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.

The Total Motor show took place this last weekend in Nairobi (Friday 9th to Sunday, September 11, 2011). It was interesting as usual, but this time it was at KICC unlike the last one that was at the Ngong Racecourse. With the weaker shilling, and higher petrol prices, there was a noted change in some vehicle prices and more companies offering more efficient vehicle management solutions.

Some notable moments:

Companies like CMC (Ford, jaguar, Volkswagen) and Toyota did not display prices, but it was a shock to hear that a Toyota Corolla 1.8, cost Kshs 3.3M ($36,000) which is about three times the price people pay for used import models.

Public Service Vehicles: Companies like General Motors have their Isuzu's ready to ride on the Government’s plans for larger PSV vehicles and they had a pimped out matatu – the NPR that costs Kshs 4M ($43,000), and an Isuzu FRR model (Used by many Citi Hoppa’s operators and which costs Kshs 5.8M ($63,000) and an 62- seat bus that was Kshs 9.4M

Trucks: These were a plenty, but the the truck king of the road is the Mercedes Actros; new models of these can be bought via D.T. Dobie at a cost of €93,500 (~Kshs 12.2 million) and each order is customized to the buyer’s requirements before it is built. The popular Mitsubishi FH215 is Kshs. 5.1M

Luxury: Head to head in the luxury department were BMW (from Simba Colt) and perennial market leader Mercedes (from DT Dobie) who had a range of cars, priced with and without duty/tax (an option for diplomat’s, Government and NGO buyers). BMW had the X3 at €60,000 )Kshs 7.8M) while Mercedes had the ML350 for €110,000 (kshs 14.3M). BMW had the 3-series for €47,000 (~Kshs. 6.1M) while the C200 Mercedes was €60,000 (or €34,000 duty free), and BMW also had the 5-series on show for €60,000 while Mercedes had the E200 for €78,000 (~Kshs 10.1M) or duty free for €48,000 (~Kshs 6.25M)

Pick-Up/SUV: DT Dobie has the Nissan NP 200, launched at the 2009 motor show at Kshs 1.2 million, but which now costs Kshs 1.87 million and CMC had a new Volkswagen pickup that was not priced. Mitsubishi had an L200 double cab at Kshs 4.1 million, an update of the popular Pajero at Kshs 6.5 million, while Mahindra had pickups ranging between Kshs 2.4 - 2.9 million.

With rising fuel prices, fuel saving solutions on offer include Stoic (touting to save up to 40% on fuel prices) and Fuel max (sold by Kiprin Enterprises - and enticing with savings of up to 50%). Other energy savers were Solar powered lanterns called Total Sola from sponsor Total. Better driving solutions were offered by Glen Edmunds driving school for defensive driving while Scania had one for long distance truck drivers that are purported to save 6 litres per 100 kilometers driven (from the current average of 40 litres over 100 kilometers) and which also brings better tyre and break wear

Other: Toyota also sell Yamaha motor bikes including a 106CC model which comes with a free helmet, reflect jacket, registration and one year warranty (or 6,000 km)

Car Tracking : Companies included Rivercross tracking (who also install a fuel fuel monitor that warns when truck drivers may be selling diesel from their trucks) as were other companies like Retriever, and Cyber Trace.

Online Classifieds: Car buyers and sellers had cheki and dealfish (which is free for buyers & sellers)

Banks: Banks in the auto finance sector were represented at the show including NIC, KCB, Equity, Imperial, Co-Op, Chase and CFCStanbic. Co-op have PSV financing (aimed at Sacco’s) and school bus financing (unique application requirement are board of governor approval and minutes, and ID, fees structure of school.

Apprentice: A motor show surprise was a twitter conversation with @karuoro and @mediamk on the prevalence of former D.T. Dobie mechanics who are specialists in Mercedes.

- @bankelele: I know about 3 garages run by ex-DT Dobie mechs (it's like a badge of honour)
- @mediamk: those mechs are amazing, I wish this was the case across different industries (as) apprenticeship is a good way to grow an industry.
- @karuoro: "The industry leader is obliged to be a net supplier of talent to the industry" - Linus Gitahi (@LGTwits) ...I think quite a number are licensees

.

The D T Dobie apprenticeship mechanic program is open to all Kenyans, male & female, who are less than 22 years and obtained KCSE C+ in English physics and mathematics. Though subsidized it will cost Kshs 50,000 ($550)per year for three years after which staff will be bonded for 3 years. They also accept self sponsored applicants who will pay Kshs 140,000, and the application deadline is 30 April 2012.

