Mobile & Card Payments across East Africa

A new unsecured card solution was launched by afb last week that will allows customers to instantly spread the cost of their purchase at participating shops into affordable 6 month repayments. afb have signed up 52 merchants like Baus Optical, Cambridge Opticians, Fabguru Shoes, Kitengela Glass, and local supermarkets (Tumaini, Home Depot, Homemade) and are also signing up other merchant shops where consumers will be able to apply for cards and get them approved & issued in the stores ahead of making a purchase.  afb settles the transaction amounts directly into the retailers bank account, and the the customer makes repayments via M-Pesa. afb next hope to venture into loans and insurance in Kenya.

How large is the card market? A Central Bank of Kenya reports showed that there were 9 million debit cards and 140, 000 credit cards in use in Kenya in 2012.

In terms of mobile money, CBK data showed that 21 million Kenyans moved Kshs. 141 billion ($1.65 billion) via 53 million mobile money transactions during February 2013.

CBK has also come up with new mobile money rules that target money laundering. They require that operators link different accounts opened by a user with a single ID card, flag accounts that move more than Kshs. 100,000 (~$1,175) per day or 300,000 (~$3,530) per week, have audit trails, institute systems to handle customer complaints and retain transaction data for 7 years. 

KCB and Western Union who have an account-based money transfer service (ABMT) in Kenya will extend it across East Africa this week, enabling KCB customers to receive money from Western Union directly into their accounts.

Kenya Airways has a 1.5% fee on all credit card transactions (owing to high processing bank charges).

Following a spate of fraud incidents last December, the Kenya Bankers Association (KBA) has launched an ATM safety campaign dubbed “Be Alert” or “Kaa Chonjo” which include tips such as cover the PIN with hand, and sharing PIN number with anyone (including spouses) 

KBA also  announced the shift by Kenyan banks to the new Europay, MasterCard and Visa (EMV) technology to ensure better security of cards.

90% of KenyaPower pre-paid electricity tokens are now purchased using #Mpesa - according to an Safaricom Business ad.

Diners can now pay restaurant bills via M-Pesa under a new partnership between Kopo Kopo, Eat Out and Safaricom. Restaurants accept payments at 1.5% per transaction.

 

MasterCard and Equity Bank introduced PayPass enabled debit cards in 5 African markets which will enable merchants to receive payments via low cost add-ons linked to applications on their mobile devices (such as a smart phone or tablet) 

Mastercard and I&M Bank launched a multi-currency (Dollars, Pounds, Euros) prepaid card which enables users to load up  to $10,000 and make foreign currency purchases without incurring exchange rate or other charges.

MasterCard also released a study called the MasterCard African Cities Growth Index that showed that Accra, Lusaka and Luanda offer the highest growth potential in Sub-Saharan Africa. Other ranked cities included Dar es Salaam (4), Addis Ababa (5), Nairobi (6), Kampala (7), Johannesburg  (8), Cape Town (11), Mombasa (12), Lagos (13),  and Khartoum (19).

Credit reference bureaus like CRB Africa and Metropol are expanding across East Africa.

The inaugural Mobile Money Africa Awards will be held in Johannesburg next month, to award the best mobile money app, mobile banking service, and mobile money platform for Africa, among others.  

Nation Hela launched last year has 8,000 active cards in use.

With PesaPal, Kenyans in the Diaspora can send school fees payment directly to 12,000 schools in Kenya using their credit cards (no need for money transfer service). 

Shell Kenya have a visa card promotion to encourage motorists to swipe their cards and pay for fuel The platform is powered by Equity Bank POS at all Shell stations, and station owners are not charged commissions for card sales (Shell pays all commissions).

Tangaza321 is said to be the second largest mover of mobile money behind M-Pesa. The Tangaza system uses biometric data (fingerprints) as many customers don't possess national ID cards and allows them to send money across all networks, even to people who don’t have mobile phones.

A team with the University of Nairobi’s University Students Community Organization (Uniscoo)  has developed a prepaid card for university students. Uniscoo which has 25,000 students seeks to encourage good money management among students through the use of the prepaid card powered by MasterCard.

Urban Inflation Index: March 2013

Gift from Uganda during the Kenya Supreme Court hearings

March 2013 saw the highly anticipated Kenya general election. There was a lot of uncertainty in the country, and beyond on what  impact it would have on the regional economies.

There were some familiar and ominous signs. The heavy investment the government had made in electronic vote systems failed, and it was a close race with a disputed result. However, unlike in 2008, the dispute was settled in the Kenya Supreme Court, and not in the streets. 

Ahead of all this, some Nairobians engaged in some extra shopping or stocking up which some called it panic shopping - but this was actually as prudent as shopping ahead of an approaching hurricane or storm, which may veer off at the last minute.

