Monthly Archives: January 2008

Kutwa Tuesday: Banking Brief’s (Jan 15)

CFC on hold?
Could the ongoing political crisis be giving Standard Bank of South Africa second thoughts about its approved merger with CFC? A decision by the Reserve Bank in SA to conclude the deal is also overdue.

Dangers of insular banking
Our banking history is littered with the remains of Daima Bank and other indigenous African and Asian banks. Most went down due to malpractices by directors and managers, but also in-lending to close circle or community companies who as a group could be potentially exposed to a singular risk.

The banks also engaged in subtle discriminatory practices like charging outsiders higher rates, frustrating their loan applications or facilities, or making them feel unwelcome – which ultimately proved to be counter productive as locking them out increased the risks that the banks faced by increasing their exposure and dependence on a core group or sector.

Something to Do

1. Donate

Through Mama Mikes and a bloggers for Kenya initiative.

There are also other other initiatives – like Save-A-Life, Kiss FM’s Jaza Lorry, the Nairobi Women’s Hospital, but beware of a revival of some NGO’s and unusual causes

2. Report Violence
Ushaidi.com is a tool for people who witness acts of violence in Kenya in these post-election times. You can report the incident that you have seen, and it will appear on a map-based view for others to see.

(3) Become a better tipper
Or, better yet, start tipping – because in Nairobi, tipping is something that we have left to tourists only.

Kenyans are woefully underpaid especially out security forces (some of whom had not been paid salaries even as they were asked to quell post-election violence) and yet they also guard our houses, million shillings cars, look after our families, serve us meals they can never afford, and never ask for more.

Many of them live in the very areas that relief initiatives are being formulated for – but just because they are not visibly suffering does not mean they don’t need our help. And while many of us are at the mercy of people whose ability to take our money we can’t say NO to (taxman, church, landlord, relatives), we need to spare a moment for those less fortunate who we interact with everyday, who also have lives and families, and are more at risk after working a full day. Yet we dismiss them so quickly, if they ask or dare to look like they are about to ask for help while at work.

So even if it means paying less tax or tithe, or having one less beer in order to spread some wealth around, get to know these people better and tip them well; waiters, maids, taxi drivers, bank clerks, and especially policemen – though how this can be done without being seen as bribing them – is a delicate task to accomplish.

Banking briefs

– Kenya’s leading bank, Barclays, is the first to acknowledge a distressed loans problem resulting from the post-election violence and standoff.

– From IHI blog; tired of bank charges? Consider a shariah account since they won’t incur frivolous charges that build bank profits.

Paper banks : Is the Nigerian banking model, which Kenya is going to emulate with increased share capital and consolidations, built on sand and bilking shareholders?

Other observations
– China speaks on the Kenyan political crisis blaming the west for imposing democracy on Africa.
– Mobile phone wars continue with Celtel shockingly low rates, while market leader Safaricom won’t compromise and keeps making money
– Hawkers who expected to be evicted from downtown Nairobi, on December 28, now enjoying continuing business with the political uncertainty in the air
– It’s not quite as staggering as Marion Jones or BALCO scandals, but from this month on a whole bunch of expensive, long hitting, golf equipment, widely used in Kenya,(including some Callaway, Titleist and TaylorMade), are now illegal. If caught using them you will be disqualified from a tournament or match event.
– Rapidly growing and expanding Fly540 airline taking a dig at Kenya Airways – with an advertisement that their propeller powered aircraft (ATR72) are more environment friendly than KQ’s jets
– Advertisers taking down the politician billboards that littered the city
– As fuel prices pass the 90 shillings a litre, will some petrol pumps in the country be able to process the sale prices over 100 per litre (3-digits) which are around the corner?
– Where’s the prophetic prophetic Mutahi Ngunyi gone to?

Opportunities

– Kenya Airways: Head Of Marketing & Corporate Communications, In-flight Performance Manager, Load Control Officer, Head Of Is Development (IS) , Systems Administrator, Training Officer – Fares & Ticketing, Qualified Pilots, Multilingual In-Flight Attendant, Customer Service Agent
– Sales positions at KCB. download form here.
– Director of research at the Mo Ibrahim Foundation. D/L is 31/1

Bankers’ post-election assessments

Citigroup (CITI)

  • Limited impact on economy if the political crisis is resolved. It Matters little to the economy who won the election as private sector will continue to drive growth
  • Share sell off at NSE could be a good buying opportunity as economic fundamentals unchanged.
  • President will use police and military to clamp down on protests which themselves will not last more than a few weeks
  • Parliament loyalties will be split by president as MP’s vote with their stomach
  • There’s little the international community can do besides pushing for reforms.
  • Also in the pre-election period, the opposition may have been falsely buoyed by opinion polls which are not sound (& could the same thing have happened to Obama in New Hampshire ?)

Renaissance Capital (RENCAP)

  • Crime wave has emerged under the guise of political riots
  • Government may take all 12 nominated seats in parliament
  • Reemergence of the civil society and NGO’s as source of political pressure and search for solutions.
  • Main threat is if two parties don’t agree so may revise down the 6 – 7% GDP projections.
  • Also prices have not factored in the chaos, so investors should hold off on buying.

Thanks to Silaha for the 2 reports – and who has also blogged some post-election predictions for Kenya

Treasury Officals:– from Business Daily

  • Damage on the economy could cut the projected growth by as much as a half, if not worse as agricultural, financial services and tourism sectors are likely to under perform
  • Treasury could be forced to craft a stimulus economic package to help reconstruct the affected regions and
  • Lower the interest rates in the economy.

