Category Archives: Pyramid schemes

Kutwa Tuesday

These are stories I have found (kutwad) and want to share this Tuesday

Getting a story straight: One way of getting your story out through the media is to buy space and have your statement run exactly as you mean it and straight to the public – and there are two recent instances of that.

Street Lights: First is by the CEO of Adopt-A-Light Esther Passaris who launched her transformed street lighting crusade into an anti-poverty and anti-corruption vehicle that may lead her to being the next mayor of Nairobi.

This comes after the City council of Nairobi disowned the contract they had with her company and advertised for other companies to fulfill outdoor lighting & advertising functions which were had been exclusively done by Adopt a light.

What’s in your water bottle?: The second statement is a concerned water expert who is worried that Kenyans may not understand the different types of bottled water being sold – drinking water, natural mineral water, mineral water, carbonated water etc. – and that water bottling companies are being liberal with the advertising truth. He writes that natural mineral water is bottled at source, and with no chemical treatment, which is an expensive process – and he doubts that it is possible for a company actually producing such water, can sell it at the same price as drinking water. I.e. some of the companies are making false claims on their water bottles. He also cautions users to check the amount of fluorine in bottled water as it can lead to bad teeth and bone disease (Should not be more than 1.5mg per litre)

Do they work?: Of course the media love a story waged on their papers and companies such as Kakuzi, Portland cement, Kenya pipeline, Nzoia Sugar and other companies have all bought space (in more than one newspaper) to run statements, usually denying allegations of financial impropriety. There was even an infamous statement defending Anglo Leasing a few years ago.

Esther Passaris took out 2 page advertisements in both the Sunday Nation and Sunday Standard – probably at a total cost of Kshs 1.5 million (840,000 for the Nation, and over 600,000 for the standard)

The media is happy because these statements add to advertising revenue and often lead to other statements and form a base for them to tackle stories that they may have been hesitant to delve into. IMHO, it is unwise for corporations to place such self-serving advertisements especially to deny allegations – the better thing is to lie low and let the bad press (negative stories) pass, plant a few trees & build schools (CSR is good first aid for a scandal wound), answer questions from regulators or authorities – but don’t splash your story in the media!

(See past PR statements by De La Rue and Italians in Malindi.

Communications Wananchi has applied for a data carrier network operator – DCNO license – joining other firms such as KDN, Simbanet, Telkom, UUNET and Access Kenya.

Bounty Hunter: In a Ugandan newspaper, I came across an article (copy here) about the search for Felicien Kabuga who is wanted for his role in the 1994 Rwanda genocide. The article had more depth than any story I have read in any Kenyan paper (fear of libel laws perhaps), but what continues to amaze me is that despite almost every literate urban Kenyan knowing about the search, a reward on offer of $5m (down to Kshs 335 million at current exchange rate), recent photos of Kabuga that the Nation published a few months ago, and significant evidence that he spends a great deal of time in Kenya – no one (his friends & associates) cares enough, for posterity, or for the reward, to turn this guy in. And now there’s a deadline – as the mandate for the International Criminal Tribunal for Rwanda (ICTR) and presumably the reward will expire at the end of 2008.

Brother please! Just came across this story – which at first I thought was from the the Onion or some satire website. But it appears to be a true story – that the wreckage of a six-seater aircraft has been found in Cameroon three months after it crashed. So should we be greatful that the KQ crash site was found within 48 hours?

Money go round: Even as some of the larger pyramid schemes are experiencing cash flow problems, smaller ones are still attracting new investors. In the newspapers every day there are more schemes in the works listed in the classified sections under business opportunity – all offering 16 – 20% returns per month, just for investing a small amount for a weeks.

Real estate The Kenya anti corruption authority (KACA) is seeking land in milimani, upper hill, kilimani or wastelands, presumably to set up a new office building. Lots sought should be 2 to 5 acres in size, close to major road and details should be sent to the Director by June 14.

