Dividend Payments across East Africa - Redux

It’s been four years since this post and the signs are still not encouraging for cross-border dividend payments across East Africa.

Good - Safaricom: I get my dividends by M-Pesa - in fact one came last week, right on the 15th anniversary of the company. At Safaricom, M-Pesa is the preferred method of paying dividends which are below Kshs 70,000 to shareholders - and this would work for almost 99% of their individual shareholders who all own less than 100,000 shares each.

But for Ugandan shareholders of Safaricom, to receive the share of the largest dividend in Kenya’s history ($256 million), they get a cheque in the mailbox  that takes 4 days to clear. The next thing for M-Pesa dividends is to have them automatically reinvested into buying other shares; but for now you can instantly lock the funds away in an interest earning M-Pesa fixed deposit.

No change - Stanbic Uganda: Shareholders in Kenya get a cheque in the mail which takes one month to clear and costs $8-10 per cheque. No improvement, and not likely to change. 

Bad:  (a surprising step back this year is) Bralirwa: At last review, Bralirwa (the Rwanda brewery) dividend cheques were issued KCB Rwanda, and KCB Kenya was encasing cheques at their branches in Kenya provided Kenyan shareholders presented their cheques, and proved their identity - they could receive equivalent cash payments up to RWF50K (~$67). 

This year that option is not there as KCB Kenya is not encashing cheques! A shareholder has to deposit the dividend cheque into KCB or any other Kenyan bank to get they payment.  I tried that at my Barclays branch and they refused as they simply don't have Rwanda francs in their bank system. 

Shares Portfolio August 2012

Comparing to last quarter  and a  year ago.   

The StableBarclays ↑
Bralirwa (Rwanda) ↑
Diamond Trust Bank ↓
East African Breweries (EABL) ↑
Equity Bank ↔
Kenya Airways ↓
Kenya Commercial Bank (KCB) ↑
Kenya Oil Company (Kenol) ↑
Safaricom ↑
Scangroup ↑
Stanbic (Uganda) ↓
 

Review 

The portfolio, excluding new shares, is up 11% since May 2012 while the Nairobi Shares Exchange main index is up 6% over the same period.

• Best Performer: Kenol (up 23% in 3 months), Bralirwa 14%)
•  Worst Performer: Diamond Trust (down 8% in 3 months), Kenya Airways (after the rights issue that yielded
• In: Equity Bank - read a recent  Equity Bank analysis report.
• Out: Britak, Uchumi
• Increase: Took up all of the Diamond Trust Bank rights
• Decrease: none
• Unexpected gains/losses: Kenol suspension was listed, Bonus share of Stanbic Uganda bonus was issued (4 new for every existing share)
• Looking Forward to more listings like the one announced today from Umeme - a monopoly electricity distributor from Uganda that is 100% owned by Actis,  and which plans to have an IPO in Uganda and Kenya later this year.

Dividends Payments across East Africa

Having bought shares in recent East African IPO's (Uganda: Stanbic Bank and Rwanda: Bralirwa Brewers), there appears to be some progress in addressing one of long standing problems of buying such shares - and this is the bank charges associated with receiving and having to process dividend cheques that are paid in currencies that are fractionally weaker than the Kenya shilling

With Stanbic, the Kenyan arm of the African bank has shown little interest in facilitating this even though a significant number of Stanbic Uganda’s 25,000 shareholders are Kenyan. In fact, the staff pension funds of Kenya Airways and Central Bank are listed among the top 10 shareholders of the bank.

At Bralirwa, the dividends are issued by KCB Rwanda and via a late message, KCB Kenya state they are paying/cashing the cheques up to RWF50K (~Kshs 8,000) across the counter. ( If higher the cheques will be sent for to Rwanda).

While the next step should be for East Africans to receive cross-border dividend payments by mobile money such as mpesa dividends this is only available to Kenyan shareholders. For now, the facilitation of affordable across-the-counter dividends, and other cross border trade & investment payment options is something that banks, not just KCB, with a regional footprint like Equity, Stanbic, Diamond Trust, and NIC should also take up.


EDIT: New communications from the banks show new options for Kenyans who have invested shares across East Africa as follows:

Bralirwa: Any cheques of less than RWF 50,000 (~Kshs 7,750) can be cashed at the counter of any KCB Kenya branch at a fee of RWF 200 (Kshs 31) on production of an ID or a passport

Stanbic Uganda: no certificates will be issued for the 1:1 bonus, and no physical annual reports will be mailed. But shareholders can now elect to receive dividends by electronic funds transfer, or mobile money (airtel money or m-pesa) after confirming their details at Comprite (Uganda) Registrars whose Nairobi office is at Marakwet House, Elgeyo Marakwet Road.

