Venture Capital in Nairobi - VC101

A talk on venture capital (VC) was given by Vincent Kouwenhoven and Brian Hirman of the eVA (eVentures Africa Fund BV) at the iHub in Nairobi. They both have about 15 years experience in VC and enumerated the criteria the fund uses for investments including that target companies in Africa should have profitable track records (not start-up's) to qualify for VC investments of between 25,000 and 250,000 Euros (~Kshs 2.5 million to Kshs 25 million).

The fund was launched in January 2010, and in the ½ year they have invested in 5-6 companies. The founders are seasoned travelers in Africa and their interest was piqued by observations they made over the last three years including;
1. Chinese investment interest in Ghana and Kenya
2. Arrival of fibre optic cables
3. More African returnees returning from the Diaspora who were setting up their own companies (it’s a good sign). They have been exposed to Kenya for many years and sense that entreprenual spirit in Nairobi is very good as are competence levels in high technology sectors.

- All their investment are active in the digital scene – whether mobile, internet, communication platforms – and include a leading internet company in Ghana, while in Kenya, they have Jumuika, Ratio Magazine, and the latest deal signed today is for an investment in Verviant (w/ Liko Agosta better known for Pesapal)

- They invest growth funding in companies and try and cultivate a healthy portfolio, unlike other VC’s who make several weak investments in the hope that one or two will payoff and offset the failures. Their investment clearly spells out the use of proceeds/funds which can vary, but ideally should not be for increased salaries or other debt repayment (unless to retire expensive debt). They also mentioned that their investment criteria is a guide, not cast in stone (e.g. Jumuika was a startup)

- They get involved in the operations of the company; whether marketing, technology, financial, entrepreneurship, HR policies. They act as a sounding board and advise owners (use skype a lot) on how to scale up e.g. when they get traction, how to set up customer care capacity

- They seek out committed entrepreneurs – not part timers, or people with one good idea they have not developed, or people with a dozen ideas (not focused). They want to invest in people with the gut and belief to start a business and are willing to eat bread & water to hack it put (not one who relies luck) - and who also enjoy what they are doing. Other "no no’s" include people who ask for too much money that dilutes their equity (EVA want founders to retain at least 51% at all timea), or which enables them to run the business without risk for two years (i.e. with the VC’s funding)

- On exit strategy their preferred rout is a buyout of the company within 3 to 7 years by multi-national or larger company. In cases where an investor may not be ready to sell, the VC can sell their stake to another VC.

VC Coffee Chat

On Monday June 28 at the iHub in Nairobi there will be a talk on venture capital, in continuation of a series of events that bring together local financiers and entrepreneurs.

In preparation for that, we had a chat with Eline Blaauboer of TBL Mirror Fund which is a Dutch venture capital fund that has made four investments in Kenya and are also branching around East Africa.

The Fund invests a minimum of EUR 100,000(~Kshs 10 million) taking minority stakes in companies that show fast growth and the potential to be market leaders. They look for well-managed ambitious and visionary SME’s and TBL invests in all sectors particularly where the partners have extensive industry knowledge, as a VC focused on a specific sector is not sustainable here yet. It's interesting to note that, while it is said in local banking that women are not ambitious enough to dream big and attract large funding, ½ of their investee are women-led companies

Related
- TBN are hiring both an investment manager and an investment analyst.
- On Monday June 28 at the iHub in Nairobi there will be a VC 101 event with a talk on venture capital given by Vincent Kouwenhoven of the EVA Fund
- Recap of recent VC activity in the region by Ratio-Magazine.

Urban Inflation Index June 2010

Tracking changes from three months ago Mar’ 10 and one year ago – Jun' 09

The World Cup is on going in South Africa and helpful guides for price comparison have been provided for comparison. Also the Kenya budget speech for 2010-2011 was read by Uhuru Kenyatta the Finance Minister and has been trumpeted as a trillion shilling budget despite a deficit of resources.

In reaction to some changes noted here, Kenya's Parliament on June passed a price control bill that seeks to regulate the retail price of among other things - maize flour, sugar, rice, wheat flour, kerosene, diesel, petrol, and cooking fat.


