The Aftermath of Election 2007 on economy

Volatility
The Nairobi Stock Exchange will remain volatile for most of 2008 reflecting the turbulence in the political arena that has been witnessed since the announcement of the controversial December 27 General Elections.

Downsizing
Most companies are now bracing themselves for downsizing and other restructuring measures geared towards cost cutting and enhancing profit margins.

Reduced Profitability
The profitability that has been witnessed in most banks at the beginning of the previous years quarterly results may be no more and by and large greatly reduced.

Economic Growth
The economic growth rate although deemed to remain resilient may not be sustainable if the spate of violence continue into the next quarter of the year and the government revenue collections will be greatly hampered.

Pillars of Vision 2030
The pillars of Vision 2030 that had been lauded to steer Kenya into rapid economic growth phase including Business Process Outsourcing (BPO), Information technology, Tourism and telecommunication are now reeling from the effects of the post election violence.

Kenya Economy Reeling From Post Election Violence

Economy
The orgy of violence that has greeted Kenya's disputed election result has led to hundreds of deaths and forced tens of thousands to flee their homes.The post election violence witnessed in various parts of Kenya has indeed raised pertinent questions on the resilience of the economy to sustain long periods of civil unrest and violence.

Tourism
Kenya's tourism industry, which brings in some $900m (£455m) a year and attracts more than one million visitors a year, is sure to take a hit after four days of rioting and ethnic clashes. Its relative economic success has been helped in part by its thriving tourist sector, with visitors attracted by its abundant wildlife and pristine beaches.Provisional figures for 2006 from the Kenya's tourist board said the country had received 1.5 million visitors for the year, a growth of 5.2 per cent.

Repercussions
The stalemate over the election results has cost the economy billions of shillings with the repercussions being felt across East Africa.

Bankers Analysis
Several bodies including the Treasury, Nairobi Stock Exchange, Tourism sector, and financial organizations have given their predictions and analysis of the implication of the destruction and sporadic violence that errupted in the country against a backdrop of controvesial presidential elections and delays in announcements.
The effects are indeed immense and portends widespread implication for Kenya as an emerging economy that has recently been rated the fast growing and most preferred by investors seeking emerging markets.

East Africa
The pinch on the economy is not only being felt locally with close to 4B having been lost but has spilt to Uganda, Tanzania Rwanda and Burundi where essential products were not forthcoming as fuel passing through Kenya was unavailable due to closure of roads and violence.

Central Bank of Kenya analysis
Kenya’s economy has grown steadily in the past five years with all indicators pointing out that if the trend was sustained, growth would hit 10 per cent. The economic recovery that started in 2003 has achieved some major milestones and laid down solidly the growth fundamentals. The growth fundamentals laid down have reversed growth decline that had taken years. It is true that the recent violence in some parts of the country could adversely affect the tempo of economic activity, but cannot destroy the growth fundamentals so far laid down. more

Foreign investors
Private investment has been behind Kenya's thriving economy. It has averaged GDP growth of 5% since 2002 and the economy is expected to expand by 7% in 2007 - rates of growth that are only beaten in booming Asian countries such as China.
Kenya's shilling strengthened by 9% against the dollar in 2007 as foreign investors poured into the country's stocks and bonds, but those gains were largely erased when currency markets began trading on Wednesday.

Equity Market
The equity market on the Nairobi Stock Exchange lost 40 billion Kenyan Shillings ($591 million) in value on its first day of New Year trading Wednesday. Kenya has attracted a large number of multi-nationals and is home to one of the world's fastest growing stock exchanges.

Positive Prospects
Expected planned sale of Safaricom shares might stir the market once again back to its feet .

Kenya Capital: TPS Stock to Watch in 2008

With his avid analysis over time now MjengaKenya thinks that TPS is a stock to watch in 2008.
Given the trend that tourism in Kenya is expected to take with expectations of increased tourist in the next 5 years, this will translate to increased revenue for this company that has spread its tentacles accross east africa. TPS is well positioned to rake in higher returns and better stock prices.

Check out my earlier analysis on this company set to benefit from tourism upswing.

TPS Serena to Benefit from Tourism Upswing

It is clear that TPS Serena will cash in on the projected increase in number of tourists into the country. It is projected that the country’s annual tourism revenue will hit the Sh350 billion mark in the next 5 years from the current Sh56 billion. Kenya Wildlife Service (KWS) director Dr Julius Kipng’etich has also revealed that the number of tourists visiting the country will increase from the current 1.8 million to 5 million.

Influx of Tourists

The influx of tourists into the country has seen Tourism Promotion Services (TPS) Eastern Africa Limited, Serena, profits before tax for the half year ended June grow by 78.9% to Sh215 million. Turnover also grew by 14.7% to Sh16 million compared to Sh14 million during the same period last year. Earnings went up by 61% from Sh191 million the previous year to Sh309 million in the year ended December 2006 due to the integration of the firms unit into a single holding which saw the company bring together its Tanzania and Zanzibar units into a single business unit name TPS East Africa formerly TPS holdings. However, the Units in Rwanda, Uganda and Mozambique are not owned by the listed company.

TPS Shares

TPS (EA) is the only listed company in the tourism sector, has shown strong performance in the stock market and the continuous growth in the sector is expected to continue driving the company’s profits up. It is further expected that there will be an increase in the demand for the company shares after a slow demand during the first half of the year. The company’s share closed at a stable Sh77 on Friday having moved 9,800 shares, and the good results are expected to increase demand for the share among the investing public.

Serena Brand

AKFED's involvement in tourism development in South Asia and East Africa takes place under the aegis of Tourism Promotion Services (TPS), with companies incorporated in Kenya, Tanzania, Zanzibar, and Pakistan.Tourism Promotion Services operates under the “Serena” brand name and owns and manages 15 hotels in East Africa and Asia.

The Aga Khan Fund for Economic Development (AKFED)

This is an international development agency dedicated to promoting entrepreneurship and building economically sound enterprises in the developing world. AKFED focuses on building enterprises in parts of the world that lack sufficient foreign direct investment. It also makes bold but calculated investments in situations that are fragile and complex. AKFED operates as a network of affiliates with more than 90 separate project companies employing over 30,000 people, with annual revenues in excess of US$1.5 billion. The Fund is active in 16 countries in the developing world: Afghanistan, Bangladesh, Burkina Faso, the Democratic Republic of the Congo, India, Ivory Coast, Kenya, Kyrgyz Republic, Mali, Mozambique, Pakistan, Senegal, Syria, Tajikistan, Tanzania and Uganda. Read more

Fintrade's Verdict: Buy and hold for the long term