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A police vehicle burns after Moi University students went on the rampage to protest the rape and death of a Third Year student who lived off-campus, yesterday. COPPERFIELD LAGAT

UP IN FLAMES

ELDORET

Alhaji Aliko Dangote. FILE Naushad Merali. FILEDeepak Kamani. FILE

Deepak Kamani becomes the latest entrant with plans for a factory in Nyandarua

Billionaies pump big money into fast-gowing milk maket

Steel, cement pricescut on low energy costSteel and cement manufacturers have joined food processors and long-distance buses in cutting prices as pressure mounts to transfer benefit of low energy prices to consumers.Page 5

Profit warnings from NSE-listed firms rise to 12Profit warnings from companies listed at the NSE for their 2014 performance have increased to a record 12, signalling a dividend drought and share price erosions.Page 8

NSE inches toward seven-year high Nairobi Securities Exchange (NSE) is edging towards a seven-year high largely lifted by Safaricom which on Friday set a new all-time trading peak of Sh15.50.Page 19

Kenya shilling best performing in regionThe shilling has gained on its East African peers to emerge the best performing regional currency so far this year helped by a wider export base and strong investor inflows.Page 20

BRIEFIN

G

COUNTY BUSINESS

Ideas & Debate Like Schiphol Airport, JKIA too can be key driver of our economic growth Page 13 Page 27

Radar ScreenFuture of solar lies in pay-as-you-go investmentsPage 3

LifeTop selling principles for all seasons and deals

MPs want part of Sh1bn village polytechnics cash Pages 12

Top TV stock-picker leads onslaught of class action suits against acquisitions Pages 16-17

NEWS INDEPTH

BY DAVID HERBLING

Kenyan graduates who got govern-ment financial support for their uni-versity studies will soon require the Higher Education Loans Board (Helb) clearance to qualify for employment with private companies, proposed regulations aimed at reducing stu-dent loan defaults say.

Helb chief executive Charles Ring-era said the agency was working with the Federation of Kenya Employers (FKE) to develop guidelines that would require employers to screen new employees for student loan clear-ance when hiring them.

We are working with the FKE to develop regulations that will ensure employers comply with subsection 16 of the Helb Act and in line with Chapter 6 of the Constitution, said Mr Ringera, adding that clearance before employment in the private

sector is one of the strategies the agency is pursuing to enhance loan recoveries.

Currently, only those seeking employment in government are re-quired to get Helb clearance indicat-ing whether they are servicing or have completed repaying their loans.

Those seeking employment with national and county governments and parastatals must also get clearance from the Kenya Revenue Authority (KRA), credit reference bureaus as well as the Directorate of Criminal Investigation.

In recent years, many applicants for HELB, Page 4

Sh3,000 Amount firms are fined every

month if they do not disclose that a worker is a past Helb beneficiary

Helb eects new hudle fo gaduates in job maket

BY VICTOR JUMA

Billionaire investors are queuing to pump big money into Kenyas dairy industry, attracted by a rapidly expanding market whose size is expected to more than double in the next 10 years.

Deepak Kamani, the chairman of conglom-erate Zuri Group and the man at the centre of long-running Anglo-Leasing financial scam, is the latest DAIRY, Page 4

2 BUSINESS DAILY | Monday February 23, 2015

Week ahead

Monday, February 23, 2015

Court rules on controversial clauses in the Security Act The High Court will rule on the constitutionality of eight clauses which had been suspended in the new Security Act assented to by President Uhuru Kenyatta last December. The ruling was to be made on Friday but the judges were yet to finalise on it.

Tuesday, February 24, 2015

NIC bank launchesleasing business unitListed mid-tier bank, NIC, will be launching a new business arm, NIC Leasing LLP. The bank is looking at tapping into the growing business of renting capital assets, especially with the government embracing the practice.

Wednesday, February 25, 2015

Residents of Upper Hill meet roads authorityResidents of Upper Hill in Nairobi will meet officials of the Kenya Urban Roads Authority (Kura) to receive an update on road completion in the business area.Construction work in the area has taken over three years, causing huge economic losses to residents and businesses. Upper Hill was rising fast as a new business hub for the capital as businesses sought to evade the crowded Central Business District but the incomplete road work has frustrated many.

Orange Kenya and partner launch solar productOrange Kenya and Green Light Planet will partner to provide solar lighting to Kenyan homes in areas that have no or limited access to electricity.The partnership is expected to be similar to M-Kopo which is backed by Safaricom.Buyers of M-Kopo solar products pay in small daily instalments through M-Pesa.

CFI hosts economic debate for investors and publicThe Certified Financial Institute, East Africa chapter, is set to host an economic meeting to offer a platform for investors and the public to debate various investment opportunities available in East Africa.The session will be facilitated by among others, Joseph Kieyah of Kippra, Chris Vroom, an expert on derivative markets, Paul Mwai of Afrika Investment Bank and Donald Ouma from the Nairobi Securities Exchange.

Thursday, February 26, 2015

CFC Stanbic releases full year results Listed lender CFC Stanbic will release its financial statements for the year ended December. The bank is one of six classified as large lenders by the Central Bank of Kenya, the industry regulator.

Friday, February 27, 2015

KNBS releases inflation figures for FebruaryKenyan National Bureau of Statistics will announce inflation figures for the

month of February. The inflation rate was on a downward trend to 5.53 per cent last month from a high of 8.36 per cent in August last year.The recent drop in electricity and fuel prices is expected to further pull down the cost of goods.

Portland Cement holds annual general meetingMr Bill Lay will chair his first annual general meeting of listed cement maker East African Portland Cement. Last year the meeting turned chaotic forcing Capital Markets Authority to cancel minutes submitted by the board. The government, majority shareholder at Portland, accused the management of creative accounting and breaching corporate governance rules. The election of Mr Lay as chairman, who is backed by the government, was one of the issues that caused friction in the company.Two weeks ago Portland said it would not pay out a dividend approved by shareholders during the chaotic meeting.

Saturday, February 28, 2015

Comesas sugar quota for Kenya comes to an endProtection given to Kenyan sugar companies from cheap imports from other Comesa countries will expire, opening the sector to new competition. The government has applied for a two year extension arguing that the local industry will die because it is not ready for the competition. The application is yet to be approved. The protection has previously been extended four times.

What is making news this week

Seeking staff solutions

NairobiKenya Private Sector Alliance director Patrick Obath (left), the African Management Initiative CEO Rebecca Harrison and Pewins Cabs MD Justus Murithi during a meeting for CEOs on practical and affordable approaches to training and employee performance, at the Serena Hotel last Thursday. SALATON NJAU

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DONT MISS PAGES 27-31

MONDAYS - PERSONAL FINANCE

TUESDAYS - CONSUMER

WEDNESDAYS - HEALTH

THURSDAYS - INNOVATION

FRIDAYS - WEEKEND

LI EIndex to companiesMajor companies cited in todays issue of the Business Daily

HELB 1

New KCC 4

Brookside 4

Devki Group 5

KAM 5

Transcentury 7

Crown Beger 8

EAPCC 8

CMA 8

Telkom Kenya 8

Emirates 10

Delta 10

YouTube 10

EPZ 12

NSE 19

CBK 19

Co-op Bank 19

Orascom 20

3Monday February 23, 2015 | BUSINESS DAILY

Kenyas position astride the equator puts it in the most favourable position to lead the ongoing race to harvest and use solar energy.

Because of its location alone, Ken-ya receives an average of 4.5kwH of sunshine every day raising its poten-tial for using solar for lighting. Efforts to tap this renewable source of energy has intensified in recent years as the world grapples with the threat of glo-bal warming.

Solar energy has be-come the subject of in-tense scientific research and billions of shillings have been pumped into the sector to make it more affordable and therefore more accessi-ble to a larger segment of the worlds population.

Yet for the majority of Kenyan households, the cost of available so-lar lighting solutions re-mains too high, blocking their access.

The little income earned first goes to food, clothing and shelter taking clear energy to the bottom of the list where luxury items belong.

Most low income households are therefore condemned to purchasing small amounts of kerosene to light up their homes for a few hours before retiring early to bed.

Although using kerosene may ini-

tially look cheap, cumulatively, these households spend about 15-25 per cent of their income on lighting.

Besides, the smoky fumes emit-ted by kerosene lamps are not only a health hazard, but also affect the en-vironment. It is estimated that one lamp emits up to 200kg of carbon dioxide, the second biggest cause of global warming.

Yet the reality is that only 20 per cent of Kenyans have access to elec-

tricity, and only seven per cent of those liv-ing in rural areas are connected to elec-tricity, according to the World Energy Outlook 2014.

In the 93 per cent rural households with no electricity, children have to fin-ish their homework before nightfall.

Those who can afford kerosene use the dim lamps that emit smoky fumes that cause respira-

tory infections and eye strain. But now there is a solution from

SunnyMoney, a social enterprise founded in 2008 by SolarAid to eradicate the use of kerosene lamps in Africa, through trade and not aid, by 2020.

SunnyMoney distributes pico-solar lights in rural East Africa and works with teachers who build trust

and awareness of solar products in the schools they teach.

The teachers then market solar lights to parents who want to invest in their childrens education by pro-viding a clean lighting solution that will help them do their homework after sunset.

