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Editor’s Note and reconciliation to the South Sudan’s natives, but also to African nation as a whole – who after several months of unrest can now begin to relate and trade cohesively with the young nation. South Sudan (SS) gained independence in July 2011 after 50 es including creating new institutions, diversifying revenue streams and providing basic services to its people. Protracted disagreement on power sharing following an inis exacerbated by the drop in petrol prices which is the main forex earner accounting for 60 per cent of GDP and a looming humanitarian crisis. In parallel SS has entered into negotiations on accession into the EAC. SS, therefore, faces multiple challenges on many fronts. Although the formation of a government of national unity is only happen when peace is more lucrative than war.

What Riek Machar’s return to Juba means for Africa

ment failed to develop any economic alternatives for so many men with guns to shift to a civil independent state. For this to happen, the transitional government must work together with civilian-oriented actors within and outside the governing parties, civil society, the business community and prosperous and peaceful country – that is starving. Only then will the process of building a truly democratic state in South Sudan will be possible. Steve Umidha - Editor

ore than two years after South Sudan’s civil war ensued; its opposition leader Riek Machar landed in Juba – the country’s capital city in April this fort to reconcile the country from months of turmoil. South Sudan, the world’s youngest nation, was born in 2011 to great international fanfare. But shortly after independence, it spiraled into a civil war that killed tens of thousands and displaced more than two million people. Nearly two years of peace negotiations in Ethiopia’s capital, THE AFRICAN BUSINESS FORTUNE

JULY 2016 5

M A G A Z I N E Finance & Admin Michael Wandey

Contents

Managing Editor Steve Umidha Consulting Editor Zack Owuor Staff Writers Brian Tirok Monicah Muema Contributors O. Benard Dan Mganda Olive Gerro Maurice Momanyi Alon Mwesigwa Guy Lawrence Photography Ayub Muiyuro Design & Layout Walter Onditi greatworldimages@gmail. com

Simon Wafubwa Founder and MD. Enwealth

Business Development Paul Arithi Abel Nyakundi Abigael Shon

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6 THE AFRICAN BUSINESS FORTUNE

What next for National Bank of Kenya after Ksh1.2 billion record loss?

Pg21 IRA constitute rules for mergers and acquisitions

Pg19 Focus on Ugandaâ&#x20AC;&#x2122;s cocoa industry

JULY 2016

THE AFRICAN BUSINESS FORTUNE - OPINION

Yoweri Museveni won Uganda’s 2016 Presidential Elections

Losers and Winners in Uganda’s March 2016 election By Alon Mwesigwa

t’s now a numbers game for traders as many of them count the costs and fortunes of an electoral process that came with mixed feelings. The election period, which dominated at least the three quarters to March

it was a time for splashing cash. According to one study by Alliance for Campaign Finance Monitoring (ACFIM), a coalition of CSO activists advocating for increased transparency in the prac-

election campaigns in Uganda, released in January 2016, between November and December 2015 alone, the ruling party NRM spent Sh 27billion, twelve times more than its competitors. The Forum for Democratic Change, the main opposition party, spent Sh 976m. Independent candidate Amama Mbabazi spent Sh 1.3bn. On the whole, some analysts estimate that close to Sh 300bn could have been spent during March election.

This has left some businesses jubilating while others bleeding. We look at the winners and losers. LOSERS Tourism sector From the start of the period, it was always going to be hard for the tourism industry to generate revenues, especially in a country where the police is always in running battles with opposition and activists - fodder for the media. And they were reported and played world over on BBC and CNN. Outlets like the Economist, the Guardian, and New York Times reported extensively what was happening in the country. In Kenya, a satirical report called Kinyanjui Ripota’s Perspective on #UgandaDecides 2016 ran on NTV Kenya to mock Uganda. All this played at the expense of the country’s image, which portrayed Uganda as violent, undemocratic and dangerous to visitors. Speaking to NBS TV days after Museveni was announced Uganda’s president, Amos Wekesa, the director of Great Lakes Safaris, said the election period “was bad

for the industry.” Uganda decides 2016 hash-tag was the sixth most-trending on Twitter between February 18 and 20, but for the wrong reasons. Words like police brutality, dictator, and tear gas were mostly used. This scared people that would have planned to come to the country.

of 2013, tourism earned $1.4bn in foreign exchange. This could have since dropped to below $1bn, according to analysts. Downtown shops The traders in the central business district were not spared the brunt of the elections. The whole of the elections week, shops remained closed as police engaged in running battles with youths who supported the opposition. Police said it was protecting business people in town. However, people never worked. The tensions were high and the would-be shoppers feared to go to town. “We still failed to work because

THE AFRICAN BUSINESS FORTUNE

JULY 2016

THE AFRICAN BUSINESS FORTUNE - OPINION there were no people to sell to,” one trader said. Many businesses in town have a daily turnover of more than Shs 100m, according to some traders. And losing

untenable. The businesses also felt the impact of the return of street vendors. In the lead to the polls, government allowed street vendors back onto the streets in what was seen as a way to lure them to vote NRM. But this came at a cost for some traders, who incurred high operational costs, but were forced to compete for customers with street vendors. Mobile money The mobile money agents and users also lost out. The platform was blocked from the morning of February 18 to 22. For every transaction that takes place, an agent earns a commission from Shs 100 upwards, depending on the amount transacted. One agent in Wandegeya told us she used to work on more than 100 people a day. According to Bank of Uganda, daily transactions worth Shs 80bn go

through mobile money. So for the four days, at least Shs 320bn was not transacted. For the users, the inconvenience was unbearable since the blockade was done without prior warning. There were rumours that telecoms were compensated for the loss, although The Observer couldn’t independently verify this. For agents and users, however, it was certainly bad. Uganda Revenue Authority (URA The Ugandan tax body was one of the losers. For every mobile money transaction, a levy of 10 per cent is collected. Uganda Revenue Authority failed to recover at least Sh 8bn each day that the mobile money system remained oﬀ, an amount more than Sh 5bn government gave the Uganda Tourism Board year. This year the board got Ush 30bn. Yet, as people feared to go town to shop or access other services such as banks, the revenue agency was not working. For every transaction at the bank or receipt issued at a shop in town, there is value added tax charged. For the election week, where business was low in town, there were

ripple eﬀects on taxes collected. Another loss came in the form of a slowdown in investment. For every investment that comes into the country, it is an opportunity for tax. In 2015, according to Bank of Uganda, foreign direct investment into the country dropped by $200m (Shs 682bn) and this was due to the uncertainty surrounding the elections. WINNERS Media of the winners in this election. From radio to television stations to newspapers, the election came with good news in the form of advertising revenue from government, civil society, and some candidates, and the electoral commission relating to the promotion of elections. The Citizens’ Coalition for Electoral Democracy in Uganda (CCEDU) ran constant adverts for people to come out and vote. The EC ran campaigns to sensitize on how to vote. All this meant income for the media

private sector revenue as many companies decided to remain cautious.

The Electoral Commission declares Yoweri Kaguta Museveni elected President of the Republic of Uganda on the presidential elections held on February 18, ...

8 THE AFRICAN BUSINESS FORTUNE

JULY 2016

THE AFRICAN BUSINESS FORTUNE - RETAIL

Uchumi-Supermarkets-chief-executiveJulius-Kipng’etich

By Olive Gerro

enya’s retail supermarket, Uchumi is a brand that evokes pride and patriotism, but over the last few years, the renowned retail ‘powerhouse’ has had a lot of things go against its repute. 2014 show that the retailer was among Kenyan supermarket chains that served the East Africa region while in June of the same year, the company’s assets stood at US$78.8 million with shareholder equity of approximately US$38.4 million. Uchumi began operations in 1975 as a public limited company by three state mercial Development Corporation, Kenya Wine Agencies Limited (KWAL) and Kenya National Trading Corporation. The main objective at the time was to create outlets for the equitable distribution of commodities and to create retail outlets for Kenyan manufactures. A year later after its formation, Uchumi’s shareholders signed a management contract with Standa SPA – an Italian retail supermarket with an aim of raining

Kenyans to run the new enterprise and 16 years later the company listed on the Nairobi Stock Exchange (NSE) in 1992. Uchumi closed down, albeit temporarily, and was placed under receivership in June 2006 after 30 years of operations. Its closure was described as ‘one of the greatest corporate disasters in independent Kenya history’ A government-led rescue plan, however, was initiated and consequently

reopened on 15 July 2006 under interim management and a caretaker administrator. By January 2011, the retail chain had

the Kenya Capital Markets Authority to re-list its shares on the NSE. Approval to re-list at the Nairobi bourse was granted in May 2011 and trading in the shares of Uchumi resumed in May the same year. Uchumi had 24 outlets spread across the country before revelations were made of the retailer having ‘cooked its books of accounts’ three years ago which led to the subsequent closure of Uganda

and Tanzania subsidiaries. Uchumi in the 90’s and early 2000’s was the key player in the retail chain store business but the questions most people are asking is what went wrong for the state owned supermarket now that signs are pointing towards it’s collapsing for the second time

In 2006 the Kenyan government pumped in $ 7.3 million as part of the recovery strategy that at point saw the company place under receivership. Uchumi is so far one of the most successful turnaround stories in the Kenyan business sphere under the leadership of Jonathan Ciano. Even after turning around the retailer to

and in came Julius Kipng’etich – who has been entrusted to return the company into glory days. Ask Uchumi shareholders what they feel about the man at the helm, and you’ll feel the optimism that is still there for a group of individuals who are now demanding a new dawn in the company. One key aspect will be crucial for the revival of Uchumi – Innovation and Online

THE AFRICAN BUSINESS FORTUNE

JULY 2016 9

THE AFRICAN BUSINESS FORTUNE - RETAIL Presence. The way forward for the retailer is to embrace Innovation and Technology. Business world is rapidly changing and Uchumi’s future survival will heavily rely on how much investments the company will aim to pump in its business in terms of innovation and technology in order to remain relevant with the emerging trends. In an interview with a Kenyan journalist the new CEO Kipng’etich expressed hope and desire to steer back the company into shareholders in the last AGM that despite exiting Uganda and Tanzania markets, the trading at the bourse. “It is important that we get Kenya back

by taking good care of our suppliers and creating value for our shareholders before reconsidering regional expansion,” he commented. Under his stewardship, Uchumi will now focus on the 95 per cent of the business that makes money for shareholders and are optimistic that we will achieve this within the shortest time possible.

Uchumi’s board he hinted, will decide what is it they want their company to become? My humble advice is that they need to learn from several technology platforms that have brought shareholder value within a very short period. The Uchumi brand must establish its niche and market itself in order to increase customer numbers that can be leveraged on volume to lower the supply chain costs. Nigeria for instance launched Yudala. ping site, may be its time for Uchumi to follow suite and go online as to their model of doing business, similar attempts by UBER who came into the Kenyan market last year. Some of its competitors are already working towards such a strategy but the headache of maintaining low costs and continuous supply still nags the entire industry. Opportunities lie in online presence something large supermarkets are a kin to. They are known for delaying payments to suppliers but if the burden of inventory

Uchumi-Supermarkets-chief-executive-Julius-Kipng’etich

10 THE AFRICAN BUSINESS FORTUNE JULY 2016

is passed to suppliers in return for prompt payments, it will be a win-win situation for both players and a good strategy for retaining reliable customers.

include: improved product quality since it will attract quality suppliers; discourage carrying of dead inventory; greater

especially the procurement unit which will become irrelevant; and, spurring development of new goods that would create more sustainable jobs. New and leaner competition such as Jumia, an online shopping mall, is emerging with very disruptive products. Uchumi can be the next Jumia or Ali baba.com where Kenyans can trade online

to the traditional way bearing in mind that the likes Nakumatt and Tuskys are really competing to eat up the market and Uchumi might not survive the trend. It’s probably time to go online if Uchumi

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THE AFRICAN BUSINESS FORTUNE - MANUFACTURING

Poor quality products, exports hurting Kenya’s leather sector

By Monica Muema

ontinued exportation of leather products is posing a serious challenge to Kenya’s leather and footwear industry, according to sector players. Kenya’s lack of competitiveness,

products has also been blamed for the low leather production. Robert Nzioka the director of Zingo

products says the government needs to among other issues correct duty and taxation structure to provide a turers and importers alike in order to revitalize the sector. “Leather sector has for a long time received low protection domestically and the government needs to fully implement and correct duty and taxachain position and make the local industry competitive and attractive,” he said.

