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Kenya is a model investment destination and a model for the rest of Africa, Sir Richard Branson, founder of the Virgin Group, declared on Saturday.
On May 28th at 17:30 BST, as part of the Homestrings Webinars Investor Series, we’re pleased to invite you to the webinar on “Homestrings Product: Innovare Agriculture Leasing Bond”.
The Innovare Agriculture Leasing Bond is designed to increase the availability of capital for African agriculture value chain companies to grow their businesses and increase food and feed production. It has been created to provide attractive, risk-mitigated market-rate returns which include a 50% credit guarantee by the African Guarantee Fund, who will be featured in the webinar.
Kenya’s tourism industry has in recent years been handicapped by a wave of terror attacks and the resultant rising insecurity in the East Africa nation. At the coast where tourism activities are concentrated, more than 40 hotels have shut down temporarily and some 28,000 workers laid off.
The Heron Portico hotel
Those tourist hotels still open have downsized their operations and slashed their rates.
But in contrast, hotels in the capital Nairobi continue to thrive and new investments are being made by local and foreign investors.
“While holiday tourism has taken a huge hit, business tourism continues to grow because of the potential for business growth. So what is driving our hotel sector now is business tourism,” says Karim Teja, managing director of The Heron Portico hotel, a Nairobi-based four-star business hotel established in 1975.
Teja adds international firms setting up, and the country’s elite and emerging middle class are contributing to rising demand for accommodation and hotel services.
“One has only got to take a look at the increasing number of cars on our roads. They are being purchased and driven by the growing middle class, and that just points to further business growth inKenya. You may not see the Nairobi middle class stay in city hotel rooms, but they certainly use hotel facilities. For example, growth in conferencing and restaurants has been tremendous.”
A number of internationally branded hotels have opened in Nairobi in recent years and more are in the pipeline. Mid-range hotels targeted at business travellers who don’t want to spend too much money are also increasing. Teja says there is heightened competition in the industry and players risk losing business if they don’t up their game.
“There is going to be significant overcapacity, and it will have implications,” he says.
Fight back, or close shop
The Heron Portico hotel, for instance, was set up 40 years ago, but faced “huge reputation issues” a decade ago. “We fell by the wayside, lost vision and converted to an accommodation shop – a room with no frills – and now we’re reverting back to being a hotel,” says Teja.
In 2012 the family-run hotel brought in a professional hotel management company, Sarovar Hotels & Resorts from India, to help reposition itself in the market and improve the guest experience.
“We made that decision after much consideration and evaluating what we stood to lose. We could see the big number of hotels coming into this market. With that kind of competition, either you are going to shut shop or you’re going to fight and compete. I think it has been a good move for the hotel.”
Trip Advisor now ranks The Heron Portico number 16 out of 124 hotels in Nairobi.
Earlier this year The Heron Portico acquired the 56-room Zehneria Hotel in Nairobi for a reported$10.5m.
“This is the other consequence of what’s happening with all these new hotels coming in. A significant number of existing hotels will either close, convert to offices, or be sold to people who do want to run them or change what they do,” predicts Teja.
But after 40 years of running a single hotel, he says having a second operation “is testing the water”.
“It’s a good thing the hotels are now being professionally managed. As a family business there is a tendency to manage what you can and therefore don’t take advantage of opportunities. Whereas if you are more of a corporate type person you have to meet budgets, you have to look at growth.
“I think risk-taking ability is sometimes diminished within family concerns whereas corporate-run operations are looking for avenues for growth and the next area in which to invest in to create further wealth.”
Teja has been involved in his family’s business for 18 years and says he has “seen it all”. The industry has been through many trying times including the 1998 US Embassy bombing in Nairobi, the 2007/08 post-election violence, and global economic meltdown.
“There was a time following a terror attack where we went from having bookings for three months solid to just four people staying in the hotel. It was the first time in our history we had to lay off our people, and that was very painful.”
“I have learned if something can go wrong, it will. You need to plan and keep your overheads as flexible and as easy as possible. Cash management is also key. We are probably going to have a few more surprises in the years to come. I hope not, but we’ve got to be prepared for it.”
Despite the many hurdles Teja concludes his family stayed put with the hotel business because it is potentially “lucrative”, and they have built decades of experience in it.
“It’s a challenging industry. It’s a stimulating industry. It’s a fun industry. And there is a market for our services.”
The Global Information Technology Report (GITR) 2015 has ranked Rwanda first globally in Government Success in ICT promotion to drive social and economic transformation. According to the report – which was compiled by World Economic Forum (WEF), Rwanda scored 6.2 points out of 7.
Connected East Africa is perhaps testament to the level of frenetic tech activity in Nairobi, Kenya, that once each year the entirety of the city’s tech stakeholders decamps to the coast to restock, though the ocean and the perfect golf courses also provide a draw.
Yet this year’s the event did consider in detail what the country has already achieved, and what it hopes to do over the course of the next year. The steps forward taken by the East African nation in terms of automating government services were highlighted.
Huduma Bora centers that seek to put all government services in one place, have been a real success, while the country’s Higher Education Loans Board and largest bank by assets, Kenya Commercial Bank, have launched a student smart card to speed up loan disbursements.
The east African nation also launched an e-procurement system earlier this year.
