Showing posts with label Economy and Business. Show all posts

Safaricom Shares Cautionary Announcement on Purchase of Essar Assets

SAFARICOM LIMITED

CAUTIONARY ANNOUNCEMENT

The Directors of Safaricom Limited (“Safaricom”) wish to advise its shareholders and the public that Safaricom has entered into discussions for the acquisition of some of the assets of Essar Telecommunication Kenya Limited.

The proposed transaction is subject to obtaining all necessary regulatory approvals and exemptions.

The proposed transaction may have an effect on the value of the shares of Safaricom.

Accordingly, shareholders and the public are advised to exercise caution in relying on the information in the public domain in relation to the transaction when dealing with the Safaricom shares.

BY ORDER OF THE BOARD
ENID MURIUKI (Mrs)
COMPANY SECRETARY



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Capital Markets Open Day (KICC, March 20th to 22nd 2014)

Capital Markets Open Day
 
Invitation to Participate in the Capital Markets Open Day Scheduled for March 20th to 22nd, 2014

The Authority, in partnership with capital markets industry stakeholders, is organizing a Capital Markets Open Day Exhibition to be held from 20th to 22nd March 2014 at the Kenyatta International Conference Center, Tsavo Ballroom. 

The event targets participants from the General Public, as well as the Business and Professional Community, within Nairobi and its environs.

The Objective of the Open Day is to create an enabling environment where current and potential investors and issuers may interact with the various capital market intermediaries to receive pertinent information that will assist them to make informed decision while participating in the capital markets industry.
 




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Salaries and Remuneration Commission Press Statement on The Remuneration and Benefits for State Officers

Salaries and Remuneration Commission
 
Press Statement
 
The Remuneration and Benefits for State Officers

In promulgating the Constitution, Kenyans made a bold statement on how they wanted their country to be governed. They wanted a system of governance that would entrench transparency and accountability and ensure a realization of basic human rights that addresses existing inequalities in distribution of wealth and resources.

As an independent Commission, SRC was established by the Constitution of Kenya by the people in order to secure the observance by all State organs of democratic values and principles as enshrined in Article 249. 

This places a huge task to the Commission which must perform a social-political and fiscal balancing act in its bid to manage the public service wage bill. To do so effectively, the Commission must receive and consider the input of numerous stakeholders.



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The Strategy for Public Finance Management Reforms in Kenya (2013 - 2018)

NOTICE TO THE PUBLIC TO SUBMIT COMMENTS ON ‘THE STRATEGY FOR PUBLIC FINANCE MANAGEMENT REFORMS IN KENYA (2013 – 2018)’

The Ministry of Finance through the Public Financial Management Reform (PFMR) Programme invites members of the public to submit written comments on ‘The Strategy for Public Finance Management Reforms in Kenya (2013 – 2018)’. 

The contribution from members of the public will be taken into account towards enriching the Strategy which is in its final stages of formulation.

Key Aspects of the Strategy
 
1. The new Strategy not only emphasizes consolidation of gains made under the 2006-2011 PFMR Strategy but also provides a framework for implementing reforms envisaged in the Constitution, the Public Finance Management Act 2012 and other relevant legislation. Most importantly, the Strategy addresses areas of concern highlighted by the report of the Public Expenditure Finance and Accounting Assessment (PEFA), 2012 which is posted on the Ministry of Finance website.
 
2. Implementation – covering a period of five years - is via seven priority themes important for realizing effective public financial management reforms. Four themes relate to the annual budget cycle (resource mobilization; resource allocation; budget execution, accounting and reporting; audit and oversight) while three themes are cross-cutting (fiscal decentralization; the PFM legal framework and automation and integration).
 
3. The existing Government systems will be used in implementing the programme and the PFM Reform Secretariat to be domiciled in the MoF will play a strategic coordination role and oversee the implementation of reforms. Political championship will be provided by the Steering Committee. Within each thematic area, there are champions and actors identified that will be responsible for reform implementation and will ensure that reforms are mainstreamed within the Government planning and work processes.
 
