Capitalization in Bank Mergers

Today should see the announcement of a merger between Southern Credit and Equatorial Commercial (ECB) banks.

They are both yet to release their full year results for 2009, (have until Thursday) but this will likely be a loss year for Southern (Kshs. - 145m in 9 months) ahead of the combination of the 32nd (Southern) and 35th (equatorial) ranked banks in Kenya with combined assets of about Kshs. 9.3 billion ($120 million) - but which were not growing as fast as their smaller peers in the competitive Kenyan market with 44 commercial banks.

The Nairobi Star today reports that the reason for the merger as the need for Southern Credit to raise their capital to the Kshs 1 billion mark after a deal with foreign investors had fallen through and this amount will be the combined capital size of both banks. The article further describes this as a takeover of Southern - a bank with structures but no capital by ECB - which is a bank with capital but no structures

Elsewhere, in the Market Whisperer [offline] column of last week’s East African newspaper shoots down the justification behind a market rumour of Equity Bank’s (valued at $787 million) interest in acquiring National Bank of Kenya (valued at $133 million) as two over-capitalized banks who don’t need each other.

It notes that NBK which was restructured by the Kenya Government is in essence still a government banker beholden to government securities which account for majority of its income, rather than traditional lending while Equity is struggling to lend out its huge capital infusion and already has a (much) larger distribution and product range than NBK.

Kenya Easter Tourism Expo 2010

Past Easter expos: 2007, 2008

This year’s edition of the Kenya Tourism Board Easter 2010 Holiday Expo was held at the Sarit Center last weekend. Some of the notable offers were

Nairobi: KWS has self catering guest houses in most of the national parks and mountains areas. They also offer shuttle services to the Nairobi National Park from downtown Nairobi on Saturday, Sunday and Holidays (9.a.m and 2 p.m.) at a cost of 500/= (~$6.5) for adults and 200 for children

Country-wide: Heritage have full board and family adventure packages at their three Mara properties, (Siana, Intrepid and Explorer), three coast properties (Voyager Ziwani, Voyager beach resort, Kipungani -Lamu), as well as Samburu intrepid, and Great Rift lodge (Naivasha)

Ashnil Hotel has Aruba Lodge (located next to a man made dam inside Tsavo Park) at a cost of 6,000 ($80). They also have a new controversial camp inside the Masai Mara, but recently lost their 200 million shilling ($2.5 million) tented camp in Samburu in a matter of hours after heavy rain and flooding last month. Another property in the Samburu managed by Atua Enkop Africa got insurance compensation after flooding. Also not nature related but a looming disaster, the Bogoris Spa Resort and other hotels around Lake Bogoria must be wondering what will come after the recent Endorois court award that may affect their land holdings.

Also in the Central Rift there is also Lake Nakuru Lodge single in April to June is 8,000 while its 11,000 in high season from July to march, sunbird lodge at lake Elementaita at 5,200 full board from April to June, Kigio with Kigio Wildlife Camp and Malewa Wildlife Lodge

In Western Kenya, there's a new entrant from Kakamega - Mago Guesthouse.com - an income generating venture of the Mago youth polytechnic in Kakamega with prices of 2,500 half board for residents missionaries and volunteers.

Kenya Coast: New North Coast Beach Hotelwon a prize for best stand the expo. They are trying to establish themselves with low introductory rates e.g. single half board is 5,800 ($75) and 6,500 full board up to December 2010 (except Christmas fortnight)
- Mombasa continental has a flying package from Nairobi 22,750 ($295) per person for 2 nights half board up to July 2010, while singles normally pay 6,500 in the low season (April to June)
- Leisure Lodge Leisure Lodge, site of the Kenya ICT Board
connected government workshop has single rooms at 6,900 8,855 and 10,960 for Easter week.

