Rail Check: SGR First Class

A review of the Madaraka Express SGR service between Nairobi and Mombasa, Kenya using the Business Traveller format of train reviews.

Background: Kenya launched the Madaraka Express, a new passenger service train service when the Standard Gauge Railways in May 2017 that replaced the ‘old’ Kenya Railways train service between Nairobi and Mombasa and which was discontinued just a few weeks before the launch. China Road and Bridge Corporation built the new standard gauge railways (SGR) and Africa Star Railway Operation runs the train service for Kenya Railways.

Booking: You buy all tickets online, and you have to choose – first (costs Kshs 3,000) or economy (Kshs 1,000). There is no seat selection or seat map. You then pay via M-Pesa and get an SMS with the seat selection and ticket number. The ticket price is a flat rate, with no difference in prices for weekends, or midweek. The booking site also shows the number of available seats and you can book for several people, but there are some rules about large group bookings. 

Getting There: Nairobi’s SGR station is located about 8 kilometres from the Jomo Kenyatta International Airport and 15 kilometres from downtown Nairobi while the one at Miritini station that serves Mombasa is a corresponding distance from the airport there and centre of the island. You can get to either station by using a taxi service like Uber or Little Cabs.

Even though you are going to hot Mombasa, dress warmly for the SGR ride. Don’t get on board in T-shirt and beach shorts as the train is kept at a cool air-conditioned temperature for the duration of the ride and the windows don’t open.

At the SGR station, you go through a few security checks – sniffer dog, bag x-ray etc. There are different rules that are not clear and some people are allowed to bring food onboard, but other items like visible alcohol bottles and cigarette lighters are confiscated from passengers.

You then go and print your ticket stub from a vending machine, which you have to show to enter the station. You enter the number that was sent to your phone via SMS and you can, for good measure, also print one for the return leg.

Boarding: At Nairobi, there is a lounge for first-class passengers that is separated by a screen from the economy ones. First class passengers board first from their lounge, and parents with children are given boarding priority. You walk across a bridge from the lounge and down to the train.  There are escalators at both Nairobi and Mombasa stations and some lifts, but they can get crowded.

You find, your coach and there’s another ticket check at door. The train has about eleven economy coaches, and two first-class ones, according to the announcer, with numbers one and two at the back, next to the dining car.

Seat: Once on board, you have to sometime be firm on the seat you paid for as some people arrive and want to sit on a different seat in the first-class cabin that is in a 2-2 layout. Window seats have a socket and you want to sit next one where you can plug your gadgets in to charge. I got the impression some people buy two seats so they can stretch out in the extra space and nap without being bothered by a seat companion who may be a noisy, messy eater.

There is enough space in the overhead bins, and large suitcases are placed at the end of the carriage near, or under, the sink. It would be nice if there were some proper luggage racks, but there is ample space.

The tray table, which pulls out from the seat in front, is wide enough to rest a laptop computer on. But it has no slots for cups, so if you are reading or working on a laptop, it is available to hold your cup. The train sways gently, but it is more likely you will knock over the cup or someone passing may bump it by accident.

Journey: The train pulls out of the station on time at 2:35 P.M. It accelerates slowly on through past the many cement factories in Athi River town, the African Heritage House, and other familiar sights. It doesn’t really pick up speed, in this area with slight curves, until it starts descends the plains, and the rail straightens. Most of the journey is done at speeds of about 110 Km/h (70 mph) and the train is very deceptive in its speed, which is displayed on a small screen in the coaches. You never get a sense of the speed until you pass a car on the highway or see a helicopter slowly pass overhead and you realize just how fast the train really is compared to these other vehicles.

The entire railway is double fenced, zoning off the SGR from the communities that it passes through on the 400-kilometre journey. The afternoon train is a non-stop one. Unlike the old train which would slow to stop in small towns and in which passengers tourists would stick their heads out of windows, watching the passing countryside or to count the number of coaches of the train as it turned, this new rail has few curves and the train hardly bends. There are no roads to cross, and instead, the train is elevated far above the ground as cars pass underneath. School kids, who used to stop and wave at travellers on the old train, do not bother to stop playing football to even glance at this fast-moving one.

Looking outside from your seat, you might spot some elephants, giraffes, buffalo, monkeys and other wildlife in the open plain, and later when an announcement is made about the train passing through Tsavo National Park. Occasionally pass another train, but mostly you pass old abandoned stations that used to be landmark stops on the old train,

Service:  In first-class, a drink cart was rolled down the aisle with a snack, and free serving of coffee or tea is served, but the service is rather slow and clumsy. Later they served drinks, for sale, which were rolled down on an old airline-style cart, with a selection of beers, wine, soft drinks and snacks, but the cold drinks are not really cold. Even warm ones can run out and you may have to switch what you are drinking.

