Imperial Bank Unlikely to Reopen

Last week, I watched some very moving clips of customers of Imperial Bank who lost their investments and life savings when the bank was closed on October 13, 2015. The Jeff Koinange Live TV show (part 1, 2, 3), featured  three different depositors who spoke of their shock on getting the news and the impact that the last month has had on their families, businesses, and plans for the future.



The program featured Aleya Kassam who’s blogged about her lost money at Imperial Bank and two others, a businesswoman who runs a children’s home and a Nigerian businessman who lives and invests in Kenya. They also narrated tales of other people they know who lost colossal amounts  (Kshs 30 million, Kshs 65 million, and even Kshs 500 million (~$4.9 million), some of who were retirees who had had all their life savings at Imperial bank

Jeff and the business lady had a light moment when they realized they had both been customers of Diners Bank which collapsed in the mid-1990’s and in which she lost Kshs 200,000 (a large amount then)  that she never recovered. How cruel was it then that she was going to lose money in another collapsed bank that offered good rates and good services twenty years later, but which also collapsed?

You could see the depositors frustration with the process over the last month since the closure. They were at times angry with the Central Bank of Kenya Governor, the shareholders of Imperial Bank, the directors of Imperial Bank, the companies that took illegal loans from the bank, and the auditors of the bank. They kept asking how did Kshs 34 billion ($333 million) vanish in fifteen years and none of  these regulators and guardians at the bank not realize something was amiss? How could they allow a bank to operate that even took in their money the day before it closed?

They were doubly frustrated on hearing of plans being formulated over the last month for the bank, with little involvement, or communication, to them as depositors. Why is the bank not open when the Governor said it would resume in a month? Why can’t the government allow controlled withdrawals by the ‘legitimate’ deposits and customers? Why has the (new) bank CEO not made a statement, and Is he even in the country or has he fled to Canada like the CEO of another large collapsed bank? Why has the Central bank not involved depositors in their talks with the shareholders and directors of the bank? Etc.

What’s been in the news seems to have taken the bank further back from reopening including revelations of “off the books” loans, some of which the takers have offered to partially return. The Kenya Deposit Insurance Corporation [KDIC], who insure all depositors up to Kshs 100,000 [$980], have asked customers to ignore fraudulent emails asking them to convert their deposits into shares at the bank in their desperation to get the bank reopened. There have also been stories of there being a Kshs 40 billion hole at the bank, and shareholders only offering a quarter of the amount, while insisting that they want immunity before they place the money in.

Imperial Bank was an award-winning Kenyan bank

Imperial Bank was an award-winning Kenyan bank

In addition the family of the former CEO,  who’s widely blamed for the bank fraud,  are now denying that he stole money, and shareholders of the bank also blaming the Central Bank for failing in its regulatory and oversight role at Imperial which won numerous awards for growth, finances, customer service and marketing. Shareholders of the bank want to sue the companies who had borrowed off the books, and depositors want to be included in cases as they also accused the government of being slow in reopening the bank and for being lax in oversight.

The outlook for Imperial Bank is not good. Even if the estimated Kshs 43 billion in ‘official’ loans, along with the Kshs 17 billion of government securities Imperial Bank had, and whatever amount is in ‘unofficial’ loans, are recalled and paid, the official amount owed to depositors is Kshs 60 billion. But the day the bank doors reopen, you can expect all the depositors to run to the bank to draw their funds in full. They will not be banking at Imperial in a week’s time and are unlikely to ever entrust their funds to the management or shareholders of the bank ever again. The same goes for other banks, and financial intermediaries, who rely on trust and confidence as a basis for banking relationships.

Kenyan bank depositors being administered by KDIC

Kenyan bank depositors being administered by KDIC

The current issue of the East African compares the situation at Imperial to Trust Bank which was placed in receivership in 1998. It briefly reopened after depositors converted their funds into shares at the bank, then again shut down, this time permanently, in 2001 after finding it hard to win new business.

The only way for Imperial Bank to survive is if it is bought out by a large, multi-national, or regional bank. That bank will have deep pockets and will have done its due diligence on the true value and exposure that Imperial Bank carries, and received a waiver of obligations above an agreed threshold and from additional liabilities, prior to their agreeing to buy the bank. And if such a deal happened, the new bank will want to take on the Imperial customers and business but erase all traces of the Imperial Bank name, forever.

