Category Archives: ABSA

Absa Kenya on Wills, Trusts and Succession Planning

Absa Kenya has been holding thought leadership seminars since their rebrand in February 2020.

This week they had an investor education connect session on wealth management, with a focus on wills, trusts and succession planning which featured Madabhushi Soundarajan (Managing Director, MTC Trust), Peter Waiyaki (Partner at Mboya, Wangong’u & Waiyaki Advocates) and Anthony Mwithiga (CEO, Absa Asset Management).

Some excerpts 

Wills:

  • People don’t do wills because they think they have nothing – but anyone over 18 who has been working has something to give. 
  • Another excuse of some educated Kenyans is they think they are courting death or will be marked for death by their families
  • Can do a will in an hour or five years. It does not have to be expensive or complex.  
  • A will should have two things to help a will (i)  a residual clause. assets grow after the will make sure any other assets be distributed the way the old “any other assets  (you don’t have o make a new will (ii) creation of a testamentary trust. 
  • Let your family know where your will is kept. If two wills emerge, the latter one will be used. If a will is destroyed, it is not valid.
  • If someone remarries, it invalidates a will because they are considered to have new dependents. 
  • Do not include matrimonial property should not be in a will. Or joint owner – when someone dies the spouse inherits the full property. They should not be in the will. 
  • Also don’t put investment or trust property in a will.
  • Proof of dependence: wives and children do not need to prove they are dependents. This also includes conceived but not yet born and adopted kids. But parents or siblings of a deceased must prove they are dependent. Also in Kenya, a husband/man will have to prove  he was being supported by a woman.
  • Covid situation: Oral wills are only valid for 3 months and must be mentioned in the presence of two witnesses who are not beneficiaries. And for a written will, someone in a hospital, surrounded by relatives is not considered to have the freedom to write a will. 
  • Without a will, only the family of a deceased person can inherit from the estate. No gifts to charities, churches etc. are recognized. 
  • Do not put assets in a will that already have nominated beneficiaries elsewhere e.g. life insurance, pension funds. 

Trusts:

  • Have the philosophy of giving things up as you will nor carry your wealth to the grave – so start thinking about preservation.
  • Banks are getting worried about lending to trusts. 
  • A trust is not a legal entity, a foundation is a better legal entity that can be created to run a school or a hospital.
  • Most common are discretionary trusts and others are ones that founders can create to run businesses for their families
  • A trust is a lengthy document. In a trust, you can exclude rogue children. 
  • To set up a trust; define the objectives, the trust structure, the beneficiaries, the trustees (ideally a corporate) and seek professional advice. 

Investments:

  • Use professionals e.g. in a unit trust to administer investments if you are too busy. 
  • If you have a vision, take a lead and invest in it so that others will follow.  
  • the realty over the last five year is the property prices can go down, unbelievable to many investors of 15 years ago. Covid has hit offices and malls, but there are still investments in residential, logistic and warehousing ventures.
  • Attributes of an ideal asset; gives returns, it should grow, it should be liquid, be understandable and It should also be secure (legal ownership & from damage). Individuals and families have investment portfolios, as it is not possible to get one asset to full all these attributes. 
  • The investment universe encompasses money markets, treasury bills, bank deposits, and listed shares which now includes a New Gold ETF.  Also unlisted shares (shares in a business stems/OTC), real estate, and alternatives such as derivatives, commodities, currencies and infrastructure projects which is a new asset class open to pension funds.

Suggestions:

  • Everyone should discover what type of investor they are and what stage they are on the life journey to understand what to invest in. 
  • Think investments beyond Covid-19.
  • Write a will today; there is no way of running from your dependents –  except through trusts, which allow one to better organize estates.
  • The best non-taxable investment in Kenya is infrastructure bonds.

Absa Kenya’s Sustainability Push

Absa Bank will plant ten million trees over the next five years with partners and stakeholders as part of a broad plan to promote sustainability and the wellbeing of Kenyans. This is the latest initiative by the bank that has identified three areas of climate action, recycling and sustainable resourcing to champion.

