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In the post COVID 19, Kenya looks up to improved economic times

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Kenyan listed firms are offering dividends to shareholders for 2021, signalling recovery from the Covid-19 economic fallout even as prospects for the country’s full economic resurgence remain uncertain.

Political temperatures

Market analysts expect rising political temperatures ahead of the August general election, rising fuel prices, lower agricultural output due to potential adverse weather and the desert locust infestation in the northern parts to dampen the prospects of recovery.

“We expect the discovery of new Covid-19 variants, the general election and slow vaccine rollout to continue weighing down the economic outlook. On the upside, we believe that the relaxation of lockdown measures will lead to improved investor sentiment,” analysts at Cytonn Investments Ltd said.

According to the National Treasury increased public expenditure pressures would place a strain to the fiscal space while the emergence of Covid-19 variants could lead to renewed disruption to trade and tourism.

Nairobi securities exchange

Some firms listed on the Nairobi Securities Exchange that have published either their half-year or full-year financial statements for 2021 show improved earnings for shareholders to cash in.

In 2020, some listed firms including banks suspended dividend payments while others opted to issue bonus shares in attempts to preserve adequate capital to navigate through the Covid-19 storm.

Analysts at Sterling Capital saw economic recovery begin with the easing of the Covid-19 containment measures and gradual resumption of economic activity last year.

Corporate leaders

However, in their market report dated December 2021, they argue that hurdles to economic recovery include the slow pace of global economic recovery, uncertainty over the political environment, high inflation and depreciation of the local currency.

So far, mobile phone operator Safaricom has declared an interim dividend of Ksh0.64 ($0.005) per share after its net profit for the six months to September 30, 2021, grew 12.1 percent to Ksh37.05 billion ($327.87 million).

East African Breweries Ltd recommended an interim dividend of Ksh3.75 ($0.03) per share after its net profit for the six months to December 2021 surged to Ksh8.73 billion ($77.25 million) from Ksh3.79 billion ($33.53 million) in 2020.

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Trading environment

“The trading environment remains uncertain with a lingering social-economic impact of the pandemic, excise tax volatility, and political changes on the horizon. We are cautiously optimistic that improved consumer incomes, on-trade recovery and off-trade resilience will continue apace, fuelling our net sales growth momentum across East Africa.”

British American Tobacco Kenya proposed a dividend of Ksh50 ($0.44) per share to its shareholders after its net profit for the year ended December 31 increased by 18 percent to Ksh6.48 billion ($57.34 million), the firm said.

This translates to a total cash dividend of Ksh53.50 ($0.47) per share after an interim dividend of Ksh3.50 ($0.03) per share was awarded during the year.

Property valuation

The cigarette maker attributed the performance to property valuation gain of Ksh1.2 billion, and a relatively favourable trading environment as the government eased Covid-19 restrictions.

Car and General (K) Plc has offered to pay its shareholders a final dividend of Ksh3.20 per share for the year ended September 30 2021 including a bonus issue of one new share for every one held with a view of recapitalising the company with an additional Ksh200.51 million ($1.77 million).

According to the Group’s annual report, net profit increased to Ksh887 million ($7.84 million) from Ksh274 million ($2.42 million) in the previous year.

Upcoming elections

“We believe uncertainty will persist in 2022 given the upcoming elections and continuing impact of Covid-19 on the business environment,” said Nicholas Ng’ang’a the group’s chairman.

The year to September 30 was positive in spite of the impact of Covid-19. Overall sales in Kenya grew by 55 percent while those abroad grew by 22 percent, with Uganda and Tanzania accounting for over 35 percent of the Group’s sales.

Publisher Longhorn made a net profit of Ksh15.09 million ($133,539.82) for the six months to December 31 compared with a loss of Ksh145.33 million ($1.28 million) in the same period in 2020.

Six months

On the other hand, utility firm KenGen’s net profit for the six months to December 31, 2021, declined by 1.38 percent to Ksh5.12 billion ($45.3 million) from Ksh5.05 billion ($44.69 million) in the same period, with the board choosing not to declare an interim dividend.

Liberty Kenya Holdings issued a profit warning that net earnings for 2021 will be lower by at least 25 percent than the previous year, attributing it to the pandemic, resulting in significantly higher risk claims. In the nine months to September 30, all banks reported higher net profit with Absa (Kenya), KCB and Equity being top performers, and all bank stocks reported price appreciation.

