Archive for the 'Kenya' Category
March 10th, 2010 by Tom Minney
The members and directors of the Nairobi Stock Exchange (www.nse.co.ke) have approved the demutualization of the Nairobi Stock Exchange, subject to enactment of requisite laws that will provide the legal framework. A draft law is available on the website of the Capital Markets Authority (www.cma.co.ke).
According to the latest weekly roundup from stockbroker Kestrel Capital (www.kestrelcapital.com), the NSE will change its name to Nairobi Securities Exchange and will have an approved share capital of KES 1bn (US$13 million). In the new proposed ownership structure, Treasury will own 10%, the Investor Compensation Fund (IFC) 10% and stock brokers will collectively own 80%, which they will share equally among themselves.
Newsagency Bloomberg reported that the decision was taken at a meeting on 4 March. It cites Chairman Edward Njoroge as telling reporters that a team has been working on the demutualization and separating ownership from management, as well as the valuation. Earlier, CEO Peter Mwangi said the NSE would trade its shares on the exchange.
February 21st, 2010 by Tom Minney
The Kenyan Government’s Privatisation Commission is taking the next step towards selling a portion of Consolidated Bank of Kenya Ltd (www.consolidated-bank.com) by appointing PricewaterhouseCoopers as transaction advisers, according to the Daily Nation newspaper (www.nation.co.ke). It is on the list of 23 State-owned enterprises to be privatized, including National Bank of Kenya and Kenya Wine Agencies, 5 sugar factories and 11 hotels.
David Wachira, the bank’s Managing Director said the Government aims to raise KSh5 billion (US$65 million) by selling a portion of the shares to the public. Due diligence is to start in April and the share sale could come in the next two years.
The bank mainly finances small and medium-sized enterprises. It has 11 branches, mainly in Eastern, Central, Nairobi and Coast regions and aims to use some of the funds raised through privatization to expand to fast-growing areas such as Kisumu, Nakuru and Eldoret towns.
According to its website, the bank is 100% Government-owned with the majority shareholding (51%) held by the Treasury through the Deposit Protection Fund. The remaining shareholding is spread over 25 parastatals and other government related organizations.
The news report quotes Mr Wachira: “The bank has a risk-based pricing on its loans, which determines whether the lending rate is above or below 13%.”
Although the privatization exercise has been going slowly, Solomon Kitungu, of the Privatisation Commission, says they have submitted proposals on how to proceed to the Treasury late in 2009 and are working on final details of remaining companies before presenting details to the Treasury.
He is reported as saying: “We are on course with the plans, it is only that there is a lot of work to be done to ensure transparency and accountability. We do not want to rush it since we would not be creating any value for Kenyans.”
The budget for the 2009/2010 fiscal year does not depend on proceeds from privatisation sales, unlike the budget for the previous year, says the paper.
January 25th, 2010 by Tom Minney
A new fund is making good progress in raising up to US$55 million to be invested in business start-ups and small and medium enterprises in Kenya, Rwanda, Uganda, and Tanzania. The Fanisi Venture Capital Fund was set up with help from Norwegian Investment Fund for Developing Countries (Norfund) and incorporated in Luxembourg. Norfund is also an investor and a shareholder in the management company, Fanisi Capital Ltd.,,which is majority owned by Nairobi-based Amani Capital Ltd.
Fanisi has raised $40 mln in commitments and expects to reach its goal in the next 12 months. On 22 January, the Internatonal Finance Corporation (www.ifc.org), part of the World Bank group, announced it will invest $7.5 mln.
According to an IFC press release: “The fund plans to make investments between $500,000 and $3 million in a variety of sectors, ranging from manufacturing to technology, helping smaller enterprises and start-ups get the capital they need to create and expand businesses. It also will set up a business services support facility to help pipeline companies overcome technical and governance limitations, pre- and post-investment.”
It quotes Ayisi Makatiani, head of the fund’s investment team and CEO of the fund nabager: “IFC’s early and continued support to the Fanisi team has been extremely helpful, especially for a local and first-time fund management platform.”
