Scangroup & Ogilvy Africa

At the end of April Scangroup announced a deal to buy into the Ogilvy Africa group and has now invited its shareholders to approve the transactions.


1. The acquisition of 51% in O&M Africa and 50% in Ogilvy East Africa will be structured as
- O&M Africa: 51% is to be acquired by payment of $238,360 (Kshs 19 million) cash and transfer of 6.2 million shares of Scangroup worth Kshs 166 million.
- Ogilvy East Africa: 50% will be acquired by payment of Kshs 13 million to Ogilvy south Africa (paid in US$) and transfer 4.4 million shares worth Kshs 118 million, and a payment to fellow shareholder Russell Holding of one euro and payments to Koome Mwambia comprising cash of Kshs 20.6 million and transfer of 3.12 million Scangroup shares worth Kshs 82.4 million
2. Shareholders will have to approve creation of 14 million new shares and waive their pre pre-emptive rights to allow the new shares to be allotted to Ogilvy South Africa and Koome Mwambia.

Winners
- Scangroup gain entry via minority shareholding in Ogilvy into Namibia, Cote d'Ivoire, Senegal, Burkina Faso, Cameroon, Gabon, Zimbabwe, Nigeria and non-equity affiliates in 11 other African countries to create a Pan-African agency
- Koome Mwambia sells out his shareholding gets cash and becomes a top 10 shareholder in Scangroup and he is to enter into a management agreement to remain MD Ogilvy East Africa
- MD Bharat Thakar gains a pan African footprint and loses just 5%

Losers
- Local investment bankers: No transaction advisers were appointed and the IM only has an opinion from BDO East Africa that issue price of Kshs 26.4 is fair and reasonable and Deloitte's calculation of these price (now trades at Kshs 36)- Kenyan corporates whose choice of partners in media, PR, advertising got smaller – as Scangroup, Ogilvy, Hill & knowlton, Blueprint, Mindshare , Millard brown, Squad digital, Smollan are all under one roof.
- Scangroup if the share swaps are denied by the South African authorities, will have to pay Kshs 427 million ($5.2 million) to proceed

From Huawei to Makmende

Last Tuesday was a roundabout day that began with the Equity Bank half year results announcement at and ended with Safaricom launch of a U8220 Android phone made by Huawei.

In between I shook hands with James Mwangi, Churchill dodged my paparazzi snap attempt, a friend of mine missed out on a free giveaway of the Huawei phone, and I missed out on buying some shares in Equity Bank as my stockbroker (temporarily) misplaced my funds.

At the Huawei launch, I had interesting chats with one pal on Kenol and another who found out an interesting tale about mobile spectrums – basically Kenyans should ignore mobile phone company promises and forget about 4G as its’ reserved for the Kenya military until further notice.

Huawei and Safaricom were jointly launching an android phone to the Kenyan market and since the Safaricom COO was late in traffic as per his boss, Michael Joseph the CEO stepped up and launched the phone on his behalf. The CEO seemed underwhelmed by the occasion, maybe because his retirement was about to be officially announced or maybe because it was because the Smartphone being unveiled would cost about Kshs 30,000 and was nowhere near the $100 (~Kshs 8,000) price for a smart phone which he has commented as being a key target for future data growth.

This ambivalence perhaps cascaded down because when Safaricom ran adverts for the new phone in the next day's paper , they were advertising a VF845 costing Kshs 16,500 ($206) and not the U8220, which had just been launched. The 'correct' ad for the U8220 then ran the following day pricing the phone at 27,200 (~$340)

Two days later, Bank of Africa formally opened their Ngong Road branch at Bishop Magua Center. This is their second branch opening this month after Nakuru and they have set out to go after the not for profit customers. They have launched a Goodwill Current Account with goodies for NGO's including waiver of monthly ledger fees, cheque book costs, (Kshs) withdrawal/deposits, internal transfers, incoming wires, banker’s cheques, interim statements and a minimum operating balance.

