Category Archives: DRC

Kenol Kobil 2016 AGM

KenolKobil had its annual shareholders meeting on May 12, at the Hilton Hotel in Nairobi. The board chairman spoke of the company’s performance in the three years since they had lost Kshs 6.2 billion. They had thereafter embarked on a turnaround that involved reducing costs, divesting from non-performing territories, focusing on profitable business rather than growing their market share, paying down debt, and corporate governance moves (separating the role of  Chairman & CEO role) .

Highlights

Regional Business: 

  • Tanzania: The company would up their short foray in Tanzania where they were losing $2 million a year. They had a depot that was part of their venture was an expensive lease, and while fuel prices in Tanzania are set by the government, many companies sell below that price as they don’t pay taxes. The directors said that Kenol was a responsible company that could not and decided to close shop.
  • DRC: They invested here, but did not ship product there as they were not happy. with the business climate and decided to sell out.
  • Burundi is doing well despite the political turmoil there.

The board faces shareholders at the 2016 KenolKobil AGM

Dividends: One shareholder said the dividend was too low, but the chairman said they have a consistent policy of paying 25% of net  profit as dividend, while the Group MD (GMD) said they still had to pay down a lot of debt.  One long-term shareholder told the meeting, that it was better for the company to be conservative with dividends, rather than aggressive, like other companies, and come back in a  few years to ask shareholders to invest more money in a right issues

Property: They have decided not to put up an office building in Haile Selassie street in downtown Nairobi for now as the office property market is saturated.

Goodies: Lunch box (which Hilton guards would not allow to be eaten on site), and tote bag. Some shareholders pleaded for the company to provide them with caps and umbrellas to promote the brand.

Odd Point: One shareholder asked why the AGM had not started with  prayers. The Chairman said it would not be productive, as they would have to have prayers for Christian, Muslim, Jewish, and traditional African religions  to be fair to all shareholders present.

Equity Bank 3.0: Agency Banking & Equitel 

A few days after Equity Bank released their Q3 results, the bank had another media briefing. CEO James Mwangi explained the stuff he had said earlier about the shareholding change, agency banking, superiority as a Telco and expansion plans for Africa.

Notes from the Live stream

Shareholding Change:

  • Helios have exited from the bank ahead of the end of the seven year life of the fund. It was a closed fund.
  • Equity listed in 2006 to discover  the price of the shares and on listing it was Kshs 50 per share  more than they had been offered
  • They chose Helios over 5 other investors. Helios had patient investors (CDC, IFC, Soros)
  •  Helios is an example of what private equity can do and the bank transformed from Kshs 2 billion to 65 billion in shareholder funds without having to do a rights issues, or issue shares and went from 20 billion to 400 billion of assets
  • Helios exit was not a buy back, but a sale to third parties including Norfund, Genesis, Investec, NSSF Kenya, NSSF Uganda and Blackrock – some of who paid a premium of 10% above the market in order to secure large blocks of shares
  • The sale has allowed local shareholders to take up more shares in the bank and reduce the foreign ownership from 49% to 42%
  • Helios netted about $500 million from the sale of there stake in Equity
  • Investors who missed out include China Construction Bank, China Development Bank, Temasek (singapore) and PIC (South Africa)

Agency Banking: 

is one of their most misunderstood and underrated products in which they outsource services /costs to third parties for a fee, and share prosperity with their customers (who become suppliers of Equity services)

  • Top agents are doing 300-400 transactions per day (one in Kitale is doing 500) and top agents earn Kshs 750,000 to 1 million per month
  • Going to add insurance, stockbroking – and transform 20,000 businesses. They want them to be profitable, so won’t register a flood of new agents (e.g. 100,000 who will reduce the pie)
  • In August, agents transacted Kshs 29 billion (2/3 is deposit, 1/3 is withdrawal) – agents have too much liquidity – that’s why Equity/Equitel money transfer is free  as it sweeps up excess cash at the agents
  • Hope to use agents to bring down their cost income ratio down to 32%

Equitel / Phone Banking: 