Stanlib Fahari REIT IPO Results

This week,  Stanlib released the results of the Fahari REIT IPO offer  that was launched in October.

They had aimed to raise between Kshs 2.6 billion and Kshs, 12.5 billion, but Kenya’s first REIT grossed Kshs 3.6 billion (29% uptake) – after expenses of Kshs 174 million,  and netted Kshs 3.44 billion.

East africa institutions (QII) applied for and received 105 million units worth Kshs 2.1 billion (58%), foreign investors applied for and got 45 million units worth Kshs 899 million (25%), and East African retail investors applied for and received 30.8 million units worth Kshs 617 million (17%).

The  allocation policy in the event of an over-subscription was to be for 55% for QII, retail would get 25%, and foreign investors 20%. But it’s not clear if the Kshs 1.5 billion ($15M investment by the IFC) committed has been factored in, or if it will come later.

The  low uptake would be considered disappointing but for a few factors. First REIT’s are a new exotic product at the Nairobi Securities Exchange (who are also planning to roll out derivatives) and REIT returns are not widely understood by investors. Second, this is a time of high interest rates for competing government securities that are still wildly oversubscribed, and third is that investors may still have overhang from the Imperial Bank shut down – which may continue to affect subsequent attempts to raise cash from the public – such as from company rights issues or commercial bank bonds.

Stanlib are expected to use the funds to complete the purchase of a Nairobi mall

EDIT: The IFC ended up investing $6.7 million (Sh684 million) to match the other investors, which is less than half the $15 million (Sh1.53 billion) it was proposing to invest in Stanlib Investment Fahari Income-Reit. (Via Business Daily

Interswitch in Kenya

Interswitch is a Nigeria-based, transaction switching and electronic payments processing company, with operations in several African countries. The company, founded in 2002, provides payment solutions for individuals and organizations, mainly around financial services to several private sector companies, as well as in the public sector (government revenue, health care etc.)

Interswitch was majority acquired by Helios Investment Partners for $96 million in 2011. Helios are best known in Kenya for their large investments in Equity Bank, Wananchi Online, and soon, at  Telkom Kenya, where they are in the process of buying out France’s Orange Telecom.

Interswitch itself entered Kenya by buying 85% of Paynet Holdings in 2014, which was best known for it’s Pesa Point network of ATM’s, which was launched in 2005,  and which grew to serve customers of over 100 institutions including several of the large and mid-size banks. At the time of the  Interswitch purchase in 2014, Paynet Services had 2013 revenue of Kshs. 320 million (~$3.7 million) and powered of 1,200 ATM’s and 1,300 bank agent locations in Kenya.

Interswitch also owns Verve International which is the largest card brand in Nigeria with almost 30 million customers. Interswitch launched the Verve card brand in Kenya last month, in a partnership with KCB, East Africa’s largest bank

Equity Bank 3.0: Agency Banking & Equitel 

A few days after Equity Bank released their Q3 results, the bank had another media briefing. CEO James Mwangi explained the stuff he had said earlier about the shareholding change, agency banking, superiority as a Telco and expansion plans for Africa.

Notes from the Live stream

Shareholding Change:

  • Helios have exited from the bank ahead of the end of the seven year life of the fund. It was a closed fund.
  • Equity listed in 2006 to discover  the price of the shares and on listing it was Kshs 50 per share  more than they had been offered
  • They chose Helios over 5 other investors. Helios had patient investors (CDC, IFC, Soros)
  •  Helios is an example of what private equity can do and the bank transformed from Kshs 2 billion to 65 billion in shareholder funds without having to do a rights issues, or issue shares and went from 20 billion to 400 billion of assets
  • Helios exit was not a buy back, but a sale to third parties including Norfund, Genesis, Investec, NSSF Kenya, NSSF Uganda and Blackrock – some of who paid a premium of 10% above the market in order to secure large blocks of shares
  • The sale has allowed local shareholders to take up more shares in the bank and reduce the foreign ownership from 49% to 42%
  • Helios netted about $500 million from the sale of there stake in Equity
  • Investors who missed out include China Construction Bank, China Development Bank, Temasek (singapore) and PIC (South Africa)

