Crowe Horwath
TM
African Footprint
Issue 14 - January 2015
Technical Newsletter of the Crowe Horwath International African firms
Inside This Issue:
Ethiopia
Location
Ethiopia is situated in the north-eastern part of Africa. The official name is
Federal Democratic Republic of Ethiopia (FDRE). It is bordered by the
Sudan and South Sudan to the west, Eritrea to the north, Djibouti and
Somalia to the east and Kenya to the south, extending 30 to 150 north of the
equator and 330 to 480 east of the Greenwich Meridian. The capital is Addis
Ababa. Ethiopia has an elevated central plateau varying in height from
2,000 to 3,000 meters above sea level. In the north and center of the
country, there are some 25 mountains whose peaks reach over 4,000
meters. Ethiopia has a population of over 94.1 million and the country is
1.14 million square kilometres.
Ethiopia
1
Withholding tax on payment of
Interest to Non-Residents
3
Streamlining of Registration
of Public Benefit Organizations
in Kenya
4
2015 Outlook for Tourism in Africa
6
Calendar
Ethiopia uses the Julian calendar which divides the year into 12 months of
30 days each. The remaining five or six days in a leap year constitute the
short 13th month of “pagume”. The calendar is seven years behind the
western or Gregorian calendar, with the Ethiopian new year falling in the
month of September.
Currency
The currency of Ethiopia is based on the decimal system. The units of
currency are the Birr and cents. The Birr is divided into 100 cents.
Economic environment
Enormous efforts have been implemented in major key sectors to achieve
millennium development goals (MDGs). As a result, the Ethiopian economy
has witnessed sustainable double digit broad based growth. Coffee is still
the major export product for Ethiopia but others like gold, oil seeds, chat,
flowers, live animal pulses, leather and leather products, meat and meat
products, fruits and vegetables all contribute to the country's GDP.
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
Audit Tax Advisory
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Crowe Horwath
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Trade
In order to enhance the export sector, the government has established
the Ethiopian commodity exchange (ECX). ECX is a marketplace
where buyers and sellers come together to trade, assured of quality,
delivery and payment. ECX assures all commodity market players the
security they need in the market through providing a secure and
reliable end-to-end system for handling, grading and storing
commodities, matching offers and bids for commodity transactions,
and a risk-free payment and good delivery system to settle transactions,
while serving all fairly and efficiently.
Finance services
The national bank of Ethiopia (NBE) is the
central bank of the country; commercial banking
functions are performed by the state-owned
commercial bank of Ethiopia (CBE) and a
number of private banks; the CBE and private
commercial banks offer foreign exchange
transactions and mail and cable money transfer
services; they also participate in equity investments, provide guarantees
and perform other commercial banking activities.
International Market for Ethiopian Products
Ethiopia has a large population and thus potentially one of the largest domestic markets in Africa. Beyond the domestic
market, by virtue of its membership of the common market for eastern and southern Africa (COMESA) embracing 19
countries with a population of 400 million, Ethiopia enjoys preferential market access to these countries; Ethiopia’s
proximity to the Middle East also offers potential market opportunities.
The country also qualifies for preferential access to European Union markets under the EU everything but arms (EBA)
initiative and to USA markets under the African growth and opportunities at (AGOA) and the generalized system of
preference (GSP). Thus most Ethiopian products can enter into these markets quota and duty free; furthermore a broad
range of manufactured goods from Ethiopia are entitled to preferential access under the generalized system of
preference (GSP) in USA.
Why invest in Ethiopia
Ethiopia’s economy is still young with vast untapped resources and a range of investment opportunities; the country has
comparative advantages in agriculture and agro-processing. The area with most promising potential for investment in the
country today are agriculture, agro-processing, textile and garment, leather and leather products, sugar, cement,
chemical, and pharmaceutical industry, tourism, mining and hydropower.
The ongoing privatization program also presents enormous investment opportunities to potential investors particularly in
the agricultural, manufacturing, hotel and tourism sectors.
?
Agriculture - Ethiopia is endowed with abundant agricultural resources, with altitudes ranging from 148 meters
below sea level to 4.620 meters above it; the country has 18 major and 49 sub agro-ecological zones, each with
its own agricultural and biological potential. Thus the country possesses one of the largest and most diverse
genetic resources in the world.
