Category Archives: ideaexchange

Future of Tech summit.

The Rest of World publication celebrated its second anniversary with an event in Nairobi featuring techies, writers and other guests and with panel talks on issues around technology in Africa.

Excerpts from the event.

  • Valuations: Panelist Ali Hussein Kassim wondered about the venture capital due diligence that placed the valuation of Flutterwave at $3 billion exceeding Nigeria’s largest bank, Zenith which has a stock market listed valuation of $2 billion.
  • Compliance: Kassim also lamented that fintech companies were doing business without engaging with regulators or undergoing KYC (know your customer), AML (anti-money laundering) and CFT (combating the financing of terrorism) steps that would keep them out of trouble. The result of this was cases like Flutterwave in Kenya, while in Ghana, Dash, a remittance firm had one of the largest pre-seed funding rounds in Africa, raising $32 million, only to be shut down a month later by the Bank of Ghana for not having a license. – “you can’t build a payment service for Africa when you don’t have a license to operate in your own country.”
  • Salaries: Whether the global tech giants that have recently set up in Nairobi are distorting employee pay scales and leading a talent war that smaller firms are losing out.
  • Appropriate Policies: Another panelist Nanjira Sambuli said techies must engage with governments about what is going on in their industry, or they would wake up and find unfavourable attempts to regulate them. She warned of the danger of the government’s copy-pasting regulations from other markets such that “that we must now opt-out of marketing messages that we never signed up for” and the excessive obsession with certifications that the government now wants to extend to informal workers. Also, in Kenya, after an umpteenth attempt, an “ICT Practitioner bill” was passed by Parliament in June 2022, only for the country’s President, Uhuru Kenyatta, to refuse to assent to it.
  • Knowing what problem you’re solving: About the spectacular year of Kune Foods from its million-dollar VC funding to its (not unexpected) demise.

One of Rest of World’s first stories was on the lending app Okash and its unorthodox collection methods. In two years, it has since published over 8,000 stories from 80 countries around e-commerce, labour, culture and social media.

More tech events are planned for Mexico City, Jakarta, and Delhi.

Nairobi Hub Spaces in 2022

Interesting times in Nairobi the last few weeks as Microsoft launched its Africa Development Centre (ADC) office. The Kenya ADC, was launched three days after another one in Lagos, Nigeria that will serve the West Africa region. Across Africa, the company now has 450 staff and engineers working at ADC’s in the two capitals.

The new office also houses the Microsoft Africa Research Institute, its first on the continent as all as a Microsoft Garage, an incubation hub, joining others located in the USA, Canada, Israel, India, and China.

Visa launched an innovation studio in Nairobi, its first in Sub-Saharan Africa to showcase payment solutions and innovations. Visa will co-create e-commerce solutions for the future with partners in the new space that was launched by Patrick Njoroge, the Governor of the Central Bank of Kenya. Visa has other innovations centres in Dubai, Singapore and USA (San Francisco) – which is its flagship “One Market”. There are already partnerships in Africa with Paga and Safaricom.

Who’s next?

It’s not just about technology; NSE-listed agricultural firm Kakuzi has launched an online “Avocademy” hub for farmers to learn about the processes of growing and managing avocado – the current “green gold” crop.

Other Hubs and co-working spaces:

Amazon announced that a new AWS Local Zone would be available in Kenya providing cloud infrastructure. Companies can use it to host their applications by connecting through Amazon local partners including Safaricom.

Google has announced that they will be opening a product development centre in Nairobi and is now hiring engineers, product managers, software engineers, user experience (UX) designers and researchers. Perfect timing as their pioneer Country Manager, Joe Mucheru will continue to serve as Kenya’s Cabinet Secretary for ICT, Innovation and Youth Affairs for the next few months.

Dominoes.

Russia – Africa: We Came and We Saw, What Next?

A guest post from the first Russia-Africa forum held from October 2019, in Sochi.

The forum was held in the Olympics stadium in Sochi, Russia. If you are coming from Moscow, it takes a three-hour flight to reach Sochi, a beautiful coastal city located on the Black Sea. It has warm weather during the day and is slightly cool in the evening. This is the city where the Russian Presidents receive other presidents. Mercedes Benz is a well-loved brand in Sochi.

