Startups and small businesses in Kenya may get some respite soon. The government of Kenya has launched a number of palliatives to support small businesses and startups in the country. According to President Uhuru Kenyatta, some of the measures adopted to assist small businesses and startups include the fast-tracking payment of outstanding VAT refund and other pending payments to SMEs.
President Uhuru Kenyatta
“To combat the effects of this downturn, my administration has had to take additional measures. Today I am happy to announce the rolling out of my 8-point stimulus programme amounting to some Sh53.7 billion. The injection of this money into the economy will stimulate growth and cushion families and companies as together we navigate our way out of the COVID-19 pandemic,” Kenyatta said.
Here Is What You Need To Know
For purposes of assisting small businesses and startups in Kenya, government has also commissioned Ksh. 10billion to be used to fast track payment of outstanding VAT refunds and other pending payments while Ksh. 3billion as seed capital for SMEs credit guarantee.
The intention here is to provide affordable credit to small and micro enterprises, the President said.
Apart from this, President Uhuru Kenyatta also recently signed into law, the country’s Tax Laws (Amendments) that sees a major a corporate tax rate cut and other tax amendments.
The new law has reduced the rate of tax paid by companies in Kenya from 30 percent to 25 percent per annum. This new change takes effect from the 2020 financial year. This now makes Kenya the country with the lowest tax corporate rate in the whole of East Africa.
Under the new Tax Laws (Amendments) Act, small and medium enterprises (SMEs) with annual earnings below Ksh.1 million ($9139) have also been exempted from tax, while those from Ksh.1 million ($9139) to Ksh. 50 million ($465,983) now have the turnover tax rate reduced to one percent from the previous three percent.
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.
Security, risk, data loss, and legislation. These are the primary concerns listed by organizations and government institutions when asked why they are reluctant to move to the cloud. It is the perennial debate – will cloud put the data at risk? Isn’t on-premise more secure? How can the organization ensure it is compliant in light of growing regulatory control over how data is accessed, protected, and used? For many, the answer lies in the tried and trusted foundations of on-premise solutions that have weathered the storms so far. The problem is that this isn’t necessarily the right answer…
President Uhuru Kenyatta
Some organizations remain convinced that on-premise is more reliable than the cloud. In Kenya, government guidelines recently approved by President Uhuru Kenyatta – safeguards that are considered to be on a par with the General Data Protection Regulation (GDPR) – have put immense pressure on organizations when it comes to data handling and sharing. When a company faces either a prison sentence or a hefty fine for violating the act, it makes sense for them to panic about security and be more prudent about with which provider to share their personal information with.
This trend is reflected in Nigeria, Ghana and Rwanda where legislation is influencing decision making when it comes to the cloud. In Nigeria, government industries have been advised to stay with their on-premise platforms. Rwanda has clamped down on its personal data protection with regulations around consent from individuals. South Africa is still toying with its Protection of Personal Information Act, but this is very likely to be signed into law fairly soon. These regulations are all essential in a time when data privacy and security are under scrutiny and the cyber-threat has never been more present. And it makes sense that companies are forming a protective circle around their information and question where and how a provider stores their data before investing into the cloud.
Due to the far-reaching hands of governments, data sovereignty is a primary concern of institutions moving to the cloud. Data sovereignty refers to the fact that information which is stored in the cloud is subject to the laws of the country in which it is physically stored. For some organizations this concern may be warranted, such as highly regulated government organizations storing highly confidential information. However, even highly regulated organizations are taking advantage of what the cloud has to offer by taking a hybrid approach.
For more sensitive confidential information, the data is stored on-premise, and other processes that are less sensitive, are outsourced to third party cloud providers. This is a reasonable approach. However, most companies don’t have the skilled manpower or budget to build a secure hybrid approach, or even an on-premise solution, which is why not moving to the cloud becomes a business risk.
At the same time the truth is that while many organisations cling to on-premise as the solution, it can be the most dangerous of the two.
Using or not using a cloud provider has no bearing on complying with privacy regulations, as long as adequate safeguards around personal information can be guaranteed. Privacy regulations stipulate organisations take into account the state of the art and industry prior to implementing new solutions. When looking into the information technology landscape today, we can see the moving to the cloud is the most secure, scalable, and reliable way to protect data.
“Professional cloud infrastructures are usually safer and more reliable than many on-premise platforms,” explains Anna Collard at KnowBe4. “One of the most common reasons for this is the lack of security resources organization can employ. Security skills are hard to come by even globally, and in Africa we only have about 10 000 security professionals across the entire continent. Large companies such as Oracle have employed a security team that is bigger than all the African security professionals together.”
Cloud service providers are in the business of looking after their infrastructure and their client’s data, providing a level of assurance via ISO 27000, PCI DSS, Cloud Security Alliance and other security certifications. Microsoft Azure or Amazon Web Services (AWS) list of security certs is mind-bogglingly long –a feat that is difficult to accomplish unless security or IT infrastructure management is your core business.
