Category: Business

Lake Turkana Wind Power (LTWP) which is Kenya’s largest private sector project will not be getting Google as a new investor as the American multinational technology company has announced it has cancelled plans to buy a 12.5 percent stake into the project.

Google’s interest in LTWP had been disclosed by Norwegian investment company Norfund which has a 6 pc stake in the power plant. “Now that the plant is operational, more international investors, including Google, are looking to invest,” Norfund’s annual report had stated.

The 310 megawatt (MW) capacity wind farm was commissioned in July last year even though it was initially set for completion in 2017. Google which was expected to buy Denmark’s Vestas Wind Systems stake has blamed the delay for the cancellation, Vestas told Danish media.

“Due to delays relating primarily to the transmission line, the Vestas agreement with Google was cancelled in 2019,” said Vestas. “As Vestas’ strategy doesn’t include being a long-term wind park owner, we’re currently in commercial dialogues with potential buyers of our shares.”

Google is one of the highest-profile corporate backers of wind and solar, most notably through power purchase agreements. The web giant claims it is the largest corporate purchaser of renewable energy globally meaning Kenya has suffered yet another major blow in the production of renewable energy.

British exploration firm Tullow Oil has now announced that it plans to cut a third of its staff to slash its administration costs by a fifth, or around $20 million in a new restructure plan.

The company in a notice stated that it had embarked on reviewing its business operations and financial performance that are constantly being affected by the company’s growing wage bill. “These factors have affected the ability of the company to continue sustaining the human resource wage bill…. Resultantly, it is now inevitable that there may be job losses and redundancies at all levels and cadres of our organisation,” read the notice in part.

“Redundancies will be implemented in accordance with employees’ respective contracts employment, the employment laws, and the relevant Company policies,” further read the statement.

The move would shrink Tullow, which industry sources say is looking to sell its Kenya projects once vaunted as a growth engine for the group, to a workforce of around 650 people and come alongside pay and hiring freezes, the source said.

The firm attributes it’s woes on the production patterns in Kenya and other African countries.

The Irish founded but London-listed firm had lost half of its market value after its shares took a nosedive on December 9, following a surprise exit of its Chief Executive Officer Paul McDade, and Exploration Director Angus McCoss. Tullow has yet to announce a new chief executive.

It costs you upto Sh17,750 annually to keep your money in a bank in kenya, a two-year survey of the banking market by Financial Sector Deepening (FSD) Kenya has revealed. The cost of having an account is diverse across banks, averaging at Sh4,419 p.a.

Standard Chartered Bank’s “all in one account” is the most expensive to maintain charging Sh17,750,  a 31 pc spike from the previous charge.

Barclays “ultimate account” is the first runners up in the category charging Sh14,558 to maintain, followed by NIC Bank’s “move pay as you go” (Sh13,393) and Stanbic’s “smart” (Sh12,312) and “silver pay as you go” accounts (Sh11,676).

Diamond Trust Bank’s current account was the cheapest, becoming the only lender that will charge you less than Sh1,000 annually to bank with the at only Sh845 a year.

“Accounts that charge a monthly ledger fee have higher annual costs. However, the line between pay-as-you-go accounts and flat fee accounts is blurred as some pay-as-you-go accounts charge a monthly ledger fee. Likewise, some flat fee accounts also charge per-transaction fees such as withdrawal and transfer fees,” FSD annual report for 2018 stated.

The survey found that a bank customer who transacts digitally saves an average of Sh9,350 in annual transaction costs.

Tullow Oil recently put up its stakes in Kenya’s first oil development , sources said the firm was selling their entire 50 pc stake. This has raised eyebrows over the future of the country’s future oil exploits.

The government insists kenyans will see a positive outcome from its Early Oil Pilot Scheme (EOPS) with the Anglo-Irish firm expected to deliver its final investment decision (FID) sometime later this year.

Kenya will be looking at a new operator on its crude developments after Tullow sells its stake in the project, “It changes the whole outlook for the Kenyan project. This is an adjustment to the entire national outlook,” Platform for Oil and Gas Coordinator Charles Wanguhu told journalists.

News about the potential exit spell doom to Project Oil Kenya, Wanguhu, however, said the quest for petrol-dollars by Kenya may not have entirely sunk as the sale presents the potential entry of a larger player. “It’s not all doom and gloom yet. You are looking at a majority shareholding on offer as both Tullow and Total puts up their stakes for sale together. As such, this is one solid block which would be attractive to a bigger investor,” he said.

The said entry of a larger player in the Project Oil Kenya operator may lead to an even more efficient development project by optimizing scale efficiencies and leveraging on easier decision making from the reduction in shareholding.

