AS THE sun
goes down over Nairobi, a new rich set of T-shirt-wearing
Kenyans, most of them black and in their 30s, roar with laughter as
they quaff whiskies and smoke giant cigars in the Capital Club, the
country's latest temple to Mammon. A year's membership, a beautiful
waitress proudly purrs, is "a million shillings"--about $10,000. Your
correspondent watches English football on one of four large television
screens, alongside a wall of faux-Masai shields, while waiting for his
would-be host, the spokesman of President Uhuru Kenyatta. Alas, the
spokesman fails to turn up; it is a Saturday evening, but the
president is apparently too busy to spare him. Mr Kenyatta, one of
Kenya's richest oligarchs, who next month will complete his first year
in office, is reportedly fond of similar ritzy watering-holes.
Barely a mile away from the Capital Club, the acrid fumes of charcoal
fires in Kibera, a notorious slum, mingle with the stench of sewage
running down the muddy alleys where perhaps 800,000 Nairobians live in
hugger-mugger squalor. The government, says May Achieng, who runs a
church-linked school there, provides "absolutely nothing" in the way
of services. Manual workers lucky enough to have a job in the
metropolis can earn 200-300 shillings ($2-3) a day. Domestic and gang
violence are rife. Armed police have a station at the entrance to
Kibera, but generally keep out of the slum. Visitors are warned to
watch out for robbers and "flying toilet"--bags of excrement chucked
out of houses at night. Politicians, says Mrs Achieng, turn up only at
election time, "or if there is a fire or some kind of disaster".
These two Kenyas exist cheek by jowl, both of them, in their way,
equally dynamic. Half a century after independence from Britain, rich
and poor are both locked into a system of patronage and tribe, all
competing for advancement, whether for modest jobs in the civil
service or for huge bribes to fix contracts for grand infrastructure
projects. In the aftermath of a disputed election in 2007, Kibera,
whose districts are unofficially divided along tribal lines, was
affected as bloodily as anywhere. "One community chopped off the
sexual organs of another community," says Mrs Achieng, a Luo, whose
leader, Raila Odinga, was reckoned by independent observers to have
been cheated of victory. Defeated again last year, in a fairer though
still flawed poll, he remains the opposition's head.
If this system is to hold, several requirements must be met in the
years to come. The weather, notoriously variable, must be clement
enough to satisfy the more than half of Kenyans who still live on the
land. At the time of independence, in 1963, the countryside barely
sustained a population of 8m; that has now swollen to 45m. Law and
order must continue more or less to prevail, even while the police, in
the words of a security analyst, "are corrupt from top to bottom".
Terrorism, especially a recent wave of it perpetrated by recalcitrant
Somalis and sundry Islamist extremists, must be contained. The balance
of power, already skewed, must not tilt too far in favour of one
tribe. And the economy must grow fast enough to spread the largesse of
patronage, leaving enough to trickle down even to the masses in the
likes of Kibera.
None of this can be assured. And yet, polarised and unequal as Kenya
is, its progress punctuated by electoral violence and spasms of ethnic
tension, the country has for the most part muddled valiantly ahead.
It remains the economic and political hub of wider east Africa,
drawing a quarter of a billion people into its orbit. The stock- and
housing markets are booming, prices in parts of Nairobi rising
sevenfold since 2009. The economy grew by 5% last year and is likely
to do just as well this.
Diplomats seeking to solve crises in Somalia, South Sudan and the
Great Lakes region encompassing Rwanda and eastern Congo are based in
Nairobi, which also hosts a plethora of UN regional headquarters. Some
international companies are shifting their African headquarters from
South Africa to Kenya, the fifth-biggest economy south of the Sahara.
Kenya Airways is among the best in Africa.
The country is also bidding to become a hub of IT. Its M-Pesa
mobile-telephonic banking system, from which more than half of Kenya's
people benefit, has proved a global model. The country has one of the
highest rates of Facebook membership in Africa; more than half a
million Kenyans are on Twitter. In the Kilimani suburb of Nairobi, a
thriving outfit called the iHub, led by a red-bearded American called
Erik Hersman, serves a burgeoning community of innovators, technology
investors and researchers, spurred on by Google and Microsoft, among
Hopes have been rising that discoveries of oil in remote Turkana
county, in the north-west, may soon be matched by an offshore gas
bonanza. This could give a boost to the much-delayed Lamu Port and
Lamu-Southern Sudan-Ethiopia Transport Corridor, known as LAPSSET,
which would include a railway, fibre-optic cable and pipeline, even if
its proposed connection to South Sudan (now in the throes of civil
war) and Ethiopia is uncertain.
