Category Archives: Citibank Kenya

Kenya Eurobond 2021 A to Z

Kenya’s 12-year Eurobond, in which the Government sought to raise $1 billion, attracted offers worth $5.4 billion after a three-day virtual roadshow with European investors.

Here’s a peek at a draft 223-page prospectus

Advisors to the National Treasury were Citigroup and J.P. Morgan Securities as book runners, co-managers were NCBA and I&M banks, Citi was also the paying agent and registrar, while legal advisors were Dentons, White & Case, Dentons Hamilton Harrison & Matthews and Coulson Harney.

Banking: The Central Bank regulates all mobile phone-based banking products offered by banks.

The government will not participate in the recapitalization of the National Bank of Kenya and plans to divest from commercial banking.

Debt rescheduling: During Covid, Kenya secured debt suspension relief from eight out of its 10 Paris Club member creditors, and China for a total of Kshs 38 billion of 68 billion requested, to free up liquidity for Covid-19 pandemic-related expenditures.

Default: Is non-payment of the principal for 15 days after it falls due or interest for 30 days after the due date. Also if Kenya ceases to be a member of the IMF or default on another security by $25 million.

Litigation: Any disputes shall be resolved under arbitration rules of the London Court of International Arbitration and shall be lodged through the High Commissioner of Kenya in London.

London Bond Listing: An application has been made to list and trade the notes on the London Stock Exchange. Notes are in denominations of $200,000

Past Eurobonds: In 2014, Kenya raised an aggregate $2.75 billion through dual-tranche 5- and 10- year Eurobonds. In 2015, Kenya had $750 million syndicated loan with a consortium of banks and in February 2018, Kenya issued its last Eurobond, a $2.0 billion one comprising a 10-year tranche and a 30-year tranche.

In April 2019, the Auditor General issued a special audit report on the 2014 Eurobond and found the funds were fungible utilized but some were spent outside the Government’s IFMIS.

Purpose: The Kenya Government intends to use the funds for general budgetary expenditures.

Repayments are made in US dollars.

SGR: In January 2021, Kenya secured a debt suspension from China of a loan by Eximbank to fund Kenya’s SGR. US$378 million, will be repaid over five years, after a grace period of one year, in ten equal, semi-annual installments.

The Kenya Electricity Transmission Company recently signed a contract with China Electric Power Equipment and Technology Company for the electrification of this section of the Mombasa-Nairobi railway.

Subscription: In case, the bond was under-subscribed, Citigroup, J.P. Morgan, I&M and NCBA would have filled the gap.

Taxes: All payments are made, without deducting withholding tax. Also, interest payable on the notes has been exempted from income tax and capital gains tax in Kenya.

Safaricom’s Ethiopia License

This week marked the deadline for bids for two new Ethiopia telecommunication licenses on April 26. Two offers were received in Addis Ababa; one by MTN (Mauritius) and the other for a “Global Partnership for Ethiopia”, a consortium by Vodafone, Vodacom, Sumitomo and Safaricom.

This is part of an overdue privatization push by Ethiopia that has continued even as political tensions have flared up in different parts of the country. The licenses do not include mobile money, but that is something that currently monopoly, Ethio Telecom has been granted and hopes to launch soon. It is expected that others who did not bid for mobile licenses such as Orange may bid for the partial privatization of Ethio Telecom which has 50 million subscribers.

Can Safaricom grow in this market 110 million population strong-market? That has been a goal of Safaricom’s management for the last few years. But a January 2021 report by Citi Bank was negative on the “high risk, high return” venture which will impact Safaricom’s earnings in the short to medium term. This was due to the impact of Covid-19 on the risk profile of all potential investors in Ethiopia, but also as, by taking a controlling stake in the consortium, the Ethiopia operations will be consolidated in Safaricom’s financials. Citi expects that Safaricom would raise half a billion dollars of debt to contribute to the consortium which would put an end to special dividends paid by the firm.

After technical and financial evaluations of the two qualified bids, a decision is expected by mid-May 2021.

Also, see more about MTN, from their Nigeria listing.