The China National Chemical Corporation (ChemChina) which owns the ChemChina UK Limited, the subsidiary which made the purchase of Kenya first batch of crude in August,  the China Petroleum and Chemical Corporation (Sinopec), the Royal Dutch Shell and ExxonMobil are firms that have been considered to take over.

In December, mobile lending app Tala decided to discourage Kenyans from borrowing from their app, running ads that urged customers not to take out loans.

Most Kenyans did not understand why the lender would be advertising against their own business and even faulted the marketing strategy since their business sorely relies on users borrowing loans and paying with interest. “So you guys instead of encouraging people to borrow you are discouraging them? Who is your marketing manager?” One customer asked on Facebook.

In 2019, the number of digital credit products in the Play Store continued to rise and without functioning credit bureaus or loan stacking databases consumers continued to borrow from multiple providers with ease leading to high levels of so did indebtedness.

Tala says they set out to help reduce this by showing customers how to budget for their Christmas celebrations and reminded them to spend their money wisely without having to take out loans.

“As a pioneer of the sector, we’re committed to doing our part to advance financial health and collaborating with other like-minded lenders on solutions. And we support and welcome regulations that would better safeguard consumers and build a vibrant digital lending industry” A statement from the five-year-old startup  Tala that recently received Sh11 billion in funding.

The mobile lender wants new regulation of the lending industry which is why Tala together with 11 other lenders founded the Digital Lenders Association of Kenya (DLAK) in June 2019 to try and introduce “self-regulation”.

Although quite limited, Tala says DLAK will continue to engage regulators and industry leaders to shape meaningful regulation that will protect customers and support sector innovation.

Tala says most of their loan defaulters are people who take loans due to unexpected medical bills. After a lot of research the company says in order to deal with this they developed an insurance cover for the customers. “We developed a pilot program with Turaco, an insurance company based in Kenya, to subsidize the cost of health insurance for select customers. We plan to continue scaling the pilot this year.”

Tala also says they are currently piloting and scaling a free financial coaching program to help customers plan and budget given that many of their customers are new to credit and debt management.

Kenyans deposited Sh76 billion more in savings and credit co-operative societies (saccos) in the year to June 2018, new data by the Treasury shows.

Total member deposits skyrocketed to Sh766 billion over the period up from Sh690 billion in 2017 reflecting an improving investment culture among Kenyans.

The Treasury says the increase in savings is due to strict enforcement of governance and accountability standards in co-operatives and the commencement of operations by the National Youth Service (NYS) Huduma Sacco while analysts say that the spike is due to high dividend payouts and an increasing number of Kenyans opting to leverage on their savings while taking loans to avoid the inconvenience of providing collateral.

“All that sacco members need to do is to save some cash and leverage on that to borrow. Also, returns on annual basis are higher for some of the saccos than commercial banks will offer,” Patrick Mumu, a research analyst with Nairobi-based investment bank Genghis Capital says.

Firms which had outstanding debts to saccos  also paid back Sh1.005 billion as at the end of last June 2018 compared to Sh911 million in the previous fiscal year – an improvement of 10.3 per cent or Sh94 million the Treasury stated.

Unlike in the banking sector, this growth has happened with very little technological interventions. Saccos hold over 40 pc of the GDP and 35 pc of total savings in the country. This means if they are supported further they can easily change our country

Kenya’s real estate market has left developers and investors with losses that are worth billions of shillings as the investments went on a sharp decline in the last five years.

Back in 2015, financial services provider Stanlib Kenya launched the first Real Estate Investment Trust (Reit)at the the Nairobi Securities Exchange (NSE). Kenyans would buy into the Reit with as little as Sh20 per share, this was an unbelievably good deal seeing as Stanlib launched the Reit at the peak of the sector when news about developers making billions of shillings buying, developing and selling residential and commercial property were nigh.

Stanlib fund managers sold optimism to Kenyans, the Reit would be the answer to opening up Kenya’s multi-billion-shilling property sector for the masses, even to those with little income. “Many retail investors want to invest in real estate but are held back because of the high capital investment required and risks associated with it,” one of the managers told journalists.

Five years later, The Reit that had promised ordinary Kenyans that they would have a chance to own a piece of the real estate billions has instead made them massive losses. Fahari iReit now retails at Sh9.60 per unit at the NSE meaning shareholders will be losing more than Sh1.6 bn on paper value of their original investment.

Large investors such as the World Bank’s private sector arm (the International Finance Corporation (IFC) which had invested Sh678 million will now be cashing out on less than half of its investment.

Stanlib Income Reit might have pinned its hopes too high when they injected the first cash they raised into Greenspan Mall. Stanlib’s rental income had declined from Sh135 million to Sh132 million in the first six months of 2018, with their net profit dipping by 16 pc from Sh78 million in the first half of 2017 to Sh65 million by June in 2018.

