Monthly Archives: March 2012

Can Kenya avoid the Resource Curse?

This week, the big announcement was that Kenya has found oil – but is that good news?

From the ArchivesMarch 2006 I am hoping that we don’t find oil fields/reserves in Kenya and not just because we are unlikely to escape the much-written-about oil curse that has plagued so many countries. We simply don’t have the governance systems in place to manage oil revenues which the Economist referred to as oil money flows from big oil to the big man and Kenya will become the latest example to confirm that resource-rich countries grow more slowly than resource-poor ones.

Kenya’s oil is likely to be found in remote parts of Coast, North Eastern, Eastern or Rift Valley provinces and these are areas that have not received much development in 43 years of independence. Discovery of oil is likely to be met by hostility from these residents (who are often armed to defend themselves from bandits and raiders) and who will have the view that “you” (other Kenyans/central government/Nairobians) don’t consider us to be Kenyans, you have never cared about us and now you’re only taking an interest in us because we have oil – so F__ you, we want our own country and we’ll cut our own oil deals, maybe even with Sudan, Ethiopia or Somalia.”

Also, the discovery of oil will not help other vibrant & diverse industries, especially agriculture-based, which will be hurt by the distorted foreign currency positions that oil will create. Also, oil & mineral industries never create as many jobs for locals as they promise – and agriculture, which supports a majority of Kenyan households & families will suffer leading to increased poverty.

There Hope: So how can Kenya escape the resource curse? At an African Leadership Network (ALN) Forum in Addis Ababa in October 2011, Oxford Economist Prof. Paul Collier, outlined steps for countries to escape the resource curse (which should begin even before oil/minerals are found)

5 Steps for Handling Resources
1. In terms of discovery of natural assets, geological information has to be made public before government’s call in the private companies (..Kenyan insiders are dealing away oil drilling leases.)
2. Have a good taxation system to benefit the society – (Africa’s resource history is one of missed revenue, and misaligned contracts so it is important to get the right contracts)
3. Involve & manage the local community (avoid a Niger Delta problem)
4. A substantial portion of income should be saved rather than consumed
5. Save in what? Africa needs sovereign development funds, not sovereign wealth funds. However Africa does not have much of this capability, and there is a need to build capacity, i.e. invest in investing to manage the resource depletion and erratic commodity prices.

At the same ALN forum, Dr. Donald Kaberuka, President of the African Development Bank (ADB) spoke about helping countries avoid the oil curse saying ..Diamond-rich Botswana has shown that it is possible to do this. Oil exporting countries have made mistakes but recently when an African country (he did not name) discovered oil, the ADB went to see the President and offered their advice as the ADB is helping countries negotiate good contracts through a legal support facility, and avoid signing bad deals which are difficult to wiggle out of without damaging investor confidence.

2011 Kenya Bank Rankings Final Word

Local banks rules, but KCB holds off Equity

The top local Kenyan banks as at December 2011, ranked by assets are:

6 (6 last year) CFC Stanbic Bank: Steady assets of Kshs 140 billion ($1.7 billion) and profit of Kshs 3.1 billion ($38 million)

5 (4) Standard Chartered: Assets up 15% to Kshs 164 billion , and profits went up 8% to Kshs 8.25 billion. Deposits grew 22%, and loans went up 48% as they halved their government securities to Kshs24 billion. (Barclays & KCB also reduced their government securities positions compared to December 2010)

4 (2) Barclays: Drop from 4 to 2, but still have the best return on assets at 7.18% on a slightly smaller asset base of Kshs 167 billion. Profits went up 11% to Kshs 12.01 billion, and loans went up 14%, but there was no change in deposits.

3 (3) Cooperative: Was leap-frogged by Equity Bank, but gained a place thanks to shrinking Barclays. Steady but slow growth as assets grew by 9% to Kshs 167 billion, deposits grew by 15% and profits by 11% to Kshs. 6.16 billion as the bank still seeks to move beyond the cooperative sector.

