Most banks Prefer Uganda for Expansion

Uganda Proves a Suitable Banking hub in E.A

According to Standard Investment Bank’s banking sector preview, Uganda is the most preferred destination for most banks seeking to expand in the East Africa Region in 2011 compared to Kenya,.

The survey indicated that Kenya was still weighed down by slow Growth Domestic Product (GDP) expansion, high volatility in inflation and high average debt-to-GDP ratio compared to Uganda.

Among the four East African Community countries, the survey ranked Rwanda as the best country for any bank to venture into first, when setting up regional operations followed by Kenya, Uganda then Tanzania came in last.

Based on the test results, there was an advantage for banks to expand their operations across the region. It further indicated that expected returns from different regional markets vary and therefore management should make a conscious decision on which markets to operate in.

The report further showed that most of the banks used the strategy of setting up on subsidiaries first while venturing into new markets in the region.

By 2011 Kenyan banks dominated the region, with 10 banks operating in 179 branches. Kenya Commercial Bank commands the largest regional share of 29.6 percent, while other five unlisted banks controlled 19.6 percent.

The bank says the market fragmentation across the region is bound to increase as more banks opt to set up new subsidiaries.

Meanwhile, in 2011 average interest rate spread across the four countries stood at 12.7 percent with a high of 18.3 percent in Uganda and a low of 9.3 percent in Rwanda.

The high spreads were attributed to the scarcity of credit from alternative sources and good source of low-cost retail deposits.

Apart from regulatory pressure in the medium term, the report indicates a bleak in ant positive foreseeable changes in this sector.

In 2011 Rwanda’s GDP growth went up by 7.4 percent, Uganda 7.4 percent, Tanzania 6.8 percent and Kenya 4.3 percent.

Business News Kenya: Lake Turkana Wind Power Project endorsed by the K...

Business News Kenya: Lake Turkana Wind Power Project endorsed by the K...: Wind power is a cheap and reliable power source for Kenya The Vision 2030 Delivery Board will soon sign a Memorandum of Understanding ...

Lake Turkana Wind Power Project endorsed by the Kenya Vision 2030

Wind power is a cheap and reliable power source for Kenya

The Vision 2030 Delivery Board will soon sign a Memorandum of Understanding (MOU) with Lake Turkana Wind Power (LTWP) that will endorse the largest single private investment worth KSh75 billion in the history of Kenya.

This project will produce 300 Megawatts (MW) of dependable, low cost wind power to the national grid, an equivalent of approximately 20% of the current installed electricity generating capacity. The wind power generating site, is spread over 40,000 acres of land and is located in Loyangalani District, west of Marsabit County, in north-eastern Kenya.

The LTWP Chairman Mr. Carlo Van Wageningen said that the wind energy resource at Lake Turkana is exceptional and able to meet the estimates set. He further said that the average wind speed is just about 11 metres per second and that it blows consistently from the South East. 

Given this exceptional wind resource at the project site, the project will be a reliable and cost efficient source of energy for the whole country. Van Wageningen said that in addition to providing a reliable low cost power, the project will also aid in bringing numerous macroeconomic, community and social benefits for the people living within the region.

Experts claim that the projects will take approximately 32 months to complete during which, approximately 2,500 part time jobs will be created and later over 200 full time jobs throughout the period of operations that will mainly target local Kenyans. 

The company will implement a comprehensive training and international skill transfer program to ensure quality skills on site. Furthermore, this will not only help in capacity building for individuals but also intellectually promote in the growth of Kenya as a whole.

The Government’s Least Cost Development Power Plan shows that LTWP wind power will be one of the least cost power generation options available in the country. This project will replace the need for Kenya to spend approximately Sh15.6 billion per year on importing fuel.

This project therefore reduces the need for depending on unreliable hydro and on expensive, unpredictably priced fossil fuel based power generation. It also insulates Kenya’s power costs by providing a slightly low and consistent power price according to the Director General of Vision 2030 Delivery Board Mugo Kibati.

CMA seeks consultant to review fees, levies

Story by James Anyanzwa (Standard Media)

http://www.standardmedia.co.ke/?articleID=2000067659&pageNo=2

Stella Kilonzo (CEO - CMA) picture courtesy of area254.com

The Capital Markets Authority (CMA) is looking for a consultant to carry out a comprehensive review of fees, commissions, and levies paid by investors and issuers, which have partly been blamed for the industry’s lacklustre performance.

