- ► 2012 (29)
- Business Daily... Quality? Editorial Failure?
- Kibaki & the Demolition Squad
- The Dollarization of Kenya
- A Rant On Public Finances
- Price Controls - Failures Abound in the Fuel Secto...
- East African Community - Union? What Union?
- Price Controls - Failures
- Syokimau - The saga continues...
- Syokimau - Smoke, Mirrors & Bullshit
- Syokimau - Land Rights (or lack thereof) in Kenya
- Cement Firms in East Africa
- Insider Dealing on Nairobi Securities Exchange
- Kenya in 2012
- ► September (3)
- ► June (2)
- ► May (13)
- ► November (13)
- ► 2008 (170)
- ► 2007 (79)
- ► 2006 (99)
Wednesday, December 28, 2011
Gas or Not?
After a long period without cooking gas, I got a call from one of my informers. I'd spoken to four petrol station workers, so that they would alert me anytime the commodity was finally supplied.
So on the 27th, early afternoon, I got a call from one of my 'watchers' from the Total Hurlingham petrol Station. I was in the CBD when the call came so it only took me all of 11 minutes to get to the petrol station. I met a gentleman with Yuvenaris/Yuvenalis on his name tag and immediatelly unloaded my empty 13kg cylinder, but he shocked me and told me that there was no gas! I asked him a second time and he assured me that cooking gas had not been delivered.
I almost packed my empty cylinder back into the car, but much as my 'lookout' had told me that cooking gas is very fast moving in these times of scarcity, I was a bit doubtful about how fast the product could have moved.
I then called my lookout up to enquire about the speed the commodity had moved, and after I explained what I was told by Yuvenalis, he told me to persist, cajole and even threaten. It seems that there is some of racket where the petrol station attendants in charge of cooking gas (and other products that are in short supply) usually hold back from selling it, only to sell it to brokers at a marked up price, as my lookouts from all gas stations confessed.
With this in mind, I persisted and told Mr. Yuvenalis that I was aware that cooking gas had been delivered and that I was not going away until I got my cylinder. I dropped one or two big names and the fellow softened up and told me to stop demanding in a loud voice, and that the gentleman in charge, a Mr. Maweu, who was away, would come and he'd ensure I got my gas.
When Maweu Nzioki, as his badge read, finally came, he informed me that 'very few' cylinders could be availed' after the people that had placed their orders picked their product. He went on to explain to me that "'Orders from above' kept his hands tied as "Watu Wakubwa" usually booked through bigger offices, and there was nothing much he could do. I was even more persistent, and so was he. Mr. Nyachae, the current chair of the C.I.C just happened to be parking his vehicle in the lot, and Maweu then went on to point out Nyachae as one of the Watu Wakubwa who had booked their cooking gas. Up until now, I have not been able to establish if Mr. Nyachae had actually booked for his cooking gas.
I was still not convinced, so I persisted, very loudly telling him that there are no provisions for prior booking and that we were all equal under the constitution, etc, there are no 'big or small people'. It did not take long for him to cave in, and finally, I got my 13kg gas cylinder, though not as happy a camper as I'd have wanted to be.
As a parting shot, before I left, another gentleman drove into the station asking for cooking gas and Mr. Maweu blatantly lied to him as well, that the commodity was unavailable. I walked into the scene and told the gentleman that there indeed was a supply of cooking gas and he should demand it. Maweu, on sensing defeat quickly sold him a cylinder of 13 kg Total cooking gas, lest I stick around and mess his 'business' more.
That is my sad tale.
Sunday, December 11, 2011
The current government (cabinet) is composed of the same chaps who were kanu shrills back in the bad old days of danny t moi...
*2012 presidential candidates highlighted*
mwai kibaki - president - He was in kanu for eons and was dan's VP for a while. Quit in 1990 to form DP which many say was a front to break up the opposition (well, let's call a spade a spade - the GEMA constituency) vote that matiba commanded. Thank the heavens he can't run for a 3rd term but never say never. See kaguta museveni of Uganda.
raila odinga - prime minister - RAO was a johnny-come-lately to the kanu bandwagon to which he hitched his LDP cart before he realized he has been outsmarted. Just like his father, he may never see the presidency & at best, like his father, remain a weak #2.
john michuki - environment and national resources - was quite the powerful chap in the old kanu for a brief period.
joseph nyaga - cooperative development and marketing - a long time kanu member until 2002. Some ministerial post under moi's kanu government.
sam ongeri - (mis)education - has served every corrupt regime he could.
