Farewell RVR

So it’s now clear to all that the Rift Valley Railways era of managing the Kenya to Uganda RVR railway concession may end in the next few days.

And it’s now apparent to many that Roy Puffett, the RVR Managing Director, was a conman, who conned two governments (Kenya and Uganda), the International Finance Corporation (IFC) and PAC who brokered the deal. Running railways is not easy it seems and even Tanzania want to end a troubled rail concession granted to an Indian Company

Puffet has been silent, holed up in boardrooms trying to squeeze out more payments while the clock is ticking. Much has change in three years, when many thought he was another Michael Joseph (Safaricom) who would save the railway from collapse and transform it to unparalleled success thought private management

In 2007, he gave a public talk to members of the Institute of Economic Affairs (IEA talk) and the public that is republished below:

New start: RVR is a 25 year concession between a consortium of companies and the governments so Kenya and Uganda.

RVR got off to a start in November 2006 and suffered 61 derailments that month. They have since slowed down all their trains as a measure to contain such incidents. They now average 10 – 12 incidents a month - from a combination of equipment, railway and human failures (including sabotage)

Financial & Investment: So far the consortium has invested about $18 million. The shareholding is 70% foreign (Sheltam, and an Australian company) and 30% local (Transcentury – 20%, ICDCI – 10%) and some financing was sourced from the IFC.

Some attendees later asked why Kenyans were not given a chance to invest in the company (like the Kengen IPO) to which the MD replied that there were not a lot of investors rushing to build railways in Africa (only 2 groups bid for the concession) .

Equipment: RVR inherited 174 locomotives from Kenya (55 were working) and 44 from Uganda (25 operational) . Also 46% of the 7,000 wagons were usable.

They have focused on getting a working fleet going. This has entailed reducing the fleet to contain only trains in good condition and they also got back 5 locomotives from Magadi Soda. Fleet repair is slow as the company faces a lead time of 8 month for locomotive spares.

Their workshops were run down, with no tools or equipment, and many of the sheds had long been taken over by other businesses. The remaining sheds had leaking roofs, and when it rained they had to stop maintenance work for fear of electrocution.

Railway: Demand from china for steel has driven steel prices through the roof. There are few companies making railway parts (and African countries have a different railway size) so it takes about 8 months to deliver (they have to order 4,000 tons at a go) which is expensive. One engineer (from the UK) at the talk said that such a railway would be shut down with all the incidents if it was in Europe - the MD replied probably true but this was the state of things. He added that new rails were be laid on the Mombasa - Nairobi line after which the older ones will be taken out and used for other upcountry lines.

They will also close some stations (there are 50+ stations between Nairobi and Mombasa) and have installed communications and tracking systems on all trains and stations

Operations: RVR have done quite well since they took over in November 2006 and move about 200,000 tons per month. While this has not changed much in volume from before the concession, they are achieving this with two differences (i) they are using a smaller fleet (ii) and they are collecting more revenue (from increased efficiency & reduced corruption in revenue collection) – about $6m a month. Their volumes dipped in December and April following flooding from the rains. The MD mentioned that they now take between 4 – 7 days to move cargo from Mombasa to Kampala – from 20+ days before, though some members of the Kenya Shippers Association disputed that there.

Other Stakeholders
Employees those not retrenched by the company are all being retrained in safety and modern railway processes

Customers While there have been complaints about the slow movement from the Mombasa port (including by the Kenya Ports Authority), the MD said that 50% of the 14,000 containers at the Mombasa port don't have proper documentation.

He added that business people were contributors to this i.e. as a result of the past railway inefficiency, companies had taken to using railway train wagons at Mombasa as extra storage facilities. But when the railway movement improved, and cargo was now moved upcountry, the same businessmen took their time to offload goods, creating more congestion.

They have tried to contain prices and their charges ($0.05 per ton per km) compare well with, truck companies (that taken advantage of rail inefficiency to jack up prices)

Passengers & Commuters: they will run commuter train services (in Nairobi) for 5 years, but this is one thing none of the bidders for the concession wanted to continue running – as it is a loss maker.

