News / Africa

London, New York, Hong Kong, and... Nairobi?

Currency dealer counts Kenya shillings at a money exchange counter, Nairobi, Oct. 23, 2008.
Currency dealer counts Kenya shillings at a money exchange counter, Nairobi, Oct. 23, 2008.
Reuters
When Kenyan infrastructure firm TransCentury wanted to issue a $75 million corporate bond, it was forced to look to the Indian Ocean island of Mauritius, Africa's leading offshore financial center some 3,000 km (1,900 miles) away.
 
Kenya is already a growing gateway for foreign investment into East Africa and now has ambitions to become an international banking and financial hub in its own right.
 
But to have any hope of coming close to rivaling the continent's pre-eminent financial pull of Johannesburg, or even Mauritius, backers of the proposed Nairobi International Financial Center must overcome multiple hurdles.
 
These range from the lack of an effective legal system, deficient company and land registries, and the absence of working double-taxation arrangements with neighboring states.
 
Taking TransCentury's bond dilemma as an example, Oliver Fowler, a partner at Nairobi law firm Kaplan and Stratton, sees Kenya's aim to raise its financial profile as work in progress.
 
"Why would you go to Mauritius when you are a Kenyan company to list a debt security? You do it because they are efficient and we are not," Fowler told Reuters.
 
Kenya's judiciary has undergone reforms since 2011, and progress in this area was credited by diplomats with helping to deliver a smooth and peaceful outcome to the hotly-contested presidential vote won by Uhuru Kenyatta in March this year.
 
But decades of political patronage and graft in Kenya, characterized by the "my turn to eat" political culture, means the country's legal system will have to work hard to gain the credibility needed to attract more investors.
 
Plans are underway to improve the efficiency of the Kenyan legal system for business by creating arbitration panels where parties can resolve commercial disputes quickly. Kenyan courts are still notorious for long delays despite the reforms.
 
"We are going to work with the City of London to ensure that we address any gaps that we have in our legal system to bring it in line with international best practice," said Geoffrey Mwau, economic secretary at the ministry of finance.
 
One of Mauritius' biggest selling points as a business center is that commercial parties in dispute can appeal rulings made locally to Britain's Privy Council, legal experts said.
 
According to Transparency International's Corruption Perception Index for 2012, Mauritius has one of the best African rankings at 43, while South Africa was 69 and Kenya lagged at 139, tied with Nigeria, Africa's top oil producer which struggles with an image of graft-plagued government.
 
Razia Khan, head of research for Africa at Standard Chartered in London, said Kenya's financial sector status would grow, but "to pitch itself against the international competition at the outset may be difficult."
 
Luring foreign banks
 
Undaunted, proponents of Nairobi as a financial hub point to the arrival of major international banks, including South Africa's FirstRand, Bank of China, and HSBC Holdings, which have been licensed to open representative offices in the Kenyan capital.
 
Kenya has converted its bourse into a securities exchange, and plans to set up a commodities exchange.
 
To compete for listings that typically head to Johannesburg or London, reforms are needed to make it easier to list locally.
 
Another big drawback is Kenya's failure to put into effect double-taxation treaties — designed to prevent firms from paying the same tax in two countries — signed with Uganda and Tanzania.
 
"There is no way that a company here is going to use Kenya as a base even for its east African operation if there is no double taxation relief across the East African Community, let alone anywhere else," Fowler said.
 
The community bringing together Kenya, Uganda, Tanzania, Rwanda and Burundi is working towards a single currency to increase trade after forming a common market in July 2010. This is an opportunity that Kenya can take advantage of.
 
For its part, Mauritius has already signed double-taxation treaties with nearly all African countries to raise its profile as a finance channel for investment in Africa.
 
Kenya's private equity house Catalyst Principal Partners, which has raised $125 million for investment across the region, chose to be registered in Mauritius.
 
"Even investing cross-border Kenya to Uganda, it is more efficient to invest in Mauritius and then come back from Mauritius to Uganda," said Yida Kemoli, head of strategy and finance at TransCentury.
 