Total 2010 AGM

The annual general meeting of Total Kenya was held on June 2 at KICC Nairobi. (Excerpts from shareholder Q&A)

Hot Button issue was the Low Divided
- Board said DPS of 1/= ($0.12) per share down from traditional 2.50/= ($0.03) per share is the best they can do
- Why are you not paying dividend as high as rival Kenol? If rival Kenol is paying more, it is because they have not invested like Total (Note: today was also the day Kenol effected their second ever share split, giving their shareholders 10 new shares, for every one they owned)
- Buyout of Chevron by creation of new shares has diluted ordinary shareholder stake and dividend? true but this information was disclosed before the deal was approved and completed

Preference shares: - Since parent owns 83% why not re-classify minority shareholders as preference shareholders? the preference shares only participate in dividends and are non-voting
- When will class A shareholders who have been locked in be released to trade their shares? CMA finally granted approval and they have been free to trade from May 17 2010

Will Total bid for Shell assets? No they will not bid - various reasons cited include, its an international deal that covers 20 countries, they (and Shell) are already at about 30% market share in Kenya and can't go higher (also cost)

High Working Capital: one shareholder noted the company traditionally carried high debtor levels, high stocks and high borrowings and called on the Board to be vigilant in collections, reduce stocks, and perhaps do a rights issue to rectify this. Chairman said they are vigilant with credit sales, and that inventory was currently higher as it was for the two individual companies (Chevron & Total), and that they will review the rights issue to see if it is relevant

Chevron stations: Which were bought in 2009 – and those not being sold onwards (as directed by Kenyan Government) will be-rebranded by year end, and there will be no loss of staff at either company

Goodies: umbrella, tote bag, t-shirt, lunch box (1/4 chicken, sausage, spring roll, beef sandwich, soda, and water

Past AGM's in 2008 and 2009

Motoring Moment: Spare Parts and Bad Driving

Bad Driving today in Kenya, there is a matatu (public mini-bus) strike protesting at new crackdown by policemen for bribes, noise pollution etc. Matatu’s get blamed for a lot of the bad & dangerous driving behaviour on Kenya roads. This used to be the case, but the bad driving trend has passed on, and you’re just as likely to see over-lapping and traffic gridlock caused by small cars (especially taxis), buses, minister & other government VIP’s - who all over-lap traffic and engage in other risky road behaviour.

Shell Quitting BBC reports Shell petroleum will quit operation in 20 African countries disposing of refinery, storage and product sales. In 2008 Shell had already left some 15 African countries, and rumoured suitors for their assets included Oil Libya Morocco Oil in Northern Africa and Engen in southern Africa. Here in Kenya @coldtusker reckons KenolKobil would be interested if they could line up enough funding. Total of France are likely to snap up some stations after taking over Chevron, and the government will likely arm-twist a fraction of the Shell assets to go to parastatal National Oil Corp of Kenya (NOCK)

Read on Cars: also got the latest issue of AUTOnews published by the Automobile Association of Kenya - some gems in it:

In another world cup opportunity pitch, the AA of Kenya (aalicenscing@aakenmya.co.ke) is offering:
- Car Net a.k.a passport eliminates hassle of lodging log-books or cash duty as you cross border points
- International Driver License that allows Kenyans to drive across borders
- COMESA insurance that covers Tanzania, Zambia, Zimbabwe, South Africa

Also, (in the issue), did you know there are 9 Kinds of Spare Parts? I thought there were just two genuine and fake, but according to the AA the 9 are:

9. Off cuts - whole chunks of cars from accidents or scrap
8. Imported used parts (also scrap from cars shipped to Kenya in mixed load containers)
7. Stolen parts (from chop shops)
6. Reconditioned parts – salvaged parts which vendors claim to have re-conditioned and tested (likely an impossible task)
5. Salvage parts - taken piece by piece from wrecked cars
4. Counterfeit parts - illegal parts branded as genuine
3. Non-originals - independent brands which copy established brands
2. Original equipment (OE) parts - independent parts approved by manufacturers
1. Genuine parts - made by vehicle manufacturer, brand new & guaranteed with warranty

Cheap Bikes are Good Business: Toyota Kenya sells Yamaha motorbikes including the kazi ngumu which costs Kshs 99,000 (~$1,320) and comes with 1 year warranty, 2 free service schedules, free registration, and a free helmet. Elsewhere in the issue, the Toyota Marketing Manager says the arrival of cheap (Chinese) bikes are boosting their (Yamaha) sales, saying low cost brands offered an entry point, but as motorcycle market has become established they can afford higher quality machines and turn to Yamaha for superior reliability, durability and performance…we are not worried about used imports, they are not a bad thing, certainly there are anomalies in standards and much duty evasion, but mitumba is a way for people to get started, and as they flourish they will look for better and newer products

From Twitter - the classic @roomthinker: You can buy a Toyota Vitz in 2 configurations: 128MB and 256MB #AVitzIsNotACar
- @ArcherMishale: Overheard on FB: In addition to #ToyotaFeets #Feetsubishi #Legsus, Kenyans will also be on #KNEEsanPatrol! LOL!!

