Kenya airways in trouble as loss deepen to US$74 million

Fuel, personnel and cost of aircraft remain top drivers of the airline’s costs

Kenya’s national carrier-Kenya Airways has posted a Ksh7.558 billion (USD74.6 million ) net loss for the year ended December 2018, as higher operating costs continue to eat into its improving revenues.

The airline which has changed its reporting period (end year) from March 31 to December 31, had a Ksh6.418 billion (USD63.5 million) loss in the 9-month period between April 1, and Dec 31, 2017.

This is despite the airline’s growth in total revenue for the 12 months which increased to Ksh114.45 billion (USD1.13 billion), compared to Ksh80.79 billion (USD789.7 million) for the nine month period ended December 31, 2017.

According to the management, fuel, personnel and the cost of aircraft remain the top three drivers of the airline’s costs, contributing to about two thirds of total operating costs.

“Fuel price volatility remains a major challenge for airlines around the world, and Kenya Airways is no exception,” Chairman Michael Joseph said as the carrier released its results on Tuesday.

According to KQ’s management, the price of oil per barrel saw an upward trend from the beginning of the year before reducing in the last three months of the year.

“As a result we saw our fuel costs rise by 73.6 per cent from Ksh19 billion (USD187.8 million) incurred in the nine months period in 2017 to Ksh33 billion (USD362.2 million) in the full year ended December 2018. The total cost of fuel in the 12-month period of 2017 was Sh25.5 billion(USD252.1 million), a 30 per cent increase,” Joseph said.

Fleet ownership costs also increased to Ksh18.9 billion (USD 186.9 million) from a restated amount of Ksh12.5 billion (USD 123.6 million) incurred in the previous nine months.

“The 2018 results are not directly comparable with the 2017 results as it is a representation of 12 months against the nine months in 2017. Were the 2017 results to be annualized, there would have been improvement in the results for the year,” the management notes in its financial statement for the year under review.

KQ has been struggling with loses since 2015 when it reported a Ksh25.7 billion loss (USD254.1 million). Things worsened in 2016 when the airline sunk deeper into losses reporting a loss of Ksh26.2 billion (USD259 million).

READ:Kenya Airways posts a $38.7 million loss in 2018 half year results

The carrier has however been making strides in improving its revenue stream through a number of initiatives, including additional routes.

Last year, growth in passenger revenue boosted its total revenues from Ksh63.9 billion (USD631.7 million) in the previous nine month period of 2017 to Ksh88.7 billion (USD876.9 million) in the year ended December 31, 2018.

Passenger numbers were 4.84 million at close of December 2018, while the nine-month period ended December 2017 recorded 3.43 million passengers. The airline achieved a cabin factor of 77.6 per cent (12 months compared to 76.2 per cent in the nine months of 2017.

In addition to the growth in passenger revenues, revenue from cargo amounted to Ksh8.68 billion (USD85.8 million) for the year 2018 compared to Ksh5.7 billion (USD56.4 million)  in the nine months of 2017.

“Kenya Airways continues to focus on delivering the turnaround programme that we embarked on in 2016. In the last year ended December 31, 2018, the capital optimization programme dubbed ‘project safari’  was completed. We have also undertaken various actions to ensure financial and operating efficiency to enhance business sustainability,” Joseph said.

KQ hired Polish CEO Sebastian Mikosz in 2017 to help turnaround the loss making carrier.

READ:Polish CEO Mikosz taxiing Kenya airways back to profit runway

The carrier is hoping its new routes, including the long haul Nairobi-New York route which commenced in October last year, will help boost its revenues as it works on its turnaround strategy.

ALSO READ:History made: From Kenya to New York with KQ’s inaugural direct flight

“We are on the right direction to turn this airline around and make it once more the pride of Africa,” Joseph had said last year when the carrier narrowed its losses to Ksh4 billion(USD39.6 million)  in half year to June 2018.

 

 

 

 

Kenya’s crude oil to hit global market this year

The first batch is intended to test the international markets

Kenyan crude oil could test the global markets before the end of this year, latest developments indicate, as stocks of the commodity continue to pile up at a storage facility in the port city of Mombasa.

In its latest operational update for the period January 1-April 25, 2019, British firm-Tullow Oil plc (Tullow), says the first export cargo is expected in the third quarter of 2019, even as exploration and drilling intensifies in the Turkana region.

This comes as the Early Oil Pilot Scheme continues to truck 600 barrels of oil per day (bopd) to Mombasa, where 80,000 barrels of oil are being stored ahead of export.

READ:Kenya oil exports gains momentum as Tullow bounces back to profitability

The crude oil from the Turkana oil fields is being stored at the defunct Kenya Petroleum Refineries Ltd (KPRL) (refinery) facility at Changamwe, Mombasa.

“Following receipt of regulatory authority approval, which is expected shortly, production will be increased to 2,000 bopd, with the first export cargo expected in the third quarter of 2019,” the firm notes.

Tullow has been searching for buyers of Kenya’s small-scale crude petroleum exports since last year ahead of the first shipment, with a number of unnamed potential buyers said to have expressed interest.

“Tullow has begun to market Kenya’s low-sulphur oil ahead of the first lifting with initial market reactions being very positive,” Tullow said in a recent statement.

Petroleum Principal Secretary Andrew Kamau had earlier revealed that buyers from Europe, India and China had expressed interest Kenya’s crude oil, though the government remains mum on the exact potential buyers.

Sources within government revealed to The Exchange that the country has reached out to at least 18 global oil refinery firms for uptake of its first crude oil.

According to the government, the first batch is intended to test the international markets’ reception to the country’s crude oil before commercial production picks. Tullow plans to commit to commercial oil production later this year.

“Tullow continues to target a Final Investment Decision (FID) in Kenya by year-end although this remains an ambitious target,” the management said this week.

The firm is finalising its Front End Engineering Design (Feed) studies for the planned construction of a crude oil pipeline from Turkana to Lamu, where the country is developing its second major sea port.

“Tullow is finalising its FEED studies for both the upstream and midstream, and both the upstream and midstream ESIAs (Environmental and Social Impact Assessments) remain on track for submission to the National Environmental Management Agency at the end of the second quarter,” CEO Paul MCDADE said.

