Category Archives: Stanbic

Deloitte on African Art and Finance

The value of African art can grow tremendously over the next decade with investment and support from buyers both within Africa, and others who live beyond the continent, as well as from African art schools, governments, museums, galleries, art professionals and banks to stimulate and support more interest in African art.

These are some of the findings from the Art & Finance Report 2017 that was unveiled at Deloitte’s 10th Art and Finance conference at the Italian Stock Exchange in Milan this week and which estimated that the value of art owned by Africans collectors was $12.7 billion in 2016 and that it  could grow to $20 billion by 2026. This still accounts for less than 1% of the global art market currently estimated at $1.6 trillion with an annual turnover of $50 billion.

Some key findings of the report which looked at the global art markets include:

  • The art market should be self-regulated and there is great support for art to be part of wealth management offerings to customers at more private banks.
  • Banks need more specialists to properly value and manage art markets.
  • Art can be used as collateral, enabling art collectors and galleries to realize liquidity without having to make unfavorable sales to meet short-term cash-flow needs. See this on how to borrow against art.
  • Art as an investment class poses risks that are no different from others that banks manage and have to guard against, including vices like price manipulation, insider trading, money laundering and terror financing.
  • The top categories in the global art market are  “post-war & contemporary art”, followed by “modern & impressionist art”, “Chinese & Asian art” and ” jewels & watches”.

Some excerpts from the report on the African art market include:

  • International dealers and auction houses like Bonhams and Sotheby’s are seeing a gradual shift in the African contemporary art buyer base from mainly African art collectors to a more international and diverse group of art collectors.
  • London experienced a 12.5%  rise in African art auction sales between 2015 and 2016, with Bonhams controlling a 65% market share.
  • Sotheby’s London joined the African art auction trend in 2017 with its first auction focused purely on African contemporary art. It achieved total sales of over $3.6 million and 79 of the 116 lots were sold.
  • In 2017, record-breaking hammer prices recorded at auction for contemporary art were achieved by Nigerian artist Njideka Akunyili Crosby, whose work sold for less than $100,000 at auction in 2016. However, less than a year later, the artist’s piece “Drown” sold for a record-breaking US$1.1 million at a Sotheby’s auction and a few months after that, her 2012 painting “The Beautiful Ones” sold for US$3.1 million at a Christie’s London auction.

There is currently an inter-section of art, wealth, and technology with the possibility that bitcoin / block-chain can be used to assist banks and financiers with tools to help with transparency authentication, copyrights and ownership of art objects and there are already platforms such as Blockai, Ascribe.io, Chainmark, and smArtchain etc. in use.

The greatest demand for African art is currently from high net worth individuals in Nigeria and South Africa, which are the two largest economies in Africa. The report also notes that there is increasing demand from corporations such as the Nigeria Stock Exchange

Elsewhere In Kenya, Stanbic was working on investor management portfolio offerings that include wine and African art, while Nigeria has Access Bank in Nigeria. There are also other innovations coming up in African art and finance from leading banks and galleries in Kenya, South Africa and Europe.

Tegeta Escrow

Yesterday Harbinder Singh Sethi and James Buchard Rugemarila were charged with obtaining $22 million and 309 billion Tanzania shillings from the Bank of Tanzania in what’s been dubbed the Tegeta Escrow case.

Perhaps the best summary of the Tegeta Escrow case comes from Africa Confidential (Vol 55 – N° 19) dated 26 September 2014 –

  • Heads may be about to roll after revelations about the contested transfer of 200 billion Tanzania shillings (US$124 million) from an escrow account in the central bank, the Bank of Tanzania, to Harbinder Singh Sethi’s Pan Africa Power Solutions Tanzania Limited (PAP, AC Vol 55 No 13). The complex details of how Sethi acquired Independent Power Tanzania Ltd. (IPTL) and then raided the BoT account have now been pieced together by two opposition members of parliament, Zitto Kabwe and David Zacharia Kafulila, with the help of The Citizen and Mwananchi newspapers.
  • If Sethi’s critics are proved right, this is the country’s biggest corruption scandal to date. Based in South Africa, Sethi is a Tanzanian-born businessman with a reputation for dubious past dealings in Tanzania, Kenya, South Africa and the United States. Sethi claims to have bought 70% of IPTL’s shares from Malaysia’s Mechmar Corporation, now in receivership. Yet Standard Chartered Bank Hong Kong (SCB-HK) claims to have purchased IPTL’s debt for $76 mn. in August 2005 and says Mechmar was already in liquidation when Sethi claimed to have acquired the shares.
  • The Tanzanian behind IPTL, former BoT employee and self-styled international consultant James Rugemalira, is also under investigation over the $75 mn. that he was paid by Sethi for his company’s 30% share in IPTL.
  • Both Sethi and Rugemalira have lived up to Kabwe’s description as ‘aggressive litigators’. Their strategy has been to steer the acquisition of IPTL away from non-Tanzanian jurisdictions (Malaysia and Britain), from other interested parties (SCB-HK) and lawyers, receivers and liquidators in Malaysia and Hong-Kong. In this way, SCB-HK’s property rights in IPTL have been summarily dismissed and attempts by SCB-HK’s lawyers to negotiate a compromise with Tanesco have all been blocked. Furthermore, the findings of the International Centre for Settlement of Investment Disputes over IPTL’s overcharging Tanesco for power supplied and the proposal for a solution involving SCB-HK claims have been ignored. Tanzanian courts have been complicit in rubber-stamping IPTL’s transfer to Sethi’s PAP. None of this helps improve the country’s image abroad.

