Absa Kenya on Wills, Trusts and Succession Planning

Absa Kenya has been holding thought leadership seminars since their rebrand in February 2020.

This week they had an investor education connect session on wealth management, with a focus on wills, trusts and succession planning which featured Madabhushi Soundarajan (Managing Director, MTC Trust), Peter Waiyaki (Partner at Mboya, Wangong’u & Waiyaki Advocates) and Anthony Mwithiga (CEO, Absa Asset Management).

Some excerpts 

Wills:

  • People don’t do wills because they think they have nothing – but anyone over 18 who has been working has something to give. 
  • Another excuse of some educated Kenyans is they think they are courting death or will be marked for death by their families
  • Can do a will in an hour or five years. It does not have to be expensive or complex.  
  • A will should have two things to help a will (i)  a residual clause. assets grow after the will make sure any other assets be distributed the way the old “any other assets  (you don’t have o make a new will (ii) creation of a testamentary trust. 
  • Let your family know where your will is kept. If two wills emerge, the latter one will be used. If a will is destroyed, it is not valid.
  • If someone remarries, it invalidates a will because they are considered to have new dependents. 
  • Do not include matrimonial property should not be in a will. Or joint owner – when someone dies the spouse inherits the full property. They should not be in the will. 
  • Also don’t put investment or trust property in a will.
  • Proof of dependence: wives and children do not need to prove they are dependents. This also includes conceived but not yet born and adopted kids. But parents or siblings of a deceased must prove they are dependent. Also in Kenya, a husband/man will have to prove  he was being supported by a woman.
  • Covid situation: Oral wills are only valid for 3 months and must be mentioned in the presence of two witnesses who are not beneficiaries. And for a written will, someone in a hospital, surrounded by relatives is not considered to have the freedom to write a will. 
  • Without a will, only the family of a deceased person can inherit from the estate. No gifts to charities, churches etc. are recognized. 
  • Do not put assets in a will that already have nominated beneficiaries elsewhere e.g. life insurance, pension funds. 

Trusts:

  • Have the philosophy of giving things up as you will nor carry your wealth to the grave – so start thinking about preservation.
  • Banks are getting worried about lending to trusts. 
  • A trust is not a legal entity, a foundation is a better legal entity that can be created to run a school or a hospital.
  • Most common are discretionary trusts and others are ones that founders can create to run businesses for their families
  • A trust is a lengthy document. In a trust, you can exclude rogue children. 
  • To set up a trust; define the objectives, the trust structure, the beneficiaries, the trustees (ideally a corporate) and seek professional advice. 

Investments:

  • Use professionals e.g. in a unit trust to administer investments if you are too busy. 
  • If you have a vision, take a lead and invest in it so that others will follow.  
  • the realty over the last five year is the property prices can go down, unbelievable to many investors of 15 years ago. Covid has hit offices and malls, but there are still investments in residential, logistic and warehousing ventures.
  • Attributes of an ideal asset; gives returns, it should grow, it should be liquid, be understandable and It should also be secure (legal ownership & from damage). Individuals and families have investment portfolios, as it is not possible to get one asset to full all these attributes. 
  • The investment universe encompasses money markets, treasury bills, bank deposits, and listed shares which now includes a New Gold ETF.  Also unlisted shares (shares in a business stems/OTC), real estate, and alternatives such as derivatives, commodities, currencies and infrastructure projects which is a new asset class open to pension funds.

Suggestions:

  • Everyone should discover what type of investor they are and what stage they are on the life journey to understand what to invest in. 
  • Think investments beyond Covid-19.
  • Write a will today; there is no way of running from your dependents –  except through trusts, which allow one to better organize estates.
  • The best non-taxable investment in Kenya is infrastructure bonds.

Roblox IPO – Prospectus Peek

Roblox Corporation will list on the New York Stock Exchange as RBLX.

How much do we know about Roblox? Kids spend hours on it every day, but do they how Roblox works and the numbers behind it? Take a peek into the IPO prospectus for Roblox. 

About Roblox:

  • Founded in 2004 by David Baszucki and Erik Cassel. Today, Baszucki is the CEO and second-largest shareholder with 12% behind Altos Ventures that has 21%.
  • The company has eight classes of stock some preferred, some convertible and more restricted share units have been granted to employees in the IPO. 