SunnyMoneys innovation unit has designed a distribution and marketing model that mimics the kerosene-buying habits people in the lower income bracket.

In the pay-as-you-go model the so-lar lights get activated when a cash or mobile-money payment is made and they get locked when they run out of credit.

This way, the customer can switch to the clean and safe solar lighting technology at a fraction of its upfront cost, benefiting from a progressive and affordable repayment.

On purchase, customers pay a small deposit of Sh100 to Sh200 to receive a pay-as-you-go solar light with one week of light credit included. Every week the customer completes another payment of Sh100-Sh150 to pay for another week of light.

After eight to 10 weeks, the pay-as-you-go solar light is fully paid off and it will not require any other payment.

SuunyMoney first sold the pay-as-you-go solar lights in Kenya in Janu-ary 2014 in Machakos after receiving funds to test the viability of the mar-keting and distribution model from the Kenya Climate Innovation Centre.

SunnyMoney partnered with Angaza Design, a technology company that provided the technology and the plat-form that enables remote operation of the solar light.

The marketing pilot showed promising results with a few adjust-ments made to the model to incorpo-rate learning from the trials.

SunnyMoney is now testing a dif-ferent payment structure allowing more flexible payment solutions like monthly and daily instalments.

This flexible mode of payment has so far been piloted in Kenya where at least a thousand households have made the shift to a clean lighting solution.

The company plans to replicate the success of the pay-as-you-go trials with similar projects in even poorer regions, such as Malawi, and also work with other partners to extend the pay-as-you-go product range, to include phone charging solar lights and possibly large solar home systems.

SunnyMoneys innovation unit is still focused on increasing the afford-ability of solar lights through product financing like through savings and credit cooperatives and micro-finance institutions, and implementing recy-cling systems to help minimise the environmental impact of end-of-life products.

Using a different distribution model, SunnyMoney has a network of almost 200 active dealers across more than 10 counties in Kenya.

Their marketing costs are minimal and optimised as they combine radio advertisements and word-of-mouth. The average customer often tells 20 of their friends about their purchase which generates interest across the community.

This sparks the market conditions needed for local shops and independ-ent agents to sell a range of solar lights at a fair price thus boosting their in-comes, keeping money in the local economy, and encouraging others to enter the market too.

Solar lights are already trans-forming the continent. When a fam-ily buys a solar light they can save up to Sh7,000 a year (which often repre-sents a large portion of their income), and the money saved is used to meet other needs or invested.

Children are also able to study for an extra hour each evening. Over half of families see an improvement in their health, freed from headaches and eye strain, and many report a better quality of life with more time to spend with their family after nightfall.

The United Nations has declared 2015 The International Year of Light. One of the areas of focus is study af-ter sunset where the use of portable solar-powered high-brightness LED lanterns will be promoted in regions where there is little or no reliable source of lighting.

Mr Chitechi works for Climate In-novation Centre (CIC)

R A D A R S C R E E N E R N E S T C H I T E C H I

Futue of sola lies in pay-as-you-go investments

ELECTRICITY : Answer to Kenyas power woes lie in launching more products for low income earners paid for in instalments

A solar-powered LED lamp. For the majority of Kenyan households, the high cost of available solar lighting solutions pushes it out of their reach. FILE

TOP NEWS

Only 20 pe cent of Kenyans have access to electicity

4 BUSINESS DAILY | Monday February 23, 2015

public jobs have been kicked out of

interview rooms after failing to produce Helb clearance certificates.

A selection panel set up to estab-lish the Independent Electoral and Boundaries Commission, for instance, disqualified lawyer Isaac Mutoka Shiv-achi in 2011 from pursuing employment with the agency for failing to repay his Helb loan.

Job seekers have to pay Sh1,000 to get the clearance certificate from Helb, whether or not they benefited from the loan programme.

Private sector employees are cur-rently not required to present Helb clearance certificates before employ-ment but firms hiring graduates have to notify Helb upon recruitment.

Firms are fined Sh3,000 per month for each defaulting employee if they do not disclose to Helb that their workers are past Helb beneficiaries.

Helb also levies a monthly fine of Sh5,000 on all past beneficiaries not

servicing their loans after the one-year grace period upon graduating.

Mr Ringera said the law binding pri-vate sector employers to demand clear-ance certificates from Helb before hiring new employees is expected to take legal effect immediately Education secretary Jacob Kaimenyi publishes the new regu-lations in the Kenya Gazette.

The new provisions are meant to make Helb comply with Chapter Six of the Constitution which provides guid-ing principles for governance meet the demands of the Leadership and Integ-rity Act.

Helb has information sharing agree-ments with the KRA, the National Hos-pital Insurance Fund and the National Social Security Fund that it uses to track past loan beneficiaries.

The latest bid to tighten the noose on defaulters comes after Helb stopped ad-vancing internship loans to undergradu-ate students and reduced the maximum loan amount to Sh50,000 from Sh60,000 per academic year.

Demand for Helb loans has increased sharply due to the double-intake admis-sions policy in public universities that has overstretched the agencys resources.

This is further compounded by the fact that Helb also extends loans to self-

sponsored students (commonly known as the parallel degree students) in public universities as well as those enrolled in private chartered universities.

Treasury secretary Henry Rotich al-located Helb Sh4 billion in this years budget and the agency had recovered Sh3.2 billion by June 2014 for a total of Sh7.2 billion, barely a half of the Sh14.3 billion the agency needs to meet total loan demands by students.

Mr Ringera said total loan applicants nearly doubled to 110,000 last year from 53,000 in 2013, a demand Helb is unable to meet at current financing levels.

We are financing only 30 per cent of the students depending on their vulner-ability, said Mr Ringera.

The number of universities has also grown to 68, including 22 public univer-sities, nine public university constitu-ent colleges and 17 chartered private universities.

President Uhuru Kenyatta plans to transform Helb into a bank and allow the agency to float bonds as part of its

fundraising activities to meet rising de-mand for student loans.

The presidential task force on par-astatal reforms said the aim is to trans-form Helb into an educational develop-ment finance institution for financing higher education with the interest on loans retained at current levels and re-views approved by Cabinet.

In the current financial year, Helb has disbursed Sh6.2 billion to 144,580 undergraduate students and another Sh153 million as bursaries to both un-dergraduate and technical, industrial, vocational and entrepreneurship train-ing students.

About 75,498 graduates owe Helb Sh8.3 billion. A total of 88,520 graduates have fully repaid loans worth Sh8.2 bil-lion. Helb said Sh13 billion disbursed to 144,040 loanees have not matured while 98,676 beneficiaries are currently serv-icing loans amounting to Sh14.4 billion, translating to a performance rate of 60.7 per cent.

hdavid@ke.nationmedia.com

Helb wants jobseekes to be sceened fo loan cleaanceFrom Page1

Helb loan recovery (Sh, Bn)Agency wants private firms to demand Helb clearance when hiring staff as it tightens the noose on defaulters

SOURCE: HELB

Sh

1.9Bn

Sh

3.2Bn

deep-pocketed inves-tor to target the dairy

market with plans to build a fresh and powdered milk plant in Nyahururu.

Mr Kamani follows in the footsteps of Africas richest man Aliko Dangote of Nigeria who has announced plans to set up a factory in Kenya to produce dry milk for local and export markets.

The upcoming ventures are expect-ed to intensify competition in a sector that is dominated by Brookside Dairies the countrys largest milk processor that is control-led by the Kenyatta family which has been tightening its grip of the sector with a series of acquisitions in the past five years.

French food group Danone last year acquired a 40 per cent stake in Brook-side and announced plans to help the company expand its product portfolio and reach in East Africa.

Rising interest in the processed milk business is seen as preparing the players for an anticipated leap in demand for the commodity, driven by rapid urbanisa-tion, population and incomes growth.

Milk processing also presents big businesses with the option of diversify-ing into one of the most lucrative fast moving consumer goods market that

remains dominated by the informal traders.

Bobby Kamani, the CEO of Zuri Group, said his companys decision to go into milk processing is informed by the quest to diversify from its core activi-ties in the hospitality, floriculture and real estate development sectors.

Industry data shows that processors of fresh milk can expect gross margins of between 15 per cent and 20 per cent.

Major dairy firms like Brookside and New Kenya Co-opera-tive Creameries (KCC) make a net profit of at least Sh13 from every litre of milk they buy from farmers at Sh38.

Wholesale prices stand at an average of Sh88 per litre, taking retail prices to Sh96 per litre after the retailers have added their trading margins.

Farm gate prices of milk have risen recently to about Sh40 per litre in the wake of

persistent dry weather in producer areas such as Nyandarua.

The market has reacted, within the realms of the supply and demand curve, causing an upshot in retail prices, John Gethi, the general manager at Brookside, said in a statement.

This means dairy firms make the most money during rainy seasons when

the processors operate higher margins after forcing farmers to cut prices sig-nificantly. Nixon Sigei, the chief execu-tive of New KCC, said higher volumes result in bigger margins as economies of scale apply.

Kenya is a volume-driven market and bigger players take the larger margins, Mr Sigei said, adding that while fresh milk is the most popular dairy product, others like fermented milk and yoghurt trade with the highest margins of up to 30 per cent.

Consumption of processed milk rose to a three-year high of 541.1 million litres last year, having peaked at 549 million litres in 2011.

