African Capital Markets News » Kenya

East African investors opening accounts at Nairobi Stock Exchange

Tom Minney — Wed, 04 Jan 2012 11:41:29 +0000

Although the number of investors from other East African countries opening trading accounts at Kenya’s Nairobi Stock Exchange (www.nse.co.ke) is still very small, it is growing more consistently in the last 2 years than other categories of investors. According to data to 30 Sept released by Kenya’s Capital Market Authority (www.cma.or.ke), East African individual investors opened 97 securities accounts at Kenya’s Central Depository and Settlement Corporation (www.cdsckenya.com). This compares to 92 accounts opened in the full year 2010 and 79 in 2009.
By comparison Kenyan individual investors only opened 27,669 accounts in the 9 months to September 2011, compared to 120,756 accounts opened in 2010 and 52,836 in 2009. Kenyan equity trading has remained subdued as investors say high interest rates make them choose government debt securities over equities.
One potential reason for the East African interest, according to an article in the East African , is that Ugandans are opening trading accounts at the NSE in anticipation of the IPO of electricity distributor Umeme (www.umeme.co.ug) scheduled for 2012. Umeme is expected to cross-list at the NSE and the Ugandan Securities Exchange (www.use.or.ug). Some investors open multiple accounts ahead of a potentially “hot” initial public offering (IPO) of shares, where they hope to sell their initial allocation quickly and make a quick profit, as this is likely to maximise their share of allocation if the IPO is oversubscribed.
Trading experience shows that cross-listed East African shares such as Centum, Kenya Airways, Jubilee Insurance, trade more on the NSE compared with the Dar es Salaam Stock Exchange (www.dse.co.tz) and USE. The increased liquidity in Nairobi means that East Africans are better off having a trading account at the NSE. The paper comments that Rwandans, Tanzanians and Ugandans are probably realising this fact and also taking positions ahead of the listing of some of their firms on the NSE by opening more CDS accounts in Nairobi: “Investors will go the extra mile to open and operate, as proxies, CDS accounts in the names of their relatives or friends who know nothing on trading in shares. Expect an influx of Rwandese, Tanzanians and Ugandans at the NSE in 2012.”

FTSE Group working on Pan-Africa index with African Securities Exchanges Association