And finally on Friday, in the same building, the iHUb hosted a launch by Kuweni Serious (Get Serious) of a of a series of clips aimed at getting young Kenyans to participate in the constitutional referendum and in public life and starred Makmende.
Here’s one clip

Farewell Michael Joseph

Safaricom announced in a statement that their long-serving CEO Michael Joseph will step down in November from the helm of the company. He has been CEO as long as this blog has been around and a search through archives finds these posts

image from the business daily
- Long before, the IPO there was a shareholder tug of war evict him in favour of a Kenyan CEO

- In 2006 he gave a talk at the British Council on how the company which started with 5 employees and 17,000 customers, overhauled celtel and came to be one of the largest revenue earners and tax payers in Kenya. The talk was given before the IPO and before they launch M-Pesa and had numerous insightful tales, as he was the only spokesperson for the company and he also touched on low education standards, wrong government statistics, the problems at kencell/celtel/zain/ and political battles to succeed his seat.

- The first post IPO report shows that he has 2.35 million shares in the company, same as the CFO so probably a contractual bonus

- He has said post retirement that he will contemplate becoming a Kenyan citizen. He (and the company) have received manyaccolades both local and international. Form government, the private sector and he is noted for his CSR efforts especially in conservation of wildlife and forest

- For many years, he has been Kenya’s Steve Jobs, a man so closely inter-wined with their brand and with a medical history, but whose company had not defined a succession plan until this week. New reports indicate the new CEO will work with MJ for two months from September, and that he will continue on in advisory role even after he leaves the CEO office.

Other Blogs
- Kainvestor asks if he was corporate legend?
- Ratio Magazine on how the retirement may shake up the local mobile & telecom sector
- Interviews with the CEO

Karibu Member

On July 20 Equity released their half year results at Equity Centre headquarters in Nairobi CEO James Mwangi mentioned that they are usually the first with results (this time pipped by KCB who are in the middle of a rights issue)

Positive economic outlook: He noted that the picture is much improved from last year; with good agricultural harvests and prices, high exchange rate, government social programs rolled out (Vision 2030 social equity programs for the youth & marginalized), positive progress in the political arena in terms of new constitution, formation of the East African community with 126 million people, remittances are above 2006 figures, tourist arrival are ahead of the 2007 figures, and overall the economy of Kenya is expected to grow by 4.5 – 5% this year.

Bank focus: How does bank focus strategically?
- They have introduce new concept to influence direction of the bank, which for many years operated at micro finance until five years ago went into commercial banking. They have now created structure and are building capacity to move into investment banking (highest IRR per unit of capital), and merchant banking (private equity, venture capital) around east Africa.
- About 400,000 customers graduated to upper and middle SME’s class. They have invested in a level 4 data centre, with a 65 million-card switch and banking platform that can handle 35 million. also boldly claimed that they have overtaken Safaricom to be Kenya’s premier brand
- Innovation will continue through more collaboration with Telco (e.g they have opened 400,000 m-kesho accounts) without agents (yet) and are doing about 20,000 ones per day. Their their dream of opening 10 million accounts is still alive. They are acquiring merchants for visa and MasterCard (3,000 merchants in Kenya) and CBK has approved 4,000 retail outlets to become agents; they want agents to do transaction processing (withdrawals/deposits) at a commission, and equity do loan processing - so when you go buy milk and bread from kiosks, you may be able to withdraw cash

Bank performance: compared to last June
- Added 20 branches (now 165) but none in 2010, and 550 ATM’s (up from 494) and say they have achieved staff stability (5,169 from ,5,056) - no more huge growth in numbers
- Have 4.96 million deposit accounts (up from 3,.9m) and loans 833,819 loan accounts (up from 710k)
- Loans of 68.3 billion (up 27%) deposits 87.8 (up 53%) and assets 122.5 billion (up 40%) – CEO noted that with the economic recover they ate going back to the days when deposits used to grow at 70 % p.a.
- Interest income was 7.3billion (up 45%), commission income 3.8 billion, total income was 10 .1 billion and with expenses at 6.27 billion, (up 36%), profit before tax for teh half year was 3.88 billion [~$48 million] (up 46% from last June)

Summary: He’s optimistic because unlike last year, income is now growing faster than expenses, staff costs grew at 16% compared to previous 40% and asset quality back to 2007 (before Kenya election chaos and drought). The CEO was keen to emphasized that capital base of bank good, and shareholders will not be diluted this year or next year and that their investment in human resource, capital and systems are large enough and stable enough for the next three years, meaning that they can at least double in size without making new investments or seeking new capital.

