Monthly Archives: November 2012

Safaricom & CBA Launch M-Shwari

This week saw the launch of what is likely to be a revolutionary mobile phone product called M-Shwari. It comes from two long-term partners; Kenyan mobile company Safaricom, well known for its world-famous  mobile money product – M-Pesa, and a local bank, the Commercial Bank of Africa (CBA) who have been custodians of M-Pesa funds for years.

In its current evolution, with a maximum loan limit of Kshs 20,000 (~$235), this is not a banking product that will threaten the banking fraternity – for now.  What it will impact are the savings and credit societies (SACCO’s) and shylocks who people turn to for payday (month-end in Kenya) and emergency loans. With M-Shwari, they can apply for loans on their phones, repay by phone, get a statement by phone and won’t have to get 2 or 3 guarantors (SACCO) or exchange an electronic item or vital document like a logbook (Shylock) to get it. But like with SACCO emergency loans, the terms are strict and not cheap. You can only take one M-Shwari loan at a time, and one has to be paid before another one can be taken up.

In the five years since M-Pesa was introduced in Kenya, banks have gone from fighting mobile phones intruding on their financial turf to fully embracing the convenience. About a dozen banks, now integrate their bank platforms with M-Pesa, a partnership between Equity Bank and Safaricom got over 700,000 accounts in its first year, and two months ago, Nation Hela was launched by the Nation Media Group and Diamond Trust Bank to bridge remittances in the Diaspora to debit cards and mobile phones.

But, when (then) Safaricom CEO, Michael Joseph spoke at a  Fireside Chat at the iHub in 2010, he had a warning to banks, saying that retail banking will disappear in 10 years time. Customers will not go there (to brick & mortar branches) except for loans, as ordinary banking will be on (the) mobile phone whose convenience is unprecedented.

Other M-Shwari Notes
  • The 7.5% charge per loan looks simple but can be astronomical for a repeat M-Shwari borrower. However, such a person is probably already serial borrower elsewhere without accumulating any savings.
  • In terms of default protection, the loans are self-securing in that for each loan, an equivalent amount of a person’s savings in the phone are frozen until the loan is repaid. Also, with five years of M-Pesa data, it’s unlikely that people will default on an easy product.
  • The M-Shwari brochure states that borrowing will be based on these savings and past usage. The M-Shwari T&C go quite a way to exclude CBA from dealing with the customers whose savings and loans they are handling by stating that no M-Shwari services will be performed at any CBA branches.
  • A side story to this is the amazing ability of the two institutions and the several government regulators to keep a secret going for several years.

Thanksgiving Portfolio November 2012

Compared to last quarter  and four years back.
The Stable
Barclays ↑
Bralirwa (Rwanda) ↑
Diamond Trust Bank ↑
East African Breweries (EABL) ↑
Equity Bank ↑
Kenya Airways ↓
Kenya Commercial Bank (KCB) ↑
Kenya Oil Company (Kenol) ↓
Safaricom ↑
Scangroup ↑
Stanbic (Uganda) ↓
Unga ↔
What’s changed?
In: Unga
Out: None
Increase: None
Decrease: None
Dividends: Safaricom, KCB, Barclays, EABL
Unexpected gains/losses: Bralirwa’s share price appreciation and Safaricom’s rebound (back up to the Kshs 5/+ IPO price) coupled against another shocking half years Kenya Airways forex loss
New listings not taken on: There are on-going rights issues for Family Bank, UAP Insurance, SMEP Trust, Uchumi and CFC Stanbic

Best performer: Bralirwa’s (up 54% in 3 months) then Safaricom, Diamond Trust, KCB
Worst Performer: Stanbic Uganda (down 33%) 
Performance Summary: The NSE 20 share index is up 10% in the last three months, while this portfolio is up 22%. Compared to four years ago, the NSE Index is up just 6%, but the portfolio only had Diamond Trust↓KCB↓ Safaricom↓Scangroup↓ Stanbic (Uganda)↓ in 2008, is much larger.

Guide to Juba

@mankangwafo visits the world’s newest country – South Sudan

Getting there: Traveling to the Republic of South Sudan is not a simple task as few airlines serve Juba, the Capital and largest city in the world’s newest Republic. If you are coming from Nairobi, Kenya Airways (KQ), Fly540, and Jetlink (until last week) are your direct flight options. KQ has several daily flights to Juba and tickets range from US$400-$600, a steep price for a 90-minute flight. Edit: Other flights to Juba are with Egypt Air (via Cairo), Ethiopian Airlines (via Addis Ababa), and Air Uganda (via Entebbe).

