Category Archives: NSSF Kenya

Reading the Tea Leaves at Safaricom

Safaricom have published their annual report (download here). In a cost-cutting measure they will not be printing or mailing out these reports to their 829,000 reporters, nor will they serve any refreshments or give gifts at their annual general meeting in August 2009.

image from sambazanow

A to Z excerpts from the report

Performance: Company had Revenue of 70.4 billion ($915 million) and a pre-tax profit of 15.3 billion ($198 million). Income was 59 billion from voice, 8 billion from data & SMS, but compared to 2008, growth is 8% and 80% respectively.

M-Pesa:

  • Earned almost 3 billion from the money transfer system.
  • Vodafone hopes to take their money transfer model to other countries, though it has not fared well in Tanzania. Safaricom also hope to extend into international transfers from the UK via Western Union: it’s in test now (and hopefully will be cheaper than the current WU rates from UK to Africa).
  • Also plan to extend it to bulk payments (e.g. low-end salaries in large organizations)
  • Agents now recruiting sub-agents.

Directors

  • In September 2008, CEO Michael Joseph (US citizen?) joined the board, while Information Permanent Secretary Bitange Ndemo left the board. Kenya Government still has the Treasury and Privatization heads on the board.
  • Susan Mudhune joined the board and was rumoured to be the next chairperson to replace (70+) Nicholas Nganga.
  • Both Michael Joseph and Les Baille have 2.35 million shares, the Chairman has 850,000, and privatization secretary Esther Koimett has 637,000.

Education: Working with JKUAT and Moi University on curriculum to get the graduates with the rights skills in telecommunications to join the company.

Investment: The company bought 51% of One Communication Ltd, a Wimax service provider. One owns Comtec training & management (has local loop license), Comtec Integration (has digital carrier network operation license), and Flexible Bandwidth Services (has ISP license). One was technically insolvent. It had net liabilities of -66 million, but Safaricom paid 186 million for a stake in it after estimating it had goodwill of 219 million.

Licenses: Safaricom has 5 licenses with a span of 15 years; international operator license (1999), international gateway (2006) and 3G (2007). Also acquired two more by buying into One Communications – local loop operator, and data carrier network operator.

Liquidity: Safaricom has trade payables of 11.9 billion, receivables of 4.3 billion, and cash of 4.3 billion. Their financial statements note that current liabilities (35.3 billion) exceed current assets (17.3 billion) by 18.2 billion ($236 million), but that the company generates sufficient cash (about 30 billion) to meet operations; also that a significant portion of creditors relate to network expansion costs and this is expected to continue in this period of intense network expansion and they will borrow if there is a shortfall. should the auditors have emphasized this?

Media Crunch?: Sales & advertising was 2.28 billon ($30 million), basically unchanged from the year before, and this was despite facing an expensive marketing campaigns from rival Zain

Shareholders:

  • Pension giants – National Social Security Funds of Uganda (160 million shares) and Rwanda (96 million shares) are in the top 10 shareholders but Kenya’s NSSF is missing.
  • Has 465,000 shareholders who own less than 1,000 and while another 300,000 own less than 10,000 shares. The former will be getting dividend payments of 100 shillings ($1.30), which makes the toll-free payment dividend a very smart option to apply for.
  • No mention of Mobitelea in report which recently exited from the shareholder register.

Submarine/Fibre: Safaricom is a shareholder in Teams fibre optic cable system. It has committed 1.6 billion shillings ($21 million), which it estimates will reduce cost of communication by up (only) to 33% over 5 years.

Tax Break: Will pay 27% income tax for 3 years from March 2010, instead of 30% since they listed. Other Kenyan companies pay 30%.

Reading the Barclays Tea Leaves

Barclays Kenya just published their 2008 annual report; what does some interesting points about the banking sector.


