Author Archives: bankelele

About bankelele

Writing on banking, finance and investments in East Africa. Email bankelele_at_hotmail.com, Instagram: Bankelele, Twitter: @Bankelele.

Central Banker on the fall of Afghanistan, 2021

Ajmal Ahmady, the Acting Governor of the Central Bank of Afghanistan, Da Afghanistan Bank (DAB) posted a series of tweets about events in the country and at the Kabul airport.

Extracts:

1/The collapse of the Government in Afghanistan this past week was so swift and complete – it was disorienting and difficult to comprehend.

2/Although much of the rural areas fell to the Taliban over the past few months, the first provincial capital to fall was just 1 week and two days ago!

  • This is how the events seemed to proceed from my perspective as Central Bank Governor.
  • On Friday August 6th, Ziranj fell. Over the next 6 days, a number of other provinces fell – particularly in the north.

3/There were multiple rumors that directions to not fight were somehow coming from above.

  • Seems difficult to believe, but there remains a suspicion as to why ANSF left posts so quickly. There is something left unexplained

4/Currency volatility and other indicators had worsened, but DAB were able to stabilize the macroeconomic environment relatively well during the last week – given the deteriorating security environment.

5/I attended my normal (Thursday) meetings. Ghazni fell in the morning.

  • I left work, and by the time I went home – Herat, Kandahar, and Baghdis also fell. Helmand was also under serious attack

6/Friday – we received a call that given the deteriorating environment, we wouldn’t get any more dollar shipments.

  • People spread rumors that I had fled on Friday.
  • On Saturday, DAB had to supply less currency to the markets on Saturday, which further increased panic.

7/Currency spiked from a stable 81 to almost 100 then back to 86. I held meetings on Saturday to reassure banks and money exchangers to calm them down. I can’t believe that was one day before Kabul fell

8/On Saturday night, my family called to say that most government had already left. I was dumbfounded.

  • A security assessment accurately forecast Taliban arrival to Kabul within 36 hours and its fall within 56 hours
  • I got worried & purchased tickets for Monday as a precaution

9/On Sunday I began work. Reports throughout morning were increasingly worrisome. I left the bank and left deputies in charge. Felt terrible about leaving staff.

  • But arrived at airport & saw that Mohaqeq, Rahmani, Massoud, etc were already there! Head of parliament seems content

10/Saw VP Danish leaving – reportedly for Qatar. By then it was rumored that VP Saleh had left.

  • Ministers + others were waiting for a Fly Dubai & Emirates flights. Both were cancelled
  • I secured a Kam Air flight Sunday 7pm. Then the floor fell: the President had already left.

11/I knew right then my flight would be cancelled and there would be chaos.

  • As expected employees & military left posts. Everyone ran through gates to on Kam Air flight. 300+ passengers boarded for a 100-seat plane.
  • The plane had no fuel or pilot. We all hoped it would depart

12/However, I decided to disembark and spotted another military plane. It was surrounded by people trying to board, while the guard forces held people back and boarded their embassy staff.

  • There was a rush. Some shots were fired. Somehow, my close colleagues pushed me on board.

13/It did not have to end this way. I am disgusted by the lack of any planning by Afghan leadership. Saw at airport them leave without informing others.

  • I asked the palace if there was an evacuation plan/charter flights. After 7 years of service, I was met with silence

14/During last days, I feared not only risks related to Taliban, but fear of transition period once there is no chain of command.

  • Once president’s departure was announced, I knew within minutes chaos would follow. I cannot forgive him for creating that without a transition plan.

Finally: Did I have a reason to worry? This is the text someone sent me:

“Taliban come to and were looking for you. They were asking about Ajmal Ahmady DAB Governor.”

Whatever their personal views, I also had many personal enemies. Or maybe they just wanted to greet me.

Follow Ajmal Ahmady at @aahmady.

Dalberg on Kenya’s Digital Economy

Dalberg has released a report titled Kenya’s Digital Economy: A People’s perspective. It finds that, in terms of digital transformation, Kenya is a lower-middle/income country that shows some characteristics of a higher middle-income economy.

The survey is based on in-depth responses from 2,456 people in Kenya’s 47 counties. It was done in 2020 to assess their perceptions on the state of the supporting ecosystems, digital infrastructure, enabling resources, applications and services.

The report differentiates between the uptake of “basic” digital services (sending money, buying airtime/data) and “advanced” digital services (e-commerce, paying for goods and services – health, education, agriculture, supporting livelihoods). It notes that some challenges to the next step of Kenya digital economy including exclusion and digital safety (fraud/harassment, cybercrime when using devices).