Agency Banking: 

is one of their most misunderstood and underrated products in which they outsource services /costs to third parties for a fee, and share prosperity with their customers (who become suppliers of Equity services)

  • Top agents are doing 300-400 transactions per day (one in Kitale is doing 500) and top agents earn Kshs 750,000 to 1 million per month
  • Going to add insurance, stockbroking - and transform 20,000 businesses. They want them to be profitable, so won’t register a flood of new agents (e.g. 100,000 who will reduce the pie)
  • In August, agents transacted Kshs 29 billion (2/3 is deposit, 1/3 is withdrawal) - agents have too much liquidity - that’s why Equity/Equitel money transfer is free  as it sweeps up excess cash at the agents
  • Hope to use agents to bring down their cost income ratio down to 32%

Equitel / Phone Banking: 

  • Equity is not a telco - it is a channel for banking service with value add for telco - so customers don’t have to carry two phones
  • Average sending amount is 2,000 - 3,000
  • Mwangi asked Kenyans to furiously take up this product as it solves two problems – that of too much cash at the Equity agents and customers solve their problem of  exhobitant money transfer costs. Equitel did 8 million transactions in August double the numbers down by agents
  • Using USSD, customers used to do 2 transactions per month. That is now to 19 transactions per month with Equitel, and they hope to go 120 per month when they add payments.
  • Kshs 4 billion has been disburse via Equitel . 1 million people have got these loans and the average is 4,000 or 5,000. They are going to increase the loan duration to 3 months, then 6, and will do loans of 3-5 years eventually.
  • Used to process 3,500 loans a day, but that’s now 12,000 loans per day via mobile. loans starts at 1 a.m. peak and are disburse by 5 a.m. before the branches open.
  • Credit applications takes 2 minutes to check with the credit reference, the national identity bureau and also come up with a score analysis.
  • You can send money to any telco, any bank account, any debit/credit card in the world
  • Next is bill presentation; you give your bank a list of recurring payments, and they will  check the bill for you and ask you to confirm payment for electricity, water, dust etc.
  • Cardless banking - no need to carry an ATM card.
  • Other products are virtualization of chamas (software that keeps meeting minutes, chama balances, contributions, reminders, and disburses member loans by phone ( requests done by secretary, approved by chairman, paid by treasurer etc. all by mobile phone)
  • Harambees (fund raisers are also virtualized:  You can see how much has been raised, who has donated a goat etc.
  • Everyone in Kenya can be an airtime reseller and earn a10% commission
  • Equity Life will have medial advice, agricultural advice (trying to map all soils in the country to better advise farmers on fertilizer), education (they have put curriculum from standard 4 to form 4 for kids to revise and do daily homework), financial literacy etc
  • It has free insurance for anyone who spends Kshs 250 per month

Equity briefingJohn Staley, the Director of Finance & Innovation, said Equitel was a free channel that enables them to do secure transactions that were not possible by USSD before and they will soon be rolling out a secure mobile app.

James Mwangi confirmed that a move by Safaricom to hike up the costs of Equitel to bank transfers had been shot down and such regulatory approval decisions will be made by third parties of payment companies and banks (including Equity).


Finally Equity are about conclude their purchase of ProCredit Bank in DRC with most regulatory approvals received and others that they have applied for (agency, mobile) pending –  and one of their big take on’s will be to process payroll of all civil servants in the DRC.

16 November 2015

An Idiot’s Guide to Getting a Tax Compliance Certificate (TCC)

A guest post by Muendo 

Taxes, are the dues that we pay for the privileges of membership in an organized society – Franklin D. Roosevelt

One thing, as sure as death is, you will pay taxes. As to how it is used, it is the prerogative of the government of the day as well as the citizens to keep the government in check to see how the paid taxes are being used to better the welfare of the citizens. I posted a Tweet, after getting my Tax Compliance Certificate and I got a few people including Mr. Banks, asking how I went round the process. So here is my story. I hope it will educate some of y’all on this long process.

