The direct attack on the Kenyatta family-owned NCBA bank has investors fleeing the Kenyan market.
The Kenya Revenue Authority (KRA) is demanding Sh900 million from the lender in a tax exemption issued during the 2019 CBA-NIC merger.
But Lady Justice Mugure Thande handed the lender a reprieve after she stopped the taxman from executing a directive issued by Treasury CS Njuguna Ndungu.
“I am satisfied that the application has met the test for the grant of conservatory orders at this ex parte stage. Accordingly, Prayer 2 of the application is hereby granted,” the order reads in part.
The attack on NCBA many say, is an attack on business investments at a time when the economy desperately needs and requires investors from both locals and foreigners.
Kenya cannot woo investors only to find a retrogressive and vindictive regime akin to Idi Amin which led to the capital flight in Uganda and paralyzed the economy.
In 1972, Amin drove out Asians but it was really the Africans who were the target of the campaign dubbed “War of Economic Independence” but later renamed the “Economic War”.
5,655 farms, ranches, and estates had been abandoned by the departed Asian community by the end of 1972. The Departed Asians Property Custodial Board took custody of the abandoned properties and assigned African tenants to homes and commercial spaces.
Three days ago, CMC Motors Group announced the sacking of 169 employees after three vehicle brands; Ford, Suzuki, and Mazda, terminated their distribution contracts with the firm.
The global franchises cited a slowdown in the passenger vehicle segment.
“As a result of the termination of these distributorship contracts, CMC Group is re-organizing its business to place great focus on the agricultural sector. This will result in a reduction in the number of roles and the resources required to execute the remaining functions. This means that it will become necessary to declare 169 employees redundant,” said CMC.
Following the termination of the distributorship contracts with the three-vehicle brands, CMC will no longer represent them in Kenya.
In January, British currency printing firm De La Rue announced its exit from the Kenyan market due to economic climate. Then, it said it was exploring business opportunities with a view of restarting production “if the economic climate permits”.
The firm was just like NCBA, involved in a tussle with KRA over the payment of historical taxes due for the years 2013–17.
Earlier this month, reports showed that investors were unwilling to lend the government billions of shillings.
Only one in four Treasury bonds launched this year have fulfilled their target, with the most recent offering raising a pitiful Sh3.57 billion against a target of Sh20 billion, showing a performance of 17.85 percent.
Due to the cash shortage, investors are predicting higher rates, which is driving many to postpone investing in longer-term securities like bonds.
Instead, as they adopt a wait-and-see approach regarding the direction of returns in the bond market, they have chosen to place their money in the shorter 91-day Treasury bill, which has been oversubscribed by as much as 643%.
In March, for example, figures at the Nairobi Securities Exchange (NSE) showed that the Kenyan stock market foreign investment had plummeted.
According to the figures, Kenya experienced a six-year low of 30.1% in foreign investment.
But this was not the first time foreign investments dropped. In April 2022, foreign investors withdrew $14.3 million in search of safer havens.
Still in 2022, foreign investors withdrew $170 million from the Kenyan stock market, citing rising international concerns. This made the decline in the share prices of NSE-listed companies, particularly commercial banks, worse.
Kenyan investors lost $6.37 billion between January and September 2022 because the share prices of companies listed on the NSE fell by 28%.
Experts reckon that the review of the NCBA tax waiver sets a dangerous precedence.
“For example, tech companies like Amazon just got an exemption last month lifting the 30% local ownership caveat to set up in Kenya. What happens in 10 years when the next government sets in, revokes that exemption and backdated those taxes? It’s a very bad precedent for investors and for the country,” said Soko Analyst.
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