Category Archives: Safaricom

M&A Moment: September 2020

Since the last update of deals in the East Africa region, we are six months into the era of Coronavirus and its effects across the world.

Merger and acquisition (M&A) deal are still happening, with some older ones having been in the pipeline for months before. The impact of the pandemic has also created some new M&A deals and partnerships, while reducing the value of others, and even killing off some earlier-announced merger deals, in scenarios that had all been foreseen by deal-makers.

https://twitter.com/gina_din/status/1227504077203886081

Here are some notable deals (1 US dollar equals 108 Kenya shillings)

Airline/ Oil/Energy/Mining M&A

  • Jubilee Holdings is acquiring an additional 9.4% share in Uganda’s Bujagali Hydropower from SN Power for $40 million to now own 18.2% of the project as part of a diversified portfolio that includes quoted stocks, bonds, real estate and interests in Farmer’s Choice, PDM and Seacom. 
  • The proposal to nationalize Kenya Airways through a National Aviation Management Bill, which grew out of a proposal by the airline to manage Nairobi’s main airport, will be debated in Kenya’s Parliament over the next few months.
  • Shareholders of Tullow Oil approved the sale of its entire interest in Blocks 1, 1A, 2 and 3A in Uganda and the proposed East African crude oil pipeline System to Total. 
  • The proposed Transfer of 85% of Global Petroleum Products Kenya  to E3 Energy DMCC has been approved 
  • Barrick Gold and the Government of Tanzania have signed an agreement to launch a new joint venture to oversee the company’s future gold mining operations in the country. 
  • The Competition Authority approved the proposed acquisition of 100% of Acacia Exploration (Kenya) by Shanta Gold Mauritius.
  • Safaricom bought 18.96% of Circle Gas for Kshs 385 million. The gas company has interests in Tanzania also acquired KopaGas’s technology in a $25 million transaction, one of the largest private equity investment in the clean cooking sector
  • In what will be a controversial deal, Kenya plans to have the Industrial and Commercial Development Corporation become a super agency to oversee a new Kenya Transport and Logistics Network (KTLN) that will coordinate the Kenya Ports Authority, Kenya Railways and Kenya Pipeline Company.
  •  Deal Undone: The Competition Authority has noted that the acquisition of 80% of the Embraer by Boeing has failed to take place following the decision of the parties to withdraw from the transaction. 

Banking and Finance: Finance, Law, & Insurance M&A

Kenyan Banks  

  • Kenya’s Central Bank approved the acquisition of 51% of Mayfair Bank by Commercial International Bank, Egypt’s leading private sector bank, and it will be renamed as Mayfair CIB Bank.  
  • The Central Bank of Kenya approved the takeover of 90% of Jamii Bora Bank by the Cooperative Bank of Kenya.
  • Access Bank completed the acquisition of 100% of Transnational Bank. 
  • Centum’s Bakki Holdico has acquired all the shares of the late Ambassador Bethuel Kiplagat in Sidian Bank (via Business Daily) 
  • Equity Bank has completed its buyout of 66.53% BCDC in DRC. Covid saw the final price reduced by $10 million to $95 million.  
  • Deal undone: Atlas Mara and Equity Bank mutually agreed to discontinue transaction discussions given the effects of the COVID-19 pandemic.
  • Deal undone? Businessman Naushad Merali and Mwalimu National Sacco plan to sell their stakes in Spire Bank after it issued a notice to engage potential suitors to buy a 100% of the bank. 

Investment Markets and Deal Makers

  • The Nairobi Securities Exchange acquired 61% of AKS Nominees, which holds an 18% share in the Central Depository and Settlement Corporation (CDSC) for Kshs 77 million.
  • Genghis Capital has partnered with EGM Securities to offer investors a wider range of alternative asset classes including online currencies, commodities, precious metals, oil, and biotech stocks.
  • Helios & Fairfax to partner on Africa investments
  • Fanisi Capital and Ascent Capital are set to merge and raise funds for bigger deals in the region.
  • Two Nairobi stockbrokers AIB Capital and Apex Africa entered a joint venture that will lead to a merger. The entity will be part of Mauritius firm, the AXYS Group which acquired Apex in 2015.
  • African Alliance Kenya investment bank is divesting from stockbroking owing to a structural decline in the agency trading model in both the local and global financial markets (amplified by the Covid-19 pandemic)

