Category Archives: Botswana

Olympia Turnaround? Part III

The Olympia Capital Holdings 2022 shareholders AGM at Nairobi club on Friday, August 26 started with a bit of confusion as the Chairman, Dr. Chris Obura, insisted that shareholders needed to wear masks unless they were speaking. It was attended by about 100 shareholders and was the first physical meeting in three years as the last two had been held virtually. The Chairman said the company had found that hosting virtual AGMs was more costly than physical ones and so the company had decided to try one, even as Covid-19 protocols remain.

The meeting took about an hour with lots of Q&A with shareholders about not having seen the documents they were being asked to approve, such as the annual report and minutes of last year’s online AGM (posted online and which the registrars had emailed) and the lack of a dividend.

Governance: The company has a unique structure with a holding company and subsidiaries and has primarily relocated its business to Botswana. The Managing Director was not at the AGM as the Chairman said that he works full-time in Botswana. This has been the case since the passing of their previous Managing Director Michael Matu in 2020.

Manufacturing Cost: During the Q&A, the Chairman mentioned that, of their Kshs 500 million in sales, 400 million is from Botswana where Olympia now does its floor tiles manufacturing, after halting that in Kenya. He said that the cost of manufacturing was one-third cheaper in Botswana than in Kenya.

Dividend when? Olympia can only pay dividends when its various subsidiaries pay dividends to the parent company – and the one in Botswana was not allowed by law to pay until it had settled a bank debt. But now that the loan was capitalized, a dividend may come to Olympia’s shareholders from profits next year.

Goodies: The Chairman said they had not expected many shareholders to show up and that the venue had only set out a small amount of tea and snacks. Nevertheless, the board agreed on Kshs 500 cash as lunch allowance and each shareholder was paid on the way out of the meeting.

Verdict: Looks like shareholders have a pent-up demand to attend physical AGMs after two years of virtual ones, that were occasioned by Covid-19.

Absa AFM Index shows African countries improve in investor readiness

The 2019 Africa Financial Markets Index report that was released in October, found that several countries had closed gaps to perennial leader South Africa, improving on several measures such as financial transparency, local investor capacity, legal protection and macroeconomic opportunity.

Showing just how much African countries have made progress, while only six had scored better than 50 (out of the maximum 100) in the first index in 2017, last year ten countries did that, and in 2019, thirteen countries scored better than 50 points.

The ranking of countries in the Absa 2019 Africa Financial Markets Index and some of the market/investor activities highlighted in the report include:

South Africa (and also number 1 in the last index): Is the top country in 5 pillars after it regained the lead from Kenya on the foreign exchange one. The JSE also launched a Nasdaq clearing platform.

2 (4) Mauritius: Has diversified its economy from sugar and textiles to tourism and financial services. It leads the continent in pension assets under management of $4,331 per capita. It has also established a derivatives trading platform.

3 (3)Kenya: More detail on Kenya’s ranking and investor initiatives here.

4 (6) Namibia: Bank Windhoek issued a green bond in the year. One concern is that the country lacks sufficient financial markets experts.

5 (2) Botswana: The country’s exchange has large market capitalization, but this is mostly due to dual-listed mining companies that have low trading volumes. They also formed a financial stability council to coordinate different regulators and plan to launch a mobile phone bond product like Kenya’s M-Akiba.

6 (5) Nigeria: Showed big improvement as they have liberalized their exchange rate and built up reserves. Pension funds were freed up to invest in infrastructure, bond, and Sukuk funds.

7 (15) Tanzania: Created a tax ombudsman and also repealed an amendment that had made it illegal to publish statistics that were not approved by the Government.

8 (8) Zambia: Improved budget reporting. But reserves dropped due to high interest payments on external debt as mining production has declined.

9 (11) Rwanda: Share of exports grew, and an agreement was reached with the IMF to accelerate urbanization and financial markets.

10 (10) Uganda: Market trading activity dropped from $25 million to  $11 million and one of the largest stockbrokers opted not to renew their operating license.

Others were:

11 (16) Egypt: Topped the pillar of macro-economic opportunity due to export gains and declines in non-performing loans. Moody’s also upgraded their banking system ratings.

12 (9) Morocco: Now publishes monetary policy announcements and data releases. Has an active financial market but limited availability of financial products. It plans to launch an agricultural commodities exchange.

13 (7) Ghana: Is seeking to cap foreign holdings of government debt. The Bank of Ghana merged small banks and revoked licenses of others that did not meet minimum capital requirements.