Who have I missed? Who should I add to this list?
Wednesday, November 30, 2011
Tuesday, November 29, 2011
Yes, yes... he took the high road & I am glad he did so... It turns out as Carol Musyoka's article describes... there was something fishy about Syokimau...
As for Eastleigh, it is time some order was brought to bear in the area. I may sound a little un-PC but I am sure there are more than a few al-shabaab sympathizers in Eastleigh. Kenya has an important military installation (the Eastleigh Airbase) around which lots of buildings have not only encroached into the 'safe zone but also high/tall buildings which pose a threat to the aircraft.
So we support President Kibaki in getting rid of corrupt cartels within the Lands Ministry. I would even venture that if he lined some of these corrupt officials up against the wall & had them shot... most Kenyan would cheer!
Sunday, November 27, 2011
There was a time the Exchange Rate was KES 7/US$ & last month it was KES 105/US$... So in less than 40 years the KES has gone to the dogs. And even they spat it out.
When KQ said it will price local/domestic flights in US$ (converted to KES at the prevailing rate) some folks huffed & puffed and called KQ all sort of names...
I said BULLSHIT to those silly arguments that KQ should charge in KES coz it is a Kenyan firm... It is out to make a profit not be patriotic.
Anyway, so comes along this little tidbit... HFCK to source loans in forex to on-lend in forex! Hah! So where are those folks who complained about KQ?
KES interest rate are 24% & climbing... So it makes sense for some who are willing to take the forex risk to borrow in US$ at much lower rates!
The over-arching theme is that Kenya is dollarizing... Ask your supplier about the following goods or services:
- Flights (local & international)
- Fuel (yep, its a combination of oil prices prices in US$)
- And so on and on and on...
** I hope the idea of a common EAC Currency is shelved until ALL the trade barriers are removed between EAC countries... Then merge the Fiscal Policies of all the EAC countries... Otherwise, it will fail... See the travails of the Euro!
*** A 'new' currency based on a /basket/combination of currencies would be a better idea but harder to implement. Some of the candidates for the basket would include US$, Yen, Yuan, Rupee, Euro, Sterling Pound, UAE Dhiram, Uganda Shilling & Tanzania Shilling. These are countries Kenya does substantial business with...
Friday, November 25, 2011
A RANT ON PUBLIC FINANCES
The Eldoret Correspondent, Matthews Ndanyi, sent over an interesting tidbit on how infrastructure projects worth KES 10 B across some 45 Technical Training Institutes have stalled – because of the funds budgeted for these programs has not been released.
Another 1.6 B is also missing in action – and that includes workers wages for between 3-6 months, depending on the Technical Training Institute in question. The sources for this story are scared to talk to the media. The KE Govt being the vindictive bastard that it is [Remember this? - http://www.youtube.com/watch?v=wGVD3jqvQ70]
their fear is entirely understandable.
Some digging led me to this article –
the first quarter review of the Budget’s implementation. On spending by line Ministries – the report said, quote,
“the Ministries that reported under expenditures includes Roads; Water and Irrigation, Higher Education, Science and Technology; Public Health and Sanitation, amounting to KES 7.5 B, KES 5.5 B, KES 4.4 B and KES 3.3 B respectively.”
So there’s over KES 4 B lying around in the Higher Education Ministry, and if you crunch the numbers a little more, it gets more interesting. It’s off target by 24.89% on recurrent spending, and a massive 60.83% on development expenditure.
The story’s sources gain credence – and a series of phone calls and text messages to the Higher Education PS, Chrispus Kiamba, are not responded to. Classical silent treatment – it’s like dealing with an moody partner, only one you religiously pay, and get shoddy returns from.
The thing is, it’s not just the Higher Education chaps that are working at the speed of racing sloths. Aggregated across all Government Ministries, development expenditure’s off target by 46.5%. That’s about half of Uhuru Kenyatta’s highly lauded “investments” not coming on line, and we’re already halfway into FY ’11-’12.
The Water Ministry, which was to spearhead part of the much publicized irrigation blitz the Finance Minister talked about in June, hasn’t touched 54.2% of its development budget. The other bit of the equation – the Agriculture Ministry – makes short work of that. 62% of its development budget is still untouched.