Insurance

  • The Competition Authority approved the acquisition of 24.1% of ICEA Lion Insurance Holdings by Eastern Africa Holdings which is being used by private equity firm Leapfrog Investments for the buyout of  ICEA Lion Insurance Holdings for Kshs 10 billion.
  • The sale of Stanlib Kenya to ICEA Lion was approved by the Competition Authority though clients have pulled out Kshs 75 billion following the deal. 
  • Mauritian insurance company MUA completed the acquisition of Saham Assurance Company Kenya. 
  • Octagon Africa, who offer pension, actuarial and insurance services in Kenya, Uganda and Zambia acquired a 49% stake in the Zambia subsidiary of Alexander Forbes who doing a group strategic review. 

Regional Banks

  • The Tanzania Postal Bank (TPB) has absorbed a third bank, TIB Corporate, in a new merger deal. 
  • The National Bank of Malawi plans to invest in Akiba Commercial Bank in Tanzania in a bid to expand its operations beyond Malawi.
  • The Bank of Tanzania approved the merger of Mwanga Community Bank and Hakika Microfinance Bank to form the Mwanga Hakika Microfinance Bank. 
  • EFG Hermes and the Sovereign Fund of Egypt aim to acquire 76% of the Arab Investment Bank. EFG Hermes will own 51% of the bank and plans to transition from an investment bank to a commercial bank. 
  • I&M Bank is buying Orient Bank in Uganda.  

Remittances

  • WorldRemit has agreed to acquire Sendwave, an app-based remittance company in a cash and stock transaction. 
  • Beyonic has been acquired by MFS Africa.  

Agri-Business, Food & Beverage M&A

  • Kenya has floated an international expression of interest for the privatization of five sugar firms
  • The Kenya Tea Development Agency Limited (KTDA) and the Japan International Cooperation Agency (JICA) are each investing over Kshs 150 million to set up Africa’s first Japanese speciality green tea production factory at Kangaita Tea Farm in Kirinyaga County. 
  • President Kenyatta has ordered the Kenya Meat Commission to be transferred from the Ministry of Livestock to the Ministry of Defence
  • Dominion Farms on a parcel of land comprising 3,700 hectares at Yala Swamp in Siaya County is being transferred to Lake Agro Ltd.

Health and Medical, Pharmaceutical M&A

  • Indo-Oceania Ventures is acquiring Mayfair Healthcare Holdings
  • The CDC Group and Novastar Ventures have invested in mPharma which currently operates in Ghana, Nigeria, Kenya, Zambia and Zimbabwe, and serves approximately one million patients annually, through a network of over 400 pharmacies.

Logistics, Engineering, & Manufacturing M&A

  • Mum’s Village Kenya has merged with BabyBliss Nigeria to create the Bliss Group Africa. 
  • Portuguese multinational Salvador Caetano Group has invested Kshs 350 million to launch an automotive hub in Kenya and be the dealer for Renaultand Hyundai cars with plans to venture into the local assembly of the two brands.
  • Bolt, the ride-hailing app, has received a EUR 50 million as venture debt facility from the European Investment Bank to support its research and development strategies.
  • Kenyan e-commerce startup AfricaSokoni has acquired Nigeria company Bolorims to expand into the West African country. The deal, which gives Bolorims a 10% cent stake in AfricaSokoni, creates a new entity in Nigeria, Bolosokoni.com, with AfricaSokoni continue to trade as before in Kenya. 

Real Estate, Tourism, & Supermarkets M&A

  • LSE-listed Network International Holdings is to acquire Nairobi-headquartered DPO Group for $288 million worth of shares of Network. The firm whose payment services are used in 19 African countries, was affected by COVID disruptions of travel and the tourism sector. DPO’s founders will get $13m worth of shares and Apis Growth Fund receives $50m of shares in Network. 
  • PrideInn Group has acquired Azure Hotel and re-opened the Kshs 1.2 billion Westlands hotel that suspended operations in March during the pandemic.  
  • Cloud9xp, an online booking service for leisure experiences and an alumnus of Nairobi Garage, has been acquired by Kenyan-based travel-tech outfit HotelOnline in a share swap deal. 
  • Tusker Mattresses announced plans to recapitalize through the sale of a majority stake that is supported by seven shareholders in its Orakam parent company. But it’s not clear if this will be enough to save the struggling retailers that initially tried to secure short-term supplier support through ring-fencing of payments.  
  • Slumberland Kenya is being transferred to Simba Foam.
  • Deal undone: Tiffany & Co. has filed a lawsuit to compel LVMH Moët Hennessy-Louis Vuitton to complete a merger transaction on earlier-agreed terms, noting that COVID-19 has not prevented other parties from concluding similar deals 

