Monthly Archives: June 2014

E-Government Moment: Part II

Stuff happening on the e-government sidelines
  • July 1 is the deadline for Matatu’s and other Public Service Vehicles (PSV’s) to switch to cashless payments of accepting fares, in lieu of hard currency. PSV’s are meant to have signed on to services like Google & Equity’s – BebaPay or be in breach of the law.  It’s not expected to be smooth sailing considering the slow uptake of cashless systems among smaller matatus within  Nairobi, and it’s possible that after taxes, the minimum fare will be more than Kshs 30.
  • June 30, (today) is also the deadline for Kenyans to file their tax returns. This had been a largely academic exercise of submitting paper forms that the revenue authority (KRA) was unlikely to ever go through, and had even been discarded. But in rejecting a bill, parliament re-opened this tiresome exercise. This year, KRA has advertised its website, as the only way for Kenyans to file their taxes – but the site and service still has many challenges, including inaccessibility. 

  • While the schools laptop project seems to have stalled at the procurement stage, some $200 million has been allocated in the 2014/15 budget to procure some laptops. More visible in terms of making the government digital, has been the procurement by by county governments and parliament of iPad’s and other devices for leaders to use.
  • In the banking sector, June was a turning point for the migration to debit and credit cards to Chip-and-PIN enabled cards. While the benefits to consumers appear negligible (less fraud identity than swipe cards) and there is a cost of about $1.80 to 3.20, there has now been a liability shift, and going forward, costs associated with fraud involving non-EMV compliant cards will be borne by the issuing bank (currently they are borne by the acquirer/merchant).
  • In terms of digital television, there’s one year left for the analogue to digital migration in Africa. However, most countries are unlikely to make this deadline. Read more.
EDIT
  • The Kenya Government has automated registration of companies by launching a one-day registration of companies system to improve efficiency at the state law office.

Centonomy: Making Smart Sense of your Finances

Some days ago, Waceke Nduati, founder of Centonomy, a personal finance series that helps people get a grip of their finances and deal with money problems (that are often self-inflicted), gave a brief talk ahead of the new Centomy class period.

Centonomy’s eleven-week course has just resumed with classes (total 3 hours a week) repeated on Tuesday, Wednesday, Thursday and Saturday from June to August. This is useful as some people may be busy on some days in a week, but can catch a repeat on any of the other days, and they are both in Westlands and downtown Nairobi.  

These include sessions on personal money management (setting goals, monitoring plans), living abundantly, investment planning (choosing an advisor, stock exchanges, valuing private companies), the psychology of spending, money & relationships, time value of money, good vs. bad debt, managing cash reserves and irregular incomes, property investing, taxes, and estate planning (wills, family companies, succession).

Some tips she cited: 

  • If you want to grow wealth, don’t hang with people who just sit around and complain about things like government. Instead read, learn, and be with uplifting voices.
  • Use your free time. Do free-lance stuff like writing on Saturday morning or drive around to check up on opportunities. e.g new houses.
  • If you buy a Range Rover for attention, you may be doing it at the wrong time in your life. Also, you’ll have to keep upgrading that car to keep impressing the same people.
  • The skills you have are assets; improve them, instead of buying the latest phone (the world will never run out of things to spend money on).
  • Realise that half your income in a year goes to taxes and rent. Also, we earn money 5 days a week but spend 7 days a week.
  • When you retire, whatever your built will have to go back to paying for your lifestyle.
  • Hidden savings – cutting back on your Kshs 300 per day lunch may equal Kshs 108,000 in December – enough for a land down payment, school fees or a (well deserved) holiday. 
  • It’s a myth that you can only save/invest when you earn a lot. Start with whatever you have, and saving Kshs 200 a day at 10 % can be Kshs 1.2 million in 10 years.

Kenya: We Are One

This morning, KEPSA – the Kenya Private Sector Alliance had a meeting with business and religious leaders to revive the  ‘We are One’ campaign for Kenya at a time when terror and insecurity appears to be a growing threat to the country. 

Excerpts 
  • Safaricom Bob Collymore spoke about an investment banker who was comfortable traveling to Abuja for the World Economic Forum, but not to Nairobi which is now considered insecure. He then said the perception of Kenya was not good out there, and that the recently launch Kenya EuroBond was oversubscribed because it had a nice yield. He urged Kenyans to focus, not on politics, but on addressing the youth bulge and insecurity.
  • KEPSA CEO Carole Kariuki urged Kenyans to help rebuild Mpeketoni, Baringo and Mandera by donating building materials or by channeling funds through the Kenya Red Cross.
  • Some disclosures & concerns discussed included political (and religious) leaders who speak carelessly on national TV or who engage in double speak before different tribal and religious audiences, arming of communities, and targeting of properties of some communities. 
  • University students are resisting pressure to demonstrate (throw stones) on behalf of politicians 
  • The police are doing their part but what are ordinary Kenyans doing to promote peace. They were urged not to speculate on facts, and not to re-send / share propaganda that is found on social media .
  • The morning ended with the national anthem, as a prayer. 