Official statistics show that pack-aged milk consumption rises and falls in step with the performance of the broader economy, highlighting the fact that rich and middle-income households in urban areas are the major targets of dairy firms.

Intake of processed milk hit a low of 398.5 million litres in 2008 when the combination of post-election violence and the global financial crisis saw a ma-jor reduction in spending by companies and households.

The fall in aggregate demand came

amidst business disruption, deep un-certainty, and massive job losses that slowed economic growth to a paltry 1.7 per cent.

The 2008 annual growth rate of 1.7 per cent represented a deep plunge from the previous years 7.1 per cent that pushed the intake of processed milk to an all-time high of 423 million litres at the time.

The majority of Kenyans, however, still buy raw milk from farmers or mid-dle men who hawk the product at much lower prices.

Increased urbanisation and higher economic growth are expected to grow the ranks of the population with the fi-nancial muscle to consume packaged dairy products, an outlook that is attract-ing new investments to the sector.

Mr Bobby Kamani said Zuri was un-dertaking feasibility studies with the help of Dutch consultants to guide its entry in the dairy market.

Details of the plan, including capital expenditure, production capacity, and expected date of commissioning the Nyahururu plant, will emerge from the market research.

Nigeria-based Dangote Group is working on similar details ahead of

its expected entry into the local dairy business.

Brookside, which produces fresh milk and yoghurt, is set to expand its products and regional presence after the deal with Danone.

The firm, which has built up an esti-mated 40 per cent market share after a string of acquisitions, is the largest dairy firm with annual sales of Sh15 billion.

While rising incomes are expected to boost demand for dairy products across the board, the entry of more players is ex-pected to increase competition that will see firms leverage pricing and product quality to gain market share.

Other big players in the dairy mar-ket are Githunguri Dairy Farmers Co-operative and Sameer Group headed by billionaire investor Naushad Merali which acquired the Daima milk busi-ness from Adarsh Developers.

vjuma@ke.nationmedia.com

Investos plan to pou billions into daiy industyFrom Page 1

FOR MORE ON THIS STORY SCAN THIS CODE OR LOG ON TO

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Mr Eliud Kemboi receives milk at the Abai Farmers Co-operative Society in Cheptiret, Uasin Gishu last year. FILE

TOP NEWS

Kenya is a volume-diven

maket and bigge playes take the lage

magins

NIXON SIGEI,

NEW KCC CHIEF EXECUTIVE

5Monday February 23, 2015 | BUSINESS DAILY

ECONOMY & POLITICSNEWS I REVIEWS I ANALYSIS

BY NEVILLE OTUKI

Steel and cement manufacturers have joined food processors and long dis-tance buses in cutting prices as pres-sure mounts on other producers to transfer benefit of dropping energy prices to consumers.

National Cement has cut the ex-fac-tory price of its Simba brand by Sh25 to Sh575 per 50kg bag retail prices vary depending on the location due transport cost component. Steel, criti-cal for supporting structures, is priced 11.2 per cent lower at Sh64,865 ($710) per tonne.

Lower energy bills have given

us room to reduce the prices since October, said Narendra Raval, the chairman of Devki Group, the parent company of National Cement, which manufactures the Simba brand.

Other subsidiaries in the group include Devki Steel Mills and Maisha Mabati Mills. The new ex-factory ce-ment prices are the lowest since they averaged Sh645 a bag last January from a peak of Sh740 in 2009.

Steel prices have also shaved 30.3 per cent compared to last year when they stood at $1,020 a tonne. Mr Raval said the company had experienced some reduction in its power bills previously standing at Sh65 million

per month before costs started falling since last August on lower fuel prices and injection of additional geothermal energy to the grid.

Most cement firms in the country rely on electricity to fire their plants, but several have indicated plans for a switchover to coal-fired plants citing high power bills. Electricity tariff for industrial consumers has dropped by about 30 per cent in the six-month pe-riod, according to the energy regulator. Fuel surcharge, eased by the injection of 280 megawatts of geothermal power to the grid between August and De-

cember, has dropped from Sh7.22 per kilowatt hour (kWh) in July to Sh2.51 this month.

The lower prices of the building materials bode well for property de-velopers and the government which is undertaking or planning to build key infrastructure development projects including a 10,000km road network and Lamu Port and South Sudan Ethio-pia Transport (Lapsset) Corridor.

Official data shows cement con-sumption rose 6.9 per cent to 4.2 million tonnes in 2013, driven by in-creased construction projects.

A 50kg bag of Blue Triangle a brand of East Africa Portland Cement retails at about Sh640 down from Sh660 last year in Nairobi while a simi-lar bag of Savannah Cement goes for Sh630 down from Sh650.

Last week, long distance buses an-nounced fare cuts of up to 26 per cent. The price of a two-kilogramme packet of maize flour has also dropped 22 per cent to Sh85 on average compared to December.notuki@ke.nationmedia.com

Cement and steel manufactues cut etail pices

ECONOMY Reduction is in line with a call to pass benefits of dropping energy cost

Mr Narendra Raval, the chairman of Devki Group which owns National Cement and Devki Steel Mills. FILE

Electricity cost comparison against fuel chargeFuel cost charge has dropped from Sh7.22 per kWh in July to Sh2.53 in January. Industrial electricity tariff has dropped 29.3 per cent to Sh13.29 per kWh over the same period.

SOURCE: ERC

BY EVELYN SITUMA

The Kenya Association of Manufacturers (KAM) has ruled out full-scale reduction in commodity prices saying to do so, firms need six months of fixed energy prices.

The business lobby asked the energy regulator to con-sider reviewing energy prices only twice a year to create sta-bility in the market.

We need predictability. If prices are fixed for six months, well be able transfer the ben-efit to the consumer, KAM chairman Pradeep Paunrana said even as he added that his firms had cut prices. He is the managing director Athi River Mining Cement CEO.

At the moment, there is no clear schedule for reviewing electricity prices while fuel prices are adjusted by Elec-tricity Regulatory Commis-sion every month.

Fix pricing for six months, firms should be able to budget at least this far in advance, reads a proposal that KAM pre-sented to government last week.

Data produced by the lobby in-dicates that firms experienced 50 per cent increase in the cost of power between July 2013 and July 2014. Between July 2014 and January 2015, however, there was 27 per cent decrease in power price, bringing the net change from 2013 to December 2014 to zero.

If costs are passed immedi-ately to consumers, the indus-try will be forced to absorb im-pact of frequent fluctuations, KAM said.

President Uhuru Kenyatta last week urged manufacturers to lower the price of goods fol-lowing the injection 280mega-

watts of geothermal power.The geothermal power

has cut bills by about 30 per cent since August following the drop in the fuel surcharge from Sh7.22 per kilowatt hour (kWh) in July to Sh2.51 this month. This benefit is what the State wants businesses to pass to consumers.

The tariff charged by Kenya Power was increased last year by Sh3.25, increasing the base rate to Kenya Power by 11 per cent in July 2014.

Manufacturers now want the State to drive down the cost of power further by reducing the tariff .

KAM ules out futhe eduction in cost of goods

KAM chairman Pradeep Paunrana. FILE

6 BUSINESS DAILY | Monday February 23, 2015

BY GERALD ANDAE

Kenyan macadamia processing factories are operating at only 54 per cent of their installed capacity amid rising cases of smuggling of nuts that have forced the industry to shed Sh500 million annually.

Official statistics indicate that the 15 factories are cur-rently processing 35,582 tonnes per year against a combined ca-pacity of 65,000 tonnes.

The demand for raw nuts has been on the increase but cases of smuggling has made it insufficient to support the in-stalled processing capacity in the factories, said Agriculture PS Sicily Kariuki.

Ms Kariuki said raw nut exporters evade paying taxes resulting in revenue loss every year and cutting the available volumes to be processed.

The move has forced genu-

ine processors to run out of sup-ply, which has seen them cut down on employment as their production falls below capac-ity, she said, adding that sur-veillance had been intensified to curb the illicit trade.

Last year, the government revoked close to seven licenc-es of macadamia factories that were found to be taking part in illegal export of the raw nut.

The macadamia is the sec-ond major cash crop in nuts category, comprising 27 per cent of the total nut produc-tion, bringing in Sh2 billion in sales annually.

Ms Kariuki said smuggling hurts the local nut industry as it lowers Kenyas competitive-ness because the smuggled raw nuts do not adhere to qual-ity requirements, while other macadamia producers carry out best agriculture practices, including traceability.

The PS said the illegal trade also damages macadamia trees because it encourages stripping of nuts from the trees contrary to international best practices whereby nuts should be allowed to fall down on maturity.

The crop occupies an esti-mated 7,945 hectares of land and is mainly produced by small-scale farmers who sell

them to middlemen who in turn supply the processors.

Ms Kariuki said plans were underway to enable major processors to open buying centres close to farmers during the harvesting season to facili-tate direct purchase from the growers and stop exploitation by brokers. She said sealing the existing loopholes in the sector would boost productivity.

Marketing of nuts has expe-rienced a number of challenges since the 1990s after the liberal-isation of trade, spurring com-petition between processors and exporters of raw nuts.

Currently, the Agriculture, Fisheries and Food Authority Act prohibits the export of raw cashew nuts, raw pyrethrum, raw bixa or raw macadamia except with written author-ity of the Cabinet secretary is-sued with the approval of the National Assembly.

