Kenya’s leading financial institution, the KCB Bank Kenya has entered into a partnership agreement with Ukheshe to issue both physical and virtual banking cards across East Africa. According to Victor Ndlovu, VP of Ukheshe Africa, the deal will include other innovative digital products such as QR issuing and acquiring.
Annastacia Kimtai, KCB Director Retail Banking
“By joining forces with KCB we are well-placed to address several open-loop market opportunities while boosting wider consumer adoption. Payment options across various segments will benefit such as payroll, companion cards, multi-currency prepaid cards, travel cards and gift cards, together with social security and other government benefit programs such as insurance claims.”
Ndlovu says financial inclusion remains a massive challenge in the region and across the continent where millions of people are either unbanked or severely underserved.
“With a shared objective of contributing to economic growth and financial freedom on the continent, Ukheshe and the KCB will meet the bourgeoning demand for viable cash alternatives.”
In recent months, Ukheshe has ramped up efforts to establish and enhance key partnerships in Africa as the continent shifts towards digital channels, products and services across all categories.
“Embracing a digital-first approach is not only a win for African consumers but for fintechs, banks, payment processors, as well as issuers and merchants. Our agreement with KCB will escalate our impact in transforming the payment space while collaborating with key industry players to stimulate the uptake of digital payments,” notes Ndlovu.
“We are keen on continually expanding our digital offering and card business to serve customers and deepening financial inclusion. KCB has been at the forefront of digitising transactions to offer customers seamless services,” says Annastacia Kimtai, KCB Director Retail Banking.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
Netflix has appointed Zimbabwean billionaire and philanthropist Strive Masiyiwa to its board of directors. The appointment has come at a time when the company is looking to expand its African market. Strive is the first African on the board of an entertainment company. The streaming giant has more than 190 million subscribers mainly in the US and Europe. It is seeking to grow its customers in Africa and Asia where the subscription levels are relatively low. Netflix unveiled cheaper streaming services for mobile-only subscribers.
Strive Masiyiwa
Strive Masiyiwa is one of the richest persons in Africa and has valuable experience in telecommunication and broadband services in Africa and beyond. He is the founder of the telecommunication giant Econet Global with operations in Africa, Europe, Asia, and Central America. “We are delighted to welcome Strive to the Netflix board,” said Netflix Chairman and co-chief executive officer Reed Hastings. The company will benefit from Strive’s knowledge of the African continent and his entrepreneurial skills.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
As part of efforts to deepen financial inclusion through adoption of financial card technology, Nigerian fintech startup, Wallets Africa, has joined forces with global payments giant, Visa, to launch debit cards for its customers. Wallets Africa was birthed out of the need to engender financial transactions through digital wallets, and the startup has grown in strides in simplifying how users carry out transactions across the continent with just an app and a card.
Wallets africa founder, John Oke
Established two years ago (2018) by John Oke in 2018, the company has gone on to establish relationships and integrations with other cards, banks, and switch providers in Nigeria. Now, it is joining forces with Visa to extend the reach to a wider audience. It could be recalled that sometime in June, Wallets Africa closed a seven-figure round deal to enable it start issuance of its own prepaid naira cards to allow customers to withdraw cash at ATMs and make payments at POS terminals.
This partnership with Visa according to company sources came after Wallets Africa got accepted into Visa’s Fintech Fast Track Program. Visa says the programme creates an avenue for fintechs around the world to leverage its network “to introduce new and innovative payment experiences.” Similarly, it provides turnkey access to Visa’s ecosystem partners, online licensing, and APIs. The Fast Track Program has given the startup a further boost: issuing physical naira and dollar Visa cards.
Two months ago, Wallets Africa began issuing virtual dollar cards to its users, enabling them to buy items and courses, and make payments for subscriptions and tools online.
Speaking on the development, Wallets Africa Digital Marketing Manager, Franklin Ugobude, says that while the company was already issuing virtual Visa cards with its card technology, physical Visa cards needed to come into play because of the customers Wallets Africa couldn’t reach. “This is more direct as opposed to integrating with this, integrating with that. What we’ve done is a direct thing to the big switch, to Visa in this case. So we’re much psyched about it,” he says.
