Kutwa Tuesday: December 31 2008

1. Yes it’s Wednesday
2. this is the final post for 2008
3. Happy New Year
4. Welcome first time readers searching online for primary school exam (KCPE) results. This is a blog on finance and investment issues in Kenya mainly
5. stories you may have missed in December 2008

- National Oil Corporation NOCK will borrow $65 million from French Bank PNB Paribas
- Triton Petrol (now under receivership) has left several local and international banks exposed to bad loans. They were also partners of Reliance (India) in the second national Operator contract
- From January 2009 Kenyans can buy government bonds and bills for just Kshs. 100,000 (~$1,300) through the Central bank of Kenya. The next bill auctions are on 5th January for bills while bond are on 26th January. one must open a CDS account with the CBK (currently they hold 4,222 accounts that trade in GoK securities) more details here
- The CBK also released a report on commercial banks readiness and compliances with Basel II requirements
- New branches Banks opening new branches in December were National bank of Kenya (Kakamega, Eldoret airport, Embu, Ongata rongai), Bank of Baroda (Nakuru) and CFC Stanbic (Kisumu, Westlands – Westgate)
- Dyer & Blair Investment Bank will arrange a fund raising plan for TransCentury, one of Kenya’s leading Private Equity firms
- Standard Chartered expected to roll out a mobile banking platform in 2009 in Kenya for funds transfer, utility payments etc. (already operational in Uganda)
- Uchumi made a payment to debenture holders in December, can it re-list at the Nairobi stock exchange in 2009?
- Co-Op Bank shares began trading at the NSE – but mini bounce on day one was not sustainable

from the blogs
- Kshs. 2.5 billion worth of Equity shares trade hands in a surprisingtrade yesterday
- NIC Kenya’s leader in asset finance, but more retail and corporate has ventured into Tanzania acquiring 51% of S&F Bank - more here
- Want to buy goods online, but you don’t have a credit card – read up on Afripay - a local company that offers that service in Nairobi
- Why is it so hard for foreign (German) companies to invest in Tanzania?
- While Pirate terrorize the east African Coastline, what should be Kenya’s flagship navy vessel is rotting away in Europe.

Bank’s Need to Embrace MPesa

banks need to adapt to M-pesa, not fight it

A recent Nairobi Star story links banks to m-pesa probe in an underhand move to stifle the growth of mobile company Safaricom’s money transfer service - M-Pesa.

How much growth? As a recent article put it four million Kenyans can’t be wrong in reference to those who have signed up for the M-pesa and which the company recently stated to be clocking up to 10,000 new registrations per day!

Here’s why:

1. It makes sense and that's all the law it needs Is it illegal and does it need more legislation? The answers are probably not and yes. Probably Not - because you can’t legislate everything, more so the simple payment of cash from person A to person B - whether a prostitute or a priest. And Yes, M-pesa agents need to beef up security, systems and training of staff as its popularity grows.

But the argument that M-pesa will be used for money laundering or other crimes is laughable - who launders less than $500? (Kshs. 35,000 is the maximum transaction amount on m-pesa) You are more apt to find a transfer of Kshs. 35 million at a bank - and banks were themselves used to prop up the numerous local pyramid schemes before they all imploded.

2. M-Pesa is affordable banking: Is it unfair? What’s to stop a bank from operating branch-less accounts? Several small banks have 1 – 3 branches and can comfortably and profitably serve their customers. Most Kenyan banks still don’t want to serve the unbanked and M-pesa has evolved because banking is still too expensive for the masses. There’s Mzansi in South Africa and in the absence of a similar program, Kenyan masses have created their own Mzansi in M-pesa. It is not Safaricom’s fault that they are so popular – take away m-pesa and people will go back to stuffing cash in tins, rolling them in blankets and mailing them in cartons on buses. They will not go back to open new banks accounts or queue at western union.

