Diaspora defy virus to send home Sh331b

Diaspora defy virus to send home Sh331b

Kenyans abroad sent home a record Sh331 billion ($3.04billion) in 2020, which is a 9 percent increase compared to 2019, in the midst of a ravaging Coronavirus pandemic.

Central Bank of Kenya (CBK) data shows that Diaspora remittances defied COVID-19 shocks to increase by Sh27 billion from Sh304 billion in the 12 months to November 2019 compared to Sh331 billion, same period last year.

“Kenyans in the Diaspora defied COVID-19 shocks to send in the 12 months to November 2020 totaled $3.045 billion (Sh331.9 billion), compared to $2.790 billion (Sh304.1 billion) in the 12 months to November 2019,” said CBK.

This despite World Bank’s earlier projection that remittances will fall 23 percent, by braving the shocks, the Diaspora remained the lone standing pillar as tourism fell while exports collapsed drastically.

Remittances came to the rescue of families whose incomes had dried up due to job losses.

“What happened is that developed nations where most Kenyans are such as the US and UK have social support systems such as cash transfers that cushioned them,” said Nairobi based economist and businessman Robert Shaw.

Cash transfer

Shaw said that Kenyans abroad saw themselves as crucial in helping their loved ones through the pandemic.

The pandemic rendered an estimated 5 million Kenyans jobless according to a recent survey by the Kenya Private Sector Alliance (KEPSA).

Several companies went into receivership while many downsized. Some were completely shut. Small businesses were the most affected as consumers cut back on discretionary spending.

During that period, however, Kenyans in the Middle East countries, Asia and Eastern Europe were forced to return home after their jobs ended, with some of them seeking government help to come home.

Nearly 25 percent of the diaspora remittances came from the US, followed by Britain and other countries which tend to give visas to highly skilled immigrants thus partly explaining the resilience of diaspora inflows.

The resilience of remittances has led the government to mull over a diaspora investment vehicle, such as bonds, to help in infrastructure projects in the country.

Kenya has been ranked third in World Bank Africa diaspora remittance inflows. Kenya is the only country in Sub-Saharan Africa where remittance inflows have so far been countercyclical to the COVID-19 pandemic disruptions.

Supporting shilling

The World however warns that 2021 may see remittances fall. Nigeria is Africa’s largest recipient of remittances followed by Ghana then Kenya and Senegal.

South Sudan however leads Africa when it comes to remittances inflows as a percentage of GDP at 35 percent, followed by Lesotho (20.6 percent), the Gambia (14.9 percent), then Cape Verde (12.0 percent), and Comoros (10.8 percent).

Other key recipients of remittances include El Salvador, Eritrea, Ethiopia, Gambia, Ghana, Guatemala, Guinea, Haiti, Iraq, Jordan, India, Indonesia, Honduras, and Kenya.

The inflows helped to support the shilling which analysts said could have faced even more vicious shocks had remittances dropped.

Safaricom group taps Sh55bn loan for Ethiopia entry

Safaricom group taps Sh55bn loan for Ethiopia entry

Safaricom and its partners have signed an agreement to borrow up to $500 million (Sh55.7 billion) from America’s sovereign wealth fund US International Development Finance Corporation to fund expansion into Ethiopia’s telecommunications market.

Safaricom and its parent companies Vodafone Group Plc and Vodacom Group Limited have formed a joint venture – Global Partnership for Ethiopia — through which they are bidding for one of two telecommunications licenses being auctioned in that country.

The financial investment in Ethiopia is expected to top the $1 billion (Sh111 billion) mark, with the DFC loan deal seen as part of the project’s fundraising efforts.

“An up to $500 million (Sh55.7 billion) loan to the Vodafone-led Global Partnership for Ethiopia that will finance the design, development, and operation of a new private mobile network provider and the acquisition of a mobile network provider license,” DFC said in a statement.

