Category Archives: tanzania

Bank Closures in Ghana and Tanzania

August 2 saw bank closures in Ghana and Tanzania with interesting back stories on the institutions from regulators in both countries.

Tanzania: the regulator Bank of Tanzania (BoT) issued notices that covered two separate cases. BoT took over Bank M, closing it down for three months and appointed a statutory manager (in place of the directors and management of the bank) who will determine the future of the institution. The statement (PDF) read that this was done for reasons that “..Bank M has critical liquidity problems and is unable to meet its maturing obligations. Continuation of the bank’s operations in the current liquidity condition is detrimental to the interests of depositors and poses systemic risk to the stability of the financial system.“. Two years ago, Bank M distanced itself from M Oriental Bank in Kenya.  

The Bank of Tanzania also published an update (PDF) on other banks whose licenses it had revoked in January 2018. Of these earlier bank closures, three of them had been given up to 31 July to increase their level of capitalization and as a result, the BoT had approved a decision to merge one of the affected banks – Tanzania Women’s Bank with another bank – TPB which will result in all its customers, employees, assets, and liabilities transferring to TBP Plc . Meanwhile, two of the other banks, Tandahimba Community Bank and Kilimanjaro Cooperative Bank managed to meet the set minimum capital requirements and have been allowed to resume normal banking operations.

Ghana: Meanwhile in Ghana, the regulator Bank of Ghana revoked licenses of five banks – uniBank Ghana, Royal Bank, Beige Bank, Sovereign Bank, and Construction Bank – and appointed a receiver manager to supervise their assets and liabilities as a combined new indigenous bank, called the Consolidated Bank. All deposits at the five banks have been transferred to the new bank and customers will continue banking at their usual branches which will now become branches of Consolidated. Also, all staff of the five banks will become staff of Consolidated, except for the directors and shareholders of the five banks who will “no longer have any roles”

The Bank of Ghana statement reads that .. “to finance the gap between the liabilities and good assets assumed by Consolidated Bank, the Government has issued a bond of up to GH¢ 5.76 billion. ” and goes on to give some details and background of the problems encountered at the former five, leading to the subsequent bank closures:

  • uniBank: The Official Administrator appointed in March 2018 has found that the bank is beyond rehabilitation. Altogether, shareholders, related and connected parties of uniBank had taken out an amount of GH¢5.3 billion from the bank, constituting 75% of total assets of the bank. Over 89% of uniBank’s loans and advances book of GH¢3.74 billion as of 31st May 2018 was classified as non-performing, in addition to amounts totaling GH¢3.7 billion given out to shareholders and related parties which were not reported as part of the bank’s loan portfolio. uniBank’s shareholders and related parties have admitted to acquiring several real estate properties in their own names using the funds they took from the bank under questionable circumstances. Promises by these shareholders and related parties to refund monies by mid-July 2018 and legally transfer title to assets acquired back to uniBank have failed to materialize.
  • Royal Bank:  Its non-performing loans constitute 78.9% of total loans granted, owing to poor credit risk and liquidity risk management controls. A number of the bank’s transactions totaling GH¢161.92 million were entered into with shareholders, related and connected parties, structured to circumvent single obligor limits, conceal related party exposure limits, and overstate the capital position of the bank for the purpose of complying with the capital adequacy requirement.
  • Sovereign Bank:  Subsequent to its licensing, a substantial amount of the bank’s capital was placed with another financial institution as an investment for the bank. The bank has however not been able to retrieve this amount from the investment firm with which it was placed, and it has emerged that the investments were liquidated by the shareholders and parties related to them. Following enquiries by the Bank of Ghana, the promoters of the bank admitted that they did not pay for the shares they acquired in the bank. The promoters of the bank have since surrendered their shares to the bank, while the directors representing those original shareholders have since resigned. The Bank of Ghana has concluded that Sovereign Bank is insolvent, and that there is no reasonable prospect of a return to viability.
  • Beige Bank: Funds purportedly used by the bank’s parent company to recapitalize were sourced from the bank through an affiliate company and in violation with regulatory requirements for bank capital. In particular, an amount of GH¢163.47 million belonging to the bank was placed with one of its affiliate companies (an asset management company) and subsequently transferred to its parent company which in turn purported to reinvest it in the bank as part of the bank’s capital. The placement by the bank with its affiliate company amounted to 86.86% of its net own funds as at end June 2018, thereby breaching the regulatory limit of 10%. Also, the bank has not been able to recover these funds for its operations.
  • Construction Bank: the initial minimum paid up capital of the bank provided by its promoter/shareholder, was funded by loans obtained from NIB Bank Limited. An amount of GH¢80 million out of the amounts reported as the bank’s paid-up capital and purportedly placed with NIB and uniBank, remains inaccessible to the bank – and the bank’s inability to inject additional capital to restore its capital adequacy to the minimum capital of GH¢ 120 million required at the date of licensing threatens the safety of depositors’ funds and the stability of the banking system.