On company registration, after you have received that blue/white document from the State Law Office saying that you are a legal entity recognized by the Government of Kenya, you have to go to the next step, which is getting a Personal Identification Number (PIN) for the company. In this new regime, unlike others, you can’t do any business with the biggest spender of our taxes, the government and its agencies, without a PIN. In fact for you to open and a bank account, for you to buy assets in your company’s name, for you to transact with any organization in .KE, you will be required to produce a PIN Number. It is a mandatory requirement. (I suspect soon the government will abolish ID numbers and use your PIN to locate every single thing about an individual. Instead of ID numbers, your PIN will serve as the ID number), (those are just my thoughts). How do you get your PIN in our modern society? KRA went the tech way to get you plugged in to the system. They have a robust system called iTax. Any new employee above the age of 18, and any registered organization, has to register with iTax to get their PIN.

Take that a notch higher, for you to increase the chances of you getting awarded a Tender, as everything in this country is tendered, you need another document called a Tax Compliance Certificate (TCC). The Tax man aka Kenya Revenue Authority (KRA), certifies that you have submitted your returns and paid all your liabilities before it issues you with that piece of paper stipulating that you are cleared to conduct business for the next 6 – 12 months.

Normally, for start-ups, the first years certificate is quick to get as your business is new and there is nothing much for them to look in to. (Though, rumour has that they (KRA) are also slowly going to the route of issuing TCC to directors of the companies and will slowly keep an eye on them as well. How true that is I am yet to find out) Now since KRA introduced iTax to the Kenyan system, it killed a few birds with one stone.

Previously, people never cared much about paying taxes. Now, if you are doing business you have to have an Electronic Tax Register (ETR) machine that captures the Value Added Tax (VAT) that you charge to your customers. Unless, you are selling zero rated commodities, it is assumed that every enterprise (Start-up, SMEs, Blue Chip, Multinationals etc.) has a PIN number and an ETR machine. Every transaction is/will be captured there and therefore a customer is issued with an ETR receipt. A normal ETR receipt has your PIN number and the amount you are charging the customer plus VAT and a breakdown of what the VAT is.

Again, previously, the Tax man used to assume that all Kenyans are upright and outstanding citizens who will pay their VAT after balancing their accounts (There is a way that you need to do, briefly explained as, (1) there is what you are charged by your suppliers and then (2) there is what you charge your customers, (3) the difference is what you remit to the KRA, hence the term ‘doing your returns’). Anyways, not many Kenyans including the ones in authority, seemed to fit that tag. They would find tax loopholes, using their accountants and tax lawyers,  and exploit them. And the government would lose revenue. So, the Tax man,  aka Njiraini, decided to tighten the belt to curb that habit. So every time you supply the government with substandard goods with over inflated prices, because people have to eat, then the said agency snitches/alerts Njiraini and company, that company X has supplied us with goods/services/consultancy, and here is 6% of the tax they are going supposed to pay. Ask them where the other 10% is. And once the 6% is held, the agency, in return sends you an electronic withholding tax certificate.

As an upright citizen, who wants to be in the good books of the Tax man, you are given up to the 20th of every month to file returns of the previous month. Now, KRA will check up on its database and see how many organisations have submitted 6% with your company name in there and compare it with the returns you have submitted. Occasionally, you will find scenarios, where the Tax man needs to refund you some money. Problem with KRA is, once that is the case, it can take up to 2 years even more before they decide/remember they need to do tax refunds. 

That aside, once you have filled your returns, whether nil or you have a liability (This is where you owe KRA money) or a Tax refund is required, you comply with the law of the land. Failure to file returns attracts a hefty fine of Kshs. 10,000 (~$100) per month for the months you haven’t filed your returns plus a percentage interest determined by a tax officer that you need to pay per month till you finish you with your liability. This is not a joke, especially, now that the government is tightening its laws on taxes and widening its tax base.

Here is a weird thing that KRA does. It waits for say 3-4 years of a company existing. And then, it is expected you have to have audited accounts say for the past two years (That is assuming you are done with your tax amnesty of 18 months – not sure whether this exists anymore,) and you have gotten a few good tenders here and there, and then they knock on your door, to find out how you are carrying out your business and how you have been performing in doing tax returns.) Assuming you are an upright citizen means, you have 4 years of an annual Tax Compliance Certificate issued and you have about 3 years audited accounts. They will request for all, and I mean all, documents to support your claim of existence. And by all I mean, from receipts, to P&L Accounts, to Audited accounts, to bank statements. Who the heck remembers stuff that they did 4 years ago? The Tax man will flip through records and see whether you have dodged taxes or you have acquired your TCC in a fraudulent manner. If you are a citizen of no morals, they will subject you to a fine of a percentage of your gross turnover and give you a time period to pay, failure to which, all assets you own will be liquidated and the money is recovered. I know that a bit to well, as a relative was being auctioned for tax non-compliance.