Tom Minney — Wed, 21 Dec 2011 09:02:16 +0000

Dateline – Marrakech
FTSE (www.ftse.com) is working on a FTSE-ASEA index with the African Securities Exchanges Association (www.africansea.org), which will help to unlock Africa an investment for larger portfolio investors. According to Imogen Dillon Hatcher, Executive Director, FTSE Group, speaking at the ASEA conference in Marrakech, Morocco, on 12 Dec, the index will make clear how much Africa is outperforming the rest of the world: “A ‘back-cast’ of the FTSE Africa index performs better than FTSE world index by quite a margin”. The index covers stocks on 16 exchanges and is adjusted for investibility, including free float and liquidity.
She said that FTSE Group was restructured on 12 Dec, with the London Stock Exchange Group buying out the 50% share owned by Pearson, owner of the Financial Times newspaper, “as of this morning”. The buyout transaction is set to close in the first quarter of 2012. FTSE calculates and manages over 200,000 indices worldwide, which are linked to over $3 trillion in global assets under management. These include the widely-used global benchmark, the FTSE All-World Index. She said FTSE is the top index group worldwide: “FTSE is known as a partner around the word, FTSE works with you to unlock the investment potential that is your market.” As markets mature, broader ranges of investible tools are needed including a reliable index that can promote the development of a wider range of investment products, including exchange-traded funds (ETFs).
The group had a strong commitment to Africa and already been working with South Africa’s JSE Ltd (www.jse.co.za) since 2002. In December 2010 they signed with the Casablanca SE (www.casablanca-bourse.com) to create FTSE CSE Morocco Index Series with two index products. On 8 November 2011 FTSE announced a partnership with the Nairobi Stock Exchange (www.nse.co.ke) to create new indices. FTSE NSE Kenya Index Series track the performance of the largest and most widely-traded stocks listed on Africa’s fourth oldest securities exchange.
Dillon Hatcher said FTSE China indices form the basis for $14 billion worth of ETFs, including giant funds by iShares. The group had worked to develop the indices with international and domestic managers including Xinhua Finance Ltd. She added: “We know something about building an index” and the ASEA index would “throw the light of transparency onto your markets”.
The work of developing the ASEA index had been led for over a year by Jonathan Cooper, Managing Director Middle East and Africa, working with a broad range of African exchanges. The target was to build an investible index, with clear and transparent rules and methodology. They started with all African companies; then filtered for those whose price information is available on Bloomberg and Thomson Reuters. They looked at securities types, adjusted for a minimum 15% free float (the proportion of shares potentially available for buyers) and did liquidity testing on the securities and then did country weightings. The index now covers 16 countries, which have securities which meet the requirements.
The new index will be reweighted twice a year. Dillon Hatcher added that FTSE would be working with a prospective client base to put forward this pan-Africa index: “We hope funds will come out of this and drive Africa as an investible destination, make sure the index stays fresh and make it sure it stays relevant, as the client base comes to us with ideas, such as sectoral indices.
She also explained how securities markets indices had evolved. It started as a general economic indicator, showing how share prices are moving as an indicator of investors’ expectations of business prospects. Then indices became a tool for benchmarking but were still simple measurement tools. From this they became an underlying framework for more passive asset management such as ETFs, and depending on market these could be simple or ever more complex, depending on the needs of organizations such as asset managers or investment banks. Eventually they would also develop into a tool to assess market risk, with much potential to get involved in top-end investment strategy, where “we are starting to blur the lines between passive and active management”.
She threw down the gauntlet to active managers “We would assert that over time it is very hard for an active manger to beat an index, we have done lots of work with academics.” She said indices bring market benefits including low-cost market access provided they are transparent, rules-based and useful. “All the name-brand indices have to be fit for purpose and they have to do a job. You know they will behave in a particular way.” At other meetings this author has heard exchanges have wondered about the future of securities markets when the volume and value of derivatives and ETFs traded far outweighs the trade in the actual shares.
Commenting on the transaction in which the LSE buys out Pearson, LSE CEO Xavier Rolet commented in a press release: “Fully aligning FTSE with one of the world’s most liquid and most international trading groups is an exciting opportunity. This transaction further delivers on our diversification strategy, expanding the London Stock Group’s existing offering deeper into indices, derivatives and market data products and services. This is a business we know well, and we expect that going forward our customers will directly benefit from greater choice, opportunity and innovation.”

Aureos Africa Health Fund invests $2.5m in Kenya healthcare

Tom Minney — Mon, 21 Nov 2011 23:48:20 +0000

Aureos Africa Health Fund invested $2.5 million in a Kenyan hospital and health insurance company, the Avenue Group (www.avenuehealthcare.com), which offers affordable healthcare cover, integrated with quality healthcare provision. It has a 70-bed full-purpose hospital in Nairobi, 7 clinics through Kenya as well as in-house clinics for corporate clients, a home-based care service for elderly, terminally ill or otherwise dependent patients, rental and sale of wheelchairs and other rehabilitation equipment for home use, and First Aid training schemes.
It combines healthcare cover with quality, affordable outpatient and inpatient medical services. The group’s corporate medical schemes are designed to be accessible to businesses with as few as 10 employees and around 70% of the staff covered are in non-managerial roles. With Aureos investment, Avenue Group will expand into other regions in Kenya, building 2 more clinics in smaller towns and expanding existing in-patient facilities in Kisumu and Mombasa. The funding will ensure the group can continue non-profit activities, such as free medical camps across Kenya and public health screening days at Avenue clinics.
Africa Health Fund is managed by private equity manager Aureos Capital Ltd (www.aureos.com), which specialises in socially sustainable small to medium-sized businesses in emerging markets. It has more than 20 local offices covering more than 50 markets. It has expertise in healthcare, with investments in hospitals and medical supply companies across Asia, Latin America and Africa. It builds environmental, social and governance performance into its investments as an integral part of managing risk and generating returns, particularly in Africa where managing employees’ health is a major challenge for many of Aureos’ portfolio companies.
Africa Health Fund was established by Aureos in June 2009 with the International Finance Corporation (www.ifc.org), the African Development Bank (www.afdb.org), DEG, and the Bill & Melinda Gates Foundation (www.gatesfoundation.org) as cornerstone investors. Subsequent investors include the Elma Foundation (www.elmaphilanthropies.org) along with private investors such as family offices and a major European retail bank. Committed capital in the fund now totals $75.4m. The fund aims to help low-income Africans access affordable, high-quality health services while providing investors with good long-term financial returns. It has invested in hospitals in Kenya and Ghana.
Shakir Merali, Partner at Aureos Africa Healthcare Managers Limited in Kenya, says: “Avenue has developed strong links with the Kenyan business community that are helping to bring health cover to a wider range of workers, even those who work in smaller firms. We are looking forward to helping the Group to pursue its plans for growth and to extend its successful model and high quality care, initially within Kenya, and eventually in neighbouring East African countries.”
Diana Patel, Executive Director at The Avenue Group, comments: “We are very pleased to be working with an investor with such extensive experience of the medical sector. The support from Aureos’ strong local team will be crucial in helping us to achieve our ambitions to make affordable health cover a reality across the whole of East Africa.”
Aureos was set up in 2001and has increased funds under management to US$ 1.3 billion with a footprint in over 50 emerging markets covering Asia, Africa and Latin America, by establishing 17 regional private equity funds.