- @MwaiKibaki: Kenyans should not listen to radio traffic reports. There have been no traffic jams in Nairobi since January 2003

2009 Nairobi Motor Show

The 2009 Total Kenya Motorshow was held over the weekend. Since the last motor show was held in 2007, much has changed in the motor industry, mainly the global economic downturn, Kenya electoral violence and the dip in the fortunes of car manufacturers & dealers.

Who’s missing? Kenya Revenue Authority, CMC (Ford, Land & Range Rover Mazda, VW, Audi)

who’s here?

GM Kenya the Hummer is now old news in Kenya, and the highlight of their display was a dressed up a Chevy Optra. The 1800 cc car that costs Kshs 2.46M was outfitted with a Government of Kenya Flag and made for a very elegant slap in the face of Government Ministers who have resisted giving up their fuel guzzling Mercedes Limousines that costs 3X as much. NTV reports that the Government is buying over 100 new VW Passat’s, but it will be interesting to see if the top leaders will hand over their Mercedes cars, and what will happen to the fleet afterwards.

DT Dobie: had the new E-Class Mercedes which costs EUR74k (~Kshs 8M) while the smaller C-class Kompressor cost 6.2M and new B class costs 4.7M. Also an icon of Kenya roads, the 1200 Datsun/Nissan pickup has finally being replaced with the NP200, a 1.6 litre pickup that cost 1.2M. They are big in trucking and the award winning Actros was on show at a cost of about Kshs. 9.9M for new trucks, which can take a few weeks to order and deliver. Many local transporters import used Actros trucks from Europe at about ½ the cost. The dealers also sell the Chrysler 300 for $72,600 (~Kshs. 5.5M)

Toyota Kenya Toyota is the most popular car in Kenya, and they often advertise the slogan the car in front of you is always a Toyota They had the Land cruiser VX cost Kshs. 12M, but the diplomats, local NGO’s and donor groups can have it for 7.58M. Also the popular Prado costs 5.6M, with the duty free price is 3.74M and the hardworking Hilux double cab costs 3.69M, with a duty-free price of 2.45M

Simba Colt: the long-time dealers of Mitsubishi are now the new franchise holders for BMW of which they brought a whole range of cars; these included all diesel models of the 530D at 90,300 euros (~Kshs 9.3M) which is about 1.3m more than an E-class Mercedes favoured by the Kenya Government), X5 diesel for 100,000 euro (~10.9M) and vying for the title of new status symbol in Nairobi (currently held by range rover sport)is the (ugly?) X6 whose diesel version is 95,000 euro (~10.4M). Company also had the usual stock of Mitsubishi cars and trucks including the Fuso prime mover which costs 9.04M

Subaru: Had several cars including the Tribeca which Kshs. 6.8 million, and the 2009 Forester that costs Kshs 4.15M. Also car owners can order Subaru spare parts by phone, pay for them by M-Pesa and have them delivered.

Dealers for Indian Car companies were there for Tata, Mahindra, Ashok Leyland. Mahindra got bad reputation in Kenya many years ago when the police acquired some sub-standard used vehicles through political middle-,men that did not last long, and that image is yet to be cleaned up. They had a double cab pickup for 2.45M. Tata had many trucks and vehicles on display, and sales guys said that the Nano will be available in two months in Kenya, at a cost of Kshs. 250,000 (~$3,300 after our hefty vehicle taxes)

Dealers for China Car companies were also present. These included Transafrica for the increasingly popular FAW, Nelion (who’s Beiben truck closely resembles a Mercedes Actros) and Abson Motors . You see many Chinese trucks on the road these days, mostly working on government building projects being done by Chinese road construction companies. -FAW prime movers cost about 5.9M, and are increasingly popular with transport companies because of their manual features (not too heavy on the electronics, computerization of the Euro trucks), while the company also had a new pick up truck, the admiral, which costs 1.4M

Auto accessory companies these included for lots of anti-theft/car tracking (rivercress, stoic) companies, fleet management (AFMS), driving schools (Automobile Association of Kenya, GlenEdmund), body builders like Sai Raj who even fibre glass boats and bus builders KVM - who lamented the shortcuts that other bus (body) builders use in construction e.g. use of arc welding, which results in weak buses that are easily shredded in road accidents, leading to high casualties.

