Cooking Gas & The Pecking Order

This is a Guest Blog. I have been asked not to reveal the name.


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.

Still a kanu government...

An article by Makau Mutua Wetang’ula behaving as if he is Bashir’s lawyer got me thinking...


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.

kalonzo muyoka - vice president - Well, I have to admit that for a chap who was all but finished in presidential politics in 2007, turned lemons into lemonade. He prophesied a miracle and a miracle he performed by selling out the ideals of Kenya's fragile democracy for VP's seat.

uhuru kenyatta - deputy PM - The current head of kanu but make no mistake, this is not the dreaded kanu of yore. The mantle of the new kanu may have passed to uhuru but the powers-that-be are almost all from the old kanu. uhuru was considered dan moi's 'project' or preferred successor in 2002. As head of the official opposition, in 2007, uhuru did the math & decided to support the incumbent rather than vie for the presidency.

musalia mudavadi - deputy PM - His dad was some sort of kanu hotshot. The son is an affable chap but seems to be hanging on others' coat-tails. He was made VP for a few days by dan moi. He was uhuru's running mate in 2002.

moses wetangula - foreign minister - Nominated by moi as an MP & he has returned that favour by being a politician who gives nothing but the best for the wrong cause. Implicated or accused of various scams (or at best incompetence) including the purchase of land in Japan for Kenya's embassy at an inflated price. Also known to open 'mouth, insert foot' in diplomatic circles.

george saitoti - internal security - He was dan moi's VP for ages, then dropped like a hot potato. Picked up again but not a chap who was taken seriously thereafter. He oversaw Kenya's worst economic crisis. Either he was clueless about goldenberg or complicit. According to many he was both.

mutula kilonzo - something constitution - was dan moi's lawyer for eons. Here is a chap who probably has a file ala J Edgar Hoover on dan moi & family's stolen wealth. All those pieces of land all over the country including bits of Mau Forest (or what is left of it). He might even have been kanu's lawyer. Well, at some point there was no real distinction between danny boy moi & kanu.

wiiliam ruto - dishonorable mention - came into the limelight in 1992 at the head of "youth for kanu 1992" (yk92) which was a means of getting moi & cohorts re-elected & screwing the Kenyan taxpayer. Soon thereafter came the goldeberg scandal. Well, the dirtier you are the better Kenyan idiots, erm, voters, like you. The erstwhile minister for education or agriculture or something of the sort.


john michuki - environment and national resources - was quite the powerful chap in the old kanu for a brief period. 

fred gumo - regional development - as minister for anything development is an oxymoron. He is as neanderthal as they come but this is Kenya where selling land 'allocated' to you by the kanu government back to the kanu government for KES 300,000,000 means you get re-elected.

william ole ntimama - national heritage & culture - is a chameleon. A former kanu man who changed his colors. I am not sure if he can even sit through cabinet meetings at his age.

yusuf haji - defense - is a chap who was moi's lightning rod as a provincial chief of sorts and now oversees Kenya's defense forces and the huge budgets for shady deals. A very pricey ship never delivered. Third-hand warplanes. Some junk helicopters. You name any piece of war debris, Kenya buys it.

dalmas otieno - public service - heads a ministry that does little. I am being extremely generous. He might have been minister for transport under danny moi. Means jackshit when you consider the state of Kenya's road/rail/air infrastructure during the kanu era.


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?

Business Daily... Quality? Editorial Failure?

From the Business Daily comes this gem...

http://www.businessdailyafrica.com/Opinion+++Analysis/Why+Kenya+needs+a+high+interest+rates+regime/-/539548/1281500/-/6nn5ne/-/index.html

In the United States for instance it is virtually impossible to buy anything in cash even if you have the money. All retailers insist on credit sales preferring to know your credit rating as opposed to accepting cash.

What a load of BULLSHIT - and not the type you can use to improve your crop yields!

Except for purchases over $10,000 (coz of money laundering laws/regulations) it is highly unlikely a retailer is going to refuse 'cash' for any purchase... Heck, why should they say no to good old hard cash?

I challenge the writer to visit a store - electronic, clothing, department store, etc - in the USA & say... I want to pay in cash... Chances are the cashier will smile & say "of course, sir/madam" and take the cash!!!