Is lack of liquidity driving African issuers to list on London Stock Exchange and others?

Tom Minney — Thu, 03 Nov 2011 18:30:05 +0000

Reuters newsagency has put together stories on issuers’ and investors’ difficulties with African stock markets. These include lack of liquidity and sinking currencies. It notes that African companies are increasingly dual listing on international stock exchanges.
“Liquidity: the scourge of African stock pickers” quotes a range of institutional investors complaining that liquidity is a major constraint on markets such as Malawi Stock Exchange. According to the article: “Poor but fast-growing, Malawi and other sub-Saharan African countries would offer huge opportunities to international equity investors – if it weren’t for the liquidity scourge. Markets across the continent are hampered by a lack of liquidity, making it nearly impossible to take stakes in all but the biggest firms. “With the exception of South Africa, we feel all sub-Saharan African (markets) are illiquid,” said Ronak Gadhia, Africa equities research analyst at London-based frontier markets specialist Exotix. “Most of our investors are unable to invest outside the big 2 markets, and even then their investable universe is usually the largest 5-10 stocks,” he said, referring to the Nigerian Stock Exchange and Kenya’s Nairobi Securities Exchange, the two biggest markets outside Johannesburg.
It notes that Sonatel, the giant of the BRVM West African regional securities exchange, is concerned about liquidity on that market and thinking about a secondary listing. An earlier story said the pressure comes from investors.
“Africa’s growing firms shun Jo’burg for London” suggests that even when companies are thinking about dual-listing, they head to the London Stock Exchange or AIM market and don’t consider Johannesburg. The article quotes Zambeef executive director Yusuf Koya: “It was a tough decision. A key factor in the decision process was London’s reputation as the world’s financial centre, which allows us to access a potentially wider range of investors and liquidity.”
According to the article: “A total of 104 African companies are listed on the London exchange, with the majority on AIM. The combined market value of African companies listed in London is now bigger than every African exchange except Johannesburg. Just under $2.1 billion was raised by African companies on the London bourse in 19 transactions in 2010, representing about 90 percent of all equity capital raised by Africa-focused companies in 2010, said Ibukun Adebayo, the LSE’s head of equity primary markets. Dual listings are critical for companies that outgrow their home exchanges, where thin liquidity keeps large investors out. Big bourses such as London and Johannesburg also boast tougher disclosure requirements, reassuring investors concerned about Africa’s corporate governance.”
It also cites bankers that London-based investors tend to have a bigger appetite for emerging market assets than their South African counterparts and quotes a private equity manager: “South African investors don’t understand Africa risk in the same way UK investors do.” It also suggests London may be an easier sell to international investors unfamiliar with Johannesburg. Nicky Newton-King, incoming CEO of South Africa’s JSE Ltd, says Johannesburg offers a world-class standard of disclosure for a lower price and less hassle than London: “You can come to the JSE, you can raise the money here, and your shares will be traded in a very liquid environment, a very respected environment. Without going through the costs and the hoops of listing in London, but with exactly the same standards.”
African investment institutions are just starting to rise, it could be a great time to heed the call from ASEA Chairman Sunil Benimadhu for African securities exchanges to find ways to get more liquid. SADC Stock Exchanges already have a workable model, but what will cause anyone to initiate the change to move onto the next level before many more firms move activity to London , New York or elsewhere?

