EAA Events

SEPTEMBER 2018

August 28th

The CEO appeared on Sky News to be interviewed about the UK Prime Minister’s visit to South Africa, Nigeria and Kenya, largely through the prism of Brexit and future trade relations with the UK. President Kenyatta had a very high profile few days, meeting President Trump in Washington and President Xi of China in Beijing, as well as the UK Prime Minister, demonstrating the growing importance of the country within the region now that it has settled down politically following the elections last year.

August 29th

The Regional Representative in Nairobi met members of the UK Trade Delegation who had accompanied the Prime Minister and attended a meeting when she and President Kenyatta made interesting presentations about their discussions, which included security issues as well as trade, and about future relations between the two countries post-Brexit.

September 5th

EAA members’ breakfast meeting in Nairobi, with over 100 attendees. In addition to the usual political and economic briefing on Kenya by the Regional Representative there were interesting presentations on the local property market, on the insurance sector and on cyber-crime, described as a “global menace”. It was noted that private sector sentiment has generally become more positive and GDP growth of around 5.5% is projected for 2018. However, there is growing political discussion about the next election, due in 2022, and speculation about who the potential presidential candidates will be.

September 6th

The CEO addressed a meeting of members from the Swedish East Africa Chamber of Commerce (SWEACC) and from the Norwegian Africa Business Association (NABA) in Stockholm, providing a political and economic briefing on East Africa and taking the opportunity to promote the EAA joint-EU investment mission to Ethiopia from October 24th – 26th.

September 12th

The CEO attended a meeting in London on the political and economic outlook for Ethiopia, which featured a number of interesting presentations.

September 19th/20th

The Regional Representative in Nairobi visited Tanzania, where the political and economic environment appears to be deteriorating quite seriously and investor sentiment has become increasingly negative because of the current government’s economic policies, which are perceived to be anti-business, with foreign investors a particular target for the tax and immigration authorities.

September 26th

EAA UK members’ meeting on Ethiopia, primarily to promote the Association’s joint-EU investment mission to the country. The guest speakers at a well-attended meeting were the Ethiopian Embassy Business Counsellor, the Business Advisor, as well as the UK Trade Envoy to the country, Jeremy Lefroy MP.

The CEO’s introductory remarks are below.

Good afternoon ladies and gentlemen and a very warm welcome to today’s meeting which is primarily a prelude to the investment mission we are organising and leading to Ethiopia from October 24th – 26th.

Let me begin as usual by thanking Kamal Shah and all the various members of the Stephenson Harwood staff for hosting this gathering in their usual generous way, their continued support of the EAA’s activities is, as always, very much appreciated. I would also like to welcome on your behalf our two guest speakers, the Ethiopian embassy Business Counsellor, Eskindir Yirga, and the UK Trade Envoy to Ethiopia, Jeremy Lefroy MP. He also happens to be the APPG Chairman for Kenya and Tanzania, so he has a great deal of knowledge and indeed experience of the region generally. Welcome gentlemen.

This date was chosen very carefully because the Ambassador was due to be in Addis Ababa the two weeks beforehand to attend the annual Ethiopian Heads of Mission meeting. However, unfortunately it happens to coincide with a long-standing lunch appointment the EAA Chairman, Lord Valentine Cecil, had with the US Ambassador to the UK, and he has asked me to convey apologies on his behalf for not being able to be with us today. However, he definitely will be joining us for the investment mission in October and so far it looks as if we will have around 30 participants.

I did say that this date was carefully chosen but, a couple of weeks ago, I met the Ambassador here in London and he advised that the meeting in Addis had been cancelled at very short notice, with no new date announced, and that he would therefore “definitely be able to attend the EAA meeting on September 26th”. However, I received a call late last week saying that his plans have changed once again, accompanied by his sincere apologies, and that he is now required to be in Addis Ababa this week. I am delighted therefore to welcome the new Business Counsellor, Eskindir Yirga, together with the Business Affairs Advisor at the embassy, Dr Frezer Haile, who will I am sure between them be able to brief us on the trade and investment opportunities in Ethiopia, which is basically the main purpose of this meeting in order to publicise our forthcoming investment mission.

There is a well-known saying that you cannot make an omelette without cracking a few eggs and I don’t believe anyone who follows recent events in Ethiopia can be in any doubt that Prime Minister Abiy has shaken things up in the country very dramatically since he assumed office just six months ago, particularly on the political side. When I spoke to the Ambassador a couple of weeks ago he was tremendously excited about recent developments, which have certainly grabbed the attention of the international media, because very few people would have predicted what has taken place and perhaps, even more surprisingly, the almost unbelievable pace of change. As a consequence, consumer confidence is rising, investor sentiment has improved and, I gather, interest from the diaspora, particularly in the US, where it has generally been pretty negative and antagonistic in the past, has increased very significantly.

I do not want to get too involved in the politics in what is an incredibly ethnically diverse country where rivalries between the various groups have been going on for centuries. However, it is important to note that the reforms that have been introduced, and in particular the invitation to certain leaders of opposition forces to return to the country, inevitably carried risks. The recent civil unrest on the outskirts of Addis Ababa, with some people killed and many arrests made, was perhaps something that was to be expected in the short term. The PM has however continued with his message of unity, which the vast majority of the people of the country support, saying that such acts of violence “must not be allowed to divide us”. I know he has the support also of the international community as he embarks on an extremely ambitious journey to develop his country for the benefit of the more than 100 million people there and it is this that has encouraged us to organise the mission and what makes the timing so opportune, despite this recent unrest.

You will no doubt be hearing a great deal more about the political and economic developments taking place in the country from our two guest speakers so let me now try to provide you with a more regional perspective as we are, after all, the Eastern Africa Association.

