Bad Politics to Blame for our Woes

Since independence, Kenya has enjoyed relative calm and many of its 42 tribes co-existed well. This happened against a backdrop of bickering, infighting and politically instigated uprisings accross the continent. Indeed, Kenya has been an island of peace in the sea of political turmoil.

The advent of multiparty democracy in Kenya saw the widening of the democratic space and with it came the increase freedom of expression. The media that had been strangled and gagged for a long time rejuvenated and reemerged with a renewed gusto to delve into issues bedevilling the country in a suscint, blunt and unwavery way.

As the media industry in Kenya grew by leaps and bounds, many became more informed on the goings-on in the political, social, and the business arena. The populace had now become greatly abreast with the issues affecting their lifes many bordering on bad governance, inherent grand corruption and blatant looting of public resource. This unending tirade of grand corruption has its epicenter in the ills of the Kenyatta administration that grabbed massive junks of public land alongside haemorrhaging of public assets and resources.

The unveiling of the Moi administration was seen as a ray of hope and light at the end of the tunnel on issues reform. Many were optimistic and expectant of radical shift in the paradigms that begat our leadership. Sadly however, hardly had the administration sat in office than another sweeping indictment of the administration was revealed. The cases of mega corruption had now been given a thrust and its tentacles now spread far and wide as public officers, cognizant of the public servants code of ethics, defiantly diverted public resources to private use.

The corruption that had eaten into every facet of the Moi administration was epitomized in the Goldenberg scandal that saw the country loose Billions in imports compensation.
Fast forward to 2002 and the political climate was so charged after exit of the hallowed baba Moi. Many including those in his inner circle didnot take kindly his open support of project Uhuru, then an amarteur in politicalspeak. This latter saw a wave of rebellion in government leading to the formation of the Rainbow Coalition and eventually NARC that resounding took power away from the party of the Cockerel-KANU with its project that was no match to the machinery of 'yote yawezekana'.

The unveiling of the Kibaki administration lend credence to the hope of fighting corruption as hundreds of thousands thronged the Uhuru Park to celebrate the resounding victory against the metaphoric Mugumo tree.

Theafter, and in a sudden change of events, the administration was dogged by the Anglo Leasing scam that encaptioned payments to fictitious companies through promissory notes. Sadly therefore, the administration had become an embodiment of corruption that tainted its leadership and the ghost still haunts some of them until today.

The administration oblivious of the resolve of its populace, and the resilience of their will went into the ballot again in 2007 for a second term though some of its members had ditched camp during the referendum to form the Orange Democratic Movement, ODM, that became such a force to reckon with upto the ballot.
Hordes of Kenyans turned up in large numbers to cast their vote though the tribal equation was now more evident than before.

The results became such a close game to call and each party was expectant of a resounding victory. As the results were announced Kibaki had 'won' and this did not augur well with the other camp that marshalled its troops for countrywide mass action that latter blurgeoned into full blow violence now famously know as the Post Election Violence. Several months latter over a thousand had died, several injured and hundreds of thousands displaced and became the Internally Displaced Persons.

Indeed, quite sadly and unprecedented, politics had wrecked havoc in our country and the effects are still being felt.
As the country reels from this unfortunate events, businesses have sufferred immensely as the economy was dealt a major blow. Further our risk assessment internationally was alterred and Foreign Direct Investment significantly reduced.

The stock market is at its lowest ebb and sadly it is a victim, a pawn in this roller coster called politics.

Emerging Stock Market Trends in 2009 (Part I)

As we move forward a look at the African stock markets amidst the contagion of the Sub prime Morgage crisis that emanated in the US might not be that rossy after all. The Capital Markets Authority did make a case for highly capitalized financial institutions and risk based supervision approach amongst other recommendations in view of the crisis.Business confidence did slide as most companies review their investment plans and strategies in 2009.

Global Financial Crisis
The year 2008 in global financial markets has been one of the most volatile since the 1930s.The last serious bear market originated in Asia in 1997, but this 2008 crisis originated in the US.

Currencies
During 2008,emerging market currencies weakened against the US dollar as a result of
the rush to the US dollar and US Treasury instruments.Investors sought “safe havens”
and US Treasuries were considered the safest haven.

