Category Archives: EABL

Bringing Big Music Concerts to Kenya

Grammy award-winning American singer Erykah Badu is slated to perform in Nairobi, Kenya on December 11. Tickets will cost Kshs 4,000 (~$47) for regular and Kshs 7,500 (~$88) for VIP entries.

Last month there was a bit of debate about the reception of international concert stars who perform in Nairobi. @KenyanPoet  wrote about the live concert business and the value Kenyans give it noting that, while the James Ingram concert in Nairobi attracted 500 fans, a Rick Ross concert in Tanzania attracted 22,000 fans, and Konshens in Uganda drew 25,000 fans.

Another equally interesting perspective came from @ItsBuddhaBlaze who wrote on twitter about the challenges that concert promoters go through in order to bring international musicians to perform in Nairobi. Some of them (nicely archived here)  include:

@ItsBuddhaBlaze

  • As soon a promoter in Kenya says they bringing an international artist $$$ bells start ringing in all government offices – from Immigration to KRA (the Kenya Revenue Authority)…  
  • The taxes: Immigration, Kenya Revenue, Lands Office, Environment office, Security, Information – everyone (at) these Ministries want a piece.
  • First to pay the artist you show through an Escrow account that you have the full fee. The artist requires a half down payment of the show
  • The Kenyan government then requires the promoter to show a contract between artist & promoter. They take 10% of that fee, and this must be paid in advance.
  • The promoter must then pay Immigration for special work permits. That’s 25,000 (~$295) per member of an entourage – paid in advance.
  • The promoter must then print the tickets and go back to KRA to stamp them. They also tax 10% of the ticket.
  • After paying all these, the promoter must comply with environmental law and pay that noise tax…..I know you already have a headache and promoter hasn’t even paid for the venue which is hectic. Then security, publicity, transportation…by the time any sane person has paid taxes worth their whole investment, some of you will already be retired. So don’t blame promoters.

Finally –  The promoter who brought Sean Paul and Wayne Wonder ran outta business. Losses galore.

We trust that the promoters of the Erykah Badu concert won’t go out of business..or incur a loss. Her concert is sponsored by giant brewer East African Breweries’ @TuskerLite brand. She’s a world-famous artiste who has toured extensively and has a strong track record of award-winning songs like Window Seat, On&On and Tyrone – and the promoters should come out ahead if marketed right. Still, it should be easier to bring more international acts to Kenya.

EDIT: Apparently, promoters of other US stars including Keri Hilson and Chris Brown are also scheduling concerts for December 2012 in Kenya.

Agriculture Moment: VC Funding, Farmer Social Networking

Recap of recent agriculture-themed events and blogs posts

Farm blogs: The agriculture themed blog Tracking The Scent had a recent post that linked to an article by Bedah Mengo about farming being unattractive to young Kenyans.  The blog was the winner at the recent Bloggers Association of Kenya (BAKE) in the category of  agriculture blogs and that also included several worthy competitors including Kipsizoo 

 Young Agropreneur Chronicles of a Kenyan Farmer and the Pan-African Agribusiness & Agroindustry Consortium blog.

Other recent blogs and articles of note relating to agriculture include: 

Timbuktu Chronicles had a post about going back to farming that noted Although Kenyan youths make up over 75 per cent of the country’s population, farming is not considered an attractive option. This mentality has been entrenched in the education system that traditionally dooms the academically challenged to farming, otherwise known as the ‘poor man’s profession’. As a result, according to Kenya’s agricultural ministry, the average age of a Kenyan farmer is 55. However, the tide is beginning to turn.

The blog How We Made it in Africa highlighted nine agribusiness opportunities including fruit juices, cassava, soya bean, sorghum (replacing barley in Kenyan beer) vegetables, milk, and equipment leasing. 

The  Business Daily newspaper had an article on large scale (white) farmers in Kenya  in Tanzania, and some the challenges in terms of production, leasing, markets, diversification and business secessions.

