Archive for the 'Kenya' Category
March 9th, 2011 by Tom Minney
The International Finance Corporation (www.ifc.org), a member of the World Bank Group, on 8 March announced it was investing $10 million in equity in Catalyst Fund I LLC. The fund aims to stimulate employment and accelerate economic growth across East Africa by improving access to equity financing for emerging and mid-size companies.
Catalyst Principal Partners (www.catalystprincipal.com), a private equity firm based in Kenya, has raised $70 million for the fund. Other investors include the African Development Bank, the Commonwealth Development Corporation, Germany’s development finance company DEG and PROPARCO of France.
The fund will invest in growth companies with dynamic management to drive growth, regional expansion, consolidation, and performance improvement. Investments in target companies will range from $5 mn to $15 mn. It will be managed by Catalyst Principal Partners LLC, and aims to invest in Kenya, Uganda, Tanzania, and other East African countries. It will provide financial and management advice to up to 14 mid-size companies across different sectors.
Paul Kavuma, Chief Executive Officer of Catalyst, said: “We anticipate additional substantial commitments in the coming months to achieve our target fund size. We are particularly encouraged by the interest expressed from regional pension funds and insurance companies, noting that we have already received significant capital from reputable local institutions and private investors.”
Jean Philippe Prosper, IFC Director for Eastern and Southern Africa, said: “IFC is supporting this fund to help East Africa’s entrepreneurs gain better access to finance and promote the high growth and dynamic companies that encourage sustainable development and create jobs and new opportunities.”
IFC is the largest global development institution focused on the private sector in developing countries. Investments climbed to a record $18 billion in fiscal 2010.
December 29th, 2010 by Tom Minney
Kenya’s stockbrokers and investment banks are moving fast to automated systems. They say that the future of stock trading is going to be via the Internet and mobile phone applications, according to a report in the Business Daily newspaper (www.businessdailyafrica.com). Kenyans are fast with technology and moved en masse to leapfrog the rest of the world and adopt new technology for mobile money transfers.
Recently CFC Stanbic Financial Services (www.stanbicbank.co.ke) and Suntra Investment Bank (www.suntra.co.ke) launched automated trading systems (ATSs). African Alliance Securities, Faida Investment Bank and Drummond Investment Bank said they plan to launch online trading platforms early in 2011.
The report quotes Faida Investment Bank Chief Executive Bob Karina: “Market players will have no choice but to create systems that allow clients to operate from home and offices.” He added that online trading will save brokers the costs of opening new branches and other costs of reaching clients. He said Faida had contracted information technology company Tangaza to design an online trading system similar to Suntra’s.
King’ori Githinji, Executive Director at Drummond Investment Bank, reportedly said improved Internet speeds and reduced Internet connection costs have catalysed the growth. He said Drummond already offers some online services, including client orders through e-mails linked to their accounts.
According to African Alliance Securities managing director Lucas Otieno, an important milestone will be when there is connectivity between the stockbrokers’ back-office systems and the Nairobi Stock Exchange (www.nse.co.ke). The NSE is upgrading its back-office system estimated to be complete by the end of the first quarter of 2011 for KSh100 million cost. He said: “Once brokers get access to the NSE back office system then we’ll move to the next level.” He forecast that it could reduce settlement time. According to the report, it takes up to 7 days to complete a transaction including transfer of ownership and receipt of funds.
The paper also quotes Michael Gichohi, Chief Executive of Suntra Investment Bank and Chairman of the Kenya Association of Stockbrokers and Investment Banks that online trading could bring a revolution to share trading: “No one imagined M-Pesa (a mobile money system) would be as big when it was started.”
The move could also open up the stockmarket to a much wider range of participants than the 1.8 million accountholders listed at the Central Depository and Settlement Corporation. The automated trading systems (ATSs) should permit online trading via mobile phones and could attract some of the 19 million mobile phone subscribers in Kenya, of whom 13.5 million use Safaricom’s M-Pesa money mobile transfer service.
Treasury Permanent secretary Joseph Kinyua reportedly warned: “Companies that intend to remain competitive and in business must embrace technology in their processes,” at Suntra’s ATS launch last week.