Industies lose Sh500m on illegal nut expots

About Macadamia The crop occupies about 7,945

hectares of land in Kenya. It is mainly produced by small-

scale farmers.

Catholics ejoice

Catholic faithful celebrate during the installation of Archbishop Martin Kivuva

Musonde to the county Catholic Archdiocese at the Mombasa Stadium on February 21. KEVIN ODIT.

Mombasa

BY LYNET IGADWAH

The Foreign Affairs ministry has set up a 10-member team to draft guidelines on how the close to 600,000 Kenyans living abroad will vote in the next Gen-eral Election.

The task force, chaired by Foreign Affairs diaspora and consular affairs director Washington Oloo, has been handed a three-year re-newable term to finalise its work.

The Kenya Gazette no-tice published by Labour Cabinet secretary Kazun-gu Kambi said his ministry would meet the task forces expenses.

The costs incurred by the committee, including but not restricted to facili-tation and payment of al-lowance in respect of the members and secretariat of the committee, shall be defrayed from voted funds of the Ministry of Labour, Social Security and Services, read the notice.

The guidelines prepared by the task

force would pave the way for Kenyans living abroad to participate in the 2017 General Election or any referendum organised before that period.

In the last General Election, Ken-yans in the diaspora were barred from casting votes for their preferred pres-idential candidate following unpre-paredness by the Independent Elec-toral and Boundaries Commission

(IEBC).Despite the 10th

Parliament passing rules to guide the registration of voters abroad, the Cabinet opted not to approve the listing on realising that IEBC did not have structures and mecha-nism in place to facili-tate the process.

Aside from finan-cial and time con-straints, the electoral

commission faced logistics chal-lenges in conducting the massive exercise of registering voters locally and abroad.

The task force is expected, among

other things, to advise on profiling of Kenyans in the diaspora who are eligible to vote. It would also estab-lish the extent to which Kenyans living abroad could progressively participate in General Elections and Referenda.

Other members of the task force are Lucy Kiruthu, Gregory Somba, Joseph

Kanyiri, Scholastica Ndambuki, Den-nis Muhambe, Karen Rono, Kariuki Kimemia, Immaculate Kassait and Peter Oduge.

Kenyans in the diaspora play a key role in growth of the economy having remitted an estimated Sh1.3 trillion in 2014 alone.ligadwah@ke.nationmedia.com

Team picked to set ules on diaspoa voting in 2017 poll

ELECTIONS Task force to come up with guidelines for Kenyans abroad to participate in electoral process

A resident of Mathare in Nairobi votes during a by-election on August 11, last year. The Foreign Affairs ministry has picked a task force to prepare rules for Kenyans in diaspora to participate in the 2017 General Election. FILE

COUNTY BUSINESSECONOMY & POLITICS

The costs incued by the committee...

shall be defayed fom voted funds

of the Ministy of Labou, Social

Secuity and SevicesKENYA GAZETTE NOTICE

One-stop bode post in Malaba eady fo useBY ALLAN ODHIAMBO

Contractors have completed and handed over the Malaba one-stop border post to be shared by Kenya and Uganda, paving the way for its commissioning to improve trade flow between the countries and the Great Lakes region.

The Works ministry in Uganda handed over the facility to the Ugan-da Revenue Authority (URA), raising hope for faster clearance of cargo.

Innovations have reduced the time needed to travel from Mombasa to Uganda. Initially, it required 18 days, which have since reduced to less than five days. The OSBPs (one-stop bor-der posts) would dramatically reduce clearance time, Richard Kamajugo, Commissioner for Customs said.

The one-stop border post concept is aimed at harmonising transit clear-ance, with two officers from border-ing countries sitting under one roof to handle transit documents concur-rently to save time.

Currently, traders in the region are hampered by strenuous customs clearance procedures in which goods are separately inspected by officers on either side of the border leading to massive delays.

The special border posts will in-clude Taveta-Holili border and the Namanga border (Kenya-Tanzania), Busia and Malaba borders (Kenya Uganda) and the Kanyaru-Akanyaru border (Burundi-Rwanda).

7Monday February 23, 2015 | BUSINESS DAILY

ECONOMY & POLITICS

Public school teaches set to undego special needs taining BY ANNIE NJANJA

All 288,000 teachers are set to undergo special needs training as the Educa-tion ministry moves to end discrimi-nation against learners with disabili-ties in public schools.

Education secretary Jacob Kai-menyi said the ministry had embarked on a new programme to prepare pub-lic school teachers to handle all types of learners, including those with spe-cial needs. At the moment, children with mental and physical handicaps have to be isolated and sent to sepa-rate schools or classes.

We want to ensure that children, regardless of their physical capability, learn from the same schools but this can only start when we have teachers who can deliver adequately, said Prof Kaimenyi last week.

The Cabinet secretary also said his ministry was reviewing the school curriculum to accommodate learn-ers with disabilities. We are aware that it is a challenge but the govern-ment is on course to ensure that we offer inclusive education and give all children a fair chance, he said.

Under the ministrys special needs investment programme, the govern-ment plans to disburse learning funds and allowance to the special needs teachers.

Needy studentsProf Kaimenyi spoke last week at a KCB Foundation event where the or-ganisation announced it would spon-sor 40 students with disabilities join-ing secondary schools for the first time since its inception.

KCB Foundation chairperson Cath-erine Kola said: As a foundation, we believe that every child has a right to education and that is why under our scholarship programme this year, we made an additional investment to support bright needy students with disabilities to progress to sec-ondary school.

The scholarship covers tuition fee, textbooks and boarding equipment for the four years of study. The foundation will spend Sh78 million on scholar-ships for 240 students this year.

The beneficiaries were drawn from all over the country based on overall performance and financial need.

To date, KCB Foundation has spon-sored 840 needy students to second-ary schools.

Prof Kaimenyi called for public-pri-vate partnership to ensure adequate investments were made in education sector. I call upon all stakeholders to play part in the building bright futures for children with disability, said the minister.

BY ERIC MATARA

Doctors have warned of a looming cri-sis in the public healthcare system as a large number of medics protesting poor remuneration flee to private sec-tor and foreign countries in search for greener pastures.

The Kenya Medical Practitioners, Pharmacists and Dentists Union cited the meagre budgetary allocation to the Health ministry as a top threat to serv-ice delivery.

We have witnessed continuous reduction in percentage of total GDP (gross domestic product) allocated to health (funding), said chairman Samuel Oroko. The Abuja Declara-tion of April 2001 requires all member countries to allocate at least 15 per cent of total GDP to health. In Kenya we are trailing at three per cent based on

2014/2015 Budget. Of the Sh1.75 trillion Budget in the

current financial year, only Sh47.4 billion was allocated to health, out of which only Sh2.4 billion was meant to pay doctors, clinical officers, nurses and other healthcare staff.

Dr Oroko who is also the secretary

general of the union in South Rift said last year alone 1,800 doctors resigned from the public sector citing poor pay. These are patriotic doctors who would have liked to work with the govern-ment, but the working conditions were terrible and they couldnt take it anymore, he said.

The union official lamented about persistent neglect of healthcare and said that the few remaining health practitioners are overwhelmed with the doctor to patient ratio standing at one to 17,000 as opposed to the one doctor for every 1,000 patients recommended by the World Health Organisation.

We have had perennial underpay-ment of doctors in Kenya resulting in massive brain drain, he said. Why do you pay a doctor, who works 15 hours a day and 450 hours a month, only

Sh40,000 a month? Is this fair labour practice?

Dr Oroko said devolution of health services was done in a hurry, hurting service delivery in the 47 counties.

He said: Most counties have zero knowledge on how to manage the hu-man resource in health sector with de-layed salaries, stagnated promotions, unpaid allowances and harassment by members of county assemblies among other frustrations.

The official said the inter-county transfers had become a nightmare with doctors being forced to resign from one county to seek fresh employment in another devolved unit of choice.

He called on the government to centralise human resource manage-ment and leave counties to manage infrastructure and supplies to save the health sector from collapse.

Union wans of cisis as moe doctos esign

Dr Samuel Oroko (right) addresses the Press early this month. KEVIN ODIT

BY SANDRA CHAO-BLASTO

Milimani Law Courts in Nairobi is expected to be the scene of the lat-est ambitious experiment by Chief Justice Willy Mutunga as he moves to clear backlog of cases that have chocked the legal system over the past five decades.

A team of 15 judges that Dr Mutun-ga appointed on Friday are expected to sit in the chambers of Milimani Law Courts from today with a target of clearing 15,494 pending cases in five days. This means each judge would be under pressure to handle at least 215 cases per day, up to Friday.

The Chief Justice wants the team to handle all the cases which are older than five years.

Many of these cases are older than the new practising lawyers. Behind every pending cases are lives and prob-ably generations ruined forever and we must bring justice to them starting from the oldest, said Dr Mutunga.

Among the 15,000 cases, 11 were filed between 1960 and 1970, 39 cases filed between 1971 and 1980 and 1,000 between 1981 and 1990.

The build-up of unsettled civil suits at the Judiciary had been attributed in-adequate judicial officers and absence of automated systems that would see

disputes speedily determined.According to the 2014 Judicial Case

Audit and Institutional Capacity Sur-vey, there are 426,508 cases pending in courts as at June 2013 with the magis-trate courts and the High Courts car-rying the bulk of the unresolved mat-ters. The survey showed that while the High Courts had 74,695 cases pending, the Civil Division contributed close to half of these cases.