Kenya Railways : The corporation still exists and will oversee the concession on behalf of the government of Kenya, while also maintaining a register of railway assets. The corporation still has a great burden from the past – illustrated by Kshs 31 billion of debts (about $600 million). Including a 12 billion pension deficit. They hope to use land sales to pay off their employee (and perhaps supplier) obligations while also talking with the governments to waive some debt. They have also received 1 billion shillings form the world bank to resettle some residents in Kibera who live/work too close to the railway line (but this plan/financing is already 1/ ½ years behind schedule)

Summary: The MD mentioned that there was a lot of expectations about the now concessioned railways – some of which were not close to being realistic. He also added that they had fewer customers as a result of the slow uptake by the concession, but added that RVR had no regrets and that the governments of Kenya and Uganda were very supportive.

So, a rough but promising start by the company who now say they have enough locomotives working to achieve their 5 year targets. Will they be a celebrated success like Safaricom? We'll know in a few years.

IM The Bank!

Kenya’s I&M Bank has made two bold moves in recent days:

1. The second was the purchase of a stake in a Tanznian Bank, after their venture last year into Mauritius. It will probably be similar to the bank buy by NIC in Tanzania that they (NIC) revealed to their shareholders. But expert analyst @coldtusker points out that it has taken six years for I&M’s foray to bear fruit in Tanzania.

Also, Ratio Magazine just published a timely Tanzania Country Brief which has this comment on the banking sector;

…Tanzania is already home to 25 banks – none of which have managed to bring down the country’s high interest rates (many banks charge up to 25%). There is much opportunity to court new customers, as only 10% of Tanzania’s 40 million people have access to formal banking services. But scarce human resources that have plagued other foreign entrants will also be a challenge…


From ABN Digital: On 27/01/10 CNBC Africa's Alishia Seckam spoke to Suprio Sengupta from I & M Bank

2. The first was the was the partnership with partnership with VISA that may place I&M at the forefront of the e-commerce banking in Kenya, which though it still has a small debit and credit card base, these consumers now have the access and a platform to make online payments as well as for local merchants to sell their goods, and receive payments, online.

Safaricom DRIPs

On Thursday Safaricom announced the possibility of allowing investor to use dividend re-investment programs to utilize their dividends to purchase additional shares in the company.

Last year post was about DRIP’s and other ideas that Safaricom can adapt from Vodafone to manage their large shareholder base.

Promote alternative methods for shareholders’ to enhance value. Support a dividend re investment program (DRIP). Not everyone wants an M-Pesa dividend; some may prefer to buy 100 more shares in the company instantly, while the shares are still cheap (Kshs. 3.7 or ~$0.05 per share) and a DRIP will be a useful tool that keeps cash within the company and its owners. Alternately, if feeling philanthropic, Vodafone shareholders may donate their meagre shares to a charity - and why not to a school in Kenya that was Tahidi High last night!

Other IR Initiatives: This requires approval of Nairobi Stock Exchange share regulators, but now that the Mobitelea monkey has been shed, Safaricom is leading in the region in terms of investor relations = and their latest media briefing was put up at their website in one day, while their CEO's exclusive interview at Rich.co.ke is also up on the internet.

Other suggested proposals mentioned at the media briefing include share consolidation, and an employee share option program (ESOP), which however have a mixed record in corporate Kenya.

Savings Accounts that Save Part II

Commercial Bank of Africa (CBA) recently infomed their customers about changes in their savings accounts. They quoted market & customer research, and recent amendments to the banking act which required that banks are to pay interest on savings accounts as long as customers maintain the account minimums and banks are not to levy charges on saving accounts, or fixed deposit.

