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.