3. M-pesa is better than banks in some functions: Two scenarios
- Having a bank account is of no use sometimes, as one executive told me. She may be in Malindi looking to hook up Flavio Briatore or find Obama’s village (Nyangoma – not Kogelo) - her bank account is in Westlands (Nairobi) she has no way of reaching that money (avoid credit cards) - but her bank has no presence in many parts of the country, but from where she can access M-Pesa
- I received a small cheque payment of Kshs. 10,000 shillings ($130) that I deposited in my bank account on 19th December – today it’s 10 days later and the cheque has not cleared – reason is that four working days have not elapsed - (banks don’t count weekend or holidays – thought they work six days a week). What the banks does - transferring money from a creditor to a debtor (me) is no different than what M-pesa is doing. But with access to the same technology and similar resources, M-pesa takes 3 minutes, while the bank system takes 10 days.

4. M-Pesa is going to get more mainstream: More corporations are embracing the cost cutting and simplicity of M-Pesa. You can now pay for satellite TV (GTV), some insurance plans, and mutual funds (Old Mutual) by M-pesa. Next up will probably be two large companies that are in dire need of a cheaper alternative of money transfers
- Safaricom with its 800,000 new shareholders will probably have to pay a dividend next year. The use of text messages/e-mail and M-pesa will save the company millions of shillings that would be spent on printing, postage and cheque processing charges
- Kenya power & lighting company; as KPLC takes electricity to thousands of new customers in rural Kenya and inner cities, it has a dire need for cash collection points. It has used the banking system and the post office (paying an average Kshs. 30/= for each payment), but M-pesa would be a cheaper (for them) and more convenient option (for distant customers) who can also have been alerted by SMS on how much to pay.
- Also microfinance institutions (and shylocks) – who make small loans, for short periods of time. The sooner they can transfer funds, the clock is ticking, and their customer can access funds immediately and pay them back at the last minute without each having to wait for cheques to clear. M-pesa fits into the last minute thinking of many Kenyans – who tend to wait till the last minute to do many things including payment of electricity bills!

Banks need to change and embrace M-Pesa as it is able to do some things they can't or won't do. e.g. The lady in scenario one has a relationship officer at her bank, who can move her funds from one account to another – why not also enable her to M-pesa the next Ms. Briatorie her money? This can be an extra service from bank from which they can earn some income, instead of opening a branch in Malindi?

They should take a cue from other players such as

- Pesa point (ATM network) who may be losing some business to M-pesa but have now have embraced and partnered with them so that customers can withdraw cash from M-pesa 24 hours a day at any of their Pesa Point ATM
- Western union whose local money transfer system may have been eroded by M-pesa will now be the international arm for remittances through Safaricom's M-Pesa
- Banks like Housing Finance and Family Bank already process M-pesa payments for their customers.

FYI
1. Are you a heavy M-Pesa user? Did you know you can get a statement of your M-Pesa transactions - a statement of the last three months costs Kshs. 500 from Safaricom, which is about what many banks charge for interim/instant statements
2. Want to become an M-Pesa agent?
3. Other interesting recent posts about M-Pesa.

Why I blog about Africa

Was tagged by Mweshi my brother from TED Africa on why I blog about Africa

It’s about telling my story. No one else can tell it, I can’t even tell it myself

I am uniquely privileged and challenged and I have access to opportunities and difficulties that constrain me. This is my record of life in Africa, a land of challenges and of opportunities, and I try and tell about both, but with an emphasis on the opportunities for an ex-Diasporan.

I have spreadsheets, annual reports, statements and certificates, but they are static; this blog gives life and flesh to those numbers and papers.

Finally this is my diary, my record of important events - about me and my business world & economy, the blog simply helps me keep track.

Finally, it has opened up a whole world of opportunities, some small material gain but more of the networking kind and opportunities and new friends - and I hereby extend the tag to fellow financial bloggers - Coldtusker, Terry Anne, Ka-Investor, Fintrade Capital, MainaT, Kenyanentrepreneur, and Maishinski.