CBA resolves this matter, by giving their savings account customers two options to convert their accounts into either
- A low cost account transactions account (called Freedom) that charges 200 shillings ($2.67) per month but comes with unlimited ATM withdrawals and a waiver of first year of a credit card fee.
or
- A Savings account (called Nufaika) that has a minimum balance of 3,000 ($40), pays interest semi-annually and also comes with the offer of a personal loan amount bases on 75% of savings. It has not fees, no bank charges, but interest will only be paid on balances above 30,000 shillings ($400)

And while CBA is not known to be a low cost bank, they will by default, move all their savings accounts holders into the Freedom a/c (i.e. (low balance, no interest paid out, but steady monthly income for bank), unless the customers opt for the Nufaika a/c option.

CBA is being upfront about the banking act, something most banks are not being forthright with their customers about. Banks have a variety of charges levied against savings accounts including withdrawal of cash over the counter or by ATM, a fee when the a/c balance drops below the ‘minimum’, interim statement (per page), new ATM card or replacement, and closure of account. All this means that the banks profit from charges while depositors have holes through which their savings leak out instead of grow

bank charges are savings holes
The relevant clause on Savings Accounts in the Kenya Banking Act (PDF),is 16 (A) which states:

No institution shall impose any form of charges on a savings, seven day call or fixed deposits account. and an institution shall, in respect of a savings account, pay interest accruing, to that account as long as the minimum balance is maintained.

CBA is complying now, but its’ clear that banks have been flouting the act for some years now, despite repeated pronouncements for them to comply with the savings rules.

The Central Bank Governor has also made futile calls for banks to increase their deposit payment rates to match their lending rates, or vice versa - lower their lending rates (12% to 25% to be in line with the low rates they pay on deposits (2-7%)

What savings account charges (if any) are levied at your Bank?

Who Got Court?

When you spend the day the Commercial Court in Milimani it’s not a fun day. It’s a dreary and boring rotation of procedures and observations of roles played by (mostly) young lawyers, who learn to master the art of speaking.

When a case is called, lawyer stands up and states their name, "I am Odinga for the plaintiff" or "Kibaki for the defendant", and wait......... for about a minute while the judge scribbles out these details. The sequence is repeated for about another ten minutes, as a lawyer speaks for about ½ a minute at most, and the judge writes out the details. Only one lawyer speaks at a time, while standing up, and only at a glance, or reminder, from the Judge to continue or speak up

As with all Courts in Kenya you bow as you walk in or out when court is in session and please don’t have your phone rings in the presence of a mischievous judge.

The Judge is like a teacher who takes homework from in a particular case. Who filed their affidavit? Who has not filed their reply? Who is not ready to proceed and why? This is often the outcome in each case as one or more parties is not ready to proceed and asks their lawyer asks the judge to indulge them with an adjournment – another two weeks to reply, get evidence, issue summons etc.

The court is low key, no guards, bailiff, handcuffs, cells, and metal detectors etc. that are found in criminal court houses. You are unlikely to spot a famous defendant, and there is rarely the colorful testimony as you would find a criminal court where the theft of a chicken is before the court.

It is a back and forth of civil, not criminal, disputes between two parties or companies over money, mediated by their lawyers and governed by documents, evidence, contracts etc. The cases are often open and shut, but one party is too stubborn to honour a contract, and gets a lawyer who goes through the charade of filing a case or a defense - Bank vs. debtor, debtor vs. bank, company vs. supplier, etc. The lawyers know this, and know each other even as they refrain from throwing barbs at each others clients. Parties to a dispute are often encouraged to settle out of court, or come to this conclusion after many months of legal bills and mountains of evidence.

There are few smoking guns or surprise Perry Mason like moments that overturn the course of a case, these sometimes happens – and a lawyer friend of mine has won shocking cases on technicalities such as with this example.

That’s a day at the Milimani Courts.

the famous question/phrase who got court? is attributed to the Late ODB of the Wu Tang Clan who uttered the phrase when he discovered, in the middle of a press conference, that he had another court hearing due. Listen below to the clip from the Howard Stern radio show on You tube – Part II has the phrase, Part I is the funnier one to be listened to first

Mostly Mobile

The mobile phone story is everywhere now, and it seems it has taken on a life of its own, bringing real life transformations as more applications and uses develop around it.