“The government of Kenya, via the National Land Commission, has gazetted the land required for the upstream development in Turkana and, so far, approximately two-thirds of the pipeline. Discussions with government regarding key commercial agreements are making steady progress. A late 2019 FID remains contingent on these key government of Kenya deliverables,” the management notes in its update.

Oil pipeline

Kenya is looking forward to the development of an 892-kilometre crude oil pipeline from the oil fields in the Northern region of Turkana to the Coastal County of Lamu.

Last year, Tullow hired Wood Group (Plc) to design the pipeline needed to pump crude from the Lokichar fields to Lamu, with commercial production and exports anticipated for 2021/2022.

The cost of the pipeline is estimated at USD1.1 billion (Ksh111.6 billion), with a further USD2.9 billion (Ksh 294.1 billion) needed for upstream operations.

Other investors in the country’s oil projects include Canada’s Africa Oil and France’s Total. Kenya’s government is expected to take a stake through the state-owned National Oil Corporation of Kenya (NOCK).

Australia’s Worley Parsons has been tasked as the engineers for Tullow’s oil blocks.

According to Tullow, the Amosing and Ngamia fields have estimated contingent resources of about 560 million barrels, with plateau production potentially reaching 100,000 barrels per day.

Tullow and its joint venture partners have proposed to the Kenyan government that the Amosing, Ngamia and Twiga fields be developed as the foundation-stage of the South Lokichar Development.

This foundation stage includes a 60,000 to 80,000 bopd central processing facility and the export pipeline to Lamu.

The installed infrastructure from this initial phase is expected to be utilised for the optimisation of the remaining South Lokichar oil fields and future oil discoveries, allowing the incremental development of these fields to be completed at a lower unit cost post the first oil production.

Total gross capex associated with the foundation stage is expected to be approximately USD3 billion (Ksh304.3 billion).

Last year, Tullow had earmarked USD70 million (Ksh7.1billion) for investment in its Kenyan operations.

The company has spent more than US$1 billion (Ksh101.4 billion) to prospect for oil and develop of wells in the country.

Kenya’s readiness

In March this year, President Uhuru Kenyatta signed into law a Bill outlining how oil revenues will be shared between the national government, counties and local the communities.

Under the new Petroleum Act, county government from where oil is produced will enjoy 20 per cent of revenue from petroleum operations, while five per cent will go to local communities living around the oil fields.

The national government will retain a bigger chunk which is 75 per cent of the revenue.

The law is expected to address concerns mainly by locals who last year paralysed the pilot evacuation of the commodity by road to Mombasa.

READ:Tullow Oil suspends operations in Turkana citing insecurity

The new law however halves the 10 per cent earlier awarded to locals in a previous bill passed by Parliament ( in 2016),  which went unsigned by the President.

On safeguarding and managing resources from oil and other natural resources, the government is working on a Sovereign Wealth Fund, expected to be in place before the country becomes a net oil exporter.

During his State of the Nation address on April 4, the President said his administration will be presenting the Sovereign Wealth Fund Bill during the current session of parliament, a move that could see the fund created before the end of his second term (2022).

The bill proposes creation of a Fund and provides a legal framework to guide the investment of revenues from oil, gas, mineral and other natural resources.

The Fund, as proposed in the bill, comprises three critical parts which include  a Stabilization Fund, an Infrastructure and Development fund; and a Future Generation Fund.

“We are a country blessed with natural resources, which, if properly managed, will transform in a big way our nation and the welfare of our people,” the President said, “It must be our solemn duty as a State to manage those resources sustainably for the fair and equitable benefit of both present and future generations.”

Sovereign Wealth Funds are state-owned investment fund’s whose source of revenue is most often balance of payments surpluses, fiscal surpluses and in particular resource revenues.

In February, the National Treasury invited Kenyans to give views on the draft Sovereign Wealth Fund Bill, 2019 and on Kenya’s draft Sovereign Wealth Fund Policy.

If implemented, Kenya will join the likes of Angola, Rwanda, Libya, Morocco, Nigeria and Botswana, African states which have establishing wealth funds in their respective countries.

Globally, Norwegian Sovereign Wealth Fund remains one of the best examples with a value of more than $1 trillion (about Ksh101.4 trillion).

Data by the Sovereign Wealth Fund Institute shows over 65 economies, majority of them resource-rich countries, own at least one wealth fund.

Lack of proper management of oil and mineral proceeds have been blamed for the never-ending resource-linked conflicts in Africa, with the resources being viewed as a curse rather than a blessing as millions lurch in poverty despite the continent being resource rich.

Multinationals and their respective countries have been accused of reaping billions by repatriating profits and raw commodity, with little benefit going to local communities and host nations.

ALSO READ:Rights bodies calls for greater scrutiny of Kenya’s Turkana oil revenues

 

 

Kenya’s biggest trading partners, Uganda tops EAC

China dominates as Kenya’s top import source globally 

Uganda is Kenya’s biggest trading partner within the East Africa Community (EAC), latest data show, with China dominating the global scene.

The Economic survey (2019) shows total trade volumes (import and exports) between Kenya and Uganda in the year 2018, were valued at Ksh111.3 billion (USD1.09 billion).

Tanzania comes in a distant second with a total trade value of Ksh47.6 billion (USD468.9 million) while Rwanda is third with Ksh19 billion (USD187.2 million).

Trade with DR Congo, South Sudan and Burundi, mainly export markets for Kenya, were valued at Ksh15.2 billion (USD149.6 million), Ksh12.9 billion (USD127.1 million) and Ksh6.6 billion (USD65.02 million) respectively.

Uganda

During the year under review, Uganda increased the value of its exports to Kenya by 17.6 per cent to close at Ksh49.4 billion (USD486.7 million), from Ksh42 billion (USD413.8 million) in 2017.

READ:Uganda keen on enhancing exports to EA region

“The value of imports from Uganda rose largely driven by increased imports of maize, sugar, milk and animal feeds,” the Kenya National Bureau of Statistics (KNBS) has noted.