Agriculture not only improves Food Security but creates Wealth for Africans

An open letter to African Union Heads of State by Kanayo F. Nwanze, President of the United Nations rural development agency, the International Fund for Agricultural Development (IFAD)
Judging from the daily outpouring of commentary, opinions and reports, you would think that there were two African continents. One of them is the new land of opportunity, with seven of the world’s 10 fastest growing economies, offering limitless possibilities to investors. There is, however, this other image: a starving and hopeless continent, hungry and poor, corrupt and prey to foreign exploiters.
As Africans, we are tired of caricatures. But we are also tired of waiting. Waiting to be led toward the one Africa we all want: the Africa that can and should be. We know the real Africa, filled with possibilities, dignity and opportunities, able to face its challenges and solve them from within. Never has the time been more right for us to finally realize our full potential. It is within our grasp.
As a scientist, I am always interested in facts. Africa is a land rich in resources, which has enjoyed some of the highest economic growth rates on the planet. It is home to 200 million people between the ages of 15 and 24. And it has seen foreign direct investment triple over the past decade.
As the head of an institution whose business is investing in rural people, I know that you also need vision and imagination. At the International Fund for Agricultural Development we have banked on the poorest, most marginalized people in the world, and over and over again these investments have paid off. For people, for communities, for societies. And more than half of the people we invest in are Africans.
More than 10 years have passed since the Maputo Declaration, in which you, as African leaders, committed to allocating at least 10% of national budgets to agriculture and rural development – key sectors in the drive to cut poverty, build inclusive growth and strengthen food security and nutrition.
Today, just seven countries have fulfilled the Maputo commitment consistently, while some others have made steps in the right direction. Ten years is a long time to wait. In less time I have seen projects turn desert into farmland.
In just a few days in Malabo at the 23rd African Union Summit, I will join those of you, African leaders, who will gather to discuss this year’s focus of agriculture and food security. This is my call: Don’t just promise development, deliver it, make it happen now. Make real, concrete progress toward investment that reaches all Africans. Investments that prioritize rural people.
Our biggest resource is our people. To squander this is worse than wasteful. If we don’t act now, by 2030 Africa will account for 80% of the world’s poor. Is this the legacy that we want to leave for future generations?
The AU declared 2014 as the year of Agriculture and Food Security. And this is the year we look beyond the deadline of the Millennium Development Goals to a post-2015 world with new goals and targets to reach. I hope that this means that we will be dedicating ourselves fully to making agriculture a priority. GDP growth due to agriculture has been estimated to be five times more effective in reducing poverty than growth in any other sector, and in sub-Saharan Africa, up to 11 times. Ironically, it is countries that lack lucrative extractive industries and that have had to invest in agriculture who have found out what is now an open secret: agriculture not only improves food security but creates wealth. Small family farmers in some parts of our continent contribute as much as 80% of food production. Investing in poor rural people is both good economics and good ethics.
A full 60% of our people depend wholly or partly on agriculture for their livelihoods, and the vast majority of them live below the poverty line. It’s not pity and handouts that they need. It’s access to markets and finance, land tenure security, knowledge and technology, and policies that favour small farms and make it easier for them to do business. A thriving small farm sector helps rural areas retain the young people who would otherwise be driven to migrate to overcrowded cities where they face an uncertain future. Investing in agriculture reinforces not only food security, but security in general.
In an Africa where 20 states are classified as fragile and 28 countries need food assistance, the need for a real rural transformation backed by investment and not just words is critical – I have often said that declarations don’t feed people.
Investments must be focused on smallholder family farms. Small farms make up 80% of all farms in sub-Saharan Africa. And contrary to conventional wisdom, small farms are often more productive than large farms. For example, China’s 200 million small farms cover only 10% of the world’s agricultural land but produce 20% of the world’s food. The average African farm, however, is performing at only about 40% of its potential. Simple technologies – such as improved seeds, irrigation and fertilizer – could triple productivity, triggering transformational growth in the agricultural sector. It is estimated that irrigation alone could increase output by up to 50% in Africa.  Rural areas also need the right investments in infrastructure – roads, energy, storage facilities, social and financial services – and enabling policies backed by appropriate governance structures that ensure inclusiveness.
If we look at the countries that have met the Maputo commitment, we see that investing in agriculture works. Given that agriculture has become lucrative for private investors, and about 60% of the planet’s available uncultivated agricultural land is in Africa, there is no mystery why we hear about so-called ‘land grabs’. Opportunity draws foreign investors. There is nothing wrong with foreign investment. But it has to be managed, to the benefit of all.
What is a mystery is why, with such a vast potential and a young population just waiting for a reason to seize it, our African leaders do not announce that they will redouble their efforts to drive an inclusive rural transformation, with concrete commitments, that will make Maputo a reality. I hope that after the Malabo meeting, that will be a mystery no longer.
African economies have grown impressively. But it is time to stop focussing on GDP figures and instead focus on people. The majority of our people are engaged in agriculture, and the neglect of that sector must stop if we really want to realize the healthy, peaceful and food secure Africa that we know can be. It is not a dream; it is a responsibility.