The authority has issued out an expression of interest, seeking to engage an independent consultant to review the various fees, levies and commissions charged in the market. This will include but not limited to regulatory fees, Nairobi Securities Exchange (NSE) fees, Central Depository and Settlement Corporation (CDSC) fees, and transaction levies.

Others include  investment management fees, advisory fees, issue costs, brokerage fees and commissions. The findings and recommendations of the study will inform policy review of the current fee structure.

The move is part of CMA’s efforts to deepen the capital markets, whose role in resource mobilisation is critical in the achievement of the country’s long term development blue-print Vision 2030.

The consultant is expected to undertake the study with reference to the various fees, commissions and levies charged in the market. This will assist in determing their adequacy, the impact of various fees to overall transaction costs and the relevance and basis for charging/determining the fees and justification for each specific fee.

The consultant would also be required to consider the relevance of various fees in determining the choice of investment or fund raising option, consider other ways of generating fees and revenues for CMA, NSE, CDSC and market intermediaries and consider level of competitiveness of the current market fees relative to other jurisdictions comparable to Kenya. He or she would then be required to recommend optimal fees structure for the Capital Markets.

“The CMA now invites interested candidates to express their interest to provide the services. Interested persons must demonstrate ability and capacity to undertake the assignment,” said CMA.

Each transaction on the securities exchange attracts a commission of 2.1 per cent for any transactions worth below Sh100,000 and 1.8 per cent for any transactions above Sh100,000.

Listed companies

CDSC’s main source of revenue is a transaction levy charged on each transaction settled through the CDSC and a depository levy charged to listed companies on the basis of the number of transactions per year but subject to a cap. 

The CDSC is paid a transaction levy of 0.06 per cent and 0.002 per cent of the value of equity and debt transactions in the secondary market respectively. CDSC also collects levies from pledges, releases and foreclosures. CDSC proposes that the transaction levy rate be increased from 0.06 per cent to 0.12 per cent of transaction value.

Rising operational costs, falling revenues, stiff competition for limited consultancy contracts and fluctuating trade volumes at the NSE are swiftly pushing stockbrokers, investment bankers and fund managers into financial distress.

“ Basically our concerns have to do with the level of commissions. Over the last one year or so the performance of the NSE has not been impressive with volumes going down,” said John Kirimi, Executive Director at Sterling Capital Ltd. “ As we go forward we have to prepare for the worst because our business is perception-based.”

Rules to help SMEs list at the NSE

SMEs will soon be able to list in the NSE

The earlier proposal that sought to have (small and medium enterprises)SMEs listed on the Nairobi Securities Exchange (NSE)   moved closer to fruition with the gazettement of new policies.

A message from the Nairobi Securities Exchange chief executive officer Peter Mwangi, revealed that the new rules will offer small and medium sized companies a platform to access long-term and relatively cheap capital. SMEs will also be able to raise their profiles through their participation at the NSE.

This follows the approval of Nominated Advisors (Nomads) rules and the NSE’s ongoing training of prospective advisors on their responsibilities to clients before the listing. The Nomads will assist firms to list and to comply with the good corporate governance practices.

The acting CEO, Capital Markets Authority acting Mr. Paul Muthaura revealed that they are looking forward to training at least 50 market intermediaries in the next 100 days in a new programme.

Mr. Mwangi also said that they will also offer lessons on corporate governance to directors of mid cap companies.  They are doing this so as to reassure investors seeking to invest in the fast growing and well run small companies.

The NSE is in the hunt for regulatory approval that will allow it to list on the bourse by mid next year. Its shareholders have already approved the listing through the introduction of the bourse to the Alternative Investment Market Segment.

Mr. Mwangi further said that the Capital Markets Authority gazetted the demutualization regulations in August and that they are now making a formal application, as required by the regulations.

Starting October 3, the NSE and FTSE International will be introducing FTSE NSE Treasury Bond Index that will allow investors to use an independent benchmark for the first time to measure their bond portfolios performance.

This new program gives investors the opportunity to access current information and provide a reliable indication of the Kenya Government bond market performance.

The NSE officials were speaking during the Diamond Trust Bank’s listing of new shares following the completion of a rights issue where the bank sought to raise Sh1.8 billion to fund its expansion plan in East Africa. The bank will use the funds to explore alternative investment opportunities sub-Sahara Africa.