InReturn Capital invests in Kenya’s Eagle Eye Laser Centre

Tom Minney — Thu, 03 Nov 2011 08:49:11 +0000

East African venture capital firm InReturn Capital (www.inreturncapital.com) has entered a partnership with Hurlingham Eye Care Services group (HECS – hurlinghameyecare.co.ke), according to a press release issued on 2 November. InReturn Capital is an impact investing company which aims to generate positive social impact and profits by investing in small and medium enterprises (SMEs) in the East African region, from its offices in Nairobi, Kenya and Dar es Salaam, Tanzania. It has Jacana Venture Partnership (www.jacana.org) as an investor and key partner in fund management, and several Dutch and international partners.
HECS has been operating optical shops and a diagnostics centre around Nairobi since 2000 and in April 2010 opened the Eagle Eye Laser and Diagnostics Centre at the 5th Avenue Building on Ngong Road, close to the Nairobi Hospital. This aims to be a leading provider of eye-care surgery and diagnostics in East Africa, particularly long-term eye problems. The centre is the first clinic in East Africa to offer Lasik surgery, which is the most advanced type of laser surgery for vision correction. Other eye surgeries include cataract, glaucoma, multifocal refractive surgery, as well as a broad variety of eye diagnostics using modern technology. The founders, Dr. Ilako, Dr. Kimani and Dr. Kiumbura, all have a long track record in eye surgery and have teamed up with Dr. Gaeckle, one of the most successful and experienced eye laser surgeons in Germany.
InReturn already has investments in construction, infrastructure and energy and is keen to expand into healthcare. It linked with HECS in July 2011. It provides hands-on support to HECS in strategic focus, human resource management and marketing and financial administration processes, as well as joining weekly management meetings and being a member of the board. Its investment in the surgery centre will assist in expanding and improving operational capabilities while the centre prepares to expand within the region. The plan is also to set up a non-profit unit that will provide free eye-care health services such as free surgeries and consultations to the lowest income groups.
Dr. Kiumbura, CEO and co-founder of HECS commented: “There is a saying in my language that two are always better than one. The partnership with InReturn has just proven this to be true one more time! It has been a time of improvement in the organisation, from personal growth to organizational transformation, and to a more efficient and focused entity from the time we started working together. I have no doubt in my mind that together we will grow to unchartered heights in provision of quality affordable eye-care in this region in the coming years.”
Eelco Benink, Investment Manager of InReturn commented: “We are excited to invest in this state-of-the-art eye-care institute in Kenya. The doctors are amongst the best in their field and the technology available at the Eagle Eye Laser Centre is unparalleled in East Africa. Together with the optical shops it forms the only one stop shop for eye health care in greater East Africa. Our partnership will lead to further expansion of the HECS group, and it will contribute to the growth of quality medical industry in the region.”
Other InReturn investments include Vipingo Stone, Equator Shipping on Lake Victoria and an engineering company developing micro hydropowerplants.