At last Kenya is seriously trying to improve its dreadful transport
links, with help from China. Nairobi's traffic is still in a perpetual
jam, but work on a ring road is under way and there are plans to build
a new railway line from Mombasa to Nairobi, besides revamping the one
that goes on to Uganda. A trans-Africa highway should eventually run
from Mombasa through Kenya and Uganda and even across Congo to the
Against this hopeful backdrop, grave worries persist. The attack by
Somali extremists on Nairobi's Westgate shopping centre in September,
which left at least 69 people dead, has shaken confidence in the
police and armed forces, who looted the place afterwards. Gross
overreaction by the police against suspected Islamist extremists on
the coast, involving extrajudicial killings, has served only to
recruit more people to the extremists' cause. Another attack on a
prominent target is all too likely--and could drive away foreign
investment. Several close shaves since December include a bomb that
failed to detonate near the British Airways check-in counter at
Nairobi's main airport, ludicrously shrugged off by the interior
minister as "an exploding light-bulb".
This year has witnessed a sharp rise in violent crime, already at
epidemic levels. The police are frequently suspected of complicity.
Big companies rely on private-security firms, of which there are at
least 200 in Nairobi alone. Their staff are far better paid and
equipped than the police, though they are not allowed to be armed.
President Kenyatta is considered so rich that he has no need to
feather his nest, thanks to the wealth amassed by his family during
and after the presidency of his father, Jomo, who ran the show from
1963 until his death in 1978. Mr Kenyatta has spoken out against
corruption and docked his own pay by one-fifth. But nobody thinks that
graft is being seriously tackled. The railway contracts, awarded
following closed bidding, and an extravagant scheme to provide schools
with computers are dogged by accusations of graft.
The creation of 47 counties, as a result of a new constitution
endorsed in 2010, has added a new layer of corruption and taxation.
Moreover, the two houses of parliament, the county governors and the
courts (under an admirably independent chief justice, Willy Mutunga)
are paralysed by a dispute over whose powers and decisions should
As for the president, he has been woefully distracted by his
indictment by the International Criminal Court (ICC) at The Hague for
allegedly orchestrating violence after the election in early 2008. He
has used every conceivable ruse to ensure that his case ends in
acquittal or is dropped altogether, an outcome considered increasingly
likely. The Standard, a Kenyan newspaper, reported on February 24th
that nearly half of the witnesses enlisted by the prosecution had been
Mr Kenyatta has stirred up Kenyans and fellow African leaders against
the ICC, badly damaging relations with allies in Europe and America.
If the case fizzles out, they may be repaired. But much of Mr
Kenyatta's first year in office has been wasted on this issue. In any
case, there is a growing perception that he lacks grip. He failed to
sack any senior figures in the wake of the Westgate fiasco. Despite
his declarations against corruption, he has instigated no
investigations over the railway contracts and other dodgy-sounding
And Kenya remains split along tribal lines (see table). Mr Kenyatta's
fellow Kikuyu, the largest and richest group, are perceived by members
of other tribes to be "eating"--as the Kenyan metaphor goes--more than
their fair share of the cake. William Ruto, the vice-president, who
heads the Kalenjin group that ruled the roost under a previous
president, Daniel arap Moi, is said to be unhappy. He, too, has been
indicted by the ICC. Should the case against the president fail but
the one against Mr Ruto drag on, the coalition would wobble and could
fall. Mr Kenyatta is said to be lining up Mr Moi's son Gideon as a
"Kenya is very polarised," says John Githongo, a veteran
anti-corruption campaigner who in 2002 was entrusted with cleaning up
government but had soon to flee abroad for his life. "It is a country
no longer at ease with itself." The "coalition of the accused", as he
has mockingly called it, may not last. "The Kalenjin will never trust
the Kikuyu," says a banker friend of Mr Kenyatta. "No matter what the
ICC says, Kikuyus in their hearts believe Ruto orchestrated the
violence against them. But for the sake of the government's survival,
they're not saying it too loudly."
