Skunkworks: Nairobi September 29

The latest Skunkworks was held on September 29 2009 at Teleposta Towers Nairobi. The focus of the tech group this week was on Tech & Entrepreneurship and four speakers were chosen to provide their insight on the new business models they are developing in Kenya. This comes at a time when the fibre cable initially considered the greatest thing since sliced bread has become a corporate product with targets to break-even before cheap internet costs can be passed on. The fibre is just one arm, so it was good to hear techpreneurs talk not just about revolutionary business but grappling and scaling numerous challenges of running such businesses in this part of Africa – i.e. business registration, financing, staffing, patenting, winning contracts, succeeding and making money

skunkworks panel

full disclosure – I correspond with Liko, drink with Kahenya and Joshua arranges some advertising at this site

1. Liko Agosta - Founder and CEO of Verviant a leading web developing firm and BPO provider talked about:
Startup financing: He started his company with savings, then family & friends, and finally banks
company strengths: include having a good team (20 staff in Kenya), good track record (measured by repeat business they get), interacting with customers, good customer service (including fixing up products for their customers that other companies had previously messed up)
customers: - have contracts with companies in the USA, Canada, Europe, New Zealand, and South Africa
- show companies how they can save money e.g. Africa online, akamba, instead of having staffed offices all around t company waiting for people to bring them money, have a platform that does this cheaper
watch cash - many business fail because they are under-capitalized, entrepreneurs should save money and keep costs low because it can sometimes take many months for them to get paid
- advises tech companies to focus on mid size products and contracts; this is because cash flow kills many Kenyan companies and this is likely to happen when if serving large contracts whose payments are spaced out
new product: pesapal will allow Kenyans to pay online via mpesa or zap for products and services from vetted merchants. It will also store transaction details details for 7 years, and comes with a readily available API, and pre-built components. More details on pesapal availed at verviant site on October 2.

2. Caroline Juma is the managing director of KCR - which stands for Kenya computer resources. She talked about her company which does human resources for IT professionals exclusively.
education or experience don’t always matter: while some companies ask for job candidates with advanced degrees or who have several years experience to fill positions, she sometimes finds that the best person may be one who is still in school, or who does not have the work experience. She looks at what they have done; KCR can test/examine what their skills are and will vouch for them to companies to employ them as IT professionals. IT professionals should show initiative, and work on projects that will enhance their career prospects not just learn outdated VB in university
don’t wait for governments: Kenya is not known for IT and call centers will not save the day. People should stop waiting for the government to do things in outsourcing, fibre etc. But governments don’t do that they only crate policy.
KCR is free IT professionals can place their CV's with KCR for free, there is no charge, unlike with other placement companies
IT conference upcoming KCR will be involved in an Aitech conference in November in Nairobi on business match-making

3. Kahenya Kamunyu - CEO, ViRN Instruments. Involved with Zuqka, previously worked for BT, Yahoo, Sanyo Business, and Sony Playstation. Currently developing smart ideas and providing Venture Capital to small enterprises. Kahenya has been coding since he was 13 years old and gave a talk on his entrepreneurship and employment history from South Africa, UK, Japan and finally in Kenya, and the lessons he has picked up along the way:

boot-strap: be frugal, pay bills, and put whatever cash is left aback in the business. Businesses that are under-capitalized and will fail
More education produces bad developers! college kids write better program than senior engineer with degrees; his is because kids write code without rules, while company programmers can only write within the parameters/box set by the company
business is fun
what?! if you’re single you’ll never make money – get a wife/husband.
have a wish list: these targets let you know where you are going and give you targets to work for
look after your health don’t over-work yourself or get tired. Work smarter
give back to community: tithe, get involved in non-profits, help others – this is because what goes around comes around, and you may be the one in need of a helping hand next time
debt is bad: do not start a business when in debt, you will go deeper into debt and have to sell off assets
on partnerships: set the rules before you go into partnerships
Kenya is not friendly to start-ups it is very hard to start a business and expensive. It would also be nice if there were incentives for local companies. E.g. Vodacom in South Africa has a super low tariff for start-up businesses that use their products, why not Safaricom? Also banks are not friendly in lending to star-ups.
banking secret you can use a patent to get a bank loan
small is better many entrepreneurs chase one big multi year contract, but it is better to serve several small contracts. The big contract may pay one, and replace you with someone cheaper, while the small ones, diversify the risk, provide for better cash flow, and the happy customers whose expectations are easier to meet, will grow and stay your loyal customers of many years big fish =small fry, small fish= big fry
high tech not the answer many young people go into high tech industry because its the in-thing, cool, sexy now, but internet has expiry date, while people will always eat food.its unfortunate some entrepreneurs are too proud to go into mundane (non-tech) industries that are more sustainable in the long run-
Kenyans should invest in R&D talk to customers, observe competitors. Many Kenyan companies don’t do this and fail owing to bad idea/false assumptions i.e. build it and they will come.

