Author Archives: bankelele

10 Points from AfDB 2019 in Malabo

The African Development Bank (AfDB) Group held their 2019 series of annual meetings from 11 to 14 June in Malabo, Equatorial Guinea with the theme of “Regional Integration”

Highlights of the meetings:

The opening ceremony during day 2 of the AfDB Annual Meetings on 12 June 2019 in Malabo, Equatorial Guinea. (Photo by Edouard Richard)

1. Fast growth is not Enough: A key theme of the week was that the stellar growth levels in Africa (over 4%) were still not enough to create enough jobs and produce sufficient food on the continent.

2. High 5’s:  Regional Integration is one of the development priority themes (‘ High 5s’) that the Bank had adopted at its 2016 meetings in Lusaka, Zambia alongside (to) “Light up and power Africa”, “Feed Africa”, “Industrialise Africa”, and “Improve the quality of life of the people of Africa.”

3. It is Capital Raising time for the Bank and is organs. There are advanced talks towards a 7th general capital increase, the first since 2010, for the African Development Bank, which will be concluded in September.

A few months ago, Canada provided temporary callable capital of up to $1.1 billion to stabilize the AAA rating of the Bank.

There are also ongoing negotiations for a 15th replenishment of the African Development Fund.

4. Visa Index: The Bank’s Africa Visa Openness Index ranks how accessible African countries are to visitors from within the continent in terms of requiring travel visas and tracks developments by different countries to improve the ease of travel for fellow African citizens.

5. Low intra-Africa trade:  Ahead of the African Continental Free Trade Area (AfCFTA) which comes into force in July 2019, the potential economic benefits of full implementation were highlighted, with the greatest beneficiaries of the increased trade likely to be countries in the Central Africa region.

Africa has 54 countries; Alone they are not very competitive, but together, under the Continental Free Trade Agreement, they are a market of $3.4 trillion

 

Also see the regional economic outlook reports by the Bank.

6. Debt levels in Africa: There was some discussion about the levels and types of debt across Africa and their potential burden versus the growth and infrastructure needs of individual countries. Also the Bank affirmed its support to help countries negotiate better financing terms, get better deals for extractive resources, minimize currency risks, and to enable them to mobilize their own resources domestically.

7. Asia-models for Africa: At the AfDBAM2019, Korea and India showcased their partnerships with the Bank including on agricultural transformation, enhancing food security and scaling financing across Africa.

8. Different forms of development finance by the Bank: 

  • Toward Financial Inclusion

  • Integration of Africa

  • The Environment

  • Food Security

  • Disaster Relief

  • Clean Energy

  • They also have plans for an affirmative action finance facility for women in Africa (AFAWA).

9. Transformational Infrastructure Projects funded by the bank include ports, highways, bridges and border-crossing stations across different countries.

10. Malabo Image: Host nation, Equatorial Guinea, used the forum to shed an image about the country that is full of old stereotypes to one of economic diversification, transformation and infrastructure. President Obiang attended the opening of the AfDBAM2019 which were chaired by the country’s Minister of Finance, Cesar Abogo, who is just 39 years old.

 

(a) Parallel events during AfDBAM2019: 

  • Africa Investment Forum last year which at its inaugural AIF forum in 2018 in Johannesburg secured  $38 billion of investments for 40 projects across Africa.

  • African Banker Awards

(b) Next meeting: Following these first-ever meetings to take place in Central Africa, the next annual meetings of the bank will be in a year’s time in Abidjan, Côte d’Ivoire – the bank’s headquarter city, where they the election of the Bank President will be the main agenda item.

Spanish delivery company Glovo enters the Kenyan market.

Glovo is a four years old Spanish delivery company started by Oscar Pierre and Sacha Michaud. Its headquarters are in Barcelona, Spain and Glovo has been expanding globally, and just recently begun operations in Kenya five months ago, with Morocco and Nigeria being the other two African countries using the Glovo app services.

Glovo actually means balloon in Spanish to signify the way a balloon moves easily from one place to another. Kenya has seen some new delivery companies but is yet to experience one which can deliver even a personal item that you forgot at home. We are used to the traditional delivery of items by people we know but now this app will very well facilitate an easier way. The one challenge being how safe or how trustworthy Glovo delivery people are which, and the company has placed safeguards for this.

The Glovo app is found on Google play store for Android and App Store for IoS and it doesn’t take more than five minutes to start using the app. What makes them even more competitive is their pricing which is quite the saver.

Glovo performance is improving by the day. William Benthall, the General Manager for Kenya stated that the number of Glovo bikes he’s seen around town keeps increasing with time. Just like other delivery services, with Glovo, interested partners sign up their machines, for instance, bikes, to the app and can from there, connect with clients who need items delivered.

A guest post by @themkare 

Kenya unveils new currency banknotes with a demonetization shock

The President of Kenya unveiled new generation currency notes at the 2019 Madaraka Day Celebrations in Narok on June 1.

This was after a speech by the Governor of the Central Bank and comes after a case last year cleared the way for bank notes to be printed and also a few months after new coins had been unveiled. The Governor mentioned that there had been extensive public participation in the process which led to the themes of green energy, agriculture, social services, tourism and governance (an image of Parliament!) on the new notes.

The Governor also mentioned that Central Bank had observed that the Kshs 1,000 note (equivalent to about $10) was being used to illicit financial flows and is being counterfeited. They had therefore moved to withdraw the old Kshs 1,000 notes by October 1, 2019, after which they will no longer be legal to use.

