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20:29

Software & Intellectual Property Law in Kenya

» ‎ Bankelele

15:04

Reading the Kenya Airways Tea Leaves

» ‎ Bankelele

23:45

Why Telco Mobile Money wins over M-Banking

» ‎ Bankelele

Safaricom's mobile money transfer service M-Pesa is only five years old yet it has about twice as many subscribers as all the bank accounts in Kenya. The numbers are not growing as fast any more and many commercial banks now offer services that link to telco mobile money, or promote their own m-banking platforms, or extend services to customers through agents

But the attraction of mobile phone companies as preferred mobile money wallets is that they have gained customer trust with simple tariff structures. Millions of Kenyans are comfortable sending and receiving money by mobile phone. They know what it costs e.g. Kshs. 30 shillings ($0.40) to send money, and Kshs. 30 to withdraw money on the other end.

But for banks, they enter the mobile phone relationship with a stain in the minds of many of their customers as they have a legacy and history of imposing dozens of fees on their account holders & customers. While there are banks that have no ledger fees (just transaction charges similar to mobile phones Kshs 20 or 30 per transaction) and others that have free 'mobile' banking, the legacy of banks is also one of changing customer terms, raising tariffs and interest rates, phasing out services, migrating customers to new costlier services, phasing out services that were promoted as 'free', migrating their customers to more expensive options at will.

For comparison, if you leave Kshs 1,000 (~$12) in your M-Pesa account it will be there until you use it, with no phantom charges eating it away (it won't stay in your phone for 6 months). But if you leave the same Kshs 1,000 in your bank account for a few months, the money will be exhausted by various tariffs like ledger fees, dormant account fees, minimum balance fees and the account will be drained out and shut down. Unfortunately, a similar distrust extends to companies offering third party payment services m-commerce, payments, settlements etc. as they are new or unknown entities to customers until they establish a behaviour pattern with customer tariffs.

This should also be a caution to mobile operators not to shake up their cost structures too often. Safaricom recently changed their M-Pesa tariffs, but by having simple & clear disclosures and not levying hidden or unexplained charges, they will keep the trust that their customers have.

1:24

WEF Africa 2012

» ‎ Bankelele

23:37

NSE Moment: Kenya Airways Rights, Private Equity

» ‎ Bankelele

Rights Issue: Kenya Airways just launched a rights issue, in which the airline hopes to raise Kshs 20.6 billion ($250 million) from shareholders its 73,612 shareholders (to whom it has mailed out a 36 page abridged prospectus in lieu of the full 236 page information memorandum)

While KLM (Dutch airline owns 26% of KQ) and the Kenya Government (23%) have committed to take up their full rights, thus assuring the airline of 49% investor commitment, some retail may be shocked to find out the amount they are being asked to pay for the rights. The formula works out as 16 new shares for every 5 owned (pay 3.2X their shareholding) so if one owns 1,000 shares worth ~Kshs 14,000 ($167), they are being asked to Kshs 45,000 ($542) to take up their full rights.

Some banks have lined up for the controversial practice of shares for loans, but with a rights issue there is some assurance of getting your full allocation. See more reading and analysis of the KQ rights here.

Not now: Both UAP Insurance & Family Bank have set aside plans to list at the Nairobi Stock Exchange for now. The bear market, (is it ending?)is said to be the reason, but Family have again postponed a listing to raise cash from a private investor instead. With UAP they are expanding in the region in Uganda, South Sudan, and DRCongo but they feel the market is not conducive and the will go for property/real estate investments to fund these new territories.

Why not NSE?: Africa Assets recently published their 2012 East Africa Private Equity Survey and while they found a lot of investor optimism, with 53 funds operating in the region (16 solely focused on investing in East Africa) , most deals in East Africa are 'small' (40% are under $5M) and none of the fund managers see IPO's at local stock exchanges as viable exit avenues for their investments (49% expect a sale to a strategic investor)

The Survey also notes that Kenya’s Capital Markets Authority (CMA) is finalising the legal and regulatory framework for a new Small and Medium Enterprises Exchange (SMEX). This market will have less stringent listing requirements than the main Nairobi Securities Exchange (NSE), which is intended to encourage more SMEs to consider a listing.