Farm Networks & New Media Tools: The iHub blogged about the results of the Rockefeller Foundation 2012 Innovation Challenges Competition which aimed to generate innovative ideas for how to address water insecurity, food insecurity, as well as key challenges posed by urbanization. Four Kenyan Entries were shortlisted as finalists and two emerged the winners in the categories farming now and decoding data. The one on farming was by Joseph Macharia and aimed to empower youth with agricultural information through radio and other ICTs.

At a recent Wireless Wednesday session at the mLab, several mobile applications relating to agriculture were showcased including Mkulima Calc (a farm management system) GreenhousePro (an input calculator) FarmPal (equipment for hire, sell produce online, find temp farm staff)  Fishmate, GreenHouseDIY and Mpoultry.

There is a very nice & informative Farming Kenya group on Facebook group as well as a mobile social network for farmers called Ukulima.net.

Financing: Away from the traditional financiers in agriculture like banks and the agriculture finance corporation. They covered a variety of targets sectors and are of interest to farmers willing to invest alongside the funders.

Last week saw the launch of a new  Kshs 2 billion (~$25 million) African Agricultural Capital Fund by Pearl Capital Partners that will invest  in high growth businesses in the agricultural value chain in East Africa

They have been in investing in the East Africa region for a few years in diverse companies including in seed, certification, ethanol and poultry. They invest, advise and growing with investee companies over  5 – 7 years.

  The fund is seeking agri-business firms with a  turnover of less than $10m, fewer than 150 employees, less than $5m asset value, but which have high-quality management chains to invest amounts of $300,000 to 2.5M (Kshs 25 – 200M shillings) in debt or equity. 

At the launch, Jane Karuku, the  president of  AGRA (Alliance for a Green Revolution in Africa), spoke about their goal of promoting food security, by invest throughout the food chain from seed to market (including sustainable markets, regional/export) and the work they had done with partner banks and institutions to finance $4 billion in Kenya, Uganda, Mozambique and Tanzania where they have had the greatest success by funding seed companies.

Kenya’s Money in the Past II

Njenga Karume was politician & businessman who grew up on a Delamere farm and in his time he became one of the richest indigenous business people before independence, and later a reluctant, but effective leader of a controversial organization (GEMA), long-term member of parliament and one time Defense Minister of Kenya. He passed away in February 2012 having lived to be an old man though he seemed to slaughter a goat (he was a generous networker) on almost every other page of his autobiography Beyond Expectations – From Charcoal to Gold (written with Mutu wa Gethoi) which was published in 2009.

Here’s another slate condensed version of the book

Seeing opportunity & taking advantage of changes:

  • His first business was in high school where he bought & sold pens to fellow students (by delaying paying his own fees) and undercutting the school shop (page 49)
  • Took up the opportunity to sell liquor when Africans were granted permission (116)
  • Took up the opportunity to go into wholesale business (102)
  • Went into tobacco distribution, though not a smoker (151)
  • Tried to buy shares in the Kenya Wine Agencies Ltd where he clashed with Njonjo (153)

Fortune in Family:

  • When he was unable to find good managers for his growing business empire, his father-in-law advised him to marry a second wife (122) and he learnt that prosperous men acquired additional wives to manage their property (285)
  • Credits his (first) wife for looking after his business even when he was in detention (115, 283)

Fortune in beer:

  • First visited a brewery when he was still a schoolboy (54)
  • He was approached to become a partner to a beer distributor (120)
  • To end a boycott that affected their profits, Kenya Breweries offered Kenyatta a quarter of the shares in the company (135)
  • South Africa Breweries offered him a partnership (271) which later ended his 38-year distribution arrangement with Kenya Breweries and resulted in a costly court case where he was (briefly) awarded 231 million shillings.

