Category Archives: Investing in Kenya

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.

Sportpesa return flames out

Last Friday, there was a bold tweet by the CEO of Sportpesa announcing the return of the company to full business, with partnerships for sports development to follow.

This comes after a crackdown last year crackdown on gambling companies through a moral push, taxation claims and difficulties renewing licenses, which all led many of the top betting companies to scale back their sponsorships and operations.

But the announcement, just as the English and European soccer leagues that are popular with betting punters get into gear, was followed by a surprising turn of events.

The following morning, the Chairman of the Betting Control and Licensing Board had a press conference and issued a statement about information that Sportpesa Global had granted to Milestone Games permission to operate as ‘Sportpesa’. It went on to say that had licensed Milestone to operate in the country, but asserted that Sportpesa is owned by Pevans East Africa and that no other company can use its name brand, domains and mobile phone shortcodes – asked directed Milestone to use its own website.

Then over the weekend, one of the other Sportpesa shareholders, Paul Wanderi Ndung’u also released a statement on behalf of Kenyan shareholders of Sportpesa and said he had been unaware of the developments with Milestone. He also made some serious claims about the company:

  • Said the problems of the company started in 2017 when its executive directors allied with its foreign shareholders and started running the company without reference to the board. 
  • Said that another director, Asenath Maina, had requested a forensic audit in 2019 on the firm, but that the foreign shareholders, who had been since been deported from Kenya, continue to frustrate the audit.
  • In three years Pevans East Africa (Sportpesa) has transferred $250 million to the Isle of Man, Dubai, the Canary Islands and the UK. Then, after the company closed, it transferred another $17.5 million to Sportpesa Tanzania and $0.5 million to Sportpesa South Africa.
  • KPMG and Deloitte &Touche have resigned as auditors and tax advisers respectively of Sportpesa Global in the UK, while PricewaterhouseCoopers resigned as the auditor of the Kenyan business.
  • Officers from the UK’s Serious Fraud Office (SFO) have visited Sportpesa’s Nairobi office – and this was linked to negative media and parliamentary coverage in the UK.

To be continued . .

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.

M&A Moment: September 2020

Since the last update of deals in the East Africa region, we are six months into the era of Coronavirus and its effects across the world.

Merger and acquisition (M&A) deal are still happening, with some older ones having been in the pipeline for months before. The impact of the pandemic has also created some new M&A deals and partnerships, while reducing the value of others, and even killing off some earlier-announced merger deals, in scenarios that had all been foreseen by deal-makers.

Here are some notable deals (1 US dollar equals 108 Kenya shillings)

Airline/ Oil/Energy/Mining M&A

  • Jubilee Holdings is acquiring an additional 9.4% share in Uganda’s Bujagali Hydropower from SN Power for $40 million to now own 18.2% of the project as part of a diversified portfolio that includes quoted stocks, bonds, real estate and interests in Farmer’s Choice, PDM and Seacom. 
  • The proposal to nationalize Kenya Airways through a National Aviation Management Bill, which grew out of a proposal by the airline to manage Nairobi’s main airport, will be debated in Kenya’s Parliament over the next few months.
  • Shareholders of Tullow Oil approved the sale of its entire interest in Blocks 1, 1A, 2 and 3A in Uganda and the proposed East African crude oil pipeline System to Total. 
  • The proposed Transfer of 85% of Global Petroleum Products Kenya  to E3 Energy DMCC has been approved 
  • Barrick Gold and the Government of Tanzania have signed an agreement to launch a new joint venture to oversee the company’s future gold mining operations in the country. 
  • The Competition Authority approved the proposed acquisition of 100% of Acacia Exploration (Kenya) by Shanta Gold Mauritius.
  • Safaricom bought 18.96% of Circle Gas for Kshs 385 million. The gas company has interests in Tanzania also acquired KopaGas’s technology in a $25 million transaction, one of the largest private equity investment in the clean cooking sector
  • In what will be a controversial deal, Kenya plans to have the Industrial and Commercial Development Corporation become a super agency to oversee a new Kenya Transport and Logistics Network (KTLN) that will coordinate the Kenya Ports Authority, Kenya Railways and Kenya Pipeline Company.
  •  Deal Undone: The Competition Authority has noted that the acquisition of 80% of the Embraer by Boeing has failed to take place following the decision of the parties to withdraw from the transaction. 

Banking and Finance: Finance, Law, & Insurance M&A

Kenyan Banks  

  • Kenya’s Central Bank approved the acquisition of 51% of Mayfair Bank by Commercial International Bank, Egypt’s leading private sector bank, and it will be renamed as Mayfair CIB Bank.  
  • The Central Bank of Kenya approved the takeover of 90% of Jamii Bora Bank by the Cooperative Bank of Kenya.
  • Access Bank completed the acquisition of 100% of Transnational Bank. 
  • Centum’s Bakki Holdico has acquired all the shares of the late Ambassador Bethuel Kiplagat in Sidian Bank (via Business Daily) 
  • Equity Bank has completed its buyout of 66.53% BCDC in DRC. Covid saw the final price reduced by $10 million to $95 million.  
  • Deal undone: Atlas Mara and Equity Bank mutually agreed to discontinue transaction discussions given the effects of the COVID-19 pandemic.
  • Deal undone? Businessman Naushad Merali and Mwalimu National Sacco plan to sell their stakes in Spire Bank after it issued a notice to engage potential suitors to buy a 100% of the bank. 

