MOTOR COMPANY HYUNDAI OPENS ASSEMBLY PLANT IN ETHIOPIA

South Korean motor vehicle manufacturer Hyundai has set up an assembly plant in neighboring Ethiopia. It is Hyundai’s first plant in the East African region.

Mr. Haile Gebraselassie, one of the business partners in the assembling venture said that the plant will produce passenger hatchbacks and trucks. The company expects to roll out 10,000 vehicles annually.

Hyundai hopes to attract car buyers by offering affordable alternatives to the highly priced imported vehicles. The company plans to sell its cars in Ethiopia and in neighboring Kenya, Sudan, Somalia, Eritrea, and Djibouti.

Kenya recently revised the age limit for second hand car imports to five years from the earlier limit of eight year. The move aims to reduce the purchase of second hand cars in Kenya.

The assembly plant in Ethiopia will boost the number of affordable cars available to Kenyan buyers as the assembly plants in Kenya are not able to meet demand for vehicles in the country.

WHICH COUNTIES HAD THE HIGHEST GDP

The Kenya National Bureau Statistics (KNBS) has released its first gross county product report which provides official statistics on economic size of counties, the structure of county economics and it also estimates the economic potential of the various counties in different sectors.

The publication which covers the period between 2013 and 2017 showed that Nairobi contributed Kenya’s GDP at 21.7 per cent followed by Nakuru, Kiambu and Mombasa with shares of 6.1, 5.5, and 4.7 per cent, respectively.

Only 21 counties led by Bungoma, Tharaka Nithi, Nyandarua, Elgeyo Markwet, Siaya, Nyeri surpassed the average growth in GCP per capita of 2.8 per cent.

KNBS Director General Zachariah Mwangi attributed large populations and thriving economic activities such as agriculture, manufacturing, transportation, financial, real estate and wholesale and retail trade to the high economies of these leading counties.

“Overall, agriculture and services account for the largest share of economic activity in majority of counties,” the GCP report stated.
Nonetheless, agriculture is seen to have a bigger share in contributing to the counties’ economy as major towns like Nairobi and Mombasa, which largely occupy urban centers are seen to have a declining GCP over time.

“Counties that are largely dominated by urban centers, notably Nairobi City and Mombasa, have had their shares of GCP consistently decline over the period mostly due to growth in agriculture’s contribution to gross domestic product.

“On the other hand, counties with strong presence of agricultural activities, particularly horticulture, have consistently improved their share of GCP over the period,” the report stated.

Lamu, Samburu, Isiolo, Tana River, Elgeyo Marakwet, and Baringo were listed as counties with untapped opportunities for industry sector development`while Nairobi, Kiambu, Mombasa, Machakos, Kisumu, Nakuru, and Kajiado thrived in that sector.

“More than a half of county economic activity is driven by services sector. GCP amounted to Ksh 3,992.7 billion in 2017, with services sector accounting for 54.6 per cent, followed by agriculture (24.0 per cent) and industry (21.4 per cent). However, agriculture remained the most spread across counties,” the report added.

CMA EXTENDS DEACONS SHARE SUSPENSION FOR 10 MONTHS

The suspension of Deacons EA Plc (under administration) from trading its shares at the Nairobi Securities Exchange has been extended by the Capital Markets Authority until 30 November 2019.

The decision was made following a proposal from the joint administrators to appoint an Independent Transaction Adviser and ultimately agree on an actionable timetable in the turnaround process.

“Notice is hereby given on the extension of suspension from trading of Deacons EA Plc shares following a proposal from the joint administrators to appoint an Independent Transaction Adviser, subject to the company trading at a profit by September 30, 2019 and thereafter agreeing on an actionable timetable in the turnaround process,” statement issued by NSE noted.

Deacons Plc woes began in November 19 when it was suspended from trading in the bourse for 40 days and subsequently extended for 10 days ending Thursday.

‘The fashion retail company planned to operate four stores at Two Rivers Mall. It invested Ksh400 Million in stock as it awaited the mall’s opening. However, the Kiambu-based mall delayed its open date more than six months. This left the retailer with excess stock and no additional revenue from its investment,” he said.

WHY ISIOLO COUNTY NEEDS TO IMPROVE TOURISM SECTOR

Tourism is an endowment that is a serious natural gift; an ornament that can raise our county’s profile and make it worthy player in the tourism industry if efficiently and successfully managed. However, it is paramount that we first realize ourselves before we start talking of making any stride and possibly awaken our sleeping gold mine.

The talk of what we can do with the kind of potential we have would be the beginning of our road to becoming a huge player in the industry. Tourism can form a strong pillar for the attainment of vision 2030 and raise our bar higher as we seek to stamp our authority in the region. The potential is there but we need to invest more if we are to reap from the sector.

Our lodges, the wildlife, the rich and diverse culture of our NFD people have by far amazed the tourists that have visited the region. The many other products yet to be developed makes us the envied destination in the world but lack of either understanding or goodwill is denying us the privilege to make something out of nature’s gift.

It’s incumbent on us to develop ways of tapping these monumental resources to benefit our economy. There are brilliant minds out there who can be brought on the table and asked to give suggestions and ideas and the Tourism sector can be able to pick up and make a huge impact to the lives of many. We can create both direct and indirect jobs and improve the economy in ways unimaginable. What do we need to get Right???

Marketing/Research
Outreach is essence because on our own we can realize so little, we first need to get the inventory of our capacity and understand the policy framework on which we can operate to interrogate its level of success and determine how it can be enhanced and enriched with new thinking, approach and model.

