aug 3rd 2015
TRANSCRIPT
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MONDAY, AUGUST 3, 2015 WWW.BDAFRICA.COM KSH60 | TZ SH 1,700 | UGSH2,700 | RFrNO. 2152
Ex-CMC boss opens battleove≥ sec≥et Je≥sey accountsMartin Forstersays CMA had noauthority to hireforensic auditorsand send themin to probe firm’sinternal affairs
BY KIARIE NJOROGE
Kenyans are paying up to 20 per cent more for basic
items like electricity and maize flour following signifi-
cant price increases over the last four months.
Other essential items whose prices have been rising
include diesel, petrol, kerosene, sugar and meat, bring-ing many household budgets under pressure.
The increases come even before the market factors
in the full impact of the recent spike in interest rates
and the depreciating shilling.
Consumers in Nairobi may soon also have to dig
deeper into their pockets for the PRICES, Page 4»
Price changes March-June 2015 (Sh)
Item March June Change (%)
Sifted maize flour (2kg) 94.38 112.38 19.071837
Petrol (1 litre) 90.34 98.14 8.6340491
Diesel (1 litre) 77.16 84.26 9.2016589
Electricity (50KWh) 494.28 507.62 2.6988751
Kerosene (1 litre) 56.71 62.73 10.615412
Branded sugar (2kg) 230 250 8.6956522
SOURCE: KNBS
MAY:SH 90.34
JUNE:SH 98.14
PETROL (1 LITRE) SIFTED MAIZE FLOUR (2KG)
MAY:SH 94.38
JUNE:SH 112.38
SUFFERING CONTINUES
ELECTRICITY (50KWH)
MAY:SH 494.28
JUNE:SH 507.62
% CHANGE 2.6% % CHANGE 8.6% % CHANGE 19%
BY BRIAN WASUNA
Martin Forster, the former chief execu-
tive of motor dealer CMC, has launched
a fresh legal battle aiming to quash a
forensic report that accused him and
other senior managers of stealing and
funnelling millions of shillings to secret
Jersey bank accounts.
Mr Forster is challenging the Capi-
tal Markets Authority’s (CMA) deci-
sion to hire the South African law firm
Webber Wentzel to investigate CMC’s
internal affairs.
He insists that the regulator’s pow-
ers are limited to appointing an auditor
to conduct a specific inquiry on firms
listed on the securities exchange.The Webber Wentzel report accused
Mr Forster and former CMC chairman
Jeremiah Kiereini of illegally defraud-
ing the motor dealer by colluding with
suppliers to inflate invoices and skim-
ming off the extra funds to deposit in
Jersey bank accounts.
The report said that more than £1.7
million (Sh261 million) had been fun-
nelled to Jersey accounts by the time
Mr Foster left in 2011.
Mr Forster and Mr Kiereini were
subsequently disqualified from being
appointed as directors in firms listed
on the Nairobi Securities Exchange
(NSE). “In FORSTER, Page 4»Martin Forster, former CMC CEO. FILE
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2 BUSINESS DAILY | Monday August 3, 2015
Week ahead
Monday, August 3, 2015
University of Nairobi setto host innovation fairThe University of Nairobi is set to hold
the Innovation Week fair to showcase in-
novations by its staff and students.
The event will bring together govern-
ment and private sector officials, devel-
opment agencies and researchers to dis-
cuss capacity building and showcase in-
novation. Saul Singer, an American-Israel
journalist, is listed as one of the speakers
at the event as well as Mr Langdon Mor-
ris, a partner and co-founder of Innova-
tionLab and US-based consultancy LLC.
Jubilee bonus shares begintrading at Nairobi bourseBonus shares issued by insurance group
Jubilee Holdings in March will begintrading at the Nairobi Securities Ex-
change. The company declared a bonus
share issue of one-for-every-10 held, a
move that will see an allotment of 5.9
million shares and raise the volume of
its outstanding stocks to 65.8 million
units. The company’s share closed trad-
ing Friday at Sh560.
The stock has avoided the bearish run
currently pushing down valuations in
the market.
Tuesday, August 4, 2015
Equity Bank releasesits half- year resultsEquity Bank is set to release its half year
results, becoming the second top tier
bank to do so after Kenya Commercial
Bank. The regional lender recorded a
21 per cent growth in 2014 half-year
after tax profit to Sh7.66 billion buoyed
by growth in its loan book and transac-
tions-based income. Last week the bank
announced a Sh9.2 billion net profit in
the six months to June compared to
Sh8.1 billion in a similar period last year,
boosted by a 31.3 per cent growth of its
loan book to Sh320 billion. National Bank
of Kenya more than doubled its half-year
net profit to Sh1.72 billion on the back of
the sale of 12 branches, booking a pr
of Sh600 million.
Institute of accountants
and ACCA to sign MoUThe Institute of Certified Public Accoants of Kenya (ICPAK) and the Assoc
tion of Chartered Certified Accounta
(ACCA) are set to sign a memorandu
understanding. The agreement will s
the two institutions enhance collabo
tion in policy, research and advocacy
aimed at accelerating regulation act
ties in the profession.
Wednesday, August 5, 2015
Central bank meets in bidto stabilise falling shillingThe Central Bank of Kenya is set to ho
its Monetary Policy Committee mee
ing a month after the bank raised the
benchmark lending rate by 1.5 perceage points to ease inflation fears due
weaker shilling. The bank has upped
rate by three percentage points to 11
per cent since June to offset a weake
shilling. CBK governor Patrick Njorog
last week said he was cautiously opt
mistic that the currency will soon reg
stability after persistent volatility tha
has seen it lose more than 10 per cen
its value.
Friday, August 7, 2015
Women on Boards Netwotreats graduands to dinnThe Women on Boards Network (WO
is set to treat several women accoun
ants who took part in a 10-week mod
training on corporate governance an
leadership to dinner. Members of the
Association of Women Accountants
Kenya (AWAK) who took part in the p
gramme will be feted at a graduation
dinner. The forum will also be used to
highlight low representation of wom
in Kenyan boardrooms.
Several studies show that female rep
sentation in boardrooms is below gl
standards, standing at less than 15 p
cent, despite proof that a representa
mix is beneficial to companies.
What is making news this week
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Monday August 3, 2015 | BUSINESS DAILY
N ow is the time for Africa. But don’t just
take US President Barack Obama’s
word for it; in several respects this
sentiment has been anchored on fact.
Steadily, sub-Saharan economies have
chugged along with more than a dozen mar-
kets booking impressive growth fuelled by
improved purchasing power, strong regional
and domestic demand, and investment in-
flows all of which have kept average growth
rates consistently around four to five per cent,
compared to the global average of three per
cent and below.
And the future appears to be brighter with
more democratisation and regional integration
which is sure to maximise resource wealth and
create employment opportunities.
With new oil and gas prospects coupled with enviable clean energy potential in sev-
eral emerging economies and infrastructure
developments aimed at driving efficiencies
across all sectors, it’s no wonder Shakira’s ode
to Africa resounds five years after the South
Africa World Cup.
But borrowing from the critique the gyrat-
ing Columbian received for upstaging indig-
enous musicians on their home turf, I can’t
help but draw the correlation that Africa is at
the centre stage of global economic develop-
ment, however, are we merely dancing to the
tune or singing the lead vocals?
Moreover, one cannot be sure that once the
music stops, the society and environment will
be better or worse off.
The present enthusiasm of global inves-
tors, including sovereign funds, is a welcomed
change from the donor aid approach that has
clouded mind-sets for several decades.
Nevertheless, we must remember that all
this renewed attention comes with a price. And
that price is not just the interest rate of the debt
we are taking on as countries.
Our governments and political leaders have
a real opportunity to ensure that our people are
truly empowered and enabled to leverage this
“kairos” well into the future.
The rate at which all Africans, including
those who only seem to matter during a gen-
eral election, will be delivered from perpetual
poverty, food and water insecurity, wanting
public services, and all the other effects of sys-
temic waste and corruption, will depend on
the leaders and their ability to put the pursuitof real, sustainable economic growth ahead of
short-term, superficial – and often individual-
istic – gains.
So what are we giving up to foreign inves-
tors? Is the funding we seek bringing us full
circle to when the social rights and economic
opportunities of the majority were mortgaged
for the benefit of the few?
I doubt the deals our governments are sign-
ing will be as dramatic as recolonisation.
There will be measured and substantial posi-
tive economic and social impacts. However,
there also will be disadvantageous by-products
in the process, especially in the environmental
dimension.
We all agree that development must take
place in Africa. But certainly not at all costs, in-
cluding losing that which makes Africa unique
– our natural capital. There is an opportunity
cost of the accelerated growth in terms of the
potential adverse effects on cultural heritage
sites, breathtakingly picturesque
landscapes and diverse wildlife that
compel tourists to pay a premium to
enjoy, boosting our local currencies
and fuelling further growth.