When I led an investment mission to Ethiopia in 2009 we had an audience with the former PM, Meles Zenawi, and in an answer to the question “would his country consider becoming a member of the EAC?” he answered that “we have always enjoyed warm and close relations with neighbouring Kenya and we wish to strengthen these through improved infrastructure and trade links, rather than through joining the EAC”. These words, spoken around ten years ago, are worth bearing in mind because this is undoubtedly what has happened – diplomatic, trade and security relations have indeed been strengthened between the region’s two largest economies and one of PM Abiy’s first state visits was to Kenya, shortly after he assumed office. There are a number of important infrastructure developments taking place, under what is known as the LAPSSET initiative, which includes a new road between Nairobi and Addis Ababa, shortly to be completed, and access to the port of Lamu in northern Kenya, for goods to and from southern Ethiopia. Visas are no longer required for each country’s people to visit the other and so, I believe, the centre of gravity of the region, both politically and economically, will gradually shift northwards as these two countries further strengthen their ties and the peace-making efforts with other neighbours that Prime Minister Abiy has embarked on gradually bear fruit. This is, I believe, an important consideration for foreign investors as it marks a significant and pretty radical change on the part of the Ethiopian government, which has historically tended to look to China and certain Middle East countries for its trading links, rather than with its African neighbours, which is good news.

THANK YOU, I would now like to invite Jeremy Lefroy MP to come and say a few words.

 

June 6th                                         

Members’ breakfast meeting in Nairobi, when the EAA Regional Representative gave his usual political and economic briefing on Kenya, which is included in the June newsletter as one of the various country reports.

There were also three interesting sectoral presentations, on the Nairobi Securities Exchange, the 2018 Income Tax bill and on the banking sector.

A number of potential new members attended the meeting.

June 6th   Ethiopia National Day

The CEO attended this celebration in London, at which the Ethiopian Ambassador outlined some of the important developments that are taking place in his country at the moment, emphasising the government’s announcement that it plans to sell a minority stake in Ethiopian Airlines, Ethio Telecom, Ethiopian Power and the Maritime Transport and Logistics Corporation.  These are all very positive and encouraging signs for greater foreign investment.

The UK All Party Parliamentary Group Chairman was a guest speaker at the event and he emphasised the strong and growing ties between the two countries.

June 12th AGM - CEO OVERVIEW

Few would argue that the past 2 or 3 years have been difficult in Eastern Africa.  Political uncertainty in Kenya, with two presidential elections and a great deal of heated rhetoric from both sides of the political divide unnerved the business community and economic growth suffered as a result.  A new President in Tanzania and a fundamental change there in political direction back to the socialist days of Nyerere, a continued rather stagnant political status quo in Uganda following the removal of presidential term and age limits, a constitutional change in Rwanda to allow President Kagame to stand for a third seven-year term, and two periods of a State of Emergency in Ethiopia, following periods of extended civil unrest, have all contributed to these uncertainties.  Add to these more domestic issues such as the continuing impasse over signing the EU Economic Partnership Agreement, the potential implications of Brexit and a Trump US administration that is not only threatening to turn the global trading system on its head but which also, so far, has shown very little interest in Africa.  It is therefore perhaps not surprising that business confidence has been negatively affected and that foreign investor interest in the region has declined quite dramatically. This is reflected in our decreased membership numbers, as the Chairman explained in his annual statement.

However, thanks to the sale of our Vincent Street property a few years ago and the investment of the proceeds from that, the Association remains in a strong financial position to weather what we believe is a temporary storm.  For the first time in 3 years, in 2017 we had to drawdown some income from these investments to cover operational activities and will have to do the same this year.  Can I just add to the Chairman’s comments at this point to thank John Fone for stepping in to prepare the 2017 accounts following the sad passing of Mike Taylor in July last year.  He undertook a difficult task with little back-up from previous years and I am particularly grateful for his assistance.

Regarding the future, I am confident we will soon be back on track financially as it does appear that a corner has been turned, at least in the two largest economies in the region, Kenya and Ethiopia, and that the business and investment environment in both will rapidly begin to improve.  You will be hearing more about Kenya from our Regional Representative later on so let me turn to what just a few months ago would have been considered some quite astonishing changes occurring in Ethiopia.  After just over two months in office, the reform-minded new Prime Minister, Dr Abiy Ahmed, has quickly reached out to various neighbouring countries, with the prospect of an end to a 30-year dispute with Eritrea now a real possibility and diplomatic, security and trade ties with Kenya considerably strengthened, following his recent state visit to the country.  He has also visited Djibouti to cement relations with that country, as well as Sudan, and welcomed the Prime Minister of Somalia to Addis Ababa, in addition to seeking a resolution with Egypt over the disputed River Nile waters after the construction of the Grand Ethiopian Renaissance Dam.  Thanks to him, Ethiopia was one of the first countries to sign the Africa Continental Free Trade Area agreement, something that would have perhaps been unthinkable under his predecessors, and he has vowed to “very soon” follow Rwanda’s example by allowing all Africans to travel to Ethiopia without visas.

Domestically he has been busy as well, seeking to shake up the army, reaching out to opposition groups and announcing that the current State of Emergency, imposed for six months ago following the surprise resignation of his predecessor in February, will be lifted “two months early”.  It was in fact lifted almost immediately after this announcement. Perhaps more significantly for EAA members, in what is viewed as a major policy shift, his government has decided to implement measures to liberalise certain major state monopoly companies, including Ethiopian Airlines, Ethio Telecom, Ethiopian Shipping Lines and the Ethiopian Electric Power Corporation.  Hopefully, it will not be too long before plans are announced to liberalise the financial services sector. This is perhaps the main constraint on the private sector as it is one of the main reasons they currently have to endure chronic shortages of foreign exchange, placing enormous strains on their operations.

All these encouraging developments come at a time when the EAA is in the process of organising and leading a joint-EU investment mission to the country in October this year and it would appear the timing is very propitious.  We have had strong expressions of support from the Nordic countries, in particular, through the Association’s close involvement with the European Business Council for Africa and the Mediterranean (EBCAM). There have also been keen expressions of interest from EAA members in Nairobi after a formal announcement was made about the mission at the breakfast meeting on June 6th and promises of support have been given here in the UK, from both the Trade Envoy to Ethiopia and the All Party Parliamentary Group Chairman for Ethiopia, as well as the Ethiopian and British Ambassadors.  I really do hope our members in Europe and others will join us for what promises to be a most interesting and illuminating trip.