Wallets Africa added that both cards — virtual and physical — will be aimed at business users who hope to initiate local transactions as well as international transactions. Also, they’ll be able to make offline payments as well. “So whether you want to pay for your local ride, or need a card for your next holiday, Wallets has got you covered,” Oke adds. This business-facing side of Wallets Africa’s platform wasn’t launched until late last year. In June 2020, the startup had 1,400 businesses; now, the number has increased to over 4,000 in addition to its over 60,000 individual users.
This development means Wallets Africa users can now access physical and virtual Verve and Visa cards from the company. Moreso, it promises a top notch customer relations team that ensures that when users request for cards, Wallets Africa delivers them in less than two weeks. He also adds that users can make withdrawals with the dollar cards from any bank ATM in the country.
Otto Williams, VP, Fintech Partnerships of Visa, says the company is very enthusiastic about working with fintechs, and especially Wallets Africa on this new project. “The Wallets Africa team has made tremendous progress in a short time. I am impressed with the fact that they’ve successfully enabled Visa prepaid cards that work everywhere to thousands of digital natives and entrepreneurs in Nigeria. I look forward to seeing what they’ll do in other African countries soon.”
Oke, on the other hand, is keen to see how the partnership will evolve in the coming years. “We’ve been working with technology suppliers across the world since inception to help offer world-class financial services to Africans. We are very excited to have Visa on board as we continue on our journey.”
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
To develop the local economy, the government of the Democratic Republic of Congo has launched during this month the construction of the first Special Economic Zone in the commune of Maluku in Kinshasa. In total, 6 free zones will be built, with the objectives of attracting foreign investment and stimulating the creation of businesses.
Félix Tshisekedi, president, Congo DRC
The free zone offers tax and regulatory advantages for investors and entrepreneurs. Among other facilities, a tax exemption over 5 or 10 years for those who settle there. At the end of these once-renewable periods, payment of half of the duties and taxes owed to the State is expected.
The construction of the pilot site, which spans 885 hectares and 6,500 meters of fence, has been entrusted to Strategos Group, a firm recruited by the World Bank. It will focus in particular on the construction of warehouses and the provision of space to companies from various sectors, except mining companies and banks.
In the long term, the Maluku Special Economic Zone will promote exports and allow the creation of 3,500 direct jobs.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions. He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance. He is also an award-winning writer
End of the road for naysayers obstructing Uber, Lyft and the whole gig economy system from sticking to their traditional model of classifying their workers as independent employees. In a landmark voting round, California residents have agreed 58% to 42% to retain the independent contractor model as against the employee model, California Secretary of State’s Office had said. This decision has, therefore, finally put to rest all the controversies generated by California’s new employment law, often referred to as Assembly B5. The ballot, known as Proposition 22, put up on November 3, the same time as the US presidential election, invited any eligible voter in California to vote, for or against, on whether Uber and Lyft be granted an exemption from the law. The voting round for Proposition 22 was reportedly the most expensive ballot initiative in California’s history.
Alex Rosenblat, a technology ethnographer and author of Uberland
What Was This California’s New Employment Law All About?
The best way of summarizing it is that the law attempted to reclassify, disrupt, remove and destroy everything you know about the gig economy, such that if you decide to register with Uber as a driver, in say Lagos Nigeria, for instance, you would no longer be seen as working independent of the e-hailing company, but as its employee; even though the car is yours and you command some influence on how you choose to do your work.
And of course, as an employee, you’re entitled to daily or monthly wages or salaries, and are subject to Uber’s control and authority.
But this is the most simplistic interpretation of the law.
In Details, Here Is What The New Law Fully Stated
The law, entitled Assembly B5, or simply AB5, had attempted to change the criteria for being an independent contractor in California.
Under it, for a company to classify a worker as an independent contractor, it must prove three things (you may hear this being called the “ABC Test”). If they can’t, then the worker is treated as an employee.
