Crowe Horwath
TM
African Footprint
Technical Newsletter of the Crowe Horwath International African firms
Issue 7 - April 2013
Egypt
Inside This Issue:
Egypt, officially the Arab Republic of Egypt (Arabic: ‫)ﺟﻣﻬﺔ ﻣﺻ اﻟﻌﺑﺔ‬, is a
transcontinental country spanning the northeast corner of Africa and
southwest corner of Asia via a land bridge formed by the Sinai Peninsula.
Most of its territory of 1,010,000 square kilometers (390,000 sq miles) lies
within North Africa and is bordered by the Mediterranean Sea to the north,
the Gaza Strip and Israel to the northeast, the Red Sea to the east, Sudan to
the south and Libya to the west.
Egypt
1
Global Audit Process and
Business Development Training
Held in Nairobi on 15 and
16 November 2012
4
The Kenya Income Tax Venture
Capital Enterprise Rules
6
Egypt is one of the most populous countries in Africa and the Middle East,
and the 15th most populated in the world. The great majority of its over 84
million people live near the banks of the Nile River, an area of about 40,000
square kilometers (15,000 sq miles), where the only arable land is found. The
large regions of the Sahara Desert, which constitute most of Egypt's territory,
are sparsely inhabited. About half of Egypt's residents live in urban areas,
with most spread across the densely populated centres of greater Cairo,
Alexandria and other major cities in the Nile Delta.
Spotlight on the Central African
Tourism Environment
7
Did you Know?
8
Egypt has one of the longest histories of any modern state, having been
continuously inhabited since the 10th millennium BCE. Its monuments, such
as the Giza pyramid complex and its Great Sphinx, were constructed by its
ancient civilization, which was one of the most advanced of its time. Its
ancient ruins, such as those of Memphis, Thebes, Karnak, and the Valley of
the Kings outside Luxor, are a significant focus of archaeological study and
popular interest. Egypt's rich cultural legacy, as well as the attraction of its
Red Sea Riviera, has made tourism a vital part of the economy, employing
about 12% of the country's workforce.
The economy of Egypt is one of the most diversified in the Middle East, with
sectors such as tourism, agriculture, industry and services at almost equal
production levels. Egypt is considered to be a middle power, with significant
cultural, political, and military influence in the Mediterranean, the Middle East
and the Muslim world.
Audit Tax Advisory
Feedback from our
Readers!
Should you wish a specific topic to
be covered in our next issue,
please let us know by emailing
your request to our editor
kent.karro@crowehorwath.co.za
Crowe Horwath
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Names
The English name Egypt is derived from the ancient Greek
Aígyptos (Αγυπτος), via Middle French Egypte and Latin
Aegyptus. Miṣr (IPA: [mesˤr]) is the Literary Arabic and modern
official name of Egypt, while Maṣr (IPA: [mɑsˤɾ]) is the common
pronunciation in Egyptian Arabic. The name is of Semitic origin,
directly cognate with other Semitic words for Egypt such as the
Hebrew ‫( מצרים‬Mitzráyim), literally meaning "the two straits"
(a reference to the dynastic separation of upper and lower Egypt).
The word originally connoted "metropolis" or "civilization" and means
“country" or "frontier-land".
Republic
On 18 June 1953, the Egyptian Republic was declared, with
General Muhammad Naguib as the first President of the Republic.
Naguib was forced to resign in 1954 by Gamal Abdel Nasser – the
real architect of the 1952 revolution. Nasser assumed power as
President in June 1956. British forces completed their withdrawal
from the occupied Suez Canal Zone on 13 June 1956. He nationalized the Suez Canal on 26 July 1956, prompting the
1956 Suez Crisis.
In 1958, Egypt and Syria formed a sovereign union known as the United Arab Republic. The union was short-lived, ending
in 1961.
President Nasser died in 1970 and was succeeded by Anwar Sadat in 1970. Sadat switched Egypt's Cold War allegiance
from the Soviet Union to the United States, expelling Soviet advisors in 1972. He launched the Infitah economic reform
policy, while clamping down on religious and secular opposition. In 1973, Egypt, along with Syria, launched the October
War, a surprise attack to regain part of the Sinai territory Israel had captured 6 years earlier. While the war ended with a
military stalemate, it presented Sadat with a political victory that later allowed him to regain the Sinai in return for peace
with Israel. Sadat made a historic visit to Israel in 1977, which led to the 1979 peace treaty in exchange for Israeli
withdrawal from Sinai. Sadat's initiative sparked enormous controversy in the Arab world and led to Egypt's expulsion
from the Arab League, but it was supported by most Egyptians. Hosni Mubarak came to power after the assassination of
Sadat.