Happy Holidays

2008 Kenya Bank Review

What happened in 2008?
See also half year. (who?, what? means no news of note)

ABC: (25) who?, what?
Bank of Africa: (18) Quiet expansion becoming big in asset finance and the bank of choice for French interests, with a new club for small business owners
Barclays: (2) steadying their 2007 rapid growth and expansion in the retail sector, launched two tranches of bonds at affordable prices which made CBK notice and will go into mobile messaging next year
Baroda: (14) Going retail, and opened new branches, no longer playing safe and investing less in GoK securities
CFC Stanbic: (4) merger (takeover) by Stanbic formalized. Collapse of small brokers a boon as they are seen as being safe(r). Will open branches and may need to raise capital next year. Note: If the merger had been planned this year (instead of last) it would have cost ½ as much
Chase (22) one of the fastest growing banks in ’08, ventured into stockbrokerage, but may need to raise capital next year
Citibank Kenya: (8) best return on assets in sector, but with aggressive off balance sheet. Still unclear how much parent troubles will impact subsidiaries in Africa.
City Finance: (43) the country’s smallest bank effected a capital reduction. New owners yet to settle in, but may achieve a slight profit this year
Commercial Bank of Africa: (7) would be a beneficiary of American business interests following Citibank woes, if it didn’t also own 1/3 of equally troubled AIG Kenya. Also CEO got caught up in Uchumi corruption case and may need capital next year.
Consolidated: (31). Cabinet has approved sale for next year and the deposit protection fund has always planned to exit. 2008 will mark the third year of (modest) profits for the bank, so its eligible for an NSE listing or IPO
Cooperative: (5) went ahead with an IPO and NSE listing late in 2008 in a difficult market to raise capital for expansion
Credit: (35) who?, what?
Development Bank of Kenya: (26) in play next year as GoK (ICDC owns 90%)plans to sell shares in the development finance institution to the public or private investors
Diamond Trust: (11) continued regional expansion with more investments in Uganda and Burundi, and also had a second rights issue to raise capital.
Dubai (42) quiet year, will make a loss
Ecobank: (19) arrived in Kenya big and are setting up retail presence (nairumor that they are the bank Equity emulated to succeed). Came up short in a (huge) pan-African capital raising move, but plan to enter stockbroking next year
Equatorial: (30) activated investment banking wing, but denied they were being sold to Libyan investors
Equity: (6) stellar growth continued though January ’08 showed an exposure to political undercurrents. Bounced back with branches in Nyanza, agricultural products and participation in the Safaricom IPO. Bought a Ugandan bank and are investing in S. Sudan in a diversification move they hope to take their model (bankign the unbanked) to more African countries.
Family Bank: (20) quiet year, but income tripled in ’08 and new CEO was confirmed
Fidelity: (33) who?, what?
Fina: (21) the Rwanda turf was invaded by a host of other Kenyan banks led by KCB. Continued a much heralded focus on SME‘s and expanded into Uganda.
First Community: (40) the second Shariah bank got off to a much quieter start than Gulf and will record a major loss this year from setting up operations.
Giro: (27) who?, what?
Guardian: (28) who?, what?
Gulf African: (36) new Shariah bank seems to be well received and respected by business people. Opened several branches and will also assist the GoK youth fund with loan products, but will make a loss this year from start-up costs.
Habib AG Zurich (24) who?, what?
Habib Bank (34) who?, what?
Housing Finance: (15) had a fully subscribed (just) rights issue that raised Kshs. 2.4 billion and Equity Bank now own ¼ of the institution.
Imperial (16) who? what?
India (17) who?, what?
I&M (12) new formal name for the former investment & mortgages bank, also got new shareholder capital (two euro dev banks) and opened new branches
KCB (1) Kenya’s top bank this year had another rights issue, rebranding and supported expansion to Uganda, Tanzania, South Sudan in addition to being cross-listed.
K-Rep: (23) surprising loss will be recorded as it appears the post election violence impact small enterprises they financed.
Middle East: (38) who?, what?
National Bank of Kenya: (9) went big in the Safaricom IPO (and to a lesser extent with Co-Op). Some activity expected nest year as the government and perhaps NSSF shares may be in play for a strategic investor now that their balance sheet is largely cleaned up
NIC (10): rebranded again this year, phasing out MOVE and establishing new branches as a one-stop shop for corporate, asset finance, investment banking (acquired Solid Stockbrokers) needs.
Oriental: (41) former Delphis bank should have an operating profit this year
Paramount Universal: (39) who?, what?
Prime: (13) a year of rapid growth for this bank, big with Asian business owners, but may need to raise matching capital next year
Southern Credit: (29) who?, what?
Standard Chartered: (3)steady, least aggressive of the big banks in Kenya went after the retail crowd this year with personal loans, cards and youth accounts. Will launch mobile app next year
Transnational (37) who?, what?
Victoria: (32) who?, what?