What’s happening in mobile now here?

Conferences: Conferences have always been there, but tech conferences, especially mobile related ones, are really sexy these days thanks to Ushahidi – (currently working at Haiti earthquake emergency operations and M-Pesa from Vodafone/Safaricom.

February will see Mobile Web East Africa which will have a round-table format and will feature, among others @whiteafrican (Ushaidi), @ VincentMaher (Vodacom) @MosesKemibaro, and @kahenya.

Later in the month will be another Mobile Banking Conference (AITEC’s COMESA Banking & Mobile Money Conference)

Mobile Wallet: With over 8 million users signed up in two years, M-Pesa is all the rage in the media owing to the staggering M-pesa growth rate that continues. @whiteafrican in a recent post showed that mobile transfer volume numbers are actually quite low compared to formal banking systems; however the increasing number of subscribers and organizational partners that M-pesa is drawing indicates a growing disenchantment with traditional banking/payment channels. Partners now include airlines, schools, insurers, media houses (KBC, Nation media group), micro-financiers, banks (CFCStanbic, Family) as well as others such as Chloride Exide (solar equipment), Davis & Shirtlift (water pumps) , spare parts (Ecta-Subaru), Oriflame (beauty products), Gor Mahia etc.

Mobile Investment: Over at the Nairobi Stock Exchange, M-Pesa is represented in the form of Safaricom whose share price has been leading a resurgence of NSE shares by re-attracting foreign and institutional investors

chart from rich.co.ke
Faux Mobile However as simple mobile banking strikes a connection with consumers tired of hidden bank charges, banks are rolling out their own mobile platforms. Kenyans largest bank Barclays has embarked mobile banking and recently announces that mobile banking is free - except at Barclays ‘free’ costs 100 shillings, as this was the tariff increment passed on to its customers at the same time

Know Your Mobile Users: There is a mandatory registration of mobile subscribers is ongoing, a mild shock to the laizze faire pre-paid when anyone with less than $1 could acquire a new phone line . However the exercise in not unique, and SIM registration is also ongoing in Tanzania, Nigeria and other countries. In Kenya the exercise will help reduced instances of crimes related to mobile phones such as extortion.

Mobile Domains: In March, there will another conference in Nairobi - ICANN which concerned with domain names - and in Kenya, embattled domain registrar Kenic has just announced raft of new low priced domains including mobile domains - .mobi.ke for mobile sites, and .me.ke for personal sites.

Mobile Data Costs: Why the high costs of mobile communications? Some argue that Kenya has a skewed regulatory environment that that favours Safaricom and protects it as a government revenue generating machine (Safaricom is Kenya’s largest corporate taxpayer) but hurts the consumer through high communications costs.

Twitter Week: January 7

Here’s a summary of my week on Twitter in a top 5 format covering traffic and restaurant woes

5. Raring for the World Cup in South Africa: - ESPN to broadcast 2010 world cup in 3D http (via Business pundit)
- Thinking of driving to world cup in SA? AA of Kenya offer (i) car passport (ii) international driver license (iii) COMESA insurance; r/t @bugzville58 good idea you should though Kampala bus is also offering a trip for about 800 dollars one way.

4. Traffic in Nairobi was Good and then Bad: - Nairobi should remain like this: no traffic, or queues and faster bandwidth. Lets close Thika & Nakuru roads and #devolve the rest to shags

- Back to 5 day week and a matatu strike in Kenya to kick off 2010; ying yang: Nairobi public transit strike means booming business for taxis (good luck getting one this evening); r/t @tmsruge I was in the CBD today. All streets were a parking lot. No point taking either as you won't get anywhere. #footing works best! ; Roads not so bad out of town 30min stationary then 10 min cruise home #matatustrike
- R/t @MoSande KE Matatus call off nationwide strike after PM promises to address their grievances. Normal service to resume immediately
- @inexes and i hear someone may be ending Mombasa vacation this evening #nairobitraffic; @karuoro someone just flew in from Mombasa holiday

3. Odds and ends: - From Nairobi Star: statehouse complains about Lucy worst dressed rank, while Atwoli is scandalized–says his peers in 150 wool class are Moi & Kirubi
- The Tamarind Group has taken over the Karen Blixen Coffee Garden Restaurant, which is renamed Tamambo KBCG
- Repeat of 'House of cards' showing on CNBC Africa. Documentary should be done on Nairobi or Nigeria shares bull run and bust
- Books first have buy pizza in happy hour, get one free. But also charge Kshs. 100 for take away pizza cartons - why?