Retailers do NOT care about your credit history if you are paying cash... after all why should they bother with your credit history if you are PAYING in cash???

Kibaki & the Demolition Squad

Well, I have to give it to President Kibaki, who took a stand as regards the Syokimau, Eastleigh among other demolitions!

http://www.businessdailyafrica.com/Corporate+News/Kibaki+supports++controversial++house+demolitions/-/539550/1281632/-/hvdy4a/-/index.html

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...

http://www.businessdailyafrica.com/Opinion+++Analysis/Had+I+not+smelled+a+rat++I+would+also+have+fallen+victim/-/539548/1280374/-/11sxpsp/-/index.html

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!

The Dollarization of Kenya

Let's not kid ourselves... and huff & puff about the sanctity of the Kenya Shilling!

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:

• Cars
• Computers
• Flights (local & international)
• Fuel (yep, its a combination of oil prices prices in US$)
• And so on and on and on...

Just dollarize... Zimbabwe did it & it has one of the lowest inflation rates in Africa...

** 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...

A Rant On Public Finances

The original blogpost is linked here.

A RANT ON PUBLIC FINANCES

by Ramah Nyang on Friday, 25 November 2011 at 08:53

A quick update on public finances – there’s a treasure trove of data out there with all sorts of interesting inferences to be made on it. However, it usually takes an specific event to trigger a search for data of a specific sort – like say, why projects are stalling and salaries aren’t being paid.

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 –

[http://www.treasury.go.ke/index.php?option=com_docman&task=cat_view&Itemid=54&gid=70&orderby=dmdate_published]

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. 

Price Controls - Failures Abound in the Fuel Sector

The populists in GoK and Parliament decided that Price Controls is the way to go... then did (as usual) a half-assed job...

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.

http://www.businessdailyafrica.com/Corporate+News/New+charge+sets+up+consumers+for+higher+petroleum+prices/-/539550/1278248/-/xbrecm/-/index.html

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.”

So who bears the cost???

So whereas Banks (some whose owners/shareholders are either powerful politicians or very well connected) are not under any sort of Price Control regime... Basically, the populist Mandarins at the ERC are saying... "Let the banks make super-profits"

• 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...

As I have argued in the past, many OMCs will STOP importing fuel for the Wholesale Sector. A consevative OMC will import only that product/s it can quickly move through its own sales channel without giving/extending credit to anyone.

The (competitive) Free Market will be killed off as many smaller retailers rely on credit but at 24% (or higher) they cannot afford to absorb the financing costs associated with storage. The OMCs who import and distribute fuel (KenolKobil, Shell, Total, etc) will stop extending credit to the Retailers. In essence, 'trading' will slow down to a crawl.

Bottomline: Price Controls are bad and selective Price Controls create rent-seeking. I expect to see fuel shortages as the norm in some areas serviced by small/independent Retailers as OMCs will not import more than they can sell through their own channels to cut financing costs. The 'distant' areas with mostly Independents will see a thriving black market in fuels.

East African Community - Union? What Union?

Kenya & the rest of the EAC should stop wasting time (& taxpayer cash) on discussing a Monetary Union. It remains a WASTE of time (& taxpayer cash) in 2011, 2012, 2013 or 2014. IMHO, it will remain a waste long 2014! The only beneficiaries are the (taxpayer funded) academics, (taxpayer funded) government bureaucrats, (taxpayer funded) UN/EAC/World Bank/IMF officials & other so-called 'academics' who get grants or paid junkets to attend conferences on someone else's dime!

There are 5 members in the EAC:
Kenya
Tanzania
Uganda
Rwanda
Burundi

Potential Members:
South Sudan
Sudan
Ethiopia

• 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.

My roadmap is simple...

1. 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.
2. Uganda needs to build the oil refinery ASAP. Then supply Kenya, Rwanda, DRC & Tanzania.
3. Uganda and Kenya need to fix/upgrade/build the railway between Mombasa & Kampala. Then to extend it to Hoima and Kigali.
4. Burundi needs to follow what Rwanda is doing. Not rocket science. Copy the good. Avoid the bad. Simple.
5. 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.
6. 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.
7. Tanzania will plod along at its pace but there will some integration though much slower.
8. 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.
9. 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.