4. Joshua Wanyama: Founder and CEO of Pamoja Media, and a TED fellow, helps companies strategize their online presence to make money.
company strategies (i) interactive strategy (ii) creative development (iii) media buying & placements online
niche is getting companies aiming to advertise to Africans e.g western union
understand marketing: easy to get a meeting in Kenya, much harder in the US
keep learning: learn through reading, searching online & in libraries, networking, associating with smart people. He has learnt more about business from reading after his education
use web tools: he runs a web based company that has several components - all online including e-mail, ad server, sales leads, finance (payroll) and project management> can this also be retransferred to a farmer or fisherman?
opportunities Kenya
- include online services, e-commerce, procurement and local content
- It’s time to walk the talk in Africa; in a country like Kenya only 20% of the top 100 sites ranked by alexa for Kenya are Kenyan companies. We need to retain more people within our domain, and keep traffic generated within Kenya
- thanks to m-pesa’s success, it’s now easier for Kenyan mobile development companies to get funding from abroad
- Mentioned other companies doing exciting things online including: Preciss,
Ushahidi, Verviant, Nyeri Online, Jumuika and Mama Mikes
keys to success for Kenyans online
- tell our success stories better
- Ease the way of doing business: it has taken him several months to register his business in Kenya as well as to open a bank account for the company in Kenya. There seem to be difficulties for companies that have overseas-based directors or partners, and he has only been able to open an account with the help of a lawyer
- Cultivate a culture of entrepreneurship. Financing entrepreneurs is risky business the world over with expectations that 40% of business will fail, 40% will break even and 20% will bring in rewards
- companies should do R&D and follow through on these because one year from now the company or its products may not be relevant

Kenya Airways 2009 AGM

Kenya Airways (KQ) is the cradle of blogging for me – one of their annual general meeting's (AGM) is the place it all started, the place where the inspiration for blogging, since then it’s been a ritual to attend because I like planes and investments similarly. This year’s AGM, held on September 25, was the first I’ve attended at Kasarani sports gymnasium; previous ones were at their Embakasi HQ, Carnivore and Bomas grounds.

what was remarkable or noteworthy?

shareholders aplenty KQ always draws in shareholders, maybe its because they are rather generous with gifts a.k.a SWAG (more on that later); but the meeting hall is full of the whole rainbow of Kenyan shareholders from business peoples, to student types (perhaps sent as proxies), but mainly older people who perhaps bought shares as far back as the IPO in 1997.

KQ courtesy shames Safaricom a few weeks ago Safaricom held a no frills AGM that did away with many of the niceties that shareholders are used to. KQ, showed they this was no a costly affair to gold; they had shuttle buses from town to ferry shareholders to and from the meeting and also gave out lunch boxes to all shareholders. The AGM did not have the usual red t-shirt that shareholders are used to, but coming on the back of Safaricom, many were satisfied.

in the meeting - CEO Titus Naikuni talked about the tough year the airline had from the credit crunch, which affected travel budgets and the price of fuel, which escalated during the year.
- Fuel hedging: FD Alex Mbugua tried to explain the subject of fuel hedging, something he said even many accountants don’t understand, but which had left the company with a 5.6 billion loss. The company was able to manage an operating profit of 4 billion ($52 million) before hedging kicked in, even though the price of fuel had gone up to Kshs. 24.5 billion representing 35% of their total costs.
- For the last 5 years they have engaged in fuel hedging, this worked in their favour till 2008 – when with oil looking to zoom past $200 they locked in some contracts, only for the price to nose dice to $40 . Overall in the five years the gains remain a positive Kshs. 516 million.
In response to shareholder questions he also said
- KQ board is reviewing hedging policy, and this is through the committee of the board
- some hedging parties have been reluctant to enter into contracts with KQ of late, and insist on some cash cover
- while they could not comment on recent prices they have hedged, some to 2011, he mentioned the numbers have swung in their way as at August and they may have a write back in profits this year when they brief investors in October 2009.