At the moment the High Court judges bear the greatest workload

among the judicial officers with each expected to handle more than 1,600 cases.

It takes an average of 12.5 years for a case to be filed and a judgment de-livered at the High Court.

Appointment of the 15 judge team under the Judiciarys Justice@Last in-itiative is expected to reduce the back-log within the Civil Division by up to half of the pending cases by Friday.

schao@ke.nationmedia.com

Judiciay bets on 15 moe judges to clea cases backlog

BACKLOG Mutunga appoints 15 judges to determine 15,494 suits in five days starting today

Chief Justice Willy Mutunga (centre) launches the Judiciary Case Audit and Institutional Capacity Survey at the Milimani Law Courts on Friday. COURTESY

BY SIMON CIURI

Power and infrastructure company TransCentury Group has partnered with the national and county gov-ernments to train hundreds of young people as it seeks to plug technical skills gap.

The pilot project dubbed the TransCentury Technical Training Programme (TTTP) will start at four local institutions; Kiambu Institute of Science and Technology, Rift Val-ley Technical Training Institute, Ken-

ya Industrial Training Institution and Mombasa Technical College.

Officials said a total of 120 students admitted in the first phase of TTTP will undergo a one-year training with the participants securing both internship and employment at TransCentury after the course work.

Each of the four institutions will produce 30 students. As a key industry player TransCentury Group acknowl-edges that there is an existing gap that needs to be addressed, driven by the fact that over 70 per cent of our staff are

drawn from the technical institutions that we are now seeking to partner with, said TransCentury group chief executive officer Gachao Kiuna.

We recognise that the deficit in technical skills is likely to slow down effective implementation of major projects, like Kenyas ambition to de-velop the recently discovered petro-leum resource, said Mr Kiuna.

The group intends to expand the programme to other East African states, mainly in areas where it has operations.

Last year, the government estab-lished the Technical Vocational Edu-cational Training Authority to over-see the management and growth of technical training institutions in the country.

It allocated Sh2.5 billion for the construction of technical training institutes in every county which will see about 60 vocational centres built across the country as the State moves to plug technical skill gaps that threatens Kenyas industrialisa-tion ambitions.

TansCentuy tains youth in counties to plug technical skills gap

8 BUSINESS DAILY | Monday February 23, 2015

CORPORATE NEWSNEWS I REVIEWS I ANALYSIS

BY BRIAN WASUNA

Telkom Kenya has denied signing a copper smelting deal that has seen a Ugandan-based firm make a claim of Sh3.6 billion for breach of contract.

The telco denied having any knowl-edge of a deal purportedly inked in 2010 where the Ugandan company, Kilembe Copper Smelters, was to smelt more than 6,000 tonnes of decommis-sioned cables, other metals and alloys for export.

Kilembe reckoned that Telkom Kenya refused to meet terms of the deal, adding that it only smelt a mea-gre 150 tonnes worth Sh135 million, even after relocating its factory from Jinja, in Uganda, to Industrial Area, in Nairobi, on assurance by the Kenyan operator of good business.

The telco said it had no deal with Kilembe, and that the Ugandan firm was first expected to establish the vi-

ability of the copper smelting venture before agreeing a contract.

Telkom Kenya denies that it guar-anteed to provide 6,000 metric tonnes of copper from decommissioned ca-bles and that there was any agreement that Kilembe would shift its smelters of copper experts from Uganda to Nai-robi, the firm says. Telkom was offered reprieve after High Court judge Fred Ochieng set aside a judgment that awarded Kilembe a compensation of Sh1.8 billion. The firm protested the judgment because it had not re-sponded to the suit, arguing that the one-year window for responses had not lapsed. The Sh1.8 billion compen-sation was linked to an alleged rene-gotiated contract between the Uganda smelter and Telkom to deal in 2,000 tonnes of metal with an agreement to share the proceeds on a 50:50 basis.

Telcos globally have been selling their decommissioned copper cables,

which have been rendered obsolete by fibre optic technology that transfers data faster than copper cables.

The sale of the decommissioned cables is aimed at saving telcos from leaving the equipment to go to waste after investing heavily in their acqui-sition.

The Ugandan smelter told the court that it relocated to Kenya following the re-negotiated deal and that it got the required licences with the help of

Telkom Kenya, which later pulled the plug on the deal.

The smelter says it relocated its smelter to Telkom Kenyas Industrial Area premises in Nairobi after the two had principally agreed on the terms of the deal. The Ugandan firm claims that only Telkom Kenya chief executive was yet to sign the contract, hence it got the impression that the deal was as good as done.

Based on good faith and the fact that Telkom Kenya had pro-vided Kilembe with space within its premises, Kilembe had no reason to believe that the Telkom CEO would deliberately withhold his signature, said Kilembe managing director Tho-mas Eggenburg.

After noting that Kilembe had exclusively dedicated its time and re-sources to the project, Kilembe was requested by Telkom to recover the redundant underground cables.

An Orange Telcom shop on Koinange Street in Nairobi. FILE

Telkom denies deal with Ugandans in Sh3.6bn suit

BY DAVID HERBLING

A German has been appointed to head the upcoming Radisson Blu Hotel located in Nairobis Upper Hill district ahead of its planned opening in June.

The Brussels-based Carlson Rezi-dor Group, which owns Radisson Blu Hotel, rated five-star has hired Jens Brandin as general manager.

Mr Brandin, a career hotelier, will be tasked with setting up Carlson Rezi-dors first hotel in the region and woo holidaymakers and business travellers visiting Kenya to the facility.

The key remit for this appoint-ment was to ensure we brought in someone with not only great com-mercial expertise but also a person committed to other key elements of the role such as people development, Mark Willis, vice president Middle East and Sub-Saharan Africa for the Rezidor Hotel Group, said in an inter-view with the Business Daily.

Mr Brandin has worked with Carlson Rezidor for about 16 years in Germany, Ireland, UK and was the general manager at Radisson Hotel Kaliningrad in Russia for nearly four years before his Nairobi posting. The hotel, is set on a two-acre plot.

The incoming boss will have to fight for market share with established five star hotels in Nairobi including The Tribe, Serena, InterContinental, Villa Rosa Kempinski, Crowne Plaza and Hemingways.

The Sh7 billion Radisson Blu Nai-robi is owned by businessman Michael Kairu backed by four Nordic private equity funds namely Swedfund, Finnfund, Danish investment fund IFU and Norfund.

Mr Kairu holds a 58.7 per cent stake in Elgon Road Developments Ltd the special purpose vehicle behind the lux-ury hotel followed by Swedfund (21.3 per cent) while Finnfund and IFU each have a 10 per cent stake.

Norfund does not own an equity in the hotel but provided part of the 7.85 million (Sh811.8 million) loan advanced to the project through Af-rinord, a joint venture fund backed by four Nordic countries.

The 271-bed Radisson Blu Nairo-bi also features conference facilities, three restaurants, pool bar and grill, outdoor swimming pool, spa, sauna, fitness centre and an underground car parking with 800 spaces. Carlson Rezidor Hotel Group plans to open a three-star facility dubbed Park Inn located in Westlands, Nairobi .

Radisson Blu gets Geman manage as opening neas

BY HERBLING DAVID

Profit warnings from companies listed at the Nairobi Securities Exchange for their 2014 performance have increased to a record 12, signalling a dividend drought and share price erosions.

Earnings alert from the listed companies stood at eight 2013 finan-cial year, compared to 10 in 2012 and two in 2011.

The weaker performance has been linked to a mix of increased competition, mis-management, travel adviso-ries, lower capital gains at the bourse and falling prices of agricultural commodities like tea.

Paints manufacturer Crown Berger is the lat-est to make such an an-nouncement after TPS Eastern Africa and Pan Africa Insur-ance Holdings.

Investors in the companies that have issued profit warnings are set to get lower or no dividend this year,

besides suffering share price ero-sion. Pan Africas share price stood at Sh105 on Friday, representing a 11 per cent drop from Sh118 on Wednesday when it issued the profit guidance while Crown Berger shed Sh23 over the same period.

Other companies that have made similar warnings are Sameer Africa,

Sasini, Williamson Tea, Sasini, Kapchorua Tea and Transcentury.

Mumias, East Afri-can Portland Cement Company (EAPCC) and Rea Vipingo have already published their results after issuing the profit warnings.

The announce-ments mean some of the firms will post losses or record sig-

nificant declines in their profits, a move that could lead to a freeze or cut in dividends. The earnings alert have come from firms listed at the commercial and industrial segment

of the NSE with banks expected to an-nounce double and triple digit profit growth next month.

Most companies retain most of their earnings to fund new invest-ments and strengthen their financial position, with lower profits leaving even less cash to be distributed as dividends.

Only a few firms, including ciga-rette manufacturer British American Tobacco, pay out their entire profits as dividends.

Cooling off demandReduced earnings also have the effect of cooling off demand for a companys stock unless investors see it as a tem-porary phenomenon.

The Capital Markets Authority (CMA) requires companies to make the disclosures to warn investors of the risks of capital losses and reduced divi-dend as a result of the profit fall.

