<h1 style="text-align:center;">RENEW’s Legal Corner: November 2021</h1>RENEW’s Legal Corner is designed to keep you updated with the regulatory progress and changes&nbsp;happening throughout the different jurisdictions in which RENEW operates. This month has seen several regulatory changes in Ethiopia, Rwanda and Uganda. Below are the highlights:<figure class="image"><img src="/uploads/team_7fa02694c2.jpg"></figure><hr>ETHIOPIAThe Capital Market Proclamation was Published in the Negarit GazetteAs part of the reform agenda, the Ethiopian Government aims to correct imbalances and safeguard macro-financial stability in the country. This includes making improvements to access to finance and the development of a capital market. Consequently, Parliament enacted the Capital Market Establishment Proclamation No. 1248/2021. After some wait since the enactment, the Proclamation was published in the Negarit Gazette this month. Here is our <a href="https://www.renewcapital.com/resources/blogs/What%20We%20Know%20About%20the%20Establishment%20of%20a%20Capital%20Market%20in%20Ethiopia%20">blog</a> on the last draft proclamation.The English Version of the New Commercial Code was PublishedAfter the new commercial code was enacted by the Parliament in March 2021, everyone has been looking for the final and codified version. However, the new commercial code was only printed in Amharic and the English version was only published this month. Here is our<a href="https://www.renewcapital.com/resources/blogs/The%20Commercial%20Code%20of%20Ethiopia%20is%20Changing%20How%20the%20Country%20Does%20Business"> blog</a> on the changes introduced by the new commercial code.The Council of Ministers Enacted an Amendment to the Income Tax RegulationThe Council of Ministers issued an amendment to the 2017 Income Tax Regulation on September 23, 2021. The amendment aimed to:1. Clarify some of the provisions of the Income Tax Regulation for the purpose of applicability and to change certain provisions which have a negative implication on some economic activities; and&nbsp;&nbsp;2. Reduce some of the hurdles and increase the inflow of investments.The major elements introduced include:<ul><li>Depreciation in relation to capital goods leasing - The amendment allows depreciation for a business asset held under a hire-purchase agreement;</li><li>Depreciation in relation to buildings - There has been a misinterpretation of the income tax regulation on how depreciation is calculated in relation to buildings partially used as a business asset. The amendment clarifies this provision and states that it will not apply to buildings that are not completed.</li><li>Loss carry forward - The amendment also cleared a misunderstanding in the taxpaying community that is associated with loss carry forward. The amendment clarifies that no taxpayer is allowed to carry forward a loss of more than two terms and not beyond five years.</li><li>Foreign exchange loss - The tax regulation only allows deduction of foreign exchange loss from foreign exchange gain. However, most companies, other than banks, which have foreign exchange loss might not have foreign exchange gain. Hence, to rectify this, the revised proclamation divides capital gains loss into two categories:<ul><li>If an entity incurred foreign exchange loss in relation to purchase of capital goods, the loss shall be added to the cost of the capital goods and be subjected to depreciation.</li><li>If the foreign exchange loss is not related to the purchase of capital goods, the loss will be considered as deductible for the tax period.</li></ul></li><li>Calculating capital gains tax - Inflation adjustments are to be made in relation to transfer of shares and bonds while calculating capital gains tax. Under the income tax regulation, capital gains tax is calculated on disposal of either immovable property or shares and bonds. However, only disposal of immovable property was subject to inflation adjustment for the purpose of calculating capital gains tax.&nbsp;</li></ul>Companies are Now Mandated to Prove “Cash on Hand”The Addis Ababa City Revenues Bureau issued a circular mandating companies to present evidence if they record “cash on hand” in their balance sheet. The main purpose of this is for the Revenue Bureau to identify if the cash on hand indicated on companies’ books exist at banks or on hand. The Bureau is ensuring that companies accurately record their financials and if for some reason a company can’t present evidence of a “cash on hand”, the Bureau will presume that the company has used the money off the books for backdoor business activities. In which case, the Bureau might charge a presumptive tax on the revenue that it could have received.<hr>RWANDANew Data Privacy Law EnactedAs of October 2021, companies and individuals in Rwanda have two years to comply with new personal data processing requirements, which protect an individual’s data and privacy. This new regulation requires an individual’s consent in order for their personal data to be collected and stored. It requires all companies and individuals to be able to prove that explicit consent was given when it comes to the collection and processing of personal data, and it requires all individuals whose data is collected to be made aware of how and where their information is being used.&nbsp;A key component of this new law is the ability for an individual to withdraw consent at any time and also for individuals to be able to request access to any personal data that a company may be storing. Once this law is enforced in 2023, there will be penalties for companies and individuals who are accessing, collecting and using personal data without consent. Learn more about these penalties and details about this new regulation<a href="https://www.newtimes.co.rw/news/new-law-outlines-penalties-mishandling-personal-data"> here</a>.<hr>UGANDAImplementation of Tax Compliance by the Uganda Revenue Authority (URA)On November 1, 2019, the URA introduced the Digital Tax Solution/Stamps (DTS), and later introduced the Electronic Fiscal Receipting and Invoicing Solution (EFRIS) on January 1, 2021,&nbsp; both aimed at improving business efficiency. A countrywide enforcement exercise was launched on November 1, 2021 which enforces the issuing of an e-invoice/e-receipt for goods and services provided by VAT-registered taxpayers. In addition, all gazetted products must bear a digital tax stamp.&nbsp; Failure to issue an e-invoice/e-receipt or to use a digital tax stamp are now offenses punishable by law.The Uganda Revenue Authority (URA) has recently been focusing on supermarkets that are not complying with issuing e-invoices and e-receipts. Learn more <a href="https://www.monitor.co.ug/uganda/business/finance/ura-to-penalise-supermarkets-which-don-t-issue-e-invoices-e-receipts-3604452">here</a>.&nbsp;&nbsp;Photo by Imran Mazar

