Category Archives: tanzania

M-Pesa across Borders

Today brought an announcement that Safaricom’s M-Pesa customers in Kenya would now be able to send and receive payments with mobile money customers of Vodacom in Tanzania – enabling true cross border payments to take place between mobile companies in the two countries.

A sample transaction today shows how it works:

Assumptions

  • The (mean) Central bank rate today was 1 Kshs = TZS 20.17
  • M-pesa transfer cost in Kenya for Kshs 100 to 500 is Kshs 11 to a registered customer versus Kshs 44 to an unregistered customer.
  • Initial theory that the charged would be for unregistered were proved to be wrong in an experiment

Sending Mpesa from Kenya to Tanzania

  • Sent Kshs 300
  • Charge Kshs 11 (about 4%)
  • Exchange rate 20.17Kenya Tanzania Mpesa
  • Recipient got Tzs 5,757

Sending Mpesa from Tanzania to Kenya

  • Sent Tzs 5,000
  • Charge (assume 4%) Tzs 200
  • Exchange rate 20.17
  • Recipient gets Kshs 236

The transactions takes a few minutes to effect, but they actually work and it seems, for now, that there’s very little margin being made on the exchange rate, while the remittance / transaction charges are in line with in-country transactions.

This comes a few weeks after Tanzania enabled cross network mobile payments, which were endorsed by their main mobile money companies – Tigo (Milicom), Airtel, Zantel and Vodacom.

Kenya Agri Exports to the EU take a Hit?

An ad in the September 22 Nation newspaper  has a statement by the European Union addressed to exporters from the East African Community on changes to the tariff regime starting on October 1 owing to the failure of the two sides to sign an Economic Partnership Agreement (EPA)

There was also an article in the same paper showing that a draft has been agreed to, and that a final EPA may be signed and effected in time, but others say it is too late for this.

The new rates, while still subsidized compared to what other nation suppliers pay to export to the EU, are still a blow considering that some exports will no longer be duty-free.

EU Agri

EU newspaper ad

While some like tea, coffee beans & carnations will remain duty-free, Kenyan exporters will pay subsidized rates  of 4.5% on tilapia exports (compared to a normal EU rate of 8%), 2.5% for roast coffee (not 7.5%), 10.9% for mixed vegetables (not 14.4%), and 5% for roses and cut flowers (not 8.5%) between November and May – which includes the crucial Valentine’s Day period when some flower farms can earn half their revenue.

This caps what has been a tough year for Kenya’s  exports of tourism, tea and coffee which have all been adversely affected, and now this.  The recently released Economic Survey 2014 showed total exports declined by 3% from Kshs 518 billion in 2012 to Kshs 502 billion in 2013 (as per the Devolution Cabinet Secretary).

Kenya will  qualify for the preferential (GSP) tariffs, while Rwanda, Burundi, Uganda and Tanzania are currently considered under “least developed countries” and most of their exports to the EU will qualify for a unilateral 0% tariff.

 

Nairobi Securities Exchange IPO

The Nairobi Securities Exchange (NSE) launched its IPO on July 23. It runs up to August 12, 2014 and they are selling 66 million shares at Kshs 9.50 per share (with a minimum investment of 500 shares costing Kshs 4,750) and the NSE plans to raise Kshs. 627 million (~$7.3 million).

Excerpts from the prospectus and other sources. 

  • The NSE borrowed Kshs 300 million from Kenya Commercial Bank to part finance the purchase of the Westlands building that now houses the exchange. (The interest rate is minus 2 the bank’s base rate). Part of the funds raised from the IPO will be used to repay the Exchange’s mortgage debt.
  • The Dar es Salaam Securities Exchange has completely divested from the NSE and CDSC.
  • The NSE has about Kshs 1 billion assets and an EPS of 10.70. They had earnings of 622 million and a profit of Kshs 262 million in 2013. The NSE owns Kshs 20 million worth of  Safaricom bonds and Kshs 15 million of Housing Finance ones
  • The IPO is budgeted to cost Kshs 40.8M
  • Ahead of the IPO in which 194 million (M) shares are being listed, the Kenya Government and the Investor Compensation Fund each own 6.56 million shares and 22 stockbrokers each own 4.08M shares – for a total of 128.6M shares. 2.5 million shares are reserved for employees of the exchange (The NSE  has 38 employees and 5 senior managers). 
  • KRA assessed and charged them Kshs 19m for 4 years of back taxes, of which Kshs 15m has been paid
  • One of the options the Exchange is contemplating is to establish regional exchanges in Somalia, the Democratic Republic of Congo (DRC), South Sudan and Burundi 
  • The NSE expects to introduce the REITs and ETFs, and there are also plans to introduce the a Derivatives Market this year. The NSE also plans to upgrade of the Automated Trading System (ATS) and the Bonds Trade Reporting System with some of the proceeds from the IPO.

BritAm and Swala Investments

Last week saw the announcement of two new regional investment opportunities – one a new bond offer in Kenya and the other – an IPO in Tanzania – that both close on July 4.

