by JAMES MbUGUA

As the rising inflation continues to bite, several groups are asking that the government intervenes to rescue the situation.

Consumers, producers as well as government depart-ments have seen their spending power eroded significantly in the last few months and they are now demanding wage rais-es, tax and import duty waivers and increased budgetary alloca-tions.

However, these demands are unlikely to be met as resettle-ment of the displaced persons will likely divert resources from other sectors.

The costs associated with the IDPs is proving to the be the bull in the China shop for gov-ernment policy makers ahead of the nation’s budget reading next month. The budgetary al-location for the IDPs is likely to be high with an estimated sh30 billion needed for the success of the exercise.

After the post-election chaos, an estimated 500,000 peo-ple were displaced from their homes by outbreaks of violence across the country and many are currently living in camps. The costs of sustaining them in these camps is, according to one official, unsustainable.

Talk from senior treasury officials and independent eco-nomic analysts now suggest that the IDPs issue will likely

dominate the budget with little or no relief for consumers and producers in terms of taxes and duties.

Treasury Ps, Joseph Kinyua, in an exclusive interview with the star, while admitting that various sectors were facing le-gitimate difficulties nonetheless revealed the dominant school of thought at Treasury.

“We are coming from a very difficult situation and we need more resources,” said Kinyua on why government won’t give subsidies for farm inputs which farmers and Ministry of Agri-culture official have asked for.

“What should we trade off, give subsidies or IDPs, should we give subsidies which deny us of those resources to deal with the IDPs?” asked the Ps.

But with the food prices be-ing the largest driver of the current price inflation levels, economists and stakeholders in agriculture have argued that the farmers should be assisted to boost food supply in the coming months during which global food prices are expected to keep rising. Us economist, Professor Jeffrey sachs, during a recent stop over in Nairobi, said that subsidies for small

holder farmers were vital to avert a food crisis in the coun-try.

At Treasury, returning the country to economic stability which necessarily requires the return of IDPs to their farms is a priority. Professor Terry Ryan, one of Africa’s most eminent economists, says that in the short to medium term, stability is paramount even at the expense of growth. “There are only three policies whether you are in Germany, the Us or Netherlands, they are always the same,” said Ryan. “Growth, equity and stability and I would regard stability as the most im-portant right now.”

Besides farm-inputs subsi-dies, manufacturers such as millers and bakers have asked for exemptions from import duties which have risen with the mounting global food prices while workers in many sectors have asked for wage raises to cope with the eroded purchas-ing power caused by high con-sumer prices.

Recently, prison warders went on strike demanding bet-ter terms. Nurses and teachers too have threatened to go on strike over wages and it is said the police are also grumbling over poor pay.

Meanwhile, government ministries and departments are also asking for increased alloca-tions particularly the ministries of Agriculture and Tourism.

by PEtEr KirAGU

A MAJoR deal on the East Af-rican common market may be sealed this week in a meeting by the member states which kicks off on Wednesday.

The high level task force meeting is aimed at fast track-ing the process of ratifying the common market protocol.

The meeting will also be seeking the way forward on the issue of non tariff barri-ers that keep recurring in the region.

once concluded, the deal on the barriers will make it possi-ble for citizens of the five part-ner countries to move freely in the region. The agreement will also ease the movement of goods and workers as well as give citizens rights of residence within East Africa without restrictions.

EAC member countries include Kenya, Tanzania, Uganda, Rwanda and Burundi. The later two members joined the community in July last year. According to the new per-manent secretary for the East

African Community David Nalo, the Kenyan negotiating team will be holding a two-day retreat from today and tomor-row at Utalii College.

The retreat’s objective is to come up with a common posi-tion on aspects of the above protocols. The retreat will be addressed by experts from the legal fraternity, transport sec-tor, the capital markets and the services sector.

