Category Archives: Uganda

Kenya’s Money in the Past: Spymaster Memoirs by Bart Kibati

Excerpts from the Memoirs of a Kenyan Spymaster, a unique autobiography by Bart Joseph Kibati who worked in national intelligence for over two decades, where his job was to, with others in the business, identify and analyze threats and advise the government. It is a revealing look at many sectors of his life (he got married the same day that Tom Mboya was shot), Kenya’s transformation in the independence era, the business environment, and the state of security in East Africa and international relations, while serving in two administrations during  which he interacted with Presidents’ Kenyatta and Moi.

Spymaster excerpts

Police & Cattle & Remote areas

  • Cattle rustling by cattle raiders – Ngorokos (former soldier) has long been a feature in Kenya, with Laikipia and Samburu raids spilling over to Turkana, Baringo and Isiolo areas. Suguta Valley where over 40 police were killed in 2012 is a place that police have long avoided going to for years because of the dangers.
  • While the ‘Ngoroko’ plot against Moi, was a myth, it was based a well-intended idea to have an elite fighting unit to chase and deal with bandits.
  • For decades, Lamu’s Boni forest, which is near the Somalia border, has been a hideout for poachers & bandits and this has been sustained by poor policing practices in the area and support by local tribes.

East Africa & Leadership Styles

  • Some keen observations on some of the factors such as economic desires, ideology & actions of leaders  – Kenyatta, Nyerere and Obote/Amin and other political party & government officials in the run-up to why the East Africa community collapsed.
  • Two days after the signing of an East African a treaty in 1963, there were coup attempts in all three EAC countries.
  • To make their decisions, Kenyatta relied on finished intelligence information, while Moi wanted raw information.
  • Moi wanted to know why the Kikuyu hated him and Bart told him about quotas in education and government, and the collapse of their banks (which were rolled into Consolidated Bank) and area infrastructure, to which Moi replied: “How can the government build infrastructure if they ask donors not to release funds?”

Industry & Economy

  • Beach plots allocated by the President and partnership with hoteliers resulted in massive hotel empires at the coast or wealth from selling utility plots – by people around the president.
  • The greed of property developers and corruption of environmental regulators.
  • The government moved to grant duty-free cars to university lecturers in a move to pacify their radical ways.
  • Coffee smuggling from Uganda, through Chepkube, opened the eyes of many people in government, including police, to quick great wealth that could come from corruption.
  • The Numerical Machine Corporation was a success. It just could not shed the ‘Nyayo car’ tag.

Human Resources  & Working in the Government: 

  • When he finished form four at Mangu High School, he had job offers to work at East African Airways, Barclays Bank, the Post Office, Kenyatta University, and also the option to continue his schooling at A levels!
  • The recent repeal of indemnity for security forces (and TJRC) makes it hard to do police work such as combating terror threats and is a demonization of patriots.
  • How colleagues, and politicians scheme to transfer, promote or demote other security staff.
  • There is no pension for older Kenyans who, while experienced, are discarded under the guise that they are preventing youth from getting jobs. It seems the Government hopes they will die soon and stop draining the meagre government pension.
  • There were no successful coups in Kenya due to (long-term spymaster chief) Kanyotu and the Special Branch. The 1982 coup was unnecessary;  It could have been stopped but for a leak and bureaucracy. But Kanyotu was later misled by Pattni into the Goldenberg scam.
  • The more open that national intelligence services become, with things like having a visible head (of tee NIS) and a website, the less effective they have become.
  • Finally, he ends by asking if Kenya is facing more terror attacks, urban crimes, and rural banditry today because the country doesn’t have a functional intelligence collecting unit. Or there’s more reliance on technical intelligence than human intelligence by a demoralized, ethnicized spy unit.

Some revelations in Spymaster are shocking, but many of the stories have been cited elsewhere with different interpretations, and many of the people named have passed on, or circumstances have changed. Also another story elsewhere, quotes Lee Njiru a long time civil servant who says that: (the) Official Secrets Act binds civil servants to keep secrets for 30 years and the period had elapsed and he was now free to share what he knows.