East African Tanzania had Kempinski (Dar $130, Zanzibar $170, Serengeti $200 and Blue Bay), Plan Hotel (mapenzi beach camp special $333 and Neptune pwani beach $234) Hotels & lodges Tanzania (private island Zanzibar $264), Lamela Camp (Ngorongoro and Serengeti) and Gibbs Farm (Ngorongoro and Manyara)

Uganda had Lake Victoria Serena - opened in September 2009 with 2 nights flying on Air Uganda at $590 per person, Peal of Africa (tours of Bujagali falls) and ATV Safaris (ATV/quad bike safaris at lake Mburo)

other - Sports: surprisingly did not see any world cup related travel opportunities to South Africa in June/July 2010 – a missed opportunity?
- Kuoni have a package for golfers for $1,185 comprising 6 days of Golf at Windsor, Karen, Muthaiga and the Great Rift Courses, with the option of an extra trip to Masai Mara for ballooning
- Wildflower have the Wildman Triathlon 24 -25 April 2010 at Turtle Bay Resort (Watamu)

Wedding: Serena Hotels had a beach wedding package for $1,380 per couple with 2 nights half board VIP stay, marriage license & certificate, wedding cake, champagne breakfast, wedding gift, bride manicure/pedicure, and guest of the couple enjoy 10% off.

How Developers Can Make Money with Safaricom

Not to change track on the big green machine

Safaricom is Kenya's largest income generating company with a revenue of $1 billion , largest taxpayer, has 18 million customers, and the award winning Vodafone M-pesa, 3G rollout to the mobile masses etc. but has taken a lot of flack this year online and at conferences.

A Catalog of ills committed against developers in their dealings with Safaricom can be found at Thus Spaketh - one of the best blogs I’ve read this year and the perception is that Safaricom steals ideas, takes a big profit slice from developers leaving them poor, has too many requirements etc.

But this week I had a talk with a crew of who had struck it big dealing with Safaricom, more than once, in both hardware and software. And the tips they shared included:

1. It will be struggle – with lots of frustrating months of tinkering, back and forth visits to the company; you may go broke and not see the promised land
2. With 18 million customers, they won’t tinker much with their cash machine and don’t pitch old ideas or technology they have outrightly rejected. Try and work within the technological parameters and requirements they are using.

3. You have to hustle on your own to get the product/concept moving with early adopters in the market, before the Safaricom PR machine take over.
4. IF when you strike it rich you will have a very lucrative year, better than an IPO; your turnover will go from zero, to millions of shillings per day, so prepare your bank otherwise they may flag your account for money laundering or being a pyramid scheme
5. Yes they will eventually steal your idea; or they will develop in-house what they are paying you millions for - so your wonderful product has a shelf life of one very lucrative year. It’s only natural that the company will try and reduce their outlay costs to improve margins, while competitors and clones will also eat into your market share and profits and probably even improve on your product.

6. Now that you understand the last point, think two steps ahead, and have more innovations, because the gravy train will not last forever (so don’t buy a range rover in year one). Invest the profits in your next innovation, equipment, or real estate or another more stable industry

In summary it is a vicious cycle that will only pay off for a few as the likelihood of this super nova is very small. Development doesn’t appear to be a bankable field as banks and financiers like to see steady growing income and profits, so it is likely that resources will come from family, friends and savings.

Proparco in East Africa

French financier Proparco had a mini cocktail while their CEO Luc Rigouzzo was in Nairobi last week. The CEO, who grew up in Africa (Ivory Coast) talked about the group investments and potential they see in Africa, being real, not just afro-optimism statement.

In the banking sector, Africa with its 1 billion combined population has a potential urban population of 300 million banking customers, hence Proparco' intervention in the banking sector as well as infrastructure sectors

Proparco with € 1.5 billion assets has 37% of loans and 26% of equity investments to Africa, and their loan portfolio at 2008 comprised 146 million Euros in east & central Africa, and 154m Euros in West Africa
Proparco invests in social, environmental investments for the public good and that transom poverty.

The consumer may not see or feel this kind as Proparco’s intervention is at a higher level with loans of € 5 to 30 million per project (over durations of 5 to 20 years) and up to to 100m in infrastructure, and equity of € 2 to 20 million (over 4 to 10 years)

Tea estate
In Kenya they have invested in Mumias sugar, I&M bank, Zain, Bank of Africa, Serena Hotels, KTDA) , NIC Bank, Rabai Power, Kenafric. Ormat (Geothermal), while Uganda has bugajali hydro power, DFCU, and in Tanzania they have Tigo.