The government announced last month intentions to ban exportation of leather products in the next three years in order to promote local industry – a move that has been widely applauded but these concerns still stand in the way of the sector’s resurgence.

country’s exports of wet-blue leather is slightly over 50 per cent, while the country’s annual shoe uptake exceeds 35 million pairs, out of which 95 per cent is imported – frustrating eﬀorts to establish a vibrant leather industry capable of competing with interna-

Industry players have welcomed government’s idea to halt exportation of raw hide to meet a domestic shortage and boost manufacturing of leather goods and products if the market is to compete with economies like Ethiopia. In the footwear subsector for instance, where competition is largely domestic and based on price, Kenya’s

market share has also been eroded by imports of new low-cost leather footwear – believed to be originating from China and India, address these issues by putting in place right taxation measures. In Kenya, it can be as much as 30 percent more costly to produce a pair of low-cost men’s leather shoes at ($9.44) compared to ($7.28) in Ethiopia, according to a report by World Bank. Kenya’s tanning industry had about 19 tanneries in the 90’s with a capital investment worth Sh3.8 billion, but this changed after the abolition of ‘export compensation’ scheme and market liberalization, which involved cutting trade tariﬀs on imported leather and footwear, provoking a surge in cheap imports. Nzioka wants the government to set up more cottages and train more locals as well it is to revive the sector. “These concerns need to be addressed and new technologies should be on government’s agenda,” he said.

THE AFRICAN BUSINESS FORTUNE

JULY 2016 13

THE AFRICAN BUSINESS FORTUNE - BANKING

SPECIAL REPORT

What next for National Bank of Kenya after Ksh1.2 billion record loss? By Steve Umidha

he National Bank of Kenya (NBK) had everything ‘moving swiftly’ for its strategic transformation until last year when the government shelved plans to buy shares at the bank and instead ordered an investigation into its activities. Treasury Principal Secretary Kamau Thugge had in June 2015 asked NBK chief executive Munir Sheikh Ahmed to liaise with the Privatisation Commission to conduct fresh due diligence of the bank’s dealings. “This is to advise that at its meeting

held on April 22, 2015, the Cabinet directed a halt to the intended disposal of government shares in NBK until a due diligence is conducted to establish the risks in the process,” Thugge said, in a letter dated May 14, 2015. Among the issues that were to be investigated are details of bank accounts. Ten months to date (April 2016) NBK has reported a full year 2015 loss of Ksh1.2 billion or USD11.9 million, and the bank has blamed bad loans for the poor results that rose towards the end of the year.

The bank made the announcement hours mitted that the bad loans had led to a sharp increase in impairment charges.

Ksh870.7 million the bank recorded a year earlier, which represents a drop of 234.4 per cent attributed which was also blamed bad loans provision, which rose from Ksh525.3 million to Sh3.72 billion.

billion in the nine months to September last year. The listed lender, majority owned by the government through national social security

National Bank of Kenya chairman Mohamed Hassan before the Investments committee 14 THE AFRICAN BUSINESS FORTUNE JULY 2016

THE AFRICAN BUSINESS FORTUNE - BANKING

NBK’s CEO Munir Ahmed at a past event

fund (NSSF) and treasury, said gross non-performing loans jumped 63 per cent to Ksh11.76 billion, laying bare

problems. “The bank’s non-performing loan portfolio increased sharply towards the end of 2015 undoing gain of 3.3 ported by the bank in quarter three of 2015,” the bank said in a statement. Workers, through the National Social Security Fund (NSSF), are the largest shareholders at National Bank with 134.5 million shares or a 48.05 per cent stake. results two days after its chief execuplaced on compulsory leave pending an internal audit. The bank’s regulator Central Bank of Kenya (CBK) welcomed the bold move by the bank’s board that said its actions were meant to strengthen the lender while ensuring its operations continued smoothly.

Over the last six months, two Kenyan lenders, Imperial Bank and Dubai Bank Kenya, were placed under statutory management by the regulator last year, causing central bank Governor Patrick Njoroge to vow to tighten supervision of banks. The NSE-listed lender, which sold oﬀ several assets last year to fund its business, closed the year with total assets worth Sh125.4 billion while its total liabilities stood at Sh114.4 billion. The shocking turn in fortunes for the lender raises questions on the validity of the bank’s books of accounts – coming on the wake of close scrutiny presently being necessitated by the new CBK boss Patrick Njoroge. NBK’s board sent its managing direcmanagers on compulsory leave pending investigations into alleged breach of

corporate governance rules. The bank’s board did not recommend nancial year under review

“The six managers will immediately proceed on leave but will be expected to comply and make key submissions to the internal audit process,” said the board in a statement. The suspension comes at a time the bank is battling claims of mismanagement and a loose credit policy resulting in the ballooning “We have instituted an internal review of

mentioned tenets, the internal audit process shall be independent hence the request by the board for the six managers to proceed on leave,” said the bank’s chairman, Mohamed Hassan. The announcements were made following a series of multi-pronged audits that the Central Bank of Kenya (CBK) and the Capital Markets Authority ordered and which found massive gaps in the bank’s books. The bank had re-appointed Deloitte & Touche as its auditors during the last annual general meeting held in March 2015. The six suspended executives are now expected to present themselves for questioning during the ongoing forensic audit. “The aforementioned actions by the Board

THE AFRICAN BUSINESS FORTUNE

JULY 2016 15

THE AFRICAN BUSINESS FORTUNE - FINANCE are an unequivocal demonstration of our commitment to strict adherence to corporate governance tenets and the various CBK guidelines,” said the bank’s chairman Mohamed Hassan. Observers believe the bank’s woes can be traced back in 2011 when the government lost control of it after NSSF decided to go it alone in decision-making. Then chaired by Adan D. Moham-

government appointees Jennifer Riria, Paul Ngumi and Alfred Juma with Mohammed Hassan (who was later voted as the bank’s chairman), Sylvia Kitonga and Erastus Mwongera. The new catch added to NSSF directors sitting on the bank’s board who included Francis Atwoli (Cotu boss) and then NSSF managing trustee, Alex

bank’s eight voting rights. A few months later the board retired

Reuben Marambii who had taken over in 1998 from John Simba. Marambii steered the bank to declare paid dividends to its shareholders in 2010. In June 2012, Ahmed was tapped from Standard Chartered Bank where he time the National Treasury had no say on who was to head NBK. Ahmed’s brief was to help diversify NBK from consumer lending, which accounted for over 75 per cent of its loan book, to corporate lending, investment banking and insurance to support its growth. Munir was given unfettered powers to

team of top managers who in total earned a salary of Sh9.7 million a month. When he came in he embarked on an expansion programme, rebranding and recruiting new staﬀ – a move that has seen current payroll for the top manage-

16 THE AFRICAN BUSINESS FORTUNE JULY 2016

Sh 1.2 b

NBK reported a full year 2015 loss of Ksh1.2 billion

“

The six managers will immediately proceed on leave but will be expected to comply and make key submissions to the internal audit process - the board ment skyrocket to Sh23 million monthly. The bank has also seen more than 15 top managers leave in the past eight months over what insiders said were diﬀerences with the chief executive. The forensic audit report is however expected to reveal if the ‘deferred’ top managers are in any way responsible for the bank’s decline which led to the record Sh1.2billion loss – only time will tell.

THE AFRICAN BUSINESS FORTUNE - TANZANIA

United States agency suspends USD 472m deal with Tanzania

By Correspondent

nited States development agency opted last month to suspend a $472 million compact with the country – a move that is now likely to aﬀect Tanzania massively. Tanzania’s government must now outline how it will address concerns about democratic inclusivity if it wants to reopen a partnership with the Millennium Challenge Corp (MCC). At its quarterly meeting on March 28, MCC’s board of directors decided to cease “all activities related to the development of a second compact” for assistance. The board pointed to elections in semi-autonomous Zanzibar on March 20 that were “neither inclusive nor representative,” and to concerns the country’s Cybercrimes Act is being “used to limit freedom of expression and association,” according to a statement. A previous vote on the compact in December had been deferred over what the board said were “governance concerns.” “I think we’ve been very clear about what the situation was that led to the suspension,” said Beth Tritter, MCC’s vice president for policy and evaluation. If Tanzania’s government wants to re-enter into partnership with MCC, the country’s government must take the lean, with a plan to address those

“We don’t provide checklists at MCC. We leave it to governments to demonstrate how they’re going to show their commitments to these principles, and so we’ll have to look at what we get from the government of Tanzania,” she said. Tanzania is a major U.S. development partner, with nearly $600 million in assistance from the State Department and U.S. Agency for International Development planned for 2016. tiatives operate in Tanzania, including Power Africa, President Barack Obama’s eﬀort to double access to energy in subSaharan Africa. Tanzania had also been a longtime partner of MCC, signing what was at the time the largest compact in the corporation’s history in February 2008 — nearly $700 million aimed at increasing access to electricity. The new MCC compact that had been under consideration was also expected to support Tanzanian President John Maguin a country that has struggled with consistent access to power and seen economic growth suﬀer as a result. MCC’s scorecard, which evaluates coun-

indicators like “control of corruption,” has been trending in the wrong direction for Tanzania, and in December the agency’s board deferred its vote on Tanzania’s eligibility for a second compact.

18 THE AFRICAN BUSINESS FORTUNE JULY 2016

USD 472M United States Development Agency suspended to Tanzania Tanzania is a major U.S. development partner, with nearly $600 million in assistance from the State Department and U.S. Agency for International Development planned for 2016.

U.S. Ambassador to Tanzania Mark Childress at that time pointed to politically motivated arrests carried out under the auspices of the Cybercrimes Act as a reason for the deferral. MCC’s decision to suspend the partnership is consistent with similar decisions it has made in the past, including with other highsaid Sarah Rose, senior policy analyst at the Center for Global Development and former

The elections in Zanzibar could have provided MCC with a “pivotal event,” on which to base their suspension decision, Rose said. With slower deteriorating governance issues — like worsening corruption or challenges to civil liberties — it can be harder to judge exactly when a red line has been crossed, she added.

THE AFRICAN BUSINESS FORTUNE - UGANDA

Which way for Uganda’s cocoa industry? By Brian Tirok

ocoa is one of Uganda’s leading foreign exchange earners, according to velopment Project (CDP). In comparison to EAC markets in the region as well in the continent, Uganda earns about 85 per cent of the international cocoa market price – for a country that earned year yet it is not among the 12 crops which Uganda is giving priority. As at September 2015, a kilogram of dried

cocoa beans was selling at Shs9, 600 up from Shs6, 000 a year ago. Uganda earns the best of the world market price despite increase in production in the country, compared to other countries like Ivory Coast and Ghana that get one dollar per kilogram. Uganda gets three dollars. Strong performance The 2014/2015 policy statement from Uganda’s ministry of Agriculture shows that cocoa exports more than doubled in

year. This is 9,973 metric tonnes from 4,727 metric tonnes, which is exported

year. This was at the back of a strong performance in the second quarter where 57 per cent of exports were recorded. Earnings from cocoa followed a similar trend, increasing from $9m (Shs30.3b)

THE AFRICAN BUSINESS FORTUNE

JULY 2016 19

THE AFRICAN BUSINESS FORTUNE Income generator While cotton had a decline of 45 per cent in export values despite a 63 per cent increase in export quantities in the same period. Revenue recorded from cotton in the

indicated $3m (Shs10b) a decline from $5.7m (Shs19.2b) recorded the previous year. This makes cocoa the fourth highest revenue generator (nine per cent of total income) behind coﬀee, tourism and tea. While production as of September last year stood at 24,008 metric tonnes, earning an estimated $67.8m (Shs228.4b) in export, Uganda targets $140m (Shs471.8b) by 2020. Data from the CDP indicates that there were 25,000 hectares of both young and mature cocoa as of June 2015. The target is 50,000 hectares by the end of 2020. There are about 38,000 cocoa smallholder farmers in Uganda organized in producer business groups. In Bundibugyo District, for instance, there are 3,000 smallholder farmers organised in 51 producer cooperatives.

