Aug 3rd 2015

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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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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.

[email protected]

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.

[email protected]

Ex-CMC boss opens battle ove≥ sec≥et

Je≥sey bank accounts»From Page 1

FOR MORE ON

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SCAN THIS

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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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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

8/20/2019 Aug 3rd 2015

7/32


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.

[email protected]

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 develop 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

8/20/2019 Aug 3rd 2015

8/32


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.

[email protected]

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

8/20/2019 Aug 3rd 2015

9/32


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

8/20/2019 Aug 3rd 2015

10/32


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

8/20/2019 Aug 3rd 2015

11/32


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

8/20/2019 Aug 3rd 2015

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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

8/20/2019 Aug 3rd 2015

13/32


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

Aug 3rd 2015

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