“We are seeing a situation where government services are coming online and starting to eliminate some unnecessary costs,” said Microsoft 4Afrika director Louis Otieno.
“The government is starting to act like the private sector. You’ll see initiatives like government innovation platforms that are being created where we get young people to develop applications especially for government.”
Kenyan government services automation drive is far ahead of other East African countries, but also leads most of the continent.
Most public services in South Africa and Nigeria still involve long queues, and there is little suggestion of this changing in the near future. Even South African government record-keeping is not digitized, undermining service delivery, hurting accountability and assisting corruption.
Nigeria has only just begun the rollout of its national e-ID cards and citizenship database.“Startup Discussions”
Startups were also prominent in the discussions at Connect East Africa.
Lead sponsor Microsoft waxed lyrical on the opportunities for small businesses in Kenya and the rest of the region, with Microsoft Kenya country manager Kunle Awisoka saying small businesses had become one of the region’s greatest assets.
“Startups and SMEs are improving the overall competitiveness of the African continent,” Awisoka said, adding that the government “need to share data to help SMEs run their businesses.”
In line with sharing information, Microsoft launched Biz4Afrika, an online portal for SMEs providing access to information and an online community for entrepreneurs in Kenya, during the event. The programme was piloted in South Africa and will be made available in other African countries in due course.
In March, Kenya’s Ministry of ICT and the ICT Authority launched Enterprise Kenya, a project aims at supporting and building the country’s technology entrepreneurship ecosystem. The ministry has also plans to invest undisclosed amount in at least 50 startups this year.
Konza Techno City, the tech behemoth that has been on the horizon for years, was also represented at the event. Generally touted as a home to technology-based multinational corporations, Konza is keen to reach out to local tech startups, according to John Tanui, the chief executive at Konza Technopolis Development Authority.
“We have the vision to be the innovation hub of the region,” Tanui said. “We want to see startups finding their home in Konza, and walking alongside the multinationals.”
Kenya is not, however, ahead of the game when it comes to startup support.Corruption hurting projects
The government is playing catch-up in this respect compared to Nigeria, which raised $16.2 million in funding for local startups last year, as well as launched the iDEA incubator programme. In South Africa, particularly in the Western Cape, the government is heavily involved in the local startup ecosystem.
This lack of government support over the past few years is perhaps one of the reasons why Kenya’s tech startup sector has stagnated of late relative to other countries.
Bitange Ndemo, former permanent secretary at Kenya’s Ministry of ICT, said the country’s development as a tech hub was being held back by corruption and “tenderpreneurs”, who take advantage of lax procurement regulation to steal from the government.
Ndemo said current procurement and public private partnership (PPP) laws had created a legion of “tenderpreneurs”, who only undertook technology projects that benefit them.
A few examples of projects that were high jacked by “tenderpreneurs” include the flagship laptops-for-schools project, that stalled after procurement irregularities, and the rollout of Wi-Fi connectivity in the Rift valley town of Nakuru, which was delayed after Orange was ditched as a supplier and replaced by Liquid Telecom under unclear circumstances.
The country’s digital migration process has also been mired in uncertainty after a suspicious Chinese company hoarded most of the digital frequency.
Kenya is set to become home to a Swiss hotel school next month. Thomas Seghezzi, managing partner of Rainbow Unlimited, one of the co-founders of the project, spoke to The Africa Report about the project.
At a cursory glance, the service in sub-Saharan Africa is generally of sub-standard and too often at quite astronomical prices, making the price/quality ratio in the hospitality sector unappealing.
This, Seghezzi says, is not necessarily bad for business. With demand for better services soaring amid a boom in Africa's tourism, transport and MICE (Meetings, Incentives, Conferences, Events) sectors, Africa's hospitality industry is tickling international fancy.
That skills leave much to be desired -- with the exception of a few already well developed hotel and tourism markets like South Africa and Kenya -- can only point to one thing: "Huge opportunities".
Is this the beginning of a school franchise where the local partner provides the hard infrastructure and you the soft infrastructure?
That's exactly the concept. As investors in soft infrastructure, we don't set up big structures that cost millions. For this project, we did not only have to find a Swiss partner [Alpine Center - a Swiss hospitality business school] but a Kenyan partner as well.
In Kenya we partnered with BOMA Hotels, a small local hotel group owned by the Kenyan Red Cross. The plan was to establish hospitality training schools to address the deficit in the quality of service in the industry across Africa.
Some years ago, the Kenyan Red Cross decided to diversify their revenues. And so, instead of depending entirely on charity and donations from outside they invested in the creation of the BOMA Hotel Group to create their own revenue.
The partnership is effectively a partnership synergy. We try to find local partners, public or private, with the hardware and we bring in the know-how. It is a totally win-win relationship.
What levels of hospitality workforce will the school's curricular be targeting?
From what we understand, with respect to the feedback we are getting from the hotel and tourism industry, there are needs at all levels. At the first phase we are going to concentrate on the crafts level: receptionists, waiters, front office, housekeeping.
This is because there is a big need for people who are trained to properly, and in a practical way, handle these essential tasks.
Although there are programmes that target the management level -- and young people like that because they aim for management positions -- you can't be a manager if you have never been involved in practical operations in all, or at lease some, levels.
That is what management in the hospitality industry is about. Practical knowledge above all else. It must be understood that the philosophy of the excellent Swiss model of hospitality education has always been that management or middle management should be conversant with, and have knowledge of, all the levels of practical work in a hotel.
