Still, the offer of Kshs 40 per share, which value Unga at Kshs 3.03 billion, and which the Seaboard promoters state is a premium (33% above Unga’s current trading price of Kshs 30) is rather low. The share was trading at Kshs 44 per share two years ago, and one investor puts the company net asset value as at June 2017 at Kshs 52 per share, which will have gone up with the recent rise of the NSE later in the year.
Price and inflation comparisons are made a bit difficult by the unprecedented (in recent years) shortage of certain food commodities. Back in 2008 as post-election violence rocked the country, supermarkets opening shop, receiving supplies, stocking shelves and selling fresh foodstuffs and household items were seen as one of the barometers that life was getting back to normal. But going into the August 8 elections, several supermarkets have had empty shelves, notably at Kenya’s largest chain, Nakumatt that is limping under debt, and empty shelves, with lawsuits from landlords and key suppliers and a delayed shareholder deal. Unlike Uchumi who faced a similar situation just over a year ago, Nakumatt has not shown humility in asking for a bailout from the government or relief from suppliers and partners.
On to the index
Gotten Cheaper (in four years)
Finance: Bank loans are 14.0% due to the interest capping law of 2016. Average bank rates were 17% in July 2013
Fuel: A litre of petrol is Kshs 97.1 (~$4.25/gallon) today in Nairobi. It was 109.52 per litre in July 2013 (and 117.6 five years ago).
About the Same
Staple Food: With just under two weeks to the elections, maize has been hard to find, even at the government subsidized prices of Kshs 90 per pack. In July 2013 the pack cost Kshs 104 (and it was 118 five years ago) But just how long it will stay at 90 is not clear as the 2017/18 budget drafted at a time of high maize prices and low supplies, zero-rated the importation of white maize for a period of four months. Will it go back up after this window closes?
Communications: Phone call rates flattened in 2013 even though at the time Airtel and Yu were bringing the prices down, while now Safaricom battles distant Telkom Kenya (rebranded from Orange) and Airtel, as well as Equitel from Equity Bank, with competition more on data pricing, and mobile money transfers – where M-Pesa still dominates.
Beer/Entertainment: A 200 bottle of Tusker beer is Kshs 200 at the local pub. This is the same price it was in July 2013. (And it was 180 five years ago)
Utilities: Pre-paid electricity is about Kshs 2,500 per month, which is unchanged from the last review. The calculation of pre-paid tokens remains a complicated exercise.
Other food item: Sugar is hard to find, more so for traditional brands like Mumias. A 2kg bag of Chemelil sugar is Kshs 290 compared to 250 in July 2013 and five years ago it was 237. Prices of other food commodities like milk and butter have also gone up.
Foreign Exchange: 1 US$ equals Kshs. 103.9 compared to 87.15 in July 2013 and 84.25 five years ago.
$/KES at 104.065 at 1501h.
July 10's close: 103.95
Kenya's FX reserves have been falling from early May to July 7, at around $ 38.3 M/week
— Ramah Nyang (@Ramah_Nyang) July 11, 2017
There has been quite some outward flow of currency ahead of the election.
While there have been several discussions about maize and other food imports to Kenya such as where the maize came from, who is selling it, and at what price, more is on the way to deal a national disaster situation, partly attributed to delayed rains and prolonged drought.
Writing in a recent opinion piece in the Standard, James Nyoro, government advisor (who was previously the Rockefeller Foundation’s Managing Director, Africa, and probably the next Deputy Governor of Kiambu), wrote that food imports are normal for Kenya… in normal years, Kenya imports 30% of maize, 75% of wheat, 45% of sugar and 80% of its rice needs.
This comes at a time when all of Africa is talking about embracing agri-business and getting more people and more value out of agriculture. Kenya is probably in a very good place, as it produces lots of foods, does a lot of local consumption and international exports, and has good networks and communications tools for farmers and government, but still, there is little finance to agriculture, and a lot of prime agricultural lands is being converted to real estate or commercial uses.