Shares Portfolio May 2011

Enjoying the fruits of some good 2010 performance in an uncertain 2011

Comparing share performance to three months and a year ago.

The Stable
Barclays Bank
Bralirwa Breweries (Rwanda) ↑
Diamond Trust Bank ↑
East African Breweries (EABL) ↑
Kenya Airways ↓
Kenya Commercial Bank (KCB) ↑
Kenya Oil Company (Kenol) ↓
Scangroup ↔
Stanbic (Uganda) ↑
Uchumi Supermarkets ↔

Review:
- Best performer: Bralirwa 11% (this Q), then East African Breweries 10%
- Worst performer: Kenol (-4%)
- In: Barclays
- Out: Safaricom
- Increase: Kenya Airways
- Decrease: None
- Performance: The Portfolio is down 1% in the last three months while the NSE 20 Share Index is down 7%
- Uchumi, which is out of receivership, has finally got the green light from the CMA to re-list at the Nairobi Stock Exchange, though the date and conditions of re-listing have not been specified.
- Safaricom’s 2010 results which will be released on May 18, are widely expected to show a drop in revenue and profit owing to the price wars in the mobile sector.
- Kenol resumed its battle the Ministry of Energy after a quiet period as motorists grappled with an unexpected shortage of petrol (This inspired an innovative site called Find Fuel . The Kenol AGM was live streamed and can be found on YouTube.

- Stanbic Uganda had reduced profits owing to bad loans combined with staff & IT expense increases.

Events & Outlook:
Looking forward to
- Dividend payments from Diamond Trust, KCB, Scangroup, Stanbic (Uganda), Kenol
- Bonus shares from Diamond Trust (1:5), Scangroup (1:5), and Stanbic Uganda (1:1)
- New share listings: There's been no word yet from Transcentury and Britak. During the quarter, CFC-Stanbic spun off their insurance arm – CFC Insurance which is now listed on the stock exchange, and will soon to be joined at the NSE by CIC Insurance.

- Why list?: The newspapers, this week had advertisements from the Capital Markets Authority (CMA) highlighting tax and other benefits of listing shares or raising capital in Kenya. These include;

Newly listed companies will enjoy reduced corporates taxes if;
(i) They list 20% of their shares, they will pay 27% income tax for the next three (3) years on profits (while other corporates pay 30%).
(ii) List 30% and pay 25% tax for next 5 years on profits.
(iii) List 40% and pay 20% tax for next 5 years on profits.

Tax exemptions;
- A tax amnesty on omitted past income
- Dividend taxes paid to venture capital firms
- Income to employee share option programs (ESOP’s)
- Interest income on long term infrastructure bonds

Also all East African nationals are treated as ‘locals’, not foreign investors in allocation of IPO shares and get (lower) withholding tax on their dividends. These and other tax deductible expenses including payments for credit-rating, listing & issuance costs, and some exemptions from stamp duty, can be found at the CMA site.

Share Portfolio February 2010

Unchanged since last quarter and compared to a year ago

The Stable

Diamond Trust ↑
Kenya Airways ↑
KCB ↑
Safaricom ↑
Scangroup ↑
Stanbic (Uganda) ↔
Uchumi ↔
Trades: None
In: None
Out: None
Increase/decrease: None
Best performer Kenya Airways up 106%, then Safaricom 38%
Worst Stanbic UG, no change (actually was up 5 UGX per share, but the Uganda shilling is weaker)
Unexpected Gains/Losses: None
Performance: Portfolio is up 11% while NSE index is up 17% in three months – thanks largely to Safaricom which is ¼ of the index.
Events
- Uchumi may resume trading at the Nairobi Stock Exchange after four years of suspension now that shareholders have approved restructuring of remaining debt in consultation with the banks who put the chain under receivership.
- Unlisted investments are tricky to track and problematic to measure or exit.

NSE Portfolio May 2009

hit bottom? Time to buy?