Kakuzi, East African Breweries Limited, Eveready, National Bank, Centum, Total, KQ and KenolKobil

were among the listed firms which saw profits plunge by more than a quarter in 2013. Crown Paints cited challenges in its subsidiaries in Tan-zania and Rwanda for the expected fall in earnings.

The drop is as a result of very chal-lenging market dynamics for subsid-iaries in our expansion programme within the region, Crown Paints said in a notice.

The company reported a net profit of Sh213.84 million for the year end-ed December 2013, meaning that this years earnings will be lower than Sh160 million.

TPS Eastern Africa, which oper-ated hotels under the Serena brand, blamed insecurity, Ebola outbreak and VAT on tourism for eating into its earnings for 2014.

Pan Africa Insurance attributes its projected dip in profits to reduced gains from its portfolio at the NSE and slower sales of properties and plots.

hdavid@ke.nationmedia.com

Dividend dought looms as 12 fims in pofit waning

INCOME Weaker results linked to competition and mismanagement, among other reasons Brokers on the floor of Nairobi Securities Exchange. Earnings alert by listed firms

stood at eight in the 2013 financial year, compared to 10 in 2012 and two in 2011. FILE

Only a few fims, including

cigaette manufactue

Bitish Ameican Tobacco, pay out

thei entie pofits as dividends

9Monday February 23, 2015 | BUSINESS DAILY

BY GERALD ANDAE

The vice-chancellor of University of Eldoret has rebutted accusations that the institu-tions senior management is dominated by her ethic community by releasing a report showing that 75 of the top officials are from the Rift Valley.

The report released Friday shows that Western accounted for 25 per cent of the varsitys management board and the re-

maining positions are taken by executives from the Rift Valley.

Nyanza accounts for 13.6 per cent of sen-ior staff, Western 4.5 per cent, Eastern 4.5 per cent and Rift Valley (77.2 per cent)

Senator Isaac Melly (Uasin Gishu) last week led a demonstration at the university to eject the VC, Teresa Akenga on allegations of corruption and nepotism, prompting the indefinite closure of the institution.

The university says Rift Valley accounts

for nearly half of its 207 permanent employ-ees, 20.2 per cent (western), 19.8 per cent (Nyanza) and 2.9 per cent (eastern).

The lecturers union on Friday called on the police to offer security to its members at the university following an attack over the allegations.

The organising secretary of the Univer-sities Academic Staff Union (Uasu) Musalia Edebe said the stand-off at the university had put the lecturers in danger.

Univesity of Eldoet VC says most staff fom Rift Valley

BY EDWIN MUTAI

Parliament has ordered the anti-graft agency to investigate how the Geothermal Development Corporation (GDC) inflated the transportation of power plant equipment in a deal worth to Sh1.7 billion.

The corporation offered Bonfide Clearing and Forwarding a contract in 2012 to move geother-mal rigs and other equipment in 40 lots with each cost-ing Sh42 million within a distance of 11 kilometres, bring-ing the worth of the entire deal to Sh1.7 billion.

The same firm is said to have charged KenGen Sh20 million last year for a simi-lar contract covering a longer distance of 15 kilometres.

The National Assemblys Justice and Legal Affairs Com-mittee says the huge difference in the two similar contracts calls for investigations into the deal awarded by GDC.

The committee has direct-ed the Ethics and Anti-Corrup-tion Commission to establish whether GDC conspired with contractors to inflate the value of contracts and hand over the file to the Director of Public Prosecutions by March 30.

The committee received copies of GDC and KenGens rig move contracts from a whistleblower. The committee has also asked for investigations into claims that GDC acquired

over 62 trucks and earth mov-ers alleged to move the heavy geothermal exploration equip-ment. The trucks are said to be unused at GDCs Menengai site in Nakuru.

The committee criticised the anti-graft agency and the Director of Public Prosecutions for delays in investigating the

whistleblowers complaint.

The MPs also noted that the commission was yet to conclude its investigations into matters relating to the Anglo Leasing scandal, botched police recruitment, the National Social Security Fund and Kenya Pipeline

Company. GDC managing director Si-

las Simiyu has been questioned before by Parliament over the agencys multi-billion shilling procurement deals.

This followed a rocky rela-tionship between Dr Simiyu and GDCs former chair, Si-mon Gicharu who claimed that the corporation lacked transparency.

Dr Simiyu, however, de-nied the allegations insisting that GDCs financial dealings and operations were above board.

MPs have in the past ques-tioned the sinking of Sh51.8 billion in the past five years into GDC without much to show for it.

emutai@ke.nationmedia.com

SCAM Team says Geothermal Corp inflated transport cost for equipment

The committee citicised the anti-gaft agency and

Diecto of Public Posecutions fo delays in

investigations

Dr Silas Masinde Simiyu, the managing director, Geothermal Development Company. FILE

CORPORATE NEWS

House calls fo pobe into GDCs Sh1.7billion deal

10 BUSINESS DAILY | Monday February 23, 2015

When Kaleli Muli needed to buy rings for his wedding, he popped into his local su-perstore in a suburb of Kenyas capital to avoid the hassle of a trip downtown to find a jeweller.

He left 20 minutes later clutching a plas-tic bag with two gold bands worth Sh45,000 shillings ($492), happy with his purchase but also the time saved.

Before the advent of hypermarkets, the rings might also have cost hours of shopping.

It is more convenient and there is a wider variety of products that I can choose from, said the agri-business consultant, who also does his weekly grocery shopping and bought his flat screen TV at Nakumatt, Kenyas largest retail chain.

Nakumatt and other lo-cal retailers have long served Kenyas market but now in-ternational store chains and private equity investors are also coveting the strong growth prospects in east Af-ricas leading economy.

Kenya, with a GDP of $53.4 billion (Sh4.8 trillion) , is a gateway to regional trade, but it holds other attractions for retail investors. Analysts say the penetration of formal retail is 25 to 30 per cent, double that of Africas biggest economy Nigeria.

In addition, the average value of a shop-pers basket has risen 67 per cent in five years to $20 (Sh1,820), making Kenya the continents fastest-growing retail market, say industry executives.

Nairobis shopping malls hit the head-lines in September 2013 when Islamic militants attacked the upmarket West-gate shopping centre and killed at least 67 people.

It remains closed and security at other

malls has been tightened, though shoppers are undeterred. New market entrants face numerous challenges in addition to local competition.

They must race to complete buildings on time, overcome legal hurdles and establish reliable supply chains.

Wal-Marts bid to enter Kenya through an acquisition flopped in 2013 due to a court case involving the owners of local retailer Naivas, which it sought to acquire through its South African business, Massmart.

The dominance of local chains in the modern retail segment makes it difficult

for new entrants and resistance to foreign takeovers complicates mergers and acquisitions, said research firm Euromonitor In-ternational.

French retailer Carrefour says it will inaugurate its first Kenyan store this year through its Dubai-based franchisee Majid al Futtaim.

By contrast, Nakumatt, which has annual sales of $750 million (Sh68.2 billion), bought four

stores in Tanzania from South Africas Shoprite last year, taking its total in east Africa to 52, as it ramps up its presence in underserved neighbours.

It has 38 outlets in Kenya, up from 11 a decade and a half ago, eight in Uganda and two in Rwanda.

In Kenya, the Naivas ownership row has been resolved in court and the company says it is open to talks with potential suit-ors, although not with Massmart.

We are open to talks with parties that can actually help us improve the business, said Willy Kimani, Naivas head of business development.

Massmart said it still wants to expand into east Africa, where it will open its Game brand store at a new shopping mall to be

opened in Nairobi this year. Nakumatt is also looking to expand by selling a quar-ter of its shares, though the process has taken more than five years. Managing director Atul Shah said the company was in talks with an investor but declined to give details.

New investors still have to deal with de-lays in the construction of shopping malls in big cities and lack of retail space in up-country towns.

Paul Kavuma of Catalyst Principal Part-ners, a $125 million (Sh11.37 billion) private equity fund invested in a local pharmacy re-tail chain, warned that failure of real estate developers to keep pace with the growth in retail could curb investments.

The real estate industry has to also be modernising and evolving, not just within Nairobi but also upcountry into other com-mercial centres, he said.

Problems stocking shelvesRetailers can also face problems stocking shelves, said Ayisi Makatiani, managing partner at Fanisi Capital, a $50 million (Sh4.5 billion) private equity fund.

It is one thing to build beautiful su-permarkets. The other thing is can you get good, constant supply of eggs? Can you get good, constant supply of quality vegeta-bles? he said.

Fanisi has invested in a food distribution business and a meat processor in Kenya to fill that supply gap.

Uchumi Supermarkets, Kenyas only listed retailer, prefers local suppliers where possible, said chief executive Jonathan Ciano. Retailers have been left vulnerable by a recent exodus of manufacturers to Egypt from Kenya due to high costs.

Cadbury and Kenyas Eveready closed their production plants in Kenya last year, opting to supply the market with choco-late and dry batteries from their plants in Egypt instead.