A stunning finding is that there is a low demand for advanced digital services, beyond mobile money, digital communication and social media. This is because non-users and 30% of current basic digital users do not find digital products or applications that are relevant.

Some of the sectors it touches on:

  • Agriculture: Kenya is one of the most advanced agri-tech markets with approximately 30% of agri-tech startups in Sub-Saharan Africa operating here and with 18% having their headquarters in the country But the awareness of landowners of digital services is low. 45% of those surveyed are not aware, while just 13% use digital services for their livelihoods – mainly to communicate with customers, suppliers and vendors while 10% use it for inputs and 15% for knowledge sharing. Half of those who do, use it as a result of assistance from field agents who are strong support factors for rural digital economies. Also half of adult female farmers face challenges in affording devices and accessing the internet which makes them hard to reach with interventions.
  • Health: There is low use of digital health services with only 15% of respondents aware, and of those, 35% use it mainly to consult health workers and pay for medicine with mobile money. The challenges cited are high costs and mistrust of doctors they can’t see while a quarter are concerned about sharing health information online.
  • Ecommerce is urban: 23% use e-commerce in urban areas compared to 9% in rural ones, and in Nairobi and the central region, uptake (24%) is twice as popular as in other counties in the rest of the country where it ranges between 1-12%.

On Financial Access:

  • Mobile Money has (+) and (-) aspects. The usage of mobile money is near-universal with 95% of lower-income and 93% of rural people using it as Kenyans have good user experiences with it, unlike some other countries. And while there have been concerns about fraud, 80% have trust in mobile money, but also 53% cite high costs as a reason not to use mobile money, more so with lower-income Kenyans.
  • Easy Credit: The report cautions that government should watch for debt traps from increase ease of digital credit in the country. Half of the respondents have had to sell assets, borrow more or reduce food & education expenditure to repay a loan – and this increases the chance of financial exclusion. Also, basic digital users lost an average of Kshs 1,470 to fraud while advanced users lost twice as much (Kshs 2,996) over the past three years. This is a risk that can grow as more unexposed people turn to advanced services and may face devastating losses that they cannot absorb.
  • Social safety nets: People with government stipends or pensions are more likely to use e-government services (such as eCitizen, iTax NHIF) than other Kenyans in general.
  • Entrepreneurs use it little: Among self-employed and business owners half use digital services and mainly for basic reasons like communicating with customers and vendors. Only 15-18% use it for advanced reasons like keeping business records, tracking stock, paying taxes, selling services and buying supplies through e-commerce platforms.

The report by Dalberg, done with support from the Omidyar Network, along with its data sets, can be downloaded here.

New unquoted board for company listings at Nairobi

The Nairobi Securities Exchange (NSE) has launched a new push to increase the number of listed companies. Rather than wait for companies to get ready for listing, they had set out to seek and groom companies under the Ibuka program and have now launched an unquoted securities platform (USP) to woo more companies.  

At an event organized by the Bob Collymore Foundation to connect small and medium businesses seeking capital with potential investors, NSE CEO Geoffrey Odundo said there are 498 private equity funds in Africa with 238 are active in Kenya where there was Kshs 2 trillion available to invest in well-run businesses. He said the new NSE programs are designed at improving the transparency, governance, and chances of business survival after a founder hands off, not just raising capital.  

The USP is an information and infrastructure solution to promote the issuing and trading securities by unquoted companies who can list corporate bonds, ordinary or preference shares, REIT’s, private offers, rights issues and secondary listings of any amount. It targets the many companies whose shares trade over-the-counter (OTC), but whose owners are seeking liquidity, clearer valuations and maybe later to raise capital.

Companies can apply by sending a prospectus to the CMA and NSE, one year of audited accounts, board resolution, incorporation documents and a fee of Kshs 5,000. It takes 21 days for a decision to be made if all documents are sent and the cost of listing is 0.03% of the value of the securities.

The NSE’s USP board has two listings, both from Acorn Holdings. As part of the conclusion of its green bond program, Acorn has transferred the student accommodations it is building into an Acorn D-REIT (real estate development trust), and once they are complete, they will be sold to an Acorn I-REIT (income real estate investment trust) that will manage the properties. A few weeks ago, on July 9, the USP board had its first trades as one million shares of Acorn worth Kshs 20 million (Kshs 6M of the D-REIT, and Kshs 14M of the I-REIT) were traded.