The EAC task force met in Kigali Rwanda from April 14 to 22 this year where they con-sulted and reached consensus on the review of the model of the EAC common market pro-tocol. The meeting also agreed on free movements of goods, persons, workers and self em-ployed persons. Tanzania did not, however, attend the Kigali meeting but is expected in this Wednesday’s meeting where its comments will be looked into.

It would be interesting to see what kind of suggestions Tanzania will present bearing in mind its perceived fear of integration especially where Kenya is concerned. only

recently, Tanzania barred its citizens from participating in the safaricom initial public offering even though EAC member states citizens were classified in the same category of local investors.

since its establishment, EAC has made steady progress among them confidence building and harmonisation of partner states’ policies and programmes. A primary objec-tive is to reinforce a common East African identity with the vision of a fully integrated East Africa, where there shall be guaranteed movement of the factors of production.

There are also plans for a political union, the East Afri-can Federation, with a com-mon President (initially on a rotation basis) and a common Parliament by 2010.

However, some experts like those from Kenya Institute of Public Policy Research and Analysis (KIPPRA), have noted that the plans are too ambitious to be met by 2010 because a number of political, social and economic challenges

are yet to be addressed. steps already taken include the in-troduction of the East African passport and harmonisation of the vehicle transit procedures and requirements to ease bor-der crossing. other measures include the already established convertibility of East African currencies (since 1997) and preparations towards the realisation of a single currency by 2012.

Can YOU outsmart the expert?

12 Nairobi Star H Monday, 12 May 2008

Up to date, accuratebusiness information

NEWS YoU CaN USE, EVErY DaY.

Last week, we established that if safaricom declares sh21 billions in profits after tax, the PE ratio would be 9.52. that emerging market telephony has an average PE of 17.00, therefore, the fair market price would be sh5/9.52 x 17 = sh8.928 per share. I congratulate Raj Bains, who had the first correct answer.

Now, we have to survey the landscape and take some other factors into consideration.

the first issue is whether the market is bullish or bearish. Perfectly good companies will struggle to make upside progress in a bear market.

a rising tide (bull market) tends to float a lot of boats. so we need to put a bias into the model.

I have a dear friend and one of the best traders I know and when folk ask him for investment advice, he responds, “It’s a bull market, don’t you know?”

Many People are disappointed because he does not say more than that but he is signaling a key consideration.

the second consideration is the set up. Do buyers have the holding power? How is the equation between buyers and sellers? It’s not rocket science.

there are hundreds of markets all over Kenya. the bourse is no different. Let’s start with Kenya retail, that’s you and me.

are we all going to be ‘scalpers’ and ‘flippers’? Most People have

taken short term loans; the year has been tricky for all of us.

It’s going to get a lot better but many folk will be biased towards booking a profit and flipping the shares quickly. We also have foreign investors? are they going to be of the same mind set?

and somewhere in the background, Vodafone might be lurking in the shadows.

I know if I was Mr sarin (Vodafone head) I would be thinking I need 16 per cent to put myself in the majority and I would be happy to pay a premium for that 16 per cent so that I am finally in a majority and in charge.

and this is where investing becomes more of an art than a science.

and the final factor is we need to study the tape, that is the share price from the day it starts trading.

If you really want to maximise your returns (and for many this is a very big outsized investment), you need to know the price at all times.

It is going to make a very big difference if you sell at 7, 8 or 10. If it trades sh10.00 and you are expecting your very kind broker to remember to call you, there is a fatal flaw in your strategy.

You need to be calling him or her and saying, ‘Its trading at sh10 , please sell my shares.’

Aly-Khan Satchu www.rich.co.ke is the author of Anyone Can Be Rich, available in local bookshops

iDPs to StraiN trEaSUrY’S KittY

Common market deal likely on Wednesday

HoPEFUL: PS David Nalo

Photo/charles kiMani

aLY KHaN’SStar PortFoLio

Star biZ

DEEP LOOK At SAFAriCOM SHArES

HarD PrESSED: treasury Permanent Secretary Joseph Kinyua.