20 JULY 2016

There are also 12 cooperatives registered with the Ministry of Trade, Industry and Cooperatives, and the number is growing. Uganda’s cocoa is exported mainly to Switzerland, Malaysia, Sri Lanka and Belgium. Cocoa is becoming a very big and profitable enterprise in the country with the demand for the commodity and its products is increasingly growing internationally mainly in China which is the biggest consumer of cocoa products worldwide. High pricing Despite huge potential in the sector, Uganda still lack we a policy on cocoa despite the CDP having worked on the Issues Paper and the policy proposal. The November 2015 review of the cocoa market published by the International Cocoa Organisation (ICCO) showed the daily price averaged $3,361 (Shs11.3m) per ton, up by $163 (Shs549,310) compared to the average price recorded in the previous month. Uganda has for many years maintained an average $3,182 (Shs10.7m) per tonne. These high price levels have not been seen since the period of the export ban imposed on Ivorian beans four years ago

THE AFRICAN BUSINESS FORTUNE

The new markets in China and other Asian

to the farmer today. This is coupled with the strong option buying interests from traders, which has also contributed to the bullish sentiment within both local and international market. However, experts are worried about credibility of exporters and increased number of cocoa dealers in an unregulated industry. This is a challenge birthed by the government’s trade liberalisation policy allowing any individual to participate in the industry hence compromising quality. Some of the major bottlenecks for the crop are poor quality of cocoa on the market and information gap and the poor road network – partly related to a weak extension system that translates to poor post-harvest handling. Despite oﬀering a good price, international buyers are not very happy with the quality but they continue oﬀering better prices because of the alkalinity and a nice aroma of our cocoa and the bigger size of the bean. Cocoa from other producing regions like Asia and Latin America tend to have a certain level of acidity so they continue buying ours and mixing with the rest.

THE AFRICAN BUSINESS FORTUNE - INSURANCE

IRA constitute rules for mergers and acquisitions By Dan Mganda

nsurance regulator has moved to lay ground rules for anticipated rise in mergers and buyouts in the industry

small insurance providers against anticompetitive behavior. Insurance Regulatory Authority (IRA) has signed a memorandum of understanding with competition watchdog, Competition Authority of Kenya (CAK) to track premium rates charged on insurance products, push for information sharing and reign on players engaging in underhand deals. The authority has stamped its feet on the ground saying it will not back track plans to move the industry towards a risk-based capital (RBC) regime despite concerns by expansion plans and push them to losses. “We are not going to postpone the transition date. Players have a until 2018 to en-

sure they comply with new guidelines,”

Makove. The new regime eﬀective June, requires insurers to hold capital based on risks associated with businesses under their fold to ensure adequate amount of capital is left to support other operations. The impending shift has stocked a lot of activity in the sector as the country’s vestors to boost their capital reserves. IRA said it was expecting more deal makings in the second half of the year when the rules come into play. “We are seeing this as a trend in the future, a lot of movements in consolidation and buy outs will rise on the back of new regulations,” said Makove. Buy out of a 63.3 percent stake in First Assurance by Barclays Africa is latest consolidation recorded in the industry

that would also see the lender injecting additional capital of Sh700 million.

to have a capital of Sh 300 million for life insurance and Sh 15o million for general class. The new cash ratio will be implemented in phased approach over the next three years starting June. CAK said it has initially allocated Sh 5 million that will support research on premium rates charged by diﬀerent providers and addressing challenges of information sharing to introduce a culture of transparency and predictability in the sector. “Huge complains have been lodged on unquestionable conducts with consumers blaming providers for not giving them adequate information on products including pricing,” said CAK Director General, Francis Wangombe. IRA has set next week to begin a review of premium charges on products.

THE AFRICAN BUSINESS FORTUNE

JULY 2016 21

THE AFRICAN BUSINESS FORTUNE - ENERGY

A Mobisol employee presents the solar home system to potential clients at a market in Tanzania.

By Zack Owuor

he entry of Mobisol in Kenya with solar products served an eye opener for most consumers, especially rural dwellers. It revealed that solar can equally generate electricity similar to other energy sources

no pollution, no fuel costs and no risks of fuel price spikes besides being cleaner, reliable and aﬀordable.

Gottschalk, said the solar panel system introduced in the local market is the only

which is expensive and unreliable. “With solar energy your total energy bill can drastically be reduced by using a solar lamp for lighting or a water heater, which is solar powered,” Gottschalk said. According to him, solar power systems can alternatively be installed in your

22 THE AFRICAN BUSINESS FORTUNE JULY 2016

needs. Indeed, ever since Mobisol launched

the uptake has been on the rise and those who live in rural areas say the technology is good and can use the system to do a variety of things including lighting purposes. A month after the launch, Solarcentury – a solar company has announced plans to undertake the installation of three plants at the International Centre for Insect Physiology and Ecology (ICIPE). The company intends to build a $2.5 million (Sh250 million) project – which is the largest solar investment in the country and is expected to generate 1154kWp. Gottschalk said while solar solutions are gaining in popularity among the low-income individuals, the local market does not really carry large solar solu-

tions, strong enough to power large TVs, music stereo systems or even fridges. “The solar panels are designed to handle small and large electricity requirements. It can be used to heat even pools. They can be connected to an electric distribution system or even stand-alone to help you power diﬀerent appliances in the home,” he said.

sell solar panels but one the product has been bought, the company that sells it is not bothered to do a follow up whether it’s working or not working. However, that is where Mobisol Solar Systems comes handy. months’ time, Mobisol’s solar products will be in every part of the country. He says those who cannot buy the product in cash can be installed the gadget once they have down payment. “The remaining amount can be paid

THE AFRICAN BUSINESS FORTUNE - ENERGY slowly until everything is paid. Once it has been installed if its not working, the system has a sim-card which can tell whether it’s working properly or has problems,” he said. He said small-scale solar photovoltaic (PV) systems, typically on rooftops, account for the majority of solar installations, while large-scale PV systems and concentrating solar power (CSP) systems constitute the majority of solar’s overall electricity-generating capacity. The company sells various sizes ranging of solar system from 80 to 200 Watts. The smallest unit can for instance illuminate a medium-sized home with seven LED bulbs, power a radio, charge various mobile phones and run a TV – simultaneously. Gottschalk said the largest system powers multiple lights, consumer appliances such as a laptop/TV, a DC refrigerator and charges up to ten mobile phones parallel. Mobisol also oﬀers a business out of a box feature, which enables entrepreneurial customers to set-up income generating activities such as barbershops as well as phone and solar lantern charging stations. All of Mobisol’s high quality energy efteam based in Germany. Additionally, all dance to ISO9001.

The company currently oﬀsets approximately 20,000t of CO2 per year by replacing fossil fuels, created over 700 permanent jobs across three continents and further boosts local labour markets through in-house training opportunities at ‘Mobisol Akademie’. Director for Renewable Energy Ministry of Energy and Petroleum, Eng Isaac Kiva said the use of solar energy is one way through which the 15,000 MW promised by the Government can be generated. Kiva said currently, the ministry has power purchase agreement with renewable energy operators to encourage development of non-grid projects such as small hydro-power, biomass co-generation and wind energy plants. He said the Government has adopted a system where any excess energy generated from other sources can be fed into the tariﬀ without being lost. He added that apart from generating the required energy, the ministry intends to introduce net metering once the Energy Bill which is in its second reading stage in to law. He said 2.4MW capacity has been installed in public primary schools at the cost of Sh3 billion to boost school con-

the Government plans to do additional installations in a further 100 institutions, as well as undertake maintenance

in 200 institutions which were done in early years,” he said. Mobisol runs business in both Tanzania and Rwanda. “The system not only

system but can also power hair-cutters and hair-straighteners simultaneously, while entertaining their barbershop customers with music stereos,” he said. The company target rural folk Kenyans. He said Mobisol delivers and services high quality solar systems in four different sizes ranging from 80 to 200 watts peak for private households and small businesses. Mobisol continues its success story from Tanzania and Rwanda, where the company already has installed over 40,000 solar systems, hence provided more than 4MW of decentralized solar electricity to rural areas, leading the contribution of all East African off-grid players. All Mobisol solar systems can be paid for through convenient payment plans via leading mobile money providers, allowing low-income Kenyans to purchase a high quality solar system at a very affordable and competitive price. Additionally, Mobisol customers enjoy a standard three-year warranty and a comprehensive service plan including 24/7 customer care, remote monitoring and free maintenance within 48 hours.

Mobison staff installing a sollar panel THE AFRICAN BUSINESS FORTUNE

JULY 2016 23

THE AFRICAN BUSINESS FORTUNE - REAL ESTATE

Kenya’s residential property market shifting to multi-unit housing By Olive Gerro

ousing prices in the Kenya’s residential real estate market stabilized late last year – signaling a sharp rise in demand for apartment units. On the other hand costs of land have skyrocketed in equal measure. According to the latest housing price index by Kenya Bankers’ Association (KBA), released in January this year, average housing prices edged up by

just 1.14per cent in the last three months of 2015. This marked the third consecutive quarter with a less than 2 percent period-on-period increase. While average housing prices have declined, land prices in the capital (Nairobi)

last decade. Prices in Nairobi have risen

costs in the city up 9 per cent in 2015. Upper Hill area of Nairobi had the most

24 THE AFRICAN BUSINESS FORTUNE JULY 2016

expensive land in 2015, averaging around Sh206.2m ($2m) per hectare, land prices in outlying areas, such as Kitisuru, Loresho and Gigiri, increased at the fastest pace. A survey done by housing consultancy HassConsult, found that land prices in Nairobi’s satellite communities rose by around 11.9 per cent last year, almost three percentage points ahead of comparable acreage in the city centre. In Kiserian, a satellite community south-

THE AFRICAN BUSINESS FORTUNE - REAL ESTATE

west of central Nairobi, land prices rose by more than 25 per cent over the period. “With the devolution plan driving infrastructure development in cant prospects for further real estate sector growth,” Charles Odere, chairman and CEO of real estate company RE/MAX Kenya. New shift gun to change the shape of Kenya’s property market, prompting a shift away from standalone houses and towards multi-unit buildings. The KBA noted that apartments, which saw relatively higher price movements last year, accounted for more than 90 per cent of the units oﬀered in the fourth quarter, followed by maisonettes (5.8per cent) and bungalows (1.41 per cent). petite and relative aﬀordability for apartments by an apparently growing middle class,” the report said. Developers are increasingly building up rather than out, as they seek to maximize returns against a backdrop of limited urban space. “We are seeing a lot of lending for housing being channeled to residential projects in the outskirts of major hubs like Nairobi. Lending for commercial development of multi-unit housing is particularly director of research and policy. Appetite for new multi-unit housing saw the value of approved residential building plans climb by 11.2 per cent in 2015, according to another data by the Nairobi Directorate of Planning, Compliance and

Just over 60 per cent of the approved building plans were for residential developments in and around the capital, for a total value of Sh147bn ($1.5bn).

Enforcement. Just over 60 per cent of the approved building plans were for residential developments in and around the capital, for a total value of Sh147bn ($1.5bn). Investment in non-residential developments, meanwhile, declined marginally, falling by less than 1per cent to Sh95.18bn ($936.5m).

