Category Archives: SACCO

Mwalimu SACCO acquires 51% of Equatorial Bank

EDIT: Jan 27:  The Government has ordered an inquiry into Mwalimu National Sacco’s bid to acquire Equatorial Commercial Bank. The Commissioner of Co-operatives has appointed an inquiry team report to him following a protest by the Co-operative Alliance of Kenya (CAK) 

Last week, Mwalimu SACCO became  the majority shareholder of Equatorial Commercial Bank (ECB), acquiring  51% of the bank for Kshs 1.6 billion (~$18 million). The acquisition was cleared after no objections were received from the Central Bank of Kenya (CBK), Competition Authority of Kenya (CAK) and Sacco Societies Regulatory Authority (SASRA). There was another objection, but not from any of the regulators, who were aware of the issues raised.

Mwalimu with Kshs 24.5 billion of assets (2013), acquired the stake in ECB,  the country’s 27th  largest bank (Kshs 15 billion) which has been boosted by an earlier merger with Southern Credit Bank. Mwalimu will have three (3) seats on the board of ECB, but the Society is not converting into a bank nor merging with ECB. Due diligence of the financial and legal processes was done by Ernst and Young and Mose & Mose Advocates.

This comes two years after the LAPTrust, a pension scheme and the Kenya Tea Development Agency acquired a combined 22% stake in Family Bank – and LAPTrust estimated their stake was worth 1.6 billion in 2013, just two years after paying a 1/4 of that amount.

Fin4Ag14

All this week, Nairobi plays host to a conference called Fin4Aag14 which has the theme of Revolutionising Finance for Agri-Value Chains.

It started with plug & play session in which 18 companies got to introduce their platforms linking agriculture to finance across Africa. This is the second edition of the session that was introduced at the conference in Kigali last year and proved to be quite popular.

The 18 companies were: 

 

  • Tangaza Pesa: automates the value chain by doing KYC on farmers with bio data, crops produced,  and GPS  to build credit records
  • Ensibuuko (Uganda) helps (via web & mobile) to manage rural SACCO’s that can reach many of the rural unbanked farmers 
  • FarmDrive (University of Nairobi) enables small farmers to keep basic record by mobile phone and build a credit score 
  • Farmers Record Management System (FARMIS) aggregates farmers with financial institutions  to access finance and ensure loans are properly utilized 
  • Zoona’s eVoucher platform: enables agri-business supply chain payments and insurance 
  • Credit Information Sharing: enables information sharing by credit bureaus for lenders to make decisions
  • Umati Capital: paperless solution that aims to shorten dairy farmer  payment periods from 6 weeks to 24 hours
  • Agrilife – enables farmers to access markets inputs, savings, and asset finance 
  • Musoni System: a core banking for SACCO’s and micro-banks, loans, and savings that can also integrate with m-pesa and tablet apps 
  • Farmforce (Sygenta) enables traceability of farm produce for quality and for farmers to access small loans 
  • e-Krishok: Online & mobile infer for Bangladesh farmers to access information, traders and finance 
  • Creditinfo’s Credit Bureau Solution – enables credit bureaus can collect info on farmers so they can access loans without the need for collateral 
  • Craft Silicon have a platform that can link to MFI’s, bank, SACCO’s (Elma?)
  • aWhere Platform: with over 1 billion data points collected, enable farmers to be aware of field risks to make smarter decisions. this includes weather data for all of Africa since 1999 and others they pull from mobile services
  • AgroCentral – uses ICT to buy produce from farmers
  • RiMFin (Ghana): enables rural farmers to receive mobile payments and save them in their phones 
  • finFinancials (Fintech) core banking platform that can integrate with others for digital or mobile payments

They will be there all week presenting their platforms and engaging the attendees who are from across Africa, Caribbean and Asia and who include development specialists, financiers, policymakers and top bankers who hope to get youth interested in agriculture.

There was a brief session on warehousing that detailed both the challenges and the opportunities for warehousing. Commodity warehousing types include private, public and community. Examples were cited from Tanzania (community food stored in individual houses but linked to MFI’s ), Ivory Coast (large presence in Cocoa Rubber Cashew sectors), Madagascar (communities totaling 80,000 rice farmers in villages part guaranteed by DFI’s cover 2% of the national production but provide price stability), and Nigeria (massive 1.3 million ton silo capacity against  large formal sector demand of 1.9M tons), Burkina Faso and Uganda (2 successful warehouse companies). 

Challenges facing warehousing include high costs (leaving some empty of commodities) fraud, long value chains, and contract defaults (by both small farmers and larger organizations like WFP).

Fin4Ag14 is organized by the Technical Center for Agricultural and Rural Cooperation (CTA),  Central Bank of Kenya and African Rural and the Agricultural Credit Association (AFRACA), and is supported by the FAO, the Rockefeller Foundation and Afreximbank. 

 

Parliament Salaries 2014

This week, we get a look at the payslips of two Kenyan members of Parliament (MP); One from the Nairobi Senator, Gideon Mbuvi Sonko, and the other from National assembly representative for Homa Bay, Peter Kaluma. While they earn roughly the same amount, they differ because one does not need his salary, while the other says he can’t live on his salary (and stretch himself further).