IFC’s Gender Programme has agreed to support the business services facility, and IFC’s Rwanda Enterprise Development Programme will provide training support to the fund’s portfolio companies.
Haydee Celaya, IFC Director for Private Equity and Investment Funds, said, “IFC is investing in this local private equity fund that focuses in growing SMEs and startups at a critical time, when the region needs long-term financial and advisory support. The investment also will help build local fund management capacity.”
IFC is currently seeking a capital increase to strengthen its ability to create opportunity for the poor in developing countries—including by investing in private equity funds that target small enterprises in developing markets. Smaller enterprises are responsible for much of the job creation in the East African region.
January 19th, 2010 by Tom Minney
The Africa Health Fund, managed by private equity fund manager Aureos Capital (www.aureos.com) has made its first investment, acquiring a stake in the Nairobi Women’s Hospital (www.nwch.co.ke) for US$2.66 million. This is the first investment by the fund which was launched in June 2009 and aims to raise $100 million, with a final close this year (2010).
The fund is backed by International Finance Corporation (www.ifc.org), African Development Bank (www.afdb.org), DEG (Deutsche Investitions- und Entwicklungsgesellschaft mbH – www.deginvest.de, part of KfW banking group) and Bill & Melinda Gates Foundation (www.gatesfoundation.org). Together they have invested $57 mln. Aureos specialises in investing in small to medium-sized businesses in emerging markets.
The objective of the Africa Health Fund is to increase access to, affordability and quality of health-related goods and services for Africans, especially those at the bottom of the income pyramid. At the same time it hopes to provide investors with good long-term financial returns.
Nairobi Women’s Hospital provides health care services for women and children. It focuses on providing in-patient, out-patient and specialized services for women, including antenatal, gynaecology, obstetrics, breast cancer detection and surgery. Its Gender Violence Recovery Centre is believed to be the first in East Africa.
A proportion of the sum invested in NWH will be used to help fund a management buyout, with the balance going to the expansion of facilities such as clinics, beds, ambulances and operating theatres in the East Africa Region.
Sev Vettivetpillai, CEO of UK-based Aureos Advisers says: “Whilst we were setting up a unique HIV/AIDS risk management programme for our East African portfolio companies in 2008 we started to realise just how fragmented and under-capitalized the healthcare sector is in Africa.
“Many of the causes of the high costs and inefficiencies of the healthcare sector in Africa are essentially business issues that we hope the Fund, and the input of Aureos executives, will help to resolve.
“We believe the Africa Health Fund will make a valuable contribution to helping low-income Africans get access to affordable, high-quality healthcare services whilst at the same time providing satisfactory returns to our investors.
“Through the Africa Health Fund, we look forward to helping populate Africa’s private healthcare sector with growing, profitable businesses, well positioned to attract further domestic and foreign investment.
Healthcare in Africa and private equity
An IFC study “The Business of Health in Africa” finds that private sources fund 60% of healthcare financing in Africa and about 50% of total health expenditure goes to private providers. The report says that “the vast majority of the region’s poor people, both urban and rural, rely on private healthcare.”
Davinder Sikand, Regional Managing Partner of Aureos in Africa says: “The provision of capital to SMEs operating in the health sector in conjunction with professional private equity support will certainly increase the efficiency of the African health market. Aureos is well aware of the effects that health issues and under-resourced health services have on businesses because we work very closely with our investee companies. The economic, productive and emotional cost of workforces in poor health can be devastating on businesses. We have regularly helped our investee companies to devise remedial strategies.”
In 2007, Aureos wIth support from Norwegian Investment Fund for Developing Countries (www.norfund.no) did an analysis of healthcare provision in East Africa, including where the critical deficiencies in the African healthcare system lie. Given its extensive experience working with dynamic SMEs in emerging markets, Aureos identified how SMEs can plug the gaps in the African health market.
The Aureos study showed that much of the African healthcare sector suffers from severe structural and systemic bottlenecks. There is severe market fragmentation; inadequate, inefficient distribution channels; high manufacturing costs; price distortions in the market; lack of effective supply chains; absence of economies of scale; low productivity levels; and, in many cases, dependence on large international health providers.