The story from the region is not all positive, however.  There are ongoing crises and political tensions in South Sudan, Somalia and Burundi, with no real prospects for a lasting peace in any of them. As you will be hearing later, a deteriorating situation in Tanzania, particularly of the business environment there, is a cause for great concern as it is a country that really should be one of the wealthiest on the continent, given its abundant natural resources.  In Uganda, a weak opposition, militarised police force and reports of rampant corruption mean that the people there continue to suffer and business confidence remains low.  Rwanda has its own unique issues, both domestically and externally within the region, but as a country it is one of the safest, most stable and business-friendly on the continent and always a delight to visit.  President Paul Kagame has been elected as the AU Chairman and he has been the main driving force behind the Africa Continental Free Trade Area agreement, signed in Kigali in March this year.  If anyone can get this off the ground successfully, it is him.

Finally, I would like to say a few words about the staff and the sterling work they do, particularly in the Nairobi office where roughly every six weeks they organise with quiet efficiency members’ meetings which well over 100 people regularly attend. Our Regional Representative continues to do a great job and to work with tremendous energy and enthusiasm, which the large member turnouts in Nairobi are testament to.   I would personally like to take this opportunity to thank him publicly, not just for his continued great contribution but for the friendship that has developed over the years between us. I would also like to thank the Association’s various representatives in the countries we cover and for their input to both our newsletter reports and invaluable support during our visits.

Many thanks for your attendance here today and for your continued support of the Association.

COUNTRY BRIEFINGS

UGANDA

Some concerns were expressed about the apparent “glossing over” of some major concerns by the President in his State of the Union address, notably certain corruption scandals which have been blamed on “lower-level officials”.  There has been a government focus on youth, which forms a large part of the population, through agricultural activities, microfinance and “teaching girls how to knit”.

However, on the macro-economic side there are also continuing concerns. For example, over-optimistic government projections of 5.8 – 6.0% GDP growth in the coming year, which are not shared by either the Central Bank or the International Finance Institutions – it is more likely to be around 3%; a weak currency, even though it has been propped up by Central Bank intervention requiring requests for supplementary funds, although inflation continues to be surprisingly low at 1.7%; an ever-increasing external, mainly for Chinese loans, and domestic debt, approaching 50% of GDP and requiring servicing, which is causing growing concern amongst international donors; new taxes on mobile money and air time, which mainly affect the poorer people in the country; corruption in the aid industry recently uncovered; and unreliable power transmission.

The production of oil, which the economic performance (and debt accumulation) has been predicated on, is unlikely to commence before 2023.

Poverty levels believed to have worsened in past four years.

There is increased insecurity, with harassment and violence against certain politicians.

The presidential age limit, whilst settled legally, is not widely supported by the people.

TANZANIA

There are some worrying recent developments in the country which are causing concern amongst both the diplomatic community and within the business private sector.  The impact of social media on people’s behaviour has grown in influence and the government has sought to gain a degree of control over this.  There have been efforts to improve the performance of a pretty inefficient government administration and the President is believed “not to be motivated by personal ambition” even though the approach he has chosen to adopt pretty much ensures his ruling party dominates the political scene and seriously weakens any opposition.

The country’s infrastructure had deteriorated very seriously under previous administrations and the government is pursuing a long-overdue investment programme to improve the situation, focusing on power generation and the transport network, both road and rail.  The economic growth required to keep ahead of an increase in the population is very high and the government’s infrastructure investments require a great deal of funding, hence the efforts by the Tanzania Revenue Authority to extract more money from the private sector.  This has led to a great deal of harassment and aggressive behaviour, causing numerous complaints from business, although the approach recently has reportedly softened.

In summary, larger-scale corruption has diminished and government officials have become increasingly officious in implementing the regulations.  The government has positive intentions but the approach being taken to weaken the opposition and target the private sector is likely to store up problems in the future with regard to both international aid flows and economic growth.

KENYA

Following the now famous public “building bridges” handshake between the President and his main opposition rival, Raila Odinga, a governmental team of advisors has been assembled to deal with some of the current political challenges Kenya is facing and they may seek to change some laws and amend the constitution.  Their mandate is “to address ethnic antagonism, strengthen devaluation, fight corruption, address insecurity and ensure shared national prosperity” – a tall order but a welcome initiative, nevertheless.

Meanwhile, an individual MP has tabled a Bill aimed at modifying the country’s leadership structure by creating a powerful Prime Minister’s office alongside a ceremonial Presidential position, a concept not shared by President Kenyatta, or, not surprisingly, the Vice-President, an almost certain contender in the 2022 presidential elections.  Will it widen the doors for other contenders to launch a challenge?

In President Kenyatta’s State of the Union address in early May to a joint sitting of parliament he called on Kenyans “to unite in the wake of a divisive and fraught electioneering period last year”.  He stressed the need for restraint and he called on everyone “to join hands and fight against graft” by declaring “a relentless war on corruption” that he intends to lead personally.  Meanwhile, the opposition leader called for “an end to speculation about the 2022 elections”.

Numerous current cases of exposed corruption were mentioned – from the National Youth Service (NYS) scam involving the looting of around US $700-950 million to corrupt practices within the Kenya Pipeline Corporation and a maize import scandal involving middlemen accused of fraud over Uganda’s export of the commodity.  There have been some suspects arrested but it remains to be seen whether any of the stolen funds will be recovered.

Concerns were expressed about a proposed “Computer Misuse and Cybercrimes Bill” aimed at, among other things, “containing the phenomenon of fake news”.  Critics sense sinister motives “as Kenya already ranks poorly in terms of press freedom”.