Updates to regulatory changes in Ethiopia, Uganda and Rwanda: November

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RENEW’s Legal Corner: November 2021

<h1 style="text-align:center;">The Rise of "Re-Pats" -- African Talent Returns Home</h1> The financial crisis is not all bad news. One interesting repercussion is the effect on decades of immigration into the United States for a “better opportunity.” While immigration overall has slowed down, there is new phenomenon which is uniquely affecting Africa: people leaving America for greater opportunity in their home country. <a href="http://news.bbc.co.uk/2/hi/business/8370765.stm">Caroline Duffield’s BBC article</a> tracks the influence of this dynamic in Nigeria.The trend follows high quality business talent in the U.S. leaving either by choice or via a lay off, back to their home country where they had been watching growth and opportunity soar from afar. Now is the time to return ‘home’, bringing a wealth of business acumen to countless endeavors. One such individual quoted in the article said, “I came back to Nigeria after 10 years. I realized this place was calling for young entrepreneurs - to breathe new life into the system.”This shift has gained enough momentum to earn a catchy name, “re-pats”, taking cue from the original expatriate movement that marked last century. The success of a recruitment agency that specializes in bringing Nigerian talent back to Africa truly underscores the process, “In 2003, we thought around 5,000 people a month were coming in," says Funto Akinkugbe from Find A Job In Africa. "That's multiplied by three now. We're looking at the best part of 15,000 people on a monthly basis."While the challenges facing business in Africa still exist, this influx of new and experienced talent is better equipped to overcome barriers and continue to post strong growth in the region. One entrepreneur simply sums up the opportunity to become a re-pat, “It's changing fast - and you're either part of it, or not."Stories like this and many others focused on the growing business opportunities in Africa can be found on the new BBC program, <a href="http://news.bbc.co.uk/2/hi/in_depth/business/africa_business/default.stm">Africa Business Report</a> on BBC World News.

The financial crisis is not all bad news.

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The Rise of "Re-Pats" -- African Talent Returns Home

<h1 style="text-align:center;">Three Lessons From Nairobi and Kigali</h1> When I returned the week before last from a trip to Nairobi and Kigali, my brain felt like it had eaten a huge meal and needed to digest. I've had a chance over the past two weeks to review the many conversations I had with business owners and public and private sector leaders. (I think I doubled the weekly revenues of a few coffee shops in Nairobi and Kigali.) After some reflection, three themes have bubbled to the surface:<ol><li>Capital-starved does not equal capital ready. Most small businesses in Kenya and Rwanda are capital-starved -- even ones that are turning a profit. But in the vast majority of cases, there is much pre-work to be done within the business to lay the foundation upon which an infusion of capital can grow the business. Without this pre-work, capital can exacerbate unresolved issues and ultimately hurt the business.</li><li>Business owners in search of capital need to understand exactly what their options are. Equity is a powerful, patient instrument that will help close the gap between SMEs and big business in East Africa. But it comes with a set of responsibilities and expectations that are poorly understood, for the most part, by business owners. Yes, equity entails some loss of control -- but also a host of connections and resources that can propel the business in new ways. Owners need a place to think hard about not just how much, but also what kind, of financing will serve their business best. There is a lot more to capital than money.</li><li>Managers need a coach, not a consultant.Management teams need their capital partners to help implement change, not tell them what to do. Before this trip, I did not really grasp the difference. Both investor and business owner need to be prepared to roll up their sleeves and get to work both "on" the business and "in" the business.</li></ol>The common theme here is the need to understand your business partner very well. Our team thinks that is best accomplished face-to-face, so RENEW is rolling out a series of workshops this spring in Nairobi, Kigali and Kampala that will help business owners get ready to do business with the West. Stay tuned

When I returned the week before last from a trip to Nairobi and Kigali...