Urban Inflation Index: March 2010

Tracking changes in the three month ago in December 2009, as well as to six months as well as one year ago in March 2009

In 2010 government has shifted adjusted inflation basket to have a better measure of inflation that is less weighted on food. Let’s see how they compare

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 84 compared to Kshs. 83 in December 2009. It’s relatively unchanged, but overall cheaper than the Kshs 96 seen a year ago in March 2009

Free milk
With the onset of rains there is a surplus of milk in the country which has resulted in some sad scenes of dairy farmers and processors having to pour milk down the drains. For urban shoppers there is a boom of milk in the form of larger packets and 1 free packet for every 2 purchase at most supermarkets, and overall shoppers are paying ~45% less for milk now.

About the same
Communications: Safaricom’s Supa Ongea tariff is now six months old (September 2009, and is still being hyped by Safaricom. M-Pesa and SMS charges are unchanged. Price changes are being seen in data (Safaricom tried a one month February to march 2010 of unlimited internets for a price of 1,000 ($13) per week), Orange now has Bunda data bundles, Zain Africa is about to change hands again (new investor is Bharti of India), while Yu is the cheapest, but not making much of dent yet in the market where Safaricom remains the default operator.

Meanwhile equipment prices continue to drop, for smart phone and computers. Banks have gone into computer financing, the latest being KCB Laptops for all last week. And at Safaricom shops, the popular Nokia E63 now cost Kshs 16,000 ($208) compared to 20,300 last September and 23,500 in June last year.

Other food item: Sugar (2 kg. Mumias pack) is at 200, no changed for the last six months

More Expensive
Fuel: A Litre of petrol fuel (at local petrol station) is now Kshs 84.9 (~$5.0 per gallon) which is about 5% higher than it was six months ago. In face since the post-triton fall of early 2009 when shell knocked the price down to 75/= there has been a steady gradual rise of petrol prices.

Utilities/ Electricity: While my electricity: my bill last month is Kshs 1 700 (~$22) less than the 2,100 of December 2009, but about the same as March and September 2009. So despite the prolonged drought of 2009 and rains late on the year and first quarter of 2010, impact yet to hit my electricity bill. However the electricity bill has a component called fuel cost adjustment that is twice hat it was a year ago, it’s billed at 783 cents/kwh, which is 88% higher than the 416c/kwh of a year ago. Not the cost of fuel passed on to energy producers or the government continues to exceed household consumption by 1 1/3 times. So the cost has gone up, but household usage, minimizing use, using better bulbs, better planning has kept the costs in check

With Water bills, this is erratic for most with the Nairobi water company hitting customer with some crazy bills sometimes 3 or 4 times higher than what they have been paying. It has happened to others. Their billings I erratic, mine actually shows a cost reduction from 851 in 2009 to 509 in 2010. However the method of measure and billings has changed and it may only be a matter of time before I get hit with a crazy bill

Foreign Exchange: 1 US$ equals Kshs. 76.6, compared to 75.9 of September and 75.6 in December; but much improved from the 80 of a year ago last March.

Entertainment: A bottle of Tusker beer (at local pub) is Kshs. 150 ($2.00) up from Kshs. 140 in December 2009 at most places I know. East African Breweries is upping their dormant war with SAB Miller and having settled over Tanzania, there are rumours that SAB will re-enter Kenya, perhaps prompting some price wars.

Bank to acquire micro-financier

Trying to fathom how or why Kenya’s smallest commercial bank City Finance would be interested in acquiring micro-financier Jamii Bora which has over 170,000 members.

let's merge
Nevertheless the Kenya Finance Minister has cleared the way for the deal to go through with Jamii Bora who are in the money, having recently repaid Acumen Fund their $250,000 loan (~Kshs 19 million) and completed a substantial portion of their housing project in Kitengela.

IHub Launch

My A to Z notes from two days later; thanks to @ushahidi, @ihubNairobi @whiteafrican @kenyanpundit @jessicacolaco @wanjiku, Conrad

Access thanks to @wanjiku gave me the iHub password and introduced me to Dorothy Ooko of Nokia

Comments you get fewer of these at blog, the more active you are on twitter

Developers filled the launch. did not meet @iddsalim who on the same day published a nice piece on when Safaricom met developers on possible improving times & relations for developers wishing to partner with mobile giant safaricom.