First, companies must prove that “the worker is free from the control and direction of the hiring entity in connection with the performance of the work.” In other words, companies can’t manage contractors the way they would employees. As an example, if a catering hall contracted a chef to prepare food events, but controlled how the chef prepared the food — giving them custom orders from customers, giving a strict schedule for production, and instituting standard procedures — they would likely not satisfy this part of the test.
Second, companies must prove that “the worker performs work that is outside the usual course of the hiring entity’s business.” This means that a company like Uber has to prove that driving users from location A to location B is outside the company’s usual course of business. Uber said as much in a press release, contending that the company is actually a “technology platform for several different types of digital marketplaces.”
Third, the companies must prove that “the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.” For example, an electrician doing contract electrical work is still a contractor. It’s unclear if ride sharing or meal delivery companies will be unable to clear this bar.
Consequently, under this new law, all of these independent contractors could earn employee status if the companies can’t satisfy the ABC test.
This was why Uber and Lyft fumed and threatened to suspend all their operations till further notice, save for the success of Proposition 22 at the polls, which now implies that the word “independent contractors” still be tagged along with the drivers.
Although Proposition 22 envisaged some changes to give drivers minimum-wage standards, limited health benefits and flexibility, while maintaining the rideshare model, if voters had disagreed with it, Uber and Lyft, and other ride-hailing firms, would have been forced to fold up — an option, not likely to be on the table as California, alone, accounts for about 16 percent of Lyft’s business, according to John Zimmer, Lyft’s president.
One analyst, Mr. Ives of Wedbush Securities had estimated that implementing any changes to the existing rideshare model would cost Uber $500 million a year and Lyft $200 million a year. This is even compounded by the fact that both companies have remained unprofitable, as per reports, and have also been gravely affected by lockdowns associated with the coronavirus pandemic.
Comparing Africa ‘s attempt to regulate Uber, others with the rest of the world. Source: — Daily Mail
Uber California Africa Uber California Africa Uber California Africa Uber California Africa Uber California Africa
If Assembly B5 Finally Had Sailed Through At The End Of The Day, It Would Have Had Domino Effects Across Jurisdictions, Including Africa
For one thing, the influence of California in the US and around the world cannot be overstated. Apart from the fact that the state is the largest of any US state — economy-wise — it is also the world’s fifth largest economy, behind Germany and ahead of India. The state is also home to “Silicon Valley” and some of the world’s most valuable companies such as Apple, Google, NetFlix, Twitter, Uber, and Facebook. A natural argument from the success of Assembly B5 would have been, therefore, that if the tech-supported gig economy was inspired by the innovations brought about by Silicon Valley, it wouldn’t make much sense to continue to hold onto the traditional definition of the concept, when those who first laid its foundation have gone ahead to redefine it.
And although Uber and Lyft had argued that they were simply tech platforms and not transportation businesses, the argument does not hold firm for all seasons. Uber, for example, has had to bend its operations in Germany and Spain to fit into the country’s transportation rules, which permit working with fleets, even though it is a tech platform.
One thing, however, needs to be pointed out here: even though the Assembly B5 law does not apply to only rideshare business models, but to the entire gig economy, it seems, nevertheless, that the rideshare model would be the most affected given that it is often seen as being at the front lines of the economy.
But for the success of Proposition 22, African governments would have replicated Assembly B5. At least, governments of all major African countries and cities housing the continent’s gig economy ecosystems have spent the past five years caressing and testing their power to make laws that will severely touch tech startups wherever they may be located in the world. Lagos, Africa’s most valuable startup ecosystem, recently introduced a set of new regulations which will take off from August 27, 2020. The regulations, among other things, state that each e-hailing company must pay N8 million ($20.5k) per 1,000 cars as fresh licencing and renewal fees; that the companies will have comprehensive insurance for each driver while the driver is working with them; that a flat fee of N20 ($0.052) per trip, called a Road Improvement Fund, will be levied per trip.
Under South Africa’s National Land Transport Amendment Bill, which has been passed in parliament and sent to South Africa’s president for assent, drivers on car-hailing platforms like Uber and Bolt who do not have operating licences — not driving licenses — may incur a fine as much as R100 000 ($6000) for those platforms (Uber, Bolt and others), which would definitely be levied against the affected drivers directly or indirectly.