Inference – we’re not bloody serious about taming inflation beyond 2012. Given these figures, I would not be surprised if in 2012, we’ll still see the Central Bank Governor lamenting how food price shocks are making a mess of their efforts to tame inflation.
Also, one, Uhuru Kenyatta’s paying lip service to the business of cleaning up public finances and making sure our taxes go where they’re needed, to do what he claims they should do.
And someone wants me to take this fellow’s pitch for President seriously? Bollocks.
These books look like some failed Hogwarts experiment. Any private firm worth its salt would have the CEO & CFO fired for presenting numbers of this sort – but KE taxpayers being who they are, we either give the CFO & CEO of Kenya.Inc a free pass, or we bury our heads in the sand and assume nothing bad’s happening.
In a ruling this week, Judge Mohammed Warsame described the Government as follows.
“….the government monster in the name of security ought to be investigated and tamed otherwise it may run amok and cause more suffering to the citizens of this country….”
He was talking about the demolition of buildings in Eastleigh, but his words apply to the state of public finances as much as anything else.
This monster, must be brought to heel – but if you’re going to bet on anything, bet on KE taxpayers joyfully casting their ballot for more terrible financial managers in 2012.
Wednesday, November 23, 2011
Well, selective Price Controls do not work. They create problems for the Taxpayer at large. They create Rent-seeking. They create inefficiencies & a taxpayer funded bureacracy.
As you know (see prior blogpost here) Interest Rates have jumped to 24% or higher for many Borrowers including OMCs. What a pity the ERC is playing populist politics...
The energy sector regulator, however, declined to give an indication of the margin by which the next adjustment will increase fuel costs, saying the oil marketers “will not be allowed to pass on the lending cost increases in full.”
- 8-10% spreads over CBR
- Spreads of 1-5% for forex
but we want you the (legitimate) risk-taking OMC who invests billions in infrastructure to go BROKE... Of course, the Briefcase Dealers are doing a-OK...
Monday, November 21, 2011
There are 5 members in the EAC:
- Rwanda has done the most in the shortest possible time to integrate or become a true EAC citizen by opening up its borders to other EAC members. A progressive leadership knows Rwanda needs the EAC & is working hard to make it the place to be as a launching point into the EAC.
- Kenya has the largest economy in the EAC & has done well compared to the others but it can (& needs to) do much more. At the minimum, the operations at the port in Mombasa and the border (Malaba, Namanga, etc) need improvement. A lot of it.
- Uganda has done OK and even though it still 'fears' Kenya's economic weight, it has a renewed confidence after the confirmed discovery of 2 billion barrels of oil. The political bickering, corruption and decimation of the Constitution to allow Museveni a third term remains problematic.
- Tanzania is a laggard. It has always been and will continue unless there is a HUGE shift in attitudes. I do not see any progress any time soon even though it can be EAC's powerhouse and surpass Kenya's economic might since it has lots of natural resources e.g. gold, natural gas, iron ore, coal, diamonds and lots more. There are huge rivers, plenty of arable land, a long coastline with many harbours and access to a huge hinterland including Zambia, Rwanda, Burundi, etc
- Burundi is a poorly managed Rwanda. Not very consequential but its inclusion into EAC will benefit the region with an emphasis on stability.
- Rwanda & Kenya need to 'open' up their borders/trade completely. There remain a few barriers. A joint Customs Union, with electronic paperwork, can benefit the transport of goods to/from Mombasa-Rwanda even though the physical route goes through an unstable Uganda. Kenya should not let Tanzania steal a march on this important trade route.
- Uganda needs to build the oil refinery ASAP. Then supply Kenya, Rwanda, DRC & Tanzania.
- Uganda and Kenya need to fix/upgrade/build the railway between Mombasa & Kampala. Then to extend it to Hoima and Kigali.
- Burundi needs to follow what Rwanda is doing. Not rocket science. Copy the good. Avoid the bad. Simple.
- Fast-track South Sudan into the EAC. Kenya, Uganda & SS need to extend the railway north to Juba. Perhaps an integrated oil pipeline as well.
- South Sudan needs to build a refinery. The geopolitics make it difficult but why export crude oil when the processing can be done in situ to create local jobs & opportunities.
- Tanzania will plod along at its pace but there will some integration though much slower.