Central Bank Governor – from Reuters

  • Kenya can still achieve 8% growth in 2008
  • Disruptions were temporary and will have a major impact on GDP growth
  • Shilling’s depreciation was due to holiday period
  • Safaricom IPO in the first quarter of 2008
  • Interest rates will not change

World Bank
(Hat tip Kumekucha) There’s a controversy brewing of the World Bank’s assessment of the election and resultant crisis

Excerpts;

  • The considered view of the UN is that the ECK announcement of a Kibaki win is correct. More irregularities of consequence on the Odinga side than on the Kibaki side.
  • The process of arriving at the result created a crisis of confidence due to missteps by (a) the ECK chair (who joked about possible rigging during a news conference), (b) the vocal EU observer who was not thorough and precise in analyzing information provided to him (c) the lack of preparation by Kibaki’s party in dealing with a highly media-savvy opposition.
  • Moving forward. One option being explored is getting them to agree to a recount which, by law, has to be done through a petition to Kenya’s High Court. Eminent persons from abroad would monitor this recount. Meanwhile, Kibaki would proceed to form a Cabinet, possibly with some participation by Odinga supporters. It is unclear what would happen if the exercise arrived at a different result from the ECK decision. The gamble is that this would not happen and that even if it did, both sides would have a face-saving way to accept a change in course via-a-vis their supporters

This is not the first time the first time that the land-lord-tenancy arrangement between the President and the World Bank has been put to question – see here and here

Finally, not sure if she’s a banker, but Kenyanentreprenur argues that what Africa needs are development minded dictators since we are not ready for democracy – and I hope we won’t be having this debate in 2012!

My own take is that the people at the Coast, Nyanza, Rift Valley and Western provinces need to start rebuilding their lives and their industries – otherwise they will be left behind. Rioting in your own community is dumb as you destroy businesses that deliver services and create jobs within the community. So pass that message along with any peace & sympathy messages you convey. Also watch NTV’s great Voices of Reason program on Youtube that looks at pre- and post-election issues (more on that later).

Mama Mikes & the World Bank

Money, food, transport have been in short supply in many rural areas affected by the violence. Equally crippling has been the lack of communication capability where there has been no electricity (poles brought down/lines cut) or shops (closed/looted/overpriced) selling mobile phone airtime.

People in urban areas have been sending airtime up-country by the thousands to stranded friends and relatives, while others from overseas (and even within Kenya) have turned to Mamamikes – who apologize for some logistcial delays and problems that may have been experienced in the transfer process.

DC opportunity
World Bank Summer Internship Program; apply online before January 31.

Rebuilding Kenya: mini steps

Talks are ongoing, marches have been postponed and parliament possibly opens next week – January 15 , paving the way for the country to focus on re-building – but these initiatives can’t begin until a proper government is in place that is seen as legitimate internationally:

Finance: We have companies who have not done business in two weeks, or received their just-in-time supplies – yet they are expected to pay full installments to banks at the at the end of the month. There’s even a mega tourist hotel opened over Christmas in Mombasa! The financial sector will have to chip in terms of waivers and new financing for businesses destroyed. These include;

(i) Debt forgiveness: at a minimum a waiver of installments for three months. Loans can be refinanced and the Kenya bankers association (KBA) to agree on modalities.
(ii) Rebuilding Fund: Last year we had women’s fund, youth fund and another funds is needed, with the support of the international community. Business people should be allowed to re-build in new areas if they are not comfortable re-investing where their businesses were destroyed
(iii) Insurance fund: Since it appears that those whose cars or businesses were looted and burnt will not be compensated by the insurance companies.
(iv) Some form of specific assistance to farmers e.g. livestock, crop replacement, (see a past initiative)

Banks : may be reluctant to chip in, arguing that their portfolios in half the country have been negatively impacted – but since they are about to announce record profits for 2007 their arguments will not be viewed with sympathy.

Employment : Impact will not be seen until about mid-year when companies announce their March 2008 results (they are still competing their 2007 accounts, which were normal up to the end of December, apart form the extended public holidays). The Kiss FM breakfast crew have been vocal about cutbacks if they don’t earn income this month, and this week Barclays has asked casual stuff (who hawk personal loans) to stay home until further notice.

International relations: Mr. John Kufuor is the president of Ghana; he is also the head of the African union. He is no doubt a very busy man, yet his name has been bandied about in a cat-and-mouse, back-and-forth, should he-or not mediate the Kenyan political crisis. Either he is needed or we should not waste his time!

International media: Al Jazeera has become the channel of choice of since local media has instituted some-self censorship of the violence and politicians. But the international media has been found wanting; they have been called biased by BeckyIT while the Police Commissioner has called them gratuitous in desire for displaying morbid images – which they don’t show in covering their own country stories e.g. 9/11 or London bombing coverage. He asks that they adopt the same standards.

Different investor perspective: While local investors fret about falling stock prices, foreign investors may view the market turmoil positively since shares on the Nairobi Stock Exchange are viewed as being ‘over-valued’ compared to their regional peers

Also

Micro finance in Africa: According to list from Forbes of the top 50 microfinance institutions in the world – only two are from sub-Saharan Africa (both Ethiopian).

Finally; parallels in the Cricket world as two giants – India and Australia are also not talking to each other.