African businessman navigating the colonial era:

  • If detained for being a Mau Mau sympathizer, the colonial authorities would freeze someone’s bank account (94)
  • He opened his first bank account with the Standard Bank of South Africa at Nakuru in 1951 (73)
  • Africans needed an exemption certificate to borrow more than 200 shillings from a bank (78)
  • Disgruntled African soldiers after (World War Two) found themselves neglected as their European colleagues got loans to buy land or start businesses (61)

Business & Politics:

  • Navigating presidential orders – see how they work for him (176) and against him (252)
  • Land politics could be volatile (216) but he was able to negotiate tricky land deals, such as one where a group of people wanted to subdivide a large parcel of land, something that had led many group schemes into dispute & fallout (178)
  • Some of his partners pursued Africanization with Asian partners and this cost them all KWAL shares (153)

Advice for Kenya Entrepreneurs:

  • In the world of business, there is no need to give away (your) secrets (51)
  • He advises that Kenya’s (future) prosperity lies in education, technology and industrialization (318)
  • Gives tips for youth engaging in business (313)

Odd stories:

  • His (dying) grandfather tried to bequeath his goat-herd to him, and bypass the rest of the family (23)
  • He was not happy to take an oath in President Kenyatta’s house (206)
  • The case of the missing silver beer mug (238)
  • How did matatus gain exemption from TLB licensing? (220)

Urban Inflation Index: December 2011

What a year it has been, mostly not for the better with petrol and dollar prices setting records, and accompanied by other shortages. The Kenya government started a military anti-terror expedition in Somalia, and as war expenses can drastically alter government spending budgets, it was recently decided to bring the mission to the United Nations and have them offset the war cost to some extent.

On to the index comparing prices to three three months ago and year ago!

Gotten Cheaper:
Foreign Exchange: 1 US$ equals Kshs. 84 compared to Kshs 95.6 three months ago and 80.5 a year ago. That snapshot does not capture the roller coaster quarter the shillings has hard, dropping to an unprecedented level of Kshs. 107 to the dollar (and being ranked as one of the worst performing currencies in the world) before the Government instituted an interest rate hike and cut back liquidity to the banking sector. While the shilling was in free fall, and few could explain why, a World Bank blog post revealed that Kenya’s exports were (at the time) not enough to meet the country’s fuel bill, (Three years ago it cost Kshs 79 /$)

Staple Food: Maize flour, which is used to make Ugali that is eaten by a majority of Kenyans daily. A 2kg pack costs Kshs. 113, down from a record high of 119 in September, but still almost double the Ksh.s 69 cost in December 2010 (Three years ago it cost Kshs 97)

Other food item: Sugar : A 2 kg. Mumias pack which was Kshs. 385 in September is now 375, but still almost double the Kshs 195 of last December. In other news Kenya seems to have applied for another extension of a COMESA import cap, denying consumers the option of cheaper sugar imports to protect the largely uncompetitive local producers who have trouble ensuring adequate supply of sugar into supermarkets.

About the same:
Communications: These are largely unchanged though Safaricom announced a modest price increase by of voice call tariffs (which Orange are itching to follow) and @Kahenya says that corporate m-pesa tariffs have also been increased.

Beer/Entertainment: A bottle of Tusker beer is Kshs 180 ($2) (at a local pub) , unchanged from three months ago. The alcohol sector has a lot of competition now with the new brands being launched (Miller Genuine Draft) and others revived/getting new marketing pushes (Redds, White Cap Light, Heineken, Windhoek, Sierra) in a realignment of brands and owners between East African Breweries (EABL) and SAB Miller.

More Expensive
Fuel: A litre of petrol was Kshs. 124 up from 117.7 in September and 94.3 last December. Two days ago, in reaction to threats of transport operators to go on strike during Christmas week, the Energy Regulatory Commission (ERC) announced the first ever price reduction since the introduction of the price control regime – and for Nairobi the cost of petrol will be Kshs 119 (~$6.2 per gallon) till January 15 2012. (Three years ago it cost Kshs 92.7)

Utilities: Pre-paid electricity is about Kshs 2,500 per month (up from the regular purchases totaling 2,000). There are rolling blackouts as seen in the ads run by the Kenya Power company, spreading the shortfall across the country.

