EABL & Serengeti

East African Breweries is seeking shareholder endorsement of their decision to purchase 51% of Serengeti Breweries of Tanzania. They have sent out a shareholder circular produced by Merrill in London that outlines the nature of their investment.

Partnership: Serengeti will distribute EABL brands exclusively in Tanzania (except duty free shops). Also Serengeti will brew EABL beers but this has not yet started
- EABL will distribute Serengeti products worldwide (the include Premium Serengeti Lager (PSL), The Kick and Uhuru Peak beers, as well as the non-alcoholic Vitamalt Plus)

(image from Christian site writing about beer)

- The deal is contingent on EABL selling its 20% stake in Tanzania Breweries (presumably to Tanzanians), not closing any Serengeti plants while continuing to produce certain Serengeti beer brands for the next five years. (SABMiller still have a 20% stake in Kenya Breweries)

Payment: The EABL Board estimates that it will make cash payment of US$61 million (equivalent to Kshs 4.95 billion) to acquire its 51% stake using reserves or bank facilities (no recourse to shareholders). They will retain $10 million to deal with any shortcomings or deviations in concluding the deal.
- Diageo (EABL’s largest shareholder) has the option to in four years time purchase the remaining stake 49% in Serengeti (not held by EABL) for not more than $600 million. The price is higher but the reasoning is that EABL is investing at an early stag while Diageo will be investing at a latter stage when capacity and synergy gains will have been achieved at Serengeti

Partner: Serengeti is the second largest brewer in the country with a 15% share behind Tanzania breweries (EABL’s previous partner) who have a 72% share of the branded brew market. however unbranded beers command a significant majority of the alcohol consumed in Tanzania – and these include fermented drinks and local beers like Kimpumu (millet beer, is that Tz busaa?), cassava beer, Tekawima (maize beer, is that Tz changaa?) which are highly popular. Serengeti has plants in Dar es Salaam and Mwanza and is developing one in Moshi.
- Serengeti ‘s balance shaeet has assets of about Kshs 4.4 billion (compared to EABL Kshs 38 billion). Their accounts summarized in the circular show drastic changes when produced under Tanzania GAAP generally accepted accounting principles) and international financial reporting standards (IFRS) mainly from change to treatment of bottles and crates (&their deprecation), and revaluation on land & buildings resulting in larger assets and smaller profits under IFRS compared to Tz GAAP
- Current shareholders of Serengeti are Union Brewery holdings, Negus holdings (exiting), Napster group, and V. Mehta (exiting), CMG investment, Mark Bomani and Henry Mosha.

Idea Exchange: Nokia C3

I’ve been fortunate to be a tester for Nokia C3 in Kenya. It’s a phone I’ve been waiting to buy for almost three months, and while waiting, the local Nokia team lent me one to try out before the market launch. Prior to that I had an Nokai E72 loaner, which highlighted the shortcomings of the C3 in a roundabout way, and these include:

- Not 3G enabled, so E72 functions like watching youtube video’s are out
- Not a true smart phone, no multi-tasking like with the E72

Also at the Tuesday media launch, one reporter pointed out that the camera was 2mega- pixels only, but the Nokia Manager pointed out that their research showed that people wanted to take camera phone pics that they could easily share, but that large high-res photos takes a long time to upload and have to reduce the size to share across platforms.

The phone is a compromise of sorts, an affordable smartphone, with office tools. heavy on social media, connectivity, neworking, and data features.