So in the beginning, we concentrate on the basic certificate level before moving on to the other levels.
The school's curricula offers several qualification levels...
The full-fledged programme is four to five years. The first year is the certificate level, which is the lowest chart. Sixty percent of the first year is made up of practical training, that is you are in the hotel and learning at the same time. Students spend the first half year in training and the second half year in internship.
Those who want to aspire for more can continue with the two year diploma in hotel management or hotel operations. And those who want to go even farther can aim for the higher Swiss diploma and then the bachelor, or even master's, degree.
Each level has a lot of practical training. Our intention is to offer the same level of quality training as students would have in Switzerland at lower costs, back in their own countries.
What about other areas of the hospitality industry?
Alpine has a whole range of training courses namely event and conference management, Spa management, culinary arts, cruise management, health tourism, among others.
But we intend to start with hotel programmes and grow, adding the other courses and curricula as time goes on. We are especially interested in conference and event management. There are lots of conference facilities popping up everywhere, which explains the growing demand for expertise.
How accessible will the school be for Kenyans and students from other countries?
This school is all about accessibility, thus our partnership with the BOMA Hotel Group. We are situated in the middle of the benchmark in terms of current tuition fees. It is very affordable. If a young Kenyan wants a quality education in hospitality they are affordable. Annual tuition fees are between $3000 and $5000.
For East Africans or those from other parts of the continent, tuition fees would be the same, but obviously they'll have to bear the cost of their transport and accommodation. We are also looking more closely at the region which is experiencing a boom in the tourism industry.
What type of students are you looking at? Entry requirements?
First, there is no age limit, but students should have at least a minimum of secondary level of education. There are also those who want to start a career, change their career or go further in their careers.
One more important criterion, which is often underestimated is that, especially in the hospitality industry, we need to find the right profile of people in terms of passion. You want to have a passion for this métier to be able to excel. So we will not ignore the expression of passion in our recruitment process.
Are there any financial aid programmes?
We are at the very beginning of operations; we will open with a small group of students on 25 May, 2015. But we are also establishing financial aid programmes including scholarships, sponsorships, or even subsidies from government or private companies.
Other hotel groups have expressed interest in sending staff for training. There are also other sources of financial support to explore.
We have been looking at several countries for different reasons. We had a request from Ethiopia, and Ghana as well, but nothing has materialised yet.
(Bloomberg) -- Kenya is starting a fund to provide water supply to more than 9.3 million people in East Africa’s largest economy, organizations involved in the venture said on Friday.
The so-called Nairobi Water Fund, backed by government agencies, businesses, conservation groups and utility companies, is a public-private partnership and will generate $21.5 million in long-term benefits, the organization said in an e-mailed statement, without providing details.
“This landmark initiative will cut costs for hydro-power and clean water, while addressing water flow and soil erosion issues in the Upper Tana River basin,” the fund said in the statement.
Backers include East African Breweries Ltd., Coca-Cola Co., Kenya Electricity Generating Co., The Nature Conservancy, the Nairobi City Water and Sewerage Co., the International Center for Tropical Agriculture, Frigoken Horticulture and Pentair Plc, a water technology company.
Kenya is fast evolving to becoming a 'Silicon Savannah' and its ICT sector is set to contribute up to 8 per cent of the country’s GDP by 2017.
The contribution of the sector to the Kenyan economy is said to have increased significantly over the years. From innovations like M-Pesa (a mobile-phone based money transfer and micro financing service) to BRCK (a modem router that bypasses infrastructure problems associated to internet connectivity) the sector has become one of the fastest growing in the country.
“The Silicon Savannah is a reality confirmed by transformative innovations conceived in the minds of Kenyans and implemented by Kenyan forms. When it comes to ICT Kenya requires no introduction in the world, when it comes to innovation, we as a country are counted among the leaders,” President Uhuru Kenyatta said during a forum on innovation held in Nairobi recently.
The ICT sector is said to be one of the key drivers of Kenya’s Vision 2030 goals that will see the country attain the status of a middle income nation. Under the country’s new ICT master plan and part of Vision 2030, the sector will create 180,000 direct jobs in the next two years and develop globally competitive products.
“Indeed through ICT government has become more efficient, more accountable and more transparent. Moreover, ICT remains a home of real promise for all of us Kenyans given our positive ICT experience. We fully expect the sector to play an even greater role in national development and governance,” Kenyatta said.
Nonetheless, despite strides made in the ICT sector, the government as well as the private sector believes they have to work together in order to achieve its desired goals.
Kenya’s Cabinet Secretary for ICT Fred Matiangi said, “The beauty about this government is that we have free political will and leadership from the top that supports the work we are doing.”
“We are therefore grateful we are moving forward with the private sector to ensure we create jobs we provide opportunities for the growth of innovation that, is happening in our country and that we enhance the contribution of ICT to the GDP of our country.”
Lately, the news out of Kenya about its electricity situation has been quite positive. Electricity costs for both consumer and industrial customers have decreased by about 30%. You can imagine how advantageous it is for a nation to lower its electricity costs so much. In fact, one estimate pegged Kenya’s savings at $24 million per month.