There is a belief that immigration regulations are being flouted and all aliens have been directed to re-validate their work permits.  The Cabinet Secretary responsible has alleged that approximately 34,000 work permits have been issued whereas he believes there are around 200,000 aliens resident in the country.

On the economy, a projection of 5.5% growth this year appears realistic, inflation remains low at 3% - although this could be adversely affected by the damaging effects on agricultural output caused by recent floods – but the country’s growing public debt is a cause for concern.  The interest rate cap that has been imposed on bank borrowing, whilst not supported by either the President or Central Bank, may not be scrapped because many MPs wish it to continue, largely perhaps for their own personal benefit.

To conclude, whilst the country begins to emerge from the recent floods and count the cost of the damage, the mood amongst representatives from the private sector is generally positive, certainly more so than in the past two years.  The political situation at the moment is calmer and less disruptive and the nation as a whole is looking to better times ahead.

June 13th KENYA SOCIETY AGM & LUNCH BRIEFING BY EAA CEO

Good afternoon ladies and gentlemen, and many thanks to the Kenya Society Chairman, Patrick Orr, for inviting me to say a few words.

I head the Eastern Africa Association, an organisation that was established over 50 years ago to represent the interests of foreign investors in the region and we now have nearly 400 members from more than 25 different countries. Kenya is at the heart of our activities and we have a fully-staffed office in Nairobi, run by a very experienced Regional Representative.

Earlier in April this year, I was present, along with various EAA members, at a Kenya Business Forum, chaired by HE the President. He was very candid and, I have to say, very articulate & informed in his responses to the various questions put to him, quickly picking up the key implications for business, which he said he was determined to promote as the main engine of economic growth. His stated aim was for Kenya to improve its World Bank Doing Business Index ranking, from 80th to 60th in the world by next year, which would make it amongst the most business-friendly on the continent.

Later that day I attended a briefing HE gave at Chatham House. Again in a very thoughtful & articulate presentation, he explained the background to what has been a period of considerable political uncertainty in the country over the past two years & the eventual success of what he described as Kenya’s “maturing democracy.” To emphasise this, last month I attended a meeting in London where the guest speaker was the main opposition leader, Hon Raila Odinga, & he took the opportunity to explain to many from the Kenya Diaspora the circumstances which some might view as an abrupt about -turn in his position in his attempts to seek political reform. He said that Kenya “had been on a precipice” with “the potential for continued civil unrest & becoming an increasingly deeply divided nation”.

He had therefore decided, “for the sake of the country”, that he should meet the President “to move away from the tribal issues” that were “the main cause of the divisions.”  Hence the now famous public handshake, which, Mr Odinga explained, only he & the President knew was going to take place, none of their respective staff members were aware until the moment it happened.

At the beginning of this year, business confidence amongst EAA members was much higher than it has been for the past two years because of the ongoing political uncertainty, which even HE has acknowledged that “as leaders we failed in our duty to preserve the unity of the country”. However, I am pleased to say, following what appears to have been an historic reconciliation between the two political protagonists, hailed by the AU President as “unique among African leaders”, the business environment in the country has further improved and this has done wonders for Kenya’s future economic prospects, which we are now very optimistic about.

Let me briefly turn to the topic of Brexit, which I know is of concern to the Kenya government. I can advise that we at the EAA have been working with the newly-formed Institute of Free Trade on a paper, to be launched later this year, on post-Brexit UK-EAC trade. The stated aim of the UK government is to ensure that EAC countries, especially Kenya, which is by far the most important trading partner, “will not trade under less advantageous terms than they do now via the EU” and it is quite likely that “over time these will be eased”.

There has been one other important chain of events that I think is worth mentioning briefly in the context of Kenya’s future prospects and these are the enormous changes that are now taking place in its northern neighbour, Ethiopia. The country is the second most populous on the continent, with an economy that is already larger than Kenya’s & growing almost twice as fast annually. The new PM, in office for just over two months, is already taking steps to liberalise the business environment and this will, in time, present great trading opportunities for Kenyan companies as the ties between the two countries continue to strengthen and grow following a meeting between the two leaders recently.

To conclude, I believe Kenya can look forward to some very good economic times ahead & I am confident that, post-Brexit, UK–Kenya trade will continue to flourish.

June 21st/22nd

EUROPEAN BUSINESS COUNCIL FOR AFRICA AND THE MEDITERRANEAN (EBCAM)

19th General Assembly meeting

The 19th General Assembly meeting of EBCAM took place in Paris on June 21st/22nd, at which the Presidency passed from the UK to France.

Prior to the meeting, on June 8th, the Trade and Development Board of the UN Conference on Trade and Development (UNCTAD) formally approved the application of EBCAM for observer status, to allow representation and participation in Board meetings and in public inter-governmental meetings they organise. EBCAM will therefore be included on the Secretariat’s list to receive notifications concerning Board sessions and to receive copies of all general documents. This establishes a formal collaborative cooperation agreement between the two bodies on “matters of common concern”.

At the meeting itself, in addition to dealing with various administrative matters, including the potential recruitment of new members to the Council, there were briefings given on a post-Cotonou paper presented on behalf of EBCAM to the EU Commission and a preview of an Africa Development Bank/UNDP report, “African Economic Outlook 2018”, which will be formally launched and made public in July. The “special theme” of this issue was “Entrepreneurship and Industrialisation”, with a particular emphasis on job creation. The outlook highlights the fact that Africa’s economic performance “is reflecting the perils of the global economy”, with real GDP growth “slowing to 2.2% in 2016” due to the continued fall in commodity prices and weak global economic growth. It notes the “East Africa was the fastest growing region” on the continent and that this is “likely to accelerate in 2018”.

A frequently-postponed EU-Ethiopia Business Forum to be held in Brussels, due to political uncertainty in Ethiopia, now looks likely to take place in October this year, just prior to the EAA-led joint-EU investment mission to the country from October 24th-26th. Support from certain EBCAM partners for this EAA initiative looks promising, with particular interest from Norway, Sweden, the Netherlands, Switzerland and Greece being expressed at the meeting.