Mobius remains bullish on Nairobi Securities Exchange, says FT

Tom Minney — Fri, 28 Oct 2011 12:21:18 +0000

Mark Mobius, the veteran emerging markets investor and head of Templeton Emerging Markets (www.franklintempleton.com), is bullish about the Nairobi Securities Exchange (www.nse.co.ke), although it is the worst-performing stock market in sub-Saharan Africa this year, according to an article on 27 October in the UK’s Financial Times.
According to the article, by Katrina Manson: “A long-term investor, Mr Mobius makes his money from yo-yoing frontier markets. Kenya’s has see-sawed between losses of 41.4% after post-election violence in 2008 to best sub-Saharan performer excluding South Africa last year, with a rise of 28.3%. Domestic investors tend to have both less money and less time to play with.” She also cites Aly-Khan Satchu, chief executive of Rich Management (www.rich.co.ke), a Kenyan financial services firm as saying the 2011 collapse is a “rout”. Domestic confidence is low, including among many of the 800,000 people who invested into Safaricom’s 532% subscribed IPO (KSh5 in the 2008 IPO, KSh3.05 at present).
Kenya has seen currency weakness, foreign capital flight, high inflation (it was 17% in September) and drought. The NSE has seen big cuts in volumes and much less participation by foreigners, who used to dominate trading, partly because of a global flight from risky assets. Share price indices have slid, losing the strong gains of 2010. Local investors see better gains from bonds, real estate and family firms.
The IPO of British American Investment Company Kenya only achieved 60% of its target (as reported on this website) and Kenya Airways seems to be holding back a share offer in which it wanted to raise $250 million for expansion. According to the article, Satchu said: “You can’t be issuing IPOs that flunk at the first hurdle. There has not been a successful IPO since Safaricom and that has impaired the stock market. They need a flagship discounted offer and will languish until they do it. Right now, the government couldn’t raise tuppence.”
The also article quotes Stella Kilonzo, head of the Capital Markets Authority (www.cma.or.ke), as blaming the stressed economy. She says there have been 3 years of reforms to boost disclosure and set more stringent requirements and these will eventually pay off. This year the NSE was renamed a “securities” rather than “stock” exchange in anticipation of a new bond index, futures and derivatives trading, exchange-traded funds and a new small and medium sized business index among others. If these come into operation, diversification could help the market.
There is still a cloud over the bourse from a scandal after stockbroking firms collapsed owing their clients money, some after allegedly trading their clients’ money illegally. No-one has yet gone to prison although court cases continue, and not everyone has been compensated, partly because the compensation fund does not have enough resources. Ms Kilonzo says regulation is now tighter.
Reportedly, a court case against the CMA by a collapsed brokerage firm that has been under statutory management since 2007 last month halted a plan to demutualize the NSE, including selling part of it and listing its shares on the Nairobi bourse. According to some analysts, demutualisation could help clean up the market by separating stockbrokers from the exchange’s owners.
Sentiment may be changing, after the Central Bank of Kenya (www.centralbank.go.ke) moved aggressively to push up interest rates by 4 percentage points this month, which may stabilize the currency and bring back investors. Good rains and strong investment in infrastructure could fund growth in 2012, although worries remain about elections.
Manson quotes Mobius: “People are fearful of coming in, so whoever goes there makes a bundle. We may go and buy more at a cheaper price.” The Frontier Markets Fund is invested in Kenya Airways and Safaricom.

Kenya’s Capital Markets Authority regulator proposes corporate governance law

Tom Minney — Mon, 03 Oct 2011 20:55:24 +0000

Kenya’s Capital Markets Authority http://www.cma.or.ke has drafted proposals on corporate governance and is waiting for approval from Finance Minister Uhuru Kenyatta so they can be gazetted and legally enforceable. They include a requirement that at least one in three directors be “independent.”
According to a report in Business Daily newspaper, CMA chairman Kungu Gatabaki said: “We want one third of the directors to be independent and we are sending a circular to all listed companies to make sure that they observe strict governance.” An independent director is one has not been employed in an executive capacity at or had a business relationship with the appointing company in the last 5 years, including consulting work or being a significant customer or supplier. He added: “All listed companies should have independent directors but what has been happening is that many of them, because of their history, have nominee directors of the main shareholders. These (the amendments) touch on the appointment of directors, insider transactions, doing business with companies.”
Currently corporate governance is only voluntary, until the new rules become law. There should also be a formal and transparent procedure in the appointment of directors to the board. Anyone offering him or herself for appointment as director should disclose any potential area of conflict.
Mr Gatabaki said that related-party transactions will be required to be at an “arm’s length” and have adequate disclosure, but that the CMA would discourage insiders from such transactions, in order to avoid conflicts of interest. Mr Gatabaki said disclosure on related party transactions would be enhanced and that once the amendments are approved, then the CMA would have the powers to enforce them.
The guidelines are prominent after allegations of fraud and over-priced supplies at listed autodealer CMC Motors. Former chairman, Peter Muthoka, is chief executive of Andy Freight Forwarders Services, the largest single service provider to CMC, which is accused of overcharging the company by between KES300 million (US$2.96m) and KES500m. He is also the largest shareholder with 22.6%.
Mr Muthoka was dismissed as board chairman of CMC in September due to alleged “conflict of interest.” Mr Gatabaki said the CMA had met with CMC’s board to help them resolve the issues. It is also to investigate alleged fraud and could prosecute any suspected corrupt practices. A case was previously brought against former directors of Uchumi Supermarket, who were accused of irregularly selling the retailer’s assets.
Mr Gatabaki said the regulator was trying to improve the environment in which listed companies in the country operate and facilitate the return of various foreign and local investors. In August the World Bank said Kenya had weak investor protection laws that put small and minority shareholders at risk and ranked the country 93 out of 183, second to Rwanda (number 28) in East Africa in investor protection rules. The country was ranked poorly because of weaknesses on disclosure and approval of related-party transactions.
Some listed firms on the NSE have been run as family businesses or among close friends but are now faced with transparency challenges as their owners try to accommodate new shareholders.

