Monthly Archives: February 2012

Kenya’s Money in the Past I

Duncan Ndegwa is a former head of the Kenyan Civil Service and Governor of the Central Bank. He published his autobiography Walking in Kenyatta Struggles in 2006.

It’s a tale of the history of Kenya, struggle for independence, nation-building versus devolution, disengaging Asians from commerce & Europeans from Government while Africanizing the civil service, reigning in unrealistic expectations of newly independent leaders etc. In it, some leaders like Odinga Oginga, Gikonyo Kiano, and Charles Njonjo don’t come out positively and there are a whole lot of personal stories that you won’t believ.. There are more biographies and books – some thin on the money talk, and they will be reviewed in a slate condensed format in a continuing series.

Reigning in budgets & spending
– Ndegwa argues that the uncontrolled government spending was the disease that crippled Kenya in the 1980’s leading to paralysis in the early 1990’s (444). (Earlier), Kenyatta supported a balanced budget and gave strict instructions to permanent secretaries – if you over-spend, you will be the first to go (485).
– Britain gave Kenya a 60 million pound golden handshake at independence But 12M went to settlement schemes, 13M to pensions of expatriates, 10M to technical assistance, and the balance to the military (312).
-The coffee boom of the 1970’s enabled the government to buy embassy properties in New York, Washington & London, and aircraft for East African Airways (494).
– Devaluation of the British pound in 1967 had an impact on all the East African whose currencies were pegged to the pound (478). The government also had to come up other measures forex such as discouraging luxury imports when the country reserves dwindled after the oil crisis (470).
– Some foreign companies were borrowing all their working capital in Kenya while repatriating all their profits abroad (476).
– Ndegwa came up with a blueprint for the government in 1962 that he called the Kazi plan that emphasized labour-intensive schemes (Page 240).
– He proposed that Kenya print her own currency and manufacture bullets (simple technological processes that would save foreign currency) but both projects were shot down by President Moi on the advice of Njonjo (461).

Africans in Business: – The Crown Land Ordinance of 1915 deprived Africans of land ownership in the 1960’s Africans were allowed to grow coffee under a (government) Swynnerton plan that also included issuance of free title deeds (232).
– Njenga Karume was one of the first Africans to be allowed to own a chequebook (472).
– Ndegwa chaired the commission that allowed civil servants to engage in private business and own property like any other citizen(497). He maintained that the greatest danger the civil service faced was pressure from politicians (500).

East African affairs: – Kenya sought military assistance from Uganda & Tanzania to send troops to Somalia which also refused to cease hostilities in cross-border matters (352).
– Britain offered Kenya as a second home for Jewish settlements, but people like Delamere kept Kenya from becoming a Jewish settlement ( 368).
– The Kenya Attorney General appeared determined to sabotage the East African community (401).

Eccentric Cabinet & Ministers: – Presidents should not be shown the central bank vaults – Kenyatta saw the CBK’s and shooed away his security men so they would not be tempted (460) while Uganda’s Amin demanded that their vault money be put into circulation – over-riding the advice of his governor who paid with his life (471).
– Was Odinga really a Marxist? Up till the 1960’s, he was a struggling capitalist trying to build a viable trading company (363).
– Mwai Kibaki & Munyua Waiyaki kept out of full cabinet positions until they moved away from Tom Mboya (376). Earlier, Kibaki & Mboya came up with a highly respected development blueprint for the country.
– The Finance Minister missed the opening ceremony of the Central Bank (282) and later denied that he had a drinking problem (43).

Shares Portfolio February 2012

Comparing to last quarter and a year ago.

2007 was considered a wait & see year for firms in Kenya and 2012 looks to be the same with elections set for sometime in the last third of the year. Banks are expected to announce profits this month, amid allegations that some of their gains were due to lax oversight by the Central Bank which may also have contributed to the weak Kenya shilling late in 2011. Local news is dominated by electioneering, loan rates are above 25% and it’s expected to be a challenging year for Kenya Airways, Safaricom and other companies as well.

The Stable
Barclays ↓
Bralirwa (Rwanda) ↓
Britak ↓
Diamond Trust Bank ↓
East African Breweries (EABL) ↑
Kenya Airways ↓
Kenya Commercial Bank (KCB) ↑
Kenya Oil Company (Kenol) ↑
Safaricom ↑
Scangroup ↑
Stanbic (Uganda) ↓
Uchumi ↓

Review
Best Performer: EABL (up 12.9% in 3 months), Safaricom, KCB
Worst Performer: Stanbic Uganda (down -28.8% in 3 months), Britak, Uchumi
In: None
Out: None
Increase: KCB, KQ
Decrease: none

Unexpected gains/losses: Last week, Barclays announced special dividend to go a long with a final dividend. Similarly, Williamson Tea announced a record interim special dividend of Kshs. 50 ($0.55) per share following the sale of their building.