Q&A

Regional diversification How have Sudan and Uganda performed?
Sudan: Contributed to profit in first year of investment almost ~$2m– not bad for Greenfield. So far only operated in equatorial Sudan, which they can run from Uganda. They have also got lots of corporates to sign with them as their bankings, which used to take 4 days, now takes seconds with equity. The CEO expect S. Sudan to have a peaceful referendum vote next year, which will yield Africa’s 54th state

Uganda: Here, they have been bleeding - in Q1 lost 12b shillings (Kshs 600m), Q2 made los of 3b shillings (Kshs 120m) – but expect to break even this month, and be out of loss in September. In Uganda they made a made mistake, as they did not freeze lending when they bought the other bank - left in the old managers who lent $16 million in 3 months. He believes its much improved; even though they bought a non deposit taking organization, they now have more deposits than loans, (have mobilized Kshs 4b deposits, compared to loans at Kshs 3b) and have 440,000 savers in Ug.

Their increase in provisions in H1 of 2010 (up 211%) is as a result of making a one off hit to clean up Uganda books and the investment was a learning process for them. In hindsight they should have frozen lending and it’s a good lesson they will apply in more countries – the cost would have been much higher if they had made their first outside investment in south Africa or Nigeria and they still have their plan to be in 10 African countries in the next 5 years and now have a 50 member expansion team.

The next foray in East Africa is likely to be Tanzania, earlier they had wanted Rwanda, but there was no easy entry point. But with the new east African community protocol, staff will be able to work without work permits, and it will be much easier to travel across borders

Cyber crime: While he said there have been no hacking attempts on their secure systems, his managers mentioned that there have been attempts to phish or skim originating from eastern Europeans who see Africa as a soft target - however the attacks are not specific to Equity Bank (who are a leading issuer of visa cards) who are on their guard and have not lost through this fraud.

Agency banking opportunities: - From September this year, customers whose salaries pass through Equity will be able to apply for loans from mobile phones or ATM's, not fill out any forms, and automatically get approved a loan (without human interaction)
- They do about 2,500 M-Pesa transactions each day through their ATM’s from which they earn more than normal ATM charges, gettingabout Kshs 50 – 60 per m-pesa transaction as customers come and withdraw amounts that other agents can’t facilitate owing to float

Barclays no longer flat

A few years ago Kenyan banks rolled out a variety of flat fee accounts; this was at a time that there was an outrage in the country over bank charges pumping up bank super-profits.

The flat accounts offered a range of services at one flat fee. NIC was the first with MOVE, then Diamond Trust, Standard Chartered with Diva (for Women) and later X Account (for Yuppies), while Barclays had Bouquet accounts that cost Kshs 490 ($6.5), 590 and 690 ($9.2) per month.

They are few now left. Diamond Trust took their fee lower, and NIC went higher to ease out the flat tariff. Now Barclays have joined suit; for a while, they may have felt they were being taken for a ride by their customers (perhaps business owners who funneled large volumes of transactions through the flat fee account, and a few months ago) they tried to disguise an increase in the minimum fee flat fee from 490 to 590, by claiming that they had added ‘free’ mobile banking.

One problem with flat fee accounts for some sustomer who underutilized the accounts (like myself) was that they were limiting in that you paid much more than you used and you could not get additional services without paying extra; flat fee accounts could not be altered, e.g. to get a cheque book or set up a standing order you had to move to a higher priced account

Last weekend Barclays did a system upgrade and one end product seems to be a removal of the flat fee monthly accounts in exchange for a more conventional transactional charge for each over the counter or ATM transaction. The new accounts are called bank account (reduced ATM fees), bank account plus (free banking if over 50,000 [$625] in account), business flexi (cheque book) and business bouquet (first 20 transactions free). They also have tie-in discounts with Tamasha/buffet Park. Nike shop, Nairobi sports house and Sherlock’s den

Medical Investments in East Africa

Reading the Nairobi Hospital tea leaves

Had a mini debate (with @matrixster) about the potential returns of investing with AAR or another medical sector firms in Kenya (if it is well run). Kenya and the region’s population has been steadily growing (good or bad thing?) and with more people accessing formal medical care would that not be a growth opportunity? While it’s tough to get true picture of the many private firms that operate in the sector, there has been quite a bit of banking and VC interest, with some local venture capital firms specificaly seeking out medical investees.

