Thursday, December 28, 2006

Benefits of an East African Stock Exchnage

The entire East African region stands to benefit from the establishment of an East African Stock Exchange (EASE). Companies based in countries without stock markets (such as Rwanda, Burundi, Ethiopia, or Southern Sudan) may prefer to list at the mart. It would save these nations the pain of establishing mini-exchanges that take too long to mature.

Wednesday, December 27, 2006

2006 East African Stock Markets Roundup

NSE ends the year as the best performing capital market in East Africa. As the chart shows, the number one position was held by the Uganda Stock Exchange for the most part of the year. But a decline in Kampala’s fourth quarter activity sent it to the second position. The Dar Stock Exchange had a rough season. Its recovering index was negative all year long.

Year 2006 was on overall a remarkable season for East African capital markets. One can easily observe that: (1) more East Africans, especially in Kenya and Uganda, were ushered into stock market investing, (2) companies no longer shied away from raising capital at Nairobi, Dar or Kampala exchanges, and (3) governments started considering sale of parastatals through IPOs.

The year ends with a sweet note to East African investors and companies alike: the trio exchanges could soon merge into an East African Stock Exchange. NSE and USE have agreed on that arrangement, but DSE people are still “thinking.”

“It’s a relief that a company situated, say, along the Nile in Uganda can depend on capital provided by an investor in as far as Lamu in Kenya. However, an old Ujamaa Legacy means that our southern neighbors are being left out (see my comment at Odegle Nyang Investments).

Wednesday, December 13, 2006

Does Anybody Know When KPLC Was Listed ?????

I can't find the IPO date anywhere, even on the company's website.

Tuesday, November 21, 2006

Safaricom IPO Dilemma

The Capital Markets Authority (CMA) requires all companies floating shares for the first time to offload at least 25 percent of their shareholding. But Safaricom owners (the State, Vodafon, and a ‘ghost shareholder’) only want to float 9% of the East Africa’s most profitable company. In that regard, the state is in a tight dilemma. Should it

(a) push CMA to accepting a 9% floatation, or
(b) negate from the IPO altogether, or
(c) let go 25% of Safaricom.

I say they let go 25% of Safaricom. However, some government officials have argued that 25% floatation is too large for the public to swallow. But i bet Kenyans would easily oversubsribe the so-called Mother of All IPOs.

Thursday, November 16, 2006

Is Kenya Up for Grabs?

The government is set to privatize a large number of State Owned Enterprises (SOE), which is making some Kenyans think their country is up for sale. Check out a great discussion on this issue @ Odegle Nyang Investments blog. Well informed comments from Coldtusker, Gathara, Kenyanomics, and the host, Odegle Nyang Investments. Leave your thoughts.

Courtesy of Odegle Nyang Investments.

Monday, November 13, 2006

Bureaucratic Curse

Dr. George Ayittey (a prominent Ghanaian Economist) once wrote that African governments are good at creating bureaucracies. Kenya is a fine example of Dr. Ayittey’s observation. A look at our bureaucracies (what our government calls “Non-Gommercial State Organizations”) reveals how tax payers’ money gets wasted. It also makes me wonder how some of those organizations make Kenyans lives better. Check out the following list of fully operative bureaucracies and ask thyself two questions. What are their roles, and do their posh offices and gas guzzling cars deserve your tax Shillings?

Presidential Commission on Soil Conservation
Presidential Music Commission
Local Authorities Provision Board
Cost Development Authority
Central Agricultural Board
Pests Products Control Board
Radiation Protection Board
Film Censorship Board
NGO Coordination Bureau
Sisal Board of Board (Yes, that’s the name)

(Organizations’ names were borrowed from Privatization of State Corporations and Investments-- 2005 Sessional Paper)

Monday, November 06, 2006

Kenya Leads in Corruption Perception Index (CPI)

Transparency International just released its 2006 Corruption Perception Index (CPI). Once again, Kenya emerges as the most corrupt country in Eastern Africa, ninth in Africa, and twenty first in the world. Kenya’s Anglo Leasing scandal is mentioned as the new form of corruption, “which involves misappropriation of public funds through fraudulent contracts and sophisticated shell companies in Europe and other off-shore jurisdictions”. (See TI’s Press Release) It also emerges that corruption costs Kenya KShs 70 billion annually.

