Kenya Infrastructure Bond

The government of Kenya infrastructure bond closes on Wednesday and looks to be a successful fully subscribed offer that will raise Kshs. 18.5 billion (~$231 million).

It will have proved irresistible to funds and institutional investors who have been looking for investment outlets as the Nairobi Stock Exchange slump persists, and the sure 12.5% annual return from the Government of Kenya over the next 12 years is a sure bet. The 12.5% interest payments will be paid semi annually with principal repaid in 2015, 2017 and 2021. Bonds from Mabati and Barclays were fully subscribed in 2008

Through the minimum investment is just Kshs. 100,000 (~$1,250) it looks like there’s little interest from retail investors, with many smarting from the free-falling NSE and more concerned with protecting their existing investments (read these great tips) from rogue stockbrokers to sign up for bond which, the fire-fighting Capital Markets Authority (CMA) has not gotten round to providing much investor education. The short window (about 3 weeks from Jan 28 to Feb. 18) may also not have favored retail investors.

The success of the bond which is earmarked for road, geothermal and water projects comes despite some reservations (little infrastructure spending identified, limited oversight, may affect Kenya’s credit rating). The bond was first set out in the 2008 budget by the Minister of Finance.

Read more bond perspectives from the Kenya Capital Investment Group blog


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– Join embattled Suntra investment bank as a manager – investment banking & fund management or manager – stockbroking.

22 thoughts on “Kenya Infrastructure Bond

  1. Anonymous

    Hi Banks,

    Thanks for reminder. 12.5% return is great. I read about it from the article by jaindi kisero but I must admit I did not seriously consider it.

    Did you apply? 🙂

  2. Ssembonge

    According to the PWC audit, CDSC officials are colluding with brokers to fleece retail investors.

    Short of finding an honest broker, there is nothing Kenyans can do to protect their investments from rogue traders.

    To quote The Daily Nation; “clients’ shares are sold without their knowledge, where officials of the CDSC collude with brokers to postpone updating clients’ accounts and where prices are routinely manipulated by stockbrokers”.

  3. MainaT

    Was all set to apply until CBK laughably told me I couldn’t open a cds account from Ng’ambo and I had to go thru the nominee account route. Now?

    Its a good investment vehicle.

  4. Empower Kenya

    The infrastructure bond is a good investment…I would have preferred they tell us which projects they plan to use the funds for.
    It will most likely be oversubscribed.

    About the Suntra Jobs: Been there done that and I do not have confidence in the leadership especially the new head.

  5. Concept

    Banks, the bond is open to bidding thus the 12.5% rate is not ‘fixed’ neither is it ‘guaranteed’. Picture this, if i bid for the bond at a rate of 8% I’ll get first priority as opposed to one who wants a return of 12.5% P.A.

    The 12.5% is the maximum government is willing to pay as the cost of capital. And obviously the lower the rate you bid the better for the government as it translates to low cost of capital and the higher chance of getting a ‘full allocation’ as an investor

  6. pesa tu

    If it is oversubscribed that will be afntastic PR opportunity for Kenya.I can just see the Financial Times Headline: African Infr. bond raises US$ 200 million and is oversubscribed amidst global turmoil

  7. Anonymous


    Can’t you see what the government is doing? They are raising money to pay for this bloated coalition government. They are not going to use the money to invest in long term things like infrastructure, which would help the economy. This is very dangerous for kenya’s future development goals.

  8. Maishinski

    Lets give them a chance guys… I know its hard to stay positive with all the negativity (scandals etc) but reality is:

    – The bloated gov is a necessity. Since we are a divided nation, each tribe wants to “be in power”. Hence that is the cost of Peace and in my view NOT a high price for preventing bloodshed and Chaos (ala Somalia).

    – The scandals will act as a deterrent (to some extent) – especially if a high profile indictment and conviction is made at some point. What needs to be sorted urgently is IMPUNITY.

    – Rather than complain about something that hasnt happened yet, perhaps people can come up with ideas of how to prevent these funds from being “eaten”. Also your ideas on how to solve corruption… etc.

    Ideas (with suggested implementation plans) can be compiled and sent to a civic and gov groups (e.g. TI and Anticorruption bodies); possibly with some pressure for implementation from the media.

    Lets drop the “someone should do 1,2,3…” vibe. We are the Government. Time to take charge of our destiny.

  9. MainaT

    Maishinski, agree that we are probably a little negative. The idea of the infrrastructure bond and lowering the minimum thresholds are excellent. They will give investors a new investment vehicle (I don’t think anybody will bid for less than 12.5% given the lousy returns in the bourse); it may well become a weapon for CBK to control interest rates.
    However, please compare the amount and the projects it aimed at. None of them are small, there is no detail around exactly what parts of the project the money will finance. Which sewers are targeted as an example? We need infrastructure projects to be run on a similar basis as the CDF ones where you have a list of the projects the money was spent on and you can go and easily audit them if need be.
    Finally, GoK started the financial yr with a Ksh127bn deficit which won’t have gotten smaller given all the emergencies this yr.

    We can and must have a smaller govt. Leadership is not just about taking decisions. Its also taken painful decisions and explaining them clearly.

  10. coldtusker

    Maishinski: History does not bear out your optimism. The grand coalition of thieves agreed to pay ECK Kes 68mn. Sigh… why?

    And kibz is on record saying that there are ‘rogues’ in his government yet he has done ZILCH in kicking them out. Oh, this when Kenya was begging for food aid 2 days after it was revealed that $100,000,000 & counting was lost in the KPC-Triton scam.

  11. ke

    Unless people start being prosecuted for these white collar crimes, corruption will continue unabated. This is the fundamental problem right now — all these guys are covering for each other because they’re all corrupt and none of them wants to go down.