16 (13) Ivory Coast: Enabled more-accessible budget reporting and plans to launch an agricultural commodities exchange for 2020.

20 (20) Ethiopia: Announced plans to launch a stock exchange for 2020, with aims to have significant privatization events including the listing of telecommunication companies. Local banks are also adopting international financial reporting standards. But the requirement that their pension funds can only invest in government securities is considered an impediment.

Also on the index are Seychelles (ranked 14), Mozambique (15), Angola (17), Senegal (18) and Cameroon (19). The 2019 AFM Index report was produced by the Absa Bank Group and the Official Monetary and Financial Institutions Forum (OMFIF) and it can be downloaded here.

Kenya remains the third most attractive financial market in Africa

The third edition of the Africa Financial Markets Index report that was released in October 2019, found that Kenya had retained its third position thanks to industry efforts to improve opportunities for investors.

The AFM index by the Absa Bank Group and the Official Monetary and Financial Institutions Forum (OMFIF) is a useful tool designed to gauge Africa’s readiness to fund itself and its growth plans. It reviews 20 African countries across six pillars of market depth, access to foreign exchange, market transparency, tax & regulatory environment, the capacity of local investors and macroeconomic opportunity and the legality & enforceability financial agreements.

Overall, South Africa remained in first place, topping four of the six pillars, while Mauritius topped the legal agreements measure and Egypt topped the macro-economic opportunity one.

Speaking on trends across Africa observed in the 2019 AFM Index, Jeff Gable, the Head Of Research at the Absa Group, said there were several exciting financial markets events across the continent this year. These included the first-ever sovereign blue bond by Seychelles to support marine projects, Nigeria selling a 30-year government bond that was four times over-subscribed, Uganda halving the withholding tax on government bonds from 20% to 10%, Zambia launching a primary dealer system and Ethiopia announcing plans to launch a stock exchange in 2020.

On the AFM Index 2019, Kenya, along with Botswana and Namibia, increased to above 50 in the first pillar of market depth. The value of bonds listed in Nairobi doubled from $8.8 billion to $17.5 billion, mostly due to sovereign issues. However there remained a need to have more active trading of bonds and equities, and Kenya has rolled out an M-Akiba infrastructure bond targeted at retail investors that they can access for just over $30.

Kenya came second behind Mauritius on the pillar of enforceability of market agreements. It also scored well for its new insolvency law which encourages rehabilitation of distressed firms, and its endorsement of standard financial master agreements (ISDA GMRA, GMSLA).

However, it lost the lead on the foreign exchange pillar to South Africa. While the country has built up high foreign exchange reserves, up from 4 months to 5.8 months of import cover, the International Monetary Fund (IMF) had reclassified Kenya’s exchange rate regime from ‘floating’ to ‘other managed arrangement.’  The AFM Index has continued to highlight the risk of rigid management of foreign exchange by some African countries and pushed for more flexible regimes.

On the third pillar of market transparency, Kenya’s tax code was found to be supportive, but the country had raised taxation on mobile cash transactions creating some uncertainty. There has also been some recent progress as, in the last few weeks, capital markets stakeholders have convinced the Government to retain the country’s capital gains tax at 5%, and set aside an amendment in the 2019 Finance Bill that had proposed to change it to 12.5%.

The country was also flagged for its capping of interest rates which had shrunk credit availability and weakened companies profitability.

Kenya’s Treasury Cabinet Secretary, Ukur Yatani, in a speech read on his behalf at a Nairobi launch of the report, spoke of the need for Kenyans to save and invest to fund economic growth. Even with the country attaining formal financial inclusion of 82%, up from 26% in 2006, more could be achieved through financial markets.

He said that the country had established a Nairobi International Financial Centre authority to attract capital to Kenya and with the movable property security rights in place, the government was now supporting the setup a Kenya Mortgage Refinance Company that would make it easier for banks to advance funding towards affordable home ownership.

He noted that President Kenyatta had declined to assent to the Finance Bill until Parliament reviewed the cap on interest rates which, evidence showed, had resulted in a negative impact on the economy. Kenya was one of the few countries on the index which saw bank non-performing loans go up, from 10 to 11.7%, last year. He hoped that Members of Parliament would now view the President’s determination as an opportunity to give a stimulus to the economy.