Kibaki’s government should consider incorporating the “Fight Against Corruption” in its Vision 2030. Failure to do so would cost the country over Kshs 1.68 Trillion between 2007 and 2030.

Sunday, November 05, 2006

Jaramogi’s Words of Wisdom

I just read Oginga Oding’s Note Yet Uhuru, a book that could be gathering dust on our politicians’ shelves. It struck me that governance issues, which Jaramogi was addressing 39 years ago are still rife today. The last Chapter, OBSTACLES TO UHURU, reads like an address to today’s breed of politicians. Following are quotations on how Jaramogi's Note Yet Uhuru address our current problems:

On distinctions between pre-independence and post-independence (current) politicians:

“To the early generation of leaders, politics meant struggle, keeping close to the people to maintain their confidence, building unity to overcome the powerful enemy. To the later generation of leaders, politics can mean public standing, handsome salaries, shiny motor cars, and the manipulation of party branch and government office to stay in power because it brings personal advantage” (p 250).

On “Kitchen Cabinets” that have led to economic disasters such as Goldenberg and Anglo Leasing scandals:

“A government by a small circle of leaders could too easily be influenced by forces against the national interest” (p 284).

On overdependence on Western aid and investment;

“If our aid and investment come from one source only we can banish the prospect of pursuing and independent policy, for we will be brought under control by the withholding of aid, or by some other economic pressure”. We must (therefore) break this predominantly Western influence, and develop relations with both east and west” (p 285).

“It would be an insult to our dignity that a foreigner should tell us what is right for us (p 295).

On hawkers’ suppression by the City Council:

"Failure to (let the masses) attain full economic freedom will rob Kenyans their political freedom" (P 285).

Jaramogi’s words of wisdom were written down in 1967 (39 years ago) but nobody listened. Maybe we bloggers could revive Jaramogi’s dream of agitating for accountability in our government and more personal freedom for Kenyans.

Tuesday, October 31, 2006

Kenyans Are “Taxed to Death”

The World Health Organization recently called on several African countries to lower taxes on pharmaceuticals. Among them is our motherland Kenya, the country with the second largest taxes on drugs in Africa, and maybe in the world. This is according to Taxed to Death, a joint study by the American Enterprise Institute and the Brookings Institute.

The study reports that Kenyan taxes on locally manufactured pharmaceuticals stood at 27.8% in 2005. That was Africa’s (and the world’s) second highest taxes, after DRC’s 31.4%. East African Community members faired better that Kenya, with Tanzania taxing its locally manufactured drugs at 26.2%. Ugandan taxes stood at 21%.

Imported pharmaceuticals are the ones that suffer most from the tax man’s noose. The 2005 overall taxes and tariffs charged on imported drugs stood at 37.8 percent in Kenya. Again, Tanzania and Uganda had lower charges; 31.6% in Tanzania and 31% in Uganda.

The study found that high taxes and tariffs led to higher market prices, which reduced ability of the poor to access medicine. As a result of lower taxation, 50-70 percent of Ugandans and Tanzanians are able to easily access and afford medicines, whereas only less than 50% of Kenyans can easily access and afford the same drugs.

Kenya’s high tariffs and taxes have had grave consequences in the fight against HIV/AIDS. Antiretroviral prices have increased to the point that the government has failed to meet its own treatment targets. The National Aids Council is reported to have targeted to provide 45, 000 patients with drugs in 2004, but only afforded to treat 24, 000 patients. That number is just a drop of AIDS patients in desperate need of antiretroviral drugs.

