Category Archives: East African Community

Bank Roundup: January 2019

The boards of NIC and CBA banks confirmed their plans to go ahead with a merger to create the largest bank in Africa by customer numbers. Serving over 40 million customers in 5 countries, the combined entity will have Kshs 444 billion in assets (~ $4.4 billion).

Currently, they are both at 115 billion of loans and have differences in deposits with 145 billion at NIC to 191 billion at CBA and customer numbers of 142,000 at NIC to 41 million at CBA. They had relatively similar customer numbers prior to CBA’s launch of M-Shwari in partnership with Safaricom. 

Going forward they aim to obtain shareholder approval in Q1, obtain regulatory approval in Q2 and have the new entity commence operations in Q3 of 2019. Currently, NIC has 26,000 shareholders and is listed on the Nairobi Securities Exchange (NSE) while CBA has 34 shareholders (20 individual, 14 corporations) including Enke Investments (24.91%), Ropat Nominees (22.50%), Livingstone Registrars (19.90%) and  Yana Investments (11.14%). The merger will be effected through share swaps that will result in NIC shareholders owning 47% and CBA shareholders 53% of the new entity whose shares will remain listed on the NSE.

MCB in Kenya:  Leading Mauritius Lender MCB Group has officially opened its representative office in Nairobi. The largest and oldest bank in Mauritius, with $12 billion in assets and a presence in nine countries, it had been licensed in Kenya back in 2015 and it will bank on its new office to gauge opportunities in the Kenyan market and build strategic relationships.

The 19th largest bank in Africa by assets, it is listed in Mauritius and has 19,000 shareholders. It has a strategic objective of growing its international footprint and expanding non bank activities. It has 1 million customers, 3,500 employees and 55 branches but, as it was communicated at the launch, they have no intention of opening branches in Kenya or East Africa.

Ethiopia Bank summary: Asoko Insight gave a summary report of the Ethiopian banking sector, parts of which are only available to subscribers. While some foreign investment is expected in Ethiopia, the banking sector is already privatized with fifteen of the country’s eighteen banks all having private local owners. The state-owned Commercial Bank of Ethiopia is the largest bank in the East Africa region with 1,280 branches and earns 67% of the sector profits in the country.  It has revenue of $1.3 billion, while 11 (other) banks, have revenues of between $50 million and $500 million, suggesting a more concentrated market in terms of size.

Tanzania:  NMB bank has waived several bank charges for their customers from February 1 including account opening, monthly maintenance, transaction fees, dormant account reactivation, and internal transfers – all in a bid to promote finance inclusion in the country.

Meanwhile, several Tanzania banks have a series of new managing directors including NIC Bank, Akiba Commercial Bank and Bank of Africa Tanzania

Family Bank pled guilty in the NYS case:

Diamond Trust CEO questioned.

Kenya’s Money in the Past: Diplomatic Engagement

This week saw the publication of “Kenya’s 50 years of Diplomatic Engagement, from Kenyatta to Kenyatta,” a book on the history of the diplomatic services and foreign policy in Kenya.

Edited by Dr. Kipyego Cheluget, Kenya’s Assistant Secretary General at COMESA, it is a collection of writings by different authors including foreign ambassadors. It is the result of a nine-year journey that came from an idea that came when he was Director of the Foreign Service Institute – to document the history of the diplomacy in Kenya. And he then set out to travel around the county, interviewing and recording former ambassadors and diplomats such Munyua Waiyaki, Njoroge Mungai and even unofficial ones like politician Mark Too. Some of them have since passed away like Bethuel Kiplagat and Phillip Mwanzia, and whose widows were present at the book launch.

The Chief Guest was Former Vice President, Stephen Kalonzo Musyoka who has also served as a Minister for Foreign Affairs and Minister for Education and he said that to upgrade Kenya’s  diplomatic performance, the country should reward career diplomats and have them, not election losers, as Ambassadors, and legislate a 70:30 ratio of professionals over politicians in such posts, a reverse of the current imbalance. The event had panel talks with former ambassadors on topics like peace-building in Ethiopia, Somalia and the East African region, using sports as a tool of diplomacy, combating apartheid, the lost years of engagement with Russia shaped by the Cold War and how the pioneering diplomats worked through trial and error for decades without an official foreign policy.