Features I like (so far)
- WLAN so can browse on Wi-Fi at coffee shops or office hotspots
- You can setup up to 10 mail accounts, with new e-mails push updates right on home screen, for response/action (can also sync with office e-mail nokia and Safaricom
- It also has a community page for facebook, twitter updates appear on the home screen
- Pictures taken on the camera, upload to facebook in a snap. Also unlike with E72 which had too many folders, picture are easier to find and organize, and because of their size, easier to e-mail
- The home screen with all these updates (e-mail, twitter) shuts down at night so brings no midnight disturbances
- Expandable memory (yet to try it out)
- More C3 features

C3 smash: The phone was officialy unveiled on Wednesday in Kenya by Nokia and Safariom, who are both market leaders in Kenya. As promised, it’s a sleek nifty smartphone, with its QWERTY keyboard which makes it look like a much more expensive phone (E72) or a blackberry, but costs Kshs 10,000 ($123)! It is being sold in Kenya exclusively at Safaricom stores, and comes with 40MB free data from Safaricom with every C3 purchase.

This morning there were brochures being handed out on the street and promotions on the KISS FM Group for a happy hour during which the phone would be sold for one hour at a price of just Kshs 5,000. This brought out crowds of people seeking the Nokia C3, with some unfortunate effects, as captured by @wanjiku on twitter.

- Huge crowd gathered @safaricomltd sarit for #NokiaC3 looks like a political rally via
- Its wrong; 4 @safaricomltd @dorothyooko you should see the fight at Sarit 4 #NokiaC3 its bad; looks like people fighting for food; extend offer about 4 hours
-How about extending this offer 4 #NokiaC3? Its wrong to advertize so much if u can’t meet demand @dorothyooko did u expect it to b this much?
-@Ngendo87 u should see the way men & women are squeezing on the queue @sarit its chaos, guards throwing their weight... #ThatIsAll
-Sarit management has complained that the crowd @safaricomltd is intimidating the precious clients who spend lots of money; PA system; offer over
- Scenes from sarit with buyers and guards fighting over #nokiac3 http://twitpic.com/2t0tz0
- Angry buyers storm Safcom entrance. The shop was forced 2 close doors, switch off lights http://twitpic.com/2t0u8k
- Police called to calm crowd: sarit manager was there asking if crowd is gone. http://twitpic.com/2t0v5w
- some sarit pictures
EDIT: - Video from the C3 launch in Indonesia (June 2010) with round the block queues

Too Big to Fail?

Embattled market leaders Kenol and Safaricom got some reprieves last week.

In the case of Safaricom, it was signaled in the form of a public complaint from rival Zain Kenya CEO (and which he followed up in a letter to the President) alleging that the communications industry regulator altered its new rules to shield Safaricom.

At Kenol, the Permanent Secretary for Energy announced a settlement of the dispute between Kenol and the Ministry (Kenya Pipeline Company, Kenya Pipeline Refineries), which Kenol echoed that with a cautious statement.

Kenol, Safaricom, and probably Kenya Airways and Equity Bank (with 5 million bank account holders) have reached a status of being too big to fail. They are huge tax-payers (Safaricom, Kenol), models of privatization (Kenya Airways), critical to the country and region (Uganda was affected by the Kenol shutoff) or source of international pride (Safaricom’s M-pesa)

The government goes out of its way to listen to these companies and protectthem and make rules that will assist them in their growth. In the case of Safaricom, cracking down on them does not guarantee that Zain or Orange will fill the gap in the near term. The price war started by Zain has been called unsustainable by the Safaricom CEO and that language is also creeping into government circles

Urban Inflation Index September 2010

Tracking changes from three months ago - in June and one year ago

Quarterly Review - Young population: The results of the Kenya's national census done in 2009 were released last month and the results are still being interpreted. Politicians obsess on tribal numbers, economists caution on birth rates, while businesses can look to demographics like the number of mobile phone owners, the number of youth in the country, along with other intriguing findings such as the population of Kibera (largest slum in Africa) being 1/3 of previous claims, and remote Mandera is the 4th most populated constituency in Kenya (after Embakasi, Kasarani and Juja which are all in Nairobi environs). It confirms other findings like the Safaricom 2010 A/R which notes that “…with the North Eastern
region’s economy growing by over 200%, owing to improved security & enhanced economic activities, the area is no longer ‘served’ from Nairobi.”