ILower Interest Rates
Recognising the severity of the credit crunch,in October major developed and
emerging central banks lowered interest rates in an unprecedented globally coordinated monetary policy effort.This was followed by the implementation of fiscal stimulus measures and loosening monetary policies from governments and central banks in developed as well as emerging markets. Thus far, more than US$1 trillion has been pledged by governments around the world to rejuvenate their domestic economiesincluding China, the US, Germany, the UK, Taiwan, Spain, Japan, South Korea,Russia, France, Australia, Hong Kong, Singapore and Malaysia.

Fastest Growing Economies
It is expected that the BRIC (Brazil, Russia, India and China) economies to continue to be akey driver of global economic growth.They are among the fastest growing economies in the world. The four markets together account for more than 40% of the world population. Domestic demand growth also remains robust. Moreover, Brazil and Russia are resource-rich countries and although there has been a recent fall in commodity prices, the longer trend for commodity prices is to increase and these countries will benefit from global demand for oil, steel, aluminum, pulp and other commodities.China continues to take great strides towards becoming a major global player.

Capital
Capital availability is the key question for emerging markets in 2009.Those who have it should do well.As for those who don't - it may be better not to ask.

This year is not going to be easy for the developing world. Lower commodity prices and slumping Western economies will damage growth. But with the United States, Western Europe and Japan all in recession and unlikely to emerge quickly, whatever growth there is in the world - not much - will be concentrated in emerging markets.

Emerging Market stocks
Given the steep market decline, investors have begun to shift their focus to the
increasingly attractive valuations in emerging markets.
NSE Chairman alluded that assets at the NSE are highly unbdervalued due to the persistent bearish trends that have failed to attract investors amidst current inflation and increase in the cost of living. Most investors at the NSE are retail.Uncertainty in the global financial markets is also suspected to be fuelling the investors’ jitters, with the deepening recession putting into doubt the chances of a quick recovery of stock markets.

2009 Outlook
While it is believed that the longer-term outlook for emerging markets remains positive due to the relatively strong fundamental characteristics and faster growth rate than theirdeveloped counterparts, 2009 is expected to be challenging. We can expect more volatility in view of slowing growth and recession concerns in major world economies,volatile exchange rates and commodity prices, and a global credit crunch.
Investors should brace for lower returns in the first quarter of the year 2009.

Making Kenya Next Outsourcing Hub in Africa

Role of ICT
The 2006 Kenya ICT strategy promotes collaboration and outsourcing for economic growth and makes a good read. As a matter of fact, It is now evident that nations the world over have recognized the developmental opportunities as well as the challenges brought about by the fast-paced information age whose hallmark is information and communication technologies (ICTs). Evidence from developed countries has shown that ICTs can play a dramatic role in enhancing economic and social development by acting as a production sector for economic growth and an enabler for social development.

Sectoral Applications

ICT applications have enabled these countries make gigantic improvements in both productivity and quality in agriculture, manufacturing, infrastructure, public administration, and services such as finance, trade, distribution, marketing, education and health.

Kenya ICT Board

The newly launched Information and Communication Technology (ICT) board has started an aggressive campaign to market Kenya as the next outsourcing destination in the world after India and South Africa in this part of the world. South Africa with the largest economy and ICT infrastructure in the sub region, had been poised to lead the charge but now here comes Kenya with its fiber optic infrastructure being set up as well as the emergence of digital villages and kiosks all over the country.

Funding

The heavily funded ICT board plans to use the Sh8 billion loan it received from the World Bank in May to expand use of existing bandwidth, increase capacity for outsourcing as well as digitise the country’s 210 constituencies through digital villages.

Business Process Outsourcing is therefore an idea for 2007/08 and beyond and with enough capital you may wish to lay down strategies towards setting up a call center!

ICT and NSE

With the laying of the submarine cable and the country's fiber optic infrastructure time is now ripe for online shares trading and the emergence of online stock brockers in the league currenlty dominated by 18 brokers making it one of Kenya's exclusive clubs. The emergence of Online stockbrokers will be a move in the right direction. Currently hisanetafrica a stocks agency firm is providing online account management and reports and with the right infrastructure they can easily pounce on this new catch alongside other players as Eight Ltd and more.

