Monthly Archives: September 2014

5 Intra-African Travel Barriers

There’s a lot of talk about removing intra-African trade barriers. But how about barriers for Africans traveling within Africa? If it’s easier to travel, it will be easier for people to cross borders, see & seek opportunities and build trade & business networks. But what stops more of this from happening? Here are 5 angles.

1. Airline costs: Airline travel is quite expensive, even for very short flights like $350 for the one-hour Nairobi-Entebbe flight. This is largely due to national taxes, that form more than 50% of the cost of some tickets.

Costs from Nairobi to various cities, priced by Kayak.com

Costs from Nairobi to various cities, priced by Kayak.com

Kayak nairobi2. Visa restrictions. Nigerian-born Aliko Dangote, who is believed to be the continent’s richest man was recently quoted as saying “I need a visa in almost 38 countries, which means an American has more access into Africa than myself.” Two years ago, tiny Rwanda made a bold move by allowing all African nationals to be issued with visas on arrival in the country, bypassing the embassy application process that is expensive and bureaucratically burdensome to access many countries.

3. Unfriendly Currencies. To travel and trade across Africa, and many parts of the world, the US dollars is crucial, as no African currency gets respect across its borders. You might be able to exchange it in a country that has lower forex restrictions, but at what cost? Looking at the currency spreads in the bank hall today, the differential between buying (Kshs 90) and selling (Kshs 84) the US dollar works out to about 7%, which is also the same for the Sterling Pound and the Euro. But for African currencies, such as the  South African Rand (bought at 6.69 and sold at 8.93), it’s a 28% difference, and for the currencies of Tanzania its 54%, Uganda 93%, and Rwanda 96%. Somewhere in-between is Asia, with the UAE Dirham at 17%, Indian Rupee at 15%, and Japanese Yen at 16%.

4. Knowledge Gap: There’s still very little knowledge about the greater Africa beyond their borders by African country nationals. I try to follow at least one current affairs, and preferably business-related, African national on twitter, but there are still many countries that I can’t find people to follow, and learn from. The best news source on Africa I’ve found is AfricaLive, the one-hour daily news nightly programs on China’s CCTV Africa channel.

5. Poor Road networks. If it’s tough to fly, it equally to drive across the continent and cross its many borders with varying degrees of red tape. Today, I saw these quotes by @mmnjug on twitter ” DRC is the world’s eleventh biggest country at over 2.3M sq kMs,and an estimated 73M people, but has only 2,250 kilometres of paved road. In the past two decades, just two people are recorded to have crossed the DRC over land, their journey took 44 harrowing days in 2008.”

Kenya Agri Exports to the EU take a Hit?

An ad in the September 22 Nation newspaper  has a statement by the European Union addressed to exporters from the East African Community on changes to the tariff regime starting on October 1 owing to the failure of the two sides to sign an Economic Partnership Agreement (EPA)

There was also an article in the same paper showing that a draft has been agreed to, and that a final EPA may be signed and effected in time, but others say it is too late for this.

The new rates, while still subsidized compared to what other nation suppliers pay to export to the EU, are still a blow considering that some exports will no longer be duty-free.

EU Agri

EU newspaper ad

While some like tea, coffee beans & carnations will remain duty-free, Kenyan exporters will pay subsidized rates  of 4.5% on tilapia exports (compared to a normal EU rate of 8%), 2.5% for roast coffee (not 7.5%), 10.9% for mixed vegetables (not 14.4%), and 5% for roses and cut flowers (not 8.5%) between November and May – which includes the crucial Valentine’s Day period when some flower farms can earn half their revenue.

This caps what has been a tough year for Kenya’s  exports of tourism, tea and coffee which have all been adversely affected, and now this.  The recently released Economic Survey 2014 showed total exports declined by 3% from Kshs 518 billion in 2012 to Kshs 502 billion in 2013 (as per the Devolution Cabinet Secretary).

Kenya will  qualify for the preferential (GSP) tariffs, while Rwanda, Burundi, Uganda and Tanzania are currently considered under “least developed countries” and most of their exports to the EU will qualify for a unilateral 0% tariff.