EDIT May 24, 2021:

  • The Global Partnership for Ethiopia welcomed the award of a license to operate telecom services in Ethiopia. Safaricom is the lead partner in the consortium which will establish a new company in Ethiopia that aims to start providing telecommunications services from 2022. The country has 112 million people and is introducing competition as part of economic reforms supported by the International Finance Corporation.

EDIT May 25, 2021:

  • The consortium bid $850 million and will get a 15-year license, with the possibility of one extension of the same duration. Safaricom has incorporated an SPV, the Vodafone Ethiopia Holding Company in the UK, in which it owns 90% and Vodacom 10% – which will own a company in the Netherlands, that it intends to move to Kenya, and get shareholder approval at their upcoming AGM, to operate it as a subsidiary. The SPV will own 61.9% (Safaricom 55.7%, Vodacom 6.2%), and other shareholders will be Sumitomo (27.2%) and CDC (10.9%).

EDIT June 8, 2021:

  • Vodacom CEO Shameel Joosub said their group serves 180 million in Africa with 58 million accessing financial services on M-Pesa, Africa’s largest mobile money platform that processes $24.5 billion a month. It has now expanded to international money transfers, loans, savings and lifestyles ad lifestyle and could be used to enable small Ethiopian businesses to access e-commerce. Also, the launch of mobile money services in 2022 will ensure financial inclusion and close the gender gap.
  • Prime Minister Abiy Ahmed Ali said Ethiopia will next offer 40% of Ethio Telecom to a foreign investor with another 5% to the Ethiopian public. Also, they will adjust policy (mobile money) and re-tender the second national telco license as he called on all the telco players to coordinate to connect everyone.

EDIT July 5, 2021

  • Safaricom appointed a new Managing Director for Ethiopia, Anwar Soussa.
  • Safaricom released the notice for the AGM on July 30 where shareholders will be asked ratify the Ethiopia deals.

EDIT July 15: The Ethiopian Communications Authority (ECA) issued a fifteen-year telecommunications operator license to “Safaricom Ethiopia PLC,” a newly incorporated local company.

EDIT: October 6 2022: Safaricom Ethiopia launched its mobile telecommunications network and services in Addis Ababa, Ethiopia, with 2G, 3G and 4G mobile services in 11 towns. While it builds a network to span 25 towns by April 2023, it also has infrastructure sharing and interconnection agreements with Ethio Telecom.

Also comes with a mobile money license for M-Pesa:

Continues

Economic Forecasts from Citi, Barclays, World Bank, Brookings, Oxford

A roundup of recently published economic forecasts, reports, and surveys.   

AfDB: The African Development Bank’s interactive platform, #MapAfrica, maps the locations of the bank’s investments in every country across Africa.   

Also the AfDB launched their 2018 African Economic Outlook report. 

Barclays: In Nairobi this week, Barclays Africa launches the 2017/18 macro-economic report as well as the Africa Financial Markets Index,  which is a survey of 17 African stock markets.

Citi: Citi Research has just published two reports on frontier markets and one on food inflation in Africa. Citi found that frontier markets did better than developed markets and that Kenya did well (36% return on equities) despite the banking interest cap law and the prolonged election season which has now ended.

Citi’s forecasts of top picks for frontier markets in 2018 are Sri Lanka, Romania, and Kenya and they see weaknesses for Argentina, Morocco, and Egypt. The Citi rankings consider six factors: macro growth, macro imbalances, monetary factors, valuations, earnings momentum and price momentum for their forecasts. Citi also ranked five top stock for frontier markets BGEO Group (Georgia), Humansoft (Kuwait), IDH (Egypt), KCB (Kenya) and MHP (Ukraine). For KCB they like the growth profile of corporate and salaried customers from which the bank will grow market its share even if the banking law remains the same.

The Citi forecasts also looked at the Kenyan currency (shilling) which has remained stable relative to other African currencies and how it will continue to do so even with the country’s balance of payments deficits and heightened politics. But they found that one problem with making Kenya predictions is that a significant portion of inflows that offset the current account deficit is classified as other flows, and their timing is not predictable. They assume that the inflows are from the East and Central Africa region that sees Kenya as a safe haven, despite the politics of the second half of 2017. Another finding was that devaluation of currencies have a bigger impact on food inflation in sub-Saharan Africa but Kenya which had drought and food security issues in 2017 is able to draw on food production from its neighbors (Ethiopia, Tanzania, Uganda) that keeps food inflation in check even though the food trade data is not captured in official statistics.