Aureos researched the structure and segmentation of the African healthcare market. In doing so, it has determined trends in consumer demand, appropriate product pricing and market gaps which suggest investment opportunities. It identified market failures as well as the scope of the distribution chains as challenges in the environment. In drafting the strategy of deploying the Africa Health Fund, Aureos expects to work in innovative new partnerships with public and private organizations, entrepreneurs as well as domestic and international regulators.
Davinder Sikand adds: “We are very well placed to support solutions to the issues we have come to understand in the African healthcare market. Having worked in emerging markets for almost two decades, Aureos understands how production facilities, distribution systems and networks can be mobilized to reach under-served and low-income groups. This particularly applies in domains vital to healthcare, such as healthcare financing, medical manufacturing, healthcare training, telemedicine and pharmaceutical manufacturing.”
January 6th, 2010 by Tom Minney
South Africa’s Nedbank (www.nedbank.co.za) has announced an agreement with international non-governmental organisation Wildlife Works Incorporated (www.wildlifeworks.com) to launch an African carbon credit scheme.
Nedbank is to acquire carbon credits which stem from Wildlife Works’ efforts sustainably to prevent the deforestation of the Kasigau Corridor. The project will monetize the biodiversity assets of a 200,000 hectares dryland forest and savannah grassland strip called Kasigau Wildlife Corridor until 2026. It was awarded gold-level approval under the Climate Community and Biodiversity Alliance’s forestry protection standard and is apparently Africa’s first approved large project under the international Reduced Emissions from Deforestation and Degradation (REDD) scheme, which pays for projects which prevent further deforestation sustainably and measurably in areas which has seen previous deforestation. It is seeking registration with the Voluntary Carbon Standard registry. Business and people in developed countries can “off-set” carbon emissions through buying carbon credits from developing countries, which are preventing deforestation and conserving their natural resources and helping the world climate.
Over 2.5 million tonnes of carbon is expected to be released into the global carbon trading market through the Kenyan REDD carbon project partnership. The Kasigau project applies market-based solutions to conservation of biodiversity and should benefit local communities through education, job creation, environmental protection and direct financial rewards.
The investment banking division Nedbank Capital will make the Kagisau credits available. Head of carbon, Kevin Whitfield, reportedly says: “The carbon market provides a mechanism for linking Africa to the global green economy, while simultaneously conserving its rich natural heritage and safeguarding the livelihoods of its people. We hope this partnership will prove Africa can fight climate change, uplifting both rural communities and protecting wildlife by connecting them to the global carbon market.”
Saliem Fakir, Head of the WWF in South Africa reportedly confirms: “Rukinga and the associated Kasigau Wildlife Corridor project are world-class examples of projects that are making a tangible difference to both communities and the environment. It is innovative finance solutions, like carbon financing, which makes them possible.”
Wildlife Works applies innovative market-based techniques to conserving biodiversity and forest habitat. It sees the emerging Global Carbon Marketplace as a logical and exciting extension and its website gives a useful rundown of the theory (How It Works). According to WW, the Rukinga community was being forced to destroy their magnificent wilderness in order to survive. In the last ten years WW has restored a huge piece of land to a healthy vibrant ecosystem with elephants, lions, and 50 other species of large mammal. At the same time, the community has received 18 new classrooms for their children, and the employees and their families have received full health care benefits in a community with incredibly high HIV incidence. Wildlife Works also provides jobs, including through founding an organic greenhouse to promote healthier farming practices, providing local farmers with cash-generating citrus trees and free agroforestry trees to use for building and fuel wood. WW is exploring the extensive and expensive preparation for a new REDD project to save the Ngoyla-Mintom Rainforest (2 million acres) in Cameroon from being logged.
Wildlife Works Carbon is a new joint venture between Wildlife Works and Colin Wiel Investments LLC formed to pursue the emerging Reduced Emissions From Deforestation and Degradation (REDD) marketplace for Carbon Offsets as a sustainable and scaleable funding mechanism for biodiverse forest protection.