The Cabinet Secretary for Treasury recently gazetted and listed companies that were allowed to import duty free, non-GMO, yellow maize to be used for animal feed including Unga Farmcare 36,000 metric tonnes, Pembe Feeds 20,000, Isinya Feeds 50,000, Sigma Feeds 50,000, Milele Feeds 20,000, Mombasa Maize Millers 36,000, Chania Feeds 4,000, Farmers Choice 30,000, Naku Modern Feeds 2,000, Pioneer Feeds 3,000, Empire Feeds 10,000, Tosha Feeds 90,000, Turbo Feeds 1,000, Treasure Feeds 3,000, Economy Farm Feeds 1,000, Prosper Properties 2,000, Legorn Feeds 3,000 , Huduma Feeds 6,000, Eden Millers 5,000, Ohami Feeds 1,000, Tarime Feeds 1,000, and Thika Farmers Group 36,000 metric tonnes
He also set published temporary rules for white maize, sugar, milk, and dates: The ones for white maize included Any person may import white maize if it meets the following conditions—
• The white maize shall not be genetically modified in accordance with the standards applicable in the European Union; i.e it shall not be genetically modified (GMO) maize.
• It shall have a moisture content not exceeding 14.5%;
• It’s aflatoxin levels shall not exceed 10 parts per million;
• It shall be accompanied by a certificate of conformity issued by a company appointed by the Kenya Bureau of Standards; and
• It shall have been imported on or before the 31st July, 2017.
• Any person may import dates during the month of Ramadhan.
In a separate notice, he authorized there be no duty on sugar imported between May 11 and 31 July 2017 and as well as on 9,000 tonnes of milk powder imported by milk processors authorized by the Kenya Dairy Board.
In commercial agriculture, as in any business venture, the aim is to make a profit on an investment, within the environmental and policy framework available for the sector. It is, however, not in question that there exist unsavoury practices practically the world over. Recent potato, maize and milk shortages in the weeks between March 2017 and the present day illustrate as much.
That said, it is pertinent that fault is placed where it lies, and speaking to traders in the Kenyan potato, milk and maize value chains, it was gathered that low rainfall in November 2016, as well as with the rains in April, led to price fluctuations in the weeks after February 2017. Mitigating circumstances lowered prices during the same period, when traders sourced their produce in areas that had rainfall in November 2016, such as;
- In the case of potatoes, this included Narok and Mau Narok, which are blessed with forest rains and fertile lands in Tanzania.
- With milk, rains in April meant that costs to access to main roads went up – and with farmers unable or unwilling to ease traders’ burden, the costs are being transferred on to consumers.
- As for maize, a 90-kilo bag which a farmer sold at Kshs 2,200 in December, had doubled by March 2017: Meanwhile, millers have been consistently buying the maize at Kshs 4,700 per bag
We have to remember to factor such matters into our plans and budgets as Kenyans. Also, we have learned that it takes the government a lengthy period to act or even plan for such occurrences. It would help to have neutral sources of data alongside that of the government to help shape the response to food security challenges in Kenya.
See also, Secrets of a Farm Middle Man
$1 = Khs 103
The Unga Group had its 2016 AGM at the Intercontinental Hotel today. Revenue and profit were up, but profit was down compared to 2015 which has been boosted by the sale of a Bullpak subsidiary.
In comments at the AGM, the Unga chairman and MD spoke on various issues such as changing food patterns as seen in new products that they are adding to reach consumers and farmer segments, more technology being deployed in agriculture and the rise of young agri-preneurs who may be one day disrupt the food chain, difficulty obtaining quality maize, difficulties with getting timely payments from Nakumatt, and overall as slow down in the economy as seen in lower buying power for their products and a tightening of credit at banks.
Ahead of the usual votes to approve the accounts, directors re-election, dividend (Kshs 1/= share) and re-naming of the company to Unga PLC (as per the 2015 companies act), the shareholders Q&A was the main part of the AGM.
- Dividends & Bonus: Why no bonus after the Bullpak sale? The money from Bullpak went to buy Ennsvalley Bakery (and shareholders had approved it)
- Product reach: Unga is a national brand, that’s sold mainly in supermarkets, but are not in every part of the country. They are seeing challenges with buyers affording products and will introduce smaller packs of some products to remain affordable and within reach of consumers.
- Gift items: One shareholder asked for Unga shopping vouchers instead of lunch, and when the Chairman announced that there was a product pack to go with lunch, this got a cheer from the many shareholders, but the very next question was for t-shirts to market the company.
- The Chairman said they had made changes based on requests at past AGM’s but that she would endeavor to one day to have everything shareholders wanted – dividends , t-shirt, lunch, and product pack.