Shareholder questions (with answers)
- how will they control costs? Careful choice of routes, try and expand those that work, drop those that don’t. African routes account for almost 1/2 their revenue now.
- Why did employees strike? There were conflicting unions representing employees, and during labour talks, the employees went on an illegal strike as they demanded untenable wage increments. Management was able to come to an agreement with the help of COTU and is looking to learn from mistakes it may have made to avoid this again
- Why is company’s secretary (CS) not an employee? Company did a cost benefit analysis and decided to outsource the function. The CS is still Fiona Fox and she assured shareholders that she responds to all letters written to her; most of which relate to registrar matters
- Where are reports of KQ accidents in Ivory Coast and Cameroon? CEO said investigator reports are still being done by these countries authorities, and they don’t have the former, while the latter has not been released KQ so can’t comment on it. On the Cameroon crash, KQ and insurers had made settlement with 90 of the 105 passengers, but some relatives have chosen to sue the airline or the aircraft manufacturer (i.e. Boeing)
- Why did annual report come out just 3 weeks to AGM? Management said they would try and improve and not just comply with the legal minimum for listed companies
- Why not use Precision Air aircraft (a Tanzanian airline in which KQ owns 49%) to fly to Kisumu since they have no more turbo-props for short runway? The repairs at Kisumu are short term did not warrant fleet change, and will resume flying there with their Embraer 170's when repairs are done
- Do they plan to fly to the USA? KQ has never said they would fly to US; they have good partnerships and networks (KLM) through which they get feeds from US already, and JKIA will have to make some modifications before they can fly to US.
source: airliners.net
- What will be done about Boeing 787 which they have ordered but us yet to fly? KQ are talking to Airbus and Boeing about getting some replacement aircraft (won’t be brand new) but decision will be made in a few months
- One shareholder asked why managers /directors interest are divergent from KQ i.e. directors own few shares, while executive directors compensation is significant part of employee compensation: The Chairman said buying KQ shares was a personal decision of directors and he himself bought his shares at the time of IPO when he was not even a director of KQ. The CEO said management have not had any salary increments despite what union said during the strike.

Minor #FAIL’s: - The company registrars who had dozens of computers to register shareholder before the meeting, but whose computers were not connected. Anyone could have walked in. They also ran out of ballot papers
- The gymnasium had no water (though understandable at this time of water rationing). It was also not suited to the meeting format; the directors sat so far as to be indistinguishable except on TV screens while poor microphones/acoustics of hall meant some questions/comments were not audible
- Shareholder elections; this year, there was only one independent candidate on the ballot I guess they have realized of the futility of this exercise - and the results out today show all the board nominated director were unanimously re-elected
- CDSC (the share people): had a tent outside to register any of the 78,000 shareholders of the company; but they didn’t just ask if you had immobilized your shares, they practically demanded you pass by their tent and register to receive statements by e-mail or SMS (do away with the postal service)

Goodies: - Dividend of 1 shilling ($0.013) per share despite the loss. shareholder's register closed day of meeting and this will be paid after October 23
- Lunch box by Sarova with drinks (yoghurt, soda & water), meats (drum stick, beef sandwich, boiled egg), fruits (banana, apple), and breads.

10 Reasons You Lose Twitter Followers

While new media like twitter gets more popular each week in Kenya, I find myself adding more interesting friends, but only to unfollow some for different reasons. So I may have un-followed you recently because:

1. You send too many tweets in a few minutes, crowding my small nokia window; maybe you’re just in a foul mood, I may check and re-follow in a few days time
2. Too may re-tweets I want to know what you're thinking, not just reading elsewhere
3. Your account has been taken over by a monster twitter e.g. wefollow mafiawars
4. Too many boring tweets (if you've nothing to say there’s no penalty for saying less)
5. Too many back & forth with another twitter who's more interesting than you - one of you has to go you should take the argument sideways (chat, e-mail, DM)
6. You fit the profile of a stalker – you follow you follow Oprah, Ashton Kutcher and me and send me DM messages constantly
7. You take up a cause and hype it to death I may follow you after the cause/event/conference has passed
8. All activist, all the time #HIV #NGO #healtheworld #savethe kids #savethechimps
9. If you fit the profile of a spammer or send lethal links
10. u ryt gbrsh lk ths – there’s actually a proper abbreviations dictionary, but its’ much easier to just write complete words

So unlike with facebook, I can’t turn off your updates (or can I?) so I probably un-followed you for one of these reasons.