Nedbank, a subsidiary of the Old Mutual Group, is one of South Africa’s oldest banks and listed on the JSE Ltd. since 1969. The project further boosts the bank’s “green” credentials after the bank announced in October that it had won the National Business Initiative (NBi) 2009 South Africa Carbon Disclosure Project (CDP) Report Leadership Index. Other leading corporates included Bidvest Group, Woolworths Holdings, BHP Billiton, Goldfields and Sappi. It is also reportedly the only African bank included in the Dow Jones Sustainability Index.
The Global CDP is the largest source of transparent information on carbon emissions in the world. Nedbank is moving towards becoming carbon neutral and is cutting its “carbon footprint” through a robust entrenched carbon management programme including awareness, energy efficiency targets, paper and waste reduction initiatives, travel reduction, and various other methods of internal carbon reduction. Tom Boardman, Chief Executive, Nedbank Group, says: “Our position as a truly environmentally aware organisation is not the result of ad hoc environmental interventions. Rather, the external realization of our green credentials is the natural consequence of a deeply ingrained commitment to a culture of sustainability – one that runs throughout our operations and is embraced as a value by our staff members, business partners, suppliers and other stakeholders.
“Nedbank is serious about influencing others to follow our lead, by linking environmental considerations to all our financing activities, an aggressive green procurement policy that encourages suppliers to operate in an environmentally friendly manner, and a Green Affinity that raises awareness among our clients of the need to be environmentally aware and affords them the opportunity to contribute towards conservation projects simply by utilising affinity-linked Nedbank products.”
December 19th, 2009 by Tom Minney
Proposed amendments to Kenya’s Capital Markets Authority (CMA: www.cma.or.ke) Act would block institutional investors from getting compensation for money lost in cases of collapse of their stockbroker or any other investing agent. Currently all investors are eligible for compensation from the Investors Compensation Fund (ICF).
The draft CMA Act 2009 excludes financial institutions, insurance companies, collective investment schemes and other categories of investors who are generally recognised as “institutional investors” from drawing compensation from the ICF kitty. This leaves the “retail investors” as the only category of investors that can claim compensation for losses suffered due to failure or fraud by market intermediaries.
Current ICF regulations cap the maximum compensation payable per investor at KSh50,000 (US$667) and have called it to be increased to match commercial banks’ depositors compensation ceiling (KSh100,000).
Hong Kong-based International Securities Consultancy Ltd (ISC) drafted the proposed amendments jointly with local law firm Kaplan and Stratton Advocates. ISC’s Ray Astin reportedly says “It is generally assumed that the professional investors have the capacity to make prudent investing decisions and can look after themselves,”
Market players have argued that it will be unfair to compel institutional investors to contribute to the ICF pool while they do not expect to get any compensation for losses incurred. Mr Astin said contribution is guided by best practice recommendations by the International Organisation of Securities Commissions (IOSCO) of which the CMA is a member. The CMA uses allocations from new product listing charges and fees received from trading commissions in the secondary market to boost the ICF.
The ICF has had to pay out an estimated KSh302 million ($4 mln) to investors who lost money following the collapse of Nyaga Stockbrokers in March 2008, and the kitty is also likely to come in handy in paying claims to investors who also lost following the collapse of Discount Securities Stockbrokers early this year. About 90% of the estimated 27,879 Nyaga claimants were expected to receive full compensation for their losses, but some invested more than the maximum amount allowed
The CMA estimated that Nyaga could have gone under with over Sh800 million of investors’ funds, while there were allegations that Discount Securities had misappropriated Sh1.4 billion owed to the National Social Security Fund. The CMA’s financial statements for 2008 show the ICF had KSh227.5 million (June 2008), up from KSh165.2 mln (2007). “If you are investing a lot of money please take caution to know your broker and his lifestyle,” said the CMA chairman Micah Cheserem in September, according to reports.
Capital markets will be regulated by two sets of laws, the CMA Act, which deals with establishment of the regulatory body, and the Securities Industry Act addressing trading rules. The Central Depositories Act, which regulates custody of tradable securities such as shares and bonds, will also be amended.