Jeremy Awori, the Absa Kenya Managing Director, said that while companies have historically engaged in corporate social responsibility (CSR) as philanthropic ventures, these initiatives are now going through a transformation to make them more sustainable and impactful by making them a part of the core business.  

Absa has tied its initiatives with the United Nations Sustainable Development Goals on quality education (SDG 4), economic growth (SDG 8) and responsible consumption (SDG 12). The bank has also signed on to the Sustainable Finance initiative, championed by the Kenya Bankers Association, UNEP’s Principles for Responsible Banking initiative, and has also joined the Kenya Green Building Society with a plan to be carbon neutral by 2040.

Its suppliers, 90% of who are local, are undergoing training on sustainable business and the bank plans to have them all sign up with the UN Global Compact in 2021. The bank’s enterprise supply chain development program has provided unsecured loans to small and medium enterprises and a ready to work program has trained 415,000 people.

Caroline Ndungu, the Marketing Director, said old computers and furniture at the bank are being repurposed by Computers for Schools Kenya and Fun Kidz to equip labs at 66 educational institutions with 1,000 computers. Absa is also replacing water dispensers with water purification systems and will recycle billboard branding materials from the Barclays transition into school bags. The bank will also do tree planting exercises as they hand over the labs.

Moses Muthui, the Absa Country Strategy Director, said banks should exist not to profiteer from people but to profit with people. As such, along with other covid-mitigation measures, the bank has now restructured Kshs 60 billion of loans. Absa has also enabled over half their staff to work from home while still keeping all their banking channels open to provide essential financial services to customers.

Kenya had 6% forest cover in 2009 and is estimated to lose 50,000 hectares of forest each year through deforestation. Speaking at the launch, Dr Chris Kiptoo, the Principal Secretary in the Ministry of Environment called on banks to provide innovative financial solutions to promote commercial forestry by the private sector.

The Absa Sustainability Commitment report is available on the bank website.

AFMI 2020 shows African financial markets resilience

The findings of the 2020 African Financial Markets Index (AFMI) report were highlighted in Nairobi today for a year in which countries face economic and medical challenges from COVID-19.

The fourth edition of the AFMI report by the Absa Group and the Official Monetary and Financial Institutions Forum (OMFIF) now measures 23 countries that encompass two-thirds of the continent’s population and 80% of its GDP. The countries are ranked by six assessments of investment attractiveness and this year, Eswatini, Lesotho and Malawi were added to the Index. 

South Africa remained on top, followed by Mauritius, and surprisingly Nigeria, which, along with Morocco, Ghana and Seychelles, made great strides to improve. Kenya, which was number three in 2019, dropped to number seven this year. Overall, 14 of the 23 countries scored above the median mark, a great improvement from the first index when only 6 of the 17 countries achieved this.

COVID-19 has had different impacts on African countries, but as Jeremy Awori Absa Kenya CEO said, even with the slowed-growth in the first half of the year, much was still expected from the continent that has a rising middle-class, and rising urban population. He added that growth would come from developing open, transparent and well-regulated financial markets.

Absa Economist, Jeff Gable said Africa cited some developments on the continent towards financial inclusion and making exchanges accessible to retail investors. These included Eswaitni’s automated trading platform and the Nairobi Securities Exchange’s revamped mobile app for retail investors with Dar es Salaam also working on a similar one. He spoke of moves to encouraging more funds to invest within the continent that saw Lesotho require its pension fund managers to invest locally (currently just 3% of assets are in the country), the launch of a derivatives market in Nigeria, and Ethiopia drafting legislation for a stock exchange.

In terms of sustainable finance, Kenya had its first green bond, Egypt had the first one in the MENA region, and Nigeria is working on its third green bond. Also, the African Development Bank was one of the first institutions to issue a financial instrument to fight the COVID-19 pandemic as it issued a $3 billion social-bond tranche. 