Three Lessons From Nairobi and Kigali

<h1 style="text-align:center;">Workshops in Kenya, Rwanda and Uganda Announced</h1> If there is a recurring theme in RENEW's work, it is that there is tremendous potential locked up in African businesses - but a great deal of work to be done to help entrepreneurs unpack that potential for U.S. investors.Later this month, RENEW will launch a series of workshops, The Unwritten Rules of U.S. Investment, designed to walk a small group of business owners through the expectations and fears that U.S. investors bring to the table. Based on this knowledge, our team will coach participants to make a strong case for their business.The dates are as follows: Nairobi: March 18-19 Kigali: March 22-23 Kampala: March 25-26The workshop will provide each participant with:<ul><li>Insights into U.S.-Africa investment trends - what U.S. investors and business partners are looking for in Africa.</li><li>An understanding of the unwritten expectations and assumptions that American and other Western investors bring when they look at your business.</li><li>Practical solutions to common problems that occur between business owners and U.S. investors including pre-investment communication and the due diligence process.</li><li>An understanding of the different types of financing available including debt, equity and revenue-sharing – and the potential benefits and drawbacks of each.</li><li>A one-on-one feedback session with a RENEW analyst during which you will have the opportunity to pitch your business, then receive feedback and coaching.</li></ul>Our team will also use the workshops to gather feedback from business owners about their expectations and frustrations in working with U.S. investors. &nbsp;

Later this month, RENEW will launch a series of workshops...

Rwanda

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Workshops in Kenya, Rwanda and Uganda Announced

<h1 style="text-align:center;">Announcing an Investment Proposal Template</h1>We’d like to share with you to a new and growing section on our website, <a href="https://renewcapital.com/marketplace/business-toolkit">Business Toolkit</a>. As we’ve been traveling East Africa and talking with small- to medium-sized businesses (SME), we are constantly reminded that under unpolished exteriors are incredible investment opportunities.For that reason, RENEW hopes to grow our Business Toolkit to help SMEs speak the language of Western investors, in simple, straightforward ways. We also strive to provide investors with the information they must have, without placing an unrealistic burden on African SMEs. We’ve found this often just isn’t possible with existing tools created for Western or advanced markets. So we’d like to announce that we’ve created a simplified, relevant <a href="https://renewcapital.com/sites/default/files/Investment_Proposal_Template_1.doc">RENEW Investment Proposal Template</a>, which we are planning to debut at RENEW’s three upcoming SME workshops in Uganda, Rwanda and Kenya this month. With the existing RENEW SME Application, the RENEW Marketplace, RENEW Opportunity Profiles, and forthcoming templates, RENEW hopes to accomplish our goal of simplifying the market for investors and SMEs. RENEW is working hard to make this complex investment space as simple as possible for all involved.But what makes RENEW’s Business Toolkit different? We speak simply, and only request the information that is absolutely relevant to investing in the African middle-market. Simplicity is what will translate to SMEs, and simplicity is how investors will find order in the chaos.How many opportunities have been missed because African SMEs and Western investors couldn’t translate, couldn’t find the middle ground that bridges a complex market and an emerging one? As a result of these tools and RENEW’s sourcing services, we hope to significantly decrease the number of opportunities that are missed.Please continue to check back as we grow our Business Toolkit!

We’d like to share with you to a new and growing section on our website.

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Announcing an Investment Proposal Template

<h1 style="text-align:center;">Business Workshops in Kenya, Rwanda and Uganda a Success</h1> Businesses gathered in Nairobi, Kigali and Kampala recently to prepare for U.S. investors. Working with local partners, RENEW successfully launched a new workshop series entitled The Unwritten Rules of U.S. Investment. The three-country pilot attracted more than 30 local businesses looking for information on how to engage investors from the West. The workshop aimed to offer business owners a unique advantage when interacting with American investors. The workshop discussions focused on understanding the expectations of American investors and where African businesses traditionally under perform. Based on interviews with U.S. investors, RENEW presenters offered unique feedback to businesses on a variety of topics including some deemed culturally sensitive. Participants were grateful for the candid perspectives on preparing for U.S. investment.After completion of the workshop, which included a guide for SME’s and one-on-one feedback session, one business owner commented:“RENEW’s guide is really having an impact on the way I approach business and life.”With special thanks to <a href="http://quantumafricaltd.com/default.html">Quantum Africa Ltd of Kenya</a>, <a href="http://www.investorsclub-ug.com/">The Investors Club Ltd of Uganda</a>, and <a href="http://www.finabank.com/">Fina Bank of Rwanda</a> for their support in delivering the workshops. We would also like to thank several of our other local partners, listed alphabetically:<ul><li><a href="http://www.investmentkenya.com/">Kenya Investment Authority</a></li><li><a href="http://www.kam.co.ke/">Kenya Manufacturing Association</a></li><li><a href="http://www.kepsa.or.ke/">Kenya Private Sector Alliance</a></li><li><a href="http://www.ifc.org/ifcext/africa.nsf/Content/SME_Solutions_Centers">IFC SME Solutions Centers</a></li><li><a href="http://www.psfuganda.org/">Private Sector Foundation Uganda</a></li><li><a href="http://www.ugandainvest.com/">Uganda Investment Authority</a></li><li><a href="http://www.rdb.rw/">Rwanda Development Board</a></li></ul>Finally, we want to extend a special thanks to Andrea McDaniel, Bobby Mickler and family, and David Leatherman and the Living Water team in Rwanda for their support and hospitality. Stay tuned for more information about the next round of workshops.