- Ethiopia is a socialist country. Period. It will plod along but Kenya is the natural supply route for southern Ethiopia. It is a huge market/supplier for EAC's goods & services.
- Sudan is just trying to upset the apple cart for South Sudan. The real market for Sudanese goods/services is South Sudan. Cordial relations with Ethiopia will help both countries. Not a real contender for the EAC.
Sunday, November 20, 2011
The Government of Kenya (GoK) - in this case most of the populist but greedy/hypocritical legislators aka MPigs - in its usual moronic manner instituted Price Controls on fuels... Now the idiots who pushed for it are shocked that the Price Controls do not work...
Price Controls create Rent Seeking opportunities among those who have the power to control the supply/sale of these goods/services.
When an Oil Marketing Company (OMC) cannot earn a decent Rate of Return on its investment, it will minimize or stop its activities.
Some Kenyan banks are paying 25% for KES 50mn (or more) for 3-month deposits. Loans are cost a minimum of 25% p.a. therefore the incentive to 'invest' or 'trade' does not make sense for many OMCs.
My analysis is that many OMCs are bringing in the minimum amounts of fuel required to run their retail outlets to attempt to cover the minimum fixed costs. There is little incentive to take additional risks to import fuel to 'trade' thus Kenya will face a fuel shortage unless steps are taken to increase the margins allowed under the Price Controls.
Kenya has an INEFFECTIVE bureaucracy to monitor fuel adulteration which is how some of the OMCs stay in business.
Free Markets allow for many Sellers & Buyers. The first condition is being decimated under the current Price Control regime. The 'smaller' players who cannot internally finance the fuel imports are being driven out of business.
Kenya's largest OMC by volume (Total Kenya) reported a loss for 3Q 2011 on its fuel operations. The only other OMC that publishes its results is KenolKobil which has a regional network & extensive Trading Operations within Africa. It would not surprise me if some of the mid-sized & smaller OMCs close up shop in 2012 if the Price Controls (which squeeze the margins) remain in place.
I am certain many of the petrol stations adulterate the fuel:
- Kerosene/AGO's specific gravity is similar to Diesel's thus some stations would mix (tax-free) kerosene into diesel. Good for sellers. Bad for buyers.
- Regular petrol mixed in Super petrol then sold as Super/Premium. Good for sellers. Bad for buyers.
This is a complex topic but the simple message is that Price Controls do not work.
Wednesday, November 16, 2011
Monday, November 14, 2011
Probe starts on Syokimau house demolitions
What I (& many Kenyans) want to know is why the developments were allowed by the relevant authorities in the first place...?
Via NTV - More than meets the eye
I am sure corruption was involved & of any of the property owners engaged in bribing officials of the municipality then they deserved the fate that befell them. Nevertheless, I have a feeling there were amny innocent victims too.
See earlier blog post on Lack of Land Rights In Kenya
Sunday, November 13, 2011
Read the above sensible article by the sensible Carol Musyoka who discusses the financial decision/s & implications of Buy vs Rent. Now that interest rates in Kenya are 22% or higher (vs 14% 6 months ago) the problems will only get worse as many Buyers who borrowed will default in 2012 as they can't keep up with payments.
Or how about these houses demolished in Syokimau in Nov 2011 when the poor folks were told all was OK. They were given permission to build & then this...
Video 1: http://www.youtube.com/watch?v=VayMSPq94cE
Video 2: http://www.youtube.com/watch?v=d7GCZ7mro5A
Video 3: http://www.youtube.com/watch?v=xgGGtt3btxw
The folks who were building in Syokimau were not politically connected crooks like naushad merali or gideon moi but Kenyans who thought they had a clean "Right" to the land.
I do not condone violence but if these residents picked up a gun & put a few bullets into those who sold them the land, approved the building plans & lied about the flights' path... I would simply look away...
Rwanda has a Electronic Registry for Land. It covers Kigali and is expected to cover all of Rwanda by Dec 2012. This is a country that was devastated in 1994 but have done so much to improve the processes that create good National Institutions.
Thursday, November 10, 2011
[Kenya's whole district thing is too new for me so I will use provinces coz easier to remember!]
Kenya's Athi River Mining (ARM) does not have a cement plant in the town of Athi River but one in Kaloleni, Kilifi District, Coast Province. ARM is building a huge plant in Tanga, Tanzania & will also use it to supply Kenya.