Also, KRA is now working overtime to ensure that all companies are registered on iTax. There is a budgeted Kshs 8 billion to be spent in catching up with you if you are not iTax compliant.

So, finally;

Here’s an idiot’s guide to getting a TCC

1. Register at the iTax platform and get your PIN.

2. Submit your returns every 20th of the month. You had better submit a Nil return than be late to submit the returns. Be prompt in doing your accounts reconciliation every month. Now, there are times you can’t afford an in-house accountant do your books, There are some great fellas, who I have worked with that can help you with that. Talk to Plus People Ltd. They are the people behind this great platform called Uhasibu. They have really assisted me in getting my books in order and ensuring that I use the Uhasibu system to run my small company. Also get an Auditor or a certified tax accountant to help you decipher and navigate the Kenyan tax laws and the levies that you need to pay as well as how to bring down your tax liability.

  1.  Make sure you get the Withholding Tax certificate, each time, whatever agency you deal with submits that 6%. As much as the system is automated, follow through is important. I am talking from experience. I have a government agency I am chasing since February 2015, to give me my withholding tax certificate.

4. Use the iTax system to submit your returns before the 20th. This is now an easier way, than to go queue at times towers to make your returns.

5. It takes approximately, two (2) weeks between the expiry of your TCC and receiving a new TCC. Plan appropriately. During those 2 weeks, I do loads of client visits and queue up business for the next “financial” year. In those 2 weeks, Njiraini and Co, will be looking through your accounts and performance before giving you a clean bill of health. I know we people at .KE have this thing, I know a guy who can shorten that process, if you do well and good. But that’s the average time if you don’t know a guy.

6. Make sure you do annual audited accounts, just in case KRA guys show up and want to see what you have been up to. Also, a great rule of accounts, it moves, have evidence of what happened (Receipts, Invoices, Petty Cash vouchers etc).

7. In case things go wrong, occasionally they do, have your auditor in place, when this KRA officers check up on you. They kind of know how to navigate those murky waters while you sort things out with the Tax man.

13 November 2015

Kenya Airways: Still in The Red

This morning Kenya Airways (KQ) released their half-year results. Some highlights from the investor briefing.

• Half year Kenya Airways revenue was Kshs 56.7 billion same as last year. 90% is from passenger traffic, and  60% of their business is in Africa.

• Kenya’s largest increase in tourists was in 2011, and the numbers dropped in 2012 & 13 with the largest decrease was in 2014, just as KQ added great capacity. JKIA passenger numbers have been flat for the last three years and for the last three months, they have had to adjust their schedule from 24 to 18 hours as the runway is being repaired.

• Half of airline industry profit is in North America, where strong capacity, consolidation, combined with ancillary revenue and lower fuel costs has had a major impact.  The Middle East has low yield compared to investment, and Africa has 3% of global demand.

• Shareholder equity has gone from Kshs -6 billion last September, to Kshs -33 billion this year and KQ is talking to the CMA on how to reverse this.  

• KQ has a turnaround plan, developed with Mckinsey, with 24 initiatives worth a potential $200M, that starts this month.

• Despite fuel cost coming down from Kshs 21 billion to Kshs, 13 billion, the half year loss went from Kshs 10.5 billion to 11.9 billion

Some other numbers

• Revenue per available seat decreased from 6.2 to 6.14

• Cabin factor was up from 64% to 68%

• Carried 2.14 million passengersm up from 2.10 million

• Cargo tons were 35,405 down from 37,255

• On time performance was 75% (down from 77%)

• Finance cost was 3.4 billion, up from 1.5 billion

The new chairman of the Kenya Airways board, Dennis Awori, thanked the government, financiers, and suppliers for their support for the airline. CEO Mbuvi Ngunze said that the senate enquiry is ongoing and on Monday, senators will, for the first time, visit the airline.