4. The Strategy also incorporates a protocol for engagement with Development Partners. The purpose of the protocol is;
  • To ensure a commitment from relevant parties to harmonization and coordination of all initiatives and activities in support of Public Finance work in the Republic of Kenya.
  • To ensure that development partners’ contributions are coordinated and in compliance with policies of the Government of Kenya.
5. Priority areas identified for immediate implementation include: Deepening Intergrated Financial  Management Information System Reform; Fiscal Decentralization – put in place a framework for identification, assigning and costing of functions that are to be decentralized from national to county governments as well as to provide a framework for intergovernmental fiscal relations; Independent Oversight – fostering relationship between the Office of the Auditor General and the Money Committees in Parliament; Rollout of the national and county level Programme Based Budgeting; Enhancing comprehensiveness of the budget - accounting for unutilized funds from budget provisions to Ministries Departments and Agencies and factoring into the budget, as a form of expenditure, tax expenses incurred by the Government; Enhancing revenue collection by broadening the tax base, improving tax compliance etc.; Revision of the Procurement law.
 
6. A Monitoring and Evaluation Framework to track progress of implementation is a key element of the Strategy.
 
7. The Strategy further stipulates that funding of the reforms should follow a facilitative framework established within the Government. Resource allocation will be assigned to thematic areas and implementation tied to specific activities that contribute to agreed indicators. Government financing will be allocated through the normal budget process. The Government will enter into specific financing agreements with development partners willing to support the strategy. Flow of funds will be defined within the operational plan for the strategy.
 
A copy of the Strategy can be downloaded from www.pfmr.go.ke. or www.treasury.go.ke
 
Kindly submit any comments to the PFMR Programme Manager by close of business, Monday, January 28, 2013.
 
The Programme Manager,
Public Finance Management Reform Programme,
Bima House, Harambee Avenue, 8th Floor,
P.O. Box 30007, G.P.O Code 00100 Nairobi.
Tel: +254 - 20 - 2252299,
Email: pfmsecretariat@treasury.go.ke



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The Government of Kenya and France Telecom-Orange Strengthen the Capital Structure of Telkom Kenya

The Government of Kenya and France Telecom-Orange Strengthen the Capital Structure of Telkom Kenya
 
The Government of Kenya (GoK) and France Telecom-Orange have signed an agreement to strengthen the balance sheet of Telkom Kenya, their jointly owned company. This Restructuring Agreement will put Telkom Kenya on a sound financial footing that enables it to effectively implement its 5 year business plan.
 
The central pillars of the Restructuring discussions were that the shareholders would 

(i) convert their loans to the company into equity, and 

(ii) support the operational needs of Telkom Kenya for 2012 in proportion to their shareholding (51% France Telecom – Orange and 49% GOK), through the provision of Ksh. 10 billion of additional funding during the course of the year. 

On this basis, and, as a consideration for France Telecom-Orange agreeing to write-off a significant part of its shareholder loan, France Telecom–Orange would increase its stake in the company from 51% to 60%.
 
As of the date of the Restructuring Agreement, which was signed in Nairobi on 21st December 2012, France Telecom-Orange had provided its full share of Ksh. 5.1 billion in funding for 2012. The GoK had provided Ksh. 2.5 billion of its portion of Ksh. 4.9 billion, and did not provide the balance of Ksh. 2.4 billion by 31st December 2012, the end of Telkom Kenya’s financial year.

As a consequence of the GoK not having provided its full portion of 2012 funding, the stake of France Telecom-Orange will increase at this point to 70%. However, under the Restructuring Agreement, GoK has an option to increase its stake to 40% during the second half of its Financial Year 2012/13, i.e. by June 30th 2013, through an injection of the balance of Ksh. 2.4 billion.
 