Monetary Union? Forget it until the trade barriers are removed.

Political Union? Laughable till 2020. Kenya's constitition is untested. Uganda's constitutional Term Limit was shredded to bit. Tanzania is the only EAC country with 'tested' political stability. Rwanda's first change in the Presidency comes up in 2017. No idea about Burundi. South Sudan remains unstable. Ethiopia is a virtual dictatorship. (Arab/Muslim) Sudan will not allow a non-arab or non-muslim to be president/imam/sheik. 

Fiscal Union? A pipe dream until "Open Trade" is implemented. We saw what happened in Europe where the Monetary Policy is managed by the ECB but Fiscal Policy was left with Greece, Italy & Spain.

Bottomline: No-one is giving up 'power' to someone else in the near future.

Price Controls - Failures

No matter how nice Price Controls sound to the public, the truth is they will eventually fail. There may be a TEMPORARY solution for a pressing need during a severe calamity but Price Controls extract a massive cost to any economy if applied over an extended period of time.

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...

http://www.nation.co.ke/business/news/-/1006/1275928/-/4gssnlz/-/index.html

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.

http://www.capitalfm.co.ke/business/2011/11/independent-fuel-dealers-complain-over-pricing/

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.

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?

Another Scam Coming Up at NOCK

I can almost guarantee that we will see a scam in the KES 9bn ($100mn) oil jetty project being handled by NOCK.

Why do I think NOCK can't handle it without losing money?

Well, the corrupt idiots [yes, both corrupt & idiots!] recently gave Prisko [as shady as they come] KES 90mn to source & deliver diesel. Yeah, right. What's more the stupid [& corrupt] decision led to late deliveries of diesel which Kenyans paid for through a price adjustment by ERC.

Yes, instead of disciplining the corrupt folks at NOCK, the ERC passed on the cost to the suckers known as KENYANS...! Who as usual, took it in the ... without a peep!

Market Outlook for Kenya - June 2011

Continuing my attempts to get Finance Professionals to provide insights, I have convinced

Sunil 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.

www.cannonassetmanagers.co.ke

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

Thoughts on Kenya's 2011 Budget &/or Ministerial Statement

*** Guest Post by Nikhil Hira - Tax Partner at Deloitte Deloitte & Touché Kenya

Well another budget season comes to an end - or has it? We heard Hon. Uhuru Kenyatta deliver his Budget speech (or was it a Ministerial Statement?) on 8 June 2011 amid considerable confusion. It really seems to me that clarity is needed on the New Constitution and what it really means during the Transition as we head towards its full implementation. Ever since the Referendum in August 2010, there have been several instances of us moving to the cliff's edge with one foot over only to be pulled back. This isn't the way to attract the investment we want and need. Indeed if we continue in this vein we will increasingly become the laughing stock of the world.

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.

Travel chaos at JKIA after power blackout

Click the link on the subject header for the article.

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!

KRA's Simba System is down!

In addition to the current problems Kenyans faces with the Fuel shortages caused due to possible corruption & ineptness at KPC, we have the problems at the inefficient KPRL.

Now... add KRA to the list of GoK entities who add to the problem!

http://www.nation.co.ke/business/news/Technical+glitch+paralyses+KRAs+tax+clearance+system/-/1006/1161276/-/q7m4x/-/index.html

Simba System is the online clearance/taxation system used by KRA. I support the move to an electronic platform but users complain it is no longer up to the task with frequent breakdowns & connectivity problems.

http://www.businessdailyafrica.com/KRA+clearance+system+hitch+hits+port/-/539552/1161372/-/5dp3hwz/-/index.html

Simba is having problems. Again. So even when fuel importers want to clear products through Simba, they cannot do so!

For traders, however, they are likely to count losses as Ms Memo said KRA would not reimburse costs incurred during the period the system is down.

Sigh, so KRA messes up & the consumers have to pay???

What does this mean?

- Greater lead times to get fuel to the fuel stations!

- Increased costs for OMCs [since most fuel is traded on borrowed funds]

- Increased costs as fuel trucks wait longer to load.

- Possible stockouts leading to increased costs across the board.

- Reduced tax collection by KRA with some losses which cannot be recovered!