Gotten Cheaper
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. 71, which is 15% cheaper than Kshs 84 in March and 92 a year ago [a 2.5kg pack in South Africa is ~kshs. 111]

About the same
Communications: priceshave remained about the same despite it being an eventful few weeks;
- Safaricom had another exemplary year of profits and performance – returning a turnover of $1.05 billion (Kshs 84 billion) and will pay their shareholders dividend of $100 million (Kshs 8 billion). They are the exception in the sector where their rivals loss making – Zain (Africa) was acquired by Bharti Airtel and will undergo its fourth brand change in eight years, while Orange averted a messy divorce with the Kenya Government by way of a sweetheart deal that may shake up the sector. They and newcomer Yu will all benefit from a government decision to lower the cost of a 3G communications license from $25 million to $10 million.
- Communications costs remain about the same for voice and SMS (who can keep up with Yu and Zain’s promotions) and the big push has been in the area of data. Safaricom latest push is for 10MB for 8 shillings ($0.10) and continues a recent trend that pushes down the cost of data with cheaper phones (Nokia E63 is now 15,000 (about $187 down) from 23,500 a year ago) and hardware, financing (Loans for laptops).
- Unfortunately Safaricom has rubbed some local developers the wrong way entering into a Mxit partnership and again with an innovation forum that has caused some controversy.

Utilities - Electricity: Latest bill is Kshs 1450 ($18) which is down from 1,700 (~$22) in March and about the same as 1,550 a year ago. Heavy rains at the end of the last quarter have seen Kenya dams fill and a power generation shift from diesel back to hydro - the Government says this will result in reduced power bills at the end of the year, but the rains have slackened of late. In the bill, consumption is kshs 500 with a fuel levy cost of 400, while a year ago consumption was also 600 with fuel levy cost of 500

Other food item: Sugar (2 kg. Mumias pack) is at 200, and no change in the last few month. COMESA liberalization is set to happen in 2011, and is expected to expose the market to unrestricted imports from the region, bring down the retail price of sugar in urban areas, but leaving sugar farmers from western Kenya with high input costs at a disadvantage. The middlemen men still run this sector and around the period of Uhuru’s budget speech was being read, there was no sugar (from any company) on the shelves at Uchumi. [2.5kg in SA is Kshs 191].

More Expensive
Beer/Entertainment: A bottle of Tusker beer (at local pub) is Kshs. 160 ($2) most up from 150 in March at most places I know and 130 from a year ago. There was an immediate price hike effected by dominant brewer East African Breweries (EABL) when the Minister read his speech in early June; however some bar owners complain that this should have computed at 5 shillings per bottle (beer retails in ½ litre), but EABL passed on an additional 5 shilling increase to customers under cover of the tax hike. The price of coca cola has also gone up as the excise tax on carbonated soft drinks, wines and spirits was also pushed up 8%.

Fuel: A Litre of petrol fuel (at local petrol station) is now Kshs 90.9 per litre (~$5.1 per gallon) , 7% up compared to Kshs 84.9 in March and 25% higher than it was (72.5) in June 2009.

Foreign Exchange: 1 US$ equals Kshs 80.6 compared to Kshs. 76.6 in March and 77.94 a year ago as the Kenya government has indicated that it will not (can it afford to) intervene to support the shillings from sliding.

Money Transfer across Africa

From focusing on money transfer in Kenya, where there has been a lot of development and competition, especialy in the area of mobile money transfers, it now moves on to what about across Africa? From country to country?

Today in Nairobi, Ecobank formally launched their Rapidtransfer which was rolled out in October 2009 and is now available in Kenya. With Rapidtransfer one can send money e.g. to family members, for school fees, pay for goods, send cash to another account in another country, and have the funds available instantly in local currency.

An illustration used was for how one can now transfer money from Mombasa, Kenya to Dakar, Senegal - and with Rapidtransfer, an individual can send a maximum of $10,000 per day (~Kshs 800,000)between the two points on opposite sides of the continent instantly! It is also open to non-account holders and can be used for intra-country transfers as well. The product works only within the Ecobank network, which now covers about 30 countries. They get around the foreign currency restrictions in some countries by making and receiving payments in local currency (no forex exposure to the customer) and all at a competitive rate compared to Western Union or Moneygram.

