Category Archives: East African Community

NIC Bank shareholders approve merger with CBA at the 2019 AGM

NIC Bank shareholders met for their 2019 annual general meeting and approved a merger with CBA bank, creating Kenya’s second-largest bank (by customer deposits), a day after CBA shareholders had approved the same deal.

The merged bank will have about a 10% share of banking assets, deposits, and loans in Kenya. It will encompass the two groups serving over 41 million customers and their banking entities in Kenya, insurance (CBA Insurance and NIC Insurance), investment banking & stockbroking (CBA Capital, NIC Capital, NIC Securities), and regional subsidiaries in Tanzania (both banks), Uganda, (both banks) and Rwanda (CBA) and Côte d’Ivoire where MoMoKash is a CBA partnership with MTN and Bridge Group.

Group Managing Director John Gachora said scale is important in banking and that by merging NIC, which is known for asset finance and corporate banking, with CBA, which has desirable mobile banking and high net worth businesses, they would be the largest bank by customer numbers in Africa. CBA will be 53% shareholders in the merged bank.

NIC turns 60 this year, and in 2019, their focus will be on getting to Tier I ranking through the merger, and getting regulatory approvals after they had obtained shareholder approvals.  Directors also got approval to effect a name change (already under consideration) and the right to dispose of up to 10% of the assets of the bank without reverting back to shareholders. They will also create an employee share option program (ESOP) to retain key staff, and CBA, who already have an ESOP for their veteran staff (that owns 2.5% of that bank), will fold itself into the new incentive scheme. Other conditions of the merger include obtaining a waiver of capital gains and stamp duty tax in Kenya, approval of regulators in different countries, and approval of landlords and financial partners.

EDIT In May 2019, The Competition Authority of Kenya approved the merger of NIC and CBA banks on condition that none of the 1,872 employees of the merged entity are declared redundant for 12 months after completion of the transaction.

AfDB Economic Outlook – 2019 AEO for East Africa

This week saw the launch of the 2019 East Africa Economic Outlook Report in Nairobi by officials of the African Development Bank (AfDB), led by Gabriel Negatu, the Director General of the East Africa regional office. This was the second in the series, after the first was well received and, the reports will now be an annual publication of the Bank.

It looked at growth prospects and economic policies, of countries in the region – Burundi, Comoros, Djibouti, Eritrea, Ethiopia, Kenya, Rwanda, Seychelles, Somalia, South Sudan, Sudan, Tanzania, and Uganda – their challenges, and particularly progress in the area of regional integration that the AfDB has made a theme of its reports and activities for 2019.

Some key findings in the East Africa AEO are:

  • Fast growth in the East: East Africa at 5.7% leads growth on the continent due to policies of some countries to diversify their economies – Ethiopia and Rwanda which grew at over 7% in 2018 balance lead in manufacturing and services, while Kenya and Tanzania balance services and agriculture. Countries like Kenya (coffee/teas 29% of export and flowers 10%) Ethiopia (coffee 33%) Rwanda (mineral 41% and coffee/tea 38%) have diverse exports while others like South Sudan (mineral fuels – oil at 98% of exports), Somalia (live animals 71%) and Eritrea (ores/ash/slag 97%) are more dependent on single commodities.
  • There is a disparity in the fast growth, whose quality is low, leaving poverty, unemployment and inequality to persist in regional countries. There is also fragility in the nations of South Sudan, Somalia, Comoros and even Ethiopia.
  • Rising debt is a concern: The levels are at over 30% of GDP in most East African countries (over 166% in Sudan) and that, coupled with low deposit resource mobilisation is a risk. Some countries will need to make structural reforms before they slide back to pre-HIPC debt-relief levels of the 90’s and they should consider limiting imports to capital goods while promoting local manufacturing of consumer goods which also creates jobs. 
  • Integration concerns: The AfDB report sees regional integration in East Africa as having mixed performance; intra-regional trade is 8.3% which is below the continental average of 14.5%, and except for Comoros, East African countries all do less than 12% trade in the region. Also that Informal trade at border crossings is as high as 50% of what formal trade it. The report looks at how to accelerate intra-regional trade through the removal of tariffs, simplification of export rules, one-stop border posts that share data between countries,  sensitizing populations, and building better infrastructure (many border exits are single file which creates bottlenecks).
  • Security pays: The Ethiopia-Eritrea peace agreements in 2018 have opened up access to Eritrea ports and will ease Ethiopia’s trade by lessening the burden on congested Djibouti than handles 80% of Ethiopia’s goods. “Feedback from Ethiopian Airlines reveals that, following the Ethiopia-Eritrea Peace Agreement, the airline is saving up to $10 million a month in fees that were previously paid to contiguous countries to use their airspace“. That said, Burundi, Somalia, South Sudan and even Ethiopia are considered to be fragile states.
  • Intra-Africa trading opportunities: The goodwill from, and ratification of, the African Continental Free Trade Area (CFTA) in 2018 is expected to boost trade among African countries. But there is concern that few of the regional bodies that are supposed to promote trade are useful; they are under-budgeted and defined by personalities, not policies. 