Unga Group’s net profit for the six months to December 31 also declined by 90 percent to Ksh8.45 million ($74,778.76) from Ksh83.47 million ($738,672.55) in the same period the previous year due to reduced sales in both human and animal nutrition segments.

As a result, Unga issued a profit warning that its full year net earnings are likely to be at least 25 percent lower than those of 2020.

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Three Global Firms Signed By Nairobi Financial Hub On Its Launch

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TheBigIssue

Three companies were signed by Nairobi’s international financial centre on the day of its launch. The three include Prudential plc, ARC Ride Kenya and AirCarbon Exchange (ACX).

The Nairobi International Financial Centre (NIFC) is a special economic zone for financial firms.

Prudential, one of the world’s biggest insurers and asset managers, became the first firm to formally join the NIFC.

Singapore-based global carbon exchange ACX came along with Prudential. It seeks to set up a carbon exchange in Kenya.

Check out: Why Buyers Are Now Running Away From Popular Used Toyota Cars

NIFC has also admitted ARC Ride Kenya. It is a new start-up that is going to establish an electric vehicle assembly plant in Nairobi. The plant will produce two and three-wheeled electric bikes and scooters.

Also, the Financial Centre is determined to bolster the manufacturing sector in the country. It has signed an MoU with the Kenya Association of Manufacturers (KAM), to help increase financing and investment in the sector.

NIFC authority has hinted at being in discussion with other participants seeking to join it and will give official news soon.

“Last year Prudential Plc, one of the world’s biggest insurers and asset managers, made a commitment to relocating their Africa headquarters from London to Nairobi and join the Centre. Today we are proud to announce that Prudential becomes the first firm to formally join the Nairobi International Financial Centre,” Vincent Rague, Chairman NIFC Authority.

After many years of waiting, the hub will eye large foreign firms, boosting capital flows to Kenya and the region.

The authority has singled-out four sectors that it will prioritise for growth: financial technology, green finance, investment funds, and becoming a hub for regional multinationals.

The NIFC general regulations have been enacted, as the initial set of tax incentive proposals have been passed.

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Certification from the NIFC Authority must be applied by Firms considering conducting business through the NIFC.

A 15% corporate tax will benefit firms operating a carbon market exchange or emission trading system under the NIFC. The 15% advantage will happen for the first 10 years of operation.

Companies certified by the NIFC Authority and have invested a minimum of Sh5 billion will benefit from the certainty that, the Capital Gains Tax applicable at the time they make their investments will remain unchanged during the lifetime of the investments.

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Hackers Make Tactical Change, Now Targeting Small Businesses

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Traditionally, cybercriminals have been targeting big companies with aim of demanding ransoms running into millions. Nonetheless, the trend no longer holds, as new studies have shown the shift in hackers’ interest from big companies to small and medium ones.

Studies have shown that hackers are shifting their focus to small online businesses which they believe are more vulnerable.

Experts have warned that these SMEs and payment portals, especially those relying on mobile payment solutions, are now facing high risks of cyber attacks coordinated by these hackers.

Speaking during the inaugural Africa Cybersecurity Congress held in Nairobi, Hadi Maeleb, Agora Group co-founder and CEO said the threats to online businesses were growing at a high rate.

Further, he stated that more than 90% of business owners are unaware that their enterprises are at risk, despite the high growth rate of the attacks.

“Cybercriminals are now targeting small businesses more as they have realized that these enterprises do believe they would be exposed due to their comparatively low turnovers until they lose their data and payments are compromised,” said Mr Maeleb.

With the adoption of e-commerce platforms, State agencies, financial institutions, healthcare, energy and utilities have persistently faced cyber-attacks in the recent past.

According to CAK- Communications Authority of Kenya’s first-quarter data (between January to March 2022), a total of 79.2 million cyber-attacks were reported. This has prompted the government to issue 28,848 advisories in an attempt to fight the rising attacks.

Invest in Cybersecurity

Mr Maeleb noted that business owners should invest in cybersecurity tools as there is no magical solution to cybercrime.

“This ‘democratization’ of cyberattacks is expected to push losses due to business interruption, financial theft, personal data breaches and even ransom payments over the Sh4 trillion mark by end of 2022,” he said.

At the peak of the pandemic, several states adopted tough lockdown measures such as social distancing, working from home, and online learning.