On to the index that compares prices to 3 months ago and a year ago.

Gotten Cheaper

N/A

About the Same

Staple Food: A 2kg pack of (Unga) Maize flour, which is used to make Ugali that is eaten by a majority of Kenyans daily, costs Kshs. 105, which is down from 107 in December, but up from 97 a year ago

Other food item: A 2 kg. pack of Mumias sugar pack is Kshs 250, same as three months ago. It was 245 a year ago.

Communications: Telephone call and data rates are largely unchanged, and there have been few new mobile promotions,  with some items offered free like access to Facebook (Yu), Wikipedia (Orange), money transfer (airtel).

Fuel: Petrol prices in March were Kshs 117.6 per litre (~$6.12 per gallon) slightly higher compared to Kshs. 111.6 per litre a year ago and 112.6  last December.

Utilities/Electricity:  A pre-paid token purchase of Kshs. 500 purchase from the Kenya Power & Lighting Company (KPLC) gets about  33 units, compared to 31 a year ago. However the units are only a fraction of the bill with 4/5 of that Kshs. 500 payment going to pay for power generation debts, forex & fuel charges and even inflation. It's odd that even as heavy rains cause floods around the country, and presumably fill hydro dams,  KPLC still procures private thermal power and bills consumers for the costs.

Foreign Exchange: 1 US$ equals Kshs. 85.63 compared to Kshs. 86 three months ago and Kshs. 83 a year ago. The shilling did not dip much ahead of the election as many had expected.

More Expensive

 
Beer/Entertainment: A bottle of Tusker beer is Kshs 200 ($2.35) (at a local pub) up  from Kshs 180 where it has been for quite a while. The price increase was driven by local brew giant  East African Breweries that's got some debt issues.

Kenyan Consumer Guide on Solar for Homes

Kenya is currently the largest market for solar home systems on the African continent and second largest in the world, after China, by both annual sales as well as total installed base. The Kenyan solar home system (SHS) category is considered the most competitive by far, and due to its history and heritage,one of the most developed, albeit primarily in the informal sector.  Today, there are over 350,000 solar home systems across Kenya and the market is still growing at more than 15% a year.

What does this mean for you, the consumer?

 Variety of solar options for rural households

Choice:  With so much to choose from and new products, services and business models being launched, how can you evaluate what kind of solution would work best for your household needs?

Not only is there something for every budget, but big names such as Safaricom, Total, Dayliff (Davis & Shirtliff), Sollatek and the IFC with its “Lighting Africa” initiative, all have something to offer.  Do you go with the brand that is backing the product or do you evaluate the category of product and its suitability for your home?

Lets start with what are the categories of  “solar products” and then take a closer look at each brand’s offerings.  The products available in the market can be clustered broadly into the following:

1. “SHS in a box” or “Lighting kit in box”

2. Stand alone solar lanterns

3. Emerging “pay as you use” business models

4. Solar home systems (SHS)

1. “SHS in a box” or “Lighting kit in box”:  Today, complete kits like the one shown belo are available in certain electrical shops around the country. This particular one, sells for somewhere around Kshs 15,000 (~$175)  and includes a motion sensor security light as well all the components required for installation.

They are available in three main sizes – small, medium and large – but keep in mind that since brands like these are social enterprises, they are aimed at the lower income demographic – and the 15W kit shown above is the ‘Large’ size but is limited to providing only lights, and will not be able to power a television set or a stereo system. Note also that the battery is not included. Depending on the brand, expect to pay around Kshs 4000 to 6000 extra.

An alternate type of kit is the Phillips one shown below, meant for middle class urban homes as a backup for electricity power cuts.  Available at selected Nakumatt supermarkets for Kshs 6,000 ($70), this is one of the most expensive backup solar light kits in the market,  however the elegant design and details such as a wall mounted light switch make it an attractive option for the upwardly mobile home.

Advantages and Disadvantages

Philips kit

The advantage of this type of complete kit is that all the components are ostensibly designed to work seamlessly together and everything necessary to the system up and running is available in one box.  This approach addresses one of the biggest challenges with SHS in Kenya which is the dearth of well trained fundis (technicians/installers/repairmen) with the experience and knowledge of designing a solar home system.

The disadvantage of such a system however is that it is limited to the components provided, in that one cannot simply add on and build a larger system. Some of the best provided homes in off-grid rural locales have extensive installations built up over time to power their entire homestead and numerous electrical appliances - so when choosing what kind of system to purchase, keep your future needs in mind.

2.  Solar Lanterns:

Total sign

Due to donor funded support from institutions such as the IFC, whose Lighting Africa initiative offers market research information as well as quality audits on products, the Kenyan market is flooded with a large variety of solar lanterns, both with the ability to charge your mobile phone and without.