Business brothers
 
Businessmen complain that it takes 6 to 8 weeks to set up a company in Nairobi. A global survey released this year by the World Bank on the ease of registering a company showed Kenya was ranked 126 out of 185 countries, with Mauritius at 14.
 
Kenyan bank executives ranging from multinationals such as Barclays to home-grown lenders like Equity, say registering collateral takes far too long because the country's land ministry relies mostly on manual records.
 
The ministry says it plans to have digitalized all its records by mid-2014, which will help cut the scope for backhanders at a land registry widely criticized for corruption.
 
Banks also worry about costs incurred to install backup generators to cope with unreliable power supply in Kenya.
 
In addition to these drawbacks, backers of Nairobi's ambitions as a financial hub have also had to parry criticism by financial transparency campaigners that Kenya may be looking to turn itself into a new tax haven.
 
Mauritius has faced similar accusations, but rejects allegations that it is a major conduit for illicit transfers, for example between India and Africa.
 
"An international financial center is not a tax haven. Is the UK a tax haven? ... They don't know what they are saying. The most important thing is to reduce the cost of doing business," the Kenyan finance ministry's Mwau said.

You May Like

10 Migrants Drown, While 4,100 Rescued off Libyan Coast

All of those rescued are being ferried to Italian ports, with some arriving on Italy's southernmost island, Lampedusa, and others taken to Sicily and Calabria More

HRW: Saudi-led Airstrikes Use Banned Cluster Bombs

Human Rights Watch says photographs, video and other evidence have emerged indicating cluster munitions have been used in 'recent weeks' in airstrikes in Houthi stronghold in northern Yemen More

Hopes Fade of Finding Survivors of Nepal Earthquake

US military aircraft, heavy equipment and air traffic controllers arrive in Nepal to help manage growing piles of relief supplies clogging Kathmandu airport More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
From Aleppo To Berlin: Band of Brothers Escapes Civil Wari
X
Henry Ridgwell
May 03, 2015 1:12 AM
Hundreds of thousands of Syrians have fled the civil war in their country and journeyed to Europe by boat across the Mediterranean. It is a terrifying ordeal with dangers at every turn. A group of Syrian brothers and their friends describe their ordeal as they try to reach Germany. VOA's Henry Ridgwell reports. ...
Video

Video From Aleppo To Berlin: Band of Brothers Escapes Civil War

Hundreds of thousands of Syrians have fled the civil war in their country and journeyed to Europe by boat across the Mediterranean. It is a terrifying ordeal with dangers at every turn. A group of Syrian brothers and their friends describe their ordeal as they try to reach Germany. VOA's Henry Ridgwell reports. ...
Video

Video Rural Nepal Suffers Brunt of Quake’s Devastation

Nepal is still coming to grips with the full extent of the devastation and misery caused by last Saturday’s magnitude 7.8 earthquake. Some of the hardest-hit communities have been cut off by landslides making it difficult to assess the precise toll. A VOA News crew has been among the first to reach a few of the smaller, remote communities. Correspondent Steve Herman reports from the Sindhupolchak district, east of Kathmandu, which suffered greatly in Nepal’s worst quake in more than 80 years.
Video

Video Black Families Use Baltimore Case to Revisit 'Police Talk'

Following Freddie Gray’s death in police custody this month, VOA interviewed black families throughout the eastern U.S. city of Baltimore about how they discuss the case. Over and over, parents pointed to a crucial talk they say every black mother or father has with their children. Victoria Macchi has more on how this conversation is passed down through generations.
Video

Video Middle East Atheist Channel Defies Taboo

In Egypt, a deeply religious country in a deeply religious region, atheism is not only taboo, it is dangerous. It is sometimes even criminal to publicly declare nonbelief. Despite the danger, one group of activists is pushing back with a new online channel that defends the right not to believe. VOA’s Heather Murdock reports.
Video