In Ghana, from Uber to Bolt to Yango, drivers who rely on ride-hailing to sustain their livelihoods would start paying a mandatory GHC 60 ($11) annual fee, in addition to their cars undergoing roadworthy tests every six months. Ghana’s Driver and Vehicle Licensing Authority (DVLA), which imposed the GH¢60 ($11) annual fee noted that the guidelines will cover the current ride-hailing platforms like Uber, Bolt, and Yango and will also cover companies who intend to operate ride-hailing platforms in Ghana in the future.
The implications of AB5 across ecosystems have, therefore, been well noted.
“AB5 is riding two waves,” said Alex Rosenblat, a technology ethnographer and author of Uberland: How Algorithms are Rewriting the Rules of Work, to The Verve, “ a longstanding effort to restore workplace protections to misclassified workers; and it comes on the heels of the techlash.”
Rosenblat further argued that while the California law was about more than just Uber and Lyft, the drivers became the face of all workers exploited by giant tech companies. “That’s why AB5 is a symbolic and remarkable shift towards accountability, in labor and in tech,” she said.
On a final note, and as more of advice to the enablers of the entire gig economy, Bradley Tusk, president of Tusk Ventures and an early Uber investor has this to say: “ if the sharing-economy companies can’t radically reframe the narrative from ‘evil Silicon Valley powerhouse vs workers’ to ‘what this actually means for workers and consumers vs groups looking to profit from the changes,’ they’ll keep losing everywhere.”
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions. He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance. He is also an award-winning writer
Three for-profit US companies continue to control the fate of nations through “aggressive downgrades” that worsen financial crises argues Jasper Hamann.
The Africa Sovereign Credit Rating Review concluded that Fitch, Moody’s, and S&P are disproportionately “aggressive” with African nations.
Three private credit rating agencies in New York are worsening the economic consequences of the pandemic in Africa. A new report by the African Union (AU) shows that “aggressive downgrades” from US credit rating firms have impaired government abilities to raise funds. The Africa Sovereign Credit Rating Review concluded that Fitch, Moody’s, and S&P are disproportionately “aggressive” with African nations.
Jasper Hamann
Private firms, global impact
Credit ratings for sovereign debt has become a standard that international lenders use to determine how likely it is for a country to repay its debts. The ratings issued in New York have grave implications for the nations involved as these ratings directly influence how much interest they pay on new bonds issued in foreign currencies.
There are a mere three agencies worldwide who issue these ratings for Africa and the world, and they are all based in New York. These private for-profit businesses have been either involved in, or partly responsible for most of the major financial crises of the last decades. They were at the center of the Asian financial crisis in the late 1990s, the Enron scandal in 2001, and notoriously in the 2008 global financial crisis.
These firms continued to yield disproportionate power over the fate of nations despite a history of accusations of issuing false ratings, acting on political bias, and selective aggression, among other highly problematic behavior. The selective aggression these private entities apply comprised a large part of Africa’s just criticism of the current credit rating status quo.
Fitch, Moody’s, and S&P view the world through a lens of neoliberal economics and in turn reward or punish nations for their domestic policies. Deregulating business, cutting taxes on multinationals, and cutting social benefits can have a nation upgraded, while spending tax revenues on citizens’ healthcare or welfare can see a country’s ratings plummet.
Worsening COVID-19 crisis
The African Union’s new report is accusing the US-based credit rating firms of again negatively impacting the abilities of countries in Africa to issue bonds on the international financial market. The report described credit downgrades as a “self-fulfilling prophecy”: A downgrade effectively worsens a country’s financial options and in turn worsens its economic outlook.
Amid the COVID-19 crisis that has enveloped the entire globe in economic distress, five nations in Africa were forced to cancel their planned issuing of Eurobonds after these US-based firms “aggressively downgraded” them. This meant countries had less to spend on vital, and often life-saving, healthcare and economic stimulus amid the spread of COVID-19.
The approach the for-profit rating firms use is “procyclical,” meaning that “bad news is simply piled on bad news,” according to the report. The three firms therefore yield tremendous influence on the economic futures of entire nations, with little to no oversight.