For Last Minute Kengen Bond Investors

There’s a nice travel site called Kenya last minute that caters to the last minute travel planners. Similarly, taking up last minute offers is a trend that also spreads to investing and there is a lot of interest now in the public infrastructure bond PIBO (not BIPO) on sale from the Kenya Electricity Generating Company (Kengen) that closes on September 29 and targets to raise almost $200 million in exchanges for paying investors12.5% interest p.a.

Anyway what’s the rush? We have had one month to make a decision that covers ten years! And if this was a share sale, we’d probably see queues of potential investors lined up around stockbrokers offices holding bits of paper, cheques, ID’s etc. at least one of whom would look into the TV cameras and say something like “serikali ingetuongezea sisi siku moja tu” (the government should add one more day for investors). The offer has not pulled queues to the street corners, but its’ excepted to achieve its goal, as targeted marketing and forums are being held around the country

So what there to tell last minute investors? Blogger Kainvestor has a nice PIBO summary derived from the information memorandum almost from the day it was released and there’s no need to repeat the good points he has noted there.

Good for retail : with an over-subscription expected, the resultant allocation is likely to favour retail investors. The minimum investment has been set at 100,000 ($1,315) which is the same as the recent Kenya government infrastructure bond that was aimed at raising at raising 18 billion, but yielded 26 billion. Then, and probably now, the allocation formula was skewed in favor of retail investor compared larger investors and institutions.

source: CBK infrastructure Bond performance report (PDF)

Bad for retail: liquidity in the secondary market for Kenyan corporate bonds is low; while the NSE twitter feed (@NSEKenya) notes that the bonds segment witnessed trades worth Kshs. 1.15 Billion (on September 24) which is an increase from Kshs. 80 million worth of bonds traded yesterday, this was all in the government bonds segment, while corporate bonds are rarely traded; those who buy them, rarely trade them, so if a retail investor is looking to cash out early, odds are not good.

Also read another BIPO analysis from the Business Daily

Week on Twitter: September 22

Another re-cap of a week full of Twitter - @bankelele posts which included issues like Olympia prepares for shareholders then postpone AGM, a skunkworks forum and a fibre summit are coming to Nairobi this week, but how is the fibre being used in government? There’s a new newspaper from the government of Kenya and a new magazine from EAM. Charterhouse bank may re-open while PTA bank has a silent bond, Kenya airways flies to ndola while Emirates air starts selling world cup 2010 packages, and finally twitter matures by enabling medical advice for Kahenya, drawing in the US ambassador to Kenya and also by helping Stanbic Bank improve customer service

- East Africa Fibre Summit - in Kenya next week http://www.aitecafrica.com/...
Emirates Air starts selling 2010 World Cup South Africa Packages http://tinyurl.com/pbj7e3 (where's SAA, @kenyaairways, Ethiopian?)
New GoK newspaper title Kenya Today; first issue has bullet trains, brigadier Ali, SMEs, IdiAmin, MJ, and rants about parliamentary dictatorship & NYTimes writers – all at a cost of Kshs 30/=
- @SupremeGREAM I'd be very surprised if Charterhouse Bank reopens. It will be like re-licensing Triton; @kachwanya is correct, something is smoking at Charterhouse http://bit.ly/3lk8d2
- R/T @kaboro Skunkworks Tech & Entrepreneur Forum, 29Sep Speakers: Liko Agosta, Verviant, Joshua Wanyama, Pamoja, Alex Gakuru.
- Help @kahenya with medical advice http://bit.ly/1YDJ3F #rhabdomyolysis
- @RookieKE CFA one very tough exam, it has driven some very bright professionals up the wall. CFA pass rates Level I: 46% Level II: 41% Level III: 49% @kainvestor http://tinyurl.com/mwegha i salute those who have tried it
- Tiomin say they have made progress with Canadian and Chinese investors on #kwale. Wait till they get to environment minister #michuki
- Kenya government has asked all ministries/agencies to email copies of procurement tenders - to be complied at a portal http://www.tenders.go.ke/ ; also http://www.tandaa.co.ke/ which is "all about Kenyan content" has NO KENYAN CONTENT! Just Anheuser Busch, French news, love in Warsaw...
- @kenyaairways 44th destination launch flight lands in Ndola #Zambia http://bit.ly/hMFk5
- Barclays waives joining fee for gold (6K) & classic (3k) cards http://www.barclays.com/afr... #youllpaysomehow @coldtusker i have no credit card, i can usually tap family or friends #TIA
- R/t @joosi @davos World Economic Forum (WEF) to be in Tanzania May '10. Nairobi star said kofi annan steered it away from Kenya’s bad leadership
-
#Newshot and #bullseye are not too funny: seems marende may have banned use of parliamentary clips for satire. Did njoki spell stakeholder as steakholder in her protest letter? #NTV
- Sunday nation writes about US ambassador on twitter @usamb4reform, but twitter yet to be taken up keenly in Kenya unlike facebook
- Nairobi water company appoints 4 debt collection agencies
- PTA Bank has a $21 million 14% bond in Uganda closing Oct 2. Pity they stopped updating their website http://www.ptabank.org
- New women's magazine called Move out this week from EAM, costs just Kshs. 80 ($1) http://www.drum.co.ke/node/... was true love too pricey for the ladies?
- Twitter improves bank service R/T @coldtusker Thanks to @StandardBankGrp I got a call from CFCStanbic Kenya re: my problems at the bank
- R/t @kainvestor Kenya Ministry of Water office connected to fibre cable! But nobody knows what do with it...just watching movies online.