Also read: Why Buyers Are Now Running Away From Popular Used Toyota Cars

Hackers shifting focus to small businesses.

This adoption of digital solutions such as e-commerce, remote working and banking went up as Kenyans turned to online platforms to curb the spread of the coronavirus.

“Unfortunately for them, the business of cybercrime has evolved to a point where attacks like ransomware are now sold as a service,” he added.

Even though these measures triggered the adoption of digital platforms, they also increased vulnerability such as ransom, data breaches, harassment, cyberbullying, and data breaches.

Kenya’s ICT Policy which came into effect in 2006, is credited for creating an enabling environment for the growth and usage of technology.

Kenya’s ICT Policy which came into effect in 2006, is credited for creating an enabling environment for the growth and usage of technology.

To achieve Kenya’s Vision 2030 goal of a regional ICT hub, the tech sector was expected to contribute directly and indirectly to an additional 1.5% of Kenya’s GDP by 2017/2018.

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Why Buyers Are Now Running Away From Popular Used Toyota Cars

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As it has been noted that Kenyans are now running away from the popular used Toyota car models, contrary to what has been a tradition in the country. The rise in their costs has seen even dealers cut down on imports of these vehicles due to decreased demand.

Traditionally, popular models such as Toyota Premio and RAV4 have been synonymous with middle-income earners over the years. However, this is no longer the trend.

Car dealers say more Kenyans are now going for vehicles such as Nissan Sylphy and Mazda, which cost less compared with popular Toyota models.

Toyota Vs Nisaan and Mazda models

According to Charles Munyori, the secretary-general of Kenya Auto Bazaar Association, Nissan Sylphy and Mazda’s CX5 and Axela, are quickly gaining popularity among Kenyans.

Mr Munyori said the price of a Toyota RAV4 has short up to Sh3 million currently from Sh2.8 million in February while a Premio is going for Sh2.2 million from Sh2 million four months ago.

On the contrary, Mazda Axela is now selling for Sh1.6 million with Nissan Sylphy (Blue Bird) going for at least Sh1.5 million.

Currently, consumers find these brands to be the best alternatives to their preferred models, as they are relatively cheaper and good.

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With the rising household costs, these car prices are making them affordable to most Kenyans as they struggle to balance the high cost of living.

“We are seeing a shift where Kenyans are now moving from the popular brands such as Toyota Premio and RAV4 to other models. This shift has been occasioned by the high cost that these cars are now fetching at the market,” said Mr Munyori.

“In fact, most of the car dealers are hardly bringing in Premio and RAV4 models because they are not moving and they will tie up money that they would need for importation of more vehicles,” he said.

Ex-Japanese vehicles

Ex-Japan vehicles dominate the Kenyan second-hand sector with a more than 80% market share.

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The buyers in the sector prefer these cars as their spare parts are easier to obtain locally compared to other brands. Additionally, buyers believe that the resale value of Toyota vehicles are higher than that of other brands like mazda or Nissan.

Reasons for risisng vehicle cost

The rising cost of vehicles in the country has been linked to the unavailability of dollars locally, a shortage of electronic chips in Japan, and a weakening shilling against the dollar.

The country is currently experiencing extreme dollar shortage, that one has to wait for at least three days to get $20,000 or $25,000 from the banks.

“We have to wait for like nine days in order to accumulate $80,000, and this has seen car dealers delay in making their orders. We are really feeling the impact of the dollar shortage in the market,” Mr Munyori said.

banks have imposed regulations on dollar purchase. This has forced traders to face difficulty in meeting their obligations.

Industrialists are forced to start seeking dollars in advance. The shortage puts a strain on supplier relations and the ability to negotiate favourable prices in gap markets.

On the other hand, Semiconductors are used in making electronic devices. Their shortage has forced the vehicle manufacturers to scale down the production. The quantity and quality cannot be maintained with decrease in one of the crucial raw material.

Finally, the shilling has persistently remained weak against the dollar. this has made it costly for importers shipping in goods.

The shilling has hit a record low trading at of Sh 117.06 against the dollar. This predicts a continued rise in imported goods, and signifies a further dollar shortage crisis.

The continuous depreciation in shilling stability is attributed to increased demand for dollars from importers. This highly arises on importaion of crude oil and merchandised goods.

It should be noted that most external debt is repaid in the dollar. Therefore, a weakened shilling increases prices of imported goods, and puts pressure on the country’s debt repayment.

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