Monthly Archives: January 2008

Issues for Diaspora Investors

Unit trusts
In all the political news this week, some may have missed this story on collective investment schemes (funds, unit trust), who will now have to get more aggressive (take on more risk) to deliver commensurate returns – and are now asking the regulator (CMA) to relax some of the rules that restrict their investments.

A year ago this post discussed unit trusts and the cost of investment being a major deterrent to the returns they offer (and at the time the NSE was in a much better position). I still have issues with the 3 – 5% initial fee and 2% annual fee charged by many unit trusts.

Real estate
The post-election violence will have a mostly negative impact on property values and in rural Kenya, and in towns like Eldoret, Kisumu, Nakuru and especially in Mombasa (where the real estate boom was driven by visitors/tourism numbers). The cost of building will also go up as demand for supplies will be great. So buy cement company shares (Bamburi, ARM, Portland) the day Kofi Annan succeeds in his mediation efforts

In Nairobi, properties near slums like Ayany (adjacent to Kibera) have been badly affected owners and/or tenants moving out. However there is also increased demand in some of the same areas – perceived to be safer parts of the city, such as Kileleshwa and Westlands. They will also benefit from residents of other towns like Kisumu relocating to Nairobi.

These are also the areas that many Diaspora Kenyans have invested in or are considering investing; and while many have postponed their real estate investment decisions, those already in (with mortgages to pay) will have to wait out the storm. Also it may be wise to set up several investment companies to keep rental turnover and sidestep new tax laws

Also Kasarani which is one place you can still buy land cheaply to build, will have values of land increasing as will parts of Central Kenya.

Kutwa: Tuesday: Pick out a positive story

Bank Round-up
– Co-op Bank extends its banking hours from the now less-traditional 9 to 3 to 9 a.m. to 4. p.m. daily and up to noon on Saturdays.

– bold Equity Bank announced plans last week to open new branches in Kisumu, but that was before a new outbreak of violence over the weekend and the fatal shooting of an opposition MP this morning.

– The Business Daily reports that West African giant Ecobank, plans to take over a majority stake in limping mortgage bank EABS whose recent growth had lagged most of its peers

– NIC Bank to convert this cashless ATM points into full branches and expand its network.

capital flight: A leading multi-national bank is considering moving an African operations department out of Nairobi, and to another country. The amount of capital flight (money leaving the country) is also at an alarming high.

Other sectors
– Valentine’s day massacre?; What does Naivasha flare up mean for some flower farms who Valentine’s Day (Feb 14) shipment/sales can account for up to ½ their turnover in a year ?
– Nairumor that a blue chip CEO and turnaround specialist will resign next month in search of (foreign) greener pastures
– The Harvard Business School’s Africa Business Conference is on February 15-17, 2008 in Boston MA. Details from YAP
– Some troubling signs and even more today.
– Another regional airline upstart is Executive Turbine, flying 4X weekly to Kisumu for Kshs. 3,540 ($70). Regional airlines should be added to the earlier post on election winners.

Trivia
– Will ‘President Obama’ need Equity Bank? – because 46% of African American household’s don’t have bank accounts – he can tap Equity Bank’s revolutionary model to bring banking to the unbanked.

– wish I was in France: It’s better to be a rogue trader facing charges for misplacing $7 billion. But it’s also a reminder that financial shenanigans are still rarely punished and prosecuted in Kenya. E.g. Francis Thuo. (and maybe Mr. Kerviel would rather have worked for a Kenyan bank instead)

Post-election Winners

(Non political) : For a month, we have concentrated on the losers – Kenya’s image, banks, truth, profits, employees, tourism sector, insurers, economy; so it’s a good time to look at some ‘winners’ today – people, concepts, companies who proved themselves and who may make some money from the post-election turmoil.

– Mobile phone companies – Safaricom and Celtel were a vital link throughout the country. Airtime was worth more than money at times.
– Language schools: Why? Cause you never know when it will be an advantage to multi-lingual in our multi-tribal Kenya again.
– NGO’s: Are back in business in a big way.
– Dick Morris: He never had a chance to participate in the election, but his ilk i.e. dirty tricks campaign managers were at work and in full force such that many professionals who ran clean, issue-oriented campaigns rarely had a chance in this election.
– Gated community housing projects.
– Uchumi Supermarkets: Won a lot of points for being open and doing business even when urban clashes were at outide their doors. Investors can expect no dividends until 2011, but the company may get a better reception if they approach investors with another rights issue thsi year.
– Kenyans online: From blogs, to online initiatives (reporting violence, airtime/voucher transfer) thousands turned online to vent, tell their stories, get news, correct their country’s image and restore sanity – after a media blackout and/or fatigue from the political bickering and violent images that ran on TV all day.

Can you name any other winners?