Price control: A price control bill was rejected by the President who referred it back to Parliament for amendments.

Costly Health Insurance: The National Hospital Insurance Fund set in motion a plan to roll out a rather expensive health plan by increasing mandatory deductions from 320 per month to up to Kshs 2,000 ($25) for anyone earning over 100,000 ($1,200) per month. The matter has been challenged in court and the agency has been accused of not consulting widely with other health sector players and employers in a bid to revive earlier health bill

On to the index

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 65 compared to Kshs. 71 three months ago and 84 a year ago.

Communications: All Kenya’s mobile phone companies have call rates of about Kshs 3 shillings per minute to call across networks. Exactly a year ago Safaricom has launched super ongea tariff, which promised rates of as low as 0.8 shillings, but from a base of Kshs. 8 within network. What has changed? The arrival of airtel in Kenya who will pursue a low cost high volume model though outsourcing of services among other measures. i.e. today it was announced in India that they will sell their African mobile base stations to a subsidiary company (Bharti Infratel) that will re-sell them to private equity funds.

Even as Kenyans have celebrated the new chap call rates, Airtel have ruffled many feathers in the last month, forcing Safaricom and the other smaller mobile companies to match the very low tariffs, and this has been called unsustainable by some, a dis-incentive to investors by others, and even a situation which may result in a mobile operator closing shop. Two years ago, Safaricom had launched 'ongea tariff' which was a Kshs 10/= rate

About the same - Utilities: Latest electricity bill is Kshs 1,700 ($21 for a month) up from Kshs 1,450 on June, but better than 1,900 a year ago when there was drought in the country.

Other food item: Sugar : A 2 kg. Mumias pack is Kshs 200, unchanged over the last year. Two years ago, it cost 145, a price we may see next year when the COMESA regional sugar quotas are done away with. Already, leading sugar company Mumias has diversified into electricity co-generation, bottled water, and soon, ethanol production.

Foreign Exchange: 1 US$ equals Kshs 80.8 compared to 80.6 in June. BUT, Two years ago it was Kshs 67.

Beer/Entertainment: A bottle of Tusker beer is Kshs 170 ($2.1) (at a local pub) compared to Kshs. 160 three months ago. However it is tough to find a perennial location to keep track in Nairobi’s fast changing pub scene, where even Nairobi’s favorite sports pub Hooters closed last month. What needs to happen is a combination of Murua’s Tusker Index with this interactive beer map from the Czech Republic!

More Expensive - Fuel: A litre of petrol fuel (at local petrol station) is now Kshs 94.5 ($5.25 gallon) up from Kshs 90.9 per litre in June. The back and forth petrol war continues between leading oil distributor Kenol and the Ministry of Energy officials who include the Kenya pipeline company, the Kenya oil refinery and the energy regulatory commission about the issue of preferential allocation of space and who owes who more. On their side Kenol can count on some political muscle, the fact that they blew the whistle on Triton Oil before it collapsed, they are the country largest corporate taxpayers. High prices at the pump are not unusual, as two years ago petrol was retailing at Kshs 101

Idea Exchange: TEDx, Peace, Books and Samosas

Last week was a very busy one in terms of tech, with AITEC East Africa, and Google’s GKenya over-lapping on two days.

This coming weekend has the second edition of TEDx Nairobi at the Leakey Auditorium, National Museum of Kenya, on Saturday September 18. There have been other TEDx events held in the last few weeks including TEDxKibera, TEDxMathare, and a running series of TED videos at the Westgate Cinema.

Also starting the same day as TEDx, is the SAMOSA Festival; this has no correlation with the popular snack, but it stands for the South Asian Mosaic of Society and the Arts, which is a weeklong celebration with various events staged at different locales in Nairobi from September 18 to 25. It also features a mentorship program for young entrepreneurs and professionals.