There was the usual “Tour de table” with various “experts” giving their views on the countries they cover, which included the UK CEO on Eastern Africa.

The next council meeting will take place in Brussels in November.

 

ARBITRATION HUB IN NAIROBI
In the margins of the Commonwealth Heads of Government meeting (CHOGM) in London in April, a Kenya Business Forum event was held with HE President Uhuru Kenyatta to which a number of EAA members were invited. The partner and Head of the Africa Group of the law firm Stephenson Harwood offered to assist the Kenya government to improve the arbitration process in the country and this was enthusiastically received by HE who instructed his Chief of Staff to arrange a meeting to discuss how this might be acted on.

A meeting duly took place on May 2nd in Nairobi and the framework to establish a world-class arbitration hub in Nairobi was discussed. The objective is to increase the attractiveness and ease of doing business in Kenya to foreign investors by putting in place an efficient and effective process for resolving commercial disputes. The proposal under review includes the creation of a special set of Court Rules to be followed when dealing with applications related to international arbitration, the designation of a group of specially-trained judges to handle arbitration issues to ensure consistency in decision-making and putting in place a radically-reformed system for hearing international arbitration matters, as recommended by an expert working group to be established.

The overall aim is for Kenya “to take its rightful place as an Arbitration Hub” as part of a programme to improve the country’s World Bank Doing Business ranking, from the current 80th to 60th by next year. Nairobi already has much of the necessary infrastructure to support these arbitration objectives so the proposal suggests the establishment of a modern and fully equipped hearing centre to become a hub to attract leading lawyers to network and exchange ideas. Hopefully, the suggestions put forward will be acted upon by the Kenya government. They demonstrate how a partnership between a prominent EAA member and the administration can be harnessed to improve the business environment in Kenya for both domestic and foreign investors.

MEETING WITH RAILA ODINGA IN THE UK
Having been invited by both the Cambridge and Oxford Unions to speak at separate events in the UK, the leader of the main Kenya opposition party, HE Rt. Hon Raila Amollo Odinga took the opportunity to address the Kenya Diaspora in the country “to clarify some of the issues regarding his reconciliation with President Uhuru Kenyatta” and the “Building Bridges Initiative” for a stronger democracy.

This follows what was a period of great political uncertainty in the wake of two presidential elections in 2017 and the potential afterwards for continued civil unrest in what had become a deeply divided country. Rt Hon Raila Odinga recognised that the country “was on the edge of a precipice” and explained that this was “potentially the end of Kenya as we know it”. He also acknowledged “the message was clearly coming through from both sides” and that he should therefore “meet the President for the sake of the country and move away from the tribal issues that were dividing it”.

The reconciliation process, he explained, “was simply just between the President himself and Mr Odinga” and their respective “people” knew nothing about it until “the public handshake”. He emphasised that this had “nothing to do with the 2022 election” and “was not about personalities”, it was simply “for future generations”, hence the “Building Bridges Initiative” across a river “infested with crocodiles”.

There are some 200,000 diaspora Kenyans living in the UK and, at the meeting, Hon Odinga received a “Great Leadership Award”, accompanied by a message from the AU President congratulating both him and President Kenyatta “for their unique achievement”, which could act as a “blueprint for other African leaders to swallow their pride for the sake of their nations”. Mr Odinga graciously accepted the award “on behalf of the people of Kenya”.

UK EAA CHAIRMAN AND CEO MEET BRITISH HEADS OF MISSION TO EAST AFRICA
There was a briefing meeting held in London on May 21st, addressed by four British Heads of Mission to East Africa, at which it was noted that “there had been a boost to business confidence in Kenya following a difficult political period last year”, which was recognised as being “vitally important not just for the country itself but also for the region as a whole “because of Kenya’s geographical and economic importance”. There were some concerns expressed about the political and economic direction of travel in Tanzania, which have also been publicly noted by other diplomatic missions in the country, and also about the stalled EU Economic Partnership Agreement negotiations, which will potentially impact negatively on the transition to post-Brexit trade between the UK and the EAC.

The unstable political situations in neighbouring South Sudan, Somalia and the DRC and also in Burundi were raised as concerns for the region.

The EAA had earlier hosted a members’ lunch reception for the British High Commissioner to Kenya.

 

APRIL 3RD – 5TH

The Regional Representative visited Kampala, Uganda, and whilst there, met the Deputy British High Commissioner, Representatives from the European Union, the Deputy Counsellor for Political and Economic Affairs at the US embassy, the Executive Director of the Uganda Investment Authority (UIA), the World Bank acting Country Manager/Senior Economist and the German Ambassador.

An EAA members’ breakfast meeting was held after these to brief them on the discussions held and on regional issues of interest and also to obtain feedback on their views on the current business environment in the country.

Concerns were expressed generally about the EA Community (EAC) “not working as it should” as a Common Market to increase cross-border trade and also about the current continuing very unstable situation in South Sudan, once Uganda’s largest export market. Much depends on President Museveni’s efforts to help to broker some form of peace agreement, together with other leaders from neighbouring countries and the international community.

On the domestic front, the mood amongst members of the private sector was “generally more positive” in outlook compared with the past two years, with economic growth of 5.5% forecast for 2018 and a “clearer picture emerging about future oil production and refinery” in the country. Some US$ 15 billion is projected to be expended on the infrastructure required to develop the oil sector, with “around 4 years” perhaps the optimistic timeline for this to be completed, including a heated pipeline through Tanzania through to Tanga.

There are some successful business sectors identified as boosting economic growth, notably financial and professional services, agriculture in general and property development. However, tax collections remain low, from a very narrow base still, and regulations need to be simplified. It was noted that the UIA had established a “One Stop Centre” to promote inward investment and to provide practical help.

APRIL 5TH/6TH

The Regional Representative visited Kigali, Rwanda and, whilst there, met the Deputy UK High Commissioner, Deputy German Chief of Mission, Political Officer at the US Embassy, acting Country Manager/Senior Economist at the World Bank, a representative of the Rwanda Development Board and the CEO of the Private Sector Federation. An EAA members’ meeting was also held.