Silk Invest says Egypt elections will be turning point

Tom Minney — Tue, 27 Sep 2011 17:59:03 +0000

Mark Voss of fund manager Silk Invest (www.silkinvest.com) foresees a turning point for the Egyptian market in a recent note. He also notes growth in Tunisia, with companies back to pre-revolution levels, tourism boom in Morocco, giant growth in Ghana and telecom payments innovation in Kenya.
He says the company clearly sees value in the market, but the evolving politics has cast a cloud on investor sentimenty. “We believe this is now lifting as the country’s election commission chief announced a roadmap for parliamentary elections – and a crucial step in transitioning to civilian rule, from 21 November to 4 March 2012. This should also pave the way forward for the Presidential elections by early next year. Going forward, we suspect that this may mark a turning point in the market’s fortunes.” He adds that there is no shortage of lenders to help the country get back on its feet. He adds that core inflation was 6.9% in August from 8.7% in July and Suez Canal revenues climbed 8.5% year-on-year in August.
Also on the post-revolutionary theme, he looks at Tunisia and said it “continued its upward trend with many companies now back at their pre-Jasmine revolution price levels”. Tourism in Morocco was surging and by end of July was up nearly 10% year on year.
For the rest of Africa he pointed out that the IMF forecasts 13% GDP growth for Ghana this year and noted the Chinese gave a US$3 billion loan for further infrastructure developments. In Kenya: “interest rates were notched slightly up to help control inflation and reduce local currency volatility. Following an unexpected increase in harvested maize, food inflation in the country is expected to decline”. Telecoms innovation continues full speed in Kenya, as Airtel Kenya unveiled an online payment system enabling mobile subscribers to use handsets to make purchases online, while Safaricom and I&M Bank launched a service that allows M-pesa customers to transfer money from their accounts to a pre-paid visa card – which can be used globally.

Kenyan IPO only 60% subscribed but regional plans go ahead

Tom Minney — Thu, 25 Aug 2011 19:23:50 +0000

Kenya’s financial services holding company British-American Investments Company Ltd.(www.british-american.co.ke) issued a statement on 23 August outlining that its initial public offering (IPO) had only attracted 60.09% of the targeted KSh5.85 billion ($63million). The company owns 2 insurance firms and an asset manager and said it will reconsider its plans, which had included real estate and regional expansion, including in South Sudan.
The listing was previously detailed on this site here.
The company successful raised KSh3.5bn by selling 390.6m shares at KSh9.00 each. It meets the minimum 50% requirement in its prospectus to go ahead and with 28,000 shareholders is permitted to list on the Nairobi Stock Exchange main board. The shares are due to start trading on the Nairobi bourse on September 2.
According to stockbroking analysts, foreigners were largely absent due to risk aversion and worries about the Kenyan economy. Reuters quotes George Bodo, a research analyst at ApexAfrica. “The timing of the IPO came … when the global markets were risk averse and foreign investors were cutting risky positions internationally.” International problems include the US economy and the eurozone debt crisis. “It was unfortunate that the US debt crisis escalated right in the middle of the offer period, causing loss of appetite amongst institutional investors especially those outside Kenya,” said Group chairman Nicholas Ashford- Hodges, according to a report in “Business Daily” newspaper.
Foreign investors normally account for 70% of action on the NSE, but Reuters says they are less active and this has been made worse as the Kenyan currency declines against world currencies.
Local retail investors recorded the highest participation, taking up 70.9% including a 142% oversubscription of the 195m shares offered to them; qualified institutional investors hung back and took up 23.7%, just over a third of their 240.5m shares allocation; employees, agents and individual life policyholders snapped up 5.2% and foreign investors were almost absent, taking up only 0.3% of the offer, less than 1% of the 195mn shares reserved for them.
Analysts said the poor macroeconomic environment in Kenya did not augur well and inflation in Kenya hit 15.53% in July, driven by food and fuel prices. Rising interest rates have dissuaded many investors from seeking funds from banks to invest in shares and banks were also not willing to take shares as collateral. Gregory Waweru, an analyst at Kestrel Capital, was reported as saying: “There was competition for funds due to tight liquidity in the market.” Many investors have not yet realized substantail returns from East Africa’s biggest IPO which was Safaricom’s listing in 2008.
British American had planned to spend KSh2.5bn on property development and group managing director Benson Wairegi said in a statement: “The property development initiative where the bulk of the funds were targeted will be reviewed with a view to scaling it down.”
The company was also to set aside KSh1bn for regional expansion and KSh1.28 bn to expand its Kenyan operations, including the asset management business and to launch new funds for Kenyans in the diaspora as well as local and international investors and to comply with a proposed law for real estate investment trusts.
Mr Wairegi said the company may consider using bank loans to finance other planned projects: “The group has no other gearing despite the very strong balance sheet, which has become even stronger with the raising of KSh3.5bn. We shall, therefore, be able to easily leverage to implement all the profitable projects that have been lined up,” according to a report in “Business Daily”.
British American launched a Ugandan subsidiary in July and at the time the chairman said next stop would be to open offices in Rwanda, Tanzania and South Sudan.

