Friday, February 15, 2008

I-banker talks politics

Jeff Koinange has been running a show called Capital Talk on the new K-24 channel in Nairobi. It’s a 1-on-1 interview session, usually with politicians, but occasionally with business leaders. He seems more comfortable hosting these show than he did from say from upriver Nigeria with the rebels on CNN.

Last night he had Maina Mwangi, the CEO of Renaissance Capital, to talk about the future of investment banking in Kenya, impact that the political stalemate is having on the economy, and other issues

Some of Mr. Mwangi’s comments

- Renaissance is different from other investment banks such as Morgan Stanley (who are doing the Safaricom IPO) because they are here to stay. They have offices here; will have 50 staff, all East African, no expatriates here.
- The Politics must be fixed; we can’t be having upheavals every five years where lives are lost and property destroyed unnecessarily
- Impact on the economy is serious (i) tourism collapsed, at least for the next three years (ii) impact on transport sector has not been fully appreciated (ii) banks not hit yet, but will take a few months (iv) NSE is a sensitive indicator of the economy (There are about 1m shareholders and the market was down 15% in 3 weeks) as people buy shares as they are future profits of a company (v) forget about 8% growth this year
- Investors are worried, which is ok, but if the politics is not fixed, then they’ll be panic, which is bad
- Solutions for this year : (i) one was the Safaricom IPO which still can happen, and will give the government some breathing space and enable the budget deficit to remain manageable (ii) but forget about the sovereign bond - as the spreads are too wide now (iii) tax collection will have suffered, but no one knows how much yet (iv) new budget is needed for the country to factor in new spending for towns & businesses to be re-built, resettlement of people.

- Interest rates: The government will have to control borrowing otherwise that will hit interest rates which is critical; if they go up significantly, that will put the brakes on economic growth - as they make everything more expensive and reduce purchasing ability for housing, credit cards, personal loans, etc.

- Time: How much time do we have to sort out economic problems? more time than some pessimistic i-banks think,but less time than some government advisers think

- Renaissance will focus on the wholesale end of (i) consumer spending areas – this will show growth (ii) real estate. They are big in Africa and the Nairobi office runs a region from S. Sudan to Angola
- Kenya is a buying opportunity, if you think long term i.e. 10 – 15 years. Kenyans firms understand they have to go regional – and they have a head start
- Best case scenario: political solution found and hope & confidence can be restored among investors (including kiosk owners); Kenyans are successful business people as long as politics doesn’t interfere.
- Worst case scenario: no political solution; and economy goes into stagflation – nothing happened e.g. the NSE started 2007 at 5,000 and ended at 5,000. He said investment bankers can make money if and economy is going up, or going down, but not where it is stuck/going sideways

Related post: From January, some Renaissance earlier comments on the economy.

5 comments:

TheTruth said...

What advice exactly is Morgan Stanley giving on the SafariCom IPO? Unless there are international investors lining up to buy chunks of the shares. Just wondering. Its interesting.

On the NSE, it is too illiquid to be a reliable indicator of the ecomony. Besides, I was talking to a friend of mine who is a dealer in one of the banks and she was telling me how there is some price fixing going on to avoid a collapse that will discredit the govt. I.e. the banks and NSE (i.e. Jim Mbaru,etc) supported Kibaki and to avoid the economy being another thorn in his side the banks/dealers have some 'understanding' not to sell stocks/shares at prices too low. Don't think it was a complete success but it was interesting to note that otherwise logical/business minds would let their political affiliations affect their judgement when it comes to investments.

Anonymous said...

im somewhat pessimistic about the outcome of the 'peace talks' or 'power sharing talks' becaus eit seems to me the politicians have forgotten what has brought us here all u keep hearing is prim minister this, coalition that. - i think this are matter for the kenyans themselevs to address and not 4 politicans in rooms this sounds like a palace dispute.

IMHO the most important issue that needs to be addressed is youth unemployment.

land reform im not usre what it will do it will only help a few people in rift and in anycase history was long overtaken by demographics.

if youth unemployment is not addressed then no constitution no land reform no power sharing deal is going to work

Anonymous said...

It is interesting for Rencap to talk about having staff that are fully African with no expatriates, yet we all know who really runs the show behind the scenes. Banks by the way truly do not understand what HFCK is up to and what their strategy is long term, now they are stock agents and are giving room to guys like RENCAP who have the financial muscle to move in to real estate instead of focusing on how they can grow their biz in this area. Real estate has a lot of potential and i just do not get why HFCK is so hesitatnt on exploiting the opportunities, especially after getting the much needed cash infusion from Equity and Britak.

Girl In the Meadow said...

Nice article. I didn't get to watch that one. I am so optimistic about Kenya. I think we really have to re-evaluate, the pedestal we place politicians.Good one

bankelele said...

TheTruth: thye are part of the winning consortium i believe

Girl In the Meadow: was anice watch, a change from the usual 'MP who bumped into JK'

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