Kaluma: Peter Kaluma released his payslip to support his position before a court case, in which he was asked to increase his monetary support for a child, which he said he could not do – as he took home zero in net salary.

Bits of his payslip

Income

  • Salary Kshs 319,500 (~$3,759)
  • ‘Administrative’ 213,000
  • ‘Sitting allowance’ 10,000
  • ‘Vehicle fixed cost’ 356,525

Deductions

  • Pay-as-you-Earn Tax (PAYE) Kshs 257,839 ($3,033)
  • Motor car advance 184,164
  • Co-Op Parliament 153,611Pension 40,257
  • Parliament SACCO (Parliamentary Savings and Credit Co-operative Society (Pacoso)
  • Pacoso Shares 20,000
  • Pacoso loan 54,212  

Sonko:  Gideon Sonko, the flamboyant Nairobi Senator, also released his payslip on his Facebook page to show that he has maintained his commitment since he joined politics in 2010 to give (his) salary back to wananchi (people) and listed several churches that were beneficiaries of his largess.

Bits of his payslip

Income

  • Basic salary Kshs 319,500 ($3,758)
  • ‘Administrative’ 213,000
  • Sitting allowance 30,000
  • Car maintenance 356,525
    ‘Responsibility 96,000
  • Total Kshs 1,015,025 ($11.941)

 Deductions

  • PAYE 292,439 ($3,440, equal to 28.8%)
  • Pension 40,257 
  • Pacoso shares 50,000
  • Pacoso loan 64,703

In line with previous other discussions of the salaries of members of parliament, MP’s earn 2.6 times what they did seven years ago. But at least they are paying an amount of tax, as other income top earners, on the full amount of their entire gross income (equivalent to about 28% tax), not just their basic salary, as in the past that left their hefty allowances (vehicle, responsibility etc.) untaxed.

Some predictions over the next few years;

  • MP’s will continue to increase their salaries because they can.
  • MP’s will move the elections date back from April 2017 to sometime in 2018 to get a full five-year term.
  • MP’s will scrap nominated parliamentary seats so that only people who campaign as hard as they, can enjoy the benefits of their ‘hard work’.
  • MPs will move to try to allow politicians to run for more than one seat so that in the event they lose a large seat (President), they have something to fall back on (e.g. in parliament, or as cabinet secretaries).

Chama Management 101

Chama to Conglomerate (Reinventing your Investment Group) is a book by Tony Wainaina, an investment banker, who was also the C.E.O of the Transcentury Group.

In it, he highlights key pointers and pitfalls that Chamas (informal investment groups) may encounter  in meeting their (initially) ambitious growth plans, such as dealing with members with different expectations & commitment to the group, the importance of hiring professionals, avoiding mediocre management, getting all members to bring the best investment ideas to the Chama, the problem of meeting in social places, the importance of strategic planning, time-keeping, & record-keeping – and some common sense lessons – such as if everyone is talking about a particular investment, it’s already too late Safaricom IPO)

He also gives examples of other Chamas of people who turned informal meeting sessions into investment groups that invested, some with success and others with difficulties such as with members who have different expectations and level of commitment, land purchases, dealing with KRA (taxation).

There is also a brief mention of what is arguably Kenya’s most famous Chama which began at a goat eating party in Athi River in 1997.which was not the most optimistic time for Kenya. It became the Transcentury Group which roped in 29 members who put up Kshs. 24 million that was invested into local NSE shares, Castle Brewery, East African Cables, Aureos, Rift Valley Railways, Helios, and which all led to their own eventual listing at the Nairobi Stock Exchange in 2011.

The book is a short, nice, easy read that you’ll want to have with you, and refer to as your Chama grows or gets stuck like some of the examples highlighted. It also includes sample documents and guides like ‘Letters of Intent,’ ‘Investment Term Sheets,’ ‘Non-Disclosure Agreements,’ and steps to concluding a Kenyan land deal.

The book is sold at Text Book Centre, Bookpoint- Moi Avenue and is also available on Amazon for the e-reader investor types.

NSE Moment: Britak, Transcentury, Kigali Bank, Stima SACC0

This week we were reminded that there’s been no IPO at the Nairobi Stock Exchange (NSE) since 2008 (Co-Op Bank) and the events in the last few days were the fulfillment of initiatives that companies like Britak and Transcentury had initiated earlier in the year.

Britak: The British American Investments Company Kenya kicked off their IPO this week. The group had Kshs 9 billion in income, and pre-tax profit of Kshs 2.8 billion in 2010. With group assets of Kshs 25 billion, it is second only to the ICEA at 27 billion.

They are being sold at Kshs 9 with an allocation criteria of 30% East Africa retail, 30% foreign, 37% institutions, 3% employees, agents, and individual policy holders and can be obtained at British American branches, Equity bank , Standard Chartered (and partner Postbank), NIC, CBA banks and stockbrokers.