World Bank: Meanwhile the World Bank is taking heat after one of their economists admitted that the WB “Doing Business” rankings for Chile had been manipulated for political reasons. The Doing Business reports are cited by leaders of several countries such as Kenya, Rwanda, India as indicators of their good performance in office, But this one admission of political interference could trigger fall out as to the credibility of other reports, country economic forecasts, growth statistics, inflation measures and discussions with governments that the World Bank does.

The Oxford Business Group: The Oxford forecasts reviewed the year Kenya in 2017 in which growth was expected to be about 5% (down from an initial forecast of 5.8% for 2017), but still above the sub-Saharan Africa average of 2.7%. It noted the mixed agriculture performance was due to the drought that affected maize, sugar, tea. Also that Kenya’s Supreme Court decision to nullify the presidential election set a good path for the country in 2018 despite the added cost of staging two elections in 2017 affecting the government’s ability to meet budgetary targets and which later resulted in Moody’s considering a downgrade of Kenya’s debt rating.

Brookings: The Brookings forecasts are contained in Foresight Africa, an Africa-focused report  that celebrates Africa’s growth and highlights priorities for the continent. For Kenya, it contains a sum up of the ability of the country to leverage technology and innovation for things like revenue collection and uptake of products and mobile bonds (M-Akiba), M-Tiba, and IFMIS. It mentions that Kenya can balance the impact of special economic zones and infrastructure from China against politics and that the successful launch of the SGR in May 2017 could one day serve Uganda Rwanda, Burundi and even Tanzania South Sudan and Ethiopia. It has special sections on the 2017 Kenya election and the M-Akiba bond (“The KSh 150.04 million (approximately $1.5 million) uptake of the M-Akiba bond was mainly dominated by small investors who invested less than KSh 10,000 (approximately $100)”)

Citi’s outlook on Kenya Banking

Citi Bank has been producing some insightful research reports on companies they watch like KCB, Equity and Safaricom for their investment clients.  The latest one (Will it stay or will it go? — Awaiting clarity on the Banking Act) is an outlook on Kenya banking, based on the financial results that all banks released for the third quarter of 2017 which is exactly a year after Kenya’s Parliament passed a law, which the President then signed, that capped all Kenya banking loan rates at a maximum of 14% per year.

Citi’s findings:

  • Despite the Banking Act of 2016, Kenya’s leading banks maintain among the highest margins (8~9% NIMs) and returns (ROTE 20~23%) of any frontier market, coupled with strong capitalization, a stable currency and an improving political environment.
  • While there is little clarity on the future of the Banking Act, we acknowledge that many investors are interested in that “what if?” case if the legislation was to be amended, and hence provide a sensitivity analysis to gauge the upside from changes to the regulatory regime.
  • The Kenya banking sector is fairly concentrated with the top 5 banks controlling just under half of the assets (48%), KCB is the largest bank with a 14% market share, followed by Equity Bank and Cooperative bank with 10% each. A similar story for deposits, with the top 5 banks accounting for 50% of the market, KCB is the largest player with a 15% share, followed by Equity Bank at 11% and Cooperative bank at 10%.

The Citi report notes that KCB who grew loans by 9% in the third quarter despite the interest rate cap has a diverse client base that makes it easier for the bank to navigate the challenging environment. KCB has expressed interested in acquiring smaller banks like National Bank, as it also it pulled back from volatile South Sudan in May 2017, where it only retains a license.

Equity has put brakes on lending, with flat loans growth in the third quarter. The bank’s Equitel is now Kenya’s second largest mobile money platform after Safaricom’s M-Pesa, with 4% of customers and 23% value of transactions. Equitel appeals to customers as it has no internal charges. Meanwhile, mobile loan growth fell in the half year at Equity as the bank tightened lending standards, while KCB’s grew. Still, Equity disbursed 1.6 million mobile loans through Equitel in the first half of 2017.