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Manufacturing - This sector is one of Government priorities and there are enormous incentives for investors
from providing land and capital for investment. Due to the recent development in education there is available
trained and semi-trained human labour at a relatively cheap cost.
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Tourism - Ethiopia has much to offer to international tourists; it has a
unique historical and cultural heritage, magnificent scenery, a surprisingly
cool climate, rich flora and fauna, important archaeological sites and
hospitable people. The northern tourist circuit known as the “history route”
comprises the most important tourist sites in country. Its wealth of tourism
attractions gives it great potential for cultural and educational tourism,
photo safaris, hunting safaris, bird watching, water sports including river
rafting, desert trekking, mountain climbing and ecotourism. Health tourism,
on account of the cool climate and numerous hot springs, is an
additional type of tourism with great potential. Tour operators have shown
considerable growth in recent years. Conference tourism is aided by
the presence of a number of international organizations in Addis Ababa
including the African Union (AU) and the Economic Commission for Africa (ECA).
- Ethiopia offers excellent opportunities for mineral prospecting and development. Geological studies
have identified a favorable geological environment hosting a wide variety of mineral resources. According to the
Ministry of Mines, Ethiopia has substantial deposits of gold, tantalum, platinum, nickel, potash and soda ash.
?
Mining
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Construction services - Ethiopia has extensive opportunities in the construction industry, particularly in the
construction of roads, residential, commercial and industrial buildings, including low-cost housing. Aware of the
crucial role the road sector plays in the development of the national economy, the government has given special
attention to the development of country's road network.
Yeshanew Gonfa & Co
An Associate of the Crowe Horwath Business Alliance
Yeshanew Gonfa & Co is established with individuals with immense experience in auditing, financial and tax consultancy.
Our partners have carried out assignments for many large and small organizations. Yeshanew Gonfa & Co is registered
with the Federal Auditor General of Ethiopia to perform assurance services for companies and not for profit organizations
operating in Ethiopia. Additionally, we are members of the Association of Chartered Certified Accountants, Association of
External Auditors of Ethiopia and the Association of Professional Accountants and Auditors.
We are well-qualified to respond to requirements quickly and effectively. We closely monitor schedules and deadlines,
and regularly perform forecasts to anticipate potential issues or bottlenecks, allowing us to be proactive as opposed to
reactive to situations. Our excellent working relationships with clients and our cooperative work ethic contribute to our
success in meeting project schedules and deadlines.
Yeshanew Gonfa
Yeshanew Gonfa & Co
Ethiopia
Withholding tax on payment of Interest to Non-Residents
We have previously reported that, with effect from
1 January 2015, interest paid by South African
residents to non-residents of South Africa will be
subject to a 15% withholding tax.
This rate may be reduced by virtue and in terms of
applicable Double Tax Agreements which South
Africa has entered into with many foreign countries.
This tax being borne by the non-resident recipient is
a final tax and no further South African tax is payable
by the non-resident on this income. Although the tax
is borne by the recipient, it is collected by way of the
payer withholding the tax from the amount of interest
payable to the non-resident recipient.
Payment of this withholding tax must be made to the South
African Revenue Service (SARS) (on the prescribed form)
by the close of the month following the month in which the
interest is paid. If the amount of the interest is
denominated in foreign currency, the amount must be
converted to Rands at the spot rate on the date of
withholding.
It has just been announced that the implementation of the
withholding tax has been delayed by 2 months and will
now only apply to interest paid on or after 1 March 2015.
Kent Karro
Horwath Taxation (Cape) (Pty) Ltd
South Africa
There are exemptions if the amounts are paid by the
Government, any bank, any headquarter company or
in respect of any debt listed on a recognised Stock
exchange.
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Streamlining of Registration of Public Benefit Organizations in Kenya
When the Public Benefit Organizations (PBOs) Act 2013 (Laws of Kenya) comes into operation, all non-profits registered
in Kenya will be required to maintain one and only one form of legal registration in Kenya. One of the key objectives of
the PBOs Act is to streamline, clean-up and harmonize the registration process of non-profits towards greater national
and public accountability.