Uganda's Tororo Cement owns Mombasa Cement but the plant is not located anywhere near Mombasa (Coast Province) but in the town/district of Athi River.
France's LaFarge owns Kenya's Bamburi Cement (plants in Mombasa & Athi River) which owns Hima Cement in Uganda. The Mombasa plant exports to Seychelles and Mauritius.
India's Sanghi Cement is building a plant in West Pokot in Kenya but the target market is South Sudan & DRC
Kenya's Devki Cement has a plant in Athi River.
France's LaFarge has a large stake in EA Portland Cement located in Athi River.
France's LaFarge owns Mbeya Cement in Mbeya Tanzania which often supplies Zambia.
France's LaFarge owns Chilanga (now LaFarge Zambia) Cement in Chilanga & Ndola Zambia. The Ndola plant supplies DRC. Turns out LFZ has shares in Mbeya Cement of Tanzania.
To add to all this... Kenya & Tanzania import cement from Egypt, Pakistan & China!
*** Updates - I have been informed (but not verified):
1) ARM has a 'Cement Grinding' plant in/near Athi River
2) Mombasa Cement has a clinker plant near Mombasa
Tuesday, November 01, 2011
These firms are typically controlled by a few shareholders but often have a majority shareholder often through proxies. An interesting tidbit is that these firms are often poor performers but have lots of deals with Related Parties.
Hah... so let me leave it open to my readers to tell me which ones they think fit the mold?
Kenya is not an island. We import everything from aeroplanes to zit creams. In between, we also import water (*SMH*) and all sorts of items. The most important being Petroleum products.
Kenya's primary exports are to East Africa, Europe & the Middle East. The rest of the World is important but less so. Therein lies one of the problems.
Kenya's primary exports are Tea, Horticultural products (Flowers, Fruits & Vegetables) & Textiles.
An interesting but growing part of the Export Market comprises Intermediate Goods which includes chemicals, plastic products, building materials, etc. These are products Kenya imports as Raw Materials (or components) then re-exports as finished goods primarily to East Africa.
Finally, Kenya has significant forex income through Tourism, Remittances & export of Services.
2011 has seen high oil prices that sucked the air out of Kenya's forex outflows. According to the WB, the Petroleum Imports were higher than net exports. And the Kenya Shilling (KES) paid the price.
The confluence of high oil prices, failure of rains & global economic turmoil resulted in a rapid increase in inflation which has placed Kenya on the edge of a knife going into 2012. Not all is doom & gloom but care must be taken.
At some point Kenyans need to stop and think what needs to be done. Yes, the politicians in Kenya have generally failed Kenyans but they are a microcosm of Kenyan society. After all most politician were (fairly) elected by Kenyans. I am not going to comment on the 2007 elections except there were no political losers.
Kenya has to look and adopt policies that have succeeded in other countries. I am not suggesting wholesale adoption but selected adoption of what has driven Asian countries forward.
- Singapore - Few natural resources but a great harbor which they have fully exploited. Kenya has Mombasa/Kilindini which can be expanded & improved. And privatized despite political meddling by a bunch of corrupt politicians.
- India - As 3rd world as it gets. Yet 1st world in many respects. India has technology Kenya can implement due to the 'price' factor. India's technology in many areas may not be high-tech but ideal for Kenya especially in Agriculture & small-scale manufacturing.
- China - Kenya needs to learn how to build from the Chinese. They work on building roads in Kenya day & night which means more is done in less time!
- Pakistan - It may not be as glamorous as its neighbour, India, but it faces similar problems as Kenya does. Nevertheless, it has managed to churn out some decent firms as well as innovate in various sectors in including farming.
- Rwanda - OK, not an Asian country but what a country. Discipline, Transparency & Efficiency. Kenya needs to adopt "UMUGANDA" which is community service once a month by ALL able-bodied citizens. No exceptions except for the ill or disabled. President to Peasant.
- get sufficient rains in 2012
- maintain peace in the major agricultural regions
- maintain a stable economic environment
- get the Fiscal Policy on track
- maintain a tight Monetary Policy
- keep al-shabaab & friends in check
- Privatize but TRANSPARENTLY. Let me repeat. TRANSPARENTLY. No matter what politicians say, the Business of Government is not Business.