The reason for the favorable shift is the country’s consistent investment in geothermal energy. Geothermal activity in Kenya is abundant, so it makes very good sense to develop more geothermal power there. Recently, two new plants were commissioned in the Rift Valley, which boosted the country’s geothermal capacity significantly. They are located at Olkaria, which is northwest of Nairobi and this area has an estimated 2,000 MW of geothermal potential.
It isn’t surprising that developing domestic renewable energy sources has significant benefits, “I have seen first-hand how getting affordable electricity to ordinary Kenyans can transform lives. Kids can learn at school and do homework at night. Businesses can flourish and create new jobs. That’s why we are investing in the energy sector, which is a key infrastructure investment in the fight against poverty,” explained the World Bank’s country director for Kenya.
Kenya is not stopping where it is though: by 2018 another 460 MW of geothermal may be developed. If it achieves this goal, the amount of electricity generated by hydro power could be reduced to 28% of the total mix. Decreasing the country’s reliance on hydro power would likely be beneficial, because lower rain levels have decreased hydro power output. Drought can be a big problem when it occurs because river flows reduce to a trickle as does electricity from hydro power. Climate change is believed by some to intensify weather like droughts, so shifting away from hydro power is probably a good decision.
Geothermal electricity tends to remain very stable and is available constantly.
onathan Somen is one of Kenya’s most successful entrepreneurs having built a multi-million dollar IT business in the last two decades. Together with his brother they co-founded AccessKenya Group, an internet service provider (ISP), which listed at the Nairobi Securities Exchange (NSE) in 2007. In 2013 the company was fully acquired by South Africa’s Dimension Data for about US$36m. According to reports, the Somen family, which held a combined 30.3% share of AccessKenya, stood to make about $11m after the sale.
Somen spoke to Dinfin Mulupi about the decision to sell AccessKenya to the South Africa-headquartered group, his journey in business and his advice to other hopeful entrepreneurs.
You co-founded AccessKenya in 1995 way before Africa’s internet revolution. What inspired you to start the business?
Actually the real internet part, which was AccessKenya, started in 2000. It was still early days but we weren’t the first. My brother and I had been involved in some ICT services before and we sat down in 2000 and discussed what the next big thing would be. Our answer was simple – the internet. As soon as that was agreed upon, we went about getting our licences to become a corporate ISP.
We didn’t really have any target but felt the internet revolution would keep growing and Kenya would embrace connectivity more and more, similar to the trend in other countries. We decided to become a corporate-only ISP so we could focus on giving corporate clients excellent, reliable connectivity backed by amazing customer service. Those two basics haven’t changed.
Looking back at the past two decades, describe the journey.
It has been an amazing journey from the start until today. Amazing because with deregulation the business kept evolving into something different and new as licences became available and technology changed.
There have been many great moments, but each time I hear from a client or individual congratulating us on exemplary performance, it always makes me happy because it means we are doing what we set out to do.
One area I’m very proud of is staff. We have people who’ve been here for years and the personal growth many have experienced is phenomenal. Being part of Dimension Data now, has also created excellent training opportunities for our team because they have their own online university (known as DDU) where there are multiple courses people can take.
What motivated the decision to be acquired?
As a public company, you have a duty to consider what’s best for the shareholders. Dimension Data put a very good offer on the table and so the Board ultimately recommended shareholders to accept. We were not actually looking for a buyer, but had certainly been approached several times. Dimension Data, and access to their global networks and vast skill sets, has helped the business to grow and deliver new and innovative solutions for our clients. Given also that more competition exists today, being in the hands of a much larger organisation with access to funds and many products and services will only help to further secure our future as the outright leader in corporate ICT services.
Many entrepreneurs prefer to hold on to their businesses, yet you let AccessKenya become a public company, then a subsidiary of Dimension Data. Why the different approach?
I don’t think there is a “one size fits all” reality when it comes to business. There were a number of times people attempted to buy the business but offers weren’t enough value for the shareholders. It is important to remember, once you are a public company, the decision of whether to buy or sell is not based on a small family unit who make the decisions, but rather on what the board believes is best for all shareholders, ALL being the most important word.
What challenges does AccessKenya face today?
There is definitely more competition than 10 years ago, but we are happy that we continue to hold our own in the market and also continue to grow our business. This is a challenge we feel very ready for and are dealing with. It has enabled us to be better, more efficient, and more customer-centric, and as a business I believe we are improving all the time.
The lessons learned on your journey?
Too many to list all here. But one is the importance of ‘focus’, particularly when a business is small. When you are great, even good at something, it is crucial to keep focused on that. I have seen many businesses fail because entrepreneurs do well then diversify and spread themselves too thin. There is nothing wrong with diversification, and all businesses that survive do tend to branch out, but it is a road that must be travelled with care.
Any advice for entrepreneurs in Africa on building sustainable enterprises?
Start with a great idea and then focus, focus, focus. I believe most successful entrepreneurs have an unwavering belief in their own abilities to do things better than anyone else. That belief will, in many instances, carry a business through stormy times and into calmer waters.
Never relenting in its quest to become a full-fledged regional hub for burgeoning businesses, Tanzania is launching new efforts to acquire capital needed to build the most reliable and efficient network of infrastructure in East Africa. These efforts included the Big Results Now (BRN) initiative where the government showcased significant projects valued at over $10 billion to large scale financial institutions; and now, a plan to raise $1 billion by floating the Eurobond for long term infrastructure investments has emerged.