In late February 2005, Mubarak announced a reform of the presidential election law, paving the way for multi-candidate
polls for the first time since the 1952 movement. However, the new law placed restrictions on the candidates, and led to
his easy re-election victory. Voters turnout was less than 25%. Elections observers also alleged government interference
in the election process.
Constitutional changes voted on 19 March 2007 prohibited parties from using religion as a basis for political activity,
allowed the drafting of a new anti-terrorism law, authorized broad police powers of arrest and surveillance, gave the
president power to dissolve parliament and end judicial election monitoring.
Revolution
On 25 January 2011, widespread protests began against Mubarak's government. On 11 February 2011, Mubarak
resigned and fled Cairo. Jubilant celebrations broke out in Tahrir Square at the news. The Egyptian military then assumed
the power to govern. On 13 February 2011, the new military dissolved the parliament and suspended the constitution. A
constitutional referendum was held on 19 March 2011. On 28 November 2011, Egypt held its first parliamentary election
since the previous regime had been in power. Turnout was high and there were no reports of major irregularities or
violence. Mohamed Morsi was elected president on 24 June 2012.
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Tourism
Tourism is one of the most important sectors in Egypt's economy. More than
12.8 million tourists visited Egypt in 2008, providing revenues of nearly $11 billion.
The sector employs about 12% of Egypt's workforce.
Religion
Egypt is a predominantly Sunni Muslim country with Islam as its state religion.
The percentage of the adherents of various religions is a controversial topic in Egypt.
Around 90% are identified as Muslim, 9% are Coptic Christians, and other Christian
denominations make up the remaining 1%.
Islam arrived in the 7th century, and Egypt emerged as a center of politics and
culture in the Muslim world. Under Anwar Sadat, Islam became the official state
religion and Sharia the main source of law. A significant number of Muslim
Egyptians follow native Sufi orders, and there is a minority of Shi'a. Cairo is
famous for its numerous mosque minarets and is dubbed "the city of 1,000 minarets".
There is a significant Christian minority in Egypt. Over 90% of Egyptian Christians belong to the native Coptic Orthodox
Church of Alexandria, an Oriental Orthodox Church. Other native Egyptian Christians are adherents of the Coptic
Catholic Church, the Evangelical Church of Egypt and various other Protestant denominations. Non-native Christian
communities are largely found in the urban regions of Cairo and Alexandria.
Egypt hosts two major religious institutions, the Coptic Orthodox Church of Alexandria, established in the middle of the
1st century by Saint Mark the Evangelist, and Al-Azhar University, founded in 970 CE by the Fatimids as the first Islamic
University in the world.
Sport
Football is the Popular National Sport of Egypt. The Cairo Derby is one of the fiercest derbies in Africa, and the BBC
picked it as one of the 7 toughest derbies in the world. The Egyptian national football team has won the African Cup of
Nations seven times, including three times in a row in 2006, 2008 and 2010.
Squash and tennis are other popular sports in Egypt. The Egyptian squash team has been known for its fierce
competition in international championships since the 1930's. Amr Shabana is Egypt's best player.
Among all African nations, the Egypt national basketball team holds the record for the best performance at the Basketball
World Cup and at the Summer Olympics. Further, the team has won a record number of 16 medals at the African
Championship.
In the 34 times that the African Handball Nations Championship has been held, Egypt has won first place five times
(including 2008), second place five times and third place four times. Egypt has taken part in the Summer Olympic
Games since 1912.
Dr Mohamed Hegazy
Crowe Dr A M Hegazy & Co
Cairo, Egypt
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Crowe Horwath
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Global Audit Process and Business Development Training Held in Nairobi
on 15 and 16 November 2012
Crowe Horwath EA was proud to host the Crowe Horwath International Global Audit Process and Business Development
Conference which took place on 15 and 16 November 2012, in Nairobi, Kenya.
The Nairobi training drew participants from the Crowe Horwath Africa network member firms of South Africa, Tanzania,
Mauritius, Zimbabwe, Nigeria and Ghana.
