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.

Business Briefs – May 24

most from the papers this week

Strathmore to train entrepreneurs: Strathmore University has launched an Enterprise Development Centre (SEDC) to train entrepreneurs in management of SME's. This will be done through a six month certificate program in entreprenual management that covers, among other aspects, taxation & law, financial recordkeeping, managing HR, business planning, risk management, diversification, capital budgeting and excellence in customer service. It will use locally developed case studies and also provide networking opportunities and access to service providers through a business club.

ARM split: Athi River Mining intends to spin off its cement, and mineral & chemical operations into two wholly owned subsidiaries;
- ARM Cement Limited – who will continue with the manufacture and sell cement and limestone – (the new Kaloleini factory will be transferred to the subsidiary)
- ARM Minerals & Chemicals Limited – who will produce minerals and sodium silicate building products – (the Athi River factory will be transferred to the subsidiary)

Invest in Uchumi: Gearing up for a revival is Uchumi Supermarkets whose Receiver Manager has places an international tender for financial firms who will assist in the for (i) pre-qualification of financial bidders and (ii) selection of winning bids to become strategic equity partners (new investors in Uchumi). D/L is 6/6

Milky at NSE?: Preparing for a possible listing at the Nairobi Stock Exchange is New KCC who published their financial accounts this week for the year ended June 2007, which showed that they had exceeded the performance over the previous 18 month period; New KCC had assets of 4.7 billion shillings (up from 4.0b in 18 months to 06/2006), turnover of 4.5 billion (compared to 4.9b) and a pre-tax profit of 284 million (compared to 350 m) – after paying over 2 billion shillings to dairy farmers. Meanwhile Sameer is making dairy waves in Uganda

Derailment?: Rift Valley Railways in trouble with the Governments of Kenya and Uganda over the performance of the railway concession. Last year it appeared they had turned the corner in terms of performance.

FYI: You can track NSE shares in real time for free at Rich.co.ke

Earthquake week

1 ½ years ago a single tremor was a big story. Now they are coming every few hours – today we felt them at 11:50a.m. 1:30p.m, 2:35p.m. and 3:05 p.m. what’s going on at Lake Natron TZ?

Dud dividend Got my biggest dividend cheque ever (i.e. most digits) i.e. a 25,000 Uganda - a payoff from the Stanbic Uganda IPO. But it is almost impossible to cash it in. Stanbic Nairobi look at you like you came from outer space, while my other banks tell met it will cost more than it’s’ worth (about Kshs 1,000) to clear. Remember that next time you go buying shares in Uganda or Tanzania I wish there was a good dividend reinvestment program in place. - I may endorse it to my stockbroker even though there’s not a lot of shares I could but for that (Eveready perhaps?). Any suggestions?

edit Sent in my reader Drop My Load who comments:
Stanbic have issued an email that goes like this:

Dear All,
A few banks have requested me to ask Stanbic Bank Kenya to come with a solution to paying the KES equivalent of the Stanbic Uganda Divident cheques. Stanbic Bank Kenya team has since gotten a solution that I would like to share with you.

Below is a statement from Stanbic Bank Kenya, which we would be grateful if you pass along to the relevant branches and clients who invested in Stanbic Bank Uganda.

" In case of non SBK customers who choose to deposit their dividend warrants in the accounts in other local banks, these banks will route the cheques through SBK for collection in the normal interbank way for foreign cheque collection

The collection period will be 14 days and we shall credit the proceeds by the 15th day. The charges will be - amounts below 1000 will cost ksh 100 and amounts above ksh 1000 will cost ksh 150."

Ask your bank, they should be able to help.

Strange banking: It’s always a sensitive thing to write about banks since they have customers – some of who are likely to panic and withdraw their funds. But there’s no danger of that with fast growing and strong Equity Bank. Just days before their listing in 2006, one of their directors resigned - could this be the reason?

Loan shares resurface: I&M becomes the first bank to hawk loans to buy Kenya Re IPO shares.

Milk tremor: KCC has overnight raised the price of their plastic milk pouches (500 ml) from Kshs. 22 to 26 (%18). More plastic tax aftershocks?

KCC changes hands (once again)

In a political changeover long expected, KCC (Kenya Co-operative Creameries) and KCC 2000 have been taken over by New Kenya Co-operative Creameries. - and a notice to that effect was posted in the daily papers this week. This raises a lot of focus as it legitimised the KANU deal that controversially converted KCC into KCC 2000 and this new deal will provide quite a windfall for whoever has just sold KCC 2000. However the sale is likely to be challenged in court as it does not transfer any liabilities from the original collapsed (and debt ridden) KCC.

Who's buying KCC?

Now that Ndwiga and the KCC board have been exposed, the Government (knock! knock! anyone there?) should re-consider the move they orchestrated to take back KCC to sell it to 'dairy farmers.' Their motives are more likely to be ulterior, than good and chances are good that people who are not small scale rural dairy farmers will be the new true owners of KCC.