Imperatives

As policy makers and the government strive to utilize ICT in all sectors as well as make Kenya an ICT hub it is vital to ensure the following:

Policy-Hasten the formulation of a legal and policy regime that regulates e-transaction, privacy and data protection, intellectual property rights, capacity building and generating content for the digital villages initiative, among others.

Connectivity-This will be achieved through the purchase of broadband capacity in regional and national networks for specific user groups such as universities, schools and technical colleges. Further there is need to fasten ther laying of the fiber optic cable infrastructure in the country and the under sea optic cable to connect Kenya and the world.

BPO-Speed up business process outsourcing (BPO) industry through intense marketing abroad so as to wrestle the pie from such developed economies as India. South Africa etc.

Implementation- There is need to implement the proposals of the Kenya’s National ICT Policy (2005) and ICT Strategy for Economic Growth (2006) amongst others.
Collaborations-The government should encourage partnerships with all stakeholders in maintaining a favorable climate for investment in ICT manufacturing and services.

Foreign Direct Investment-The should be full support for FDIs in this vital sector that is poised to steer Kenya towards Vision 2030.

Kenya as an Emerging Capital Market (Part II)

Capital Market
Capital markets are an essential part of the financial sectors of modern economies. Providing alternative savings tools to savers and non-bank sources of financing for enterprises. The markets promote economic growth through improved efficiency in savings mobilization.
Nevertheless, in an economy of many private enterprises, many firms list in the market while many that qualify to do so do not due to fear of losing management control amongst others.

Banking Sector
Banks, in their dual role of being investment advisors as well as lenders may tend to indirectly discourage the stock exchange as a means of raising capital. For the Nairobi stock exchange, there is both inadequate marketing of itself trough efficient investor education programs as well as lack of a sufficient number of products listed at the bourse to attract more investors both local
and foreign although the current focus on upcoming Safaricom IPO is creating excitement across the globe even in Wall Stree cycles.

Factors in the Emerging Kenyan Capital Markets
There are factors that have to be addressed in terms of the stage of development of the Kenyan market. Countries with big equity markets have less volatile, more price efficient
markets with substantial degrees of liquidity. Most emerging markets, as in Kenya, are highly concentrated. As a result they tend to be undeveloped, and are small and illiquid, exhibiting pricing volatility and error. The more integrated the market to international markets, the less volatile the returns.

Institutional Investors and stability
A factor that drives markets strongly is the level of institutional arrangement and the regulatory framework. In Kenya, this may have neccessitated the need to allocate more shares to institutional investors referred to as 'Qualified Institutional Investors' to encourage market stability as opposed to more retail speculators who would sell at ther slightest of scare.

Emerging markets and development
The rise of emerging markets is changing the traditional view of development as follows.
-First, foreign "investment" is replacing foreign "assistance." Investing in the emerging markets is no longer associated with the traditional notion of providing development assistance to poorer nations.
-Second, emerging markets are rationalizing their trade relations and capital investment with industrialized countries. Trade and capital flows are directed more toward new market opportunities, and less by political consideration.
-Third, the increasing two-way trade and capital flows between emerging markets and industrialized countries reflect the transition from dependency to global interdependency.

Prospects?
Emerging markets like Kenya are the "key swing factor" in the future growth of world trade and global financial stability, and they will become critical players in global politics. They have a huge untapped potential and they are determined to undertake domestic reforms to support sustainable economic growth. If they can maintain political stability and succeed with their structural reforms, their future is promising.

So what?
The accelerated information exchange, especially with the aid of the Internet, is integrating emerging markets into the global market at a faster pace.

Business Process Outsourcing; An Idea for 2007/08

Over the weekend amidst my weekend escapades i managed to squeeze time and attend a talk by some of the creme-de-la-creme of our society who have been instrumental in their areas of engagements. The weekend saw me attending a business and investments forum addressed by The Investments Secretary Mrs. Esther Koimett, PS ministy of Planning Dr. Edward Sambili, Top CBK Directors, Business Moguls, Entrepreneurs, Young Upcoming Business leaders amongst others.

At the end of the forum i thought it would be prudent if i share the same with my avid readers.