While most eager businessmen and doe-eyed development workers might shell out the cost of a ticket, the government’s new visa requirements could be a hurdle for some. Applicants are expected to have invitation letters and business documents explaining the purpose of their trip. A single journey visa (valid for a month) costs US$100 and a multiple entry visa costs even more. Also required are two photos, a valid yellow fever card and a travel permit (if you had visited South Sudan before independence).

Once in Juba, getting through immigration, baggage claim and customs is daunting as the arrival lounge is a large empty space with few signs and  no air conditioning. The heat is exacerbated by the large number of passengers struggling to claim their bags and get them checked by customs in no defined sequence – and unclear signage has some visitors claiming their bags before being checked by immigration instead of the other way round. There are no unexpected taxes at the airport and a cab ride into the heart of Juba town ranges from 30-45 South Sudanese Pounds (SSP) or (US$10–$15 at the official dollar rate). English is the national language, though  most people speak Arabic as well.

Accommodation: Finding a decent hotel at an affordable price is a challenge as there is no apparent standard for hotels and bed and breakfasts. On average, a simple hotel room (either prefab or cement) ranges from US$160 – $400 with breakfast included. Full board prices can range between US$180 to US$500. But, the higher prices  do not guarantee accommodation equal to a five-star hotel.

Cows block traffic on main road in Juba town.

The most recent crisis between Sudan and South Sudan has gravely affected South Sudan’s economy and the cost of living has significantly increased, with inflation high and foreign reserves are low. The black market price of the SSP is almost 50%  higher than its official rate. This, (among other reasons) coupled with the fact that it is a landlocked country with limited agricultural productivity, has caused food prices to be significantly higher now than they were a year ago. One can easily spend about 60SSP (US$20) on a meal of fish and chips. There are cheaper options, however, as you can find a delicious meal of ugali and Sukuma or foule in some restaurants.

Communications: Getting a local SIM card is pretty easy. Most people have two lines either Vivacell or Gemtel. For international calls, Gemtel is relatively cheaper than Vivacell. Unfortunately, neither Safaricom (Kenya) or T-Mobile (USA) SIM’s have network coverage in South Sudan. Other MTN subscribers are able to roam in most parts of the country, but getting data on mobile devices with Vivacell or Gemtel is difficult as it needs to be configured at headquarters.

South Sudan does not yet have a power grid. All electricity is supplied by generators further hampering the business environment and increasing the demand/importance of oil. Getting a steady Wi-Fi connection can be costly, and while most hotels have V-SAT’s and free Wi-Fi for guests, the bandwidth is usually really slow. The best time to get a decent connection is usually after 9 p.m. The costs for internet access ranges from about 1 – 4 SSP per minute, and cybercafés have 30 minute and hour-long bundles.

Social scene: There are several hotel restaurants, bars and barely a handful of clubs. That said, South Sudanese are very warm and welcoming. Most discussions there are about politics, football, nationalism and the future of the new republic. Unfortunately, I did not get to taste any typical South Sudanese food, but you can be sure to find a tasty dish of nyama choma, ugali and other East African delicacies. One unique thing to South Sudan is that it has its own beer labels, brewed locally. Try a Nile Special, White Bull or Club Pilsner—all local brewed by SABMiller.

Safety: Even though there have been more reports of crimes—particularly in the Jebel Hills—Juba is still relatively safe. There are police checkpoints along the main roads after midnight, but as a general rule, it would be wise to travel with a group of people and be mindful of your surroundings. While some foreigners have reported being harassed, I haven’t experienced that.  As the country is still pretty new, there are few developed tourist sites. However, if you are into outdoor activity, a hike up Jebel hills is worth it.

Random fact: In South Sudan, there are SUVs—yes including Hummers and Porsches—everywhere. In fact, its not uncommon to see someone with a luxury SUV and no actual home. More recently, there are several matatu-style buses operating in Juba. I tried to take one but was advised against it because they do not always have defined routes.

