Monthly Archives: March 2010

Capitalization in Bank Mergers

Today should see the announcement of a merger between Southern Credit and Equatorial Commercial (ECB) banks.

They are both yet to release their full year results for 2009, (have until Thursday) but this will likely be a loss year for Southern (Kshs. – 145m in 9 months) ahead of the combination of the 32nd (Southern) and 35th (equatorial) ranked banks in Kenya with combined assets of about Kshs. 9.3 billion ($120 million) – but which were not growing as fast as their smaller peers in the competitive Kenyan market with 44 commercial banks.

The Nairobi Star today reports that the reason for the merger as the need for Southern Credit to raise their capital to the Kshs 1 billion mark after a deal with foreign investors had fallen through and this amount will be the combined capital size of both banks. The article further describes this as a takeover of Southern – a bank with structures but no capital by ECB – which is a bank with capital but no structures

Elsewhere, in the Market Whisperer [offline] column of last week’s East African newspaper shoots down the justification behind a market rumour of Equity Bank’s (valued at $787 million) interest in acquiring National Bank of Kenya (valued at $133 million) as two over-capitalized banks who don’t need each other.

It notes that NBK which was restructured by the Kenya Government is in essence still a government banker beholden to government securities which account for majority of its income, rather than traditional lending while Equity is struggling to lend out its huge capital infusion and already has a (much) larger distribution and product range than NBK.

Kenya Easter Tourism Expo 2010

Past Easter expos: 2007, 2008

This year’s edition of the Kenya Tourism Board Easter 2010 Holiday Expo was held at the Sarit Center last weekend. Some of the notable offers were

Nairobi: KWS has self catering guest houses in most of the national parks and mountains areas. They also offer shuttle services to the Nairobi National Park from downtown Nairobi on Saturday, Sunday and Holidays (9.a.m and 2 p.m.) at a cost of 500/= (~$6.5) for adults and 200 for children

Country-wide: Heritage have full board and family adventure packages at their three Mara properties, (Siana, Intrepid and Explorer), three coast properties (Voyager Ziwani, Voyager beach resort, Kipungani -Lamu), as well as Samburu intrepid, and Great Rift lodge (Naivasha)

Ashnil Hotel has Aruba Lodge (located next to a man made dam inside Tsavo Park) at a cost of 6,000 ($80). They also have a new controversial camp inside the Masai Mara, but recently lost their 200 million shilling ($2.5 million) tented camp in Samburu in a matter of hours after heavy rain and flooding last month. Another property in the Samburu managed by Atua Enkop Africa got insurance compensation after flooding. Also not nature related but a looming disaster, the Bogoris Spa Resort and other hotels around Lake Bogoria must be wondering what will come after the recent Endorois court award that may affect their land holdings.

Also in the Central Rift there is also Lake Nakuru Lodge single in April to June is 8,000 while its 11,000 in high season from July to march, sunbird lodge at lake Elementaita at 5,200 full board from April to June, Kigio with Kigio Wildlife Camp and Malewa Wildlife Lodge

In Western Kenya, there’s a new entrant from Kakamega – Mago Guesthouse.com – an income generating venture of the Mago youth polytechnic in Kakamega with prices of 2,500 half board for residents missionaries and volunteers.

Kenya Coast: New North Coast Beach Hotelwon a prize for best stand the expo. They are trying to establish themselves with low introductory rates e.g. single half board is 5,800 ($75) and 6,500 full board up to December 2010 (except Christmas fortnight)
– Mombasa continental has a flying package from Nairobi 22,750 ($295) per person for 2 nights half board up to July 2010, while singles normally pay 6,500 in the low season (April to June)
– Leisure Lodge Leisure Lodge, site of the Kenya ICT Board
connected government workshop has single rooms at 6,900 8,855 and 10,960 for Easter week.