The AU accuses the three firms of punishing Cameroon and Ethiopia for participating in a debt service freeze. The freeze intended to help the countries but resulted in greater difficulty to access international funds due to the downgrades. The downgrade “lacks objectivity” and worsened the country’s ability to deal with the pandemics of economic and public health fallout.
Furthermore the credit rating agencies punished nations in Africa for increased spending in the midst of a crisis. While countries were struggling to save lives and provide modest economic support to citizens, the US-based firms punished them by downgrading them and impairing their ability to access international funds.
Morocco’s recent downgrade
While not featured in the AU’s report, Morocco’s recent downgrades provide apt examples of this highly problematic practice. Last Friday, Fitch Ratings downgraded Morocco’s default rating to “junk bond” for its plans to increase pensions and expand healthcare. Like many other countries in Africa, the credit rating agency actively penalized Morocco.
Even though Morocco’s planned healthcare spending would still be well below the WHO’s recommended level of 12% of GDP, the ratings agency punished the country for the decision. While nations in the West have spent trillions on economic stimulus and social support, many received no or only slight downgrades from the US-based agencies.
Fitch provided a commentary on its downgrade that was rife with contradictions. It commended the government for its initiatives, while citing increased healthcare spending and social benefits as reasons for its aggressive downgrade.
Morocco now has a Fitch rating as “junk bond” for seeing its deficit rise from 4.1% to 7.9%. In contrast, the US has a deficit of 15.2%, its greatest deficit since WW2, yet Fitch continues to issue the country with AAA ratings despite describing its outlook as negative.
The problematic abuse of ratings agencies with no avenues for recompense or ways to keep these private firms accountable continues to worsen economics on the African continent. Amid a devastating public health crisis with deep economic consequences, these private firms are reaping economic havoc with little to no accountability for the suffering they cause.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
Despite challenges of constraint, Networks Unlimited Africa has managed to maintain its standards during the lockdown in order to keep its unique partner offering intact. So says Anton Jacobsz, CEO at this leading value-added distributor in the sub-Saharan Africa market. He comments, “Networks Unlimited delivers products and solutions that are affordable, better than the competition, and with faster service delivery to our partners and end-users within the converged technology, data centre, networking, and security landscapes
Stefan van de Giessen, General Manager: Cybersecurity
“We are proud to have maintained our standards during the lockdown despite the difficult environment, especially during the initial phase of the early ‘hard’ lockdown. I commend the three general managers of our divisions and their teams – Cybersecurity, Enterprise Systems Management, and Networking and Storage – for playing their parts in keeping our high standards flying during this difficult year.”
Stefan van de Giessen, General Manager: Cybersecurity, explains, “In the cybersecurity space, the general rule of thumb is that if you compromise on quality, you will compromise your network. Networks Unlimited works closely with our partners and end customers to understand their respective security needs. Once this has been established, we will prioritise the biggest threat vectors and create a project plan according to the available budget.
“It should also be noted that the quality of our selected vendors is more than just a datasheet or a rating by Gartner. Along with leading products, we offer experienced certified security engineers to implement the solutions according to best practices. In our industry, you can buy the most expensive solution but cut costs on the implementation, which will result in a very weak security posture, and vice versa, and obviously neither of these situations is to be recommended.
“As regards timely and efficient service delivery, our regional footprint throughout Africa allows us to keep stock in the required areas, and during the lockdown, we were still able to deliver timeously across the continent. But fast service delivery is more than just logistics: when it comes to post-sales support, we have over 10 years of combined experience on the edge, endpoint, datacentre and cloud areas.”
The Cybersecurity division was recently able to cement a new partnership because of the company’s commitment to affordability, quality and service delivery standards during the lockdown, explains Van de Giessen.
He clarifies, “We have onboarded a vendor with one of the big five systems integrators in South Africa. The reasons for this integration with our product included the following: the costing from the vendor in the vulnerability space is market-related; their product has been rated as a leading product, and our teams integrated well from both a sales and technical perspective to deliver on the agreed KPIs.