 

Prudential in Kenya

Today saw the formal introduction of giant UK financial services firm Prudential into Kenya. The 166-year old Prudential, which is listed in 4 countries and has $770 billion of assets under management,  announced the Kshs 1.4 billion (~$16 million) investment into the country, that commenced with a buyout of 100% of Shield Assurance, a local company

Kenya is the second African country for Prudential who only deal in life insurance. They are also in Ghana, and their representatives said Kenya was the most developed insurance market in Eastern Africa in terms of regulation and skills.

prudential

Prudential logo

At the launch, Kenya’s Treasury Cabinet Secretary, Henry Rotich, said Africa contributes only 2% of global insurance premiums and that Kenya will need to mobilize more savings (up to 30% of GDP) to sustain double-digit economic growth for the country. He said that there’s a link between insurance penetration and economic growth, and that through a new insurance bill in Parliament, Kenya plans to replace the current old laws (e.g. (life insurance capital is currently Kshs 150 million), and enable larger stronger insurance companies with diverse investors that are able to offer products like 30 – 40 year bonds and expand into other countries.

EDIT: Shield Assurance was hived off the collapsed Blue Shield. It’s relatively tiny and with Kshs 200 million of liabilities that will be settled by the new buyers.

Mobile Monday: Craft Silicon

Kamal Budhabhatti, the CEO of  Craft Silicon was the guest at Mobile Monday this evening and spoke about his company and it’s platform – Elma. Craft Silicon build mobile communications tools that talk to core banking systems. They are a  financial software company with a view that anywhere that there is a financial exchange (money changing hands), their software can be the enabler and get a piece of the  exchange.

Elma is used in 45 countries, is in  4 languages (English French Spanish Arabic)  and has 250 customers, including  21 banks in Kenya (I&M, Imperial, NIC, Family, Imperial, Jamii Bora Faulu, Rafiki etc.) who use the white labeled Elma platform. They also do payments for Uchumi, Nakumatt and the Kenya Revenue Authority (all mobile payments)

KamalKamal said Craft Silicon has the  second highest number of transactions after M-Pesa, (with Kshs 12 billion has exchanging hands so far in 2014) and have 6 – 7 million active customers on the platform which also supports people without bank accounts.

Some key features in Elma include:

  • Enabling standing orders – transactions that happen every single month  such as loan repayments
  • Enabling joint accounts: Kamal said they are the first company in the world to enable joint accounts in a mobile banking environment; In a typical scenario, one person would initiate a transaction, and the other person would get a message for them to approve or reject the transaction before it’s processed.  This works for married couple, company directors, or even parents & kids (parent approve transaction initiated by kids who may not be old enough to have bank accounts
  • Quick transfers: Transactions between customers of the 21 banks connected can be effected without going through a mobile company. Also Elma users can send money to each other’s accounts regardless of where they bank.
  • Elma customers can chat with their contacts who are also online on Elma (chat on Elma, not whatsapp)
  • Notifications e.g. A essage that  a cheque has come for clearing in your bank
  • Mobile cheque deposit – takes a take picture of your cheque on phone, and it goes to the clearing house
  • NFC enabled.

Opportunities for the Developers/ the Community 

  • Any bank can have their own corporate chats – and any developer can go sell the white label Elma chat product to a bank and keep all the revenue.
  • A developer who build an app using Elma’s API, can get to 6 – 7 million customers regardless of their telco or their bank or phone type. E.g. field data collection is a 3rd party app.
  • Also with Elma, there’s no need to write individual apps for different platforms such as for Windows, Apple, Android devices.
  • If you write on crafts silicon API, it is free to use even if you’re charging other people or banks, and the developers get to keep 100% of the revenue.
  • To download and use Elma, you don’t need a bank account to try out – all one has to do is download it, and top it up once using M-Pesa.

 

Scooping Money from Investors

Seems like there are not enough investments to satisfy local debt & equity investors in Nairobi.

NSE IPO:  The Nairobi Securities Exchange (NSE) IPO with 66 million new shares offered to the public, was oversubscribed by 687% in the retail pool, and the NSE now has 17,883 shareholders, up from 24 before the IPO. Local retail investors were allocated 41% of the shares, local institutional  34% and foreign investors received 23%. 

Britam bond:  BritAM whose 13% Kshs 6 billion bond started trading last month had a 144 per cent over-subscription netting Kshs. 7.323 billion. This was after invoking a green shoe option on the Kshs 3 billion targeted and exercised (the green shoe was for another Kshs 3 billion)  which allowed Britam to retain Kshs. 6 billion.

NIC bond: Offered at 12.5%, the bond received offers of Kshs 6.5 billion, representing a 30% oversubscription over the upsized amount of Kshs 5 billion. Institutional investors made up 90% of the applicants, and retail were 10%.