The MC for the event at Taifa Hall of the University of Nairobi, Nancy Abisai said the only good books is a finished book, and Kenya’s Cabinet Secretary for Education Dr. Amina Mohamed, added that, following a challenge by President Kenyatta, her Ministry was in the process of setting up a unit for the publication of Kenyan memoirs and which would be operational by January 2019. Former Vice President Moody Awori, who at 91 is still an active Chairman of Moran, the publishers of the book, said they were looking for more scripts to turn our more such books.

Excerpts from early sections of the book and launch

  • It has never been right to say that Kenya’s foreign policy is a “wait and see” one. Diplomats were able to negotiate to host a combined World Bank/IMF meeting in 1973 and for UNEP to have its headquarters in a newly independent African country – Ambassador Francis. Muthaura.
  • Njoroge Mungai initiated steps for President (Mzee) Kenyatta to be nominated for the Nobel Peace Prize in 1972 and Singh Bhoi drafted the dossier.
  • Dennis Afande opened the Kenya Embassy in Jeddah, Saudi Arabia in February 1977. He was the only employee there for four months and the only signatory to the Embassy bank account for the period.
  • When Paul Kurgat went to apply for his scholarship visa at the Nairobi Russian embassy, in 1984. he was arrested and questioned about links to Oginga Odinga. He was later to return to Russia as Kenya’s Ambassador in 2010.

The book is available in local bookshops, such as the University of Nairobi one, at a cost of Kshs 1,395 (1,200 + VAT) and a digital version is also available on Amazon for $8 (~Kshs 800).

Ethiopia privatization window opens

Several weeks of rapid news has seen Ethiopia privatization of state enterprises proposed as one of several changes to sustain what has been one of Africa’s fastest-growing economies. This all comes in the wake of a new era under Ethiopia’s new prime minister, Dr. Abiy Ahmed Ali, who is leading change within the country and outside, such as on his recent visit to Kenya.

In the last few days the Ethiopian government has lifted a state of emergency, signaled an effective cease-fire with Eritrea, released long-jailed political prisoners, reshuffled security leaders, launched e-visa’s for all international arrivals with a view to dropping visa requirements for all other African nationals, and opened the Menelik palace to tourists among other changes, which have drawn comparisons or Abiy to Mikhail Gorbachev in Russia in the 1980’s.

The surprise was statements about plans for the massive Ethiopia privatization program in which the government would sell minority stakes in roads, logistics, shipping, and prime assets like Ethiopian Airlines, which just took delivery of its 100th aircraft, a Boeing 787, and which is the centrepiece of a logistical, tourism and business hub plan for the country. The program would also extend to two sectors that have been off-limits to foreign investors up to now;  banking and telecommunications.

For comparison, a 2012 list of Eastern Africa’s largest banks had the Commerical Bank of Ethiopia as the largest in the region followed by National Bank of Mauritius and KCB in Kenya, and at last measure (2017) had about  $17 billion of assets, 1,250 branches, and 16 million customers. And in telecommunications, Ethio Telecom, a government-owned monopoly has about 20 million customers in a country with a population of 107 million (many of them children), but still a low penetration rate. 

Ethiopia privatization of state enterprises is not a new item, but it is one which the government has put side as it pursued an industrialization model that has seen the building of new infrastructure, new factories, industrial parks, agro-processors, leather parks, vehicles manufacturers etc. but which has not been equally felt by the country’s large and young population – and this has seen wide-spread protests and a state of emergency that ushered in a new leadership with a new prime minister (Abiy). 

It also came after a lengthy story in the FT – Financial Times on the state of Ethiopia’s economy which cited the fatigue that China has with large investments and some projects that are operating below capacity coupled with the high government debt and shortage of foreign currency  – Two investors said that Sinosure, China’s main state-owned export and credit insurance company, was no longer extending credit insurance to Chinese banks for projects in Ethiopia as willingly as it used to. It notes that imports into the country are four times that of exports from  Ethiopia leading to the shortage of foreign currency.