Despite continued investment in boosting residential housing stocks, Kenya continues to experience a Although 50,000 new residential units are added to housing stocks annually, national demand for new housing runs at around 250,000 units per year, Jacob Kaimenyi, cabinet secretary in the Ministry of Land, Housing and Urban Development, told media earlier this year. In early February the government announced plans to provide

incentives to the private sector to help bridge this 200,000-unit gap, which mainly exists at the lower end of the housing market. Among the incentives proposed is the provision of serviced land to nancing and legislative reforms of land-related laws. A national hous-

low-cost housing is also being considered, Kaimenyi said. “Financing remains very costly in Kenya, not just for buyers but for developers as well,” Chetan Hayer, director of real estate developer Nirbhau Group, told OBG. “In addition to these kinds of incentive programmes, we need to reform the way that mortgages are structured to ensure funding can be released during construction, not just when properties are completed.” The government will be looking for these incentives to encourage some developers to shift their focus towards mass housing schemes and entry-level residential projects. Such projects could become more attractive to the private sector, particularly if demand and sale prices in the middle-to-high end of the residential sector continue to stall.

THE AFRICAN BUSINESS FORTUNE

JULY 2016 25

THE AFRICAN BUSINESS FORTUNE - COVER STORY

Everything seems impossible until it is done: The story of Enwealth By Steve Umidha

Enwealth Board Chairman Nelson Kuria right the companys MD Simon Wafubwa and Retirement Bene its Authority CEO Edward Odundo after unveiling the new logo

einvention is a panic move for some ventures but for Enwealth, it is part of the normal course of business. Successfully starting one of the country’s leading independent Pension Fund, Administration and Consulting irm with relatively little startup capital made it easy for Simon Wafubwa to take another big bold step for his next entrepreneurial trip – rebranding his irm Liberty Pension Services to a new beguiling phrase, Enwealth. The irm launched in 2011 from its subterranean beginnings and multiple strategic pivots as a solidly entrenched inancial services provider. But in a clear case of “taking baby steps,” Mr. Wafubwa and his business partner gambled with the little money they had, and then saw their new startup quickly take off in the 28 THE AFRICAN BUSINESS FORTUNE JULY 2016

initial months of operations. “We started out with little money but made quick businesses in succession, Sh 600,000 in the irst month and Sh720, 000 in the second,” says Wafubwa, the founder and Managing Director of Enwealth Financial Services Ltd. “Nothing forces you to make better and faster decisions, because you feel the pain of every mistake acutely. You’re more apt to respond quickly to what works and what doesn’t when you don’t have a lot of money,” he opens up during an interview in his of ice on Ngong road, Nairobi. Enwealth is a business venture whose founders used their resourcefulness, hard work and resilience to

create a multimillion-dollar enterprise, now over Sh40billion and already serving more than 100 corporate customers in Kenya, ive years later.

“One of our mantras is, Enriching Lives through innovative social security inancial services. “Despite our history, we’ve been careful not to grow by pursuing every new concept that comes along as tempting as that can be

“We gave it everything while starting out, we saw an existing gap and were determined to bridge it even though we

THE AFRICAN BUSINESS FORTUNE - COVER STORY

knew we were introducing to the market a new brand that was not guaranteed immediate success,” says the father of two. Wafubwa says it was an unexpected resignation from a well-paying local job that left him at a crossroads, “Work for someone again or do something myself.” He chose the latter, spending Sh300, 000 from his savings to begin the long torturous journey ahead.

“One of our mantras is, Enriching Lives through innovative social security inancial services.

“We bought our irst furniture in Mutindwa at Sh6, 000 and a few other seats upon getting an of ice which we were paying Sh35, 000 as monthly rent,” says Wafubwa.

For a while the venture generated enough revenue to sustain itself and put food on the table, he says. But within ive months, amid rapidly growing competition, Mr. Wafubwa made another major stride; he acquired an operating licence from Retirement Bene its Authority (RBA) – the industry’s regulator at a cost of Sh10million and later marshaled his team to a successful rebrand exercise. “The re-brand has nothing to do with the name but rather as part of a growth strategy to boost our market share from 5to 20 percent to tap the SME market,” he says. The soft spoken 38-year old maintains a resolve to grow his business methodically. Restraint, he tells me, has served him well. He didn’t even hire administrative assistant or personal assistant (PA) until he’d been in business long enough to begin contracting professional services. “Those were the days when you were the PA to yourself, of ice messenger,

administrator and your own manager,” he recounts wistfully. Focus has also been fundamental to Enwealth’s ascent. “One of our mantras is, Enriching Lives through innovative social security inancial services. “Despite our history, we’ve been careful not to grow by pursuing every new concept that comes along as tempting as that can be by becoming laser-focused on what we do best, the ability to provide a service built on expertise and responsiveness to clients’ needs,” he says. The company further seeks to grow its regional outreach with a more comprehensive product offering that includes the postretirement healthcare funds for retirees and a diaspora pension scheme for retirees while leveraging on technology. The takeaway is that lack of money won’t keep a good business idea; at least one that has been executed well from succeeding and the journey of Enwealth is a true testament to that.

THE AFRICAN BUSINESS FORTUNE

JULY 2016 29

THE AFRICAN BUSINESS FORTUNE -COVER STORY

About Simon Wafubwa: -Age 38 years -An MBA holder actuarial science, part-time lecturer at College of Insurance, has over 15years experience in pension business with practice stints in Nigeria and Tanzania -Council member ARBS -Married with two kids

About Enwealth:

â&#x20AC;&#x201C;Started in 2011 with just Sh300, 000 capital -Deals in Pension, Insurance, Property and Training (retirement planning) -Set up its board in the 6th month consisting of 5 members has 23 permanent staff -Presently managing a fund valued at over Sh40billion and growing. 30 THE AFRICAN BUSINESS FORTUNE JULY 2016

Mayur Velji Shah

THE AFRICAN BUSINESS FORTUNE - TOURISM

Safari Park Hotel on Winding Haven, your ultimate luxury Get - away By Steve Umidha

esigned as a luxurious get-away for those who never need ask, “How much?” the Safari Park Hotel on Winding Bay is located along the modern Thika Superhighway – is for those looking to unwind in a place where man’s hand does not intrude on what nature has created. Traditionally, hotels are the best travel retreat – classy, cozy and often expensive. Luckily, there are many ways to score great deals on hotels for your trip in Nairobi.

Today we’ll dive into some favorite hotel excursion to save you time and whole lot of shillings. This hotel makes a perfect base for a get-away, so quaint are its chalets – warm honey-grey, gentle and welcom-

might expect to see in most city hotels. Completing the scene, are a bunting festooned village halls – a renowned

escape away from ‘home.’ The entrance of Safari Park Hotel (SPH) feels olde worlde, squeaky dark wood doors which lead to a passage with exceedingly cozy-looking bar that instantly tempts me into ordering whisky (I love whisky), and there is a reception desk tucked away where I hotel. Surrounded by 50 acres of beautiful grounds, SPH combines the elegance of African architecture with a leading edge of technology. Located just 15 minutes from the city center, this facility with 168 luxury rooms and 36 deluxe suites oﬀers tranquility and serenity away from the city’s Topsyturvy goings-on. The suites have special features

made up of hand carved four-poster beds, en-suite bathrooms and large garden-view verandahs. It is a fusion of international sophistication, safari style, theme park fun and cultural creativity. Though the bar hits the spot, with

wood panels, pews, and ports chalked up on a blackboard, the dining room is a little-old fashioned which makes it very charismatic.

restaurants offering African, Chinese, Italian, Japanese and Continental cuisine. Nightlife at the hotel includes the Cats Club, with its hot disco music as well as the soothing atmosphere of the contemporary piano bar – the Hemingways, Kigwa or Casino bars all offer variety in ambiance. Within the hotel grounds lies the glitz and glamour of the Casino Paradise and spills of King Solomon’s mines where 106 slot machine offer jackpots paying out up to one million shillings. There is also a fully equipped health steam room, professional gymnasium and an aerobic studio.

THETHE AFRICAN AFRICAN BUSINESS BUSINESS FORTUNE FORTUNE MAY - JUNE JULY 2016 201631 31

THE AFRICAN BUSINESS FORTUNE - TOURISM

Kenya’s tourism industry looking up By Monica Muema

he number of tourist arrivals in the country has increased by 18 per cent since the start of the year as industry players ramp up promotions to make up for falling numbers from traditional source markets in Europe. Cabinet Secretary for Tourism Najib Balala said last month that the industry is further projecting a growth of between 20 per cent and 30 percent increase in the summer season, renewing hopes of the sector’s recovery this year. “We have been seeing growth since the start of the year and we are already projecting a further increase in the summer season of between 20 per cent and 30 per cent,” said Balala during an InterMinisterial Tourism Stakeholder’s Forum in Nairobi. The industry had been held back in the last three years, mainly due to terror attacks and travel advisories which led to a sharp dip in tourist arrivals. Tourists arriving at the two main airports namely, Jomo Kenyatta International Airport and Moi International Airport dropped by 13 per cent to 748, 771 last year, a sharp contrast of 1.26 million tourist arrivals registered in 2012, the best year for the industry. The industry recorded Sh87billion in earnings in 2015. Balala said the ministry in collaboration with its marketing arm Kenya Tourism Board (KTB) will now embark on the implementation of seven key resolutions reached during a roundtable meet-

impacting the sector and recommended mitigating measures. Key among the resolutions include pricing of tourism products and services, a review of open sky policy as well as setting up a taskforce to look into security threats and will be done in collaboration with Inspector of police and representation of the private sector. “A team to monitor levels of travel advisories will also be constituted to constantly advise the government on their tonality and to necessitate government proactive engagement with foreign embassies on necessary action,” he said. Also on the cards include a plan to persuade Kenya Airways and the Tourism Industry have an ‘interface’ that will

32 THE AFRICAN BUSINESS FORTUNE JULY 2016

Cabinet Secretary for Tourism Najib Balala Jump Off a Plane Flying 11,000 Feet High

see the national carrier put in place incentives in order to open up other hubs in the region in an eﬀort to boost tourist numbers. “Recovery does not happen overnight, we have a two-year plan which shall be evaluated upon its completion to see the progress we have made. KQ also need to do a lot to get the support from the coun-

try,” said the CS. Meanwhile the CS has expressed con-

covery fund initially declined by the treasury, expected to be used in marketing Kenya as a tourism destination.

THE AFRICAN BUSINESS FORTUNE - TELEPHONY

Huawei targets FoneXpress to boost customer base in Kenya

By Monica Muema

uawei Technologies has signed a partnership deal with leading mobile phones retailer FoneExpress in a retail expansion plan aimed at increasing its coverage and market share in the local market. The deal is part of a wider plan that will see the devices giant expand its retail and reseller businesses to cover the whole country. Speaking during the signing of the partnership deal, General Manager, Huawei Devices Kenya Mark Hemaobin said the deal will enable the company to reach out to middle level and premium customers hence boost the market share across over 100 shops countrywide. Huawei is keen to providing quality and aﬀordable smartphones to as many Kenyans as possible. For us to meet our business goals and also increase our lo-

cal smartphone market share from the current 13 to over 25 percent this year, partnerships like this will be key for us,” he said. As part of the deal, Huawei devices will be selling in all FoneExpress in Nakumatt, as well as Tuscom in Tuskys, Naivakom in Naivas, and PhoneLink in Major shopping malls and retail outlets across the country. FoneXpress Service Director, Brenda Okwiri said the partnership will enable the company to bring Huawei devices to its customers in the region, as yet another choice in the company’s portfolio of International Brands in a vibrant mobile device industry. She said. “This initiative is part of our commitment to oﬀer customers a wider variety of original smartphone brands, and serves as an endorsement

of the Huawei brand and product range. We will work closely with the Huawei team to oﬀer our customers’ valuefor-money and essential after-sales support that will also be mirrored on the back-end as a dedicated newly appointed Authorized Service Centre.” Currently, Huawei Device Kenya is selling devices through business to business partners like Safaricom, Airand will be looking to set up additional shops in key towns in Kenya this year. The new business strategy will also see company sign up more resellers and retail partners throughout the

Huawei devices are readily available to existing and potential customers.