2 (5) Equity Bank: Leap from No. 5 to 2 after reporting assets of Kshs. 177 billion and profits of Kshs. 12.1 billion, signifying growth of about 32%. for each. The years of annual 100% growth are over but as John Staley the Director of Mobile Banking and Payment Innovations, told attendees at HP leadership event dubbed Staying Ahead of the Pack, the bank has grown ten-fold every five years leveraging on technology and always with the mission to provide affordable financial services which they now plan to take beyond Uganda and Sudan.

No.1 (last year No. 1) KCB assets of 282 billion ($3.45 billion) and profit of Kshs. 14 billion ($172 million) KCB remains at number and matched Equity, growing deposits by 29%, loans 31%, and profits by 22%.

Urban Inflation Index March 2012

2012 was expected to be an election year, which for Kenya are unfortunately marked by low economic growth, but this weekend, the electoral authority made an announcement that the next general elections would be held in March 2013.

A quotes from the above referenced post by Wolfgang Fengler, the World Bank’s Lead Economist for the region reads;

Since 1980, Kenya’s economy grew by an average of 3.4 percent. However, in election years, the average growth rate was only 2.4 percent, and growth was even below 2 percent in four of the election years. Equally challenging has been the management of post-election dynamics. Kenya achieved a modest 2.7 percent in post-election years, and three of the last six elections were followed by low-growth, especially in 2008, when post-election violence disrupted the country’s achievements of previous years.

It’s also been incredibly hot & dry in Nairobi and we all hope that the upcoming March/April rains will restore some supply balance for agriculture (food prices) and energy (hydro electricity costs)

On to the index comparing prices of basic urban commodities to three months ago, a year ago and even four years ago when the country was still dealing with the disruptive after-effects of the controversial December 2007 election.

Gotten Cheaper

Fuel: Petrol prices were reduced again last week to Kshs. 111.6 per litre (~$6.12/gallon) for Nairobi, down from Kshs 124 in December 2011. However a year ago the price was 98.8 (when the price control regime had just been introduced) and four years ago, after the election, a litre of petrol cost Kshs 87.9.

Staple Food: A 2kg pack of (Unga) Maize flour, which is used to make Ugali that is eaten by a majority of Kenyans daily, costs Kshs. 97 down from Kshs 113 in December 2011. However last March it was Kshs. 80 and four years ago (Feb. 2008) it cost Kshs 52.

Other food item: Sugar: A 2 kg. Mumias Sugar pack which was Kshs. 375 in December is now Kshs 245. However a year ago it was Kshs 195, and other commodities normally bought alongside it (bread & milk) have had steady price rises this year.

Foreign Exchange: 1 US$ equals Kshs. 83 compared to 84 in December 2011. This is exactly where it was last March 2011 before the Kenya shillings began a (now controversial) slide to Kshs 107 against the dollar. In February 2008, the dollar was exchanged at Kshs 70.7.
About the Same

Communications: Telephone call and data rates are largely unchanged, but Safaricom announced new rates for m-pesa including a slight increase for some transfers, but they also reduced the minimum amount that can be sent, opening the way to micro-payments. Meanwhile Airtel, who have set the low call regime over the last two years, appear to have reached an about-turn moment with their Chairman calling review of that strategy.

Utilities: Pre-paid electricity is about Kshs 2,500 per month which is unchanged from the last review. I finally got a coherent explanation from a @KenyaPower employee on how you get hit with extra taxes if you buy more than a certain amount of Kwh units.

LPG: Cooking gas supplies seem to have resumed stability for now, but at a price of about Kshs. 3,000 ($37) for a 13kg cylinder, up from less than Kshs. 2,500 before. Personally, I ditched my total LPG cylinder for a Kenol one as Total petrol stations never seem to stock enough for customers.

Beer/Entertainment: A bottle of Tusker beer is Kshs 180 ($2.2) (at a local pub), unchanged from three months ago..but it was Kshs 120 in 2008.

