Saturday, August 30, 2008

2012; The outlook on Kenya’s landscape

Since independence, there have been numerous abortive starts to a new Kenya and sadly 2007 which many reckoned to be the moment of truth, has come and gone without this realisation albeit with unexpected outcome. In the wake of this passing, many Kenyans well known for their high optimisms have once again been left bewildered and pessimistic about their illusive dream.

However, timing which is a great healer increasingly appears to be on their side. Due to the combination of various factors/events taking place, 2012 will culminate into the birth of a new prosperous, harmonious, peaceful Kenya.

On the political front, the curtain will fall for a large group of old conservatives who have been an impediment to the country’s transition. This group which has amassed wealth in the hands of a few will be led by the incumbent in exiting the political stage. This will allow generational transition to a younger leader more attuned with the large Kenyan constituent.

It is also a foregone conclusion that its not how, whether or if, but Kenya will get a new constitution this time round now that the former protagonists are together.

Interestingly, going by the 2007 general election whereby 50% of well off m.p’s many of them cabinet ministers where shown the door, it is clear that the voters are more politically conscience and informed ready to hold their leaders to account. There will be no turning back come 2012 and similar voter’s fury with inept representatives is guaranteed to be replicated.

On the economic front, business and not toxic politics has started and appears that by 2012 will have taken centre stage. The government legislative efforts to tackle bureaucracy will bear fruits by this period thus creating conducive business environment.

Likewise, N.S.E will have de-mutualised, East Africa stock exchange commenced enabling the expansion of companies regionally plus improvement in accountability, efficiency and transparency. Many companies will also have been listed in the stock exchange, over the counter trading and REIT’s will be up and running resultantly creating wealth and opportunities in Kenya as a regional business hub and leader. Hopefully the current oil exploration will have produced positive results.

Crucially, the undersea cabling will have been completed and connecting Kenya to the rest of the world at an affordable rate. This connection will bring enormous benefits and transformation to the country’s ICT infrastructure, the way Kenya do business and the multiplication of Business Process Outsourcing industry.

Socially, it is evident that Kenyans will have come of age and put the sad events of 2007 behind them replacing the animosity with valuing others, tolerance, acceptance and living in harmony. Undoubtedly, they will be more conscience of their human and civil rights and unlikely to fall for the political manipulations.

However, this is by no means to that Kenyans will live in utopia land as some of the country’s challenges are deep-rooted and require concerted efforts and lengthy intervention, but 2012 will usher in the Kenya that many have yearned for.

So what’s your take on 2012?

Friday, August 29, 2008

The "named" sponsors of the Jan/Feb violence

This is the copy of the report the new KHRC chair was sweating over at the Waki commission.
Apparently the one she released only had the PNU side of the coin. Very sad how politics have messed up even NGOs such as these which one would expect some independence of thought.

Nothing in it is much of a surprise.

PS: During the secretive m-o-i days (and before wikileaks), Africa Confidential was the only source of believable news on Kenya.

NSE today, NSE tomorrow?

The other NSE (Nigeria not India), has instituted "funny" changes to trap a very bearish market (has fallen since its peak in Feb). The ones that caught my eye were:

  1. Banks to reschedule repayments on margin facilities. Earlier in the year, CBN (equivalent to CBK) banned banks from running margin accounts. It basically feared that investors being able to borrow against their shares was fuelling a stock market bubble that could lead to large credit and market losses for the banks. Margin trading is slowly taking off in Kenya (I think around 30% of Safaricom IPO was financed this way), but I expect that we will end up with a similar issues a couple of years down the road unless clear ground-rules are formulated now. Specifically around borrowing limits or even requiring banks to have requisite risk-tools.
  2. A rule to allow companies to do sharebuy backs (with a 20% ceiling). The spilts (I still think Safaricon could have been offered at Ksh20), bonus issues and multiple right issues we are currently seeing will eventually lead to too much supply against falling or flat demand. Then we'll need something similar to mop up supply.
  3. Restrictions on new listings: This has already happened once (last March when AK and KenGen were postponed) and may happen again simply because as with (2) above, the market can't absorb any more supply. Alternatively like AK, supply can be restricted by offering shares within restricted application amount.
  4. Daily shareprice fall restricted to 1%: Very strange rule but again the effect restrict a market correction turning into a bear market. Kenya NSE has 10%+/- restriction.
  5. Reduction of transaction fees: This would be nice, but unlikely to happen at our NSE.