We, therefore, as Africans also
need to have a mind-set shift. As
Pope Francis put it, balancing finan-
cial gains with real economic growth,
societal wellbeing and environmen-
tal conservation and resilience is an
“ethical imperative”.
For the greater good, the sustain-
able or “green” approach is especiallycritical for governments to integrate into their
fiscal and bilateral policies.
Thankfully increasingly sovereign inves-
tors, such as the Dutch and German invest-
ment banks, require that their funds be uti-
lised in line with sustainability principles
which seek to strike the profits, people and
planet balance.
However, all too often the custodians of
these funds may skirt some of the ethically-
imperative conditions either due to a lack of
capacity to implement such requirements or for
sheer disregard for the greater good. Yet others
will turn to countries like China which come
with fewer “green” strings attached.
What we need is a handful of visionary lead-
ers within government to gain momentum for
the sustainable growth agenda.
There are several examples where individual
policymakers had an “enlightened moment”
which inspired them to act as a catalyst for
real impact — as was the case
in 1993 when South Africa’s
Mervyn King, a Supreme Court
judge, led the development of a
governance standard that em-
bedded sustainability in the
public and private sector.
Nigeria followed suit in
2012 when the then central
bank governor Sanusi Lami-
do compelled lenders to adopt
sustainable growth as a matter
of regulatory compliance.
We recently saw similar in-spiration in German Chancellor Angela Mer-
kel when she steered her G7 peers to adopt a
policy to decarbonise their economies and end
extreme poverty and hunger by 2030.
Mr Obama’s remarks during the Global En-
trepreneurship Summit in Nairobi had strong
views on inclusive growth as well as creating
more business opportunities for women and
youth.
The concept of sustainable development
which includes equitable growth through
national policy and financial market reform
may come across as a foreign talking point;
however, it is not entirely imported – there are
axillary buds of green policy in the east African
region. Of note are efforts that are underway in
earnest in Ethiopia to build a climate resilient
economy by 2025.
In Kenya, the ministry of Environment is
leading a National Green Strategy supported
by World Wide Fund and United Nations En-
vironment Programme that will cut across the
industrial sectors and integrate elements pro-
moting quality enterprise growth, employment
creation and social inclusion.
Meanwhile, the financial services sector is
taking a cue from the public sector and is also
recrafting its policies and priorities through
efforts led by the Kenya Bankers Association,
and the Nairobi Securities Exchange which
recently signed on as a UN Sustainable Stock
Exchanges signatory.
Ultimately these seemingly disparate efforts
sparked in various pockets of government and
industry will gain momentum and align.The challenge then is for the stewards of
the economy to ensure that the momentum
is enabled, and the immediate and long-term
wellbeing of our people and natural capital is
genuinely interlinked with the pursuit of re-
turns and prosperity.
Ms Mugambiheads the Sustainable Finance
Initiative at Kenya Bankers Association
R A D A R S C R E E N N U R U M U G A M B I
Af≥ica ≥ising should facto≥ in human, natu≥al capitalDEVELOPMENT Continent needs to put green policies at the heart of its business agenda for sustainable growth
TOPNEW
M≥ Obama’s
≥ema≥ks du≥ing
the Global
Ent≥ep≥eneu≥ship
Summit in Nai≥obi
had st≥ong views on
inclusive g≥owth
US President Barack Obama with Akirachix co-founder Judith Owigar and President Uhuru Kenyatta during the Global Entrepreneurship Summit at the
United Nations headquarters in Gigiri, Nairobi, on July 25. FILE
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4 BUSINESS DAILY | Monday August 3, 2015
most important
utility of all — wa-
ter. The Water Services Regulatory Board
(Wasreb) is set to meet before the end of
September to decide if to raise the cost of
water for city residents by 93 per cent.
The increases have been blamed on
the cost of crude oil on the international
market and the continued weakening ofthe shilling against the US dollar.
The rise in maize flour prices has been
attributed to a shortage of the grain as
millers ignore stocks allocated to them by
the National Cereals and Produce Board
(NCPB) over quality concerns.
All signs point to a continued rise in
the prices of these items, which will hit
lower income and middle class house-
holds hardest. “It’s unfortunate because
these increases, in some cases, are car-
tel-driven and will affect a lot of people
whose wages are unable to keep up,” said
Stephen Mutoro, the Consumer Federa-
tion of Kenya chief executive.
“Besides these items, manufacturers
are likely to raise prices of other manu-
factured products, citing the weak shil-
ling and the high cost of fuel.” Data from
the Kenya National Bureau of Statistics
(KNBS) indicates that the cost of a two-
kilogramme packet of maize flour rose
from an average Sh94.38 in March to
Sh113 in July. Maize flour is a significant
household purchase as it is used to make
ugali, Kenya’s staple food.
A litre of petrol that was retailing atSh90.34 in March was in July going for
an average Sh99.45. Similarly a litre of
diesel has risen to Sh85.51 from Sh77.16
in March. Consumers who use 50 kilo-
watt-hours of energy every month had
to spend Sh507.62 last month, while a
similar amount of power cost Sh494.28
in March. The price of kerosene, which is
used in many poor households for light-
ing and cooking, also went up with a litre
costing Sh63.69 from Sh56.71 in March.
The price of a branded two-kilogramme
packet of sugar has increased by about
Sh20 over the last three months to Sh250
in supermarkets, while unbranded sugar
is selling at Sh240 in kiosks.
Meat, another key household food
item costs more, with a kilogramme go-
ing for an average Sh393.58 in July, up
from an average Sh387.96 in January.
Infant products have also gone up
with a pack of 64 disposable nappies,
which were priced at Sh1,695, rising to
a current price of Sh1,850. The price of a
popular babies’ body wash has also gone
up from Sh580 to Sh620.
The rise means that households willhave to spend more on maize flour, trans-
port and energy to power their homes.
It will also decrease the amount of dis-
cretionary income available for families
to invest and spend on other items like
entertainment. Nairobi’s middle class,
on average, spend 12.4 per cent of their
income on transport and 22 per cent on
food. Poor homes spend the largest share
of their income on food at 42.5 per cent,
rent and utilities (18.2 per cent).
A steep rise in prices of these and
other household items could lead to a
clamour for higher wages with workers
looking to match the growth in their ex-
penses to their payslips.
The steady increase in the price of
electricity has dashed the promise of
cheaper power which providers had in-
dicated would be reflected in consumer
bills once water levels in hydro-electric
power dams rose. In last month’s review,
the fuel charge component was raised to
Sh2.51 per unit from Sh2.31 per unit in
June while the forex charge also increased
to Sh0.89 per unit from Sh0.60.
The rise in fuel adjustment levy, whichis linked to the amount of power gener-
ated from expensive diesel, has defied the
recent rains. The rains were expected to
increase the share of hydropower genera-
tion and further cut the use of expensive
thermal power plants.
The rise in the cost of power has been
linked to the shilling’s downward trend
with the local unit also responsible for
higher fuel prices. “The mean month-
ly US dollar to the shilling exchange
rate depreciated by 1.31 per cent from
Sh96.86 per dollar in May to Sh98.13 in
June,” said the Energy Regulatory Com-
mission (ERC) during its last review of
fuel prices, reflecting the impact of the
volatile shilling on household budgets.
These prices could rise even further in
the next review if the shilling contin
to fall as has been predicted.
So far, the unit continues to defy
raising of the Central Bank Rate from
per cent to 11.5 per cent and the Ke
Banks’ Reference Rate (KBRR) to 9
per cent from 8.54 per cent earlier
month. Analysts at investment b
Renaissance Capital say that the unovervalued by a fifth and is headed
110 to the dollar by December.
Motorists are also bracing for ano
increase of up to Sh6 in road maintena
levy for every litre of petrol or diesel c
sumed. The levy was gazetted late
month and will now be included in
pump prices beginning August 14 w
ERC reviews the prices of fuel. The
pact has already started to trickle do
to commuters with matatu fares ris
A reprieve for households on
cost of maize flour is not expected
til September when harvesting of
season’s crop is expected to start, w
millers ruling out possibility of lowe
costs before then.
Consume≥s bea≥ the pain of steep ≥ise in living cost»From Page1
the absence of lawful
statutory authority
under Section 11 (3) (m) of the Capital
Markets Act, the appointment of Web-
ber Wentzel by CMA in November 2011
to conduct a forensic investigation into
CMC was illegal and invalid. CMA un-
lawfully abdicated its statutory power
under the Act,” Mr Forster says in court
papers.
