Monthly Archives: January 2015

Unga AGM 2014

The 2014 annual general meeting (AGM) of Unga Ltd. shareholders took place at KICC in Nairobi on December 2  2014. The meeting started on time, and with good attendance, and the set-up was different with the ‘speaker’ (primarily the Chairperson) using a lectern as opposed to answering questions while seated.

Some highlights:

  • Maize milling is not very profitable due to tax evading competition at the county level and has been brought back in-house to control the consistency of quality and supply. Also, Unga has implemented new Route-to-Market strategies and is opening up stores/warehouses that sell exclusively Unga products to overcome distribution problems in some areas.
  • Unga wants to become a ‘nutrition company’ versus remaining a miller. Therefore Unga has ventured into selling cereals e.g. beans, green grams, etc packaged under ‘Amana’ to attract high-end shoppers.
  • Unga got shareholder approval to buy 52% of Ennsvalley Bakery which retails its products through high-end outlets e.g. Nakumatt. Unga’s board (CEO spoke on this) feels Unga can revamp the firm to expand rapidly with a larger product range. The purchase of 52% in Ennsvalley is being financed by the proceeds from the sale of its 51% stake in Bullpak (for Kshs. 335M) and additional cash from internal operations. Unga will also loan additional funds to Ennsvalley at 15%.
  • There were interesting (& relevant) questions including the feeling that the sale of Bullpak was ‘cheap’ given the profitability of Bullpak. Some shareholders questioned the high purchase price multiples of Ennsvalley given the low sale price multiple of Bullpak. (Bullpak was a cash cow vs the cash hog Ennsvalley will be for a few years). Also, one of the Unga directors had to declare his interest in Ennsvalley though the extent of his family’s ownership wasn’t stated.
  • There was a discussion on GMOs and the MD said that, by seeing world trends, it is just a matter of time before the Government of Kenya has little choice but to approve GMO cereals especially if the region suffers extended drought conditions.
  • SWAG? No more bales of flour to be given to shareholders as the cost is too high on a per shareholder basis. This decision was made in earlier years and will remain so in the future.

 

World Development Report 2016

The annual World Development Report  (WDR) is considered to be one of the most authoritative reports published by the World Bank and is widely read by policy makers in developing countries  and anyone looking at development issues that affect the poor.

WDR2016  looks at the how the internet for development. At a presentation in Nairobi today, the researchers spoke of the unprecedented diffusion of digital technology – with the comparison that while Kenya got electricity, 60 years after its discovery, Kenyans were able to use mobile banking 5 years before the USA.

The internet affects development by helping people and economies around the world overcome information barriers/inclusion .(e.g women, and freelancers are able to get more online opportunities and funding (kickstarter))  than were available offline, attain lower transaction costs /efficiency (manual filing systems in government replaced by models like Estonia where you can start a company in 20 minutes) and achieve economies of scale/ innovation.

However, access has been unevenly spread and there are risks and challenges brought by the internet. These include exclusion (elite take the lion’s share), efficiency may lead to inequality, cyber security attacks & wasted projects , while more innovation may lead to  job destruction.

Firms in lower-income countries are less likely to use the internet and  low-income countries are becoming more disadvantaged as the internet rewards those at the top of the chain, while middle skilled occupations may disappear (bank tellers, drivers – from a hollowing out of the labour market)

Some conclusions

  • Internet brings growth opportunities but they are largely unrealized (You need 15% broadband penetration to see impact. Also it has to be fast, affordable and always on – mobile broadband does not have the impact of fixed broadband)
  • Internet can improve welfare and reduce poverty but can also worsen inequality
  • Affordable internet requires open access and public private partnerships (which are still lacking)
  • A digital economy needs a strong analog foundation – competitive  environments where incumbents are forced to innovate, and internet savvy newcomers can enter market easily

 

Mwalimu SACCO acquires 51% of Equatorial Bank

EDIT: Jan 27:  The Government has ordered an inquiry into Mwalimu National Sacco’s bid to acquire Equatorial Commercial Bank. The Commissioner of Co-operatives has appointed an inquiry team report to him following a protest by the Co-operative Alliance of Kenya (CAK) 

Last week, Mwalimu SACCO became  the majority shareholder of Equatorial Commercial Bank (ECB), acquiring  51% of the bank for Kshs 1.6 billion (~$18 million). The acquisition was cleared after no objections were received from the Central Bank of Kenya (CBK), Competition Authority of Kenya (CAK) and Sacco Societies Regulatory Authority (SASRA). There was another objection, but not from any of the regulators, who were aware of the issues raised.