The Africa Union Peace Day is being observed on September 21 2010, and will be marked by cessation of conflict hostilities, distribution of humanitarian supplies, one minute of silence at 10.00AM (GMT), development work by members of the armed forces, football games, and lesson plans in schools.

Rounding off the month is the grand Storymoja Hay Festival over three days, from October 1 - 3 at the Railway Club grounds in Nairobi. It has over 60 events bringing together writers, business & cultural leaders to share stories, ideas and unique talks like “Demystifying the American Visa Process,” “Peculiar Kenyans,” “How to buy and sell real estate,” and “Publish your own (Children’s) book in two hours.”

EDIT: The Nairobi Book Fair takes place at Sarit Centre from September 22-26.

Others ideas from Twitter
- @firesidecom: Safaricom is taking on Access Kenya & Zuku with unlimited residential broadband at Kshs. 3,999 (~$49) for 512Kbps via wimax for residential areas – its available of prepay and postpaid, with free quick installation, equipment,. Also available is 1mbps for Kshs 6,000 and 2mbps for Kshs 7,000.
- @akcorporate Did you know that you can listen to Classic 105.2 FM through Access Kenya?
- @MTrackKenyaLtd: MTrack - Personal tracking (Children & Elderly) services

Idea Exchange: From Kimathi to Afrinnovators

Tech September this week in Nairobi has two (unfortunately) simultaneous tech events on-going. One is Google’s G-Kenya at Strathmore University and the other is AITEC East Africa at KICC. Look for news and tweets about them besides the Android announcements. What’s interesting on the AITEC site is a banner reminding south African companies that exhibit at AITEC Nairobi that they may get a refund of between 80 -100% of their costs from the south African Department of Trade (DTI) a nice incentive for SME’s to advertise overseas

Web Comic last week saw the release of a new web comic by @chiefnyamweya; Emergency Web Comic is about the life of Dedan Kimathi, with some straight history lessons thrown in.

T-shirts give away by AfricaUnsigned.com and Afrinnovator Africa Unsigned is an initiative aimed at exposing the world to new music of Africa and is now using the internet as a stage for sharing these sounds and Afrinnovator is about telling the unique stories of African innovations and inventions especially in technology. They are jointly running a competition where 5 individuals can win a one of a kind, original t-shirt of their choice by Africa Unsigned. Check the AfricaUnsigned.com website for more details...

Corporates on Twitter: Safaricom (@safaricomltd) and Zain (@zainkenyaltd) have stepped up in the online space with active messages on twitter as they respond (selectively) to customer queries & complaints and promote their price tariffs and press releases.
Unfortunately, two other recent arrival on twitter seem to have given up on the medium; Kenya Airways (@KenyaAirways) and the Kenya Government’s Ministry of Lands which have not used twitter in almost two months. step back for e-government?

Ugandan politician in Nairobi to give Kenyan counterparts some identity ideas

Africa gets Android

On the first day the GKenya summit at Strathmore University Nairobi, Nelson Mattos, Google VP for Product Management & Engineering [Europe, Middle East & Africa] announced the launch of the Android market for Kenya and South Africa that allows local developers to share (or sell) their creations worldwide through the Android store.

Somewhat of a surprise (even to Google) leading up to the event was the announcement (via the day's newspapers and blog) that Huawei was launching a low priced Android phone that would retail for just $100 (Kshs, 8,000).

It’s been an interesting month, as this is apparently the third android phone launched in Kenya in the space of one month. The latest one, costs almost ¼ of the original one (subsidized by who?)

This is Google’s third year in Kenya and they continue to work with curriculum developers and corporations, they invested in a local company called Mobile Planet, and their maps and apps are used by developers and corporations such as Kenya Airways and Eat Out. GKenya continues with day 2 set aside for software developers and day 3 for entrepreneurs & marketers.

Safaricom 2010 AGM

Safaricom held their second AGM since their 2008 share listing at the Bomas of Kenya on September 2 2010.

