Thursday, March 29, 2007

Kenyans Investing Offshore, Beware

NSE’s poor performance has not stopped young Kenyans from venturing into stock market investing. Some are even venturing into several developing countries’ capital markets. This new found adventure can prove to be simultaneously sweet and sour, as it has happened to me in Malawi. It all started in 2002 when I was a first year econ student in college. Investing time had never been sweeter for me: I had just started earning my own cash, NSE was starting to wake up, and a network of African brodas was opening immense investment opportunities. What else could a risk assertive college student could ask for?

I did some research on stocks in Kenya, Ghana and Malawi and immediately started to load-up. Things have worked very well since. But repatriating a slice capital gains from Malawi is nothing but head-ache. I never knew Malawi exercised an exchange rate control policy, which basically means controlling the amount of foreign currency leaving the country. Nobody can buy dollars without reserve (central) bank’s approval, plus there is a limit of $5,000, and you must give a credible reason. The experience has made me appreciate Kenya’s monetary and exchange rate framework, which many bloggers (me included) have been yap-yapping about.

Malawi’s system is so bureaucratic. First, I had to prove to the reserve bank that my capital was sourced from outside Malawi. That meant providing receipts of all money transfers I had ever wired to the South African country since 2002, including sections of my bank statements. Well, I provided the requested paperwork but Malawian bureaucrats could not understand how my “X-dollars” had accumulated to, say, “8X-dollars”. In their mind I was either cheating or stealing from poor Malawians. Other than that capital gains have been sweet, and there still exists under-priced shares in MSE.

Bottomline, know more about a country’s capital, monetary and exchange rate policies before sending your marupurupu there. Don’t let glittering stocks fool you.

Tomorrow: Economic Implications of Foreign Exchange Controls


Tuesday, March 27, 2007

Kengen’s Raw Deal

The decision to split Kengen into two corporations is something to wary about. According to media reports, geothermal plants—which are wholly owned by Kengen—could be transferred to the state.

Here is the problem: The public already owns 30% of Kengen assets. They should subsequently own a third of the yet-to-be-incorporated Geothermal Company. But they might get nothing from the deal.

Yesterday’s Business Daily reported that geothermal sub-sector is worth about Kshs 15 billion. Publicly owned geothermal assets are therefore worth Kshs 4.5 billion, which is what the state want to take from capital markets. That’s another raw deal for Kengen shareholders, who were lied on tariff increase during IPO.

Bottom-line: The state must purchase geothermal’s Kshs 4.5 billion assets from the public or allocate them shares of the same amount in the new company. It is also hypocritical for the state to nationalize part of a company it recently privatized.

Sunday, March 25, 2007

The Mombasa Aftermath


Hongera to athletes who lifted our nation's flag high in Mombasa. Nyinyi ni Wetu!!

Friday, March 23, 2007

How to End Tribal Appointments

The so-called tribalism in government appointments, especially in parastatals, can be eliminated by either privatizing them or making them self dependent. That would make these institutions determine their higher management, instead of the current system where management is (supposedly) determined by the tribe whose son resides at the big house on the hill.

But why should the government run these institutions in the first place? Why should it control sugar companies, supermarkets, banks, airlines, wine agencies, produce marketing boards and other business entities? KIE’s business textbooks taught me that the state (read bureaucrats and politicians) should run businesses too dangerous to be overseen by the private sector. Kenya Railways, Kenya Airways and the Eldoret Bullet Factory were given as examples. I now know that is not true, thanks to economic liberalism and further studies.

Our politicians are worse than high school textbooks when it comes to pushing for less government involvement in public institutions. They would like us believe that state institutions are tools of "ensuring equitable distribution of national resources." According to them, the “equity” includes equal participation of each tribe in the management, an utter nonsense that has historically led to institutional inefficiencies and unnecessary political bickering.

Bottomline, the state has to cease control of business entities and other vital institutions. That's the only way that tribally-influenced-appointments can be brought under control. The best manager runs the show in the private sector, whereas the best tribal-cum-political player is most likely to run the show in public institutions.

This post was inspired by African Affairs’ post on Tribalism: Kenya’s Undoing in the 21st Century.