  • Equity is not a telco – it is a channel for banking service with value add for telco – so customers don’t have to carry two phones
  • Average sending amount is 2,000 – 3,000
  • Mwangi asked Kenyans to furiously take up this product as it solves two problems – that of too much cash at the Equity agents and customers solve their problem of  exhobitant money transfer costs. Equitel did 8 million transactions in August double the numbers down by agents
  • Using USSD, customers used to do 2 transactions per month. That is now to 19 transactions per month with Equitel, and they hope to go 120 per month when they add payments.
  • Kshs 4 billion has been disburse via Equitel . 1 million people have got these loans and the average is 4,000 or 5,000. They are going to increase the loan duration to 3 months, then 6, and will do loans of 3-5 years eventually.
  • Used to process 3,500 loans a day, but that’s now 12,000 loans per day via mobile. loans starts at 1 a.m. peak and are disburse by 5 a.m. before the branches open.
  • Credit applications takes 2 minutes to check with the credit reference, the national identity bureau and also come up with a score analysis.
  • You can send money to any telco, any bank account, any debit/credit card in the world
  • Next is bill presentation; you give your bank a list of recurring payments, and they will  check the bill for you and ask you to confirm payment for electricity, water, dust etc.
  • Cardless banking – no need to carry an ATM card.
  • Other products are virtualization of chamas (software that keeps meeting minutes, chama balances, contributions, reminders, and disburses member loans by phone ( requests done by secretary, approved by chairman, paid by treasurer etc. all by mobile phone)
  • Harambees (fund raisers are also virtualized:  You can see how much has been raised, who has donated a goat etc.
  • Everyone in Kenya can be an airtime reseller and earn a10% commission
  • Equity Life will have medial advice, agricultural advice (trying to map all soils in the country to better advise farmers on fertilizer), education (they have put curriculum from standard 4 to form 4 for kids to revise and do daily homework), financial literacy etc
  • It has free insurance for anyone who spends Kshs 250 per month

Equity briefingJohn Staley, the Director of Finance & Innovation, said Equitel was a free channel that enables them to do secure transactions that were not possible by USSD before and they will soon be rolling out a secure mobile app.

James Mwangi confirmed that a move by Safaricom to hike up the costs of Equitel to bank transfers had been shot down and such regulatory approval decisions will be made by third parties of payment companies and banks (including Equity).

Africa:

Finally Equity are about conclude their purchase of ProCredit Bank in DRC with most regulatory approvals received and others that they have applied for (agency, mobile) pending –  and one of their big take on’s will be to process payroll of all civil servants in the DRC.

16 November 2015

East Africa M&A Moment: June 2015

Recent stuff in the newspapers (mainly the Business Daily), Kenya Gazette  (some of the just-approved deals were first announced two years ago) and press releases. $1 is about 95 Kenya shillings (and about 90 when deals were formulated)

Overall

Earlier this month, the Financial Times (FT) reported that mergers and acquisition (M&A) activity in Africa has fallen to its lowest level in more than a decade, as a result of collapsing commodity prices, political volatility and an anticipated rise in US interest rates. The value of African deals so far this year stands at $9.2 billionn — 23% lower than the same period 12 months ago and the lowest level recorded since 2004, according to data from Dealogic.

– Burbidge Capital also found that Kenya’s merger & acquisition deals slowed down in 2015 – with 11 M&A deals so far compared to 17 in the first four months of 2014. This year, the largest concluded deals have seen Helios sell a stake in Equity Bank to Norwegian funds and and Old Mutual’s purchase of a 60.7% in UAP Holdings.

Banking/Finance

More mergers are expected in the Kenyan banking sector as the Treasury Secretary announced that an increase in the minimum capital to strengthen banks’ capital base and increase competition…progressively from the current Kshs 1 billion to Kshs 5 billion (~52 million) by 2018. 20 banks are below the Kshs 2 billion mark.

–  Helios cashing out;  Norfund & Norwegian private investors are acquiring 50% of Helios partners investment in Kenya’ Equity Bank Group and will now own 12%. And today, Uganda’s National Social Security Fund has bought a 2.44% stake in Equity Bank Group from Helios Investors at Kshs 50 per share – and the new deal is worth ~$50 million.

– National Bank management said it has not been briefed on any merger plans with its State-owned rival Consolidated Bank. Treasury secretary Henry Rotich said National Bank would be merged with another bank before it’s planned rights issue. The government is the biggest shareholder of National Bank controlling about 79% shares consisting of Treasury and NSSF stakes. As part of a rights issue it is expected that NBK will retire its preference shares (held by the Treasury and NSSF) by converting them into ordinary shares.

– High-level talks regarding a merger between NIC Bank and Commercial Bank of Africa are  reportedly taking place but Mshwari may be spun out of any resulting entity. Both are mid-tier banks with quite a focus on corporate and high-end clients.