Angry Shareholders: really complained into management, mostly about the low dividend, and lack of freebies – and the ~1,000 shareholders largely went home unsatisfied (the bus stage was quite full)
Low dividend: Different shareholders complained 20 cents ($0.0025) dividend per share was too low, was not recognized as currency in Kenya, was not comparable to the company’s 19 billion ($238 million) profit, was not worth picking if it fell to the ground etc. The Board Chairman replied that this was a result of the large number of shares and, it was 100% increase of the previous year, and they were looking into share consolidation as a way of making it more meaningful
No SWAG: Shareholders complained about not being given transport to the venue, why there were shirts only for Safaricom staff (they [shareholders] are better ambassadors of the brand), why they only got bottles of water & juice on a cold morning, and why they could not treat shareholders better, when companies like Kengen, many shareholders (~¼ of Safaricom) could? One shareholder who looked like he had been to a ‘local’ before he spoke, said he regretted buying the shares, admonished the company for taking from the poor (subscribers) to give to the rich (board), hurled a few other insults in his speech and walked out to some applause.

No SWAG also includes annual reports, which were handed out at the door, but which shareholders felt should have been mailed to them. The Chairman said that this was a logistical impossible, it would cost almost 250 million ($3 million) to mail 800,000 books and last year shareholders had themselves approved that reports be placed on their website or headquarters, with summarized versions printed in the newspapers. How unwieldy is the large shareholder base? The registrars’ computer list at the entrance was over a month old and they did not have records of anyone who bought shares in the last few weeks.

Is CSR bad for shareholders?: Later on when not satisfied with the Chairman’s response on the dividend, they began tackling expense items in the books to see if they could dig out some cuts to yield more profit. Ccorporate social responsibility items came under fire; this argument was first seen at Stanchart a few years ago when shareholders felt ‘their dividend’ was being diverted to unauthorized expensive projects (said shareholder and former MP Jimmy Angwenyi), and which were costly (But Chairman replied that the total amount was Kshs 250 million, broken into small impactful sponsorships like boreholes and schools that had no overall impact on the 8 billion dividend [$100 million]) . Again they went further and began tackling huge payment items (anything larger than the dividend) and suggesting to the Board ways to cut down these costs.

Competition from Zain Airtel: Shareholders also took a stab at management for the high costs of their services, in relation to Zain who had recently cut call and SMS costs to 3 shillings and 1 shilling respectively arguing that the company management is asleep and they will wake up when they find their customers have fled unless they too cut prices. Outgoing CEO Michael Joseph took on these and said they had studied Airtel in India and were ready for the price cuts, but were surprised by the underhand tactics/accusations that followed. Safaricom will find a balance to protect their customer numbers, market share revenue, but most important were their profit margins. He added these prices were unsustainable, but that Safaricom would still make more money at 3 shillings than anyone else

Share price: Later in comments about the share price which has declined in the last month, CEO said the market over-reacted to Zain/Airtel promo they are due to foreign sellers who don’t understand Kenya. They take parts in road shows to teach such investors about the market, how they EBIT margin of 42% is exceptional compared to others like MTN and Orascom, and 4 of the 5 analysts who cover Safaricom put the share price as Kshs 5.5 to 5.8 (who’s the dissenter?).

Farewell Michael Joseph: Late the Chairman called on shareholders to thank retiring CEO Michael Joseph who built the company up from nothing in 10 years to be leading revenue earner and top brand in Kenya.

Waving the patriotic flag: After the meeting ended, CEO gave a talk on his pride in the company, which is a Kenyan company one can be proud of with its customers, M-Pesa (which people all over the world come to study), M-Kesho savings accounts (500,000 users signed up in 2 months). It is 60% owned by Kenyans, which none of their competitors (i.e. Zain, Orange, Essar can claim), all their spend is in Kenya, all their profits are re-invested in Kenya, with nothing outsourced outside. It has 2600 employees (all in Kenya) , and supports over 250,000 other Kenyans through dealership and mpesa agents and another 1,500 in customer care (which they can move that to India but that would not be in spirit of the company)

The Grid Goes Global

The Grid, a mobile only social network owned by Vodacom, has gone global.