Apart from the costs of listing and the paperwork, another general obstacle to SMEs listing is that it implies a massive transition: for companies that are, by definition, small and often family owned, the requirement to disclose internal information to an anonymous investment public and have outsiders involved in the company’s decision making will be challenging.

20:49

Can Kenya avoid the Resource Curse?

» ‎ Bankelele

This week, the big announcement was that Kenya has found oil - but is that good news?

From the Archives - March 2006 I am hoping that we don’t find oil fields/reserves in Kenya and not just because we are unlikely to escape the much-written about oil curse that has plagued so many countries. We simply don’t have the governance systems in place to manage oil revenues which the Economist referred to as oil money flows from big oil to the big man and Kenya will become the latest example to confirm that resource rich countries grow more slowly than resource poor ones.

Kenya's oil is likely to be found in remote parts of Coast, North Eastern, Eastern or Rift Valley provinces and these are areas that have not received much development in 43 years of independence. Discovery of oil is likely to be met by hostility from these residents (who are often armed to defend themselves from bandits and raiders) and who will have the view that “you" (other Kenyans/central government/Nairobians) don’t consider us to be Kenyans, you have never cared about us and now you’re only taking an interest in us because we have oil – so F__ you, we want our own country and we’ll cut our own oil deals, maybe even with Sudan, Ethiopia or Somalia.”

Also the discovery of oil will not help other vibrant & diverse industries, especially agriculture-based, which will be hurt by the distorted foreign currency positions that oil will create. Also, oil & mineral industries never create as many jobs for locals as they promise - and agriculture, which supports a majority of Kenyan households & families will suffer leading to increased poverty.

Map Source

There Hope: So how can Kenya escape the resource curse? At an African Leadership Network (ALN) Forum in Addis Ababa in October 2011, Oxford Economist Prof. Paul Collier, outlined steps for countries to escape the resource curse (which should begin even before oil/minerals are found)

5 Steps for Handling Resources
1. In terms of discovery of natural assets, geological information has to be made public before government's call in the private companies (..Kenyan insiders are dealing away oil drilling leases.)
2. Have a good taxation system to benefit the society – (Africa's resource history is one of missed revenue, and misaligned contracts so it is important to get the right contracts)
3. Involve & manage the local community (avoid a Niger delta problem)
4. A substantial portion of income should be saved rather than consumed
5. Save in what? Africa needs sovereign development funds, not sovereign wealth funds. However Africa does not have much of this capability, and there is a need to build capacity, i.e. invest in investing to manage the resource depletion and erratic commodity prices.

At the same ALN forum, Dr. Donald Kaberuka, President of the African Development Bank (ADB) spoke about helping countries avoid the oil curse saying ..Diamond-rich Botswana has shown that it is possible to do this. Oil exporting countries have made mistakes but recently when an African country (he did not name) discovered oil, the ADB went to see the President and offered their advice as the ADB is helping countries negotiate good contracts through a legal support facility, and avoid signing bad deals which are difficult to wiggle out of without damaging investor confidence.

16:02

2011 Kenya Bank Rankings Final Word

» ‎ Bankelele

18:18

Urban Inflation Index March 2012

» ‎ Bankelele

2012 was expected to be an election year, which for Kenya are unfortunately marked by low economic growth, but this weekend, the electoral authority made an announcement that the next general elections would be held in March 2013.

A quotes from the above referenced post by Wolfgang Fengler, the World Bank's Lead Economist for the region reads;

Since 1980, Kenya’s economy grew by an average of 3.4 percent. However, in election years, the average growth rate was only 2.4 percent, and growth was even below 2 percent in four of the election years. Equally challenging has been the management of post-election dynamics. Kenya achieved a modest 2.7 percent in post-election years, and three of the last six elections were followed by low-growth, especially in 2008, when post-election violence disrupted the country’s achievements of previous years.