Investment Markets and Deal Makers

  • The Nairobi Securities Exchange acquired 61% of AKS Nominees, which holds an 18% share in the Central Depository and Settlement Corporation (CDSC) for Kshs 77 million.
  • Genghis Capital has partnered with EGM Securities to offer investors a wider range of alternative asset classes including online currencies, commodities, precious metals, oil, and biotech stocks.
  • Helios & Fairfax to partner on Africa investments
  • Fanisi Capital and Ascent Capital are set to merge and raise funds for bigger deals in the region.
  • Two Nairobi stockbrokers AIB Capital and Apex Africa entered a joint venture that will lead to a merger. The entity will be part of Mauritius firm, the AXYS Group which acquired Apex in 2015.
  • African Alliance Kenya investment bank is divesting from stockbroking owing to a structural decline in the agency trading model in both the local and global financial markets (amplified by the Covid-19 pandemic)

Insurance

  • The Competition Authority approved the acquisition of 24.1% of ICEA Lion Insurance Holdings by Eastern Africa Holdings which is being used by private equity firm Leapfrog Investments for the buyout of  ICEA Lion Insurance Holdings for Kshs 10 billion.
  • The sale of Stanlib Kenya to ICEA Lion was approved by the Competition Authority though clients have pulled out Kshs 75 billion following the deal. 
  • Mauritian insurance company MUA completed the acquisition of Saham Assurance Company Kenya. 
  • Octagon Africa, who offer pension, actuarial and insurance services in Kenya, Uganda and Zambia acquired a 49% stake in the Zambia subsidiary of Alexander Forbes who doing a group strategic review. 
  • EDIT: Allianz will acquire controlling stakes in Jubilee Insurance’s general insurance business (property & casualty insurance) in Kenya, Tanzania and Uganda as well as the short-term insurance business in Burundi and  Mauritius for Kshs 10.8 billion ($ 100 million) while Jubilee will also acquire Allianz Insurance Kenya.  

Regional Banks

  • The Tanzania Postal Bank (TPB) has absorbed a third bank, TIB Corporate, in a new merger deal. 
  • The National Bank of Malawi plans to invest in Akiba Commercial Bank in Tanzania in a bid to expand its operations beyond Malawi.
  • The Bank of Tanzania approved the merger of Mwanga Community Bank and Hakika Microfinance Bank to form the Mwanga Hakika Microfinance Bank. 
  • EFG Hermes and the Sovereign Fund of Egypt aim to acquire 76% of the Arab Investment Bank. EFG Hermes will own 51% of the bank and plans to transition from an investment bank to a commercial bank. 
  • I&M Bank is buying Orient Bank in Uganda.  

Remittances

  • WorldRemit has agreed to acquire Sendwave, an app-based remittance company in a cash and stock transaction. 
  • Beyonic has been acquired by MFS Africa.  

Agri-Business, Food & Beverage M&A

  • Kenya has floated an international expression of interest for the privatization of five sugar firms
  • The Kenya Tea Development Agency Limited (KTDA) and the Japan International Cooperation Agency (JICA) are each investing over Kshs 150 million to set up Africa’s first Japanese speciality green tea production factory at Kangaita Tea Farm in Kirinyaga County. 
  • President Kenyatta has ordered the Kenya Meat Commission to be transferred from the Ministry of Livestock to the Ministry of Defence
  • Dominion Farms on a parcel of land comprising 3,700 hectares at Yala Swamp in Siaya County is being transferred to Lake Agro Ltd.
  • edit Nathan Kalumbu has acquired control of Interstrat Ltd (Big Square Kenya) which has assets worth Ksh 689 million.
  • edit The Competition Authority has approved the acquisition of Dilpack Kenya by Elgon Kenya and the companies will from March 2020 will jointly service the East African market with packaging solutions for the horticultural and floricultural industries.
  • edit The Competition Authority has approved the acquisition of Marsyetu Ltd by Mija Ltd. 

Health and Medical, Pharmaceutical M&A

  • Indo-Oceania Ventures is acquiring Mayfair Healthcare Holdings
  • The CDC Group and Novastar Ventures have invested in mPharma which currently operates in Ghana, Nigeria, Kenya, Zambia and Zimbabwe, and serves approximately one million patients annually, through a network of over 400 pharmacies.
  • edit Goodlife Pharmacy, which had a turnover in 2018 of Kshs 936 million, is acquiring assets of Salama Pharmaceuticals which had a turnover of Kshs 13.3 million and Eurose Enterprises which had a turnover of Kshs 9.8 million in the same years.