Rapidtransfer was launched by Kenya's Central Bank Governor who chided the media for wanting too much from the product already. On whether Rapidtransfer will be on mobile phones, he gave tales about trying to buy a car in 1992 when money would take a week to be transferred from a Nairobi account to a Mombasa account (it was then faster to send money hidden in an Akamba Bus package) and this was also at a time when branches were not linked and one could only transact at a particular branch.

Rapidtransfer is unique in that many banks don’t talk to each other across borders e.g. a bank in Kenya and a bank in Uganda may share the same parent or name but customers who cross borders are not able to transact (except using visa). However, Ecobank customers are also able to use their ATM bank card in all the 30 countries where they are present to fully transact across borders.

Swift River 101

On June 16 at the iHub in Nairobi, a talk was given by Jon Gosier the director of Swift River which I first heard of Swift River following its use with Ushahidi following the Haiti earthquake early in 2010 when crisis rescue & response teams faced a challenges of processing 200,000 SMS messages a day. So the question was how do you filter that information to get help to the people (i.e. earthquake victim) who need it?



Jon said Swift River is an open source platform that uses algorithms and crowd sourcing to filter and validate information. He gave a quote from the book the ‘The Long Tail about with such vast amounts of data in the world, there is need for filters to filter. Swift River helps by pulling out data and he mentioned some of the tools used. In his guide titled Swift River in plain English Jon lists the arms of Swift River which include:

• SiLCC pulls keywords from any Text (including SMS and Twitter) and automatically sorts related text ( a natural language processor)
• SULSa automatically detects location of incoming content/reports
• SiCDS automatically filters out duplicate content (re-tweets, blogs, text messages)
• Reverberations detects how influential/popular content is online
• RiverID allows Swift users to carry their Swift score and reputation with them across the web

All these enable an organization facing a challenge of too much data to among other things, pick out what’s important, save time, suppress noise, filter & curate the information. This is more so at time of urgency or crisis

Swift River can also be used by newsroom to manage & curate very large information in a crisis, for online brand monitoring, or for election monitoring. It runs on a free and open source platform. It’s still in development, with more features & improvements being added to the beta (now at Version 0.2.1 Batuque) over the rest of the year by the development team who are based in Uganda.

Agency Banking and Micro-Savings

Banking Hall Woes: Last week I spent about 6 hours in 6 different banking halls, trying to deposit or withdraw cash, make cross-bank transfers, utility payments and complete other bank transactions. Some observations:
- Banks with several empty ‘teller’ windows even as customers queues get very long
- Employees who sit at the front desk but don’t serve customers as they do back office transactions, reports & reconciliations
- Disinterested employees who’d rather gossip in vernacular than serve customers
- @kainvestor tweeted: it takes 1 hour, 2branches and 4 tellers to get one foreign bankers cheque done at #StanChart. Still waiting #fail
- Customers who ‘book’ places in the queue. As the queue shortens near the front, they walk up from where they have been sitting and edge back in front of the person, who they had queued with thirty minutes earlier
- Older banks like Barclays as you to being a passport photo and get a referee signature to open an account, while new banks like equity bank and family staff will snap your picture with a digital camera.
- There are no more developments in e-banking being rolled out in Kenya; new bank - customer interface deployments are in the areas of phone/mobile/m-banking
- Despite the millions of masses on mobile banking, the bulk of business in Kenya is cheques-based. Cheques remain awkward, prone to errors, and are resented as a form of payment as recipients have to wait for up to four working days to get money from the date they present their cheques. Assuming there are no r errors clear over four working days
- From a Central Bank of Kenya 2009 2009 supervision report you can get an idea which banks halls are likely to be crowded going by their number of deposit customers: Equity Bank is No. 1 with 4.0 million followed by Co-op bank with 970,000, KCB 751K, Barclays 748K, and Family 574K. Least crowded may be banks like City Finance 654, UBA 832, Development bank 1,022, Middle East 1,462, and Equatorial 1,981.
(images from Afromusing’s post on how to get Safaricom 3G on your ipad)