THE AFRICAN BUSINESS FORTUNE

JULY 2016 33

THE AFRICAN BUSINESS FORTUNE - CORPORATE

INTRODUCTION Kenya Police Sacco society was registered on 20 th November 1972 under the Cooperative Societies Act Cap 490 of the laws of Kenya and started operating in June 1973.

Our mission is to facilitate the mobilization of savings & provision of cost effective inancial and non-financial products and services to our members and customers in Kenya and beyond. Our overall vision is to be a Sacco that empowers members for improved quality of life.” Our motto “United for prosperity”

WHO CAN JOIN KENYA POLICE SACCO?

A person of either gender and is 18 years and above is eligible for membership if in satisfaction of the following requirements:1. 2. 3. 4. 5.

Is an active and regular administration or retired police of icer. Is a civilian in the employment of the Kenya Police SACCO Society Ltd All salaried employees working in any registered company in Kenya. The Business community, where applicable. Is a child or spouse of either 1, 2, 3 or 4 above

KENYA POLICE SA CCO PRODUCTS AND SEVICES FOSA Credit P roducts 1.

2. 3.

4. 5.

Emerency Loan 3 times members’ deposits. 12 months maximum repayment period. Interest rate of 1.125% p.m on reducung balance. School fees L oan 3 times members’ deposits. 12 months maximum repayment period. Interest rates of 1.125% p.m on reducung balance. Normal L oan 3 times members’ deposits. 48 months maximum repayment period. Interest rate of 1.125% p.m on reducung balance. Asset Financing L oan 3 times members’ deposits. 24 months maximum repayment period. Interest rate of 1.125% p.m on reducung balance. Super Loan 3 times members’ deposits. 60 months maximum repayment period. Interest rates of 1.25% per month Muslim L oan 2 times members’ deposits. 12 to 48 months maximum repayment period 2.5% commission on the approved amount to be charged upfront. Guarantors required Has no Interest

THE AFRICAN BUSINESS FORTUNE - CORPORATE FOSA Credit P roducts 1. 2. 3.

Salary Advance Maximum repayment period of 3 months. Interest rate of 2% of p.m Fosa Flex Maximum repayment period of 6 months. Interest rate of 3% p.m on reducung balance. Fosa Golden Maximum repayment period of 9 months. Interest rate of 4% p.m on reducung balance. 2 guarantors required.

FOSA Accounts 1.

3. 4.

Junior Account . Available to members children below 18 years. Minimum balance KES 500 Free withdrawals with bankers cheque for school fees. Interest earning threshhold is KES 2,000 Interest rate of 4% p.a Holiday Account Available to all members. Account holders make deposits into this account for a minimum period of 12 months before any withdrawal can be done. Interest rate of 4% p.a Group/Corporate Account The account does not attract a periodic ledger fee. No issuance of ATM card and M-Sacco link. Fixed Deposit Account Available to all members. Fixed savings with flexible terms for a minimum period of 3 months to 12 months. Competitive Interest rates of upto a maximum of 12% p.a Withdrawal upon maturity of contract.

BENEFITS OF PROCESSING Y OUR SALARY THROUGH YOUR

FOSA ACCOUNT

You automatically can apply for all FOSA loans. You qualify to place standing orders for monthly payments. You automatically qualify for dividend advance.

KENYA POLIC E SACCO VISA BRANDED

ATM CARD

The card is issued to all Fosa account holders. Members can access their accounts at the SACCO from any visa branded Automated Teller Machine [ATM] links. You can use the card to purchase goods and pay off bills at merchants point of sale terminals e.g Uchumi, Nakumatt, Bata shops, fuel stations, hospital bills etc.

OTHER VALUE ADDED SERVICES M-Sacco Mobile Banking

Free registration

Ready money at your comfort

M-pesa

Pay Bill No. 169500

Loan Clearance on behalf of the members

The SACCO clears outstanding loans on members payslips & bank loans to enable them to get a bigger loan. Enables a member to boost their deposits inorder to qualify for a bigger loan

Deposit using your M-pesa to any SACCO accoint anytime

Deposit Boosting

10% commission is charged on the cleared amount.

10% commission is charged on the amount advanced

Kenya Police Investment Cooperative [KPIC] is a wholly owned subsidiary of Kenya Police Sacco Society Ltd. It was registered on 12th May-2014, the 1st Annual delegates meeting was held on 03rd June -2014 at the Sarova Panafric Hotel, Nairobi.

The objectives of this investment is to mobilize resources to members to enable them venture into real estate market i.e. buying land, house & home ownership etc.

The membership is limited to Kenya Police SACCO society Ltd members. They can join by irst filling the membership application form; the form can be found in our website www.policesacco.com

The registration fee is KES 2,000 and the share capital is KES 20,000. Members can pay cash or make monthly contributions through standing order from their bank or by deductions from the pay-slip. CALL OR VISIT US AT OUR OFFICES â&#x20AC;&#x201C; Nairobi

Mombasa Branch

Ngara Road, Off Muranga Road,

Nkuruma Road

Pilot Number: 0709 825 000

Email:info@policesacco.com

Eldoret Branch

Facebook: Kenya Police Sacco

Kirem Plaza, 3rd Floor

P.O Box 51042-00200, Nairobi

Website: www.policesacco.com

Twitter: @Police Sacco

Oriental Building, Ground Floor

Ronald Ngala Street

KENYA POLICE SA CCO SOCIETY LTD: ISO 9001: 2008

CERTIFIED

THE AFRICAN BUSINESS FORTUNE - CONSTRUCTION

National Construction Authority bets on new policy to tame Chinese supremacy …in winning lucrative projects over local contractors By Steve Umidha

ational Construction Authority (NCA) is betting on a new policy aimed at supporting local contractors in challenging for tenders

The Contractor Development Fund Policy and Guarantee Scheme which

“Other than the contractor development fund policy, the authority has also developed a model for acquisition, operationalization and management of construction equipment for training and hire to local contractors,” said David Mathu, manager Research and Business Development at the authority. NCA said recently at a construction industry seminar that the new plan will also seek to defuse competition from Chinese companies that continState’s partiality in awarding lucrative bids to foreign corporations continue to be an issue of concern for local contractors – who are agi-

the government for discriminating against them. Unlike the Kenyan government, China provides their companies with operating capital; credit guarantees and at times negotiates at a governtives Mathu says have seen them contest for multibillion projects over local companies. According to him, the new plan will ‘bring rationality’ in the construction industry and provide similar incentives and competitive advantage for local contractors. -

much lower at between 3 to 4 per cent compared to Kenya’s 17 to 18 per cent. “At least 30 per cent of the monitory value of any project awarded to a foreign contractor should go to locals – this is not happening, but we hope to achieve this through joint ventures or sub-contracting,” he said. Chinese companies have scooped more than half of lucrative tenders roads and bridges and building structures. Some of the mega projects being managed by Chinese contractors include Thika Superhighway (completed), The Standard Gauge Railway project currently under construction at a cost of Sh327billion. China Wu Yi was in May unveiled as the lead contractor for the construction of University of Nairobi’s 22-storey complex valued at Sh2.3billion. ters. China Jiangxi International won in July last year a contract to Hazina Centre- touted to be the tallest building in Nairobi – the company is also responsible for the Sh1.3billion ICPAK Complex along Thika road. whopping cost of Sh6.7billion. NCA has however questioned local contractors’ dedication to work, coupled with unskilled workmanship compared to Chinese projects that are completed a head of schedule and are competitively priced. According a recent research conducted by the construction authority, at least 80 per cent of projects procured by local contractors fall below the authority’s potentials.

THE AFRICAN BUSINESS FORTUNE

JULY 2016 37

THE AFRICAN BUSINESS FORTUNE - ENERGY

Kenya Pipeline unveils new business plans to boost revenue By Staff Writer

enya Pipeline Company (KPC) has unveiled ive key business strategies aimed at boosting the company’s revenue and shareholders’ value. Mr.Joe Sang, the company’s Managing Director, disclosed this in an interview with this writer saying the transformational plan will see the oil giantscale up turnover to over Sh150 billion by the year 2025. “The transformational vision is anchored on ive key Strategic Pillars which will provide the bedrock to propel KPC deliver Vision 2025 whilst supporting Kenya achieve its set goals under Vision 2030,” said Sang. Sang who was con irmed the MD in April this year said that the company would improve its operating margins, work on its reputation and geographic expansion to revitalize the irm’s balance sheet. KPC targets to widen business focus that will see it enter into upstream, midstream and downstream activities of the Oil and Gas industry within the East and Central African region. According to him, KPC will keenly focus on its customers and key stakeholders in strengthening relations as it prepares to rebrand as Africa’s premier Oil and Gas Company. “From now going forward, we are very particular on how we are perceived by our customers and all the other stakeholders in the supply chain. “This explains why we are having more interactive sessions with our customers than ever before. KPC is now more customer-focused and we are going to intensify the interaction between us and our customers. “We have to listen and learn more from each other. This is what strategic governance is all about. Our customers should now know that we have delved into the key issues affecting service delivery at KPC’s terminals with attendant corrective measures to improve the business,”he said. He said that the company will also aim to deliver clean, sustainable, affordable, reliable and secure energy

(Inset) KPC Managing Director Joe Sang

as well as consistent supply of petroleum products in the local and regional markets in the wake of Kenya’s Oil and Gas discoveries. “There’s need to infuse a high sense of ef iciency in the entire ecosystem of the petroleum supply chain and for KPC to deliver on her mandate, we will need industry support. As you may be aware, our sector supports the local economy to the tune of about 40 per cent and therefore what we do will certainly translate to the much needed economic dividends,” he said. Kenya’s oil and gas discoveries are currently undergoing appraisal with more reserves being discovered. The evaluation of the oil quality and quantity is being addressed by relevant authorities to assess the country’s prospects as far as the sub-sector is

38 THE AFRICAN BUSINESS FORTUNE JULY 2016

concerned. The KPC boss con irmed that the company has good will from the Ministry of Energy and Petroleum and was banking on the sector’s policy and regulatory framework to encourage growth of the industry in ensuring that the right environment is in place for the sector to thrive. KPC further said it would address copious challenges that haveimpacted its operations at the regional block. The three critical areas the company is keen to address include its lost market share, fuel adulteration which has seen it lock horns with the neighbouring countries especially Uganda who have raised concerns that the quality of the product they receive is not up to standard, as well as providing a 24-Hour Depot Operations. “This calls for unparalleled ef iciency in our terminals and that is why we are asking the

THE THE AFRICAN AFRICAN BUSINESS BUSINESS FORTUNE FORTUNE - ECONOMY - ENERGY

OMCs to support our new initiative of longer loading hours in our depots. We are now opening our depots at 4am but OMCs are still coming to load at 8am and this is causing unnecessary congestion. This strategy of longer hours is supposed to catalyze more evacuation hence more business for all of us,” he said. About Mr. Joe sang -Accountant by profession and holds BA in Economics, an MBA in Strategy, and a CPA (K). Member of ICPAK -Has over 15 years hands-on experience gained in a variety of senior positions in private and public sector organizations, including being Head of Group Business Performance & Planning at East Africa Breweries Limited; Finance Director at East Africa Maltings ltd, Management

Accountant with Unga Group and Financial Accountant at National Oil Corporation of Kenya (NOCK). KPC’s ongoing pipeline expansion, projects -Kenya Pipeline has invested over Sh 60 billion in infrastructural projects aimed at consolidating its position as a market leader in oil and gas commerce in the region. -One of the major investments that KPC is currently undertaking is the construction of a new 20-inch pipeline to replace the aging 14-inch Mombasa-Nairobi pipeline. -The current Mombasa-Nairobi line is replete with system constraints that cannot meet current demand and so the new 450-kilometre pipeline due to be

completed this year is a Vision 2030 lagship project expected to meet demand for petroleum products until the year 2044. -Since its inception, volumes of product moved in the pipeline has been increasing over the years rising from 800 million litres per year in 1978 to over 5.8 billion litres in 2015 -KPC is also poised to take over KPRL after the Government of Kenya agreed to pay Sh500m owed to India’s Essar Energy effectively acquiring Essar’s 50 per cent stake to the re inery and through KPC, the sate intends to convert the re inery into a storage facility as the country gears up for commercial oil production.

kenya Pipeline Company workers hose down an oil spill in Nairobi, as Corporate Social Responsibility THETHE AFRICAN BUSINESS FORTUNE MAY - JUNE 2016 JULY AFRICAN BUSINESS FORTUNE 201639 39

THE AFRICAN BUSINESS FORTUNE - BANKING

Bliss as Chase Bank resumes operations By Correspondent

hase Bank Limited (In Receivership) resumed operations on Wednesday 27th April in a timely move by the Central Bank of Kenya (CBK) and KCB Bank Kenya that

sector.