The 2019 AEO for East Africa is published in English, French, Amharic and Kiswahili languages, and along with other regional reports, for West, Central and South Africa, some are also published in Arabic, Hausa, Pidgin, Yoruba and Zulu to ensure stakeholders are able to understand and discuss economic and policy issues.

CIA Economic Data on Kenya and its President in 1978

Excerpts from a declassified CIA document from August 1978. 

The Economic Intelligence Weekly Review issue, dated 24 August 1978, was published two days after Kenya’s first President Jomo Kenyatta, who had led the country since independence in December 1963, passed away.

The document is meant for US government officials and was done in a format that is useful to them. It has economic indicators, industrial material prices, and contains data from sources like the IMF, and the Economist (their index of 16 food prices). There are also charts on Inflation, unemployment, trade patterns (imports and exports), unemployment rates, interest rates etc. in different countries that are classified by segments such as the Big Seven (US, Japan, West Germany, France, UK, Italy and Canada), other OECD, OPEC (oil-producing nations) and also Communist countries, and other ‘World’ countries.

There are detailed write-ups in the CIA weekly review on:

  • The black market in Cuba: Hustling of consumer goods is vibrant, reflecting shortages of consumer goods. Most consumer goods are rationed except a few luxury items like rum and cigarettes. It also notes that aggregate personal incomes in Cuba are up 38% since 1973 and have reached the rank and file of Cuba, with no evidence of appreciable corruption among top-level officials.
  • The USSR has borrowed more than it needs to build a pipeline. It obtained $2.5 billion, which was $1 billion more than required, from the CEMA International Investment Bank (IIB). Five Eastern European countries helped build it, and in exchange, they will receive gas annually, while sales of natural gas to Western Europe are expected to yield $750 million to $1 billion. The IIB borrow funds in European markets and on-lends them to Eastern European countries at rates better than the countries could obtain on their own. Items paid for with the loan funds included equipment bought from West Germany, Italy and France.
  • Concern about Poland debt payment problems despite a shrinking deficit: For a third year, Poland had to borrow $4 billion and could face a financial crunch or debt rescheduling. Cutbacks of available industrial materials have been severe, affecting production, while debt service payments are now double what they were in 1976 – amounting to 60% of Poland’s exports to the West, compared to 37% in 1976. 
  • The USSR is engaging with Iraq and India.
  • On Kenya, it looked at the transition era and economic stakes of the Kenyatta family, whose inner circle controlled key economic posts and had extensive commercial and agricultural investments, and land tracts around the country. 

The CIA found that the substantial economic investments built over 15 years would deter them from unconstitutionally challenging Acting President Daniel arap Moi, even as they predicted that the Moi-Njonjo group’s (Njonjo was Kenya’s Attorney General and a key ally of Moi in the transition phase) efforts to increase the economic pie could cause disenchantment with the Kenyatta clan.

It was expected that economic pressures would cause the government to push for redistribution of the country’s wealth as it also noted that the family is big in two activities – charcoal and ivory whose exports were banned. At the time, Kenya was considering applying to the IMF for assistance with its balance of payments in the coming years as oil prices had risen, key foreign exchange earners like coffee and tea were slumping, and there was a need to modernize the military while Kenya had also lost its top destination market – Tanzania with the collapse of the East African Community.

It is an astonishing amount of economic data, from fourty years ago – so what does the CIA collect today on different countries and economies?

See also this story from the Standard newspaper. 

Bank Roundup: January 2019

The boards of NIC and CBA banks confirmed their plans to go ahead with a merger to create the largest bank in Africa by customer numbers. Serving over 40 million customers in 5 countries, the combined entity will have Kshs 444 billion in assets (~ $4.4 billion).

Currently, they are both at 115 billion of loans and have differences in deposits with 145 billion at NIC to 191 billion at CBA and customer numbers of 142,000 at NIC to 41 million at CBA. They had relatively similar customer numbers prior to CBA’s launch of M-Shwari in partnership with Safaricom. 

Going forward they aim to obtain shareholder approval in Q1, obtain regulatory approval in Q2 and have the new entity commence operations in Q3 of 2019. Currently, NIC has 26,000 shareholders and is listed on the Nairobi Securities Exchange (NSE) while CBA has 34 shareholders (20 individual, 14 corporations) including Enke Investments (24.91%), Ropat Nominees (22.50%), Livingstone Registrars (19.90%) and  Yana Investments (11.14%). The merger will be effected through share swaps that will result in NIC shareholders owning 47% and CBA shareholders 53% of the new entity whose shares will remain listed on the NSE.