Highly potential sectors:

In their address the emphasis was on the key sectors that are likely to rake in millions in the next few years and any proactive business minded person may wish to venture. These encompass the Information Communication Technology (ICT) sector, Tourism, Financial Services Sector, Service sector, Construction, Agriculture, Capital Markets, Business Consultancy and Supplies and Services/Procurement.

Today i wish to talk about the new craze in town-Call Centers- Otherwise under the umbrella of Business Process Outsourcing. It is noteworthy that the advent of the ICT technology has seen the emergence of various technologies that are expected to change the way business will be conducted and correspondingly enhance economic growth and development. The issue of Business Process Outsouring (BPO) cannot be gainsaid as this was instrumental in the rapid growth and turn around of the Asian economies expecially India, Phillippines, Eastern Europe as well as in South Africa and Egypt.

Business Process Outsourcing (BPO):

Business Process Outsourcing (BPO) is the contracting of a specific business task, such as payroll, to a third-party service provider. Usually, BPO is implemented as a cost-saving measure for tasks that a company requires but does not depend upon to maintain its position in the marketplace. BPO is often divided into two categories:

-Back Office Outsourcing, which includes internal business functions such as billing or purchasing, and

-Front Office Outsourcing, which includes customer-related services such as marketing or tech support.

BPO in India:

The BPO industry in India refers to the Services Outsourcing Industry catering mainly to Western operations of Multinational Corporations.The sector witnessed considerable activity during 2004–05, including a solidifying of operations by major Indian and MNC players and stepped up hiring. The domestic BPO market, catalyzed by demand from the telecommunication and Business Financial Services segments, matched the growth of BPO exports. The market experienced maturity and consolidation, a result of numerous mergers and acquisitions taking place within the sector. There were over 400 companies operating within the Indian BPO space, and third-party services providers. The key enabler for this has been cheaper bandwith leading to low telecom costs for leased lines and availability of educated English speaking workforce in India.

India's Challenge:

India’s BPO sector is facing increasing challenge from Kenya and other East African countries. South Africa also plans pose a strong challenge. The main daunting problem for India especially in Bangalore and Chennai is low quality in BPO services.

Other Emergent BPO Centers:

India has revenues of $6.4 billion from offshore BPO and $36 billion from IT and total BPO. Apart from India, other locations like the Eastern Europe,Phillippines, and South Africa have emerged to take a share of the market. China is also trying to grow from a very small base in this industry. However, while the BPO industry is expected to continue to grow in India, its market share of the offshore piece is expected to decline.

Call Centers:

Africa's call center industry is set for major growth and are deemed to gain popularity and preference over Indian operators, with South Africa and Egypt leading the charge thanks to cheap labor, good language skills and time zones that chime with Western Europe. South Africa, which is favored by British companies for its cultural affinity with Europe, call center positions are expected to more than triple to 7,400 by 2010. Egypt also continues to impress western investors with its mix of savvy and linguistically-talented agents.

Indeed, countries that have made improving IT and telecommunication a priority, like Botswana, Kenya, Senegal and Ghana, are ripe for growth.

Kenya--impeded in the call center industry to date by poor communications links to the rest of world--is banking that the first fiber-optic cable in east Africa to be laid by mid-2008 will boost its status as the region's top economy. Many Kenyan entrepreneurs hope that this, plus cheap labor, clear accents, and customer fatigue with Indian call centers could help the African country hook into the burgeoning call center and outsourcing Industry, worth $130 billion worldwide.

Fiber Optic Cables in Kenya:

The laying of the fiber optic cable has been on with Telkom having unveiled the long haul Mombasa-Nairobi fiber optic cable measuring nearly 500 km as the state-owned company readies for stiff competition from other players as Kenya Data Network (a company associated with the billionairre Naushad Merali and his Sameer Group) that is also eying the under sea fiber optic cable system. Telkom has introduced a new broadband wireless platform -- Kenstream Wireless -- to complement the already existing Kenstream services.

Kenya Call Centers:

Kenya's endeavor to drive down telecommunications costs to tap into the multibillion dollar outsourcing industry and make Kenya an information technology hub is welcomed in bringing Kenya into the fiber optic loop. Kenya's nascent call center business has grown from employing 200 people last year to 3,000 this year, despite relying on expensive satellite-based communications. To get more companies to give their business to Kenyan call centers, the country needs to increase its bandwidth up to 500 megabits per second by year's end and subsidize the cost until a submarine fiber optic cable is working.