November 12 2015

How the 30% Kenyan Shareholding of Foreign Companies was Conceived

For the last few weeks there’s been talk about the 30% rule. Yesterday the CS for Industrialization said it was a mistake, and the team at Anjarwalla & Khanna said they heard that it had been introduced late in the process and that they flagged it and written immediately to the Attorney General on it. Anjawalla & Khanna briefing

But how did it come about? The talk was that it was introduced late in the third reading of amendments to the Companies Bill which was a voluminous bill – almost 800 pages and with 1,000 clauses – that was discussed in parliamentary sessions over a period of 5 days.

The Hansard of one session (from Mzalendo) shows that the clause that specified that foreign companies should demonstrate that at least thirty per cent of the company’s shareholding is held by Kenyan citizens by birth may have been introduced by Wesley Korir, the MP for Cherangany – and this led to a long debate late in the evening for parliament (the sitting time had been extended).

It was supported by some MP’s and opposed by others including:

For the amendment

  • Nicholas Gumbo: If you go to some neighbouring countries in East Africa, you cannot be allowed to register a company unless you give 50% to locals. Why should we be apologetic about this?
  • James Nyikal: The reason is that as Kenya is growing richer, the majority of Kenyans are getting poorer.. The reason is basically that a lot of the wealth we have is actually owned by foreigners and a few people who pretend to be businessmen but are basically agents for principals who are abroad. In South Africa, immediately after their independence, there was serious effort and companies had even to give shares to local people, so that ownership became local. So, 30% is acceptable and we should support it for the sake of Kenyans.
  • Sammy Mwaita: I support because I remember when we were discussing the Public Procurement and Disposal Bill in this House, we pegged the local content at 40% , so that citizens may benefit from business. This is timely. We should initiate it from the time of registration. This is a very good move.
  • Robert Pukose: I support this amendment of 30%. This is because when you compare us with our neighbouring countries— In Tanzania and Ethiopia it is 50%. Ethiopia makes it very positive because companies are not allowed to employ a foreigner who has qualifications which local people have. So, we should accept this 30%.

Against the Amendment

  • (Senator) Gideon Moi: ..Number two is the fact that imposing 30% local shareholding on any foreign company is very extreme. People who want to put their money in a venture are going to be extremely wary of just picking on any shareholder. If I were to support the Member, the local shareholding would be less than 30% or none at all.
  • James Oyoo: When Kenya attained Independence, it was a prerequisite for any company to give shares to local Kenyans. The immense greed of Kenyans made us reduce it to 10% (when it) started going to individuals’ pockets. It is a good idea but it is ill conceived.
  • Aden Duale: The history of Mobitelea and Safaricom is very clear. Some brokers would sit somewhere and this meant we would increase brokers on the streets.. We will make Kenyans who are brokers in the village to say that if you cannot give them 30%, you will not do business. That is not what happens in most— President Obama says, “Take Kenya where South Korea has reached.” That law does not exist in South Korea and Malaysia…You must allow engineers to have companies but you will have people who have not gone to school.
  • Samuel Chepkonga: .. I was a regulator at the Communications Commission of Kenya (CCK). We provided a policy in which we said that for you to invest in the telecommunication sector you had to have a Kenyan partner with 30%..They kept amending the policy in the telecommunication sector to where it is now; there is 0% requirement for a Kenyan to invest in the telecommunication sector..Let me tell you Members, foreign direct investment comes in huge amounts such as US$500 million. Which Kenyan will produce US$150 million? Let us be serious. Secondly, we are a very poor country. We are seeking to attract foreign direct investment. You are now telling those companies which are seeking to invest in Kenya that this is not an attractive destination. This law is seeking to encourage and make Kenya a friendly investment country. If you are going to bring things such as these, you are going to chase direct foreign investment out of this country.

Dividend Payments across East Africa – Redux

It’s been four years since this post and the signs are still not encouraging for cross-border dividend payments across East Africa.

Good - Safaricom: I get my dividends by M-Pesa – in fact one came last week, right on the 15th anniversary of the company. At Safaricom, M-Pesa is the preferred method of paying dividends which are below Kshs 70,000 to shareholders – and this would work for almost 99% of their individual shareholders who all own less than 100,000 shares each.