LPG – Cooking gas has been in short supply in different parts of the country, with many sellers in Nairobi not having any stock to sell for weeks. Those that do are selling them at increased prices – e.g. cylinders that used to costs Kshs 2,500 for 13KG, are selling at between Kshs 3,200 – 5,000 if you can find them.

Urban Inflation Index: June 2011

Comparing changes to three months ago, last year and June 2009 in an interesting quarter with price swings in food, currencies and fuel.

Less Expensive:

Nothing really that’s being measured

About the Same:

Communications: Cell phone rates are still low, and while Safaricom appear to have survived the Airtel-initiated price war, recording a marginal full-year profit drop of 12% down to ~$220 million on increased revenue of 12% to ~$1.1 billion, the government is getting anxious about the price wars and impact on mobile companies and tax revenue.

Last week, Kenya’s President seemed to direct for an end to the mobile price wars in Kenya. Also Essar’s Yu Mobile has denied they are considering an exit from the Kenyan market while Safaricom and France Telkom (Orange) are about to sign a tower sharing agreement.

More Reading – The Economist has an interesting article on the India mobile phone market which may explain the vision the direction that Bharti Airtel is taking in Africa.

Other food item: Sugar (2 kg. Mumias pack) is at Kshs 190; a year ago it was 200, and the year before was 175. It will likely stay the same until the COMESA sugar import ceiling ends in 2012.

More Expensive:

Fuel: A Litre of petrol fuel is now Kshs 114.93, which is 26% higher than a year ago and 58% higher than two years ago. The fuel sector is characterized by accusations and allegations every other week about favouritism, manipulation of prices & shipments, corruption, capacity etc. – all while the price continues to rise.

Staple Food: A 2 kg. Unga pack (maize flour), which is used to make Ugali that is eaten by a majority of Kenyans daily today costs Kshs. 130 at Uchumi. This is 83% higher than the 71 of a year ago – and two years ago it was 92, the year before it was 73. The price fluctuations may have some artificial influence by maize farmers holding on to their crop in the hope of a better price from the Government and millers. Shrugging this off, the Government today waived tax on maize that will be imported between June and December 2011 to avert a food disaster in the country.

Foreign Exchange: 1 US$ equals Kshs. 89.37 compared to 80.6 last year and 77.9, two years ago. It is reported to have not seen such lows since 1994 when Goldenberg scandal exploded and shook the Kenyan economy. However, while focus is on the US dollar (which this month exchanges for less than a Canadian dollar) other currencies are also at levels not seen in years – like the Sterling Pound at 146, Euro at 129, and South Africa Rand at 13.

Utilities: Electricity: Many customers of KPLC have been converted to pre paid electricity and the only to get a breakdown of costs is by buying a token at a Kenya Power office. It’s much more convenient to re-load or top up electricity by mobile phone payments (M-pesa or Airtel money) and a payment of Kshs. 500 obtains 29 units of electricity – compared to 51 units for the same amount two months ago, – implying that electricity costs 43% more!
Meanwhile the city’s other major utility provider, the Nairobi Water Company also plans to convert some of its customers to a pre-paid billing system to stem illegal connections and improve revenue collection.

Entertainment: A bottle of Tusker beer (at a local pub) costs Kshs. 140 ($1.55). However, the recommended retail price of a Tusker bottle went up to Kshs. 95 in April (after last being hiked by 38% to Kshs. 90 after the June 2010 budget speech) and beers currently sell for between Kshs. 150 – 220 in most Nairobi pubs.

Tusker was re-launched in a new bottle in April, but that rebrand has received mixed reviews with some patrons calling the bottle a Probox after a Toyota station wagon that has a similar boxy shape.

EABL is also in the process of severing ties with SAB Miller a rival South African brewer, after many years of a cease fire & cross ownership – and they are expected to soon renew their beer battles in both Kenya and Tanzania.