Kenya however exported more to her neighbour where total volumes were valued at Ksh61.9 billion (USD 609.9 million),a slight increase from Ksh61.8 billion (USD608.9 million).

Uganda exports to Kenya include wood and articles of wood, wood charcoal, fodder, mineral, cereals, dairy products, honey, edible products, sugars and sugar confectionery, coffee, tea, mate and spices, tobacco and manufactures tobacco substitutes among other products.

In return, Kenya exports salt, sulphur, earth, stone, plaster, lime and cement, mineral fuels, oils, distillation products, plastics, pharmaceutical products, vehicles, beverages, spirits and vinegar, soaps, lubricants, waxes, candles, modeling pastes among others.

Tanzania

The value of imports into Kenya from Tanzania increased by 3.5 per cent to Ksh17.8 billion (USD175.4 million) up from Ksh17.2 billion (USD169.5 million), mainly on live animals, cereals, beverages, spirits and vinegar, fertilizers, mineral fuels, oils, distillation products and textile articles.

Kenya exports to Tanzania on the other hands gained marginally to close at Ksh29.8 billion (USD293.6 million) from Ksh28.5 billion (USD280.8 million), despite the existing tariffs and Non-Tariff Barriers (NTBs) between the two states.

READ:Kenya, Tanzania mistrusts ripping apart the EAC

Last year, the two EAC member states were entangled in a trade war after Dar es Salaam denied unrestricted entry of Kenyan made chocolate, ice cream, biscuits and sweets entry into its market.

Nairobi retariated by imposing new tariffs on Tanzania products such as flour with both breaching the EAC common market protocol, which allows free movement of locally manufactured goods.

Presidents Uhuru Kenyatta and John Magufuli have on several occasions directed their ministers to resolve outstanding trade disputes, to pave way for increased trade between the two countries and the region as a whole.

ALSO READ:Why Magufuli, Kenyatta are worried over Kenya-Tanzania borders

Rwanda and the rest of EAC

The President Paul Kagame led country lost ground on its exports to Kenya where the value dropped by 29.4 per cent to close at Ksh1.2 billion (USD 11.8 million) from Ksh1.7 billion (USD16.7 million) in 2017.

This is expected to further dwindle based on the recent tiff with Uganda which has led the closure of borders, with Uganda being the main transit route between Kenya and Rwanda.

Kenya’s exports to Rwanda however surged to Ksh17.8 billion (USD175.4 million) from Ksh17.1 billion (USD168.5 million) in value.

Those to DR Congo, South Sudan, and Burundi however dropped to Ksh15.2 billion (USD149.6 million), Ksh12.9 billion (USD127.1 million) and Ksh16.8 billion (USD165.5 million), from Ksh18.9 billion (USD186.2 million), Ksh6.6 billion (USD 65 million) and Ksh7.4 billion (USD72.9 million) respectively.

“This was occasioned mainly by the political instability in these regions,” a trade expert told The Exchange.

EAC and Africa

Kenya’s total imports (value) from her EAC peers totaled Ksh68.4 billion (USD 673.9 million) an upward trend compared to Ksh60.9 billion (USD 600 million) the previous year.

READ:EAC bloc has made significant gains in reducing trade bottlenecks

The East Africa economic power house however lost ground on her exports to the regional markets where the total value dropped 1.9 per cent to close at Ksh129 billion (USD1.27 billion), from Ksh131.6 billion (USD1.29 billion) the previous year.

In the continent, South Africa topped as Kenya’s biggest trading partner with the trade being in favour of the southern country.

This is on the Ksh64.7 billion (USD637.4 million) worth of imports from SA up from Ksh61.9 billion (USD609.8 million), against exports valued at Ksh4.4 billion (USD43.3 million). Kenya however gained 57.1 per cent from Ksh2.8 billion (USD 27.6 million) a year earlier.

Other notable trading partners in Africa include Egypt where the country exported to, goods worth Ksh201. Billion (USD198 million), and Somalia whose imports from Kenya in the year amounted to Ksh15.1 billion (USD148.8 million).

Imports from Swaziland were valued at Ksh8.6 billion (USD84.7 million) a drop from Ksh11.2 billion (USD110.3 million ) in 2017, while those from Zambia closed the year at Ksh6.9 billion (USD67.9 million) after dropping from Ksh7.7 billion (USD75.8 million).

Mauritius, another key trading partner exported goods worth Ksh6.1 billion (USD 60.1 million) to Kenya, a drop compared to Ksh7.3 billion (USD 71.9 million) in 2017.

During the year, total imports from the African market were valued Ksh205.9 billion (USD 2.03 billion) a slight increase from Ksh200.5 billion (USD 1.98 billion) the previous year.

That of exports however dropped slightly, by 3.4 per cent, to close at Ksh216.2 billion (USD 2.13 billion) compared Ksh223.9 billion (USD 2.21 billion) the previous year, meaning Kenya lost its export market share in intra-Africa trade.

China and the World

China continues to dominate as the top source of imports into the country in the global scenario, despite losing five percentage points on its trade with Kenya last year.

READ:US-China rivalry to shape Kenya, Africa’s foreign policy in 2019

According to the survey released this week, imports from china were valued at Ksh370.8 billion (USD3.65 billion) in 2018, a slight drop from 390.6 billion (USD3.85 billion) the previous year.

India comes in a distant second where imports from the Far East nation totaled Ksh185.3 billion (USD1.83 billion). This was however an increase from Ksh170.4 billion (USD 1.68 billion) worth of imports into the country in 2017, mainly on account of medicinal and pharmaceutical products.

The drop in the value of imports from china is seen as a result of reduced importation of machinery and equipment, related to the construction of the standard gauge railway, whose phase two-Nairobi-Mai Mahiu is 91 per cent complete.

Major Chinese imports to Kenya include machinery, electronics, motorcycles, motor vehicles spare parts, furniture and clothes.

Other top import sources for the country are Saudi Arabia and the United Arab Emirates (UAE), where total imports were valued at Ksh172.7 billion (USD 1.70 billion) and Ksh147 billion (USD 1.45 billion ) respectively.