But for Ugandan shareholders of Safaricom, to receive the share of the largest dividend in Kenya’s history ($256 million), they get a cheque in the mailbox  that takes 4 days to clear. The next thing for M-Pesa dividends is to have them automatically reinvested into buying other shares; but for now you can instantly lock the funds away in an interest earning M-Pesa fixed deposit.

No change - Stanbic Uganda: Shareholders in Kenya get a cheque in the mail which takes one month to clear and costs $8-10 per cheque. No improvement, and not likely to change.

Bad:  (a surprising step back this year is) Bralirwa: At last review, Bralirwa (the Rwanda brewery) dividend cheques were issued KCB Rwanda, and KCB Kenya was encasing cheques at their branches in Kenya provided Kenyan shareholders presented their cheques, and proved their identity – they could receive equivalent cash payments up to RWF50K (~$67).

This year that option is not there as KCB Kenya is not encashing cheques! A shareholder has to deposit the dividend cheque into KCB or any other Kenyan bank to get they payment.  I tried that at my Barclays branch and they refused as they simply don’t have Rwanda francs in their bank system.

10 November 2015

Kenya Companies Act 2015

This morning, a session was held by the law firm of  Anjarwalla & Khanna in Nairobi to advise stakeholders abount the new Companies Act and Insolvency Act that are now law.

The Cabinet Secretary for Industrialisation, Adan Mohamed, said that the day when President Uhuru Kenyatta signed 4 bills into law - the companies act, insolvency act, special economic zones act and business registration act - was his proudest day in two years in the Cabinet.

Partners at the law firm explained various sections of the new companies act including:
  • It makes businesses easy to register and operate – and one person can form a company.
  • Memo (can be one page long) & articles are simpler
  • Role of the company secretary has been clarified. Corporate governance has been clarified with penalties for directors and management including for conflict of interest.
  • 30% local shareholding in a foreign company. Adan said this was a mistake that the government would rectify. The team from Anjarwalla & Khanna said that while the 30% rule  is probably constitutional it’s impractical, and the AG & government agree. They also explained that it is for new branches only – and does not apply to existing branches, or to any subsidiaries of foreign companies
  • It gives minority shareholders court powers if main shareholder/management are prejudicial or make bad decisions / transactions on behalf of the company
  • New company is able to do anything including borrow unless if it restricted
  • PE Investor oversight: Investors can attend board meetings as observers  and  without being directors or  legally bound by decisions
  • A company must have at least one natural person as a director (all companies have 6 months to rectify this)
  • Companies can buy back shares from other shareholders
  • Kshs. 6.75 million (~$67,500) is the minimum paid-up share capital for a public company (this will affect some land owning companies and large property developers)
  • Public companies need to know who beneficially owns their shares (the true owners behind proxies)
  • Companies are required to have websites and to publish financial statements online
  • Share buy backs are now allowed.
  • All shareholders have rights to preemption when companies create new shares - (and this can only be from profits, not new money)
  • MBO and LBO: Banks could not finance acquisitions, but now they can. e.g. Management can to a  bank and use the assets of the company secure financing to buy it or pay off foreign outgoing shareholders – (this opens another exit opportunity for investors)
Adan also said that the insolvency law, which previously was aimed on recoveries for secured creditors, is now focused on bringing insolvent companies back to life.
November 9, 2015.

FastJet Finally Get Kenya License

The three year journey to get low-cost airline FastJet into Nairobi now seems to be nearer to it’s goal following the licensing of FastJet Kenya to operate domestic air services between Nairobi and Mombasa, Kisumu, Eldoret, and Wajir.

However they were not granted other rights they had applied for to fly from Nairobi to international destinations including Lusaka Harare Lilongwe and Entebbe that they serve from their current bas in Dar es Salaam, Tanzania.

Still it’s a start. In the three years since they were established JamboJet (one by Kenya Airways) has established itself as a reliable true low cost carrier in the country, while one of the main local airlines Jetlink has since gone out of business, leaving Fly540/Fly-SAX as the only other domestic airline with regular services to the main airports around the county. JamboJet also have designs on flying to neighboring countries, but an approval discussion was deferred in their case.

Sunday, November 08, 2015