Paper Planes: Big Day for African Airlines on Paper

July 18 was a big day for various African airlines with news affecting travel in different parts of the continent, ahead of the Farnborough Airshow in the UK.

Nigeria announced plans to revive a national airline – Nigeria Air, a new private sector led-airline in which the government would own no more than 5% and would not manage. It is planned to start flights in December with a target of serving 81 destinations. The launch was officiated by the Nigerian Minister of State for Aviation at Farnborough and he said that they were in talks with Boeing and Airbus and also financiers such as Standard Chartered Bank. The new airline was shown in the livery of new Boeing 737 Max and Airbus A330 models. 

Just a few days after leaders of Ethiopia and Eritrea announced a cease-fire and made historic visits to each other’s countries, Ethiopian Airlines made it’s first flight since 1998  to Eritrea. On the flight were many families reuniting, and former Prime Minister former Hailemariam Desalegn. The flights will be seven days a week, between Addis and Asmara and Ethiopian,  which is expected to be part of some privatization program, was also reported to be planning to invest in a 20% stake in Eritrean Airlines.

Also there are reports that Ethiopian Cargo, Africa’s largest cargo operator, is to sign a joint venture with parcels and logistics giant DHL that would see DHL take up a 49% stake in the company.

A few days ago, Air Tanzania received its first Boeing 787 Dreamliner, which is expected to carve some routes in East Africa that are controlled by Kenya Airways and Rwanda Airlines.

Also at Farnborough, Uganda Airlines signed an MOU for two A330-800 Neo planes which they would fit in a three class-layout.

Earlier the same day, Uganda (National) Airlines announced an order with another manufacturer Bombardier for four CRJ900 planes.

Kenya Airways continues to market new routes Mauritius, Cape Town and the new direct non-stop flights to New York that will start in October 2018.

At Farnborough, Embraer and Kenya Airways announced a spare parts deal.

South Africa Airways celebrated Nelson Mandela’s 100th birthday with some new livery on some planes.

The revival comes all comes at a time when African Airlines now account for just 20% of the air traffic from the continent, down from 60% in a decade as Gulf carriers have made great strides in the continent. African airlines have also struggled with financial performance and management, with only Ethiopian posting consistent profits in the last decade. And, notably,  the deals announced at Farnborough lack detail on the financing aircraft, with Boeing 787’s and Airbus A330’s each having official prices of over $200 million.

Earlier, Skytrax published its list of the top 100 airlines in the world and it featured some African airlines including Ethiopian Airlines (at number 40), South African Airways (45), Air Mauritius (69), Air Seychelles (82), Kenya Airways (85) and was topped by Singapore, Qatar, All Nippon, Emirates and Eva Air. Other awards for African airlines were in categories of best airline staff service (South African Airways), best regional airline (Royal Air Maroc), best low-cost airline ( Mango) and best African airline (Ethiopian).

EDIT: More from Farnborough – via Leeham News & Comment.

  • Air Botswana signed a firm order for two ATR72-600s.
  • Mauritania Airlines placed a firm order for two E175s that will deliver next year.

Kenya’s Money in the Past: Bethwell Ogot Footprints on the Sands of Time

My Footprints on the Sands of Time is an autobiography by Professor Bethwell Ogot (wikipedia),  an eminent academic scholar. It is a tale of a young man overcoming incredible hardships, and going through early schooling at Maseno, and later through winning scholarships and prizes, on to excelling at Makerere, St. Andrews (Scotland) and teaching with Carey Francis at Alliance High School. It also touches on his work and roles in the establishment of the University of Nairobi, and Maseno University, and at his travels to present papers and speak at prestigious conferences and other institutions across the world.