“In general, it is accurate to say that we have seen new business success with our three marketing pillars, based on the value we are able to deliver with an ever-growing pipeline. Once the relationship has been established and the value of the product is known to all parties, our partners keep their relationship with us based on being a trusted advisor with consistent fast delivery throughout the product sales cycle.”
“The lockdown has placed a tremendous amount of pressure on company CIOs, CEOs, CISOs and IT managers. Marketing to them was therefore key in order to deliver the message around reliability, flexibility and value, during this time when so many more employees are working from home and creating additional threat vectors within their network,” concludes Van de Giessen.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
Applications are now open for the 2nd Cohort of Lagos State Science Research and Innovation Council award. The winner of LASRIC Cohort II will, subject to the Terms & Conditions, receive funding of up to N5,000,000 ($13,000). Lagos State Science Research and Innovation Council (LASRIC) is an initiative of the Lagos State Government of Nigeria set up to pursue a science research and innovation agenda to address some of its developmental challenges and needs through the application of science research and innovation in Lagos State.
Lagos State Science Research and Innovation Council (LASRIC)
“We are looking for great ideas that could be related but not limited to Agriculture, Education, Healthcare, Housing, and Transportation,” the council said in a statement.
Startups The Council Is Looking Out For
To be eligible for the LASRIC award, the applicant must:
1. Be a citizen of Nigeria
2. Submit their application which must be their original work
3. Have an MVP (minimum viable product) i.e. you have customers
4. Be able to fund his/her/team travel expenses and other associated costs
5. Understand the objectives of LASRIC and what we stand for; and
6. Be able to represent LASRIC as an Ambassador.
In addition, the Individual must provide:
Valid means of identification (LASRRA Card is acceptable).
Full disclosure of criminal records, if any.
Evidence of payment of personal income tax till date (if innovator is gainfully employed).
Lagos has recently been in the news for muffling startups with regulations, a move that has reduced its ranking in Africa. Source: StartupBlink
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions. He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance. He is also an award-winning writer
To forestall leakages in taxation which is responsible for over $50 billion losses to the African continent, Rwanda has taken the steps to enact rules on transfer pricing. This is because multinationals that transact amongst themselves will now be required to abide by the new tax guidelines, following last week’s approval of a ministerial order that establishes general rules on transfer pricing. Transfer pricing happens whenever two companies that are part of the same multinational group trade with each other. When the parties establish a price for the transaction, this is transfer pricing.
Hajara Batamuliza, the Commissioner for Domestic Taxes at the Rwanda Revenue Authority
The practice is not illegal or necessarily abusive rather what is illegal or abusive is transfer mispricing, which essentially includes trade between unrelated parties.
In 2018, a new income tax law was enacted setting out new rules on transfer pricing. The law stipulated that a ministerial order will be passed, highlighting how the new rules will be implemented.
The ministerial order was approved last week by the cabinet meeting, which was chaired by President Paul Kagame.“The ministerial order has got rules on how transactions will be conducted at arm’s length, in terms of management fees, interest payment, and anything that any subsidiary pays the head office will be subject to scrutiny,” Angelo Musinguzi, Senior Tax Manager at KPMG Rwanda, said.
The 2018 Income Tax law, specifically article 33 sets out rules on transfer pricing. It requires that transactions between multinationals be carried out under the arm’s-length principle. The arm’s length principle requires that transfer prices charged between related parties are equivalent to those that would be charged between independent parties in the same circumstances.
The rules, among other things, require multinational taxpayers or associated enterprises as often referred to legal terms to have documents justifying that their prices are applied according to the arm’s-length principle. This means that companies are now expected to have transfer pricing policies and documentation.
Musinguzi, who has been following the process towards the establishment of the new rules on transfer pricing, says the general guidelines are likely to take effect this week. “The whole aim is to make sure that all transactions happen at arm’s length (fair basis) and there’s no dumping of costs on Rwanda,” he noted.
The rules will be enforced by the Rwanda Revenue Authority (RRA). The tax law empowers the RRA Commissioner-General to adjust profits earned between related parties if the Commissioner considers that the trading arrangements between related parties do not adhere to the arm’s length principle.