– While Mwalimu SACCO is acquiring 51% of Equatorial Commercial Bank (ECB), the Society is not converting into a bank nor merging with ECB.

– Kenya’s Nairobi Securities Exchange is acquiring the 77% of their associate company CDSC, which they own with stockbrokers, in a deal worth~Kshs 260 million.

– Barclays Africa advised on the largest sale of an African Bank in 2014 – a deal, in which Nigeria state-owned Asset Management Corporation of Nigeria (AMCON) sold Mainstreet Bank to Skye Bank.

Equity Group Holdings agreed to acquire 79% of ProCredit Bank Congo, the 7th largest bank (by assets) in DRC. ProCredit has total assets of $200 million, a customer base of over 170,000, and has KfW (12%) and IFC (9%) amongst its shareholders.

 Liaison Financial Services who have just been approved as an investment advisor in Kenya recently acquired the African business of Knutson Global who were involved in asset-backed securities, municipal development bonds and consumer lending.

Insurance

Oxford Business Group expects strong Kenya insurance M&A as companies merge to increase market share & meet higher capital requirements.

– The Mauritian Minister for Financial Services, Roshi Bhadain, said the State Insurance Company of Mauritius (SICOM), would take over the 23.9% stake (valued at more than Kshs 13 billion) held by Businessman, Mr. Dawood Rawat, in financial services firm British-American Investments Company (Kenya)  – a.k.a. Britam. This comes after the government of Mauritius placed Rawat’s firms in receivership over alleged financial impropriety charges.

UAP and Old Mutual agreed on a merger ahead of listing. This comes after Old Mutual raised its shareholding to 60% from 23% after buying 37% from private equity (PE) firms Aureos, Africinvest and Swedfund for around Kshs 14 billion. Old Mutual will not buy out the other 1,000 minority shareholders (who are staff & agents).

Old Mutual first bought into UAP in January by acquiring a 23.3% stake from Centum Investments and businessman Chris Kirubi. Centum sold its stake to get funding needed for its massive real estate, financial services and power projects.

– Also, the competition authority approved the acquisition 60% of UAP Holdings by Old Mutual Holdings and Old Mutual Life Assurance.

Barclays Africa will acquire 63% of First Assurance, Kenya’s No. 10 insurer, for Kshs 2.8 billion (~$30 million).

KCB Group is said to be considering a takeover of Madison Insurance.

– Pan Africa Insurance shareholders approved the acquisition of at least 51% percent of Gateway insurance. Through this acquisition, the company will enter into the general insurance business.

– Kenya’s competition authority approved the acquisition of 61.2% of Resolution Health East Africa by Leapfrog II Holdings.

Hotels/Tourism

– The Heron Portico, which is managed by Indian hospitality group Sarovar Hotels & Resorts, says the acquisition of rival Zehneria Hotel in Nairobi’s Westlands in a Kshs 1 billion buyout to expand its market share in conference tourism and hospitality industry in Kenya. The Heron Portico financed 80% of the purchase price using debt while the rest is self-financed.

– Minor Hotel Group of Thailand, and Elewana Afrika, are acquiring 6 camps spread across national parks in Meru, Samburu and Narok counties. Stefano and Liz Cheli (Cheli and Peacock Group), the founders of the camps, will continue to run the resorts and focus on business development.

– Kenya’s Competition Authority approved the acquisition by Fortune Hotels of Paradise Safari Park and 85% of Paradise Investments and Development Kenya held by Paradise Company.

– TPSEA (Serena) acquires 25.1% of TPS (D) that was set up to run the Movenpick Hotel in Dar, now known as the Dar es Salaam Serena Hotel in Tanzania.

Logistics/Transport

Frontier Services Group (FSG), a Nairobi-based logistics firm, has completed its purchase of Cheetah Logistics SARL – Congolese transport company as part of central and western Africa expansion plan. Kenya’s competition authority also approved the acquisition of Phoenix Aviation by Frontier Services Group as well as the acquisition of 55% of Tradewinds Aviation Services by NAS Africa Aviation.

– UK logistics and engineering firm Atlas Development says it is in advanced stages of discussions with potential takeover targets in Kenya, Tanzania and Ethiopia.

– Part of Best Wing Cargo operations at JKIA have been transferred to Suppercare Freight Services.

