Monthly Archives: December 2007

Who’s your next MP?

I have met a few MP’s, watched several live debates in the last parliament, and lot’s of TV over the last five years. What is shocking to me is how different an MP that you know is – almost a two-faced person who’s a serious level-headed professional debater in private who schmoozes the private sector and donors in person, and yet gets on TV at a rally and talks like a Neanderthal, insulting opponents from far flung places around the country.

The MP’s in the outing parliament who impressed me (yet I don’t know any of them personally ) – are people who were always in parliament, debating and active in legislative matters – these include Maoka Maore, Justin Muturi, Martha Karua, Njoki Ndungu, Wafula Wamunyinyi to name a few.

Yet many of them will not be back next March. For every professional i.e banker, farmer, stockbroker, accountant, IT specialist or other professional like Jonathan Mueke who take a first time plunge to make a difference, there are other perennial candidates that they have to run against – and however Jonathan turns out, he’s likely to be better than several other candidates who include folk like;

Current MP’s: best illustrated with quotes from Joseph Kamotho and Norman Nyagah who after losing party nominations and defecting to new parties – said I must be on the ballot and my constituents love me and I must reciprocate that by continuing to serve them.

ex-MP who feel the cold of being out of parliament. But like a gambler the morning after a big-loss night out, they think they know what they did wrong, set about scraping resources to make another lucky run the next night at the casino of parliament. In real life, they still call themselves ‘honorable,’ watch their dwindling money, as they maintain political and social networks ready for a comeback. And if asked, they are always ready to deny that they are interested in returning to parliament, but the lure is too easy and they are a sure bit to be in the ‘right party’ come election time.

Grey MP’s: not Grey in age, but these are people who have some blemished reputations – running from dubious financial escapades at Kenya Posts & telecommunications, health care sector, Goldenberg, road construction, public service, collapsed banks, etc. – who go to parliament where they will work to influence the the Public Investments (PIC) or public accounts (PAC) committees (from within) who investigate 5 year old scandals. They are well funded, know how to play (dirty) tricks, and buy their way into cash hungry political parties – since going into politics after a scandal ridden period provides a re-birth of sorts that legitimizes someone who perhaps should be a defendant, not a ‘honorable MP’

And once a professional gets to parliament does it matter how they perform as legislators? Maore, Muturi, and Muriuki Karue (who introduced the game changing constituency development fund scheme in 2003) have been voted out of parliament by their constituents this year. The CDF was a good measure of how MP’s handled public money as a measure of how an outgoing MP has performed, but I’m sure there are hardworking development minded MP’s (e.g. Tuju) who will be voted out for reasons other than addressing and improving the welfare of their constituents.

So by what measure, should we judge our parliamentarians? Many are judged by the handouts they give or how many constituents they can stuff into the bloated government workforce over the five years they are in office. It is wrong, but until the expectations of constituents change, we will remain stuck with the same old folks. Or, as the 2002 – 2007 period showed, you may vote in new cheetah’s but they will be old hippos that the same constituents will happily vote out & cheer away five years later.

Random post election questions
– does a president who loses an election remain eligible for the handsome 2002 presidential retirement package if he remains in active politics?
– how many bank loans are likely to be recalled or go bad, given the high number of MP’s (likely to be 50%) thrown out by constituents this week?

IPO’s, Election Day, and Christmas shopping

It’s been a very tiring day, after spending seven hours waiting to vote. Still, if I’m willing to buy shares in a crummy IPO, I should be equally tolerant of a election day that occurs every five years.

The week also included Christmas shopping and could also have included the Safaricom IPO before it was wisely put aside till mid 2008.

mini comparison

personal touch: While IPO’s have arrangements for high-net worth and corporate investor that shield them from the crowds (place orders over the phone, and wire money after the IPO), Christmas shopping and elections are a duty that most people have to perform in person.

For elections, you must present your identification documents in person, and for Christmas shopping, a gift is as unique as the buyer perceives the recipient will appreciate what they have chosen. So in the voting queue or at Nakumatt on the 24th or 25th on December you’re likely to meet many freinds & colleagues, or interact with a well known personality or two such as the head of the Nairobi stock exchange and a presidential candidate. It was also very touching to encounter the president daughter shopping in Nakumatt – picking out gifts, pushing a basket and queuing alone, so different from the high security entourages and preferential treatment that surrounds her folks.