The Asian continent remains the top source of imports into the country having closed at a total of Ksh1.168 trillion (USD 11.5 billion) in value last year.

It is followed by Middle East whose imports closed the year at Ksh355.7 billion (USD3.50 billion).

Imports from Europe and the US were valued at Ksh292.6 billion (USD2.88 billion), and Ksh85.9 billion (USD846.3 million) respectively last year.

READ ALSO:How Trump will beat China in Africa

Exports to china last year were valued at a paltry Ksh11.1 billion (USD 109.4 million) with the total exports to Asia closing at Ksh180.9 billion (USD1.78 billion).

“The increase in exports to Far East was largely due to significant improvement in exports to India, China, Thailand and Afghanistan,” KNBS notes in its survey.

According to the official government statistics, trade balance widened by 1.4 per cent to a deficit of Ksh1.147 trillion (USD11.30 billion) in 2018, from a deficit of Ksh1.131 trillion (USD 11.14 billion) in 2017.

“The growth of exports weakened in 2018 compared to the strong performance recorded in 2017, as increased uncertainties in the global trade led to constrained external demand,” KNBS Director General Zachary Mwangi noted during the release of the survey in Nairobi.

Kenya’s top exports include tea, horticulture, articles of apparel and clothing accessories, coffee, titanium ores and concentrates, collectively accounting for 62 per cent of the total domestic export earnings.

“The rise in exports was mainly as a result of increase in exports of horticultural products, while the slowdown in import growth was attributable to decline in imports of food due to favourable weather conditions as well as a reduction in the value of machinery and transport equipment imports,” Mwangi said.

The government has prioritized growth of the manufacturing sector, under the big four agenda, with a key focus on value addition on local produces, as it seeks to bridge the trade deficit and increase the sector’s contribution to the GDP.

“We have been implementing various initiatives to support manufacturers. This includes cutting by half the cost of electricity for industries,” National Treasury CS Henry Rotich said.

READ:Five ways Kenyan government bets will boost manufacturing sector

New plan to grow Ford’s vehicle market in Kenya

NIC Bank and CMC Kenya have entered a deal for Ford Ranger vehicles

CMC Motors, the sole distributor of the Ford Ranger vehicles, and NIC Bank, have signed a partnership agreement that will see CMC- Ford customers receive up to 95 per cent financing on all Ford ranger vehicles.

The deal is based on a 60-months-repayment plan, the latest in an effort to grow the uptake of commercial motor vehicles in the country.

This promotion scheme will ease the acquisition of Ford Ranger vehicles as customers will be able to enjoy maximum loan tenure of 60 months; 60 days repayment holiday after vehicle release and insurance services arranged through NIC bank.

Speaking in Nairobi during the signing ceremony of the financing deal, CMC Motors Group CEO Noel Mabuma said: “Given the vast expertise in financial services from Al Futtaim, CMC is proud to launch the interest subvention scheme that will ease the acquisition of the Ford range of vehicles.”

A Ford Ranger customer for example who seeks to purchase a vehicle worth Ksh 4,395,000 (USD 43, 296) will only be required to pay Ksh95,000 (USD935.87 ) for a period of 60 months.

“His or her first payment will only be required after 60-days of vehicle delivery,” Mabuma noted.

With the current financial support coupled with Ford Protect, it is now even easier to own a Ford with peace of mind through CMC, Ford and NIC bank, the two noted in a joint statement.

Ford Protect is a maintenance and service plan available for any Ford in the model line up in Kenya.

“With Ford Protect, all the owner needs to think about is driving, insurance cover and tire replacement. You can choose the premium service offering from three years 60,000 kilometres to eight years for 300,000 kilomteres. The reason for this is the confidence behind the robust workmanship of the products,” CMC notes.

Ford protect can be bundled in the CMC-NIC financing plan and for any Ford Everest and Ranger double cab, it is free for three years covering or 100,000 kilometres  whichever comes first.

NIC Bank Executive Director Alan Dodd has lauded the partnering with CMC, saying it will reinforce NIC position as the leading bank in asset finance in the country.

READ:NIC Bank, Toyota Kenya in unique asset financing scheme

“By virtue of our strengths in our product offering, this strategic partnership for all Ford Models presents a strong value proposition to SMEs and individual customers who are keen on expanding their businesses and buying new assets but face strained cash flows due to ever fluctuating economic situations in the business environment,” Dodd said.

He added that customers will now be able to apply for asset finance loans through the newly launched online portal that is available on the bank’s website. Through this, customers will get approvals in 24 hours, the quickest turnaround time in the market.

ALSO READ:Toyota, NIC Bank offer customers 90 days repayment holiday on cars

UK firm kicked out of Nairobi Securities Exchange

It was suspended from trading at the NSE in May 2017

Troubled logistics firm-Atlas Development and Support Services (ADSS) has been delisted from the Nairobi Securities Exchange (NSE) .

The delisting took effect on April 25, bringing to an end a five-year stint at the Nairobi bourse.

Registered in Guernsey, UK, in 2002, Atlas was admitted to trade at the NSE in December 2014, where it was cross-listed in the London Stock Exchange (LSE)’s Alternative Investment Market (AIM) segment.

In December 2015, the firm decided to close its operations in Kenya, placing its Kenyan subsidiaries into liquidation by way of a Creditors Voluntary Liquidation after financial headwinds.

The firm had hoped the closure of the Kenyan subsidiaries, Ardan Logistics Kenya Ltd, Ardan (Medical Services) Ltd and Ardan (Civil Engineering) Ltd, would improve the group’s overall cost base.

Two years later (May 2017), it was suspended from trading at the NSE following resignation of its Kenyan nominated advisor I&M Burbidge Capital.

The Nairobi move came after the firm had been delisted at the LSE in the same month, following the resignation of its Nominated Advisor, Stifel Nicolaus Limited.

READ:Atlas suspended from trading at LSE

NSE chief executive officer Geoffrey Odundo had then attributed the decision to the firm’s “unresolved issues at the London Stock Exchange” where it had been suspended following the resignation of its nominated adviser.