NAIROBI, Kenya, Jan 10 – China’s engagement with Kenya is set to expand with a new focus on industrial development and technology transfer.
This was the message China’s Foreign Affairs Minister Wang Yi delivered to President Uhuru Kenyatta Saturday at State House, Nairobi, at the start of the Chinese Minister’s eight day tour of Africa.
Wang said his mission was to strengthen the existing bilateral co-operations between Kenya and China and chart new areas that the two countries can partner in.
He said Kenya is at the stage of industrial take-off and China is ready to support it with its experience of attaining successful industrialisation.
“China stands ready to share its experiences on industrial zoning and special economic zones and we are ready for more cooperation in these fields,” said Wang.
He said one method the Chinese government used to succeed in industrialisation was to open up to industrial relocation when it allowed companies from neighbouring countries like Japan to set up shop within China.
This allowed the transfer of technology and skills to the Chinese people up to the stage where China became advanced.
“Industrial relocation was how China took off and Kenya can benefit from it,” he said.
The new focus in partnership between Kenya and China will be centered on Industrial development, technology transfer, Agricultural modernization and infrastructure development. The Standard Gauge Railway is the flagship of the China-Kenya partnership.
The two countries will also partner in mineral exploitation and environmental conservation.
Wang said China will also work more closely with Kenya on regional peace and security issues.
President Kenyatta welcomed the proposal by China to increase bilateral relations with Kenya.
The President said Kenya appreciates the Chinese partnership and support in developing the ICT sector, building of roads and the railway as well as in the area of production of energy.
“Our relationship is built on the principle of partnership. This is a partnership I want to see increased and cemented to bring mutual benefits,” said the President.
The President said Kenya has made tremendous progress over the last decade and this achievement was built on the understanding that it can develop its own solutions.
President Kenyatta called on China to continue its close engagement with Kenya and support its efforts to open the East African region.
“We need you to work with us to link the Eastern Africa region by extending the railway to our neighbouring countries including Uganda, South Sudan, Rwanda, Burundi and even the DRC to open up the regional economy,” he said.
The President said Kenya, which has been a central pillar in promoting regional peace efforts, counts on Chinese support in efforts to bring stability to countries in the region that are affected by wars.
The meeting was attended by Deputy President William Ruto, ICT Cabinet Secretary Fred Matiang’i and Internal Security Principal Secretary Monica Juma.
The Chinese Foreign Affairs Minister delegation included China’s Ambassador to Kenya Liu Xianfa.
Wang’s visit is a follow up on the successful visit to Kenya last year by China’s Premier Li Keqiang during which 17 bilateral agreements were signed between the two countries.
After holding bilateral meetings with Kenyan Cabinet Secretaries led by Foreign Affairs CS Amina Mohamed, Wang will continue with his Africa trip to visit Cameroon, Equatorial Guinea, Democratic Republic of Congo and Sudan.
Kenya is among Sub-Saharan countries that lead the world’s emerging markets in electronic payment regulation.
According to The Economist’s 2014 Global Microscope Index and Report (GMI), Kenya’s electronic payment regulations posted 88 per cent score out of 100 per cent to emerge second after Tanzania, which scored 89 per cent.
The GMI assesses the regulatory environment for financial inclusion in 55 emerging economies across 12 indicators (scored out of 100). In the study, six of the top 20 economies on the GMI are from Sub-Saharan Africa and include Tanzania, Kenya and Rwanda. Four of the 10 leading countries in this sub-index are from SSA and are led by Rwanda (100) and Tanzania (100), which are tied in first place globally.
SSA also has strong regulatory and supervisory capacity for Financial Inclusion with four SSA countries in the top 10 list, including Kenya (89) and Tanzania (89) in a third-place tie.The region ties with Central Europe and East Asia as having the world’s best electronic payments and mobile money regulations. The three economies outperformed Brazil and China in financial inclusion. Regionally SSA ranks third with an average GMI score of 44, which is higher than the Middle East and North Africa (30) and Eastern Europe and Central Asia (43). The government with the support of innovations spearheaded by the private sector has for example embarked on a cashless payment system in the country. For example, government procurement payment system is through electronic system, which wants to curb corruption and improve efficiency in the whole chain. Some of the popular electronic payment system, supported by the mobile operators includes Lipa na M-Pesa, a brain child of leading operator Safaricom. Credit cards are on the rise in the country with many using them to do shopping in supermarkets and pay for items in the hospitality industry through the Safaricom’s Pay Bill and Buy Goods platforms. In the report, government support for Financial Inclusion is one of the 12 sub-indices for the GMI identified. Currently, Kenya’s public service vehicles are encouraged to adopt the cashless payment system, a development which will further put the economy on a global platform on its efforts to adopt electronic payment system. This, in turn, will also demand for an improved regulatory environment.
A joint report which reviews the private equity fundraising, transaction and exit environment from 2007 to 2014 has just been published by consulting firm KPMG and EAVCA, the region’s Private Equity and Venture Capital Association. The study is the first the two organizations have collaborated on and gives a clearer picture of the value and volume of private equity activity in East Africa.
In their second annual study of private equity value creation in Africa which was published last week, transaction advisory firm EY and the African Private Equity and Venture Capital Association found that private equity exits reached an eight-year high in 2014, and anticipate that exit activity will remain buoyant as more and more portfolio investments enter their divestment periods.
