Author Archives: bankelele

Paper Planes: Big Day for African Airlines on Paper

July 18 was a big day for various African airlines with news affecting travel in different parts of the continent, ahead of the Farnborough Airshow in the UK.

Nigeria announced plans to revive a national airline – Nigeria Air, a new private sector led-airline in which the government would own no more than 5% and would not manage. It is planned to start flights in December with a target of serving 81 destinations. The launch was officiated by the Nigerian Minister of State for Aviation at Farnborough and he said that they were in talks with Boeing and Airbus and also financiers such as Standard Chartered Bank. The new airline was shown in the livery of new Boeing 737 Max and Airbus A330 models. 

Just a few days after leaders of Ethiopia and Eritrea announced a cease-fire and made historic visits to each other’s countries, Ethiopian Airlines made it’s first flight since 1998  to Eritrea. On the flight were many families reuniting, and former Prime Minister former Hailemariam Desalegn. The flights will be seven days a week, between Addis and Asmara and Ethiopian,  which is expected to be part of some privatization program, was also reported to be planning to invest in a 20% stake in Eritrean Airlines.

A few days ago,  Tanzania received its first Boeing 787 Dreamliner, which is expected to carve some routes in East Africa that are controlled by Kenya Airways and Rwanda Airlines.

Also at Farnborough, Uganda Airlines signed an MOU for two A330-800 Neo planes which they would fit in a three class-layout.

Earlier the same day, Uganda (National) Airlines announced an order with another manufacturer Bombardier for four CRJ900 planes.

Kenya Airways continues to market new routes Mauritius, Cape Town and the new direct non-stop flights to New York that will start in October 2018.

South Africa Airways celebrated Nelson Mandela’s 100th birthday with some new livery on some planes.

The revival comes all comes at a time when African Airlines now account for just 20% of the air traffic from the continent, down from 60% in a decade as Gulf carriers have made great strides in the continent. African airlines have also struggled with financial performance and management, with only Ethiopian posting consistent profits in the last decade. And, notably,  the deals announced at Farnborough lack detail on the financing aircraft, with Boeing 787’s and Airbus A330’s each having official prices of over $200 million.

Earlier, Skytrax published its list of the top 100 airlines in the world and it featured some African airlines including Ethiopian Airlines (at number 40), South African Airways (45), Air Mauritius (69), Air Seychelles (82), Kenya Airways (85) and was topped by Singapore, Qatar, All Nippon, Emirates and Eva Air. Other awards for African airlines were in categories of best airline staff service (South African Airways), best regional airline (Royal Air Maroc), best low-cost airline ( Mango) and best African airline (Ethiopian).

Bankers Predict the World Cup – 2018 Edition

The 2018 World Cup is now in its semi-final stage. Let’s look at how some banks made their picks to win the tournament.

Who was Predicted to Win the 2018 World Cup?

  • Germany:  Was picked by UBS (Germany has a 24% chance of winning football’s ultimate prize, followed closely by Brazil and Spain, who respectively have a 19.8% and 16.1% chance).
  • Brazil: Picked by Goldman Sachs (Brazil to defeat Germany).
  • France/Spain: Picked by Nomura (France and Spain to meet in the final).
  • Spain: Picked by ING.

Here is a good write-up of the Goldman Sachs picks and a summary of some of the different bank forecasts.

The teams in the semi-final today are England, Croatia, France, and Belgium. With both of its initial finalist picks now out of the competition, Goldman Sachs has revised its model and …With Brazil now out of the world cup, Belgium is at the top of our probability table with a 32.6% chance of lifting the trophy, closely followed by France (29.8%). Similarly, our model’s modal projection is for Belgium to defeat France and England en route to winning the tournament….

Look back at the 2006 World Cup banker predictions.

Kenya’s CMA Targets Young Investors through a University Challenge

Kenya’s Capital Markets Authority (CMA) will be holding a nationwide University Challenge as part of its education and investor awareness outreach program. The CMA team staged a chat last week on its Facebook page where its staff answered dozens of questions from young investors interested in participating in the Challenge, which is the second one in the series after another that was held in 2015.