It is better to go straight to the dining car where you can have more cold drinks and snacks. The train ride is not too long, so you won’t be eating large meals like the elaborate full dinner and breakfast meals that the old train used to serve in first-class. The same beer that was Kshs 250 in the VIP at the station is now 350 here. Also, the Mombasa station also has a first-class lounge upstairs but there is no restaurant there, yet.

There is no Wi-Fi or screens, but you get good service on Safaricom internet service for most of the way. Some passengers had iPads which they used to entertain children they were travelling with.

Arrival: Accessing the station at both ends can be stressful At Mombasa having arrived at about 7:15 P.M. it took about two hours to get to our destination by historic Fort Jesus. The new highway, that is still under construction, takes about fifteen minutes to reach the junction to Mombasa airport. Then it took us one and a half hours to negotiate the traffic that had overlapped and got stuck on the dusty Makupa Causeway, with matatus, tuk-tuk’s and other vehicles going off-road and meandering between long-distance trucks. Some vehicles had they engines off and truck brakes had a burning smell. The cause of the jam was a lorry that had gone off the road just as the causeway enters the island. The return a few days later took about a half-hour from town. Regardless of if you take the SGR, or fly into Mombasa’s main airport, you are stuck on the same highway that is under repair for the next few weeks.

Verdict: The 66 people in the first class train cabin are equal to the number on a typical bus on the Nairobi-Mombasa highway, while each economy coach (there were eleven) has almost double that number of passengers. Also, the 50 wagons on an SGR goods train of which you pass one or two during the journey are equal to 50 fewer trucks off the Nairobi-Mombasa. See also Owaahh’s “The Man Who Sold A Country” for more on the impact of this new railway.

Good points: The time-keeping, the on-time departures and arrivals. Also, the new SGR service crew make many announcements, about making good use of a shared public facility. When KFC came to Kenya and later Subway and other fast food-joints followed, they introduced the idea that patrons should clean up after themselves and dispose of their assorted papers, cups and leftover food in large bins provided. On the SGR they keep broadcasting announcements throughout the trip reminding passengers about cleaning up their space, not littering, not sticking gum under the tables, etc. They also ask people travelling in groups to be considerate of others in terms of their conversations and music. But other passengers played music on their phones, without using headphone, and there was a cacophony that competed with music blaring from the train’s overhead speakers.

Some groups ignored this and a few people don’t use headphones and you often have competing sounds in the cabin, including songs on the train PA in-between announcements. While others heeded the advice and took their loud conversations to the dining car where they could sit facing each other and discuss their trips and business plans over plenty of alcohol. There is also some camaraderie in first class, and people share tables as they enjoy drinks and watch the rapidly passing scenery.

In Nairobi, Kenya Railways also runs a commuter service from the old railway station in downtown Nairobi to the SGR station. They time it to shuttle passengers who are connecting on the SGR Nairobi. This costs Kshs 50, a fair deal, compared to the cost of using a taxi which is at least ten times more. The commuter trains makes two stops at Imara Daima and Makadara.

Bad points: The odd toilet rule about not throwing anything, even tissue, down the toilet does not make sense. Their instructions are to dispose of toilet paper in a bin on the floor?? Yet the toilet seems like the same standard vacuum flush that planes have. BTW, the old train used to flush straight down and fertilise the side of the tracks.

FACT FILE:

  • JOURNEY TIME 4 hours, 35 minutes (Nairobi to Mombasa).
  • SEAT CONFIGURATION 2-2. Seats can rotate backwards but no one tried to turn them around. People went to the dining car for face to face meetings.
  • PRICE:  Advance first class fares from Nairobi to Mombasa are Kshs 3,000 (about £23 / $30) for a one-way booking, which you make online and pay for via mobile money (M-Pesa). You must enter the name and ID/passport number of each traveller. 
  • CONTACT info@krc.co.ke

Barclays Kenya unveils AFMI 2018 – the Absa Africa Financial Markets Index

Barclays Kenya launched the second edition of AFMI 2018 – the Absa Africa Financial Markets Index, revealing performance improvements at a time of economic turmoil on the continent and also the addition of new countries to the index that now tracks twenty African economies.