The Nairobi Stock Exchange (www.nse.co.ke) has meanwhile introduced a mobile phone short message service (SMS) to receive complaints from all over Kenya. Complaints and questions can be sent to 8485, on both Safaricom and Zain mobile phone service at a cost of KSh10 per message.
“It is important to have an educated investor who understands the products traded and procedures governing transactions, said NSE chief executive, Peter Mwangi.
“Statistics show that 30% of the queries received at the Complaints Handling Unit (CHU) refer to a request for general information on processes, while a further 14% relate to questions on dividend issues by shareholders.”
Wycliffe Shamia, the market regulator for the Capital Markets Authority (CMA), reportedly praised the SMS complaints service and asked licensees and agents to provide clients with service charters. “Clients need to know beforehand what to expect from an agent or whoever they are dealing with, in order to make it clear what they offer, and avoid unnecessary delays and misunderstandings.”
The SMS service, which will also be used as a vehicle for investor education through the Complaints Handling Unit website (http://www.nsecomplaints.co.ke/chu) launched in August.
December 17th, 2009 by Tom Minney
The curriculum of the Securities Industry Training Institute (SITI) has been launched in Kampala, Uganda. Its establishment in September and development have been funded by International Finance Corporation, the private sector investment arm of the World Bank, as part of its Efficient Securities Markets Institutional Development programme (www.ifc.org).
SITI aims to standardize training on a wide range of programmes on capital markets and investments, corporate finance, asset management, entrepreneurship, corporate governance and other related fields of study. Eventually, all brokers, fund managers and investment advisors will require certificates to operate.
Simon Rutega, CEO of the Uganda Securities Exchange (www.use.or.ug), launched the institute and says it will serve the East Africa trading market that is gradually being integrated. He is Chairman of the Board of SITI East Africa and other members are reportedly Rose Mambo (CDSC Kenya), Jonathan Njau (chief executive of the Dar-es-Salaam Stock Exchange), Robert Mathu (executive director of the Rwanda Capital Market Advisory Council) and Peter Mwangi (chief executive of the Nairobi Stock Exchange).
Future training programmes include training for board members of USE in February, and training for the media. Rutega reportedly said: “The intention is to have as many people trained as possible. The point there is also the integrity and standardization of the market.”
The institutions – Uganda, Nairobi and Dar es Salaam securities exchanges and Rwanda’s Capital Markets Authority agreed a standardized curriculum which will be administered by SITI.
According to Rwanda’s New Times newspaper, CMAC Operations Manager Celeste Rwabukumba says all practitioners will be required to have training by SITI to learn the rules and regulations of the industry: “This is a good development which will give market actors the understanding of the regional market, experience, how the business operates as well as the harmonization of the regional stock markets.” Rwanda has seven registered stock brokers companies which focus mainly on corporate finance, stock brokerage and advisory services among others.
According to the report, only Tanzania in the region has a certification programme.
December 9th, 2009 by Tom Minney
Kenya is considering speeding up plans to privatize the Nairobi Stock Exchange (www.nse.co.ke), the biggest market in East Africa. The aim is initially that stockbrokers would acquire the large majority of the shares.
The NSE is already relatively advanced, with an Automated Trading System that also handles bonds. It is linked to the central depositories of the Central Depository and Settlement Corporation (CDSC) and the Central Bank of Kenya (CBK), which could lead to automated trading of treasury bills and other debt instruments.
Kenya’s Finance Permanent Secretary Joseph Kinyua was reported in local media recently as saying privatization could come earlier than expected as the Government moves to improve the country’s capital markets. First step would be to turn the stock exchange into a company via demutualization, separating its ownership from management to foster transparency.
Previously investor confidence had been hit by collapse of a number of some stockbroker firms, but regulators and others have since been taking some action.
November 11th, 2009 by Tom Minney
The first bond launched on the Automated Trading System (ATS) of the Nairobi Stock Exchange (NSE – www.nse.co.ke) on 9 November, when KenGen listed its KSh25 billion (US$336 million) bond. The firm had offered its investors the choice of trading on the automated system by immobilizing their holdings (holding them on the computer systems) or trading on the traditional market with paper holdings and 91% opted to have bond certificates immobilized in CDS accounts, according to local media.