As a visitor to Kigali, especially after the rather chaotic traffic congestion in Kampala, one cannot fail to be impressed by the sense of order and discipline on the roads in the capital, which means a good number of visits/meetings can be held in one day. Regional issues for this landlocked country are always of special interest to EAA members, as the economic mood domestically remains broadly positive, with a government very keen to encourage private sector investment.

The Continental Free Trade Area (CFTA) treaty was signed by over 40 African countries recently in Kigali under the AU Chairmanship of Rwanda’s President Kagame, with the others (notably South Africa and Nigeria, the two largest economies in sub-Sahara Africa) signing “Declarations of Intent”. The move to eliminate many tariffs and remove non-tariff barriers, notably long delays at borders, across the continent, is to be welcomed although many challenges regarding implementation lie ahead.

APRIL 11TH

The EAA hosted a farewell lunch in London for the outgoing Kenya High Commissioner, HE Lazarus Amayo, who has been promoted to become Kenya’s Ambassador to the UN in New York. The guests included the High Commissioners to the UK from Uganda and Tanzania, the Ethiopian Ambassador, a representative from the UK FCO and the recently-formed Institute for Free Trade, as well as the EAA Chairman and various invited members.

The EAA had established a very strong relationship with HE, who has provided much appreciated support for the Association’s activities during his time in the UK. Hopefully we will be able to build on these with his successor.

APRIL 16TH

The EAA Chairman and CEO attended a private meeting organised on our behalf by the Tanzania High Commissioner to the UK, with the Vice President of Tanzania, who was in the UK to attend the Commonwealth Heads of Government meeting (CHOGM).

Concerns about the current business environment in Tanzania from the private sector were raised and discussed.

APRIL 17TH

The EAA Chairman, CEO and various selected EAA members attended a Kenya Business Forum chaired by HE President Uhuru Kenyatta. At this private gathering, HE provided a very articulate briefing on the current business environment in the country following a period of political uncertainty, which he explained was now over and the government was in a position to focus on development issues, including a number of important infrastructure projects. These included new roads, railways, greater access to electricity, improved communications, healthcare and education reforms and efforts to increase the manufacturing contribution to GDP.

He advised that Kenya had improved in the latest World Bank “Doing Business Report” from 130th to 80th and “the target was to reach 60th by next year and to become the second best in Africa”. In his answers to various questions, many of which came from the EAA representatives, he gave very clear answers and was able to view things very much from a business viewpoint, in particular issues in arbitration under the judicial process, as some important legal reforms had been implemented and many processes had been simplified.

The recently-signed Continental Free Trade Area (CFTA) treaty had seen Kenya, and the President, playing a leading role, being amongst the first to sign. He painted a very positive picture of a stable country with his government keen to attract foreign direct investment in a number of sectors where he believed they could generate positive returns. Having previously visited the London Stock Exchange earlier in the day, he saw particular opportunities in financial services and for Kenya to be seen as a regional hub with well-established sea and air links. He also commented on the current security situation in the country, explaining that the government was working hard with international partners to tackle the threat of terrorism, “not just for Kenya, but the world” and was pleased to advise that tourist numbers “had stood up well and were on the rise”. It was overall a very informative and useful business meeting and one which the EAA will seek to build on in the future.

CHATHAM HOUSE

Later in the afternoon of April 17th, HE President Kenyatta was the guest speaker at Chatham House, where he gave a very eloquent and thoughtful speech to a packed house, that included many representatives from the media.

He focused mainly on the values of democracy, explaining that in Kenya, after two recent elections, this was “maturing”. He explained that his now famous and well-publicised handshake with his main political opponent, Raila Odinga, “was aimed at opening up a new front in Kenya” and that “he had reached out with the sole aim of uniting the country” which had “become divided along party and tribal lines”.

He explained further that “we cannot achieve the social and economic needs of our people in an environment of constant political bickering” and that “political leaders must rise above the noise and focus on an agenda to deliver development and a conducive environment for business”. At the beginning of the Commonwealth Heads of Government Meeting (CHOGM) in London, this was an eloquently-delivered message of hope and aspiration which will have gone down well with his fellow Heads of State who will be attending, as well as the wider international community.

 

The Chief Executive visited Tanzania, Ethiopia and Kenya recently, all of which are facing uncertain political times.

TANZANIA
He met the British High Commissioner in London prior to his departure and then the EU Head of Delegation, Indian High Commissioner, South African deputy High Commissioner, IMF Country Manager, Minister for Industry, Trade & Investment and the Executive Director of the Tanzania Investment Centre (TIC).

The diplomatic community are gravely concerned about the deteriorating political environment, issuing a public notice citing “politically-related violence and intimidation of the opposition in the country”. The opposition leader suffered an armed attack outside his home and is currently recovering in Brussels “with 18 military bullets in his body”.

The country is out of step with other EAC members over the EU Economic Partnership Agreement (EPA), which effectively means this will not be signed any time soon and Kenya, as the only non-LDC in the Community, will continue to receive a special extension to the existing tariff-free quotes.

The private sector is equally concerned about the deteriorating business environment, with harassment by the Revenue Authority and Immigration Department frequently cited. The IMF has reported that “the macroeconomic position in the country is generally stable and broadly in line with targets” but it cites “growing investor concerns over government policies, with some data pointing to weakening economic activity”. It also points out “a challenging business environment and a negative outlook due to an unpredictable policy environment” a view shared by most businesses operating in the country, with many either closing down or downsizing their activities. Tanzania has unfortunately become an increasingly difficult country for foreign investors and appears set to follow a socialist path, attracting a great deal of negative international media attention.

ETHIOPIA
Meetings were held with the British Ambassador, EU Head of Political and Economic Cooperation, World Bank senior economist, the Chairman of the EU-Ethiopian Business Group and the deputy-Commissioner of the Ethiopian Investment Commission (EIC). Further steps in the planning process for a proposed investment mission to the country from October 24th – 28th were also made although this very much depends on how the political situation in the country evolves.