If you have challenges in Egypt, of course they wont deliver, Mr Ciano said. - REUTERS

Mother and daughter shop at Nakumatt Lifestyle Supermarket in Nairobi last December. Retailers have been left vulnerable by the recent exodus of manufacturers to Egypt due to high costs. ANTHONY OMUYA

Supemaket chains vie to unlock Kenya etail maket

RIVALRY Global chains and private equity investors are coveting local stores strong growth prospects

The dominance of local chains in the moden etail segment makes it difficult fo new

entants

EUROMONITOR INTERNATIONAL

RESEARCH FIRM

CORPORATE NEWS GLOBAL

YouTube is releasing a new app for children soon, called YouTube Kids, which will run on smartphones and tablets and focus on kid-appropriate content.

The free app from Google Incs online video service will be available for download from today and will feature kid-friendly design, with big icons and minimal scrolling, according to details seen by Reuters.

The app, which will be separate from the mainstream YouTube mobile app, will also feature parental controls such as a timer that can be used to limit a childs screen time.

The Wall Street Journal ear-lier reported the launch, say-ing the company is planning to announce the new app today at a childrens entertainment industry conference.

A YouTube spokeswoman confirmed the information.

In December, USA Today re-ported that Google was plan-

ning to roll out child-friendly versions of its most popular products in a bid to be fun and safe for children.

Internet companies such as Google and Facebook Inc do not offer their services to children under 13.-REUTERS

YouTube to elease fee childen app unning on tablets

Kid-friendly design The free app from Google

Incs online video service will be available for download from today and will feature kid-friendly design

Emirates Airline rejected an apology by Delta over re-marks by the US carriers chief, in which it said he appeared to suggest a link between Gulf carriers and the September 11 attacks.

Emirates rejects the apol-ogy issued by Delta Air Lines in response to comments made by its CEO... which intimated a link between the Gulf carriers and the 9/11 attacks, the Du-bai-based carrier said.

Delta chief Richard Ander-son lashed out at Gulf carriers Emirates, Abu Dhabis Eti-had and Qatar Airwayswhen asked about claims that bank-ruptcy protection for US air-lines should be seen as govern-ment assistance.

Its a great irony to have the UAE from the Arabian Pe-ninsula talk about that, given the fact that our industry was really shocked by the terrorism of 9/11, which came from ter-rorists from the Arabian Penin-sula, Mr Anderson said.

Out of the 19 hijackers of the four planes used in the at-tacks, 17 came from the Gulf 15 Saudis and two Emira-

tis. But Delta said Anderson didnt mean to suggest the Gulf carriers or their govern-ments are linked to the 9/11 ter-rorists. We apologise if anyone was offended.

He was reacting to claims the Gulf carriers have been making that US airlines re-ceived subsidies in the form of payments from the US gov-ernment after the 9/11 attacks and the bankruptcy proceed-ings that resulted.

But the Emirates statement said we believe that the state-ments made this week by Mr Anderson were deliberately crafted and delivered for spe-cific effect.

This brings into question his credibility as a CEO of a US public listed company, as well as the integrity of the submis-sion which his airline has sub-mitted to the US authorities, it said.

The US big three carriers Delta, American and United are reportedly lobbying the US government to slow the ex-pansion of Gulf carriers into the US market.-AFP

Emiates ejects Delta apology ove 9/11 claim

11Monday February 23, 2015 | BUSINESS DAILY

Members of Parliament are headed for a clash with governors over control of about Sh1 billion for village polytech-nics previously administered by the Education ministry.

The Budget and Appropriation Committee has notified Treasury sec-retary Henry Rotich of their intention to take control of Sh935 million ear-marked for transfer to the counties in the next Budget.

The polytechnics have been de-volved to county governments, but committee chairman Mutava Musyi-mi said MPs may take part of the cash to build the institutions.

We may have to go for the money allocated to governors and take some of it to construct these important in-stitutions through CDF framework, said Mr Musyimi last week.

We gave them the money in the current financial year, but they have done nothing in polytechnics.

He added: Once we construct these facilities and equip them, we will then hand them over to governors to run them.

The House committee has asked Mr Rotich and his PS Kamau Thugge to look for additional money for com-pletion of stalled projects under MP-run Economic Stimulus Programme (ESP) that was started in 2010.

You will have to look for about Sh15 billion extra in this budget. There are things we have to do through Constitu-encies Development Fund (CDF). We need extra support in three areas, the Mbeere South MP told the Treasury of-ficials at County Hall in Nairobi during a meeting on the Budget Policy State-ment 2015/16 last week.

Mr Musyimi said in 2010, the government through the Economic Stimulus Programme developed Jua Kali shades in a bid to spur growth in rural economies.

The majority of these shades are sitting idle yet they consumed massive investments. We must revive and equip them, he said.

He said several educational centres of excellence that were constructed through the Sh30 million per con-stituency have not been completed or equipped.

The centres of excellence are sit-ting as white elephants.

The CDF allocation to constituen-cies is not enough to make them viable. These buildings must be completed, said Mr Musyimi.

He said targeted interventions were needed to lift more than 40 per cent of Kenyans living below the pov-erty line.

Dr Thugge, however, told MPs that the Treasurys hands were tied with regard to the amount of discretionary

revenue that is available in the budget. There is really no room for additional expenditure beyond what is provided in the fiscal framework, he told the MPs

while taking them through the Budget Policy Statement for 2015/16.

emutai@ke.nationmedia.com

Parliamentary Budget Committee chairman Mutava Musyimi (left) with Treasury secretary Henry Rotich at a function in September, 2013. SALATON NJAU

MPs want pat of Sh1bn village polytechnics cash BUDGET House team

says lawmakers might take some of the funds to build the institutions BY EDWIN MUTAI

NAIROBI

NEWS | FEATURES | ANALYSIS

COUNTY BUSINESS

A hay producer has recorded a Sh70 mil-lion loss due to invasion of its farms by herders.

Hay and Forage Company general man-ager Peter Mburu said pastoralists from as far as Laikipia were grazing livestock on their farms on the outskirts of Nyeri due to adverse weather.

We are at a loss because armed pastoral-ists have invaded our fields. We are no longer able to supply hay to some of our clients who had contracted us, said Mr Mburu.

The drought being experienced in Laikip-ia had increased the cost of fodder.

Most farmers now rely on hay and maize

germ to feed their livestock due to a lack of pasture. The prices of hay had increased to Sh300 from Sh200 per bale during the pre-vious rainy season.

Mr Mburu said the Sh500 fine imposed on herders for illegal grazing had failed to deter pastoralists from trespassing into their land. We feel helpless because the herders are armed and sometimes invade the farms at night, he said.

But Daniel Leparashao, one of the herd-ers, said their animals were starving and asked Nyeri and Nyandarua residents to allow the pastoralists to graze livestock on their farms.

Some (residents) have harvested crops in their farms and should allow our animals to feed on the maize stalks. In return , they

will get manure, said the herder.Violent clashes are experienced every

dry season when farmers attempt to chase away the herders from their land.

Laikipia county commissioner Wil-son Wanyaga has called for the deploy-ment of General Service Unit officers to guard some of the affected farms.

We are aware of the issues and already we are investigating those said to be hold-ing the guns, he said.

BY DANIEL OTIENO

NYERI

Nyei hay fim posts Sh70m loss as hedes invade fams

Hay and Forage manager Peter Mburu at the companys farm in Laikipia last week. JOSEPH KANYI

The Kilifi County government has sus-pended services of a revenue collection company for allegedly failing to comply with contractual obligation.

In a letter signed by secretary and head of public service Owen Baya, Rain Drops Limited ceased to operate in the county on February 17.

Rain Drops director Shaib Nzioka,

however, claimed he had not received such a letter and vowed to move to court to block termination of the companys contract.

In the letter, the county has accused Rain Drops of failing to achieve the tar-gets it committed itself to meet by not submitting a project schedule on time in line with their deal. It also accuses the firm of failing to submit infrastructure development plan on time and not meet-ing the deadline to install weighbridges

and automated systems for cess collec-tion as well setting up an automated sys-tem for packing fees collection.

However, at company offices in Ma-lindi, operations manager Raymond Tsuma displayed an automated rev-enue collection system he claimed the firm installed more than two months ago. He also displayed device allegedly handed to county revenue staff for use in cess and parking fees collection.

He said the firm had so far installed

weighbridges at Jaribuni, Mavueni, Kwa Ndomo and Kokotoni, which were near completion, as well as 44 cess stations.

A spot check at Kwa Ndomo weigh-bridge in Malindi revealed use of the old manual receipting system in cess collec-tion instead of the automated gadgets, which apparently had been withdrawn. Rain Drops beat 37 other firms to win the tender last year, but MCAs and a section of the Executive were opposed to the deal.

Kilifi cites contact beach in suspension of evenue collecto

Governor Amason Kingi (left) with county secretary Owen Baya. GEORGE KIKAMI

BY NEHEMIAH OKWEMBAH

KILIFI

+254 789511888 or +254 789516888 Office: +254 020 2180 399/669

WHOLESALE RETAIL

12 BUSINESS DAILY | Monday February 23, 2015

BY ANGELA OKETCH

KISUMU

COUNTY BUSINESS

Kisumu investors are threatening to relocate over rising insecurity.

A fish processing company, J Fish Kenya, that exports its produce to Asia said escalating insecurity has made it difficult to post profit after having lost at least Sh20 million in recent incidents.

The first time our truck was car-jacked. In the second and the recent one, two tonnes of fish fodder worth Sh20 million was stolen. Who can ac-cept such a loss?, said the factorys manager Raval Ravindra.