Row 1 Left to Right – Michell Okonji (Kenya), Prisca Aaida (Kenya) and Yemi Badiru (Nigeria)
Row 2 Left to right – Imra Dhalla (Tanzania) Jiten M. Parmar (Tanzania) Joseph Magembe
(Kenya), Justine Mabati (Kenya), David Chitty (Facilitator United Kingdom), Martin Lange
(Facilitator South Africa), Naphtali Fordjour (Ghana) and Vijay Lutchmun (Mauritius)
Row 3 Left to right – Cephas Osoro (Facilitator Kenya), Stephen Bullock (Facilitator United
Kingdom), Vijay Bohorun(Mauritius), Chris Musuya (Tanzania), Victor Majani (Kenya), Tunde
Lawal (Nigeria), Onesimo Musi (Zimbabwe), Francis Ugango (Kenya) and Riogi Mose (Kenya)
The meeting was opened by Coutts Otolo, Chief Executive Officer, Crowe Horwath EA, with a welcome speech and an
invitation to the participants to visit the Crowe Horwath EA offices.
The training commenced with David Chitty, the Crowe Horwath International's Audit & Accounting Director and partner at
Horwath Clark Whitehill UK, leading the training in the understanding and the implementation of the Crowe Horwath
Global Audit Process, the Crowe Horwath Audit Methodology and Process (CHAMP) and Crowe Horwath International
Audit Templates (CHIAT)
The participants also shared their experience and all noted that their respective member firms must apply the audit
methodologies for accounting periods beginning after 1 January 2014.
The participants were updated by David and Caseware CQS South Africa's Stephan via internet live feed on the latest
technical developments in the CHAMP version 2.
The participants resolved to form an Africa Champion group to lead in the implementation of the CHAMP. The team's
members selected / nominated were:
Martin Lange
Horwath Technical Services SA (Pty) Ltd
South Africa
Betty Metto
Crowe Horwath EA
Nairobi, Kenya
Jiten M Parmar
Horwath Tanzania
Dar es Salam,Tanzania
Naphtali Fordjour
SCG Chartered Accountants
Accra, Ghana
Vijay Lutchmun
Crowe Horwath (Mur) Co
Mauritius
Tunde Lawal
Horwath Dafinone
Lagos, Nigeria
Martin Lange (Horwath Technical Services SA (Pty) Ltd) trained on why quality assurance reviews (QAR) are conducted,
objective of the QAR, timelines of QAR visits, member firms visited so far and the important elements in the ISQC1.
David Chitty also reminded participants that the Crowe Horwath International QAR is positive regulation meant to
encourage continuous quality improvement by individual member firms. Firms were also reminded of the need to review
managers and partners.
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Cephas Osoro, Africa Group Head of Assurance and Partner and Head of Assurance Crowe Horwath EA, presented to
the participants the Africa Strategy including the go to market strategy.
Stephen Bullock, Partner and Head of Natural Resources group at Horwath Clark Whitehill UK, was on hand to give a
summary of key service lines that we in Africa need to offer to international companies. These service lines are split
between core competencies (such as audit) which most offices will be able to offer and more specialist services (such as
risk consulting) which some offices will not at present be able to offer and the link in the split of services between the
international work and the local work.
Stephen listed the opportunities in both natural resources and other areas what we need to do to, including credibility, to
be able to win and share international work and working together to make sure we do so.
On the final day David presented to participants the detailed practical implementation of the CHIAT especially on risk
assessment. He demonstrated using the version 2 software how to customize the audit procedures and also how to
conduct group audits.
The participants further benefited from the 2 day training through the opportunity of meeting other Crowe Horwath Africa
Group members and on one to one exploring business opportunities that are yet to be exploited. The European
participants, some with clients with subsidiaries in Africa, also obtained first hand information on the accounting
profession and doing business in Africa.
All in all the 2 day training provided an insight into implementation of the Crowe Horwath International Global Audit
Process, standard setting developments and the practical implications of new standards and proposals. Business
development was an area of interest to all member firms.
The training ended on a high note with a much welcomed evening stroll to Crowe Horwath EA's offices nearby.
Thereafter all participants were transported across Nairobi to the world famous Carnivore Restaurant where they had the
ultimate 'Beast of a Feast' dinner. Other than beef, lamb and chicken, a variety of other meat including ostrich, crocodile
and camel was roasted over charcoal, carved at participants tables and served non-stop.
On behalf of Crowe Horwath EA, I wish to thank all attendees for participating in the training and visiting our offices. We
look forward to hosting you again in the future.
Victor Majani
Crowe Horwath EA
Nairobi, Kenya
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Crowe Horwath
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The Kenya Income Tax Venture Capital Enterprise Rules
Introduction
Investor interest in the continent of Africa and Kenya in particular by regional, national and international organisations has
grown over time. The focus once again is on the continent, due largely to relatively higher investment returns and an
increasingly predictable and stable investment climate. In Kenya, one of the business opportunities a foreign investor may
wish to explore is the venture capital market by the formation of a venture capital company.