Numbers:

  • The company had $489 million revenue in 2019 and $589 million in the first nine-months of 2020. $409 million (70%) of its revenue is from US/Canada, 17% from Europe, with Asia-Pacific adding 8% and the rest of the world is 5% (28.2 million).
  • The company has $1.49 billion assets, 801 million of which is in cash.
  • It lost $86 million in 2019 and $205 million in the first nine-months of 2020. It has carried forward accumulated tax loss credits with the US government of $162 million and $54 million in the state of California.

Users & Experiences:

  • Key attractions that draw users to Roblox are unique identities, interaction with their friends, low friction (easy to join) and the variety of 3D experiences easily accessible on most devices whether they run on iOS, Android, PC, Mac, Xbox, Oculus Rift etc.
  • Most experiences are free and users can then purchase others such as clothing and avatars.  Users do this using ‘Robux’ which they purchase with a credit card, subscriptions or one-time mobile payment (such as with M-Pesa), and use the Robux is to access digital items such as avatar and features.
  • The user base is currently 51% male and 44% female, with 72% of uses using mobile devices. Geographically, 33% of users are in the US /Canada, 29% in Europe 15% in Asia and 22% in the rest of the world. The Roblox business case going forward depends on growing internationally, particularly in Europe (Germany & France), and Asia (South Korea). Also, in February 2019 they entered a joint venture with Tencent to use the Roblox platform in China and Roblox owns 51% of the JV.
  • Users aged 9-12 years are 29%, under-9s are 25% and 13-16 are 13%, while 14% of Roblox users are over 25 years. They hope to grow the over-13 crowd as they have a higher propensity to spend on content.
  • During Covid-hit in 2020, active users have gone up from 18 million in 2019 to 31 million by September 2020 from 180 countries. On average, people spend 2.6 hours per day on Roblox.

Operations:

  • Roblox has 18,000 servers in the US, Europe and Asia that handle 10 million requests per second.
  • Users are able to draw from a library that has 18 million experiences and the company uses machines and 1,700 humans to moderate this content.

Developer Program:

  • It has 7 million developers and 960,000 of them earn on the platform. Developers can build in their native languages and machines translate the content into 11 languages including English, Japanese, Korean, Spanish, Chinese, German and French.
  • Creators receive 30 % of revenue from the creations while developers receive 70% of Robux spent on their experiences. In the nine months to September 2020, developers earned $209 million up from 72 million in the same period last year. 1,050 developers earned $10,000 or more and 250 earned more than $100,000 in Robux.
  • If they want to cash out of the developer exchange program, the rate is one Robux is equivalent to $0.0035.

Advisors:

  • Underwriters of the IPO are Goldman Sachs, Morgan Stanley, J.P. Morgan, Allen & Co, Bank of America, and RBC.
  • The auditor is Deloitte while the firm of Wilson Sonsini is the legal counsel.

To be continued.

Ant Group IPO

Tuesday should have seen the listing of shares of Ant Global in the largest IPO in history but it was cancelled at the last minute. This came after Jack Ma, the founder of the company, the Executive Chairman and the Chief Executive Officer were all summoned to a meeting with regulators a few hours before the launch. 

Later the Shanghai Exchange announced that it had cancelled the listing of Ant Group’s A-shares on the STAR Market and published the suspension decision which stated it was due to material matters.

Reasons varied from capital controls to politics around Jack Ma who is currently China’s second-richest man and now a global philanthropist who donated medical testing and protective equipment to different countries around the world as they battled Covid-19. 

The company was to raise $34 billion from the IPO, valuing it at $313 billion, but by the time of the cancellation, they had a staggering $3 trillion in bids from investors. The company had allocated 1.67 billion shares each for Shanghai and for Hong Kong to raise 115 billion Yuan ($17.23 billion) from each location, but Shanghai investors bid $2.8 trillion, 872 times the number of shares allocated, while those in Hong Kong bid $168 billion or 389 times their allocation.

This came after a book building done by Citi, JP Morgan, Morgan Stanley and CICC who were the joint global coordinators and book-runners. Also participating was Credit Suisse, Barclays, Deutsche Bank, ING, Goldman Sachs, ICBC, BNP Paribas and Mizuho, among other banks, while the Bank of China (Hong Kong) was the receiving bank.

Ant was started within the Alibaba Group in 2004 as a company offering online escrow services. It was spun off from Alibaba in 2011, which itself reported a 30% rise in quarterly revenue today to reach $23 billion. Earlier this year Ant had 711 million active users, just behind 800 million on Tencent’s WeChat Pay. It now serves 1 billion users and 80 million small businesses in China, and recently provided billions of dollars in loans to Chinese companies impacted by Covid-19 and also waived fees, subsidized logistics, and offered free streaming and work from home tools.