Campaigners for democracy and openness are worried that Mr Kenyatta
and his friends are trying to impede them, much as the government has
plainly done its best to hamstring the ICC's investigation. Bills are
being put forward in Parliament to curb the buoyant media and to limit
foreign funding for NGOs. On March 7th one of Kenya's liveliest
anti-establishment campaigners, Boniface Mwangi, was beaten up by
police. "There's a danger we are sliding back to the ways of the Moi
era," says another disconsolate pro-democracy activist.
Nonetheless, in its usual inequitable and patchy manner, Kenya is
powering ahead. The vitality and reach of social media make it
impossible for Mr Kenyatta to acquire the sort of powers Mr Moi
exercised in what was then a one-party state. But he is finding it
hard to keep Kenya both dynamic and harmonious. A year into office, he
still has to prove that he is the right sort of leader. If the ICC
case is put to one side, he will have no excuses.
Aly-Khan Satchu1 min ago
I think you have summed it up just right. Lots of Promise a potential
Break-Out Moment as long as it does not get sacrificed on the Altar of
the Government's recurrent expenditure. And I absolutely agree, it is
the President's Charm and Manner and an instinctive sense amongst
Kenyans that his Motives are in the right place, which has got us
here. Like Yourself, I think the President has now to walk the Talk.
It is extraordinary that not one Official has been fired. Its just
peculiar. You begin to look a little helpless when not one fellow gets
fired after Westgate and a string of other issues. Aly-Khan Satchu
Kenya likely to start marketing Eurobond later this month-IMFhttp://in.reuters.com/article/2014/03/13/kenya-imf-economy-idINL6N0MA2LB20140313NAIROBI, March 13 (Reuters) -
Kenya plans to begin marketing its debut
Eurobond at the end of this month, and investor interest in the issue
appears strong, the International Monetary Fund said on Thursday.
Kenya expects to borrow up to $2 billion from international markets to
refinance an existing syndicated loan of $600 million and to fund the
construction of infrastructure projects.
"It is still the objective of the Kenyan authorities to conduct a
roadshow, most likely towards the end of March or in April 2014,"
Ragnar Gundmundsson, the IMF's resident representative in Kenya, told
Reuters in an interview.
There were indications of considerable interest in the issue, he said,
in spite of market volatility set off when the United States decided
to wind down its economic stimulus.
"The yields for countries like Kenya are still likely to be
attractive, especially when you compare with the cost of borrowing on
the domestic market," Gundmundsson said.
The IMF expects the Kenyan economy, east Africa's largest, to expand
by 5.5-6 percent this year, compared with an estimated 5.1 percent in
2013. Good weather and increased lending to the private sector are
expected to boost growth.
Credit to the private sector is growing 20 percent a year, the central
bank said, up from about 10 percent in 2012, after Kenya's central
bank raised rates to combat inflation.
"This rate of growth in credit to the private sector is compatible
with a pick-up in economic activities without creating undue
inflationary pressure," Gundmundsson said.
The central bank is likely to maintain a cautious monetary stance
until towards the end of the year, when inflation is projected to fall
to its 5 percent target, from 6.86 percent last month.
"If they do see that the downward inflation trends are confirmed, then
they may consider some relaxation of the monetary policy stance," he
said, adding that the central bank will also bear in mind the credit
The IMF expects Kenya's current account deficit to narrow to 7.7
percent of GDP by June 2015, the end of the next fiscal year, from 8.3
percent this fiscal year. Gundmundsson credited government efforts to
better capture data related to the current account, such as foreign
investment and export of services.
Kenya is also rebasing its gross domestic product to take into account
emerging sectors like oil and gas, which is likely to lead to an
increase in estimates of the economy's size. The exercise will be
completed by the end of May this year.
However, rising public-sector wages threaten to crowd out spending on
development, set at a minimum of 30 percent of the revenues per year.
Kenya spends 54 percent of annual revenues on wages, against a global
benchmark of about 35 percent. Salaries are expected to jump to 64
percent of annual revenues in the next three years.
"It is clearly not sustainable if the government wants to create
sufficient space to finance development priorities," Gundmundsson
And of course, there is our big Wembley stadium moment with the
eurobond, which is now imminent January 20 2014http://www.rich.co.ke/media/docs/038NSX2001.pdf
I incline to the view that the Kenya government should slot the
Eurobond market the full $2bn. This eurobond issue will release the
pressure cooker that is the domestic bond and interest rate markets--we
should see a good rally in interest rates. Hopefully, the banks will
go for some volume and not just spread and the economy can get juiced
a little on lower interest rates.