Mining
– On J7 July at the Msambweni divisional office, a case will be heard between Simon Ndungu Karanja vs. Tiomin over his 1.9 ha piece of land
– Gippsland offshore petroleum of Australia is doing an geophysical survey of the Kenya coast (kipini area, ungama bay)
– Tile & carpet center are prospecting for carbon dioxide in (Kereita forest) of Kiambu district
– Oil giant Halliburton is moving is headquarters from Houston to Dubai!

10 shilling shares

The recent surge of share splits was unjustified based on the overall trading history of the companies. So it’s only a matter of time before some of these shares dip to their pre-split / hype prices. Any share that was trading for less than 100 shillings in the last 18 months is a candidate for a correction – to the below 10 shillings mark and that includes CMC, ICDCI, and Sasini.

IPO’s
Now that a few IPO’s have passed, but not their euphoria, it is apparent that investment advisors of future IPO’s will have to rework their calculations to satisfy institutional and seasoned retail investors. While government divestment offers will be geared to the mwananchi, smaller private companies will have to ask themselves if by offering IPO shares at about 10/= each, they want to be like Eveready or Scangroup and end up with up with 100,000 shareholders who own 100 – 200 shares each.

Rising shareholder costs
– Kengen told us their 2006 annual general meeting (AGM) – after the IPO would 80 million shillings and another post IPO company Firestone will have their AGM in Nakuru on March 22 (where fewer shareholders can attend).
– With over 175,000 new shareholders, the cost to Eveready of even inviting all their new owners to the AGM is quite prohibitive – mailing out accounts & AGM notices would cost about 4 million shillings ($63,500) [i.e. 175,000 letters X 25 shillings postage per letter]. So Firestone shareholders will also be asked to approve a change in company articles to allow such notices to be sent by e-mail or fax.
– The same postage costs will apply when Eveready mail out their dividend cheques. Since most shareholders have the minimum 100 shares, they will receive payment cheques of Kshs 60. which is hardly justified when you factor in bank & postage charges
– Also to cut costs, the company has sent out slimmed down accounts that are about the size of the president’s speech on Jamhuri day.
– On a positive note, Kengen have made an arrangement with (their bankers) KCB so that shareholders can cash their Kengen dividend cheques at any KCB branch at no cost.

Alternative investments
KTN had a story on Friday about the Central Bank (CBK) crackdown on pyramid schemes – and it was followed by a poll on whether they should be banned. The result was 16% YES, 84% NO (i.e. they should not be banned.) Though unscientific, you sense from the poll that these schemes have become lifelines/shortcuts to riches for a diverse variety of Kenyans.

In fact many of these schemes have been shut down at the urging of commercial banks – who have had to deal with swelling crowds in their banking halls – either depositing or receiving cash in the merry go rounds. Some of these investors blame jealousy from banks (who want to hold their money and give out as loans) and the Nairobi stock exchange for putting pressure on the CBK to act (since they have been selling shares to re-invest in these quick cash back avenues with guaranteed returns.

IPO fizzle

No disrespect to the Eveready IPO which opens today, but there appears to be less enthusiasm for what it now the 3rd IPO this year after Kengen and Scangroup. There are lines outside stockbrokers today, and will be around for the next two weeks but nowhere near Kengen size.

Most of the fatigue comes from the over-subscription and resultant fractional allocations of shares to investors – each requiring several trips, phone calls and hours spent pursuing IPO shares.

Likewise to buy Eveready, I’d have to sell something or if I wrote a cheque i’d have to make several trips to my broker – who’s normally super efficient. But at IPO time, things get hectic with the long queues and harried staff – payments/orders get misplaced or have to be corrected, and a second trip would likely be in order, followed by a third in a month’s time, after the IPO results are known (11/12), to collect the inevitable refund cheque (after 15/12).

I may be better off just waiting to the shares to list (on 18/12) then simply send my broker an e-mail to buy the shares. Price volatility can be expected on day one, but with Christmas around teh corner, there won’t be much activity on the exchange and the price should hold steady (I hope) till January.