It's also been incredibly hot & dry in Nairobi and we all hope that the upcoming March/April rains will restore some supply balance for agriculture (food prices) and energy (hydro electricity costs)

On to the index comparing prices of basic urban commodities to three months ago, a year ago and even four years ago when the country was still dealing with the disruptive after-effects of the controversial December 2007 election.

Gotten Cheaper

Fuel: Petrol prices were reduced again last week to Kshs. 111.6 per litre (~$6.12/gallon) for Nairobi, down from Kshs 124 in December 2011. However a year ago the price was 98.8 (when the price control regime had just been introduced) and four years ago, after the election, a litre of petrol cost Kshs 87.9.

Staple Food: A 2kg pack of (Unga) Maize flour, which is used to make Ugali that is eaten by a majority of Kenyans daily, costs Kshs. 97 down from Kshs 113 in December 2011. However last March it was Kshs. 80 and four years ago (Feb. 2008) it cost Kshs 52.

Other food item: Sugar: A 2 kg. Mumias Sugar pack which was Kshs. 375 in December is now Kshs 245. However a year ago it was Kshs 195, and other commodities normally bought alongside it (bread & milk) have had steady price rises this year.

Foreign Exchange: 1 US$ equals Kshs. 83 compared to 84 in December 2011. This is exactly where it was last March 2011 before the Kenya shillings began a (now controversial) slide to Kshs 107 against the dollar. In February 2008, the dollar was exchanged at Kshs 70.7.
About the Same

Communications: Telephone call and data rates are largely unchanged, but Safaricom announced new rates for m-pesa including a slight increase for some transfers, but they also reduced the minimum amount that can be sent, opening the way to micro-payments. Meanwhile Airtel, who have set the low call regime over the last two years, appear to have reached an about-turn moment with their Chairman calling review of that strategy.

Utilities: Pre-paid electricity is about Kshs 2,500 per month which is unchanged from the last review. I finally got a coherent explanation from a @KenyaPower employee on how you get hit with extra taxes if you buy more than a certain amount of Kwh units.

LPG: Cooking gas supplies seem to have resumed stability for now, but at a price of about Kshs. 3,000 ($37) for a 13kg cylinder, up from less than Kshs. 2,500 before. Personally, I ditched my total LPG cylinder for a Kenol one as Total petrol stations never seem to stock enough for customers.

Beer/Entertainment: A bottle of Tusker beer is Kshs 180 ($2.2) (at a local pub), unchanged from three months ago..but it was Kshs 120 in 2008.

More Expensive
N/A

Generally prices have come down, but life is more expensive than what it was four years ago when the last election was concluded. However there could be some slight relief in slight for urbanites as the Kenya Cabinet approved the VAT bill 2012 which removed VAT from maize, wheat flour, milk, bread and medical supplies.

1:55

For Book Lovers Redux

» ‎ Bankelele

7:20

Idea Exchange: TED, Tullow, Diageo, Kenyan Design Opportunities

» ‎ Bankelele

18:26

Open Data and African Banking

» ‎ Bankelele

22:15

Kenya’s Money in the Past II

» ‎ Bankelele

Njenga Karume was politician & businessman who grew up on Delamere farm and in his time was one of the richest indigenous business people before independence, a reluctant, but effective leader of a controversial organization (GEMA), long term member of parliament and one time Defense Minister of Kenya. He passed away in February 2012 having lived to be an lived to an old man though he seemed to be slaughter a goat (he was a generous networker) on almost every other page of the book of the auto-biography Beyond Expectations - from charcoal to gold (written with Mutu wa Gethoi) published in 2009.
Here’s another slate condensed version of the book

Seeing opportunity & taking advantage of changes
- First business was in high school bought & sold pens to fellow student (by delaying paying his own fees), and undercutting the school shop (page 49)
- Took up the opportunity to sell liquor when African (116)
- Took up the opportunity to go in to wholesale business (102)
- Went into tobacco distribution 151 though not a smoker
- Tried to buy shares in the Kenya Wine Agencies Ltd where he clashed with Njonjo (153)

Fortune in Family: - When he was unable to find good managers for his growing business, his father in law advised him to marry a second wife (122) Prosperous men had had additional wives to manager property (285)
- Credits his (first) wife for looking after his business even when he was in detention (115, 283)

Fortune in beer: - First visit a brewery when he was still a schoolboy (54)
- He was approached to become partner to a beer distributor 120
- To end a boycott that affected their profits, Kenya Breweries offered Kenyatta a quarter of the shares in the company (135)
- South Africa Breweries offered him a partnership (271) which later ended his 38 year distribution arrangement with Kenya Breweries and resulted in a costly court case where he was (briefly) awarded 231 million shillings.