04-NOV-2013 :: Kenya joins Africa's Eurobond Leaguehttp://www.rich.co.ke/media/docs/039NSX0411.pdf
WE have notified JPMorgan and invited them to discuss a letter of
mandate, which is essentially a contract, to be the lead manager of
the sovereign bond," The Cabinet Secretary National Treasury said on
This will be Kenya's inaugural sovereign dollar Eurobond and the issue
size is likely to be $2b and therefore, the biggest Eurobond issue by
a sub Saharan issuer [the government needs to repay a $600m syndicated
loan and therefore a $2b issue will equate to $1.4b of new money].
Given that the Eurobond is set to be denominated in US dollars and the
maturity set at 10 years, our first port of call needs to be the [on
the run] US 10-year bond, which is essentially the reference price.
The US 10 year bond yield was last trading at a yield of 2.622 per
cent. The US 10 year yield touched a low of 1.692 per cent early May
[and that was the most optimal moment in 2013 for issuers] and in
early September the yield touched three per cent [and that was the
least optimal moment for issuers in 2013].
There are currently nine sovereign issuers in sub Saharan Africa and
they include the likes of South Africa, Nigeria and the newest kid on
the block [at least, until we get there] Rwanda. Rwanda sold their
Eurobond in late April when the US 10-year was at historic lows close
to 1.692 per cent and when folks take a broader sweep, they will no
doubt be hugely impressed by the timing of President Kagame's Rwanda,
an erstwhile neophyte in the global capital markets.
Traders and investors all watch the credit spread. The credit spread
is the difference between the yield of the issuer and the equivalent
US bond. For example, Rwanda's Eurobond carried a coupon of 6.625 per
cent and was sold at a yield of 6.875 per cent. Rwanda sold bonds at a
credit spread of 6.875 per cent-1.70 per cent = 5.175 per cent. The
correct terminology would be that Rwanda was sold at 517.5 basis
points over the US.
I recall being in a conversation at the IMF/government of Kenya
conference with an advisor to the Central Bank who asked me;
"Aly-Khan what was the yield on the Rwanda Bond?" I said, "6.875 per cent."
"Well, we cannot sell ours above that!"
And I replied; "Actually, the coupon and the yield of our bond will
depend on the yield of the US bond pertaining at the time and the key
point is the credit spread."
The response was that this was all irrelevant and we had to issue a
bond with a yield less than Rwanda's. As I have grown older, when I
hear this kind of argument, I think of Lao Tzu who said;
"Men are born soft and supple; dead they are stiff and hard. Plants
are born tender and pliant; dead, they are brittle and dry. Thus
whoever is stiff and inflex- ible is a disciple of death. Whoever is
soft and yielding is a disciple of life. The hard and stiff will be
broken. The soft and supple will prevail."
So the key metric to watch is the credit spread. That is a market
driven measure and it is dynamic. Bond holders take no prisoners.
Once, we issue our Eurobond, we have essentially given the
international markets a vehicle to price Kenya's credit spread on a
daily and a real time basis. I am exaggerating a little but not much.
The global markets will be poring over every single utterance on a
real time basis and that spread about which I spoke will start moving
around. And if the markets feel for example that we do not hold sacred
the sanctity of contracts, our spread will start moving.
Prime Minister Tony Blair gave talking points every morning to his
cabinet and no minister was permitted to stray from those points. We
will surely need a similar process because when you sell $2b of bonds
to international investors that bond holder constituency immediately
becomes primus inter pares and that you can take to the bank.
Kenya Shilling versus The Dollar Live ForexPros 86.459http://j.mp/5jDOot
Nairobi All Share Bloomberg +5.74% 2014 [0.193% below a Record
Closing High set 24th January 2014]http://www.BLOOMBERG.COM/quote/NSEASI:IND
144.29 +1.98 +1.39%
03-MAR-2014 Corporate Earnings above Expectations @NSEKenya Poised Higherhttp://www.rich.co.ke/media/docs/038NSX0303.pdf
Nairobi ^NSE20 Bloomberg +0.71% 2014http://j.mp/ajuMHJ
Every Listed Share can be interrogated herehttp://www.rich.co.ke/rcdata/nsestocks.php