Due to historical reasons, there are non-profits in Kenya that are registered under more than one legal registration option.
The PBOs Act has given the following general and specific conditions:
(1)
A public benefit organization shall be registered under the PBOs Act for it to enjoy the benefits that accrue to
Public Benefit Organizations.
(2)
No organization that is registered under any other law in Kenya shall be registered under this Act while its
registration under that other law subsists.
(3)
Registration of an organization under the PBOs Act supersedes any prior registration of that organization under
any other law in Kenya.
(4)
Where an organization is registered under the PBOs Act and under any other law, that organization shall be
deemed registered under the PBOs Act and that other registration shall be deemed invalid.
(5)
Organizations shall be deemed to be similar under the PBOs Act if the name, objects and the officials, taken
together, are similar whether wholly or partially.
No organization shall purport to be a Public Benefit Organization unless that organization is:
(a)
registered under this Act;
(b)
where registered under any other written law in Kenya or not registered under any other written law in Kenya, the
PBO's Authority has bestowed on that organization the status of a public benefit organization.
Reference to “not registered under any other written law” suggests that there could be “legally” operating non-profit
organization but with no legal home within the body of legal registration regimes (options) in Kenya. What the drafters of
the PBOs Act had in mind was a major but silent non-profit sub-sector in Kenya which is estimated to have over 600,000
entities that are handling billions of Kenya Shillings annually. They are commonly known as Community Based
Organizations (CBOs) and NGO networks.
CBO's are active at local grass root levels but are in fact officially given recognition by the government through the
government's ministry responsible for social services. NGO Networks do not have any form of registration and largely act
as energy groups both for coordination of common activities, learning and knowledge sharing avenues and are generally
good for political and non-political agitation. Networks are also effective at coordinating sector-wise activities to reduce
wasteful duplication of effort and unwarranted NGO rivalry.
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Crowe Horwath
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Existing Registration Avenues and Alternatives
in Kenya
There are five avenues (options) for legal registration
as a non-profit in Kenya. A non-profit (by choice) and
before 1990 could be legally registered under the
Societies Act; Trustees Perpetual Succession Act; a
company limited by guarantee; as a foreign branch
of a non-profit in another country (also under the
Companies Act) and since 1990, the fifth legal option
was created under the NGOs Co-ordination Act No.
19 of 1990.
(f)
To date, the five statutory registration options remain
on the statute books of Kenya. Over time, existence
of the five legal registration options has caused
considerable legal and political discomfort to the
government of Kenya. The PBOs Act 2013 is
essentially, but not wholly, an attempt to address
both legal and political problems in the non-profit
sector in Kenya.
(a)
an application form (in a prescribed format);
(b)
proof that it is a legal entity in another country;
(c)
the organization's address in Kenya; and
(d)
a written statement from a representative of the
organization's headquarters with authority to
provide such statement stating:
such other particulars or information as may be
required by the PBOs Authority in order to assist
the PBOs Authority to determine whether or not
the organization meets the requirements for
registration under the PBOs Act.
An international non-governmental organization may
register as a public benefit organization by filing the
following documentation:
In order to bring some form of legal order, the PBOs
Act has set out the following requirements for
registration and recognition in Kenya of non-profits:
(i)
the purposes of the international nongovernmental organization;
An application for a PBO registration must include:
(ii)
a general description of the activities that
the international non-governmental
organization is planning to carry out in
Kenya; and
(iii)
the name, address and other contact
information of the authorized agent (in
Kenya).
(a)
a copy of the constitution or other
constitutive document of the public benefit
organization;
(b)
names and addresses of the founders of the
public benefit organization;
(c)
public benefit purposes for which the PBO is
organized and operated and all of the
principal activities that the PBO will engage
in;
Note:
All quotations / extracts are from the PBOs Act No. 18 of
2013 of the Republic of Kenya. The author takes
responsibility for all editing done.