The ATS links to the central depositories of the Central Bank of Kenya (CBK) and the Central Depository and Settlement Corporation (CDSC www.cdsckenya.com). It offers T+3 settlement (payment and transfer of ownership on the third day after trading), compared to T+7 on the manual market, and a much better flow of information.
On Monday, some market players told local press that there had been problems with trading, but the NSE said that the system was functioning well and the only difficulties had been with some pricing by the sponsoring broker Standard Investment Bank, and some clarification on schedule dates falling on a Saturday, according to local press reports.
NSE Chief Executive Officer Peter Mwangi was reported as saying: “From this day forward, all immobilized listed bonds, such as the KenGen bond will trade in an end-to-end automated capital acquisition platform, right from the placement of orders, to matching and finally settlement. This is basically what has been implemented.”
NSE First Vice Chairman Lutaf Kassam told Monday’s listing ceremony: “Automation is the key that will unlock the much needed capital required to stimulate this economy. Automation is really about ensuring easy flow of information so as to allow market players, investors and potential issuers to make informed decisions.” He thanked investors for their support in choosing to have their bonds traded electronically.
The KenGen bond is currently the only corporate bond that has been immobilized abnd listed on the ATS to date. The next step could be to trade treasury certificates (which make up 92% of the KSh385 bln – $5.2 billion – market) and Government bonds, which are on the CBK central depository and so already linked to the ATS. Other corporate bonds can join but those already in issue and traded on the manual market would have to ask their bondholders to immobilize their certificates through an immobilization timetable approved by the Capital Markets Authority and CDSC.
The ATS is expected to offer more liquidity and attract more retail investors. It offers real-time data streaming from the transactions and more information on bond market mechanics. It guarantees T + 3 settlement for corporate bonds and T + 0 for government bonds and this will help liquidity. Bond Traders Association chairman Fred Mweni is reported as saying the ATS could boost annual trade volumes to KSh1 trillion from this year’s projected trade volume of about KSh200 bln.
On the first day of trade, a deal worth Sh77 mln was reported. The bond had initially aimed to raise KSh15 bln but offered an additional KSH 10 bln through a “green shoe” option after applicants offered KSh26.5 bln.
Based on reports from Nairobi SE, Business Daily and Capital FM.
October 14th, 2009 by Tom Minney
The Nairobi Stock Exchange (NSE) has just readvertised its request for IT firms and others to express their interest in providing a Broker Back Office (BBO) system to handle administration and client accounts for its 18 active and licensed stockbroking members. The closing date is 27 October. The request was previously advertised in August.
The NSE advertises the request on its website (www.nse.co.ke) and says it acts on behalf of Central Depository and Settlement Corporation, the Capital Markets Authority, and the Kenya Association of Stock Brokers and Investment Banks.
The request says the vendor should be able to provide automated solutions to individual brokerage firms which they can integrate with the electronic trading, central depository and the national clearing and payment systems. The system should support trading of both equity and debt instruments, including full internet trading.
Services required include acquiring, installing, testing, training and commissioning the system, and support and maintenance afterwards.
Preference will go to systems capable of centralized control and in-built risk management mechanisms across the entire trading process. The system should have detailed audit trail and log file tracking. It should support multiple-branch access including agencies and must ensure controlled access to client details maintenance, order management, on-line bank reconciliation and distinct client accounting linked to the firm’s core financial system. It should be able to interface with multiple trading systems by use of FIX protocol (a way for systems to exchange financial information) and link directly to markets and support Straight Through Processing from trade to settlement.
It would be good if the system could handle brokers’ processes such as: everything from marketing to allocation on Initial Public Offers, helping ensure compliance with regulations, dealing on own account, discretionary portfolio management, and recording complaints via the web.
For more details, check the NSE website. Expressions of interest must be in the tender box at NSE by 4pm on 27 October.