Kencall:

Kencall is a premier call center established in Kenya that is already making inroads into the highly competitive Business Process Outsourcing industry despite the infrastructure challenges to their efficient operations. KenCall, being one of the country’s premier call centres, has defied the odds to win a global award in back office operations business, beating rivals from the infrastructure-enabled markets such as India and the Philippines.

Kencall has 500 agents and 5 international clients and has been at the forefront of an emerging outsourcing industry in Kenya, and is hungry for more growth.

Future 0f Call Centers:

Statistics shows that some 3,000 Kenyans now work in call centres, with the outsourcing sector encompassing about 30 companies. KenCall and 3 others dominate, industry players say. KenCall wants to treble its number of agents by the end of 2008. more

The future of call centers is bright with possible reduction in telecommunications costs. Further, with intense maketing likely to go on and a new focus by western companies on Africa (Kenya Included) It is time we take the responsibility to invest in call centers and MAKE MONEY!!!!!

The Kenya that was in the News

Kenya News:
This week has seen various occurrences i nthe newsfront some political others business. Taking about politics the August House dramatically shot down two government sponsored Bill that sought to increase the number of MPs in parliament through 40 new constituencies and 50 new nominations seat for women.
In Business, as others focused on Safaricom IPO and its attendant problems, others were taking about Mergers and Acquisitions amidst new profitability feats realized by some corporate bodies and much more.

Kenya Parliament:
Acrimony, hostility and bitter exchange of words characterized debate yesterday's debate when the two bills were brought into the house after a morning of lobbying amongst themselves by the goverment side. When the bill was tabled a rather full house parliament was deserted as MPs walked out of the House causing a quorum hitch and when division bell was rang only 95 MPs were there , 50 short of the required 145 (two-thirds).

KenyaWomen:
The dramatic debates that characterized the House when this bill was brought were fun to watch and i couldn't help but wonder where politics of ODM and NARC went to as men ganged up against the women literally (with few excepions though) to shoot down the bill that would have seen the womenfolk get 50 free nomination slots in parliament-without going through the elective process. On the sidewalks i wondered aloud how women would want equality and the likes while asking for favors without fighting it out with men in elective posts. Do they expect the men to dole these free seats just like that especially with their majority vote in parliament?

Kenyan Constituencies:
The other bill that would have seen an increase in the number of constituencies by 40 new constituencies was also shot down on technicality as the requisite two-thirds majority coudnot be raised when the Division Standing Orders of the House can again be introduced 6 months latter which means that elections will be held and women will have to fight it out for more seats for themselves whereas there will be no new constituencies for those who have been waiting with bated breathes.

Kenyan MPs:
The Kenyan MPs have been described as a selfish lot, that would increase their salaries and allowances without bating an eyelid. As you might not be aware, the Statute Law (Miscalleneous Amendment) Bill which seeks to inter alia ratify a pay cheque for MPs as hefty gratuities at the end of current parliament was quickly withdrawn from the order paper amidst the hostility that saw some bills rejected. Talk about parochial selfish interests? what more do we need to know?

Kenyan Fourth Estate:
The news gatherers became the newsmakers as in a rare show of solidarity and unity (Except for KBC Journalists who abhorred the silent demonstration, dont know why???) they took to the streets in a dramatic and the most eloquent of ways-Loud Silence-With their mouths and microphones gagged with masking tapes symbolic of th gagging of the media by the current controversial Media Bill. From local media moguls, leading newcasters, print, radio, cameramen, reporters, mass communication students and supporters as well as foreign media houses, they all hit the streets to petition the president not to ascent the bill.

