Emerging Markets : Kenya Calling






Kenya’s mobile communications industry flourishes following IPO of Safaricom.

A June IPO by Kenyan mobile operator Safaricom was oversubscribed by 532%, according to Kenya’s finance minister Amos Kimunya. The government exercised a provision allowing it to reduce the amount of shares available to foreigners when demand by local takers was oversubscribed by more than 200%. Foreign investors got 15% of shares sold, instead of 35%, with the remainder going to East African investors. The public now holds 25% of Safaricom ordinary shares, the government holds 35%, and Vodafone Kenya 40%.

Despite appetite for telephony shares, a report by GSMA, the global mobile telephony association, says high tax rates inhibit the sector’s expansion prospects in Africa. While the sector will generate $71 billion in tax revenues in sub-Saharan Africa in 2000-2012, GSMA estimates this would be higher if non-VAT taxes were removed. Reduced revenues would be offset by higher corporate tax receipts as subscriptions grow. Uganda has the highest rates, charging 30% in combined excise duty and VAT on mobile service, followed by Rwanda’s 28% (if a proposed 10% excise tax is approved) and Tanzania’s 27%.

Standard & Poor’s affirmed Ghana’s B+ long-term and B short-term sovereign ratings. S&P; says this reflects evidence that Ghana will benefit from offshore oil production, offsetting weakness in fiscal and external performance. Ghana’s fiscal deficit rose from 1% in 2005 to 8% in 2007. The agency predicts the deficit will be 7% in 2008. The public sector debt ratio also rose from 42% of GDP in 2006 to 52% last year. Concessional borrowing accounts for most deficit financing.

In South Africa, finance minister Trevor Manuel remains optimistic that his country’s economy will grow by 4.1% in 2008, despite a crippling energy crisis that reduced mining output earlier this year. Economic growth slowed to 2.1% year-on-year during the first quarter, after averaging 5.1% over the past four years. Analysts are less cheerful and contend that the power gap, mining output decline and high inflation, which Manuel expects to hit 9% by year-end, will further dampen growth.


Antonio Guerrero