Finance Minister Amos Kimunya should seriously consider revising Kenya’s pharmaceuticals taxation policy. He could argue that every industry needs to pay taxes and all importers pay tariffs. But his arguments would carry little weight considering that (1) tariffs on imported drugs are only 0.058% of the Kenyan government’s annual revenue, and (2) taxes collected from locally made drugs are equivalent to 0.837% of the country’s annual health budget.

Apart from reducing taxes and tariffs, the government should consider eliminating trade barriers that make drugs expensive, such as slow clearance of cargo at the port of Mombasa. All these costs are passed to the already overtaxed consumer.

The government should know that only a healthy Kenya would make Vision 2030 possible. Unhealthy Kenya would only lead to "Vision Kuombaomba From China", the 2030s superpower.

This post is based on Taxed to Death, a study by Roger Bate, Richard Tren. and Jasson Urbach for the AEI-Brookings Joint Centre for Regulatory Study.

Monday, October 30, 2006

Kenya's Digital Newspapers: A Rip Off

This is a follow up to last week’s Kenyanomics post on Why Pay for Internet News. Excellent comments from KBW members like the girl next door and bankelele advised Kenyans abroad to subscribe to The Nation’s digital paper, a replica of the print edition. Taifa Leo and The East African Standard are also available in their digital forms.

Kenyans abroad can now read home newspapers page by page on their computers. But they will have to face unfriendly prices. The Daily Nation readers will have to pay US 75 cents or Kshs 53 for the paper. The Standard readers will pay a modest US 63 cents or KShs 44. Both newspapers sell at KShs 35 in Kenya.

The idea of selling Kenyans abroad digital newspapers is great, but poorly executed. According to a report by the Online Journalism Review magazine, most digital newspapers cost between 75 to 100 percent of their print editions. But that’s not the case with the tenants of I&M Towers and The Nation Centre. The Standard’s digital paper exceeds print edition by 125%, whereas The Nation’s digital paper is selling at 151% above its print edition.

The annual cost of reading The (Digital) Standard stands at USD $216 and USD $273.75 for The Nation. Just for comparison purposes, the annual cost of reading the New York Times digital newspaper is US$ 160 and that of the USA Today, America’s largest newspaper, is US$ 146.

Good luck to the two media houses business plans. But I don’t think Kenyans will be bought into “the great digital newspaper rip-off”. Ama niaje?

Friday, October 27, 2006

Jimnah Mbaru: Africa's Godfather of Investment Banking

Many Kenyans would relate the expression “being in the right place at the right time” with J. J. Kamotho. The Mathioya MP has always been in the right political party at the right time, which has guaranteed him consecutive parliamentary seats in the “Kamotho-hostile” Central Kenya.

No ones talks of Mr. Jimnah Mbaru or—if you would like—the Kenyan Warren Buffet. The gentleman has excelled at investment banking, and has transformed the Nairobi Stock Exchange from an exclusive elite club to a money machine for the masses.

Mr. Mbaru has succeeded at the backdrop of successive problems with Kenya’s political class. For instance, the 1980s saw Moi’s administration takeover Mbaru’s banks in the name of streamlining the banking industry. Those actions were undertaken by non other than Professor George Saitoti, the then Minister of Finance. The disappointed Mbaru kept his cool and concentrated on nurturing Dyer and Blair Stockbrokers LTD. He had just acquired the firm from the Kenya Commercial Bank at a cost of KShs. 400,000. The rest is an epic success story: The little Dyer and Blair Company is now a "billion-shilling" investment banking business.

In 2002 general elections, Mbaru tried to apply his investment banking know-how to bring some common sense to Kenya’s political scene. But who was Mbaru to join Kenya’s well knitted political class? His candidacy was snatched and given to one of their own. That event turned to be a déjà vu all again. The disappointed Mbaru kept his cool and went back to his Dyer and Blair Investment Bank. He soon became the NSE chairman. The bourse has broken several records during his tenure.

Jimnah Mbaru: Africa’s own Godfather of Investment Banking and another reason to Kujivunia kuwa mkenya.