CFC Stanbic Financial Services managing director Nkoregamba Mwebesa was reported saying the new systems have attracted interest from Kenyans living abroad: “Investors both in the country and those in the diaspora have lauded the launch of the online share trading platform since it provides a convenient and innovative solution to shares trading.” He predicted that online trading will eliminate investor queues in future and all trading will be done without the need to go to brokerage offices.
December 16th, 2010 by Tom Minney
The International Finance Corporation (www.ifc.org), a member of the World Bank Group (www.worldbank.org), and East Africa’s Securities Industry Training Institute (SITI), based at the Uganda Securities Exchange (www.use.or.ug) have signed an agreement to broaden training. This will boost opportunities for market participants, regulators and others in East Africa’s capital markets sector, with the aim of strengthening and supporting the growth of securities markets in the region.
SITI will be licensed to use IFC-developed securities markets training material for the next 10 years to train and certify thousands of securities market participants in Kenya, Rwanda, Tanzania, and Uganda. The material is developed by the Efficient Securities Markets Institutional Development (ESMID) Programme, a joint project by the Swedish International Development Cooperation Agency (www.sida.se), which provided $5.5 million, the IFC and the World Bank.
IFC Principal Investment Officer Aida Kimemia said in a press release: “Supporting the development of securities markets is a priority for IFC in Africa. This agreement will make available world-class training materials to thousands of people in East Africa, improving their skills and knowledge and giving them the tools that will support broad economic growth in the region.”
Joseph S. Kitamirike, Chairman SITI board and CEO, Uganda Securities Exchange, said: “We at SITI are very pleased to have cooperated with IFC to develop the training materials. We know that they are cutting edge and will help us develop the personnel we need to grow the securities markets in East Africa. On the strength of this successful cooperation with IFC, we are confident we will undertake more activities of this nature that will ensure proper market development.”
The ESMID programme aims to help develop well-functioning securities markets in Africa, with a goal of supporting key economic and social development needs with high developmental impact, such as infrastructure, housing, and microfinance. Despite efforts over the last 12 months this blog has been unable to contact the East Africa office directly to find out more, as the officers do not seem to reply to emails or phone messages.
Its funded programmes are to help simplify regulations and procedures for issuing and trading bonds; strengthen market infrastructure; build capacity of market participants; facilitate the regionalization of securities markets; and support demonstration transactions. In East Africa, it reportedly works with central banks, securities regulators, stock exchanges, and market participants, such as brokers, dealers, investment banks, and institutional investors. It also works in Nigeria, according to the website.
The ESMID-developed training material consists of 3 courses and 5 seminars: Fundamentals Securities Course; Securities Certification Course; Officers and Directors Course; Bond Trading Seminar; Corporate Finance Seminar; Corporate Governance Seminar; Bond Underwriting Seminar; and Portfolio Management Seminar.
The courses, which will be required for licensing of market intermediaries, have already benefitted more than 700 course participants in East Africa.
The IFC, a member of the World Bank Group, is the largest development institution focused on the private sector in developing countries. It says “our new investments climbed to a record $18 billion in fiscal 2010.”
December 16th, 2010 by Tom Minney
Kenya’s Capital Markets Authority (www.cma.or.ke) has cut the cost of trading bonds from 0.04% per cent (KSh400 for every KSh1 million transacted) to 0.035% (KSh350 for every KSh1 mn) in order to pass on the lower costs due to automated trading on the Nairobi Stock Exchange (www.nse.co.ke), according to a report in Business Daily (www.businessdailyafrica.com).
The NSE can now benefit from the booming market for bonds through levying a transaction fee of KSh35 on every KSh1 mn traded (0.0035%), according to a notice in the Kenya Gazette on 3 Nov. However stockbrokers are losers as their brokerage commission is cut to 0.024% from 0.04%.
New fees on secondary bond fees accrue to the CMA, (0.0015%) the Central Depository and Settlement Corporation (www.cdsckenya.com) (0.0002%) and the CMA Investor Compensation Fund (0.0004%), earn fees on the secondary bond trade. Previously they only earned fees from listings.