ION two companies at the NSE – East African Portland Cement and CMC Group
appear to have imploded from the inside with board wrangles disrupting the company operations and leading to both being suspended from the NSE.

Events/Outlook: The portfolio excluding new shares is down 4% from last November, while the Nairobi Shares Exchange main index is down 9% over the same period.

Looking Forward to:
1. Investing in Government bonds – the government was selling a 30 year savings bond that paid 12% and targeted to raise Kshs. 18 billion with a minimum investment of Kshs 50,000 ($615), and this month, there’s a tap sale of 12 year infrastructure bond 12 year as the government seeks to raise Kshs 17.7 billion ($196 million). Minimum investor amount is Kshs. 100,000 ($1,111) and the average yield has been 16.6%
2. Kenya Airways rights issue
3. Any other new listings at the NSE.

Educating Taxpayers

Do you have questions about taxes? How to calculate Value Added (VAT), Withholding, or Pay As You Earn(PAYE) or other taxes? When to assess them, and where to pay them? It’s not just large corporations who are unsure on how much tax to pay, but such questions also apply to small business owners & ordinary citizens who are all taxpayers.

The Kenya Revenue Authority (KRA) has seminars and sessions for taxpayers almost every week. There are two kinds of these, one for their online system held on most Thursday’s in all the major towns (Nakuru, Eldoret, Naivasha, Meru, Kericho, Malindi, Machakos, Embu, Nyeri, Kisii, Thika, Kakamega, Kisumu, Mombasa, Nairobi) and others for new taxpayers held in the same towns as well as Bungoma, Lamu, and Voi with emphasis on introduction to VAT and income tax rights and obligations.

The classes all have Q&A sessions in which many questions are asked. This is very useful as it’s better to ask them there, without consequences, than ask them when you have a tax inspector visit your business premises!

Right now KRA is running dual systems – manual and online with different taxpayers using either method to file various tax returns, monthly, quarterly, or annually. It’s their intention to make more online filing mandatory for taxpayers and this will be done in a phased manner.

The goal of this is to have a more efficient tax collection system and because it’s more effective to get taxpayers to cooperate than to coerce them. Also getting more people to file their tax returns online from cyber cafes or from their business premises, will result in fewer people having to queue to pay taxes at KRA offices.

Business people who bank with National Bank, Cooperative Bank and to a lesser extent KCB also have some filing advantages as these banks have invested in systems that are compatible with KRA’s and so payments made at these banks are automatically reflected as their tax filings.

Guide to Port-au-Prince

Guest post on a visit to Haiti, two years after the earthquake where it’s an odd mix of NGO’s, dollars, insecurity, and voodoo

Getting There: Only British Airways gets you there with change over stops in London, New York (or other US airport), then on to Haiti for about $2,500…always with a one night sleep over and 22 hours flight time in total. You can use Kenya Airways too via Dubai, Paris, Miami then Haiti and for that you use a UK Visa

The airport (Toussaint Louverture International Airport) is pretty fast as long as you have your visa… You require a UK visa or US Visa to be admitted into the country. Unique: They have a band playing all the time to welcome you into the country. They also have uniformed casual laborers who offer to push your trolley from the clearance office to the pickup point about 200m for a small fee…..however the trolleys at the airport are not free like in Kenya…its $10 for one.

Getting around: Locals mostly use matatus which are called tap tap. Taxis are not readily available and they are not colour coded or marked or parked in certain areas….. They are few private vehicles, and take these at your own risk.

There are parking boys are on the streets and when there is traffic they dust your windscreen and car with a dirty dry rag and expect you to pay something small.

They have two main highways. Also, there’s no parking lane on the streets. The roads are very narrow so people park half on the kerb and half on the road that causes mad traffic…. but the President is escorted everywhere by local police and UN police.

Insecurity Getting around you feel very insecure as riots are the norm and you see people walking with placards and complaining about the president, political affairs or the NGOs. This is because foreigners are targeted – so if you don’t speak fluent French, and look exotic, you’re advised to walk with a local or use a driver wherever you go. Basically, if you work for an NGO, you’re a hostage (biggest targets for kidnapping) who rarely walks more than 100 metres.

Business & economy: The country is run by 1% of the population… and there’s an absolute divide between the poor and rich. It’s not surprising to see an Aston Martin, and rich people withdraw money from the banks on Friday because they are scared they might collapse over the weekend – so by Friday afternoon you cant find money in the bank!