The resumption of operations at Chase Bank (IR) gives depositors a renewed sense of hope two weeks after the regulator placed the bank under statutory management.

While assuring customers that their money was safe, Paul Russo the Receiver Manager appointed by KCB said that the bank remained committed to its customers and was keen on retaining its clientele.

“We recognize the fact that our customers have been regrettably inconvenienced over the last two weeks. We thank them for their support and remain deeply committed to our customer service promise.

Chase Bank’s (IR) unparalleled support to the small and medium sectors will continue unabated. We are cognizant of the central role SME’s play in the country’s economic growth and we are keen on living up to our promise as the ‘relationship bank,” said Russo. The Kenya Deposit Insurance Corporation (KDIC) had appointed KCB Bank Kenya as Chase Bank’s (IR) statutory manager. The appointment gives KCB the mandate to undertake all roles and responsibilities of running the bank on behalf of KDIC, the receiver manager, as provided for under the Kenya Deposit Insurance Act 2012. All 57 branches across the country will remain open during the Bank’s normal operating hours while Chase Bank’s (IR) alternative – online and mobile banking - channels will be available. Any new deposits will also be available as soon as they are needed proof of the Bank’s determination to resume normal operations.

40 THE AFRICAN BUSINESS FORTUNE JULY 2016

“We would like to retain as many of our clients as possible. But as earlier announced, customers with a million shillings or less in deposits can access all or part of their money. The bank’s history of exceptional customer service has not changed despite the receivership. If anything, our commitment to our customers has redoubled as we look forward to growing with our customer,” said Russo.

Joshua Oigara, KCB Group’s chief executive said, “We take the appointment as the receiver manager for Chase Bank Limited (IR) as a strong message that the Kenyan banking system has the capacity to oﬀer globally bench-marked but locally relevant solutions to market challenges.” (IR) recovery. CBK and KCB Bank Kenya will ensure that Chase Bank (IR) will have adequate liquidity for its operations. Chase Bank (IR) built a strong brand based on strong customer relationships and a commitment to service excellence. We are determined to regain our clients’ trust,” said Oigara.

THE AFRICAN BUSINESS FORTUNE - TELEPHONY

Kenyan market excites Zuri smartphones

Mr, Vikash Shah , Zuri Ceo (in the middle) Showing one of the phones to members of press(not in the Picture) during the launch of Zuri phones in Kenya.

By Maurice Momanyi

obile manufacturers continue to made inroads into the Kenyan market as a promising market destination. Hong Kong-based Smartphone brand Zuri is the latest player to enter the local market and has already appointed a distributor for its products in East Africa. Zuri Mobile, a digital lifestyle deDESPEC, a regional distributor for IT supplies and consumables, as a distribution partner for its Smartphone products in Kenya, Uganda and Tanzania. In a move aimed at extending its global footprint, Zuri has equally signed an agreement with DESPEC

– which will provide Zuri with a unique opportunity to expand its channel reach within the markets covered by the agreement. The two companies will collaborate closely to increase consumer awareness of the Zuri brand throughout the region. Zuri CEO Vikash Shah noted that demand for smart phones is increasing across East Africa, adding that Zuri was committed to building its presence in the continent in order to compete with established brands. cant growth opportunity for Zuri, with demand for smartphones increasing across the region. able us build strong routes-to-market across Kenya, Tanzania and Uganda. Zuri is fully committed to building its

brand presence in East Africa and DESPEC is the perfect partner to help us achieve this,” he said during the device launch in Nairobi. Zuri has initially launched four Smartphone models in the Kenyan market, all of which are covered in the agreement with DESPEC. The smartphones come with a 1 year warranty, backed by an extensive aftersales network. dence that the brand has a promising future in East Africa. “We are pleased to add Zuri Smartphones to our portfolio and believe that the brand has a bright future in East Africa. Channel partners and consumers are looking for Smartphone brands that stand out from the crowd. We believe the Zuri message, branding and image -- coupled with the quality of the devices will allow us to build strong sales across Kenya, Tanzania and Uganda,” said Ja-

JULY2016 THETHE AFRICAN AFRICAN BUSINESS BUSINESS FORTUNE FORTUNE MAY - JUNE 201641 41

THE AFRICAN BUSINESS FORTUNE - TELEPHONY

mal. The appointment of DESPEC represents the next step in Zuri’s ambitious international expansion plans. It provides Zuri with access to an extensive channel customer base spanning both reseller and retailer channels across the region. The two companies plan to work together for a series of marketing initiatives, branding exercises and social

media campaigns in the coming months to build brand awareness. The entry of Zuri Mobile into the local market leaves mobile device users spoilt for choice on which model to go for. This is however, backed up by the free market environment existing in the country and customers can enjoy the device now available in Kenya. Smartphone users interviewed said they were happy for the new device and welcomed more entries to our market saying they all of-

42 THE AFRICAN BUSINESS FORTUNE JULY 2016

fered a variety of unique features. Some of the models available in the market are C41, C46, C52, and S56. Zuri designs, develops and manufactures Smartphones, tablets and accessories – digital lifestyle devices that are intelligent and intuitive, feature-rich and future-forward. Based in Hong Kong, the company works closely with channel partners around the world to deliver on the brand’s promise of great design, value-for-money and trusted quality.

THE AFRICAN BUSINESS FORTUNE - EAC

EAC adopts code of conduct to guide regional trade By O. Benard

usiness operations within the East African Community (EAC) are set to revamp after the bloc adopted codes of conduct to curb corruption and unethical business behavior within the trading bloc. Denis Karera, chairman of the East African Business Council (EABC), the organ representing the private sector in the bloc, stated that the code of conduct was intended to create a sense of ethical business operations among the business operators in the region. “The code of conduct is necessary because we do business in very unethical ways. We agreed that corruption was a present danger, keeping lots of people outside jobs, key tenders….. people lose not because they have lost, but because they have not carried an envelope for the powers that be,” Karera said. The code is set to complement, rather than replace, individual company’s

codes of ethics and other existing national and international codes, thus entitling companies to ensure that employees understand and comply with the code. By committing to the code, business operators in the region pledge to treat their stakeholders with respect, run their businesses responsibly, are actively involved in promoting integrity and preventing corruption as well as act in compliance with applicable laws and regulations. “We demonstrate our commitment by creating policies, procedures and structures to implement the values and obligations of this code in our companies, and by reporting annually on our implementation of this code,” a part of the code reads. The regulations were adopted at the recently concluded EAC summit in Tanzania, and endorsed after a report of the “baseline assessment and risk mapping of unethical business conduct in the community” was presented by EABC. duct are recognized as an important com-

ponent of self-regulation and acts as a guide for users, providing a point of reference on how to navigate certain situations. EABC business ethics report, which briefs on among other areas, unethical business behavior, ethics management initiatives and factors that contribute to unethical business practices, points out that “bribery to access a service, to avoid a regulation and

problematic factors in doing business in the sociations and employees with associations describing it as a big problem, while chief

problem. Regional projects and trade EAC heads of state endorsed the guiding principles at a time when most countries in the region have kick-started mega projects. For instance, Kenya and Tanzania launched the construction of the Arusha-Tengeru dual carriage way and a by-pass road in Tengeru

President Uhuru Kenyatta and Tanzania’s John Magufuli commenced the $12million

President Paul Kagame launched Kenya National Electronic Single Window System seen as a major boost for regional trade since it will simplify THE AFRICAN BUSINESS FORTUNE

JULY 2016 43

facility, which is part of the ArushaHolili-Taveta road that links northern Tanzania with Taveta in Kenya, and which will reduce by a third the time trucks take to cross the border. It will also reduce the distance between Mombasa and Bunjumbura by 400kilometres. “We want to take our friendship and relations to higher levels by implementing projects that impact positively on the lives of our people,” stated the presidents in a joint statement after a regional summit in Arusha.

of its kind to be commissioned among 15 border facilities under construction across the EAC bloc and South Sudan. Following hot on the heels is a mega deal between Uganda and Tanzania that is set to pave the way for building a pipenian coast. The move strikes a huge blow to Kenya concerns about the Kenyan route, which was an earlier option but that could run near Somalia, a country whose militants have launched attacks on Kenya.

44 THE AFRICAN BUSINESS FORTUNE JULY 2016

“The two countries are planning to build an oil pipeline between Tanga in Tanzania, and Uganda covering a distance of 1,120 km,” the Ugandan presidency said in its statement. While his Tanzanian counterpart John Magufuli expressed that, “the pipeline is projected to employ 15,000 people.” Just like Kenya, Uganda is yet to start oil production but the date of commencing the project has since been postponed due to declining oil prices and pipeline considerations. On the other hand, Kenya is spearheading the development of the multibillion Lamu

US$147b Combined Gross Domestic Product (GDP) of EAC with a population of 145.5million citizens

Port-South Sudan-Ethiopia-Transport (LAPSSET) corridor project which will strengthen her position as a gateway and a transport and logistics hub to the East African sub-region and the Great Lakes region to facilitate trade and regional interconnectivity in Africa. Combined Gross Domestic Product (GDP) of EAC is US$147.5billion, with a population of 145.5million citizens. Kenya has the largest economy, with annual GDP of US$ 32.1 billion which sums up 41 per cent of the bloc’s GDP, while Burundi is the poorest with an average nominal per capita GDP of US$ 180 billion. Common protocols Further, the region’s member states have been focusing on three critical common protocols- common market, customs union, monetary union and lately, common education- to smoothen operations within the bloc. Common market protocol, an ex-

pansion of the bloc’s existing customs union, aims at promoting free movement of labour, capital, goods and services within the region. To adapt to the demands, countries must change their national laws on immigration and customs. Kenya, Rwanda and Burundi have already agreed to waive work permit fees for EAC citizens. In an eﬀort aimed at achieving a single currency, the region’s states are to hartices, policies and standards on statistical information and establish an East African Central Bank. Then recently, the bloc has been focusing on harmonising the education systems in the region’s partner states so as to boost skills, develop knowledge and reduce brain drain. Once a common EAC Higher Education

will be recognised in all partner states both for continuation of studies and in the labour market. “The most important development will be the elimination of the disparity in the national education systems when the EAC will be declared an EACHEA,” stated Prof Mayunga Nkunya, the executive secretary of the InterUniversity Council for East Africa (IUCEA). New state Finally, EAC’s economy is set to rise after it admitted South Sudan as a sixth partner state to the trading bloc. The oil rich country’s admission to the bloc early 2016 will be a game changer as it will immensely improve the energy sector and work force in the region. With corruption estimated to add up to 10 per cent the total cost of doing business globally, and up to 25 per cent the cost of procurement contracts in developing countries, EAC stakeholders are optimistic business operations will be streamlined

