Monthly Archives: December 2004

Banking Stories of 2004

1. MOVE: Started in late 2003, this was the smash story of 2004 and winner of numerous banking and marketing awards. MOVE combined flat fee banking with extended hours, and Kenyans tired of frivolous and excessive bank charges (such as 800/page for bank statements) flocked to move. By the end of the year other banks, including giant Standard Chartered, had also embraced the flat fee concept.

2. Interest Rates, which had been low for 2003, and most of 2004, started to creep up late in the year.

3. Personal loans: When interest rates were low, all the major banks with cash rolled out unsecured personal loans to an eager public to finance cars, education, medical, holiday purchases (that typically charged over 20% interest)

4. Housing: Barclays and Standard Chartered and a few others entered the mortgage sector and met with stiff opposition from traditional players, and surprisingly the government itself.

5.Government bonds: As the government started trying to raise interest rates, it found that no Banks wanted to buy their bonds as they awaited higher rates to come.

6.Goldenberg: The boring parts (non-Pattni for the Public) were interesting to Banker’s, and these included testimony on vouchers, forex-c, money transfers, pre-shipment, CD3’s etc. Bankers were pressurized to do the wrong things or look away as Pattni followed his money through the system. This was laid bare by forensic accountant Melville Smith (whom lawyer Pattni later said was not so clean himself) and Prof. Ryan who showed that Goldenberg has little do with gold.

7. Strike averted: An industry-wide strike was averted following yearlong negotiations. Banks had said that they could not afford to pay the 15% raise awarded to employees.

8. Bills, Bills, Bills: Banking, Micro finance, Privatization, Anti-Corruption Bill etc. Some were passed, while some are still pending in a parliament split by party warfare. Banks have stopped waiting, since their effects won’t be felt for a few more years.

9. Equity: This building society has quietly mobilized customers chased away from banks, built up a deposit base of Kshs. 5 billion and has grown to become a major player. Next year, they will convert to a full commercial bank, with plans to expand throughout Kenya, as well as Central Africa, and will be listed on the Nairobi Stock Exchange.

10. Governor becomes a story: While Kenyans enjoyed the low interest rates, Dr. Mullei made a series of questionable decisions (his intention to raise interest rates, his actions that cooled off the Nairobi bond market, and engaging a consulting firm associated with his family to a lucrative contract that duplicated work already done by CBK staff), that forced the previously reclusive Governor to come out before the press and defend his actions.

Kenya Bus monopoly ends

According to the Nation, some backroom wheeling, dealing, and mud-slinging at KBS was clearly going on before City Hoppa was given a license. However not many tears will be shed for KBS as they have been giving Nairobians a raw deal – they have been using the same buses for the past 15 years (with only seatbelts added).

With matatu’s, a commuter can choose NOT to board a matatu based on it’s age, look, noise, crew etc. – but now with KBS who run the same old buses. While KBS have the metro shuttle, it covers too few routes.

KBS will soon be using double decker buses around Nairobi, and it will be interesting to see Michuki allows them to run. As of today City Hoppa and KBS are sharing the Kencom bus stage, and peace prevails.

Why Not 5 mobile companies?

Safaricom published their 6 month annual reports (their year end in March 2005) and reveled that they earned a profit of Kshs. 2.6 billion between April and September 2004, which was up from the Kshs. 1.5 billion they earned from the same period last year.

There needs to be more competition in this lucrative sector, where Kencell and Safaricom earn super-profits from their high mobile (tariffs) charges that consumers pay. My question is why stop at 2 (3 if you believe in Econet) mobile operators?

I recommend that anyone who PAYS the $25 million should be licensed to operate a cellular/mobile phone company in Kenya. That way the government earns more revenue and mobile communications become more affordable as companies will lower prices and actually compete to attract more consumers. I believe Uganda has 3 and Tanzania 4 mobile companies. (And what happens if Kencell and Safaricom decide to merge one day? – we have seen telecom mergers of such magnitude in Europe and America)

Apprentice Kenya Style (Mwaziri, umevutwa!)

Newspapers have gone on Holiday this past week – However the Sunday Standard has a review of the cabinet’s performance in 2004. All ministers except Martha Karua who they left blank are assessed. (They’re either making a statement or are afraid of another lawsuit)

Anyway since the government has introduced performance appraisal to the parastatal sector, I recommend that it apply to the Cabinet too. Non-performing ministers will be sacked (You’re fired, but not by Mr. Trump) while those who keep their jobs will have their salaries, perks (number of vehicles, assistants,) and budget adjusted according to how they performed against goals that taxpayers set out at the beginning of each year.