Commercial banks are the biggest traders of fixed-income securities at the NSE. However, they still want an over-the-counter (OTC) bond market to operate alongside the exchange. Duncan Kinuthia, a fixed income dealer at the Bank of Africa, was reported as saying: “I am not happy that I will now be paying less, CMA should just have allowed banks to have their OTC market. If they are allowed to by-pass stockbrokers and the NSE and to trade bonds among themselves directly, they would expect to save the commission of 0.04%.”
Government bonds account for more than 90% of daily bond volumes traded at the NSE. Gino Ndung’u, a fixed-income dealer at Dyer and Blair Investment Bank, said the new rules will slash the brokers’ earnings: “We are looking at almost half the revenue gone, meaning we have to work twice as hard as before to earn the same income. There is no reason why the CDSC should earn a fee on bonds that are not under its custody” he added, as the Central Bank of Kenya is the custodian of the Treasury bonds.
December 3rd, 2010 by Tom Minney
Telecoms giant Safaricom Ltd. (www.safaricom.co.ke), a mobile phone company that is the biggest listing by market capitalization on the Nairobi Stock Exchange (www.nse.co.ke), is selling KSh 4.49 billion shillings ($56 million) of 5-year bonds from 1 Dec, according a report on Bloomberg newsagency.
The agency reports an email statement that the fixed-income securities will pay a coupon of 7.75% a year, the Nairobi-based company said in an e-mailed statement today. “Interest will be paid semi-annually in arrears beginning May 2, 2011.
The bonds will start trading on the NSE on 17 Jan.
Safaricom Public Relations Officer Wachira Kang’aru told Bloomberg the floating-rate coupon is the prevailing 182-day treasury-bill rate plus 185 basis points. Bloomberg reports the Central Bank of Kenya as saying on 25 Nov that the weighted average rate of accepted bids for the T-bills was 2.464% at the most recent auction, while the cut-off rate was 2.8%.
On 7 Oct 2009, Safaricom announced a KSh 5 billion (US$67 mln) bond, also pegged to Central Bank of Kenya rates. It said it was the first tranche of a KSh 12 bln programme approved by the Capital Markets Authority (CMA). The offer was aimed at institutional clients, and closed on 29 Oct 2009.
December 3rd, 2010 by Tom Minney
PTA Bank, a multilateral financial institution based in Nairobi, successfully launched a US$300 million Eurobond in November. According to a press release from Standard Bank, this was the only corporate Eurobond from sub-Saharan Africa in 2010, the only one since 2007 and the first Eurobond from an east African issuer, either sovereign or corporate.
Standard Bank Group and HSBC were joint-bookrunners on this debut Eurobond. According to the press release: “The new 5-year Reg S bond was priced to yield 7.125%. This transaction is the inaugural issue under PTA Bank’s new US$ 1 billion EMTN programme and the proceeds will be used to support new trade and project finance lending in Eastern and Southern Africa.. PTA Bank is rated Ba1 by Moodys and BB- by Fitch.” EMTN is defined as a euro medium-term note and is flexible instrument issued continuously rather than in one tranche.
Florian Hartig, Standard Bank Group’s Global Head of Debt Capital Markets, said in the press release: “This is a landmark transaction for Sub Saharan Africa which will have important benefits throughout the region for future sovereign and corporate issuers. The transaction also demonstrates the strength of Standard Bank’s Eurobond distribution platform for Emerging Market issuers together with our expertise in African domestic markets.
“PTA Bank has proven to be a leader among Sub Saharan African bond issuers. Future issuers will benefit substantially from rapidly growing international investor interest in Eurobond issuance from the region.”
The PTA Bank is formally known as the Eastern and Southern African Trade and Development Bank and covers the Preferential Trade Area. It is owned by 19 shareholders, including 17 member states from eastern and southern Africa. The shareholders are: African Development Bank (institutional shareholder), Burundi, China (non-regional shareholder), Comoros, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Malawi, Mauritius, Rwanda, Seychelles, Somalia, Sudan, Tanzania, Uganda, Zambia, and Zimbabwe.