Kenya’s premier hospital, Nairobi Hospital, which is owned by an association of members, also have their results out for 2009. It is considered a hospital for the middle and upper class in Kenya and the region. But, you can also get admitted to Nairobi Hospital if you observe the Underwear Rule (hilariously illustrated here byKuweni Serious)

Anyway Nairobi Hospital, which is not a bad place to stay and recupearate ,had these illustrative numbers to ponder.

- Turnover of Kshs 3.98 billion ($50 million) up from 3.3 billion in 2008
- A surplus of 832 million ($10.5 million) up from 564 million the year before
- Some income items: Medicine sales of 1.194 billion, inpatient bed income of 809m, radiology 400m, lab income of 628m, theatre/HDU/ICU income of 300 million, student fee income of 33m, and finance income of 47m.
- Some expense items: staff costs of over 1 billion, bought medicine costing 894m, cleaning costs of 70m, oxygen 16m, and finance cost of 22m (with 11m paid to credit card companies)
- Some operational numbers for the hospital: They had 106,242 visits to accident & emergency centre, carried out 427,725 lab tests, handed out 269,302 prescriptions, and did 93,755 radiology procedures. They also anoccupancy levels of 80%, up from 77% on their 272 beds, and had a slightly improved a customer satisfaction measure of 79.1%

They promote their service locally and abroad; Since, in Nairobi, there are firms who advertise for medical procedures to be performed in India, the Nairobi hospital also competes for the same customers; last year they continued a medical tourism program that targeted 8 African counties and their teams made visits to DRC and Uganda, which may have contributed to their 50% increase in the number of foreign patients. Domestically, they participated in 16 expos and 36 corporate sessions, had open days (kidney, cardiology) and sponsored programs on Radio Waumini, and K24 TV.

A to Z of Proposed Kenya Constitution

Kenyans will vote in a referendum in August 2010 on a new constitution. Here’s an A to Z summary of some of what’s contained in it and the [chapters] which are cross posted at Mzalendo (where one can also download the current, proposed draft, and other analysis of the changes).

Affirmative action: provides for 1/3 women on government boards, county assemblies (177) etc. (noble, but is it practical?)
Culture: parliament will enact legislation that will see communities get royalties for use of their culture, and recognize the use of their seeds which will legalize mnazi, muratina, mayeek, busaa etc (11)
- Youth: can benefit from affirmative action and access training and employment (55), but odd for a government that continually employs retirees and has extended the retirement age

Citizenship: Dual citizenship is allowed - and a born Kenyan does not lose citizenship by becoming one of another country, and anyone who has lost it is entitled to re-acquire it (14) and (16). Also citizenship can be acquired by marriage to a citizen for 7 years, or lived in Kenya for 7 years (15) or is an orphan under 8 years can be citizens (14)

Devolution: - The 47 counties are spelt out in the first schedule and include Mombasa, Kwale, Kilifi, Tana river, Lamu, Taita/Taveta, (for what looks like coast province), while Nairobi City is a single county
- County government will have an executive committee (led by governor and a deputy governor who may not serve more than two terms) and not more than 1/3 of the assembly members.
- National laws prevail over county laws where there is a conflict (191) (e.g. Mandera town that purported to ban DSTV)