Ogot narrates tales on growing up in Luo culture, seeing emerging economic changes e.g. he took a honeymoon trip to Uganda in 1959 traveling on first class from Kisumu to Kampala via Nakuru, a twenty-seven-hour train journey. Later, when his father died on August 30, 1978, this was the day before Kenya’s first president Mzee Jomo Kenyatta was to be buried, and it was a period when the sole broadcaster – the Voice of Kenya refused to publish any other death announcements, newspapers would not publish any other obituaries as a sign of respect to Kenyatta, and coffin-makers were not willing to make any other coffins.

He was close to former schoolmates, who were now in government and its leaders. Ogot was waiting to meet Tom Mboya for lunch at the New Stanley Hotel when Mboya was shot (his death was not unexpected to his friends), and Ogot had an encounter with Mboya’s killer who was fleeing the scene.  He writes of his work to establish and get government and financial support for the Ramogi Institute of Advanced Technology – RIAT and a delicate dance with community leaders including Oginga Odinga who was firmly out of government.

The book has a wealth of information on corporate governance and management from Ogot’s time at regional bodies, parastatals, international organizations, donor-funded ones, universities that were in slow decline and government. He writes of working in research and publishing, and struggling to document and publish African history. Also of his times at the East African Publishing House that published books on political science, history, geography and a modern African library with much opposition from British Publishers who controlled publishing and later from government officials who set out to shut down independent academic stories. They published Okot p’Bitek’s Song of Lawino that some critics considered a terrible poem ahead of its publication but which went on to be celebrated and sell over 25,000 copies.

There are also stories of navigating the East African Legislative Assembly, travels around East Africa, interacting with leaders and observing actions that were either supporting or undermining the East African Community. Uganda’s President Amin spoke of supporting the community even as he launched Uganda Airlines that he said would only do domestic flights in Uganda. There was also the importation of goods for Zambia through Mombasa that undermined the Dar es Salaam port and the Tazara railway, so Tanzania banned Kenyans trucks with excess tonnage from using their highways, and Kenya retaliated by closing its border with Tanzania. Officials in different countries also tried to keep community assets from leaving their borders, and Kenya grounded planes and withheld fuel of East Africa Airways which owed money to Kenya banks in a move designed to hurt vast Tanzania the most.

The most shocking tales are from his time working at the Museums of Kenya and its spinoff that saw Ogot as the first director of The International Louis Leakey Memorial Institute for African Prehistory – TILLMIAP (see an excerpt). It is a serious indictment of Richard Leakey who regarded TILLMIAP as his personal family fund-raising institution and who, with the support of Charles Njonjo in government and diplomats and donor agencies, warded off transparency and Africanization efforts – and was eventually to hound Ogot out of the institution.

Another tale is of when, as the candidate representing Africa on the executive board of UNESCO, he ran for the Presidency of the General Conference. But what should have been a formality of confirming his position became a long process after a surprise Senegalese candidate emerged to run against him – and France lobbied Francophone countries to only vote for a French-speaking African candidate, rules were changed, documents forged, and additional multiple election steps added before Ogot finally won.

The 500+ page book by Prof. Ogot does not have an index, but it’s worth reading all over again.

EAVCA: Fintrek explores Fintech opportunities in East Africa

This week, the East Africa Venture Capital Association (EAVCA) with Intellecap Advisory Services released the Fintrek – which explores fintech opportunities in East Africa, new frontiers in fintech (defined as firms using technology to deliver financial products/services or capabilities to customers or others firms) and fintech investments in East Africa.

Asia Pacific and Africa have been harbingers of mobile payments and that is transitioning into fintech now. The Fintrek report notes three underlying factors driving fintech uptake as:

  • (i) the use of alternative data to generate credit takings of the unbanked (and deliver services to them cheaply e.g no need for bank branches),
  • (ii) peer to peer networks (decentralized collaboration, payments across borders, unregulated) and
  • (iii) the emergence of nontraditional players (telcos, wallets like Google Pay & Apple Pay, e-retailers like Amazon)

smartphones offer fintech opportunities.

Regionally, Kenya is seen as a leader in the region owing to its levels of deposit penetration, deep financial sector penetration, and smartphone ownership (at 44% compared to less than 10% for Tanzania Uganda Rwanda and Ethiopia). Kenya is where most fintechs are setting up, and Kenya-based fintechs have raised $204 million between 2000 and 2017 which is 98% of the funding to the region.