The CMA is yet to respond to the
suit. Mr Forster says his action has
been prompted by the fact
that the regulator is seekingto recover money from him
to compensate CMC, but
has not stated how much
he owes.
The law allows the CMA
to recover twice the amount
proven to have been ac-
quired fraudulently by offi-
cials of NSE-listed firms. Mr
Forster now wants the court
to declare the Weber Wentzel
report invalid because it is a
product of an unlawful action.
Mr Forster was dismissed from office
in March 2011, and a few months later
his successor, Bill Lay, was reported to
have found documents in his office de-
tailing the existence and contents of the
Jersey accounts.
The fraudulent scheme is said to have
begun with the founding of Fair Valley
Trust, before 1996, whose proceeds were
funnelled to a secret bank account named
Corival in National Westminster Bank at
St Heiler in Jersey, Channel Islands.
Mr Forster has in the past stated that
he deliberately left the documents be-
hind because the money in the offshore
accounts belonged to CMC.
The Webber Wentzel report said that
Mr Forster benefited the most from the
offshore accounts, earning a total of
£142,750 or 26.4 per cent of
the £538,684 disbursed be-tween 2008 and 2011.
Other top beneficiaries
were Mr Kiereini, who was
paid £32,000, and Mr For-
ster’s son, Greg, who was
paid £19,500.
Mr Forster is also chal-
lenging the CMA’s decision
to appoint retired judge
Aaron Ringera, Jacqueline
Kamau and James Boyd Mc-
Fie to an ad hoc committee
formed to hear his side of the story and
make recommendations based on its
findings. He argues that the CMA can
only appoint its board members to
such a committee and that the outcome
of the hearings he attended should also
be quashed.
The committee was formed to rule
on allegations that Mr Forster was part
of the scheme that enabled CMC’s sup-
pliers to overstate invoices by between
1.5-2 per cent and remit the surplus tothe Jersey account.
“The proceedings, determinations,
recommendations and report of the
ad hoc committee are unconstitutional
and invalid. The unlawful impugned
decisions and actions of the CMA have
occasioned the petitioner loss of office as
director and deprived him of his right to
earn a livelihood.
“Your petitioner therefore humbly
prays that this court be pleased to make
a judicial review order compelling CMA
to compensate Mr Forster for the dam-
age caused to him by its actions and the
quantum of such compensation to be
determined by this court,” Mr Forster
adds.
Mr Forster had requested for a 30-day
adjournment of the hearings two days
before they commenced on April 4 to al-
low him prepare evidence and a defence
in the matter.
This was, however, denied, and he
now says the move robbed him of anopportunity to be tried fairly.
The former CMC CEO adds that the
regulator has refused to furnish him with
a copy of the reports compiled by the ad
hoc committee and Webber Wentzel de-
spite several demands.
He had also asked the regulator to fur-
nish him with a copy of the CMA board
resolutions appointing the committee
and Webber Wentzel.
“Mr Forster requires the information
in order to assist him to examine and
challenge the legality and constitutional-
ity of the impugned decisions and actions
of CMA,” the court documents say.
The suit comes as Mr Kiereini faces a
CMA tribunal to hear his side of the story
before determining his fate. He had ini-
tially been slapped with the same sanc-
tions as Mr Forster but moved to court
last year challenging the decision.
Justice Fred Ochieng last mo
stopped proceedings in a civil suit fi
by the CMA to recover Sh189 million f
Mr Kiereini until the tribunal heari
are completed.
Justice Ochieng said in his ruling
allowing the two hearings to proceed c
currently would amount to subjecMr Kiereini to double jeopardy, wh
is against the law.
He, however, held that striking
the case was also not appropriate as
amount of money at stake was subs
tial. The CMA had earlier obtaine
court order stopping Mr Kiereini fr
transferring any of his assets held at
Nairobi bourse until the suit seeking
covery is determined.
Other individuals believed to h
benefited from the Fair Valley Trus
former Attorney-General Charles Njo
and deceased billionaire businessm
Prahland Jani.
The Webber Wentzel report
Mr Forster had indicated to his Je
contacts that he would consistentlystroy his copies of telefax and letter
Nairobi.
He and Mr Kiereini allegedly
deeper into the fraudulent schem
arranging for CMC to borrow the sa
money it had lost through the o
charges.
Based on an average exchange
of Sh125 at the time, CMC lost Sh1
million in the overcharges even as i
ported a loss of Sh181 million.
Ex-CMC boss opens battle ove≥ sec≥et
Je≥sey bank accounts»From Page 1
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CMC Holdings showroom in Nairobi.. FILE
TOPNEWS
The p≥oceedings,
dete≥minations,
≥ecommendations
and ≥epo≥t
of the ad hoc
committee a≥e
unconstitutional
MARTIN FORSTER
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Monday August 3, 2015 | BUSINESS DAILY
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6 BUSINESS DAILY | Monday August 3, 2015
BY LYNET IGADWAH
Powerful individuals are working be-
hind the scenes to delay enforcement
of the stringent tobacco laws that were
to take effect from June 5, Health sec-
retary James Macharia has said.
The new laws will compel cigarette
makers to disclose the quantity pro-
duced yearly to the Health secretary.
They also ban promotion of tobacco
products as well as smoking in open
places. Mr Macharia told the Nation-
al Assembly’s committee on health of
frantic efforts to compromise staff at
his ministry to delay the implemen-
tation of the Tobacco Control Regula-
tions, 2014.
The High Court suspended the im-
plementation of the new regulations on
June 4, a day before they were meant to
take effect, citing violation of Article 10
of the Constitution by the State.
“The tobacco industry is big and
there is a lot of commercial interest
in it,” Mr Macharia said in response to
Embakasi North MP James Gakuya,
who sought to know the status of im-
plementation of the World Health Or-
ganization (WHO) convention and the
Tobacco Control Regulations, 2014.
BAT moved to court to contest the
legality of the regulations and the
Health ministry’s failure to release the
required technical information to en-
able implementation of the law.
Kenya ratified and signed the WHO
Framework Convention for Tobacco
Control (WHO-FCTC) in June 2004,
making it the second country to sign
and ratify the convention after Norway.
Kenya created the Tobacco Control
Board in 2008, but it is only recently
that it started pushing its agenda.
Ministe≥ blames tobacco laws delay on powe≥ful lobbyists
BY GERALD ANDAE
The Kenyan market has one of the most
stable prices in eastern and southern
Africa with the dollar value of items in-
creasing by small margins compared to
peers in the region.
The Harmonised Consumer Price
Indices (HCPIs) report released by the
Comesa secretariat on Friday indicates
that Kenya’s inflation for the year to
June stood at only 1.9 per cent.
The country is the bloc’s third most
stable market after Mauritius where
the dollar value of goods and services
was unchanged over the period, and the
Democratic Republic of Congo which
recorded year-on-year inflation of 0.6
per cent.
Unlike Kenya’s shilling-based Con-
sumer Price Indices (cost of living meas-ure) which puts the country’s inflation
rate in the year to June at 7.03 per cent,
the HCPIs figures submitted to the Com-
mon Market for Eastern and Southern
Africa are prepared to track monetary
inflation.
The aggregated Comesa HCPIs are
calculated as weighted averages of each
country’s total household expenditure
converted to a common currency sup-
plied by the African Development Bank
and the World Bank.
Going by latest Comesa HCPIs fig-
ures, inflation for the whole Comesa
bloc stood at 9.2 per cent in the year to
June, down from 10.9 per cent registered
in the year to May 2015.
“It means that using a particular or
common currency, an item that cost an
average of 100 cents in June 2014 in-
creased to 109.20 cents in June 2015,”
Comesa said in a statement.By comparison, the dollar value of
goods fell by 8.9 per cent in Burundi,
5.4 per cent in Uganda, 2.7 per cent in
Rwanda and 2.8 per cent in Zimbabwe.
Malawi was the region’s market with
most unstable prices, having recorded
a harmonised inflation of 23.5 per cent
followed by Sudan at 21.9 per cent.
In what highlights a common trend
across the region to maximise sin taxes,
the price of alcoholic beverage and to-
bacco recorded the highest increases of
24.6 per cent, followed by education at19.6 per cent with hotel and restaurants
coming in third at 12.9 per cent. Kenya
accounts for 6.65 per cent of the Come-
sa HCPIs weight, Egypt 58.71 per cent,
Sudan 8.93 per cent, Uganda 4.08 per
cent, Burundi 0.47 per cent and Rwanda
1.32 per cent.