Total, for example, distributes d.Light’s solar lanterns at it’s retail petrol stations, while Nakumatt picks and chooses which products it will carry according to the needs of the location their outlets serve.   The basic light sold at Total costs Kshs. 999 ($12)  while the larger model which allows you to charge your mobile phone as well can go for upwards of Kshs. 3,000.

Powerpoint at Twiga

 Given the wide variety and choice available in the Nairobi market, one can choose according to design and price as per one’s preference.  However, these solar solutions are limited to a single light and the vast majority of products tend to have the panel either embedded in the light source or attached to it permanently, limiting their flexibility.

Powerpoint's outlet in Twiga Towers is one of the few reputable solar specialists specializing in serving the needs of urban Nairobi’s market.  As you can see, the range of solar lighting and solar lanterns offers something for everyone.  If you’re thinking of something solar for your household, that’s a great place to start your fact finding trip.

ToughStuff

 Here, ToughStuff’s ecosystem of products built to work independently around a durable solar panel – available at Nakumatt – offers you flexibility in terms of whether you want only a lightweight portable mobile phone charging solution or if you’d prefer a light or both.

3. (Pay as you go) Mobile Business Models for Solar products: With Safaricom’s launch of the M-Kopa business model, customers now have the choice of paying for a solar product using M-Pesa over an extended period of time. The solar light is from d.light such as that available via Total.  Their kit contains 3 bright lights and a mobile charging system, similar to the “Kit in a box” described above.  The business model is designed to automatically deduct Kshs 40/= ($0.47)  from your account in order to use the lights until the point where you own the system. Alternatively the complete kit can be obtained for Kshs. 15,000 ($175) upfront.

Another is Eight19's Indigo pay as you go solar that seems to be piloting in Kenya. Here they use vouchers or scratch cards to top up your charge rather than directly via the SIM card. This is however still in the pilot stage as the company websites do not yet show a Kenyan outlet.

4. Solar home systems (SHS): Known colloquially in upcountry locations as “sola”, the basic SHS consists of a solar panel, a battery for holding the charge,  between 2 to 4 fixtures for holding energy saver bulbs (known informally as “solar lights”) and the requisite wiring.  These  kits can cost as little as Kshs 10,000 ($118)  including installation and tend to be the starting point for many homes seeking modern energy systems.

From here, one can build up to including invertors and larger panels such as the 100W-120W kits popular in Maasailand, that are able to power flat screen Sony Bravia televisions, kitchen appliances and the latest stereo systems in addition to lighting the home inside and out.  Colour television and new digital systems require 60W at minimum in order to work. Such panels alone cost around $200 upwards but prices are very rarely displayed and often negotiable.

For a household in Nairobi,  an SHS  would be the first recommendation. Dayliff is probably one of the most credible brand names, as long as the technology is German. (Be sure to the check the back of the panel to ensure this).  Ubbink is a newly launched brand that fundi’s consider to be efficient and high quality. It is manufactured by a Dutch company establishing Kenya's first solar panel factory in Naivasha and their panels are smaller than average offering higher wattage and more affordable cost due to lack of import duties and transportation. Check them out. Its a commonly held fallacy that physical size of the panel is important.

Do's & Don'ts on How to buy an SHS:   (also applicable to the other options above)

* Do find a reputable fundi with references and experience in calculating your power requirements and designing the requisite home system. This is the biggest reason for customer unhappiness with the performance of solar energy.

* Don’t try to talk to all and sundry and make up a list of components yourself. This is another major reason for inadequate systems that fail to meet customer needs.

* Do your homework however.  Nairobi’s CBD is the heart of the solar power industry for the entire country and the latest products are seen here first.

 * Don’t go window shopping without a list of minimum requirements on what you wish your SHS to be able to power and for how long.

* Do have an idea of your estimated budget. For a 3-bedroom house in  Nairobi, it’s possible to start as low as $500.

* Don’t let the salesman confuse you until you simply give up and plunk down the money for the nearest panel.  Take the time to think over what you really need to purchase.

* Do keep in mind that SHS are modular and an experienced fundi can help you figure out your starter kit on which you can keep adding over time as budget permits.

Photo and market research courtesy of @nitibhan 

Urban Inflation Index March 2012

2012 was expected to be an election year, which for Kenya are unfortunately marked by low economic growth, but this weekend, the electoral authority made an announcement that the next general elections would be held in March 2013.

A quotes from the above referenced post by Wolfgang Fengler, the World Bank's Lead Economist for the region reads;

Since 1980, Kenya’s economy grew by an average of 3.4 percent. However, in election years, the average growth rate was only 2.4 percent, and growth was even below 2 percent in four of the election years. Equally challenging has been the management of post-election dynamics. Kenya achieved a modest 2.7 percent in post-election years, and three of the last six elections were followed by low-growth, especially in 2008, when post-election violence disrupted the country’s achievements of previous years.