- Support agriculture development. Not by providing subsidies but better roads from farms to towns, easier market access by simplifying licensing of agro-producers, introduce new & better crops. I would even venture many of these roads should be Public-Private Ventures.
- Kenya has to encourage its local manufacturing firms to stay put. Expand when & where possible. No subsidies but a better environment including easier access to financing & better courts dedicated to business matters.
- Export, export, export. Kenya cannot compete against China or India in many markets but East Africa (esp the hinterland) is Kenya's oyster. The hinterland extends all the way to DRC, Sudan & Ethiopia.
- Reforms - Judiciary, Civil Service, Education. I believe Education should be privatized though heavily supervised/policed to keep out charlatans. Citizens should get vouchers they can use to shop around. Misuse or fraud should be severely punished.
- Re-negotiate Trade treaties - Many countries subsidize their industries directly & indirectly. This has to be countered or we will kill off local industries. Egypt is a notorious COMESA partner which exports to Kenya what they import!
- Security - Not a cheap endeavor but a safe country means more citizens will be out & about everywhere. No-one should feel unsafe not matter what ethnicity anywhere. Transporters should work 24/7 to improve utilization rates of infrastructure. Shops, hotels, airports, ports, offices can all run 24/7 for those who need the services. Rwanda is an attractive destination since it is considered 'safe' especially Kigali when compared to Nairobi.
Thursday, September 22, 2011
The odd thing is they complain while;
- drinking imported beers instead of Tusker/Sierra
- wearing imported shoes instead of Bata
- eating imported cereals instead of local Weetabix
- imports galore instead of acceptable local products/services
Wednesday, September 07, 2011
Banks just like retail/corporate borrowers need to borrow money.
Banks lend money they 'borrow' from depositors (you & I). Sometimes, due to various reasons, they need 'cash' which does not mean the banks are 'broke' but they face a liquidity (cash) shortfall due timing issues.
Banks lend to customers/borrowers.
Banks buy T-Bills & T-Bonds (lending to governments) for interest or trading income.
Banks buy other assets which might not be cash-like (i.e. not very liquid) for income.
Banks buy corporate Bonds or other instruments for income.
Banks buy/hold Foreign Exchange for trading or business dealing.
Therefore a bank at a specific point in time may be 'illiquid' i.e. it does not have the'cash' it needs therefore at the end of that day it needs to borrow 'cash' from other sources. These sources are:
- Other Banks
- Central Bank
Getting last minute cash from Depositors/Customers is a tough call but the first port of call NORMALLY are other banks in the 'Interbank' market. If the cost or availability in the Interbank market is too high then the 'illiquid' bank can approach the Discount Window of the CBK.
CBK's Discount Window - The borrowed funds are normally short-term in nature and at rates higher (often punitive) than the benchmark or prevailing T-Bill rates.
* Different CBs may use different benchmarks including 30-day T-Bills.
There is a Monetary Policy Committee that seems out of sync with the 'real' economy. The MPC sets the Central Bank Rate (CBR) which was at 6.25% which the CBK used as the DWR (Discount Window Rate) but which was not correlated to the T-Bill Rates.
So the 'smart' banks:
- Borrowed at the CBR at 6.25% & bought T-Bills at 8%+ (Almost risk-free arbitrage)
- Lent in the Interbank at 6.25%+ then borrowed at the CBR at 6.25% (Risk-free arbitrage)
- Borrowed KES at 6.25%, converted into USD/Euro/Forex then lent the forex at 7.5%+
*So the bank benefits from arbitrage in interest rates but also potential depreciation*
Sensible Central Banks make the DWR higher than the benchmark i.e. there is a 'haircut' to borrow from the CB. Not so in Kenya where CBK's DWR < T-Bill Rate.
Not surprisingly banks loaded up on T-Bills while borrowing from the CBK. Other banks went all out to buy Forex (hard currencies). This led to a rapid drop in the KES vs 'hard' currencies.
What did the CBK do? Nothing at first. Then some 'hidden' moves which were promptly ignored by the banks concerned. Ndungu (CBK Governor refused to reveal the banks' names).
Next: CBK Governor blamed KenolKobil for the rapid increase in inflation & depreciation of the KES. So while he refused or was afraid to tell Kenyans which banks were behind the rapid & massive depreciation of the KES, he was happy to blame KenolKobil about an opinion!
Next: Issue circulars that were contradictory or at the minimum confusing!