November 9th, 2010 by Tom Minney
Kenya’s Nation Media Group (www.nationmedia.com) has cross-listed its shares at the Rwanda Over-The -Counter (ROTC) market on 2 November. According to a report in New Times (www.newtimes.co.rw), NMG’s Chairman Wilfred Kiboro said the company was offering 157,118,572 ordinary shares to the official list of ROTC. The ordinary shares have a nominal or par value of Rwf 18.40 (US$0.03) each. The regulators, the Capital Markets Authority (CMAC) of Rwanda and the ROTC Market, approved the listing.
The paper quotes Mark Rugenera, the Chairman of Rwanda’s Capital Market Advisory Council (www.cmac.org.rw): “To attract both investors and issuers, fiscal and non-fiscal incentives were approved by Government. The income tax and value added tax were amended to include the tax incentives recommended under the (East African) Common Market Protocol..
Some of these include withholding tax on dividends on listed companies, which is now down to 5% from 15%; tax interest on listed bond with maturity of 3 years is now 5% from 15% and corporate income taxes were reduced to the lower rates ranging from 28% to 20%. All registered collective investments are exempted from taxes.”
Mr Kiboro added that the cross-listing on the ROTC market was mainly to enhance the profile of the company in Rwanda and to recognize the emergence of capital markets growth in Rwanda.
The paper quotes John Rwangombwa, the Minister of Finance and Economic Planning: “The cross-listing of NMG, the most established media house in the region, will help Rwandans mobilize long term savings and propel the integration of regional economies.”
NMG is the second Kenyan company to cross-list shares, following Kenya Commercial Bank in 2009. Its shareholders have also approved cross listings on the Uganda Securities Exchange and the Dar es Salaam Stock Exchange.
October 17th, 2010 by Tom Minney
The African bond market continues to expand, with many countries raising money on world capital markets. They are taking advantage of low global interest rates and many investors turning to African debt, partly fuelled by better economic management in Africa. Yields are near zero in Europe, the U.S. and Japan, and investors are looking to new frontiers.
Africa has massive capital needs to fuel its anticipated long growth run. The temptations to rack up debt again remain. The World Bank estimates that Africa needs to spend $93 billion a year on power, transport and water projects over the next decade to lift growth in the world’s poorest continent.
Bloomberg news agency reports that Nigeria appointed Barclays Capital in October as an adviser for its planned $500 million Eurobond. Zambia plans to raise $1 billion on the back of a planned sovereign credit rating this year.
Other African nations are dusting off plans to sell Eurobonds – bonds issued in an international currency, not the local one – to international investors. Many plans had been shelved in the global financial crisis in late 2008.
Bloomberg quotes Tanzania’s Deputy Finance Minister Omar Yusuf Mzee as saying that Tanzania is returning to work on its bond plan after postponing a sale of $500 million of the securities in 2008.
Angola has been talking for some time about raising $1 billion – $2 bln through international bonds this year. It received a B+ credit rating from Standard & Poor’s and Fitch Ratings in May.
Kenya plans to wait on its planned $500 million sovereign bond as the global recovery is “still uncertain,” according to Geoffrey Mwau, economic secretary in the Finance Ministry reportedly in August.
Sudan is next year to seek investors from the Persian Gulf region for $300 million of Islamic bonds because U.S. economic sanctions have denied the country access to other international markets, central bank Governor Sabir Hassan told the agency in an interview in Khartoum on 6 Sept.
Economic growth for Africa is expected to be more than 5% a year, says Bloomberg, fuelled partly by investment from China and India and partly by its own growing consumer spending. Infrastructure to be upgraded includes obsolete road and rail networks and power generation, where may countries face more power shortages – Bloomberg says that a continent of 1 billion people that has electricity capacity equivalent to Spain.
Bloomberg cites Samir Gadio, an emerging- markets strategist in London at Standard Bank Group Ltd: “The timing is perfect. Global yields are extremely low and that’s pushed a lot of countries to tap international markets. We’ll see good demand for these bonds. There’s just so much excess liquidity across the globe.”