Jeremy Awori, CEO of Barclays Bank of Kenya said that the country had ranked favourably, rising from 5th, when the first AFM Index report was published in 2017, to 3rd in 2018, a position it retained this year. This was due to efforts by industry stakeholders and regulators who had also worked with the Capital Markets Authority to launch a 10-year master plan for the industry. He added that, after Kenya had come up with new regulations for exchange-traded funds, Barclays Kenya had launched the first ETF in the region – New Gold which had performed well since its introduction.

He said that, as Barclays transitions into the Absa brand in Kenya and across Africa, customers will not feel any change in products or services and that they were working to upgrade systems to ensure they remain accessible from anywhere in the world. He added that strong domestic financial markets were a cushion to economic headwinds and that Barclays would soon launch a new wealth and asset offering in Kenya.

Charles Muchene, Chairman of Barclays Bank of Kenya, saluted Paul Muthaura, the outgoing CEO of the Capital Markets Authority, who has led the organization to be recognized as the most innovative capital markets regulator in Africa for four years in a row.  He said that a new ATS platform,  introduced at the Nairobi Securities Exchanges, had broadened the capacity of traders, enabling them to do multiple transactions on the same day, while also supporting securities lending and derivatives trading.

Later, in speaking about the capacity of local investors, the CMA CEO spoke of the need to educate, and shift, more retail investors towards long-term gains from managed funds. This would cushion them from the tendency to speculate on quick returns from land, gambling, and pyramid schemes.

Geoffrey Odundo, CEO of Nairobi Securities Exchange, said they had held some positive engagements with the National Treasury to get more big government listings to the NSE. He also said that they now have an Ibuka program to nurture small companies to be more attractive for investments, adding that this was part of a plan to increase its equities turnover from 6% of the total market to 15% in a few years. The NSE now had 12 asset classes including equity and index futures launched earlier this year and had been voted the second most innovative exchange in Africa.

The 2019 AFM Index report can be downloaded here along with a databank summary of the different country rankings under each of the six pillars.

Guide to Gaborone

A guest post by Marvin Tumbo, the CEO of Socialight Media

Getting There: Kenyans don’t need visas when flying to Botswana, nor do they need yellow fever vaccinations, which several African countries require. But if you are traveling via Johannesburg, you might be required to get yourself a transit Visa. I have not experienced this, but know of friends from Nigeria who on several occasions, have not been able to fly via Johannesburg because of issues with transit visas.

It costs around US$700 for a return flight to Botswana, and for travel from Nairobi, the ideal flight to take is Kenya Airways, which flies directly to Gaborone 3 times a week. However, there have been occasions when KQ flights to and from Gaborone have been canceled on short notice as was the case when I returned this time.

An alternative route is to fly via Johannesburg and then take Air Botswana or South African Airways onwards to Gaborone. However, while it is only a 35-minute flight between Johannesburg and Gaborone, a problem may be the connection time as you may have to wait 4 to 6 hours for the connecting flight.

The last time I came to Botswana, the Sir Seretse Khama International Airport was still under construction but now after two months, they are finishing up and most of the Airport is in operation. Currently, there are no shops at the Airport yet, just a restaurant. I had been told that, prior to the upgrade, the Airport had the best perfume shops, which sold world-class perfumes at a fraction of the price – and maybe these will come back.

The airport is not as busy as Oliver Tambo Int’l Airport or JKIA so checking in and out is pretty fast with no hassle at all.

Getting Around: The local money is called Pula and it has the same strength as the South African Rand. The largest denomination here is 200 Pula.

There are many taxis from the Airport and it costs between 60 and 100 pula ($6 to 10) to get to the city. Some of the hotels usually provide your transport back to the airport for free when leaving, like the Cresta President.

If you have meetings within the city, you can use Taxis, which will cost you between 20 and 40 Pula (less than $5). There are no traffic Jams here so going to and from the Airport and around the city is not a hassle at all. The roads are in great shape and there is a healthy respect for the law here, which means no funny (bad) driving.

Gaborone is a very secure city, and Safety-wise, it is very safe to walk around any time of the day or night. I saw very few police officers for the duration I was there and locals will tell you that there are no horror stories like robberies and muggings or worse. You even feel that the place is very safe without being told.

Botswana also has our version of Matatu’s plying various routes. I did not get to use these but compared to the Matatu’s in Nairobi, they look more organized and respectful.