The decision by the Prime Minister to resign had been expected but the timing of it came as something of a surprise. The immediate declaring of another State of Emergency meant that the country was once again facing uncertain political times and an announcement as a replacement was anticipated fairly soon afterwards to calm down the situation, with reports of continued civil unrest in parts of the country. The fact that this did not materialise, and that there was a further meeting of the ruling EPRDF coalition a week later, again with no definitive result, would suggest an internal power struggle is taking place between the different ethnic groups. The country is clearly at a political crossroads as many diplomats believe the State of Emergency declaration, with all its implications, was not really warranted. In many ways it is essentially counter-productive to the government’s stated goals of political reform and more inclusive governance and could further embolden those who believe violence is the best way to achieve fundamental changes to the democratic system. It also negates the national and international goodwill that was generated by the government’s unprecedented release of political prisoners, although they are not recognised as such, and some high profile opposition people who had been detained. There is now serious risk that the impressive achievements of the past could be negated by serious solid upheaval.

Meanwhile, the economy continues to grow impressively, expected to reach around 8% following a recovery in the agricultural sector after last year’s drought. Despite an official devaluation of 15% in October last year, the currency is still thought to seriously over-valued and a severe shortage of foreign exchange continues to be perhaps the main constraint for businesses operating in the country. Assuming it goes ahead, anyone interested in the Investment Mission the EAA is planning to organise and lead to the country from October 24th to 28th should contact either the Association’s UK or Nairobi office.

KENYA
Various meetings were held with members of the diplomatic community by the Regional Representative based in Nairobi prior to the CEO’s visit and the briefing provided to EAA members at a breakfast meeting reflected the uncertain political position the country was facing, with a rather serious stand-off between the President and main opposition leader, Mr Raila Odinga, the main focus of this. The government’s “nuzzling of the media and intimidation of the judiciary” attracted international condemnation, with the prospect of a seriously divided country continuing for some time.

However, just after his departure from the country, possibly due in part to pressure from the US (Secretary of State Rex Tillerson had just visited), reports and pictures of the two adversaries emerged shaking hands and saying they had held secret talks aimed at “ending the dangerous divisions to heal the nation”. Raila’s co-leaders were taken by surprise as they had been unaware such meetings had been taking place (as was the vice-President, apparently) but the agreement effectively sounds the death knell for the NASA opposition coalition of four parties. Hopefully the government can now look ahead and focus on the “Big 4” policies the President has announced, namely boosting manufacturing, enhancing food security, providing universal healthcare and making available more decent affordable housing, all by 2022. Little detail as to how these laudable aims will be funded has been provided. Even before this agreement was announced, the private sector outlook for 2018 is more positive than it was for the previous two years and the macroeconomic situation – apart from a deteriorating debt position – is generally “stable”. A US$ 2 billion bond has been raised on the London market, the IMF have just extended a US$ 1.5 billion standby loan and remittance from the Kenya Diaspora have reached record levels, all signs of growing confidence in the country and its future prospects.

 

PAST EVENTS

April 25th
EAA members’ breakfast meeting in Nairobi

The Regional Representative presented his usual political and economic briefing on Kenya, noting in particular that the climate of uncertainty that had gripped the country following two hotly-disputed Presidential elections during the second half of 2017 had eased very significantly after the two main protagonists had agreed “to bury the hatchet” with a widely publicised handshake and “to seek to heal the divided nation”.

This caught other opposition leaders off guard and surprised many people. However, events and attitudes since are now being shaped in a much more positive way, especially as President Kenyatta emphasised the theme of reconciliation in an address he gave at Chatham House in London where he was attending the Commonwealth Heads of Government Meeting (CHOGM). The message of hope and aspiration he presented has certainly gone down well with his fellow Heads of State, as well as the wider community.

The government will now focus on what it has described as its “Big4” policy objectives – universal health coverage, affordable housing, improvement in food security and efforts to increase the contribution from the manufacturing sector. The private sector was already more positive about business prospects for 2018 than it has been for the past two years but these recent political developments provide grounds for greater optimism, with GDP growth of 5.5% now being projected for this calendar year.

Kenya is at the geographical and economic heart of the East African region which recorded the best overall economic growth in 2017 across the continent. More recent surveys point to a further pick-up in confidence and the country’s resilient and broadly-based private sector is now back in business, looking forward and determined to make up lost ground.

There were also presentations at the meeting on topical legal matters, on new IT developments in the country and an analysis of the findings from a survey of views about the recent reconciliation between President Kenyatta and main opposition leader, Raila Odinga, following the now-famous (and very unexpected) “handshake”.

Prior to the meeting, the Regional Representative and members of the Local Advisory Committee held discussions with representatives from the donor and diplomatic communities, including the IMF, Heads of Mission from the US, EU, Netherlands, Italy, Canada and Turkey, Deputy High Commissioner from the UK as well as the CEO of DEG/KfW. These open and confidential exchanges provide much useful information for inclusion in the EAA newsletter report on Kenya and the region.

They also provide an opportunity to convey private sector views on the Kenya economy and business environment, as well as on regional issues.

April 26th
Meeting with the Founder and President of the Institute for Free Trade in London, Dan Hannan MEP. The Institute (there is some dispute as to whether the organisation qualifies to be called this) seeks “to make the intellectual and moral case for global free trade” and sees Britain’s withdrawal from the European Union (Brexit) as “a unique opportunity to revitalise the world trading system”.

It is managed by an Executive Board, and has an International Advisory Board, which includes former heads of government, trade ministers and business leaders.

The specific purpose of the meeting with Mr Hannan was to discuss the content and launch of a paper the Institute is currently preparing on post-Brexit UK-EA Community trade. The EAA is arranging to host this launch at some stage in London during the UK summer.