Funding: In terms of funding, fintechs are still in early stages as seen in the small deal sizes: seed funding provided 47 deals (averaging $447,000) and 60% of all funding was to impact areas renewable energy/off grid lighting and health care (microinsurance). Five companies M-KOPA, Off-Grid Electric, SunFunder, Angaza, Azuri) have raised $345 million (through debt and equity) accounting for 55% of the funding between 2010 and 2017. Another finding was that while 53% of all funding between 2010 and 2017 was from venture capital funds, their average deal size  ($6 million – e.g. from Apis, Madison Dearborn)  is lower than those of corporates ($15 million – e.g. from Stanbic, Commercial Bank of Africa) and foundations ($10 million – e.g. from Calvert, Emerson, Omidyar Network) deals.

Fintechs needs a balance of debt and equity investments to grow, but they are struggling to get debt financing (mainly bank loans). Fintechs in East Africa had debt-equity ratios of 1:1 compared to 3:1 globally, indicating they have capacity to absorb more debt but are not doing it. The EAVCA report cites one of the funding challenges as investors want proof of traction while fintechs need working capital to demonstrate proof of concept, lack of funder knowledge about local markets, East Africa fintechs don’t look like what foreign investors expect, currency fluctuations make it had to raise debt and there is a lack of fundraising skill among local fintechs who can’t afford the teams that will enable them to raise money.

The Fintrek report identified 11 fintech opportunities models and 47 sub-models and identified 4 sub-models that have flourished in East Africa:

Payments and Savings: digital wallets (M-Pesa, Alipay, Tigo pesa – which pays 7-9% interest and now attract high-end users), payment intermediaries (Cellulant, Direct Pay, Jambopay) and digital currencies (Bitpesa, Coinbase, Belfrics – a crypto-currency platform).

Lending: direct lending (Branch, Tala – with 1.8M customers in Kenya, Kreditech, Umati capital), P2P lending (Lendable, Pezesha – has 6,000 borrowers & 200 lenders), and lending aggregators (lakompare). Also, there is telco-based nano lending (M-Shwari, KCB-M-Pesa, Equitel – which issued $57 billion worth of loans – and telco-bank lenders in Kenya account for over 76% of total loan accounts, but only 4% of the loan values)

Financial Management: Insuretech (Bimaspace, BimaAfya, Microensure), Investech (Abacus, Xeno) and personal finance management – (Chamasoft, Caytree).

FS Enablers: (Jumo – credit underwriting for 5 million customers and 20 million loans), Arifu, FirstAccess, NetGuardian – fraud identifier), FarmDrive, Sasa solutions, Lendddo).

Some recent fintech deals in East Africa include Farmdrive (from the Safaricom Spark Fund), Pezesha (DFS lab), Pula (DFS lab, CGAP), M-Kopa ($80M – Stanbic, CDC, FMO, Norfund), Tala ($30M – IVP), Jumo ($24M – Finnfund), Mobisol ($12M – FinnFund), Angaza ($10.5M – Emerson), Flutterwave ($10M – Greycroft), Netguardian ($8.5M – Freemont), Trine ($8M – Gullspang), Lendable ($6M – Kawisafi, Omidyar, Fenway), Direct Pay ($5M – Apis), Azuri ($5M – Standard Chartered), Bitpesa ($4.25M – Greycroft), Branch ($2M – from high-networth Kenyans and funds – arranged by Nabo Capital)

Production of the Fintrek report was supported by Financial Sector Deepening (FSD) Africa and Netherlands Development Finance Company (FMO).

See more of the EAVCA Fintrek report and other fintech opportunities at the 5th Sankalp Africa Summit on March 1-2, 2018 in Nairobi and see their private equity snapshot report.

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Tanzania closes 5 banks

In notices released today, the Bank of Tanzania (BoT) revoked the licenses and directed that five banks proceed to compulsory liquidation, by the country’s  Deposit Insurance Board (DIB).

BOT found that the banks – Covenant Bank For Women {Tanzania}, Efatha Bank, Njombe Community Bank, Kagera Farmers Cooperative Bank and Meru Community Bank were found to be critically undercapitalized and that their continued operations would be detrimental to depositors and a risk to the stability of the financial system.

In another notice, depositors, creditors, and debtors of the five banks were asked to be patient as the liquidator (DIB) makes arrangements, collect debts, and works out a payout plan.