Elections: - Will be run by one body called the independent electoral and boundaries commission (82); currently there are two separate commissions, one for boundaries, one for elections. After it passes the boundaries commission will set constituencies and ward boundaries for the remainder of their term (but not county boundaries)
- Election petitions can be served by a notice in a newspaper (87)
- Independent candidates can avoid messy, expensive, party elections by running without signing on to a political party by obtaining 1,000 signatures for MP and 2,000 for senate from constituents (99). Also political parties have one year to comply with political parties act or be disbanded
- Election date is constitutionally set (101) as second Tuesday in august, every fifth year for all including president. (This will be during August holidays for most schools which also double up as voting centres, but also importantly won’t affect busy Christmas season when elections have traditional being held and which churches have complained about)

Financial Management: - No budget busting: government may not spend more than 10% in supplementary appropriations in any financial year (223)
- Parliament shall enact creation of an ethics and anti-corruption commission (79) (good because current anti corruption commissions can’t review ethical actions such as conflicts of interest actions which don’t qualify as corruption)
- Constitution defines separate roles of attorney general (156), director of public prosecutions (157) controller of budget (228), and auditor general (229)
- The human rights & equality commission, judicial service, land commission and auditor general all have power to summon witnesses in the course of their investigations (252)
- No double jeopardy: every accused person has the right not to be tried for an offence that was previously acquitted or convicted (50). Also you can’t be tried for an act that as not an offence in Kenya, or under international law (does that exclude old economic crimes which were only legislated in 2003? would Pattni, other Goldenberg offenders go free?)
- A salaries & remuneration commissions will be created (230) that is separate from the public service commissions (233)
- County Governments: are a are a new level of Government created to devolve power to the people by way of 47 county governments (176), will receive and share at least 15% of revenue raised by the state (203). Another 0.5% will go to an equalization fund (204) for the government to use to provide services to marginalized communities for the next 20 years. A commission on revenue allocation (215) formed by the president will recommend how much each county gets out of the national government while the senate will vote every 5 years on resolutions sharing resources among counties (217). Parliament till normal vote on such bills two months before the end of their scheduled terms (218). Using the 2009 numbers, of tax revenue of Kshs 480 billion, county governments will get 72 billion
- Tax separation: county governments collect property, entertainment and other taxes approve by parliament, while only the national government may collect income tax, customs, excise and valued added – VAT taxes
- County finance: county government may take loans if their assemblies approve, but only if the national government guarantees that (212). Parliament may legislate bailout of non-functioning county governments (190) and the government must operate sound financial systems prescribed by national government

Judiciary: - Kenya will now have a supreme court (163) in addition to court of appeal (164) and high court (165) and subordinate courts (169) comprising kadhi courts, magistrate courts, and court martial
- The Kadhi’s Court is limited to Moslems matters of status, marriage, divorce and inheritance (24)
- The president will appoint judges, recommended by a judicial service commission for approval by parliament (166)
- Traditional dispute mechanisms, are encouraged, but shall not violate bill of rights (159)
- Judges and chief justice lose jobs under the constitution and have to re-apply (–)

Land: - Clause (60) says land customs and practices should not have gender discrimination, but (67) which creates a national land commission also encourages application of traditional dispute mechanism in land conflicts (where daughters are routinely left out of land inheritance)
- Community land definition (63) is vague – it mentions ethnicity, but is that Masai land (managed by specific communities), (volatile) Kalenjin land, county government land, or Ogiek land (traditionally occupied by hunter gatherer tribes)?
- Land holding by non-citizens is restricted to 99-year leases (65) (takes effect as soon as the constitution is passed) and land without an heir reverts to the state (62)
- Parliament must ratify concessions of land and mining agreements (71) (no more Tiomin’s)
- In terms of land not much will change since parliament has the discretion to set rules (68) on land investment, minimum and maximum land holding, foreign ownership of land, matrimonial sharing and inheritance

