Category Archives: Investing in Kenya

Coca-Cola Innovation Push

Coca-Cola today launched “Coke plus Coffee”, a coffee-flavoured beverage that is one of five new products that the company is introducing in Kenya to match new and changing consumer tastes and spending habits. 

Also unveiled was “Minute Maid Nutridefenses” in five different fruit flavours, “Sprite” and “Fanta” without sugar, “Fuze” tea bags, and “Powerade”, a rehydration drink for sports users that will feature at the Olympic Games.

At the launch, Company representatives said that the developments were guided by their research to come up with new products and to deliver choice and convenience to customers by providing quality products – dubbed  “the right refreshment, in the right package, at the right price.”

Aside from the new beverages for coffee lovers, juice lovers and sports people, Coca-Cola is also moving to reduce its plastic footprint by shifting the distribution of Dasani water to glass, returnable bottles that are sold at more affordable prices. This is alongside a wider push to accelerate the collection and recycling of plastic bottles and reduce waste pollution in East and Southern Africa.

Aside from this Coca-Cola is in the process of completing a deal with Centum Investments to take control of beverage bottling companies in Eldoret and Nyeri (through Almasi) as well as Nairobi Bottlers.

Spanish delivery company Glovo enters the Kenyan market.

Glovo is a four years old Spanish delivery company started by Oscar Pierre and Sacha Michaud. Its headquarters are in Barcelona, Spain and Glovo has been expanding globally, and just recently begun operations in Kenya five months ago, with Morocco and Nigeria being the other two African countries using the Glovo app services.

Glovo actually means balloon in Spanish to signify the way a balloon moves easily from one place to another. Kenya has seen some new delivery companies but is yet to experience one which can deliver even a personal item that you forgot at home. We are used to the traditional delivery of items by people we know but now this app will very well facilitate an easier way. The one challenge being how safe or how trustworthy Glovo delivery people are which, and the company has placed safeguards for this.

The Glovo app is found on Google play store for Android and App Store for IoS and it doesn’t take more than five minutes to start using the app. What makes them even more competitive is their pricing which is quite the saver.

Glovo performance is improving by the day. William Benthall, the General Manager for Kenya stated that the number of Glovo bikes he’s seen around town keeps increasing with time. Just like other delivery services, with Glovo, interested partners sign up their machines, for instance, bikes, to the app and can from there, connect with clients who need items delivered.

A guest post by @themkare 

KWAL at 50

This week, Kenya Wine Agencies Ltd (KWAL) celebrated fifty years of business. At a Nairobi dinner event to mark the occasion, KWAL Managing Director, Lina Githuka, said that the company, which had been privatized four years earlier, had renovated its portfolio and improved its operation. These had resulted in volumes going up threefold and, with profits up ten times, had set the stage for a second round of privatization.

During the event, there were clips and narrations showing the history of the companywhich was established in 1969 by the Government of Kenya to bottle wines and spirits. initially, and up through the 1990s when Kenya’s economy was liberalized, KWAL had a monopoly to import leading international brands like Martell, Hennessy, Bacardi and Campari which they worked with local business owners to distribute to hotels and shops. Later in the 1980s, they opened a commercial winery and embarked in the manufacturing, process and bottling of local wines. While grapes are not easily obtainable here, they used other fruits, starting with pawpaw from Kakamega and later Pekera, and “Papaya” became the first domestically produced wine in Kenya. They later added variants based on passion fruit (Passi Flora), strawberries (Kingfisher), and apples (Woodpecker).

KWAL, under KWA Holdings E.A, is now a subsidiary of Distell, which owns 55% of the company after acquiring a 26% stake in April 2017 for Kshs 1.1 billion.  The company produces 20 brands locally including Kingfisher for the last 36 years, and through its partnership with Distell, also distribute many top international brands. The KWAL portfolio includes Yatta juices, ciders (Savanna, Hunters, Kingfisher) wines (Nederburg, Drostdy-Hof, 4th Street), Amarula, and Viceroy.

Distell reported that Kenya had a stellar year (in 2018) with volume up 32% and revenue up 27%, which was partly attributed to the impressive performance of local brands like Kibao and Hunter’s Choice. KWAL plans to open a production facility at Tatu City, near Nairobi, their first new manufacturing plant in two decades, at a cost of Kshs 3 billion to meet the demand of fast-growing brands.

Kenya’s Cabinet Secretary for Industrialization, Peter Munya, who was the chief guest at the event,  said the Government was prioritizing value addition and local content in investments and that the Cabinet had recently approved an investment policy to legally safeguard all the incentives offered to investors. He applauded the privatization process which had rejuvenated KWAL, and he hoped this would extend to the sugar sector where private companies were doing very well, unlike the Government-owned ones.

Reading the Kenya Rugby tea leaves

The Kenya Rugby Union held its annual general meeting on March 20. On the agenda too was the election of officials, including a new Chairman.

Officially called the Kenya Rugby Football Union (KRU)  the AGM came after a tough year, for the sport. Kenya does relatively well in international rugby, with its colourful ‘Sevens’ team featured on television broadcasts and with a loyal fan following around the world. The sevens team is currently ranked number 14 (after finishing number 8 in 2018)  and sometimes features Collins Injera, the all-time top try scorer.

But the team and the sport is rankled with management and funding issues, and while some corporations have supported different rugby series, competitions, and programs, there are still issues of team selection, coaching support and player welfares. During one series in Paris, the sevens team covered up logo of their shirt-sponsor, Brand Kenya, in protest over not receiving their allowances by the time they started their matches, and that drew the wrath of Kenya’s Tourism Minister, Najib Balala, who angrily cancelled their sponsorship contract, only to reinstate it a few days later.