Atlas had also failed to prepare and publish its financial statements from December 31, 2015 to date, hence failing to comply with the continuing listing obligations.

The Nairobi headquartered logistics firm also did not have a Kenyan nominated advisor, and no updates have been made by the company to the shareholders and the general public regarding their closing down process.

“Notice is hereby given on the mandatory delisting of Atlas Development and Support Services from the Nairobi Securities Exchange (NSE) effective April 25, 2019,” NSE said in a statement on Friday.

“This follows the closing down of the company’s operations; the deregistration of the company in its country of incorporation under the Guernsey laws and failure by the company to adhere to regulatory requirements from the year 2017 when the security of the company was suspended from trading on the NSE,” the bourse added in its public notice.

The delisting has been approved by the Capital Markets Authority (CMA).

It now winds up Atlas’s existence in the Kenyan market, a blow to investors and shareholders who had hoped of its possible turnaround or listing in another stock.

The firm has had previous troubles including tax evasion claims in Ethiopia, a market it had entered through the acquisition of TEAP Glass.

The Ethiopian Revenue and Customs Authority seized USD2.4 million from the subsidiary’s account to clear the tax liability.

The Nairobi-headquartered support services and logistics company was listed on the Growth Enterprise Market Segment (GEMS) of the NSE, after it had (then) raised USD5 million through a private placement to Kenyan investors.

According to the then CEO Carl Esprey, the firm had hoped to tap the growing opportunity in the region as well as leverage on local content.

“The strong interest from Kenyan investors is recognition of the opportunity to create a world class development and support services provider in Eastern Africa,” Esprey had said during the listing.

ALSO READ:How NSE is preparing small companies for listing at the bourse

 

 

 

PEWIN CABS invests Ksh100 million in Kenya, rebrands to PTG Travel

It has invested Ksh100 million to grow its fleet

Pewin Cabs has officially rebranded to PTG Travel in a bid to increase its market share by offering diversified service in the Kenyan market.

The firm, which is now moving beyond cabs after 10 years, was among the first to launch its cab-hailing App in 2013, a move that contributed significantly to corporate transport solutions in Kenya.

Speaking at the launch of PTG Travel, Managing Director Justus Kirigua, said: “We are excited about the opportunities the new brand offers us.  The transition to PTG Travel is anchored on a three-year growth strategy which includes a Ksh100 million investment to grow our fleet and increase our services to include Bus services, VIP Services and Charter Flight.”

The sum invested translates USD986,232.

Mr. Kirigua has since assured the existing customers that even with the identity change, the firm will continue to deliver greater convenience to clients.

“To help our clients manage their logistics costs, we have enhanced our APP for increased transparency and accountability,” Kirigua said.

Nairobi County Roads, Transport and Infrastructure Executive Hitan Majevdia who graced the event said:”We are proud of PTGs strategy to innovate the transport sector in Kenya. Services like corporate transport sharing and Air Charter will greatly enhance road safety and ease congestion on our roads.”

PTG Travel is eying to enter two East African countries using its current corporate client franchise model in the near future, Kirigua said , as the company seeks to transform corporate transport landscape in Africa.

The move to rebrand comes at a time when tourism numbers continue to improve in the country thus increasing demand for tourism travel.

Last year, number of international arrivals hit 2, 025, 206 compared to 1, 474, 671 in 2017, an increase of 37.33 per cent.

Moreover, foreign companies continue to show interest in setting up shop in the country due to the continued government’s efforts in improving ease of doing business in the country.

Last year, over 20 new UK companies announced plans to set up in Kenya during UK Prime Minister Theresa May visit in the Country.

Speaking about the opportunity to give back to the community, Mr. Kirigua concluded:”There are different modes of transport, and majority of people in our country actually walk to their places of work. We need to improve the walk paths, and make provision for bike lanes. This is something PTG would love to do as part of CSR for the industry.”

ALSO READ:Investing in Kenya’s logistics space

How Kenya managed to grow its economy by 6.3%

The economy generated 840,600 new jobs compared to 787,800 in 2017

Kenya’s economy expanded by 6.3 per cent in 2018, the economic survey released on Thursday indicates, a notable comeback from a 4.6 per cent growth recorded the previous year.

This came as the country recovered from the effects of the persistent drought experienced in 2017, coupled with uncertainties associated with general elections held in the same year.

READ:Kenya’s economy falls below Tanzania and Rwanda, records 4.9% growth

The growth has principally been attributed to increased agricultural production, accelerated manufacturing activities, sustained growth in transportation and vibrant service sector activities.

“Agricultural activities benefited from sufficient rains that were well spread throughout the country,” Kenya National Bureau of Statistics (KNBS) Director General Zachary Mwangi said during the launch of the Economic Survey (2019) in Nairobi.

Similarly, the increased precipitation was a significant boost to electricity generation and consequently favourable to growth during the review period.

During the year, the growth realized was anchored on a relatively stable macroeconomic environment with the various macroeconomic fundamentals remaining supportive of growth for the better of the year.

Inflation remained low at 4.7 per cent compared to 8.0 per cent in 2017, majorly as a result of considerable declines in prices of food after the shortage experienced in 2017.

The current account deficit narrowed to stand at Sh441.8 billion(USD 4.3 billion ) compared to Sh503.4 billion(USD4.9 billion ) in 2017, mainly due to a faster growth of imports of goods and services.

In the markets, the Nairobi Securities Exchange (NSE) 20-Share index dropped to 2,834 points in December 2018 from 3,712 points in December 2017. The performance was also manifested in the increased uptake of credit facilities across most sectors of the economy during the year.

Agriculture

Activities of agriculture, forestry and fishing were vibrant in 2018 mainly on account of favourable weather conditions . The sector’s growth accelerated from a revised growth of 1.9 per cent in 2017 to 6.4 per cent in 2018.

The growth was mainly driven by marked improvement in crops and animal production that benefited significantly from the sufficient rains during the period under review.

Increased supply of food crops was mirrored in significant drop in prices of key food crops during the review period. The quantities of key food crops such as maize, irish potatoes and vegetables increased notably in 2018 compared to depressed performances reported in 2017.