Major Stories
1. CBK eternally optimistic governor, lowered bond prices, lowered cash ratio and – but statistical /economic forecasts called into question, and mired in sale of the Grand Regency Hotel
2. Safaricom the bane of banking sector was M-pesa and the company’s IPO
3. Capital raising: through rights issues, private placements and IPO (Co-Op) more are expected

Coming soon
banks expected in 2009
- UBA
- Faulu or KWFT

Co-Op IPO Aftermath

A formal statement is out today after Monday's press conference where the bank’s management revealed that through their 2008 IPO, Co-op Bank had raised Kshs. 5.4 billion (~$77 million) but short of a revised target of Kshs 6.7 billion as 66,576 shareholders bought 546 million shares. The Business Dailyreports the shares will be allocated 60% to individual investors (340.5 million shares) , 30% to institutions (171 m shares ) and staff will get 9% (52.6 m shares)

Capital raising: the offer was not underwritten (by D&B winner - best lead transaction advisor and best investment bank), but despite the shortfall, what was raised should be enough for a few years. Co-op’s capital adequacy goes from 9% to about 18%, which is not bad [10 billion would have taken to this to 22%]

Other banks that have been reported to have engaged in recent private capital raising include K-Rep and Southern Credit while others who may need to tap shareholders next year could Chase, CBA, CFC Stanbic and even KCB (for the third time in five years?)

Glass Half Full: Though Co-op had initially set out to raise Kshs 10 billion, their listing came at a tough time and was not received as enthusiastically as past IPO’s. Still it had some positives but came in a tough market before the target was revised down, but has some positives

- For the bank: 66,000 shareholders is a manageable register , and since they did a lot of the placement and receiving work in house, the IPO was not as costly as others (budgeted at Kshs. 248 million)
- For new shareholders: no refunds to queue for, and for once a 100% allocation
- For other serious investors, a brief return to sanity as the IPO speculators with their borrowed funds kept away – Co-op was the fall guy that injected some reality back into IPO process and share investments.

2009 IPO’s: Next year could see the entry of Nakumatt supermarkets, bread maker a DPL and others from the private sector.

From the public sector (Government side) comes a series of planned privatizations a few of which could be IPO candidates to assist the Government in fund-raising:

Top of my my wish list is Kenya Pipeline, whose much improved governance saw a consortium of banks line up this month to offer the company funds for expansion (a few years ago KPC was using dubious financial intermediaries) and Kenya Wine Agencies. In addition, more shares of Kengen East African Portland Cement Company and National Bank will be sold to the public.

Other non-IPO candidates will be targeted at strategic partners [for Kenya Ports Authority- and TEAMS (submarine cable)] while private investors may be sought to invest in the sugar companies [Chemelil, Sony, Nzoia, Miwani, Muhoroni] hotels of Kenya Tourism Development Corporation, banks [Consolidated Bank, Development Bank of Kenya] and food processors [Kenya Meat Commission, New Kenya Co-operative Creameries]

Electric Slide

Kengen: the Kenya electricity generating company will have its third AGM later this week – and while shareholders may be happy with a Kshs. 0.90 dividend they will also be asked to approve (i) 30% investment in a geothermal development company to be created by the Government of Kenya (ii) invest in a coal plant (iii) participate in other ventures – (perhaps buy into another IPP independent power producer?)

The proposals to shareholders are vague and without any spending amounts attached, they should not be presented to a vote. When the Access Kenya board got shareholder authority to make other investments, they capped them at Kshs. 200 million each - this one has none, and the third proposal doesn’t even limit Kengen from investing within the energy sector so it could probably buy a sugar company or tea company (for cogeneration?) with that mandate.

Anyway Kengen has undertaken a lot of geothermal work with three olkaria plants and is it really necessary for the Government with strained recourses to create another parastatal at this time? Shareholders who were also spooked by plans of a secondary listing of shares and plans to hive off a geothermal company from their assets two years ago will also not be happy to see that the plans are. still active.