Also read The Birth of an Airline by Owaahh, which narrates from the Spymaster book, about the break-up of East African Airways and the birth of Kenya Airways.

EAVCA: East Africa Private Equity Snapshot

Ahead of the 3rd Annual Private Equity in East Africa Conference, (taking place on June 15 in Nairobi) the East Africa Private Equity & Venture Capital Association (EAVCA) and KPMG East Africa released their second private equity survey showing increased funding and activity, and with a lot more opportunity for deals to be done.

They estimated that of the $4.8 trillion raised between by P/E funds globally between 2007 and 2016, about $28 billion was raised by Africa-focused funds and $2.7 (including $1.1 billion in 2015-2016) had been earmarked for investment activity in East Africa.

This private equity had funded over 115 deals in the period that were included in the survey. Out of these  the 115 deals, 23 were agri-business, 20 were financial services, 13 manufacturing, and 12 FMGC representing 59% of deal volume. The average deal size had also grown to the $10-15 million range, while in the initial survey it was below $5 million.

East Africa Private Equity Survey

Of the 115 deals, Kenya had 72 deals (63% of the total), Tanzania 19, Ethiopia 8, Uganda 12, and Rwanda at 4. Some of the large deals in the survey, by country, include:

Rwanda: Cimerwa – PPC ($69M), Cogebanque ($41M), BPR-Atlas Mara ($20M), Pfunda Tea ($20M)
Uganda: topped by oil deals CNOOC and Total SA (both $1,467 million), Tullow $1,350M, Total $900M, CSquared-Mitsui $100M, Sadolin-Kansai $88M
Ethiopia: National Tobacco – Japan ($510M), Meta Abo-Johnnie Walker ($255M), Dashen-Duet ($90M), Bedele-Heineken ($85M) and Harar-Heineken ($78M), Tullow-Marathon ($50M)
Tanzania: Africa Barrick Gold ($4,781 million), Tanzania – Pavilion ($1,250M), Vodacom ($243M), Export Trading Co ($210M), Millicom-SREI ($86M), Zanzibar Telecom-Millicom ($74M)
Kenya: Safaricom-Vodacom ($2,600 million), Africa Oil-Maersk ($845M), I&M-City Trust ($335M), Ardan-Africa Oil ($329M), Kenya Breweries-EABL $224M, UAP-Old Mutual ($155M), ARM Cement-CDC ($140M), Wananchi ($130M), CMC-AlFuttaim ($127M), Essar ($120M)

P/E operations: There are about 72 funds operating/focused in East Africa (up from 36 in the first survey) with over 300 employees. 89% of the survey respondents have a local presence in East Africa.

Some of the fund companies that responded to the survey include Acumen, Abraaj, AfricInvest, AHL, Ascent, , Catalyst, Centum, CrossBoundary, Grofin, Emerging Capital Partners, Kuramo, Metier, Mkoba, NorFund, Novastar, Phatisa, Pearl Proparco, Swedfund, and TBL Mirror

Returns:  Of  the deals done, survey responders had an average IRR target was 22% while the actual IRR achieved was 19%.  There were 34 exits between 2007 and 2016, with increased recent activity; 2014 (had 7), 2015 (7) and 2016 (6). The preferred mode of exit is sale to a strategic investors (preferred by 78% while this mode accounts for 38% of exits) followed by share buy backs (32%), then sales to another P/E (21%).

Many of the funds in the region are still in early stages, and 54% have made nil returns to their investors. They surveyors estimate there are more opportunities for Africa private equity in health, education, retail, and manufacturing sectors.

Church Donation Mystery

tuko-church-donation

Screen grab of the Tuko.Co.Ke video

There was this fantastic story on Tuko website about huge donations that were made to a Church on behalf of the President and the Deputy President.

