Monthly Archives: July 2009

Real Estate Moment

a series of real estate pieces

Real Estate Paradox: was with a real estate developer who’s looking to set up even more projects over the weekend; he talked about a paradox where real estate rental prices are dropping, while house prices continue to rise. Note: I’ve not seen signs of rental drops, but this probably applies to the developer’s current financial outlook when choosing to build for sale or to rent in Nairobi today

NSSF the Kenya National Social Security Fund NSSF continued a trend started last year of publishing their financial accounts. For the year to June 30 2008, they had of total assets of Kshs. 87.53 billion (~$1.1 billion), partially comprising 49% equity investments (43.7 billion), treasury bills & bonds (11.2 billion), and land & building 24% (20.97 billion) which was down from 29% the year before.

While NSSF’s investment income of Kshs. 5 billion was a 25% increase from the year before, poor returns in local shares at the Nairobi stock exchange have hit pension, fund, and insurance schemes leading them to seek greater returns and safety by investing in real estate. Yet the NSSF, because of its past association when it was a political cash cow and got saddled with unpalatable properties, is going against the popular grain, but has no choice even as it faces as long struggle to be viable safety net for retired workers.

Water shortage: dry water pipes in some Nairobi estates have been a pain to residents in some parts of town who have to buy water from vendors. Many construction sites even have to ferry in all the water they need by lorry seems to be a good business idea to have a water lorry now

Bricks & Banks: The new Equity Bank headquarters are now up in Upper Hill and UAP Insurance will soon be putting up a building in the area. On the Westland’s side its Southern Credit Bank and Standard Chartered Africa with new buildings about to be completed.

Cement & inflation: I’ve added retail cement prices to the inflation index starting with a 50 kilo bag of bamburi cement at 780 shillings (~$10).

S&L Gone: Savings & Loan is no more after KCB shareholders absorbed the subsidiary within the group structure as a cost saving measure. There was a nice (offline) article by Carol Musyoka in the Business Daily and she highlighted that S&L’s rapid growth was funded, not by deposits, but by funds drawn from parent KCB and wondered what return this was to KCB shareholders

Goodwill barrier: goodwill is a fee demanded by business owners from business tenants, shop owners etc. It’s a strange phenomenon; the fee, often as much a year’s rent, is paid before the building is even put up for the shop-tenant to secure space in the building. Another fee is paid each time a shop moves in or out of the building. This exorbitant business expense has put off many start ups and small business owners from renting or setting up shop in downtown Nairobi.

More articles on the goodwill phenomenon from Ghana, a Kenya forum and the Standard

How Safaricom can adapt Vodafone’s investor relations


old safaricom logo incorporating vodafone

Safaricom have done a great job in terms of dealing with investor relations since its listing; they have also said there won’t be any SWAG for shareholders at their August annual general meeting (AGM).

But there are things that Vodafone can do that can enhance shareholder value beyond giving mere t-shirts and lunch boxes. As 40% owner of Safaricom, Vodafone can drive many things about investor relations. Consider that while Safaricom is considered to have too large a register with 831,000 owners, Vodafone is not too different with 551,000 shareholders – 440,000 who own less than 1,000 shares, and just 46% presumed to reside outside the UK. Despite the numbers, the Chairman’s letter invites as many shareholders to attend the meeting and participate (and probably ward of any hostile resolutions)

So here are 10 things Safaricom borrow from Vodafone to enhance shareholder relations in lieu of SWAG:

1.Have an enhanced agenda and promote shareholder participation in management. Many NSE companies do the bare minimum asking shareholders to adopt accounts, approve auditors and re-elect 1/3 of directors – that means an AGM can take 15 minutes which leaves the floor open for the nonsense questions. With a ‘fatter’ agenda shareholders won’t have time to ask for trivia. Newer companies like Access Kenya, Equity, and Scangroup are more pro-active with the management of their companies. So decisions on acquisitions, fund-raising, are common on the agenda. Another examples is executive compensation: many companies ask shareholders to approve creation of employee share options plans (ESOP’s), but then leave the computation and awarding of benefits to trustees (another set of directors); at Vodafone, shareholders know and vote how much current CEO Vittorio Colao, and former CEO Arun Sarin earned, so why not let the shareholders know how much Michael Joseph and the directors earn per year per meeting etc. Can’t handle that? Uganda companies can do that. Also at Vodafone all directors retire each year, which should ensure a robust re-election session.

2. The complete 2009 Safaricom annual report will only be given to those who request it, to save costs. It will be downloaded from the website. So let’s have a interactive report so investors can choose to download video or just sections they are interested in e.g. the notice only. Same with the memo & articles

3. Promote a alternative methods for shareholders’ to enhance value. Support a dividend re investment program (DRIP). Not everyone wants an M-Pesa dividend; some may prefer to buy 100 more shares in the company instantly, while the shares are still cheap (Kshs. 3.7 or ~$0.05 per share) and a DRIP will be a useful tool that keeps cash within the company and its owners. Alternately, if feeling philanthropic, Vodafone shareholders may donate their meagre shares to a charity – and why not to a school in Kenya that was Tahidi High last night!

4. Broadcast a webcast of the AGM – this will be a showcase for safaricom’s broadband capabilities and will be enable foreign investors to participate. If not ,broadcast it on TV so people don’t have to travel to Nairobi from other towns and can watch have it from home – NTV or Citizen would cover the mid-morning event up to the 1PM news

5. Promote alternative voting ; by e-mail, by telephone, by mailing in the post; mail-in happens in Kenya, but Kenyan investors feel they have to be there, to vote which is not the case.