KPLC: The much heralded VAT reduction in electricity bills has not amounted to much. It was effected in the November power bills, but the reduction in VAT from 16% to 12% appears to only cover the fixed charge of a Kshs. 240 per meter – so the savings amount to just Kshs. 9.6 per consumer.

IPhone to Kenya

Today will see the official launch of Apple’s i-Phone (3G) into the Kenyan market by Orange mobile.

You could say it’s a case of bad timing as Kenyans are going through tough economic times and perhaps entering a recession period.

Recession or not?: With (very) high prices of petrol (until recently), electricity, maize and other foods, a spike in the government deficit, global financial turmoil, fewer tourists, reduced remittance volumes all signs would point to an economic slow down. Right?

But not the Central Bank of Kenya (CBK): I have been in the past ‘impressed’ (did I say it was the best bank site?) by the volumes of reports published by the Central Bank, mostly because they are timely, though difficult to decipher the message.

The CBK reports have predicted some hardships, but remained very optimistic and rosy about the country economy. But it appears that the messages are tailored to suit the tone of the day because Kenya’s leading business newspaper has taken note.

Today's Business Daily has a very harsh critique of the CBK reports (which many banks, funds, government departments use to formulate their policies). The BD editorial laments the consistency of presentation, shifting periods for which data is presented, differences in figures published by KNBS (statistics bureau) and a determination by its authors to manipulate data through a series of omissions and change of periods under review that makes it nearly impossible to keep track of ongoings in the economy.

Former Nairobi Stock Exchange boss Jimnah Mbaru (who's also a sometime author) thinks Kenya is headed for a recession and has published a column which ran in some newspapers and appears at Capital FM website titled How Kenya can escape recession . He advocates (like US President-elect Obama) that the Kenya Government spend its way back to robustness. Some of the proposals he suggests include reduce interest rates and cash ratio (which have already happened) but also some strange ones like the government should buy Safaricom shares, sell buildings, and mandates that more sewers be built he also says hedge funds cashing out brought down the NSE this year...hmm.

Blog views: In the absence of as Finance Minister, the Government is engaged in a series of Voodoo economics.

i-Phone outlook: Looking around Nairobi with all the Hummers, new Range Rovers, new apartments complexes etc., it is clear that there’s an affluent class that does not feel the pinch of a (possible) recession and despite the tough year it has been, there have been several new entrants in Kenya.

The i-Phone which has been a worldwide smash, and impressed many (not all) its customers, can be expected to do well here also. Like with the Blackberry before it - which was circulating here unlocked/hacked before its official debut, it will now be licensed and supported after the official launch.

Education Moment

Google hosted the latest skunkworks where the debate was how to design a better computer science curriculum. Present were a team from the Google EngEDU (Engineering Education) which works with campuses to mould student skills that will enable them to adapt to a work environment at Google, and through continuous learning within Google that feeds back into universities through training.

Present was a nice mix of professionals, programmers, coders, Google, who were ex-students of Nairobi, Kenyatta, JKUAT, Strathmore and other foreign universities.

So what ails the Kenyan computing curriculum?
- Universities are large factories, that focus on quantity (of students) not quality (of learning) to support their income streams
- Lecturers are lazy (don't want to teach new concepts or learn new developments), instead they spend more time outside, on more lucrative consultancies
- Students are programmed to (cram) pass exams, obtain degrees and gain employment. Few are inspired to learn outside, or become developers. They accept poor learning, without challenge, and will riot over food but not poor lectures
- Engineering/ computer science curriculums are static, have not changed in years. It is difficult to change the curriculum as it involves all departments of university, and even consultation with the Government (for public universities)
- There is little research and publishing at universities
- There was an unresolved debate of why JKUAT is a ‘better’ institution for technology programs than Nairobi University which has more resources and ‘better’ lecturers

What can be done?
- Teach children more computer/programming skills (in high school) before university
- Universities should be encouraged to compete more with each other
- Corporations should establish mentorship programs
- More programming languages should be taught, even at schools e.g. python, .net, ruby, java, not just C++ and Visual Basic.
- Engineering students remain highly employable in other sectors like accounts and audit