It's also been incredibly hot & dry in Nairobi and we all hope that the upcoming March/April rains will restore some supply balance for agriculture (food prices) and energy (hydro electricity costs)

On to the index comparing prices of basic urban commodities to three months ago, a year ago and even four years ago when the country was still dealing with the disruptive after-effects of the controversial December 2007 election.

Gotten Cheaper

Fuel: Petrol prices were reduced again last week to Kshs. 111.6 per litre (~$6.12/gallon) for Nairobi, down from Kshs 124 in December 2011. However a year ago the price was 98.8 (when the price control regime had just been introduced) and four years ago, after the election, a litre of petrol cost Kshs 87.9.

Staple Food: A 2kg pack of (Unga) Maize flour, which is used to make Ugali that is eaten by a majority of Kenyans daily, costs Kshs. 97 down from Kshs 113 in December 2011. However last March it was Kshs. 80 and four years ago (Feb. 2008) it cost Kshs 52.

Other food item: Sugar: A 2 kg. Mumias Sugar pack which was Kshs. 375 in December is now Kshs 245. However a year ago it was Kshs 195, and other commodities normally bought alongside it (bread & milk) have had steady price rises this year.

Foreign Exchange: 1 US$ equals Kshs. 83 compared to 84 in December 2011. This is exactly where it was last March 2011 before the Kenya shillings began a (now controversial) slide to Kshs 107 against the dollar. In February 2008, the dollar was exchanged at Kshs 70.7.
About the Same

Communications: Telephone call and data rates are largely unchanged, but Safaricom announced new rates for m-pesa including a slight increase for some transfers, but they also reduced the minimum amount that can be sent, opening the way to micro-payments. Meanwhile Airtel, who have set the low call regime over the last two years, appear to have reached an about-turn moment with their Chairman calling review of that strategy.

Utilities: Pre-paid electricity is about Kshs 2,500 per month which is unchanged from the last review. I finally got a coherent explanation from a @KenyaPower employee on how you get hit with extra taxes if you buy more than a certain amount of Kwh units.

LPG: Cooking gas supplies seem to have resumed stability for now, but at a price of about Kshs. 3,000 ($37) for a 13kg cylinder, up from less than Kshs. 2,500 before. Personally, I ditched my total LPG cylinder for a Kenol one as Total petrol stations never seem to stock enough for customers.

Beer/Entertainment: A bottle of Tusker beer is Kshs 180 ($2.2) (at a local pub), unchanged from three months ago..but it was Kshs 120 in 2008.

More Expensive
N/A

Generally prices have come down, but life is more expensive than what it was four years ago when the last election was concluded. However there could be some slight relief in slight for urbanites as the Kenya Cabinet approved the VAT bill 2012 which removed VAT from maize, wheat flour, milk, bread and medical supplies.

Urban Inflation Index: December 2011

What a year it has been, mostly not for the better with petrol and dollar prices setting records, and accompanied by other shortages. The Kenya government started a military anti-terror expedition in Somalia, and as war expenses can drastically alter government spending budgets, it was recently decided to bring the mission to the United Nations and have them offset the war cost to some extent.

On to the index comparing prices to three three months ago and year ago!

Gotten Cheaper:
Foreign Exchange: 1 US$ equals Kshs. 84 compared to Kshs 95.6 three months ago and 80.5 a year ago. That snapshot does not capture the roller coaster quarter the shillings has hard, dropping to an unprecedented level of Kshs. 107 to the dollar (and being ranked as one of the worst performing currencies in the world) before the Government instituted an interest rate hike and cut back liquidity to the banking sector. While the shilling was in free fall, and few could explain why, a World Bank blog post revealed that Kenya's exports were (at the time) not enough to meet the country's fuel bill, (Three years ago it cost Kshs 79 /$)

Staple Food: Maize flour, which is used to make Ugali that is eaten by a majority of Kenyans daily. A 2kg pack costs Kshs. 113, down from a record high of 119 in September, but still almost double the Ksh.s 69 cost in December 2010 (Three years ago it cost Kshs 97)

Other food item: Sugar : A 2 kg. Mumias pack which was Kshs. 385 in September is now 375, but still almost double the Kshs 195 of last December. In other news Kenya seems to have applied for another extension of a COMESA import cap, denying consumers the option of cheaper sugar imports to protect the largely uncompetitive local producers who have trouble ensuring adequate supply of sugar into supermarkets.

About the same:
Communications: These are largely unchanged though Safaricom announced a modest price increase by of voice call tariffs (which Orange are itching to follow) and @Kahenya says that corporate m-pesa tariffs have also been increased.

