Monthly Archives: February 2008

I-banker talks politics

Jeff Koinange has been running a show called Capital Talk on the new K-24 channel in Nairobi. It’s a 1-on-1 interview session, usually with politicians, but occasionally with business leaders. He seems more comfortable hosting these show than he did from say from upriver Nigeria with the rebels on CNN.

Last night he had Maina Mwangi, the CEO of Renaissance Capital, to talk about the future of investment banking in Kenya, impact that the political stalemate is having on the economy, and other issues

Some of Mr. Mwangi’s comments

  • Renaissance is different from other investment banks such as Morgan Stanley (who are doing the Safaricom IPO) because they are here to stay. They have offices here; will have 50 staff, all East African, no expatriates here.
  • The politics must be fixed; we can’t be having upheavals every five years where lives are lost and property destroyed unnecessarily
  • Impact on the economy is serious (i) tourism collapsed, at least for the next three years (ii) impact on transport sector has not been fully appreciated (ii) banks not hit yet, but will take a few months (iv) NSE is a sensitive indicator of the economy (There are about 1 million shareholders and the market was down 15% in 3 weeks) as people buy shares as they are future profits of a company (v) forget about 8% growth this year.
  • Investors are worried, which is ok, but if the politics is not fixed, then they’ll be panic, which is bad
  • Solutions for this year: (i) one was the Safaricom IPO which still can happen, and will give the government some breathing space and enable the budget deficit to remain manageable (ii) but forget about the sovereign bond – as the spreads are too wide now (iii) tax collection will have suffered, but no one knows how much yet (iv) new budget is needed for the country to factor in new spending for towns & businesses to be re-built, resettlement of people.
  • Interest rates: The government will have to control borrowing otherwise that will hit interest rates which is critical; if they go up significantly, that will put the brakes on economic growth – as they make everything more expensive and reduce purchasing ability for housing, credit cards, personal loans, etc.
  • Time: How much time do we have to sort out economic problems? more time than some pessimistic i-banks think, but less time than some government advisers think
  • Renaissance will focus on the wholesale end of (i) consumer spending areas – this will show growth (ii) real estate. They are big in Africa and the Nairobi office runs a region from S. Sudan to Angola.
  • Kenya is a buying opportunity, if you think long term i.e. 10 – 15 years. Kenyans firms understand they have to go regional – and they have a head start

Best case scenario: political solution found and hope & confidence can be restored among investors (including kiosk owners); Kenyans are successful business people as long as politics doesn’t interfere.

Worst case scenario: no political solution; and the economy goes into stagflation – nothing happened e.g. the NSE started 2007 at 5,000 and ended at 5,000. He said investment bankers can make money if the economy is going up, or going down, but not where it is stuck/going sideways

Related post: From January, some Renaissance earlier comments on the economy.

Valentine’s Gift

As a rule, I don’t partake of this day. But to all the female readers, here’s a flower for you – which is a gift forward from Oprah’s site: You can download a free e-book of Women & Money, by personal finance guru, Suze Orman. The offer is for this day only and ends in the evening (US time)

Kutwa Tuesday: Capital Chickens

Capital rights issues come home to roost

Last October this post discussed banks’ needing to raise share capital to support their rapid growth over the last five years. Since that time, Diamond Trust, NIC, Housing Finance, Equity and now KCB have all gone ahead and put plans in place to increase their share capital to catch up with their asset base.

KCB hopes to raise Kshs. 5 billion and hopefully this could spur some quality mid-tier banks, with foreign shareholding to step forward to the NSE listing place as well i.e K-Rep, Commercial Bank of Africa, Investment & Mortgages, Fina, Citibank and even Cooperative banks.

Corporate news

KQ expands (From African Flyer blog) – Kenya Airways will from mid-year increase flights on routes in Africa (Ethiopia, Nigeria, Ghana), Mid-East (Dubai) and Far East (China, Hong Kong, Thailand).

Another stockbroker falls: This time it’s another small firm – Nyaga stockbrokers. This is not unexpected, as problems were well known for over a year and had even been discussed in a stockskenya forum. The authorities (CMA) can’t pretend to act surprised as they had in the past considered taking action against the firm whose managers repeatedly sold investors shares without their knowledge – and when caught they would blame errors, and take their time correcting the situation, only to repeat the same up to last week.

  • Though the NSE launched a 100 million rescue package, a Business Daily story mentions that as much as 820 million could be owed to clients.
  • Other blogger takes: The KCIG has some suggestions for the capital markets authority while Coldtusker is dismayed by the pattern of bailouts of Nyaga Stockbrokers and Invesco Insurance after financial shenanigans.

OTC Bank shares: Are shares of Family Bank available to buy over the counter?

New branches: coming soon Gulf Africa bank at Hughes Building – Kenyatta Avenue, and a new Family Bank branch opp. Yaya Center, Kilimani

Big radio opportunity: Kenya’s highest-rated radio show, Kiss FM‘s Big Breakfast Show (with Carol Mutoko) is looking for a new voice to join her on the show. Send a CV with a recording to md@kissfm.co.ke

SME Opportunities

EPZ incubation: The Kenya export processing zones authority (EPZA) has an incubator program which aims to convert SME’s to major exporters. Previously companies located at the EPZ in Athi River had to be almost pure exporters (80%) to enjoy the benefits. But with the incubator program a company can start with exporting just 20% and progress to the 80% threshold within 4 years. Terms are; $50 application fee, $250 annual fee, 75% local shareholding, no more than 100 employees and no more than 40 million invested.

SEED Funding: The SEED Initiative has the SEED Awards 2008. Any group in a developing country, which is working in partnership with others to generate environmental and social benefits in an entrepreneurial way, is s eligible for a service (not cash) prize worth $25,000. D/L is 16 March.

SMME Award: The 2008 Africa SMME Awards; 6 winners (1) Industrial Sector Award; (2) Trade Sector Award; (3) Services Sector Award; (4) Best New Business Award; (5) Most Innovative Enterprise Award; and (6) Young Enterprise Award. All six category winners will become finalists for the overall African Union SMME of the Year Award – closing date for entries is 31 July. Africa’s successful Small Medium Micro Enterprises (SMMEs) Managers / Owners who are creating jobs and improving the quality of life in their African communities can also contact author David Fick, E-Mail: (WhlgEagle@aol.com) to be featured in his next book, African Entrepreneurs in the 21st Century, Their Stories of Success (proposed publication, September 2008).

ICDCI now Centum Investments

name change
The former ICDCI will officially become Centum Investment Company Ltd. at the end of the month after the company’s AGM – ending years of confusion with ICDC – its former parent company.

Other than the name change, they are also adjusting their financial year end from June to March which means the year 2007-8 will end in March 08 – just 9 month long).

Last year was active for their investments, but the abbreviated year results could be badly hit by the post-election events. They had acquired shares in KQ, KPLC, Mumias, lightened on Eveready (largest shares block now KCB, Kenya Airways, EABL and Mumias) and sold off real estate (Kimathi House and Consulate Chambers) to improve liquidity. On the unlisted front, they acquired 10% of Rift Valley Railways (and will acquire another 10% from IFC over the next four years) and increased their stake in Kisii bottlers to 24% – so their unlisted portfolio is mainly two insurance and four coca cola bottling companies.