Why Pay for Internet News

Gone are the days when The Nation and the East African Standard provided all internet news for free. The two newspapers have now introduced “prime content news”, which require subscribers to pay an annual 60-US-dollar subscription fee. This has not gone well with people relying on internet-news, especially Kenyans living abroad and the budding investment class. The latter group will now have to pay for The Nation’s Smart Company and Money and the Standard’s Financial Standard.

Disappointed Kenyans should worry no more. After all, Kenya is an emerging market with a well established entrepreneurial culture. As a result, the action taken by The Nation and the Standard has inspired other entrepreneurs to venture into news provision business, some for profit and others for leisure.

This claim is made clear by the number of websites and blogs providing Kenyan news. The number of those offering business news and analysis is by itself uncountable. One of them ( is reporting stocks prices live from the bourse. Newspapers report the same information once in 24 hours.

Economic and political policy blogs such as Bankelele, Kenyan Pundit, Mzalendo, Thinker’s Room, and Kenyanomics have provided portals for meaningful discussions, which cannot be equated with the scanty number of “letters to the editor” published by the two newspapers.

Why pay for “prime content news” while the blogosphere is still free?

Friday, October 13, 2006

Please Control Media, Says Maina Kiai

It is hard to believe that the Kenya National Human Rights Commission (KNHRC) is pushing for more media control. In the following Daily Nation (Oct. 12) article, KNHRC chairman Maina Kiai, is asking the government to block media houses from owning several news outlets, all in the name of making reporting “fair and open”. This group should be reminded that open and fair society cannot be achieved through state control, but through competition of ideas. It is the absence of competition that has resulted to development of "monolithic ownership".

Kiai team calls for controls on media holdings

Story by SAMUEL SIRINGI Publication Date: 10/13/2006

"A State-owned human rights agency has called for the enactment of a law that will limit media ownership. Restrictions on cross-media ownership would ensure public life was reported in a "fair and open manner", says the Kenya National Commission on Human Rights (KNCHR).

In a report to be launched today, the commission, chaired by Mr Maina Kiai, says a media house owning both print and electronic media was not healthy for democracy. Local print media is dominated by two major publishing houses – Nation and Standard – both of which have substantial broadcasting stakes. Royal Media Services, which owns radio, television and a newspaper, is also classified under what the commission calls "emerging sense of monolithic ownership". It proposes: "There is therefore urgent need for regulation of cross-media ownership to guarantee a diversity of information and variety of voices."

The report adds: "It bodes ill for our democracy if Kenyans are expected to make choices based on three sources of information." The Referendum report calls for speeding up of the Media Bill to regulate cross-media ownership. The commission's recommendation is welcome news to the Government, which has been pushing for a law against cross-media ownership despite opposition from industry players.

Last month, Information and Communications permanent secretary Bitange Ndemo said the Cabinet had endorsed a draft media policy. Dr Ndemo said the paper would open the way for tabling in Parliament of a proposed media Bill. But he stated that the Government was not intending to control the operations of the media through the policy. One of the proposals states that "concentration of ownership of print and electronic media in a few hands will be discouraged". At a forum held in Nairobi in May, the media asked the Government to drop the proposal on the matter, saying cross-ownership should be left to market forces rather than be regulated."

Wednesday, August 09, 2006

We Don’t Need 21 Electoral Commissioners

The editorial, “Pact on Poll Body Needed” (DN Aug 9, 2006), echoed Chairman Samwel Kivuitu’s repeated cries: that reforming Kenya’s electoral law is not only necessary but urgent. Among other things, we need to—once and for all—stop political appointments into the Commission. Since the country’s electoral law was legislated in 1963, electoral commissioners have always been political appointees. The reintroduction of multi party politics in 1992 did not help. In fact, things got worse as political parties jostled for positions in the commission. Gradual increase of political interests has catapulted the number of commissioners from nine in 1991 to the current 23, including the Chairman and his deputy.

