Category Archives: Kenya procurement

SGR enters the Nairobi National Park

Kenya’s National Land Commission (NLC) has again published a list of land titles it is seeking to acquire on behalf of Kenya Railways for the construction of Phase 2A of the Standard Gauge Railway (SGR) between Nairobi and Naivasha.

The parcels are in the counties of Kiambu, Kajiado, Nakuru, and Narok. Big winners include Kedong Ranch Ltd as they will be compensated for three huge land parcels (measuring 35.7 hectares, 13.01 hectares, and 100.65 hectares) that were previously listed as being belonging from Morning Side Heights,  Ruaraka Housing Estate, and Morningside Heights respectively. Another is Kiambu Western Grazing Area from who the NLC will purchase 146.8 hectares.

Big losers include the Nairobi National Park which is managed by Kenya Wildlife Services (KWS) and which is billed as the only national park within a capital city in the world which will lose loses 41.3 hectares (about 102 acres) which will be hived from land title – L.R. 10758 that was reserved.  The Nairobi National Park was originally 28,950 acres in 1961 when a 999-year lease was granted to Trustees of the Royal Nairobi Parks. Another loser will be Oloolua Forest 17.3 hectares (about 43 acres) to the railway, at a time when Kenyans are concerned about the depletion of forests. There have been news reports that construction work for the SGR has commenced in the Nairobi National Park park in the last few weeks.

Construction through the park had been contested for some time, and back in November 2016, a session was held at the Strathmore Business School where Kenya Railways staff met wildlife conservation groups, and concerned residents, to explain issues like the intent of the government, justification for the SGR, land rights, the railway route, land acquisition cost, feasibilities done, stakeholders consultations, impact on wildlife, environmental and community impact etc.

Alternative routes map from Save Nairobi National Park (“SNNP”)

Athanas Maina, MD of Kenya Railways said that it was not possible to follow the corridor of the old (British) railway, which would not be funded and whose terrain was difficult – and that they had considered seven different routes through which the new railway could exit Nairobi to pass through a crucial tunnel at Ngong. They had settled on a “modified savannah” option and the new SGR railway would loop back from the Inland Container Depot at Embakasi, and go over six kilometers of the Nairobi National Park. This would be achieved by constructing elevated bridges in three stages, and running the railway elevated at an average height of eighteen (18) metres over the park with noise defectors and that construction would be completed in 18 months.

The acting Chairman of the Friends of the Nairobi National Park said that if there was a conflict between conservation vs development,  it is because of a lack of planning and consultation, while another representative spoke of continuous assaults on the Nation National Park over the years with demands for the park to cede more land for construction of the Southern bypass highway, oil pipeline, and fibre cables among others.

Maina said that exact route that the railway would follow remained a secret as many people wanted the line to pass on their land to make money – speculating on land at any cost and waiting for the government project to come – and pointed to the LAPSSET projects that had been derailed demands for land compensation. (Elsewhere it has been reported that landowners in the Konza area got Kshs 3 million (~$30,000) per acre of undeveloped land that was acquired for phase one of the SGR). Another resident said that the park’s main threat was  not the SGR, but individuals who were privatizing land, along wildlife corridors, south of the park for housing and quarrying and cited the Jamii Bora development case

Finally, a letter from Richard Leakey, Chairman of the KWS, was read out in which he said that the SGR would have minimal impact on Nairobi National Park, and mainly during the two years of construction. He added that some conservationists had opposed fencing the southern part of the park for many years because wildlife species migrate through there, and if the railway was laid and fenced there, outside the park, it would cut off wildlife from accessing the park. That ended the debate, that day.

Cement, Sugar, Governments contribute to Bad Debts in 2017

In a press conference this week the Central Bank of Kenya (CBK) governor spoke about non-performing assets i.e bad debts and highlighted manufacturing, real estate and, trade sectors.

This comes after the half-year 2017 bankers credit survey released by the CBK noted that the ratio of gross non-performing loans to gross loans increased from 9.5 percent in March 2017 to 9.91 percent in June 2017. The increase in the gross non-performing loans was mainly attributable to a challenging business environment

  • Non-Performing Loans: Generally, the commercial banks expect an increase in the levels of NPLs in the third quarter of 2017 with 42 percent of the respondents indicating so. This expected rise in NPLs is attributed to the industry’s perception of increased political risk in light of the upcoming general elections.
  • Credit Recovery Efforts: The banks expect to tighten their credit recovery efforts in eight out of the eleven sectors.

The Governor said that in manufacturing, the bulk of the Kshs 5 billion of bad debts increase could be attributed to a sugar company, two cement companies, and a plastics firm, while  In real estate, Kshs 3.9 billion was due to two projects – one a golf course, and the other was a housing one. But he added that, for all of these projects, the banks that had financed them were working to resolve the loan performance.

On trade, he said that Kshs 2.8 billion increase of bad debt loans was spread across many banks and that a lot of it relates to delayed payments by government – both national and county ones – to suppliers.