Also present in a big way were G4S - as the former security company has diversified into a hole range of services including fire fighting, ambulances, home fires safety (extinguishers blankets), , training (fire safety), vehicle tracking, all to go along with their traditional 24 hour burglary response

Auto financiers present were several banks (KCB, NIC, Bank of Africa, Diamond Trust (best bank in asset finance), Stanbic) and car insurers Heritage, CIC and CFC Life (who all had very aggressive sales people)



Related past Total motor shows from 2005 and 2007
Ref: Euro = 109 shillings, US dollar = 76 shillings, M=million kenya shillings

Total 2009 AGM

The 55th annual general meeting of Total Kenya was held on May 19 2009 at KICC and was presided over by company Chairman Herve Allibert
Easy registration took a minute. Total have introduced an electronic check-in, shareholders or their proxies show up with a bar code, which is scanned and they as they sign in

Q&A

Erroneous publication: company secretary apologized for some omitting list of top shareholders and wrong agenda contained in the annual report; saying the printer gave out wrong copy.

Buyout of Chevron assets: in 2007 Chevron decided has divested from petrol stations in west and east Africa and Total is buying their stations in Kenya and Uganda. The chairman clarified that parent Total Group (pronounced Tota hutra -meh) is buying the assets and deal will be finalized in June 2009. Thereafter Total Kenya (78% owned by Total Group) will buy the assets from the Total Group. Total Kenya has obtained regulatory approvals in Kenya, is arranging financing for that deal, and the directors will call for a shareholders meeting in a few months to approve that deal.
In answering another shareholder, Chairman added that Total Group is not divesting from Africa; they know how to do business in Africa, work well here and will continue to invest here

Performance drop in fourth quarter: board member answered shareholder that it was true that Q4 performance was worse. He said it was a s a result of negative stock effect (oil bought at $140+ that was sold at lower prices), and company had to make provision of Kshs 171 million for a supplier (Triton?) who was paid, but failed to deliver products to the company. He added that Q1 of 09 was much improved as the company had received a payment of 150 million in refunds from the Kenya revenue authority (KRA), a feat, which the Chairman added, was very difficult to attain.

Increase in borrowing costs: this had gone up because of the price of fuel was up, while they also had to pay upfront for all taxes

Bio energy: the group does research and investment for that and deploys products such as bio-diesel now sold in Ethiopia

No women directors Chairman said company was aware of this mis-match. They were continuously seeking some women to join the board and also plan to have more women in all management levels of the company

Hot point I - Total’s Q&A format; instead of having shareholders stand and ask questions, Total have (for some years now) had shareholders write their questions down on notes which are then handed to the board table and the company secretary selects a few which to read. The directors were today accused of ignoring some questions, not answering other key questions properly (about the flat share price and lack of bonus shares), while altogether leaving shareholders and some directors in the dark . The Chairman said they would review the practice before next meeting. Another aspect of the meeting (the French Chairman called it a “general assembly” ) that was challenged was the time of the meeting 3 PM

Hot Point II – Goodies:
- Total still doesn’t get it; they always have buffet of meat bitings , today by San Valencia that is messy to serve with shareholders jostling to get some food before it’s finished. They should just serve lunch boxes.

- each shareholder got a tote bag, t-shirt and an umbrella. Some shareholders complained that they had not got their gift items (but somehow other shareholder had 3 or 4 umbrellas) – and the company secretary was asked to record their names and see if the company could have them delivered after the meeting

Kutwa Tuesday: From Stanchart to LPG

stories found this week

Stanchart Bank:

Smaller profit - Standard Chartered is being much maligned for being the first bank to report a profit drop in 2008 of 4% to 4.7 billion shillings. ($59 million) (Increased 29% in 07). The bank which adopted a conservative approach compared to Barclays, KCB and Equity. Stanchart had asset growth of 9% to 99 billion (13% in 07), deposits up 4% to 77 billion and loans up 10% to 43 billion in 2008. Still their shareholders will get the highest dividend of any listed bank in 2008.

Here are some other performance comparisons of the main banks that have so far reported their 2008 results.