The changes in Ethiopia could also be a warning to other African counties that have been moulded in a similar way to Ethiopia model, with heavy borrowing from China and building infrastructure and mega-projects for the future.  When the Ethiopia privatization program starts it’s unclear who will benefit and if Chinese companies will be given priority given that they have invested for a long period in Ethiopia compared to other new companies, such as Vodacom and MTN, who are excited about the prospects that are now opening up

Kenya’s Money in the Past: Bethwell Ogot Footprints on the Sands of Time

My Footprints on the Sands of Time is an autobiography by Professor Bethwell Ogot (wikipedia),  an eminent academic scholar. It is a tale of a young man overcoming incredible hardships, and going through early schooling at Maseno, and later through winning scholarships and prizes, on to excelling at Makerere, St. Andrews (Scotland) and teaching with Carey Francis at Alliance High School. It also touches on his work and roles in the establishment of the University of Nairobi, and Maseno University, and at his travels to present papers and speak at prestigious conferences and other institutions across the world.

Ogot narrates tales on growing up in Luo culture, seeing emerging economic changes e.g. he took a honeymoon trip to Uganda in 1959 traveling on first class from Kisumu to Kampala via Nakuru, a twenty-seven-hour train journey. Later, when his father died on August 30, 1978, this was the day before Kenya’s first president Mzee Jomo Kenyatta was to be buried, and it was a period when the sole broadcaster – the Voice of Kenya refused to publish any other death announcements, newspapers would not publish any other obituaries as a sign of respect to Kenyatta, and coffin-makers were not willing to make any other coffins.

He was close to former schoolmates, who were now in government and its leaders. Ogot was waiting to meet Tom Mboya for lunch at the New Stanley Hotel when Mboya was shot (his death was not unexpected to his friends), and Ogot had an encounter with Mboya’s killer who was fleeing the scene.  He writes of his work to establish and get government and financial support for the Ramogi Institute of Advanced Technology – RIAT and a delicate dance with community leaders including Oginga Odinga who was firmly out of government.

The book has a wealth of information on corporate governance and management from Ogot’s time at regional bodies, parastatals, international organizations, donor-funded ones, universities that were in slow decline and government. He writes of working in research and publishing, and struggling to document and publish African history. Also of his times at the East African Publishing House that published books on political science, history, geography and a modern African library with much opposition from British Publishers who controlled publishing and later from government officials who set out to shut down independent academic stories. They published Okot p’Bitek’s Song of Lawino that some critics considered a terrible poem ahead of its publication but which went on to be celebrated and sell over 25,000 copies.

There are also stories of navigating the East African Legislative Assembly, travels around East Africa, interacting with leaders and observing actions that were either supporting or undermining the East African Community. Uganda’s President Amin spoke of supporting the community even as he launched Uganda Airlines that he said would only do domestic flights in Uganda. There was also the importation of goods for Zambia through Mombasa that undermined the Dar es Salaam port and the Tazara railway, so Tanzania banned Kenyans trucks with excess tonnage from using their highways, and Kenya retaliated by closing its border with Tanzania. Officials in different countries also tried to keep community assets from leaving their borders, and Kenya grounded planes and withheld fuel of East Africa Airways which owed money to Kenya banks in a move designed to hurt vast Tanzania the most.

The most shocking tales are from his time working at the Museums of Kenya and its spinoff that saw Ogot as the first director of The International Louis Leakey Memorial Institute for African Prehistory – TILLMIAP (see an excerpt). It is a serious indictment of Richard Leakey who regarded TILLMIAP as his personal family fund-raising institution and who, with the support of Charles Njonjo in government and diplomats and donor agencies, warded off transparency and Africanization efforts – and was eventually to hound Ogot out of the institution.

Another tale is of when, as the candidate representing Africa on the executive board of UNESCO, he ran for the Presidency of the General Conference. But what should have been a formality of confirming his position became a long process after a surprise Senegalese candidate emerged to run against him – and France lobbied Francophone countries to only vote for a French-speaking African candidate, rules were changed, documents forged, and additional multiple election steps added before Ogot finally won.