Telecommunications, Media & Publishing M&A

  • Edelman, the largest independent global communications firm, has expanded its African footprint with the acquisition of Gina Din Corporate Communications
  • Scangroup completed a long-standing deal after a special EGM in May 2020 saw 88% of its registered shareholders participate and vote 99.98% in its favour.
  • Safaricom and Vodacom have acquired control of M-Pesa in Africa from Vodafone for Kshs 2.15 billion, with each firm paying 50% of the amount (Kshs 1.07.billion) as their share of the joint venture. 
  • Tigo has combined with Zantel. The Tanzanian firms have a combined 12.8 million customers and 7.4 million mobile money users.
  • Mettā and Nairobi Garage are combining their services to create Kenya’s largest innovation community, offering access to all their networks, while members will have access to both organizations’ workspaces throughout Nairobi and the complimentary business support services
  • Nigeria’s CcHub acquired Kenya’s iHub to create a mega Africa incubator.
  • Deal undone: Telkom Kenya and Airtel have mutually agreed to end their pursuit of a joint venture. This came after conditions were raised that delayed the deal.  

Other M&A

  • Sport: The legendary Williams F1 racing was taken over by US investment firm Dorilton Capital. Covid and a sponsor departure were triggers for the deal. 
  • Foreign Aid: The United Kingdom, which is leaving the European Union, plans to merge the Department for International Development and the Foreign and Commonwealth Office – to become the Foreign, Commonwealth and Development Office.
  • Art: The art prize collection of the bankrupt Abraaj Group was acquired by a Saudi art organization Art Jameel and will be hosted at their space in Dubai. 

M-Pesa App eases cash management and reporting for SMEs

In June 2020, Safaricom launched a new app for business owners that is a serious tool that enables them to do true real-time cash management, accounting and business banking on their mobile phones.  

Perfectly timed during the Coronavirus when businesses are moving shopping online, and paying more with M-Pesa over cash, the new Lipa Na M-PESA Business App allows business people to set up and manage multiple tills at different locations, keep track of cash and integrate payments from different tills.

By using the app, business owners get immediate updates on sales and receipts, giving them visibility of how different stores are performing and should reduce pilferage and leakage from cash sales handled by employees at different locations.

Payments collected through mobile money can be used to settle supplier bills, pay daily casual salaries or be sent to the bank, all using the app. A big plus is that businesses can obtain instants overdrafts to complete crucial payments, and this follows in the runaway success of “Fuliza”.

Crucially the Lipa Na M-PESA Business App creates a digital data trail, marries accounting and banking as they can now export their periodic statements to other systems like Excel or an accounting system for easier and faster reconciliation. This is expected to ease the record-keeping and payment efficiency of business owners, 170,000 of who currently use Lipa Na Mpesa and who can receive payment from 24 million M-PESA users across the country. 

Business owners can apply online for the new M-PESA business till numbers or to add to their existing ones. The requirements asked for from different entities, from sole proprietors to partnerships, companies and churches, are listed on the site. Decisions on applications will be made within 24 hours of providing all documentation, with new till numbers provided to successful applicants. Other status decisions such as pending, or rejected, with reasons given, will also be in the same period.

The Lipa Na M-PESA Business App is now available in the Google Android store and on USSD (*234#), while the iOS version will be out later.

Digital Newspapers boost during Covid

At the end of May 2020 digital copies of leading newspapers were availed to Kenyans through a partnership with Safaricom.

The newspapers are the Standard and the Nairobian from the Standard Group and the Daily Nation and the Business Daily from the Nation Media Group. The digital copies all cost Kshs 20 each, which is about 1/3 of the street prices of Kshs 50 and Kshs 60 for the print newspaper copies.