Beer/Entertainment: A bottle of Tusker beer is Kshs 180 ($2) (at a local pub) , unchanged from three months ago. The alcohol sector has a lot of competition now with the new brands being launched (Miller Genuine Draft) and others revived/getting new marketing pushes (Redds, White Cap Light, Heineken, Windhoek, Sierra) in a realignment of brands and owners between East African Breweries (EABL) and SAB Miller.

More Expensive
Fuel: A litre of petrol was Kshs. 124 up from 117.7 in September and 94.3 last December. Two days ago, in reaction to threats of transport operators to go on strike during Christmas week, the Energy Regulatory Commission (ERC) announced the first ever price reduction since the introduction of the price control regime - and for Nairobi the cost of petrol will be Kshs 119 (~$6.2 per gallon) till January 15 2012. (Three years ago it cost Kshs 92.7)

Utilities: Pre-paid electricity is about Kshs 2,500 per month (up from the regular purchases totaling 2,000). There are rolling blackouts as seen in the ads run by the Kenya Power company, spreading the shortfall across the country.

LPG - Cooking gas has been in short supply in different parts of the country, with many sellers in Nairobi not having any stock to sell for weeks. Those that do are selling them at increased prices - e.g. cylinders that used to costs Kshs 2,500 for 13KG, are selling at between Kshs 3,200 - 5,000 if you can find them.

NSE Moment: Britak, Transcentury, Kigali Bank, Stima SACC0

This week we were reminded that there's been no IPO at the Nairobi Stock Exchange (NSE) since 2008 (Co-Op Bank) and the events in the last few days were the fulfillment of initiatives that companies like Britak and Transcentury had initiated earlier in the year.

Britak: The British American Investments Company Kenya kicked off their IPO this week. The group had Kshs 9 billion in income, and pre-tax profit of Kshs 2.8 billion in 2010. With group assets of Kshs 25 billion, it is second only to the ICEA at 27 billion.

They are being sold at Kshs 9 with an allocation criteria of 30% East Africa retail, 30% foreign, 37% institutions, 3% employees, agents, and individual policy holders and can be obtained at British American branches, Equity bank , Standard Chartered (and partner Postbank), NIC, CBA banks and stockbrokers.

The minimum for retail investors is 2,000 shares (Kshs 18,000 while for institutions it’s 10,000 shares (Kshs 90,000 or ~$1,000). The IPO is budgeted to cost Kshs 320m ($3.5M) with estimated payments to transaction advisor 24M, sponsoring broker 6M, legal costs 9M, selling commission 87M, CMA 9M, NSE 1.5M, PR 67M, and advertising 90M.

Insurance Opportunities

Of the Kshs 5.9 billion to be raised, 1 billion will be for regional expansion (Tanzania, South Sudan, Rwanda), 1.2 billion will be for Kenyan operations (set up a frontier investment fund, new branches), 2.5 billion for the housing & mortgage sector aimed at affordable housing models, and 750 million will go to pay off a loan at CBA bank that was used to purchase shares in Equity Bank (Britak own 11% of equity and 16% of housing finance banks).

The Britak IPO runs from 12 July to 5 August and they have also reached out to bloggers, with forums and their own blog posts such as this tale of their CEO's initial investment.

However, there are some concerns that with their 45-year history and strong brand name (-pay Kshs 18 million a year to British American), this is a retail magnet IPO and the sale of 650 million shares (30% of the company) is likely to be over-subscribed, and the dividend paid (Kshs 200m in 2010) is likely to be safaricom-ish (small)

The company has also called for the Government to extend current tax incentive for newly listed operating companies to also include holding companies (like Britak)

Transcentury: The investment group which has had a spectacular climb and string of investments, most notably with East African Cables listed their shares at the NSE on July 14.

Their shares had been trading at an OTC exchange and were listed at the NSE at Kshs 50, which worked out to a P/E ratio of 38

RVR Coach

The Group also has a Mauritius convertible bond issued to finance the restructuring of Rift Valley Railways and investment in geothermal and other energy projects, but which also has the potential of diluting investors shareholding by over 1/3. (150 million shares available to bond holders over the next 5 years prices between 40 and 50)

Still, Transcentury has been am inspiration to other investment groups, albeit not as well connected to initiate projects with more risk such as energy real estate, and offshore. The introduction is budgeted at Kshs 20 million (220,000 - CMA 5M, NSE 1M, advisor 8M, stockbroker 4M) and the PDF prospectus is 'protected' so you can't copy sections of it.

Family Bank: Their long dalliance with the NSE is about to be fulfilled as their shareholders will next month approve a listing at the exchange. They will also vote on an ESOP for managers and 1 % transfer of shares of the company to the new CEO. It has since emerged that he is purchasing the shares at a discount as part of his employment package.