The new improved capital structure with shareholder equity expected to exceed Ksh. 18 billion at the end of 2012, will enable Telkom Kenya to pursue its growth over the coming years by implementing its business plan approved by the Board. More specifically, the company will continue to build upon its leadership in the enterprise market and to develop new mobile data services and technologies. This agreement reflects the confidence that both shareholders have in the company’s future and in the business climate in Kenya.
 
About Orange
 
France Telecom-Orange is one of the world’s leading telecommunications operators with sales of 45.3 billion euros for 2011 and has 170,000 employees worldwide at 30 September 2012, including 105,000 employees in France. 

Present in 33 countries, the Group has a total customer base of 227 million customers at 30 September 2012, including 169 million mobile customers and 15 million broadband internet (ADSL, fibre) customers worldwide. Orange is one of the main European operators for mobile and broadband internet services and, under the brand Orange Business Services, is one of the world leaders in providing telecommunication services to multinational companies.

France Telecom (NYSE:FTE) is listed on NYSE Euronext Paris (compartment A) and on the New York Stock Exchange.
 
For more information (on the internet and on your mobile): www.orange.com, www.orange-business.com, www.orange-innovation.tv or to follow us on Twitter: @presseorange.
 
Orange and any other Orange product or service names included in this material are trade marks of Orange Brand Services Limited, Orange France or France Telecom.
 
Press contacts:
 
France Telecom-Orange
 
Tom Wright, +33 1 44 44 93 93, tom.wright@orange.com
 
Olivier Emberger, +33 1 44 44 93 93, olivier.emberger@orange.com



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De La Rue's Response to the PAC Report

DE LA RUE’S RESPONSE TO THE PAC REPORT
16th August 2012

De La Rue has been an investor in Kenya since 1992 when we invested almost 15 billion shillings in the construction of and equipment for a modern Currency Print works in Ruaraka, Nairobi at the invitation of the
Government of Kenya.

In the last five years we have contributed over 5 billion shillings to the Kenyan economy delivering a total benefit of over 35 billion shillings since 1992 (all figures calculated assuming current exchange rates). De La Rue’s factory in Ruaraka is one of 7 first class production facilities De La Rue operates around the world which are involved in the production of over 150 of the world’s currencies.

Having sent a delegation to present and address all the questions from the Public Accounts Committee (PAC) relating to the currency printing contracts between the Central Bank of Kenya and De La Rue in May, it is with some regret we consider it necessary to respond publicly to the findings detailed in the report.
We wish to respectfully highlight what we believe to be certain errors and omissions in the report.

VALUE DELIVERED TO THE KENYAN TAX PAYER
The PAC report states:
The Committee ¡s satisfied that the tax payer lost Kshs. 1.8 bn being the price difference between the interim orders and the contract.... for printing 1.71 billion pieces of banknotes.
De La Rue strongly disputes this point.
De La Rue was originally awarded the contract to print New Generation banknotes in Malta. The decision to print in Malta was solely predicated by our desire to have our offer compared on the same basis as our overseas competitors and not by any technical constraints relating to the Ruaraka factory.

When this contract was subsequently cancelled we were asked to print interim orders of the current generation banknotes at our factory in Ruaraka. It is misleading to consider comparative pricing for new generation notes and current generation notes as it is like comparing sugar and salt — although similar they are of a different technical specification, a different size and significant differing quantities involved.

As part of De La Rue’s verbal evidence to the committee it was stated that De La Rue operations in Kenya contributed at least Kshs 1 billion p.a. to the Kenyan economy. In the five years since the cancellation of the contract Kshs 5 billion has been pumped back into the economy. As requested by the PAC, De La Rue provided a detailed written breakdown within the specified 7 days which actually showed how the Ruaraka factory had provided Kshs 1.25 billion in the previous year in the form of taxes, wages, local purchases etc. 