Overall, the effect was positive with index rises the day after the announcement, but its the sort of thing that can be avoided by controlling broker greed at the outset.

Half Yr Results: Standard, Pan Afric, Kakuzi...

Despite a fairly political first half of the year (i.e. equals more newspaper sales all things being constant), Standard Group saw revenue rise of 9%, but higher expenses and financing charges saw PBT fall by 7%. Cash flow position remains negative. With that perfomance, would rather buy NMG.

Pan-Africa Insurance saw a particularly good half given the circumstances (I'd have thought claims would have gone up due to the destruction earlier in the year). Its premiums were up for the period by around 20%. This could be an indirect result of more people taking insurance. PAT was up by 798%, but this is due to unrealised gains from its very volatile APA subsidiary though PBT was also up by 32%. Still, I prefer KenRe in the insurance business.

Kakuzi as expected, perfomed badly. I am pretty sure the shenangigans earlier in the year where it was trying to sell some of its assets against vociferous opposition from minority shareholders has not helped. I avoid agriculture companies as I can't predict or keep up to date with weather patterns, global commodity prices, exchange rates et al.

Thursday, August 28, 2008

Coherent policy

Inflation stands at a painful 26% and GoK is desperate to bring it down to manageable levels. Yet the same GoK authorises KPLC and Water boards to institute inflation bursting increases in their prices! Perenial droughts in some parts of the country continue to occur at the same time that other areas are throwing away grain...

While one's expectations of GoK must start from a very low level, it'd be nice to see an attempt being made to bring to bear some coherence to policy on some of these issues especially when some have such immediate impacts on the economy.

Who is up for the job? Certainly not Baba Jimmy going by this video. RAO already has his plate full, so perhaps one of dpms can have a go?

Wednesday, August 27, 2008

Equity Bank: The revolution and the law of diminishing marginal returns

From a failing micro-mortgage building society--->successful mould breaking microfinance--->very strong retail bank---> what next?

The law of diminishing marginal returns states that all things being equal, the rate of change will increase initially, will then level off before starting to decrease. After doubling profits continously since 2000, Equity investors and watchers will be waiting for 2009 to see if the bank is going to be able to maintain the furious rate of growth. In effect, with projected Ksh3.9bn for 2008, Equity would have to hit Ksh7.8bn for 2009 to maintain an increase of 100% in profits.

Impossible? Yes?

The bank is giving the target every shot and is now moving to answer the what next? question posed above.

1. Equity in 2009 and beyond will almost certainly be operating a model akin to the universal banking model that only CFC Stanbic has in Kenya or East Africa for that matter. The bank will be a:

  • Retail bank: provider of the probably the largest selection of retail banking products. The bank is working to shush all the noises about loong queues in its branches. Its scaling up its mobile banking offering and moving ATMs to supermarkets and other outlets. It will presumably also try to bring in HFCK into the fold at last by offering it the distribution channel as well as products (Hekima Milele product being done jointly with Britak is ground-breaking in some respects).
  • Investment bank: Initially I think this will just be the brokerage offering plus custody service layered on top. Its already doing the custody business very profitably (made something in the region of Ksh1.5bn from Safcom IPO). According to this piece in the Standard, it's talking to around 6 firms in the NSE about buying an investment bank licence.

  • Insurer: Its already got a couple of products in the market. The next move might well be a formal distribution agreement with BRITAK which was until Helios came along, its largest shareholder. The fit in terms of culture is actually very good. The deal would only be a win-win if Equity gets a cut of upfront-premium and repeat premiums for distribution rather becoming an originator of insurance products because embedded values come into play.

Can the model work for Equity where its failed for many others? Please note that before Stanbic came along, CFC results tended to go up and down somewhat primarily because of its CFC Life business. In the west, the universal banking model is now besmirched given that the two largest writedowns have come from universal banks (Citigroup and UBS). Quite simply, it boils down to risk management and lack of management knowledge of investment banking. Risk management is something that Equity has had to work hard on and will need to do so to be a success. Nyaga and FT should be pointers of what can happen otherwise.

2. Regional bank: Though UML is small (83k depositors and around Ksh2bn in deposits), Equity' plan is to replicate its retail banking success in Kenya across M7's country. Its also advertising for hires to help open its first branch in South Sudan though I suspect that'll be very gradual business growth. The regional banking strategy will only see returns in the long-term i.e. 2/3 years time.