The Citi report also notes that KCB lags Equity in the digital push, with mobile phones accounting for 70% of transactions at Equity and  57% at KCB. Elsewhere, 86% of all customer transactions at Co-op Bank are done on alternative delivery channels mainly mobile banking, ATMs, internet and agency outlets. Another finding was that the large banks have benefitted from the flight to safety by depositors following the collapse of three smaller banks in 2015-16.

The Citi Report looked at the Kenya banking interest rate caps under three scenarios with the first  being that the caps are extended even further to bank charges. The report mentions that the Kenya banking regulator, the Central Bank (CBK), had rejected 13 out of 16 commercial bank applications to increase charges, all pointing to tough times for banks in a slow loan growth environment. The second scenario was that the interest rate cap remains as is, and the third scenarios was that the caps are loosened by excluding some loan segments which will allow banks to lend at higher rates to riskier segments like SME’s, retail and micro-finance clients. However, Citi finds that the interest rate caps are not going away soon, and they are here to stay, probably for a few years. 

Finally, the Citi report (published on 19 November), rates KCB as a ‘buy’ with a target share price of Kshs 47 (current price on December 8 is Kshs 43), while they are neutral about Equity Bank which they value at Kshs 38.5 per share (current price is Kshs 41) as they think it is fairly valued.

Idea Exchange: Bank, Literature, Journalism, Opportunities, and Win a Free Phone

The Africa AgriBusiness Challenge from Enactus Kenya and Syngenta seeks out youth to generate creative business ideas to improve the agricultural productivity of certain crop value chains. Deadline is June 10.

The 2014 Africa Awards for Entrepreneurship will have five awards to celebrate entrepreneurs at different stages of the entrepreneurial life cycle; lifetime achievement, transformational business, outstanding mature business, outstanding growing business and outstanding social entrepreneur.

The Africa Prize for Engineering Innovation. Details here .. via @calestous.

@AfriCOG Investigative Journalism Fellowship Programme 2014. Deadline is 30 May. 

Anthemis Fellowship seeks out entrepreneurs, executives and thought leaders who are passionate about building an improved financial services industry fit for the digital age. The Anthemis Fellowship program includes 4 months at the Anthemis London office, 4 months with one of their portfolio companies and 4 months with a major financial services firm. It also comes with a monthly stipend of EUR2000 and an invitation to attend the Anthemis #HackingFinance Retreat from July 10-13, 2014 in Meribel, France. Deadline is June 1. 

@APO_Source has had a scholarship for an African journalist to to attend the 2014 annual meetings of the African Development Bank.

Bloomberg Africa ‏@BBGAfrica – seeks Swaziland, Eritrea, Djibouti, G.Bissau, Cape Verde, Eq. Guinea, Sao Tome stringers – Please e-mail asguazzin@bloomberg.net

Citi Africa Management Associate Programme Citi in Africa is  looking for ambitious graduates with strong academic backgrounds, maximum of two years’ work experience, leadership, teamwork, and excellent communication skills.

The 2014 CNN/MultiChoice African Journalist Awards will recognise excellence in culture, economics & business (NEW), energy & infrastructure (NEW), environment, health & medical, news impact (NEW), photography, press freedom, sports, language general news, Francophone news and also Portuguese news. Details here and the deadline is 30 May.

EABL Foundation scholarships for needy students who have gained admission to Kenya public universities. Deadline is June 6. 

Etisalat Prize 2014 for African literature is now open with a top prize of £15,000 and a fellowship at the University of East Anglia, while winner and shortlisted writers also receive a sponsored two city tour promoting their books. Details here and the deadline is 8 August.

The Golden Baobab Prizes for Literature include awards for a picture Book (targeting readers aged 6 – 8 years), early chapter (targeting readers aged 9 -11) and rising writers (for a young African author under the age of 18 who demonstrates the talent and drive to become the next great African author for children). Details here and the deadline is June 29.

Jalada / @KwaniTrust seek 3 best Afrofuture submissions for a second anthology. Deadline is D/L 15

Japan Government scholarships  in research, teacher training, technology, and specialized training .. via @njathika

Want to be a Jameson brand ambassador? Here’s how to apply (via @uqweli ) oops – deadline also passed.

KCB: The region’s largest bank has ongoing internships, management trainee and management exchange programs. Sourced from @RookieKE blog.
 
