Monthly Archives: September 2010

EABL & Serengeti

East African Breweries is seeking shareholder endorsement of their decision to purchase 51% of Serengeti Breweries of Tanzania. They have sent out a shareholder circular produced by Merrill in London that outlines the nature of their investment.

(Image from Eyes4Mwanza.blogspot.com)

Partnership: Serengeti will distribute EABL brands exclusively in Tanzania (except duty-free shops). Also Serengeti will brew EABL beers but this has not yet started.

  • EABL will distribute Serengeti products worldwide (they include Premium Serengeti Lager (PSL), The Kick and Uhuru Peak beers, as well as the non-alcoholic Vitamalt Plus.
  • The deal is contingent on EABL selling its 20% stake in Tanzania Breweries (presumably to Tanzanians), not closing any Serengeti plants while continuing to produce certain Serengeti beer brands for the next five years. (SABMiller still have a 20% stake in Kenya Breweries)

Payment: The EABL Board estimates that it will make a cash payment of US$61 million (equivalent to Kshs 4.95 billion) to acquire its 51% stake using reserves or bank facilities (no recourse to shareholders). They will retain $10 million to deal with any shortcomings or deviations in concluding the deal.

  • Diageo (EABL’s largest shareholder) has the option to, in four years, purchase the remaining stake 49% in Serengeti (not held by EABL) for not more than $600 million. The price is higher but the reasoning is that EABL is investing at an early stage while Diageo will be investing at a later stage when capacity and synergy gains will have been achieved at Serengeti.

Partner: Serengeti is the second-largest brewer in the country with a 15% share behind Tanzania breweries (EABL’s previous partner) who have a 72% share of the branded brew market. However unbranded beers command a significant majority of the alcohol consumed in Tanzania – and these include fermented drinks and local beers like Kimpumu (millet beer, is that Tz busaa?), cassava beer, Tekawima (maize beer, is that Tz changaa?) which are highly popular. Serengeti has plants in Dar es Salaam and Mwanza and is developing one in Moshi.

  • Serengeti‘s balance sheet has assets of about Kshs 4.4 billion (compared to EABL’s Kshs 38 billion). Their accounts summarized in the circular show drastic changes when produced under Tanzania GAAP generally accepted accounting principles) and international financial reporting standards (IFRS) mainly from changes to the treatment of bottles and crates (& their deprecation), and revaluation on land & buildings resulting in larger assets and smaller profits under IFRS compared to Tz GAAP.
  • Current shareholders of Serengeti are Union Brewery Holdings, Negus Holdings (exiting), Napster group, and V. Mehta (exiting), CMG investment, Mark Bomani and Henry Mosha.

Idea Exchange: Nokia C3

I’ve been fortunate to be a tester for Nokia C3 in Kenya. It’s a phone I’ve been waiting to buy for almost three months, and while waiting, the local Nokia team lent me one to try out before the market launch. Prior to that, I had an Nokia E72 loaner, which highlighted the shortcomings of the C3 in a roundabout way, and these include:

– Not 3G enabled, so E72 functions like watching YouTube videos are out.
– Not a true smart phone, no multi-tasking like with the E72.

Also at the Tuesday media launch, one reporter pointed out that the camera was 2 mega- pixels only, but the Nokia Manager pointed out that their research showed that people wanted to take camera phone pics that they could easily share, but that large high-res photos takes a long time to upload and have to reduce the size to share across platforms.

The phone is a compromise of sorts, an affordable smartphone, with office tools. heavy on social media, connectivity, networking, and data features.

Features I like (so far)

– WLAN so can browse on Wi-Fi at coffee shops or office hotspots
– You can set up up to 10 mail accounts, with new e-mails push updates right on the home screen, for response/action (can also sync with office e-mail Nokia and Safaricom)
– It also has a community page for Facebook, Twitter updates appear on the home screen
– Pictures taken on the camera, upload to Facebook in a snap. Also unlike with E72 which had too many folders, picture are easier to find and organize, and because of their size, easier to e-mail
– The home screen with all these updates (e-mail, twitter) shuts down at night so brings no midnight disturbances
– Expandable memory (yet to try it out)
– More C3 features

C3 smash: The phone was officially unveiled on Wednesday in Kenya by Nokia and Safaricom, who are both market leaders in Kenya. As promised, it’s a sleek nifty smartphone, with its QWERTY keyboard which makes it look like a much more expensive phone (E72) or a blackberry, but costs Kshs 10,000 ($123)! It is being sold in Kenya exclusively at Safaricom stores and comes with 40MB free data from Safaricom with every C3 purchase.