BritAm Bond: Kenyan financial group Britam announced a Kshs 6 billion ($69 million) bond  which will be in two tranches starting with an initial target of Kshs 3 billion.

 Some excerpts from the bond prospectus 

  • There is a green shoe option of Kshs 1 billion in the first tranche.
  • Funds raised will be utilized in private equity, ICT development and local and regional expansion projects.
  • The minimum investment is Kshs 100,000 (~$1,150) with multiples after of Kshs 50,000.
  • The 5-year bond (maturing in July 2019) pays 13% a year (6.5% every six months). So if you invest Kshs 100,000, you will get an interest payment of ($) Kshs. 6,500 twice a year.
  • The bonds will be listed at the NSE for easy trading.
  • At the end of 2013, BritAm had Kshs 47 billion of assets, revenue of Kshs 15 billion and a pre-tax profit of Kshs 3.1b. They had Kshs 3.7 billion in investment property and Kshs 6.1 billion in listed companies. They own 21% of Housing Finance, 10% of Equity Bank and 25% of the Acorn group. They are acquiring Real Insurance for Kshs 1.3 billion (825m cash and shares  for the balance).
  • The bond issuance will cost Kshs 57m shillings – and Dyer & Blair get about Kshs 36M of this as the arranger gets (27M) and for the Placement (9M).

Swala Energy: Swala Oil & Gas (Tanzania) aim to raise between TZS 1.6 billion ($969,000) if they sell 3.2 billion shares and TZS4.8b ($4.8 million) if they sell 9.6 billion shares at TZS 500 each. The Offer is conditional on the Company achieving a minimum subscription of 3,200,000 Shares under this Prospectus, to raise TZS 1,600,000,000 (before expenses of the Offer). The Company may decide not to allot any shares and repay all application monies or seek a no objection to proceed with the allotment, in case the minimum subscription is not attained.

  • The minimum subscription is TZS 50,000 ($30) for 100 Shares. You can apply online, but a physical application form must be received at the brokers by 4th July.
  • Swala has total assets of $1.8 million in 2013 (up from $75,000 in 2012). Revenue in 2013 was $285,000 (up from $62k)  and loss was $5.5 million for the year (down from $1.26m the year before).
  • They are fundraising as they plan to spend $3.5M next year and $6M the year after.
  • A London broker values the company at $52.3 million based on 50% interest in Pangani (an area of 8578 sq. km worth $25.1m) and 50% in Kilosa Kilombero (an area of 8838 sq. km worth $36.3m). Otto Energy is a 50% partner in both of these ventures. 
  • The Costs of filing will be between TZS 210M and TZS 248M ($150,000) with printing costing 32M, accountants 40m (~25,000 to BDO), technical specialist (Risc Pty) 40M legal (Asyla) 16m, nominated advisors 27M (~$16,000 to Arch Financial if $3m is raised) and the Dar es Salaam Exchange gets 27M.
  • The Swala Energy prospectus gives insights on Kenya oil deals that are rarely public and which are used as a basis for the valuation of these shares and for comparison as they are all in the East Africa Rift System E.g. Recent Kenya transactions (EARS ) include Marathon Oil bought aBlock 12A license from Africa Oil for $78.5M and a Block 9 license, Africa Oil bought a  Block 12A license from Tullow for $3.86M ($1,265 per sq. KM and Adamantine sold a Block 11B license to Bowleven for $10M ($1,429 per sq. KM).
  • In Tanzania, profits from oil are shared out as 45% government and 55% to the contractor when production is less than 12,500 barrels per day and when barrels are over 100,000 per day, the government gets 70% and the contractor 30%.
  • Swala has applied for approval to list on the Enterprise Growth Market section of the Dar es Salaam stock exchange (they need 100 shareholders so list).
  • Swala will go from holding 74% to 61%  and new shareholders all have 10% with convertible noteholders at 7%.
  • Tanzanian Applicants will be allocated Offer Shares in priority to all other Applicants. Any Offer Shares remaining thereafter will be allocated to East African Applicants. Offer Shares will only be allocated to Foreign Applicants if they have not all been acquired by Tanzanian Applicants and East African Applicants.

Guide to Dar es Salaam

A guest post by Josiah Mugambi – @JMugambi to a neighbouring coastal city with good manners and good food, proper Swahili and while Ujamaa is strong, so is government corruption as in Kenya

Getting there: Transport options from Nairobi include road (driving a car or taking a bus for the over 900KM journey) and air with Kenya Airways / Precision Air which is a 1:15 duration. There are at least two flights each way daily, with a return ticket going for about 410$.