Partnership
Kenya Tourism Board is the country’s premier statutory institution mandated to show case Kenya’s tourism resources and seek market for it, it’s imperative we lobby KTB to feature Isiolo in it’s marketing campaign so as to raise awareness about its existence and it’s product line on offer. We could support such initiatives by providing them with videos and documentaries that highlight Isiolo’s area of historical significance which will be the campaign’s strongest show and emphasis, the same could be posted on KTB website so that any visitor could benefit Isiolo as well.

Kenya association of tour operators
Kenya association of tour operators is a significant player in the tourism industry and its importance cannot be overemphasised, Isiolo County needs to engage this outfit so as to benefit from it given million memberships base, KATO is the umbrella body that brings together all tour companies in Kenya and partnering with them will be critical, it serves as a bridge between tourist and the market and since KATO members are responsible for managing their client itinerary it will be prudent if they have all the information about isiolo county’s tourism products so as to correctly advise their client and convince them why this destination is superb in terms of offering.

The county authority should also make every effort to package Isiolo as a tourism destination differently as an alternative to the often overstretched and monopolized Maasai Mara while at the same time highlighting the great developmental stride in logistics that could very easily help in connecting Isiolo to the world and facilitate the travelers to Isiolo take advantage of the recently opened Isiolo international airport.

Building of an Interactive Website
In the technology era Isiolo has no excuse not to market its tourism potential using the internet because information empowers and absence from the cyber sphere is not only undoing but embarrassing as it depicts us as inherently analogue.

We can easily let the world know about us and all that we offer, the rates and every other related information from comfort of their home just by visiting the web portal.

Product diversification
Other than only offering a single line of service this lodges and game reserves could think outside the box by enriching its menu by bringing on board cultural tourism where locals could be allowed to organize cultural activities around the camps so that the travelers could share in the experience, this way a client feels he has been accorded value for their money.

Creation of a flagship project
Isiolo county can think of creating a flagship project like the Maralal camel Derby or even Cultural festivals, this project could be done annually with possibly a week long activities that culminate in a major cultural show case involving all communities in Isiolo. We could of course think of a great trek along Ewaso Nyiro river course to explain our people’s migratory lifestyle informed by their nomadic way of life. This would allow the travelers a peep into this unique cultural phenomena, a trek that would culminate in a well organized cultural festival showcasing every aspects of our life.

THE LESSONS FROM GREECE

There was once this country that harboured great ambitions. It dreamt of growing its economy and also gaining membership into the exclusive club of developed nations. Easy access to cheap loans made the dreamless far-fetched. As you would expect, the nation jumped at this rare opportunity and took off on a borrowing spree. With the money in its account, all ambitious development plans were soon abandoned for personal interests.

Borrowed funds were dished out to state employees in form of huge paychecks, sketchy deals were signed off, theft and bribery reigned, and figures were cooked to cover the country’s financial position. Does this sound like Kenya? No, I’m talking about Greece.

I am currently reading Michael Lewis’s book “Boomerang” on the European fiscal crisis. The resemblance of events in Greece in the early 2000’s to the current drama in Kenya is astonishing. The story on Greece is in the second chapter of the book going by the interesting title “And they Invented Math”.

Michael narrates how anarchy reigned in Greece’s economy at the start of the 21st century. Corruption was the standard way of life in the country. If anyone needed the service of a government officer, he or she had to pay a bribe. The country’s wage bill doubled in just twelve years and its debt rose to 1.2 trillion dollars. The madness was so pervasive he notes that “….the only Greeks who paid taxes were the ones who could not avoid doing so- salaried employees… who had their taxes withheld from their paychecks,” Every other worker in the informal sector evaded taxes.

Every single day Greeks devised new ways to steal from the state. A group of monks traded in a fairly valueless lake for prime government land. The write states that “The Greek state was not just corrupt but also corrupting.”

Ultimately, Greece’s day of reckoning arrived in 2010. The North European state had little choice but to change its ways. Some of the adjustments were; sale of national assets, reduction in government expenditure and tax hikes.

As you would expect, Greeks did not like the decision and quickly took to the streets in protest. The protests lasted a few months during which a lot of damage was done on the already struggling economy. Despite the cuts on expenditure, tax hikes, and several bailouts, Greece’s economy has still not recovered from the setback.

As for Kenya, our day of reckoning has come; the show is about to start. Government expenditure is at unprecedented levels. The debt is at the all-time high of Kenya shillings 5 trillion. Kenyan’s are feeling the pain of reckless spending. Swift action is needed from our leaders. I can only hope that our leaders will act responsibly and provide a permanent solution to the problems we are facing. In the meantime, we brace for tough times ahead.

MOBILE MONEY OVERTAKES CASH IN SOMALIA

The use of mobile money has overtaken use cash in Somalia with over $2.7 Billion being transacted monthly. A report by the World Bank has found that close to 155 million mobile transactions are carried out every month, making the country one of the most active mobile money users in the world.

Lead ICT policy specialist at the World Bank Tim Kelly says private sector actors have given Somalia a unique opportunity to leapfrog towards widespread financial inclusion saying that the World Bank will continue to support the partnership between the Central Bank of Somalia, the National Communications Authority and the key private sector actors as they deliberate on an appropriate regulatory framework for the sector.

“Reducing costs and promoting greater stability is a top priority for the overall development agenda for the financial sector, ensuring that regulation does not stifle innovation by levelling the playing field is a very close second,” said Thilasoni Musuku, Senior Financial Sector Specialist at the World Bank Finance,

Media reports by Capital news also indicate that Somalia has overtaken most African countries in mobile money use despite lack of infrastructures that other countries enjoy such as, robust consumer protection and know-your-customer requirements as well as key policies and regulation. Early 2017 reports by Quantum Global Research Lab had put Somalia at 34 per cent only 3 per cent behind Congo in mobile money usage.