Some excerpts of the responses during the chat:

  • The Challenge is open to all students interested in capital markets.
  • It is for individual young investors (over 18 years), who are enrolled at any university in the country and are in good standing academically (i.e. not on probation, or suspension at their university), and who must not be related to any CMA officials of organizers of the Challenge.
  • Once the university Challenge starts in mid-July 2018, the CMA which also has an investor education department will organize tours and barazas (meetings) with some Universities and will also have ambassadors at different campuses around the country.
  • The CMA Investor Education department has an investor education page on their website, a library for research, and also a unique resource portal for investors in capital markets to get information which is also useful to people who have graduated and are now outside of campus, but still interested in becoming savvy young investors.
  • The Challenge runs from July to November and students who enter will go through a series of online examinations, and the finalists will also get to give presentations.
  • The top prize is Kshs 150,000 (about $1,500) which the winner will use to buy shares at the Nairobi Securities Exchange (NSE). Other winners will also get a chance to travel and see how capital markets in other African countries work.
  • You can re-watch the chat on the CMA Facebook page.

Besides the Challenge aimed at young investors, other interesting and notable CMA opportunities include a sandbox to test bitcoin, block-chain, and other financial technology (fintech) solutions in Kenya.

FSD Kenya Insights on Youth and Agri Finance

FSD Kenya, which aims to create value through financial inclusion, have just released their 2017 Annual Report which contains findings from ongoing research projects around Kenya.  

Some excerpts 

  • The unregulated digital credit space in Kenya, mainly phone loans, has overtaken other forms of credit in the country with 19% paying digital loans, much more than 17% repaying family/friends or 14% paying shopkeepers for goods taken on credit. 
  • 45% of borrowers through mobile phones are now female. Usage has shifted from day-to-day to investing in businesses, but 14% are (900,000 individual) are juggling multiple loans, and half have defaulted or delayed loan repayment.
  • Tweaking Agri-Finance: There is lack of access of credit to agriculture which receives just 4% of banking credit. This could be partly due to lack of data so they are partnering with M-Kopa Labs to research other models. Hall of M-Kopa customers make money from agriculture and buy solar products so the research aims to see of if the pay-as-you-go model can be applied to other products like farm inputs, water tanks, fertilizer, animal feed etc.
  • Youth Finance products: 40% of the population is under 15 years but youth are underserved by the banking sector. They see money as a means of survival and savings as being for buying something not long-term or unanticipated needs. There is a lack of appropriate financial products for the youth, and this could be because older adults are the ones developing financial solution for the youth. One outcome of this research, funded by Funded by SIDA and the Bill and Melinda Gates Foundation could be a new class of lending to the youth, a development by FSD Kenya and the Kenya Bankers Association. 

  • They are also involved in the Kenya Hunger Safety Net program in which the government transfers Kshs 20 billion ($200 million) a year to people over 70 years.
  • Visiting economist John Kay gave a lecture where he advised that Kenya should develop local financial solution and not adopt western financial models.
  • Smartphone uptake still low, but USSD is how Kenyans can access robust banking services with cheap handsets.

Credit Cards Moment: AmEx and MasterCard take on Visa in Kenya

Central Bank of Kenya (CBK) statistics from the first quarter of 2018 show that there are 120,000 locally issued credit cards and 18 million debit cards/ ATM cards. With interesting patterns of credit cards usage over the last few years, for various reasons, there are some new entrants out to take on ubiquitous Visa-branded cards in Kenya.

MasterCard: GT Bank Kenya is rolling out a series of World MasterCard credit cards. The Gold and Platinum cards come with perks of travel and rewards including international airport lounge access, complimentary nights at 175 Starwood Hotels, luxury apartment discounts and Hertz Gold Plus car rentals along with enhanced insurance benefits that are easy to claim and a 24/7 concierge who offers personalized travel services. There are also tailored dining offers for Diani, Kisumu, Malindi, Mombasa, Nairobi. Ukunda and Watamu as well as towns in Nigeria.

Previously, one of the most-popular MasterCards on the market was the prepaid global card by Nakumatt that was supplied by KCB and Diamond Trust banks. They have been inactive since early this year following Nakumatt’s difficulties that started before the supermarket chain went under voluntary administration.

American Express: Also, Equity Bank and American Express have just extended their 2013 partnership. The bank which issues the American Express Green Card and Gold Card is the sole issuers of the globally accepted American Express cards in East Africa. With the signing of a now exclusive merchant acquisition agreement, Equity will be the sole merchant acquirer of American Express card transactions and will manage all aspects of merchant relationships including acquisition, statements, and marketing. Equity Bank earned Kshs 278 million in AmEx commissions last year, a 54% increase from 2016. The Bank also issues Union Pay, Diners, and JCB cards in addition to Visa and MasterCard.