Stima SACCO: Away from NSE is Stima SACCO that is in the process of raising funds of about Kshs 500 million ($6 million) . They have advertised in newspapers (even on TV), which may land them in trouble with the CMA, for selling shares to the public without adequate information. At Kshs 100 per share, individuals can buy 200 shares at a minimum (Kshs 20,000).

Kenya Airways: Nothing yet from the airline who were expected to approach shareholders for new funds. The government has allocated funds to invest and defend their 26% stake an the airline which has since signed a deal for new Embraer aircraft to grow their African footprint.

Bank of Kigali: The Bank of Kigali is aiming to raise $62 million from new investors in an IPO that runs from 30 June to 29 July. The Bank control 25-30% of the banking sector in Rwanda; it had profit of 8.6 billion francs ($14 million) in 2010 on assets of 197 billion francs ($324 million) - equivalent to a smaller mid-size Kenyan bank

300 million shares are on offer, and the minimum is 200 shares per person at 125 francs per share ($0.075 or Kshs 18.65). They are open to cross-border investors and the allotment will be to 27% retail East Africans, 2.4% to employees & directors, 15% – East African institutions, 15% to Rwanda institutions and 40% to international investors.

The Rwanda government owns 66% of the bank, and the other 1/3 are owned by the social security fund of Rwanda. 16 billion francs ($27 million) will go to the Government for reduction of its shareholding and 20.8 billion francs ($34 million) will go to the bank to reduce its assets & liabilities maturity gap and grow its loan book and operations (from 33 to 60 branches). This will result in new shareholders owning 45% of the bank, the government 30% and the social security fund with 25%

Other: The IPO prospectus lists
- lawyers acting for the bank, number of cases they have and prospects of loan recoveries
- lawsuits filed against the bank by name (former employees, debtors opposing auction)
- list of subcontractors and related partners such as visa card providers, SMS partners, providers of credit reference and lines of credit etc.
list of properties owned and rented by the bank and rent amounts. Also Rwanda depreciate building over 5 years, after each revaluation

Risks & Exposure - one of the operational risks is scarcity of qualified personnel in Rwanda
- commerce restaurants & hotels account for 46% of the bank portfolio while construction was 29%. Also 11% of loans were to a single group and records of large are available for review to persons who sign non-disclosure agreements
- Kenya is the country's largest trading partner: Rwanda exports 33% to Kenya and imports 16% back.

Staff: - All staff are entitled to bonus and in 2010 this totaled 8% of profit, which that was shared by 441 staff (out of 454), and the average award was $3,200.
- The bank also runs an in-house dispensary and provides full medical cover to staff and 4 dependents
- The oldest director was born in 1960, the youngest in 1977. At senior management, the managing director is the oldest employee at 54, while the head of finance is the youngest at 31.

Prepaid Electricity in Kenya

Kenya Power & Lighting Company (KPLC), the national distributor of electricity is converting customers in many parts of the country from post use billing and payment to pre-usage payment.

One KPLC challenge for many years has been revenue collection, but that has changed since signed they signed up banks and supermarkets (some at a cost of ~ Kshs 50 per bill paid) outlets like Uchumi.

Changes

Payment: You can buy electricity tokens from some KPLC offices, but it is easier to pay by mobile money Safaricom's 'M-Pesa' or 'Airtel Money' zap. You load money into M-pesa, send it to KPLC, and in about an hour you get a 20 21-digit number that you punch into the meter for an immediate update of electricity credits.

Orientation: None at all! One day you come home and find workmen in the corridor doing a lot of re-wiring (at first I thought the landlord was installing fibre to the block, but it turned out to be KPLC's sub-contractors) and the next day, you come home and find the watchman with a booklet for you to read and study on the pre-pay system! The booklet has been quite useful, but it omitted a process where you have to call KPLC to link your old meter and new meter numbers – in order to activate the new meter.

Cost: None to the customer, and the brochures say cost of usage should be the same, and so far I’m on par at about Kshs 500 ($6) per week.

The meter also has some commands that you can use to check out your usage at any given time (a fluctuating 80W) and usage since installation – 100Kwh in three weeks. What I miss (for tracking inflation is a breakdown of usage, fuel surcharges and other taxes that form anywhere from 1/3 to 1/2 of every bill, and
- [edit] cost of collection which may vary from Airtel to Safaricom) i.e it cost Kshs 20 to pay by M-pesa
- In order to pay by M-pesa, you have to know your Meter No. (so save it in phone)
- The cost of electricity has gone up by ~45% in a month i.e in mid-April a 'unit' of electricity cost Kshs 9.8 and in mid-May its Kshs 14.2.

Reading the Tea Leaves at KPLC

The on going rights issue closes on today (22/12/10) after a month and a half of the balance sheet restructuring program.

Background: CEO Joseph Njoroge said its necessity began with the 1999-2002 power-rationing period when the company incurred heavy trading losses of Kshs 15.9 billion. The debt was converted into equity for the government (GoK) and preference shares for the government and what became Kengen – and which Kengen transferred back to GoK prior to their IPO.