South Africa’s $2 billion bond maturing in March 2020, yielded 3.69% recently (on 11 October), 138 basis points lower than when the securities were sold in June, according to data compiled by Bloomberg. The yield on Ghana’s 8.5% dollar-denominated bonds, due October 2017, has fallen 239 basis points to 5.78% during 2010.
According to the report, David Damiba, managing director in London for Renaissance Asset Managers,says: “It’s a fantastic idea to diversify their sources of funding. It’s important that these countries would want a benchmark bond” so that other assets can be priced appropriately by investors.
Another proponent is Stuart Culverhouse, chief economist of London-based Exotix Ltd., which advises clients on investments in illiquid markets. “Africa is relatively new to investors. After the last 20 to 30 years of really bad news, the past 5 to 6 years have been generally positive. There’s a cash pile just waiting to be invested. African Eurobonds will definitely be well-received.”
Some economic fundamentals have improved in Ghana, Zambia, Nigeria, Tanzania and Uganda. Most of their foreign debt, totaling about $33 billion, was canceled by lenders such as the International Monetary Fund and the U.S. starting in 2000.
Nigeria’s sovereign debt was 15% of gross domestic product in 2009, according to data from the IMF. That compares with 115% in Greece, 77% in Portugal and 116% in Italy. The report cites the IMF’s April 2010 Regional Economic Outlook for Sub-Saharan Africa. as saying in 2009 government debt was 26% of GDP in Zambia, 37% in Tanzania and 60% in Ghana.
Eurobond sellers will have to rein in fiscal deficits and limit any shortfall in their current accounts, to show that they can repay the money.
“It puts the countries on their toes,” said Kofi Wampah, first deputy governor of the central bank of Ghana, which is considering selling its second security in international markets, speaking to Bloomberg in an interview from his office in Accra on 7 Oct: “You have to ensure that your fundamentals are always right.”
September 28th, 2010 by Tom Minney
Kenya’s Central Depository and Settlement Corporation (www.cdsckenya.com) continues to expand outside the borders of Kenya, buoyed from its 2008 triumph with the region’s biggest initial public offer, Safaricom. Recently, Business Daily newspaper (www.businessdailyafrica.com) reported that CDSC has submitted a bid to offer consultancy services for setting up an electronic share depository for the Zimbabwe stock market.
According to the report, the CDSC issued a statement on 21 September, that it had submitted a proposal to the Zimbabwe Securities and Exchange Commission “to provide advisory services” in the intended implementation of an electronic share registry similar to the one introduced in Kenya in 2004.
The statement read: “Such services have been previously provided by CDSC to the Uganda Securities Exchange, and discussions are ongoing for the provision of similar services to the capital market in Rwanda.” CDSC also recently won the tender to provide registrar services for the BRALIRWA Initial Public Offering (IPO) in what will be the first local listing and share offer for Rwanda’s over-the-counter securities market.
CDSC is privately owned by the Capital Markets Challenge Fund (50%), Nairobi Stock Exchange (20%), AKS Nominees (18%), Capital Markets Compensation Fund (7%), Uganda Securities Exchange and the Dar-es-Salaam Stock Exchange (2.5% each).
Chief executive officer Rose Mambo denied recent reports which said the CDSC was experiencing financial difficulties. She said it: “..made a profit in 2009 and maintained a strong financial position… 2008 was a good year boosted by high turnover as a result of the Safaricom IPO, so the reports of a slump are inaccurate.”.
CDSC receives a 0.06% commission on all trading done at the Nairobi Stock Exchange, where market turnover was KSh97.52 billion ($1.2 billion) in 2008 against trades of KSh88.17 billion in 2007, boosted mainly by the Safaricom IPO which pumped Sh50 billion worth of shares in to the market and attracted 750,000 individual applicants. Its revenues (turnover) declined after foreign investors reduce their trading at the NSE in the storm of the global economic crisis.
Ms Mambo was reported as saying CDSC’s income from trade commissions in 2009 was KSh38.1 million (US$473,535), a drop from the 2008 turnover of Sh63.6 million. The regional push is meant to increase its sources of revenues after a 2-year slow-down at the NSE reduced earnings from trading commissions, which is the core revenue source for the company.