By the end of 2018, Stanlib was among five cash-strapped listed companies that the capital markets regulator called out for operating below the required capital and liquidity limits. Stanlib has since announced it will sell its Kenyan operations to the Philip Ndegwa family through ICEA Lion Asset Management.

According to a report, house prices in Nairobi have been on a sharp decline in the last quarter of 2019, sliding by 5.4 pc in the year to September, the Decline has been associated with oversupply as more and more Kenyans opt to invest in the real estate sector. Towards the middle of the 2019 demonetisation drive, Central Bank Governor Patrick Njoroge said lots of dirty cash was being offloaded into the real estate sector. “This not only made the sector lose structured pricing index, but it also made the sector lose competitiveness, as it was reserved for the obscenely rich to transform it into an economy of thieves’ public auction sector,” he said.

In December, mortgage lender Housing Finance Group (HF Group) announced it would be closing down its investment unit, in a move aimed at cutting losses and strengthening liquidity.

Light at the end of the tunnel? 2020 is the year when confidence will gain ground for local real estate, according to PricewaterhouseCoopers in a report. The report, ‘Real Estate 2020: Building the future’, says Kenya will be a key pillar in the global investable real estate, which is expected to expand substantially.

Contrary to a statement by British exploration firm Tullow Oil that it has the financial muscle to stay in Kenya late last year, new reports now show that the company has put up its stakes in Kenya’s first oil development that could see Tullow exit completely amid uncertainty over the project’s launch, banking and industry.

“Our focus remains to deliver an FID (final investment decision) in Kenya in late 2020… we are engaging the government with a view to finding an amicable solution to pending issues that have delayed FID,” Tullow Kenya Managing Director Martin Mbogo had said.

The Irish founded but London-listed firm had lost half of its market value after its shares took a nosedive on December 9, following a surprise exit of its Chief Executive Officer Paul McDade, and Exploration Director Angus McCoss.

last year Tullow had indicated it intended to sell up to 20pc of its 50pc stake for Blocks 10 BA, 10 BB and 13T in the South Lokichar Basin. Sources now say Tullow together with Total, have hired French bank Natixis to run the joint sale process.The sources said it is now willing to sell the entire 50 pc stake.

French oil major Total, meanwhile, aims to sell up to half of its 25% stake in the Kenyan project.

The Kenya Development Plan for the South Lokichar Development project was targeted for late-2019 FID but is still in the negotiation stages with the Kenyan government, Tullow this month said it was still targeting FID by the end of 2020, with production starting in 2022, describing the timeline as “challenging”.

The entire project is valued at between Sh100 – Sh200 billion ($1.25 billion-$2 billion), but it is hard to be precise because the development has yet to receive a final investment decision (FID).

Toyota Motor Corporation TM is recalling 3.4 million vehicles worldwide due to an electronic fault that could lead to air bags not being deployed in crashes. The cars being recalled include include the Corolla 2011-2019, Matrix 2011-2013, Avalon 2012-2018 and Avalon Hybrid vehicles 2013-2018.

The vehicles being recalled may have an electronic control unit (ECU) that does not have adequate protection against “electrical noise” that may lead to crashes, resulting in the air bags being incomplete or not deployed. The ECU device is supposed to communicate with a car’s sensors and help trigger its airbags and seat belt pretensioners, which is a part of the harness that is designed to tighten and hold riders back during a collision and help lower the risk of injury.

The subject vehicles are equipped with a front driver airbag with an inflator made by Takata and according to information provided by Takata, the airbag may not deploy properly.

Should such an event occur, there’s incredible danger posed to the drivers and passengers.

For the past few years, Toyota has been recalling vehicles in large numbers for various safety concerns

Improved diaspora remittances have been cited as one of the reasons for the strengthening of the shilling with the remittances playing as Kenya’s biggest source of foreign exchange, ahead of other traditional sources such a tourism, tea and horticulture exports. New data now shows cash sent back home by Kenyans living abroad in 2019 hit a record high of $2.7 billion (Sh280 billion).

The amount was Sh6.3 billion more than the $2.6 billion (Sh272.3 billion) sent in 2018, a 3.7 pc growth rate, the slowest since 2015. in 2018, the remittances had grown by 40.7 pc from 2017 at the same period in the year.

A weekly bulletin by the Central Bank of Kenya released last Friday shows inflows increased to $250.3 million (Sh25.2 billion) in December, up from $218.8 million (Sh22 billion) in November with those in US accounting for half of the total cash sent. in 2018, Sh22.2 billion was sent home in November.

“The cumulative inflows in 2019 increased to $2,796 million (Sh282.3 billion) compared to $2,697 million (Sh272.3 billion) in 2018, reflecting a growth of 3.7 per cent,” said the CBK

North America accounted for 50 pc, Europe accounted for 20 pc and the Rest of the World accounted for the remaining 30 pc of the total remittances in December.