They were each said to have given 34 million shillings in a video shows the Governor of Narok county presenting an envelope with the cash. He also gave 6.8 million of his own, and another 3.4 million from another governor.

The sum of 34 million is incredible. Indeed, it is almost the  same amount as the equally implausible claim of 40 million from NYS that Josephine Kabura says she carried out of a bank hall on more than one occasion.

So what’s more likely?. I though it may have been a donation in Tanzania as Narok county borders Tanzania. But a different story by Citizen TV of the same event notes that the Kenyan contingent donated a sum of 82.6 million shillings in support of the Ugandan Church in Sebei, Kapchorwa District.

If the donations were in Uganda shillings (UGX), not Kenya shillings (KES) then that makes more sense, and tallies with the video clip that shows the size of the cash bundles, and is more realistic in terms of the usual donations that leaders are reported to make. 34 million Uganda shillings is equal to about 1 million Kenya shillings, UGX 6.8 million equals KES 200,000, and  UGX  3.4 million is equal to about KES 100,000.  There’s no clear mention of the currency (whether Kenya shillings or Uganda shillings) in the video and it’s likely that the Governor translated the equivalent in Uganda shillings for the congregation while presenting the Kenya shillings donation to the Church.

$1 = KES 101, $1= UGX 3,500, 1 KES = UGX 34.

Reading the Tea Leaves at Crane Bank

On October 20, the Bank of Uganda (BoU  – the country’s banking regulator) took over (PDF) the management of  Crane Bank and stated that:

  • (Crane was( significantly undercapitalised (and) poses a systemic risk to the stability of the financial system (and) ..  in its current form detrimental to the interests of its depositors.
  • BoU  appointed a statutory manager and suspended the Board of Directors of Crane Bank
  • Crane Bank will remain open and its operations will continue normally, but under the management and control of BoU.

Tweets about Crane Bank Crane Bank was started in 1995 and was said to be the fourth largest bank in Uganda. It had 46 branches in Uganda and 2 in Rwanda, where the bank regulator has said that the Crane Rwanda subsidiary licensed in 2014 is solid and will remain unaffected by the closure of the parent in Uganda.

In its 2015 supervision report, the Bank of Uganda made reference to the performance of domestic systemically important banks – Stanbic bank, Standard Chartered bank and Crane bank which accounted for 36% of total banking sector assets. ..there was a decline in asset quality among D-SIBS with NPL ratio rising from 3.5%  percent in December 2014 to 7.6% (and) while this reflected the general performance of the banking sector, the decline in quality among DSIBs was also on account of the performance of one bank with a significant exposure to one borrower. All the DSIBs have adequate capital to absorb losses.

Crane Bank is an award-winning indigenous bank in Uganda, and was audited by KPMG. Like Chase Bank in Kenya it was said to be a fast growing, darling of entrepreneurs, paid higher interest rates to depositors, and progressive in its outlook to entrepreneurs and business people – with lot’s of referrals by word of mouth and repeat business from customers.

But one difference from Chase Bank is that while there was the bank was very inactive on social media , Crane had posted only 2 tweets this year even as there was a storm of social media posts leading to the take over last week.

The 2015 annual report of Crane notes that:

  • The Bank’s loans & advances reached  UGX 1,010.9 Billion against UGX 836.9 Billion in 2014  
  • Customer Deposits grew from UGX 1,267.5 Billion in 2014 to UGX 1,336.6 Billion in 2015 indicating the growing confidence of our patrons and customers.
  • The bank added about 75,000 accounts during the year, pushing the total number of accounts to 499,133 as of December 2015.
  • The bank is controlled by Dr Sudhir Ruparelia who controls 48.67% of the voting rights in the bank.. at 31 December 2015 advances to companies controlled by directors or their families amounted to Shs. 1,003 million (2014: Shs 4,639 million). All the above loans were issued at interest rates of 16% (2014: 16%) and were all performing as at 31 December 2015 and 2014.
  • The aggregate amount of non performing loans and advances was Ushs 142,358 million (2014 – Ushs 19,362 million).
  • As at 31 December 2015, the bank had no exposures to a single borrower or group of borrowers exceeding 25% of its total capital
  • (importance in tax collection) The bank maintained its position among top collection agents for UMEME / NWSC and (is) in Ppartnership with URA to do all URA PIN generation and KCCA COIN registration and all URA & KCCA payments. Bill payment is currently enabled through Internet banking.

