Category Archives: Covid19

Absa Kenya rebounds from Covid hit

As the wave of quarterly financial results by Kenyan banks stream in this month, the banking industry appears to have recovered from the early effects of the Covid-19 pandemic. 

Absa Bank, Kenya’s fifth-largest bank with assets of Kshs 398 billion ($3.6 billion), released its results, showing a 5x growth in pre-tax profits in the half-year, from 1.6 billion last June to 8.0 billion in June 2021. In the half-year period,  it made provisions of Kshs 1.9 billion compared to Kshs 5.3 billion last June. Overall, loans have grown from Kshs 202 to 219 billion (8%) while deposits have grown from Kshs 249 to 264 billion, representing a loan-to-deposit ratio of 83%. 

The banking industry made many responses to Covid-19, including reducing digital bank charges and restructuring customer loans. Absa restructured 59,000 loans worth Kshs 62 billion, representing 30% of its balance sheet. Absa Kenya’s Managing Director, Jeremy Awori, said it had been a good initiative to work with customers as, by June 2021, 94% of the loans have resumed repayments and the bank’s non-performing asset levels were down to below the industry average of 14%. 

In the last seven years, the bank had doubled the size of its balance sheet, navigated the re-branding from Barclays to Absa, and brought down its cost to income ratio from 53% to 45%.

Absa will optimize costs through technology to improve banking services. In 2021, it will invest Kshs 1.6 billion in technology initiatives; they have already launched WhatsApp banking and will upgrade the Timiza digital banking platform, expand agency banking, automate securities trading and increase cash deposit ATMs and rollout of contactless cards. 

Going forward, Absa Kenya management expects that, with the built-up strong capital and liquidity, the bank will be in a good position to pay a dividend to the shareholders at the end of the year which they missed last year.

AfDB 2021 annual meetings

The African Development Bank Group (AfDB) has announced its series of annual meetings for 2021.

The theme of the annual meetings which will take place from June 23-25 is “building resilient economies in post-covid Africa” and will include the 56th annual meeting of the governors of the African Development Bank and the 47th one of the African Development Fund. The 81 governors of the bank will review the annual report and operations of the group and adopt key resolutions with a focus on inclusive growth, debt and governance.

Just like in 2020, the meetings will be held virtually due to the ongoing Covid-19 situation in which the prescribed mitigation measures are restricted gatherings and travels.

Most dialogue sessions will be restricted to only the governors and bank officials, but there will be some” knowledge events” that are open to the public such as on climate change and building Africa’s health defences.

EDIT: Also during the annual meetings will be the 2021 African Banker Awards with the two main ones being the African Bank of the Year Award (contested by Afreximbank, Attijariwafa, Banque Centrale Populaire, Commercial International Bank, Equity Group Holdings, Standard Bank Group, Trade and Development Bank and Zenith Bank) and the African Banker of the Year between Ade Ayeyemi of Ecobank Transnational Admassu Tadesse (TDB), Brehima Amadou Haidara (Banque de Développement du Mali), Herbert Wigwe (Access Bank), James Mwangi of Equity Group, João Figueiredo – (MozaBanco), and Kennedy Uzoka of United Bank for Africa.

Also Innovation in Financial Services Award, Financial Inclusion Award, Sustainable Bank, SME Bank, Investment Bank (with nominees Absa EFG Hermes, FBNQuest, Misr Capital, and  Standard Bank of South Africa. There is also the Energy Deal of the Year Award, Debt Deal of the Year (which includes Dangote Cement PLC $208 million bond by FBNQuest), and Agriculture Deal of the Year which has nominees from Banque Misr, Standard Bank Group, Nedbank, Stanbic IBTC Capital and, Afreximbank.

Some of the other nominees of include the Equity Deal of the Year Award, which has the Acorn Holdings student accommodation bond/REIT by Renaissance Capital, Infrastructure Deal of the Year in which TDB is nominated for both Kigali’s King Faisal Hospital and Tanzania’s Standard Gauge Railway.

Safaricom’s Ethiopia License Bid

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.

Equity Bank’s War Chest

Equity Bank has been on a tear, signing deals with other banks for affordable lines of credit for on-lending. The latest ones are with the African Development Bank and FMO.

The recent financing agreements include:

In 2020:

  • September 2020: $50 million (Kshs 5.5 Billion) loan facility with the IFC.
  • October 2020: $100 Million from Proparco (Agence Française de Développement Group) to enable Kenya MSMEs, women entrepreneurs who had been particularly affected by the economic shock of the COVID-19 crisis to create jobs. It is expected to impact 240 MSMEs firms which will create over 5,000 direct and indirect jobs.

In 2021:

  • March 4: EUR 125 million (Kshs 16.5 Billion) loan facility signed with the European Investment Bank. The long-term loan will support Equity customer to sustain and scale their operations, with Kshs 6.5 billion to agriculture and Kshs 10 billion to MSMEs.
  • March 10: $100 Million (Kshs 11 Billion) facility with DEG of Germany, CDC Group of the United Kingdom, and FMO of the Netherlands to support MSMEs cope with COVID-19 over three years.
  • March 15: USD 75 Million (Kshs 8.25 Billion) loan facility with the African Guaranty Fund to lend to women-owned and managed micro, small and medium-sized enterprises in Kenya, Uganda, Rwanda and DRC.
  • March 23: $10 billion (Kshs 11 billion) from the African Development Bank to support its expansion into Central Africa. The  tier-two facility with a 7-year maturity is also to support lending to women and youth entrepreneurs access capital to recover and thrive in a post-COVID environment.
  • March 25: $50 million (KShs 5.5 billion) NASIRA loan portfolio guarantee from Netherlands FMO, covering loans provided to MSMEs affected by the COVID-19 crisis, including women and young entrepreneurs and companies in the agri-value chain.

Kenya Airways 2020 results

Kenya Airways (KQ) recorded an unsurprising record loss for a year in which Covid-19 saw grounded aircraft and closed airspaces. After the worst year for aviation since 1999, KQ’s Chairman Michael Joseph said he expects that the airline will not recover to pre-Covid growth and revenue levels till about 2023 and will use the period to right-size its fleet, and deal with legacy issues & contracts. A bill currently in Kenya’s Parliament will place the airline in an aviation holding company with the Kenya Airports Authority.

KQ flew 1.8 million passengers, down 66% from 2019, and they were grounded by Covid-19 through the summer which is usually their most-profitable period. For the year, revenue was down 60% to Kshs 52 billion, and while operating costs were down 39%, it still resulted in a loss of Kshs 36.2 billion. 

KQ Group MD Allan Kilavuka said the airline has resume flying to routes that are safe and which provide steady revenue (China is their best route but all airlines are restricted to two flights a week). They have also revived cargo, delivering more flowers, food and pharmaceuticals. They added a new cold storage facility (300-ton capacity) and converted a 787 Dreamliner into a preighter (adding 50 tons of capacity). The airline also started a Mombasa – Sharjah cargo flight, resumed weekly cargo ones to Delhi, and in Southern Africa, they obtained 5th freedom rights to operate cargo flights between Johannesburg, Harare, Lilongwe, Dar es Salaam and Maputo.

This year, they will explore partnerships with other airlines (in Africa and Europe) as their joint-venture with KLM comes to an end, by mutual consent, in September 2021. They also plan to convert another aircraft into a preighter and will explore commercial drone operations, after having bought four for training.