A REVIEWAL OF DATA TARIFF

The cut-throat competition in Kenya’s Mobile data space is forcing mobile service providers to reconsider their data offers in the market to remain competitive. Mobile service provider Safaricom is the latest to review its data tariff in an effort to fend off competition and remain dominant in the data space, only days after Telkom Kenya established 200 4G sites within the capital.

According to Safaricom’s Acting Consumer Director Mr Charles Wanjohi, ’’competition is real and competition brings the best out of us, also for our customers they have been saying when we look at what other are offering, we think there is better value there, but we know their network is not up to par. We don’t want to leave you but adjust the value proposition, which is what we have done.’’ Adding that they have to remain market competitive and assuring customers to expect average speeds of about 5MBS.

However, the state of the country could have also played a role in the decision. ‘’This decision has mainly been driven by listening to our consumer, at the end of the day what’s happening in the country now it comes in handy…things are not easy financially.’’ Said Carolyne Kendi, Safaricoms Head of Brand Marketing and communication.

The new tariffs will allow mobile users to continue using mobile WhatsApp even after their data runs out until the expiry of the data duration. For SH20 Safaricom customers will get 50 MBs and 50 SMS, while for Sh50 they will receive 150 MBS and 150 SMS daily. Weekly and Monthly charges have also been adjust to 350MB for Ksh99, 1GB for Ksh250 and 3GB for Ksh500 and 2GB for Ksh500, 5GB for Ksh1000 and 15GB for Ksh2000 respectively.

FIVE BANKS FINED FOR HANDLING NYS FRAUD MONEY

The Central Bank of Kenya (CBK) has penalized five banks in relation to the recent National Youth Service scandal. The five banks, Standard Chartered Bank Kenya Limited, Equity Bank of Kenya, Kenya Commercial Bank, Co-operative Bank of Kenya Limited and Diamond trust Bank are said to have transacted the largest flows.

The CBK says the banks are being penalized for failure to report large cash transactions, failure to undertake adequate customer due diligence, lack of supporting documents and lack of reporting Suspicious Transaction Report (STR) as required.

Kenya Commercial Bank (KCB) which transacted Sh639 Million will pay the heftiest fine of Sh149 Million, followed by Equity Bank which will pay Sh89 Million. Standard Chartered Bank, Diamond Trust Bank and Co-operative will pay Sh77 Million, Sh56 Million and Sh20 Million respectively.


‘’The main objective of the investigations was to examine the operations of the NYS-related bank accounts and transactions, and in each instance asses the bank’s compliance in the with the requirements of Kenya Anti-Money Laundering /Combating Financing of terrorism (AML/CFT) laws and regulations.’’ Said the CBK.

The second phase of the investigations into the NYS scandal is expected to involve findings by other investigators as well as the DCI and ODPP.

The CBK says the each bank is expected to provide an action plan to that seeks to address the loopholes and commitment to compliance to all aspects of the law. ‘’These action plans will be submitted within fourteen days (14) days and CBK will closely monitor their implementation.’’ CBK said.

Adding that they will continue to enforce strict adherence to the application of the laws and regulation to safeguard stakeholder interest and maintain a healthy financial sector. The CBK actions comes amid a heightened fight against corruption by the government.

THE PUBLIC DEBT PROBLEMS IN KENYA

Lately there has been a lot of talk about our public debt. It is therefore necessary for all to understand what the issues are with our public debt. This will help in informing public debate on the issue. Besides it is easier to develop solid solutions when you are clear on the issues.

Our current debt problems can be summarised as follows;
Collapsing of the budget making process – Since 2013 our budget making process has become chaotic and incoherent. It can be described as a calamitous circus. The budget is nowadays a moving target where changes are introduced throughout the year. This has caused a lot of confusion. For instance people talk of a KShs 3 Trillion budget for the current year yet the actual printed figure is KShs 2.6 Trillion.

The assumptions on which the budget is based such as revenue targets are usually not backed by any evidence. The current revenue targets are KShs 1.9 Trillion up from KShs 1.5 Trillion last financial year. That is a 31% jump in one year. This is an absurdity and fiscal impossibility. Last year revenues rose by 6% what would be the basis for projecting a 31% rise this year especially in a struggling economy.

The budget process begins with a long spending wish list which is followed by a panicked search for revenues. The actual expenditure last year was KShs 2.1 Trillion. The actual expenditure on 2016/2017 financial year was also KShs 2.1 Trillion. What is the point of raising the expenditure to KShs 2.6 Trillion in the current financial year? This has resulted in extracting up to the last drop of blood in terms of taxes to fund the bloated spending plan. Why can’t we begin with the revenues we have and then come up with spending plans on that basis instead of budgeting for expenses then look for funds to finance them. That is what we do with our household and business budgets.

Despite numerous tax rate rises the revenues have flattened with little hope for growth. There is a limit to which you can tax people. Also in the process of raising revenues we have turned the business environment toxic through a chaotic policy environment. An exaggerated spending plan creates room for and encourages looting of public funds.

We have borrowed too much, too fast to the extent that we have all but exhausted our borrowing capacity. Over the last five years annual average growth in revenues was 13% while annual average growth in debt was 22%. This has robbed us the opportunity to continue leveraging on debt to manage our fiscal deficits. We have to look for debt alternatives in financing future budgets. This means either we sell some of our national assets or drastically reduce our spending. Reducing spending will slow down the economy. We are in a situation where you can’t tax people more and can’t borrow more.

Our debt is largely unproductive. We have spent most of our debt on politically driven projects which do not make economic sense. Furthermore, we have spent borrowed money on recurrent expenditure which is an unforgivable economic sin. Our spending has also become sinfully tenderpreneur driven.

