Category Archives: Wananchi online

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.

Dstv Pricing in Kenya

This week saw satellite TV provide Multichoice Kenya increase the price of their DSTV satellite TV subscription service, with the top (premium) package now going to cost Ksh 9,400 (~$92) per month from October – an increase of almost 15%. This has since been debated on several fronts, one of which was a cost comparison with South Africa pricing where the company is based.

WGKantai dstv

 Another was done  in terms of what paying for TV means compared to other real life costs like paying for housemaids.

In an interview on the price change, Multichoice Africa CEO Tim Jacobs cited several factors behind the increase including Kenya’s shilling which has depreciated 15% this year against the US dollar in which they buy most of their programming such as the (extremely popular) English Premier League (EPL) who’s rights were hiked 70% in the new deal signed earlier this year.

The price increase also sparked a local consumer lobby to pursue a boycott and petition and in past years, a similar dstv cost increase was debated in Kenya’s parliament. Back in April 2010, one MP asked if Kenya’s national broadcaster – KBC, who own 40% of Multichoice Kenya would consider waiving their profit so that more Kenyans could afford to watch the 2010 World Cup .

dstv maid

This may be the most significant sports television moment in Kenya since  GTV went bust after a short period of outspending dstv in the race to televise top sports events.

The new dstv cost that has a figure close to five digits per month seems to be a tipping point with many subscribers now saying that the cost is simply too much and that they plan to downgrade their subscription to a cheaper one or switch to another company.

Rival, Zuku (of the Wananchi Group) has since responded to the dstv increase with an enhancement of their channel package and offering their viewers more programming, at no extra cost, by adding as many as 19 new channels such as Nat Geo Gold, Fox Sports 2, BET, Discovery Science, IConcerts, TLC, Fox News, FX , Bloomberg, E!, Sky News and Euronews.dstv multichoice

It’s not clear how many of the 100,000-160,000 dstv subscribers in Kenya are on the premium package, but it’s clear that many of those that do, subscribe to it for the sports packages (which are exclusive to the premium tier), and also that many of the same premium dstv subscribers do enjoy watching their favorite sports teams and players with their friends and fellow fans in sports pubs, and not at home where they are paying for the sports (and face many distractions!).

Growing a Tech company: 5 Lessons Learnt in Hiring

A guest post by @Wanjiku

Two months ago, Erik Hersman wrote a nice post on his blog about Kazi ya mkono. To the educated folks, “kazi ya mkono” is for those who didn’t go to school and were relegated to manual labour or just assisting and to the folks doing it, its a way of earning a living.

Over time, the term “kazi ya mkono” has evolved to mean the people who are not afraid to get their hands dirty and, given the proliferation of universities and colleges, having a degree doesn’t mean anything, and you still get to do kazi ya mkono.

But for the sake of this article, let us use the meaning as “digging the trenches, getting our hands dirty and just getting stuff done”. I am that person who always has a business going, whether selling biscuits and bread in high school or operating the corner milk shop in the neighbourhood – I am the side-hustle person.

Since Erik’s piece came out, I have been thinking about my mistakes and lessons in the process of growing a tech company. Staffing is probably the biggest challenge a growing company faces, along with capital. Investing in an area like tech infrastructure is challenging. You get the most skilled and the mediocre claiming ability to do the same job.

The lessons relate to bringing together a team, that will help achieve the dream.

1. Earning your credibility: One of the guys we hired in the early days, told me that he wanted to work for a company with directors. I wondered what he meant because the company is limited ergo, must have at least two directors.

What the guy meant was that he wanted to work for a big company with a name or a board of directors – I presume more than two. You guessed it right, a month later, the guy gave me a day’s notice when Wananchi Group came calling. (and that was of course after I had paid him his salary 🙂 )

That statement stuck with me over the years because the guy went to work on the same salary or maybe slightly higher, but he had chosen to go because Wananchi had the name. That I couldn’t argue with although I wanted to ask if Richard Bell would tuck him to bed in the evening, after his board meeting or serve him dinner. But I reserved my comments.

You can imagine the conversation a few months ago, when we discovered the guy was let go from Wananchi and was working at another company but with basic pay. I actually called him to say that we still have the same directors but could give him a job. Well, that was just talk.

People want to work for a credible or seemingly big organisation. That is why people get souped-up offices, with furniture that can massage behinds, directors buy big cars and provide this make-believe image in order to attract talent. People seem to buy into this perception big time.

2. Papers don’t always mean anything: Last month, I was very shocked by a smooth-talking guy who had tech certifications from here to Meru. He had everything but I was interested in the practical bit. I asked him like ten times whether he knew the stuff and if I sent him to a client he would be o.k. He answered yes, giving me examples of sites he had deployed and I was impressed by the young man.