Mobile money banking solutions Banks have tried to minimize the prevalence of queues, usually longest at month ends rather than mid-month, by offering alternative channels such as mobile banking and ATM facilities. A few years ago, the push was to develop Internet based banking, but that seems to have been set aside by the industry to focus on (mobile) phone-based avenues.
Last month also brought M-kesho, a partnership between mobile giant Safaricom and a leading bank Equity Bank. This one was very notable as it was marketed as one in which Equity Bank account holders could earn interest on money saved through their mobile phone - and this has been widely written about widely:

From the blogs - Idd Salim. Nothing new, Zain Zap has done this since 2007, but Safaricom is like Man U. They have ‘refs‘ who favor them game after game and win battles that are not even their own.
- Kainvestor: Too complex and not particularly new
- Rombo , Safaricom's 17,500 M-Pesa agents will now operate as part of Equity Bank (account opening, withdrawal/deposit) which has 80 branches countrywide
- Majibu: (after M-kesho) Safaricom can do better - by working with local developers and allowing them to develop on their platform. Safaricom needs to learn from the likes of Apple, the success of the iStore is because each developer is given an equal chance.
- White African: As others have pointed out, this isn’t exactly groundbreaking and new. Why is it big then? It’s big because of who is doing it: the giants of the banking (equity) and mobile sector (Safaricom).
- @wanjiku suggested that her bank, Family bank should partner with Zain

Others - A comment at the CGAP who advised on the creation of M-pesa noted that hopes that system failures that plague m-pesa will be a thing of the past
- Equity Bank’s CEO made one comment on TV, about how this made sense as they (Equity) had launched a mobile banking application (EAZZy), but they found over time that could not compete with M-pesa so were folding it to join M-pesa.

More mobile variants: What does that mean for other banks? Despite @wanjiku’s earlier suggestion Family Bank went ahead and signed with Safaricom, not Zain, upgrading their existing mobile application into one called existing mobile banking application into new called Pesapapwhich also allows transfer from account to/from m-pesa and mobile service providers Cellulant rolled out at the same time with one called lipuka

Other thoughts on agency banking Vis a Vis m-kesho - Safaricom has very subdued brochures about M-kesho – with which one can transfer funds to from their bank account at Equity and all the benefits (micro savings) andproduct hype is by the Equity side. Odds are that most of Equity’s 4 million customers are M-pesa account holders already
- M-pesa cash has been held in trust by CBA Bank since its inception. Will Equity angle for a piece of that?

Enter Agency Banking: The sub-text of M-kesho and other variants is the emergence of agency banking in Kenya, a process endorsed by the Government of Kenya to bring more banking services to more of the (unbanked) population. Agency banking is supposed to take customers out of the bank halls and out to kiosks and villages; as @Rombokins noted, Equity Bank scales up from having 80 branches, and can now (potentially) sell its products through 17,000 agents of M-pesa.
CBK recently published their Agency Banking Gudelines which include provisions on what agents can and can do

Can Do: - Agents can be limited liability companies, cooperative societies, parastatals, trusts, partnerships or individuals. Agent applicants are judged based on their network (number of agents per province), services to be provided, anti-money laundering procedure, strategy and financial projections envisioned from agency business. Other factors considered will be company registration documents, audited accounts, availability of funds, bad credit reference, reputation, unclear source of funding, or criminal prosecution – which are some of the reasons for an application to be struck out. Also a license can be withdrawn if an agent is loss making, or a sole proprietor passes on
- agent may provide services to multiple institutions (no contract between institution and agent shall be exclusive and an )
- All agent settlements must be in real time
- Agents must receipt all transactions
- Some of the services agents can perform include cash deposit/withdrawals, loan repayments, bill payments,
Salary payments, debit cards, collection of mail

Can’t do: Faith based, non-profit, non government organizations are not eligible to engage in agency banking
- Agents may not use such names as 'bank', 'finance' in their brands
- agents may not charge customers for services directly
- Agents may not transact when system is not operating (e.g. m-pesa downtime?)
Agents may not open accounts, offer guarantees, or appraise loans
- agents may not undertake cheques deposit or encashment (cash only) and may not transact in any foreign currency