    This bloated cabinet is terrible and it could have been avoided had Raila and Kibaki been more willing to make a tough choice. i.e. Raila could have limited his ministerial choices to just 5 people and kibaki could have done the same, but none of them were willing to make this tough choice and the country is literally going to pay for this.

    The money is now being wasted on non productive consumer goods — lavish offices, lavish cars, lavish conferences. None of these things will do anything to increase the countries productivity levels in key industries like manufacturing, education or technology. It’s like throwing money down a rat hole.

    At some point, you have to start making capital investments in your country, otherwise you will remain a pre-industrial society.

  12. Maishinski

    I hear you my friends, these problems are real – but my challenge to you is how can we fix it?

    – They collude to subvert justice – noted – how to fix it?

    – PM / Prezzo cant make tough decisions – noted – how to fix it?

    – No plan for utilization of Bond funds – noted – how to fix it?

    – Prezzo too democratic / or maybe just indecisive – noted – how to fix it
    etc etc

    If you can analyze a company (and its stock) and strategize by looking at trends vs history, doesnt that give you some skills that can be applied to life in general?

    For how long shall rogue politicians determine our fate? Hopefully you will have a bias for NON-VIOLENT change.

    Like Sun Tsu said in the Art of War, there is nothing extra ordinary about a general attacking with a big army, winning the battle by virtue of brute force -then everyone says “well done!”. The best strategists are seldom famous because they win battles without shedding even a DROP of blood.

    Sun Tsu is a legendary strategist and one of the best war generals who ever lived.

    Non-violent change is possible – it just needs more THINKING!

  13. PKW

    Maishinksi; I’ve been fantasizing about a revolution in Kenya, and have christened it ‘bila tone’ as in without a drop of blood. A bloodless coup, if you like.
    Banks, sorry, it’s unlike you to do politics, sorry we mad your blog political!

  14. Chebet

    issue closed yesterday, will be interesting to see the subscription rates..meanwhile, here is “list of some of the projects identified, some are rather general, but some have the exact project details…

    Amount : Ksh 18,500mn

    Sectors/Projects : 1) Water, Sewerage and Irrigation: Rural
    and Urban Water supplies including Sewerage

    (Ksh 1,812mn); Construction of dams (Ksh1,824 mn); and Construction of Irrigation

    infrastructure (Ksh 520mn)
    2) Roads: Mau Summit Kisumu Northern
    Corridor Improvement Project (Ksh 3,000
    mn); Nairobi–Thika Road (Ksh 1,430mn);
    Kagio – Baricho Kibirigwi (D455/D454) (Ksh
    415mn); Lewa – Isiolo Road (Ksh 550 mn);
    Ena – Ishiara Road (Ksh 550mn) and Meru–
    Mikinduri Road (Ksh 490 mn)
    3) Energy: Drilling of Olkaria IV Electricity
    Generating Steam Wells (Ksh 4,475mn);
    National Grid System New Transmission Lines
    (Ksh 750mn); and Rural Electrification (Ksh


  15. Anonymous

    @ maishinski
    You do give a great positive action oriented outlook.

    Did you apply for the infrastucture bond?

  16. Anonymous

    @PKW. I totally agree with you. Without a revolution in Kenya, there is no redemption. Which society became civilized without one..the romans, the britons, the french, the american, the chinese, etc., all came back and fought what was rightly ours. We cannot forever appease the vampires with blood, unless we are willing to sacrifice the lot of us. I disagree that we have no other route except for the ruling elite (hiding behind a veil of tribalism cacoon) run down the country. Finally, there will be more of us to draw blood from. The Bond is a mortgage to our futures children, yet who will benefit from the so called road project–kirinyaga and others. Kenyan, it is time we woke up. Perhaps as the good book says, there is no redemption without blood!

  17. bankelele

    Rafiki: good point, about inflation, but I wouldn’t worry unless we have another Goldenberg scenario that distorts rates

    Ssembonge: I’m dying to get the PWC report DOES ANYONE HAVE THE PWC REPORT? PLEASE E-MAIL ME said…

    MainaT: shame about procedure, but now everyone is careful in dealing with the CDSC, maybe to your advantage?

    PKW: continue to invest please

    Empower Kenya: they named some projects, Thika road, geothermal etc. but the issue is about supervision, oversight, and that the funds are not lumped into normal recurrent expenditure

    Concept: noted, though I expect 12.5% to 13% for most of the bids. Results out on Friday morning

    Pesa tu: considering how Ecobank performed (raising ¼ of target), this will be great for Africa

    Maishinski: true, we may want a lean 15 man US style cabinet, but the reality is different. Even if you reduce the ministers, government and the civil service have not restructured enough – and whose interest does that serve anyway?
    – Would be nice to get a white collar conviction – maybe the CMA will win a couple in 2009

    Coldtusker: 68M a bargain, they had asked for 400m. If I was Sam kivuitu I would sue the government for more (but the judiciary would slow him down in his old age)

    KE: government is big, much bigger if you look below the ministerial costs. Isn’t Obama making the US government bigger?

    Chebet: the bond has projects, but oversight and management has not been addressed. E.g. road ministry is notorious for exceeding budgets and timelines; or with the deficit this year; funds could be diverted to teacher salaries and disasters

  18. Maishinski

    @ Anon 9:09

    If you really believe in what you say, why do you hide behind anonymity?

    If you want to follow the good book literally, why not sacrifice yourself and volunteer your own blood like Jesus – to die alone so that others may live? You’ll be famous!

    You quote the scriptures – yet your heart is full of evil. May God have mercy on you.

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