Dar Es Salaam bourse aims for IPO and 2 cross listings, capital controls easing

Tom Minney — Thu, 25 Aug 2011 07:20:28 +0000

As the East African region moves towards faster integration, Tanzania is preparing to ease controls on the amount of shares foreigners can buy, in line with changes in the rest of the region. The Dar Es Salaam Stock Exchange (www.dse.co.tz) is also hoping to increase from 15 to 18 listed companies and is preparing for an initial public offering (IPO) for Precision Air (www.precisionairtz.com) during September and cross-listings of 2 mining firms listed in London.
Gabriel Kitua, CEO of the Tanzanian bourse, told Reuters on 24 August at a meeting organised by the Nairobi Stock Exchange: “Tanzania is not exactly a closed market. Up to 60% of any listed security is available to any citizen of the world, 40% is reserved for Tanzanians… with time, the control will be erased especially as we go to the regional monetary union where free movement of funds across the countries will automatically be there.”
Reuters says the 5-nation East African Community (EAC) bloc of Rwanda, Burundi, Uganda, Tanzania and Kenya aims to have a monetary union in place in 2012 and move to a political federation by 2015. It reports that Tanzania has the tighter capital controls, including barring foreigners from investing in government securities.
Kitua also said that the approval of the cross-listing of African Barrick Gold Corporation (www.africanbarrickgold.com) is advanced: “The approval process is almost complete”. He added “The other one is in very initial stages … it is a mining company,” according to Reuters.
Barrick (ABX, listed on the Toronto and New York stock exchanges) owns 73.9% of African Barrick Gold and raised $884 million through offering the rest of the shares in an IPO on the London Stock Exchange in March 2010. Barrick describes itself as “the gold industry leader, with a portfolio of 26 operating mines and advanced exploration and development projects located across 5 continents”.
Precision Air’s listing application was received and being considered by the Capital Markets and Securities Authority (CMSA) in February, according to local news reports. At the time it was reported that Precision Air sought to raise $25m (about TSh38bn) in the IPO. Kenya Airways owned 49% and Michael Shirima, the founder and chairman of the airline, owned 51%. The IPO would see their stakes diluted to 34.2% and 34.6% respectively.
Reuters also adds that East African Breweries Ltd of Kenya is expected to offload its 20% stake in Tanzania Breweries Limited in a public offering. Kitua rejected claims in a regional paper earlier this year that EABL had been compelled by Tanzanian authorities to offer the shares at a set price: “In capital markets there is no compelling of people. This is a free market economy and decisions are done by the board of directors of the companies and no one can interfere with that.”
The agency says the most heavily traded shares on the DSE are banks such as CRDB and National Microfinance Bank and manufacturer Tanzania Cigarette Company. TBL is the biggest by market value.
“For the last 12 months the Tanzania share index has risen by 17% and the all share index by close to 7%. The market has been growing,” Kitua said. The Tanzania share index excludes shares cross-listed from the NSE, including Kenya Airways. Kitua said the postive performance is due to good earnings by listed companies and the stable Tanzanian economy: “There are signals that the trend will be on an increase for the next 6 months.” He warned that inflation is past 10% and is emerging as a challenge.
The DSE delisted the National Investment Company (NICOL) with effect from 6 July after a 1-month suspension from 6 June and it become the first company in the 12-year history of the Tanzanian bourse to be delisted. This was on account of the firm’s failure to submit 2009 and 2010 financial results, and failure to comply with a directive from the DSE Governing Council about plans to sell 22m shares it owned in National Microfinance Bank (NMB), which is also listed.