Last quarterly check of the Nairobi share portfolio was in February 2009 and a year ago
The Stable

Diamond Trust ↓
Kenya Airways
KCB ↑
Safaricom ↓
Scangroup ↓
Stanbic (Uganda) ↓

Review:
- Best performer: KCB up 2%
- Worst performer Stanbic down 30% (combination of share drop and weaker Uganda shilling), and Safaricom down 10%
- In: Kenya Airways
- Out: none
- Increase none
- Decerease none
- Unexpected gains/losses: none

Events & Outlook:
- Performance: Portfolio is up 1% in the last three months while the NSE Index is down 3.5%
- Bought KQ, tried to buy illiquid Kenol at 30

Looking forward to
- Dividend payments expected from Diamond Trust, KCB, Scangroup, Stanbic (UG)
- Privatization commission has lined up several companies that may be availed later in 2009

Ugandan Envy

this is NOT about Migingo Island

Google Earth image courtesy of afromusing

A year ago wrote this on the information availed to Ugandan investors by their companies; this year the envy is even more, it makes me sad; that by being the leading country in the region, we may not notice we are being passed in some aspects of investor awareness & rights.

Use of E-Mail: The Stanbic Uganda invitation/AGM notice again arrived by e-mail; now many Kenyan companies have passed by-laws allowing them to send out e-mail notices and annual reports to shareholders, but none has done so far. Maybe, with the eventual passage of the much maligned/controversial communications bill the legal framework is now there to back enable this – but we’ll see; While not every shareholder will have an e-mail account, if 1/4 of 1/3 of some company’s shareholders (Kengen, Co-Op, Safaricom) do, then these companies could potentially saves millions of shillings in postage costs.

Investor Disclosures:
(i) For Stanbic UG, rules of voting are clearly stated – shareholders are to endorse new directors and that 1/3 of directors will retire at each meeting.
(ii) for directors who are up for election, their mini-CV’s are printed out for all to peruse i.e. their ages, year of appointment, educational qualifications, directorships in other companies, and committee seats they. In Kenya, Company Chairmen just mumble through, if at all, fully expecting elections to be a foregone conclusion. Refreshingly here, the directors up for election at Stanbic Uganda (Hannington Karuhanga, Kitili Mbathi, and Samuel Sejjakka) are all younger than 50 years. In Kenya, opportunities for younger leaders & directors are the exception rather than the rule. But at Stanbic Uganda - the Chairman and Deputy Chairman have their tenure is capped at two terms of 5 years only.
(iii) Remuneration of directors is declared. Again in Kenya money amounts paid to directors are rarely mentioned, but in Uganda they are spelt out for shareholders to approve – here the Company (non executive) Chairman gets an annual retainer of US$7,500 while a director gets US$5,500

Language used; several companies (most recently) KCB have amended their company article to allow for electronic communication with clients; but they merely replace one of gibberish with another one, without bothering to explain what the jargon means. Here; Stanbic explain allows video-conferencing or tele-conferencing to be used at board meetings

Proxy detail proxy forms contain a lot more details including the items to be voted for with shareholder able to vote for or abstain on votes. They also call for shareholders to provide contact details (name, e-mail – what an easy way for a company registrar to build up a working database to manage is subsequent years)

Shareholders or their proxies (who can be more than one)are entitles to attend, speak, and vote, and the endorsement /presence of a proxy does not disqualify a shareholder from attending; this enables a shareholder to bring his wife/wives or children for them to learn about the process!

==

Investor guides: There are many things to learn from other countries in the region on investor rights and information despite Kenya being the leader. We are innovative, Uganda is about to unveil a CDSC system that Kenyan investors have had for three years, but which rogue stockbroker have besmirched. It would not be surprising if the Ugandan version may be sorted out ahead of time, closing loopholes that will be used to protect shareholders, and by educating them on how the system works.

All the regional exchanges – Kenya, Tanzania, Uganda, and soon Rwanda (where KCB, Kenya’s largest bank in Kenya will be the first company to have its shares to be (cross) listed & trading) all have the same information; but my NSE seems stale, like all the regulations were put up years ago and forgotten. Usualy we just check for the latest share trades, bond trades and quarterly financial announcements.

e.g. Faced with a budget deficit, Kenya has lowered the minimum amounts to invest in bonds to Kshs. 50,000 ($625). The Central Bank of Kenya which issues these bonds has put up some investor information basics, but nothing from the NSE who trade in these bonds. In Uganda, there is an advisory page for investor guides for bonds and shares, for any new investor to read, download for free.