You can use dollars or gouds (Haitian currency) to trade, but the ATM’s do not dispense dollars. In October 2011, dollars started disappearing from the country as people were hedging against inflation and it became so bad that from December you could not get any dollars from the bank – and some organizations had to send money in from neighboring country and then have G4S transport it here so that they could pay for their expats and operations.

Haiti street

As is in most places, suburbs are next door to the slums and they have mass graves due to the earthquakes. Its mountainous and hilly and houses are built on the hills in an unfathomable way.

Two years after the earthquake, there are still camps (in the form of tents) in the middle of the CBD where the displaced people stay. e.g. in the park next to Hilton Hotel. Gangs have been formed in the camps and they are responsible for the kidnapping of NGO staff to solicit for money from the NGOs. The gangs are so good and efficient that if your wallet is stolen in the city, and you know a gang member in that area code, they will get it back for you for a fee with everything intact!

Communications My roaming line is expensive it’s like Kshs. 180 per minute without taxes (post paid), and local calls to Kenya cost about $2. They are hotspots in a few expatriates restaurants.

Where to Stay: Hotels are like $140 -160 and these include Le Manoir $140, El Rancho $130, Ibolele $155 while Karibe, a 5 star is $320. Electricity is very unstable and generators are used a lot.

Customer service: is a thing of the past it takes at least 40 minutes to get your order in most restaurants… and once you finish eating they clear the table and don’t present the bill….and when you ask for it, it takes another 30 minutes…..so you’re advised to ask for the food and the bill together ..Walking out without paying is also an option as it actually takes them long to notice as its not an area of priority. Despite this food is expensive, and for a nice meal, the cheapest is ~$15. The main local dish is Rice and beans and beers cost about $2.

Shopping & Sight Seeing: The ladies mode of dressing on a day to day basis leaves nothing to your imagination….Maybe its Caribbean culture or the weather which is hot and hummmmid!!!. Also, an interesting sight while walking around is seeing pharmaceuticals hawked on the street – with medicines taped around big basins.

French Is the main language here and all the newspapers are in French or Creole. There are beaches & animal orphanages, but very few malls and nothing much good to shop.

They are 4 big groceries/supermarkets (like Nakumatt) where many shops and they also have very high end shops which sell some very expensive French designer stuff. Popular gift items are some very good paintings and pictures which are hung on the streets and in the cultural centres.

Odd points: Voodoo is the order of the day;  it’s their culture and people carry anointing oil. It’s no surprise to read in the papers or watch news of someone found walking with skulls. They have festivals and carnivals to celebrate it. and they drink a liquid which makes their eyeballs turn back to their heads and then parade in the streets doing their rituals. Creepy stuff! As with all Caribbean countries, reggae is the in- thing, but there is even voodoo music which plays in all the clubs (at a faster beat with drums and chants).

Idea Exchange: Pivot, MobileWeb, TEDx

All Africa Business Leaders Awards from CNBC Africa is open for nominations in the following categories; business leader of the year, young business leader of the year, businesswoman of the year, entrepreneur of the year, and lifetime achievement award.

Cartier Women’s Initiative award targets female entrepreneurs engaged in creative for profit initiatives and prizes may be up to $20,000 per year.

The IDS Knowledge Services Open Application Programming Interface has technical grants of up to £3,000 in two categories – plug-ins and innovations. Details here.

Mobile East Africa: returns to Nairobi on February 22 and 23. When the event was last here two years ago, it was an eye opener on the presence mobile advertising, mobile learning, smart phones sales, social media potential, gaming, and software standards.

Persephone Miel Fellowship from the Pulitzer Center & Internews, is designed to help media professionals (journalists, writers, photographers, radio producers, filmmakers; as well as free-lancers and media professionals) outside of the United States do the kind of reporting they’ve always wanted to do, and comes with a travel grant, payments and distribution arrangment.

Pivot East: Entries are open for this year’s edition of Pivot East (previously known as Pivot25) scheduled for June in Nairobi. Categories this year include financial services, business & resource management, entertainment , mobile society and utilities and the competition is open to companies and individuals in Kenya, Uganda, Tanzania, Rwanda, South Sudan and Somalia.

The Poptech social innovation fellowship is now open.

The Stanford Africa Forum forum on February 25 (source Ken Opalo)

TEDxPreparations are also on for the next edition of TEDxNairobi.

Here’s a favourite video from the last TEDxNairobi with students from the Bishop Lawi Imathiu Secondary School in Meru performing a classical music selection in September 2010.