This morning there were brochures being handed out on the street and promotions on the KISS FM Group for a happy hour during which the phone would be sold for one hour at a price of just Kshs 5,000. This brought out crowds of people seeking the Nokia C3, with some unfortunate effects, as captured by @wanjiku on twitter.

– Huge crowd gathered @safaricomltd sarit for #NokiaC3 looks like a political rally via
– It’s wrong; 4 @safaricomltd @dorothyooko you should see the fight at Sarit 4 #NokiaC3 its bad; looks like people fighting for food; extend offer about 4 hours
-How about extending this offer 4 #NokiaC3? It’s wrong to advertize so much if u can’t meet demand @dorothyooko did u expect it to b this much?
-@Ngendo87 u should see the way men & women are squeezing on the queue @sarit its chaos, guards throwing their weight… #ThatIsAll
-Sarit management has complained that the crowd @safaricomltd is intimidating the precious clients who spend lots of money; PA system; offer over
– Scenes from sarit with buyers and guards fighting over #nokiac3 http://twitpic.com/2t0tz0
– Angry buyers storm Safcom entrance. The shop was forced 2 close doors, switch off lights http://twitpic.com/2t0u8k
– Police called to calm crowd: sarit manager was there asking if crowd is gone. http://twitpic.com/2t0v5w
– some sarit pictures
EDIT: – Video from the C3 launch in Indonesia (June 2010) with round the block queues

Too Big to Fail?

Embattled market leaders Kenol and Safaricom got some reprieves last week.

In the case of Safaricom, it was signaled in the form of a public complaint from rival Zain Kenya CEO (and which he followed up in a letter to the President) alleging that the communications industry regulator altered its new rules to shield Safaricom.

At Kenol, the Permanent Secretary for Energy announced a settlement of the dispute between Kenol and the Ministry (Kenya Pipeline Company, Kenya Pipeline Refineries), which Kenol echoed that with a cautious statement.

Kenol, Safaricom, and probably Kenya Airways and Equity Bank (with 5 million bank account holders) have reached a status of being too big to fail. They are huge tax-payers (Safaricom, Kenol), models of privatization (Kenya Airways), critical to the country and region (Uganda was affected by the Kenol shutoff) or source of international pride (Safaricom’s M-pesa)

The government goes out of its way to listen to these companies and protectthem and make rules that will assist them in their growth. In the case of Safaricom, cracking down on them does not guarantee that Zain or Orange will fill the gap in the near term. The price war started by Zain has been called unsustainable by the Safaricom CEO and that language is also creeping into government circles

Urban Inflation Index September 2010

Tracking changes from three months ago – in June and one year ago

Quarterly Review – Young population: The results of the Kenya’s national census done in 2009 were released last month and the results are still being interpreted. Politicians obsess on tribal numbers, economists caution on birth rates, while businesses can look to demographics like the number of mobile phone owners, the number of youth in the country, along with other intriguing findings such as the population of Kibera (largest slum in Africa) being 1/3 of previous claims, and remote Mandera is the 4th most populated constituency in Kenya (after Embakasi, Kasarani and Juja which are all in Nairobi environs). It confirms other findings like the Safaricom 2010 A/R which notes that “…with the North Eastern
region’s economy growing by over 200%, owing to improved security & enhanced economic activities, the area is no longer ‘served’ from Nairobi.”

Price control: A price control bill was rejected by the President who referred it back to Parliament for amendments.

Costly Health Insurance: The National Hospital Insurance Fund set in motion a plan to roll out a rather expensive health plan by increasing mandatory deductions from 320 per month to up to Kshs 2,000 ($25) for anyone earning over 100,000 ($1,200) per month. The matter has been challenged in court and the agency has been accused of not consulting widely with other health sector players and employers in a bid to revive earlier health bill

On to the index

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 65 compared to Kshs. 71 three months ago and 84 a year ago.