Summary: Banks still require that customers come to the halls, for most services, but with agencies can they get served better (and perhaps cheaper) elsewhere? The use of dealers and agents helped transform the telecommunications sector in the span of a decade - from having a monolithic giant (Kenya post & telecommunications) where Kenyans had to queue and buy lines, pay for equipment and other bills (and which served ~100,000 customers) to now where customers able to do the same at kiosks all around the country (serving 20 million customers) Can banks mirror the phone model of growth through agents? It’s a tough call as the safekeeping of money or the incurring of a debt (by taking a loan) is one that calls for caution on the part of the customer.

But taking a loan is a sophisticated process - as most customers need to ask the loan officer what rate am I getting? what is the payback and installment? Even if someone is desperate and signs for a loan without reading an agreement, or swipe a credit card readily, they will over time come to learn the cost of transacting as they will read and review documents, especially if they feel the are being shortchanged. It seems that lending is beyond the training and capacity of agents - and the CBK has recognized this by limiting them to being amedium for repayments. So if you want to get a loan with m-kesho, you get that information from a (trained) Equity loan officer, not an M-pesa agent.

Finally, micro-savings or savings by poor people is more about the principal, not interest. i.e there has to be a mandatory obligation to save, which is difficult for someone trying to build up savings to revoke. E.g. group schemes, chamas, investment clubs, SACCO’s have an obligation to save that binds its members through a social bond of their mutual up-liftment. An obligatory commitment is also a factor in larger savings programs like mortgages or pensions.

Pan African Banking

Part II of Ecobank 2010 AGM
After the Ecobank  AGM in Nairobi on June 11 for shareholders only, there was a media briefing after with Arnold Ekpe - Group CEO, Kolapo Lawson- Group Chairman, Tony Okpanachi - Managing Director: Kenya and the Executive Directors of Ecobank.

At the brief were journalists from several African countries including Ghana, Nigeria, Rwanda, Uganda Zambia, and Kenya and various media houses including allafrica asking questions of members of the board, mainly answered by the Chairman and the Managing Director. Questions were asked in English and French and the (multi-lingual) directors answered each in the language asked, with the CEO summing in English sometimes. A lot of the same information given to the press was also disclosed to shareholders during the AGM, and at some point, the CEO asked business journalists to read the actual full annual reports, not just the abridged versions, as a lot of the answers were there.

Media Q&A excerpts
Explain the African strategy especially in war-torn countries?
They serve African countries, and African countries always have needs for financial services. E.g. Democratic Republic of Congo (DRC) can be Africa’s richest country, it needs financial services and Ecobank has invested about $30 million there in telecommunications and small  & medium enterprises (SME’s) there. They understand the risks they face such as non-payment of loans  and mitigate those risks. Also wars can’t last forever, and they saw this in Liberia where they were the only bank that remained during the wartime and are now the largest bank in the country.
- Also they plan to be a world-class Pan-African bank. They devote 1% of their after-tax profit to an Ecobank Foundation that has helped a lot of young entrepreneurs and they are the leading micro-finance bank in Africa have MFI subsidiaries, in additional to commercial banks, in Nigeria, Sierra Leone, Cameroon etc. they have also lent between $500 million to $1 billion to other micro-finance institutions.
In answer to other questions, they said no, they don’t have a sector-specific strategy; they look at all risk & return opportunities, and also they are not really into agriculture, though by extension their micro finance arms are.
- Asked about 38% decline in profit attributed to Nigeria banking problems: Ecobank's exposure in Nigeria is 30% compared to the rest of Africa, which is 70%. they are competitive in Nigeria and going forward they see markets like East Africa, and Southern Africa (notably Angola), as being more important over time to an extent that problems in one market (country) should not adversely affect the bank's bottom line.

- What is unique about Ecobank? (asked by a Zambian journalist who noted that they and  other banks had invested in Zambia at the height of the global economic crisis?)

They are present in more African countries (29) than any other bank in Africa: from Zambia one can transfer cash within Ecobank to 28 other countries and a customer can use an Ecobank card in all their 29 African countries, including South Africa during the World Cup and access thousands of ATM machines.