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JULY 2016 45

THE AFRICAN BUSINESS FORTUNE - EAC

Looming job losses as EAC states slap ban on ‘mitumba’ The bloc insists it has what it takes to support and bring the textile sector to life By O. Benard 46 THE AFRICAN BUSINESS FORTUNE JULY 2016

inywa Mungai says his life may not be the same again once East African Community partner states effects ban on the importation of secondhand clothes (mitumba). The 30 year-old father of three fears that his, and about 65000 traders’ jobs in Nairobi will be lost if the government makes real the proposal. He has been in the business of selling secondhand khaki trousers for 11 years, having started at age 19 in Muthurwa market, the second largest open-air market in the Kenya’s capital city Mitumba business, he says, employs many youths, majorly those that failed to get formal employment. His business has enabled him support his family over the years, and rakes in between Sh2000 and sh5000 a day. “I have labored all my life to grow this business, I’m so sure my life and that of my family will be greatly affected. Where will the government take us, having in mind that at least 85 percent of traders in Muthurwa market depend on mitumba as their source of livelihood,” he says, adding that the Kenyan populace majorly dependent on these clothing will suffer a great deal. Mungai insists the government should strive at making the market fairly competitive to both parties if it means good for its citizens. “We (traders) have no powers to control the decisions the government feels

is a fair market that will promote equal participation. The government should ensure that local companies produce clothes at an aﬀordable price to enable Kenyans and traders access them at a favorable price,” says Mungai. Eﬀecting the ban EAC summit, the highest organ of the bloc, had last year instructed its council of ministers, which is composed of ministers in charge of East African Affairs, to study ways of supporting the region’s textile and leather industries. the bloc in deciding its approach to the sector, which has been severely chocked by the importation of cheap

Kenya alone imports around 100,000 metric tonnes of second-hand clothes, shoes and accessories a year from Western countries. The region’s heads of state agreed to adopt their minister’s position calling for a ban on importation of used

THE AFRICAN BUSINESS FORTUNE - EAC clothes, shoes and bags, by imposing heavy levies on the imports. While addressing the nation after this year’s Arusha summit, President Uhuru Kenyatta urged traders in the secondhand clothes business to ease out of trade to encourage growth of the local textiles and manufacturing sectors. The president said the move is meant to promote manufacturing and growth of high-value jobs locally while ensuring that the mitumba business goes on without interruption. “Ultimately, it is critical for the mitumba industry to slowly move into the new clothes market, supporting local production and local jobs. This is an important step towards promoting the ‘Buy Kenya, Build Kenya’ initiative,” he said. The message rang negatively to the aggrieved traders, who felt that the initiative aimed at taking away their jobs, prompting the president to host the Association of Mitumba Importers in Kenya (AMIK) in state house so as to iron out the issues. The East African Business Times magazine (EABT) has learnt that the meeting eased tensions, with the president’s assurance that the government will provide competitive alternatives for mitumba traders through adequate supply of quality locally manufactured apparel that will be sourced at competitive prices. The East African Community (EAC) secretariat’s study on the existing installed capacities in the region, both domestic and export manufacturers, pointed out that the region has the capacity to satisfy the market in a three-year phaseout plan. After addressing his ministry’s milestones at the just concluded Jubilee InterMinisterial Public Symposium in Nairobi, Industrialization and Enterprise Development Cabinet Secretary Adan Mohammed disclosed to this publication that the government is working on making Kenya the easiest place of doing business by lowering production costs, improving infrastructure and availing land for investors. “We are aware of the demands required to boost the sector and we are handling the issues cautiously but remarkably. The ministry will continue engaging the private sector and ensure that Kenya tops in ease of doing business so that local products can be aﬀordable,” he said. According to Kenya’s Industrial Transformation program, a publication by the ministry of Industrialization and Enterprise Development that showcases its

“

I have labored all my life to grow this business, I’m so sure my life and that of my family will be greatly affected - Kinyua Mungai

“

100,000MT

Amount in tones of secondhand clothes, shoes and accessories Kenya imports from Western countries a year projects and prospects, Kenya accounts for only 0.4 percent of the US$84 billion American Textiles market despite her advantage over other low-cost countries. Moribund sector Further, statistics from the African Cotton & Textile Industries Federation show that the local textile industry peaked in 1984 with 52 mills producing more than 70,000 bales, and grinders alone employed more than 42,000 people. Currently, the number of mills has reduced to 15, operating at a capacity of between 30 and 45 per cent. Decline of Kenya’s textile industry dates to early 1980s when the liberalization policies spearheaded by the World Bank opened up the local economy to second-hand clothes, and after the collapse of Kenya Cotton Board. Due to their lower costs compared to loclothes, which were largely imported into the country, led to the gradual collapse of the then robust Kisumu Cotton Mills (KICOMI) and Rift Valley Textiles. To speed up investment in the sector, Kenya’s ministry of industrialization is set to develop an integrated textile cluster in Naivasha so as to attract anchor investors and leather clusters in Machakos and two other locations within the country. Already, Uganda had proposed a ban last ment by EAC- on the importation of these second-hand garments, which account for 81 per cent of all clothing purchases in the country. Imports of these clothes are to be phased out by 2019, and the most aﬀected by this move are the many traders who depend on this business.

THE AFRICAN BUSINESS FORTUNE

JULY 2016 47

THE AFRICAN BUSINESS FORTUNE - ENTREPRENEURSHIP

Politician starts Sacco to save his constituents

By Amos Njau Riabai ward MCA Martin Wachira. By Amos Njau

artin Wachira Ngure 35 and a father of three has tasted life, from a grave digger at Langata cemetery to Riabai Ward Member of County Representative (MCA), but he says, he is long way to ful ill his future dream of empowering people of Riabai Ward economically and socially. Wachira an adamant believer of hard work says that, “there is nothing under the sun that you can’t achieve only if you walk with the right people who can show you the right way and motivates you when you are down.” Born and raised in Kiambu County, Wachira experienced varies challenges that forced him to seek various casual jobs immediately he completed his form four education but he had a vision, one day he would stand in front

of great people and narrate his story. “I have done all manner of casual jobs including going for an interview at city mortuary as an attendant, construction, but all these activities offered me a platform to horn my skill in various capacities,” Wachira said. He said that while working for a construction Company at Kitengela, he was appointed as an assistant supervisor a position that equipped him with leadership skills. In 2007 election, Wachira contested but lost narrowly but he didn’t give up as he composed himself and embarked on a well-organized campaign in the last election that he won. He adds that being elected at a tender age of 30 years gave youths a hope, as most of them thought, they can’t be elected without university education but I proved

48 THE AFRICAN BUSINESS FORTUNE JULY 2016

them wrong as i had no university certi icate. “I had no university papers when I was elected but I had faith within myself while God’s favor worked on me, I am currently studying leadership and governance at JKUAT and I am about to graduate soon,” Wachira said. Asked About the projects that he has initiated in his ward, Wachira says that they are countless but there is one out standing project that everyone in Riabai and Kirigiti town is singing all way Kumisa Sacco, a cooperative initiative that helps locals inancially. Wachira says that, his irst year in of ice was characterized with much dif icult as people expected much from him but he could not cater for everyone inancially and thus an idea stroke his mind, to start a saving initiative.

THE AFRICAN BUSINESS FORTUNE - ENTREPRENEURSHIP

Why the word Kumisa? I asked during an interview at his of ice in Kirigiti Market, Wachira said that Kumisa is derived from the word “KUMI” ten shilling, every member is required to contribute a minimum of ten shilling daily which he says is affordable to everyone. Now two years old with a membership of 3000 has accumulated a deposit exceeding 12 million, Wachira (Chairman of the Sacco) says that since the inception of the Sacco that started with barely Ksh 300,000 that he raised himself has changed the lifestyle of locals who save their money and get loans three times of their savings. “The idea of starting Kumisa Sacco started two years ago after realizing that I can’t cater for everyone in my ward inancial need and thus I decided to call a meeting for all youth leaders and they agreed to support the idea,” he said. He adds that the future of the Sacco is to establish the branches in every corner of the Country to ensure Kenyans get the services that they deserve. Wachira further added that the Sacco offers various types of loans to members that include Boaster, Group, Table banking, Asset Finance, Biashara, Jipange Mapema and project inancing loans. He adds that the Sacco offers an interest rate at 1 % monthly and the repayment period differs from one product to product. Wachira said that empowering youths is like empowering the whole society and thus he

and his team are ready to teach them on how to develop the culture of saving using the Saccos’ of their choice. “My wish to my fellow Kenyans especially youths is to start saving whatever little they might have with Sacco’s of their choice,” he said. Benadictor Nduta a vice chairperson said that, they severally hold civil education meeting with members informing them the bene its of working with Sacco ‘over banks. She added that they have done a lot in the society including digging borehole in Gicoco primary school, giving motorbikes to youths while also educating them on how to develop the culture of saving the little cash that they might have instead of wasting them in a drinking den. She further urged the regulatory bodies like KUSCO and SASLA to put in place regulations that prevent rogue inancial institutions defrauding innocent Kenyans Money. She further pointed the need for the national government to be appointing a cabinet secretary who will be responsible for cooperative society matters. “I would like to urge the National government to create a position of a cabinet secretary who will be solely responsible for regulating Saccos ’in an effort to curb the ills in the ministry,” he said.

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THE AFRICAN BUSINESS FORTUNE - LEISURE

Why Morocco beats Kenya as an ideal travel destination

Morrocan Beach

By Rose Njoroge

orocco targets more visitors from Russia, China and West Africa, as instability in nearby countries daunts tourists from traditional European markets. Plans to open new air routes are in top gear. Just last month (March) alone, Moroccan airline, Royal Air Maroc made its

More announcements will be expected from the country’s aviation industry players with regards to launching new routes in the said markets. But what makes Morocco tick over Kenya in terms of tourism numbers? Morocco has the highest international tourist arrivals in the entire continent – Africa. In 2013 for instance the North African nation saw a whopping 10.05 million international tourists visit the country – compared to Kenya’s international tourist arrivals for a similar period of 1.49million. 50 THE AFRICAN BUSINESS FORTUNE JULY 2016

THE AFRICAN BUSINESS FORTUNE - LEISURE

Diani Beach in Mombasa Tourism contributes about 11.9 percent to Kenya’s GDP at US$ 5.65 billion against Morocco’s 19.3 percent (US$

in promoting its culture and historical buildings like the Medina of Fez ( the oldest university in the world build in 1981) being touted as some of the country’s decisive strengths. Of the entire continent’s, Morocco is the most politically stable nation in North Africa – Kenya on the other hand is still battling with the effects of the 2007-2008 post-election violence, tribalism, corruption and constant terror attacks. Terrorism dealt the biggest blow to Kenya’s tourism sector which suffered an 18 per cent drop in tourism numbers in 2013. Although the Eastern country (Kenya) is doing its share in upgrading infrastructure, Morocco has already co’s excellent road and rail infrastructure make for a smooth visit through the country by any tourist. While Kenya’s investment to the tourism sector stands at a low of US$ 673 million, Morocco which comes third in tourism investments spends over US$ 3.7 billion in the sector. In 2014 alone, the number of chain hotel development in the pipeline stood at 29 hotels with Kenya doing little in new constructions. Efforts to renovate government owned hotel by allocating funds for the same have been hit by massive corruption. The renovations that tar-

geted Mombasa Beach Hotel, Ngulia Safari Lodge and Voi Safari Lodge have seen millions of shillings disappear according to Tourism Cabinet Secretary Najib Balala. tor to Morocco’s success in the tourism sector. The country offers a variety of activities in boosting the sector from camel rides in the dessert to hiking the Atlas Mountains. Clean beaches, exotic meals and historical tours are other sightseeing areas. Its strategic location also comes as an advantage with Morocco only 4 to 5 hours away from Europe. Tourists from Spain, which is closest to Morocco, frequent the country in accessing its beautiful beaches. The Moroccan monarchy puts a lot of focus into the tourism sector ensuring that it hits all set targets. In 1999, after the accession of King Mohammed the sixth, the government drew up a new tourism strategy called vision 2010, to increase its tourism numbers to 10 million by 2010. In 2013, Morocco reported Morocco and Kenya however enjoy an almost equal amount of business tourism spending standing at 5th and 6th in Africa respectively. There is a big difference in leisure tourism between the two, with Morocco which comes 3rd in Africa at US$ 12.2 billion compared to Kenya’s US$ 2.6 billion. The two countries suffer from low domestic tourism spending by residents. They are ranked at position 30 and 32

in Africa having domestic tourism standing at 4.5 and 4.4 per cent of total tourism numbers in Morocco and Kenya respectively.