African businessman navigating the colonial era: - If detained for being a Mau Mau sympathizer, colonial authorities would freeze someone’s bank account (94)
- Opened his first bank account with the standard bank of south Africa at Nakuru in 1951 (73)
- Africans needed an need exemption certificate to borrow more than 200 shillings from a bank (78)
- Disgruntled African soldiers after war found themselves neglected as their European colleagues got loans to buy land or start business (61)

Business & Politics: - Navigating presidential orders - they work for him (176) and against him (252)
- Land politics could be volatile (216) but he was able to negotiated tricky land deals, one where a group people wanted to subdivide, something that has lead many group schemes to disputes (178)
- Some of his partners pursued Africanization with Asian partners and this cost them KWAL shares (153)

Advice for Kenya Entrepreneurs: - In the world of business, there is no need to give away (your) secrets (51)
- Kenya’s (future) prosperity lies in education, technology and industrialization (318)
- Tips for youth engaging in business (313)

Odd stories: - His grandfather bequeathed his goat herds to him, trying to bypass the rest of the family (23)
- Was not happy to take an oath in President Kenyatta house (206)
- The case of the missing silver beer mug (238)
- Matatu’s exempt from TLB (220)

23:47

Kenya’s Money in the Past I

» ‎ Bankelele

Duncan Ndegwa is a former head of the Kenyan Civil Service and Governor of the Central Bank. He published his autobiography Walking in Kenyatta Struggles in 2006.

It’s a tale of history of Kenya, struggle for independence, nation building versus devolution, disengaging Asians from commerce & Europeans from Government while Africanizing the civil service, reigning in unrealistic expectations of newly independent leaders etc. In it some leaders like Odinga Oginga, Gikonyo Kiano, and Charles Njonjo don’t come out positively and there are a whole lost of personality stories that you won't believe.. There are more biographies and books - some thin on the money talk, and they will be reviewed in a slate condensed format in a continuing series.

Reigning in budgets & spending
- Ndegwa argues that the uncontrolled government spending was the disease that crippled Kenya in the 1980’s leading to paralysis in the early 1990’s (444). (Earlier), Kenyatta supported a balanced budget and gave strict instructions to permanent secretaries - if you over-spend, you will be the first to go (485)
- Britain gave Kenya a 60 million pound golden handshake at independence But 12M went to settlement schemes, 13M to pensions of expatriates, 10M to technical assistance, and the balance to the military (312)
-The coffee boom of the 1970’s enable the government to buy embassy properties in New York, Washington & London, and aircraft for East African Airways (494)
- Devaluation of the British pound in 1967 had an impact on all the East African whose currencies were pegged to the pound (478). The government also had to come up other measures forex such as discouraging luxury imports when the country reserves dwindled after the oil crisis (470)
- Some foreign companies were borrowing all their working capital in Kenya, while repatriating all their profits abroad (476)
- Ndegwa came up with a blueprint for the government in 1962 that he called the Kazi plan that emphasized labour intensive schemes (Page 240)
- He proposed that Kenya print her own currency and manufacture bullets (simple technological processes that would save foreign currency) but both projects were shot down by President Moi on advice of Njonjo (461)

Africans in Business: - The Crown Land Ordinance of 1915 deprived Africans of land ownership . in the 1960’s Africans were allowed to grow coffee under a (government) Swynnerton plan that also included issuance of free title deeds (232)
- Njenga Karume was one of the first Africans to be allowed to own a chequebook (472)
- Ndegwa chaired the commission that allowed civil servants to engage in private business and own property like any other citizen(497). He maintained that the greatest danger the civil service faced was pressure from politicians (500)