Olympia CEO comments South Africa has been a real challenge, but we still believe in the market M Matu http://tinyurl.com/klheg7 ; later Olympiacapital muddle continues, now AGM postponed to 2nd-oct cause delayed fin statement dispatch

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.

Reading the Kenya Airways Tea Leaves

excerpts from the 2009 Kenya Airways annual report
pic from airliners.net
Investor performance: - Annus horribilis - airline industry performance has been bad with over 40 airlines suspended from the IATA settlement system in the last 15 months for non payments
- Turnover of Kshs. 71.829 billion (~$945 million), and operating profit of 4.04 billion, but the year ended with a pre-tax shocking loss of 5.66 billion ($74.5 million) owing for fuel hedging. In 2008 turnover was 60.47 billion and a pre-tax profit of 6.52 billion
Have 76,703 shareholders, 35 243 who have immobilized their accounts
- KQ has become more sensitive to fuel price changes and less sensitive to currency fluctuations – a 1% increase/decrease in fuel impact the profit by 269 million ($3.5 million). Report does not mention who fuel hedge partners, but hedges ran up to December 2010
- Their investment in Tanzania’s Precision Air is good. Their 49% stake brought in 62 million in profit
- As a result of currency restrictions, KQ has 58 million ($763,000) in Seychelles that they could not repatriate, but the government there has allowed them to utilize it to procure services
- Have loans of 32 billion (with 23 billion or ~$303 million) owed to Barclays, also from ABN Amro and EXIM Bank USA – all at rates between 4.5% and 6.6%

Routes: - fly to 37 African cities, 5 Asian and 3 European destinations
- Revenue comes from Kenya (4%), Africa (46%), Middle East & Asia (22%), and Europe (29%)
- Stopped Lamu because they don’t have a plane that can land there (after they sold turbo-prop)
- Paris is back on, but KQ scrapped Nairobi - Guangzhou direct because of poor traffic. Guangzhou now served through Bangkok
- Aim to offer more night flights to Nairobi for easier connections
- Have run some enticing promotions to celebrate new routes new routes - $43 to gabarone (Botswana) and $44 to Ndola (Zambia)

Embraces new media : - website has 230,000 visits per month and sales have passed $10 million (that’s about 1% of a year sales)
- No. 7767 is an SMS alert number that passengers can use to get information of flight status, delays, cancellations etc.
- About 3% check in via web, and booking for hotel and cars is also at a good rate
- have installed wireless network for staff to serve passengers, for baggage crew, engineering teams to coordinate flights why not wi fi for passengers?
- no mention of twitter @kenyaairways

Passenger services: - Busiest passenger months are July -August (~270,000 passengers p.m.) while lowest are February (~200,000)
- On time flights have gone up as a result of a zero tolerance policy on delays
- Airline report again laments that the Jomo Kenyatta international airport (JKIA) – their hub- has not kept up with their rapid growth in passenger numbers – and transit facilities inadequate
- Report also again appeal to the Kenya government to grant transit visas to their west African passengers flying to the far east via Nairobi
- KQ bought 3 buses to ease passengers’ convenience, long walks to flights and protect them from weather
- KQ still runs Bombay Ambulance that provided discounted tickets to airlift needy patients traveling for medial operations overseas (donated 20 tickets last year)