In the meantime, the bank will be looking for its brokerage and insurance businesses to bring the bacon home.

PS: My 2009 forecast is Ksh6.2bn i.e around 60% growth from 2008 close of Ksh3.9bn.

PPS: The shareprice perfomance over the same period will be affected by this messy announcement.

Tuesday, August 26, 2008

A review of Duncan Ndegwa's Walking in Kenyata struggles

As a quick preamble, there are very few useful books out there that give Kenyans a glimpse of how their government actually operate. Secondly, there are very few books that attempt to bridge the gap between the mythological beginnings of many a Kenyan tribe and their history pre the mzungu's invasion.

This is one of few that I have read that does attempt to do both.

As I suspect it is the case with many of my posts, the book could have done with extensive editing to give it some chronological order. I really enjoyed the first half of the book which looks at the history of Kenya at the beginning of last century has lots interesting detail on Agikuyu practices before we fell hook line and sink for mzungu-culture; very funny bits about growing up in those and especially when they first encountered whites and the various struggles against colonialism in its virulent stages when you could get shot for looking at a white lady!

The second half of the book suffers from neglect from a good editor. The story jump back and forth from the period after Uhuru to years downstream to the Kapenguria jail period and so forth. It does include a lot of nuggets. Moi apparently offered 7 GEMA Mps the VP post in 1978 before settling on Kibz. Kibz would have been minister of finance (to replace the perpetually drunk James Gichuru) earlier than he did but for his closeness to Tom Mboya (the two jointly did the 5 year development plan of 1965). His explanation of why his civil service commission allowed civil servants to own businesses is laughable and shouldn't go any further.

Ndegwa idolises Kenyatta, but in the end paints the old man as nothing better than a tyrant who punished those who didn't show absolute sycophancy. Recalling m-o-1's rule the Kanu circus of late 80s when Mps were treated like schoolboys, you can say he was just following mzee's nyayo.

Sunday, August 24, 2008

Equity "IPO": what does it mean?

One of the key underlying and intangible requirements of stockmarket is continuity or stability. Anchor shareholders are important because they in effect represent stability. They do this by the fact that usually tend to hold onto their portion of shares thus in effect guaranteeing scarcity of shares a pre-requisite for share price growth. Every share thus needs anchor shareholders. Equity shareholders have been on tenterhooks this year wondering if its anchor shareholders would introduce millions of share into the market come 7th of August. The date came and passed with no reaction (except for CEO Mwangi's 0.3% that was released to comply with CBK 5% requirements for management).

The assumption was that most of them would either hold onto their portions or look for institutional substitutes. Now comes the announcement that Equity will instead float the shares of its foreign holders! So what is the difference? Does it include Hellios' holding (which its supposed to be holding for 7 years)? Even worse than a spilt, an additional float of shares will presumably mean that potential investors will have to be offered a discount almost certainly based on most recent price.

Bottomline: The additional free float might not be greeted as positively as Equity is hoping even if the share has stellar performance underpinning its future.

PS: My thinking is that brokers under the mistaken impression that more supply means more commissions for them are pushing for some of these moves. Lakini supply has to equal demand otherwise NSE will stay bearish,,,

The worst Kenyan tribalist revealed

There are various social ill inflicting the Kenyan soul presently that threatens the glue which holds the country together. Amongst them is the runaway grand corruption, impunity, poverty, insecurity etcetera. However, the elephant in the room which has existed and continuously swept under the carpet since independence, until it reeled its ugliness in 2007 bringing deaths and destruction is the tribal animosity.

Tribalism is defined as the possession of a strong cultural or ethnic identity that separates oneself as a member of one group from the members of another.

In today Kenya, tribalism has infiltrated every aspect of the society starting from the presidency to the civil society. Many opportunists more so the politicians have been quick to join the bandwagon in exploiting it to full potential resulting in the tragic consequences of 2007, nepotism etcetera.

Attempts to fight this evil is often met with counteracting arguments of siding with this or that tribe and worst of all as often practiced by politicians, one is accused of either defending or threatening the other tribe. The sad consequences are that having a united Kenya remains a mirage.

So who is the worst tribalist in Kenya?

This is the individual who believes that their tribe is superior, advantaged, resourceful, beautiful, intelligence than others. It is also one that thinks that their tribe must rule others. It is also an individual who judges other tribes or individuals in relation to their own tribe especially with concern to language, behaviour, customs or religion.

