Category Archives: South Africa

Kenya’s Money in the Past: Kalonzo Musyoka

Excerpts from his recently published official biography – Against All Odds. 

Background

  • – He worked at customs department at the port of Mombasa where he was disgusted by the bribery he saw. He did his pupillage at Kaplan & Straton. Later he got a Rotary Club scholarship to study business management at Cyprus and he was poached to work at Manu Chandaria’s Comcraft in the legal department.
  • Lost the 1983 election and came fourth. But when the MP was shot two years later by a policeman, occasioning a by-election, Kalonzo reluctantly entered that and won.
  • He has always been touched by the poverty he saw when he grew up and launched the Kalonzo Musyoka Foundation in January 2006 which worked with Shelter Afrique to launch affordable housing for rural women in Kitui.

Cabinet & Economic Intrigues

  • KANU era: Mwingi is one of the fastest growing towns in Kenya because of the water it gets from Kiambere-Mwingi. But that was only after he fought off powerful forces after he secured $116 million from the Italian government – a powerful voice who wanted it to go to the National Water & Pipeline Corporation but Kalonzo steered it to TARDA so it did not become a white elephant.
  • CHOGM The Commonwealth Summit in New Zealand which was attended by Mandela was almost overshadowed by ‘Bull of Auckland’ incident. But Kalonzo explained the incident to officials there so that it did not reach the media there or affect the ongoing summit. But it did leak afterward in the Kenya media.
  • When Tony Blair praised him before President Moi after the 1997 CHOGM, he knew had lost his Foreign Affairs docket – and after the elections, he was moved to the Education & Manpower ministry.
  • In 1998 he fled teachers striking outside his office by hiding in his wife’s car. He then got Mulu Mutisya and elders to negotiate a settlement with teachers union (KNUT) and the strike was called off the following day.
  • Moi was shocked at the excesses of Mobutu when they visited Gbadolite – his hometown and said “River Ubangi could generate electricity for all of Africa.
  • South Africa: After Kenya had in 1963 turned down an ANC request to set up a base in Nairobi, Moi worked hard to mend fences with South Africa after Mandela was freed, and Mandela thanked Moi for $1 million that Kenya gave to ANC during apartheid struggle. Mandela also made a secret visit to Nairobi when he fell ill on a flight in April 1990, then returned for an official visit in July.
  • NARC: Free primary education was Kalonzo’s brainchild as education minister. When Kibaki became the NARC candidate in 2002, Kalonzo gave the campaign team all the papers and policies that he had written – including on FPE that was soon implemented by the new government. 
  • MOU breach: Happened when Kibaki moved Kalonzo from Foreign Affairs to Natural Resources. All NARC summit leaders had a choice of their ministerial dockets – and he had chosen Foreign Affairs, Raila had taken Roads & Public Works and Moody chose Home Affairs. 
  • Jubilee: After beating back a “feeble” Musalia (for president) effort, Uhuru and Ruto turned on to him; and his reunion with Raila started the day Uhuru and Ruto returned from the ICC hearings and after (vice president) Kalonzo had met them at the airport and driven around Nairobi with them.

The book is available to buy here.

Using the AMIB50 ETF to track Africa Investments

A new fund offers South African investors a chance to invest in 50 large, non-South African companies that are listed on other exchanges and in other countries across Africa. The AMI Big50 ex-SA AMIB50  ETF (exchange traded fund) was launched at the Johannesburg Stock Exchange on April 20.

The ETF is promoted by investment firm – Cloud Atlas Investing and targets institutional and retail investors, offering them a way to invest away from the Rand and South Africa. The current basket of the fund is composed of Itissalat Al Maghrib (Maroc Telecom) (20.6% of the fund), Coml.Intl.Bank (Egypt) (11%), Lafargeholcim Maroc, Guaranty Trust Bank, Safaricom (4.3%), Nigerian Breweries, Tanzania Breweries, Mcb Group Ltd, Attijariwafa Bank and Delta.

In terms of countries, exposure to Morocco 28.4%, Egypt 19.3%, Nigeria 13.7% and Kenya 11%, and for sectors, the spread is banking shares 29.3%, telecom firms 27.8%, food & beverage 17.7%, and industrial ones 14.6%.

Investors need to have a brokerage or custody account in South Africa to buy the AMIB50 and the fund management fee is a total of 1.17% per year.

Barclays Exiting Africa: Part II

Almost a year after Barclays Africa announced a decision by (parent) Barclays PLC to exit Africa, they released their Barclays 2016 results (PDF). While the world is now a different one after BREXIT and President Donald Trump, the exit plans are still on course.

Excerpts of the some statements released on Thursday 

  • Revenue from (the rest of) Africa) has been growing at about 16% a year, compared to 5% in South Africa, but, the rest of Africa (excluding SA) is still just 23% of revenue for Barclays Africa. They expect that rest of Africa growth should exceed South Africa’s
  • They have agreed with Barclays PLC on terms of the “separation payments and transitional services  – Barclays PLC will contribute £765m, comprising of £515m in recognition of the investment required in technology, rebranding and other separation projects, £55 million to cover separation related expenses, £195 million to terminate the existing service level agreement relating to the rest of Africa operations”.
  • Barclays PLC will contribute an amount equivalent to 1.5% of Barclays Africa market capitalization towards a black economic empowerment (BEEP) scheme and Barclays plans to create an equity plan for employees in the next 12 to 18 months.
  • They will continue to use the ‘Barclays’ brand in the rest of Africa for three years from the date on which Barclays PLC reduces its shareholding in BAGL to below 50%.
  • During 2016, Barclays PLC reduced its shareholding from 62.3% to 50.1%. Other shareholders include Public Investment Corporation (SA) 6.86%, Old Mutual Asset Managers 3.31%, Allan Gray Investment Council 2.16%, Prudential Portfolio Managers 2.01%, Schroders Plc 1.93%, BlackRock 1.69%, Vanguard Group 1.66%,  Dimensional Fund Advisors 1.65%, and Sanlam Investment Management (SA) 1.62%.