The stability of prices in the Kenyan
market boost its chances of becoming a
region investment hub. Last year, Kenya
exported goods worth Sh170 billion to
Comesa and imported Sh60.4 billion
goods. [email protected]
Kenya ≥ated topma≥ket fo≥ dolla≥deals in ≥egion
INFLATIONHarmonised Consumer Price Indices report says country’s inflation for the year to June stood at 1.9pc
A goods truck crosses the Kenya/Uganda border at Malaba. The stability of prices
in the Kenyan market boosts its chances of becoming a region investment hub. FILE
ECONOMY& POLITICS
BY ALLAN ODHIAMBO
Pharmaceutical manufacturers in East
Africa are seeking special safeguards
to cushion them from cheaper imports
from rivals in Asia.The Federation of the East African
Pharmaceutical Manufacturers has
petitioned East African Community
secretary-general Richard Sezibera for
ncentives that would help grow their
business amid rising competition by
cheaper imports.
Mr Nazeem Mohamed, chairman
of the lobby group, urged for the adop-
tion of a uniform incentive programme
that would include the reservation of a
20 per cent quota on all public tenders
for products and equipment manufac-
tured in the region.
“There is a need for harmonisa-
tion of some of the possible incentive
frameworks to promote local pharma-
ceutical production in the region that
include; no duties on imports of raw
and packing material, pharmaceuticalmanufacturing related equipment as
well as spare parts for this equipment
acquired by local manufacturers reg-
istered in the EAC,” he said during a
meeting with the EAC boss.
“There is also a need for classifica-
tion or import restrictions for finished
pharmaceutical products that can be
produced locally, based on regional
capacity and quality audits of local
manufacturers.”
Rivals from mainly India and China
have in recent years captured a huge
chunk of the region’s pharmaceutical
market. The federation said the imple-
mentation of the incentive framework
would lead to the growth of local pro-
duction and create jobs.
“There is also the benefit of reduc-
tion of substandard and counterfeitproducts, creation of high value indus-
try and attraction of investments and
financial viability, improved skills and
technology transfer, creation of back-
ward and forward linkages and import
savings and export earnings among
others,” said Mr Mohamed.
Mr Sezibera said there was a need
for well-structured incentive frame-
works that would meet the market
requirements and allow for growth
of enterprises in the bloc.
EAC countries such as Kenya have
regularly cushioned their domestic
industries from the effects of cheaper
imports. In his 2015/16 Budget, Treas-
ury secretary Henry Rotich issued an
extension on several administrative
safety nets to cushion industries.
He handed a lifeline to manufactur-ers of fish nets, gas cylinders, plastic
packaging tubes and food processors
– long affected by competition from
cheaper imports – when he said the
government would implement a de-
liberate strategy to support local com-
panies by increasing the import cost
of non-essential goods.
Manufacturers of paper and paper
board products, who have been sub-
jected to a stay of application of the
Common External Tariff at the rate of
25 per cent, were also beneficiaries of
Rotich’s measures.
EAC d≥ug make≥s seek cushion against Asia impo≥ts
BY NEVILLE OTUKI
Kenya and South Africa are expec
to open fresh talks in Nairobi to
in a bid to resolve a visa standoff t
has threatened their bilateral relat
since last year.
Top on the agenda of South Afr
immigration officials expected in N
robi between today and Wednes
is review of travel rules that could
Kenyans start getting free passes u
arrival in Johannesburg.
Last year, South Africa impo
tough rules on Kenyans seekin
visit the country, besides a ser
charge of Sh5,850 for applicatisparking an uproar.
Currently, South Africans visit
Kenya do not require a visa if they
on transit or plan to stay for less t
30 days. In the past, Kenyans wo
get free visa if they were staying
less than 30 days in South Africa
required no visa if they were transi
through South African airports.
Visa processing
“We are hopeful of a deal this t
round,” said Kenya’s Foreign Aff
secretary Amina Mohamed. “We l
to have Kenyans get their visa upo
rival in South Africa or even drop
need for visa for those on short tra
as is the case with South Africans
Previous talks have yielded little.
Kenyans travelling to South A
ca also have to wait for at least se
working days for visa processing
Those making visits of more t
30 days have to pay an additional
fee of Sh4,800 on top of the Sh5,
service charge.
If the two countries fail to ag
on the pact, Kenya’s Immigration
partment will from September 1 m
it mandatory for South Africans,
other foreigners, to apply for visa
line at a fee and wait for at least
days to get their travel document
Kenya’s new immigration rule
quire all visiting foreigners to regiand apply for visa on the eCitizen p
tal — a government website — fr
September 1.
Bargaining chipPresently, foreigners, excluding So
Africans who do not need visas to
Kenya, get their visas upon arriva
the country.
The other group that is exclu
from having visas to visit Kenya
nationalities of Tanzania, Uganda
Rwanda under the East African C
munity’s common market protoc
Kenyan officials now seem emb
ened by the new visa requirement
could be a potent bargaining chip
better terms with South Africa.
Nai≥obi to ope f≥esh talks withSouth Af≥ica o
visa ≥ules ≥ow
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Monday August 3, 2015 | BUSINESS DAILY
BY MUGAMBI MUTEGI
The sale of land and cost-cutting measures
helped lift East Africa Breweries Limited’s
(EABL) full-year profit 40 per cent to Sh9.6 billion, the beer maker’s financial statements
have showed.
The brewer has booked a gain of Sh1.8
billion from the sale of 15 acres of land (out
of 60 acres of idle land it owns in its Ruaraka
headquarters) to an undisclosed party, boost-
ing its earnings.
Administrative expenses decreased by
Sh1.5 billion to Sh9.3 billion as the company
reaped the benefits of a restructuring con-
ducted last year, which saw 100 employees
get laid off. The gains from land sale and
expenditure cuts were critical for EABL es-
pecially after a marginal increase in sales of
its mainstream beer, Tusker and emerging
brand Balozi in Kenya as well as Serengeti
beer in Tanzania.
“We currently own about 60 acres of un-
developed land at Ruaraka and think we
need to hold about half of that for future
capacity expansion,” said the EABL chief ex-
ecutive officer Charles Ireland (above) in an
interview shortly after announcing EABL’s
results on Friday.
“The balance of that acreage will never be
used and that is why we decided to dispose
15 acres in the last financial year. Another
10 acres or so will be disposed this financial
year.”
In 2012 EABL sold 32 acres of land to Lon-
don-based private equity fund Actis on which
it is building the multibillion-shilling Garden
City Mall. The brewer last year spent Sh1.18
billion in restructuring its business, seeking
to realign its cost structure to a sharp revenuedip from Senator Keg following the introduc-
tion of a higher rate of excise tax.
Costs like office supplies dropped by Sh771
million to Sh2 billion but staff expenses in-
creased 8.5 per cent to Sh5.15 billion.
“The benefits of restructuring as well as
measures taken to manage the cost of sales
are starting to come through for the business,”
said Tracy Barnes, EABL finance director.
The beer and spirits maker said its revenue
rose to Sh64.42 billion from Sh60.75 billion
the previous year. Revenue generated by its
mainstay Kenyan business grew by three per
cent. EABL said this growth would have been
six per cent were it not for the slow growth
of Senator Keg.
Growth of the low-end beer is, however,
expected to pickup in the current financial
year after the government revised excise
duty payable to a remission (rebate) of 90
per cent.
Tanzania’s revenue grew by two per cent
as the company experienced slowed perform-
ance by its flagship beer brand Serengeti while
Uganda revenue grew by seven per cent.“Our
mainstream beers were challenged hence the
softening in revenues this year. In the current
financial year, Tusker will remain our mainfocus,” said Jane Karuku, the managing di-
rector of Kenya Breweries Limited.
Reserve spirits (Ciroc and Singleton) as
well as ready-to-drink brands (Smirnoff Ice
Double Black with Guarana and Snapp), how-
ever, boosted the brewer, growing 71 and 70
per cent respectively. Sales of premium sprits
like the Johnnie Walker brand grew by 31 per
cent while emerging sprits such as Jebel Gold
grew by 32 per cent.
The brewer recently paid its parent com-
pany Sh2.8 billion to offset an outstanding
$200 million five-year loan as its financing
costs for the year decreased four per cent to
Sh4 billion. Its total borrowings stand at
Sh33.7 billion, a decrease from Sh36.6 bil-
lion the previous year.
Rua≥aka land sale andcost cutting lift EABLnet p≥ofit to Sh9.6bn
STRATEGYDisposal of 15 acres of land at Ruaraka
helped boost the brewers financial position by Sh1.8bn
CORPORATE NEWSNEWS I REVIEWS I ANALYSIS
Brewer’s profit (Sh Bn)
SOURCE; EABL
EABL’s land sale and cost-cutting meas-
ures helped lift the brewer’s full-year
profit 40 per cent to Sh9.6 billion.
BY VICTOR JUMA
South Africa-based insurance
group Metropolitan & Momentum
International (MMI Holdings) is
set to spend over Sh1 billion on ac-
quisition of additional 25 per cent
stakes each in its Kenyan subsidi-
aries Cannon Assurance and Met-
ropolitan Life Kenya.