This comes at a time of declining readership, and declining advertising for newspapers and in recent months both the media groups have issued profit warnings – the Standard for 2019 and the Nation for 2020. During the Coronavirus outbreak, there have been readers who have stopped buying and reading print newspapers for fear of contracting the virus, despite newspapers running advertisements about the safety and hygiene of their printing and distribution processes. Safaricom is powering this initiative as a Covid-19 response and the digital newspapers are available for a period of two months.

The digital newspapers are very easy to buy with the payment deducted from a user’s airtime, not from M-Pesa. Sign-up requires no cumbersome registration and there is no app to download. One also has to be on Safaricom data to download it, not Wi-Fi, though the download does not consume data, and the purchased copies are available to read for 7 days.

Whether this will accelerate a more permanent shift in readership will be seen after the period ends in the second half of the year. Local media houses have tried for many years to get readers to pay for online subscriptions without much success.

Early in the Covid-19 period, full PDF copies of newspapers would circulate on WhatsApp, but these seem to have stopped since a crackdown was initiated. This is also a period of increasing political activity and a key tool of propaganda is the use of doctored government documents and fake newspaper covers to mislead online readers – so having actual digital copies is a welcome tool to verify which are with the fake covers.

There is also another Nairobi newspaper that is completely free – both online and in print. The People Daily that is handed out to motorists and also distributed to a smaller clientele around the country. The packaging of the newspaper during Corona is indicative that costs may not be an issue at this paper.

*Get the digital newspapers from Safaricom.com  under “discover” then “newspapers” or by dialing *550#.

EDIT: On June 22, Radio Africa and Mediamax joined the partnership, availing their The Star and People Daily newspapers for Kshs 10 per issue.

EDIT: On July 1, the Nation Media Group announced a “change its business model from print advertising and physical reader copy to digital advertising, ePaper subscription and content-driven reader revenue.” This was accompanied by a reduction of workforce effective July 3, 2020 and salary reductions, of, in some cases, 40%.

Safaricom 2020 results with CEO transition

Safaricom PLC announced its financial results at a unique event, streamed online, that featured its incoming and outgoing CEO’s.

Overall revenue grew 5% to Kshs 251 billion as M-Pesa revenue grew 12% to Kshs 84 billion with mobile data growing 12% to Kshs 40 billion. Voice and SMS revenue declined. Profit before tax increased to Kshs 105.77 billion up 17% from the previous year, and the company will pay out Kshs 56 billion as dividends to shareholders, up from 50 billion in 2019.

The firm’s Chairman Nicholas Ng’angá welcomed the new CEO Peter Ndegwa who has been in office for a few weeks now and thanked Michael Joseph who had been appointed interim CEO following the demise of Bob Collymore in July 2019.

Ng’angá asked that the country’s regulatory period, after Coronavirus, be designed to support the revival of businesses, not one that increases taxes for consumers and businesses, noting that the company had paid Kshs 111 billion in taxes and fees to the government during 2019.

Michael Joseph said that in his second stint as CEO they had simplified offers to customers and mobile data had double-digit growth while gaining market and increasing data revenue. Safaricom and Vodacom have acquired the M-Pesa brand from Vodafone and will roll out M-Pesa across Africa with new products and lower costs. Safaricom is also pursuing one of the new licenses in Ethiopia.

Sateesh Kamath, the Chief Financial Officer, said the results were adjusted for the one off-gain of acquiring M-Pesa and that service revenue still grew in the year, despite the decline of the sports betting and the reduction of tariffs the company had undertaken to support consumers during Coronavirus. He said that they plan to introduce more use cases to cannibalise M-Pesa “withdrawal” revenue and instead grow customer e-balances in the long run, while Joseph said that they plan to roll out a unit-trust investment product.

Peter Ndegwa, the incoming CEO, announced that the company would roll out a device financing offer to enable Kenyans to access 4G smartphones, with affordable data, by paying as little as Kshs 20 per day. He concluded by saying that Coronavirus made it impossible for the company to provide forward guidance on earnings and capital expenditure for 2021 and that they would do that at a later date.

Coronavirus in Kenya: Week One

The Outbreak

  • March 13: The Ministry of Health confirms the first case of coronavirus in Kenya on March 12 from a Kenyan citizen who returned to the country from the USA via London 
  • March 22: Kenya confirms 8 new cases, bringing the total number to 15. It is tracing 363 other people and institutes a mandatory shutdown of major social activities in the country. 