What else is happening?
- Google now has a director for education for Africa (A sign of better things to come)
- South Africa has signed up to link with TEAMS (submarine cable), and Governments now recognize that skills shortage is the next critical area to address after bandwidth
- Google will be working with Strathmore, Nairobi, JKUAT and with other universities on design of better computer science curriculum.

elsewhere

Safaricom University: the latest Safaricom Options magazine talks about a corporate learning & development initiative the company has with Moi University that began in October 2006. Safaricom helps design the electrical engineering curriculum at the University to produce competent engineers with skills that are useable by Safaricom, with the top performing telecommunication bachelor of engineering students, currently in first and second year, eligible to be offered attachment places at Safaricom. The collaboration is next targeting a master’s telecommunications program (to be based in Nairobi). More on Moi and JKUAT collaborations.

Universities need Change: A very timely post this week from Gukira on the difficulty of doing research from a technological standpoint at Nairobi University. For one who is used to the research recourses available at a US university, Kenyan universities are rather close-minded about IT access to research students’ e.g.

- Internet resources are lamentably bad
- Printing costs are exorbitant.
- Could not get into the library could not even apply to get into the library
- Faculty members teach ridiculously high loads
Read more

Multimedia University: The Government has gazetted the establishment of the Multimedia University College of Kenya, formerly Kenya College of Communications Technology (KCCT)

Multimedia Cows: Over the weekend, I heard about Michigan State University research program with Maasai pastoralists – where they used GPS to track the movement of cattle and their grazing patterns to help pastoralists find pasture for their cattle easier, and by having to walk shorter distances.

University Blog: Diary of a Kenyan Campus Girl is a great read about university life by a female student studying computer science at JKUAT.

Broke brokers?

Buying and selling of shares in a commission generating business. Like at supermarkets, banking halls, movie theatres, pubs, hotels - foot traffic means customers which translates to income and then hopefully a profit.

But some stockbrokers’ offices have gone back to being relatively quiet and in many cases empty for the most part of the day. Offices opened in the hey day of the Safaricom IPO are now empty desks.

Disocunt expanded furthest and fell first. For the others; are they generating enough income? Will they be able to pay the rent? Staff? Or are their customers trading online? Trading volumes at the NSE are down (as will commission income for all) – and not all of them are investment banks able to generate income from other avenues. Even as they wait for another IPO for a boost, will it make a difference? Co-Op Bank, whose IPO ended last month, handled a significant chink of their applications in house, and did not generate much traffic elsewhere

Pepsi to Kenya?

. Nairumour that after an absence of many years, Pepsi will re-enter the Kenyan market in the near future to resume battle with Coca Cola, possibly through their South African partners. If so, it will cap a great year for investment to the country, and that despite 2008 being a relatively tough year for investors and companies, with the post-election violence, business disruption, high fuel and energy prices, depressed consumer spending, P & P madness (pirates and politicians) collapsing stockbrokers, there was a steady flow of new investments and new products that happened this year.

Re-cap of some notable ones

Banking
- Takeovers concluded - Ecobank take over of EABS, and Stanbic merger with CFC (now CFCStanbic)
- UBA licensed (2009)
- Gulf African and First Community (Shariah banking kicks off)

Beverages
- Summit Lager a new beer from Keroche Industries
- East African Breweries launched Alvaro (malted soft drink)
- Coca Cola launched Novidia (another malted soft drink) and also started selling Minute maid
- KETEPA launched Safari Iced Tea

Communications
- WPP buys into Scangroup
- 2008 saw the launch of two new mobile operators - Orange (France Telkom) and Yu (Essar/Econet) to battle Safaricom and a re-energized Zain
- Altech buys into KDN
- A long-running fight over one (EASSY) submarine cable gave birth to three different ones being laid to Mombasa.
- Wananchi launched Zuku (TV, Broadband, Phone)

Transport, Energy & Manufacturing
- Tiger brands buying into Haco
- An investment in the Kenya Oil Refinery at Mombasa was still under battle between Libyan and Indian Investors
- Jinchuan (China) to bail out Tiomin?
- Mirambo and PD Toll to salvage the Rift Valley Railways
- Delta Airlines (USA - but postponed to 2009)
- Air Arabia started flights to Kenya

Tourism
- Libyans took over the Grand (Laico) Regency
- The Tribe opens.

