12 Feb

Kenyan Currency’s Resilience Shows Cracks Amid Political Crisis

Kenya’s shilling weakened the most in more than six months on Monday, as warning signs started to flash for a currency that has, until now, been resilient in the face of a political crisis that shows little sign of abating.

The currency of East Africa’s biggest economy has climbed 2.1 percent this year, reaching its strongest level since June 2016 and posting five straight weeks of gains even as a basket of emerging-market currencies declined amid a global stocks selloff. The shilling fell 0.3 percent by 1:26 p.m. Monday in Nairobi to 101.10 per dollar.

That rise had sent the dollar’s 14-day relative strength index versus the shilling plunging to 6.3 last week, its lowest in more than a decade and well below the level of 30 that some technical traders see as a signal it’s oversold. It rose on Monday to 22.6.

The currency’s price-swings are increasing. Its one-month historical volatility, while low relative to major emerging-market currencies such as South Africa’s rand, has spiked to the highest in more than a year.

Exotix Capital said in a note Thursday that the shilling was, along with the Pakistani rupee and Omani rial, the most vulnerable of the frontier-market currencies it covers. Hasnain Malik, a Dubai-based Exotix analyst, said the shilling was overvalued relative to its real effective exchange rate and cited Kenya’s widening current-account deficit as a concern.

Even stock investors have stayed bullish. Though the FTSE NSE Kenya 25 Index dipped 0.7 percent to 228.31 points on Monday, it’s still near a record high.

Equities have more or less risen steadily since Kenya’s election re-run in October, even though the main opposition alliance has refused to accept defeat. On Jan. 30, it held a mock ceremony to swear in its leader, Raila Odinga, as the “people’s president.” President Uhuru Kenyatta’s administration retaliated by arresting opposition officials and closing down some television channels.

To read the full article, click here. 

 

05 Oct

Comic Relief and Fairtrade back ethical gold mining in east Africa

Comic Relief and Fairtrade have joined forces with the Dutch government to back a $15m (£11m) scheme to support ethical gold mining in east Africa after a successful pilot project in Uganda.

About a fifth of the world’s gold produced every year comes from small-scale mines where millions of people work in hazardous conditions without access to modern technology. They resort to extracting and crushing ore by hand before using water and then highly toxic mercury or cyanide to separate the gold. The ad hoc process is not only harmful for the individuals involved, some of whom are children, but pollutes their local environment. It is also highly inefficient, on average extracting only 40% of the available gold.

US interest rate rise to deepen debt crisis in developing world
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Fairtrade is working with specialist mining consultancy the Dragonfly Initiative in trying to raise up to $4m in investment by 2020 from specialist environmental and social investors, government bodies and big business to help small-scale artisanal mines. Half of the funds will be loans to support investment in better technology and the other half grants to support building the organisational change necessary.

“We are trying to generate a proof of concept which has the possibility to bring economic benefits to thousands of families. We also hope over time to increase supply of Fairtrade gold,” said David Finlay of Fairtrade. At present only about 400kg of the ethical precious metal is produced ever year.

“Miners want to improve standards but it is a real struggle. They want access to finance to acquire equipment and reduce reliance on mercury and enhance the recovery of gold. There will be both an economic and environmental benefit,” Finlay said.

Using a centrifuge device, which costs about $5,000, increased the extraction rate for gold to 70% in the Uganda trial. But introducing the machinery is only part of the answer alongside supporting miners to work in a more organised and safe way.

 

Read more: Comic Relief and Fairtrade back ethical gold mining in east Africa

28 Sep

Businesses: East Africa is a Rising Hub – Jad Abbas, The Abraaj Group

East Africa: being local is key. Simply put, it helps us to identify great businesses, work in partnership with investee companies, and manage risks. That philosophy has always been core to the investment thesis across each of the markets we work in and Africa is no exception.

With a two decade history in the continent and investment in more than 80 businesses, this is a region that we know extremely well. I have lived in both East and West Africa and worked on deals across sectors including Mouka, a leading mattress manufacturer in Nigeria. Two fundamentals are clear: Firstly, the continent is not, and cannot, be treated as a monolith. Secondly, local, national and regional nuances are critical to success and our track record in Africa is proof of Abraaj’s ability to create value for its partner companies.