“The project is expected to have a highly developmental impact through the creation of a new private telecommunications network that will increase connectivity in Ethiopia while utilizing trusted technology.”

Safaricom had earlier said it was ready to take more debt in its role as the majority shareholder of the consortium with a 51 percent stake.

Vodacom has a five percent interest in the joint venture, with the rest of the ownership spread among unnamed strategic financial investors.

The DFC loan offers the consortium long-term financing on relatively favorable terms.

The international financier says its loans typically mature between five and 25 years, with repayment schedules set on a quarterly or semi-annual basis.

A grace period on principal repayment at the beginning of the loan term is also common. The interest rate is a “negotiated spread over the base-cost of funds.” Long-term US government bonds currently have interest rates of below two percent, setting a low base on which to price the DFC loan.

DFC, however, levies a series of special fees on its credit facilities, including upfront retainer (to cover due diligence), origination (payable once on the first disbursement), commitment (an annual percentage on undisbursed amount), and maintenance (an annual charge to cover the cost of monitoring the loan).

The Safaricom consortium, if successful, will likely rely on funding from deep-pocketed foreign investors such as DFC given the size and international nature of the Ethiopia investment.

The Nairobi Securities Exchange-listed firm’s borrowings have so far been limited to local banks from which it has mostly taken short-term debt denominated in Kenya shillings.

The company recently raised its bank borrowings to a new high of Sh32.7 billion to fund capital expenditure and pay dividends, with most of the debt expected to be settled by March next year.

Safaricom sees Ethiopia, a market with more than 100 million people and relatively lower uptake of mobile and broadband services, as presenting significant growth opportunities.

The Ethiopian Communications Authority announced that it had received expressions of interest from scores of firms including telcos and non-telecom operators by June 22.

They included the Safaricom consortium, Etisalat, Axian, MTN, Orange, Saudi Telecom Company, and Telkom SA.

Others were Liquid Telecom, Snail Mobile, Kandu Global Communications, and Electromecha International Projects.

Vodacom recently told its investors that the capital expenditure for the potential Ethiopian entry is not yet clear, adding that the auction of the licenses is anticipated in February or March next year.

The South African telco added that while it is limiting its exposure in the consortium to five percent, it could raise its own after a couple of years into the operation.

Safaricom was allowed to lead the consortium for several reasons, including Kenya’s geographical proximity to Ethiopia.

“I think it will be a very good exposure to Safaricom from the perspective of geographical closeness on the one perspective, but also giving Safaricom additional exposure to more growth areas,” Vodacom’s chief executive Shameel Joosub said in a recent earnings call.

Besides selling the new telecoms licenses, the Ethiopian government is also disposing of a minority stake in Ethio Telecom which has a monopoly in that market. The transactions are part of economic liberalization policies being implemented by Ethiopia, a country that is seen as presenting major growth opportunities.

Kenya – Somaliland Improved Relations To Boost Investor Confidence

Kenya – Somaliland Improved Relations To Boost Investor Confidence

Kenya has deepened its economic diplomacy in the region, tapping Somaliland in what is set to advance bilateral trade between Nairobi and the self-declared country.

While this could be seen as a double-edged sword with Somalia accusing Kenya of meddling in its internal political affairs, a move which has seen Mogadishu declare to have cut diplomatic ties with Kenya, certain sectors of the Kenyan economy are set to leverage this for growth in the short term.

For instance, the deal will not only enhance collaboration in air transport, including setting up the return of direct flights between Nairobi and Hargeisa but will also excite lots of cooperation with Somaliland’s nascent economy.

The move could turn out to be a lifeline for the troubled Kenya Airways which can recoup the Somaliland route, currently being serviced by Ethiopia Airlines.

Direct flights will, therefore, see KQ fly directly to Hargeisa, opening the market for delivery of perishable goods such as khat (Miraa).