Sochi Stadium was estimated to have cost $50 billion; this was the world’s most expensive Olympics. The stadium was home, for two days for the Russians and the Africans who were attending the first-ever Russia – Africa forum and leaders from more than forty African countries were in attendance. 

Besides the beautiful scenery of Sochi, the stadium had a few interesting sights, organized for the forum, including a display of army helicopters and AK47 rifles.

A session at the Russia-Africa forum

New businesses opportunities and new political dialogues happened.

In 2018, trade between Russia and Africa was valued at $20.4 billion in 2018. Also, there were 15,500 Africans registered in Russian universities, with the Russian government subsidizing half of their education costs through scholarships, according to the Botho Group.

During the forum, Russia’s President Vladimir Putin and his administration signed $12.5 billion worth of memorandums with more than 40 African governments for mining, oil and exploitation, nuclear energy, and military cooperation. Among these deals for data storage & software with the Democratic Republic of Congo and to build two 12,000 MW nuclear reactors in Ethiopia.

Nuclear energy received high attention and the State Atomic Energy Corporation, disclosed that it had signed memorandums and agreements with 18 African countries including Ghana, Kenya, Rwanda, Ethiopia and Zambia.

  • “Rosatom today is an indisputable leader in nuclear technology. We are building 36 power-generating units in 12 countries around the world. During the past 14 years we have commissioned 15 new generating units, and this year we are putting the first floating power plant into operation,” Evgeny Pakermanov, President, Rosatom State Atomic Energy Corporation. “Africa is a priority region for us, and we have projects in over 20 countries. We see an incredible demand and incredible interest in nuclear energy from the African countries.”

Focusing on military cooperation, Nigeria purchased 12 helicopters at the summit while several other African countries including the Central African Republic, Namibia, Madagascar and Uganda. Egypt, Gabon, and Rwanda declared their interest in military equipment such as tanks, planes, helicopters, rifles, and military advisers, marketing and inviting Russia’s investment in their countries.

  • “I encourage our Russian partners to set their sights on Gabon. Gabon is a very stable country,” Jean-Fidele Otandault, Minister of Investment Promotion, Public and Private Partnerships, added that “We have an entire ministry dedicated to private-public partnerships for projects that are valued over 200 billion and I would like to invite Russian investors to join.”
  • Francis Gatare, Chief Executive Officer, Rwanda Mines, Petroleum and Gas Board said “Right now, we are looking for international investors,”

Besides the wonderful talks and agreements, it is important to remember that Africa does have challenges that hinder trade between the two regions. Lack of information has been a key impediment to trade as both regions are not informed about the opportunities and how to capitalize on these gaps for financial benefits. It is crucial to address the lack of information to enable new and deeper forms of cooperation.

What are the stumbling blocks to trade?

Investing in Africa has always been considered risky due to factors such as political instability, unfavourable business climate, rigid tax policies and the infamous corruption. On the other hand, some investors want success in Africa without gaining market insights or visiting these African countries.

  • “Some of the main challenges that our companies are facing is lack of information, lack of experience, lack of confidence to enter new markets, including African and Middle Eastern markets,” Andrey Slepnev, Chief Executive Officer, Russian Export Center.
  • “Lack of information is one of the major problems in Africa. It is not there, and it is really hard to extract consistently,” said Mikhail Orlov, Partner, Head of Tax and Legal, KPMG Russia; Chairman of the Expert Council of the Committee for Budget and Taxes of the State Duma of the Federal Assembly of the Russian Federation.

Lack of information has often led to several wrong assumptions by investors such as that the whole of Nigeria is in conflict due to the famous Boko Haram conflict – yet the regions of trade (Lagos, Abuja, Enugu, etc.) are very far from the conflict zone. There is also the use of non-African business plans across Africa which often fail as all African countries have very different characteristics.