Poor parliamentary oversight. Parliament has failed in ensuring our borrowing is sustainable. MPs are only keen about their salaries and CDF allocations as far as budget making is concerned. This has left Treasury with a freehand in recklessly piling up debt. It is a shame we have left the issue of debt sustainability to IMF yet this should be the business of our parliament and indeed a domestic affair.

Lack of transparency in borrowing. The government has failed in keeping an up to date and accurate debt register. As of today nobody in this country actually knows what our total debt exposure is. Take for example the recently released Quarterly Economic and Budgetary Review Fourth Quarter, Financial Year 2017/2018 Period ending 30th June, 2018. On page Vi the document says our total debt is KShs 5.174 Trillion and on page 26 the same document says our total debt is KShs 5.039 Trillion. Which is which? To make things worse significant part of our borrowing has been hidden in books of parastatals such as Kenya Railways, Kengen, Kenya Power etc.

The Central Bank of Kenya has consistently failed to update its website on the public debt in a timely manner. For instance, we are now in September 2018 and the last time CBK updated the debt figures as per its website is March 2018. What is the explanation for such a delay if not mischief?

We have borrowed very expensive money. Before 2013, our external debt was largely cheap bilateral and multilateral loans. As of April 2013, our external debt was KShs 817 Billion and by June 2018 we were at KShs 2.56 Trillion a 213% growth. In April 2013, our expensive foreign commercial debt was KShs 57 Billion and as of June 2017 was at KShs 906 Billion a growth of 1,477%. This is neither acceptable nor sustainable. The risk of debt default are rising by the day.

Our debt servicing costs are no longer sustainable. Last year we spent KShs 324 Billion on interest payment while in the current fiscal year ending June 2019 we are to spend KShs 399 Billion on interest payment. The interest paid last year represents 22% of total revenues. The total spending on public debt in the current financial year is estimated at KShs 871 Billion (principal + interest) against targeted revenues of KShs 1.8 Trillion. The public debt spending is thus 49% of target revenues. These are shocking ratios.

Structural and constitutional issues. The 2010 Constitution came with a new government structure which is quite expensive to maintain. For instance, the hardcoding of County Governments’ issues at 15% of revenues does not make sense inasmuch as it may seem necessary to guarantee funds to county governments. What would happen if this is fiscally impossible? The government structure is just too wasteful. This will make it hard to cut spending. We need to ask questions as to whether the current 47 county governments are sustainable. Do we need two houses of parliament with a combined 416 MPs? Do we need all these constitutional commissions? Do we need Constitution Development Fund (CDF) in this era of County governments?

Bloated and expensive civil service. The current civil service needs to cut fat. A lot of rationalisation is necessary. We have a lot of duplication which should be done away with. Furthermore the government does not even seem to know how much it spends on salaries and wages. For instance it says it spent KShs 384 Billion on salaries and wages for the national government in the 2017/2018 financial year.

The recurrent spending of the Teachers Service Commission was KShs 218 Billion. Can the bill for teachers alone be 57% of the national government wage bill or 23% of its recurrent spending? Even assuming these figures are correct, how can it be that the salaries and wages of national government never reduced even after some functions were taken over by county governments? In the 2012/2013 financial year, the wage bill of national government was KShs 274 Billion. In the 2017/2018 financial years it was at the erroneous KShs 384 Billion a 40% rise.

Political interference with government finances. We have developed this culture of politicians such as the President and his Deputy making unjustifiable political declarations with serious economic implications. The politicians have been making promises on projects without any reference to the budget. This has resulted in fiscal indiscipline and chaos. These politics have exacerbated pressure on borrowing. It has also contributed to the earlier discussed issue of unproductive borrowing.

Notice there is nowhere I have talked about the much debated debt to GDP issues. I have argued so many times that you cannot use GDP to pay debts. You use cash represented by government revenues. As such, it is naïve and irresponsible to use GDP as an excuse or basis for borrowing. This will become clear in the near future.

KENYA RANKED TOP TARGET FOR SA INSURERS

Kenya has been ranked as the number one target market for South African insurers beating their home market which comes in second place. According to a report by audit firm PricewaterhouseCoopers (PWC), Kenya is among the first five African markets being targeted while other markets in the top five include Botswana , Mozambique and Nigeria respectively.

According to the report, Kenya’s high GDP growth rate and its population size are some of the main factors that the southern investors now want a piece of the Kenyan cake.
‘’Given that insurance markets in Africa are largely un(der)insured, for various historical and access reasons, it’s important for us to develop a more detailed understanding of the “new” customers that could be targeted for growth and the kind of changes required to get more people to buy insurance.’’ Reads the report in part.

However the report also sites Regulatory burden, access to distribution, availability of talent and Political (in) stability as some the main barriers to the Kenya Market.

KENYA SIGNS SILK BELT AND ROAD AGREEMENT WITH CHINA

During his visit to Beijing, President Uhuru and the Chinese President Xi Jinping “signed a cooperation agreement within the Framework of the Silk Road Economic Belt and the 21st Century Maritime Silk Road Initiative.” The initiative aims to promote economic prosperity, development, and regional economic cooperation. The Silk Belt and Road initiative will connect Asian, European, and African countries more closely.
The agreement, among others, was signed at the Great hall of the People where the two leaders discussed ways to strengthen the comprehensive and strategic partnership between the two nations.