Another question was asked (in French) and from the answer, it seems to be about delays in Rapidtransfer (through which one can send cash to 29 African countries within 24 hours) they answered that, they have to comply with anti-money laundering/fraud verification, and they use text message for the transfers, and if the recipient is not available, the money is refunded to the sender. CEO said there are more Africans in the African Diaspora, than outside Africa and they transfer a lot of money which is what Ecobank is facilitating, noting that the volume of rapidtransfer had trebled in 3 months.

- The genesis of the bank was in a private sector attempt to facilitate regional trade in the ECOWAS (Economic Community of West African States) region. To this day they try and facilitate regional trade within Africa, among African countries ; in East Africa regional trade is ‘high’ at 20 %, West Africa its 10%, Central Africa its 2% - Compared to Europe's 60%. The bank enables business people to trade across countries instantly, and in East Africa when the EAC protocol takes off on July 1 2010, they will be the only bank with such a presence in the five East African community countries.

Fundraising plan: of the $3 billion targeted in a rights issue they managed to raise $778 million. They had earlier discussed with shareholders and plan to raise another $500 million this year and more when conditions improve.

Will they cross-list in Kenya? They mentioned the need to build a critical mass of shareholders as they have just about 800 shareholders in Eastern and Southern Africa. Answering a similar question later, they said cross-listing had to make business sense and there  needs to be ample liquidity in terms of many shareholders trading a lot of shares. Their investor relations (IR) people are watching and will advise them on the way forward.

Investment in Kenya: Has been about $40 million in two years. The bank they bought (EABS) had 8 branches, they are now at 19 with another three scheduled to be added this year. 
Why staff numbers are down: overall, in the last few years, staff numbers have been on the increase going from 3,000 to over 11,000, but they shed some staff numbers in 2009 from rationalization and efficiency programs

Ecobank 2010 AGM

Ecobank, a Togolese-based banking conglomerate, makes history today by having its 22nd annual shareholders' general meeting, not in Togo or Accra, where it is listed, but in Kenya. Why Kenya? While it has presence in over 30 African countries, in 2008, they completed a buyout of a homegrown financial institution that has been known as East African Building Society, and which is now known as Ecobank Kenya, from which they will base their ambitious regional plans.

As with exposure to Ugandan investment sector, Ecobank brings an awareness of practices of and levels of disclosure for Kenyan companies that have engaged in cross-listing on exchanges in Uganda and Tanzania.

• Looking at the AGM notice for Ecobank, which has 180,000 shareholders, it encourages shareholders to sign their proxies and vote even if they don’t plan to attend the AGM with for/against/abstain boxes to tick.
• Notice figures are quoted in US$ [profit of $62.9 million and a dividend of $29.7, equivalent to $0.3 per share]. [At the end of 2009, Ecobank has assets of $9 billion, while Kenya it was the 19th largest bank by the same measure with assets of Kshs 13.95 billion, ($186millin) and made a loss of 1.15 billion ($15 million) after making heavy provisions in a one-time effort to clean up their old loan book]
• Approval of the director’s remuneration is something glossed over in Kenya and approved without scrutiny or number, perhaps referred to in the footnotes. Ecobank lists the packages availed to directors that are being voted on [chairman $50,000, other board members $30,000, and all get two first-class air tickets to Europe]
• There is follow-up to previous shareholder resolutions: It notes that shareholders had approved capital to be raised of $3 billion, by a rights issue - but that so far only $778 million has been raised and asks shareholders to reaffirm the decision and allow the board to continue to raise funds by various means.
• Audit firm of Pricewaterhousecoopers (PWC) are re-appointed as joint auditors comprising teams from PWC Ivory Coast and PWC Nigeria. 
• Directors being co-opted to the board have their (extensive) CV’s - two in this case, and both are under 50 years.

Matatu IPO

There was a small advert in the Nation this week for a private placement to raise Kshs 600 million ($7.5 million) as investments in the public service vehicle (PSV) transport business.