Employee relations: pre-strike - Has 4,240 employees
- KQ sold land in Embakasi to a developer who will put up 332 houses, in which preference will be given to KQ staff
- Have 340 pilots and 850 cabin crew. Plan to hire 68 pilots this year (48 direct, 20 ab initio) and another 23 over the next 5 years to replace retiring pilots

Fleet: - KQ owns Boeing 777-200, 737-300, 737-700 aircraft
- KQ leases Boeing 737-800s and 767s, as well as Embraer 170s (paid 4.9 billion in leases in the year)
- SAAB turbo-props were sold to a European buyer in May, so now have an all jet fleet now
- Paid deposits of 1.65 billion ($21.7 million) to Boeing for the yet to fly 787 whose deliveries they expect between 2013 and 2015

Green airline: - planted 450,000 tress in Ngong forest with other corporate partners, costing KQ $220,000
- will map their carbon foot-print in 2009, though they cite a report that global aviation contributes only 2% to carbon emissions

AGM - their annual general meeting is coming up at the end of the month
-shareholders will vote for a dividend despite the (non-cash fuel hedge) loss for the year, and as is the norm this year with Kenyan listed companies, also for electronic mailing of reports or their publication of account sin the newspapers to replace expensive mailings through the post office to each shareholder
- KQ director elections are usually interesting affairs shareholders will be asked to (i) re-elect Chairman Evans Mwaniki and Denis Afande who must be re-elected each year because they are over 70 years old. (ii) Also new to the board is group finance director Alex Mbugua, and (iii) there will be a new director since a government re-shuffle will bring new transportation permanent secretary Cyrus Njiru on board as the main government representative replacing adan ali. (iv) There is also a vacancy as KLM nominee Micah Cheserem resigned during the year when he was appointed chairman of Kenya’s Capital Markets Authority.

Reading the Olympia Capital Tea Leaves

Holding company - Olympia Capital’s annual report is one of the most jumbled I have seen in a while - it has contradictory statements, dates overlap, and profit/loss amounts that may have led to some regulatory trouble in Botswana where the company was also listed.


recap
Performance: their accounts were qualified accounts by the audit firm DCDM who noted that the company did not comply with IFRS – where they should have consolidated a subsidiary (Plush - to be liquidated) in their accounts; the auditors however added that this omission did not have a material effect on the performance numbers since Olympia wrote off all related amounts

Disastrous SA investments
capping a disastrous foray into South Africa – whose dismal results the directors blame on the recession in that country
- owned 74% of Plush products limited which ceased business and will be liquidated as their bankers (Nedbank) moved in – the SA equivalent of a receivership?. Olympia wrote off Kshs. 103 million from Plush – 86 million investment and 17 million in loans
- With another company, Natural wooden products, they expected to buy (and who they lent money), but this will not materialize; they don’t expect to recover monies and have provided for it in full
- another one Natwood owes 63 million
- The report notes that Olympia provided a total of Kshs. 115 million for SA investments that have not contributed to profits since investment while the elsewhere is a note that discontinued SA operations will cost Kshs. 200 million

Investment/subsidiaries
- own 12.5% Heri investments (valued at 71.6) million and mentioned they got a good dividend, thought its unclear how much was received
- A subsidiary, Dunlop, bought a tile making plant at a cost of 54 million – but it has not been installed – and the company may have to get a third party to install or operate it – or may even have sell the plant!
- Owned 7 million worth of Safaricom shares at year end

Other
- Some directors & top shareholders have reduced their shareholding
- There are so many internal deals /within-the group based on valuations or estimated of directors
- There are no director profiles in report
- Corporate governance: Olympia created two board committees audit & nomination, and investments committee – but these did not meet during the year (this company needs a competent independent investments committee after its SA foray!)

Upcoming AGM
should be interesting to attend
- The AGM will be held on 25th September
- Auditors signed accounts on July 31, but the reports have been sent to (2,685) shareholders just two weeks before meeting
- Shareholders will be asked to approve a dividend at a critical time for the company (Olympia will pay out Kshs 4 million)
- Bad timing for the directors to ask shareholders to approve creation of an employee share option plan (ESOP), fund it, appoint trustees, issue shares etc.
- Increase share capital from 40 million to 50 million by creating 10 million new shares of 5/= each – this adds up to an additional 50, not 10 million!
- DCDM will continue as auditors.