–  Part of  Fastlane Freight Forwarders  operations at JKIA have been transferred to Airwagon Cargo Movers.

Energy

Norfund to acquire a stake in Globeleq Africa from Actis for $225M and partner with CDC to pursue power generation opportunities.

UAE’s Gulf Petrochem Group acquires Essar Petroleum East Africa and renames it as Aspam Energy (Kenya) in a deal to enhance the group’s integrated services and products for the downstream supply chain in the oil and gas sector in East Africa.

Media/PR

Scangroup dropped a bid to acquire 80% of Experiential Marketing, as approvals were not granted in time. Scangroup shareholders later renamed the company WPP Scangroup signifying that WPP Scangroup and WPP plc. are now fully together, with a shared vision for developing marketing communications across Sub Saharan Africa.

Hill+Knowlton Strategies (H+K), and Buchanan, one of the world’s leading financial communications consultancies, joined forces to launch H+K Financial, a specialist financial communications division dedicated to the Middle East and Africa.

Telecommunications/ICT

Millicom is to acquire 85% of Zanzibar’s Zantel for $1 and take over $74 million of its debts. Zantel is the leading Telco in Zanzibar (but just 5% to Tanzania’s total) with $82m in revenue and 1.7m customers.

– Kenyan innovation, Wezatele, was acquired for $1.7 million by AFB Kenya.

Techno Brain acquired the trips™ suite of integrated customs &revenue software from Crown Agents to provide tax and customs solutions that target the broader financial management needs of government.

Akvo Kenya transfers the business of building open source intemet and mobile software to support international development partnerships to Akvo Kenya Foundation.

Industry

– A Paris-based PE fund bought 30% of Ramco Plexus, a subsidiary of Ramco Group that has an annual turnover of Kshs 5.5 billion. The Ramco Group was started in 1948 as a hardware store, and has grown into a 34-subsidiary strong business, which employs 3,000 people.

– The competition authority approved the acquisition of 51% of Bullpark by Nampak Holdings.

 Pharmaceuticals

Business transfer:  Antipest Kenya Limited, has transferred to Modern Ways.

Business transfer: Unicorn Pharma Kenya has been sold and transferred to Medisel (Kenya)

– The competition authority approved the acquisition of the assets of European Perfumes and Cosmetics by Charm Industries. The deal excludes the debts of Varanasi Deepak, and Chirag Savia The

 Agri Business/Food Business

–  Syngenta rejected Monsanto’s $45 billion merger offer. An eventual agreement will have an impact on Kenya’s agricultural sector.

– Shareholders of REA Vipingo Plantations approved sale of the firm’s land at Vipingo to Centum Investments as agreed upon in a settlement with R.E.A Trading.

– Giant milk processor Brookside Dairy has bought out Sameer Agriculture & Livestock business in Uganda for Sh3.5 billion (~$38 million). The government of Uganda, which owns 49% (of Sameer) confirmed this on March 25.

Business transfer: Pure Imported (formerly European Foods E.A. Limited) (which was in the business of importing & selling deep frozen foods and supplying fresh juices) to European Foods Africa

– The Competition Authority exempted the production, bottling supply and distribution business between Distell and Kenya Wine Agencies Business transfer: for 5 years.

Business transfer: The ice cream production & trading business of Alpha Dairy Products is being transferred to Razco.

The Tanzania’s competition commission may reverse it’s decision approving for EABL to merge with Serengeti Breweries, as Serengeti’s performance failed to meet expectations.

– The competition authority approved the acquisition of an additional 30% in Largo Investments by NAS Holdings

– The competition authority approved the acquisition of the brands and assets of Chirag (Kenya) by Chirag Africa. Elsewhere these were acquired by newly-listed Flame Tree.

– The competition authority approved the acquisition of 52% of Ennsvalley Bakery by Unga Holdings.

– Norwegian private equity fund, Norfund, has bought shares in agriculture firm Vertical Agro in a Kshs 476 million (38.7 million Norwegian krone) deal. Vertical Agro is the parent company of Sunripe and Serengeti Fresh which makes it the largest exporter of organic vegetables in the country. The company produces 6,500 tonnes of fruits and vegetables annually from its farms in Kenya, Tanzania and Ethiopia.

Property

– Kenya’s competition Authority has approved (i) The acquisition of 50% of Equatorial Commercial Bank Centre by Fidelity Shield Insurance  (ii)  The acquisition of Parkway Investments by Mt. Kenya University Trustees (iii) The acquisition of Endebees Estate (Kilifi Holdings) by Balloobhoni Chhotabhai Patel.