In the time since Barclays launched the initial Africa Financial Markets Index in 2017, they have seen good engagement from policymakers striving to improve their appeal to investors through the AFMI 2018 index which measures countries across six pillars of market depth, access to foreign exchange, market transparency/regulations, capacity of local investors, macroeconomic opportunity, and enforceability of legal agreements. This year, three new countries – Angola, Cameroon and Senegal joined the index bringing the countries tracked to 20 and the country measures were also tweaked to include elements of financial inclusions and levels of investor education

The AFMI 2018 was again topped by South Africa, the most advanced financial market in Africa, followed by Botswana, Kenya, Mauritius and Nigeria. Kenya, Morocco and Seychelles all improved in the rankings while Mauritius and Namibia slipped slightly. Nigeria was credited for improving in its administrative efficiency and tax reforms. 

Jeremy Awori, Managing Director of Barclays Kenya said that emerging markets were under great pressure with currencies dropping, interest rates rising, political instability, falling commodities etc. and these highlighted how strong domestic financial markets could be used to cushion African economies from headwinds. He said that while  Kenya topped the access to foreign exchange pillar of the index, and had improved in the enforcement of  legal agreements, showing it was on a path to be a regional financial hub, there was still need to need to improve capacity of local investors, and grow the diversity of investor products. He added that Barclays Kenya was the first institution to list an ETF – an exchange-traded fund at the Nairobi Securities Exchange (NSE) and was also providing thought leadership on international swops and global master repurchase agreements.

Guests at the launch included Geoffrey Odundo, CEO of the NSE, and Paul Muthaura, CEO of Kenya’s Capital Markets Authority (CMA). Odundo said that while the 2006-08 IPO era unlocked retail investor capital, there was much more opportunity for investors to get good returns in the secondary markets including through REIT’s and that the NSE was currently piloting on offering derivatives. Muthaura spoke of initiatives to connect investors across African investors including a pilot exchange partnership between Kenya and Nigeria, and the African Securities Exchanges Association which was looking to enable trading links between the six largest exchanges on the continent.

Anthony Kirui, Head of Markets at Barclays Kenya said the country had an array of fixed income securities, but attention needed to shift to re-opening bonds as opposed to issuing new paper. He added that there was a need to create a primary dealership and a true OTC market and to also address the reluctance from local owners to list on stock markets. Muthaura said that one factor in the lack of new listings at the NSE was due to companies, who may have been candidates for listing to get new capital, now opting for the abundant and cheap funding from banks that were flush with cash in the era of interest rate caps

In East Africa, Uganda was stable (at No. 10) on the index while Rwanda and Tanzania dropped slightly, the former due to discrepancies in the implementation of rules and the latter due to lack of capacity of local investors. Ethiopia was at the tail end of the Index due to not having a security exchange and corporate bond markets, but that is likely to change as the country pursues reforms such as freeing the foreign currency exchange rate and planning for privatization of Ethiopian enterprises.

The AFMI 2018 report was done with the Official Monetary and Financial Institutions Forum (OMFIF) and can be downloaded from the Absa site.

Rubis Énergie to takeover Kenol Kobil

A day after a huge block of shares of Kenol Kobil, exchanged hands on the Nairobi Securities Exchange (NSE), came an announcement that Rubis Énergie intended to buy out all the remaining shares and delist the company.

Rubis had acquired 24.99% of Kenol from Wells Petroleum, at Kshs 15.30 per share on October 23, in a deal that was the highlight of the day at the NSE. The offer to other shareholders of Kenol, to buy the shares at Kshs 23 per share, a 53% premium, values the oil market leader in Kenya and the East Africa region, with 350 retail outlets, at Kshs 36 billion ($353 million).

Making the announcement in Nairobi was the Rubis Energie  CEO Christian Cochet and CFO Bruno Krief. French company Rubis operates over 50 subsidiaries and its downstream business had 2017 sales revenues of Euros 2.7 billion and net income of Euros 187 million while its midstream business has sales of Euros 895 million and net income of Euros 53 million. It is a subsidiary of Rubis SCA Group which is listed on the Euronext Paris stock exchange.

The company which operates in Southern Africa, Western Africa, North Africa and islands off the continent, intends to appoint a majority of the board of directors and use Kenol to extend its reach in East Africa as a part of Rubis operations and development strategy through acquisitions which may mean lower dividend payments. 

If the deals succeeds, they will pay Wells an amount equal to the difference in the price they paid on October 23 and what other Kenol shareholders will get. Rubis intends to acquire the other 75% of the company in addition to new shares from Kenol CEO David Ohana who has already undertaken to sell the shares which were granted to him through the Kenol ESOP to Rubis. Once they get the approval of 90% of Kenol shareholders, they intend to delist the company and will move to trigger this once they get to over 75% of shares. The transaction advisors are Stanbic Bank Kenya and SBG Securities who also double up as the sponsoring broker and lead acceptance agent.