MMI Holdings first bought
into Cannon last year, taking a
66.3 per cent stake at a cost of
Sh2.5 billion. Its equity in Met-
ropolitan also stands at the same
level, leaving with it minority in-terests of 33.7 per cent each in the
two subsidiaries.
MMI says it is ready to further
boost its shareholding in the units,
setting aside the requisite sums
that it will use to exercise its right
of first refusal should the non-con-
trolling interests opt to sell their
stake from next year.
“Non-controlling interests of
25 per cent of Metropolitan Life
Kenya and Cannon have the op-
tion to sell their shares from Oc-
tober 3, 2016 at a price linked to
embedded value,” MMI said in a
trading update.
“In terms of international
financial reporting standards
(IFRS), the group has recognised
a financial liability, being the
present value of the estimated
purchase price, for exercising
this option.”
MMI says it has already consol-
idated 96 per cent of the subsidi-
aries’ earnings and de-recognised
the non-controlling interest based
on the fact that it has already pro-
vided for their buyout.
Cannon and Metropolitan –
which are in the process of merg-
ing their operations – did not re-
spond to our queries by the time
of going to press.
In the initial acquisition of
non, MMI offered its sharehoan undisclosed minority sta
Metropolitan as part of the
and-stock deal.
The additional share purc
by the multinational are ex
ed to see the exit of most of t
shareholders. MMI is bettin
the acquisitions to grow its
ence in the East African m
where the low uptake of i
ance – at less than five per
– is seen providing future gr
opportunities.
Cannon and Metropolita
rently operate only in Keny
the multinational plans to u
subsidiaries to expand in th
gion in the medium term.
SA insu≥ance g≥oup eyes 25p
mo≥e stakes in Kenyan fi≥ms
Subsidiaries’ speciality Metropolitan only offers Life
insurance while Cannon, which has
five branches in Kenya, is a composite
underwriter
Customers queue at an insuran
firm. FILE
BY BRIAN WASUNA
A section of Lamu residents has
moved to court seeking to stop
compulsory acquisition of their
land for the construction of a
Sh23.5 billion ($235 million) wind
farm by a Belgian company.
The residents want the court
to quash a decision by the Lamu
County Assembly approving a
request by Kenwind Holdings
to acquire 3,167 acres of land in
Mpeketoni for the project. They
hold that the County Assembly un-
lawfully passed the motion before
the governor’s office had approved
Kenwind’s request.
They hold that over 8,000Mpeketoni residents were not
informed of the plan to acquire
their land, and that they have not
been offered any alternative for
settlement. James Gichu, one of
the residents, says the land has
been occupied by members of
minority communities known as
the Bajun and Sanya.
Kenwind has partnered with
Belgian firm Electrawinds to de- velop the wind plant. International
Finance Corporation (IFC) – the
private sector investment arm of
the World Bank – announced its
support for the project in June
2013.
“The suit land has been occu-
pied by indigenous communities
known as the Bajun and Sanya
since time immemorial anillegal alienation of their
without their participation
amount to a violation of
rights. The unlawful app
will culminate into evicting
8,000 residents of Baharini W
Mr Gichu says.
The petitioners’ lawyer Nd
Njiru added that the area has
pitals, 10 churches, three mos
three public primary school
other social amenities which
efit the residents.
Mr Njiru says that the Co
Assembly and county govern
hold the land in trust for the 8
residents and must dissolv
trust before releasing the laanyone else.
Justice Oscar Angote on T
day directed the petitione
serve the Lamu County As
bly, governor, attorney-gen
National Land Commission
Kenwind with the suit pa
The judge has set Septemb
for hearing of the suit.
Lamu ≥esidents oppose Sh23.5bn wind fa≥
Lamu Governor Issah Timamy. FILE
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8 BUSINESS DAILY | Monday August 3, 2015
BY VICTOR JUMA
Three Kenyan dcotors have secured
Sh1.8 billion funding from interna-
tional investors for a hospital to be
built in Nairobi’s Ridgeways estate.
The hospital, named Iso Health
Limited and sponsored by three Ken-
yan doctors, is set to receive Sh577 mil-
lion from the International Finance
Corporation (IFC), which is part of theconsortium of financiers.
The balance is to be provided by
private equity firms Abraaj Group and
Africa Health Fund (AHF).
Iso is set to offer treatment and
care for heart diseases, targeting the
mass market. The investors have as-
sembled a team of cardiac specialists,
operating under an unnamed Indian
hospital brand.
The two-storey hospital will have
130 beds with a total floor area of 7,926
square metres.
According to disclosure documents
by the IFC, the hospital will be built on
2.5 acres of land to be bought from a
Dr Githegi, who is among the doctors
sponsoring the project. Construction
of the hospital is expected to be com-
plete by end of 2017.
The investment in Iso is the latestin Kenya where investors, including
private equity firms, are putting up
new hospitals and expanding exist-
ing facilities to capture increasing
demand for healthcare by the grow-
ing middle class.
Equity Group has also announced
its funding of healthcare institutions
around the country that will be oper-
ated by healthcare professionals and
branded “Equity Afia”. Gertrude’s Chil-
dren’s Hospital in 2013 invested Sh500
million to set up a new building at its
Muthaiga branch, raising its bed ca-
pacity to 103 from the previous 83.
Other hospitals that have made
new investments in the past few
years include Nairobi and the Aga
Khan hospitals that have put up can-
cer treatment centres.
Aggressive expansion of privatehospitals has been linked to a rising
spend on healthcare by the country’s
middle class as government hospitals
suffer from congestion and frequent
strikes.
This has seen charitable trusts and
private equity firms increase their in-
vestments in the healthcare market,
with a view to promoting social wel-
fare and earning returns.
Research firm Business Monitor
International (BMI) says growth in
Kenya’s healthcare sector is being
driven by a rising population and
increased awareness of preventative
healthcare.
The investors are also eyeing rising
cases of illnesses such as malaria and
diseases of the respiratory systems.
“In comparison to many other
African markets... Kenya offers morecommercial promise and a more sta-
ble overall business environment,”
BMI said in a research note.
The research firm says the local
healthcare sector has been growing at
double digits, with revenues rising 11.8
per cent to Sh212 billion last year com-
pared to Sh190.3 billion in 2014.
Th≥ee docto≥s getSh1.8bn to build
Ridgeways hospital FUNDINGSh577 million funding to come
from the International Finance Corporation
Workers put finishing touches to a new children’s wing at the Moi Teaching and
Referral Hospital in Eldoret in March. Growth in healthcare is being driven by a
rising population among other factors. JARED NYATAYA
CORPORATE NEWS
BY DOREEN WAINAINAH
Global IT giant Google is set
to put Kenya’s Samburu Na-
tional Reserve on its Street
View platform, exposing it to
millions who use the feature
across the world.
Street View, a Google Maps
feature, offers users a pano-
ramic (360 degrees) view of a
place. It works by searching an
address on Google Maps. The
address and street imagery
appears and by clicking on
the image, a user can view apicture of the site. By moving
the mouse around, a user can
view all the buildings visible
within 360 degrees, similar to
what one would see if standing
at the address.
Street View will also allow
users to upload additional pic-
tures of destinations that can
be viewed by the public. Ken-
yans currently have access to
Street View images for other
destinations including differ-
ent states in the US, Europe,
Australia and even South Af-
rica but cannot upload or
view images of local streets
and sites.
Samburu National Re-
serve remains one of the few
reserves that humans cohabit
with elephants. It hosts ap-
proximately 160 elephant
families, which translates to
over 1,000 elephants. Google
plans to launch the feature in
September through a partner-
ship with Save the Elephants
initiative.
The feature is expected to
attract interest of potential
visitors by offering them a
glimpse of what they would see
on a tour of the park. National
parks and reserves offer a key
attraction to animal lovers w
travel across continents to
perience scenes such as the
nual wildebeest migratio
the Maasai Mara National Pand also see elephants - wh
population has been redu
significantly by poachers w
kill them for their ivory.
In Africa, South Afric
currently the only coun
that has Street View. Ke
currently has access to
main Google Maps app th
used to find directions.
Users are also able to fi
the quickest and shor
routes to their destinatio
Using the Google Maps, u
can also zoom in for a sate
view of an area. The mod
traveller has taken to the
ternet to study the most ex
destinations to visit.
Google to put Sambu≥u
Rese≥ve on St≥eet View
Decision making aid Increasing use of travel apps
and pages including Trip Adviser
has become a benchmark for
selection of destinations by
users.
BY BRIAN WASUNA
A lawyer’s demand for Sh455 mil
in legal fees has hampered inherita
by the children of a deceased co
farmer’s vast empire estimated t
worth Sh5.1 billion.