Barclays Peek
– Is the second largest bank in Kenya behind KCB, but still tops in profit – with Kshs 8 billion ($100 million) before tax. Has 126 billion ($1.58 billion) in deposits, loans of 108 billion ($1.35 billion) and total assets of 168.5 billion shillings. It would probably reclaim the number one status from KCB, but KCB shareholders will next month absorb the assets of S&L, their mortgage subsidiary
– Shariah Banking Barclays launched La Riba in 2008 – and in 2008 they managed to mobilize over 2 billion in new la riba deposits to stand at 3.3 billion ($41 million) at end of year, but gave out just 19 million in loans
– Customers They have a popular Business club – with over 10,000 members some of whom were flown to Dubai, China and Holland. Barclays had 930,000 customers in 2008 (2007 was 580,000) – compared to Equity Bank’s 3.3 million customers, and 60,917 shareholder 60, 917 (up from 58,945 in 07)
– Staff cutback? Employees in 2008 reduced by 16% – as group had 5,571 at December 08 compared to 6,900 in December 07. In 06 they had 2,197 (but it appears in 2008, they shed the part time staff whose numbers reduced from 4115 to 1698)
– No thanks Agriculture. Agriculture is referred to as the backbone of Kenya’s economy7, but Barclays estimate their exposure to the sector to be just 1% of loans. Private industries account for 44%, with 10% each to manufacturing and to transport & communications sectors.
– Asset finance reduced?? Assets under financial lease decreased slightly – still at 6.1 billion
– Gloabl crisis / External Impact? a 1% or decrease in interest rates would impact profit about 5%, but there’s no impact from strength/weakness of Kenya shilling (bank only does business in Kenya)
– Directors: the three directors who were appointed at previous times are up for re-election on May 15; Brown Ondengo (2003), Jane karuku (2003), and Paul Phemngorem (1998). Barclays (UK) parent, with 68.5% of the vote, will pretty much determine who will remain or leave the board. No other shareholder has more than 1%, with the next largest being Kenya’s national social security fund (NSSF) with 2%
– Cheaper to borrow overseas than the NSE: The bank received subordinated debt in the form of a tranche of NSE listed bonds of 2 billion shillings (3,078b) repayable over 5 years – at 10.36%. They also borrowed 1.25 billion from their Barclays parent; BBK in the form of a 10 year loan at just 2.39%
– Pension Funds gloomy outlook The Barclays staff pension scheme with 44% equity investments was down 13% in value (to Kshs 7 billion), compared to a gain of 6% in 07

Mostly Equity – Suspensions & Housing Evictions

Equity suspended: Equity Bank was briefly suspended as a Central Depository Agent by the Central Depository & Settlement Corporation (CDSC). They have smartly escaped unscathed without answering any charges owing to:
– Playing one regulator against another the. The Capital Markets Authority (CMA) immediately reversed the ban, and reinstated Equity while terming the CDSC action as being against procedure
– By invoking the ‘small investor’ Equity said that they were in trouble because they had reached out to the small investor, lending them funds to buy Safaricom shares without collateral, and some people did not like that

Lost in the story is:
– Equity split shares were supposed to start trading on April 14, but have been trading as split prices and have appreciated about 40% since the announcement
– The spat makes the CMA and CDSC look bad; by having a turf war (PDF) and fighting in public both claiming to fight for the integrity or interest of investors
– Why won’t Equity pay the minuscule amount or respond to the regulator (CDSC)?
– Comments made by the CEO at the bank AGM, bragging having the most investor accounts in the country coming back to haunt at a time when brokers are (i) broke (ii) resentful/envious
– More tales at the stockskenya forum

Equity moves in at Housing Finance: At Housing Finance, Equity is asserting its authority at the bank and Equity directors will now form 1/3 of the Housing Board of Directors, with Peter Munga (Equity chairman) Benson Wairegi (Equity vice chairman) and Babatunde Soyoye (Helios) all appointed in 2008 and who will all be ratified by Housing Finance shareholders this month.

During the 2008 rights issue at Housing Finance, Equity also increased their ownership stake from 20% to 24.9% while sister institution British American Investments (Britak) also increased from 4.9% to 7.5%. The rights issue also saw the National Social Security Fund reduce stake from 7.8% to 6.8% as the Government of Kenya which did not take up any new shares saw its stake reduce from 7.3% to 3.6%

Opportunities

Free Download Githongo Book – The most talked about book in Kenya – It’s Our Turn to Eat – the Story of a Kenyan Whistle-Blower (John Githongo) by Michela Wrong will be available for download from April 10. yes you probably have a bootleg copy, but this is the real one from the publisher

– Invest in a Government of Kenya Bond to raise 10, billion shillings ($125 million), and earn a potential 10% bond return (PDF); minimum application amount is 50,000 ($625), and the offer closes 22 April. (better than Madoff?)

– Maker Faire Africa (MFA), a celebration of African ingenuity, innovation and invention, will take place August 13-15 at the Ghana-India Kofi Annan Centre of Excellence in ICT in Ghana’s capital, Accra there are opportunities to sponsor the summit

– Jitihada is the Kenya National Business Plan Competition – (details) (PDF) that will be launched in mid-April.