Kenya Politics:
Politics is a dirty game or so they say and here there are no parmanent enemies or friends. Now this is evident as the politics of the orange gone bitter and the flower about to dry up emerge. One mans woos is anothers blessings and as ODM-Kenya moved house to ODM the original outfit, Kalonzo Musyoka, Ojiambo and Maanzo's team were taken to the drawing board. Moi is closely working with Kibaki, what with the new appoinment as the goodwill ambassador of peace to Sudan. Uhuru is loking for new alliances and sticking his guns in KANU with new work relations with Biwott's Team despite the earlier bitter vourt debacle-Enemies turned friends.
Kibaki's is laughing with more votes to him as the teams fight it out as he hits the road for more votes while dishing out new districts, characteristic of the Moi regime. The dust is yet to settle, politics of oranges going bitter and flowers drying up continue as the dust continue in the haphazard manner the politics of 2007 are indeed entertaining to look at! we remain waiting!

Kenya Business:
Profitability: There are reports that Scangroup Limited has seen its half-year pre-tax profits increase by 30 per cent to Sh116.6 million, up from Sh89.6 million recorded last year due to 54 per cent growth in billings by the advertising and public relations giant and earnings achieved through major acqusitions in advertising firm Redsky— in late 2006 and early 2007. More...

New markets: ScanGroup is also set to enter the Nigerian market by end of the year as growth in the industry peaks, raising investor expectations for better performance in future[More]

Safaricom IPO: The never ending debacle of the Safaricom IPO resurfaced again after the problem sorrounding its shareholding and Mobitelea Ventures Ltd 5% stake acquired in a mysterious circumstance. This time Hon Raila or if you may wish ODM, promises to halt the process in court even as the Treasury continues with the tendering process of the advisory team with yersterday's opening of the technical bids for consultancy services.

AccessKenya contracts: AccessKenya another recently listed firm has struck an interconnectivity agreement with Safaricom that will open the biggest and most lucrative voice traffic to this newly listed firm within Kenya.

Rights Issue: NIC Bank has appointed its investment bank subsidiary, NIC Capital, to act as the lead transaction advisor for its upcoming rights issue as well as Kestrel Capital and Dyer & Blair Investment Bank as the lead stockbrokers for the plan to raise Sh1 billion by selling new shares (rights Issue) to existing shareholders. The money raised will fund the bank’s expansion plans and shore up its capital base. More here...

Expansion/Rights Issue: Olympia Capital Holdings is set to embark on an ambitious expansion plan after the Capital Markets Authority (CMA) approved its plans to raise over Sh400 million through a rights issue.The creation of 30 million new ordinary shares will give existing shareholders the right to purchase 3 shares for every 1 share. More
Coldtusker enumerates more on how to buy shares under a rights issue.

Upgrading: Meanwhile, Olympia Capital Corporation (Botswana) has been granted approval to migrate from its venture capital board to the main board. This effectively means that the company, which is 27 per cent owned by Olympia Capital Holdings (OCH) Kenya, ceases to be classified as a "speculative" investment on the Botswana Stock Exchange. More

Projects: East Africa Portland Cement Company (EAPCC) will shift its energy source from electricity to coal to cut down power bills and operation costs.The move by the cement maker follows recent discovery of coal deposits in parts of Kenya[Here]. Further, EAPCC has launched a Sh1.6 billion project that will double its production capacity in the next one year. The investment comes amid confusion whether the company and Bamburi Cement Ltd, intend to merge to keep off stiff competition.

Mergers/Acquisitions: There were reports that Kenya’s two largest cement producers East Africa Portland and Bamburi have kicked off a process that may see them merge into one of Africa’s biggest manufacturer. Sources say that the two companies have tabled the proposal before Capital Markets Authority (CMA). The law requires the market regulator to approves any takeovers and acquisition of publicly quoted companies.

...and the business world continues to churn more and more news and as investors we receive, assimilate, digest and probably act in them if they are fundamentally useful and...

Have a business week!!!

Investing at Home while away from Home

I am looking for kenyans abroad who have the intention and ability to invest in the now vibrant Kenyan stock market. anyone out there????

Stock market has become the latest fad in Kenya and many rural folks young and old, men and women and rushing to cash in on this new craze.

The expected listing of new companies in the Nairobi Stock Exchange (NSE) including Kenya Re and Safaricom is expected to add an impetus to the vibrancy and ensure better returns for investors.

Anyone who is abroad and wants to channel foreign direct investments into kenya to drop me a line and lets see how far we can go this year. For financial advice, company analysis, portfolio management and many more we can always talk.

Jeff