The amount, however, fell short of the World Bank’s prediction of a 5 pc growth which would have been Sh285.5 billion. ‘’The rate of growth of remittance inflows will rise by just 5 percent compared to a 39 percent growth between 2017 and 2018,’’ World Bank had said.

Kenyan startup ventures raised Sh42.8 billion ($428.91 milllion) in 2019 as African startups attracted a record high of Sh134 billion ($1.34 billion) in venture capital during 2019, with fintech raising Sh67.8 billion ($678.73 million) alone, according to a research conducted by WeeTracker. This is the highest amount of funding driven into the continent.

Its Decoding Venture Investments In Africa 2019 Report found that 427 startups raised funding throughout the year, and a mere 6% of these accounted for 83% of the total investments.

Kenya was one of the top destinations attracting deal flows, second only to Nigeria in the amount received. In comparison to figures from 2018, the number of deals in Kenya were more or less, with this year recording 72 deals, down from 77 in the last year. However, the investment volume went up by close to 300%. The gross escalation could partly be attributed to big-ticket deals of more than Sh4 billion ($40 million), nabbed by three companies, Branch, Bboxx and Carepay.

Kenya had 283.64% growth over the previous year’s funding amount, Nigeria and Kenya accounted for Sh109 billion ($1.09 billion) or “a whopping 81.49% of the total VC money raised in Africa”.

Fintech and agritech emerged as the top sectors in The Silicon Savannah. Similar to 2018, the highest amount of investment went to a fintech company.

A total of 203 investors participated in the investment landscape in Africa with about 427 startups raising funding in various rounds throughout the year.

Over 75% of the deals were in Nigeria, Kenya and South Africa, with fintech continuing as the sector that attracted the most funding.

Nigeria led the investments with Sh66 billion ($663.24 million) with South Africa coming in third.

In 2018 African startups had raised Sh72.5 billion ($725.6 million), and Sh20 billion ($203 million) in 2017.

SWVL, the Egypt-based ride-hailing app has added Eldoret to its list of long distance routes as the company seeks to extend their ventures out of Nairobi where it was previously available.

The platform had quietly launched its commuter services to Naivasha, Meru and Nakuru routes during the festive season. “Long distance travel is a viable business segment for us and you will see a lot more investment into it as we get into this year,” SWVL general manager Shivachi Muleji said.

Kenyana who want to travel from Nairobi to Eldoret will be charged Sh1,200 while those travelling to Nakuru or Naivasha from will pay Sh1,000 on each of the routes. “When you think about the level of travel between Nairobi and Nakuru, for example, on a daily basis, you start to see why we would invest in it. Our core market will always remain the Nairobi commuter, but we will seek growth in new business areas.”

SWVL also added a number of routes to its ever growing trips around Nairobi county, previous 55 connections, some of them include Ruai, Kiserian and Ngong.

SWVL recently resumed their services after a period of disruption that followed the firm’s move to have the buses comply with the National Transport and Safety Authority rules.

Starting the year 2020 on a high note, the Kenya Revenue Authority (KRA) yesterday began the implementation of an additional 3 pc tax burden on small and mid-sized businesses like Juakali on sales made.

The turnover tax which will hurt enterprises that make less revenue was re-introduced for businesses whose annual sales are below Sh5 million to boost tax collections when President Uhuru Kenyatta signed into law the Finance Act 2019 on November 7.

The turnover tax law had been halted back after poor performance in 2018 after most traders failed to make revenue disclosures, it was replaced by the presumptive tax  which will also remain an advance tax that will be deducted against the turnover tax traders have raised concerns over the levy citing deteriorating business conditions and additional operating costs.

The taxman has over the last few months been under pressure to hit their target tax collection, due to a drop in money in circulation in the country the taxman has been below target on collection of payroll taxes which account for nearly 50 pc of the taxman’s collections. Corporate taxes, have also decreased in in the country as most businesses issue profit warnings.

Imposing the tax on small traders is part of the new tax measures that are expected to boost collections and help KRA hit the revised target.

The Kenya Revenue Authority (KRA)now  expects to collect over Sh1.6 billion revenue from bottled soda and water sales before the financial year ends almost half the Sh3.6 billion the taxman had earlier anticipated.

Delayed rollout of the excise tax management system for bottled water, soda and juices will see the State forego more than Sh1.6 billion, even as the taxman expressed confidence in the implementation.

Enforcement will start in January.

This new system will require manufacturers affix new generation excise stamps on bottled water, juices, soda, energy drinks, non-alcoholic beverages, food supplements and cosmetics. This means the firms will have installed an automated stamp-fixing system and will be making real-time data transmission to the KRA.

About 175 out of the target 400 companies producing bottled water and juices have so far complied.