What's Inside

• Kenya’s Budget Cuts

• Glovo Exits Ghana

• Don't forget to attend these events...

• Headlines you might have missed

• Interview of the Week

Kenya’s Budget Cuts

As Kenya tries to move closer to achieving a balanced budget amidst high recurrent expenditure, looming debt repayments and lower than projected revenue, Treasury has revised its budget estimates for the next fiscal year downward by KSh. 273 billion. 

• In a memo to Parliament, Treasury said the budget cuts were informed by revenue shortfalls, forcing it to “contain borrowing and rationalise expenditure.”

• The total budget has now been cut from KSh 4.2 trillion contained in the Budget Policy Statement to KSh 3.91 trillion.

• These include budget cuts in education, agriculture, water, healthcare, roads, transport, and a halving of the allocation for the fuel subsidy program.

By March, the total revenue collection fell short of target by KSh 270.7bn, which was mainly attributed to under collection of ordinary revenues. Combined with the government’s plan to narrow the budget deficit, the new budget plans point to increasing austerity measures midst looming debt repayment cycles.

According to IMF figures, Kenya’s aim of achieving a KSh 514.7bn budget shortfall in the next fiscal year would be the narrowest budget gap in more than a decade. This has changed from a projected deficit of 3.9% of GDP-KSh 703bn) in the budget policy statement in February.

Why it Matters

While austerity measures will provide Kenya with much needed cuts in expenditure, it will also redefine development goals and force the government to accelerate measures aimed at increasing revenues in the next year. This includes expanding not just the tax base, but also accelerating economic recovery to boost revenue collections. 

Budget cuts will also have ripple effects not just on the public sector, but also on the private sector due to reduced government spending. Some cuts such as the halving of the fuel subsidy may lead to fuel price hikes, for example, if global oil prices rise significantly.

Among the areas Treasury has invited public participation on-with a deadline of May 13th-are contributions and ideas on accelerating economic recovery, bringing down the cost of living, and accelerating the recovery and growth of the private sector and MSMEs.

Glovo Exits Ghana

Glovo will shutdown its operations in Ghana on May 10 to focus on other profitable African markets. 

• Although the company acknowledged the potential inherent in the Ghanaian market, investment has not proven profitable due to high inflation and increased taxation. 

• Glovo had invested US$ 3.7 million in 2022 to expand its operations in all Ghanaian regions, hoping to serve the country’s growing population and improved internet penetration. 

• The food delivery platform sent an email to one of its restaurant partners, promising to settle any outstanding payments before the exit. 

“While we recognise the potential of the Ghana market, building a stronger position in the market and achieving profitability would require substantial investment over an extended period of time,” the company said in a statement sent to its customers in the country.

Glovo has a strong market presence in Kenya, Morocco, Uganda, Cote D’Ivoire, and Nigeria. Over the years, the delivery platform has broadened its utility potential by allowing customers to not only order food but also groceries, pharmaceutical and sanitary products, and gifts.

Their month-on-month growth in Ghana averaged 30 – 45%, trailing other countries where the app dominates market share. 

Glovo’s decision will have a serious impact on Ghana’s retail and restaurant industry whose growth has been influenced by the availability of delivery platforms carrying out services they could not offer. The platform collaborated with almost 400 retail stores dealing in different products, who are likely to face a revenue crunch. 

The exit follows Jumia Food which announced in December last year that it was halting food delivery operations in Ghana and other African markets.

Meanwhile, a recent study by Kenya’s competition authority showed that online food and groceries delivery platforms generated US$103mn in 2023-a figure that is projected to grow by more than 19% annually.

Don't forget to attend these events...

Headlines you might have missed

• Investment firm ETC Group’s local subsidiary Saturn Resources has acquired Shanta Gold, which discovered three gold fields in Western Kenya in 2022.

• Ethiopian startup Kubik, which produces cheap building materials from plastic waste, recently closed its seed round at US$5.2mn.

• Delivery service Glovo is shutting down operations in Ghana on May 10th, citing the market as not profitable due to high inflation and increased taxation.

• Agritech startup iProcure, which raised millions of dollars in funding, was placed under administration on April 26.

Interview of the Week

The Future of the Workplace in Africa: The Kenyan Wall Street sits down with the Pan-African team at Horizons Offices to explore how the workplace has changed over the past 10-years and predict what the next 10-years have in store.

Have a great week!