Gatheru Gathemia has move
court seeking to stop the childre
deceased coffee farmers Samuel G
Munene and Winnie Wanjiru fr
transferring any of their assets in
estate in a bid to secure the dispu
fee. Mr Gathemia says the fees ar
from succession cases in which
represented Jane and Joan Mun
against their brothers, who had ta
a majority stake in the estate.
The lawyer argues that his le
fees were to be pegged on the t value of the estate, which stand
Sh5.1 billion today. Jane and Jo
who have a combined 40 per c
stake in the estate, however say
Gathemia’s fees cannot be pegged
their siblings’ inheritance as he
not represent them in the suit.
The children inherited their p
ents’ coffee estate and several tr
of land.
Lawye≥’s feestalls sha≥ingof Sh5bn estat
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Monday August 3, 2015 | BUSINESS DAILY
BY JOMO KWAME SUNDARAM AND
MICHAEL T CLARK
The world received an important re-
port card last month in the form of
the latest annual Millennium Devel-
opment Goals Report. It highlights a
number of important achievements, but omits to mention that some tar-
gets of the Millennium Development
Goals (MDGs) were lower than those
agreed to at the relevant UN interna-
tional conferences of the 1990s.
Some of the good news is real. Halv-
ing the share of the world’s popula-
tion who are extremely poor during
1990-2015 was achieved well ahead of
schedule. But there is more to the story.
Upon closer inspection, it is clear that
progress on poverty has been uneven
across and within re-
gions and countries,
with the rapid de-
velopment of China
alone accounting for
much of world pov-
erty reduction.
Progress toward
most other MDG tar-
gets has been more
limited. Slower growth
for over half a decade,
increased economic in-
equality in many coun-
tries and reduced pub-
lic social provisioning
in recent decades, have undermined
progress despite growth in average
incomes.
According to the World Bank, the
global poverty rate at the purchasing
power parity of 1.25 dollars/day fell to
less than half the 1990 rate by 2010.By 2015, the number of extreme poor
had fallen from 1.9 billion in 1990 to
836 million.
Meanwhile, the hunger rate or
the prevalence of undernourishment
(inadequate dietary energy) has de-
clined by less than half since 1990,
from 23.3 per cent in 1991 to 12.9 per
cent in 2014.
FAO estimates that 780 million
people went hungry in developing
countries in 2014, down from 991 mil-
lion in 1991 — well short of the more
ambitious 1996 World Food Summit
goal to halve the number of hungry
people by 2015.
At the same time, progress in reduc-
ing child stunting—a key measure of
early childhood malnutrition and its
lifelong consequences—has been even
more modest. Most areas have seen
uneven progress, but in sub-Saharan
Africa, the number of stunted children
actually rose by a third between 1990
and 2013.
Since the poverty line was originallydefined by the money income required
to meet basic needs, including food, it
is difficult to understand how incomes
could rise to a level that cuts poverty
by more than half, while the impact on
nutrition has been so much less.
Meanwhile, almost half of the
world’s employed work in vulnerable
conditions, with women and youth
more likely to be in insecure, poorly
remunerated occupations.
Since 1990, 2.1 billion people have
gained access to im-
proved sanitation.
But the proportion
of people defecating
in the open has fallen
far short of the MDG
75 per cent reduction
target, threatening the
health and nutrition of
others, especially chil-
dren.
The target of halv-
ing the population
share without sus-
tainable access to safe
drinking water was
also met by 2010 — with those using an
improved water source rising from 76
per cent in 1990 to 91 per cent in 2015.
The share of slum dwellers in urban
populations has declined from 46 per
cent in 2000 to 30 per cent in 2014, but
their number has grown by more than25 per cent, from 689 million in 1990
to 881 million in 2014.
The maternal mortality ratio has
fallen by almost half since 1990, but
well short of the MDG target of 75
per cent; only half the countries in
the world collect data on maternal
death causes.
Globally, more than 71 per cent of
births in 2014 were assisted by skilled
health personnel, up from 59 per cent
in 1990. In developing countries, only
56 per cent of rural births are attended
by skilled health personnel, compared
with 87 per cent of urban births.
The global under-five mortality rate
has declined by more than half, from
90 to 43 deaths per 1,000 live births
between 1990 and 2015.
Nevertheless, about 16,000 children
under five continue to die daily in 2015,
mostly from preventable causes.
Tuberculosis prevention, diagnosis
and treatment saved an estimated 37
million lives during 2000-2013. Grow-
ing interventions have averted over 6.2
million malaria deaths during 2000-
2015, primarily of children under five
in sub-Saharan Africa.
Meanwhile, new HIV infections fell
by about 40 per cent between 2000 and
2013, from around 3.5 million to 2.1 mil-
lion. By mid-2014, 13.6 million people
with HIV were receiving antiretroviral
therapy globally, up from just 800,000
in 2003.
The literacy rate among youth aged
15 to 24 rose globally from 83 per centto 91 per cent during 1990-2015. The
primary school net enrollment rate in
developing countries reached 91 per
cent in 2015, up from 83 per cent in
2000. Many more of the world’s chil-
dren have been enrolled in primary
schools, with girls fast closing the gap
with boys.
Primary school age children out of
school worldwide have declined by less
than half, from 100 million in 2000 to
57 million in 2015, while the number of
children in primary school in sub-Saha-
ran Africa more than doubled during
1990-2012, from 62 to 149 million.
In developing countries, children
from the poorest households are four
times as likely to be out of school as
those from the richest households. As
with child survival and other matters,
further progress will require concerted
reduction of socio-economic dispari-
ties. With the MDGs deadline still five
months away, a few more MDG targets
may be achieved when monitoring is
completed. But much more will need
to be done to meet targets on nutri-
tion, public health, sanitation, gender
equality, infrastructure, resource sus-
tainability as well as climate change
mitigation and adaptation.
Developing a broad, ambitious
and universally relevant set of goals
to guide world community efforts in
the next 25 years seems done. But as
the Addis Ababa Action Agenda has
shown, meaningful progress on the
“means of implementation” is prov-ing very difficult.
A common vision and a clear
agenda, with measurable goals and
targets facilitating accountability,
are now proven requisites for achiev -
ing success. Despite its mixed record,
international mobilisation around
the MDGs offers valuable lessons to
draw upon. It also provides proof that
progress is only feasible with the req-
uisite shared political will.
Mr Sundaram is United Nations As-
sistant-Secretary-General for Econom-
ic Development. Mr Clark is Special
Adviser on International Governance
at the Food and Agriculture Organisa-
tion of the United Nations.
Why uneven MDG p≥og≥ess mustd≥ive wo≥ld ≥esolve to do much bette≥
A teacher and his charges at a primary school in Mombasa. Primary school net
enrollment rate in developing countries reached 91 per cent in 2015, up from 83
per cent in 2000. LABAN WALLOGA
TARGETS We need a common vision
and clear agenda, with measurable goals
With the deadlinestill five months
away, a few mo≥e MDG ta≥gets may be achieved whenmonito≥ing iscompleted
IDEAS & DEBATEOPINIONS I REVIEWS I ANALYSIS
Ashraf Ghani
Afghan istan president
Other Voices
David Rohde (Reuters)
Afghanistan’s new president, Ashraf Gh
has also come under withering criticism
from fellow Afghans for a bold diploma
gamble. Since taking office, the US-edu
anthropologist has openly wooed Chin
and Pakistani officials. He made many
concessions in hopes they could help b
the Taliban to the negotiating table. As
as it may seem to some Americans, Ta
leader Omar’s death could not come at
worse time.
Andy Mukherjee (Reuters)
By unceremoniously dumping his depu
embattled Malaysian Prime Minister N
Razak has opened the door to a protrac
power struggle. In doing so, he raises t
prospect of lasting financial damage.Th
last time a deputy prime minister got fi
in Malaysia, investors got the rude shoc
capital controls. Seventeen years later
commodity-exporting nation has squi
away enough foreign assets to withsta
capital outflows for some time.
Christine Lagarde
IMF managing director
Najib Razak
Malaysian Prime Minister
Heather Stewart (Guardian)
Last week, Christine Lagarde told the IM
board, made up of representatives of it
member countries, that an IMF team s
be sent to Greece. Observers have bee
expecting Greece to seek a short-term
bridging loan from its eurozone partne
to cover the ECB payment. But without
IMF involvement, the amount of fundinneeded in the coming months is likely t
considerably higher. The IMF’s role in th
eurozone bailouts has been controvers
since the first rescue of Greece in 2010
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10 BUSINESS DAILY | Monday August 3, 2015
Alot has been written about
President Barack Obama’s trip
to Kenya. The visit was historic
seeing he was the first sitting Ameri-
can president as well as having Ken-
yan roots. And not forgetting the sour
relationship between Kenya and the US
after the 2013 elections.