President Kenyatta appreciated China’s commitment to support Kenya’s development goals while noting that the next Forum on China-Africa Cooperation (FOCAC) is in line with the country’s Big Four agenda. “It is my ambition that we shall continue to strengthen our strategic and comprehensive partnership,” he stated.
China and Kenya have been cooperating in various sectors such as infrastructure, industrialisation, energy, technology transfer, agriculture, peace and security, capacity building, environmental protection, and people-to-people exchanges. “Kenya is satisfied with the tremendous progress achieved in our bilateral cooperation, and continues to open up new areas of cooperation,” the President added.

The SGR Project
President Uhuru observed that the first phase of the SGR project, which was completed before schedule, is already reaping benefits for the country. He also highlighted the significant by-product of building human capacity in railway engineering that is emanating from the project.

To this end, the University of Nairobi, the Beijing Jiaotong University, and the Kenya Railways Corporation signed a MoU which will facilitate the training of railway engineers and managers for the SGR operations and management. “My government appreciates your government’s commitment to developing jointly with our Railway Training Institute, the appropriate vocational and technical skills to ensure optimal management of the rail network on a sustainable basis,” President Kenyatta said.

With regards to the SGR project, skill transfer to the Kenyan workers has been slow due to language barriers and cultural differences. “It will take time for them to socialise and fully engage with one another,” the Chinese ambassador to Kenya Sun Baohong said. Still, the alleged abuse of Kenyan workers by the Chinese workers could create a greater divide between the two parties.

Despite the success of the SGR project, Kenyans have a major debt burden which has surpassed the Sh5 trillion mark . This debt could potentially derail Kenya’s economic prospects while increasing the pressure of the already overburdened Kenyans. That said, the completion of the China-Africa Summit could see President Kenyatta sign the postponement of the implementation of the fuel levy thereby alleviating the pressure on Kenyans the tax has already caused since Sunday.

THE WORLD REMIT LAUNCHES DIGITAL MONEY TRANSFERS WITHIN EAST AFRICA

Online money transfer service World Remit says it has launched a new digital money transfer service to be rolled out in Kenya, Rwanda, Tanzania and Uganda. The new service is expected to reduce the cost of sending money across borders which has been a major hurdle to regional integration.   

"Just as WorldRemit has revolutionized the way people send money from developed countries, our vision is to do the same within Africa. From the frequent traveler, who works in different countries, to the small business owner buying goods abroad, our new fast service will offer the benefits of lower cost and greater convenience.” Ismail Ahmed, CEO and Co-founder of WorldRemit. 

The company was founded by Ismail Ahmed and is backed by venture capital companies; Accel Partners and Technology Crossover ventures while recording transfers of more than $1.6 billion at an annualized rate to the region. With customers sending transfers from over 50 countries to over 145 destinations globally, the firm prides itself to having quick, secure and low cost transfers providing SME’s an alternative to costly traditional money transfer systems.

ONLINE TRADING UNIT FOR GOVERNMENT BONDS LAUNCHED BY JSE

Africa’s largest bourse Johannesburg Stock Exchange (JSE) has officially launched an electronic trading platform (ETP) for government bonds, in partnership with the country’s ministry of Treasury and a multi-stakeholder group consisting of Strate, the Financial Sector Conduct Authority (FSCA) and banking institution.

The electronic trading platform for bonds which is meant to allow transparency, price discovery and settlement assurance to allow issuers to transact anonymously both pre-trade and post- trade.
 “The Bond ETP was also an important element of South Africa’s commitment to Capital Markets reform at the G-20 group of nations. The culmination of the intensive efforts of a multitude of stakeholders including our technology provider MTS; our nine Primary Dealers, the World Bank as project consultant; the South African Reserve Bank; and Central Securities Depository Participants (CSDPs) has really paid off and this is a proud moment for our country.” Donna Neer Director of Capital Markets JSE

Currently more than $137 million in government bonds is listed on the JSE debt board accounting for over 90% of all debt market liquidity reported to the JSE. Government entities issue bonds and list them on the JSE to raise funds for large infrastructure projects such as roads, power stations and hospitals.

In February JSE had announced listing of ‘project bonds’ allowing institutional investors a chance to invest in infrastructure and energy projects. The treasury had at the time said that Government and banks alone cannot fund South Africa’s infrastructure programme.
 “The use of electronic trading platforms has shown notable positive effects in the secondary markets including: improved liquidity through price discovery; reduced transaction costs and greater competition; increased transparency, and lower trading costs.” says Mondli Gungubele Deputy Minister of Finance.

CHALLENGES FACED BY INSURANCE BROKERS IN KENYA

The insurance brokers have warned of a looming extinction of their business as underwriters increasingly opt for direct contact with policy buyers. The Association of Insurance Brokers of Kenya said direct procurement, especially by public entities, has emerged as one of the trends that threaten their survival. Mr Omolo talks to Financial Standard about the challenges facing the sector and how they overcame them.

What is the current insurance uptake in Kenya compared to her peers?
It’s not good and not bad. The current average insurance penetration level in Kenya is at three per cent of the GDP compared to South Africa at 12 per cent. In the East Africa region, we are followed by Tanzania and Uganda at less than one per cent. 
There is a drive to sell insurance to millennial from this year, why now?

Research carried out both by Insurance Regulatory Authority (IRA) and other global bodies has proved that the millennials will be the greatest consumers and that’s why we are targeting them. Historically, many of the insurance products sold then targeted the old. Millennials are also able to spend without a blink and are able to appreciate the products much more. The micro- insurance is some of our target areas, where we use mobile phones to reach them.

What has caused low uptake of insurance services in Kenya?

If you look at the traditional products we have been selling in the past, they have been targeting the rich but now you find that their focus is now shifting because they are not many and it’s now better to focus to the middle class who are increasing day by day and the reach will be wider.