A venture capital company is defined under The Kenyan Income Tax Act, Cap 470, Laws of Kenya, as a company
incorporated in Kenya for the purpose of investing in new or expanding venture enterprises. Formation of a venture capital
enterprise is governed by The Income Tax Venture Capital Enterprise Rules 1997 which replaced the Income Tax
Investment Duty Set Off Rules of 1996. Venture capital enterprise rules encourage novel enterprises and regulate
activities of existing enterprises in Kenya.
Legal requirements for Registration
A venture capital enterprise in Kenya must be managed by a fund manager licensed by the Kenya Capital Markets
Authority. The venture capital company must also be registered by the Kenya Revenue Authority (KRA). In order to
register a venture capital enterprise in Kenya, the application must be made in writing and include two copies of i. Memorandum and Articles of Association of the company
ii. Certificate of Incorporation
iii. Certificate of registration by the Capital Markets Authority
iv. Income tax personal identification card
v. Fund manager's licence under the Capital Markets Authority Act.
Kenya Revenue Authority (KRA) may also ask for further clarification or information. Kenya Revenue Authority upon
receiving an application for registration may either register the enterprise or reject the application subject to such
conditions as the Commissioner of KRA may impose.
Compliance
Registration of a venture enterprise in Kenya is subject to conditions and requirements by the Commissioner of KRA.
These are I. It must be registered in Kenya;
ii. It must have been registered in Kenya for the purpose of investing in new or expanding venture capital
enterprises;
iii. It should have a fund manager and be registered under the Kenya Capital Markets Authority;
iv. 75% or more of its portfolio of investable funds must be invested by way of equity or quasi-equity investment in
venture capital enterprises;
v. It should be engaged in approved investment activities.
Trade activities for a venture capital enterprise are limited and do not include business activities involving i. Trading in real property
ii. Banking and financial services
iii. Retail and wholesale trading services
Conclusion
The Commissioner of KRA may order withdrawal of a registration certificate of a venture capital enterprise upon being
satisfied that the enterprise no longer qualifies for such registration.
In the words of Henry Ford, (founder of Ford Motor Company) 'time and money spent in helping people to do more for
themselves is far better than mere giving”. The Kenya Government in a desire to attract more foreign investment is
working on reducing red tape and the steps one needs to go through before registering a commercial entity in Kenya.
Jackline Oluoch
Horwath Erastus & Co.
Nairobi, Kenya
Jackline Oluoch is a Legal Assistant in the Tax Department at Horwath Erastus & Co, Certified Public Accountants Nairobi, Kenya.
She is awaiting graduation with a Bachelor of Laws Degree (LLB) from the Catholic University of Eastern Africa in Nairobi, Kenya.
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Crowe Horwath
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Spotlight on the Central African Tourism Environment
According to the World Tourism Organisation (UNWTO), the Central Africa
sub-region includes Angola, Cameroon, Central African Republic, Chad,
Congo, Democratic Republic of Congo, Equatorial Guinea, Gabon, and
Sao Tome & Principe.
In 1990, the sub region recorded an estimated 0,4 million international
tourist arrivals. By 2010, according to the latest available data in respect
of those countries included in the sub region, the number of international
tourist arrivals in the sub region had increased to an estimated 1,3 million
corresponding to an annual growth rate of approximately 6 percent.
1.4
1.2
(millions)
1.0
0.8
0.6
0.4
0.2
0.0
1990
1995
2000
2005
2010
Over the past several years, international tourist arrivals to the sub region have increased marginally with the sub region's
share of international tourist arrivals in Africa growing from approximately 2,6 percent in 1990 to approximately 2,7
percent in 2010.
Of the nine countries included in the Central Africa sub region, Cameroon and Angola attract the highest proportion of
international tourist arrivals which combined accounted for approximately seventy six percent of the total number of
international arrivals in the sub region in 2010.
By comparison, Congo, the third largest receiving country in
the sub region, reported an estimated 101 000 international
tourist arrivals in 2010 representing a market share of
approximately 8 percent of the total number of international
arrivals recorded in the sub region in that year.
According to the limited information available for countries
included in the sub region, approximately half of international
tourist arrivals in the sub region travel for personal reasons
including leisure, recreation and holiday purposes and the
remaining tourists travel to the sub region for business or
professional reasons.
1 400
1 200
(in thousands)
With an estimated 573 000 international tourist arrivals
recorded in 2010, Cameroon is the largest receiving country
in the sub region followed by Angola with an estimated
425 000 international tourist arrivals recorded in the
country in 2010.