If you believe in more than 3 of the aforementioned statements, then you are the worst tribalist in Kenya. Just to note that chauvinist, racist, homophobic and religious haters are alike in holding derogatory beliefs about those unlike them.

Saturday, August 23, 2008

Why have anti-corruption initiatives failed in Kenya?

I propose 3 reasons
  1. Kenyans don't associate GoK money and their money as being one: Out of around Ksh700bn annual budget, KRA collects around Ksh500bn. This is paid by most Kenyans who work or do business. So why don't most peeps care about how their money is spent? Here in the UK, I pay tax similiar in amount to my mortgage plus monthly shopping bill. That tax excludes car tax and local taxes. So I care very much about how the UK govt spends my money. In Kenya, perhaps because many of the elite are tax evaders or MPs, you rarely hear anybody decry wasteful GoK spending. That makes it easy for peeps to think they can get away with pocketing the same because Kenyans think its GoK money who cares. Corruption involving GoK money is as bad as someone carkjacking you, ngeta-ing you et al.
  2. Too much fear or respect of those in authority: A culture od doing what the boss said pervades the civil service at all levels. And yet, its like peeps haven't learned from Prof Mbithi who when testifying at Goldenberg said he received phone calls at night asking him to parocess Ksh1bn plus payment for Pattni! And off he went. Today he is a disgraced man. Because of this culture of doing as you are told rather than demanding that you get the same in writing, corruption is easy to do because there is rarely any paper-trail. In such a situation, its nigh on impossible to one, ascertain that corruption has taken place and secondly, as difficult to find out who played what role. In that respect Githongo's tape-conversations was God-sent (notice its the same trick Kalonzo used on his own PA).
  3. Politicisation of everything:Many will condemn corruption and the impact it has on our economy. They'll argue that peeps caught being corrupt, should be hanged and quartered. Wait until the suspect is of similar political affiliation...Oh there is selective justice, oh he is an angel and would never do that. Our politics being bereft of any ideology, principles or policies have surrendered to our lowest common denominator, tribe. That is why Kibaki can easily say that corruption will be a thing of the past and also query whose goat Njeru Ndwiga has partakrn off. Similar attitudes will ofcourse be the norm from the hoodlums who partcipate in mashada and kumekucha forums. They will shout when Kibaki and allies are caught with their hands in the cookie jar, but praise without hesitation Raila's allies such as the likes of Ruto of the NSSF-plots; Kosgey of the All-Africa games et al

There is hope that things can change. I remember guys telling cops off in 2003. And guys like Githongo pia.

Thursday, August 21, 2008

Welcome back John Githongo

Kenya has few true heroes. Outside of athletics, we have very few peeps that you would want your children to emulate. Principled, with something positive to give to Kenya.

Only the truly corrupt in any shape won't be glad to have John Githongo back home.

Wednesday, August 20, 2008

Wednesday shorts

The forthcoming era of fast internet connections continues to garner interest from all. Its one of the reasons I fear for AK. Internet provision like mobiletelephony is initially expensive to provide due to high capex, but the revenue generation afterward is phenomenal. You lay the network and then chop it up into small bits that you mass market in such a way that you cover the amortised capex, staff pay, generous bonuses and maintenance costs. The rest is profit...And who is very good at mass marketing in Kenya?

I like this article's question on how World Bank came up with its Ksh70. The measure requires context and also has to be dynamic because today Ksh70 is not much for a day's spend.

Bolt by name, bolt by action! I've taped that 100m so I can re-watch again and again... Its the equivalent of the first time I saw someone patting a lion.

NSE-are we out of woods yet? Most likely until Co-op IPO comes along. Last week's recovery was not unexpected given that investors had oversold, but the issues remain. Supply and demand are still looking for equilibrium. In the meantime, I have Equity, KCB (by end of next week we'll which way with supply), AK and NMG on my stockwatch.

Tuesday, August 19, 2008

AK "average" at 38%; TPS unsurprisingly down

AccessKenya announced distinctly average first half. Although sales were up 76%, cost of sales (which in its case would presumably be bandwidth) was up by a humongous 160%. Financing (basically interest charges on loans and overdrafts also increased by Ksh16m). Overall PBT grew by 39%. Removing the effects of the first two months but adding introduction of residential broadband and in an exponentially growing industry, the numbers are distinctly average. One wonders if AK will do a "ScanGroup" ahead of the introduction of undersea cable. My reasoning is that cash-rich businesses will do well in grabbing market share especially the crucial residential and small business sector and unless AK wants to come back to the market and do a rights issue, I don't think the Ksh400m it raised last year will go far...I've got it as a hold or wait and see counter.