Goes for smaller customers - In a slight about turn, Stanchart has also launched a new low cost transactional account called Hifadhi, costs 2,000 to open, no ledger fees, or ‘cash handling fees’ with e-statements you only pay for transactions you incur, though its’ not as affordable as other 'cheap' bank accounts for small earners. Going for smaller customer has been a recurrent theme in 2008 with banks, insurance and investment companies lowering the minimum subscription amount. Examples are pepea from Barclays, Toboa from Old Mutual and even the Government of Kenya which lowered the minimum investment for GoK treasury bonds to just Kshs. 50,000 (~$625)

Bank briefs
- Stanchart get back to what they are good at – big corporate deals this one for Kengen
- Gulf African launches a shariah compliant mortgage scheme
- New bank branches: First Community bank now in Malindi, Ecobank in Kisii, while Family Bank re-opened in Githurai
- Another SMS sends Equity customers into bank panic withdrawals this time in Machakos.

From the blogs

Siasa mbaya, maisha mbaya: Global economic slump aside, Nairobi’s Stock Exchange will not see a bull run until the country’s political problems are sorted out according to MainaT

The Sunday Nation broke a story of the old Embakasi airport been handed over to an unlicensed new airline, but airport analysis comes from one Coldtusker

Following in the success of the infrastructure bond (over-subscribed by 45%), the Kenya Government is offering another bond to supplement its budget deficit; this one is for 8.5 billion ($106 million). More details from Conceptadvisoryservices and the minimum investment is just 50,000 ($625).

Kenya Rugby Effects: Kenya had a wonderful run at the IRB World Cup in Dubai, and knocked out defending champions Fiji in the quarter finals. Here’s some rugby loss reactionfrom Fiji.

Elsewhere

Employees lose & lose - it’s been a bad week for employees as the Employment Act was set aside and the government shifted more of the pension burden to civil servants to contribute towards their own retirement funds.

Madaraka finalized - Madaraka Estate houses were finally sold, apparently ending a long long running saga between homeowners, the City Council and the National Housing Corporation who should really update their website.

Laptop mania - so many offers for laptops these days, new this week were
- Safaricom selling Macbook with broadband modem for 100,000 ($1,250)
- Acer A110 laptop on sale with open office for $230 - great for Kenyans new to mini laptop market
- Even my bank/broker (CFC) hawks Acer Aspire 4710 and has loans that work out to 5,500 ($70) per month

Is Grad School a Con? - Half the Sunday Nation advertisements were for colleges aiming at the recent high school graduates whose results were announced last week. Also growing are the numbers of universities and master programs, but this article argues against going to grad school to avoid the recession with the author pointing out that;

- Grad school pointlessly delays adulthood.
- PhD programs are pyramid schemes
- Business school is not going to help 90% of the people who go.
- Most jobs are better than they seem: You can learn from any job.
- Graduate school forces you to overinvest: It’s too high risk.
(found at chris blattman)

LPG Shocker - when to buy cooking gas last night. Found the cylinder, however it appears that there is now a valve that will be mandatory on all cylinders from April 2009 - it is a universal valve, that will enable consumers to buy LPG /cooking gas from any supplier e.g. Kenol., Total, NOCK - replacing cylinders from any of them, since they will now have a common head/valve. The move is supposed to break the monopoly of established companies e.g. if you had a Kenol gas cylinder, you could only replace it at Kenol when buying new gas, whereas if you wanted to switch to Shell gas, you’d have to buy a brand new cylinder.


new gas cap

The problem was that many Total stations did not have the valve. (I checked at three stations) and they all sent me to the place that has everything in Kenya - Nakumatt. Nakumatt also say they stock valves for all companies, but only had the generic caps to sell. It’s scary to use a generic caps, since there are many fires in Kenya caused by exploding/leaking cooking gas cylinders. Hope this turns out ok when April comes around and more consumers realize they have to buy caps which cost anywhere from 500 ($6.25) to 900 shillings each, another cost to the burdened urban consumer. It would also be nice if oil companies and/or the Government conducted some consumer awareness about this matter, not leaving it to Nakumatt and untrained Petrol attendants.

Total 2008 AGM

excerpts

Total Kenya’s Managing Director Bertrand Fontanges follows in the footsteps of previous Chairman Momar Nguer (or is it a French company thing?) to AGM to educate shareholders on the state of their company and the industry in an hour long presentation on Wednesday.

Oil sector grew at 6.5% last year which coincided with country’s economic growth. The market share of the companies at the end of 2007 was Kenol/Kobil 22.4%, Shell 21.8%, Total 21.2%, Chevron 13%, Oil Libya 7.3%, NOCK 2.4% and independents 11.5%.

Challenges include;

The Government; makes all oil companies tender for oil together, for which they have to pay upfront. He referred to the process as they pre-finance the government - on top of which they pay Kshs. 30 per litre of petrol (~$0.48) and 20 per diesel litre. They also pay upfront taxes for fuel they export (i.e. to other African countries) - but don’t get refunded for at least six month after they claim. As such they have reduced their export amounts as it is not viable. He’s the second CEO in a month to put the government on blast after Eveready also went after KRA and KEBS.