Hotels: While there, I stayed at the Cresta President Hotel, which is one of the best Hotels in Botswana. It has good Wi-Fi and is located at the centre of the City, a mere 15 minutes drive from the Airport, and is also within walking distance of every office you will probably need to visit. Similar 3* and 4* hotels cost between $100 and $130 per night

Communications: Orange, MTN, and Mascom are the leading providers in Botswana with Mascom being the largest in terms of subscribers. However, you cannot roam with Safaricom here but can do so with an Orange line, and while phone calls are cheap, they are not as cheap as in Kenya.

Language: The local language is Tswana but everyone speaks English as well so there are no language barriers here. You will hear the word Dumela a lot which is how you greet people in Tswana. – and you also reply by saying ‘Dumela’ as well. The local newspapers are all in English with the most prominent ones being Mmegi and the Botswana Guardian. There is also the Daily News, which is a free newspaper published by the Government.

Sightseeing & Shopping: If you really want to see what the country has to offer, the Okavango Delta in the Northern part of Botswana is the place to go. Game shooting is allowed here but only for certain animals – (and not) the Big Five which are heavily protected.

If you want to buy anything to take back home, remember there are no shops at the airport yet. Instead try the variety of malls in and around the city as well as craft fairs, which are the equivalent of Maasai Markets in Kenya. These are open every day but only a few of them will be on Sundays.

Food: There are many places where you can eat and for as little as 20 Pula or as much as 95 Pula ($10). To eat local foods, ask to be taken to The Station and there you will find the best local food for just 20 Pula. At high-end restaurants, good local food will cost 60 to 100 Pula (10 to 15 USD with drinks). Make sure you check out Cattle Baron and Beef Baron, and try their speciality which is the Beef Schnitzel or T-bone with baked potatoes, papa, Seswaa – the Botswana National Dish. Try out Morogo as well. The local beer is called St Louis and they offer it as a Lager or Export, and the latter has a better kick to it.

On any given day you will spend between $40 and, on the higher side, $100 having meetings, lunches, dinners and a couple of drinks in the different parts of the City.

Business & Infrastructure: As a business destination, this place looks God-sent. There are no issues with electricity or water for that matter. Registration of a business is pretty straightforward and costs roughly 500 Pula to register and 1,500 Pula for a trading license so, in total, this amounts to $250.

When you look at your normal day in Nairobi and compare it to here, there are immense business opportunities here. However, all the above is the insight of a local lawyer who will be handling our legal issues here. We are just finishing setting up shop and I can update this later based on experience. Our lawyer also warned us about xenophobia in Botswana though this is not something I have experienced yet. Most of the people I met were really receptive and excited about meeting a Kenyan and talked positively about Kenya and Nairobi.

Shocker One thing to note is that almost all drivers in Botswana respect the law as far as driving is concerned. There are no traffic police here to direct traffic, and if you have been to Nairobi or Lagos or even Kampala, it’s a shock how organized the traffic is. People adhere to road rules even if they are the only ones on the road, and there is no running through red lights even if it is at 2 A.M

Summary: On the face of it, Botswana is a great place as both a tourist and business destination. You will hear and read a couple of corruption cases, but the legal system here will give you investment confidence because of their conviction rate. A friend at the AG’s Chambers informed me that regardless of who you are, there is no escaping the law. At the end of the day, my deciding to set up my business there also means I am a convert!

Banking Round-up

In Nigeria, Banks have turned their tellers into prostitutes, appropriately titled “relations managers.” With 89 banks in Nigeria, competition can be fierce, and many businesses have complained of harassment by “corporate prostitutes” and Women’s Rights Watch Nigeria and other groups accuse some banks of “specifically mandating young, unmarried female staff to target and convince wealthy young men [that] these employers insist on skimpy outfits and unusual work hours”.

In Britain, Barclays Bank staff won’t get paid on time owing to a Banking error. The wrong date was entered into the bank’s computer system and as a result, as many as 62,000 Barclays UK staff and another 40,000 former employees will get paid a day late.

In Uganda, a Bank now collects taxes for the URA or Uganda Revenue Authority. Look for this outsourcing model to be expanded in Kenya where bank’s already collect utility payments for KPLC and other cash-strapped bodies.

In Botswana, the Finance Minister has warned Banks about their poor service. Mr. Gaolathe said there is growing concern amongst the general public regarding long queues in banking halls, especially at peak times and also took issue with the commercial banks for focusing on the prestige market at the expense of the larger community.

Lastly, in Canada customers pay as much as 16,000 shillings in banking fees (Can$C258 a year) for current accounts at some Banks.