MCB in Kenya:  Leading Mauritius Lender MCB Group has officially opened its representative office in Nairobi. The largest and oldest bank in Mauritius, with $12 billion in assets and a presence in nine countries, it had been licensed in Kenya back in 2015 and it will bank on its new office to gauge opportunities in the Kenyan market and build strategic relationships.

The 19th largest bank in Africa by assets, it is listed in Mauritius and has 19,000 shareholders. It has a strategic objective of growing its international footprint and expanding non-bank activities. It has 1 million customers, 3,500 employees and 55 branches but, as it was communicated at the launch, they have no intention of opening branches in Kenya or East Africa.

Ethiopia Bank summary: Asoko Insight gave a summary report of the Ethiopian banking sector, parts of which are only available to subscribers. While some foreign investment is expected in Ethiopia, the banking sector is already privatized with fifteen of the country’s eighteen banks all having private local owners. The state-owned Commercial Bank of Ethiopia is the largest bank in the East Africa region with 1,280 branches and earns 67% of the sector profits in the country.  It has revenue of $1.3 billion, while 11 (other) banks, have revenues of between $50 million and $500 million, suggesting a more concentrated market in terms of size.

Tanzania:  NMB bank has waived several bank charges for their customers from February 1 including account opening, monthly maintenance, transaction fees, dormant account reactivation, and internal transfers – all in a bid to promote financial inclusion in the country.

Meanwhile, several Tanzania banks have a series of new managing directors including NIC Bank, Akiba Commercial Bank and Bank of Africa Tanzania

Family Bank pled guilty in the NYS case:

Diamond Trust CEO questioned.

Kenya’s Money in the Past: Diplomatic Engagement

This week saw the publication of “Kenya’s 50 years of Diplomatic Engagement, from Kenyatta to Kenyatta,” a book on the history of the diplomatic services and foreign policy in Kenya.

Edited by Dr. Kipyego Cheluget, Kenya’s Assistant Secretary General at COMESA, it is a collection of writings by different authors including foreign ambassadors. It is the result of a nine-year journey that came from an idea that came when he was Director of the Foreign Service Institute – to document the history of the diplomacy in Kenya. And he then set out to travel around the county, interviewing and recording former ambassadors and diplomats such Munyua Waiyaki, Njoroge Mungai and even unofficial ones like politician Mark Too. Some of them have since passed away like Bethuel Kiplagat and Phillip Mwanzia, and whose widows were present at the book launch.

The Chief Guest was Former Vice President, Stephen Kalonzo Musyoka who has also served as a Minister for Foreign Affairs and Minister for Education and he said that to upgrade Kenya’s  diplomatic performance, the country should reward career diplomats and have them, not election losers, as Ambassadors, and legislate a 70:30 ratio of professionals over politicians in such posts, a reverse of the current imbalance. The event had panel talks with former ambassadors on topics like peace-building in Ethiopia, Somalia and the East African region, using sports as a tool of diplomacy, combating apartheid, the lost years of engagement with Russia shaped by the Cold War and how the pioneering diplomats worked through trial and error for decades without an official foreign policy.

The MC for the event at Taifa Hall of the University of Nairobi, Nancy Abisai said the only good books is a finished book, and Kenya’s Cabinet Secretary for Education Dr. Amina Mohamed, added that, following a challenge by President Kenyatta, her Ministry was in the process of setting up a unit for the publication of Kenyan memoirs and which would be operational by January 2019. Former Vice President Moody Awori, who at 91 is still an active Chairman of Moran, the publishers of the book, said they were looking for more scripts to turn our more such books.

Excerpts from early sections of the book and launch

  • It has never been right to say that Kenya’s foreign policy is a “wait and see” one. Diplomats were able to negotiate to host a combined World Bank/IMF meeting in 1973 and for UNEP to have its headquarters in a newly independent African country – Ambassador Francis. Muthaura.
  • Njoroge Mungai initiated steps for President (Mzee) Kenyatta to be nominated for the Nobel Peace Prize in 1972 and Singh Bhoi drafted the dossier.
  • Dennis Afande opened the Kenya Embassy in Jeddah, Saudi Arabia in February 1977. He was the only employee there for four months and the only signatory to the Embassy bank account for the period.
  • When Paul Kurgat went to apply for his scholarship visa at the Nairobi Russian embassy, in 1984. he was arrested and questioned about links to Oginga Odinga. He was later to return to Russia as Kenya’s Ambassador in 2010.

The book is available in local bookshops, such as the University of Nairobi one, at a cost of Kshs 1,395 (1,200 + VAT) and a digital version is also available on Amazon for $8 (~Kshs 800).