East African affairs: - Kenya sought military assistance from Uganda & Tanzania to send troops to Somalia which also refused to cease hostilities in cross-border matters (352)
- Britain offered Kenya as a second home for Jewish settlements, but people like Delamere kept Kenya from becoming a Jewish settlement ( 368)
- The Kenya Attorney General appeared determined to sabotage the East African community (401)

Eccentric Cabinet & Ministers: - Presidents should not be shown the central bank vaults - Kenyatta saw the CBK’s and shooed away his security men so they would not be tempted (460) while Uganda's Amin demanded that their vault money be put into circulation - overriding the advice of his governor who paid with his life (471)
- Was Odinga really a Marxist? Up till the 1960’s he was a struggling capitalist trying to build a viable trading company (363)
- Mwai Kibaki & Munyua Waiyaki kept out of full cabinet positions until they moved away from Tom Mboya (376). Earlier, Kibaki & Mboya came up with a highly respected development blueprint for the country.
- The Finance Minister missed the opening ceremony of the Central Bank (282) and later denied that he denied he had a drinking problem (43)

21:00

Shares Portfolio February 2012

» ‎ Bankelele

last quarter and a year ago

2007 was considered a wait & see year for firms in Kenya and 2012 looks to be the same with elections set for sometime in the last third of the year. Banks are expected to announce profits this month, amid allegations that some of their gains were due to lax oversight by the Central Bank which may also have contributed to the weak Kenya shilling late in 2011. Local news is dominated by electioneering, loan rates are above 25% and it's expected to be a challenging year for Kenya Airways, Safaricom and other companies as well.

The Stable
Barclays ↓
Bralirwa (Rwanda) ↓
Britak ↓
Diamond Trust Bank ↓
East African Breweries (EABL) ↑
Kenya Airways ↓
Kenya Commercial Bank (KCB) ↑
Kenya Oil Company (Kenol) ↑
Safaricom ↑
Scangroup ↑
Stanbic (Uganda) ↓
Uchumi ↓

Review
Best Performer: EABL (up 12.9% in 3 months), Safaricom, KCB
Worst Performer: Stanbic Uganda (down -28.8% in 3 months), Britak, Uchumi
In: None
Out: None
Increase: KCB, KQ
Decrease: none

Unexpected gains/losses: Last week, Barclays announced special dividend to go a long with a final dividend. Similarly, Williamson Tea announced a record interim special dividend of Kshs. 50 ($0.55) per share following the sale of their building.

ION two companies at the NSE - East African Portland Cement and CMC Group
appear to have imploded from the inside with board wrangles disrupting the company operations and leading to both being suspended from the NSE.

Events/Outlook: The portfolio excluding new shares is down 4% from last November, while the Nairobi Shares Exchange main index is down 9% over the same period.

Looking Forward to:
1. Investing in Government bonds - the government was selling a 30 year savings bond that paid 12% and targeted to raise Kshs. 18 billion with a minimum investment of Kshs 50,000 ($615), and this month, there's a tap sale of 12 year infrastructure bond 12 year as the government seeks to raise Kshs 17.7 billion ($196 million). Minimum investor amount is Kshs. 100,000 ($1,111) and the average yield has been 16.6%
2. Kenya Airways rights issue
3. Any other new listings at the NSE.

9:32

Educating Taxpayers

» ‎ Bankelele

16:51

Guide to Port-au-Prince

» ‎ Bankelele

guest post on a visit to Haiti, two years after the earthquake where it's an odd mix of NGO's, dollars, insecurity and voodoo

Getting There: Only British Airways gets you there with change over stops in London, New York (or other US airport), then on to Haiti for about $2,500...always with a one night sleep over and 22 hours flight time in total. You can use Kenya airways too via Dubai, Paris, Miami then Haiti and for that you use a UK Visa

The airport (Toussaint Louverture International Airport) is pretty fast as long as you have your visa... You require a UK visa or US Visa to be admitted in to the country. Unique: They have a band playing all the time to welcome you into the country. They also have uniformed casual laborers who offer to push your trolley from the clearance office to the pick up point about 200m for a small fee.....however the trolleys at the airport are not free like in Kenya...its $10 for one.

