July 2021 / Focus Africa

$100 million

Amount raised by Chipper Cash, a three-year-old startup that facilitates cross-border payments across Africa, in its Series C led by SVB Capital. This comes only a few months after Chipper Cash raised its $30 million Series B led by Ribbit Capital and Jeff Bezos fund Bezos Expeditions. (TechCrunch)  

330,000 tonnes

Volume of cargo that Kenyan Jomo Kenyatta International Airport handled in 2020. This constituted the largest share of Africa's cargo even as its revenue was hit hard by Covid-19 effects, according to a report by The African Airlines Association (AFRAA). (The Star)  

500,000

Number of houses to be built by South African housing company, Property 2000 South Africa in Addis Ababa, Ethiopia at a cost of $4.2 billion. The houses will be made available to low and middle-income residents at 30-year low-interest mortgages. (Ethiopia News Agency)  

$1.19 billion

Amount raised by African startups since the beginning of 2021 with deals worth $1 million and above accounting for about 95% ($1.14 billion) of it. (Technext)  

10%

Headcount growth planned by US investment bank Citigroup. This could add close to 100 new employees to Citigroup's businesses across the African continent as it surges past rivals to reclaim the top spot in arranging debt sales in the region. (News24)  

283 metres

Height of F Tower, the third tallest building in Africa whose construction begins in Abidjan, Côte d'Ivoire this month. F Tower follows the Iconic Tower (385m) and the Pinnacle Tower (320 metres) both of which are under construction in Egypt and Kenya, respectively. (Construction Review Online)  

$26 billion

Market capitalisation of the Nairobi Stock Exchange, a 39-month-high having added approximately $1 billion in the last month alone on the back of a rally of Safaricom and Equity Bank stocks. (Technext)  

100,000 tonnes

Amount of cobalt produced by the Democratic Republic of Congo in 2020, making 71% of the global total, according to Darton Commodities’ review of the market. The DRC’s state cobalt buyer will put in place a price floor of $30,000 a tonne for the cobalt it buys from artisanal miners. (Reuters)  

22%

Morocco cereal grain yields increase in the 2020/21 season. Experts reported higher yields across several staple crops and the increase is due to a tailored fertiliser programme initiated in this harvest season, as well as above-average rainfall. (Morocco World News)  

100 million

Number of COVID-19 vaccine doses a year to be manufactured by South Africa's Biovac to help alleviate Africa's vaccine inequality. The company will 'fill and finish' the Pfizer/ BioNTech mRNA jabs for use across Africa. (The East African)  

146%

Subscription of the first green bond issued by Nairobi-based property developer Acorn Holdings. The final tranche raised $19.3 million against a target of $13.3 million, a significant vote of confidence for such a bond in Kenya's capital markets. (The Star)  

7

Female CEOs of Nigerian banks after two recent appointments of women to the top role. Women now lead 30% of the nation's lenders, moving the industry closer to the the 40% target outlined in the Nigerian Sustainable Banking Principles. (This Day)   Review by Kili Partners . Powered by Asoko Insight

The government has announced, through the Bank of Tanzania (BOT), additional measures to reduce the economic impact of the COVID-19 pandemic. These measures are aimed at extending credit to the private sector and lowering interest rates on commercial bank credit extended to the private sector.

Before the outbreak, the economy was one of the fastest growing economies in the East Africa region, recording average GDP growth of 6.7% between 2010 and 2019, but slowed to an average of 4.8% after the pandemic.

Proposed policy reforms which took effect on 27 July 2020 are set out below.

• Reduction of the statutory minimum reserve requirement (SMR) for banks extending credits to the agricultural sector with an interest rate not exceeding 10% per annum.
• Relaxing the agent banking eligibility criteria by removing the 18-month experience requirement. Applicants will now be required to only possess a national card or national identity card.
• Limitation of the interest rate paid on mobile money trust accounts to a maximum of the interest rate offered on savings deposit accounts by the relevant bank.
• The BOT will introduce a special loan (TZS 1 trillion) at a rate of 3% per annum to banks and other financial institutions for lending to the private sector on the condition that the commercial banks will lend at a rate not exceeding 10% per annum.
• Reduction of the risk weight on loans. The BOT will reduce the risk weight on different categories of loans in the computation of regulatory capital requirements of banks. This measure will provide an opportunity to banks to extend more credit to the private sector than before.

According to a recent overview published by the Council of Europe, Kenya has joined the Multilateral Competent Authority Agreement‎ on Automatic Exchange of Information Agreement (2014) (CRS MCAA) on the introduction of the automatic exchange of information in tax matters on a reciprocal basis.

The CRS MCAA is a multilateral competent authority agreement, based on Article 6 of the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, as amended by the 2010 protocol, which aims to implement the automatic exchange of financial account information pursuant to the OECD/G20 Common Reporting Standard (CRS) and to deliver the automatic exchange of CRS information by 2018. The text of the CRS MCAA, background information and a list of the 107 signatories can be found here. Further developments will be reported as they occur.