Performance of the sector was further supported by significantly improved performances in other agricultural subsectors. Production of tea grew by 12.1 per cent to stand at 493,000 tonnes in 2018 compared to a 7.0 per cent decline recorded in 2017.

Similarly, the sector’s performance was buoyed by increased production of coffee from 38,600 tonnes in 2017 to 41,400 tonnes in 2018.

Manufacturing

Activities in the manufacturing sector were robust in the year compared to the constrained performance in 2017 when elections fever and uncertainty rocked the industry.

The sector grew by 4.2 per cent compared to a revised growth of 0.5 per cent in 2017. In contrast with 2017, strong performances were recorded in most activities in the sector in 2018.

The sector’s performance was largely supported by agro-processing activities and production of beverages that recovered from considerable declines in 2017 ,to grow remarkably in the period under review.

Under manufacture of food and beverages, improved growths were recorded in manufacture of sugar (30.3 per cent); processing of liquid milk (18.5 per cent); processing of black tea (12.1 per cent); manufacture of beer and stout (6.3 per cent); manufacture of bread (5.8 per cent) and soft drinks (4.2 per cent).

Other sub-sectors that showed better performance in 2018, albeit in smaller magnitudes, included manufacture of maize meal products (0.4 per cent); edible oils (2.1 per cent) and manufacture of wheat flour (1.1 per cent).

Similarly, the sector’s performance was enhanced by increased manufacture of non-food products, although some declines in production of some products were reported in 2018.

However, manufacture of cement and that of clinker declined by 2.6 and 2.5 per cent, respectively.

Credit to manufacturing activities increased from Ksh315.5 billion (USD3.1 billion )in 2017 to Ksh336 billion(USD3.3 billion ) in 2018.

READ:How Kenyan manufacturers will grow sector by 2022

Transport sector

The transportation and storage sector expanded by 8.8 per cent compared to 7.2 per cent in 2017. The growth realized in the sector emanated from notable growths in most of the transportation sub-sectors.

The sector’s growth was considerably supported by increased activity in railway transport that has flourished since the introduction of the Standard Gauge Railway (SGR) train services between Mombasa and Nairobi.

ICT

The Information and Communication Technology (ICT) sector expanded by 12.9 per cent to Sh390.2 billion(USD 3.8 billion) , from Sh345.6 billion (USD 3.4 billion)  in 2017, driven mainly by growth in the digital economy.

Another key sector which contributed to growth of the  economy was the tourism sector which registered an improved performance in 2018 compared to 2017, as the number of international visitor arrivals increased by 14.0 per cent from 1.778 million to 2.027 million.

“The improved performance may be attributed to stable political environment, withdrawal of travel advisories, improved security and investor confidence in the country,” Mwangi said.

The construction sector however recorded a slower growth of 6.6 per cent compared to a 8.5 per cent growth in 2017, despite an increase in loans and advances to the sector which increased by 1.8 per cent to Ksh114 billion(USD1.12 billion).

This was also at the  back of a vibrant real estate sector which has gone hand in hand with infrastructure development.

Job creation

Last year, the economy generated 840,600 new jobs compared to 787,800 jobs created in 2017.

The informal sector which accounted for 83.6 per cent of the total employment created 762,100 new jobs. This is despite the credit crunch which continues to hit  Small and Medium Enterprises (SMEs) since the law capping interest rates came into place in 2016.

Banks have been shying off  the private sector mainly individuals whom are perceived high risk borrowers. Instead, banks have been investing heavily in government securities where they are assured of returns.

During the year, employment in the public sector went up from 833,100 in 2017 to 842,900. The private sector which accounted for 69.5 per cent of the total employment grew by 3.0 per cent.

The World Bank and the International Monetary Fund (IMF) had projected growths of  4.9 per cent and 5.5 per cent respective .The National Treasury had projected a six per cent growth.

2019 outlook

The government has projected an even stronger growth in 2019, expected to be driven by growth in manufacturing, tourism sector and a fast expanding SME sector.

“With continued government strategies, we will achieve a better growth in this coming year,” National Treasury Cabinet Secretary Henry Rotich said during the report launch. He has projected a growth of above xsix per cent.

The results of the survey will inform policy formulation and implementation of various government initiatives targeted for economic growth, as the government moves implement the Big Four Agenda.

READ:Uhuru’s Big Four Agenda takes shape

”The big Four agenda does require statistics so that we can be able to monitor and evaluate the progress,” Principal Secretary-State Department for Planning Julius Muia said.

CS Rotich on the other has said the government will continue to put in place incentives which will make it easier to do business in the country.

READ ALSO:Kenya lures Private Equity, Venture Capital entities to fund Big 4

Italian Agency launch Kenyan entrepreneur’s accelerator program

The accelerator accepts applications from innovative enterprises that are aligned with Kenya’s Big Four agenda and Italian excellence in Agri-food, Fashion and design, Leather, Machinery and equipment

Kenyan entrepreneurs stand a chance of building their business through an accelerator programme managed in Kenya with cooperation with Italian business.  The E4Impact Accelerator which works with Kenyan businesses, so as to support their growth, increase their revenues, guide them toward profitability and Give them partnership access to Italian businesses.

The E4Impact programme funded by the Italian Agency for Development Co-operation aims to boost the number of entrepreneurs in Kenya through exchanging ideas with their Italian counterparts.

Candidates for the Accelerator could be formal or informal, registered or to be registered in Kenya.

They will be expected to possess an innovative product/service, show post-revenue (scale-up) with existing customer base, have a team of co-founders in place with complementary skills and a clear social or environmental impact.

The accelerator accepts applications from innovative enterprises that are aligned with Kenya’s Big Four agenda and Italian excellence in Agri-food, Fashion and design, Leather, Machinery and equipment, Construction and affordable housing, Healthcare, Green businesses and renewable energy and ICT Innovations that could benefit from satellite technologies.

The Accelerator builds upon the existing partnership between the E4Impact Foundation, Tangaza University College and the Università Cattolica del Sacro Cuore (UCSC) of Milan (Italy), who together have already trained over 300 Kenyan entrepreneurs.