However, a few hours after receiving a notice about the Rubis cash offer for Kenol, Kenya’s Capital Markets Authority announced that it was launching an investigation into suspicious trades in relation to the takeover transaction and asked Kenya’s Central Depository and Settlement Corporation to place a freeze on the suspected accounts.

The Rubis deal comes a few years after Kenol tried to engineer a majority sale to Puma Energy and Kenol is also in the process of acquiring fuel stations in Rwanda land Uganda in two separate deals.

Excerpts from the 2016 Kenol AGM of shareholders.

Mortgage Refinance and Amendments to The CBK Act, 1966

Via a legal alert from Oraro & Company Advocates: The Finance Act, 2018 which was assented to on September 21, 2018, amended the Central Bank of Kenya (CBK) Act, 1966 to regulate Mortgage Finance Businesses (the business). The amendments include having new definitions and the introduction of new powers to the CBK. These amendments came into effect on 1st October, 2018.

New Definitions

  • A Mortgage Refinance Business is defined as the business of providing long-term financing to primary mortgage lenders for housing finance and any other activity that the bank may prescribe from time to time;
  • Mortgage Refinance Company means a non deposit-taking company established under the Companies Act of 2015 and licensed by the CBK to conduct mortgage refinance business;
  • Specified Mortgage Refinance Company means a licensed mortgage refinance company licensed under the CBK Act.

Increased CBK powers

With the introduction of new sections, CBK will now have the power to license and supervise the business. This includes:

  • Determining capital adequacy requirements;
  • Prescribe minimum liquidity requirements and permissible investments for the business;
  • Supervise the business by conducting both on and off-site supervision;
  • Assess the professional capacities of persons managing the business;
  • Approving the board management of the business;
  • Approving the appointment of external auditors;
  • Collecting regular data from the business;
  • Approving the annual audited accounts of the business before publication and presentation at the AGM;
  • Revoke or suspend a license;
  • Receiving reports from the Mortgage Refinance Business.

These are extracts from other documents from Oraro & Company with detailed implications of the passing and presidential assent of the Finance Bill 2018.

Financial Sanctions for South Sudan? Part II – The Profiteers

The Profiteers is a documentary by Africa Uncensored that was unveiled in Kenya this week. It was to air on television but was cancelled a few hours before airing on Kenya Television Network (KTN) a local TV channel. The producers confirmed the network’s abrupt decision to pull the broadcast, and then went ahead to release the feature on their own, on Youtube in three parts, and with links and commentary on Twitter.

The Profiteers production by Africa Uncensored follows other work by The Sentry Group and are featured in the latest Sentry report on the situation in South Sudan. Sentry continues to run a watch on events in South Sudan, corruption, the growing refugee population, and complicity of foreign organizations such as banks in Kenya and security forces in Uganda.

The Profiteers investigative team led by John-Allan Namu extensively document, both with straight and under-cover reporting, stories of South Sudan leaders luxuriating in other countries and cutting deals for weapons, logistics, security and valuable wood as they purchase luxury houses and real estate properties in Kenya, Uganda, Ethiopia and Australia, flashy cars and are flush with cash which is the basis of their profligate lives and which does not match their official modest salaries. They are able to freely travel and operate bank accounts and transact vast sums through them, even though some of them face international sanctions.

The Profiteers and The Sentry mention several institutions including banks like KCB, Stanbic and Equity bank, and money transfer services such as Dahabshil, and Amal. Some activities look questionable but are understandable such as the decision by the Bank of South Sudan to hold the bulk of its reserves outside the unstable country while soldier battle.

Sentry Recommendations
  • Kenya and Uganda should strengthen regulatory bodies to track money and enforce sanctions.. compliance departments in Kenyan and Ugandan banks should not wait for financial regulators to request information and should immediately find and flag high-value transactions, all real estate transactions, and the accounts of South Sudanese politically-exposed persons (PEPs)
  • Law Enforcement Should Investigate South Sudanese property without political interference
  • Trade Associations should improve standards for investments
  • Businesspeople should share investment information.
Also mentioned in the Sentry report is a wave of posts by Kenyan bloggers: In mid-2018, a group of Kenyan bloggers garnered significant attention when posting photos on Twitter of luxurious homes owned by South Sudanese elites or images of top officials’ family members living extravagant lifestyles in Kenya and Uganda. Referencing the impunity apparently enjoyed by these well-connected South Sudanese, the bloggers labelled their tweets with the hashtag #SouthSudanUntouchables. The same day that hashtag went viral, a high-level U.S. government official spent the day in Kenya, addressing government agencies, financial institutions, and civil society to deliver a related message: that South Sudanese officials should no longer enjoy impunity and that their ill-gotten gains should not be welcome in Kenya and Uganda.