East African Tanzania had Kempinski (Dar $130, Zanzibar $170, Serengeti $200 and Blue Bay), Plan Hotel (mapenzi beach camp special $333 and Neptune pwani beach $234) Hotels & lodges Tanzania (private island Zanzibar $264), Lamela Camp (Ngorongoro and Serengeti) and Gibbs Farm (Ngorongoro and Manyara)

Uganda had Lake Victoria Serena – opened in September 2009 with 2 nights flying on Air Uganda at $590 per person, Peal of Africa (tours of Bujagali falls) and ATV Safaris (ATV/quad bike safaris at lake Mburo)

other – Sports: surprisingly did not see any world cup related travel opportunities to South Africa in June/July 2010 – a missed opportunity?
– Kuoni have a package for golfers for $1,185 comprising 6 days of Golf at Windsor, Karen, Muthaiga and the Great Rift Courses, with the option of an extra trip to Masai Mara for ballooning
– Wildflower have the Wildman Triathlon 24 -25 April 2010 at Turtle Bay Resort (Watamu)

Wedding: Serena Hotels had a beach wedding package for $1,380 per couple with 2 nights half board VIP stay, marriage license & certificate, wedding cake, champagne breakfast, wedding gift, bride manicure/pedicure, and guest of the couple enjoy 10% off.

How Developers Can Make Money with Safaricom

Not to change track on the big green machine

Safaricom is Kenya’s largest income-generating company with a revenue of $1 billion, its largest taxpayer, has 18 million customers, and the award-winning Vodafone M-pesa, 3G rollout to the mobile masses etc. but has taken a lot of flack this year online and at conferences.

A Catalog of ills committed against developers in their dealings with Safaricom can be found at Thus Spaketh – one of the best blogs I’ve read this year and the perception is that Safaricom steals ideas, takes a big profit slice from developers leaving them poor, has too many requirements etc.

But this week I had a talk with a crew of who had struck it big dealing with Safaricom, more than once, in both hardware and software. And the tips they shared included:

1. It will be a struggle – with lots of frustrating months of tinkering, back and forth visits to the company; you may go broke and not see the promised land
2. With 18 million customers, they won’t tinker much with their cash machine and don’t pitch old ideas or technology they have outrightly rejected. Try and work within the technological parameters and requirements they are using.

3. You have to hustle on your own to get the product/concept moving with early adopters in the market before the Safaricom PR machine take over.
4. IF when you strike it rich you will have a very lucrative year, better than an IPO; your turnover will go from zero to millions of shillings per day, so prepare your bank otherwise they may flag your account for money laundering or being a pyramid scheme
5. Yes they will eventually steal your idea; or they will develop in-house what they are paying you millions for – so your wonderful product has a shelf life of one very lucrative year. It’s only natural that the company will try and reduce their outlay costs to improve margins, while competitors and clones will also eat into your market share and profits and probably even improve on your product.

6. Now that you understand the last point, think two steps ahead, and have more innovations, because the gravy train will not last forever (so don’t buy a range rover in year one). Invest the profits in your next innovation, equipment, or real estate or another more stable industry

In summary, it is a vicious cycle that will only pay off for a few as the likelihood of this supernova is very small. Development doesn’t appear to be a bankable field as banks and financiers like to see steady growing income and profits, so it is likely that resources will come from family, friends and savings.

Proparco in East Africa

French financier Proparco had a mini cocktail while their CEO Luc Rigouzzo was in Nairobi last week. The CEO, who grew up in Africa (Ivory Coast) talked about the group investments and potential they see in Africa, being real, not just afro-optimism statement.

In the banking sector, Africa with its 1 billion combined population has a potential urban population of 300 million banking customers, hence Proparco’ intervention in the banking sector as well as infrastructure sectors

Proparco with € 1.5 billion assets has 37% of loans and 26% of equity investments to Africa, and their loan portfolio at 2008 comprised 146 million Euros in east & central Africa, and 154m Euros in West Africa
Proparco invests in social, environmental investments for the public good and that transom poverty.