Like many other visitors to England or United States, I returned to my home country Uganda pondering “When will we get there?” So even though I reside in the US, I have sought to remain engaged with the continent as much as possible.
Through this blog, I attempt to focus various economic sectors and available investment opportunities in Uganda, and other developing countries. So let’s power up and speak out! – And don’t forget to share your comments.
Mozambique and India will continue to cooperate in the exploration of mineral and hydrocarbon resources in the country, said Thursday in Maputo Mozambique’s Minister of Mineral Resources and Energy, Pedro Couto.
The assurance came during a meeting with India’s Minister of Oil and Gas, Dharmendra Pradhan, who is on a three-day working visit to Mozambique, in order to strengthen two-way cooperation.
“The partnership between Mozambique and India remains strong and should continue to develop,” said the minister, who pointed out that Indian companies are already active in projects related to the exploitation of oil and mineral resources, especially the extraction of gas in the Rovuma basin.
In turn the Indian Oil and Gas Minister thanked the Mozambican government for it openness to investments by Indian companies and stressed that the memoranda previously signed between the two countries also provide for training human resources as a way to speed up the economic and social development of Mozambique.
Umeme Ltd., the Ugandan power distributor owned by Investec Asset Management Ltd. and Actis LLP, may invest as much as $100 million in upgrading its network this year, Managing Director Selestino Babungi said.
Planned funding this year is part of the $440 million the company is spending between 2013 and 2018 overhauling old equipment, buying new technology and adding distribution points, Babungi said Thursday in an interview in the capital, Kampala. Last year, the company spent 269 billion shillings ($90.5 million), he said.
“As we invest, we are reducing energy losses, connecting more customers and expanding the network,” Babungi said.
Uganda, Africa’s biggest coffee exporter, has a peak power demand of 540 megawatts against a generation capacity of 670 megawatts. At least 15 percent of Uganda’s population has access to electricity and demand grows at an average of 10 percent annually, according to the state-run Electricity Regulatory Authority.
The nation may face a power deficit late next year, which may force it to rely on reserves of 100 megawatts of thermal power for additional generation, Babungi said.
Uganda is building the 600-megawatt Karuma and the 183-megawatt Isimba hydropower plants along the Nile River to forestall future deficits. The government says its two plants, being developed by Sinohydro Corp. and China International Water & Electric Corp. will start generation in 2018.
“Our growth strategy is to prepare for all this power coming on board by building new sub-stations,” Babungi said.New Plants
Industrial consumers in the country including the domestic units of Coca-Cola Co., the world’s biggest beverage company, and Lafarge Cement SA of France. The government uses at least 70 percent of the East African nation’s power, according to Umeme.
The 250-megawatt Bujagali hydropower plant on the Nile River, in which Blackstone Group LP’s Sithe Global Power LLP has a stake, is the nation’s biggest electricity generator.
A Ugandan unit of Eskom Holdings SOC Ltd. operates the government’s 180-megawatt Nalubaale and 200-megawatt Kiira plants along the Nile, 80 kilometers east of Kampala.
Investec has an 18.47 percent interest in Umeme, Actis’ Umeme Holdings Ltd. has 14.3 percent, while the state pension National Social Security Fund owns 14.27 percent of the power distributor. Umeme has a concession to manage the nation’s power distribution network until 2025.
The middle class in Africa is growing. That much we know. But depending on who you speak to you and how you measure it, you can get a very different picture of its size. It makes a huge difference, for example, if you decide that people with incomes above $2 or $4 a day are part of the middle class.
Ben Longman, managing director of African market intelligence company Trendtype, unpicks the true size of the middle class, how to understand it and track its growth.
1. Decide what you mean by ‘middle class’. The African Development Bank includes people who earn above $2 a day within its middle class. On that basis, 34% of Africa’s 1.1 billion people are middle class. But are they really middle class? We prefer to use the term ‘consumer class’ to make sense of these new consumers. The key point is to use a consumer segmentation that fits the products and services you sell.
2. Stop looking just at income. Most sub-Saharan African countries have large informal economies in which people are reluctant to declare their real incomes to government agencies. Official income data triangulates the measured size of the economy, income inequality and the size of the population. If any of those data points are wrong or outdated, the size of the middle class will shift dramatically.
3. Look at lifestyle and living standards. Some 791 million Africans live in homes with at least one mobile phone, and 495 million in homes with a television. About 311 million have a refrigerator and 114 million live in homes with a car. It is estimated 38 million Nigerians have incomes above $2 a day. Almost 90 million Nigerians live in homes with a television. Living standards provide a much clearer indication how the consumer market is growing.
4. Living standards predict income changes. It seems counterintuitive, but the reality is that it is more accurate to track changes in lifestyle and living standards, than to see how economic growth filters down to consumer income at the household level. We are going to see more country economic data get radically revised upwards, as both Nigeria and Kenya have done. If you pay attention to living standards, you can actually see where this is going to happen.
5. It is not just rising income driving this change in living standards. Electrification – particularly in rural areas – is transforming households. In Tanzania and Mozambique, the number of households with electricity has more than doubled in the past five years. The rise of online retail and the growing supermarket sector are transforming access to goods and services. Rapid urbanisation is bringing more consumers within reach. In other words, it is becoming cheaper and easier to join the middle class.