Communications: All Kenya’s mobile phone companies have call rates of about Kshs 3 shillings per minute to call across networks. Exactly a year ago Safaricom has launched super ongea tariff, which promised rates of as low as 0.8 shillings, but from a base of Kshs. 8 within network. What has changed? The arrival of airtel in Kenya who will pursue a low cost high volume model though outsourcing of services among other measures. i.e. today it was announced in India that they will sell their African mobile base stations to a subsidiary company (Bharti Infratel) that will re-sell them to private equity funds.

Even as Kenyans have celebrated the new chap call rates, Airtel have ruffled many feathers in the last month, forcing Safaricom and the other smaller mobile companies to match the very low tariffs, and this has been called unsustainable by some, a dis-incentive to investors by others, and even a situation which may result in a mobile operator closing shop. Two years ago, Safaricom had launched ‘ongea tariff’ which was a Kshs 10/= rate

About the same – Utilities: Latest electricity bill is Kshs 1,700 ($21 for a month) up from Kshs 1,450 on June, but better than 1,900 a year ago when there was drought in the country.

Other food item: Sugar : A 2 kg. Mumias pack is Kshs 200, unchanged over the last year. Two years ago, it cost 145, a price we may see next year when the COMESA regional sugar quotas are done away with. Already, leading sugar company Mumias has diversified into electricity co-generation, bottled water, and soon, ethanol production.

Foreign Exchange: 1 US$ equals Kshs 80.8 compared to 80.6 in June. BUT, Two years ago it was Kshs 67.

Beer/Entertainment: A bottle of Tusker beer is Kshs 170 ($2.1) (at a local pub) compared to Kshs. 160 three months ago. However it is tough to find a perennial location to keep track in Nairobi’s fast changing pub scene, where even Nairobi’s favorite sports pub Hooters closed last month. What needs to happen is a combination of Murua’s Tusker Index with this interactive beer map from the Czech Republic!

More Expensive – Fuel: A litre of petrol fuel (at local petrol station) is now Kshs 94.5 ($5.25 gallon) up from Kshs 90.9 per litre in June. The back and forth petrol war continues between leading oil distributor Kenol and the Ministry of Energy officials who include the Kenya pipeline company, the Kenya oil refinery and the energy regulatory commission about the issue of preferential allocation of space and who owes who more. On their side Kenol can count on some political muscle, the fact that they blew the whistle on Triton Oil before it collapsed, they are the country largest corporate taxpayers. High prices at the pump are not unusual, as two years ago petrol was retailing at Kshs 101

Idea Exchange: TEDx, Peace, Books and Samosas

Last week was a very busy one in terms of tech, with AITEC East Africa, and Google’s GKenya over-lapping on two days.

This coming weekend has the second edition of TEDx Nairobi at the Leakey Auditorium, National Museum of Kenya, on Saturday September 18. There have been other TEDx events held in the last few weeks including TEDxKibera, TEDxMathare, and a running series of TED videos at the Westgate Cinema.

Also starting the same day as TEDx, is the SAMOSA Festival; this has no correlation with the popular snack, but it stands for the South Asian Mosaic of Society and the Arts, which is a weeklong celebration with various events staged at different locales in Nairobi from September 18 to 25. It also features a mentorship program for young entrepreneurs and professionals.

The Africa Union Peace Day is being observed on September 21 2010, and will be marked by cessation of conflict hostilities, distribution of humanitarian supplies, one minute of silence at 10.00AM (GMT), development work by members of the armed forces, football games, and lesson plans in schools.

Rounding off the month is the grand Storymoja Hay Festival over three days, from October 1 – 3 at the Railway Club grounds in Nairobi. It has over 60 events bringing together writers, business & cultural leaders to share stories, ideas and unique talks like “Demystifying the American Visa Process,” “Peculiar Kenyans,” “How to buy and sell real estate,” and “Publish your own (Children’s) book in two hours.”

EDIT: The Nairobi Book Fair takes place at Sarit Centre from September 22-26.

Others ideas from Twitter
– @firesidecom: Safaricom is taking on Access Kenya & Zuku with unlimited residential broadband at Kshs. 3,999 (~$49) for 512Kbps via wimax for residential areas – its available of prepay and postpaid, with free quick installation, equipment,. Also available is 1mbps for Kshs 6,000 and 2mbps for Kshs 7,000.
– @akcorporate Did you know that you can listen to Classic 105.2 FM through Access Kenya?
– @MTrackKenyaLtd: MTrack – Personal tracking (Children & Elderly) services