Another issue is that people often ask if the security on offer by the cloud service provider is the absolute best on the market. The real question should be whether the security is appropriate for the level of data and services being provided and where the data center is located to ensure adequate data protection alignment.
“Cloud service providers consider all the angles from auditing to phishing to updates to patches and intrusion detection,” concludes Collard. “Their solutions are designed to not just meet industry standards but to exceed them. This is not only to ensure the safety and security of the customer but because their own reputation is on the line if they don’t deliver.”
According to ESG research in January 2020 67% of enterprises use public cloud infrastructure services to support their IT operations. That number is most likely going to increase even more so over the next few months with the Covid-19 pandemic forcing many organizations to set up work from home. There is no guaranteed road to risk-free business. Cybercrime is on the rise and it is exceptionally sophisticated, leveraging human error and system vulnerability to gain access to systems and damage reputations. Ultimately the cloud is just a third-party provider, the responsibility over the data remains with the data owner, which is the business or organization processing the data.
Performing a third-party risk assessment and reviewing the cloud provider’s security certifications should be standard practice to ensure adequate security will be applied, regardless of where the data is stored, and should help greatly in the decision-making process.
While it’s perfectly understandable for the business to hold onto what it knows – the on-prem solution – cloud has become a powerful and reliable ally that can not only surpass most on-prem solutions but can do so at a lower cost and with better security.
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
Kenya is sending signals that it is ready to rebuild its economy post-pandemic. President Uhuru Kenyatta has signed into law a corporate tax rate cut and other tax amendments. The Tax Laws (Amendments) Bill was presented to the President for signing by National Assembly Speaker Justin Muturi following its passage in Parliament.
President Uhuru Kenyatta
“In recognition of the extra-ordinary nature of this global tragedy and its enormous local effects, and conscious of the solemn duty of the government to guarantee the enjoyment of social, civil and economic rights; my administration has made and will continue to make targeted state interventions to cushion every Kenyan from shocks arising from Covid-19,” President Kenyatta said in a televised address to the nation.
Here Is All You Need To Know
Corporate Tax Cut
The new law has reduced the rate of tax paid by companies in Kenya from 30 percent to 25 percent per annum. This new change takes effect from the 2020 financial year. This now makes Kenya the country with the lowest tax corporate rate in the whole of East Africa.
However, it should be noted that new corporate tax regime only applies to companies resident in Kenya. Non-resident tax rate, that is tax rate targeted at companies with their branches in Kenya or foreign companies that have their permanent offices in Kenya remains at 37.5%.
Under the new Tax Laws (Amendments) Act, small and medium enterprises (SMEs) with annual earnings below Ksh.1 million ($9139) have been exempted from tax, while those from Ksh.1 million ($9139) to Ksh. 50 million ($465,983) now have the turnover tax rate reduced to one percent from the previous three percent.
Reduction In Value Added Tax
Kenya’s new tax law also saw that reduction from previous 16% to a new 14% of value-added tax in line with the cushion measures. However, despite the reduction, new sectors such as insurance and security brokerage services have been included in the VAT tax net.
Reduction In Personal Income Tax (PAYE)
Under the new law, Kenyans earning Ksh. 24000 ($223) and below will receive a 100% waiver on pay as you earn (PAYE) while earners above the threshold will see their PAYE discounted by 5%.
Generally, the maximum tax rate on personal earnings in Kenya is now 25% for those with annual income above Ksh. 688,000. Before this was at 30%.
This has the net implication of making more money available to salaried workers, whether local and expatriate staff.
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
Kenya’s economic diversification programme seem to be on course as the country is popularly known for its tourism, and agriculture exports is earning trickles of dollars from petroleum. A release from the Kenya’s Bureau of Statistics says the country earned $14Million from 324,000Barrels of crude oil it exported from oilfields in Turkana County.
President Uhuru Kenyatta
To bypass the construction of expensive pipelines that may also cause environmental challenges, the Kenyan government devised an unusual production scheme, involving trucking of small volumes of crude from the oil fields in Turkana in the north of the country, to Mombasa, the southern coastal port town on the edge of the Indian Ocean.
The so-called Early Oil Pilot Scheme (EOPS) at Ngamia and Amosi fields was commissioned in June 2018. The scheme is operated as part of an agreement between the Kenyan Government and the E&P partners, including the operator Tullow Oil, TOTAL and Africa Oil Corp.
The Uhuru Kenyatta government said that the scheme was designed to comprehend the reservoirs’ flow assurance, prior to the commencement of full-blown commercial development
Kenya started exporting the commodity from Mombasa in August 2019, with the value of inaugural shipment of 200,000 barrels, bought by ChemChina UK Ltd, for an estimated $12Million.