According to Hajara Batamuliza, the Commissioner for Domestic Taxes at the Rwanda Revenue Authority, the ministerial order paves way for the implementation of the new rules. However, she said, the scope goes beyond multinationals to include local companies that may have associated relationships – those that are part of the same group.
“You can imagine if a company is enjoying a seven-year tax holiday, it would be beneficial for its own entity also located in Rwanda, to shift all the profits from a tax-eligible entity to the one that is enjoying investment preferential treatment,” she explained. Batamuliza highlighted that an analysis done across multinational companies in mining, financial sector, telecoms and other businesses, revealed loopholes in their dealings. “Most of these companies were declaring losses and you wondered why would an entity always be in losses for 8-10 years and still remain in business? We then realized there was an issue,” she noted.
During the analysis in 2018, more than 43 per cent of the tax revenues that had been lost through such dealing was recovered by the taxman, according to Batamuliza, who also said nobody objected to their findings.
Last year, Rwanda hosted the convention of the Association of Chartered Certified Accountants (ACCA) Africa during which members pointed to fraud and corruption as key challenges in Africa. A report of the High-Level Panel on Illicit Financial Flows from Africa commissioned by the African Union (AU) and the Economic Commission for Africa indicated in 2015 that Africa loses $50 billion a year in illicit financial flows. The flows relate principally to commercial transactions, tax evasion, corruption, and criminal activities like money laundering, among others. Transfer pricing manipulation is one of the specific ways experts point out which countries lose millions of financial resources.
There are large differences in tax rates between countries. If left unchecked, the practice could lead to the shifting of profits from high-tax countries to lower-tax countries.
The main goal of transfer pricing regulation is to prevent such a situation and ensure that profits are taxed at the place where value is actually created. Rwanda’s move to establish rules could change the game and reduce tax leakages.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
GreenTec has announced that it has invested in Nigeria-based Powerstove Energy, an innovative smokeless stove and fuel system to address problems of high fuel costs and greenhouse gas emission.
“We design, manufacture, distribute and sell clean cooking stoves that self-generates electricity as a by-product of the cooking process, and we also produce wood pellets from agricultural and wood waste. Our anchor strategy has been that we avoid using the traditional marketing channels to advertise our products. Instead, we rely on word of mouth and referrals, which have grown our sales by an average of 18% month on month,” Founder and CEO Okey Esse said in an interview.
CEO and Founder of PowerStove, Okey Esse.
Why The Investor Invested
The latest investment by Greentec Capital Partners is one way the VC firm is diversifying its portfolio. The VC firm has previously invested in startups such as Sumundi, Coliba, Amitruck, Kwiks, Ecodudu, among others. Apart from fintech, retail-tech, ecommerce, cleantech or agritech, the VC firm is yet to make a major inroad into healthcare.
“Powerstove has developed a novel and scalable solution to addressing not just fuel costs and emissions, but more broadly to address issues of hunger and hygiene. Okey and his team have a well-developed product that is an excellent fit for its niche and they are the team to execute on it. We look forward to helping this impactful business grow and bring low-cost and high-efficiency heating to Nigerian and expanding energy access in Africa,” Xavier Chapel, Senior Company Builder for GreenTec Capital Partners said.
A Look At What Powerstove Does
Founded in 2018 by the University of Jos graduate Okey Esse, Powerstove’s solution combines sustainable resource use with tech-driven efficiency innovation into a versatile and affordable to solution. The startup converts non-recyclable paper, wood and agricultural by products of various crops into biomass pellets, which are then used to fuel the affordable, fuel efficient, and smokeless cook-stove. The innovative stove is able to produce 50 watts of continuous power, providing enough energy to charge phones, lights, cameras, and more. The stoves are also equipped with an IoT System with internal pre-programmed and programmable computer chips that controls the fan, electricity supply, and also data transfers over 2G/3G network by using input sensors and output components to control all these functions. Powerstove claims to be currently the world’s first and only clean cookstove that is built on on-board IoT System.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions. He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance. He is also an award-winning writer
