- The Supreme Court rules for presidential petitions were tried and tested in 2013.
- Virtually every Kenyan is affected by some unresolved judiciary court case, whether it’s a commercial dispute, employment, land, traffic, inheritance, bank loans and so on.
- Disputes between borrowers and banks should not drag on for so many years that they incur legal, penalty and interest charges that eventually exceed many times the initial loan amount. From my notes while reading Charles Hornsby’s Kenya: A History since Independence, “15 petitions followed the 1969 elections and they were heard by Euro and Asian judges (Njonjo’s decision) – 3 were successful.” … “39 petitions followed the 1974 elections, and 9 MPs lost their seats, with 4 barred from contesting for 5 years.”… “The 1979 elections had no observers…31 petitions were heard by non-African judges and 9 MP’s (including 3 ministers) lost their seats”
- This year is expected to be no different and the Deputy Chief Justice was quoted as saying the courts were expecting as many as 300 petitions following the August 8 election.
Compared to six months ago
Comparing performance since February, this portfolio is down 3% mainly due to shares sales, while the while the NSE 20 share index is up 41% from February 2017.
Bralirwa (Rwanda) ↓
CIC Insurance ↑
Diamond Trust ↑
Kenya Airways ↓
Stanbic (Uganda) ↑
- In: None
- Out: TPS EA (Serena), Fahari I-Reit (Stanlib)
- Increase: None
- Decrease: None
- Best performer: CIC Insurance (up 95% since February) , NSE 84%, Diamond Trust up 77%.
- Worst performer(s): Bralirwa down -3%, KQ -1%
- There’s been a surprising resurgence in shares that’s been very quiet, amid the expected decline and investor exists with the August 8 election.
- Kenya Airways restructuring deal has not yet hit the share price but will dilute shareholders by 95%
- The surprising Safaricom sale with Vodacom buying out Vodafone
- Banks are struggling, despite their rising share prices.
- Disappointment with East Africa: The Vodacom Tanzania IPO stalled until it was opened to foreigners, and it crossed the finish line at with a full subscription after PIC of South Africa made a huge investment to bridge the gap. The Vodacom IPO was not marketed to Kenyans or through local stockbrokers. That said, it has been a struggle holding shares in different East African countries after the welcoming IPO period has passed, with difficulties collecting dividends or selling shares to get money back.
- Less traditional banking: there has been a decline in assets as more banks have turned to digitization to cut costs, and increase efficiency. At Equity, deposits were flat between March and June, which also marked the third straight quarter of overall loan declines
Lower interest income: e.g. 45% down at Family Bank, plunging it to a half-year loss
- A buildup of government debt: Equity now has Kshs 105 billion, KCB 100 billion, and Diamond Trust 83 billion.
- More closure of branches e.g. Barclays, Standard Chartered, Bank of Africa and Ecobank. But it’s not all gloom as some banks like Cooperative and Diamond Trust have announced plans to open new branches.
- Job cuts have been announced at KCB, Standard Chartered, Barclays, Family Bank, National Bank of Kenya, NIC Bank, Ecobank, Bank of Africa, First Community Bank and Sidian Bank.
- With nowhere to go, banks are giving money back to shareholders. Some banks have reduced capital, while KCB with profit flat at the half-year will pay a rare interim dividend confirming analysts’ view that some banks will return more capital to shareholders at a time when they have curtailed lending to riskier customers.
- Big banks are okay, small ones, not so much:
.The banking industry has become skewed. The Top 10 banks share 92% of profits. The small banks share 8%. James Mwangi – #EquityH1Results
— jgmbugua (@jgmbugua) August 22, 2017
- Losses, not profits. E.g. Family and Sidian, went into the red at the half year, despite layoffs and closures, while Ecobank managed to stay above water. These have mainly been attributed to reduced interest income.
- Declines in loans and deposits at tier ii banks, and T1 equity
- Mortgage declines: Buy Rent Kenya said that there has been a major drop in the number of mortgage applications over the past year and that those that the cap was meant for are currently the biggest losers as banks are skeptical to give credit to most individuals as they now have numerous terms and conditions that are not easy to meet.
- Local banks converting debt to equity at Kenya Airways: This has been a reluctant move, with three banks delaying the Ksh 23 billion conversion that will see a consortium of Kenyan banks become the second largest shareholder at the airline.
- Equity announced they will no longer lend unsecured loans to salaried Kenyans, cutting off a product feature that has brought them great popularity.
- New business lines: Banks have looked to other sources of income this year. Co-operative Bank which has net interest income and pre-tax profit that was down 10% in the half-year, received regulatory approval from the Central Bank of Kenya to enter into a joint venture with Super Group, a leading South African leasing company and together they will target major infrastructure projects, government vehicle leasing, oil & gas exploration, and other leasing opportunities. Elsewhere, National Bank entered a partnership with World Remit to allow remittances to be paid directly into bank accounts at NBK, Barclays is funding solar mini-grids in Turkana while Standard Chartered bucked the trend on Equity and will step up unsecured lending.
- Non performing loans (NPA’s) are up: At NBK, they are up to 29 billion, half the 57 billion loan book. NBK is awaiting a Kshs 2.9 billion NSSF (shareholder) loan to shore up capital.
- NPA’s have also gone along with increased provisions e.g. 1.8 billion at Stanbic at the half-year.
— Rwandan Aviation (@RwandAnFlyer) August 25, 2017
Appearing in today’s newspaper was a notice for the Safaricom shareholders annual general meeting (AGM) that will take place on September 1. In addition to the usual shareholder resolutions, there are additional matters that will be approved, mainly relating to governance by at Safaricom. This all follows the buyout of UK’s Vodafone stake in Safaricom, by South African Vodacom in an internal Vodafone group corporate realignment earlier this year that has now been completed. A running theme seems to be entrench Kenyan citizens in the governance and influence at what is now Kenya’s most valuable company.
Some of the changes:
- The company Chairman shall be a Kenyan (this is now going to be mandatory and is spelled out in the company’s articles of association)
- Directors shall encourage retention of a “Kenyan character” in the senior management and executive committees of Safaricom.
- The articles are also changed to spell out that that independent non-executive directors of Safaricom, shall all be Kenyan citizens.
- The position of Deputy Chairman is eliminated.
- Directors appointed by Vodafone shall be excluded from voting on agreements relating to M-Pesa.
- Directors appointed by Vodafone are to vote in the interest of the company (Safaricom) if its growth and investment decision clash with those of Vodafone.
- Directors shall appoint the Managing Director Previously as indicated in documents from the Safaricom IPO, Vodafone directors had veto power over the appointment over approval of business plans, annual budgets, the appointment of the Managing Director (Chief Executive Officer) and appointment of the Financial Director (Chief Financial Officer). Now, the Safaricom articles will change to read that “75% directors must approve these provisions” including a new one of “any material change to the company brand”. Shareholders at the AGM will also approve a name change of the company to “Safaricom PLC” in compliance with Kenya’s new companies law for listed companies to be “PLC”