The scheme “continued to register improved production with daily transportation, increasing from 600barrels of oil per day (BOPD) to 2,000BOPD in the review period”, the Kenyan Bureau of Statistics said in the report: Kenyan Economic Survey 2020 released Tuesday April 28, 2020.
But in January 2020, which is outside the scope of the report, Tullow Oil reported it had suspended the transport of crude oil from Turkana to Mombasa due to incessant rains that caused severe damage to roads. While the scheme lasted, the London listed company used over 100 tankers to move 2,000 barrels per day over 1,000 kilometres.
In March 2019, President Kenyatta signed into Law the Petroleum Act of 2019, which allocates 75% of state-designated oil profits to the central government, 20% to oil-producing counties and five percent to local communities.
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
Businesses in Kenya may now have to execute documents on computers. President Uhuru Kenyatta has finally signed the Business Law (Amendment) Bill, 2009 into law. The law has amended the Kenya Information and Communication Act to allow electronic authentication and signing of documents.
President Uhuru Kenyatta
“Where any law provides that information or any other matter shall be authenticated by affixing a signature or that any document shall be signed or bear the signature of any person, then, notwithstanding anything contained in that law, such requirement shall be deemed to have been satisfied if such information is authenticated by means of an advanced electronic signature affixed in such manner as may be prescribed by the Minister,” reads part of the new law.
What The New Business Law Amendment Means for Startups and Businesses In Kenya
a) Companies Act, 2015 The new business law amends the Kenya ‘s Companies Act, 2015 as follows:
Elimination of the requirement of affixing a company seal in the execution of company documents, contracts and deeds. By the terms of this new law, a document, contract or deed will be considered to be validly executed by a company if it is signed on behalf of the company by two authorised signatories or by a director of the company in the presence of a witness who attests the signature. This is a welcome amendment which reflects modern-day practice in developed jurisdictions.
Abolition of the use of bearer shares. Bearer shares are unregistered equity securities owned by the possessor of the physical share documents. Their use worldwide has dwindled because they incur increased costs and are convenient instruments to secure funding for terrorism and other criminal activities. The Companies Act, 2015 prohibits the issuance of bearer shares. However, bearer shares that had been issued under the previous law would now be converted into registered shares within 9 months of the law coming into effect.
Raising of the applicable threshold for ‘squeezing in’ and ‘selling out’ of shares in a company to at least 90 percent of the shares of the company. The Companies Act, 2015 had previously been amended in 2019 to reduce the threshold from 90 percent to 50 percent which was a major blow to the protection of minority shareholders’ rights. This is a welcome amendment as it seeks to protect the rights of minority shareholders against majority shareholders who might want to compulsorily acquire the shares of the minority shareholders.
2. b) The Land Registration Act, 2012 The new Business law also amends Kenya ‘s Land Registration Act as follows:
Abolition of the requirement to obtain any consent that may be required from the national government or county government in respect of leasehold properties. This will go a long way in reducing the time, cost and expenses incurred while obtaining the consents from the national government or county governments.
Abolition of the requirement to produce a land rent clearance certificate and a land rates clearance certificate before the Land Registrar can effect registration of an instrument of transfer of land. By the terms of the law, it is now upon a purchaser to ensure that the vendor of the property has paid all the land rates and land rent in respect of the property as the Land Registrar will not demand proof of payment of land rates and land rent in order to register a transfer in respect of a property.
Provision for the use of electronic signatures in the execution of documents processed under the Land Registration Act and gives the Registrar powers to maintain the Principal Land Registry in Nairobi and the Coast Registry in Mombasa in both physical and electronic forms.
3. c) The Insolvency Act, 2015 The law also amends the Insolvency Act as follows:
Entrenchment of creditors’ protection by giving them the right to request for information from an insolvency practitioner in respect of a company that has been placed under administration. The insolvency practitioner is obliged to provide the information requested within 5 days or such other number of days agreed between the insolvency practitioner and the creditor.
Provision for additional factors that a Court may consider in lifting a moratorium for a company under administration. The law provides that a Court shall take into consideration the perishability of a movable asset and whether or not the movable asset is being used to maintain the company as a going concern before lifting the moratorium on legal processes.
Electronic Signatures
By the terms of the law, businesses and entrepreneurs in Kenya can now register their organizations online based on the new requirements of the Business Registration and Registration of Documents Acts.
The law also means that the government will establish digital registries in Nairobi and Mombasa. The registrar has the option to offer searchable digital databases of registered businesses for the public.
The law also permits parties that conduct business to sign contracts electronically.
Operations such as land purchases will now be made easier because stamp processing can now be done through electronic means by the terms of the new law.
Furthermore, the transfer of properties and securities can now be conducted digitally.
However, title deeds and legal wills will still require physical signatures for them to be valid in case of a dispute.
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.
He could be contacted at udohrapulu@gmail.com
