Syokimau - The saga continues...

This is a sleek website from the developers of Athi View Estate but there is probably no view left...

I am not sure if this project is endangered since it could be on land that KAA does not claim it owns...

Syokimau - Smoke, Mirrors & Bullshit

So AFTER the demolition of houses built in Syokimau, there will be a probe on why they were demolished?

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

Syokimau - Land Rights (or lack thereof) in Kenya

Do not buy a house in Kenya unless you are 100% sure that the title is 100% clean.

Why?

http://allafrica.com/stories/201104040237.html

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.

Cement Firms in East Africa

Globalisation...!
[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

Insider Dealing on Nairobi Securities Exchange

Thanks to the wrangles on the Board of CMC... some directors will start running scared at some of the listed firms on the NSE...

http://www.businessdailyafrica.com/Claims+of+insider+trading+emerge+at+CMC+case+hearing+/-/539552/1265234/-/fl98j3z/-/index.html

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 in 2012

These are just my thoughts/opinions. I am not going to link articles or stats but please do comment or correct me if I have made errors... Or if you disagree with me!

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.

I am of a Libertarian bent which means I am a Fiscal Conservative & a Social Liberal. I don't care what you do in your private life as long as you don't expect or have me pay for it!

The Bugbear is 2012's General Elections. Kenyans will pay a heavy price as the country comes to a standstill. Kenyans love elections. I think it is stupid for a country to be paralyzed just because we have elections. Folks in the USA work on on the even of Election Day, on Election Day and the day after. In Kenya, Election Day is often a holiday and often the day after.

If Kenya does not;

• 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

then 2012 is going to be very difficult for Kenyans. Whoever becomes the President will have a tough time getting Kenya back on its feet in 2013.

Do I sound pessimistic? Yes.

(Partial) Solutions

• 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.

The above solutions are  relatively easy to attain but they require an engaged citizenry not the current 'tunaomba serikali' nonsense!

2012 will be a tough year but if Kenya starts down the path of sustainable development, folks will sit up & take notice. They will choose to invest in Kenya which is a small but important step going into 2013.

Your thoughts?

KES 100 to US$?

It seems many Kenyans have resigned themselves to KES 100 to US$.

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

So why complain about the KES 100???

CBK Mismanagement of the Discount Window

*My apologies for any technical language but I shall try to simplify the blog post to appeal to all my readers. Suggestions/Corrections are welcome. Not complete coz I need to clean it up as well + complete it*

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:
- Depositors/Customers
- 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*

CBK - What is going on? Or not?

Can anyone make head or tail of CBK's recent moves relating to the Monetary Policy or Exchange Rate Policy?


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?

"We forecast that, having got its message across to the banking sector (though we are not sure what the message is), the CBK will relent and bring the overnight discount rate closer to 8%, without diluting its tight monetary policy stance."

So as CAM said "not sure what the message is" - What happened to clarity? Heck, I think CAM is being polite. You can't go start, stop, start, stop, start, stop... then start the process all over!

"we estimate that the weighted average rate of the rejected bids for the 30-year bond was about 21.7%"

Gulp! This would kill off investment since many would rather invest in T-Bonds than invest in the real economy! I do agree that CBK/Treasury should reject such bids but it also shows the lack of confidence in Kenya's Economic or Monetary Policies. If the (estimated) WEIGHTED AVERAGE is 21.7%, I dread to think what the higher end of the range was!

Bottomline: These announcements & badgering by CBK is confusing folks leading to a higher premium on loan & forex to 'mitigate' the uncertainty. I have spoken to many bankers who say they are MAXIMIZING the risk premium/spreads on loans & forex since they can't plan. 

Some banks have even stopped (reduced) lending - not because of the liquidity crunch - but the uncertainty of CBK's unpredictability. Unpredictability leads to Volatility leads to Higher Spreads leads to Higher Pricing/Costs leads to Reduced (sustainable) Economic Activity.

If I get the time I will blog on the CBK's crazy shenanigans at the Discount Window & how even a mediocre Finance/Economics/Banking students would have collectively scratched their heads at CBK's moves.


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.

* I hope Cannon is OK with the use of the quotes in red. I assume it is OK as long as I give credit to CAM & the newsletters are posted on their website *

Disclaimer - All comments/opinions are mine. The 'original' newsletter can be found at http://www.cannonassetmanagers.co.ke/newsletter-august/index.html and has a lot more detail. I also like the grading given to banks but note the lack of sufficient detail provided to the investing public.

ColdTusker BANNED from predicting scams

Mr. Cold Tusker,

I write to you to BAN you from predicting, forecasting or even dreaming of scams at entities under the control of the Govt of Kenya or Ministry of Energy.

Such predictions have a way of coming true. Furthermore, shedding light on such scams or potential scams makes us look exactly like what we are. We feel exposing these to the public shall open their eyes & make it difficult for us to continue such plans prior, during & post to the 2012 elections.

We have our friends (mboss, can I call them flunkies) in the Media who are capable of not informing Kenyans as & when needed.Of course, all actions are for the good of the few at the expense of the many.

This is a blogpost you posted in January 2009, please note as you predicted, such a scam did take place around June 2011 but we feel you should not predict or highlight such matters. Let our PR folks deal with it by:

• 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.

To save taxpayer money, we have pre-printed letters blaming KenolKobil for any & all ills facing us. We found it easier & thanks to the Media & gullible Kenyans, it works very well.

So herewith we BAN you from predicting scams concerning any of the following entities:

Govt of Kenya

Ministry of Energy

Kenya Pipeline Company

National Oil Company of Kenya

Central Bank of Kenya

After all the transfer of wealth of only 10/- per Kenyan per month means a freaking lot to the some of us. Consider it our version of "AllKenyans4SomeKenyans".

Thank you for your cooperation on behalf of the politically helpful folks,

[Names Redacted]

WHAT DO YOU THINK COLDTUSKER SHOULD DO?