The European Union has been negotiating an “Economic Partnership Agreement” (EPA) with the EAC for over ten years but this has not been successfully concluded, due largely to vested interests getting in the way of an agreement. As the only non-Least Developed Country (LDC) in the EAC, Kenya has the most to lose potentially by no agreement being reached so a post-Brexit bilateral deal with the UK appears the most likely eventual outcome.

April 27th
Meeting between the UK EAA CEO and the Ethiopian Ambassador to the UK to discuss a proposed joint EU Investment Mission to Ethiopia in October.

The provisional programme for this mission is as follows:

DATES:
24/10/18 – 26/10/18
27/10/18 – 28/10/18 (OPTIONAL)

PROVISIONAL PROGRAMME:

WEDNESDAY 24/10

07.00-09.00
EAA members breakfast regional meeting in Nairobi (optional).

18.30
Evening introduction reception at Sapphire Addis Hotel

THURSDAY 25/10

9.00
Introductions and welcome
EAA CEO/EU Head of Delegation/Norwegian Ambassador

9.30
Political overview/QandA
British Ambassador

10.00
Economic Overview/QandA
World Bank Senior Economist

10.30
Tea/Coffee break

11.00
Doing Business in Ethiopia presentation/QandA
Zemedeneh Negatu
Fairfax Africa Fund

11.30
EIC presentation on business/investment opportunities/QandA
Deputy Commissioner Abebe Abebayehu Chekol & EIC staff

12.30
Ministerial overview
HE Dr Akilulu Hailemichael,
State Minister for Business Diplomacy and Trade

13.00
Networking lunch break, opportunity to engage with EIC staff

14.30
B2B meetings, market research, company visits organised by EIC

18.30
Evening cocktail reception hosted by EU Head of Delegation

21.00
Invitees from government, donor/diplomatic community and local business people

SOCIAL PROGRAMME:

FRIDAY 26/10

OPTIONS:
Trip round city of Addis Ababa/Lucy museum
Visit to Heineken brewery
Visit to Rift Valley vineyard

19.30
Cultural evening at Yod Abyssinia restaurant

SATURDAY 27/10
Visit to city of Gonder (one hour flight)

SUNDAY 28/10
Tourist rip round town (castle etc)
Hotel opening evening function
Dinner/reception hosted by Mayor of Gonder

EVENING 28/10
Return home

May 9th
UK Members’ meeting in London with guest speaker Jeremy Lefroy MP, UK Trade Envoy to Ethiopia and All Party Parliamentary Group Chairman for Kenya and Tanzania.

In a thoughtful presentation, Mr Lefroy mainly focused on the potential business opportunities in Ethiopia, particularly for British companies. The main sectors he identified included renewable energy – geothermal, solar, wind and hydro – infrastructure, especially relating to the new 4-runway airport that is being built as Ethiopia seeks to become a freight hub for Africa, agro- processing, with a particular emphasis on improving productivity through research, industrialisation, pointing out the government’s ambitious development of various Industrial Parks and the low cost of labour and power (although the lack of forex was noted as a major restraint), financial services, although currently restricted for foreign investors was identified as a key driver for future economic growth and telecommunications, also currently severely restricted for foreign investors, because of security concerns and still being a cash cow for the government.

Emphasis was placed on investment in the country, rather than simply trading, and also the importance of taking a long term view, particularly regarding creating employment opportunities for the growing population, estimated at 2 million per year. The strengthening relationship with Kenya was also noted as the two countries seek improve diplomatic and trade links.

Having lived and worked in Tanzania for eleven years there were serious concerns expressed about the closing down of political space in the country although the efforts to try to curb the rampant corruption there and improve administrative effectiveness were recognised. However, there were threats to the country’s future economic growth if the political situation continues to deteriorate, a view that the EAA has also fully recognised.

Comments were also made about the “catastrophe” that has unfolded in Burundi since 2015 and the apparent lack of any potential solution, which has meant the international community has effectively given up on a country that is now probably the poorest in the world.

UK Chairman and CEO meet the UK Minister of State for Africa, Hon Harriet Baldwin MP, to discuss the Association’s activities and services.

In addition to explaining the background to the EAA, what the Association does and the services provided to members, there were discussions about the various countries in the East African region.

Following the recent reconciliation between President Kenyatta and his main opposition rival, and some very positive comments made about a “maturing democracy” in Kenya during the recent Commonwealth Heads of government meeting in London by the President, relations between the UK and Kenya have become stronger and there was now considerable optimism expressed about the future and about an improving business environment. However, concerns were again expressed about the deteriorating political situation in Tanzania and the potential impact this could have on future economic growth. Of the neighbouring countries, South Sudan’s continued political impasse shows no sign of a solution any time soon, there was only limited progress being made in Somalia, which remains very unstable and insecure for businesses, despite considerable continued international efforts and Burundi is facing a terribly uncertain future given the current political situation there. Eritrea remains a pretty oppressive country and there is only very limited engagement by the British government although it was noted that efforts being made by the new Ethiopian Prime Minister to try to resolve long-standing border issues were very welcome.

 

FUTURE MEMBERS MEETINGS’ 2018

KENYA - NAIROBI
Wednesday (Breakfast) 31st January
Wednesday (Breakfast) 7th March
Wednesday (Breakfast) 25th April
Wednesday (Breakfast) 6th June
Wednesday (Breakfast) 25th July
Wednesday (Breakfast) 5th September
Wednesday (Breakfast) 24th October (Regional Meeting)
Wednesday (Breakfast) 5th December

UGANDA - KAMPALA
Thursday (Breakfast) 5th April
Wednesday (Breakfast) 17th October

TANZANIA - DAR-ES-SALAAM
Tuesday (Coctails) 27th February
Thursday (Coctails) 20th September

RWANDA - KIGALI
Friday (Lunch) 6th April
Friday (Lunch) 19th October

ETHIOPIA - ADDIS ABABA
Thursday - Sunday (Investment Mission) 25th - 28th October

UK - LONDON - AGM
Tuesday (Lunch) 12th June