Exits
- Chevron (Caltex) sold out – bought by Total
- Unilever (de-listing from the NSE)
- Roy Puffet from Rift Valley Railways

Urban Inflation Index: December 2008

Four months ago last review (should be a quarterly exercise going forward) . 2008 has been a year with high prices and cost of living factors in the news. From the post-election violence in January to the (then) world oil prices, the pinch has been felt in Kenya.

The Government has come under pressure, but without addressing of its own excesses (procurement, new offices & limousines, parliemantarians, councilors and judges who refuse to pay income tax), has likewise tried to run the screw on the corporate sector - resulting in efforts to reduce the price of petrol and now maize flour (staple food)

Gotten more expensive

Staple food: Maize flour which is used to make Ugali, that is eaten by a majority of Kenyans daily. A 2 kg. Unga pack at Uchumi today costs Kshs. 97 which is 1/3 more than the Kshs. 73 four months ago. Farming woes continue, the crop this year is bad and Unga who said that they ran out of flour, among other revelations at their AGM, also stated that the maize harvest in 2009 will be worse and high prices will continue. There have been allegations of dodgy imports and the Government is today trying to arm-twist the price of Unga down to Kshs. 55 (EDIT – the Government announced today that maize will cost Kshs. 72 in urban areas and Kshs. 52 in rural areas)
Other food item: Sugar (2 kg. Mumias pack) is at Kshs. 160, up from Kshs. 145 three months ago. For Mumias customers and shareholders, the price is even lower for other unbranded sugar(s) on shelves.

Foreign Exchange: 1 US$ equals Kshs. 79.08, (18% weaker) than the Kshs. 67.4 four months go. This is partly the strengthening of the dollar, partly outflows from Kenya (at the NSE) - and comes after the shilling (while strong) had cushioned some impact of high oil prices.

Gotten cheaper

Fuel: Litre of petrol fuel (at local petrol station) is now Kshs. 92.7 (~$5.40 gallon) which is about 10% cheaper than the Kshs. 101.50 seen last time. While that is still higher than it was at the beginning of the year, and oil prices are down over 60% from the record highs of mid-2008, it is remarkable that for once fuel prices have reduced. In the past they have merely stagnated and oil companies, not passed on savings to consumers, but the threat of the government to regulate the prices, and a sustained media campaign (web/radio) has resulted in a slight reduction in petrol prices. (EDIT – A leading oil marketer - Shell announced today that prices will drop by Kshs. 15)

Entertainment: Bottle of Tusker beer (at local pub) is Kshs. 120 down from Kshs. 130 (cheaper by 8% from four months ago). Don’t know if this is one pub decision or the competition from new Summit beet launched by Keroche in October 2008 - the first true local competitor since (South African) Castle folded shop about six years ago. How will EABL fight back, and do they have to? Keroche got off to a good start but there has been little post launch marketing.

Communications: Continues to get cheaper as two mobile phone companies have become operational in the last quarter of the year – Orange (France Telkom) and Yu (Essar/Econet). The tone was set by Zain’s successful Vuka tariff, priced at Kshs. 8 per minute to call any network. Market leader Safaricom responded with Jibambie (up to a 63% discount) which enabled their subscribers to make calls at prices ranging from Kshs. 8 down to Kshs. 3 per minute if they bought a bigger denomination airtime voucher. The battle for subscribers is shifting now from voice calls which have reached unprecedented lows to data and money transfer where Safaricom is effectively Kenya’s largest ISP and money wallet.

No change: Electricity: My November KPLC bill is still Kshs. 1,900, same as it was in August, with a fuel surcharge reduction yet to be effected. High electricity prices have been a major cause for concern among Kenyan companies leading to President Kibaki to call for a reduction in the taxes levied on petrol prices and electricity.

But: Related: Is the quality of official statistics inflation data in question?
EDIT - Challenged by inflation, but with a view to improving liquidity, the Central Bank of Kenya today lowered the CBR rate (implied base rate) from 9 to 8.5% and also lowered the bank minimum cash ratio from 6 % to 5%