Also in Kenya , tribe is the unacknowledged elephant in the room; one we pretend to not be influenced by, but which governs many aspects of our lives. Kenyans are required to communicate official in English (almost all government documents), and to a lesser extent in Kiswahili. But there are rural folk who may not understand the national or official language, but may wish to learn about shares and bond Uganda has investor awareness booklets in vernacular languages – including a Luo investor guide (PDF)(for the Northern Region) available from the Uganda Securities Exchange. And that, properly disseminated, may be worth much more than a small island.

IPO Guilt

I am

- Guilty of having to get into an IPO queue after signaling a wavering of my IPO strategy (its political season)

- Guilty of waiting till the last minute; procrastination is a Kenyan habit, and the queues of Safaricom are very long in the last 24 hours, despite the IPO having run for almost a month. What were we waiting for? (and does Obama carry this gene?)

- Party guilty of not fully embracing technology: it’s actually possible to buy the shares without having to join a stockbroker queue if (i) you apply online at the official IPO site (which I did) but I did not (ii) attempt to pay via ATM for the same shares. IPO’s tend to run on a different cycle and I didn’t want to be time barred for a delay in funds

More on the official IPO site; it calls for a leap of faith like buying an air ticket online with boarding pass and successfully completing the flight. But the site does not seem to allow for any amendments (buy more or less shares or even cancel an order after you have applied.

And then I received this ominous e-mail from whoever runs the official site

Safaricom IPO"
To: ___________________
Subject: SAFARICOM IPO APPLICATION: PENDING PAYMENT
Date: Thu, 17 Apr 2008

Dear Sir or Madam,

Thank you for your online application for Safaricom IPO shares dated 4/__/2008 reference _______, in the name of ______.

Please note that the next stage of the application process is to make payment for your application at the receiving bank or broker that you selected, by the close of the IPO offer period on Wednesday April 23rd 2008.

If you have already made payment for your application, kindly disregard this email.

In the event of any queries, contact us via email at safaricomipo@swiftkenya.com or call us on +254 20 2754300.

Warm regards
Customer Service Team
Safaricom IPO at Citi

So let’s see how it goes in the last day of the IPO as I pay for the shares.

across the border: Stanbic Uganda, another over-subscribed IPO from 2007 performed even better than expected with a nice dividend of Ug. Shillings 6.64 shillings per share. Maybe I should try the Zambia Celtel IPO too

IPO Train: full on board

It’s now the fourth official day of the Safaricom IPO, with some banks and brokers working over 7 days processing applications. And, over the weekend, many of the negatives of the IPO turned into positives;

Politics align: The IPO was launched last Friday by President Mwai Kibaki, who placed a personal application for 1 million shares, worth 5 million shillings ((0.01% of the shares on offer) . Since then the ODM side have also changed tune of the IPO matter, as they realized that as leaders they have to guide their people – and one of the ways to do so is to enlighten them on opportunities of wealth building and methods of advancement beyond agricultural and real estate productivity. Why tell people not to buy shares, when other communities buy the shares? What do you want your people to do? In any case the public holds minority stakes in most NSE companies with over half the shareholding hidden behind other companies whose shareholders are not well known.

Competitive sisters: Kengen was a watershed IPO but that was 2 years ago. The last massive regional IPO was Stanbic Uganda – how do they compare?

Company; Stanbic : Safaricom
Target; (Ushs 70 billion) USS$ 38 million: (Kshs. 50 billion) US$ 770 million
Beneficiaries; Standard Bank (SA) & Government of Uganda ; Government of Kenya only
Shares on offer; 1 billion shares : 10 billion shares
Share price; (Kshs. 3) $0.04 : (Kshs. 5) $0.08
Oversubscription 3 X : (2X is a conservative estimate)
Applications: 37,000 ; (1 million expected)

Animal Metaphors: We now have CNBC Africa which has been live for about a month and it’s a great channel to watch especially late at night, when they are covering Asia or American markets. Last week, they were discussing the US banking crisis and one analyst used the Sherlock Holmes tale of the dog that did not bark in the night to reflect on the silence of Japanese banks that were heavy investors in US mortgage securities but have not declared any losses.

The animal metaphor with Safaricom - is the elephant in the room which everyone is ignoring and that is Vodafone (UK): Did they want the IPO? I doubt it – they are not making money from the IPO, and will go from having a cozy boardroom, to having a million shareholders (estimate) demanding phones and umbrella’s at AGM’s.