A BRIEF BUDGET ANALYSIS OF ISIOLO COUNTY

The 2010 Constitutional dispensation brought forth devolution creating the County Governments as a way of decentralizing services and resources to improve the lives of the common man. Devolution has been cited as a system that will ensure regions that have for a long period been marginalized get a chance to catch up with the other parts of the Country. The critics of devolution have cited misuse of funds as the major reason for the dismal performance of a number of Counties. The statistics given by the Ethics and Anti-Corruption Commission have proved that we have quite a long way to go for a number of Counties. In the advent of devolution, Counties in the NFD had a golden chance to redeem themselves from the shackles of marginalization and pick up to catch up with other regions. There was hope amongst the people as money started trickling down to the grassroots and there were signs that the taps of development will at last drop some water. Hopes were soon dashed as most of the funds went into the pockets of a few. The anticipated development for the many not the few fizzled away. We would like to study the budgetary allocation of NFD counties and how they have been spent by those mandated to plan for their expenditure.

The latest report from the Auditor General for Isiolo County brought to light a lot of anomalies when it comes to the County Government’s spending which is a clear reflection of mismanagement that has denied delivery of services to the common Mwananchi. The report which was recently made public raises red flags that demands prompt and immediate answers as to how exactly the County spends the money received from the National Government.

According to the reports the Supplementary Budget approved for Isiolo County for the FY 2017/2018 was Ksh. 4.37 billion and of that Ksh. 2.77 billion was marked for recurrent expenditure and Ksh. 1.57 billion was meant for development. From the total budget the County was expected to receive Ksh. 3.78 billion as its constitutional equitable share of national revenue and another Ksh. 382.42 million in conditional grants. In the first half of the FY 2017/2018 the County received Ksh. 1.02 billion and out of this the County spent 95.2% which is equivalent to Ksh. 943.64 million for recurrent expenditure and only 4.8% was spent for development.
Out of the Ksh. 943.2 million that was spent on recurrent expenditure a staggering Ksh. 768.2 million (81.4%) was spent on personnel emoluments and Ksh. 175.44 (18.5%) on operational maintenance. Only 76.77 million(8.05%) was spent on development projects. It is not clear which development programs this was used for as the county administration has not made clear. Specific projects that the 77 million shillings was used for is not mentioned anywhere by the administration. One year in office, Isiolo County Government does not have an Internal Audit Committee and did not constitute the County Budget and Economic Forum.

Briefly, Isiolo County Government is showing little effort in spearheading development in the region going by the negligible budgetary allocation for development programs. To spend a paltry 8% of budgetary allocations on development programs is not only unconstitutional but an open disregard of the importance of prioritizing broader development delivered to the grassroots. The County Government needs to cut down on the recurrent expenditure if it is to deliver on the promises it made to the people of Isiolo County.

The County is also doing poorly when it comes to revenue collection which has potential of raising a considerable amount of money that can do a lot to supplement the budget. In the last financial year the County Government raised only Ksh. 53.73 million in revenue which was way short of its target of Ksh. 182.86 million. The County needs to invest more in ways of increasing revenue collection which is completely untapped. It seems like there exists incapacity in the County administration to streamline revenue collections and explore new strategies to improve on collection to spur economic activity.

A large percentage of the County fund is being spent on salaries and allowances for County staff. The County needs to relook its strategy and spending if Isiolo is to benefit from the second phase of devolution. There is no tangible development to show for this first year of the second phase and the people of Isiolo are worse. The main reason why County Governments exist is to prioritize on development and focus solely on efforts that will improve people’s lives. The people of Isiolo must stand up and speak against extravagant waste of the public resources and assist the government of the day to suitably strategise and efficiently prioritize so that the county can benefit from the devolved system.

KENYA TO RECEIVE $232 MILLION FOR WIND POWER PROJECT

Kenya is going to receive an amount of $232 million from the Us Overseas Private Investment Corporation (OPIC) and Kipeto Wind Energy Company in the financing for the construction and operation of 100 megawatt grid connected wind power plant south of Nairobi. The plant will provide a more reliable source of energy to the national grid and support the US Power Africa Initiative to double the number of people in Sub-Saharan Africa with access to electric power.

“Kenya is open for business and all we want to do is package our partnership in a way that it is mutually beneficial to you as a private sector and the people of Kenya.” said the Kenyan President Uhuru Kenyatta.
This comes on the back of stalled the Lake Turkana wind power with the government resulting to another contractor who commits to completing the project within next month. The wind farm is the largest in Africa with a capacity of 310 megawatts. Kenya aims to generate 2,036 MW of wind power, or 9% of the country’s total capacity, by 2030.

The US business executives expressed their appetite to increase investments in Kenya following the assurances by President Kenyatta. The US Govt has also signed $5 million letter of commitment to expand the distribution network of Twiga foods. President assured Twiga of his administration’s commitment to remove any hurdle that could impede their operations in Kenya.

KENYA'S PUBLIC DEBT EXCEEDS SH5 TRILLION MARK; 58% OF GDP

Kenya’s public debt exceeded the Sh5 trillion mark in June because of the government’s continued borrowing according to the National Treasury’s most recent quarterly report. External debt currently stands at Sh2.563 trillion while domestic borrowing is at Sh2.448 trillion.

The report notes that Kenya’s debt in the same period a year ago was at Sh 4.41 trillion. During the 2017/18 period, the govt borrowed Sh 632 billion to bring the total debt upto June 2018 to Sh5.011 trillion, which is 58 per cent of the country’s GDP. International lenders such as the International Monetary Fund (IMF) and China accounted for a bigger chunk of the loans. World Bank’s total lending to Kenya now stands at Sh 581 billion while China’s is at Sh 557 billion.