The 500+ page book by Prof. Ogot does not have an index, but it’s worth reading all over again.

Economic Forecasts from Citi, Barclays, World Bank, Brookings, Oxford

A roundup of recently published economic forecasts, reports, and surveys.   

AfDBThe African Development Bank’s interactive platform, #MapAfrica, maps the locations of the bank’s investments in every country across Africa.   

Also the AfDB launched their 2018 African Economic Outlook report. 

Barclays: In Nairobi this week, Barclays Africa launches the 2017/18 macro-economic report as well as the Africa Financial Markets Index,  which is a survey of 17 African stock markets.

Citi: Citi Research has just published two reports on frontier markets and one on food inflation in AfricaCiti found that frontier markets did better than developed markets and that Kenya did well (36% return on equities) despite the banking interest cap law and the prolonged election season which has now ended.

Citi’s forecasts of top picks for frontier markets in 2018 are Sri Lanka, Romania, and Kenya and they see weaknesses for Argentina, Morocco, and Egypt. The Citi rankings consider six factors: macro growth, macro imbalances, monetary factors, valuations, earnings momentum and price momentum for their forecasts. Citi also ranked five top stock for frontier markets BGEO Group (Georgia), Humansoft (Kuwait), IDH (Egypt), KCB (Kenya) and MHP (Ukraine). For KCB they like the growth profile of corporate and salaried customers from which the bank will grow market its share even if the banking law remains the same.

The Citi forecasts also looked at the Kenyan currency (shilling) which has remained stable relative to other African currencies and how it will continue to do so even with the country’s balance of payments deficits and heightened politics. But they found that one problem with making Kenya predictions is that a significant portion of inflows that offset the current account deficit is classified as other flows, and their timing is not predictable. They assume that the inflows are from the East and Central Africa region that sees Kenya as a safe haven, despite the politics of the second half of 2017. Another finding was that devaluation of currencies have a bigger impact on food inflation in sub-Saharan Africa but Kenya which had drought and food security issues in 2017 is able to draw on food production from its neighbors (Ethiopia, Tanzania, Uganda) that keeps food inflation in check even though the food trade data is not captured in official statistics.

World Bank: Meanwhile the World Bank is taking heat after one of their economists admitted that the WB “Doing Business” rankings for Chile had been manipulated for political reasons. The Doing Business reports are cited by leaders of several countries such as Kenya, Rwanda, India as indicators of their good performance in office, But this one admission of political interference could trigger fall out as to the credibility of other reports, country economic forecasts, growth statistics, inflation measures and discussions with governments that the World Bank does.

The Oxford Business Group: The Oxford forecasts reviewed the year Kenya in 2017 in which growth was expected to be about 5% (down from an initial forecast of 5.8% for 2017), but still above the sub-Saharan Africa average of 2.7%. It noted the mixed agriculture performance was due to the drought that affected maize, sugar, tea. Also that Kenya’s Supreme Court decision to nullify the presidential election set a good path for the country in 2018 despite the added cost of staging two elections in 2017 affecting the government’s ability to meet budgetary targets and which later resulted in Moody’s considering a downgrade of Kenya’s debt rating.

Brookings: The Brookings forecasts are contained in Foresight Africa, an Africa-focused report  that celebrates Africa’s growth and highlights priorities for the continent. For Kenya, it contains a sum up of the ability of the country to leverage technology and innovation for things like revenue collection and uptake of products and mobile bonds (M-Akiba), M-Tiba, and IFMIS. It mentions that Kenya can balance the impact of special economic zones and infrastructure from China against politics and that the successful launch of the SGR in May 2017 could one day serve Uganda Rwanda, Burundi and even Tanzania South Sudan and Ethiopia. It has special sections on the 2017 Kenya election and the M-Akiba bond (“The KSh 150.04 million (approximately $1.5 million) uptake of the M-Akiba bond was mainly dominated by small investors who invested less than KSh 10,000 (approximately $100)”)