TPS' numbers were not surprising. Most hotels had 20% occupancy rate in Jan/Feb and even March for some. Given that most of its clientele is still very upmarket, the results are very much in line and the shareprice for the last 2/3 months has moved to reflect that. Its still a good medium/long-term buy because if Serena can't manage in this industry nobody can.

Friday, August 15, 2008

NIC so-so, KRe good upside for H1'08

In a way its good because those that disappoint are being compensated by those that surprise. NIC disappointed because KCB had a very good half (I tend to look at the base from which the company has coming from). Lakini when you look at the recent steps, you realise that a smaller branch network will hurt a bank when there is a liquidity crunch.

KRe, I expected worse results because of having to cover-off Jan/Feb claims, but it looks like its come away unscathed. Fundamentally, it looks like a business that was just looking for solid management. At current price, the share is clearly good value.

Friday Unknowns & Githongo for Ringera

In January, our great nation was on the verge of becoming a non-nation in the mould of Somalia. Yet, the lowest the NSE has reached this year was on Wednesday this week…

Safaricom is the largest mobile provider in East and Central Africa, with products that are mould-breaking not just in its sector but in Kenya. Yet at Ksh5.10, everybody who owns this was going to make a loss if they sold. So why wasn’t there 1bn shares being ordered yesterday?

When my wife was away, I did our weekly and discovered a shocker. Manyake accounts for 15% of our weekly shopping; carbohydrates (pasta, potatoes and rice) 6%; but 33% was fruit & vegetables. And you wonder about these headlines?

I can understand cultural reasons (ala the Maoris) and even lack of paper, but why do people tattoo themselves?

Last year, somebody who claims to know a lot about Kibaki told me that mzee didn't even want a 2nd term and its because of peeps like ka-roocy and the money-machines that were really pushing him to go for another term. His reluctancy was for two reasons; the referendum showed him Kenyans were ungrateful and 2ndly because his health was not good at all. So why all that bloodshed in Jan?

And finally, if we had got together as a nation and really knew what we wanted , Ringera would be back to the high court and Githongo would be asked to turn up at Integrity Centre on Monday morning sharp… as the new head of KACC.

Tuesday, August 12, 2008

NSE: Why the bear

First all, I wanted to disapprove the myth about Safaricom disproportionately pushing down the index (note here we are talking about the NSE 20 Share Index which is quoted daily). The table has the evidence. Please ignore the effect of volumes as the formula used to compile the index does.

Safcom has had some effect but so have other shares. Where its effect is real is in putting the integrity of the NSE further into question.

The other reasons posited have been:

  1. Inflation: Reduced disposable income has meant investors cashing in some of their shares. In the absence of a breakdown of volumes by type of investor, I'd suggest this is likely. However retail investors form like 20% of daily volumes. The one area where inflation will have a bearing is on performance of companies across the board. Especially if one just focuses electricity and fuel inflation.
  2. Diaspora: Credit crunched Diasporians haven't been sending as much cash home. But given the effect that this would have on the exchange rates, one can't see it. Notice that the £/Ksh and $/Ksh has been very strong since around March...
  3. Temporary over-supply of shares: In addition to 10bn Safaricom shares, we've had in a short period, HFCK bringing in around 100m shares, NMG doing likewise (although its proportion of floated shares remains the same) and the forthcoming 225m from KCB. It’s a lot for the NSE to absorb in a very short period. For me, this is one of the bigger unseen reasons for the current slump.
  4. Safaricom refund fiasco: Again, Ksh10/20bn does make a difference to the bourse transactions. Investors will tend to liquid their current holdings especially if they were investing in Safcom for speculative purposes.
  5. Herd mentality: This is what ultimately turns a market correction into a bear. Especially if it,s not based on fundamentals.
  6. Economy: Inflation+fuel infaltion+electricity inflation+drought+supply blockages+bloated expensive GoK+liquidity-resilient private sector=trouble

Bottomline: Its more a concurrence of issues that are driving the current bear session. And like the on March last year, no one reason will make it go away.