2. Safaricom mandatory SIM registration, and costly 3G: - Via @kahenya solutions to improving mobile competition in #Kenya, and break #Safaricom domination of #3G http://tinyurl.com/y8bs9cl
- via @kainvestor #Safaricom forcing new users to register their sim cards, which can't be activated unless registered with an ID ->safcom=Gok r/t @LarryMadowo Its now a legal requirement for ALL SIM card holders to be registered & #Safaricom move is only the 1st step but @LarryMadowo @kainvestor Safaricom already has 1/2 their subscriber details from m-pesa accounts
- Can’t find a reliable #zain #zap money transfer agent in Kenya? Try the local post office or #posta (via #introverted blog post)
- Consumers getting unhappy about #Safaricom #internet bundle costs http://tinyurl.com/yzxjt25 but they rarely leave @archermishale the word is out, be careful how you use expensive Safaricom data bundles - are they billing on supa ongea tariff?

1 It's 2010: Happy New Year: Against sound advice, went out and got served a crap lunch. Remember waiters & kitchen staff are working, not celebrating the holidays
- Best food prayer I’ve heard '. . Also for the wonderful meal, bless the pockets that may have been depleted by it'
- Looking at the @KenyaBuzz year end calendar - Pole Dancing Competition at Tembo Disco Mombasa http://tinyurl.com/ya786td

Motoring Moment: Spare Parts and Bad Driving

Bad Driving today in Kenya, there is a matatu (public mini-bus) strike protesting at new crackdown by policemen for bribes, noise pollution etc. Matatu’s get blamed for a lot of the bad & dangerous driving behaviour on Kenya roads. This used to be the case, but the bad driving trend has passed on, and you’re just as likely to see over-lapping and traffic gridlock caused by small cars (especially taxis), buses, minister & other government VIP’s - who all over-lap traffic and engage in other risky road behaviour.

Shell Quitting BBC reports Shell petroleum will quit operation in 20 African countries disposing of refinery, storage and product sales. In 2008 Shell had already left some 15 African countries, and rumoured suitors for their assets included Oil Libya Morocco Oil in Northern Africa and Engen in southern Africa. Here in Kenya @coldtusker reckons KenolKobil would be interested if they could line up enough funding. Total of France are likely to snap up some stations after taking over Chevron, and the government will likely arm-twist a fraction of the Shell assets to go to parastatal National Oil Corp of Kenya (NOCK)

Read on Cars: also got the latest issue of AUTOnews published by the Automobile Association of Kenya - some gems in it:

In another world cup opportunity pitch, the AA of Kenya (aalicenscing@aakenmya.co.ke) is offering:
- Car Net a.k.a passport eliminates hassle of lodging log-books or cash duty as you cross border points
- International Driver License that allows Kenyans to drive across borders
- COMESA insurance that covers Tanzania, Zambia, Zimbabwe, South Africa

Also, (in the issue), did you know there are 9 Kinds of Spare Parts? I thought there were just two genuine and fake, but according to the AA the 9 are:

9. Off cuts - whole chunks of cars from accidents or scrap
8. Imported used parts (also scrap from cars shipped to Kenya in mixed load containers)
7. Stolen parts (from chop shops)
6. Reconditioned parts – salvaged parts which vendors claim to have re-conditioned and tested (likely an impossible task)
5. Salvage parts - taken piece by piece from wrecked cars
4. Counterfeit parts - illegal parts branded as genuine
3. Non-originals - independent brands which copy established brands
2. Original equipment (OE) parts - independent parts approved by manufacturers
1. Genuine parts - made by vehicle manufacturer, brand new & guaranteed with warranty