tourism has paid up for Morocco. The sector employs a total of 1.96 million Moroccans, accounting for 17.3 per cent of total employment. In Kenya, tourism employs 10.4 per cent he population standing at 593.8 thousand people. Tourism is the 2nd largest foreign domestic earner in Morocco after the phosphate industry. International tourist spend over US$ 9.7 billion in Morocco in 2014 alone this compared to Kenya’s US$ 2.1 billion injected by tourism. Kenya has however put forward efforts to revamp its tourism sector. Flights by the Royal Air Maroc from Morocco to Kenya will offer an opportunity to channel the over 10 million tourists that visit Morocco into Kenya. The Kenya Tourism Board will work in conjunction with Morocco to market Kenya to its citizenly, in a bid to improve North Africa’s tourist numbers from the current 373,000 annually. Kenya is also offering economic incentives to tourist to beef up its numbers through the Charter Incentive Programme. They are also waiving visa fees for children under 16 and reducing park fees for tourists. However, more still needs to be done if Kenya is going to compete with tourism giants like Morocco, South Africa and Egypt. Kenya needs to beef up its security, clean up its beaches, ensure effective management of ferries and clean up corruption in the tourism sector.

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THE AFRICAN BUSINESS FORTUNE - TECHNOLOGIES

E-payments driving Kenya’s economic growth Electronic payments in kenya contribute USD 70 B to GDP

By Brian Tirok

very day, electronic card transfer payments are initiated by individuals, institutions or companies. The use of card payments be it prepaid, debit or credit card has grown by leaps and bounds in Africa and more particularly Kenya. The Kenyan electronic card market remains in its early stages, but it is growing quickly despite heavy competition from Mobile money services like M-PESA. To capture the untapped market, banks, card issuers and retailers are launching prepaid card variants for instance Kenya’s retail chain, Nakumatt has employed on the same after it launched the Nakumatt Global MasterCard Prepaid card, enabling cash-less technology. Visa Incorporated released a 2016 study conducted by Moody’s Analytics that analyzed the impact of electronic

payments on economic growth across 70 countries between 2011 and 2015. Those countries in the study make up almost 95 per cent of global GDP. The study in the 70 countries found that increased use of electronic payment products added USD 296 billion to GDP, while raising household consumption of goods and services by an average of 0.18 per cent per year. In addition, they estimate that the equivalent to 2.6 million new jobs was

year period as a result of increased use of electronic payments. Mark Zandi, Chief Economist of Moody’s Analytics noted that Electronic payments are a major contributor to consumption, increased production, economic growth and employment creation. “Those countries which saw large increases in card usage also saw larger contributions to overall growth in their economies,” he said

53 THE AFRICAN BUSINESS FORTUNE JULY 2016

Increased electronic payment usage added $70 million (Sh7.1 billion) to Kenya’s GDP from 2011 to 2015, according to the report. Kenya’s GDP elasticity in regard to card penetration is estimated at 0.0047 per cent meaning that a one per cent increase in card usage caused a less than one per cent increase in GDP. This elasticity has grown from 0.0041 creased uptake of e-payment systems. The research also estimated that higher card usage contributed an additional USD 296 billion to consumption between 2011 and 2015 a 0.1 per cent cumulative increase in global GDP during the sample time period. That equals about a USD 74 billion contribution to GDP each year. Real consumption grew at an average of 2.3 per cent in the same period, of which 0.01 percentage point is attributed to increased card penetration. -

THE AFRICAN BUSINESS FORTUNE - TECHNOLOGIES and contributed to a more stable and open business environment. As a result, electronic payments provided a higher potential tax revenue base for governments, while also

cash handling costs, guaranteed paycial inclusion for consumers. The report highlighted that African countries experienced, on average a 0.05 per cent increase in GDP due to increased card penetration. Many African countries are in the early stages with appropriate infrastructure to support electronic payments. In the coming years, the increase in the use of mobile phone technologies to make payments is expected to increase electronic payments penetration. Increased electronic payment usage added US$70,000,000 to Kenya’s GDP from 2011 to 2015. It also highlighted that African countries had the second lowest average number of jobs added per year from increased card usage, which is not surprising given the region’s low

infrastructure to facilitate electronic payments. Real consumption grew at an average of 2.3 percent from 2011 to 2015, of which 0.01 percent is attributable to increased card penetration. This shows that card usage accounted for about 0.4 per cent of growth in consumption. Countries with the largest increases in card usage experienced the biggest contributions in growth and economic performance. Contribution to Employment Increased card usage and electronic payment created the equivalent to an average of 5,330 jobs in Kenya per year between 2011 and 2015. In the 70 countries sampled it created almost 2.6 million jobs on average per year between 2011 and 2015. Both emerging markets and developed countries experienced gains in consumption due to higher card usage. Increased card usage added 0.2 percent to consumption in emerging markets, compared with 0.14 percent in developed countries between 2011 and 2015. were 0.11 per cent for emerging econo-

mies and 0.08 per cent for developed countries, and suggest that all markets, regardless of current card penetration rates, can

to increase in card usage.

Potential Future Growth Across the 70 countries in the study, Moody’s found that each 1 per cent increase in usage of electronic payments could produce, on average, an annual increase of approximately USD104 billion in the consumption of goods and services. Assuming all future factors remain the same, this could result in an annual average increase of 0.04 per cent to a countries GDP attributable to card usage. The study highlights that expanding electronic payments alone will not necessarily increase a country’s prosperity — it requires the support of a well-developed have the greatest impact. The report recommends at a macro-level,

payments, countries must promote policies that minimize unneeded regulation, create a greater consumption.

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our member Outpatient 1. General Consultation 2. Diagnostics and treatment of common ailments 3. Prescribed laboratory and X-ray investigation services 4. Prescribed drugs administration and dispensing 5. Management of chronic ailments (HIV/AIDS, Diabetes, Asthma, hypertension, Cancer) 6. Treatment of sexually transmitted diseases 7. Minor surgical services 8. Family planning/midwifery/ante/post-natal services 9. Referral for specialized services 10. Renal dialysis

Unique features of N.H.I.F Inpatient Cover 1. Family based cover 2. No upper age limit 3. No medical examinations required /pre-existing conditions cover 5. No exclusions apart from cosmetic procedures 6. Over 650 accredited health facilities 7. Widespread branch network for your convenience 8. No deposits required on admission Our comprehensive Inpatient package covers bed , medication, doctorâ&#x20AC;&#x2122;s fee, surgical and other medical procedures in general.

THE AFRICAN BUSINESS FORTUNE - ENERGY

Powering Powering Kenya’s Kenya’s economy economy through solar solar through energy energy

By Guy Lawrence

New buildings going up include county al facilities such as factories and processing plants. The 2016 City Momentum Index (CMI) report by Jones Lang LaSalle points out Kenya’s booming economy as the driving force behind the development of new infrastructure and the country’s booming real estate sector. These activities, according to the report, have enabled Nairobi’s expansion as it registers among the highest levels of

enya continues to experience healthy economic growth due to increased Foreign Direct Investments (FDI), better living standards in the urban areas and more multinationals setting up base in the capital city Nairobi as they seek to penetrate the regional market. The upward trajectory in economy has seen the construction of iconic commercial buildings as investors, local and international, seek to tap into globally at the moment. tage of the robust retail market. This All this new construction amounts to competition in the property market is a fast growing demand for power – with being driven by Nairobi’s status as an the current grid capacity sometimes investment hub for the East and Censtruggles to meet its demand, resulting tral African region. in power rationing or blackouts. Devolution in Kenya has also spurred The interruption to business operamore activity in the construction sector as counties seek to erect mega structures that will positively impact Never in Kenya’s history has the need development in their respective areas. 56 THE AFRICAN BUSINESS FORTUNE JULY 2016

for new energy solutions been more evident than right now. Only 25 per cent of Kenyan population is connected to the national electricity grid, with rural grid access at about 5 per cent. It is also estimated that there is a 300MW electricity shortfall at peak hours (6.30pm to 10.30pm), when most domestic consumers switch on electricity from the country’s total 2,282 MW capacity. Also, much of Kenya’s energy is currently provided by expensive, dirty diesel generators – not good news for the business bottom line, or the environment. To move Kenya away from diesel sources,

government is increasingly looking to renewables as the antidote to Kenya’s power woes. Heat from the earth’s core, the wind, the water, and the sun are all freely available and sustainable – harnessing them can supply an endless source of energy and in Kenya, the long daylight hours make it particularly well suited to solar technology, which

THE AFRICAN BUSINESS FORTUNE - ENERGY

Solarcentury built Africa’s largest solar carport at the Garden City Mall in Nairobi, Kenya. generates electricity even in cloudy conditions. Recognizing this, a growing number of businesses throughout east Africa are installing solar systems to generate solar electricity for powering facilities in buildings such as lights, air con, or machinery. Solar roof systems are particularly well suited to dense urban environments, where land is at a premium, and power demand is high. Solar is ables it to be integrated in innovative ways. A great example is the solar carport that was constructed on the roof of the car park at Garden City Mall in Nairobi last year. There is no better illustration to show how planning at the initial design stage of a new mega structure can easily incorporate solar, which provides a source of electricity to power the building during daylight hours, thereby reducing reliance on

grid energy. Such systems – known as solar hybrid – are dispelling the common perception that solar is the preserve of households and communities with no access to grid energy. In fact, there are examples around the world of structures with solar integrated in clever ways, such is the global opportunity for solar PV. The solar system at Garden City Mall comprises 3,364 solar panels; the structure not only provides 454 parking spaces and 6,000 square meters of car park shade, but also generates 1,450mWh of clean electricity annually, equivalent to powering 550 urban homes in Nairobi every year. By using solar electricity rather than grid energy, the Mall will reduce carbon emissions by around 18,750 tonnes over the lifetime of the solar system. Solar hybrid technology is a highly innovative energy solution that works alongside the power from the grid, and in combination with a diesel generator. During daylight hours, the solar panels

generate solar electricity, and if the grid goes down, the system generates solar electricity alongside the diesel generator. According to MasterCard’s African Cities Growth Index (ACGI) 2015, Nairobi is one of the cities globally with the highest growth potential and it is expected to grow rap-

cial property sector is as robust as ever. It is commendable for new buildings to adopt environmentally friendly technologies, such as solar, in order to generate clean energy which reduces reliance on fossil fuels. If all the shopping centres and buildings with unused roof spaces in Nairobi, and other towns and cities, installed solar, there would be far less need to rely on grid power and diesel energy. The amount of additional solar electricity generated by the panels could help to meet the energy demand of the new and existing businesses, many of whom need a secure, reliable source of energy around the clock.

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WELCOME TO KENYA

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KAA Complex, Jomo Kenyatta, International Airport, Nairobi Tel. +254 020 827470-75, Mobile: +254 728 606 570, Email: info@kcaa.or.ke | Website: www.kcaa.or.ke