The promoters, PSV Investments, say they have already investment in PSV’s commonly known as matatu’s through transport companies, savings & credit societies (SACCO’s), and individual owners. They are selling 6 million shares at 100 shillings each, with a minimum investment of 5,000 (~$62) for individuals and 100,000 (~$1,250) for institutions, and the Vice Chairman is Dickson Mbugua who’s often on TV defending the Matatu Industry as an official and a spokesman. It opened on May 17 and closes on July 3.

The PSV business is one which has had difficulty getting organized investments because if the poor reputation of the business. This is because of the reckless driving habits of drivers, gangs involved in management, insurance claims & losses.

(this matatu ran me off the road this morning, and I had to drive on the pavement to avoid an accident)

Nevertheless matatu owners are able to obtain loans from some banks but who limit their exposure by financing less than they would for an individual e.g. where a bank may finance 80% or higher of a vehicle cost, for a matatu that’s only about 50% with the owner paying the different. In some cases they also shorten the repayment cycle to weekly installments, instead of monthly, to prevent diversion mismanagement of cash as a matatu generates (and spends) most of is cash on a daily basis.

SACCO’s have a reputation for running the best matatu business, and listed transport company, Express Kenya, has also invested in the PSV business via KBS and Citi Hoppa, as detailed at last year’s invested in PSV business, as discussed at their 2009 AGM.

Private placements are riskier in terms of entry and exit, and I’m dealing with two unique placement cases now: one with an investor who wants to exit from a minority shareholding, but at a greater price than the majority shareholder will pay and another placement in which the promoters have been incommunicado for six months after urging investors to buy into a company. It’s not clear if the CMA is aware of this or if there is a transaction advisor or prospectus for the company.

Kutwa Tuesday: March 10 From Stanchart to LPG

Kutwa Tuesday: From Stanchart Downscale & LPG Caps

stories found this week

Stanchart Bank:

smaller profit is being much maligned for being the first bank to report a profit drop in 2008 of 4% to 4.7 billion shillings. ($59 million) (Increased 29% in 07). The bank which adopted a conservative approach compared to Barclays, KCB and Equity. Stanchart had asset growth of 9% to 99 billion (13% in 07), deposits up 4% to 77 billion and loans up 10% to 43 billion in 2008. Here are some other performance comparisons of the main banks that have so far reported their 2008 results.

goes for smaller customer & investors In a slight about turn, Stanchart has also launched a new low cost transactional account called Hifadhi account, costs 2,000 to open, no ledger fees, or ‘cash handling fees’ with e-statements you only pay for transactions you incur, though its’ not as affordable as other 'cheap' bank accounts for small earners. Going for smaller customer has been a recurrent theme in 2008 with banks, insurance and bonds lowering the minimum subscription amount. – Such as pepea from Barclays, Toboa from Old Mutual and even the Government of Kenya which has lowered the minimum investment for GoK treasury bonds to just Kshs. 50,000 (~$625)

Bank briefs
- Stanchart get back to what they are good at – big corporate deals this one for Kengen
- Gulf African launches a shariah compliant mortgage scheme
- New bank branches: First Community bank now in Malindi, Ecobank in Kisii, while Family Bank re-opened in Githurai
- Another SMS send Equity customers into bank panic withdrawals this time in Machakos

from the blogs

siasa mbaya, maisha mbaya: Global economic slump aside, Nairobi’s Stock Exchange will not see a bull run until the country’s political problems are sorted out according to MainaT

The Sunday Nation broke a story of the old Embakasi airport been handed over to an unlicensed new airline, but airport analysis comes form one Coldtusker

- - following in the success of the infrastructure bond, the Kenya Government is offering another bond to supplement its budget deficit, Treasury bonds, following success of the 18.5 infarsture over-subscribed by 45% this one is for 8.5 billion ($106 million) bond 13%. More details From Conceptadvisoryservices and minimum investment is just 50,000.