1 000
800
600
400
200
0
1995
Angola
Central African Republic
Congo
Sao Tome & Principe
2000
2005
2010
Cameroon
Chad
Democratic Republic of Congo
In light of the political conflict associated with many of the countries situated within the sub region, international hotel
management companies confirmed only three hotel developments under construction in the sub region in 2012
representing an estimated 710 guest rooms.
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Crowe Horwath
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According to the international hotel management company announcements, two thirds of the proposed new hotel
developments are under construction in Libreville, Gabon [approximately 470 additional guest rooms].
Congo is reported to have one project under construction in Kinshasa representing approximately 240 additional guest
rooms.
In the first quarter of 2013, two projects were announced as being under construction in Angola, one in Lomas de Zamora
[approx. 59 guest rooms] and the other in Huambo [approx. 144 guest rooms].
In the following edition of the African Footprint we will share insights into the tourism environment in the West Africa sub
region.
Michelè De Witt
Horwath HTL
Cape Town, South Africa
Did you Know?
The following countries will celebrate their independence shortly -
June
25
26
29
30
Mozambique
Madagascar
Seychelles
Democratic Republic of Congo
-
Portugal
France
United Kingdom
Belgium
Burundi
Rwanda
Cape Verde
Comoros
Malawi
Sao Tome & Principe
-
UN Trusteeship under Belgium administration
UN Trusteeship under Belgium administration
Portugal
France
United Kingdom
Portugal
July
01
01
05
06
06
12
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Crowe Horwath
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Our African Network
Contact Information
Algeria
Hamza & Associés
Tele: +213 20 508188
Email: h.tarek@hamza-dz.com
Mauritius
Crowe Horwath (Mur) Co
Tele: +230 208 8684
Email: contactus@crowehorwath.mu
Angola
Horwath Angola - Auditores e Consultores, Lda
Tele: +244 925 289207
Email: carlos.florencio@crowehorwath.ao
Morocco
Horwath Maroc Audit
Tele: +212 37 77 46 70
Email: benkirane@horwath.ma
Cote d’Ivoire
Uniconseil
Tele: +225 08212520
Email: soraya_toure@yahoo.fr
Nigeria
Horwath Dafinone
Tele: +234 1 545 1863
Email: duvie@dafinone.com
Egypt
Crowe Dr A M Hegazy & Co
Tele: +202 376 00516
Email: mahegaz@link.net
Reunion
Fiduciaire des Mascareignes
Tele: +262 2 6290 8900
Email: a.lala@fdm.re
Ghana
SCG Audit
Tele: +233 21 251497
Email: george.katako@scg.com.gh
South Africa
- Cape Town
Horwath Zeller Karro
Tele: +27 21 481 7000
Email: contactus@crowehorwath.co.za
Kenya
Crowe Horwath EA
Tele: +254 20 2329542
Email: coutts.otolo@crowehorwathea.co.ke
Horwath HTL (South Africa)
Tele: +27 21 527 2100
Email: capetown@horwathhtl.co.za
Kenya
Erastus & Co
Tele: +254 20 3860513
Email: erastuscpa@kenyaweb.com
- Johannesburg
Horwath Leveton Boner
Tele: +27 11 217 8000
Email: info@crowehorwath.co.za
Madagascar
Cabinet Genevieve Rabenjamina
Tele: +261 202 221121
Email: cce@moov.mg
Tanzania
Horwath Tanzania
Tele: +255 22 2115251
Email: chris.msuya@crowehorwath.co.tz
Mali
Inter Africaine d’Audit et d’Expertise (IAE-SARL)
Tele: +223 20 286675
Email: iaecpt@orangemali.net
Tunisia
Horwath ACF
Tele: +216 71 236000
Email: noureddine.benarbia@crowehorwath.com.tn
Crowe Horwath EA, Crowe Horwath (Mur) Co, Crowe Dr A M Hegazy & Co, Horwath Zeller Karro, SCG Audit, Horwath Leveton Boner, Horwath Maroc Audit, Horwath Dafinone, FIDECA, Hamza & Associés, Horwath Angola, Uniconseil, Cabinet
Genevieve Rabenjamina, Inter Africaine d’Audit et d’Expertise (IAE-SARL), Horwath ACF, Fiduciaire des Mascareignes, Erastus & Co and Horwath Tanzania are separate and independent members of Crowe Horwath International, a Swiss verein
(Crowe Horwath). Each member firm of Crowe Horwath is a separate and independent legal entity and is not responsible or liable for any acts or omissions of Crowe Horwath or any other member of Crowe Horwath and specifically disclaim any
and all responsibility or liability for acts or omissions of Crowe Horwath or any other Crowe Horwath member.
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