Kenya made an effort to put its best
foot forward. Security at the airport
was beefed up, the airport was given a
face-lift, and welcoming billboards were
erected. Nairobi Governor Evans Kidero
ordered grass to be planted on Uhuru
Highway, even though it did not grow in
time. Siaya, the county where Obama’s
father hailed, organised several events
to mark the occasion.
Kenyans followed events keenly from
the time Air Force One landed at JKIA to
Obama disembarking from the plane,
receiving a bouquet of flowers and hug-
ging President Uhuru Kenyatta.
By the time Obama left for Kenya for
Ethiopia, a lot had happened. Listening
to coverage in mainstream media and
following social media discussions, one
could see that the event had made an
impact on Kenyans. Most people now
knew what POTUS meant and what the“beast” was.
Now that the excitement has died
down, two lessons stood out for me.
Before that, however, it is important
to underscore that the hosting of the
Global Entrepreneurship Summit has
been beneficial to this country in many
ways, beyond the huge financial dealsthat were struck. The coverage that the
meet gave Kenya in the international
arena is huge and has long-term ben-
efits that we must tap.
My top two priorities though are
promoting equality and ensuring sus-
tainability. People will remember the
comparisons made between a child in
Nyanza and Central, and one in Rift
Valley and her counterpart in Nairobi.
The inequality debate drove us to em-
brace devolution. But more is required
because inequality has several facets,
not just economic. There is also social,
political and gender inequality, among
others.
Kenyans are often too quick to judge
others based on where they come from.
If you follow social media you will see
how many times we fall into the trap of
stereotypes. It is time to take bold steps
to celebrate our diversity.
This past week in Mombasa I was re-
minded that it takes more than one fin-
ger to kill lice. It takes all of us to make
Kenya prosperous. We have to start
pulling in the same direction as much
as possible and to value each other. We
have the same country to build and it
requires all our collective energies.
My second take home was sustain-
ability. As an environmentalist it was
gratifying to note the place that sustain-
ability occupied in Obama’s discussions.
In his speech at Kasarani, he stated that“We have not inherited this land from
our forebears, we have borrowed it from
our children.”
All students of the environment
will recall that these words wer
the core of the case filed by renow
environmental activists Tony Op
against forest logging in Philippincase which popularised the concep
intergenerational equity.
Taken together with the discussi
Obama had with civil society where c
servation was again a key theme,
clear that in all we do we should ens
that we balance our interests with th
of future generations.
We also have to remember that
resources at our disposal are a gift
we have a responsibility to extend t
benefits to those who will come afte
Importantly, conservation should n
be at loggerheads with developmen
with community welfare. Sustainab
is about ensuring that communitie
central, and that development occ
This is at the core of our commitm
in Article 10 of the Constitution.
While these two lessons may l
unrelated, they are connected. It is
possible to have sustainability when
do not address equality. Neither can
speak about equality if you focus on
ploitation without conservation. For
word exploitation connotes to mistr
to corrupt, to abuse or misuse. It exte
to not just how we use natural resour
but all resources at our disposal.
I hope that beyond the discou
about the “beast”, the political ban
and other aspects of the visit, we s
reflect deeply on the discussions du
Obama’s visit and determine our ta
home messages. Let us ask ourse what we will do to apply some of
lessons from his dialogue.
Dr Odote is a senior lecturer, Uni
sity of Nairobi
Lessons fo≥ Kenya f≥om Obama’s visit
COLLINS ODOTE
REFLECTION
China not keen on reformsThe Chinese government certainly likes to
control things. It keeps its currency artificially
low to promote exports. It meddles heavily
in real estate prices.
And it is obsessed
with controlling information on the Internet.
But nothing has been as jarring to American
sensibilities as its recent efforts to prop up stock
prices, which began plunging this summer.
Acts fly in the face of civilityNo matter how rich one is, there’s one thing money
can’t buy - respect. And it certainly can’t keep one
out of jail. Mainlanders are now the world’s top
travelers in terms of
numbers and spending.
But unfortunately, they’re also the second most
unwelcome tourists, behind the so-called “ugly
Americans.” Some mainlanders believe money is
everything and behave like barbarians.
Pro-poor justice system needeA functioning, fair and accessible justice syste
is the foundation of every democratic state, sa
head of the European Union delegation to Zam
Ambassador Gilles
Hervio. Can anyone h
a dispute with this statement from Ambassad
Hervio? Our justice system is still very much
anchored on money. If you don’t have money, t
is very little justice you can get in this country.
HONG KONG STANDARD
HONG KONG
VIEWS FROM ABROAD Opinions f≥om a≥ound the wo≥ld
THE POST
LUSAKA
THE USA TODAY
WASHINGTON DC
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Monday August 3, 2015 | BUSINESS DAILY
Many progressive coun-
tries across the world
respect professional-
ism in the management of public
affairs. The adherence to pro-
fessional codes and standards
is what separates the developed
countries from their developing
counterparts.
Best practices have shown that
societies that employ and respect
professionals tend to achieve
faster rates of development. Af-
rica should not be left behind on
this front as it strives to join the
league of developed nations.
At industry level, companies
that are managed by professionals
are known to post better results.
Professional managers are likely
to apply the best policies and tech-
nical skills to improve productiv-
ity. Better still, professionals will
respect systems and established
procedures.
Why has Kenya not fully pro-
fessionalised her operations after
more than 50 years of independ-ence?
When former president Mwai
Kibaki brought professionals on
board, the country experienced
faster economic growth. From a
growth rate of negative two per
cent, the economy shot to seven
per cent in less than two years.
The same trick can work for the
Jubilee government.
The tourism sector is guilty
of not upholding professional-ism. The industry has the high-
est number of unskilled labour.
Could it be due to the fact that
most people take it as a last-re-
sort discipline?
How can a lucrative sector be
treated as a second career choice?
Things must change to give the sec-
tor the recognition it deserves.
While answering questions
touching on direct flights from
the US to Kenya and the issue of
travel advisories, President Barack
Obama demonstrated respect for
professionals.
Road side declarations and
blind pronouncements have no
place in America. Can’t we bor-
row a leaf?
We should change the culture
of embracing quacks instead of
professionals. The frequent col-
lapse of buildings and erroneous
medication by untrained doctors
are perfect examples of neglect of
professionalism.
Soon, bridges will collapse lead-
ing to massive loss of lives due to
poor workmanship by bogus en-
gineers. Let us be warned.BENARD AMAYA
via email
Former president Mwai Kibaki. FILE
LettersThe editor welcomes brief letters on topical issues. Opinions expressed here are not necessarily those of
the editor or publisher. They may be edited for clarity, space or legal considerations.Send via e-mail to [email protected]
Professionalism needed to build Kenya
The Ethics and Anti-Corrup-
tion Commission should
move with speed and in-
vestigate officials whose ministries
have been mentioned adversely in
the auditor-general’s report to as-
certain culpability.
The report is shocking. State
corporations have glaring ac-
countability issues. More than 70
per cent of money spent by gov-
ernment was not fully approved.
Some government officials have
questioned the credibility of the
auditor-general’s findings saying
the report could have failed to in-
clude documents from the affected
ministries. But questions abound
on why the ministries failed to pro-
vide the documents.
Parliament has failed in its over-
sight mandate.
On his trip to Kenya, US Presi-
dent Barack Obama while ac-
knowledging Kenya’s economic
potential, warned that the can-
cer of corruption was holding the
country back.
Kenya continues to scare inves-
tors just days after hosting the 2015
Global Entrepreneurship Summit.
The country is ranked among top
corrupt nations in the world ac-
cording to the Global Transpar-
ency International Corruption
Perception Index, 2014.
The war on graft seems to be
targeted at a certain clique of in-
dividuals where only the small
fish fry immediately. The big fish
rally their supporters and retreat
to tribalism, obstructing the course
of justice.
EDWIN KISANYA,Maseno
EACC should investigate misuse of funds by ministries immediately
K enya Airways has re-
ported a record loss
of Sh25.7 billion after
tax. This has been attributed to
competition from Middle East
carriers, travel advisories and
high operating costs.
I wonder why high operat-
ing cost is among the causes
when they are the same peo-
ple who were planning to
lease passenger buses at Sh10
million per month. Was that
sustainable?