6. Living standards and lifestyles keep changing. Old data can be particularly misleading where the changes are most dramatic. The number of households with a mobile phone grew from just under 6 million in 2000 and will reach 200 million towards the end of 2016. Many aspects of the emerging consumer economy which will have a profound change on living standards and lifestyles are still in their infancy: internet connectivity, mobile payments, access to clean water in the home, uptake of a wide range of consumer appliances and assets, and the formalisation of retail.
7. Be wary of forecasts. It goes without saying that if the current measures of the middle class are poor, then the forecasts are unlikely to be much better. We do know, for example, that tertiary education rates today are a good indicator of where the middle class will grow tomorrow – not only because it creates a skilled workforce but because it is often indicative of the institutions and policy that foster growth and stability. Quality of governance in areas such as poverty reduction, infrastructure building and attracting foreign investment will continue to play a major role in the development of the middle class. But make sure the forecasts you use, take account of the environment in which the middle class is supposed to take hold.
In 2013 US-born Erfaan Mojgani moved to Tanzania to start Kaymu, an online marketplace that allows buyers and sellers to trade a wide range of products including home appliances, electronics and fashion. Kaymu is one of several e-commerce platforms owned by the Africa Internet Group (AIG). Mojgani told Dinfin Mulupi about running an online company in Tanzania. Below are edited excerpts from the interview.
What has been the market’s reaction since you launched Kaymu in Tanzania in October 2013?
Reaction has been good, especially in the last six months. In the first months we were targeting a more upper-class seller. So we went mainly to city centre shops and to people already selling online. Thus we were just offering them another platform [but] in the past six months we have had a dramatic shift in strategy.
We bring on about 200 vendors a month, and that’s quite a significant figure given that many of these people have never sold online before. We still find shops that know how to sell on Instagram, but this is truly their first marketplace experience and we are the ones who introduce them to the idea of a marketplace, and what selling online can do for your business. We have grown over four or five times, just in the past six months.
Why was the Tanzanian market interesting for AIG?
Technology isn’t being born and bred here often, but people are adopting technology quickly. I was here a few summers ago in 2013 and some people had WhatsApp, but now it’s how everyone communicates in a span of just 18 months. The potential of this country is huge. People do adopt technology quite quickly.
Swahili is a popular business language in Tanzania. How much of a challenge is the language?
It’s a bit of a challenge I’ll be honest, but it’s fun. It pushes me to learn a language I think is really pretty, and I have to find more time for it. But it’s tough because I rely on some of our biggest sellers who don’t speak English. So at the moment, when I go to meet them I rely on my teammates to translate. And when we start getting into serious negotiations, I have to hope they are expressing the message the same way I would.
Another challenge is sometimes people will agree to do something because they don’t want to say ‘no’ in front of me. But then a week later they don’t do what I assumed they’d agreed to, either because they didn’t understand or just didn’t want to. The culture here doesn’t like sharing bad news.
What difficulties do you face running the business?
The toughest part is the post-purchase process, especially the logistics. This is not that unique to many African countries unfortunately, but the idea of street names and proper addresses is quite rare. Even for us, many of our vendors are in these crowded markets yet don’t even have a shop sign.
Working with business partners can also be tricky because we have to make sure we find the best ones, whether it’s a delivery company, a bank doing payments, or the sellers. So getting the most reliable and responsible partners is a little bit of a challenge.
Definitely the business environment is interesting in a couple ways. One is there’s a lot of opportunity here and that’s what’s fun about it. And because this is a mostly informal economy, we have to educate both sellers and buyers.
Do you expect to see more competition?
There is competition at the upper-end of the market. However, I think we can be dominant tackling the middle class. There will be a much bigger middle class in the next two to three years. Right now it’s still the upper-class who are online. But if you think about all the new people coming online and getting emails and browsing the internet and selling online – that growth is all in the lower to middle class.
Your advice for foreign investors looking to enter the Tanzanian market?
You really need a good understanding of the market so it is important to pilot first. Don’t just assume something that works in Nigeria works here in exactly the same way. Understand that your population is different, has different cultures, different tastes and also Swahili is the language of business here.
You need good local people to help you communicate unless you are fluent in Swahili yourself. Have partners who have good connections and know how the government works. I grew up with online shopping and selling in the US so this is not new to me, but not for someone who has maybe only had it around six months or a year. Also, we test the service on our own team every week and get feedback from them.
(Reuters) - Ethiopian greenfield brewer Habesha, majority-owned by Dutch brewer Bavaria NV [BVMVE.UL], said it plans to start selling beer in the second quarter of this year to tap rising domestic demand that has attracted global brands.
Bavaria NV is the latest beer maker lured by Ethiopia's expanding middle class over the last five years and will compete with breweries owned by Heineken (HEIN.AS) and Diageo (DGE.L).
The world’s leading brewers have turned their focus on emerging markets such as Africa as consumer demand in Europe has stagnated and the United States offers limited expansion opportunities.
"We expect to start selling beer in the second quarter of 2015. Say two or three months from now," Thijs Kleijwegt, Habesha Breweries’ finance director, told the Reuters Africa Investment Summit.
Ethiopia’s average annual beer consumption of less than five liters per capita is about half the average for sub-Saharan Africa, excluding South Africa, offering scope for expansion among the population of 94 million, more than 60 percent of whom are Christian.