  • “Africa is still considered to be a very risky place. This needs to change. Africa must be defined as a place of possibility and business. We must discuss and diminish the risks and guarantee comfort for our investors,” Monica Juma, Cabinet Secretary, Ministry of Foreign Affairs and International Trade of the Republic of Kenya. “To provide the right environment for our investors we also need Public-Private Partnerships (PPPs) which are very attractive for a country’s economic development and from the fiscal point of view. This is our focus for enhancing social, economic and political trade between Kenya and Russia.”

For the continent to progress, infrastructure needs to be implemented to drive economic growth. The continent needs to resolve the lack of and poor infrastructure to attain the required goals such as education and health.

  • “Africa needs $50 billion in sectors such as energy, transport, and natural resources so that our sponsors can strive in business, implementing infrastructure projects,” Samaila Zubairu, President, Chief Executive Officer, Africa Finance Corporation (AFC).

Foreign businesses underestimate country specifics in Africa.

  • “I would like to point out a few common mistakes our businessmen make when they come to work in Africa. Lack of understanding local mentalities leads to the gravest of errors,” Galina Sidorova, Professor, Moscow State Linguistic University. “Another important aspect is that our businessmen are preoccupied exclusively with their profit. It would be nice to see them also thinking about the interests of African people.”

What solutions are African nations implementing?

  • Gabon stated its progress in creating favourable investment conditions by diversifying the economy since 2009 to attract foreign investments.
  • “One of the key sources that allowed us to build an oil refinery was project financing that attracted $4.4 billion for us. Today, we produce petrol that complies with European regulations. How did we get this kind of money? Through a regime that attracts international financial institutions and welcomes them into the country,” Ahmed Heikal, Founder, Chairman of the Executive Board, Qalaa Holdings, Egypt.
  • “In Ghana, it is far easier for the business sector to attract foreign investment than for the state. Why is that? Because the business sector is far more efficient, primarily in human resources and human capital,” Frank Adu Jr, Chief Executive Officer, Managing Director, CalBank.
  • “Stability is extremely important, it is a key aspect of developing investment and attracting the capital,” Bob van Dijk, Group Chief Executive Officer, Naspers, South Africa.

Expanding Russian-African cooperation holistically

  • “We need to work on consolidating and coordinating the efforts on promoting Russian-African cooperation with all of the stakeholders. Expanding cooperation with our African partners not only via bilateral cooperation but using the multilateral institutional opportunities as well, including Russian business programmes,” Alexander Shokhin, President, Russian Union of Industrialists and Entrepreneurs (RSPP). “Stimulating the development of multilayer cooperation mechanisms to foster business cooperation by increasing the resource potential of Russian companies encourage involving small and medium-sized enterprises, as well as Russian and African regions via project financing and project groups.”
  • “It is a huge mistake to try to get as much profit as soon as possible and ignore the long-term investments. It is a huge loss. Thirdly, we do not support small and medium-sized businesses in Africa. They cannot exist there without state support. So, let us create a few support centres for business, for instance, North, South, West, and East. It would be extremely efficient in promoting our investments,” Irina Abramova, Director, Institute for African Studies of the Russian Academy of Sciences, Corresponding Member, Russian Academy of Sciences.

Africa is attractive for investment and trade

Both Russia and Africa are well endowed with minerals, agriculture, human resources, and other sectors that will benefit if deals are well-structured and trade is enhanced.

  • “What do we see? Incredible opportunities – there are 55 countries and each one needs to be approached individually. Uralkali, as a business, is ready for that,” Dmitry Osipov, CEO Uralkali; Chairman, Russian-Nigerian Business Council.
  • “A promising area of cooperation involves attracting big Russian investors in industries strategic for many African countries, such as agriculture, mining or processing raw material,” Andrey Kostin, President and Chairman of the Management Board, VTB Bank.
  • “Africa is a large consumer of agricultural produce. Last year, the volume of our exports exceeded $4.6 billion,” Sergey Yushin, Head of the Executive Committee, National Meat Association.
  • “Rating agencies assess countries based on further investment in them, but our actual resources are much higher than the risks we are usually associated with. Our continent can only be perceived as a whole. $1 trillion is expected to be invested in infrastructure parts so that we could cooperate under our free trade agreement,” Paulo Gomes, Co-Founder, New African Capital Partners; Chairman, Paulo Gomes and Partners.