Parliament/Legislature: - Is based on 290 constituencies and 47 counties.
- Parliament (97) will comprise 290 members of parliament, 47 women one from each county, 12 nominated by political parties and a speaker
- Senate (98) will comprise 47 members, one representing each country, 16 women nominated by political parties, 2 youth nominees (M/W), 2 disabled nominees (M/W) and a speaker. They will legislate on bills concerning the county governments (110)
- There will be two different speakers and two different clerks (128) in each house, and also speakers for each county
- Money bills (114) are any that touch on taxes or use of public money or guaranteeing of loans, and will be referred to the cabinet secretary and parliamentary committee first before parliament votes on it (e.g. Anglo leasing?)
- Any parliamentary vote that affects their interest e.g. salaries wont take effect until the next parliament comes in (116)
- Quorum (121) is higher for senate (15 members ~22%) than for parliament (50 members, ~14%)
- Parliament /national assembly (132) shall approve on nominees of the president for cabinet secretary (ministers), attorney general, secretary to cabinet, principal secretaries (permanent secretaries), ambassadors/diplomats
- There are no term limits for parliament as there are for presidents, county government, judiciary and government officers e.g. inspector general of police will only serve one 4-year term (245)

President: - Is (131) head of state, government, and armed forces
- Restricted powers of acting president defined (134) as well as procedure when a president is incapacitated (144) or impeached (145)
- Will be sworn in public (141) (swipe at you know who) two weeks after election results or one week after an election petition verdict by Supreme Court
- Deputy president rules are defined (148) may not be replaced on whim (150) (has to resign or be impeached) and may not serve for more than two terms (148)
- Cabinet size is defined (152) as between 14 and 22 cabinet secretaries (152) approved by parliament (no more 40 minister plus 60 deputy minister governments)

State officers: (and anti-corruption)- Have leadership rules & guidelines set out for them mainly objective service to the public (73) & (75)
- Can’t have bank accounts outside Kenya
- Restrict number of directorships to not more than 2 simultaneous ones
- Can’t be involved in politics (e.g. chair a Kengen and a political party)
-Person who has been removed from a state office for a violation is not eligible for any others
- State officers shall not have other gainful employment (77) (is this a repeal of the (controversial) Ndegwa Rule that allowed civil servants to engage in private business?

Transition/Summary
- Parliament’s calendar for the next three years to 2012 is going to be very heavy as they amend and enact new legislation to support the constitution if it is passed in August
- President Kibaki, Vice President Kalonzo,Prime Minister Raila – his deputies Uhuru & Musalia, and the bloated cabinet of 100 ministers & deputies will remain in their posts until 2012 or the dissolution of the Grand Coalition Government. During this period Kibaki can continue to make appointments in consultation only with Raila. In effect the executive and parliament have postponed the difficult decisions of trimming the cabinet and subjecting appointees for parliamentary approval to the next government, as the constitution does not provide for prime minister or deputy ministers.
- Key government officials will be forced out including chief justice Gicheru who will be out in 6 months, attorney general Wako and the auditor general who will be out in 12 months while all other state officers remain intact. In the first year parliament is to setup up system to vet existing judges. Any acting officials are left in limbo, so expect anyone serving in an acting capacity to push for confirmation before the constitution becomes effective
- The provincial administration staff will be re-deployed into government over the next 5 years
- Civic education has not been carried out adequately in the country and media and politicians have polarized on issues of the kadhi courts, abortion and land.
- From a taxpayer perspective, taxes are likely to go up to support devolved government structures which ill take up over 15% of money raised by the current government, and services provisions are likely to go down, in the short term as the government is already on a cash crunch and devolved government set up to take on their new roles

KCB Rights Revolution

($1 = ~Kshs 80
Six years after the first, and two years after the second (reloaded), comes a third KCB shareholder rights issue (a revolution).

KCB (aka Kenya Commercial Bank) is Kenya’s largest bank by assets [Kshs 221 billion (~$2.75 billion)] and has 210 branches in Kenya, Rwanda, South Sudan, Tanzania and Uganda. Separately, a Central Bank of Kenya audit report for 2009 shows it has the 3rd largest number of deposit customers at 751,852, behind equity 4 million and co-op 970,000 and followed by Barclays, 748k and Family 574k.

In 2004 and 2008 they surpassed their fund-raising targets and raised 2.3 billion and 5.2 billion respectively. This time they are aiming for a much larger amount Kshs 15 billion (~$188 million), by offering 887 million new shares to their shareholders at Kshs 17 ($0.22) per share, in the ratio of 2 new ones for every 5 held – adding to the issued 2.217 billion shares and representing a 40% increase.