It is important to note that Somalia currently allows Ethiopia to export its Miraa to Somaliland, technically locking Kenya out of this crucial market, but direct flights will change this.

Among others, the decision will spur cooperation in various sectors and deepen cooperation between the ports of Mombasa and the new Berbera port.

With Kenya’s superior education sector and a huge pool of specialists, the ties will ensure the exchange of skills and allow local manpower to offer services there.

Actually, this is already happening, since most of Somaliland’s hospitality industry is being managed by Kenyans.

To effect these commitments, therefore, the two leaders must ensure the Kenyan consulate in Hargeisa opens as soon as possible as Somaliland upgrades its liaison office in Nairobi.

While at it, the two countries must work together to safeguard peace and stability in the Horn of Africa region particularly in regard to Al-Shabaab militants who continue to pose significant threats.

More importantly, the diplomatic row simmering with Mogadishu must be resolved as soon as possible since the ongoing stalemate has already seen Kenya lose millions of shillings in foreign exchange earnings after Miraa from Nairobi was banned from accessing the Somalia market.

The technocrats who authored the latest pact must move with speed to cushion Miraa farmers and the country from the underlying impact of this tiff.

Trial by Fire: KCB Auctions Nakumatt CEO Atul Shah’s Property Within Hours After Winning Court Case

Trial by Fire: KCB Auctions Nakumatt CEO Atul Shah’s Property Within Hours After Winning Court Case

Atul Shah may have walked out of the Nakumatt fiasco wealthier than when he started some 40 years ago but has left behind sorrow among the people he dealt with.

High Court judge Alfred Mabeya on Tuesday gave a nod to Kenya Commercial Bank (KCB) to auction property owned by fallen Nakumatt CEO Atul Shah over a Ksh2 billion debt.

In a speedy move aimed at evading a tussle between lenders, KCB sold the property to Furniture Palace International Ltd for Ksh1.04 billion, taking a loss of about Ksh1 billion. The sale was supposed to be closed on Wednesday.

Making the ruling on Tuesday, the Judge wondered how several banks were duped into offering loans amounting to over Ksh4 billion for a property that was not worth the amount as security.

“If the court was in doubt, which is not the case here, the balance of convenience tilts in favor of allowing the defendant (KCB) to recover its outlay,” said Justice Mabeya.

“The court was invited to consider that the sale by the defendant would injure and prejudice the rights of the other lenders who have the suit property as their only security. While this court sympathizes with the said lenders, it defeats logic how prudent bankers would extend facilities amounting to over Ksh4 billion on single security whose value is less than Ksh2 billion.”

Standard Chartered and DTB Banks, who were eyeing the same property, are owed a combined debt of Ksh4.5 billion.

Nakumatt owed DTB Bank Sh3.6 billion, Stanchart Sh900 million, KCB Sh1.9 billion, Bank of Africa Sh328 million, UBA Sh126 million, and GT Bank Sh104 million.

The High Court in August had allowed Bank of Africa to auction Shah’s property, but the former CEO moved to the Court of Appeal to block the auction.

He later withdrew the case, opening a battlefield for banks over the property.

By the time Nakumatt closed completely in January 2020, it owed creditors over Ksh30 billion including Ksh18 billion to suppliers, Ksh4 billion to commercial paper holders, and the rest to banks.

Nakumatt’s troubles started when the business had peaked in 2017 at a time sales topped Sh52 billion. It also coincided with the exit of Harun Mwau, who sold his 7.7 percent stake to the Shah family at an undisclosed price. Funds spent were drawn from the business, hence the immediate impact on cash flows.

Nakumatt could not survive the blow as it immediately started struggling to pay suppliers, to mark the start of its death occasioned by stock-outs.

The family-owned supermarket until two years ago boasted of 62 branches spread across East African capitals but does not have assets today.
From a son of a once bankrupt father, he built an empire that grabbed global attention, including from the world’s biggest retailer Walmart, but ended just about where it all started.