Russian companies are successful in Africa

  • “We have been working in Africa for over 10 years .. we have invested close to USD 2 billion in the African countries,” Evgeny Tulubenskiy, Chief Legal Officer, Corporate and Regulatory Affairs, Member of the Board of Directors, Nordgold.
  • The Institute of Africa of the Russian Academy of Sciences has stated that during the past 10 years Russian investment into Africa grew by 185% and reached USD 17 billion. This shows there is much more work for us.
  • “Having the large group of Africans was impressive because it demonstrated a deep interest in our desire to keep engaging with the greater global community to identify areas of continued cooperation. It was also interesting that the forum had a strong mix of private and public sector experts thus creating real opportunities for trade and other commerce activity,” Isaac Forkuo, CEO, Botho Consulting Group, Kenya. “This event had more action than talk.

There appeared to be a desire to create linkages among businesses, especially SMEs. African governments realize that leveraging the relationship with Russia through country-specific trade. From the Russian side, this forum provided an opportunity to re-engage with Africa also from a trade angle as African countries provide a market for Russian goods and services while also providing a market for diversification of Russian State and private investments.”

Let us wait and see how many of the signed memorandums will be implemented between Russia and Africa.

Nairobi Real Estate Moment: 2021

  • The Nairobi Expressway construction that will span from the Jomo Kenyatta International Airport to Westlands, has reached downtown Nairobi and is causing disruptions to real estate and traffic .. some changes to retail include..

  • Changes to Malls – many of which are largely idle above the first floor. Quite a bit of foot traffic there is from bank customers visiting their branches which have now been relocated to the third and fourth floors of Nairobi malls.

Other real estate stories.

  • An EFG Hermes report on Nairobi real estate found the demand for affordable houses has a disconnect that has seen prices are softening in Nairobi – at high-end residential (-27% below 2017 peak), and commercial properties (-13% off-peak). Also, the tough Nairobi office market is very visible (vacancy rates of 22% compared to 9% in 2011) with exposure to some financing banks including KCB and Housing Finance.
  • Orbit Group and Grit Group have partnered on a 25-year $53.6 million sale & leaseback transaction for a light industrial (warehouse and manufacturing) property on Mombasa Road, supported with a $25 million loan from the IFC. Orbit Products Africa, controlled by the Sachen Chandaria family, is a leading contract manufacturer for brands in personal care and home care products and its clients include Reckitt Benckiser, Unilever, Colgate and Henkel. They will expand the plant by an additional 14,741 m2 warehouse space and improve it to modern FMCG industry standards to achieve an IFC EDGE green building certification on completion. As part of the deal, $31.5 million will be a “perpetual note”, raised from Ethos Mezzanine Partners GP and BluePeak Private Capital and additional proceeds from this will be invested in the St Helene Private Hospital in Mauritius, an idea that was conceived by Catalyst Principal Partners. Grit Real Estate Income Group is listed in London and Mauritius 
  • A Knight Frank report, the “Africa Logistics Review” finds that Nairobi had the best real estate market between 2018 and 2021 for prime warehousing and logistics.  “Nairobi recorded the highest increase in average prime rents across Africa, from USD 4.70 psm in 2018 to USD 6 psm ” – and developers have grown over 170,000 square meters in the last five years. Kenya has the highest concentration of special economic zones (SEZ) in Africa (61 of the 180 SEZ’s). The country is also making good progress to grade A warehousing and in growing a real estate investment trust (REIT) ecosystem.  Also because of high land values in Nairobi, developers have sought towns/areas beyond traditional industrial hotspots Read more.
  • Speaking of REITs .. Acorn Project (Two) LLP, the Issuer of the Acorn Medium-Term Green Note (MTN) Program, closed the final tranche on 16th July 2021, raising Kshs 2.096 billion against the target of Kshs 1.438 billion representing a subscription rate of 146%.  As part of this transaction, the Acorn green bond was converted into the Acorn Student Accommodation Development REIT (ASA D-REIT). Read more.
  • The Architectural Association Of Kenya reported on development challenges within the Nairobi metropolitan area. A decade after an electronic construction-permitting system covering Nairobi, Mombasa, Kiambu, Machakos, Kisumu, Kajiado and Kilifi was deployed with the support of the World Bank Group, it is plagued by frequent disruptions and system downtime. In Nairobi, the system has not been operational for more than three months of 2021 and in a survey of AAK members, 46.7% of the respondents indicated that they had to wait for over 6 months for their applications to be processed or granted approval.
  • Kenya’s Lands Ministry is doing a digitization of title deeds through a National Land Information System (NLIMS), referred to as ArdhiSasa with a goal to have all land records digitized by the end of 2022.  The Lands Cabinet Secretary indicated that the Ministry has scanned and digitized 30 million documents in Nairobi.
  • A Cytonn Real Estate report on properties in the years 2020 found that “residential units in Thindigua, Syokimau and Rosslyn recorded the highest returns to investors and land asking prices recorded an overall annualized capital appreciation of 2.3%.” According to the report, Gigiri was the best performing office node in FY’2020, followed by Westlands and Karen, In the retail sector, Westlands and Karen were the best performing nodes while in hospitality, Westlands-Parklands was the best performing node. Read more in the report.
  • Cytonn is now doing a restructuring and has applied to wind down two funds – the Cytonn High Yield Solutions LLP and Cytonn Real Estate Project Notes LLP through administration and has invited creditors to submit their debt claims, with proof, to Kereto Marima who is the appointed administrator – by November 29, 2021.
  • Hotels are not doing well with many iconic sites closed or on sale due to Covid-19 and the resultant curfews and travel bans that have affected the flow of tourists into Kenya.
  • Many hotels expect a steady recovery once the curfew is lifted (which happened in October 2021). See a survey of hoteliers by the Central Bank of Kenya.