6. Send investors information by phone (SMS) or e-mail. Safaricom is a mobile phone company; they send trivial messages to advertise products, so why not also quarterly results by phone? And for those of us at the next level, why not Safaricom twitter ? Join @kenyaairways and @jimmykibaki (:_}) on the new media wave

7. Don’t leave everything to the share registrar: On the website, shareholders can track their shareholding, change their address, and change their dividend payment option. At the meeting have a shareholder help desk – already a common feature at bank AGM’s (Equity, NIC) but to help them transfer their shares to the bank. Online information use was a feature deployed during the IPO, but that information is sitting un-utilized in a server somewhere

8. Pre-empt shareholder questions with a FAQ. Compile a list of frequently asked questions with appropriate answers, put them on website, or hand out flyers for those who attend meetings.

9. The Vodafone site warns investors about boiler room tactics and cold callers after their shares. So why not tell shareholder which brokers are misbehaving? Which to use and not to use?

10. Vodafone governance policy calls for disclosure of any political donations (and for Safaricom if any) – it has been noted here that the company tends to have increased corporate social responsibility activities in the home areas of the sitting information minister

11. Oh, and finally Tea & coffee will be served at Vodafone AGM

Michael Jackson 1958-2009


Michael Jackson passed away a few day ago and is being buried today

Years ago I used to contribute to a fan site, because I was a fan of the man and his music. The business angle was fascinating touring, royalties, tax, and investments; it’s also where I learnt HTML basics in business school, and why blogging afterwards came much easier.

Yes his money & investments; there’s been much debate about his money, and where it went versus what his catalog is worth to his heirs. Where did the money go? Extravagant shopping, the entourages, the lawsuits, settlements, legal bills (he was probably the most sued individual in America – non corporate). He also attracted an endless circus of managers/advisors and toured the world with Byzantine proposals of an emperor gone mad. to put up Disneylands in Ireland, Bahrain, Korea, South Africa, with Prince Alwaleed, Don Barden, Sol Kerzner, Bahrain princes, Nation of Islam, etc.

He seemed to have no interest in making music or touring musically which is what many of his fans wanted. And when he tried, he said it was his final time. But was he going to enjoy it? Maybe not, but he had to do it.

I was also a fan of Mike Tyson and through his years in the wilderness in the 1990s I was always afraid that Tyson would end up having to fight in his middle ages, taking on young champs, not because he was still the champion or a contender, but because he needed the money. And from reading Randy Taraborelli’s biography “the Magic & the Madness”, even Michael Jackson was aware of Jack Johnson and other old boxers from decades before who had ended up as casino greeters in their old age. Was Michael Jackson at 50 going to be able to sing, dance, and perform in concert the way he last did 12 years ago? We’ll never know now.

Whatever the reasons for his death, may he rest in peace. His music remains, and with careful management of his estate, his children could be provided for and he could have a prolific posthumous career in music and through film. He deserves one.

The photo and more stories are on the NY Times Michael Jackson page

Farewell Mobitelea

Contained in the fine print of the Vodafone 2009 annual report, is a note:

During the year ended 31 March 2009, under an agreement with Mobitelea Ventures Limited, the Group completed the purchase of a 5% indirect equity stake in Safaricom increasing the Group’s effective interest in Safaricom to 40%

M4Change Nairobi

 

The Mobile Tech for Social Change camp (m4change) was held last Saturday (June 27 2009) at Strathmore University, Nairobi, and was staged by @afromusing and @jessicacolaco

More presentations and pictures are at the Wiki page, and these are my notes from attending a brief part of the talk on mobile applications in the morning

– With regard to mobile applications e.g. MPesa, (developers should) just create them, and let users sort themselves out e.g. a credit society that has 4 managers who are signatories, each one enters one (secret) digit of the society mobile PIN# to enable a mobile transfer transaction
– Wanahabari is a text to mobile application for journalists
– You can buy prepaid electricity via mobile phone in Rwanda
– Alternatives mobile browsers to opera include skyfire and mobileXL
– Safaricom is buying out leading developers in Kenya who may develop applications that compete with them (is that a bad thing?)
– While there is demand for Safaricom to avail an API for Mpesa, it is owned and controlled by Vodafone (UK)
– If you have an account at Consolidated Bank of Kenya and others, you can use a mobile phone to transfer money from your bank account to your Mpesa account
– Fibre mirage?
(i) The cost of last-mile connectivity in Kenya is still high e.g. one example cited was a quotation from a leading ISP in Kenya for $10,000 to extend the fibre just 300 metres
(ii) Even though fibre can make speeds more than 17X faster today, the ISP will only make gradual increments of 2X every few months to fool customers that they are always upgrading/improving
– There is no adequate consumer protection group/lobby in Kenya to agitate for better services. The communications commission of Kenya (CCK) regulator does not respond to consumers complaints
– Only Safaricom has a 3G license in Kenya (the cost is astronomical) and so far only deployed in Nairobi, Mombasa, Kisumu
– Safaricom has developed Mpesa bulk payment/transfer systems. An example given was to enable payments to farmers in Mt. Kenya region
– A great resource for mobiles in development is the CGAP site (World Bank)
– M-pesa heralds a shift from branch-based banking to agent-based banking with examples (at CGAP)
– Safaricom partnership with Western Union to enable transfers from the UK to be sent to recipients mobile phones. Still being tested with Safaricom employees, but will probably be as expensive as a regular western union transfer.