Other

  • The unfolding details about the Tegeta Escrow case resulted in the removal of four ministers back in 2014. On Saturday, the energy minister, Sospeter Muhongo, resigned over his alleged role in the affair last year that saw $180m (£116m) taken from the country’s central bank. The move follows the removal from office of the attorney general, Frederick Werema, the energy secretary, Eliakim Maswi, and the housing minister, Anna Tibaijuka, who was sacked over the transfer of $1m to her private bank account Chairs of three parliamentary committees have also resigned following the scandal: Victor Mwambalaswa, energy and minerals committee; Andrew Chenge, parliamentary budget committee; and William Ngeleja, legal affairs and governance committee.
  • Back in December 2014, Stanbic Bank Tanzania released a short statement on the-then parliamentary report on Tegeta Escrow and their role.

 

Kenya – Dubai: Fresh Exports & Chamber Commerce Trade

There’s a delegation from the Dubai Chamber of Commerce & Industry in Nairobi this week and they were hosted by the Kenya National Chamber of Commerce and Industry (KNCCI). The Dubai Chamber announced that they will open a representative office in Nairobi, their fourth in Africa, after Addis, Accra and Maputo – to do market research, discover opportunities for partnership and value addition, support Dubai businesses in Kenya and give Kenyans information about business opportunities in Dubai.

dubai-flag

Kiprono Kittony said Kenya imports about $900 million from Dubai and exports about $300 million. He said that some challenges of business in Kenya include double taxation between the counties, infrastructure to the counties, corruption, but that he saw endless trade opportunities for their 14,000 members in 45 counties.

Naushad Merali said that when he first went to Dubai in 1982, it was smaller than Mombasa, but it had since transformed, thanks to Sheikh Mohammed’s leadership.  He said Kenya was one country with a stable currency and Dubai investors would not have to worry about moving money in and out the country – and that while manufacturing was difficult due to dumping from Asia, the advantage was if you were doing agro business, especially of things that are grown here. A Stanbic bank executive said they were the largest bank in Africa said they were ready to finance projects in infrastructure energy, renewable energy, tourism, electricity transmission etc. – and that while banks are able to do projects of $25 – $ 60 million, with larger than $100 – $200 million, ones there was need to syndicate across borders.

bananas-for-dubai

Hot button issue. Kittony also spoke of Kenyan flowers that go to Amsterdam and then get re-shipped to Dubai. He added that Kenya had developed a disease-free livestock belt that could export to Dubai and the Gulf states (GCC). Someone else said that there are only 5 Kenyan fresh products on Dubai supermarket shelves (including mango and avocado) out of a potential 70 others, and  lots of fresh stuff is sent to Europe where it is repacked and relabeled before being shipped to Dubai. While someone else said the lack warehouses and charter flights from Mombasa and Eldoret were the problem, another said that there were 14 Emirates flights a week, along with others from Kenya Airways and Etihad (and Qatar) – so flight were not the problem. Another said that Kenya had simply not marketed itself fully to Dubai in terms of what it could produce and export and get to Dubai via a 4 hours flight or a 12 day ship ride. Kiprono later lamented that flights flew into Eldoret, full of cargo, and flew out largely empty – while they could carry flowers, coffee, bamboo and other things.

Shares Portfolio August 2010

Market picking up steadily since last quarterly review in May 2010

The stable
Diamond Trust ↑
Kenya Airways ↓
KCB ↓
Kenol ↓
Safaricom
Scangroup ↑
Stanbic (Uganda) ↓
Uchumi ↔

Review:
– Best performer: Scangroup Safaricom up 25% this quarter
– Worst performer Kenya Airways down 10%
– In: Kenol
– Out: None
– Increase None
– Decrease None
– Unexpected gains/losses: None