- They are reluctant partners in this who for the last three years (and long before Mobitelea became a Matatu name) they had tried to buy 9% or 11% of Safaricom from the Government of Kenya, for a figure far less than the Government will raise from the public. Vodafone will remain the largest shareholder with 40% (or 35%) to GoK’s 35% , and retain veto power over business plans, budget, and CEO & FC appointments. But most companies listed on the NSE have parent companies who find it prudent to retain at least 50% of the company’s ownership to control the strategic and management direction of a company – and could they be buying any floating shares out there after listing? They can own up to 60% of Safaricom.
- It has exposed the embarrassing practices that gave rise to Mobitelea

Will stockbrokers’ change?: The only smudge so far has been the past performance of stockbrokers. It is sad that the lines outside Nation Center (of Nyaga Stockbroker clients) is as long as that any broker/banker I have seen this week. Stockbrokers have put out their best clothes, advertised and got new staff to woo investors for the 1 billion plus shillings ($15 million) commissions from the IPO - but what happens after? Will they revert to their dark old ways of insider trading, and secret share dealing? An ominous story from the Nation goes that one of the most interesting but unconfirmed anecdotes at the bourse is that Nyaga Securities managing director Patrick Gakiavi actually attended (as a director) the NSE meeting that decided to pump Kshs. 100 million into his operation. - and that joins the NSE urban legend archive like the one of the CEO who was able to cash out his significant stake on the last day of Uchumi share trading

Modernization to eliminate rogue brokers: The central deposit settlement corporation (CDSC) is seeking an SMS solution (mobile phone messaging) to alert investors on their account share trades (theirs/by rogue brokers) and also respond to client requests. (Deadline is April 9) The laws have already been amended to allow them to collect 30 shillings from each Safaricom applicant for postage and this will probably continue for any statements thereafter – as investors will be eased into the cheaper option of SMS (maybe at 5 or 10 shillings per message)

Beyond Safaricom: Hisanet Africa recommend that investors look at some other shares of interest amidst the IPO: these include NIC Bank, Kengen, Barclays (who are now expanding into Rwanda), Access Kenya, and East African Cables.

Financial Friday

Earlier results showed that tax collection is not profitable, but neither is dealing with the strong shilling.

The Central Bank of Kenya year ended June 2007 shows the bank recorded a 386 million shillings loss down from a 4.5 billion profit in 2006. This was largely due to a forex loss of lost 9.8 billion shillings as the shilling remained strong against the US dollar, Euro and Sterling pound.

How much currency is circulating in Kenya? 90 billion shillings ($1.34 billion), in currency up from 76 billion in June 2006.

Bank in law
You don’t start a marriage by locking out the in-laws, but that’s what’s happening with CFC Stanbic as CFC stockbrokers have suspended trades in Stanbic Uganda shares to clear up a backlog of orders.

Shares vs. Holiday vs. Election expenses
The much anticipated Safaricom IPO edges into danger zone as the IPO could be pushed back to start on December 10th, not the 3rd.

Hedge funds to Africa
There was the Equity - Helios deal announced this week.

Another prime opportunity would be for a hedge fund to invest in Transcentury

PSD blog puts the new investment interest in Africa in a historical perspective with China and other Asian countries recognizing an opportunity to stake out the long term

Hedge Funds a year ago

Earthquake week

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

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

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

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

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

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

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

Ask your bank, they should be able to help.

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

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

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

Stanbic apples & oranges

Standard Bank (of South Africa) operates as Stanbic in other parts of Africa.

Here’s a snapshot comparison of the 2006 financial results of Stanbic Kenya and Stanbic Uganda.

Stanbic Kenya is unlisted while several Kenyans participated in the 2006 Stanbic Uganda IPO which was relatively cheap owing to the exchange rate difference (25:1) between Kenya and Uganda. The Stanbic (UG) IPO was partly blamed for the performance of the Mumias (Kenya) rights issue whose uptake was judged to be average.

Merger talks between Stanbic (K) and CFC which is another locally listed Kenyan bank are at an advanced stage. So how do the bank’s compare?

Approximate figures in US$

Rank
Uganda Stanbic (1 in Uganda)
Kenya Stanbic (9 in Kenya)
CFC (10)

Assets
Uganda Stanbic $725 million
Kenya Stanbic 378 million
CFC 371 million

Deposits
Uganda Stanbic $513 million
Kenya Stanbic 289 million
CFC 271 million

Loans
Uganda Stanbic $195 million
Kenya Stanbic 166 million
CFC 220 million

Pre-tax Profits
Uganda Stanbic $32.3 million
Kenya Stanbic 13.4 million
CFC 9.9 million