As a result, Kenya has the world’s largest Electoral Commission in terms of members. No country comes close. For instance, Uganda and Tanzania have seven commissioners each. South Africa has six, whereas Nigeria, which boasts Africa’s largest number of registered voters (58,000), has 12 commissioners. The United States and United Kingdom have six commissioners each. The Democratic Republic of Congo that just held its first elections since independence has eight commissioners. The Election Commission of India—which oversees 670 million votes (60 times more than Kenya)—is administered by four commissioners. One therefore wonders what is so special with Kenya’s 11.6 million votes that it requires a multitude of commissioners to oversee electoral transparency.

Most Kenyans would agree that their bloated electoral body has been a source of unnecessary political confrontations, which can be eliminated by reducing the number of commissioners. A smaller number, say five, would mean fewer positions for political parties to fight about. This would also increase scrutiny of candidates in parliament. Finally, only candidates who are well qualified and untainted by party politics would become Electoral Commissioners.

However, reducing the number of commissioners is by itself a political battle. Chairman Kivuitu has already warned of political problems if ECK’s composition was not molded to reflect the current political environment (DN Aug 8, 2006). Unfortunately, such proposals have been implemented three times before, but without much success. In fact, appointing commissioners to reflect political climate is the cause of all ECK problems.

Consider that in 1992, the commission membership was remolded to portray commitment to multiparty politics. In 1997, the membership was altered through the IPPG to fit political demands of day. The membership structure was also altered in 2003 to include members of the short-lived Rainbow Coalition. And for the fourth time in the fourth multi party elections, Kenyans want to repeat the same mistake knowing very well that it does not work. That should not happen.

Let’s not forget Benjamin Franklin’s wisdom, “The definition of insanity is doing the same thing over and over and expecting different results.” Is that where we are going? I say No, because We Kenyans must not let political winds dictate structures of our civil institutions.

Tuesday, August 08, 2006

Kenya's military budget baffling

I published this article in the Daily Nation (03/01/2006):

Did you know that Kenya is the biggest military spender in East Africa? Our military budget has always dwarfed those of our sister states, Uganda and Tanzania. Moreover, we have been spending more per military personnel than Ethiopia did during its war with Eritrea, Sudan with SPLA and now in Darfur, and Uganda with the LRA.

Interestingly by 1999, Kenya's army of 24,000 personnel was the smallest in the region. This is according to the World Military Expenditures and Arms Transfers, a 2003 study by the United States Department of State. Ethiopia's army of 300,000 personnel was the largest, followed by Sudan's 105,000. Uganda and Tanzania had 50,000 and 35,000 military personnel respectively.

You would expect that our small army and relative peace within our borders would translate to a smaller military budget. But that has never been the case, at least, since 1989 when the US Department of State started collecting East African military expenditure data. In 1999, Kenya spent $8,000 (Sh560,000) for every military personnel. This was more than four times that of Ethiopia (Sh120,000), almost three times that of Uganda (Sh200,000), two and a half times that of Tanzania (Sh244,000), and double that of Sudan (Sh280,000).

Kenya's military budget has since 1999 skyrocketed to significant levels. The above military expenditures indicate that Kenya has surely been spending as if she was at war. However, we have had peace, which makes one wonder how the Department of Defense (DoD) ended up spending Sh150 billion between 1989 and 1999.

The answers are buried in the secrecy surrounding these budgets, which are never disclosed to the public for "security" reasons. Worse still, the Parliament's Defence and Security committee, currently chaired by Embakasi MP David Mwenje, lacks power to scrutinise defence spending.
Doesn't that provide a perfect recipe for fraudulent defence deals? It does. Those who have read John Githongo's dossier would agree that lack of transparency has historically made successive defence budgets a perfect haven for corruption. And that's how Anglo Leasing organisers found their way into our nation's coffers.

While hoping that those named in vague defence contracts will face justice, something has to be done differently: Transparency in defence spending. To achieve that goal, Parliament must grant its Defence and Security committee powers to scrutinise military budgets. Failure to do so would make attempts to protect our sovereignty an illusion.