The US Internal Revenue Service Criminal Investigation Division (IRS-CI) and the South African Revenue Service (SARS) enforcement divisions are joining forces to fight tax and economic crimes affecting both countries. To announce their collaborative effort, the IRS-CI and SARS jointly issued a Press Release, dated 6 July 2021.

According to the Press Release, the IRS-CI and the SARS are working together to identify, investigate and bring to justice criminals with a nexus to both countries who have committed, among other crimes, international public corruption, cyber fraud, and money laundering. The newly formed partnership has already uncovered emerging schemes perpetrated by promoters, professional enablers, and financial institutions.

Note: The IRS CI is the only US federal law enforcement agency with jurisdiction over US federal tax crimes. The IRS-CI has special agent attachés who are strategically stationed in 11 foreign countries to build and maintain strong alliances with foreign governments, law enforcement and industry partners.

The African Tax Administration Forum (ATAF) has issued a statement on what the OECD/G20 Inclusive Framework (IF) on Base Erosion and Profit Shifting (BEPS) two-pillar solution to address the tax challenges arising from the digitalization of the economy means for Africa.

The ATAF, in its statement, welcomed this milestone and acknowledged the fact that a global consensus on the tax challenges arising from the digitalization of the economy is of great importance since cooperation and multilateralism are required in developing solutions that will assist all countries in rebuilding their economies in a post-COVID-19 environment.

In order to ensure that all developments by the IF relating to taxation of the digitalized economy meet the needs of African countries, the ATAF has been providing technical support to its members and actively participated in the ongoing discussions, for example, in the recent release of its proposal on Pillar One on 12 May 2021.

The key issues in the ATAF's statement are summarized below.

Pillar One

The ATAF welcomes the fact the new Pillar One proposals reflect many of their proposed changes that were made to the IF blueprint report released for public consultation in October 2020. The ATAF and its members considered that the proposals in the blueprint were far too complex and resulted in insufficient profits being reallocated to market jurisdictions.

The ATAF proposed that the reallocation of profits be calculated as a portion of multinational enterprises (MNEs)') total profits instead of its residual profits. This is because of the likely unequitable distribution of profits especially for businesses that do not have a taxable nexus in the market jurisdiction such as digital businesses. In this regard, the quantum to be reallocated would be a return on market sales based on the global operating margin of the MNE group. This proposal was not adopted by the IF according to the statement issued on the two-pillar solution.

The IF agreed to allocate between 20% and 30% of residual profit - Amount A (profit in excess of 10% of revenue) to market jurisdictions. But in order to result in an equitable and meaningful reallocation of profits to market jurisdictions, the ATAF is of the opinion that at least 35% of residual profit should be allocated to market jurisdictions.

The ATAF also recommended that the IF consider implementing an elective binding dispute resolution mechanism to be made available to African countries with limited capacity and no or a low level of mutual agreement procedure (MAP) disputes. According to the statement of the IF, there is a proposal to only consider giving an elective binding dispute resolution mechanism for issues related to Amount A for developing economies that are eligible for deferral of their BEPS Action 14 peer review and have no or low levels of MAP disputes.

Pillar Two

Much as the ATAF has welcomed the introduction of a global minimum tax rate by the IF, the ATAF together with the African Union continue to advocate for a higher rate of at least 20% instead of the proposed 15%. In their view, a higher rate will be more effective in protecting African tax bases and stem Illicit Financial Flows (IFFs) by reducing profit shifting by MNEs.

The ATAF welcomed the agreement by the IF on the inclusion of the Subject to Tax Rule (STTR) as a minimum standard. Since the suggestions by the ATAF to make source-based rules (i.e. the Undertaxed Payments Rule (UTPR) or STTR) primary rules under Pillar Two so that they have priority over the Income Inclusion Rule have received a lot of resistance from most developed countries, as a minimum standard, developing countries can now require the inclusion of the STTR in bilateral tax treaties with other IF members that apply nominal corporate income tax rates below the STTR minimum rate. The ATAF is, however, calling on the IF to widen the scope of the STTR to cover payments of interest, royalties, capital gains and all service payments instead of only interest, royalties, and a defined set of payments as agreed upon by the IF.

In conclusion, the ATAF recognizes the need for further work to be done in order to finalize the new Pillar One and Pillar Two rules in order to ensure a more equitable tax allocation and to stem IFFs from Africa and also raises concerns on how these new rules will impact countries that are not members of the IF or on any IF members that choose not to adopt the new rules. ATAF suggests that countries should join the IF at will and no form of political pressure should be exerted on any country to join. Currently, of the 54 African countries, only 24 are members of the IF and four of these countries (i.e. Angola, Congo (Dem. Rep.), Kenya and Nigeria) have not yet joined the new two-pillar plan to reform international tax rules.