(d)
the postal and physical address of the
principal place of doing business of the
public benefit organization;
Erastus K Omolo
Horwath Erastus & Co
Kenya
(e)
the prescribed fee (national PBOs vs
international PBOs);
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Crowe Horwath
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2015 Outlook for Tourism in Africa
Over the decades, globally, tourism has experienced continued growth and deepening diversification to become one of
the fastest growing economic sectors in the world. In fact, the business volume of tourism equals or even surpasses that
of oil exports, food products or automobiles. As such, tourism has become one of the major players in international
commerce, and represents at the same time one of the main income sources for many developing countries.
Source: World Tourism Organisation (UNWTO)
The global spread of tourism in industrialised and developed states has produced economic and employment benefits in
many related sectors - from construction to agriculture or telecommunications. These dynamics have turned tourism into
a key driver for socio-economic progress. Consequently, modern tourism is closely linked to development and
encompasses a growing number of new destinations.
According to the UNWTO, the UN agency dedicated to tourism, tourism is defined as a social, cultural and economic
phenomenon which entails the movement of people to countries or places outside their usual environment for personal or
business/professional purposes. The people engaged in the activity referred to as tourism are called visitors (which may
be either tourists or excursionists; residents or non-residents) and their [tourism] activities, may involve tourism
expenditure.
Typically, tourists undertake the activity of tourism for a specific purpose. The main purpose of a tourism trip is defined as
the purpose in the absence of which the trip would not have taken place and enables the classification of tourism trips
according to the main purpose into one of the nine established categories, namely:
business & professional,
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visiting friends & relatives (VFR),
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holidays/ leisure & recreation,
?
education & training,
?
health & medical care,
?
religious & pilgrimages,
?
shopping,
?
transit, and
?
other.
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Whilst the African Continent boasts some of the most unique natural attractions and is often considered as primarily a
leisure destination, based on our experience in many destinations across the Sub-Saharan Africa region, we have long
held the view that, in the short to medium term future, tourism on the African Continent is and will continue to be reliant on
and influenced by the robustness of the respective country's business environment.
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Crowe Horwath
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As the number of countries on the African Continent demonstrates political stability, economic reform and diversification,
so the Continent becomes more interesting to investors. And for those African governments who have embraced an
open-skies policy whereby their country is easily accessible both from within and off the Continent, [business] tourism is
likely to continue to contribute meaningfully to their country's economy.
So, what, in our opinion, will influence [business] tourism on the Continent in 2015? We believe there are three key
factors that could (positively or negatively) influence tourism on the Continent in 2015, namely:
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Democratic governance: Many African countries are scheduled to hold elections in 2015. In the latter part of 2014
the actions of many of the current leaders who are not eligible for re-election have raised concerns about
democratic governance in the lead up to these elections. Political stability as characterised by the peaceful
transition of a country's leadership from one political party to another via democratic elections will be closely
monitored throughout 2015.
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Economic growth: According to the African Development Bank, the Continent's economy is anticipated to register
economic growth of between 5 and 6 percent in 2015; higher than the estimated 4.8 percent growth recorded in
respect of 2014. However, we expect those economies reliant on revenues derived from crude oil exports are
likely to be more fragile this year. It is still too early to fully understand what effect the falling global oil price will
have on these African countries' economies.
?
The emerging African middle class: According to a Standard Bank Group report of August 2014 which focussed on
eleven (11) of sub-Saharan Africa's top economies, there are an estimated 15 million middle class households, up
from an estimated 4.6 million middle class households recorded in 2000. (A middle class household was defined
as spending a minimum of US$23 per day).
Our predictions for tourism development on the Continent in 2015 include:
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Countries situated in the East African sub-region are likely to command more interest from potential investors as
opposed to countries situated in the West African sub-region in light of the Ebola epidemic and the resultant
negative impact the epidemic has had on economic activity in sub-region and related negative perceptions of the
sub-region.
?
The East is likely to remain a key source of infrastructure funding sought by African countries.
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Tourism infrastructure development will continue to be focussed in primary cities.
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The interest in mixed-use projects is likely to continue to gain momentum thus addressing the shortages evident in
many primary cities of A-grade office space, corporate apartments, and hotel accommodation of an internationally
acceptable standard.
?
With continued growth of the African middle class, we anticipate this will lead to a more robust domestic tourism
market in many African countries as citizens are likely to have more disposable income available for tourismrelated activities.