Events & Outlook:
– Performance: The Portfolio is up 8% in the last three months while the NSE Index is up 10%.
– Got dividends from all the banks, which are improved performance this year. Dividend included that from Stanbic Uganda but its still a problems to cash as Stanbic Kenya is incapable of partnering with Stanbic Uganda to ease the encashment process – even better would be for Stanbic Kenya though CSFS to facilitate more share buying perhaps reinvestment of dividends to buy more Stanbic UG shares
– Sat out the KCB rights issues whose results came out today (August 10). The Bank had set out to raise Kshs 15 billion ($189 million) from shareholders but yielded 83% of that – 12.45 billion
– Scangroup’s investment in Ogilvy Africa
– Kenol rebounded from problems at battle with government to report some much improved first half profits.
– Looking forward to buying Safaricom shares, and attending their (no SWAG) AGM
– Uchumi is yet to re-list despite exiting their receivership phase

KQ leased 737 from KLM

– Privatization: The Kenya Government is short on cash but their privatization basket is still empty. Nothing has come yet from National bank and East African Portland cement, while the next infusion of cash is likely to be from Kenya Power & Lighting Company. Meanwhile the Kenya government bond market has been much more active than the equity one.

CFC Stanbic 2010 AGM

The CFC Stanbic Holdings annual general meeting (AGM) for 2010 was held on May 21 at the tented parking at CFC Centre, off Museum Hill, Nairobi. (twitter @Standardbankgrp)

The Managing Director re-capped the year’s performance of the group companies. CFC Stanbic (bank) had a flat profit of 1.9 billion [$25 million], CFC financial services (stockbroker) lost 108 million [-$1.4m], CFC Life (insurance) lost 433 million [-$5.6m] while Heritage (insurance) had a profit of 278 million [$3.6m]. He attributed the performance to impairment of the stock portfolio at the Nairobi stock exchange which declined by 60%, increased operating costs (New IT system, write-off old IT system, opening of new branches, and refurbishing/rebranding of all other branches) overall operating income was up 25% in 2009, but operating costs went up 46%. Finally, he added that the first quarter of 2010 has seen a good performance – with good earnings from forex and government securities, and the NSE rebound has good for their portfolio this year

Hot Button Issue: Poor performance of the Group /companies was cause for concern among several shareholders who asked questions citing:
– High operating expenses of 6 billion
– Item of ‘other expenses ‘ totaling 3.4 billion ($45 million) that were not detailed in the notes
-Ill-feeling, that when they approved the CFC Stanbic merger they were told that the group would have a leaner management structure would lead to cost savings across the group, and this has not happened
– Company used to be generous & give bonuses, but looking at the results, this is not going to happen any time soon!

In reply, the Board referred back to the MD’s earlier statement that had broken down the major cost items as well as the decline in the company’s NSE portfolio that had resulted in their auditors asking that they factor in an impairment provision of about 700 million while the others were the IT costs, advertising/branding branch refurbishment across the group, not just bank business.

Why new borrowing?: a corporate bond of 2.5 billion [$32.5m]was asked about. Notes also show increase loan from IFC of 759 million and new loans from other banks – NIC (200m) and CBA (500m). MD said the bond and loans were to support their mortgage business, which has been one of their better performing lines, and also support their subordinate capital position. .
(500m)

Banking sector fraud is high even as the group invests in new system and new products like electronic banking, there is a lot of fraud in the sector with customers losing their money to bank insider, and are Kenyan laws keeping up with new fraudsters. MD replied that the new system was safer.

Long-serving Chairman Exits: During director elections, the chairman Charles Njonjo announced that Mike Du Toit (long time Stanbic K MD), Titus Naikuni (MD of Kenya Airways) and himself who were all up for re-election were all stepping down, but added that Du Toit would take up other responsibilities within the group. On his part he thanked shareholders for their support though the years and said he was proud that the company that he, Jeremiah Kiereini (fellow powerful director), and PK Jani had started many years ago had grown into a conglomerate which now had undergone many recent changes and there were many new faces (and more women) who did not know his face, He said Kiereini , who will remain on the board for a few more years, would look after his interests but that he would still be around next year, as a shareholder on the floor, to ask questions of the board. Re-elected directors were Eddy Njoroge (Kengen MD), Fred Ojiambo (Nairobi lawyer), Jane Babsa-Nzibo and Greg Brackenridge who will be the new Bank CEO?

Bonus at next meeting: an extraordinary general meeting of shareholders will be called later in the year to approve the hiving off of the insurance business (CFC Life and Heritage) into a new company (in a deal with Liberty Holdings & African Liaissons Consultants)that will also be listed on the Nairobi Stock Exchange. Current CFCStanbic shareholders will receive a dividend in specie of 1 share of the new company for every 1 CFC share they currently hold, at no additional cost.

Goodies: – lunch box (flat rice & chicken piece), soda, umbrella (which I lost an hour later)
– scary? annual report was 114 pages long without as ingle picture or CSR fluff page. Shareholders also, after several questions, approved a motion allowing the company to publish account sin the newspapers, have it on their website or e-mail it to shareholders in lieu of having to print and mail one to every shareholder.