Going by the recent wave of a government moves in Kenya, we can probably expect a few challenges to the decision in the Courts and Parliament that will delay the new notes rollout over issues like:

  • The image of a statue of the First President of Kenya remains prominent on every new note.
  • On the demonetization of old 1,000 shilling notes, Parliament’s Committee on Delegated Legislation will say that it should have approval over such a radical move.

EDIT  On Tuesday, June 3, the Governor of the CBK held a press conference where he announced modalities for the transition to the new currency which is already being issued to commercial banks:

  • Persons exchanging currency notes for amounts not exceeding Ksh.1 million of the withdrawn currency notes will exchange at their Commercial banks, CBK Branches and Currency Centres, or any nearest commercial bank. 
  • Bank customers exchanging currency notes for amounts Ksh.1 million to Ksh.5 million of the withdrawn currency notes will exchange at their respective commercial banks, under the normal procedures and requirements. 
  • Persons without bank accounts exchanging currency notes for amounts exceeding Ksh.1 million will require an endorsement from CBK. 
  • Persons exchanging currency notes for amounts exceeding Ksh.5 million (bulk exchange) will require an endorsement from CBK.

CBK launches Stawi SME pilot credit facility

The Central Bank of Kenya has launched a pilot credit facility targeting informal unbanked traders in partnership with local institutions.  This will be through an app, marketed under the name “Stawi”, that will initially be managed by five banks – Commercial Bank of Africa, Cooperative Bank, Diamond Trust, KCB Bank and NIC Group.

The pilot phase lasts two weeks and will involve 3,500 traders without bank accounts, who have turnover of Kshs 30,000 to Kshs 250,000 (~$2,500) per month and who are at least six months old. To register, besides providing their ID details, traders will need a valid business permit and an email address to create an account – this is an unusual as mobile apps just require a national ID number to match with the phone number of the loan applicant.

The businesses will be able to borrow between loans of Kshs 30,000 to 250,000 (~$2,500). Loan charges are at an interest of 9% per annum, plus a facility fee of 4%, insurance fee of 0.7% and excise tax on the facility fee – all adding up to about 14.5%.

Other features of Stawi:

  • Loans are repayable between 1 – 12 month and borrowers can top up loans once 80% has been repaid. Loans are only disbursed through the app as will all repayments be done
  • The loan rates are not cheap, but they are mild, and this program is targeted at the unregulated lenders who charge as much as 300% p.a. There was a draft financial markets conduct bill formulated to protect consumers from such practices.
  • There are also transfer fees and Stawi customers can also link up with Pesalink which allows much greater daily transfer amounts (up to Kshs 1 million) than the mobile money wallets.  
  • For now, there is no Stawi in the Google store as the program is still in a test phase. (There is an app called Stawika that has no affiliation)
  • A second round of the pilot will target 10,000 other traders.

While trying to forestall the arrival of interest rate caps back in 2016, banks, through their umbrella Kenya Bankers Association committed to set aside Kshs 30 billion for lending to SME’s including Kshs 10 billion to micro-enterprises owned by women and youth and lend to them at no more than 14%. They also committed to rank borrowers by high, medium and low risk and to work to reward low-risk borrowers with low-interest rates. To date, the credit reference bureaus piling up data on loan defaulters which good borrowing records are ignored or not rewarded with lower interest rates.

KWAL at 50

This week, Kenya Wine Agencies Ltd (KWAL) celebrated fifty years of business. At a Nairobi dinner event to mark the occasion, KWAL Managing Director, Lina Githuka, said that the company, which had been privatized four years earlier, had renovated its portfolio and improved its operation. These had resulted in volumes going up threefold and, with profits up ten times, had set the stage for a second round of privatization.

During the event, there were clips and narrations showing the history of the companywhich was established in 1969 by the Government of Kenya to bottle wines and spirits. initially, and up through the 1990s when Kenya’s economy was liberalized, KWAL had a monopoly to import leading international brands like Martell, Hennessy, Bacardi and Campari which they worked with local business owners to distribute to hotels and shops. Later in the 1980s, they opened a commercial winery and embarked in the manufacturing, process and bottling of local wines. While grapes are not easily obtainable here, they used other fruits, starting with pawpaw from Kakamega and later Pekera, and “Papaya” became the first domestically produced wine in Kenya. They later added variants based on passion fruit (Passi Flora), strawberries (Kingfisher), and apples (Woodpecker).

KWAL, under KWA Holdings E.A, is now a subsidiary of Distell, which owns 55% of the company after acquiring a 26% stake in April 2017 for Kshs 1.1 billion.  The company produces 20 brands locally including Kingfisher for the last 36 years, and through its partnership with Distell, also distribute many top international brands. The KWAL portfolio includes Yatta juices, ciders (Savanna, Hunters, Kingfisher) wines (Nederburg, Drostdy-Hof, 4th Street), Amarula, and Viceroy.

Distell reported that Kenya had a stellar year (in 2018) with volume up 32% and revenue up 27%, which was partly attributed to the impressive performance of local brands like Kibao and Hunter’s Choice. KWAL plans to open a production facility at Tatu City, near Nairobi, their first new manufacturing plant in two decades, at a cost of Kshs 3 billion to meet the demand of fast-growing brands.

Kenya’s Cabinet Secretary for Industrialization, Peter Munya, who was the chief guest at the event,  said the Government was prioritizing value addition and local content in investments and that the Cabinet had recently approved an investment policy to legally safeguard all the incentives offered to investors. He applauded the privatization process which had rejuvenated KWAL, and he hoped this would extend to the sugar sector where private companies were doing very well, unlike the Government-owned ones.