Video Nepal Quake Survivors Tell Their Stories

Against all hope, rescuers have found a few more survivors of the devastating earthquake that hit Nepal last Saturday. Mountain climbers and hikers trapped in remote places also have been airlifted to safety, and aid is finally reaching people in the areas closest to the quake's epicenter. Survivors and rescuers are now recounting their experience. Zlatica Hoke has this story.
Video

Video Lessons for Germany, Europe Remain on Anniversary of WWII's End

The 70th anniversary of the end of World War II will be marked May 8-9 in all European countries except Germany, which lost the war. How is the war viewed there, and what impact is it still having? From Berlin, VOA’s Al Pessin reports.
Video

Video 'Woman in Gold' Uses Artwork as Symbol of Cultural Identity

Simon Curtis’ legal drama, "Woman in Gold," is based on the true story of an American Jewish refugee from Austria who fights to reclaim a famous Gustav Klimt painting stolen from her family by the Nazis during World War II. It's a haunting film that speaks to the hearts of millions who have sought to reclaim their past, stripped from them 70 years ago. VOA's Penelope Poulou reports.
Video

Video Nepal Town Destroyed By Quake Counts Itself Lucky

Foreign search teams on Wednesday began reaching some of the communities outside Kathmandu that suffered worse damage than Nepal’s capital from last Saturday’s massive earthquake. VOA Correspondent Steve Herman is in Sankhu - a town of about 10,000 people - where there is relief the death toll is not higher despite widespread destruction.
Video

Video First Surgical Glue Approved for Use Inside Body

While medical adhesives are becoming more common, none had been approved for use inside the body until now. Earlier this year, the first ever biodegradable surgical glue won that approval from the U.S. Food and Drug Administration. VOA’s Rosanne Skirble reports on the innovation and its journey from academia to market.
Video

Video Somali Hotel Chain Owner Strives to Make a Difference

Many in the Somali diaspora are returning home to make a new life despite the continuing risks. Since 2011 when a military campaign against Al-Shabab militants began making progress, members of the diaspora community have come back to open hospitals, schools, hotels, restaurants and other businesses. Abdulaziz Billow in Mogadishu profiles the owner of a chain of hotels and restaurants who is helping to bring change to the once-deadly Somali capital.
Video

Video Study: One in Six Species Threatened with Extinction

Climate change is transforming the planet. Unless steps are taken to reduce global warming, scientists predict rising seas, stronger and more frequent storms, drought, fire and floods. As VOA’s Rosanne Skirble reports, a new study on species extinction underscores the need to take action to avoid the most catastrophic effects of rising temperatures.
Video

Video Taviani Brothers' 'Wondrous Boccaccio' Offers Tales of Love, Humor

The Italian duo of Paolo and Vittorio Taviani have been making movies for half a century: "The Night of the Shooting Stars," "Padre Padrone," "Good Morning, Babylon." Now in their 80s, the brothers have turned to one of the treasures of Italian culture for their latest film. VOA’s Carolyn Weaver reports.
Video

Video Child Migrants Cross Mediterranean Alone, Face Unknown Future

Among the thousands of migrants making the deadly journey by boat to Europe, there are unaccompanied girls and boys. Some have been sent by relatives to earn money; others are orphaned or fleeing war. From a shelter for young migrants in the Sicilian town of Caltagirone, VOA's Henry Ridgwell reports.
Video

Video Baltimore Riots Shed Light on City’s Troubled Past

National Guard troops took up positions Tuesday in Baltimore, Maryland, as authorities tried to restore order after rioting broke out a day earlier. It followed Monday's funeral of a 25-year-old black man who died while in police custody earlier this month. VOA's Chris Simkins reports.
Video

Video Challenges Await Aid Organizations on the Ground in Nepal

A major earthquake rocked Nepal on Saturday and killed thousands, injured thousands more and sent countless Nepalese outside to live in makeshift tent villages. The challenges to Nepal are enormous, with some reconstruction estimates at around $5 billion. Aid workers from around the world face challenges getting into Nepal, which likely makes for a difficult recovery. Arash Arabasadi has the story from Washington.

Poll: Baltimore Police Charged

Poll archive

VOA Blogs