The selected entrepreneurs/innovators will be involved in mentoring and coaching sessions delivered by Openet in the field of the Space Economy. They will also be directly involved in the “Space Week” that will be held in Nairobi.

Once selected, the Kenyan entrepreneurs will have access to milestone based seed grants between KSh. 500,000 to 1.5 M. They will also have a direct connection and mentor-ship with Italian & European Businesses.

Due to the training with Openet Technologies, the selected entrepreneur will have access to satellite technologies like GNSS, Earth Observation products and precision farming. Equally, the budding entrepreneurs will have access to office space for 12 months, 1 year customized training program, access to professional services like legal, accounting and marketing as well as relationships with potential investors and financial institutions.

Aga Khan Foundation supports youth entrepreneurship as Scale Forum moves to Kenya

One Urban Garden; the road to Africa’s food security

The venture is keen to achieve food security, income generation, healthy living and environmental awareness

It is early morning in the outskirts of Kenya’s capital, Nairobi. A group of three young people are working in a field, using hoes to remove plastic bags and other solid waste from the soil in preparation for crop planting.

Together with other youth, they are raising seedbeds of vegetables such as kale, cabbage, spinach, carrots, onions, green peppers, tomatoes, and other commonly consumed vegetables in Kenya.

The seedlings will later be transferred to gardens and irrigated for several weeks before the vegetables are supplied to clients in households and restaurants within Nairobi.

The trio are Mastercard Foundation Scholars, selected for their academic talent, social consciousness, and leadership qualities.

Mutoni Shadadi  from Rwanda, and her colleagues Laetitia Mukungu and JacquilineMaina, from Kenya, are pursuing their studies in agricultural sciences at EARTH University in Costa Rica.

Mastercard Foundation Scholars have formed One Urban Garden, a social venture that gives people an opportunity to engage in the food production process, enhance the farm-to-table value chain,and demonstrate self-sustenance on a small piece of land. The group targets to help Kenya and the East Africa region achieve food security.
From Left: Mutoni Shadadi, Jacqueline Maina and Laetitia Mukungu during the Resolution Social Venture Awards in 2018.

Together, they formed One Urban Garden, a social venture that gives people an opportunity to engage in the food production process, enhance the farm-to-table value chain,and demonstrate self-sustenance on a small piece of land available.

One Urban Garden will provide fresh vegetables to the clients, acting as a training centre and an incubator for job opportunities involving youth.

One Urban Garden aims to provide youth with training in agriculture and agribusiness.The social venture envisions achieving food security, income generation, a healthy lifestyle and environmental awareness-raising among urban dwellers in Nairobi.

“We envision One Urban Garden as a hive of production and service provision. We are planning to start with vegetable production, which will include kale, peppers, and spinach and be readily available for household consumption. The second phase of production will be the introduction of rabbit farming and greenhouse production mainly targeting restaurants. Once the centre is established, six youth will undergo a 21-week training program and they will be in direct contact with our clients as consultants” said Shadadi.

Expected to be fully operational by end of this month (April 2019), One Urban Garden will first identify the farmers and provide training to those that need it.

The Scholars are currently looking for partners and available land in Nairobi and investing much time in studying other similar models, especially from other developing countries.

To serve a larger clientele in Nairobi, One Urban Garden will create several farms in different locations.

“We plan to move in phases and our target for the first phase is to have 25 farmers as our base, as well as a couple of restaurants. As variety is one of our selling points, the prices will vary depending on demand and we plan to make the prices more affordable as we grow.We estimate that farmers will pay 50 dollars for the training each year, and we hope that one day we might take on a big project from a hotel or institution. We are also considering the option of installment payments,” said Laetitia.

One Urban Garden won the Resolution Social Venture Challenge in 2018, a competition that rewards compelling leadership and promising social ventures led by youth.

These young leaders earned a fellowship that includes seed funding, mentorship, and access to a network of young global change-makers to pursue impactful projects in their communities.

Mastercard Foundation Scholars have formed One Urban Garden, a social venture that gives people an opportunity to engage in the food production process, enhance the farm-to-table value chain,and demonstrate self-sustenance on a small piece of land. The group targets to help Kenya and the East Africa region achieve food security.
The Trio

A collaboration between the Mastercard Foundation and The Resolution Project, the Resolution Social Venture Challenge provides a pathway to action for socially responsible young leaders who want to create change that matters in their communities.

Shadadi, Laetitia, and Jacquiline want to use urban farming to motivate African youth who think farming is a dirty job and only meant for people living in rural areas.

“It feels great being a Resolution Social Venture Challenge winner because it proves to me that we have the potential to contribute to change in the world. Being a Mastercard Foundation Scholar makes me feel like a winner because I get a chance to accomplish my dreams and also share them with my community as I give back,” said Shadadi.

Jacquiline said she is overjoyed and is very proud of her team.

“We have started working on the business strategy and sometimes that gets a bit overwhelming, but the teamwork is great and I learn more each passing day. I am also very grateful for this opportunity.”

Laetitia said that being a Resolution Social Venture Challenge winner is both a blessing and a challenge to keep pushing until One Urban Garden starts making a difference in the lives of Nairobians.

“I am thankful to the Mastercard Foundation because it not only gave me the opportunity to pursue my career but also to fulfill my interests and goals, and expand my network.”

The ambitious group’s initiative is just but one example that can go a long way in helping President Uhuru Kenyatta achieve his food security plan under the Big Four Agenda.

READ:EAC to launch platform to promote food security and nutrition

READ ALSO:Kenyan President Uhuru Kenyatta Tackling Food Insecurity as part of his Big Four Plan

 

HotelOnline conquers Africa from Kenya

How two Norwegians turned Kenyan built a global traveltech success from five apartments in Syokimau

When Håvar Bauck landed in Kenya in 2002, the country was in chaos. The government of outgoing president Daniel Moi was preparing to exit the scene after 24 years in power. It was not clear who would become the next leader and despite great optimism of the future of the country, fear of instability was still evident.

“Kenya was experiencing a great moment of change. When Mwai Kibaki won the election, the country exploded in optimism. I was excited to see Kenya starting to realize its potential. The spirit of ‘yote yawezekana’ was contagious,” notes Bauck who was on a student exchange program through the Norwegian Peace Corps.