Forests – chat with @ngeny and @swmaina on the danger of man-made forests - don't support ecology (crops around them die forest die) no animals inhabit them,

F1 - Formula one about to start, will be watching with @moseskemibaro and anyone else welcome to join and chat

Funding is the next step to work on at iHub according to Eric

Gatecrashers 250+ attendees according to iHub launch tweet, (was supposed to be 50) many had to cool off with Tusker on the balcony

Geeks are Cool - phrase coined by Mrs M

ICT board CEO Paul Kukubo spoke and they will be represented at iHub in future by @kaburo

iPub open bar was flowing, until the people switched to Yoghurt

KTN anchor Larry Madowo uses his TV platform to highlight tech happenings better than anyone else in Kenya - his news piece about the launch

Mamamikes makes friends – Segeni’s roommate was Moses and on one of their good US customers is now back in Kenya as an art gallery boss

Management stress talked with @kaboro on the fatigue of management (being strangled by neck ties)

Museum for technology was my pitch to Google’s Joe Mucheru to remind people how far things have progressed in a short time. Put up a 28.8 modem (one day a developer will ask what’s a modem?), Ericsson flip phone or cupboard TV set that only works from 5 PM to 11PM

Photos event galleries at Kenyan Poet and Africa Knows

Sevilla, Mr. Joe an icon of the Strathmore University institution, tech before there was tech (IDPM)

Shirts to mark the iHub launch ran out, got a small size which is fine

Twitter folk : @egmphotos thanks for tip on how to use a binoculars as a zoom lens for a camera, @jwanyama and @sheilaafrica taught me photo edit tips and how to send photo submissions Africa knows submission, but also my plate of nyama choma, @sportinkenya – clock is ticking, @edobie- first time meeting this wannabegeek.co.ke
- People did not see but saw them in photos: @pesapal, @afrinnovator @kachwanya, Vincent wangombe (KDN) @gotissuez @creditsms
- People saw but did not get proper chat with - Isis nyongo (Google), @kenyanpundit (made a future date), @pkukubo, @mato74, Denis Gikunda, @ToneeNdungu (very busy MC),

Uchumi is across the street for foods & stuff @jmugambi and I passed there to try and keep it profitable

Vandalism of fibre cable is not a bad as some people claim and seems to affect some companies more than others according to Riyaz

Yoghurt Kahenya’s presentation on natural yoghurt was the highlight of the evening, despite him having a car accident that day

Tech Moment: Nairobi iHub for Innovation and more

iHub Nairobi: Our fabulous friends at Ushahidi are in the news for their recent technological endeavors which have been used in earthquakes rescue & relief in Haiti and Chile. But back here in Kenya, is something even more momentous, which is the unveiling & launch of the Nairobi iHub on March 3 2010.

It’s the culmination of many months of talks, visualizing the concept to plan, searching for appropriate buildings and finally the hard work of transforming an empty room to an innovation hub via teams of volunteers, advisers, and technicians while side-stepping others who were already hogging the free internet. Congratulations!

Other Tech Events in Nairobi this month:

The Pan Africa Media Conference from18-19 March 2010, a rather top heavy conference (lots of Current & Ex African presidents and leaders) but which has interesting speakers and panelists like Dr. Mo Ibrahim, H.H. the Aga Khan, Chris Kabwato (Highway Africa) Guy Berger (Rhodes University SA), Rose Kimotho (MD Kameme FM), Ory Okolloh (Ushahidi) Matthew Buckland (Media 24), Patrick Quarcoo (Radio Africa) and a talk on New Media - the possibilities, limits, and risks offered by blogs, SMS, MMS, social networks.

The Kenya ICT Board has
- A meeting for mobile developers (follow up from #MWEA10) on March 2
- BPO/ITES Centre of Excellence on March 4
- Tandaa Symposium on Local Digital Content on March 8

The ICANN Nairobi conference takes place from 7-12 March 2010.

The Nairobi 1% event takes place on March 12.

The Institute of Software Technologies launch their new brand, IT training center, and premises on March 11.

E-Fraud News: The Business Daily has a write up today about Kenyan banks combating fraud to protect their customers even as they roll out new technology channels for their customers to access more convenienct services from the banks.