Other Travel Tips:  

  • There are few ATMs in Juba, so be sure to have hard currency (preferably US$ or SSP). If carrying US$ make sure you have US$100 and US$50 notes—few places (if any) accept 1, 5, 10 or 20s. Also, make sure your US$ notes were printed after 2006. 
  • Do not forget to take malaria prophylactics at least two weeks before your trip to South Sudan and also try to get a typhoid vaccine.
  • The quickest and cheapest way to get around the city is by Boda Boda. But, though efficient, Boda’s are a bit more dangerous in Juba than elsewhere in the region because of the rough terrain.
  • Most hotels have potable water, but if traveling outside Juba be sure to carry a bottle or two of water.
  • If you are traveling out of Juba have a mosquito net & insect repellent handy. There are few hotels outside the main cities and you might have to stay in a tukul (hut).

Bringing Big Music Concerts to Kenya

Grammy award-winning American singer Erykah Badu is slated to perform in Nairobi, Kenya on December 11. Tickets will cost Kshs 4,000 (~$47) for regular and Kshs 7,500 (~$88) for VIP entries.

Last month there was a bit of debate about the reception of international concert stars who perform in Nairobi. @KenyanPoet  wrote about the live concert business and the value Kenyans give it noting that, while the James Ingram concert in Nairobi attracted 500 fans, a Rick Ross concert in Tanzania attracted 22,000 fans, and Konshens in Uganda drew 25,000 fans.

Another equally interesting perspective came from @ItsBuddhaBlaze who wrote on twitter about the challenges that concert promoters go through in order to bring international musicians to perform in Nairobi. Some of them (nicely archived here)  include:

@ItsBuddhaBlaze

  • As soon a promoter in Kenya says they bringing an international artist $$$ bells start ringing in all government offices – from Immigration to KRA (the Kenya Revenue Authority)…  
  • The taxes: Immigration, Kenya Revenue, Lands Office, Environment office, Security, Information – everyone (at) these Ministries want a piece.
  • First to pay the artist you show through an Escrow account that you have the full fee. The artist requires a half down payment of the show
  • The Kenyan government then requires the promoter to show a contract between artist & promoter. They take 10% of that fee, and this must be paid in advance.
  • The promoter must then pay Immigration for special work permits. That’s 25,000 (~$295) per member of an entourage – paid in advance.
  • The promoter must then print the tickets and go back to KRA to stamp them. They also tax 10% of the ticket.
  • After paying all these, the promoter must comply with environmental law and pay that noise tax…..I know you already have a headache and promoter hasn’t even paid for the venue which is hectic. Then security, publicity, transportation…by the time any sane person has paid taxes worth their whole investment, some of you will already be retired. So don’t blame promoters.

Finally –  The promoter who brought Sean Paul and Wayne Wonder ran outta business. Losses galore.

We trust that the promoters of the Erykah Badu concert won’t go out of business..or incur a loss. Her concert is sponsored by giant brewer East African Breweries’ @TuskerLite brand. She’s a world-famous artiste who has toured extensively and has a strong track record of award-winning songs like Window Seat, On&On and Tyrone – and the promoters should come out ahead if marketed right. Still, it should be easier to bring more international acts to Kenya.

EDIT: Apparently, promoters of other US stars including Keri Hilson and Chris Brown are also scheduling concerts for December 2012 in Kenya.

Taxing Property Owners

The last two weeks has seen a few signals on what seems to be untapped tax resources available to the Kenya Government from the real estate sector. During the recent controversial debate on taxation that ended with a move by parliamentarians to raise their own salaries, the issue of a capital gains tax on land & property was discussed, but set aside.

Despite that setback, the Kenya Revenue Authority has issued three notices in rapid succession.

First that all government taxes to be paid through either KCB, NBK, Co-Op, Equity or Central Bank. In past seminars, KCA has touted some of these banks as having online banking systems that share details of tax payers & payments directly to KRA – negating the need to fill out extra copies or make separate cumbersome periodic filings (EDIT: this has now been delayed to January 2013)

Then came another notice from KRA calling on tenants to provide information on who their landlords were – such as name, address, property location, rent amount, bank details etc.

Finally, there was another one yesterday with KRA seeking providers to supply a geographic information system to tie in property locations with Google Earth with tax  & property information and pictures or street maps.

Despite stamp duty being collected on property investments and transfers it remains to be seen how much more of that along with Value Added Tax (VAT) on rental income tax can be identified and collected from the new measures.