Kengen & other Nairobi Bonds

Lots of questions abound about whether its time to invest in bonds at the Nairobi stock exchange. From late last year when Mabati Rolling Mills launched a bond, 2009 has really been the year of the bond with the clincher being the successful Kenya government infrastructure bond of February 2009.

Now ongoing now is the Kengen PIBO for which Kainvestor reviews the prospectus. It offers a 12.5% and the minimum subscription is 100,000 shillings (~$1,316)

Next expected next is a Safaricom bond, a Centum bond ( 2 billion), and more tranches from CFC Stanbic and Barclays. It’s quite a turnaround from 2007 when companies like Athi River Mining, Safaricom and Celtel Kenya (now Zain) all redeemed /repaid bond investors at a time of low interest rates.

Track all the corporate bonds at the at the NSE daily bond report and these include East African development Bank, Barclays, Faulu Kenya, Mabati, PTA Bank, Athi River Mining, Sasini and CFC Stanbic

Buy bonds directly from stockbroker agents, but if still unsure of the process, consider investing through bonds funds such as those from Old Mutual Kenya and Dyer & Blair Investment Bank - Kachwanya reports that investors can even access the Kengen Bond at ½ the prescribed price – paying just Kshs 50,000 (~$650) instead of the subscription minimum of 100,000.

Stocks versus bonds? in the long run, as shown by this stockskenya thread, shares are likely to out-perform bonds – even the generous 12% Kengen bond.

EDIT also on offer is Uchumi Bond/10% convertible shareholders’ debenture is on. Press reports say it was valued at 12 shillings each by KPMG and is available at a discount of 10/= to shareholders of the company. The funds raised will be used to restructure the balance sheet, which shoudl lead to the end the receivership, and re-listing of the company’s shares at the NSE.

Uchumi Financial Results

published by Specialized Receiver Manager – September 2009

Week on Twitter (September 11)

Another re-cap of a week full of Twitter - @bankelele posts which included issues like - more innovative loans from Equity Bank, why do Kenyan companies make such large PDFs? The fibre cable has reached Mandera in remote Northern Kenya, but piped water is yet to get there, police dogs sniff grass, Zimbabwe ministers text like teenagers, how to get through to safaricom’s notoriously inaccessible customer service, mobile companies know how to keep Kenyan ministers happy, Kenyans laugh at their failings, pre-paid internet gets cheaper, another bank to list at the Nairobi stock exchange while another joins twitter, more awards for women, more jobs at the central bank of Kenya, and the UNEP toys with Kenya

- @TChenya @KumekuchaChris was just at Equity Bank; amazed they have loans for water tanks http://bit.ly/AoYg4
- This #Safaricom portal is going to be the Kenya borg http://portal.safaricom.com...
- Do cops favour their own matatus, leading to traffic jams for other motorists? http://www.coastweek.com/32...
- R/T @baldaufji #Zimbabwe minister text messages leaked http://bit.ly/2KkUIx U c the strait jacket vakuru [old man] is being given 2 wear
- The koinange family starts development of the parking lot next to kencom Nairobi
- Just registered to get my Safaricom dividend by cellphone m-pesa in November @saitonne m-pesa dividend registration ongoing around the country till 30 September, mostly at supermarkets - which one is near you?
- Cold call from a bank offering an unsecured personal loan at 24%!
- @egm_photo @jmugambi its soooo wrong for fibre cable to reach mandera before piped water!
- Gabon09 election resembles kenya08 but little concern in Kenya
- #TPF3 Tanzania is 0-2: EABL endears itself to that beer market
- (Sad to hear) R/t @estoni #samburu insecurity rife, tourist vans attacked, some travel companies are canceling Kenya safaris
- @kainvestor the most blatant on-going copy cat is 'citi shuttle' aping 'citi hoppa' with same green, same routes #thuo should do something
- (i) #shagslife a police dog from anti-stock theft unit just tracked down some stolen bales of hay to a nearby compound (ii) Hay and fencing was 'stolen' from farm of local MP last night. @coldtusker, this police lassie did an impressive job over many KM
- More bank for twitter @Standardbankgrp the official account for #stanbic (found at @kainvestor)
- R/t @saitonne are you stuck trying to call #Safaricom customer care 100 number? Try adding some zero's and no's e.g. 1000055
- R/t @kachwanya Yu to launch money transfer service on October 1. (Now where's telkom, been almost 5 years in the making?)
- Watching morning news - #Safaricom seem to trend #CSR projects to home area of sitting communication minister
- Family bank march to listing at Nairobi stock ex @nsekenya on with plans for share split and rights issue pending approval
- you know you’re Kenyan goes viral (i) #youknowyourekenyan when you understand (and agree with) Francis atwoli (ii) #youknowyourekenyan cause your "najivunia kuwa mkenya" cap is made in china