Enter the practical bit. The technical lead greeted him with a router and the guy descended on his phone to search. Then he was told that the internet wasn’t needed. The guy sneaked out under the guise of pressing matters. The guy had Cisco certification but he couldn’t even log in.

I have several other cases of guys with certs who have done it but an equally high number that are self-taught or learnt on the job and are very good at it. My new strategy was to start with the practical, then chat about other stuff later.

The best, efficient people are not always the most educated.

3. No one likes to persevere, learn and earn later: This debate has been going on for a while. A person leaves university and immediately wants to earn some big money. They don’t look at it in terms of experience and what they can provide, its all about the big money.

Yes, our higher education teaches us that we can only be managers and bosses and not the people doing the actual stuff. I guess that is why very few people want to stick it out for a few years on minimal pay that rises normally;  we are all ready to drive within year one and how will you guarantee that loan?

I was recently eavesdropping on a conversation with two people in accounting. The old timers got their jobs when CPA (K) was the thing. Now, new graduates are coming with the papers and within the first year they wonder why their boss with minimal papers should be taking home that much.

I drew parallels with tech, where new graduates ask the same of a guy who has learnt through experience over the years. How do you answer that, while there is no substitute for experience?

I gave up on trying to show people what comes with patience. I started by working hard to show people that lack of higher education shouldn’t be a barrier to achieving dreams. People didn’t see that far and in the end, my colleague told me to quit “being all motherly”.

Now, I demand performance, if you can’t hack it, try another place where mediocrity is entertained and if you want to go stay at home, it is ok.

4. For the guys who put their head down and work: I know much has been said about salary negotiations and productivity. The last quarter we hired more people and of course we all have to keep the wage bill in check. The salaries are not the highest but we are good and make people comfortable.

But after a month or two, we realised that some of the guys were worth more than they negotiated. These guys had gone out of their way to deliver beyond expectations. The fact that they were on fair or comfortable salaries didn’t impact their productivity.

There are several circumstances that may make people not to get the best deal but once someone has proven their value, it is only fair that you make them feel appreciated. So, within the second month, the salaries were adjusted up, to reflect their (almost) true value.

I am still struggling with the guys who over promise and under deliver. How do you call guys and say, your salary is a scale lower? Yet they negotiated higher? That one I am still figuring out.

5. Rewarding loyal employees: In every company, I am sure there is that one person or people who can give you the history, from the time they all shared one desk. These are the people with institutional memory and probably know the organisation’s DNA.

Pay rises, continuous training and promotions are some of the strategies to retain the people but as companies grow, shareholding becomes a better option.

Conclusions: There no way of saying that these lessons apply to everyone but for Kenyan companies that are bootstrapping, you are likely to face these challenges.

At the same time, don’t think that your passion and drive as a founder can necessarily rub off the people working there. You need extra motivation and money does a great deal of motivation. If you have to go hungry to drive the company, you can do it with your co-founders, but not with the employees, otherwise they will start leaving.

The trick is to sell the dream to the team while at the same time working hard to make the conditions comfortable and making them feel it whenever there is an upturn in fortunes. If the profits get better, find a way to make it felt.

That is what I tell myself 🙂

Zuku Slashes Kenya Internet Prices


thanks K for the Breakfast invite

It’s been a big year for Zuku of the Wananchi Group – they got new funding and the fibre cable reached in Kenya – they are a shareholder in TEAMS which is operational (but not yet launched) and have also bought capacity on Seacom. Their CEO said the 50 gigabytes they have on TEAMS will serve the anticipated needs of their Kenyan customers for the next decade and they have the option to increase capacity on either cable.

Reduced internet prices: This morning (2/12/09), Zuku announced reduced internet prices of ~50% as follows for wimax package:
• Prosurf (256Kbps) 3,000 Kshs 1,500 (~$20)
• Supersurf (512 Kbps) 6,000 Kshs 2,500 (~$33)
• Megasurf (1 Mbps) 10,000 Kshs 4,500 (~$60)
The one time installation cost has also gone down from 5,800 to Kshs 3,000 lowering the entry barrier for homes

For small corporates and SME’s they have new Zuku Biz which is unlimited corporate broadband packages priced as follows:
• 10Mbps will cost Kshs 10,000 per month (~$133)
• 15 Mbps will cost Kshs 15,000 per month (~$200)
• 20 Mbps will cost Kshs 20,000 per month (~$266)
For these installation costs are Kshs 3,000, and equipment and VAT are included in the pricing, with security services offered at an additional cost (firewall, e-mail security, spam management)