This July, we announced our latest investment in Sub-Saharan Africa through the acquisition of Java House Group (Java House), the largest casual dining chain in East Africa with 60 outlets in Kenya, Rwanda and Uganda. As a member of the East Africa investment team that worked on the acquisition of this truly iconic asset, I believe the transaction was timely and targeted, especially when considering the underlying dynamics of the sector in East Africa, but also across Sub-Saharan Africa.

Enabling Environments

At a time when the ‘Africa Rising’ narrative seems to be in question, our focus as long-term investors in the continent remains resolute. Why do I say that?

If you look at the African Great Lakes area, the economic growth we expect to see over the next decade, combined with compelling individual investment opportunities makes it an exciting time to be active in this market. And it is not just Abraaj that believes in this opportunity. The Africa Private Equity and Venture Capital Association (AVCA), a leading Pan African investment body which promotes and enables investment in the continent, likewise foresees a shift of investment activity to East Africa and a maturing secondary market in the years ahead.

Read more: East Africa: A Rising Hub

 

 

06 Sep

Whatever happened to East Africa’s oil boom?

Politics has been central to the progress, or lack thereof, in developing East Africa’s oil. And it will continue to be.

It was not long ago that East Africa was the shining frontier of the continent’s oil scene. Uganda sparked the rush in 2006 after wildcatters ventured deep inland and made Africa’s largest onshore discoveries in decades. And Kenya’s north­western Turkana region continued the run with new oilfields found in 2012.

With crude prices averag­ing almost $112 per barrel at that time, it was hoped these fresh discoveries could be linked up with a new regional pipeline network stretching from South Sudan to the coast. It was believed that oil could economically transform the East African region.

Yet a decade on, little progress has been made on the pipeline, while Uganda and Ken­ya’s oil remains trapped far from interna­tional markets.

Security risks have hindered developments, while the steep drop in crude prices from late-2014 has slowed things down. However, politics – both domestic and regional – have also been central to the delays.

Read More: Africa Arguments

 

14 Aug

Kenya: Buy-Out Plans Boost Uchumi Shares Despite Drop in Sales

Uchumi

Shares of Uchumi supermarket continued an upward rally at the bourse this week following revelations of possible cash injection by a strategic investor.

While other counters suffered a lull or no-show performance, the retailer shrugged off post-poll jitters to post an impressive Sh4 per share sale for 937,700 shares, up from last Monday’s 3.70 price when it moved 514,100 shares.

On Friday, the government-owned listed firm issued a statement exuding confidence of a impending deal between it and a strategic investor who had pledged to pump in Sh3.5 billion to acquire a stake.

This, they said, would help them settle debts owed to suppliers and property owners in Kenya, Uganda and Tanzania, with part of the proceeds to be used in replenishing stocks.

The announcement on August 5 elicited positive interest in Uchumi shares that witnessed a sharp rise in trading from the 35,300 shares sold on August 3 to August 5’s close of day price of Sh3.45, where 828,400 shares were dealt.

Uchumi’s chief executive Julius Kipng’etich said the cash-strapped chain was seeking between Sh3.5 billion to Sh5 billion of debt capital through issue of convertible debt instrument or outright purchase of equity or a combination of both.

On Friday, Uchumi said the process of bringing on board a new investor would take four months or less, adding that the funds realised would help revamp its operations, stock up shelves, pay suppliers and rebuild customer confidence.

“The transaction process will come to a conclusion within the stipulated time or less, marking the last mile of Uchumi’s recovery,” said the CEO.

While auditors blamed Uchumi’s woes on mismanagement and abuse of office, the retail sector’s market leader Nakumatt has been suffering financial woes that saw it announce plans to bring in an investor to inject an undisclosed sum of money for a 25 per cent equity.

The firm has sought court intervention to avert seizure of its assets to repay rent arrears for two of its stores while workers have been going without salaries, raising fears on its preparedness to handle expansion into East Africa.

The regional operator with 65 stores across Kenya, Tanzania, Uganda and Rwanda has expressed optimism of returning to profitability, but emerging details show all is not well with suppliers, workers and property owners who remain unpaid.

Suppliers Association chairman Kimani Rugendo said talks were ongoing over unpaid deliveries.

In its rescue plan, Uchumi saw Dr Kipng’etich move in, closed its Uganda and Tanzania subsidiaries, as well as several branches in Kenya, and got a not from shareholders to seek injection of fresh capital.

It also sold its Ngong Hyper and Lang’ata Hyper properties on a buy-lease back arrangement.

Source from allAfrica