Some hotels that are gone: Intercontinental and the Nairobi Dusit/ D2 which recovered after the January 2019 terror attacks only to succumb in the Covid-19 aftermath.

Some hotels currently closed: Mt Kenya Safari Club, Norfolk, Radisson Blu.

Some hotels on sale: Outspan, Treetops (should the Queen buy the hotel ahead of her 100th birthday?), Fairview and Country Lodges, Jumuia (Nakuru).  

EFG Hermes launches online trading in Kenya

Kenya’s leading stockbroker, EFG Hermes has launched One, a new online platform that enables retail investors to trade shares on the Nairobi Securities Exchange (NSE).

EFG Hermes One, the equities trading platform will be available to clients of the stockbroker. The One app has been very successful in other markets, notably in Vietnam and the firm hopes to capitalize on the high mobile phone density in Kenya, reported at 108%. 

Speaking at the launch, the CEO of the NSE Geoffrey Odundo said that Kenya has an active retail investor base as seen with M-Akiba, a government bond issued and traded on mobile phones that drew 500,000 investors. He added that the new NSE platform has the ability for “day-trading” and “short-selling” and those would be products that appeal to retail investors.

Muathi Kilonzo, Head of Equities at EFG Hermes Kenya said that retail investors across the globe showed great activity in powering different equities and investments markets while the world was slowed by Covid-19.

Ali Khalpey, the CEO of Frontier Markets, said EFG Hermes started in Egypt 35 years ago and had grown to have 5,500  employees and offices in Egypt, Dubai, Nigeria, Kuwait, USA, Oman, UK, Kenya, Jordan, Saudi Arabia, and Pakistan offering stockbroking, investment banking, asset management, securities brokerage, research, and private equity services.

In 2017, EFG Hermes launched a greenfield operation in Kenya that has grown to be the top stockbroker by value traded on the Nairobi Securities Exchange in 2021. Last year it was acclaimed as the top frontier research institution and the best broker in Kenya and Nigeria. It produces highly prized research reports on frontier markets with recent ones on Kenyan banks, the silicon savannah potential and digitizing COVID-19 stimulus initiatives.

Download the One app from the Apple app store and Google play store, register to be an EFG Hermes client, and get on board after a regulator-mandated, know-your-customer (KYC) process.