Reaching out to property developers Zuku is currenlty available in Nairobi Nakuru Mombasa and Nyeri are already wired, and in Nairobi 40 buildings are fully wired with another 100+ having cabling up to their doorstep. By reaching out developers and property owners, Zuku hopes to convert planned, new, and existing buildings to be internet-ready properties that meet the modern demands of some of their prospective tenants for high quality affordable internet. Zuku have a dedicated team to liaise with property owners on right of way, and installation issues for buildings. (Here’s a list of Nairobi fibre- ready buildings)

New Nairobi Hotel: The Zuku breakfast took place at the new Ole Sereni Hotel on the edge of the Nairobi National Park, off Mombasa Road. The building previously housed the old US Embassy in Nairobi prior to its conversion to a 134 bed 5-star hotel. Like the adjacent Panari, Ole Sereni also lies close to Nairobi’s Jomo Kenyatta Airport, shielding their guests, and transiting airline passengers, from some of Nairobi’s (now) notorious traffic jams. Though not yet officially open, and with some facilities yet to be completed, management says the hotel rooms are already fully occupied. Wildlife in the park can sometimes be observed in the early morning, and should become a regular occurrence once a waterhole is completed (inside the park fence) to be observed from the hotel’s dining room and bars which have a (relatively) pocket friendly Tusker price of 195 ($2.6)

Urban Inflation Index – June 2009

Tracking changes in the three months since the March 09 index and to approximately a year ago with the July 08 index

It’s going to be a tough year given the financial results that we have seen so far. Safaricom had reduced profits, while Zain and surprisingly Kenya Airways also recorded losses for the financial year. And while most banks have growth of 30 – 40%, GTV went bust.

The arrival of the submarines/fibre cable are expected to bring down the cost of communications sometime in the future, but at the same time it is expected that the Kshs. 109 billion ($1.4 billion) to be raised from local financial markets in the next few months to finance the services, programs, and deficit of the Government of Kenya will in the process also push up interest and borrowing costs for individual and businesses.

Gotten cheaper

Fuel: A Litre of Petrol fuel (at local petrol station) is now Kshs 72.5 (~$4.18 gallon) down 3% from 75 in March 2009. A year ago, petrol was retailing at over 100 shillings per litre.

Staple Food: Maize flour which is used to make Ugali that is eaten by a majority of Kenyans daily. A 2 kg. Unga pack at Uchumi today costs Kshs. 92, down from 96 in March. However this is still much higher than the Kshs. 73 a year ago and a high food prices remain a sore point for many consumers – both urban and rural.

Communications: While phone calls through leading mobile company Safaricom are largely unchanged at about 8 shillings per minute (~$0.10), calls are cheaper at Orange and Zain, but probably from subsidizing consumers to lure them away from Safaricom. What has gotten cheaper is the cost of data. A Safaricom modem now costs Kshs. 4,000 ($51) and has been dropping periodically since it was introduced in 2007. Safaricom has also several ongoing promotions for laptops, blackberry’s and data-enabled phones as it competes with the likes of Access Kenya, Orange who sell the I-Phone, and Zuku from Wananchi who last month slashed in ½ the price of unlimited broadband.

Foreign Exchange: 1 US$ equals Kshs. 77.94 having appreciated from 80.07 three months ago. It was 67.4 a year ago, but few expect it to edge downwards for the next few months.

Unchanged

Entertainment: A bottle of Tusker beer (at local pub) is Kshs. 130 ($1.60) unchanged from three months ago, and also priced the same as last July. While prices have not changed, beer sales may on shifting sands. Former Trade Minister and member of parliament Mukhisa Kituyi was interviewed a few weeks ago on TV and he made some remarks on how the economy is impacting the mwananchi (ordinary man) – he said before someone would go and watch a soccer match on TV in a sports pub and have 4 beers, today that same person will nurse a single beer for the duration of the match (was he talking about himself?)

More Expensive

Electricity: my bill last month is Kshs. 2,100 ($27) up from 1,800 three months ago (comprising fuel cost of 436c/kwh, and forex adjustment of 63c/kwh – it was lower 649c/kwh last July). The expectation is that with drying rivers and water dams, electricity generation and consumptions costs (Kenya is still hydro or diesel fuel dependent) will become more expensive. In his Budget Speech last week, Kenya’s Finance minister proposed to remove taxes on generators and other power production equipment, perhaps in anticipation that more companies may be buying these soon. Already, blackouts (announced and unannounced) are becoming more common either from transmission failure or vandalism (some brave people steal wires or fuel from transformers!)

Of concern also is the quality of electricity supplied. In the last week, my microwave and kettle have been knocked out, while a neighbour lost both water heating boilers in her house. The inconsistent electricity supply also knocked out my TV a few months ago and I’m scared of charging my laptop except late at night when i expect supply to be stable!

Other food item: Sugar (2 kg. Mumias pack) is Kshs. 175, up from 165 three months ago, and a year ago it was 145 (now costs 21% more than a year ago).