Cheap Bikes are Good Business: Toyota Kenya sells Yamaha motorbikes including the kazi ngumu which costs Kshs 99,000 (~$1,320) and comes with 1 year warranty, 2 free service schedules, free registration, and a free helmet. Elsewhere in the issue, the Toyota Marketing Manager says the arrival of cheap (Chinese) bikes are boosting their (Yamaha) sales, saying low cost brands offered an entry point, but as motorcycle market has become established they can afford higher quality machines and turn to Yamaha for superior reliability, durability and performance…we are not worried about used imports, they are not a bad thing, certainly there are anomalies in standards and much duty evasion, but mitumba is a way for people to get started, and as they flourish they will look for better and newer products

From Twitter - the classic @roomthinker: You can buy a Toyota Vitz in 2 configurations: 128MB and 256MB #AVitzIsNotACar
- @ArcherMishale: Overheard on FB: In addition to #ToyotaFeets #Feetsubishi #Legsus, Kenyans will also be on #KNEEsanPatrol! LOL!!

- @MwaiKibaki: Kenyans should not listen to radio traffic reports. There have been no traffic jams in Nairobi since January 2003

Best of 2009

recapping 2009: 2009 has been another great year, for me in blog world. I was trying to do a year-end post, and decided to adapt from ken banks formula by analyzing the most read blog posts.

the top 10 were
1. Kenya exam results online
2. Safaricom jobs & other business
3. KCSE Results are out
4. Nairobi Kenya Jobs
5. Where to buy Shares
6. Media Bill 2008
7. Jobs with Emirates Airlines
8. Bank’s Need to Embrace MPesa
9. Money Transfer within Kenya
10. Safaricom Success

so what are Kenyans looking for online? Jobs, exam results and money transfer? But many of these posts are a few years old, and ½ the blog traffic is from search engines and just 25% is direct visits. So I put on my Kivuitu hat and refined the searches to look at direct traffic and posts from 2009 alone and the tally was:

1. Media Bill 2008
2. Which Kenyan Bank Has Best Transaction . . .
3. Kenya Infrastructure Bond
4. M Pesa IPO
5. Urban Inflation Index (March 2009)
6. Zain In Kenya
7. Equity Bank 2009 AGM
8. Mostly Equity Laptop Ni Lazima
9. M Pesa As Low Cost Bank Account
10. KCB And Triton
11. Google Launches Local Maps Domain
12. Analyzing Kenya Pipeline
13. Mindspeak With Professor Calestous Juma
14. Money Transfer In Kenya
15. Zuku Slashes Kenya Internet Prices
16. Nairobi Stock Exchange Fiddles
17. Athi River Board Mining Evicts Bamburi
18. Skunkworks Nairobi September 29
19. Best Bank For Netpreneurs
20. Pyramid Schemes In East Africa

so popular reading topics are cheaper banking, financial scandals, money transfer, local tech events, and again money transfer

In terms of blogging there have been positives and negatives in 2009

ayes - Peaceful Kenya: and many ex-diasporans continue to stream back and set up tech & other business ventures
- Pictures: after several years of procrastination, got a camera from a fellow blogger and have tried to incorporate a relevant picture in every post; the best picture I think I’ve taken was during the ‘test’ period before got the camera – (forest in Kericho) – maybe it’s just the beauty of the area and not my skills, and the first one is fireworks from a wedding I attended last week.

- Also thanks to a fellow blogger, I finally got onto twitter, two years late - and if you’re not on it (individual or local company), you’re missing the world.
nays - vitriol and in-fighting in the small local blog community remind one to be careful while networking in the online world
- did not travel outside Kenya. I made many local trips, but I need to breathe kerosene fumes and eat re-heated airline dinners; travel blogs are the most fun and I plan to have some more in 2010, maybe even the world cup in south Africa
- facebook goes mainstream, but the endless tweaks they make take away form the experience