J Fish, which was established in 1980, exports about 1.5 tonnes of fish fodder to China and Japan weekly. It has employed over 250 workers and over 1,000 fish traders.

A number of robberies have been

reported in Kisumu in what is believed to be the work of a gang targeting busi-ness people.

This is the third time I am being robbed in the same fashion. Three peo-ple on a motorbike stopped me and stole Sh547,000 just after I closed my business for the day, said James Owino, a butchery owner in Kondele estate who was attacked two weeks ago.

Something needs to be done. I can-not keep on sweating for people and they take as if they own it.

J Fish management wrote a protest letter to the county commissioner of police expressing its disappointment over insecurity in the town following the repeated attacks and no action be-ing taken despite several complaints filed with authorities.

As a temporary measure, the com-pany has been forced to incur extra costs of hiring more night guards, two police officers and installing security

gadgets that include light control pan-els, magnetic doors and panic alarm switches.

Benson Onyango, the chairman Nile perch traders said the attacks at the factory will render them jobless if the factory relocates.

If the director decides to move the factory to other towns or move to Uganda and Arusha, it is us the traders

that will suffer, he said.The chairman of Kisumu chapter

of chamber of commerce Israel Agina, however, maintains that the county is safe for business.

Despite several cases of robberies, Kisumu is a county that thrives so well in business. We have a good working relationship with the police, we meet regularly with the stakeholders and

business organisations. Factory thefts should be treated as isolated cases, he said.

But the rising insecurity has not spared residential homes. Last month, Ahero ward representative Maurice Aloo was shot and injured at his Bola home.

The attack came a week after the Kisumu deputy majority leader John Olum lost valuables estimated at Sh250,000 in a robbery at his home.

Late December, Eric Onunga the director of Ounga commercial agen-cies that deals with real estates and property management was accosted by thugs at his home in Riat.

Kisumu city residents through chairman, Audi Ogada have protest-ed laxity by the security organs. The county government should bring to-gether the various stakeholders in a security conference to deliberate on the issues ailing the county, he said.

Investos theaten to elocate ove ising insecuity

A trader arranges fresh tilapia for sale. A fish processing plant in Kisumu is threat-ening to close business over rising insecurity. FILE

Counties to contol chacoal industy and manage foests

County governments are set to control the Sh30 billion charcoal industry and manage forests that were previously run by the local authorities after the Kenya Forest Service (KFS) devolved nine of its functions.

The agencys acting director Emilio Mugo said counties will take up the role of controlling charcoal burning, its taxation and movement to markets.

The county governments will also oversee the use of private forests and farmlands and will have the authority to license residents to cultivate in un-gazetted lands.

He said the forest depart-ment had already completed sensitisation programmes to empower county governments and strengthen their capacity in management of forests.

Speaking last week in Nai-robi, Mr Mugo stressed that partnership between KFS and the county governments in the implementation of policy on national forests, legislation and the rules and regulations developed under the Forest Act, 2005 would have to be strictly adhered to.

According to the Kenya Gazette Supplement No 116 of August 9, 2013, specific forestry functions, among them farm for-

estry extension services, forests and game reserves that were for-merly managed by local authori-ties were identified as being the ones to be devolved.

However, gazetted forests and National Water Towers Agency will remain under the national government, he said.

He said counties will be ex-pected to set up measures for increasing forest cover by ensur-ing there are enough extension services.

The official, asked County As-semblies to enact relevant legis-lation in conformity with their local needs and aspirations.

Emilio Mugo, Kenya Forest Serv-ice acting director. FILE

BY CHARLES WANYORO

NAIROBI

Ricardo EPZ International has failed to reverse a decision by the Export Process-ing Zone Authority (EPZA) to shut down its premises over rent arrears and unpaid licence fees.

The company had moved to court to compel EPZA to reopen its premises it shut last year, leaving 650 employees jobless.

It said the authority acted unfairly by shutting its operations over Sh20 million arrears, after talks to stagger the payments collapsed. The company, in its court ap-plication argued the arrears accumulated when it was placed under receivership by Trans National Bank.

Shutting downHigh Court Judge George Odunga, how-ever, said the companys application failed to prove that EPZA acted unfairly in shut-ting down its premises.

In this case there is no contention that the respondent (EPZA) made any prom-ises or conducted itself in a manner which gave rise to legitimate expectation that the applicant would retain possession of the suit premises, he said in a judgment delivered Tuesday.

Accordingly I decline to grant the or-ders sought herein. In the result the notice of motion dated April, 30 2014 fails and is dismissed with costs, he further said.

Ricardo EPZ International chief execu-tive, Richard Ndubai told the court that EPZA officials rejected an agreement they

had reached with auctioneers appointed to collect the debt.

Mr Ndubai, in his application said a Sh3 million cheque issued to EPZA was rejected and instead Ricardo EPZ was di-rected to clear the entire amount or stop operations.

The company said the stand taken by

the authority was dire and extremely ad-verse considering the firm was just recov-ering after one year receivership under Trans National Bank of Kenya which ap-pointed Messrs Farid Sheikh and Denis Musyoka as receivers.

The authority said that the applicants continued occupancy of the premises with-out payment and without a valid trading license was depriving other Kenyans an opportunity to earn a living by making use of the premises and that due to the huge outstanding amount, it had been forced to seek and pay for the services of auctioneers which had so far not borne fruit.

Valid licenceEPZA, through a letter dated April 10, 2014 and addressed to Mr Ndubai, suspended the firms operations from April 11.

In the letter, the company is accused of violating the EPZ Act, which provides for valid licence for all companies in the EPZ, Employment Act that provides for when wage should be paid and Environmental Management and Coordination Act that governs disposal of waste.

By copy of this letter, the Commis-sioner of Customs Services Department Kenya Revenue Authority and her officers at the Athi River EPZ are hereby notified that Ricardo EPZ ceases to immediately enjoy any and all benefits/incentives of-fered under the EPZ programme, read the letter.

aodhiambo@ke.nationmedia.com

EPZ company loses cout fight with egulato ove shutdown

Textile workers at Ricardo EPZ in Athi River. The company was closed over rent arrears. FILE

CONFLICT Ricardo EPZ International was closed for failure to pay rent, licence feesBY ALLAN ODHIAMBO

NAIROBI

13Monday February 23, 2015 | BUSINESS DAILY

Last week a work trip led me to pass through my favourite air-port Schiphol in the Nether-lands. Coming in on the final descent into Amsterdam, I noted there were at least four other flights in the sky above us, leaving a tell tale trail of white jet stream in their wake and I marvelled at the remarkable skills of the Dutch air traffic controllers in keeping all these planes safely in their own paths. About five kilometres to the west of our de-scending plane was another that was moving at the same speed and altitude as we were.

The similarity of movement was certified when the landing gear for our plane was released in perfect synchronicity with the neighbouring plane. Thats when I realised that both planes would be landing at exactly the same time albeit on different runways. I didnt see the plane again as we de-scended into heavy fog that clung to the ground rendering visibility next to zero and I assumed that the plane landed without incident.

I became very curious about the size of Schiphol airport thereafter if two planes could land simultaneously and never meet again. It took at least 10 minutes for the plane to trundle along the interconnected network of taxiways to the terminal. Often, the vehicular traffic on the Amsterdam highways ran under the taxiways, confirming the fact that the airport expansion was a continuous evolu-tion in a neighbourhood where land was a scarce resource. It bears noting that Amsterdams Schiphol is the 14th busiest airport in the world and the 4th busiest in Europe.

But the airport is specifically and strategically operated to connect Netherlands with all the important economic, political and cultural cit-ies in the world. This goal has been a

financial success as Schiphols aviation operations contribute Sh2.7 trillion) to the Dutch GDP, with 500 companies located at the airport employing 65,000 people. The airport is connected to 323 direct destinations, resulting in 52.6 million passengers and 1.5 million tonnes of cargo annually.

There are 425,565 take-offs and landings collectively called air move-ments annually. This translates to 1,166 daily air movements. Total real estate on the terminal side is 650,000 m2 with five runways all of which are on 6,886 acres. On the revenue side, the airport generated Sh145 billion in 2013 with a net profit of Sh23.6 billion.

Its not difficult to see how the operating com-pany - Schiphol Group - manages to generate good revenues through the execution of their business strategy. The business is run as a com-bination of four main op-erations: Aviation, Con-sumer Products and Services, Real Estate and Alliances and Participations. The Aviation business area operates at Amsterdam Airport Schiphol and provides services and fa-cilities to airlines, passengers and han-dling agents. It generates 57 per cent of the total revenue for the group.

The Consumer Products and Serv-ices business area develops and man-ages the range of products and serv-ices available at Amsterdam Airport Schiphol, the key objective of which is to ensure that passengers enjoy a carefree and comfortable journey. The business area grants concessions for retail and catering outlets, services and entertainment facilities, and op-erates retail outlets and car parks. It also creates advertising possibilities at Amsterdam

Airport Schiphol. This generates 25 per cent of total revenues. Real Estate develops, manages, operates and invests in property at and around Schiphol and other airports and generates 10 per cent of total revenues. From the property under management, 33 per cent are used as offices while 44 per cent are used as indus-trial units.

Alliances and Par-ticipations, which generates eight per cent of total revenues, consis