Kutwa Tuesday: Jan 22 Pot Pourri

All Safaricom:
Good: An IPO from Safaricom could be the tonic that will restore investor confidence in Kenya that has been damaged the political events over the last month.
Good: Safaricom has partnered with Google to offer free email (6GB worth) to all their customers.
–but not good Have Safaricom raise their data costs? Internet browsing by phone seems to chew up airtime a lot faster these days

Air wars:
– Fly cheaper: Kenya Airways flights to Mombasa are now 3,000 shillings ($45) one way and 5,000 for roundtrips (plus tax) – about ½ of what they were a month ago
– There’s a new airline on the Kisumu route, as another airline, Fly 540 has also acquired new aircraft to embark on flights to other regional African countries.

Mitigating political risks:
– There was a notice in the paper by the Association of Kenya Insurers (AKI) confirming that political risks/riots are not covered in their policies. However, members will discuss loss compensation on a case by case basis.
– But there’s a green light for some; Today’s Daily Nation has an (offline) story about the Africa Trade Insurance Agency – a World Bank subsidiary that covers political risks that has been largely dormant in Kenya until this month when corporates like Kenya Airways, Telkom and Nakumatt have been flocking to enquire about political risk cover. The story has an ominous warning that election violence could be an event that recurs every five years in Kenya in future.

Phantom exchange: Owing to a system hitch, there was no trading at the Nairobi Stock Exchange on Monday – though someone at the Standard says there were some trades. The exchange appears slightly inflated with all that’s going on around in the country.

Boycott averted: I was in the second week of my personal boycott of national broadcaster Kenya Broadcast Corporation (KBC) for shoddy programming and outright disservice to Kenyans in the post-election period. But they have won me back temporarily with their belated offer to broadcast soccer matches from the Africa Cup of Nations in Ghana. Having a variety of channels to watch is however a luxury that million in rural Kenya do not have as they only have the national broadcaster to tune to for news and entertainment.

Opportunities
Consult with Pricewaterhousecoopers: Kenya jobs include Transfer Pricing Manager, Consultant (Internal Audit) Senior Consultant (Internal Audit Services) Specialist (s) (Public Sector), Manager (Financial & Operational Effectiveness), Consultant (s) (Financial & Operational Effectiveness), Manager (Assurance-Audit), Consultant (IT Effectiveness), Consultant (CCH TeamMate), Associate Director (Mergers and Acquisition), Analyst (M&A), Manager (M&A). Also, other positions available in Uganda and Tanzania – D/L for all is 31/1.

Jan 18: From ODM to Icarus

three weeks after the ill-fated elections and three days of mass protests

The disruptions in the workflow have been a nuisance to the country, while the violence is threatening to cut off Central Africa. But how long before President Yoweri Museveni decides to drive eastwards for another road trip  to check out the situation for himself?

If ODM’s goal is to grind the country to a halt, it may take a while. With tax collections significantly down, the pending Safaricom IPO which I thought will be an election winner could turn out to be a (one time) budget lifesaver – expected to yield over 30 billion shillings in Q2 of 2008.

ODM is now specifically targeting companies linked to key government personalities like Citi Hoppa, Brookside and Equity Bank. This sounds far-fetched and could lead to retaliatory attacks (ODM personalities are also business people); it’s also an extension of silent boycotts that people have undertaken on their own. E.g. people who only selling petrol to their kinsmen, while others boycott pubs or have stopped reading the Nation or Standard/KTN because of their perceived political leanings.

While George Bush is trying to revive the US economy through bipartisan tax breaks, but here we have two sides who won’t even sit down with each other. If they don’t, the crisis may soon spin out of control as the race for the presidency assumes historical dimensions

cut & paste: The Central Bank has introduced business continuity guidelines for all banks. However, it seems to be an update of an IT disaster preparedness document that’s a few years old and does not mention any of the words – crowd, riot, security, cash, ATM – and only one mention of ‘police’. In short, it does not address many of the challenges banks have faced.

Insurers with hearts: Some insurance companies like Pan Africa and Heritage (CFC) are making ab exception on a case by case basis to assist business people victimized in the riots. As a rule, insurance companies have no responsibility to cover such acts

Such as Business coping: Ukwala supermarket, which was destroyed in Kisumu, lost all their financial records. They are asking suppliers & partners to provide them with statements, delivery reports, and invoices as at December 31 and not to bank any of their cheques.

But can’t please everyone: like thieves who take advantage of busy police battling rioters, some unscrupulous borrowers are also using the economic shutdown to plead with banks for delayed repayment and favorable revision of loan terms when they haven’t really been affected.

Signal of confidence: On Wednesday, Imara Holdings introduced a new fund targeting the Diaspora willing to invest in east Africa. It’s an open fund with a minimum investment of 6.5 million shillings (~$100,000) and will be sold through Kenya’s ICEA

– Recognize us: Barclays have eaten humble pie for two years, but who would have through that high-street Standard Chartered would open a branch in Eastleigh?

Local Icarus: what happens when you fly too close to the sun

opportunities
– From PSD Blog; nominate a women entrepreneur to the doing business group of the World Bank.

Current open jobs
from the papers this week
– APA Insurance: unit managers, account managers. Apply to recruitement@apainsurance.com
– Safaricom: VAS Propositions Manager, Channel Development Manager, Key Accounts Executive – apply online. But for the position of chief information officer – but apply though PricewaterhouseCoopers executive selection division (ESD).