Tuesday, March 20, 2007

Prospects of the US-Kenya Airline Route

The ongoing expansion of JKIA (Jomo Kenyatta International Airport) will enable the airport receive a Category One status from the United States FAA. This new status will allow airlines to launch direct flights between the US and Nairobi, which would boost the local aviation industry. Odds are that passengers that usually connect through Europe and South Africa will start using JKIA.

After all, it would be more economical for travelers originating from central, east and south east of Africa to fly through Nairobi. The near future could see JKIA becoming a stop-over-port for flights serving South East Asia, Australia, New Zealand, and Indian Ocean islands.

The direct route between East Africa and the USA will be a battleground for domestic and foreign airlines. Kenya Airways, which previously thought it would be the only player, will have to fight it out with tough competitors like Virgin and Ethiopian airlines. One can only hope that the Kenya Airport Authority will grant landing rights to KQ's competitors.

JKIA’s new status could also have a “big-bang” effect on the US-Africa route, which is currently being served by three airlines, i.e., South African, Ethiopian and the US-based Delta Airlines.

Saturday, March 17, 2007

Cricket World Cup in the Caribbean

We are second in our group. Canada and England lost their opening games, whereas New Zealand and Kenya won theirs. Our team has the ability to crash Englishmen next weekend, which could give us better chances at semis. Am not sure whether we can discipline Kiwis. But our team is full of surprises.

And guess what! Kenya is playing England on March 24th, the D-day for Cross Country Championships in Mombasa. Is a double victory possible? I bet it is.

ICC World Cup: Group C


P
W
L
T
N/R
R/R
Pts
1 New Zealand 1 1 0 0 0 0.94 2.0
2 Kenya 1 1 0 0 0 0.71 2.0
3 Canada 1 0 1 0 0 -0.71 0.0
4 England 1 0 1 0 0 -0.94 0.0

Please visit: http://kenyacricket.blogspot.com/ for full analysis.



Wednesday, March 07, 2007

On Bureaucrats and Tribal Politics

Am not amused by Prof. Njuguna's appointment as the new CBK governor. We all know that a fair share of parastatal jobs are reserved for the big man's home boyz. This happened with the colonial government, Kenyatta, Moi and now with the Kibaki administration. Any other president--be it Raila, Mudavadi, Kalonzo, Ngilu, Muiru, Ojiambo, or Ruto will do the same.

That's why the parliament must start approving senior civil servants hirings. But our September House attendees (MPs) are busy politicking on re-elections and on unmet political promises. The most vocal ones ( read "saviors" in ODM) preferred to board the next flight to
London.

Am sure Prof. Njuguna's appointment will soon be a thing of the past, just like the dictatorial appointment of the new ECK board came to pass.

I dare say that not all home boyz are bad boyz. Githongo and Cheserem (not quite sure of him) are examples of home-boyz-gone-wild. But will Professor Njuguna join this group? Only time will tell.

Please let Kenyanomics know of any bureaucrat that did not toe the "T" word line. Was Githongo the first?

Monday, March 05, 2007

"KNEC website exposes candidates to fraudsters"

It’s great that candidates of KNEC exams can access their results online. Graduates with tuition balances will no longer beg for a peek of their results. But the examination council's technological move has compromised on candidates' privacy, given that anybody can access the results online. KNEC should consider assigning passwords to candidates, as the following opinion piece suggests (The Standard, March 06, 2007). I don't think anybody wants his/her Kiswahili D+ to be broadcasted worldwide.

KNEC website exposes candidates to fraudsters


The Kenya National Examinations Council (KNEC) posts results on its website.

This has catapulted the examination and education system to the technological age. But there are ethical issues on the matter.

It is possible to get access to personal candidate’s information — full names, index numbers and examination results. This is gross invasion of privacy.

I am not well versed with privacy and confidentiality law, but I consider this unacceptable. The information will be invaluable to fraudsters who can use it to produce fraudulent certificates.

KNEC should introduce privacy restrictions. To access personal information, a unique identifier known only to the candidate should be given.

Njeri Kagotho, US