Unga AGM 2008

The company which was founded in December 1908 by Lord Delamere to mill his wheat harvest, is now a century old. It is celebrating its fourth straight years of profits on the back of improved sales Kshs. 9.5 billion (~$125 million) and profits of Kshs. 564 million (~$7.5 million). The Chairman commented on the improvement from the time a few years back when they used to record losses and had their financial accounts qualified by the auditors.

slow registration

Excerpts: missed a few minutes of the meeting as the registration was really slow – just two ladies, with no computer. They had to write every shareholder name down, and have them sign, but without verification of their legitimacy

Bonus: The company offering a (1) bonus share for each five (5) held to reward shareholders since the board had opted not to pay a cash dividend this year.

Company structure: The Seaboard Corporation is a management company and shareholder that contributed to the turnaround. However their presence is a sore point with some shareholders unhappy that while they have no divined, Seaboard gets paid a minimum of Kshs. 12 million a year that will escalate as the company gets more profitable. Their agreement has also been extended by the directors for another five years and there was also a question on the loans owed to the company that could be called in at any time – an unlikely scenario according to the board
– Shareholders also asked on the relationship between Nampak (a partner company) and Bulpack which was a joint venture between Nampak and Unga to make bags. The dividend paid that appears in the accounts was paid to Unga from Bulpak, and not by Unga.

(No) Dividend: Though this was the fourth year of profits, the board said it still needed to retain cash for plant & machinery replacement and to also strengthen the balance sheet.

No Maize in Kenya: Later the Unga MD Nicholas Hutchinson gave a talk on the current maize shortage and stated that the company (Unga) had ran out of maize (corn) stock floor eight days ago. He said there is not enough maize in the country, and the late decision by the Government to import maize, means it will trickle to the markets slowly – by mid December. The Cabinet may release more to millers, but the Government also wants to build up grain reserves and assist displaced people (flood, post-election violence victims)

The maize harvest this year was bad – Unga is offering Kshs. 2,500 per and 2,250 in Nairobi and Eldoret respectively but are still not able to get enough maize so they are operating about 35 – 40% which may show in the coming results

For consumers faced with a high retail price (just under Kshs. 100 for a 2kg pack, it’s a good time for farmers, but bad for consumers (dangerous?) – as prices may not drop significantly even after the supply. He said that the Government will be importing maize to Nairobi at Kshs. 2,500 if no duty is paid and that it must speculative ventures – which has affected supply of maize. Also, next year’s maize harvest could be just as bad.

Receivables: are much higher than the year before. Management responded that its from their increased business. They had in fact reduced the number of customers i.e. 55 key wholesalers that they deal (down from 140) with and gave them incentives to pay cash or open bank guarantees.

Outlook: – Asked about market share, management said it was growing. They focus on urban markets and supermarkets, and don’t emphasize rural sales as entrepreneurs can flour mill and sell it cheaper than Unga branded products.
– Other subsidiaries: are performing well like the Uganda one and animal feed division – Unga had anticipated a maize shortage so had started to substitute maize with wheat in their animal feed. Wheat subsidiary is good though the current good prices may fall next year

Shareholder gift

Goodies: Each shareholder present got a voucher for a bale of baking flour. Which retails at about Kshs. 1,500 ($20)


Interpreting a local American Gangster

Having watched ‘American Gangster’ over the weekend then spent a couple of trips around town with a major business player, you get to understand why a certain group of people with mundane jobs can get so wealthy.

It’s understandable how the police do it (roadside bribes), but you can also bodyguards, drivers, personal assistants (PA’s) and even secretaries to that list

They are not necessarily corrupt but they are around centre of power and power players and have a chance to observe. By working closely supporting business and political leaders, they are unique situated to be around when the big deals happen, know what major developments are taking place and are able to spot arbitrage opportunities before anyone else.

Focus on drivers: They are in the company of ministers and other business leaders who talk deals in the cars and over their phones. Like the Frank Lucas character (played by Denzel Washington) in the movie American Gangster, drivers/bodyguards their bosses to meetings and get to see secret deals/big investments develop made by their boss whether it’s a new block of apartments, factory or even a new mistress. They also overhear conversations between the boss and engineer/architect/banker who’s sometimes in the car or over the phone as the boss dashes to/from meeting these same people.

The boss may be buying a building, but his driver may buy a small piece of land in the area or drop a line to a distant buddy to make another small deal. They observe secrets and learn skills at the same time.

Also bosses are human and have a compulsion to brag and backbite like all the rest of us – discussing with their driver the merits or demerits of an ongoing investment, or whether the person who has just hung up is a genius or an imbecile.

So it’s no surprise when a driver retires, he often has a sawmill, matatu or two, and three pieces of land or buildings, with wives scattered all over the country to manage them

His boss never groomed him and he never waited for Christmas or when the bosses’ good fortune sparked a feeling of goodwill and generosity that made him throw some crumbs at his henchmen.

So the driver creates a mini-empire silently over time to cater for his/her retirement, completely legitimate and by one who uses an opportunity to the maximum.

Who’s Kenya paying?

A noble step in the war on corruption is this website by the Public Procurement Oversight Authority which list all contracts awarded over 5 million shillings ($71,430) by organs of the kenya government . A step further would be to require/ publish all companies who are awarded such contracts to also publish/disclose all the company directors.

Transparent dust
Mwalimu Mati is showing his former employers Transparency International quite a bit of dust with his new venture Mars Group Kenya which unearths more dirt than Transparency ever did.