June 1 2017 update

  • Barclays Africa Group Limited today announced that following the completion of South Africa’s largest bookbuild in South African Rands, Barclays PLC has sold 33.7% of Barclays Africa’s issued share capital at a price of R132 per share.
  • This results in accounting deconsolidation of Barclays Africa from Barclays PLC.
  • Barclays PLC sold 285,691,979 Barclays Africa ordinary shares at a price of R132 per share, which results in Barclays PLC reducing its shareholding to 23.4%, with a further 7% to be taken up by the Public Investment Corporation at a later date, following receipt of the necessary regulatory approvals.
  • The significance of this sell-down is that Barclays PLC is no longer the controlling shareholder of Barclays Africa, which now has a diverse shareholder portfolio made up of very supportive, long-term, institutional and individual investors.
  • Ownership of Barclays and Absa operations in Africa does not change as a result of the reduction in shareholding. The 11 banks that form part of Barclays Africa will continue to be led and operated by people with deep local knowledge and a diversity of skills and experience.
    £1 is $1.25, £1 = KES 128.5, and  £1 = 16.1 ZAR.

What Africa means to Barclays

Last week, Barclays Africa released their our 2015 Integrated Report (PDF). It comes in the  backdrop of the Barclays Africa sale that is still reverberating, with denials that the Bank will be divesting from Africa.

It notes that :

  • The Barclays PLC sale is meant to deconsolidate Barclays Africa from an accounting and regulatory perspective and that the Barclays Africa chairman, Wendy Bull, has already resigned from two Barclays (UK) PLC boards so there’s no conflict of interest.
  • The 2015 results demonstrate that we are delivering against our strategy and ambition. We made a profit of R14.3bn, with headline earnings up 10% and a return on equity of 17%.
  • Barclays Africa has a presence in 10 countries. Kenya is the second largest of the 10, but they all trail South Africa by a large margin (79% of the group revenue is from South Africa,). Tanzania has similar numbers to Kenya, but they are contributed by two different banks (BBT and NBC)
  • Barclays parent owns, 62%. The other top 10 shareholders include Public Investment Corp (SA) with 5.6%, Stanlib assets 2.2% and others with 1% each including old Mutual, Sanlam, Prudential, Vanguard, and Blackrock.
  • Barclays Africa has 12.3 million customers.
  • Retail & business banking account for 72% of revenue, corporate & investment-banking 20%, and wealth management 7%.
  • They paid 8.6 billion rand in dividends, 7.3 billion in taxes and 20.9 billon rand in salaries to their 41,000 employees across Africa.

Barclays Africa CEOThe report (We actively sought shareholder views so as to further develop our remuneration reporting) has a levels of disclosure,that would be welcome in Kenyans banks and companies  who have endured a horrible year of governance issues with almost 20 companies declaring profit warnings after previous ‘robust’ years, under long-serving CEO’s.

  • It details the salaries and bonus of the CEO (Rand 28 million), top executives, and non executive (independent) directors of board members (which included the Barclays Kenya chairman).
  • It also lists the performance dashboard of al the executives, and of all the key segments of the bank in their own pages.  Not like Kenyan banks which have the Chairman’s statement noting the tough economy, then (after magic happens) the super profit that was achieved.
  • It lists key matters discussed by the board , tabled month by month, and incorporates the balanced scorecard.
  • No individual director or group of directors has unfettered powers of decision-making.

1 Rand  was about Kshs 7.2, and 1 Rand was about $0.07 in December 2015. 

Africa’s New TFTA Economic Bloc

So what’s the TFTA (download an English language PDF here)? Why is it so important?  And what’s good about it for Kenya? A lot of that is in this nice article by the Oxford Business Group titled Kenya to benefit from newly agreed TFTA. 

Extracts

  • The Tripartite Free Trade Agreement (TFTA) is an economic integration initiative pursued by the East African Community (EAC), the Common Market for Eastern and Southern Africa (COMESA) and the Southern African Development Community (SADC), which will create a 26-country integrated economic bloc.
  • Members of the TFTA aim to progressively eliminate tariffs to trade in goods, liberalise trade in services, cooperate on customs matters, among other areas.
  • Kenya is expected to be 1 of only 5 countries in the bloc to see exports increase by more than $100m following full implementation of the TFTA.
  • The TFTA gives Kenyan exporters preferential access to 6 new markets not already covered by the EAC or COMESA, namely Angola, Botswana, Lesotho, Mozambique, Namibia and South Africa.
  • “Sensitive” agricultural goods like sugar, maize, wheat and rice will be subject to duty and quota restrictions, as will other products such as cement, plastics, electronics and paper. till at least 2017 to give these industries in some countries time to adjust to increased competition.Highland tea export journey
  • Members of the TFTA aim to progressively eliminate tariffs to trade in goods, liberalise trade in services, cooperate on customs matters, among other areas.

Ahead of the Word Trade Organizations (WTO) 10th Ministerial Conference (MC10) to be held later this month in Nairobi, Kenya’s parliament (national assembly) hurriedly ratified the TFTA . This was in a debate just before their year-end recess, and during this, some members chastised the government (executive) for being slow to bring  the TFTA before parliament – and legislative assent is a conditions that all member states must meet.