The consumer may not see or feel this kind as Proparco’s intervention is at a higher level with loans of € 5 to 30 million per project (over durations of 5 to 20 years) and up to to 100m in infrastructure, and equity of € 2 to 20 million (over 4 to 10 years)

Tea estate

In Kenya they have invested in Mumias sugar, I&M bank, Zain, Bank of Africa, Serena Hotels, KTDA) , NIC Bank, Rabai Power, Kenafric. Ormat (Geothermal), while Uganda has bugajali hydro power, DFCU, and in Tanzania they have Tigo.

Urban Inflation Index: March 2010

Tracking changes in the three month ago in December 2009, as well as to six months as well as one year ago in March 2009

In 2010 government has shifted adjusted inflation basket to have a better measure of inflation that is less weighted on food. Let’s see how they compare

Gotten Cheaper
Staple Food: Maize flour which is used to make Ugali that is eaten by a majority of Kenyans daily. A 2 kg. Unga pack at Uchumi today costs Kshs 84 compared to Kshs. 83 in December 2009. It’s relatively unchanged, but overall cheaper than the Kshs 96 seen a year ago in March 2009

Free milk

With the onset of rains there is a surplus of milk in the country which has resulted in some sad scenes of dairy farmers and processors having to pour milk down the drains. For urban shoppers there is a boom of milk in the form of larger packets and 1 free packet for every 2 purchase at most supermarkets, and overall shoppers are paying ~45% less for milk now.

About the same
Communications: Safaricom’s Supa Ongea tariff is now six months old (September 2009, and is still being hyped by Safaricom. M-Pesa and SMS charges are unchanged. Price changes are being seen in data (Safaricom tried a one month February to march 2010 of unlimited internets for a price of 1,000 ($13) per week), Orange now has Bunda data bundles, Zain Africa is about to change hands again (new investor is Bharti of India), while Yu is the cheapest, but not making much of dent yet in the market where Safaricom remains the default operator.

Meanwhile equipment prices continue to drop, for smart phone and computers. Banks have gone into computer financing, the latest being KCB Laptops for all last week. And at Safaricom shops, the popular Nokia E63 now cost Kshs 16,000 ($208) compared to 20,300 last September and 23,500 in June last year.

Other food item: Sugar (2 kg. Mumias pack) is at 200, no changed for the last six months

More Expensive
Fuel: A Litre of petrol fuel (at local petrol station) is now Kshs 84.9 (~$5.0 per gallon) which is about 5% higher than it was six months ago. In face since the post-triton fall of early 2009 when shell knocked the price down to 75/= there has been a steady gradual rise of petrol prices.

Utilities/ Electricity: While my electricity: my bill last month is Kshs 1 700 (~$22) less than the 2,100 of December 2009, but about the same as March and September 2009. So despite the prolonged drought of 2009 and rains late on the year and first quarter of 2010, impact yet to hit my electricity bill. However the electricity bill has a component called fuel cost adjustment that is twice hat it was a year ago, it’s billed at 783 cents/kwh, which is 88% higher than the 416c/kwh of a year ago. Not the cost of fuel passed on to energy producers or the government continues to exceed household consumption by 1 1/3 times. So the cost has gone up, but household usage, minimizing use, using better bulbs, better planning has kept the costs in check

With Water bills, this is erratic for most with the Nairobi water company hitting customer with some crazy bills sometimes 3 or 4 times higher than what they have been paying. It has happened to others. Their billings I erratic, mine actually shows a cost reduction from 851 in 2009 to 509 in 2010. However the method of measure and billings has changed and it may only be a matter of time before I get hit with a crazy bill

Foreign Exchange: 1 US$ equals Kshs. 76.6, compared to 75.9 of September and 75.6 in December; but much improved from the 80 of a year ago last March.

Entertainment: A bottle of Tusker beer (at local pub) is Kshs. 150 ($2.00) up from Kshs. 140 in December 2009 at most places I know. East African Breweries is upping their dormant war with SAB Miller and having settled over Tanzania, there are rumours that SAB will re-enter Kenya, perhaps prompting some price wars.