Remembering Basil Mramba: Let the good times roll

‘Sawa sawa’ was a stock response I recall from the late Basil Pesambili Mramba (BPM), Finance minister from November 2000 to 2005, who was laid to rest on August 21, 2021. Simple words - but ones that encapsulate his attribute of being a good listener; and it was this ability to listen that enabled him to have such an impact when Minister for Finance, particularly in driving private sector focussed reforms.

One resounding memory from meetings of the pre-Budget Think Tank meeting that he chaired as Minister for Finance was his openness to listen to both sides of the argument - for example, if the Ministry’s technocrats had put forward a proposed change but had not been able to adequately respond to concerns raised by the private sector in respect of the proposal, he would challenge them to go and research the point further and where necessary delay implementation.

One vivid example of a delay in implementation of regulatory change was for the Income Tax Act 2004, with the commencement date delayed to July 1, 2004 (instead of January 1, 2004 as originally announced in the 2003 budget). This extension of time for implementation enabled further consultation with stakeholders, and where necessary changes to make the Act better fit for purpose and gave time for stakeholders to be properly prepared to implement the new legislation. In general, his approach de facto resulted in some form of Regulatory Impact Assessment (RIA), an approach more recently explicitly stated as a commitment in the Blueprint for regulatory reforms to improve the business environment (The Blueprint) but infrequently adhered to.

Tax reforms for the agriculture sector were a centre piece of BPM’s focus. These included: measures to cap produce and livestock cess (at 5 percent), the reduction of land rent for the agricultural sector, a 100 percent capital deduction for plant and machinery, reduction of stamp duty on transfer of agricultural land to a nominal amount, skills and development levy exemption for agricultural workers, as well as measures to support the tea and wine industries.

More generally his reforms sought to rationalise the tax and regulatory environment. There were various measures to help small and medium size enterprises including the abolition of “stamp duty on receipt” (levied at one percent of turnover, and which had been applicable to businesses not registered for VAT), and the removal of the smallest traders from the VAT system (in 2004 by a doubling of the VAT registration threshold to Sh40 million). Other reforms included the removal of various local withholding taxes (on goods and services, and on transport services), a reduction in ad valorem stamp duties to one percent (where previously charged at two percent or four percent), and a reduction in payroll taxes (with removal of “development levy”, a local tax of one percent of payroll costs). On the regulatory side, there was a review of the business licensing system and some rationalisation of the number of licences.

The introduction of the ITA 2004 was a particularly significant reform. It replaced archaic income tax legislation with a more modern approach including: greater consistency between accounting profit and tax profit; greater focus on international tax issues (including significant anti-avoidance measures (for example, transfer pricing) as well as best practice in terms of taxing rights in the form of source rules); and a move to self-assessment. Unfortunately, more recent times have seen some reversal of certain of these aspects.

The most significant indirect tax reform during his tenure was the implementation of the East African Community (EAC) Customs Union Protocol effective from January 1, 2005, resulting in a common external tariff for the EAC, the elimination of internal tariffs and the harmonisation of customs principles and procedures.

You may well say that “the proof of the pudding is in the eating” - so what were some of the financial highlights of BPM’s tenure? Well, a consistent good Government revenue performance, with actual collections consistently exceeded budgeted collections, and an average annual increase in revenue of around 18 percent per annum such that revenues in 2004/05 (Sh1,774 billion, representing 14.1 percent of GDP) were almost double what they were in 2000/01 (Sh929 billion; 12.0 percent of GDP).

Economic growth, very much private sector led, was on an upward trend - with annual GDP growth (per World Bank statistics) averaging 6.96 percent in the five years 2001 to 2005, the best five year record in the last 30 years (which in other periods included averages of 1.80 percent (1991 to 1995), 4.23 percent (1996 to 2000), 6.12 percent (2006 to 2010), 6.37 percent (2011 to 2015), and 5.38 percent (2016 to 2020)). Similarly, foreign direct investment (FDI) was on an upward trend - according to UNCTAD’s World Investment Report reaching $936 million in 2005, higher than total combined FDI in the same year for the rest of East Africa and Ethiopia. If you were to write an anthem to this period, then it might very well be BB King’s ‘Let the good times roll’ - and have as much fun, or live life, as richly as possible.

On a personal level, BPM also brought the “good times” feel into any engagement or interaction with his great sense of humour - but also humanity. I very much saw that humanity when I was bereaved - both for my father’s burial (which he attended 30 years ago in Rombo-Mashati) and on the passing away of my youngest daughter six years ago. BPM, you certainly did ‘let the good times roll’ - and have left a great legacy. I will miss you, and your family will miss you even more... I can hear him upstairs saying ‘Sawa sawa!’