Tax amnesty planned to spur Gems listings

Small-sized companies that list on the Nairobi Securities Exchange (NSE) will be spared accumulated penalties and interest on tax arrears for previous two years in proposed policy measures by Treasury secretary Henry Rotich.

The proposal will only apply after the largely family-owned businesses sell part of the company to the investing public through the Nairobi Securities Exchange Growth and Enterprise Market Segment (Gems).

The Gems segment, launched in July 2013 with relaxed listing rules targeting the predominantly small- and medium-sized enterprises, has struggled to attract new listings since June 2016.

“Uptake has not been good in view of potential back taxes that the enterprises may be facing,” Mr Rotich said.

“I propose to introduce an amnesty on the tax penalties and interest, on any outstanding tax for two years prior to the listing, for SME’s that list under the Gems programme to encourage them to list and clean their tax records. The principal taxes shall, however, be paid in full.”

The amnesty call was fronted by the Capital Markets Authority (CMA), which had proposed a conditional full tax pardon, including the principal sum, for firms that remain listed for at least five years.

Only Flame Tree Group Holdings — a profitable fast-moving consumer goods (FMCG) company with operations in five regional countries and Dubai — remains on a relatively strong financial footing among the five that listed on the Gems.

Investors in shoe vendor Nairobi Business Ventures, real estate developer Home Afrika and investment firm Kurwitu Ventures have gained little while Atlas African Industries has entirely collapsed.

The NSE is running an incubation and acceleration programme dubbed Ibuka (Kiswahili for emerging) where prospective companies access consultants and financial advisers to help them restructure the business and prepare them for capital financing ahead of listing.

The NSE said in March that three companies had been on-boarded on the programme, which takes six to 18 months, with 20 others having shown interest.