Increasing Concern
The rising cost of the debt has been a public concern as the global analysts such as the Institute of Chartered Accountants in England and Wales (ICAEW) warn that it could stall the country’s economic recovery. In June this year, Kenya’s debt standing was ranked the fifth highest in Africa after Mozambique, Egypt, Ghana, and Gabon. “The pace of public debt accumulation and the lack of a clear communication strategy regarding the government’s plan to address deficits have raised concerns about the sustainability of Kenya’s public finances,” the ICAEW report stated.

The Lenders
China is one of Kenya’s biggest lenders with the largest portion of the bilateral debt being used to finance the standard gauge railway. Other external lenders include the World Bank and the Africa Development Bank that have given the country about Sh2.7 trillion. On the other hand, domestic lenders such as pension funds and commercial banks have given the country a total of about Sh2.5 trillion.

At the end of June, the World Bank’s total lending amounted to Sh581 billion compared to China’s which stood at Sh557 billion during the same period. The former’s debt could rise further as Kenya seeks another Sh380 billion to fund Phase 2B of the SGR between Naivasha and Kisumu. Kenya’s top two bilateral lenders are Japan and France that are owed Sh101 billion and Sh61 billion respectively.

Managing the Debt
According to the programmes officer at the Institute of Economic Affairs John Mutua, Kenya should reduce its exposure to the commercial debt market and focus on cheaper multilateral debt. “Carrying more commercial debt means interest payment will soon become our biggest challenge in public debt management. Kenya’s official policy is to go for concessional loans, but we haven’t managed that very well,” he said.

KENYA RANKED 23 GLOBALLY IN BITCOIN TRADING VOLUMES

Kenya has been  ranked 23 globally in bitcoin trading volumes according to the recent localbitcoins.com volume charts. The country traded $25 million in bitcoin, coming third after countries Nigeria and South Africa which traded $258 million and $98 million respectively.

This comes at a time when Kenyan regulators are still putting the brakes on cryptocurrencies with the Central Bank of Kenya prohibiting banks from doing business with companies dealing in cryptocurrencies. However, there could be a turnaround to this status quo if the country adopts a local digital currency in line with the recommendations of the AI and blockchain taskforce. A recent Ecobank report indicates that regulators in Africa have adopted a ‘wait and see’ approach with regards to cryptocurrencies.

The report states:
“Many African governments and regulators recognise both the risks and the potential positive impacts of   cryptocurrencies, and some also appreciate the difference between cryptocurrencies and the underlying blockchain technology. But they have been reticent in authorising cryptocurrency transactions, and mostly remain apprehensive about the potential risks. African countries appear to be looking to their neighbours to regulate and innovate first, and learn from their mistakes, rather than being the first mover.”

The Rankings
According to the LocalBitcoins all-time country volume leaderboard, Asia has traded the most bitcoin at $2.07 billion with the US, Russia, and the UK topping the list with trade volumes of $1.44 billion, $1.05 billion, and $738 million respectively while the rest of Europe traded $286 million. Tanzania is also appearing on the top 46 list with trade volumes of $2 million while Morocco traded $6 million. China came fifth with $622 million in traded bitcoins while India ranked eleventh recording trade volumes of $73 million despite the Reserve Bank of India (RBI) banning cryptocurrencies.

KENYA‘S LENDABLE’ HAS RECEIVED $4.5MN GRANT FROM DUTCH DEVELOPMENT BANK

The Dutch Development Bank FMO has extended a convertible grant to the Kenya based FinTech platform ‘Lendable’ that will be used to fund loans from latter’s alternative lender clients across Africa to small and micro enterprises and low-income consumer borrowers.

Lendable was founded in the year 2014 and currently provides structured finance facilities to seven fast-growing alternative lenders across African markets, including off-grid energy companies, small and medium-sized enterprise (SME) lenders and asset finance companies.

The USD 450,000 convertible grant is being provided by the Dutch government’s MASSIF fund, managed by FMO. It aims to reach targeted end-beneficiaries through financing the local financial intermediaries and institutions that can contribute to their development. Lendable’s technology platform allows for direct data integration with alternative lenders, including loan portfolio data analysis and cash flow predictions.

“By working with FMO we can scale-up the volume of the capital reaching SMEs and consumers in our markets as well as to support our partners in implementing the Responsible Finance Guidelines. As we scale, finding parties like FMO that are willing to invest alongside Lendable to de-risk commercial investment is key to our success.” Daniel Goldfarb, CEO Lendable.

GUESTS OPINION ; CRYPTO-CURRENCY ADOPTION FROM GLOBAL TECHNOLOGY DYNAMICS

Let us talk about the unstructured data perspective of how global geopolitics and culture is going to affect the adoption of crypto currencies. Cryptocurrencies being money can be looked at as a medium of exchange and as store of value. The devaluations of fiat currencies in Venezuela, Zimbabwe and Turkey in the recent past present compelling cases for the use of crytocurrencies as a store of value. Of course there is also the issue of inflation eg a loaf of bread used to cost Ksh 20($0.20) and now the same load or bread costs Ksh 50($0.50) in Kenya for example. There is also the aspect of crypto currencies as an investment creating a speculative aspect of the digital currency. The speculative aspect might not have been in the original thesis for the creation of Bitcoin or any other top altcoins and crypto currency projects but it has become a key part of the ecosystem. Globally the adoption of cryptocurrencies will be influenced by different factors in different countries and regions.

Google Is the most used search engine in Africa and in the USA while Baidu and Naver are the most used equivalents in China and South Korea respectively. This doesn’t surprise me. This is because they are in line with what has become the trend for software adoption globally. The aspiration to have a software or hardware player that dominates in all the regions of the world remains elusive. Cryptocurrencies won’t be the exception. Let us look at specific crypto currency projects and their possible adoption dynamics.