Logistics: Shopping wins, IPO’s second, while voting is a distant third. The electoral commission reliance on manual registers to search for voters was time consuming (see my 7 hours). This was after as a previous voter, who had verified using their online system, should have been straight forward. There was a lot more confusion with the electoral commission of Kenya station than the last time round – and even worse in parts of Langata where a leading presidential candidates name was missing from the register (others will see it as sabotage).

Early bird: It’s good to be early with Christmas shopping as you can make careful decisions, shop for bargains, and a have a variety of goods to choose from that are often sold out by the time us late shoppers arrive. But with IPO’s and elections, often the right decision is to wait until the middle (end of first week for IPO, or noon of election day) after the anxious early-bird crowds have been sevred and disappeared. E.g. While i spent 7 hours voting, some people queued for 20 min tops in the afternoon

Some other elections observations:
– Party observers, who were only keen to help their party members. They increased the workload of ECK official who should instead be tending to voter individual queries and problems
– ECK officials arguing in public with each other. It’s understandable given the stress they are under to cope today, but bad for the image.
– The Langata snafu
– Self policing in the lines, in the absence of police or NYS officers who were absent from the poll station
– met my candidate almost alone in the queue, and later saw his big party rival who had a dozen strong media and security entourage
– EU observers walking around, but not talking /interacting/understanding voters in the queue unless there was the possibility of some violence

Summary: all in all, a tough week, with a lot of time and effort required. The Safricom IPO was taken out of the picture which was a big relief to the other two events.

Jonathan Mueke for Westlands

If you live in Westlands Nairobi, vote Jonathan Mueke today. A good man, a young visionary leader who was my pal in grad school and who can represent the future for Westlands, Nairobi. He’s up against bigger, better funded, or connected candidates, but he should be the MP who can make a difference after 2007.

Bank Review ’07: Part IV

Finally the big leagues – these banks have large networks of branches and ATM’s in most of the major towns around the country.

6. (No. 13 last year) Equity Bank: Estimated assets of 51 billion ($730 million) and profit of 2.1 billion shillings ($30 million) as Equity continues the staggering 100% annual growth rate it has maintained since it converted from a building society. Took some political and banking industry heat, but was ably defended by authorities and management. The bank also bought out ¼ of Housing Finance and sold 25% a stake to Helios Capital to 11 billion shillings. The Helios deal will be used to finance Equity’s expansion into East & Central Africa as well as the payment to Housing Finance – and with the addition of new directors, Equity needs to sort out some governance and staff morale issues in the new year.

5. (9 and 10 respectivly) CFC Stanbic Bank: Estimated combined bank assets of 64 billion and profits of 2.2 billion resulting from the mega-merger of two mid-size banks – the local arm of Stanbic (Africa’s largest bank) and mid-size CFC with a combined corporate, insurance and stockbroking business. Some clash of cultures and systems can be expected as with most mergers, but this could be a South African – Kenyan partnership that succeeds, where many others have failed.

4. (4) Cooperative Bank: Estimated assets of 70 billion, profits of 2.5 billion in 2007. Another record year for the bank that has recovered massively from a loss five years ago and since the government set out to sort of the cooperatives sector debts. With growth of 15% from a year ago, and profit up 100%, though the MD was rumored to have been keen to move to KCB.

3. (3) Standard Chartered: Estimated assets of 100 billion and profits of 3.5 billion. The quietest of the big three banks in terms of product development & marketing, it lost ground to KCB even as it remains second in market cap. Hawking their products on street corners may have hurt their image, while the corporate banking is plagued by high fees and an operational system difficult to maneuver.

2. (2) KCB: Estimated assets of 110 billion and profits of 4.3 billion in 2007. Had a smooth CEO transition and growth of 20% but with both deposits and loans up 30% from a year ago. But into S. Sudan has been slow, while Uganda was also delayed, showing the difficult of regional banking.

1. (1) Barclays Kenya: Estimated assets of 160 billion ($2.3 billion), profits of 8.5 billion ($120 million) with growth of 25% from a year ago. The bank continued its turnaround, expanding in rural Kenya and other parts of Africa where it had previously withdrawn and closed branches. This is not the first time that it has had to reverse direction – years ago they spun off an unwanted asset finance business that is now NIC Bank – and who they are fighting for dominance of the same market.

who’s missing?
– Charterhouse Bank which is under statutory management by the Central Bank
– Gulf African – new Shariah bank began in 2007, but may be operating under different rules – (see post)
– Kenya Women’s Finance Trust a micro finance organization with assets of about 4 billion and profit of about 200 million that may be the next bank licensed in 2008.