The newspaper says the NSE had 1.4 million accounts in the Central Depository System (CDS). In addition, the CDSC also acts as a clearing house for market transactions. The system introduced 6 years ago made it possible to transfer and register securities in electronic format without the necessity of physical certificates. This had an immediate impact of increasing number of shares traded at the bourse from 380 million in 2003 to about 5.8 billion in 2008, according to CDSC data. The company also aims to cut operational costs by substituting paper-based statements for text and e-mail statements.
According to the report, Rwanda also has six more listings in the pipeline.
September 20th, 2010 by Tom Minney
Kenyan venture capital company East Africa Capital Partners Ltd (www.eacp.co.ke) is to begin raising its second fund next year, with a target size of USD250 million, after its success in fully investing $100 million of the first African Technology, Media and Telecommunications (ATMT) fund. The new fund is to focus on information technology, media and real estate.
In an email to African Capital Markets News, EACP chief executive officer Richard Bell says: “We’ve bet on our view that growth in mass market “home entertainment” in the next 10 years in Africa will be what mobile phones were to the last”.
On technology, the plan is to build massive data centres, generate clean energy to power them, and stimulate the creation of an outsourcing cluster in East Africa. We believe that East Africa is set to become Africa’s ICT Hub.
On real estate, Bell says “Africa is the fastest-urbanizing society in the world.
Africa’s emerging consumer class needs massive amounts of housing”. He says Kenya, for example, needs 250,000 homes a year and is only building 30,000. “Amongst other things our real estate strategy aims to make a dent in that supply-side bottleneck.”
Much of EACP’s Fund 1 investments were channelled through Wananchi Group Ltd. (www.wananchi.com), an Internet and cable television company. EACP has a 51% stake through its ATMT I Fund.
Last month (August 2010) Wananchi and Cisco announced a multi-year contract to roll out “triple play” (broadband, multichannel cable television and voice telephony) to 9 countries in East Africa: Kenya, Uganda, Tanzania, Rwanda, Burundi, Malawi, Ethiopia, Sudan and Zambia. According to the press release: “The contract will enable Wananchi to deploy Cisco’s integrated end-to-end network technology solutions, encompassing Cisco’s Borderless Networks, collaboration and data centre virtualization solutions, as their customer base expands and technology advances.”
According to a report on Bloomberg, Bell says: “We have invested in 10 new TV channels,” he said. The sports channel has started operating while the others will go live over the next month. “In Africa, what you have is satellite TV for the elite. What we are introducing is pay TV for the mass market.” The venture Zuku TV (www.zuku.co.ke) was introduced in October 2008.
The penetration of pay TV in developed economies is estimated at 70-80% compared with 20% in emerging markets, he said and expects this to grow fast over the next 5 to 10 years, if the market gets “the right product at the right price,” he said.
Private Investors, Export Development Canada and the US Government’s Overseas Private Investment Corp. (www.opic.gov) have invested a total of $90 million in Wananchi to date, while Emerging Capital Partners LLC (www.ecpinvestments.com), a Washington-based company that owns 49% of Wananchi, has invested $25 million, according to the report.
Bell told African Capital Markets news that ATMT Fund 1 was basically a TMT infrastructure fund. “Even though we have used Wananchi as the conduit for all of our investments from this fund the investments themselves are quite broad and include:
(1) SimbaNet – corporate voice and data business services
(2) Wananchi Telekom – through which we have invested in the undersea fibre-optic cable TEAMS, and a number of terrestrial cables dark fibre leases to create a international and long distance carrier of carriers business.
(3) iSat – a specialist VSAT and satellite business
(4) Zuku Cable – a mass market retail cable TV business that is deploying triple play across all the major towns in East Africa.
(5) Zuku Satellite – a Direct-To-Home (DTH) Satellite TV business
(6) Wananchi Programming – a media and content business that is building initially 10 new TV channels including a sports channel, a general entertainment channel focusing on African content, a documentary channel and 6 new movie channels.