Banking Industry:

  • March 15: President Uhuru Kenyatta appealed to banks and mobile operators to reduce the costs of mobile transactions and calls on Kenyans to use credit cards, mobile money and other forms of cashless payments. 
  • March 16: Safaricom waived fees for M-Pesa payments below Kshs 1,000 (~$10) for 90 days and raises M-Pesa transactions limits to Kshs 150,000 and also increases daily transaction caps and maximum mobile money wallet sizes up to Kshs 300,000 ($3,000). Airtel and Telkom Kenya follow suit a day later. 
  • March 18: Bankers meet the President at State House where the Central Bank of Kenya (CBK) Governor announces that all commercial bank personal loans that were there in good standing on March 2, are eligible for extensions for up to one year while SME and corporate borrowers can approach their banks to be assessed for loan restructuring, with the cost borne by banks. Also, that banks would no longer charge fees for customers to check their bank balances.
  • Different banks announced their compliance with the new rules.   
  • March 19: The Kenya Bankers Association confirms that all banks will assist clients who come in to speak about how COVID-19 has affected their employment or business operations, and whose loan repayments were up to date as at 2 March 2020. They also ask all customers to observe 1-metre (or 3 feet) social distancing at branches
  • March 20: The CBK announces presents Kshs 7.4 billion ($74 million) to the Government to support the coronavirus fight efforts. This it says are the proceeds from the demonetization exercise that concluded in September 2019 and is the sum of (old) Kshs 1,000 notes that were not turned in and which the CBK had classified as being miscellaneous receipts. 

Famous People in Quarantine

  • March 18: Senator for Kericho County Aaron Cheruiyot announces on twitter that he is in self-quarantine. 
  • March 19: Members of Parliament and Parliamentary staff who arrived from London on March 9 are reported to be in self-quarantine. 
  • March 19: Ambassador Macharia Kamau Kenya’s Principal Secretary to the Ministry of Foreign Affairs announces on twitter that he is in self-quarantine after returning from New York. 
  • March 20: Jane Marriott, the British High Commissioner to Kenya announces on twitter that she is in self-quarantine, following her trip to the UK. 
  • March 22: Kenya’s Cabinet Secretary for Health announces that Gideon Saburi, the Deputy Governor of Kilifi County, has been apprehended and put in a mandatory 14-day quarantine after he failed to isolate himself after returning from a trip to Germany. Also that he will be charged in Court after his isolation period. 

Mandatory Quarantine in the Eastern Africa region 

  • March 18: Uganda announces immediate mandatory quarantine for arriving visitors, at their cost.  
  • March 21: Ethiopia announces mandatory for passengers arriving from March 23, at their cost. However, diplomats will be quarantined for 14 days at their embassies, while transiting passengers will be placed in isolation at the Ethiopian Skylight Hotel until they resume their connecting flights.
  •  March 22: Kenya has suspended all international flights other than cargo from March 25. Also, all arriving passengers will undergo mandatory quarantine at a government institution at their own cost. 

Internal country shutdowns

  • March 14: Rwanda closes schools, places of worship, large gatherings, and asks people to work from home. 
  • March 15: Kenya’s President announced the Government has closed all schools, suspended official foreign travel, and will encourage all employees to work from home. 
  • March 18: Uganda closes schools, universities and bars, and bans weddings and religious services for a month. 
  • March 21: Rwanda closes its borders to movement of people and cancels international flights, other than cargo ones. It also suspended tourism and research in 3 national parks where gorillas are found.
  • March 21: Nigeria shuts its airports to international flights as coronavirus cases reach 22.  
  • March 21: South Africa closes its airspace to foreign travelers.
  • March 22: Kenya orders a suspension of religious services at all places of worship, closure of bars and bans gatherings including weddings, and birthday parties. Restaurants are to remain open for delivery services and funeral events are restricted to a maximum of 15 mourners.