The Julius Nyerere International Airport is smallish, and when busy, the queues for arriving passengers waiting to clear with immigration can be long. However, they seemed to be able to handle the large number of arriving passengers reasonably well. On this day, there was a large number of people waiting to buy their visas on arrival, however, I did not need one as East African citizens ordinarily do not need a visa for stays of less than three months. Visa requirements are easily found online

Once out of immigration, it is possible to change money at one of the few forex bureaus at the airport. (1 USD was equal to about TSh 1770 at the time of my stay)

Getting Around: Taxi’s are readily identifiable, mainly white with yellow or green stripes. A cab (most if not all are not metered) from the airport to the Oyster bay area costs about 35-40k Tsh (approximately 20-25 US$) meaning that one to town would be slightly less as it is closer from the airport.

Most people use the “dala dala” public transport vehicles to get around; which are clearly distinguishable. The ‘City Bus’ operates several routes, which are clearly indicated on the front and side, with fares (nauli in Swahili) starting at 300-450 Tsh ( ~ $0.20) for most city destinations.

‘Bajaja’s – three-wheel Bajaj scooters are another popular form of transport for those who want added flexibility without paying for a taxi. They are however sometimes driven rather recklessly. For shorter distances, some may opt to walk but the hot and humid weather can be a disincentive.

Communications: I was able to use both my Kenyan phone lines in the country. I avoided roaming data (usually expensive anywhere in the world) as much as I could. For internet access, one can get a data modem from any of the four local mobile operators (Vodacom, Airtel, Tigo, Zantel) with Wi-Fi available in some locations (mostly restaurants). I noticed that the mobile market in Tanzania is more evenly spread among the four major operators: Vodacom 37%, Airtel 30%, Tigo 25%, Zantel (Zanzibar focused) 8% (2010 stats from CGAP)

Where to stay, What to eat: If you are in the central business district for business, it would be probably wiser to stay closer to town. Reasonable hotel rates start at $100-150 depending on location, and hotels around Sea Cliff area tend to be more expensive. I stayed at the Colosseum Hotel & Fitness Centre mostly because of the state-of-the-art gym. I also liked the Mediterraneo after visiting it briefly with friends.

Any (modern) economy is heavily reliant on electricity and Tanzania is no exception. I noted that the hotel I was staying at had a backup generator that seemed to go on nearly every night, implying that demand for electricity at peak hours was very high.

One thing that I loved about Dar was the quality of food. Many Kenyans go to Tanzania and say that things happen slower there, but when it comes to food, it’s probably for a good reason as most of the time, the food is freshly cooked and delicious (and served in good quantities too!).

I loved the Mshkaki (a form of Kebab, either roast beef or fish) which one can order with lightly roasted bananas – absolutely delicious. If there’s anything I miss from Dar it is this! I’m not one for beer, but the average price of a bottle starts at around 1500 TShs ( less than $1), and some (familiar) sodas (Coke, Fanta, Sprite) are sold in 350 ML bottles.

All in all, daily one can expect to spend anything from $10 to over $45 depending primarily on your mode of transport and choice of food.

Language, Stuff to do: Being from Kenya it was not too difficult to communicate in Swahili to locals, though their grasp of the language exceeds that of most Kenyans. I had an interesting conversation with a traffic police lady (after we got pulled over for a routine check) and she said that they (Tanzanians) get really amused about how Kenyans speak Swahili. They are very conscious about grammar while in Kenya we tend to gloss over poor Swahili (unless one is doing an exam of course).

I visited the Mlimani City Complex which is an interesting development bordering the University of Dar Es Salaam, with an office complex hosting multinational firms, a shopping centre and a residential park. This is a popular shopping location outside of the city centre with a large supermarket as well as a theatre and several banks. The Sea Cliff area is popular, especially for tourists who buy African art, and Tanzanite stones.

I noted that many security guards are armed with a shotgun which lent some semblance of security (unlike in Kenya where your ordinary watchman would have at most a piece of wood to defend himself). Walking around is not advised in lonely places, especially on the beach.

As with many coastal areas, the main leisure activity would be visiting the beach. I especially liked Kunduchi beach, situated north of the city centre, with its white beach and from which several windsurfers took advantage of the excellent conditions to show off :). A weekend excursion would be to take a short trip to Zanzibar by boat, but I was not able to do this.

Economy and Society: In Kenya, there is a lot of talk about corruption, but even in Tanzania many of the locals complain about the corruption that is rife in government. There have been several corruption scandals lately and my taxi guy was rather emotive about the subject.

Mwalimu Julius Nyerere is still highly regarded by many, though some say that he held back economic development somewhat (compared say to Kenya). I however admire the level of social integration present. Unlike in Kenya, there is a distinct sense of unity (possibly due to Julius Nyerere and Ujamaa) and ‘negative ethnicity’ is virtually unheard of – Something Kenya could learn from its neighbour!

Also, unique, I noticed children holding ‘School Children Crossing’ signboards at the zebra crossings helping fellow students cross the road, and that drivers respected their right to cross :). Tanzanians are generally courteous and respectful, (a sign of ujamaa?), and generally follow traffic lights and rules – another thing I liked about Dar.

All in all, a good place to visit, especially on holiday.