First heard about The Grid when 'Portfolio Manager', Vincent Maher, spoke at Mobile Web in Nairobi earlier this year.

- The Grid is a mashup of instant messaging, content sharing, location based services

- They target ads by location gender age time of day. Also they use location based adverts. To use LBA one needs user location, ad server that support this (Google does) and application that adds location. This is good for very small businesses e.g. hairdresser, plumbers, and they can expect to see low volume of impression but a high click though rate

- Users don’t need to have GPS to use the service
 as the Grid uses aerial photographs and their own maps (not Google maps)

- 

What is coming next?
- Ambient (mood based) advertising

- Desire line anticipation (plot where you will be and advertiser prompts you to buy later when you get there)



The Grid has about two million users in South Africa, Nigeria and Tanzania. It rivals MXit, which dominates South Africa, and was launched in Kenya with Vodafone-managed Safaricom in May 2010.

Rockefeller helps Farmers cope with Climate Change

The Rockefeller Foundation involvement in Africa goes as far back as 1914 and one of their goals is to strengthen food security in sub-Saharan Africa.

Climate change is affecting food security and the current floods in Pakistan attest and African farmers are seeing wild swings in weather, coping with higher temperatures, less dependable rainfall, and experiencing longer droughts. In Kenya, the Rockefeller Foundation estimates that maize production could decline by 30% in the next 20 years.

Africa countries need to recognize their vulnerability to climate change as ½ billion people depend on agriculture for their livelihoods, yet some governments are instead selling off buying tracts of productive land to other countries who are themselves investing to enhance their own food security through geographic diversification

The Foundation has thus made agricultural investments improve their productivity of farmers by reducing the risks they face through key innovations including

- Developing new affordable insurance products for small farmers & pastoralists that are indexed to weather; this encourages farmers to increase land & agricultural investment with the knowledge that they may be compensated if weather conditions adverse affect their harvest

pastoralists & their cattle camp in Nairobi's kileleshwa suburb during 2009 drought
- Funded the World Food Program to develop a software platform to predict most destructive elements; Known as RiskView, it can be customized or every district in every country in Africa and allows governments and aid agencies to when and where a drought will occur.
- Funded Kencall to implement a national helpline for farmers, staffed by a team of experts to answer farmer question on climate change, seeds, fertilizer, agro-dealer location etc – this will help overcome a challenge many famers don’t try new techniques or seeds because they don’t have enough information to take a risk. The information collected will become a research resource even outside Kenya.
- Partnered with Kenya-based Alliance for Green Revolution in Africa (AGRA), in a $50 million loan program through Equity Bank’s ‘kilimo biashara’ program in which the Foundation undertook some risk guarantee enabling the Bank lend to small farmers at below market risks who take up other products like fertilizer weather insurance, and use the help line.

read more

Ship Repair in East Africa

There’s an old company located near the port of Mombasa called the African Marine and General Engineering Company Limited - (AMGECO) which is a dry dock ship repair facility, and one of its kind on the East Coast of Africa.

The company has a long history in East Africa, and has gone through ownership and management changes over several decades, but the core investment is the Lloyd's certified giant facility & dry dock which carries out all manner of ship repairs including steel & metalwork, engine servicing, mechanical, electrical, cabin/woodwork, refrigeration/air conditioning and hull-cleaning among others. They also re-stock ships with provisions like food and water.

pic from their website
The facility can handle repairs of various ships including cruise liners, military , cargo, tankers and others in its 40 metre wide berth, and currently they are repairing one of the old Kenya Likoni ferries.

The skilled work and scope of repairs is fascinating, and ranges from light repairs of lifeboats to heavy ship re-building in their dry dock - and it makes for an interesting place to visit in Mombasa if you get the chance