Monday, August 11, 2008

NSE bear/ correction: Survival strategies

First of all, a bear is defined as 20% fall in the general stock market over a period of two months. Yani, one it must fall by 20% or more and two, it must to do so over a period of two or more months. A market correction is defined as a decrease of similar magnitude (i.e. 20%) but over a shorter period during a bull season. So do we have a bear or a market correction? Judge for yourself...

Investing strategy will always be about timing. Are you long, short or speculative? Your strategy choice will depend on many factors but will probably boil down to how monetary challenged you are.

A market correction gives long-term investors a chance to look at how resilient their portfolio is. If it’s a resilient portfolio, it may fall but only by half or even less compared to market index. Short-term and speculative investors will probably use the opportunity to book their gains and look for more positions to take ready for the next bull rally.

A bear is a different animal altogether. Long-term investors typically find themselves having to buy and even (God forbid), sell. Typically, a long-term investor will sell to lock-in gains on stocks that were below their desired long-term return. On those already above desired long-term return, a bear market may in certain situations offer an opportunity to buy the same at such a price that the average buying price opf shares held on that stock is lowered. For example, say you are long on KCB having bought at Ksh169 in Dec 2006, subsequently added some at Ksh24 (after last yr's spilt). Right now, you are still very much in profitable territory. If it falls to say Ksh19 (say after the rights), you may want to buy some such that you are able to reduce your average overall buying price to KSh20.
For the short-term investors and speculators, the bear market sees many run-off unless they are keen judges of minute rallies. However, even they can find opportunities for example by anticipating corporate actions say results announcements that may lead to higher than expected PAT or even happily, dividends.

No matter your holding period, investors must use the bear/correction period to streamline their portfolios (code for sell) and of-course to think/look outside the box.

B&B surprise for H1 2008

After growing by a paltry 7% in the first quarter, Barclays Kenya turned this around with 24% growth for the whole of the first half. BBK says it made Ksh1.7bn in Q2 alone. So I was curious to see how it had done this. Income was slightly higher perhaps driven by more business days in Q2. The main driver was actually lower other operating expenses in Q2.

Bamburi also had a super half coming in 21% higher than the same half last year. These are very good numbers for two reasons. External factors were at their for sometime in this half. Fuel prices rose dangerously and ofcourse the Janaury political clashes would have cut-off the supply lines to customers. Hima, its subsidiary in Ug, also suffered from power rationing. Secondly, its bitter rival Athi only grew by a disappointing 24% from a lower base. This despite the fact that ARM has a more balanced income generating portfolio of products.

RIP Bernie Mac.

D&B new website, new sheriff in town & KPA IPO

In practical terms, D&B's earlier website was good because it fairly easy to navigate. What has always been my issue with D&B is the speed and quality of its customer service. Hope that is also given a new coat of painting.

Hope Mwakwere realises there is a new sheriff in town. He is officially the worst performing minister in the history of Kenya. A complete and utter waste of taxpayer's money. If there must a be a minister from the coast on the PNU side, lets try somebody else. I think if there was ever going to be an effective PM-post, then it'd have a required a strong personality who can set an agenda for how and what the post should do. If only GoK could also think about reducing the cabinet numbers, we'd be well on our way.
Why not list KPA? Apart from reducing the political dimension somewhat because investors won't put up with people like Mwakwere recommending who should its CEO, it'll give another fund-raising option.

Mind you, with the way Safaricom is going, Kenyans may steer away from GoK OFS in future. I am worried that its rate of depreciation may mean I have to re-write this post. Although supply has been cited as the biggest issue, I'd actually say its the realisation that it doesn't have a goods investor relations team. Econet has been pushed back and I doubt if it'll have the cash to compete and neither will Telkom. Still, I've sold my small holding just in case things go below IPO price (or rather below Ksh5.10 which is the breakeven point).

Friday, August 08, 2008

Tourism: The next target of the corrupt

There are 3 cash-rich sectors in Kenya today. Retail especially supermarkets although these have hold an equal amount in working capital. Banking is other. But in terms of pure cash, I think tourism is in a class of its own especially when the traffic is buoyant. Its Kenya’s second foreign earner after the diaspora bringing in around Ksh50-60bn.

