Legacy Leadership

Nelson Mandela is a worldwide icon because he laid down the best years of his life for his people, was freed, became president of South Africa and left a legacy of a reconciled/reconciling beacon of African democracy for the world to see. The late Boris Yeltsin is hailed in the West as a brave leader who finally ushered Russia into the post-communist world, while Russians remember him as a drunk who broke up their nation, gave away nation assets creating Oligarchs and wasted a golden opportunity to democratise Russia, create a free but fair economy and above all took them into Chechnya. Uganda remembers Idi Amin with a shudder, Margaret Thatcher is remembered as the PM who privatised everything but the Queen. Deng Xiapong is now known as the Chinese leader who kicked off its current economy turbo charge. Lee Kuan Yew's authoritarian leadership in Singapore and that of Mahathir in Malaysia pulled their respective economies into the 21st century. In Kenya, we remember Jomo Kenyatta for his oratory skills, ushering in Kenyan economics (growing while allowing stealth corruption), tribalism and uttering unprintable names political assassinations. We have Moi to thank for the mkae hivyo hivyo economics, tribal clashes at every election, Goldenberg, Pattni, roadside cabinent reshuffles and Kibaki-free primary education and continuation of Kenya economics-I think apart from political assassinations this guy is Jomo Kenyatta true heir. The question, how many of these leaders ever think about the legacy they want to leave behind or how they will be remembered and is it important. What sort of qualities do leaders who have overhauled their nations and left a positive impact need or require?

In the private sector, you have your Henry Ford for the whole assembly concept; Warren Buffet for investing in value; George Soros for UK not being part of the Euro; Jack Welch for introducing Six Sigma to GE and the corporate world and succession planning in management. Sandy Weill/Chuck Prince have transformed Citigroup despite recent underperfomance as has Ken Lewis (and Hugh Mccoll before him) at BoA. Toyoda for Toyota; Chris Gent at Vodafone is a notable company builder in the UK. James Mwangi and Peter Munga with Equity Bank are on the way to building a banking concept of note in Kenya. However, there are few other CEOs/Chairmans that one can say have transformed the business landscape Kenya. In business as in politics, vision, intelligence, and special comparative advantages are required to be a transformer.

Shareholder Activism?

Just imagine that if it wasn't for The Children Investment Fund (TCI) increasing their stake in ABN Amro to 1% and demanding that the bank either breaks up or looks for a merger, ABN Amro would today still be serenely going about its business as only the Dutch do. Tomorrow, Barclays will most likely confirm that it has agreed to merge with ABN Amro, thus acting as a white knight to save ABN Amro from being broken up. And its not as if the ABN was underperfoming, only that its strategy was not clear.

Today there are Kenyans who hold large but minority stakes in some of the top NSE stocks, the question is, would they demand for example that KQ fires its head of customer service following recent poor pefomance in this area? Or could Transcentury demand the cancellation of Manitoba's management contract with KPLC due to continued underperfomance? Only time will tell...

What a gooooooooooooaaaaaal!!!!!

Its like Maradona famous goal only faster. Watch it.

Kenya to list bond internationally, AccessKenya IPO

Although minuscule in comparison to normal paper being floated in the international markets, the fact that Kenya is thinking of venturing into the international bonds market is worth a mention. Before that, what, why and how-type questions will be asked. How are bonds listed internationally? What is the rationale for raising funds internationally? Why not continue raising funds internally-after all there is plenty of liquidity in our economy?

• It is to help maintain domestic interest rates and insulate the private sector from the crowding out effect e.g. banks preference for buying t-bills instead of lending
• To increase marketability and liquidity of govt bills-the flip side is that the type of investor who will buy these will be hot money taking to the hills at the slightest sign of risk. It does however mean that the risk of default is reduced by entrenching a tighter monetary policy so no more 1993 level of interest rates...
• To create a benchmark for our corporates to raise funds in the same way e.g. KenGen who need to fund more electricity generation projects
• To raise the profile of our economy-my favorite one as Kenya would get a credit rating from the likes of S&P, Moodys and so forth and would get a regular SWOT analysis of its economy
• Typically international bonds are long-held and used to finance big infrastructure projects e.g. roads
• Is it to raise funds away from domestic eyes/pressure-quite clearly this is a real issue as you may not necessarily budget for it?

AccessKenya IPO kicks off tomorrow and I believe it will be oversubscribed given the size of the issue and despite the careful choreography of allocations. Is it worth investing in though. AK has 32% of the corporate market, and will be re-investing just over half of the raised funds into VOIP and other residential related products. There is also talk that it will be looking for some bolt-on acquisitions perhaps aimed at improving its retail offering. Numbers-wise, yes revenue and PAT have grown but an EPS of 0.47 for FY2006 would be among the lowest on the NSE. If you want to go long-term, the elephant in the room will Kenya Telecom, if you are a speculator, you need to ask yourself who will come into the secondary market given Institutionals are being catered for.

I keep wondering, our neighbour Ethiopia has a population of 80m, and yes they are mainly involved in agriculture, but why aren't more Kenyan companies (apart from Kenol) moving in?

I guess next time the WB president meets some Kenyan politician, they will have some common conversation topics along the lines of "I know I am supposed to non-corruptable, but I am human, right?"...

RVR deal goes off the rails, NMG, CFC excite

When the Rift Valley Railway deal was announced, I said that i thought that a 25 year term was economically suicidal. Rail if handled as a business, could be a cornerstone of our economy's regeneration helping generate revenues and support the growth of the our landlocked neighbours, our productive Western and Rift Valley provinces that don't have roads to match their productivity and help ease the wear and tear rote on the Mombasa-Nairobi road by HGVs. To surrender the business away to entities some with dubious history and others that are entangled in messy legal entities for 25 years without any back-out clauses smacks of desperation and will cost us in the next few years. Already, the first results show that under the new RVR tutelage, KR is underperforming in various areas with KPA having to publicly complain about yet-uncollected rail cargo, RVR are still in court with their former partners and they off course haven't paid all the fees to GoK. It is messy and I forecast that the whole deal will have to be reviewed in the next 18 months. The other point to make is that there are very few of the big tenders in any sector that this govt has done well in and I wonder whether we need to call on our "partners" World Bank/IMF to help streamline the way we evaluate these deals so that we get the right candidates.
While I was away, various companies rushed in their results to comply with the end of March rule. Several stood out. NMG with a k12 dps was awesome and those wise enough to look at price growth potential as well as dps will have NMG's shares. For me, this is the only media company worth holding over the long-term given its expansion goals. CFC is one I expect to hear more of. The 06 results show that it can do well on a standalone basis; PAT grew by 68% driven by growth in customer loan book (30%), govt securities and fees and comms. As the only universal bank in Kenya today, CFC will show momentum in the 3-4 years as it streamlines its ops. Its likely merger with Stanbic to create a top 5 bank will be the icing on the cake for its shareholders. Finally, there are rumours that Express is eyeing an strategic international partner presumably to give it capital assistance that will expand its reach. From being a loss maker 3 years ago to an international business is quite some turnaround. ARM, ScanGroup are others that announced FY06.