Preference share burden: There was a five-year moratorium on dividend, but the preference shares have continued to be perceived by lenders and investors as debt - with fixed annual payout. This distorted the value of ordinary shares, creditworthiness of KPLC, and would be a burden on cash flow to meet as seen when the moratorium ended with a payment of Kshs 1.25 billion ($15.6 million) to holders of 7.85% preference shares in 2010

New balance sheet will have a level playing field and enable the company to access more funds after the redemption of preference shares in three steps by (i) issue of 76 million new ordinary shares (ii) ordinary share split 1 to 8 (iii) a (December 2010) rights issue to shareholders entitled to buy 20 new shares, for every 51 they own, at a ~20 per share with GoK renouncing its rights – to raise a net amount of ~Kshs 9.1 billion ($114 million)

Underwriter: KPLC sought an underwriter and got Centum and Equity Bank to underwrite the issue by 50%.

Retain GoK control: from a current 40% ordinary shareholding, GoK stake will 69% for short period, but as they are renouncing their rights, on conclusion it will be 50.1% and still remain a parastatal. GoK can also ‘count on’ no.3 shareholders – the National Social Security Fund who own 8%

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.

Urban Inflation Index December 2009

Comparing changes to three months ago - September 2009 and a year ago - December 2008

What’s gotten more expensive

Fuel: A litre of petrol is Kshs 83.5 (~$5.0/gal) up slightly from 80.9 three months ago, but still about 10% lower than the 92.7 of last December.

Entertainment: A bottle of Tusker beer (at local pub) is now Kshs. 140. This is up from 120 price of three months ago and also a year ago. There is a proliferation of new pubs all the time in Nairobi - and as others shut down, more entrepreneurs step up (with a new name, coat of paint and furniture) to take their turn behind the bar counter. The median price in Nairobi now seems to be 150 shillings ($2) for a beer, as Tusker brewer east African Breweries (EABL) remains untroubled by Summit of Keroche (what’s to blame? - poor distribution, dirty tactics by EABL, poor marketing?) or by the reports that South African giant SAB Miller may choose to re-enter the re-enter the Kenyan market following collapse of an EABL-SAB agreement in Tanzania.

Electricity/utilities: this month’s electricity bill is Kshs 2,100 ($28) compared to the 1,900 of three months ago, as well as last December. 2009 has been a year of harsh reality checks for Kenyans with the failure of rains, drying of dams and water & electricity rationing programs. And while electricity rationing has ended, water rationing is still on in urban areas, and in rural areas, water sources are diminishing and the usage of water is becoming a cause for tension among communities and neighbours. The government has set out to reclaim and restore water towers in the country, notably the Mau Forest, and has made investment in geothermal energy and is linking up with neighbouring country grids (Ethiopia, Tanzania) ; unfortunately wind and solar energy are not considered to be viable large scale avenues worthy of requisite investment.

about the same

Food: though the inflation impact of food items has been played down by the Central Bank (CBK) who said food prices distorted inflation figures, there has not been much change in the last quarter.

food is bad for inflation
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. 83 compared to 84 three months ago. But this is much better for consumers than the 97 shillings of a year ago.

Other food item: Sugar (2 kg. Mumias pack) is Kshs. 200 up, unchanged from 3 months ago, but 25% higher than the 160 shillings of a year ago.

Consensus among farmers and traders is that 2010 will be a worse year for food production in the country, so we’ll see where prices are next year.

Gotten cheaper

Communications: there have been lots of developments towards reducing the cost of communications as competition in the sector heats up.
- Mobile giant Safaricom, who told institutional investors that they aim on becoming the ISP of choice for Kenyans, have been pushing out internet devices at a rapid pace. The company earned 7.2 billion ($96 million) from SMS and data in H1 of 2010 (up from 2.1 billion a year ago). They have now partnered with Equity Bank to get laptops computers (with free modems) to thousands of consumers by way of bank loan
- Both Safaricom and Orange (Telkom Kenya) are selling 3G modems’ at a cost of Kshs 2,000 (~$26) – these used to cost 4,00 before. And with Safaricom you can cash in just 2,000 bonga (loyalty) points and get the modem, which used to cost 15,000 bonga points a year ago.
- ISP’s respond Wananchi have lowered Internet prices of their broadband zuku packages since the arrival of fibre cable connection in Kenya. Meanwhile KDN is offering free butterfly service over Christmas and have a program with family bank to offer free wifi services to their customers.

Foreign Exchange: 1 US$ equals Kshs. 75.62 compared to Kshs. 75.93 three months ago and 79.08 a year ago.