Mwalimu with Kshs 24.5 billion of assets (2013), acquired the stake in ECB,  the country’s 27th  largest bank (Kshs 15 billion) which has been boosted by an earlier merger with Southern Credit Bank. Mwalimu will have three (3) seats on the board of ECB, but the Society is not converting into a bank nor merging with ECB. Due diligence of the financial and legal processes was done by Ernst and Young and Mose & Mose Advocates.

This comes two years after the LAPTrust, a pension scheme and the Kenya Tea Development Agency acquired a combined 22% stake in Family Bank – and LAPTrust estimated their stake was worth 1.6 billion in 2013, just two years after paying a 1/4 of that amount.

QNB in Kenya

The local newspapers have an ad by QNB Group (QNB – Qatar National Bank ). QNB is not in Kenya officially, but they are the largest investor at Ecobank (with 23.5%) who have a mid-size presence in Kenya (about No 20) – one of the 36 countries across the continent that Ecobank is present in. QNB

A newspaper opinion piece last year linked QNB with a bid to buy government shares in one of Kenya’s state-owned local banks – one with a regional presence in East Africa. QNB Capital was also the joint lead manager for Kenya’s 2013 Eurobond with plans to arrange a Sukuk (sovereign bond) for Kenya after the Eurobond.  

A Bloomberg piece notes that the Qatar bank is pushing into Africa as competition in its home market of 2 million people curbs profitability..with the possibility that QNB will go for the entire (Ecobank).

Guide to Seychelles

A guest post by @Honoluluskye about a visit to Seychelles. In it’s November issue, Vanity Fair featured a travel guide to the Seychelles which has 115 islands, located 1,000 miles east of Kenya, which is the closest point on mainland Africa.

Getting There: I used United Airlines miles to purchase the flight so it was a much better deal than the going market price (which I believe is about $1,500 USD per person). I used 70,000 miles and paid about $250 USD in taxes for two people round-trip with a 1 week layover in Ethiopia on the way back.

On Arrival: It was very easy to go through. The great thing about Seychelles (and Ethiopia) for Kenyans is that there is no visa needed. We got a pick-up at the airport included in our lodging so I’m not sure the exact cost but taxis are not cheap. It could cost between $20 – $50 USD to get from the airport to your lodging.

Getting Around: Most locals use the bus system which is quite reliable. It comes every 30 minutes or so and costs 5 Seychelles rupees ($0.37 USD) per person per trip. However, as a tourist you will probably want to rent a car (about $50 USD a day) as it is much more convenient to move around the island.

It is very safe and secure (esp. as compared to Nairobi). We were just told to watch our belongings and that pickpocketing has become more common but no violent crime.

Where to Stay: We used Airbnb and paid approximately $90/night. Most hotels are between $150 – 300 USD/night. Electrcity is quite reliable, and they have the British plug system.

Staying In Touch: You can purchase a SIM card quite easily (about $3.75 for the SIM card and some airtime credit). Data is expensive to use on the SIM and phone calls cost more than they do in Kenya. Also, it’s hard to find Wi-Fi hotspots or cybers.

Shopping & Sight-Seeing: While most Seychellois use Creole (a pidgin French), most in the tourist sector are able to speak English well.

The capital city, Victoria is a small town walkable in about an hour or less. You might be able to find some gifts there but there’s not much to purchase. We stopped by a grocery store to buy some vanilla tea and also brought home some coconut oil. There is a local rum, Takamaka Rum, that one can purchase either at local shops or even at the airport to take back to your home country.

The main sights are the beaches!!! We especially recommend Petit Anse on Mahe Island and La Source D’Argent on La Digue Island. Hiking is also great. We recommend Copolia trail on Mahe Island and Anse Major.A beach in Seychelles

Eating Out: Most Seychellois (locals) eat at home so there are very few tasty and reasonably priced restaurants targeted to locals. Most restaurants are expensive and targeted at tourists.

The main local food is seafood (esp. fish). There is a delicious sauce called creole sauce that can be put on everything. Local beer is called SeyBrew and goes for about $1.50 USD – and easy to get anywhere.

Lunch could go for as much as $50 and dinner between $50 – $100 so if you plan on going to tourist joints, I would budget about $150 a day. We ate at smaller kiosks/take-away so we were able to get by on about $50 a day.