The Pipeline: the oil pipeline which has capacity constraints. At least expansion of the Nairobi-Mombasa pipeline expansion should be complete by year end which should double capacity and end the constraint problem.

The Mombasa refinery; given the opportunity, none of the companies would use the refinery which is outdated, inefficient and makes products expensive - yet they have to refine about 50% of their products there. He added that independents don't process at the refinery which gives them an ‘unfair; advantage.

LPG i.e. cooking gas. He expressed concern and they have cautioned the Government about the proliferation of illegal re-fillers in the market. These are companies who refill gas cylinders – saying there are safety issues (they can explode) and consumers cannot ascertain the quantity of gas in the tanks from these shops.

Aviation Gas margins in aviation have become so low that they have reduced their sales there and will wait till the market improves before they go back in.

Despite all, the company’s performance improved (EPS of Kshs. 2.99 from 2.7 – out of which a dividend of 2.5 will be paid) thanks to asset sales, Kengen and reduced financial costs. Of the 623KMT of sales, 21% (134KMT) are through their petrol station network while 78% (498KMT) is though bulk, general trade, big companies etc.

Finance charges: Have been an albatross at Total for years. The price of oil (Murban crude) has doubled over the last year to about $120 per barrel (even though some OPEC officials say it should be $60 - $70) and the cost of holding inventory has likewise doubled. So Total has resorted to carrying only as much inventory as is needed, and requiring customers to pay up front.

Kengen awarded a contract to Total which runs for almost another two years. It is not part of the government tender process so they are able to get supplier credit for the oil which has reduced their borrowing charges significantly. (2006 Q3 had financial costs of Kshs. 415m compared to Kshs. 287m in Q3 of 2007).

Regional diversification

Taking regional investments a step further - how are various local listed companies doing on the regional front? January 2008 showed that having a focus on Kenya alone could be an Achilles heel despite it being considered one of the strongest economies in the region. Various listed companies are making pushes in East and Central Africa – however many of these countries are all dependent on Kenyan access, hence its not really true diversification of political risk. In that sense, Olympia Capital, an NSE laggard may be ahead of its peers with its tangled Botswana and South African corporate moves.

here’s a recap:

- CMC says regional sales are on target in Uganda and Tanzania (from ½ year results this week)
- Diamond Trust has set its sights on Burundi (adding to Uganda and Tanzania) while many other banks have targeted Rwanda
- East Africa Cables attribute good performance to their subsidiaries in Uganda, Rwanda and Tanzania
- KCB has subsidiaries in Uganda, Tanzania and S. Sudan (though it wrongly had the flag of Sudan on its’ annual report cover. These countries contribute less than 10% to their income and Ug had a loss of 49 million (setup costs) while Tz barely broke even with a profit of 0.2m in 2007. KCB opened in Kampala in November 07 and will open 6 more Ug branches in 2008, 4 new ones in S. Sudan in 08, and another 20 new branches in Tz over the next two years according to their annual report
- Kenol who after acquiring Kobil could be the first 100 billion shilling turnover company, have subsidiaries in Uganda, Tanzania, Rwanda, Zambia and Ethiopia. 80% of their sales are from Kenya, while the other countries contribute about 20%.
- TPS East Africa acquired 8% of Serena Rwanda which includes Kigali Serena and Lake Kivu Serena. Of Serena's 2007 sales of Kshs. 3.7 billion (~60 million), Kenya accounted for 64% and Tanzania 36%.
- Total Oil Kenya has sister companies in Uganda, Tanzania Congo Rwanda so essentially remain a Kenyan company with 97% of their sales being local. They however complain in their 2007 report that other countries who should be buying from Kenya are (because of our tax regulations) buying offshore and shipping through Kenya instead.
- Sameer Africa are looking for transporters to Somalia, DRC, Ethiopia, Rwanda, Sudan, Burundi, Mozambique, Zambia, Malawi Uganda and Tanzania for their products.

Looking Back: Annual reports

I found the annual accounts for Total East Africa (now Total Kenya) for the year 1990 and tried to compare the changes over the years. This is important as companies with over a hundred thousand shareholders (Eveready, Safaricom) will be considering cutting their costs soon until they are able to use e-mail for distribution.

comparing the 1990 and 2006 annual reports from Total

size: 1990: 20 pages, black & white, no pictures, heavy envelope paper
2006: 48 pages, glossy paper, all colour, lots of pictures

Financials: 1990 profit & loss (appears on page. 8), balance sheet (p.9), cash flow (p.10) followed by notes 11 – 15 (13 notes) – showing turnover of 3.1 billion shillings and pre tax profit of 237 million.