AGM: The meeting was held after members overruled a request from the Government for them to postpone the AGM. The financial accounts of the Kenya Rugby Football Union (KRU), audited by PFK auditors, were shared with members at the meeting.

What do they tell us about the state of rugby?

Income: The income for 2018 included national squad income of  92 million (down from 117M in 2017), annual competitions income of 80M (up from 17M in 2017), World Rugby 21M and World Rugby sevens team support of 20M. There was also other income from jersey sales of just Kshs 736,000.

The annual competition income included 35M from Radio Africa and 9M  from Stanbic. East African Breweries donated 24M and 15M in 2018 and 2017 respectively while tickets sales in both years were 5.5M and 11.6M respectively. 

Of the national squad income in 2017, 97% of that (Kshs 113 million) came from Sportpesa, who later withdrew all sponsorships in protest at the Government increasing taxes on sport betting companies.  The 2018 income was more balanced, with Kshs 52M from the Government, and 20M from Brand Kenya as, to their credit, the Government fulfilled a pledge, at least for rugby, to plug the hole left by the Sportpesa departure.

In 2018, they also got 18M from Bidco, and enjoyed use of a vehicle that was donated by Toyota Kenya and containers from Bollore Logistics. Sponsorship income in 2017 included Kshs 20M from Wananchi (Zuku), Tatu City 5M, 4M from Bidco and a 2M bonus payment from Sportpesa

Expenses: In 2018, Kshs 132 million was spent on national squad operations (comprising 65M for the sevens team and 57M for the 15’s team), and 38M on competitions (comprising 10M each for club subsidy and the Safari Sevens tournament, and 8M each for international matches and the national sevens circuit). On rugby development, 10M was spent while 40M went towards administrative expenses (including 21M of salaries and 6M million on marketing and agency – which was down from 20M in 2017).

OverallThe Kenya Rugby Football Union (KRU) took in Kshs 227 million in 2018 and spent the same amount to end with a Kshs 527,104 surplus. The year before it took in 212 million and spent 247 million, resulting in a deficit of Kshs 36 million.

KRU has an accumulated deficit of Kshs 61 million, on its balance sheet with current liabilities of Kshs 120 million far greater than its current assets of Kshs 47 million. KRU had a negative bank position of minus 1.9M in 2018 (comprising a cash balance of Kshs 661,822 and overdraft of 2.5 million. They are owed 47M in receivables but owe 118M in trade payables (62M) and accruals of (50M)

These items were flagged by the auditors who also noted that KRU does not have a tax exemption certificate and the Society has made no provision for the payment of corporate tax.

Elections and Way Forward: The campaign manifesto of Sasha Mutai, one of the candidates for Chairman, was circulated online a few weeks before the election. In it, he articulated his plans including, short-term ones of settling the KRU debt, encouraging more (tax-eligible) corporate sponsorships, ensuring salaries are paid on time, supporting programs to nurture more women and schools rugby, increasing broadcast coverage and improving player welfare (including providing health insurance). His long-term goals include building an affordable national rugby stadium at Kasarani and to have Kenya qualify for the 2023 Rugby World Cup in France.

After the votes were counted, George Gangla was elected to succeed Richard Omwela as the  Chairman of the Kenya Rugby Union. He received 33 votes against Sasha Mutai 20 and Asiko Owiro who got two votes.  Geoffrey Gangla is the CEO of Genghis Capital, an investment bank while Omwela is Chairman of Scangroup and a managing partner at a leading law firm – HH&M.

Knight Frank on High Net Worth Kenyans – HNWIs

Knight Frank has released its report on wealthy Kenyans or HNWIs (high-net-worth individuals)  whose number and wealth grew in 2018, which was considered a difficult year for the country with the increased cost of living, credit shortage, and post-election economic slowdown.

According to the Knight Frank Wealth Report, the number of Kenyan HNWIs, with net worths, excluding their primary homes, of over $1 million (Kshs 100 million) grew by 306 to reach 9,482 individual. It noted that there were also 82 “ultra-wealthy” individuals, with net worths of Kshs 3 billion, residing in Nairobi.

Some characteristics of the group of dollar millionaires (which also draws from an Attitudes Survey by Knight Frank, among other reports):

  • Home ownership: First and second homes make up 45% of their wealth. Kenyan HNWI’s own an average of 2.7 homes, while those in South Africa own an average of four homes.
  • 18% of HNWI’s bought new homes in 2018 in the country, and 8% bought homes abroad,. 22% plan to buy new homes in the country this year with the drop in luxury home prices and unfavourable economy in Kenya last year considered a good opportunity for property investments. 39% own investment properties in Kenya and 22% have investment properties overseas. 
  • Investment Portfolios: 25% of HNWI investments are in equities (company shares), 22% for properties that earn income, 22% in cash and 20% in bonds. Just 3% goes to private equity – and this has been a sore point for upcoming young companies who have to turn overseas to get equity funding.  
  • Local Preferences:  The report notes that governments around the world are targeting global wealth, and 24% of the ultra-wealthy Kenyans have second passports or dual nationalities but only 9% are considering emigrating with an indicated preference for the UK, Canada and the USA. Half of them educate their children overseas for primary and secondary school and 65% of them send their children overseas for university education. 

  • HNWI’s allocated 3% of their wealth to luxury investments such as arts, wine and classic cars, among other collectables, with the majority collecting cars and jewellery followed by art and furniture. Whiskey and Chinese ceramics also feature, while gold gets 1%.  The Report mentions that EABL has a mini mentorship program to woo more Kenyans to invest in collectible whiskies. 
  • Generational Wealth: Transferring wealth is still a delicate matter among Kenya’s rich, with only 43% of respondents to the Attitudes Survey saying their clients have robust succession plans in place to pass their wealth to the next generation.