Solution: No short-term solutions but Simba needs to be replaced or strengthened. Let ICPAK, Stakeholders & ICT Board have input on how to improve the stability & abilities of Simba [or help choose its replacement].

"Ghost" firms allocated ullage at KPC

It just gets more interesting [euphemism for oh crap!] at KPC...

So when Kenyans started peering intently into who the allotees of ullage were at KPC, some smart chap came up with an idea! How about using fake 'Ugandan' firms?

On 17-Feb-2011, a firm called 'Black Gold' [So Tintin-like as Bankelele would say] got an allocation for 2,697 MT of fuel.

Now, compare BG's allocation to these legit firms with retail operations in Uganda:

• 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]

The ship (MT NAVIG8 HONOR) discharged 26,776 MT of fuel & 10% of storage was allocated to Black Gold. Another interesting factoid is that the shipment was brought in by Gulf Energy.

Questions:

1) Did Black Gold evacuate the tanks? When?

2) Did Black Gold export the fuel to Uganda? When?

Kenya's Oil Industry - The Unholy Trio

Under the proud eye of the parent Ministry of Energy... the bad boys trio of Kenya's Oil/Fuel Sector!

Kenya Pipeline Company - After the KenolKobil & Glencore cases are done... Kenyan taxpayers will lose anything from KES 5-10 billion!

See earlier blog posts

http://coldtusker.blogspot.com/2011/05/kenya-pipeline-company-bankrupt-may.html (May 2011)

http://coldtusker.blogspot.com/2009/03/kenya-pipeline-company-bankrupt.html (July 2009)

National Oil Company of Kenya

Kenya Petroleum Refineries Limited

Petrol Shortages in Kenya - May 2011 Part 6

You heard it here first!

Rumors are rife that there are 2 more EMERGENCY TENDERS being floated tomorrow for imports of Diesel/Gasoil (AGO) & Super Petrol (PMS) tomorrow!

This will add to the crazy prices Kenyans are already paying since emergency shipments cost more just like many other 'urgent' tasks!

This second round of emergency tenders in May is after the 1st one a few days earlier!

More interesting stuff! KenolKobil refutes claims & allegations of delayed delivery by MoE for PMS shipments. Apparently, KK was restricted in supplying PMS as required by OTS due to KPC ullage constraints!

15,290 MT of PMS for delivery 10-11 June 2011 [At least 1 month off!]

31,355 MT of AGO for delivery 01-03 July 2011 [Good coz not so much of an emergency but still not part of the regular OTS imports]

Kenya Pipeline Company - Bankrupt? May 2011 Update

This was my earlier post on KPC's impending bankruptcy...

Glencore wants $40 million from KPC for products that 'disappeared' while under KPC's watch!

KenolKobil has a case winding its way through the courts for KES 4-6 billion [depending on the version]. KPC has appealed the verdict to award KK loads of moolah but KK has doggedly refused to be intimidated by KPC, MoE or other goons!

It is just a matter of time before KPC is forced to enter into a settlement with the various litigants!

Petrol Shortages in Kenya - May 2011 Part 4

5 May 2011: kiraitu murungi [Kenya's Minister of Energy] said there were 67mn liters of PMS [Premium Motor Spirit aka Super Petrol], 99mn liters of diesel [AGO] and 102mn liters of Kerosene in KPC's system. [Source: Nation Business Reporter per the Press Briefing on 5 May 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?

Oil marketers have faulted the process, saying, it would not be competitive. "Since the supply is an emergency, there is little time to get a competitive bid,” a leading oil marketer told the Nation.Others warned that this could push up the prices further.

However, KPC has maintained it was wet with the product, meaning, it had enough stocks of the popular super petrol.

MoE controls ullage [storage] at KPC & the OTS tender process which means they have the inside track of who imports what & when. KPC is 100% owned by GoK & controlled by MoE.

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

Kenol(Kobil) General Manager David Ohana confirmed marketers do not know the source of the consignment held in KPC facilities, which he says, had denied them chance to offload their imports currently in the high seas and attracting demurrage of US$40,000 (Sh3.3 million) daily.

So legitimate imports cannot be off-loaded while the tanks are full yet there is a 'shortage'???

"Kenya Oil Industry in chaos" from Daily Nation

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.