Kenya’s richest class for a long time been using offshore accounts to hide proceeds from illegal activities.
A new report released by National Bureau of Economic Research (NBER) from America has revealed that the super rich have stashed more than sh14.8 trillion in offshore accounts spread across the world.
This comes as a shocker as the amount is five times Kenya’s sh3 trillion budget in the 2018/19 fiscal year.The report shows that countries with high offshore wealth to GDP that created many shell companies include Kenya, Zimbabwe, Venezuela, UAE,Russia, Jordan and Taiwan.
The Kenyan government had given an amnesty window to those holding wealth in offshore accounts to declare them and bring them back but it is emerging that it has not worked.
Investment analyst Aly Khan Satchu says that the money mostly belongs to politicians who served in past governments and it won’t be easy to return to Kenya due to new banking regulations.
“The percentage of GDP held offshore is clearly an eye catcher. First, it speaks to a common sub-Saharan Africa narrative and here it seems Kenya is evidently an outlier. Politically exposed wealth probably saw the offshore markets as a safe haven strategy. This is now being reversed and as a senior banker at an international bank told me, a lot of this money is trapped because it will not be able to exit under the new more stringent Know- Your- Customer rules,” said Khan.
Grand Thornton Chief Operating Officer Kunal Ajmera cited that lack of proper incentives in Kenya are a major reason blocking potential investors to invest locally. He added that the intention of the amnesty is not clear as it might be used as a trap.
“ It would not be fair to say that all the money stashed abroad is looted wealth because a lot of this wealth would be part of a tax evasion strategy as well. The amnesty scheme is a well-meaning tool to bring back much needed liquidity in the economy. We have to trust our own revenue authority and give them this benefit of doubt,” he said.
Mossack Fonseca, a panama based legal firm in 2016 leaked 11,500 confidential documents that incriminated 191 people and 25 offshore companies used to keep money with connections to Kenya. The identity of the offshore company owners remain a mystery.
Despite the call to return money stashed in offshore accounts, there is an increase in deposits by rich Kenyans standing at 4.3 per cent to sh96 billion in 2017/down from sh92.1 billion in 2016.