I believe when we change
the management of the airline
things will start moving swiftly
and such high losses won’t be
experienced again. There is
need for new people with fresh
ideas who will offer alternatives
to travel advisories and ways to
curb competition.NDOLO VICTOR
Bungoma
Change KQ’s
management
for rebound
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12 BUSINESS DAILY | Monday August 3, 2015
Failed Financial Times bid shows Axel Sp≥inge≥fi≥m caught between t≥adition and ambition
A xel Springer’s failure to clinch a
deal to buy the Financial Times
lengthens a line of setbacks in a
decade-old quest by Germany’s biggest
news publisher to expand abroad. Once
again, cautious bidding practices cost it
the prize, revealing a complex dynamic
within the family-controlled company, which is best known for its Bild tabloid
but which calls itself a digital powerhouse
with international potential.
The last-minute loss to Japan’s Nikkei
of a newspaper Axel Springer had coveted
for years was clearly a blow to its man-
agement, but for some investors it was a
relief, and not just in hindsight.
“Worse than not expanding interna-
tionally would be Springer overpaying
for an asset,” one top 10 investor told
Reuters. “In that respect, shareholders
gave a clear signal last week.”
Axel Springer shares dropped two per-
cent on reports it was bidding for the FT,
but recovered that loss and ended the day
higher after the company said it would
not buy it last Thursday.Japan’s Nikkei bought the premier
business newspaper for $1.3 billion
(Sh130 billion) from Pearson, just Sh11
billion more than Springer was prepared
to spend, according to a person familiar
with the talks. The company declined to
comment.
Springer CEO Mathias Doepfner, a
former journalist at Frankfurter Allge-
meine Zeitungand editor-in-chief at Die
Welt , had long expressed the wish to buy
a big English-language title.
Two people familiar with the talks
said ultimately, the price was too high
for a company with a market capitalisa-
tion of five billion euros (Sh555 billion),
a conservative bidding strategy and aver-
sion to debt.
Financial prudence has been key ever
since Doepfner was appointed in 2002 by
Friede Springer, widow of founder Axel
who built the company in West Berlin
soon after World War Two.
“Doepfner doesn’t do anything he has
not first calculated, so he was reluctant
to counter the higher bid,” one person
familiar with the talks said.
The 72-year-old Friede is a hands-on
shareholder and vice-chair of the super-
visory board, who sees it as her task to
protect the legacy of her late husband,
according to German media, and is very
close to Doepfner.
Their relationship is described by
some Axel Springer insiders as like moth-
er and son. In 2012, she gave Springer
shares worth almost $82 million (Sh8.2
billion) to Doepfner, at the time two
cent of all outstanding shares. Doepf
now owns 3.1 per cent of the firm.
Friede’s involvement dates bac
the 1980s, when she inherited ab
a quarter of Axel Springer shares. T
Springer family’s former nanny who
become the publisher’s fifth wife ha
fight her corner with the German me
elite shareholders including mogul
Kirch and the Burda family.
After buying out other sharehol
and taking control of the publisher, Fr
vowed she would never put herself in s
a position again, a former Axel Sprin
worker said. When Doepfner took o
he had three key strategies: first br
MEDIA Japan’s Nikkei bought the premier
business newspaper for Sh130bn from Pearson,
Sh11bn more than Springer was prepared to spend
NEWS INDEPTH
The headquarters of
theFinancial Times
newspaper in London.
A Japanese media
house has bought the
paper. AFP
A commuter reads Japan’s business newspaper, theNikkei , in Tokyo last week. Britishpublisher Pearson said it had agreed to sell the Financial Times to Japanese media gro
Nikkei. FILE
Japanese media giant Nikkei’s surprise acquisition of the Fi
nancial Times for $1.3 billion underscores its goal to be the
voice of Asia on economic affairs as part of a broader Inter
net-driven global expansion.
But the unlikely cross-border marriage — Japanese mediararely venture overseas and are routinely criticised as timid in
pursuit of investigative news —has sparked concerns abou
editorial independence at the storied salmon-pink busines
paper founded in 1888.
“The merger of the Financial Timesand Nikkei will give
the group a major international presence in the media sector,
the Japanese paper said in its Friday edition, touting it as the
country’s biggest-ever foreign media acquisition.
President and CEO Naotoshi Okada said on the Nikkei’
website: “Our goal is nothing short of making Nikkei the lead
ing media voice in Asia”.
In Japan, the Nihon Keizai Shimbun — or Nikkei daily
— is a must-read for executives and has a strong track record
of financial scoops.
About 2.7 million copies of its morning edition are printed
daily while the afternoon version numbers 1.4 million cop
ies.
Japanese media
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NEWS INDEPT
the company back on track after years of inter-
nal unrest and operational setbacks, then make
the transition from print to digital and after that
expand internationally.
But flirtations with global media brands have
so far remained just that. Last year, Springer
walked away from buying US publisher Forbes,
which was sold to an Asian investor consortium
in a deal that valued the prestigious company at$475 million (Sh47.5 billion).
A decade ago, it looked at British titles the
Daily Telegraph or the Daily Express but soon
backed out.
Earlier this month Springer was reported
to be discussing a possible tie-up with German
broadcaster ProSiebenSat.1, which is about twice
the size of Axel Springer.
But a day later Springer issued a statement
saying Friede would not give up control, and later
ProSiebenSat.1 and Axel Springer announced a
project for digital start-ups but said they had no
further tie-up plans.
Buying a trophy titleSpringer shares rose 1.5 per cent and those of
ProSiebenSat.1 were up 1.9 per cent, outperform-
ing a 0.2 per cent weaker German midcap indexand very close to the high they hit when news of
the tie-up broke.
Instead of buying a trophy title, Axel Springer
has taken stakes in financial blog Business In-
sider and US youth news site Mic.com, and is a
co-owner of the European edition of Politico.
In the first quarter, such digital products, es-
pecially classified ads, accounted for more than
60 per cent of company sales and almost three-
quarters of core profit.
Investors have rewarded the digital push with
a 75 per cent rise in the share price over the past
five years, making Friede one of the richest peo-
ple in Germany.
In May, news website Re/code reported Axel
Springer was in advanced discussions with AOL
to spin off its flagship Huffington Post content
unit, citing numerous sources.
AOL’s new owner Verizon has since said it will
not sell. Axel Springer declined specific comment
on its acquisition strategy but the statement on
Friede’s plans to retain control referred to a plan
to transform into a so-called KGaA or partnership
limited by shares, which would allow Springer
to raise more capital and grow while protecting
Friede’s position.
To proceed, it would need approval at next
April’s AGM. An Axel Springer manager, who
declined to be identified, said the price for the FT
was too high but added such an asset only comes
to market once in a few decades.
For Nikkei it represented a chance to move
beyond a flagging domestic market. The $1.3
billion FT price tag represented roughly a 35
times multiple for its core earnings. That is three
times more than the value of Axel Springer shares,
which trade at 11 times earnings, broadly in line
with publishing peers.
“Why on earth was Axel Springer manage-
ment preparing to buy a trophy asset for a silly
price... when it touts itself as investing in fast-
growing digital assets?” brokerage Berenberg
asked after Nikkei’s winning bid was annou
A person familiar with Springer managem
thinking said Doepfner would continue to
on journalism and not make material chan
its strategy.
“If it was up to the financial markets, Spr
would have to sell off anything that is journ
and focus on classified ads,” the person said
the soul of the company is journalism and wi
journalism there won’t be Axel Springer.”
- REUTERS
Tsuneo Kita (right), the chairman of Japan’s Nikkei newspaper speaks as company president Naotoshi Okada looks on at a press conference in Tokyo last wee
British publisher Pearson said it had agreed to sell the Financial Times t o Nikkei for $1.3 billion (Sh130 billion).AFP
D E A L A F P
The FT deal adds an internationally known
brand and about 225,000 print copies to the
Nikkei’s arsenal as it eyes a battle with business
powerhouses the Wall Street Journal and Bloomb-
erg. Online, the Nikkei-FT marriage would cata-
pult the group past the New York Times’ 910,000
Internet subscribers. Like the FT, the Nikkei is
seen as a business bible. Its 140-year-old history
is inextricably linked with Japan’s industrial sec-
tor and once-booming economy, and the Tokyo
Stock Exchange’s benchmark index -- the Nikkei
225 -- takes its name from the group.
The move into magazines, books and televi-sion, among other sectors, has left the Nikkei
on solid financial ground, even as many major
media struggle with their finances in the age of
the Internet.
Meanwhile, the FT has earned a reputation
as one of the most nimble media giants in the
digital age, building a giant subscriber base and
successfully attracting advertisers because of its
upmarket readership.
“It’s a good story for the Nikkei — buying the
FT offers the experience online and a foreign sub-
scriber base in the dominant language in the world,
English,” said Yasuhiro Matsuzaki, deputy chief
editor at the rival media group Tokyo Keizai.
“The Nikkei is already the most advanced Japa-
nese newspaper in the digital domain but it takes
time to get subscribers,” he added.
However, the takeover could make for a roc
cultural exchange. T