BritAm and Swala Investments

Last week saw the announcement of two new regional investment opportunities – one a new bond offer in Kenya and the other – an IPO in Tanzania – that both close on July 4.

BritAm Bond: Kenyan financial group Britam announced a Kshs 6 billion ($69 million) bond  which will be in two tranches starting with an initial target of Kshs 3 billion.

 Some excerpts from the bond prospectus 

  • There is a green shoe option of Kshs 1 billion in the first tranche.
  • Funds raised will be utilized in private equity, ICT development and local and regional expansion projects.
  • The minimum investment is Kshs 100,000 (~$1,150) with multiples after of Kshs 50,000.
  • The 5-year bond (maturing in July 2019) pays 13% a year (6.5% every six months). So if you invest Kshs 100,000, you will get an interest payment of ($) Kshs. 6,500 twice a year.
  • The bonds will be listed at the NSE for easy trading.
  • At the end of 2013, BritAm had Kshs 47 billion of assets, revenue of Kshs 15 billion and a pre-tax profit of Kshs 3.1b. They had Kshs 3.7 billion in investment property and Kshs 6.1 billion in listed companies. They own 21% of Housing Finance, 10% of Equity Bank and 25% of the Acorn group. They are acquiring Real Insurance for Kshs 1.3 billion (825m cash and shares  for the balance).
  • The bond issuance will cost Kshs 57m shillings – and Dyer & Blair get about Kshs 36M of this as the arranger gets (27M) and for the Placement (9M).

Swala Energy: Swala Oil & Gas (Tanzania) aim to raise between TZS 1.6 billion ($969,000) if they sell 3.2 billion shares and TZS4.8b ($4.8 million) if they sell 9.6 billion shares at TZS 500 each. The Offer is conditional on the Company achieving a minimum subscription of 3,200,000 Shares under this Prospectus, to raise TZS 1,600,000,000 (before expenses of the Offer). The Company may decide not to allot any shares and repay all application monies or seek a no objection to proceed with the allotment, in case the minimum subscription is not attained.

  • The minimum subscription is TZS 50,000 ($30) for 100 Shares. You can apply online, but a physical application form must be received at the brokers by 4th July.
  • Swala has total assets of $1.8 million in 2013 (up from $75,000 in 2012). Revenue in 2013 was $285,000 (up from $62k)  and loss was $5.5 million for the year (down from $1.26m the year before).
  • They are fundraising as they plan to spend $3.5M next year and $6M the year after.
  • A London broker values the company at $52.3 million based on 50% interest in Pangani (an area of 8578 sq. km worth $25.1m) and 50% in Kilosa Kilombero (an area of 8838 sq. km worth $36.3m). Otto Energy is a 50% partner in both of these ventures. 
  • The Costs of filing will be between TZS 210M and TZS 248M ($150,000) with printing costing 32M, accountants 40m (~25,000 to BDO), technical specialist (Risc Pty) 40M legal (Asyla) 16m, nominated advisors 27M (~$16,000 to Arch Financial if $3m is raised) and the Dar es Salaam Exchange gets 27M.
  • The Swala Energy prospectus gives insights on Kenya oil deals that are rarely public and which are used as a basis for the valuation of these shares and for comparison as they are all in the East Africa Rift System E.g. Recent Kenya transactions (EARS ) include Marathon Oil bought aBlock 12A license from Africa Oil for $78.5M and a Block 9 license, Africa Oil bought a  Block 12A license from Tullow for $3.86M ($1,265 per sq. KM and Adamantine sold a Block 11B license to Bowleven for $10M ($1,429 per sq. KM).
  • In Tanzania, profits from oil are shared out as 45% government and 55% to the contractor when production is less than 12,500 barrels per day and when barrels are over 100,000 per day, the government gets 70% and the contractor 30%.
  • Swala has applied for approval to list on the Enterprise Growth Market section of the Dar es Salaam stock exchange (they need 100 shareholders so list).
  • Swala will go from holding 74% to 61%  and new shareholders all have 10% with convertible noteholders at 7%.
  • Tanzanian Applicants will be allocated Offer Shares in priority to all other Applicants. Any Offer Shares remaining thereafter will be allocated to East African Applicants. Offer Shares will only be allocated to Foreign Applicants if they have not all been acquired by Tanzanian Applicants and East African Applicants.