Bavaria NV bought a stake in Habesha Breweries in 2012, and has since increased its holding to 60 percent.
Habesha's plant in Debre Birhan, around 120 kilometers (72 miles) north of Addis Ababa, will have a capacity to produce 350,000 hectoliters once it is completed, although production will start before then.
Heineken’s $130 million brewery near Addis Ababa is the largest in Ethiopia with a capacity of 1.5 million hectoliters.
The Dutch firm also owns the Bedele and Harar breweries it purchased from the state for a combined $163 million in 2011.
Diageo acquired Meta Abo Brewing in 2012 for $225 million, while Ethiopia's BGI – considered the market leader in the country – was bought by French drinks company Castel in 1990.
“It is an interesting beer market,” Habesha Breweries’ Kleijwegt told Reuters. “I think the potential in Ethiopia is huge.”
KAMPALA - The minister of State for foreign affairs of the United Arab Emirates (UAE), Reem Al Hashimy has said that Uganda is “a beautiful” country that needs to be helped to realize its potential.
Kenya has launched a coffee branding initiative designed to boost the country's reputation for producing high-quality beans and help the industry regain its position as a top foreign exchange earner.
Belgium is seeking a permanent political framework with Rwanda, to prevent any more future squabbles between the two countries.
Belgium and Rwanda have heard good bilateral relations for the last 20 years. This was after Belgium came out and apologised for its role in the 1994 Genocide against Tutsi.
Now, Belgium, Rwanda’s former colonial master, says it wants the two open a permanent friendship.
On Thursday, Foreign Minister, Didier Reynders, told reporters in Kigali that: “We need to go further on a permanent dialogue on the coming development aid and working together to build capacity to invest and organize business contracts for our companies.”
Reynders mentioned further areas to be tackled in the permanent framework, including investing in new technologies in different fields.
“I am told one of the biggest priorities for investment in Rwanda is energy.”
Rwanda wants to increase access to electricity to 70% of households by 2017, up from current 22%.
Reynders and his fellow minister of cooperation, Alexander De Croo, are in a three-day visit to Rwanda, since January 6.
Rwanda’s Foreign Minister, Louise Mushikiwabo said “We had a very good bilateral discussions with the two ministers. Belgium is a very important historical partner for Rwanda and the region. For us, this visit signifies that after 20 years, we should be moving for a much more stable relationship.”
The Minister however did not rule out ‘small tensions’ the two countries have heard, including bank accounts closure and visa delays. “That should be an opportunity for us to step up in terms of our relationship.”
Currently, Belgium injects €160 million aid to Rwanda, in a five-year cooperation deal, penned in 2011 between the two countries. Outside direct aid, Rwanda sees Belgium as an important partner in development.
Belgium Development Agency (BTC), in collaboration with Rwanda, has funded different projects worth over €50 million, to improve in the areas of energy, capacity building and vocational training, among others.
In private sector cooperation, Minister Mushikiwabo praised Belgian companies investing in Rwanda. Major Belgian companies investing in Rwanda include SN Brussels and Skol Breweries, with other mining companies; Somuki, Minetain, GeoRwanda, and Corem that have penetrated the Rwandan market.
For Foreign Minister Reynders, “We are in discussions with Rwanda to send more companies to exploit investment opportunities here.”
Mabati Rolling Mills (MRM) says many Kenyans living abroad prefer investing in residential and other property, which gives good returns on investment
Speaking in Nairobi during the launch of Mabati-Cornell Prize, a Kiswahili Literature award scheme, MRM’s Head of Business Santosh Shridharan attributed growth in the building industry to the growth of a middle class with good disposable income and the Government’s increased spending in infrastructure development. “Although the Government’s overall spending in 2014 was limited, quite some spending went into infrastructure development, particularly roads,” said Shridharan.
Mr Shridharan observed that Kenya’s building regulations ought to be updated to take care of the rapid changes in the sector. “Building materials whose quality is uncertain still find their way into the market,” he noted.
Mr Shridharan observed that though 2014 was a difficult year for the company, it will continue innovating materials for both the high-end and low-end market to enable more Kenyans to buy quality roofing materials. The Mabati-Cornell Prize, a joint venture with Cornell University, UK, will see Swahili enthusiasts from the region get involved in literary competitions like essay writing, poetry and stories.
“We understand the need for such an initiative and we are keen to promote local talent. We will ensure this programme is mutually beneficial to all participants even as we try to build the Swahili brand,” said Shridharan.
The programme will see Sh1.35 million shared among three categories.
The winner will clinch Sh450,000, the runner-up Sh270,000 and third-placed writer Sh180,000.The last date for submission of manuscripts is expected to be on March 31, 2015.
MRM Head of Corporate Affairs Salim Bakari said the partnership with Cornell University offers a viable prospect moving forward, adding that the best manuscript will be published in Kiswahili by East African Educational Publishers while the best poetry will be published by the Africa Poetry Book Fund.
Scholar and Author Dr Hamisi Babusa called on all relevant stakeholders to play their role in advancing the Swahili language. The Kenyatta University lecturer expressed concern with the casual manner in which the national language was being handled.
“I want to thank MRM because of this project but I am concerned that not enough is being done to strengthen the language in schools and at the grassroots” said the Kamusi Teule Author.