Kenya Revenue Authority –  KRA graduate trainee program 2014

The Kenya StartUp Cup is open to all Kenyan youth entrepreneurs who can apply to win Kshs 1 million (~$11,500). Details from the @prepaid_africa blog and the deadline is May 20.

KenyaTop100 seeks successful companies with turnover of Kshs 70 million to Kshs 1 billion (~$12,000)  with 3 years audited accounts to compete and be among @kenyastop100 

Kijabe Forest Trust @KijabeForest  is seeking a new logo design.

Kuona Trust has internship opportunities for students at their offices in Hurlingham, Nairobi. 


The Kwani Trust 2014 fiction workshop seeks to develop new contemporary fiction writers between the ages of 18 and 24 and from outside of Nairobi. To apply, check the website, and send email to submissions_at_kwani.org by May 26.

Orange  has launched the 4th edition of the Orange African Social Venture Prize which will award prizes to four projects; three with grants of 10,000 EUR, 15,000 EUR and 25,000 EUR, and a new special prize of 10,000 EUR. It’s open to all entrepreneurs or legal entities that has been in existence for fewer than three years at the time of the competition and the deadline is 19 September.

Power Africa Off Grid Energy Challenge from @USADF and @GeneralElectric Africa offers up to $100,000 to 100% African owned and African managed firms that seek to power up under-served parts of rural Kenya. Deadline is June 20.  

School of Data: Become a School of Data Fellow as they are currently broadening their efforts to spread data skills around the world, and are seeking people who are data savvy, understand the role of NGO’s, are interested or experienced in working with journalism and/or civil society, or enjoy community-building.  Deadline is 1 June.


Standard Chartered Bank Fast Track Program: The bank is looking for young graduates to join their management trainee program in several African countries, including Kenya, Ghana, Nigeria, Tanzania, Zimbabwe, Uganda, and several international locations. Sourced from @RookieKE blog

 
The Stanford University Africa MBA Fellowship Program pays for tuition and associated fees (approximately US $145,000) for citizens of African countries with financial need who wish to obtain an MBA at Stanford GSB. Stanford will award up to eight Stanford Africa MBA Fellowships annually. Details here and the deadline is 13 June.

Strathmore University @StrathU scholarships from @imbankke for 10 needy students pursuing various Finance related degree programmes.

Swedish Institute Management Programme‏ The Swedish Institute is launching a new leadership programme for progressive leaders from Kenya,Tanzania, Rwanda, Ethiopia and Zambia – offering a combination of theory and practice in the area of responsible leadership and sustainable business.  Details here and the deadline is June 6.

Total Kenya Graduate Management Trainee Program. The company was is looking for young dynamic graduates.  Also sourced from @RookieKE blog but the deadline was 7 May  
The Wall Street Journal @WSJ looking for entrepreneurial reporter to cover the most entrepreneurial of Africa beats–business, from Nairobi. Apply to @pwonacott

Submit your wikimedia proposals to be included at Wiki Indaba 2014 in Johannesburg. Details here and the deadline is 15 May.
The World Bank Young Professionals Program 2014 seeks highly qualified and motivated individuals skilled in areas relevant to the World Bank’s operations such as, economics, finance, education, public health, social sciences, engineering, urban planning, and natural resource management. Details here and the deadline is 30 June.
 
Win a Nokia Lumia 1320: There are very few comments on the blog here despite the number of daily readers, and many of the comments are from spammers promoting products from far off countries. To stimulate comments, I’m giving away a brand new Nokia Lumia 1320 phone (worth about $400/Kshs 35,000) to the person who engages the most on the site. The phone was an excellent, but unexpected, prize awarded to the winner of the best business blog at the recent 2014 Kenya Blog Awards ceremony. During the month of May, readers to the blog and it’s archives, can make as many comments as they want, and I’ll respond on some. 
Rules 
1. There are no rules about winning.
2. It’s about serious comments, not volume – and blog comments only, not tweets/tags
3. This is personal, and the promo has nothing to do with Nokia  or Nokia East Africa.
4. @Coldtusker is excluded 🙁
5. An announcement will be made on June 14, and there may not be a winner  if no one is deemed to be worthy.