Kenya’s exports rise to $4.4 billion: government official

Kenya’s exports rise to $4.4 billion: government official

Kenya’s total exports increased to a record 480 billion shillings (4.4 billion U.S. dollars) for the period between January and September, up from 4.1 billion U.S. dollars over the same period in 2019, a senior government official said on Friday.

Betty Maina, cabinet secretary, Ministry of Industrialization, Trade and Enterprise Development, told a trade forum in Nairobi that total imports shrank by 9.6 percent to register 11 billion dollars between January to September, compared to a similar period in 2019.

“This means that the balance of trade deficit improved by 1.5 billion dollars to stand at 6.5 billion dollars between January to September down from 8 billion dollars over the same period in 2019,” Maina said during an event to mark the Africa industrialization day.

Maina noted that the country is planning to negotiate preferential trade agreements with more countries so as to drive the export agenda.

She noted that the current phenomenon of collapsed global value chains means that Kenya must rethink nurturing strategic industries to enable them to grow and become regionally and globally competitive.

“It calls for all Kenyans to develop a taste and liking of locally made goods and services in support of domestic industry, which is necessary to occasion increased employment opportunities, improve incomes, reduce poverty and enhance livelihoods,” she revealed.

According to Maina, the Buy Kenya Build Kenya strategy aims to increase competitiveness and enhance the consumption of locally produced goods and services, and to reduce over-reliance on imports.

Kenyan business mogul James Mwangi to establish financial towers in Rwanda

Kenyan business mogul James Mwangi to establish financial towers in Rwanda

Rwanda’s plans to fully develop the Kigali International Financial Centre (KIFC) could be edging closer to realization following a development which will see Kenyan businessman James Mwangi set up financial towers in Rwanda.

The project, Kigali Financial Towers, was approved by the cabinet last week and will be developed by Equity Holding (EH) Venture Capital, an investment arm of Equity Group.

The Group is a brainchild of Mwangi, whose banking unit already has operations in Rwanda and across Kenya, Uganda, Tanzania, South Sudan, and the Democratic Republic of the Congo.

Clare Akamanzi, the Chief Executive of the Rwanda Development Board (RDB), told The New Times that the Kigali Financial Towers will be a real estate project that will be located in town, Nyarugenge District.

“They will build one of the buildings for the Kigali International Financial Centre (KIFC), and the idea is for it to be a state-of-the-art real estate project with a hotel that can accommodate people working at the Centre,” she said.

Akamanzi added that such kind of investments in real estate is necessary for attracting global financial brands like HSBC – British multinational investment bank – or Citibank.

“Again, if Rwanda becomes a financial center, staff will travel a lot so you always need a hotel nearby where those people can stay,” she noted.

The Government has been building a foundation upon which the country can become a regional financial center, including signing partnership agreements with other financial centers in the world.

The Kigali Finance Limited was set up to spearhead that agenda and tens of laws have been revised to build a conducive environment for big banks, wealth management firms, insurance companies, and other multinational businesses to set up base in Rwanda.

The Kigali Financial Towers is one of the latest additions to that development.

Akamanzi said the cabinet had to approve such a private project because they believe it is a “strategic project that is going to support the growth and vision of the International Financial Centre.”

Following the cabinet approval, the government will now sign an agreement that paves away for the development of the project, which should be completed within three years from the time of signing.

The real estate project will be built at the former Ministry of Foreign Affairs and International Cooperation land, just next to Ecobank Headquarters in the City Centre.

EH Venture Capital official based in Kenya told The New Times that the project was still at an early stage with no more details regarding the size of the commercial development and level of investment to reveal at the moment.

However, he said, “Definitely we’ll be done by the [project] design early next year.”

The concept of financial towers is not new. In the United Arab Emirates, Emirates Financial Towers is a 27 story twin-tower commercial development located in the Dubai International Financial Centre, Dubai’s central financial district.