Create a Logo for an international mobile banking conference and win $200. Details here, found at @whiteafrican

Jobs
– Old mutual: Broker distribution manager, Mass market manager. Apply to recruitment@oldmutualkenya.com by 17/4
– National social security fund managing trustee. apply through manpower associates by 26/4
– Capital Markets Authority: Assistant Manager (Legal Framework), Accountant, Assistant Manager (Investigations), Manager (ICT). D/L is 15 April

Mostly Centum

Last week the company CEO departed and the Centum (formerly ICDCI) directors postponed the annual general meeting (AGM) and payment of the year end dividend.

Today’s newspaper has a statement from the Centum Board asserting that:
– The management is firm, the company is on sound financial footing, and the departure of CEO Peter Mwangi had no relation to the delayed dividend and meeting. However, while Tony Wainaina (Mwangi’s predecessor) and Mugo Kibati (EA Cables) may have set a precedent for young CEO’s to enhance corporate performance and value and leave at the top, the timing & coincidence is not good.
– Statement does not address delay of the dividend which would amount to about Kshs. 248 million ($3.3 million). Without doubt, the conpany’s investment portfolio is down this year (quoted investments – which should be easily disposable include about Kshs. 1.5 billion of KCB (but down from 2 billion ), Kshs. 422 m of EABL and probably a healthy slice of Safaricom) – but it’s scary that three months after a company declared a dividend, it would find itself unable to fund it.

Toxic broker:
– Centum’s statement adds that its listed holdings are not accessible to any (rogue) stockbroker, and the company had no dealings with Discount Stockbrokers
– A separate from the CMA statement today effectively states that the company is under receivership by KPMG – owing to corporate governance including poor strategies manifested by an unsustainable expansion plan (branches all over the country)
– A bigger scandal than Discount appears to be at the national Social Security Fund (NSSF) whose dealings with Discount are a lesson for fraudsters.

Best Kenyan corporate site
In the wake of hiding from questions on Discount, the Centum statements along with financial results from listed companies (Kengen, EA Cables and KPLC) have appeared in the newspapers before they were posted on the NSE site. And though the NSE won an African Investor award (for 2nd runner up – most innovative African stock exchange) website updates should be a priority matter

Probably the best bank, and perhaps corporate site in Kenya, with the most relevant, timely, updates has to be the Central Bank of Kenya website with their controversial/pro-active governor Professor Njuguna Ndung’u (and his media team) who post several statements, speeches, policy matters a week (read it and judge)

Co-Op IPO: After a stop-go debate the Co-op Bank IPO has been green-lit and will begin in about a week’s time with investors still digesting refunds and possible losses from the previous IPO – Safaricom.
Dates: October 30 – November 13
Share price Kshs. 9.50 ($0.13) each (for 701 million shares)

Related Posts
– Reasons to invest in Co-op IPO (or not)
– The last Centum AGM (February 2008)
– Saying farewell at AGM’s: in style (Barclays) or in shame (Kenya Airways)

NSSF: Apples & Oranges

Kenya’s National Social Security Fund finally released their year-end results in the newspapers today after many years of pressure from governance experts and regulators. The scheme hopes to convert into a pension fund and states that it plans to hold an AGM soon

While the statements show improved performance over the last four years (NSSF-K was abused in the 1990’s and forced into bad property investments and lost billions in collapsed banks), how does it compare with NSSF Uganda who released their results last week?

an approximate conversion to US$

Buildings/property/land
NSSFK $434 million (35%)
NSSFU $76 million (13%)

Government Securities
NSSFK $115 million (9%)
NSSFU $289 million (51%)

Equities
NSSF Uganda lists their holdings – as Uganda Clays, Baroda, Nsimbe, DFCU, Stanbic, Serena, HFCU, Victoria properties. The Kenyan one does not list but the portfolio would include Unilever Tea, Nation media group, HFCK (11%) KCB (8%) British American Tobacco (20%) East African Breweries (8%), EAP cement (27%), and National Bank (48%)
NSSFK $618 million
NSSFU $54 million

Current assets
NSSFK $50 million
NSSFU $350 million

Current Liabilities
NSSFK $20 million
NSSFU $11 million

Members Funds
NSSFK $1,240 million
NSSFU $548 million

Totals assets
NSSFK $1,240 million
NSSFU $564 million

Income:
NSSFK $61 million
NSSFU $38 million
However, the Kenyan one include changes in the market value of shares in last year, adding another $80m to bring total income to $141m

Costs
NSSFK $41 million
NSSFU $7 million

Net Gain/Profit
NSSFK $147 million
NSSFU $31 million

Earlier:

  • Under its current format, the ultimate payout will be low from NSSF(K) and the benefits at retirement will not be enough to sustain a majority of retirees.
  • Comparison between Stanbic Kenya and Stanbic Uganda.