Ripple,XRP, The elephant can also dance
It uses byzantine fault tolerant algorithm. It is Iterative and tends to favor speed over security making it potential for violation of atomicity in distributed systems. Transactions on XRP network are created by a subnet of all nodes in the network hence it does not have network wide consensus. This means that it is not truly decentralized. The company prides itself as ultimate disruptor of cross boarder payments and money transfer which is currently dominated by SWIFT, Paypal, Visa and Mastercard. The payments space is already crowded with players like Apple, Google, Tencent, Alibaba making inroads.

Also it is not all the times that existing players are kodak’d by disruptive entrants. A good case is that of Zynga the online video game company that was seen in 2011 as the ultimate disruptor of the traditional game companies like Electronic Arts and Nintendo. As at the end of 2017, Zynga made less revenue than it made in the year 2013 yet Electronic Arts digital revenue have more than doubled over the period. Nintendo, Microsoft and Tencent have leapfrogged them on the online game industry. Ripple has made some very interesting partnerships in the financial sector but the days ahead remain tough and depends on how the industry leaders like SWIFT respond. The elephant can also dance! IBM has done it for over 100 years.

NEO, China, Russia and South Korea
China has got the world’s best digital ecosystem and it the envy of the world’s biggest social media and technology companies. It has played a very important role in the adoption of cryptocurrencies and will remain a key player going forward. China,Russia and South Korea have their own equivalents of US backed technologies and firms that have dominated on the global front. They are therefore very likely to create their own cryptocurrencies in line with this trend. It might not be NEO but it is important to look at crypto currencies emerging from these 3 countries.

Indeed companies that invested in early stage Chinese companies such as Yahoo and Softank in Alibaba, Naspers in Tencent have made tremendously gains on their investments. As such the strategy of investing in Chinese backed companies rather than trying to take them head on in China has paid off handsomely. In the recent past we have seen Uber retreat from the Chinese market and invest in Didi Chuxing. We have also seen them divest in the Russian and 13 neighbouring markets and invest in Yandex, the Russian company that whose products are the equivalents of Google and Uber. Walmart has also invested in JD.com in China. These developments are in line with the technology dynamics of these markets. Amazon, Facebook and Google might know how to swim very well in the ocean but Alibaba and Tencent know how to swim in River Guangzou. Crytpocurrencies are likely to mirror this interesting trend.

Reinvention
For the sake of this article let us refer to reinvention as the improvement made to the original product or idea such that it appears totally different from the original product or idea.
For many years Weetabix was marketed in Kenya and many markets as a foodstuff for children going by the commercials. This has changed and most commercials position it as a cereal foodstuff that is good for consumption even to adults. This is a good example for reinvention of a product. Similarly, detergents were being markets for ‘whitening’ clothes. Over time, manufacturers realized that scent is a big part of clothing and now the scent aspect of detergents feature prominently in the commercials of detergents. For the crypt currency ecosystem, we have seen many reinventions from forks and project spin offs. Ethereum was built to improve on the limitations of Bitcoin and it allows smart contracts which cannot be achieved on Bitcoin. There have been forks on Bitcoin, the most noticeable ones being Bitcoin cash and Litecoin that promise faster transactions. Stellar and ripple were both created by the same person but are currently running separately. This is an example of a spin off.

There are very interesting stories of great spin off in tech such as Saleforce Founder Benioff was once a senior VP at Oracle; he would later form Saleforce which became very big on cloud sales of ERP. Veeva founder Peter Gassner used to be an executive at Saleforce. Veeva specializes in offering cloud computing for life sciences and health sector. The semiconductor industry has also had very interesting spin offs. The founders of AMD and Intel used to work together at Fairchild semiconductor. Nvidia, the now leading GPU maker which is one of the best companies positioned to take advantage of AI technologies like self-driving has its founder Jensen Huang as a former employee of AMD. He would leave and form Nvidia and the rest is history. Forks or spin offs could lead to cannibalization of original products or ideas. These by-products or ideas could act as moderating ideas to their predecessors moderating their adoption.

Below are examples of pairs to look at.
1) Ethereum/bitcoin
2) Bitcoin vs bitcoin cash
3) Ripple vs stellar
4) Reddcoin vs Steem
4) Ethereum-EOS
5) EOS for example promises to have better governance and transactions speeds than ethereum as well as simplicity of build decentralized applications (Dapps). Steem and Reddcoin are both gunning for social media games and payments.

Privacy in Cryptocurrencies
Since most cryptocurrency transactions are traceable through public ledgers, there is still demand for the so-called privacycoins like Monero or Zcash. I am a big fan of blockchain for business. Privacy on blockchains will become increasingly important as more businesses begin to use smart contracts to process transactions.

Supplier of Suppliers
Redhat Systems survived the dotcom crash and it's now thriving in the cloud computing craze. This is because if you look at Amazon, Oracle and Microsoft as end user suppliers of cloud computing, Redhat Linux Systems is actually a common supplier of Redhat Linux OS to these 3 top cloud computing companies. This is akin to what Intel used to be to PC manufacturers. There was always an intel processor or component inside irrespective of the PC manufacturer. EOS and Ethereum being the leading platforms on which decentralized applications can be built are going to play very critical roles as platform players in the blockchain ecosystem. It is the same thing with Nvidia supplying chips to different self-driving companies giving it unrivalled advantage in the self-driving craze if it works.

Global adoption of cashless transactions
Countries such as Canada, Australia, South Korea and German are leading globally in regards to the adoption of cashless transactions and are likely to help drive the adoption of cryptocurrencies. Many would agree that cryptocurrencies are more traceable already than dollars in briefcases and cash transactions.