Urban Inflation Index September 2009

(i) Tracking changes in the three months since June 2009, and approximately one year and two years ago
(ii) also the job/other opportunities column is back

Gotten cheaper
Communications: leading mobile company Safaricom this week launched Super Ongea, a zoning tariff that eases congestion on the network by offering different rates from the then low 8 shillings per minute (now the high) to as low as 80 cents per minute. This they hope will ease congestion on the network and also hold on to some customers who are flocking to the cheaper new provider Yu (Essar telecom) who have very low rates. Zain and Orange have gone slow on the marketing front, and this week the Orange CEO called for an end to price wars. The new Safaricom tariff does not affect data or money transfer of which Safaricom is getting a stranglehold with m-pesa and 3G. Safaricom is big seller of mobile phones, modems, and laptop computers, going full blast in data at the expense of retail ISP’s while M-Pesa utilization has taken on a life of its own that makes Kenyans wonder how life was before mobile money transfers started three years ago.

Foreign Exchange: 1 US$ equals Kshs. 75.93 compared to 77.94 three months ago.

About the same
Fuel: A litre of petrol is Kshs 80.9 (~$4.79/gal) up 11% in 3 months, 1@% cheaper than a year ago and 10.5% above two years ago, so relatively unchanged as thin fuel margins still continue from the price drop of about a year ago that wiped off Triton

Entertainment: A bottle of Tusker beer (at local pub) is Kshs. 120 down from 130 three months ago. Prices seem to have stabilized though and with English football season on now, bars will not be changing prices anytime soon. East African Breweries year-end results showed that beer volumes were up just 1% for Kenya

Gotten more expensive
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, 9% cheaper than 3 months, 15% up from a year ago, and 68% up in two years ago. Already there is worry about a grain shortage in the next few months, and the country may have to import some maize while awaiting the harvest from local farmers near the end of the year

Other food item: Sugar (2 kg. Mumias pack) is Kshs. 200 up 14% in 3 months, 38% in 1 year, 33% in 2 years, though it’s hard to say if sugar shortages are genuine or artificial; the annual importation exercise is a tug of war between politicians, tax man and importers.

Electricity/utilities: this month’s bill is Kshs 1,900 compared to 1,500 from three months ago. Still I can’t complain since compared to what some residents pay . The electricity rationing seems to have ended but at a cost since the new electricity is generated from more expensive thermal sources. The clean energy planned for Kenya- wind (Turkana, kengen) and sugar (Mumias), and mini-hydro’s (KTDA) will take a while to be felt in our bills.

Water rationing is still on going and the Nairobi water company said bills would increase from July 2009 onwards by about 50%.

Opportunities
most from the daily papers this week

SME Funding/Solutions
- For software developers from Microsoft through Local innovation centres unverified
- The Esther Passaris Grant is a monthly grant for Entrepreneurs. of between Kshs. 50,000 to 100,000 unverified
- Ongoing business plan competition jitihada closes 23/9
- Toolkit for learning: the IFC SME Toolkit Kenya

Jobs
- finally a blog -related job makes the newspapers - The British high commission in Nairobi is hiring a communications support officer part of whose job will include supporting the post webmaster in developing & maintain website, including the high commissioner's blog through regular updates and site moderation. d/l is 23/9 and applications by snail mail only.
- Central Bank of Kenya : Accountants/ Financial Analysts, Finance Officers, Network Engineer, Network Administrator, Analyst/Programmer, Assistant Director: Policy Development And Research, Assistant Director, Academic Affairs, Finance Manager (2), Assistant Finance Manager (2), Internal Audit And Risk (manager, assistant manager, officer) and other jobs. D/L 25/9
- Equity Bank: Assistant HR Manager- Training & Development, Assistant HR- Services Manager D/L 19/9
- Apprentice engineers (20) at KPLC recruitment@kplc.co.ke by 7/10
- KIPPRA jobs not online Economists in Infrastructure & Economic Services (3 positions), Senior Analyst/Analyst, Assistant Analyst, Analyst, Assistant Analyst apply to admin @ kippra.or.ke by 21/9
- Safaricom : Senior customer systems analyst , senior manager - financial systems & analysis , principal accountant – treasury planning D/L 23/9

Tenders
The Kenya Government has asked all ministries, agencies, parastatals to e-mail in soft copes of any tenders or procurement notices they advertise in the newspaper. This will be displayed at a government procurement portal.

Despite Safaricom's controversial, no frills, AGM, Kengen, the company with the second largest shareholder register (216,000) after Safaricom, is not going to let its members go home empty handed. They have a tender at their site for
supply of agm goods & services that closes on 24/9

Travel: Emirate Airlines have launched world cup travel packages for fans wishing to attend the 2010 world cup in south Africa; these combine air travel, hotel bookings in Johannesburg, cape town & Durban, and ground transport to stadiums.