Kenya: President Kenyatta to impose capital-gains and windfall tax legislation within months

Kenyan President, Uhuru Kenyatta, stated in a 2 August interview that Kenya will impose capital-gains and windfall taxes on oil, gas and mining companies within months to ensure the East African nation maximizes benefits from its mineral resources.

Enacting the laws this year will be a positive signal to investors that Kenya is keen on creating necessary conditions for the industry. “This is something that we are very clear about,” Kenyatta said from Nairobi’s State House, “We want to ensure that we as a country also are able to benefit from both the windfall and capital-gains tax.” 

Recently oil reserves have been found in northern Kenya, while gas exploration continues and the nation’s potential for gold production is being studied. 

Kenya hopes the new legislation will prevent similar situations to Tullow’s experience in Uganda, where the company is appealing against the state revenue authority’s demand that it pay capital-gains tax of about US$473 million following its sale of assets in Uganda. 

For an in-depth analysis of this issue and how it will affect the exploration companies operating in the country please see our upcoming issue of East Africa Politics & Security.

© 2014 Menas Associates

Terror attacks continue in Kenya coastal counties

The security situation in coastal Kenya remains beyond state control. In the past two weeks, three further attacks have taken place. Attacks in Lamu and Tana River Counties, which have again been claimed by Somalia’s Al Shabaab militant Islamists, have resulted in the deaths of at least 22 people. The attacks took place on the night of Saturday 5 July.

The Tana River County attack was in the small town of Gamba, where detainees were freed from police cells and nine people were killed. At least a further 13 died at Hindi close to Mpeketoni in Lamu County. Al Shabaab claimed to have freed 40 detainees and to have killed 60 people in the process.

On the night of 11 July the village of Pandanguo was attacked by a gang of up to 60 people. Six police reservist guns were taken. Pandanguo is close to the village of Witu where, on the night of 22 June, another attack saw 11 people brutally killed.

Lamu County is fast turning into a war zone. People are fleeing the insecurity with at least 2,500 people being served by the Kenyan Red Cross in displaced people’s camps and many more relocating under their own resources. Some are reportedly questioning the government’s inept response which has allowed these attacks to continue.

The state’s response remains confused. Military spokesman Major Emmanuel Chirchir continues to contradict President Uhuru Kenyatta by pinning the blame for the attacks on Al Shabaab. Meanwhile, the Hindi and Tana River attacks have been blamed on the Mombasa Republican Council (MRC).

The MRC was founded in 1999 and seeks to establish an independent state based around Mombasa. It strongly denies the allegations. In a July 7 statement released on its Facebook page, they called on people “not to fall into the government’s trap of creating war between communities” and that “whether you like it or not, the Mombasa Republic will take its place amongst nations”. Prior to the Hindi and Gamba attacks the police reported the arrest of four alleged MRC members in Mombasa.

Mombasa itself remains tense. A Russian tourist was shot dead on Sunday 6 July while touring the UNESCO Heritage Site of Fort Jesus. It is unclear if the attack was a simple robbery or a terror attack that was targeting tourists.

On Friday 11 July the controversial businessman, Mohamed Shahid Butt, was assassinated in his car coming back from Mombasa’s Moi International airport. Butt was facing charges for inciting radicalism in the town and last appeared in court in December 2013. His shooting is suspected to have been carried out by state security officials in the Anti-Terror Police Unit. Similarly, the Al Shabaab-supporting cleric, Abubaker Shariff Ahmed, was murdered in April 2014.

The recent months have exposed the new frailties in Kenya. The traditional rivalries of the leadership of the country’s main tribes and their political groupings continue, but it is almost as a sideshow. Intensifying conflicts on the edges of the Kenyan state - in its arid north and its increasingly unstable if not ungovernable coastal region - present an increasingly acute risk to investors. The tourism sector is collapsing in the face of terror.

For more news and expert analysis about East Africa, please see East Africa Politics & Security.

© 2014 Menas Associates

Buganda Kingdom seeks share of oil wealth

Uganda’s traditional and powerful Buganda Kingdom has floated the idea of a 1% share of the oil wealth being reserved for “cultural institutions”, a term that refers to traditional leadership structures.
Buganda MPs are considering seeking an amendment to the Public Finance Bill, which currently allows for 93% of the revenues to be reserved for central government and 7% to accrue to oil producing districts.

 

The Buganda Kingdom - led by Ronald Muwenda Mutebi II (b. 1955) who is the current king or Kabaka of Buganda - covers 18 counties. Hoima County lies to its west. Although the king has few formal powers, it has historically been a key centre of power in Uganda since pre-colonial times.

 

For more news and expert analysis about East Africa, please see East Africa Politics & Security.

© 2014 Menas Associates

Battle for the Nile as rivals lay claim to Africa's great river

For a decade the nine states in the Nile basin have been negotiating on how best to share and protect the river in a time of changing climates, environmental threats and exploding populations. Now, with an agreement put on the table, talks have broken down in acrimony. On one side are the seven states that supply virtually all the Nile's flow. On the other are Egypt and Sudan, whose desert climates make the Nile's water their lifeblood. "This is serious," said Henriette Ndombe, executive director of the intergovernmental Nile Basin Initiative, established in 1999 to oversee the negotiation process and enhance co-operation. "This could be the beginning of a conflict."

The sticking point between the two groups is a question going back to colonial times: who owns the Nile's water? Kitra's answer – "It is for all of us" – might seem obvious. But Egypt and Sudan claim to have the law on their side. Treaties in 1929 and 1959, when Britain controlled much of the region, granted the two states "full utilisation of the Nile waters" – and the power to veto any water development projects in the catchment area in east Africa. The upstream states, including Ethiopia, source of the Blue Nile, which merges with the White Nile at Khartoum, and supplies 86% of the river's eventual flow, were allocated nothing.

However debatable its claim under international law, Egypt strongly defends it, sometimes with threats of military action. For decades it had an engineer posted at Uganda's Owen Falls dam on the Nile, close to Kitra's island, monitoring the outflow.

But in a sign of the growing discord, Uganda stopped supplying the engineer with data two years ago, according to Callist Tindimugaya, its commissioner for water resources regulation. And when Egypt and Sudan refused to sign the agreement in April on "equitable and reasonable" use of the Nile unless it protected their "historic rights" the other states lost patience. Isaac Musumba, Uganda's state minister for regional affairs, and its Nile representative, said: "We were saying: 'This is crazy! You cannot claim these rights without obligations'." Minelik Alemu Getahun, one of Ethiopia's negotiators, said all the upstream states saw the move by Egypt (Sudan has a more passive role) as "tantamount to an insult".

Ugandans endorse this stance. Ronald Kassamba, 24, scything grass along the banks of the Nile near Jinja, 50 miles from the capital Kampala, said: "Egypt is being very unfair. We have the source, so we should also be able to use the water."

Convinced that from their point of view there was no purpose in more talks, Uganda, Ethiopia, Rwanda and Tanzania signed a "River Nile Basin Co-operative Framework" agreement in May. Kenya followed, and Burundi and the Democratic Republic of Congo look likely to do so – causing alarm and anger in Egypt. When parliaments in six states ratify the deal, a permanent commission to decide on water allocation will be set up – without the two states that need the river most.

To read the full article please go to the Guardian web site, which you can find here.

Menas Associates has recently done a Breakfast Briefing about Sudan, and the disputes surrounding the river Nile. To request more information about Menas Associates' past and forthcoming Breakfast Briefings please contact us.

For more news and expert analysis about Egypt, please see Egypt Politics & Security.