Other news stories:

  • A few months ago, the bank’s principal shareholder spoke with Red Pepper about the impending sale of a stake in the bank.
  • The East African has a story on how employee tipoff may have led, government, large and foreign depositors to withdraw huge sums from the bank as talks with suitors like Atlas Mara got more complicated.

$1 = ~UGX 3,414. 

Domestic Resources Mobilization in Africa

African case studies on tax reform and domestic resource mobilization from Togo, Uganda and Ethiopia.

Togo 

  • IMF was not very happy when they merged the two offices of customs and revenue. But Togo accepted performance monitoring mechanism that was funded by the WB and when they saw that it was working, then the IMF came back on board.
  • Introduced reform in a country where the richest people are civil servants
  • Invested in computers, capacity building, software to have a system that tackles all aspects from declaration to dispute resolution.
  • Got 15,000 new taxpayers last year, while in past years they used to get 7,000.
  • Also improve speed and security. Previously, petroleum revenue used to be manually recorded. They now use PIN’s in different department, and the software is connected to the banking system so no more direct payments (all are done at at banks).
  • While they initally retired a number of officers who did not want to learn or comply, those who remained had improved terms with performance targets for which they earn bonuses
  • 2015 target was 480 billion CFA and they managed to college 516 billion.
  • They have not fully used the system yet. It’s only two years old, but they rely on their neighbours for internet connectivity.

Afcop AfriK4RUganda: 

  • Is in second phase of a 2019-20  plan which targets to  fully financing budget from domestic sources. The revenue authority started in 1991 but reforms started in 2005.
  • Even as the economy has grown, surprisingly the informal sector has also grown to take a larger share of the economy (49% of GDP, up from 43% in 2002. They have had to target the informal sector to keep up e.g via presumptive tax thresholds.
  • The revenue authorities treat the government as ‘private sector’and removed their exemptions like VAT and income tax.
  • Have business bands, and a taxpayer identification number (TIN) is requires for most transactions and permits, whether livestock movement, boda boda purchase, agriculture payments etc. All professionals – doctor engineers lawyers also have TIN’s, and they hope the introduction of national ID cards will enhance tax collection efforts.
  • They have a separate section for international taxation and have built capacity in oil & gas taxation. But as they train staff, other companies hire away their top performer, so they have to be retained.
  • They have simplified tax system so people can pay at their convenience e.g. via mobile money even when banks are closed.

Ethiopia:

  • Set out to mobilization domestic resources for the largest hydroelectric dam in Africa after foreign donors and partners who had supported previous smaller dams, balked at participation.
  • The GERD (Great Ethiopian Renaissance Dam) will generate 6,500 MW. It is 1,680 Sq.KM, and 120 kilometres by 14 kilometers and 146 metres high – and it took off  in April 2011, is 70% done, to be completed in July 2017.
  • Because of political impact river to other countries (shared Nile), external funding was blocked by international community and they turned to own people to meet the $4.8 billion cost (11% of their GDP or about 60% of the country’s 2012 budget).
  • Got contributions from individuals and companies –  local and diaspora –  though direct contributions, lotteries, music events.
  • They also had a diaspora bond which has raised $500 million. People bought the 1.5% bond that matured in 5,7, 10 years. The dam will generate income from electricity sales to pay back the bond – and is expected to generate $1 billion per year.
  • They also got support from banks, who expanded branches to reach more of the rural population (one bank now has 1,000 outlets) and mobilized deposits. The banks were required to allocate 27% of every loan they make to buy the bond.