Many have cottoned onto this, but also the fact that there is limited number of huge cash-generating lodges, hotels, camps that can be built given environmental constraints that mean for example only a certain number of camps can be set up in Mara.
Unfortunately or fortunately, the business set-up in Kenya currently lends itself to corruption. My recommendation is that GoK should in effect be an enabler (providing the legal setting, infrastructure and so forth), but shouldn’t be an owner of hotels or camps. Otherwise what is currently brewing under the cover at KTDC will become GRH repeated over and over many times.

Wednesday, August 06, 2008

Need for a long term multi-disciplinary solution to the school crisis

It is still unclear as to the exact causes of the current ongoing crisis in mainly public secondary schools and whether it will spill over to the primary schools now or in the future. Amongst the issues blamed for these crises have been drugs abuse, indiscipline, poor management and cultural crash etcetera. These crises were previously common place in public universities and colleges, God forbid their graduates some who are now secondary school teachers are involved or transferred their experiences to the schools as it would complicate the finding of a solution.
What is emerging is that the current issues are historical and multi-faceted hence important to address them holistically. Put into context they also signify a society and systems at a cross road in tackling the past, present and future.
In addressing the school crisis, numerous proposals have been put forward albeit too late in the day. The fallacious one by the education ministry has been the formation of yet another commission on top of the previous countless one’s whom recommendations remains unpublished. Another proposal came from the tourism minister on bringing back the outdated corporal punishment notwithstanding it would contravene the Children Act 2002 and the UN Convention on the Rights of the Child 1989 which prohibits such measures. Not to forget that even during its hay day when I was at school, corporal punishment did not resolve these crisis nor stop strikes occurring. The opposite effect was suppression of grievances, rebellion, communication and relationship breakdown with teachers. The worst case scenarios, quite common those days were the physical and psychological traumas inflicted by rogue disciplinary masters via arbitrary punishment. There was also the heart-retching punishment of children with physical, developmental or intellectual difficulties such as dyslexia, Attention-Deficit/Hyperactivity Disorder or Autism. Admittedly, many have argued that present day violence and dysfunctional systems directly correlates with the experiences of that era.
Tellingly, such a proposal also disregards the various research findings on appropriate child moulding onto a physically, socially and emotionally secure and healthy adult. John Bowlby (1957) the father of attachment theory between child and care-giver points the key to moulding such an adult is consistency compassion, affection, understanding, sensitive, listening and empathy. More recent studies by Gaffney (1997) and Andero (2002) similarly conclude that the effects of corporal punishment are intergenerational and last for years, with the family and society at large paying the price for teachers' actions as individual often develop fear rather than respect for authority.
Worryingly, the minister’s proposals demonstrate the government scarcity of ideas and lack of adequate preparedness in responding to major crisis facing the country. Need I mention the 2007 violence, Mau forest amongst others. It is also an indictment of failure to learn from history as these crises are not new.
However, there has been laudable solutions put forward one such from the rightful education minister who is however the assistant minister for Higher Education, Science and Technology a position widely known to hold little sway or veto in policy development and implementation. He looks at the students grievances from a social rather than medical model, that, it is a society problem not just the students or schools.
Such a solution relates to the revolutionarily preventative and cost effective approach that has produced effective results elsewhere through the integration of multi-disciplinary professions in primary and secondary schools. These professions includes Educational Psychologist, Social workers, Behavioural support specialist, designated nurses, police liason officer, child Psychologist or Psychotherapist, mentors and Parent support specialist. These professions should be readily available or attached to the schools on an accessible ratio. Their role would entail undertaking a holistic SWOT assessment of the social, behavioural, physical, psychological, family, financial and educational needs in partnership with the troubled students, their teacher and parents. Thereafter, the drawing up, coordination, monitoring and management of an intervention support plan both at school and at home.
Critics of this approach may however argue that it is a westernised model and impractical but, this can be modified to fit into the Kenyan context. Others might point to the implementation cost forgetting that a stitch in time saves nine.
Thus it is imperative that this revolutional approach is implemented to narture good future leaders from our schools rather than continue to lavish our current leaders in extravagancy in the midst of desparing crisis.

Below is the assistant minister's response.

Thanks for your honest view Bwa Maina.


Hon. Dr. Kilemi Mwiria (PhD),M. P. Tigania West & Assistant Minister,Ministry of Higher Education, Science & Technology,Jogoo House " B", Harambee Avenue,

NSE Latest

NBK grew by 38% compared to first half of 2007. SCB stood still despite an incredible first quarter which was driven by FX presumably due to Diaspora trasnfers into Safaricom IPO.