The new DWR = CBR + Prior Day's Interbank Rate - CBR + 3% = Huh?
*Why not just say IBR + 3%? No need to "+ CBR - CBR" coz = ZERO
And the crap hit the fan! The overnight IBR started jumping 2-3% daily and soon breached 30%. Crazy! The KES remained 'weak' since the banks paid more for large short-term (wholesale) deposits but paid peanuts to small depositors. The lending rates started creeping up for ALL borrowers. Go figure!
The banks that had 'hoarded' forex were sitting pretty as long as they were not very illiquid. They simply waited it out.
*Still more to come*
Tuesday, September 06, 2011
I am going to refer to the August 2011 newsletter by Cannon Asset Managers - please click on this link for the entire newsletter - for an incisive look at what the CBK is saying or not saying or who knows what it's saying...
"Central Bank once again reverted to a tight monetary policy stance, just 2 weeks after indicating that they did not believe tight policy stance would have the desired result"
Flip flop... Well, at least they are willing to change but have the mandarins at CBK really thought it through? Or will the flip flop continue?
Or CBK Guv can blame KenolKobil for the woes facing Kenya!
No rain? - KK should plant more trees.
KES falling? - KK decided to pay for fuel imports instead of delaying payments.
Interest Rates Up? - KK has a Commercial Paper out.
Traffic Jams? - KK has made it easier to buy fuel by opening up more stations.
Fuel Shortage? - KK hasn't opened enough stations.
Inflation up? - KK's Deal Poa should be 10/- not 5/-
Food Shortage? - KK should be in the business of growing food crops.
Monday, August 15, 2011
- Blaming the Kenya Shilling (note to self; Do not piss off CBK Guvnor)
- Blaming the Arabs/Indians/Malaysians/Somalis
- Blaming consumers
- Finally our fail-proof method; blaming KenolKobil. No reason required.
Monday, July 04, 2011
Friday, July 01, 2011
Continuing my attempts to get Finance Professionals to provide insights, I have convincedSunil Sanger of Cannon Asset Managers Limited for allowing me to post this Research Report or click the header.
If you have questions or comments, please post them on here & I will ask him to respond.
For those who need more specialized assistance, you can contact Sunil Sanger or Daniel Chege.
Sunil Sanger | Managing Director | Cannon Asset Managers Limited| Block D, Gateway Park Mombasa Road| P.O. Box 30216 – 00100 Nairobi| Tel +254-20-2362545, 3966260
Daniel Chege | Portfolio Manager | Cannon Asset Managers Limited| Block D, Gateway Park Mombasa Road| P.O. Box 30216 – 00100 Nairobi| Tel +254-20-2362545, 3966260
Monday, June 20, 2011
Enough about the Constitution, let's turn to the budget that was or, perhaps, never was. We are now in the midst of the 21 day period that the Speaker of the House set for public input. What surprises me is that, as of Friday last week, no guidelines had been given as to how this process is supposed to work. Nevertheless, I intend to submit my thoughts on the proposals announced on 8 June. Overall the tax measures were a mixed bag of innovative to the down right impractical.
To me the introduction of the tax free status for Real Estate Investment Trusts albeit from 1 January 2012 was extremely innovative and forward thinking although it remains to be seen what the detailed guidelines will contain. Of course what concerns me is who will actually benefit from this wonderful idea - let's hope it doesn't result in a major scam! By the way, I was asked the other day whether a development of 2 houses on a small plot of land could be set up as a REIT. Well I suppose we will have to wait for the guidelines but I can't see this being possible.
On the other extreme the various measures introduced for personal tax. Great in theory but in practice........
The abolition of the requirement for the employed class to file returns if their only income is taxed under PAYE, was great to hear - after all it means less red tape. But how is to work and given our propensity to evade tax, isn't it likely that a number of people will do just that? It seems the onus is back on the KRA to find and catch the evaders and with a system that is already under strain, one wonders how practical it is.
Similarly, the measure to prevent the use of the Personal Relief (that princely sum of Kshs 1,162 per month) more than once is a great idea but who is responsible for enforcing it and who will be responsible if misused - the first employer, subsequent employers or the employee. It really seems minimal thought went into it. May I suggest some guidelines from KRA or we will all be like the proverbial dog trying to catch it's tail! I understand Rwanda has a scheme for nominating the Principal Employer and in this day and age of info sharing, why not talk to them?