For Bauck, there began his great love for Kenya and an exciting journey for sixteen years that has pushed him to developing one of the biggest start-ups ever developed in Kenya that is making great ripples across Africa.

HotelOnline is a technology backed online hospitality marketing platform that allows low to mid-sized hotels in Africa boost their online presence through several packages that expose these hotels to world class reach competing with established facilities.

How two Norwegians turned Kenyan built a global traveltech success from five apartments in Syokimau - The Exchange

The platform which was born out of Nairobi’s lack of an affordable accommodation next to Jomo Kenyatta International Airport has grown to be a force to reckon with in the hospitality industry. Since the first business in September 2014, to selling hotel rooms worth USD 80,000 by end of 2015 with 130 partner hotels to selling rooms worth USD 1.7 million in 2016.

But it was not all that rosy as Bauck tells The Exchange in an exclusive interview.  HotelOnline was not a big entity it is today. However, to understand the journey, Bauck took us through a story of his life.

Kenyan based entrepreneurs launch talk forums

Born in Norway and growing among diplomatic communities that took him to Brussels in the height of Fall of the Berlin wall, and the birth of the European Single Market. This gave him the concept of travel which he greatly enjoys to date. But it was the students exchange program that brought him to Nairobi that changed everything.

Bauck finished his internship and and did not want to move back to Norway.  He aggressively used his contacts for what they were worth to get consulting projects. That kept him going for the first two years. He later worked with different tech startups and scale-ups, all focused on Africa.

For almost a decade, he kept moving between Kenya, Nigeria and Norway. In 2015, he was just about to move to Kinshasa when he left employment once and for all, and went full time on HotelOnline.

His friend Endre, whom he has now known for almost two decades, had moved to Nairobi in 2010, and already then, the ball started rolling.

“Endre was running several quite exciting business projects at the time. I had a full-time job as the regional one-man army for a Greek company contracting with most of the mobile operators in the region. I was basically living on planes and in airports. Hence, Endre and I had a lot to do with the travel and hospitality industry on the continent, but from totally different angles. We were always discussing business ideas, and this is where the idea of a serviced apartments hotel came up.”

Endre was the first to go in terms of business. While looking for a place to live, he came across a ‘very run down’ house in Lavington area of Nairobi. He barely could use the entire house so he thought of an idea of converting part of it into a guest house. Endre knew it was going to be an epic effort to refurbish the place, but he went at it, and turned the place into a quite pleasant guesthouse.  When Bauck’s parents were visiting Nairobi in early 2012, he booked them there, and thus, they became the first guests,” Bauck notes.

The two friends kept their business discussions going, and their attention turned to the fact that Nairobi at the time lacked a reliable budget hotel near the airport.

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“We moved in, and looked to exploit the obvious gap. We didn’t have the money to buy a plot and build, so we went for the serviced apartments idea instead at Syokimau.”

“Endre was the one who realised that the domain Nairobiairporthotel.com was available. You can say is aggressive marketing to brand some budget serviced apartments in Syokimau as an airport hotel, but it worked! “

The apartments were fully booked from the first day. The business was booming and they

“We realised our core skills was online marketing and not daily running a serviced apartments. We started offering simple online marketing services to hotels: Building their profiles on Expedia and Booking.com, and taking a commission on the additional revenue we brought in.”

The business has since expanded in many African countries. Bauck as still working full time in the job that kept him traveling. This gave him the opportunity to get in touch with hoteliers in some of the countries he frequented, such as Uganda and DRC.

It was however the birth of his first born daughter that made him cut his African trotting and decide to settle in Nairobi. He reasigned and committed fully to working on his outfit. Two events in the life of HotelOnline have remained etched in the company’s history.

First, Savanna Sunrise, still smarting from its newly found fame engaged itself into merger talks with Nigerian outfit HotelOga. This did not work well but as they were doing due diligence search, they met the owners of a technology company based in Poland. After the collapse of these merger talks, they opted to work with the Polish outfit and merged to form HotelOnline leaving behind Savanna Sunrise.

Then, in 2018 HotelOnline worked on its board buy incorporating Teranga Solutions where perennial investor Eric Osiakwan was a key shareholder.

“Last year one of my investments became profitable, – HotelOnline. I became a shareholder of Hotel Online through a merger that we did which basically resulted in the new business becoming profitable within the year because we combined our strengths which mitigated our weaknesses – the business is now poised for exponential growth and there is also a leading PE fund that is looking to come in this year,” notes Osiakwan.

HotelOnline is growing by the day. They work with online travel agents to boost the income of the hotels in their network.

Eric Osiakwan is the Managing Partner of Chanzo Capital, a growth capital firm investing both capital and mentoring in high-tech startups and scale-ups in Kenya, Ivory Coast, Nigeria, Ghana and South Africa- The Exchange
Eric Osiakwan during a past event

“Jumia travel, Expedia, booking.com, etc are all online travel agents (OTAs). They are only some of the channels through which we distribute the hotels. We handle the entire online marketing and distribution of our partners, from their official web site, to their profile in the channels you mention, and more,” notes Bauck.

The company is still going strong with new investments in the pipeline. Asked if there are options of closing any deal he said, “If by “closing a deal” you mean selling the company, then the answer is definitely: Not yet. In terms of raising money, several of the current shareholders wish to increase their investments before a potential strategic investor later this year. That’s an ongoing process. If other, new investors approach us, then we can obviously talk to them as well

“In terms of expansion, our current markets already have a combined population of 700 million people! We want to make sure we are the leaders in those markets before we venture into new ones.”

Famous traveltech investor Shravan Shroff has also agreed to join our board. Shravan has made more than 50 investments, and is a co-founder of the Indian angel-backed startup accelerator Venture Nursery. He was the first investor in the now-famous Indian traveltech unicorn OYO Rooms.

Shravan has a track record as a successful cinema entrepreneur in India, and sits on the Board of Dubai Entertainments PJSC, a multi-billion dollar group of companies, managing four theme parks in Dubai.

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