Getting around: Locals mostly use matatus which are called tap tap. Taxis are not readily available and they are not colour coded or marked or parked in a certain areas..... They are few private vehicles, and take these at your own risk.

There are parking boys are on the streets and when there is traffic they dust your windscreen and car with a dirty dry rag and expect you to pay something small.

They have two main highways. Also there's no parking lane on the streets. The roads are very narrow so people park half on the kerb and half on the road that causes mad traffic.... but the President is escorted everywhere by local police and UN police.

Insecurity Getting around you feel very insecure as riots are the norm and you see people walking with placards and complaining about the president, political affairs or the NGOs. This is because foreigners are targeted - so if you don't speak fluent French, and look exotic, you're advise to walk with a local or use a driver wherever you go. Basically, if you work for an NGO, you’re a hostage (biggest targets for kidnapping) who rarely walks more than 100 metres.

Business & economy: The country is run by 1% of the population... and there's an absolute divide between the poor and rich. Its not surprising to see an Aston Martin, and rich people withdraw money from the banks on Friday because they are scared they might collapse over the weekend - so by Friday afternoon you cant find money in the bank!

You can use dollars or gouds (Haitian currency) to trade, but the ATM's do not dispense dollars. In October 2011, dollars started disappearing from the country as people were hedging against inflation and it became so bad that from December you could not get any dollars from the bank - and some organizations had to send money in from neighboring country and then have G4S transport it here so that they could pay for their expats and operations.

As is in most places, suburbs are next door to the slums and they have mass graves due to the earthquakes. Its mountainous and hilly and houses are built on the hills in an unfathomable way.

Two years after the earthquake, there are still camps (in the form of tents) in the middle of the CBD where the displaced people stay. e.g. in the park next to Hilton Hotel. Gangs have been formed in the camps and they are responsible for kidnapping of NGO staff to solicit for money from the NGOs. The gangs are so good and efficient that if your wallet is stolen in the city, and you know a gang member in that area code, they will get it back for you for a fee with everything intact!

Communications My roaming line is expensive its like Kshs. 180 per minute without taxes (post paid), and local calls to Kenya cost about $2. They are hotspots in a few expatriates restaurants.

Where to Stay: Hotels are like $140 -160 and these include Le Manoir $140, El Rancho $130, Ibolele $155 while Karibe, a 5 star is $320. Electricity is very unstable and generators are used a lot.

Customer service: is a thing of the past it takes at least 40 minutes to get your order in most restaurants... and once you finish eating they clear the table and don’t present the bill....and when you ask for it, it takes another 30 minutes.....so you're advised to ask for the food and the bill together ..Walking out without paying is also an option as it actually takes them long to notice as its not an area of priority. Despite this food is expensive, and for a nice meal the cheapest is ~$15. The main local dish is Rice and beans and beers cost about $2.

Shopping & Sight Seeing: The ladies mode of dressing on a day to day basis leaves nothing to your imagination....Maybe its Caribbean culture or the weather which is hot and hummmmid!!!. Also an interesting sight while walking around is seeing pharmaceuticals hawked on the street - with medicines taped around big basins.

French Is the main language here and all the newspapers are in French or creole. There are beaches & animal orphanages, but very few malls and nothing much good to shop.

They are 4 big groceries/supermarkets (like Nakumatt) where many shops and they also have very high end shops which sell some very expensive French designer stuff. Popular gift items are some very good paintings and pictures which are hung on the streets and in the cultural centres.

Odd points: Voodoo is the order of the day its their culture and people carry anointing oil. It's no surprise to read in the papers or watch news of someone found walking with skulls. They have festivals and carnivals to celebrate it. and they drink a liquid which makes their eyeballs turn back to their heads and then parade in the streets doing their rituals. Creepy stuff! As with all Caribbean countries, reggae is the in- thing, but there is even voodoo music which plays in all the clubs (at a faster beat with drums and chants).