Our hot picks, in no particular order, for 2015:
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Ethiopia
?
Ghana
?
Kenya
?
Nigeria
?
Rwanda
?
Senegal
?
South Africa
?
Tanzania
Michelè De Witt
Horwath HTL
Cape Town, South Africa
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Crowe Horwath
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Our African Network
Contact Information
Algeria
Mauritius
Hamza & Associés
Tele: +213 20 508188
Email: h.tarek@hamza-dz.com
Crowe Horwath (Mur) Co
Tele: +230 208 8684
Email: contactus@crowehorwath.mu
Angola
Mauritania
Horwath Angola - Auditores e Consultores, Lda
Tele: +244 925 289207
Email: carlos.florencio@crowehorwath.ao
Cabinet Exaco Amic
Tele: +222 45 25 87 00
Email: info@exacoamic.com
Cote d’Ivoire
Morocco
Uniconseil
Tele: +225 08212520
Email: tiemeleyaod@yahoo.fr
Horwath Maroc Audit
Tele: +212 537 77 46 70
Email: adib.benbrahim@crowehorwath.ma
Cameroon
Nigeria
Audit & Financial Consultants
Tele: +237 33 42 1969
Email: njc.calvin@gmail.com
Horwath Dafinone
Tele: +234 1 545 1863
Email: ede@dafinone.com
Djibouti
Reunion
Crowe Horwath Djibouti Sarl
Tele: +253 2135 7517
Email: melanie52300@gmail.com
Crowe Horwath Fiduciaire des Mascareignes
Tele: +262 2 6290 8900
Email: a.lala@fdm.re
Egypt
South Africa
- Cape Town
Crowe Horwath Dr A M Hegazy & Co
Tele: +202 376 00516
Email: dramhegazy@crowehorwath.eg
Ethiopia
Yeshanew Gonfa & Co
Tele: +251 0 118693141
Email: ygandcompany@gmail.com
Kenya
Horwath Erastus & Co
Tele: +254 20 3860513
Email: erastuscpa@kenyaweb.com
Libya
Ahmed Ghattour & Co
Tele: +218 21 444 4468
Email: aghattour@ghattour.com
Madagascar
Cabinet Genevieve Rabenjamina
Tele: +261 202 221121
Email: cce@moov.mg
Mali
Inter Africaine d’Audit et d’Expertise (IAE-SARL)
Tele: +223 20 286675
Email: moussa.m.konate@gmail.com
Horwath Zeller Karro
Tele: +27 21 481 7000
Email: contactus@crowehorwath.co.za
Horwath HTL (South Africa)
Tele: +27 21 527 2100
Email: capetown@horwathhtl.co.za
- Johannesburg
Horwath Leveton Boner
Tele: +27 11 217 8000
Email: info@crowehorwath.co.za
Tanzania
Horwath Tanzania
Tele: +255 22 2115251
Email: chris.msuya@crowehorwath.co.tz
Tunisia
Horwath ACF
Tele: +216 71 236000
Email: noureddine.benarbia@crowehorwath.com.tn
Zimbabwe
Welsa International Chartered Accountants
Tele: +263 772 294 913
Email: wssibanda@gmail.com
Crowe Horwath EA, Crowe Horwath (Mur) Co, Crowe Dr A M Hegazy & Co, Crowe Horwath Djibouti, Horwath Zeller Karro, Horwath Leveton Boner, Horwath Maroc Audit, Horwath Dafinone, Hamza & Associés, Horwath Angola, Uniconseil,
Audit & Financial Consultants, Cabinet Genevieve Rabenjamina, Yeshanew Gonfa & Co, Inter Africaine d’Audit et d’Expertise (IAE-SARL), Horwath ACF, Fiduciaire des Mascareignes, Horwath Erastus & Co, Ahmed Ghattour & Co,
Horwath Tanzania, Cabinet Exaco Amic and Welsa International Chartered Accountants are separate and independent members or business associates of Crowe Horwath International, a Swiss verein (Crowe Horwath). Each member or
business associate 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 or business associate of Crowe Horwath and
specifically disclaims any and all responsibility or liability for acts or omissions of Crowe Horwath or any other Crowe Horwath member or business associate.
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