Equity Bank EGM

Equity Bank held an Extraordinary general meeting on Friday, December 21, 2007 in the KICC Amphitheatre. The meeting started 45 minutes late as shareholders were treated to almost a whole CD of the greatest hits of Boney M. The hall never filled up, and it started at about 10:40 a.m.

The Bank Chairman Mr. Peter Munga invited a Chaplain to say a prayer, after which he introduced members of the board of the Bank and legal and transaction advisors (Kaplan & Stratton, PricewaterhouseCoopers, Ernst & Young) in attendance. The Managing Director, Dr. James Mwangi then introduced several of the top managers of the Bank who were present.

The Company Secretary then confirmed that there was a quorum and proceeded to read the notice for the meeting. However, after completing the first of three resolutions (took about two minutes), the Chairman interrupted her and asked if, in the interest of time, all shareholders had read and were aware of the resolutions. We confirmed – and the meeting proceeded on without a full reading.

The MD then gave a brief talk about the proposal to sell 25% of the Bank to Helios Partners. He said Equity had been growing at about 100% a year and now wished to expand into other countries in Africa. They had sought and now found the right partner to finance that growth and with networks & expertise to manage the new ventures. Helios would get two director seats and may add more funds if the need arose.

The 11 billion capital injection from Helios would also ensure compliance with prudential ratios, increase lending capacity, and allow further necessary investment in IT.

Sweetener for shareholders: the MD told shareholders, that though their individual stakes would be diluted by 25%, the net asset value of their shares would increase from 11.9 shillings per share to 39.4 shillings per share. And though shares were diluted, Helios would not take part in the 2007 dividend.

Shareholders questions
There’s a gentleman called Mr. Alois Chami who owns shares in just about every listed company in the country and is a fixture at all AGM’s – known to all company chairman. Normally he’s a bit of a windbag, but today he acquitted himself with his frank questions.

Chami at a previous AGM
Before answering him, the MD complemented Chami as one of the few shareholders who took up the company invitation to inspect the transaction documents at the headquarters

Chami asked;

  • Who was exempt, all shareholders or Helios? – as the Governor of the Central Bank and the Minister of Finance gave differing interpretations.  MD answered – Only Helios is exempted. Helios is a partnership fund investing in the bank, while Kenyan law only recognizes individuals or companies as investors. Also said that existing directors continued to be bound by their non-sale agreement till July 2008.
  • What does the exemption mean? Kaplan lady lawyer confirmed that applied only to Helios partnership and would not venture further
  • No other bank has that exemption, why? Others may look at the exemption and see a political angle, but it was just a business decision made by the Central Bank
  • Does management have the capacity to utilize capital? Management had the competence, and the bank has been growing at 100%
  • Why invest in housing finance (Equity has bought 25%), a sinking ship? Why not Equity’s own mortgage company? Equity saw housing finance as a turnaround opportunity, bought at 18, now at 40 shillings a share and performance will be better as together they will provide affordable housing finance solutions to Kenyans.

Shareholders vote
Since Mr. Chami was the only shareholder with questions, the resolutions were put to the floor and were passed in quick succession, with the first two being straightforward to:

(1) Increase share capital
(2) Allot new shares to Helios
(3) The third amended articles of association of the bank; in addition to the usual modernization resolutions e.g. allowing teleconferencing, also had some unusual ones like if a shareholder is non-responsive for six years, the company may sell those shares and keep the proceeds, made it more difficult for directors to amend dividend policy, business plan or budget (all but one must approve any change)

Edit – One of the Helios managing directors, Mr Babatunde Soyoye, was invited to the podium and he briefly spoke about the new pan-African partnership that the Bank would venture into next.

The Chairman then invited director Dr. Julius Kipngetich (also head of Kenya Wildlife Services) to give a vote of thanks. He thanked the shareholders and assured them that “stick with Equity, and we will make you rich”, customers (now heading towards 2 million customers by January) suppliers (for world-class service) Board of directors (best in the country) management staff (ordinary people doing extraordinary things) transaction advisers, and media (for good coverage even as Equity remained misunderstood)

Finally, the Chairman thanked shareholders, saying they were now richer than when they came in.

Goodies: tea and snacks outside, while all shareholders got a toe bag with Bank brochures and souvenirs book