-changing sweep she had sought in the last big voting day in this marathon race.
The margin of Obama's North Carolina win, about 14 points, will weaken Clinton's bid to keep the party's uncommitted super delegates, who will ultimately decide the nominee, from breaking to Obama and putting an end to a race which has proved both exhausting and worrying to the party elite.
Clinton needed a win in Indiana to survive and she was declared the winner early this morning.
The victory could have been academic, however. This was Obama's night.
"Some were saying that North Carolina would be a game-changer in this election," Obama said, tossing Clinton's own appraisal back at her.
"But today, what North Carolina decided is that the only game that needs changing is the one in Washington, D.C."
He told his supporters he is within 200 delegates of becoming the party's nominee.
With Indiana still unresolved, Clinton met supporters here and vowed to go "full speed ahead to the White House" in a race with six contests looming.
But there was an air of reconciliation as the two spoke to supporters in different parts of the nation, suggesting a change in tone based on the night's results, which were clearly a setback for the former first lady.
Clinton said all Democrats were on the same journey.
"People are watching this race, and they're wondering, I win, he wins, I win, he wins. It's so close," she said.