Flight cancellations/ Airlines reschedulings:

  • March 17: Kenya Airways updates its schedule, reducing London flights to five times a week, Dubai & Johannesburg to once daily, and Johannesburg to two daily. It also suspends flights to Bangkok, Khartoum, Djibouti & Mogadishu. 
  • March 18: Rwanda announces a halt to all commercial passenger flights into/out of the country on March 20 including operations of Rwanda Air for 30 days. 
  • March 19: Kenya Airways suspends flights to Antananarivo, Bamako, Bangui, Blantyre, Brazzaville, Kigali, Kilimanjaro, Luanda, Yaounde/Douala, and Zanzibar. 
  • March 20: Ethiopian Airlines announces 30 routes closures. The list is not revealed till the next day – and the listed countries include Egypt, Lebanon, Somalia, Djibouti, Namibia, Equatorial Guinea, Cameroon, Chad, Madagascar, Angola, Congo, Mali, Senegal, Rwanda, South Africa, Canada, Spain, Belgium, Switzerland, Indonesia, Israel and all US ones. 
  • March 20: South African Airways immediately suspends all operations until the end of May following a government notice prohibiting the embarkation/disembarkation of non-SA crew and passengers. The only flights that will remain will be domestic service between Johannesburg and Cape Town.
  • March 22: Emirates announces cancellation of all passenger flights from March 25 .. but .. 
  • March 22: Turkish Airlines to suspend most of its flights – leaving just a handful of flights to New York, Washington, Addis Ababa, Moscow & Hong Kong (via AlexinAir).
  • March 22: Kenya Airways suspends all international flights. Cargo flights remain, as will passenger services to Mombasa and Kisumu. 

Corporate Restructuring’s: 

  • March 13: Trading was suspended at the Nairobi Securities Exchange. This came following news of the discovery of the first coronavirus case in Kenya and the main share index dropped by over 5%. Past instances when circuit-et breakers have been tripped include in the period of post-election violence in 2008, and in September 2017, on the day that Kenya’s Supreme Court nullified the results of the August 8 presidential election. 
  • March 13: Kenya’s insurance regulator, IRA, communicates that insurance companies will continue to provide their services to policy holders affected or infected with the virus .. but insurance companies say their re-insurers do not cover pandemics such as Coronavirus. 
  • March 16: Ethiopian Airlines restructuring plans include scaling up cost-saving programmes and asking service providers for temporary relief, discounts and waivers. They have also started to renegotiate all contracts, including aircraft leases as well as scaling down offices and reducing staff.
  • March 16: Java adjusts seating and promotes delivery as do other restaurants. But many other restaurants closed. 
  • March 18: It was revealed that The Standard Group plans to lay off 170 workers. 
  • March 18: Churches to restrict attendance numbers.
  • March 18: The African Development Bank cancels all travels and requires staff to work from home. The Bank’s Board of Directors is reviewing the configuration and design of the Bank’s statutory Annual Meetings originally scheduled for May 26-29, 2020 in Abidjan
  • March 18: Kenyan listed companies and licensed investment schemes that were to host annual general meetings (AGM’s) in March, April and May 2020 have been asked to defer them to later dates.
  • March 20: Kenya Airways CEO sends a memo to staff following COVID-19 and writes that in the last 24 hours, nine countries in our Africa network, the UAE and India have announced travel restrictions. So far, we have reduced approximately 65% of our flights, and this is changing by the hour. He announces that instead of layoffs they will ask staff to take salary reduction and paid & unpaid leave. The leadership team and he will take 75% and 80% respectively, while that for other staff will be 25% or 50% depending on the pay grade.
  • To facilitate supermarket shopping home deliveries, Tuskys has partnered with Sendy and Naivas has partnered with Glovo.

Government Adjustments 

  • March 16: The Ministry of Lands closes all land registries for 28 days from March 17. 
  • March 16: Kenya’s Sports & Culture Ministry closes all museums, archives, stadiums, public libraries, and cinemas for 30 days.
  • March 18: Kenya’s National Assembly and Senate both go on a month-long recess. 
  • March 18: Kenyan courts embraced digital filings and rulings of cases. 
  • March 19: Public health campaign to stop the spread is launched. 

Uplifting News

  • March 21: A thread to help those losing jobs their jobs this week and to help match their skills with part-time or remote-work opportunities. 
  • March 22: The first shipment of medical relief equipment offered by the Jack Ma Foundation arrives in Africa for distribution to different countries. The total will be 500,000 test kits and one million masks had been pledged on March 13.