Equity/HFCK boardroom myths; Mpesa in the UK

Despite all the talent and research time at their finger tips, both DN and Standard seem to have missed out on the fact that the Equity/Britak/Jimnah Mbaru fraternity owns 35%+ of HFCK. Basically, the 3 hold a controlling interest in HFCK. That they'd seek to have a BoD that is more amenable to their interests is no surprise. Is it wrong to do so? Not in Kenya. Note that unlike in the West where there are clear guidelines on the composition of Board of Directors and corporate governance generally, in Kenya, CMA/CBK/NSE are all silent on BoD. Hence, a lot of what happens in Corporate Kenya in terms of composition and BoD rules is copied from the West purely in the same way that we have democracy without the context. However, there should be rules that state that of the third non-executive directors, some should be non-shareholders.

Mpesa is in the UK. Not quite in the same, all path-blazing way that it has been in motherland, but more in an experimental manner. Of the 8 or so publicised agents in Greater London, only two were working the other day, and neither had a float to sustain a £250 send. Contrast that with Western Union or general banking presence. However, assuming you are sending school fees plus lets say farmer workers salary and need to do so urgently, then its recommended you use the Mpesa service. It costs £4 for anything upto £150 (compared to £21 with Western Union and £2 via normal bank) and will be with recipient's phone in Khayega in minutes (compared to 3 days for banks). Provident Capital have licensed some agents (the only operative one is E2 East Ham).

Monday Shorts

Mugo Kibati's impending departure from EA Cables doesn't sound right. The MIT engineer was airlifted from NY to come and turnaround the then underperforming cable company in 2004. Apart from the profitability growth, he has managed to make EA CAbles a competitor in TZ and further on. The company has just completed a factory that will strategically position it for the incoming fibre optic. So his departure now seems odd and might be due to:

1. The cashflow rumours being true, and thus he is taking the flak or running off before the proverbial hits the fan


2. He sees bad times ahead.

I expect price to drop steadily until a statement is issued on the way forward.

Company's only ever spilt businesses into distinct subsidiaries as opposed to strategic business units if they are planning to sell. Is this ARM's (thanks Bankelele) intention? Note that ARM is primarily a manufacturer of chemicals.

Britak's retention of its highly-rated CEO for its investment arm was a shot in the arm for its plan to do an IPO-which I hope is very soon.

Excellently researched piece on NMG (a share that can only grow further).

Friday Shorts

As the convulsions keeping on blowing through the financial world, a wind chill is passing through London which still holds the financial centre mantle. Practically every investment banks has made a portion of its workforce redundant primarily the mortgage desks and its now spreading to back office. It'll shortly start hitting the high street banks. The issue is that since investment banks and others have discovered that they can't write-off their CDOs/CDS books without shutting shop, they've decided to sit on the stuff until the housing market in the US improves and that is not going to happen this yr. This then means that they can't underwrite IPOs, M&A, loan arrangements deals et al. Tough days. Most firms either use FIFO (first in, first out) or look at the highest paid when deciding on redundancies.

The scramble for Nyaga and other weak brokers will be intense among those banks that have been wanting to get into the business. I think Equity has got to be favorite for Nyaga's license especially given that most of the investors with Nyaga are from its natural playground of Central. If Equity with its customer base gets a license, its game over for many retail brokers.

Kiarie's move from BAAM is a big loss to it. He actually built the business from ground-level. I'm surprised BAAM let him go easily. He is the type those old-moneyed like Wairegi like employing i.e. very competent at what they do and not political.

Does Kenya have a food policy? What we are seeing in countries like Egypt, China could be a harbinger of food shortgages to come...

Equity takes HFCK? More detail...EA Cables (TZ)

A bit more detail on the Equity/HFCK link-up now including Britak, Equity's largest shareholder. As an aside, Britak is planning an IPO in the next 18-24 months.

While this blogger has a very positive view of this deal, those fearing its impact on Equity bottomline ought to be aware that as Equity will only hold 25% of HFCK, HFCK's results will be accounted for as an associate in Equity's books. Equity will however have a controlling stake thus will be able to steer HFCK strategy and be in a position for a later takeover or equity exit

EA Cables seems to be working its magic in TZ, where its subsidiary is experiencing a turnaround in perfomance.