Danae Kyriakopoulou of OMFIF spoke of Kenya’s drop which was mainly in the “access to foreign exchange” measure where which it was ranked tenth after having topped the pillar just two years ago. This was partly due to the perception of the currency exchange rate. And on market transparency, she said that Kenya has few firms that have global credit ratings, compared to Nigeria, South Africa, and Mauritius.

She added that a strong local investor base was a source of long-term capital and a financial markets shock absorber of volatility, and that Namibia has the highest pension assets under management per capita on the index.  In terms of protection of minority shareholders, Kenya does well on that but it also needs to adopt enforcement of international financial master agreements (ISDA) as a key area of improvement. Kenya is also part of a pilot Africa Exchange Linkages Project to promote intra-African investment flows between the stock exchanges of Nairobi, Johannesburg, Casablanca, Egypt, Nigeria, Mauritius and the BRVM in West Africa.

George Asante, Head of Global Markets at Absa, said that the impact of COVID-19 was not as drastic on African financial markets as they had developed more resilience through having regulators work in uniform. This was in comparison to the 2008 global financial crisis which had a big disruption on African markets resulting in bond yields shooting up 30%. But he cautioned that African governments should work hard to remove the uncertainties that are still in the prices of their bonds, to attain lower borrowing costs in future.

The 2020 AFMI report by Absa Group and OMFIF can be downloaded here.

Coca-Cola partners for business recovery in Kenya

Coca-Cola has launched a program to assist traders to quickly recover, and safely reopen their businesses, following months of disruption from Covid-19.

The company will avail Kshs 125 million as part of a Coca-Cola system small business recovery campaign to assist 18,000 businesses, along with its partners including Absa Bank Kenya, Amref Health Africa and the Women Enterprise Fund. This will be through initiatives such as loans, personal protective equipment, sanitation facilities, soda cases, gardening furniture (for outdoor dining) and training to help them reopen safely between October 2020 and March 2021.

Coca-Cola has 300,000 traders in the country, and through its data, has noted the disruptions on these small businesses, 40% of which are at risk of closure even after the government relaxed lockdown restrictions in September 2020. This is partly from expired stocks and slow sales pick up in places like downtown Nairobi.

Absa will provide unsecured business loans of up to Kshs 10 million, for working capital, and up to Kshs 50 million for Local Purchase order (LPO) and inventory discounting. As the financing business partner in this campaign, the bank, through trade data, is quickly able to score the business creditworthiness, and extend financing, to suppliers and retailers in the Coca-Cola ecosystem, without having to scour their financial statements.

Coca-Cola has also extended a grant of $175,000 (~Kshs 20 million) to Amref to support 4,000 micro-outlets, such as eateries and leisure places, in Laikipia, Nairobi and Mombasa counties, to carry out occupational safety changes & training and reopen safely in their communities. Also, for participating businesses in Laikipia, the County Government has offered further support to traders there through credits to offset some business loans as part of a Kshs 123 million Laikipia economic stimulus package.

Absa Kenya absorbs Covid hit

Absa Kenya reported their June financial results, continuing the thread of banks taking being impacted by the reduced business activity and increased credit risks occasioned by COVID-19.

Kenya’s fifth-largest bank with Kshs 392 billion ($3.62 billion) in assets saw its deposits and loans higher than 8% last June and a pre-provision profit of Kshs 8.6 billion for the half-year.

However, the bank increased its provisions for bad loans threefold due to COVID-19 impacts and IFRS9 guidelines from Kshs 1.6 billion to 5.3 billion. This resulted in a net profit before tax and exceptional items of Kshs 3 billion, down from Kshs 6 billion last June, with a further one-time charge of Kshs 1.7 billion as the cost of completing the transformation from Barclays to Absa in the first half of the year.

During COVID, the bank had focused on helping its customers manage their livelihoods and has restructured 56,000 loan accounts, worth Kshs 57 billion, 28% of the loan book. COVID-19 has hit across the sector and commercial banks in Kenya have restructured a combined Kshs 844 billion of loans, 29% of the industry’s total. Absa’s bad loans are now at 8% compared to 13.1% average for the banking sector in June 2020.