2006 P&L (appears on p.25), balance sheet (p.26), cash flow (p.27), followed by note page 29 – 44 (32 notes) - showing turnover or 38.0 billion shillings, and pre tax profit of 677 million.

shareholding: 13.7m ordinary shares 6/= dividend [total dividend of 84 million]
173m ordinary shares 2.50 dividend [total dividend of 435 million]

Chairman's statement
1990 ½ page
2006 4 pages

Auditors statement: 1990 - Murdoch, McCrae & smith; they issued a 1 page statement with two paragraphs, saying they examined books, and they are true in their opinion.
2006 Deloitte & Touché: 1 page statement with 6 paragraphs; explaining directors’ responsibility, auditors’ role, audit process, and finally their opinion that the accounts are true.

Other Formatting: what’s missing from 1990, that’s found in 2006? shareholder profile (p.22) mission & ,vision (p.2), directors bios & photos (2 pages), picture of key managers (1 page), management report (5 pages), company profile (4 pages), corporate social responsibility and adverting messages.

verdict: companies like Eveready can cut back on the ‘filler’ and give an annual report with just the basics to cut the postage cost in ½. Last year they issued a small size report that was short on ‘filler’ but financial, regulatory and governance changes have also contributed to the increasing size of corporate reports and resultant shareholder costs.

Looking back on Kengen & Total

Total
In October last year, Total Oil held a cocktail party to reassure shareholders after some dismal 9 month results.

Now that the 2006 results have been finalized, here are some other things shareholders were told at the event.
- Company experienced difficulty with upfront payment of taxes and ineffectiveness at the oil refinery in Mombasa
- Total had made a provision of 100 million shillings for an oil marketing case, but that very day the high court had ruled in their favor.
- The Chairman (Mr. Nguer) promised that the results at the end of the year would be much better than the 9 month ones
More comparisons to Kenol: he said that Kenol share price was 115 shillings in April and 109 on that day in October, while total had similarly changed from 44 to 37/38. He also said that while their operations were down 9%, Kenol’s were down 30%. [Today March 2007 – Kenol is 85 and Total 30]
- Commenting on Mobil oil exit and entry of Tamoil (of Libya) to Kenya, Nguer remarked that the sector was stable but that oil marketing was unique in Kenya and some multi –nationals could not understand this.
- On threats by Minister of Finance to fix oil prices, he said he did not see the country going back on its 1994 deregulation of the sector prices

Kengen
The surprise announcement last week that geothermal development company would be hived off from Kengen prompted a look back at the company’s pre-IPO prospectus. And sure enough in the future outlook for the company, the Kengen prospectus does mention the state will set up a geothermal development company to undertake high risk activities such as exploration and drilling. It will be financed by appropriations from parliament and will take over Olkaria from Kengen

Also that:
- Regulator (ERB?) will be empowered to set the price of fossil fuels bought by Kengen i.e. diesel. This is likely to affect independent power producers.
- New rural electrification authority. Any impact on KPLC?
- Kengen to bill KPLC at 2.36 not 1.76 per kWh which has become a hot button issue in this election year

Total AGM

Intro
Total Kenya Limited held it’s 51st annual general meeting (AGM) at the French Cultural Centre on Monday April 11. The company ended the year with sales of 37 billion shillings and a profit of 938 million before tax. This translated to earnings per share of 3.31 shillings and the firm declared a dividend of 2.50 shillings per share, payable after this meeting. Total is 78% owned by parent Total, and 21% by Kenyan shareholders ( 4,450 shareholders, 1,800 of whom own fewer than 1,000 shares) and 1% by employees.

The meeting began promptly at 3 p.m. Earlier shareholders had been given the annual reports, minutes (of 2004 meet), sheet to write questions and a goody bag (with an umbrella, polo shirt and baseball cap)

best part
This was the most interactive meeting I have seen. After Chairman (& Executive VP East Africa & Indian Ocean) Momar Nguer read his speech, and the auditor’s read their statement, he proceeded to go though most of the written questions submitted by shareholders after they had been seated. The number of questions was large, as people are less intimidated writing their questions, as opposed to being handed a microphone in a hall full of stranger. Anyway it led to a very insightful debate on Total; it’s competitors, the oil sector in Kenya. Here are some of the answers

