To invest in Africa you have to be in for the long haul as most analysts say and Josphat Mwaura, Managing Partner of KPMG in East Africa agrees and with that the continent should continue to look at ways tax can be an incentive to stimulate investment.
Mwaura explains how the initial global excitement about Africa is waning because of the decline in commodity prices and not understanding the market.
“Not fully understanding the value of the middle class or the purchasing power they are in and having perhaps more of a short-term" view.
He adds: "When you look at the specific trends, you will not see as dramatic a rise as you would have expected and to some extent the challenges of transforming resource endowment into value has somewhat dampened that flow.”
The most “critical thing” an investor of the continent should know is it has to be long term.
“One has to really understand the full value of each of the regions, each of the countries and how to translate that value into benefit for the investor.”
The short-term perspective leads investors to question the value of the African story and that is unfortunate, says Mwaura.
“They need to better understand the value that Africa offers, that it takes a little bit more strategy, more understanding of the local market to actually be able to mine that value.”
Another issue is taxation and he believes Africans and investors need to appreciate that tax is a necessity if we want to find sustainable development, good roads, education and health.
“You have to pay your taxes, the question is actually of translating the tax that you pay into value, into results and that there is limited if non-leakage between the revenue and the results that you see on the ground.
Mwaura says that everyone has to understand and the leaders in Africa have now realised the objective now should be to make it easier for individuals and investors to voluntarily comply with tax requirements.
"The other side of the story is that if you are complying and then you set out to create a small business or to be a large investor in that market, the first priority for our African government should not be to increase the amount of taxes that you pay.”
Governments should be facilitating entry into the market, growth of businesses, the expansion of wealth, employment and the market, so that when the investor is a success in the environment created by them they can take note of how much of that is coming into their domestic revenue.
"When you change the order then you become an inhibitor to wealth creation, to employment creation.”
“When people can provide for themselves more than your demand for services reduces and then you have more of a public-private partnership.”