Businesses gathered in Africa recently to prepare for U.S. investors.

Business Workshops in Kenya, Rwanda and Uganda a Success

<h1 style="text-align:center;">Announcing New Tool for African Business Owners</h1> News Release - May 21, 2010: Investor relationships often pose uncharted territory for African businesses, and RENEW is working at alleviating some of the uncertainty. <a href="https://renewcapital.com/sites/default/files/RENEW_Business_Guide_to_Investor_Relationships_1.pdf">RENEW's Business Guide to Investor Relationships</a> is now available as a tool for small- and medium-sized businesses seeking relationship with U.S.-based investors. The guide includes information about investor expectations at each stage of the investment process from pre-investment, initial contact, information gathering, verification and validation, site visit, due diligence, terms negotiation and growth.The guide is designed to help business owners avoid common pitfalls that preclude them from healthy business relationships with U.S. investors. The guide was first presented at RENEW's March 2010 workshops in Nairobi, Kigali and Kampala where several business owners commented that the guide provided invaluable information to help them navigate relationships with investors.

Investor relationships often pose uncharted territory for African businesses...

Announcing New Tool for African Business Owners

<h1 style="text-align:center;">Why Engage Africa? A U.K. Think Tank Makes the Case</h1>The Chatham House, a U.K. think tank, recently released a report by Tom Cargill entitled <a href="http://www.chathamhouse.org.uk/publications/twt/archive/view/-/id/2037/">Investment in Africa: All to Play For.</a> In it, Cargill makes a well-grounded case for participating in Africa's economic future.<blockquote>Africa sits at the base of the global supply chain, with almost forty percent of the mineral resources, arable land, fresh water and energy required to secure global growth. With a billion people, it offers valuable market share, and for the past decade growth across much of the continent has outpaced every other region of the world.</blockquote>Cargill provides necessary perspective to the mainstream media's focus on China as a player in Africa, while challenging the private sector to engage lead the way in African economic growth.<blockquote>While China has been the focus of much western media interest, it is the sheer number of countries increasing their African engagement that is noteworthy, many with far fewer historical ties to the continent than China...while aid will remain important, under the prevailing global economic system it is only private sector-led growth that will deliver the broad based expansion required for the kind of lifestyle choices taken for granted in the west. This is why commercial interest from emerging powers is so welcome in principal, but also why the lack of a strong private sector element in western interest in Africa is both self defeating and self deluding.</blockquote>

The Chatham House, a U.K. think tank, recently released a report...

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 Why Engage Africa? A U.K. Think Tank Makes the Case

<h1 style="text-align:center;">Emerging Africa, the Latest from Financial Times</h1> Financial Times recently began a series entitled Emerging Africa. In one article entitled Africa’s Frontier Market Ready to Score, author William Wallis quotes former UN Secretary General Kofi Annan who last week launched a review of Africa's progress in meeting development goals. Annan said, “Africa is rich, and its stock is rising. The value of its land and minerals is going up. There is no lack of resources, no deficiency of knowledge and no shortage of plans. Africa’s progress rests above all else on the mobilization of political will.”The article brings attention to IMF predictions that slate sub-Saharan Africa for 6% GDP growth in 2010, and provides details on the vastness of Africa's resources:<blockquote>Africa has about 10% of global oil reserves, possibly more. South Africa has 40% of the world’s gold. The continent has more than a third of cobalt reserves and base metals abound. Its agricultural potential is barely touched.</blockquote>What potential for Africa's entrepreneurs. Without a doubt, the challenges identified in the article are real including capital flight, the AIDS pandemic and ongoing crisis of leadership, but Africa's bright spots are getting brighter as highlighted in another article in the series entitled Rwandan president carves out innovative role.“My preoccupation,” says Paul Kagame, “is how do we make Africa, this one billion people, relevant so that we can partner with other members of the global community, instead of being just dependents or victims caught up in between the conflicts of the key players?”

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