Total
- Chairman Nguer showed that Total had been gaining, was 18 shillings two years ago, 27 a year ago, now 40
- Under Nguer, has gone from the no. 4 company in Kenya in 1997 when he arrived to no. 1
- The company will not cut corners. A 28-year-old tanker ship used by a rival company caused an oil spill in Mombasa last week. Nguer said that ships over 20 years old are not widely used anymore, and are not allowed in European ports.
- Said there was no need for bonus shares as long as the company was giving dividends
- The company’s main social project is the “Total Eco Challenge” which seeks to plant 100 million trees a year in Kenya to restore forest cover while meeting demand for charcoal and other wood products (which provide for 80% of Kenya’s annual fuel requirements) in 2004 Total spearheaded the planting of 10 million trees

Kenol (Kenya Oil)
Competitor Kenol has been one of the hottest companies on the NSE and it’s share priced passed the 500 shilling mark, before it was split 10 to 1 – bringing the price to more affordable 50 shillings, from where it has risen to 64 (equivalent 640)

Chairman Nguer was put to task by some shareholders for posting lacklustre results compared to Kenol, having a flat share prices and generally being left 10 steps behind by Kenol. Nguer forcefully defended his company (he must have expected such questions because he had the 2004 accounts of Kenol with him) and tried to prove that Total was a better choice for shareholders.

- Nguer poured cold water on Kenol’s plans to expand into Ethiopia and Zambia. He’s the Total Chairman in those countries and said that any operation in (price-controlled) Ethiopia is very unprofitable while he’s never seen any presence of the company in Zambia.
- Claimed Kenol made a lot of non-oil income, including 226 million from the sale of commercial paper, while Total focused on its core operations only
- Said Total was giving a better return: 2.5 shilling dividend on a 40 shillings share versus Kenol’s 2 shillings on a 60 shilling share
- Admitted that he was confused by the Kenol’s accounts system and urged their shareholders to look at their books

Government of Kenya
- Has been detrimental to Total and the Oil Industry, and consumers of their products
- It is cheaper for Total and oil companies to import petrol and diesel into the country, but they are required to import crude and refine 70% at the government refinery in Mombasa. Unfortunately this also means higher fuel prices for motorists
- The government reneged on a deal to waive all taxes on cooking gas and cylinder’s (as it is with kerosene). Nguer believes that his is the only way to reduce the cost of cooking gas in Kenya.
- Government also reneged on an agreement it signed to mandate the use of low-sulphur diesel and unleaded petrol by 2006. Our Mombasa refinery cannot produce these fuels yet - and this has also prevented willing governments like Rwanda & Uganda (who import though Mombasa) from implementing the same.

Oil Industry
- Said contrary to public perception fuel prices go up and down, not just up.
- OPEC has proved ineffective in managing the price of oil
- Does not expect oil prices to go down any time soon owing to the great demand of China and Asia
- Oil is a low margin business, and profit come from increasing volumes, not prices
- Network fuel stations only contribute 1/6 of Total’s sales
- Is a tricky business to finance: $ interest rates are 3%, while shilling rates are 10%, and most suppliers have to be paid in $

Other shareholder questions
- asked why meeting were held in the afternoon causing people to get home late
- asked for umbrellas (which had got finished)
- asked for extra umbrella for wife at home
- asked for a job
- asked for a promotion for a certain worker
- asked Total to pay shareholder travel expenses

All the question session took up more than an hour, after which all the voting matters – dividend, auditor & director fees and re-election (the actual purpose of the meeting) were concluded in about ten minutes. The Chairman then invited shareholders for refreshments

worst moment
Refreshments after the meeting
Today, churches like All Saints Cathedral are honest enough to admit that they have thieves in their service and advise worshippers to watch their own pockets and not to leave bags unattended when they go for communion. Likewise Kenyan corporate giants should accept the fact that some of their shareholders only attend meetings to grab food and gift bags. The smash and grab scene in the food court of the French Cultural Centre was a sad spectacle. I suspect that some of the grabbers were no shareholders, since the registration and security at the meeting was quite lax.

I recommend that in future:
(i) give individual lunch bags (apologies for criticizing Barclays)
(ii) If they must serve meals at the meeting, employ ushers and arrange for groups to be served in sequence. It’s tough enough serving 1,000 civil guests at a wedding, so why should Total expect 1,000 strangers to behave themselves wedding- Total should have done the same as they dished out a limited supply of wine, juice, beer and bitings such as samosas, beef cuts, mini pizzas etc.
(iii) or give vouchers for meals and gifts – to be claimed on a day after the meeting e.g. vouchers for pizza at Total food courts
(iv) or don’t serve any food at the event.