In the blog world there have been some recent tales of e-fraud and bank fraud:

- Room Thinker received the latest 411 letter from Tim Geithner at the US Department of Treasury
- Wanjiku lost some money through old fashioned inter bank transfer
- Idd Salim warned of the dangers of SMS banking fraud as a ticking time bomb warning that SMS can be intercepted on its way from your phone to telecom, changed & edited, delayed, deflected & even deleted before it ever gets to bank.
- Gmeltdown writes about a recent mpesa fraud> and there’s even a related facebrook group but thankfully this is very rare occurrence among the millions of Mpesa customers.

You don’t know my name: Seems I spoke to soon in lamenting registrars mistreating retail investors in a bid to clean up their records, cut fraud, and authenticate investor information. My own stockbroker CFCStanbic (formerly CFCFS) wants the same of me, asking via an ominous warning letter, about Know Your Customer requirements, that (after about 5 years of trading through them) to confirm my identity as an individual. I’m as an individual supposed to provide copies my documents (CDS account opening form, my ID, 2 colour photos, PIN copy, utility bill, bank statement or pay/slip which will be certified by their panel of lawyers). There are also additional requirements for partnerships, informal groups, trust accounts, accounts for minors (birth certificate & parents ID’s) sole proprietors, foreign corporate, companies and Diaspora investors (certified passports, photos, utility bills, bank/c.card statement)

Compliance with the new KYC will enable me to continue transactions with them after March 31, but there’s’ no mention of what will happen if there’s no compliance by the March 26 2010 deadline.

Kenya Bank Rankings 1968 Edition

From reading a 1968 book Who Controls Industry in Kenya - a report of a working party comes some history of the Kenyan banking sector. It mentions that in 1968;

- Kenya had 10 banks and all but 3 banks were foreign bank off shoots.
- They had given loans of loans of £70m, deposits of £83m – a book ratio of 83% - compared to US or US which had rations of between 33% to 50%
- Depositors received 3-4% interest on deposits, and paid interest of 7-8% on loans [today deposit rates are about the same but loan borrowers pay 12 - 25%]

There were two tiers of banks then;

The Big 3 Banks which 3 held 80% of deposits and 85% of bank assets amounting to K£111 million in 1966 were
- Barclays Bank – had assets of UK£1.4 billion and had 83 branches, and Kenyan directors included Michael Blundell, S. Waruhiu and J. Opembe. Today it has 111 branches
- Nation & Grindlays (now KCB) had assets of UK £401 million and after tax profit of £1.2 million. It had 50 branches, and 16 directors who were all British. Today KCB has 165 outlets in Kenya
_ Standard Bank (now Standard Chartered) with assets of UK £892 million and a net profit of £3.1 million. It had 41 offices, 22 directors all British.

Next 7 Banks
- Bank of Baroda
- Ottoman bank
- Bank of India
- African Banking Corporation (subsidiary of standard bank)
- Commercial bank of Africa
- Algemene bank (General Bank of Netherlands)
- Habib bank

Other institutions
- Cooperative Bank of Kenya (established in 1967)
- National Bank of Kenya (established in 1968)

Finance houses
- Big 3 (licensed as banks)

- National industrial credit (then 40% owned by Standard Bank, now NIC)
- United Dominions Corporation
- Credit finance company (now CFCStanbic)

Others registered as ordinary companies
- Transaction finance corporation (subsidiary of cooper motor corporation CMC)
- Industrial promotion services (Now IPS, was est. in 1963 by the Aga Khan)
- Africindo industrial development (powerful Asian industrialists seeking credit facilities for exports o India with training for Kenyans there)

Development corporations
The big 3 commercial banks also owned development corporations to undertake longer-term investments than normal banks accepted; these were Barleys Overseas Development [assets of B£9m and 88 projects in east Africa], National & Grindalys Finance and Development [B£3m] and Standard Bank Development Corporation

Building societies
As at 1964 they had loaned k£3m more than they had in deposits; this was after sudden withdrawal in 1959 of £4m savings by European and Asian depositors
- Savings & loan society
- East African building society
- First permanent (east Africa)
- Kenya building society (subsidiary of commonwealth development corporation CDC)
- housing finance company of Kenya (now Housing Finance)