Simple Nairobi stock trades with EFG Hermes One

Background: Kenya’s top stockbroker, EFG Hermes has set out to expand from its institutional investors and also target retail customers. They launched their EFG Hermes One app in July 2021 allowing Kenyan investors to purchase shares on the Nairobi Securities Exchange (NSE) anytime on their mobile phones.

First Impressions: To get started, one had to go through the Kenyan regulatory requirements of KYC (know your customer). While the process is extensive for investors, with a lot of forms, ID, address and other details, new clients can scan and email documents, including photos to EFG Hermes.

Once you’re done, download the app and log-in with the credential to start trading. One fund an investor using mobile money (M-Pesa pay bill) and selects their share account (CDS) to get credited.  

For any issues, there are quick responses via email from EFG Hermes Kenya client services on issues like registration and trades. 

How It Works: Investors can view equities, and their portfolios with up-to-date prices, and also see their cash balances. They can place trades, set the prices and the expiry dates and see the commission/fee calculation before executing any buy or sell trades.

One useful feature of the app is that it allows trading of “odd lots”. This is something not available at many brokers who still only allow  investors to buy or sell shares in multiples of a hundred (100) shares – yet many investors end up with odd lots as a result of selling other shares in ’00s or getting bonus issues.

another odd feature from the stockbroking industry is T+3 days/ again this is somewhat standard and after you sell shares, it will take about two days for funds to reach your account after that one indicated at the account opening where the funds will be sent. 

For now, the Kenya app only allows trades of equities on the NSE, but in future may have more issues – bonds, derivatives, REIT’s, ETF’s regional and international products from EFG Hermes in different markets and assets classes and also as the NSE comes up with more products for retail investors such as day-trading and short-selling.

Verdict: It enables investors to trade from anywhere securely and tracks their trades and portfolios with up to date prices. The app is really small, just 10 MB, and does not use a lot of data to run. Many retail investors have other apps, laptops and sources to analyze what trades to make, and they can turn to the One app which can also be used to place trades after hours to execute when the NSE opens.

At the end of the month, investors get emailed a statement by EFG Hermes of trades during the month. This is a useful record to keep and they should cross-check with the one that comes from the CDSC.  

The EFG Hermes One app is available in the Google Android and Apple App stores.

Kenya Development Corporations Merged

July 2021 saw the announcement of the conclusion of merger plans for a Kenya Development Bank. In a gazette notice, the Government announced the creation of the Kenya Development Corporation in June 2021, which comprises the Industrial and Commercial Development Corporation (ICDC), the Tourism Finance Corporation (TFC) and IDB Capital (formerly known as the Industrial Development Bank).

Industrial & Commercial Development Corporation:

ICDC owns 89% of Development Bank of Kenya, 27% of East African Fisheries, 17% of Eveready Batteries, 18% of Funguo Investments, 20% of General Motors East Africa, 4% of IDB Capital, 46% of KWA Holdings (KWAL) 27% of Mountain Region Poultry, 28% of Sisibo Tea, 2% of Uchumi Supermarkets, 31% of Almasi Beverages, 20% of Aon Minet Insurance and 23% of Centum Investments. Through a defunct subsidiary also 5% of Panpaper Mills, and 100% of Kenatco Taxis and 100% of Kenatco Transport.

ICDC also owns Uchumi House and Finance House in Nairobi and plots in Mombasa, Eldama Ravine, Eldoret and Embu, with another next to Malindi airport.

Tourism Finance Corporation:

TFC has subsidiaries including the Bomas of Kenya, Kabarnet Hotel (98%), Sunset Hotel at Kisumu (95%). Also Kenya Safari Lodges (82%), Mt Elgon Lodge (73%), Buffalo Springs (41%), Golf Hotel at Kakamega (40%), Mountain Lodge at Nyeri (39%) as well as 9% of Mararal Lodge and 5% of the Ark. Also Kenya Hotel Properties i.e. Nairobi’s InterContinental Hotel (33%) and International Hotels Kenya i.e Nairobi’s Hilton Hotel (41%). It also owns 52% of African Tours & Hotels (in liquidation).

TFC, previously known as the Kenya Tourist Development Corporation, owns Utalii house, a building on Moi Avenue Nairobi and a plot on prime Nkrumah avenue in Mombasa

IDB Capital:

IDB owns 0.3% of Consolidated Bank, 0.9% of Nzoia Sugar and 0.3% of South Nyanza Sugar Company (Sony) and a sliver of the Africa Export-Import Bank (AfrExIm)

Other:

All assets, securities and systems of the three institutions are now vested in the new corporation.