The issue is not underwritten and is subject to a minimum subscription level of 50% i.e. must raise at least 7.5 billion. The shares will also be available to other east African investors in Uganda, Tanzania, and Rwanda. Rights also provided a way for shareholders to buy shares for close relatives by way of private placements.

The prospectus (IM) (PDF) was not mass mailed this time, but is available only from their web site, stockbroker, and branches of the bank.

comparisons to the last rights issue in 2008
Then (June ’08) ; Now (July ’10)
- Target 5.2 billion ; 15.8 billion (~$190 million)
- Focus: then - East African expansion, Bank ESOP ; Now - grow mortgage business and other growth (if funds are raised, 13 billion will be used in Kenya, 1.5b in Uganda, 894m in Tanzania , 473m in Rwanda) Negative funds marked for Sudan and elsewhere the IM notes that KCB with 5 branches has 34% of the Sudan market by assets
- New shares 222.1 million ; now 800 million
- Price : then - 25/= ; now – Kshs 17/=
- Allocation: then : 1 for 9 : now 2 for 5
- Market cap: then – Kshs 66.4 billion, now – Kshs 47.6 billion?
- Profit after tax then - 2007 2.9 billion ; Now - 2009 - 4.5 billion
- Result: then oversubscribed; now, may fall short

Budgeted cost of the offer: 2008 - 220 million : 2010 - Kshs 446 million ($5.5 million)
What costs more? : CMA approval fees – up 360% (kshs 37.5m), Transaction advisor – up 288% (31.5 million), PR/advertising – up 300% (69.4 m), Legal advisor up 190% (2.2 million) NSE fees up 10% (500,000)
What costs less? Reporting accountant (3.8m is unchanged from last time so virtually a decrease), and no figure given for printing costs which should be substantially lower than last time as they are not printing & mailing a copy the 116-page prospectus to each of the 169,076 shareholders

Market players: The lead sponsoring stockbroker is Standard Investment Bank and they are also the lead transaction advisers along with KPMG. In Kenya, there are 18 NSE members selling the shares [including discount securities under statutory management, and reliable securities (in which Old Mutual acquired a 70% stake)] as well as 6 commercial banks with large branch networks - Stanchart, Equity, National, Co-op, Barclays and KCB itself)

The rights issues is also open to foreign investors who are East African nationals who can buy shares through;
- In Tanzania: 6 investment banks (including Core, Orbit, Rasilmali, Solomon, Vertex)
- In Uganda: 20 investment advisers and stockbrokers (include crane, MBEA, African alliance, Crested, DFCU, Stanbic, Devere)
- In Rwanda: 8 investment banks (including MBEA, Dallas, Continental, and a trio of Kenyan offshoots - (dyer & Blair Rwanda, kingdom, Faida)

Shareholders: Anchor shareholders - then and now :
Government of Kenya (26%:23%), NSSF (7.8%:5.23%), ICDCI (3.5%:3.36%), Sunil shah, (2.33%:2.33%) staff pension fund (2.32%, now out?). In terms of directors, no change except that the IM shows that Group CEO sold his entire individual shareholding between 12/09 and 7/10 while another has decreased hers by about 70% (none have

At the record date, KCB had 169,076 shareholders who included other East Africans (12 institutions, 198 individuals) and foreigners (55 institutions, 438 individuals)

Calendar: Record date 18/6, rights start trading 1/7, last day trade rights 12/7, last date to pay for rights 23/7, new share trade 19/8,

Verdict: The rights started trading at over 1 shilling, but in the span of a week have dipped by 50% to about 0.5 shillings per share. Stockbrokers say that demand is good for the shares but that they anticipate the Government and one other top shareholder (one on CNBC said it would be the NSSF) are foregoing the offer and selling their rights before the offer lapses leading to the dip in the rights price.

Investment analyst have variously complained about the massive amount of shares being listed, dilution of existing shareholders, and the large amount of money being raised by the bank, which they doubt has the capacity to utilize the infusion efficiently. One analyst from Renaissance Capital said they had downgraded KCB when the rights issue was announced.

Farewell CNBC Africa?