The minimum for retail investors is 2,000 shares (Kshs 18,000 while for institutions it’s 10,000 shares (Kshs 90,000 or ~$1,000). The IPO is budgeted to cost Kshs 320m ($3.5M) with estimated payments to transaction advisor 24M, sponsoring broker 6M, legal costs 9M, selling commission 87M, CMA 9M, NSE 1.5M, PR 67M, and advertising 90M.

Of the Kshs 5.9 billion to be raised, 1 billion will be for regional expansion (Tanzania, South Sudan, Rwanda), 1.2 billion will be for Kenyan operations (set up a frontier investment fund, new branches), 2.5 billion for the housing & mortgage sector aimed at affordable housing models, and 750 million will go to pay off a loan at CBA bank that was used to purchase shares in Equity Bank (Britak own 11% of equity and 16% of housing finance banks).

The Britak IPO runs from 12 July to 5 August and they have also reached out to bloggers, with forums and their own blog posts such as this tale of their CEO’s initial investment.

However, there are some concerns that with their 45-year history and strong brand name (-pay Kshs 18 million a year to British American), this is a retail magnet IPO and the sale of 650 million shares (30% of the company) is likely to be over-subscribed, and the dividend paid (Kshs 200m in 2010) is likely to be safaricom-ish (small)

The company has also called for the Government to extend current tax incentive for newly listed operating companies to also include holding companies (like Britak)

Transcentury: The investment group which has had a spectacular climb and string of investments, most notably with East African Cables listed their shares at the NSE on July 14.

Their shares had been trading at an OTC exchange and were listed at the NSE at Kshs 50, which worked out to a P/E ratio of 38

The Group also has a Mauritius convertible bond issued to finance the restructuring of Rift Valley Railways and investment in geothermal and other energy projects, but which also has the potential of diluting investors shareholding by over 1/3. (150 million shares available to bond holders over the next 5 years prices between 40 and 50)

Still, Transcentury has been am inspiration to other investment groups, albeit not as well connected to initiate projects with more risk such as energy real estate, and offshore. The introduction is budgeted at Kshs 20 million (220,000 – CMA 5M, NSE 1M, advisor 8M, stockbroker 4M) and the PDF prospectus is ‘protected’ so you can’t copy sections of it.

Family Bank: Their long dalliance with the NSE is about to be fulfilled as their shareholders will next month approve a listing at the exchange. They will also vote on an ESOP for managers and 1 % transfer of shares of the company to the new CEO. It has since emerged that he is purchasing the shares at a discount as part of his employment package.

Stima SACCO: Away from NSE is Stima SACCO that is in the process of raising funds of about Kshs 500 million ($6 million) . They have advertised in newspapers (even on TV), which may land them in trouble with the CMA, for selling shares to the public without adequate information. At Kshs 100 per share, individuals can buy 200 shares at a minimum (Kshs 20,000).

Kenya Airways: Nothing yet from the airline who were expected to approach shareholders for new funds. The government has allocated funds to invest and defend their 26% stake an the airline which has since signed a deal for new Embraer aircraft to grow their African footprint.

Bank of Kigali: The Bank of Kigali is aiming to raise $62 million from new investors in an IPO that runs from 30 June to 29 July. The Bank control 25-30% of the banking sector in Rwanda; it had profit of 8.6 billion francs ($14 million) in 2010 on assets of 197 billion francs ($324 million) – equivalent to a smaller mid-size Kenyan bank

300 million shares are on offer, and the minimum is 200 shares per person at 125 francs per share ($0.075 or Kshs 18.65). They are open to cross-border investors and the allotment will be to 27% retail East Africans, 2.4% to employees & directors, 15% – East African institutions, 15% to Rwanda institutions and 40% to international investors.

The Rwanda government owns 66% of the bank, and the other 1/3 are owned by the social security fund of Rwanda. 16 billion francs ($27 million) will go to the Government for reduction of its shareholding and 20.8 billion francs ($34 million) will go to the bank to reduce its assets & liabilities maturity gap and grow its loan book and operations (from 33 to 60 branches). This will result in new shareholders owning 45% of the bank, the government 30% and the social security fund with 25%

Other: The IPO prospectus lists
– lawyers acting for the bank, number of cases they have and prospects of loan recoveries
– lawsuits filed against the bank by name (former employees, debtors opposing auction)
– list of subcontractors and related partners such as visa card providers, SMS partners, providers of credit reference and lines of credit etc.
list of properties owned and rented by the bank and rent amounts. Also Rwanda depreciate building over 5 years, after each revaluation

Risks & Exposure – one of the operational risks is scarcity of qualified personnel in Rwanda
– commerce restaurants & hotels account for 46% of the bank portfolio while construction was 29%. Also 11% of loans were to a single group and records of large are available for review to persons who sign non-disclosure agreements
– Kenya is the country’s largest trading partner: Rwanda exports 33% to Kenya and imports 16% back.

Staff: – All staff are entitled to bonus and in 2010 this totaled 8% of profit, which that was shared by 441 staff (out of 454), and the average award was $3,200.
– The bank also runs an in-house dispensary and provides full medical cover to staff and 4 dependents
– The oldest director was born in 1960, the youngest in 1977. At senior management, the managing director is the oldest employee at 54, while the head of finance is the youngest at 31.