Logistics, Engineering, & Manufacturing M&A

  • Mum’s Village Kenya has merged with BabyBliss Nigeria to create the Bliss Group Africa. 
  • Portuguese multinational Salvador Caetano Group has invested Kshs 350 million to launch an automotive hub in Kenya and be the dealer for Renaultand Hyundai cars with plans to venture into the local assembly of the two brands.
  • Bolt, the ride-hailing app, has received a EUR 50 million as venture debt facility from the European Investment Bank to support its research and development strategies.
  • Kenyan e-commerce startup AfricaSokoni has acquired Nigeria company Bolorims to expand into the West African country. The deal, which gives Bolorims a 10% cent stake in AfricaSokoni, creates a new entity in Nigeria, Bolosokoni.com, with AfricaSokoni continue to trade as before in Kenya. 
  • edit Evo Pack Ltd is acquiring Kshs 234 million worth of assets of Digital Packaging Innovation Holdings.
  • edit The Competition Authority has approved the acquisition of certain assets of Bamburi Special Products, a wholly-owned subsidiary of Bamburi Cement, by Yellow House Ltd.
  • edit The Competition Authority has approved the acquisition of 25% of Macquarie Airfinance Limited by Sunsuper Pty.
  • edit The Competition Authority has approved the acquisition of Ignazio Messina and C.S.P.A and Roro Italia S.R.L by Marinvest S.R.L on condition that Ignazio Messina East Africa business continues to operated and managed independently of Marinvest.
  • edit Shareholders of NSE-listed Nairobi Business Ventures approved the sale of 84% of the firm to Delta International FZE of Dubai, for Kshs 83 million, pending regularity approval.

Real Estate, Tourism, & Supermarkets M&A

  • LSE-listed Network International Holdings is to acquire Nairobi-headquartered DPO Group for $288 million worth of shares of Network. The firm whose payment services are used in 19 African countries, was affected by COVID disruptions of travel and the tourism sector. DPO’s founders will get $13m worth of shares and Apis Growth Fund receives $50m of shares in Network. 
  • PrideInn Group has acquired Azure Hotel and re-opened the Kshs 1.2 billion Westlands hotel that suspended operations in March during the pandemic.  
  • Cloud9xp, an online booking service for leisure experiences and an alumnus of Nairobi Garage, has been acquired by Kenyan-based travel-tech outfit HotelOnline in a share swap deal. 
  • Tusker Mattresses announced plans to recapitalize through the sale of a majority stake that is supported by seven shareholders in its Orakam parent company. But it’s not clear if this will be enough to save the struggling retailers that initially tried to secure short-term supplier support through ring-fencing of payments.  
  • Slumberland Kenya is being transferred to Simba Foam.
  • Deal undone: Tiffany & Co. has filed a lawsuit to compel LVMH Moët Hennessy-Louis Vuitton to complete a merger transaction on earlier-agreed terms, noting that COVID-19 has not prevented other parties from concluding similar deals 
  • edit The Competition Authority has approved the acquisition of control Of Kingdom 5-KR- 185 Ltd by Madison Hotels and Resorts. The Business Daily has this story of the sale of hotels between billionaires by Prince Al-Waleed bin Talal to Binod Chaudhary.

Telecommunications, Media & Publishing M&A

  • Edelman, the largest independent global communications firm, has expanded its African footprint with the acquisition of Gina Din Corporate Communications
  • Scangroup completed a long-standing deal after a special EGM in May 2020 saw 88% of its registered shareholders participate and vote 99.98% in its favour.
  • Safaricom and Vodacom have acquired control of M-Pesa in Africa from Vodafone for Kshs 2.15 billion, with each firm paying 50% of the amount (Kshs 1.07.billion) as their share of the joint venture. 
  • Tigo has combined with Zantel. The Tanzanian firms have a combined 12.8 million customers and 7.4 million mobile money users.
  • Mettā and Nairobi Garage are combining their services to create Kenya’s largest innovation community, offering access to all their networks, while members will have access to both organizations’ workspaces throughout Nairobi and the complimentary business support services
  • Nigeria’s CcHub acquired Kenya’s iHub to create a mega Africa incubator.
  • edit French media company Groupe Canal+ SA has acquired a 6.50% stake in Multichoice Africa. This comes after Canal+ acquired African film and television studio ROK in 2019.
  • Deal undone: Telkom Kenya and Airtel have mutually agreed to end their pursuit of a joint venture. This came after conditions were raised that delayed the deal.  
  • edit The Competition Authority has approved the acquisition of 20% of Icolo Limited By Prif Africa Holding.
  • edit Autochek.Africa is buying out Ringier One Africa Media’s Cheki and will operate in Nigeria, Ghana and Kenya where Cheki runs new and second-hand car sales, car importation services, car loans and financing.

Other M&A

  • Sport: The legendary Williams F1 racing was taken over by US investment firm Dorilton Capital. Covid and a sponsor departure were triggers for the deal. 
  • Foreign Aid: The United Kingdom, which is leaving the European Union, plans to merge the Department for International Development and the Foreign and Commonwealth Office – to become the Foreign, Commonwealth and Development Office.
  • Art: The art prize collection of the bankrupt Abraaj Group was acquired by a Saudi art organization Art Jameel and will be hosted at their space in Dubai.