Which conveniently brings me on to the information exchange agreements. Those of you with cross border transactions with related parties, be prepared. - all the revenue authorities are going to be talking about you and it is unlikely to be all good. And even if you don't fall into this category of taxpayer, you will be caught under this sharing arrangement if you have other sources of income cross border so beware!
Then my biggest bug bear - the doubling of WHT on professional fees from 5% to 10%. One of those shock and awe moments for me at least! My, and other suppliers of management and professional fees, cash flow is going to take a severe hit. Add to this the continuing saga of withholding VAT and I must say this measure is entirely counter-productive. It's not going to work I'm afraid.
No reduction in tax rates once again, indeed not since 2005, leaves the taxpayer worse off given inflation. Why this fear of reducing tax rates I am not sure but we have historic evidence of what they can do to collections. I hope the Budgetary Committee takes note of this and pushes for it before Finance Bill 2011 becomes an Act.
Sunday, June 12, 2011
Operations at the Jomo Kenyatta International Airport were thrown into disarray as aeroplanes could not land or take off for several hours.
The air traffic closure, from 5.30 pm until after 8 pm on Saturday was occasioned by a power blackout, according to the Kenya Civil Aviation Authority.
An aircraft was diverted to Entebbe airport in Uganda while the rest were forced to land in Mombasa and Kisumu during the time.
Others that were due for take off were delayed at the airport in Nairobi.
The Authority’s public relations officer Mutia Mwandikwa said the interruption stalled the entire computer system, including the runway lights.
“After the power failure, the back-up system also failed to start immediately. The UPS (uninterruptible power supply system) took some time before it was fixed,” he said.
During the time passengers were stranded while airlines were forced to adjust their schedules.
Mr Mwandikwa said normal operations at the airport resumed at 8 pm.
Someone needs to be fired or sued. Here is my take:
Someone in the earlier management [perhaps even current management] was paid off to install a crappy UPS system. So when push came to shove, it did not work!
UPS systems need batteries & these must be maintained but I would venture someone was sleeping on the job while being slipped a few coins!
The cost to airlines to divert planes to other airports is HUGE. There are costs for additional fuel to/from NBO + crew costs + upset passengers + wear & tear on aircraft + delayed schedules, etc!
Thursday, May 12, 2011
- Total Uganda 2,911 MT
- Libya Oil Uganda 345 MT
- Shell Uganda 1,750 MT
- KenolKobil 1,000 MT
- Gulf Energy 2,632 MT [Yes, that Gulf]
Wednesday, May 11, 2011
Monday, May 09, 2011
9 May 2011: MoE floats an "Emergency" Tender for the supply of 47 million liters of petrol through OTS [35,000 MT] for delivery between 17-21 May.
So the questions/observations are as follows:
- Why float an Emergency Tender if there is plenty of petrol in the system? Kenya uses 3mn liters of PMS then 67/3 = 22 days of petrol.
- Emergency Tenders tend to be pricier since the 'urgency' means paying higher rates for a ship or cargo than under normal circumstances.
- If the purchase/delivered price uses the May PLATT average (higher than April PLATT average price) then Kenyans are in for another price hike come 15 May 2011 for petrol.
- Which firms products [especially PMS] are clogging the KPC system?
- Why haven't these firms been forced to evacuate the products from KPC tanks?
- Will these firms be allowed to bid for the Emergency Tender?
- What if these firms bid, win & supply the products ALREADY in the KPC tanks?
With private imports by individual marketers restricted, all players must patiently wait to get supplies from the next OTS tender, even when their customers want more.
The only exception are the rare cases where politically-favoured importers are allowed to bring in product from outside the system.
Access to the only pipeline is regulated by an ullage committee under the oversight of the ministry of Energy.
Another interesting article from The Standard
For instance, it emerged on Wednesday that of the 19 million litres of petrol sitting in KPC tanks as wananchi were suffering, the largest proportion belonged to trading companies with no marketing outlets.
They were Addax Kenya Ltd, Royal Energy Ltd , Gulf Oil and an importer who signed as “one time vendor”.
How these small players came to hold so much petrol within KPC’s systems at a time when the rest of the industry was dry remains a puzzle.
The Ministry of Energy co-ordinates the so-called ullage committee that decides how to allocate space in KPC storage facilities to oil companies.