Kenya rugby effects: Kenya had a wonderful run at the IRB World Cup in Dubai, and knocked out defending champions Fiji in the quarter finals. Here’s some rugby loss reactionfrom Fiji


Elsewhere

Employees loose & loose: it’s been a bad week for employees as the employment act was set aside and the government shifted the pension burden to civil servants to contribute more towards their own pensions

Madaraka finalized; The Madaraka Estate was finally sold, apparently ending a long long running saga between homeowners, the City Council and the National Housing Corporation who should really update their website

Laptop mania so many offers for laptops these days, new this week were
- Safaricom selling Mac book with broadband modem for 100,000 ($1,250)
- Acer a110 laptop on sale with open office for $230 - great for Kenyan new to mini laptop market
- Even my bank/broker CFC sells Acer Aspire 4710F loan at 5,500 per month ($70)

is grad school a con?:
Half the Sunday Nation advertisements for colleges aimed at the recent high school graduates whose results were announced last week. Also growing are the numbers of universities and master programs, but this going to grad school to avoid the recession author point out that

- Grad school pointlessly delays adulthood.
- PhD programs are pyramid schemes
- Business school is not going to help 90% of the people who go.
- Most jobs are better than they seem: You can learn from any job.
- Graduate school forces you to overinvest: It’s too high risk.
(found at chris blattman)

LPG shocker: when to buy cooking gas last night. Found the cylinder, however it appears that there is now a mandatory valve that will be mandatory from April 2009, it is a universal valve, that will enable consumers to buy LPG /cooking gas from different suppliers e.g. Kenol., Total, NOCK, replacing cylinders from any of them, since they will now have a common head/valve. The move is supposed to break the monopoly of established companies e.g. if you have a Kenol gas cylinder, you could only replace at Kenol when buying new gas, where if you wanted to switch to Shell gas, you’d have to buy a brand new cylinder


Problem was that my Total stations did not have the valve. (Tend three station) and they all sent me to the place that has everything in Kenya - Nakumatt. Nakumatt also say they stock valves for all companies, but they also sell generics, the generics are there in plenty, but the branded are scarce, not that it matters. But it’s scary to use a generic cap, since there are many fires in Kenya caused by exploding/leaking cooking gas cylinders. Hope this turns out ok win April when more consumers realize. The cap’s also cost anywhere from 500 – 900 shillings each – another cost to the burdened urban consumer, though it’s one time only (as long as the cap lasts). It would also be nice if oil companies and/or the government conducted some consumer awareness about this matter, not leaving it to Nakumatt and untrained Petrol attendants.

new gas cap

Total 2010 AGM

The annual general meeting of Total Kenya was held on June 2 at KICC Nairobi. (Excerpts from shareholder Q&A)

Hot Button issue was the Low Divided
- Board said DPS of 1/= ($0.12) per share down from traditional 2.50/= ($0.03) per share is the best they can do
- Why are you not paying dividend as high as rival Kenol? If rival Kenol is paying more, it is because they have not invested like Total (Note: today was also the day Kenol effected their second ever share split, giving their shareholders 10 new shares, for every one they owned)
- Buyout of Chevron by creation of new shares has diluted ordinary shareholder stake and dividend? true but this information was disclosed before the deal was approved and completed

Preference shares: - Since parent owns 83% why not re-classify minority shareholders as preference shareholders? the preference shares only participate in dividends and are non-voting
- When will class A shareholders who have been locked in be released to trade their shares? CMA finally granted approval and they have been free to trade from May 17 2010

Will Total bid for Shell assets? No they will not bid - various reasons cited include, its an international deal that covers 20 countries, they (and Shell) are already at about 30% market share in Kenya and can't go higher (also cost)

High Working Capital: one shareholder noted the company traditionally carried high debtor levels, high stocks and high borrowings and called on the Board to be vigilant in collections, reduce stocks, and perhaps do a rights issue to rectify this. Chairman said they are vigilant with credit sales, and that inventory was currently higher as it was for the two individual companies (Chevron & Total), and that they will review the rights issue to see if it is relevant

Chevron stations: Which were bought in 2009 – and those not being sold onwards (as directed by Kenyan Government) will be-rebranded by year end, and there will be no loss of staff at either company

Goodies: umbrella, tote bag, t-shirt, lunch box (1/4 chicken, sausage, spring roll, beef sandwich, soda, and water

Past AGM's in 2008 and 2009