Guide to Bukavu

A guest post by @abbyqoey

Getting There: We did not take a direct flight to Bukavu. We flew with Kenya Airways to Kigali (Rwanda) then took a taxi to Rusizi the border town between Rwanda and DRC (South Kivu).

On Arrival: The Kigali International Airport is pretty fast and efficient. As an East African citizen, I did not have to pay any taxes or get visa to go through Rwanda. However, for non-East Africans you have to make a visa application online otherwise even the authorities from the point of origin (Nairobi) won’t let you fly to Rwanda (it happened to my Canadian colleague and he missed his flight from Nairobi to Kigali. They also do not allow visa payments at the airport – which differs from the information on their website)

The taxi ride takes about 5 hours one way, and it’s a scenic route through the forest on a really good road. The border crossing was not too hectic. It took about 10 minutes on the Rwandan side and about 15 minutes on the DRC side. People have to be wary of the moneychangers on the Rwandan side. The guy at the border office warned me that they sometimes give people fake currency and it’s safer to just stick to the legit bureaus.

Getting Around: We has a personal driver to take us round and this was mostly because we were working in a village that was about 1.5 hours out of Bukavu city. I did notice that locals took either small saloon cars or what appeared to be 14-seater vans to get round the city. These vehicles were mostly in a sorry state, but there were quite a number of taxis in a much better state. We took one once at night and it turned out okay. Out in the village we saw quite a few lorries transporting cargo and people, and we were told this is a popular form of public transport out there.

The locals speak French and Swahili. The Swahili dialect was quite different to what we speak in Kenya. Some people do speak English but they are few and so we had a local translator helping us for our time there. Our host client hired the driver and translator for us.

During the day we felt pretty secure walking around. We would sometimes walk around 7:00 pm to a restaurant near our hotel but we were a bit antsy doing it as we had been warned about doing so at a security briefing given by our host client. We also had to make sure we were out of the field by 3:00 pm so as to get to Bukavu by 5:00 pm. We noticed the streets emptied out really early in the night (compared to Nairobi).

Staying in Touch: We were able to use our personal mobile phones. We got new phones and local SIM cards too. We chose Tigo as our carrier, over other available carriers like Airtel, Orange and Vodacom. But sometimes we had problems making local and international calls via the network. Our friends and family also reported having problems while trying to call us from Nairobi. That said, the quality of calls when they worked was good.

We also had access to Wi-Fi at the hotel we stayed at, at some places we frequented for dinner and also at the office we sometimes worked out from.

Where to Stay: We paid $60 USD per night for B&B at the Horizon Hotel, which was for a simple standard room. The lights kept going off a lot of the times and most places in the city seemed to have generators.

We didn’t use any credit cards. We ‘d use both the USD and Congolese Franc. You can pay for something in USD and get the change back in Francs, dollars or both. On average I spent about $22 per day, usually on food.

Eating Out: There was a lot of plantain and different types of fish in the local hotel we frequented. There was also cassava, sweet potatoes, yams, rice, ugali, pork and a kind of eggplant stew. Lunch was always buffet style so I couldn’t really tell what was the staple dish. Also, mayonnaise was served with meals at almost all the hotels.

Beer is mostly in one-litre bottles and goes for around $5. A double tot of rum, whisky and other spirits is an upward of $10 and a red wine carafe was about $20.

Shopping & Sightseeing There is an area that has a lot of colorful Congolese fabric. My colleague got some for his aunt and friend.

Gorilla trekking is something I would recommend for those who are fit. This is because it entails about an hour’s drive out of the city and then walking through a hilly forest to get to where the gorillas chill J in the Kahuzi-Biega park area

You can also chose to take a ferry ride to Goma in North Kivu and go see some volcano. We heard it’s awesome but we couldn’t manage the logistics given the limited time we had. (You need to book for an excursion online, go across Lake Kivu to Goma, get a vehicle to get you to Mt. Nyiragongo which you then scale and then spend a night at the top – as it’s best to view the volcano at night).

Odd Points: The country uses two currencies, the US dollar and the Congolese Franc. The Franc notes were quite old, like really old and tattered. The Congolese would happily trade in these notes but if you gave someone a dollar with even the slightest of rips or dent they wouldn’t take it. They’d tell you stuff like, “This is not money here.”