More Expensive
N/A

Generally prices have come down, but life is more expensive than what it was four years ago when the last election was concluded. However there could be some slight relief in slight for urbanites as the Kenya Cabinet approved the VAT bill 2012 which removed VAT from maize, wheat flour, milk, bread and medical supplies.

For Book Lovers Redux

It’s been a few years since I wrote this post to celebrate the concept of Book Villa which was a combination of library and a book shop. But while it’s sad that the Book Villa has recently gone out of business, that does not mean that are less reading books to be found in Nairobi.

5. There are book torrents..

4. There are Kindles and other book readers, tablets, and software platforms that bring new or obscure books within easy reach for those who have e-reader devices and credit cards.

3. There are regular established book shops like Prestige (Mama Ngina St), Bookpoint (Moi Ave), Text Book Centre (Sarit Centre) and BookStop (Yaya Centre)

2. The above bookshops carry many local books, but not all as there are many more rare biographies and history books in university libraries or sitting in publishers vaults. Sadly for many researchers, some new books published locally don’t contain indexes & references.

1. There are also local street vendors and book shops who collect and sell old & used books at very low prices. But searching for a specific book is not easy, and it takes many hours or days to visit all the shops. For a real treat, books vendors in India are a better experience, as a pal easily found this rare book that I had been scouring for many years.

Idea Exchange: TED, Tullow, Diageo, Kenyan Design Opportunities

Designer Opportunities (From the local newspapers)
– Design a logo for the Kenya Salaries & Remuneration Commission. First prize is Kshs. 150,000 (~$1,830) and D/L is March 30.
– Architects & artists are invited to design a new Kenyan courthouse. First prize Kshs 500k ($6,097) and deadline is March 16.
– Help design new Kenya banknotes & coins, with themes of Kenya reborn/ Kenya prosperity. The deadline April 13.

Diageo Africa Business Reporting AwardsThe 2012 edition of the DABRA business journalism awards is now open. Categories this year include ICT, finance, infrastructure, agribusiness, tourism, newcomer, media journalist and other awards, with March 23 as the deadline for entries.

Hewani: Get your mobile apps published for free at Hewani.co.ke – including all android, nokia, WAP, Web & USSD versions (via @johnwaibochi)

Hitachi Foundation: Did you start your business before the age of 30? Is it 1-5 years old, and are you interested in lifting people out of poverty? If so, you’re eligible to apply for $40,000 from the Foundation’s Yoshiyama Young Entrepreneurs Program by March 30. (via The Unreasonable Institute)

TED: Worldwide auditions for speakers take place in 14 cities including Nairobi and anyone can apply as long as they have not spoken at a TED conference before. Inventors, teachers, artists, performers, change agents, story tellers and others are all invited to apply – details are here, and the Nairobi deadline is March 17.

Tullow scholarship: In partnership with the British Council Tullow invites applications for post-graduate training in oil & gas – drilling & well management, reservoir evaluation & management, energy studies with specialization in oil & gas, environmental science, oil & gas law. Details are here and the deadline is April 6.

Edit: Advance Africa is a useful resource of funding with a constantly updated list of scholarships & fellowships for African students.

Carnegie Mellon Rwanda: The Carnegie Mellon University’s college of engineering will have a Rwanda campus and from August 2012, they will offer a Master of Science in Information Technology. There are 50% scholarships offered to East African citizens who apply by the April 21 deadline.

The East Africa Association of Grantmakers has organized the East African Philanthropy Awards. Categories include family, faith, corporate, youth, reporting, and individual awards and the deadline to submit nominations is April 13.

Kenya Blog Awards: The Bloggers Association of Kenya (BAKE) announces BAKE Blog Awards with 14 categories including technology photography, creative writing, business, food, agriculture, sports, fashion, corporate, new blog, Tweep (best individual and corporate on twitter) and even politics! Entries are open till March 29 for entries to be submitted.

The 2012 Kenya ICT Board Connected Kenya awards have just been announced; they are thirteen categories, and the deadline for entries is 26 March.