The invitation to invest noted that financial systems that have been in place for the last 200 years were designed to serve 20% of the population and that better products have to be designed for the other 80% through digital payments, digital finance, and digital daily life services. The company has 26,000 patents and patent applications.  

One of the risks cited in the listing documents is possible action by US President Donald Trump to restrict the use of payment services of Ant.

Refunds to investors started on Wednesday, November 4, and it is now expected that the IPO could be delayed by at least six months.

Edit

https://twitter.com/bankelele/status/1324614736823095296

Continues

Sportpesa return flames out

Last Friday, there was a bold tweet by the CEO of Sportpesa announcing the return of the company to full business, with partnerships for sports development to follow.

This comes after a crackdown last year crackdown on gambling companies through a moral push, taxation claims and difficulties renewing licenses, which all led many of the top betting companies to scale back their sponsorships and operations.

But the announcement, just as the English and European soccer leagues that are popular with betting punters get into gear, was followed by a surprising turn of events.

The following morning, the Chairman of the Betting Control and Licensing Board had a press conference and issued a statement about information that Sportpesa Global had granted to Milestone Games permission to operate as ‘Sportpesa’. It went on to say that had licensed Milestone to operate in the country, but asserted that Sportpesa is owned by Pevans East Africa and that no other company can use its name brand, domains and mobile phone shortcodes – asked directed Milestone to use its own website.

Then over the weekend, one of the other Sportpesa shareholders, Paul Wanderi Ndung’u also released a statement on behalf of Kenyan shareholders of Sportpesa and said he had been unaware of the developments with Milestone. He also made some serious claims about the company:

  • Said the problems of the company started in 2017 when its executive directors allied with its foreign shareholders and started running the company without reference to the board. 
  • Said that another director, Asenath Maina, had requested a forensic audit in 2019 on the firm, but that the foreign shareholders, who had been since been deported from Kenya, continue to frustrate the audit.
  • In three years Pevans East Africa (Sportpesa) has transferred $250 million to the Isle of Man, Dubai, the Canary Islands and the UK. Then, after the company closed, it transferred another $17.5 million to Sportpesa Tanzania and $0.5 million to Sportpesa South Africa.
  • KPMG and Deloitte &Touche have resigned as auditors and tax advisers respectively of Sportpesa Global in the UK, while PricewaterhouseCoopers resigned as the auditor of the Kenyan business.
  • Officers from the UK’s Serious Fraud Office (SFO) have visited Sportpesa’s Nairobi office – and this was linked to negative media and parliamentary coverage in the UK.

To be continued . .

Safaricom’s Pochi

During Safaricom’s 20th anniversary celebrations last week, the company announced the launch of a new M-Pesa business product called launched “Pochi la Biashara” as part of a commitment to support micro, small and medium enterprises (MSMEs).

This comes shortly after they rolled out a new app for business payments (Lipa Na Mpesa app) and which had racked up 240,000 enterprises in a few months. What’s different about the new business pouch (Pochi) product? It’s targeted at informal business people, such as some food vendors, kiosk owners, and boda boda (motorcycle) operators who are not formally registered as businesses.

  • No loss of Fuliza repayment: Sometimes  people with Fuliza loans (a useful instant temporary overdraft on their phones that are replenished by the next infusion of cash) can sometimes find the service an inconvenience, as they may have an urgent or immediate use for an incoming payment – so to get around this, they ask for the money to be sent to a different phone number. Pochi eliminates this need to juggle two phone lines, as business payments do not go to replenish Fuliza – and borrowers can later repay these at a more convenient time.
  • Anonymity: For customers wary about their telephone numbers being misused when they pay via M-Pesa, a phone number is not visible when they make a payment to Pochi. This has become a pet peeve as they sometimes have their numbers harvested and they later get advertising messages or even face personal harassment. To pay to Pochi, they dial *334#.
  • Simple sign up for business owners. There’s no paperwork and they do not incur charges as they receive payments. 
  • No reversals of payments without the business owner’s permission.

So one can now buy from a roadside hawker or at a highway market on the way to Nakuru without worrying that their M-Pesa details (name and phone number) will be used to pester them

Likewise, the vendor has no worry that someone who buys food or curios from them will try and reverse the payment as soon as they drive off.

Safaricom CEO Peter Ndegwa also said the company is going through a competitive process to enter Ethiopia as they plan to make M-Pesa, which now processes 21 million transactions a day, the financial service platform for Africa.