Careful banks: Unlike before when several banks lined up to offer loans to buy Kengen shares, they are still available, but there’s no marketing or fanfare announcing them. Also, while Kengen was sold on almost every street corner, this time KCB is the only commercial bank selling Evereyady shares.

Still I must commend some brokers who have opened satellite offices to process IPO applications, thus easing the crowds at their main offices.

BARS free
Barclays shareholders will endorse the sale of their BARS to CAPSEC of South Africa – in addition to a share capital increase, bonus, and share split at an EGM in Nairobi on December 8. Register closes Nov 29

No parking
The latest ludicrous proposal by city council is to double the daily parking fee from 70 to 140 shillings ($2) in order to finance the construction of parking garages. What the council should do is have a bond or enter an arrangement with a bank that will finance construction of the parking in record time and the council can repay the bank over the long term. The council would be ill-advised to finance construction using daily collections of which it has little control. The proposal also has no end date which means we could be paying double for the next 10 years, long after the project is over, or without any new parking garages ever being built.

Posta booster
There’s a story in the East African today about how the Postal corporation will reap over 16 million shillings ($226,000) from Kengen mailing annual accounts and notices for their AGM on November 30. Kengen had to pay for tens of thousands of stamps and has budgted 80 million shillings ($1m) for the day.

Nyramid update
A prominent city Church led by a charismatic preacher is behind one of the newest Nyramids.

Tesco’s here
Tesco, a former partner of Uchumi has opened its own Nairobi supermarket.

Cadillac’s to Kenya?
Cadillac returns to Africa via South Africa with right hand drive cars which will then be sold to other Sub-Saharan African countries -with BLS, SRX and STS models arriving early next year. Geenral Motors has a significant presence in the Nairobi through isuzu truck and minibus sales.

Nyramid Update

– The communications company identified earlier has stopped accepting new investors or deposits and has told existing investors that their contracts will not be renewed once they expire. (I.e. receive full payment)
– Also, in an e-mail circulating, purporting to be from Equity Bank, names some of these companies and warns other banks and their customers to be on the lookout for these schemes.

To: undisclosed-recipients
Subject: Message from Central Bank
It has come to the knowledge of the Central bank (and other commercial banks) that some fraudsters have opened accounts in the guise of Merry Go Rounds. Be advised that these are in fact pyramid schemes. A pyramid scheme is a fraudulent system of making money which requires an endless stream of recruits for success.

The fraudsters have already mobilized a sizeable number of people who have made colossal sums of deposits. The security machinery has managed to penetrate the cells and is making good progress in this regard. In some incidents, they masquerade as working with the knowledge of the bank.

We make it very clear that the bank is not involved in any way with their operations. This is the more reason why it has been decided that all these accounts cease from receiving any deposits from the public or allow any withdrawal either from the counter or from the ATMs. Any member of the public wishing to deposit or withdrawal should be advised accordingly.

Refer any enquiries to Major Mutua and Security Department in Head Office.

The following accounts have been identified to be receiving suspicious deposits from the public on a daily basis:-
———————————————————————————-
And many others not yet fully identified.

Please circulate this mail to all your friends to avoid more innocent Kenyans getting into the trap.

New NSE listing?
The Daily Nation reports that a new company will soon list on the NSE via a private placement. Midlands Limited will sell 20 million shares to raise 250 million shillings to put up cold storage facility. Suntra has valued the shares of the agro-processing, Nynadarua-based company, which currently has 3,000 shareholders at 28 shillings and they will be listed at at 10.50 each. Related piece.

Sports

– Kenya is bidding to host the 2009 sevens rugby world cup. The organisers, who are up against seven other countries, are deriding the lack of government support. Good luck!

– The 2006 Nairobi Marathon takes place in 12 days. However, unlike in previous years where the different races were spread out over different parts of the city from Lenana school, to Nairobi School, to Mombasa Road, this year’s races will center around the Nyayo Stadium area.

Previous marathons have inconvenienced some travellers, church goers, and shoppers, on Sunday morning. However, for those interested in watching this prestigious international sporting event will have to go to the race area.

Safaricom security
Safaricom to enhance it’s anti-fraud systems.