From July 2010, my favourite TV channel CNBC Africa is no longer available on free TV in Nairobi. CNBC Africa is not going away, just that it will be harder to find and more costly to reach.

A twitter message from the company shows that All Kenyan viewers should be advised that @cnbcafrica is completely exclusive to @DStv on Channel 410

So no more free broadcasts of the channel, only on for DSTV subscribers. Having CNBC in Kenya was a great addition to our local airwaves. It provided a forum for business talk, almost 24 hours a day, refreshing counter-programming e.g. on Sunday morning when every other free TV channel feels that it has to broadcast a noisy church sermon.

Many will miss the range of investor & industry analysis, business news and interviews from around Africa (South Africa, Kenya, Nigeria), Asia, Europe and the USA. Still the video’s of the day from the channel can still be found at the ABN Digital site that’s updated with fresh content on a daily basis.

Other reads: Business reporting is ‘hot’ in Africa with CNN market place Marketplace Africa and last weeks edition of the Diageo Africa Business Reporting Awards now in its seventh year. Also here’s a profile of CNBC Africa Nairobi anchor Terry Anne Chebet and another story from South Africa that gives an interesting insight to the underbelly of the profession.

Data Collected but Not Processed

So much data is being collected from Kenya citizens these days at various points of transactions by citizens. This is largely in the form of being asked to produce more and more documents to authenticate/verify information that some of the organizations already know or have in their archives - these include:

- Last week (June 30) marked the tax filing deadline Kenyans who rushed to the revenue authority offices and returned forms, while some even managed to file online
- Government workers & civil servants have been filing their annual income and asset returns for about six years now in a wealth declaration exercise – but the forms are just filed away, and for some who participate such as members of parliament, the rules stipulate that no one can look at their forms ever!
- Mobile phone companies have began to comply with a directive (not a law) that asks mobile phone subscribers to register and verify their data in a bid to crack down on terrorism, money laundering, hate crimes etc. A lot of this information’s is already in the hands of the companies e.g. with Safaricom, post-paid subscribers, M-pesa users and any shareholder who registered for dividends by m-pesa last year has already given all of this information – and Safaricom have now issued a statement that m-pesa and post-pay customers won’t have to re-submit their information. Kahenya views the mobile phone registration exercise as being for national security to build a database on citizens that they can tap into if/when they choose to scrutinize.
- From July this year, it has been mandated that there will be Kenya banks share information in a program to improve the assessment of borrowers capability to repay loans and which is hoped will lower the cost of credit (to good re-payers) and amount of bad debts at banks (by filtering out bad re-payers)
- Some banks have changed, others have not. Some like Barclays ask you to bring in a passport photo to open an account, while others like Equity snap your digital picture in their banking hall after you fill out the forms. Still in a single bank you may have an account, but to open another savings or credit card account, you may be asked to produce photocopy of ID, passport photo, and your bank statement
- My problems with custody registrar services who are one of the largest collectors of photocopies of documents, continues to this day; and CRS appear to have been vindicated by the Kenyan stockbrokers fraternity who have endorsed the Kenya capital markets proceeds of crime and anti-money laundering efforts by way of obtaining as much information as they can to ascertain a customers risk profile, nature of business, sources of funds and they are also to report any transactions greater than $10,000 (~Kshs 800,000)

A lot of the information is in paper photocopy form, and in application forms which thousands of people fill out without reading the fine print of what the information can be used for e.g. Safaricom m-pesa dividend mobile phone dividend payment form explicitly stated

Safaricom recognizes the importance of protecting privacy (3.1)… Safaricom collects personal information that we use to profile m-pesa users (3.2) and administer accounts …Safaricom does not share your information with unauthorized persons (3.3)…and you expressly consent and authorize Safaricom to disclose data relating to your dividends to (among others) Kenya police, central bank of Kenya, Kenya anti corruption commission, the central depository & settlement corporation (11.2)

So there is a massive amount of information being collected, but is it being processed? No and Yes. No because it may at most be at most scrutinized at the point of receipt/approval (mainly only in the case of banks) and then filed away to only be retrieved if an account goes bad.