Speaking of which, Safaricom is now firmly in my territory, but I am not buying because the supply volumes are averaging something like 10m shares which way to much bearish-sentiment on the counter. Surely it must be good news that Econet won't now happen until September (possibly not at all this year according to Kainvestor)?

An investor was caught napping and bought NMG at Ksh332 after the share had already spilt. What I didn't understand is why given that dealers do still enter the share order, they didn't spot this and just divide the order by 2 or at least counter-check with the investor.

Despite 197% growth from H1 2007, Equity proved what a speculative Stockmarket we have by giving up almost 20% a week after its results announcement because investors feared that its principal shareholders would move their cash into bonds and farming once their lock-in period ended. Some are also confused as to whether the lock-in period ended on 31st of July or will end on 31st of August...

Tuesday, August 05, 2008

Tuesday's Shorts

Oh KQ. This summer, I needed to book direct flights urgently and to fit my pocket. So I noted that KQ were offering good prices and tried its new booking facility. After going through all the various pages, I got to the paying web-page. And discovered, there was nowhere for one to insert the 16-digits of the credit card! Incredible...

RVR seems to have done something right at long last. Puffet always looked like he didn't have a clue where he had landed.

We said it. Hiring professional wailers to moan about Kimunya mumunyaring, but then we all missed the crucial point that Grand Regency was now owned Libyans. And then the professional defenders of the establishment come out with stuff like, GRH was never public proponent. CBK is a public institution that held a property in lieu of unpaid debts. Thus by extension GRH is a public property. This week, I sincerely hope parliament finds Kimunya to be an incompetent liar and more importantly that GRH is public property that should be auctioned publicly to the highest bidders.

Where Kenyans fear August, I worry about July. A few years ago I lost my grandfather, who brought me up. This July I lost my father-in-law and our family lost close a close family friend. Then my pastor who is barely in his 40s was discovered to have cancer of the kidney which necessitated being taken out. Its also a time that reminds me that a life is very short. As such one must do what they've set out to do and not leave it for tomorrow because tomorrow may never come. And spend less time on quarrels; negativism; or the past.

Friday, August 01, 2008

EA Stock Exchange

If this does come into effect from January next year, it could have the same effect as the NSE's automated trading system and introduction of CDSC. With upside and downsides. Nevertheless exciting. Imagine trading in Bongo-land who are notoriuosly fearful of the Kenyan avarice.

Speaking of which, I think I'll test how easy/difficult it is to trade at the DSE. National Microfinance Bank is about to do its IPO from the 18th of August. I tried buying its shares last year when I saw it'd be listing, but the CEO politely told me to wait for IPO. So here we are...

NCD is a sort of a microfinance bank, but unlike most of this found in Kenya, its currently majority government-owned. Gova will be selling 21% of its holding so that the shareholding will be:

RABO Bank (Dutch community-type bank)- 34.9%

TZ Gova-31%


NICOL (a mostly investment company that listed recently)-6.6%

Exim Bank TZ (i.e. is a parastatal)-5.8%

TZ Chamber of Commerce blah blah-1.7%

Stellar Numbers from KCB for H1 2008

KCB posted KSh2.46bn PAT for the first half of 2008, 67% higher than prior year. Of the big 4 (BBK, Stanchart and Equity being the others), KCB is the only one that looks to be keeping up with Equity (though the later has now surpassed it in terms of PAT having posted by khs432k more :-)). Interest income was higher driven by KSh20bn growth in loans as well as interest from t-bills (up Ksh7bn). I assume it also benefited from Safcom IPO commissions (Ksh1bn in "other income"). Cost/income ratio has improved though from among the highest in the industry to around 65%.
Price comment: My number one rule when investing in a stock is usually the growth rate of its PAT and how sustainable this is. With these kind of numbers, KCB still remains a buy as it moves into Uganda, Rwanda & Burundi and expands in TZ and very successfully in South Sudan.

Prior to the announcement on NBK, I was running it through my investment thought process, but I think this makes much harder to decide on the way forward. The upside is that reduced GoK involvement is very welcome as it'll mean getting a strategic investor who can hopefully ease it Marimbi out. The downside is that the proposed increase of shares floated on the NSE will have similar effect to a that announcement on KenGen. Ultimately, will have to take a position either way.