- NHC rescinds sale of houses to 102 #madaraka estate residents (for non-payment?) while NSSF threatens to repossess some tassia-embakasi plots
- @ kainvestor how do Kenyan corporations create such huge huge PDF? E.g. quarterlies from NSE site (i) Mabati Rolling Mills half year results (large PDF) http://tinyurl.com/ldyk22 (ii) @kainvestor #KenGenPIBO information memorandum dead D link on site at http://www.kengen.co.ke/PIBO/
- Nominate an African woman achiever for a Graca Machel award http://www.civicus.org/media/Graca_Machel_Initiative_Call.pdf D/L 30/9
- R/T @gishungwa @shiroh: Central bank of Kenya is hiring http://tinyurl.com/lu6bbo
- @inexes @shiroh while standard chartered will take divas to South Africa for shopping for $1,000, family bank has week-long trip in October for business customers for $2,000
- Eh @intelligensia, plans underway to (dredge &) raise the water level of masinga dam by 1.5 metres
- New Zain Kenya unlimited pre-paid internet bundles costing $3 per day, or $30 per month
- NTV's Rita Tinina on GoK begging UNEP for Mau Cash http://bit.ly/2m8BUu (look for a toy truck near end of vid)

Paying investor dividends by mobile phone

With 829,000 shareholders Safaricom, Kenya’s largest mobile phone company is taking the step of enhance investor relations by using m-pesa, its money transfer system, to pay out the annual dividend to shareholders.

At just 0.10 shillings per share, it will not amount to much, with several thousand shareholder receiving a divided of Kshs 22 (~$0.30) , and if shareholders get paid by bank cheque, the traditional method of paying dividend up to now, it will cost them more to do so (typically Kshs. 50-100), than the cheque is worth. Paying my m-pesa will reduce the cost to Safaricom and its investors - as it’s a good bet that a vast majority of shareholders are also M-pesa users (there are over 5 million registered)

Last week the company published a list of locations where shareholders can register for the m-pesa dividend payment option through the month of September for payment in November 2009. All an investor needs is their identity card and proof of shareholding e.g. CDS statement (and photo copies of each). If it’s successful, it will likely be taken up/imitated by other listed companies e.g. Kengen, Kenya Re through their registrars and other mobile companies like Zain (with Zap money transfer) and Yu (launching a money transfer next month) as another mobile partnership possibility.

Salute to Kenyan Stockbrokers Part I

Salute to Kenyan stockbrokers, investment banks and fund managers, and the capital markets authority (CMA) for their moves to improve transparency at the NSE of late.

When the new rules were announced early this year, few doubted that licensees (especially stockbrokers would comply, but the early signs are good.
One of the milestones was for the publication of financial statements by Collective Investment Schemes, Stockbrokers, Dealers, Fund Managers and Investment Banks twice a year; and this they did, many baring their losses, some with dubious figures or cosmetic summations, and some omitted profit & loss, but which their auditors will hopefully be able to reconcile at the end of the year.

The compliance was notable in that the intermediaries were able to publish their June 2009 summarized financial accounts,

Investment Banks: 100% (missing was Juanco (now Equity IB?), while FCB Capital was only licensed in June 09)
- Stock Brokers: 100% (missing was Discount (collapsed), Bob matthew (is now KingdomSecurities), while African Alliance is now an investment bank)
- Authorized Security Depositories: 100% (all 12 are commercial banks)
- Collective Investment Schemes: 100% (all are fund managers)
- Fund Managers: 94% (missing was Aueros, while African Alliance reported as an investment bank, and amazingly CIC who were licensed in June 09 already complied)
- Investment advisories 10% they are not required by the law to report, but Dry Associates and Tsavo Securities did

The results were harsh (more on that later) as the downturn at the Nairobi Stock Exchange has had a shocking effect on these companies. But they have recognized that and started taking measure in the form of mergers, re-capitalization staff reductions. When the NSE improves, they will reap the dividends. The signs are good for frontier markets and African markets, but the Kenyan political scene is still a cause for concern for the recover of the NSE and its brokers.

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