Category Archives: CMA Kenya

Kenya Pension Fund Managers: Who does What?

We have four professionals involved in the running of a pension scheme, namely: 

  • Trustees who are responsible for management of the scheme and act in the best interests of the beneficiaries. 
  • Fund Managers to provide investment advice as well as investing the scheme funds.,
  • Custodians for the safe custody of scheme assets and title documents. 
  • Administrators who carry out administrative duties including keeping members records.

The lines above are excerpts from a speech by Edward Odundo, CEO of the Retirement Benefits Authority, at the rebrand and launch, of Liberty Pension Services, one of the leading independent pension fund administrators, which has now rebranded as Enwealth. He also said that the retirement benefits industry assets have grown tremendously from Kshs 50 billion in 2000 to Kshs 814 billion in 2015, and should reach Kshs 1 trillion by the end of 2016.

All the above entities are licensed by the Capital Markets Authority.

$1 = Kshs 100

 

Kenya Airways: Still in The Red

This morning Kenya Airways (KQ) released their half-year results. Some highlights from the investor briefing.

• Half-year Kenya Airways revenue was Kshs 56.7 billion same as last year. 90% is from passenger traffic, and  60% of their business is in Africa.

• Kenya’s largest increase in tourists was in 2011, and the numbers dropped in 2012 & 13 with the largest decrease was in 2014, just as KQ added great capacity. JKIA passenger numbers have been flat for the last three years and for the last three months, they have had to adjust their schedule from 24 to 18 hours as the runway is being repaired.

• Half of the airline industry profit is in North America, where strong capacity, consolidation, combined with ancillary revenue and lower fuel costs has had a major impact.  The Middle East has low yields compared to investments, and Africa has 3% of global demand.

• Shareholder equity has gone from Kshs -6 billion last September, to Kshs -33 billion this year and KQ is talking to the CMA on how to reverse this.  

• KQ has a turnaround plan, developed with Mckinsey, with 24 initiatives worth a potential $200M, that starts this month.

• Despite fuel cost coming down from Kshs 21 billion to Kshs, 13 billion, the half-year loss went from Kshs 10.5 billion to 11.9 billion

Some other numbers

• Revenue per available seat decreased from 6.2 to 6.14

• Cabin factor was up from 64% to 68%

• Carried 2.14 million passengers, up from 2.10 million

• Cargo tons were 35,405 down from 37,255

• On time performance was 75% (down from 77%)

• Finance cost was 3.4 billion, up from 1.5 billion

The new chairman of the Kenya Airways board, Dennis Awori, thanked the government, financiers, and suppliers for their support for the airline. CEO Mbuvi Ngunze said that the senate enquiry is ongoing and on Monday, senators will, for the first time, visit the airline.

November 12 2015

Government takes over Imperial Bank

The Central Bank of Kenya has appointed the Kenya Deposit Insurance Corporation (KDIC) to manage Imperial Bank for a year following their awareness of unsafe or unsound business conditions.

Unlike previous banks, liquidity appears to not have been a problem in the decision, and the bank has just raised Kshs 2 billion (~$20 million) via a 5-year, 15% bond that was to list today at the Nairobi Securities Exchange. Imperial Bond

Imperial was Kenya’s 18th largest bank, with assets of almost Kshs 57 billion last year, including deposits of 47 billion, loans of 31 billion and had a pre-tax profit of 2.7 billion ($27 million) in 2014.

Another blog on the intrigues at Imperial notes that the shocking development comes against the backdrop of the death of the bank’s group managing director, Abdulmalek Janmohammed, on September 15, 2015 of a reported heart attack.

EDIT: The KDIC statement notes

  • The Bank was placed under receivership due to, amongst other reasons, irregularities and malpractices in the Bank which exposed depositors, creditors and the banking sector to financial risk. 
  • Normal operations of the Bank are suspended except for collection of loan re-payments or any other payments into the Bank. Debtors are therefore encouraged to continue servicing their obligations.

EDIT: The Central Bank and the Capital Markets Authority released a joint statement

  • The Capital Markets Act, has directed the Nairobi Securities Exchange to suspend the introduction to listing and trading of the Corporate Bond issued by Imperial Bank which closed on September 17, 2015. This suspension has been imposed in the public interest and to protect the interests of investors.
  • The board of directors of Imperial Bank Limited brought to the attention of the CBK inappropriate banking practices that warranted immediate remedial action in order to safeguard the interest of both depositors and creditors.
  • CBK and the board of directors of Imperial Bank Limited are working closely on a feasible resolution mechanism for Imperial Bank Limited (In Receivership). CBK assures members of the public that Kenya’s banking sector remains safe and robust.

Using Pensions to fund Private Equity & Venture Capital

The recently passed Kenya finance budget 2015/16 had some changes that affect licensed retirement benefit  schemes.

The main one was to allow pension managers to invest up to 10% of retirement funds they manage into private equity and venture capital investments that are licensed by the Capital Markets Authority (CMA).

Pensions can also invest up to a maximum of 15% their funds in any asset class, bond, equity or security issued by a single issuer, but this exception does not apply to government securities.

The new rules also bring in term limits, as trustees are now limited to serve two terms of a maximum of 3 years each and are contained in legal notices 109-112 of 2015.

 

Finance Act to Enhance NSE Investments

The Capital Markets Authority highlighted some points about the recently passed Finance Act that enhance the investment climate in Kenya. These include;
  • Removal of capital gains tax (CGT) on the transfer of securities traded on any licensed securities exchange.
  • Allowing a company introducing shares through listing to pay 25% corporate tax for 5 years.
  • No stamp duty on the transfer of property to a Real Estate Investment Trust (REIT) till after year 2022.
  • Asset-Backed Securities (ABS) are exempted from paying stamp duty on securitization transactions.