We consider it regrettable that this document has not been appended in report along with other documents submitted by De La Rue.
Rather than a loss during this period the Kenyan tax payer has actually gained a benefit in the region of Kshs 2 billion. In 2008 according to the PAC report, the Cabinet of the Government of Kenya approved the commencement of negotiations with De La Rue for ajoint venture and retention of onshore production of Kenyan Currency safeguarding 260 highly skilled Kenyan workers and keeping the revenue flow into the Kenyan economy.

CAPABILITY OF THE DE LA RUE RUARAKA FACTORY

The PAC report states:
When the committee toured the Ruaraka plant...it observed that most of the machines in use were analogue while modern technology had shifted to digital.
De La Rue is keen to point out that this statement makes no sense.
The source of this observation is unknown however it should be noted that the term digital printing usually refers to things such as laser printers (often used by counterfeiters) and is never used for referring to printing equipment used in the banknote industry. 

The equipment at the De La Rue’s Ruaraka factory for printing currency was most recently refurbished 3 years ago. The banknote printing presses in the Ruaraka factory work on exactly the same principle as printing presses in all other banknote factories.
A number of witnesses detailed in the report have stated that De La Rue chose to bid for the New Generation banknote contract based on production at the De La Rue factory in Malta because the Ruaraka factory had neither the technology nor capacity to print these banknotes. This is not true and we have already stated the decision to use the Malta facility was solely predicated by our desire to have our offer compared on the same basis as our overseas competitors.

With the current staffing levels the Ruaraka factory has a capacity of 600 million notes p.a. However when demand requires higher levels of production this can be increased by changing staffing levels and shift patterns. 

The peak production year to date of the Ruaraka factory was 2010 when 928 million notes were produced. The contract for the supply of 1.71 bn New Generation banknotes called for delivery between August 2006 and December 2009, a period of three and a quarter years. 

Thus with staffing levels as they were in 2010, a total of 3.016bn banknotes could have been produced during this period. Given the requirement of 25% export from the factory this would have left capacity of 2.26bn banknotes for the New Generation notes during the period of the contract.

THE JOINT VENTURE WILL DELIVER
The PAC report states:

It must not tie Central Bank of Kenya to signing a 10 year currency printing contract with De La Rue Company. This contravenes Government procurement regulations and procedures since the Bank cannot guarantee a fair market price for currency printing unless there ¡s a competitive procurement process.
De La Rue is surprised by this statement for two reasons.

Firstly the Government of Kenya and Treasury were advised by the esteemed legal firm of Mboya Wangong’u & Waiyaki on the legality of the proposed contract throughout the negotiations relating to the
Joint Venture. The contract was also approved by the Attorney General of Kenya.
Secondly, previous long term agreements between De La Rue and the Central Bank of Kenya have contained provisions for biannual review of bank note prices in the light of prevailing market prices and technological advancements. The PAC report notes that during the period of these contracts the prices charged by De La Rue actually dropped as a result of these provisions.
We therefore respectfully request that the contents of the report are corrected to take into consideration all the points above and to prevent a misleading impression being given to the public. This will also remove what is a significant disincentive and barrier to investment in Kenya for overseas companies.

www.delarue.com



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Unfair War against Second Hand Clothes - Second Hand Clothes Traders Association

Unfair War against Second Hand Clothes
 
Statement by Second Hand Clothes Traders Association

The second hand clothes association is a body that brings together all players within the second hand clothes business in the country. These range from but are not limited to, retailers, small distributors, wholesalers, transporters and importers of second hand clothing. The association further attracts thousands of other auxiliary small scale businesses in various parts of the country where second hand clothes markets exist and which support the sub sector.

Second hand clothes trade dates a couple of decades back when it was introduced mainly by missionaries concerned about the plight of many not able to afford decent clothing. The sub sector has continued to date to offer quality and affordable clothing to millions who may not afford the pricier alternatives in the market.

This is especially so in a country where more than 50% are self employed and minimum wage levels are at around Ksh. 7,000 per month.

The industry has over the years grown to employ directly and indirectly over 5 million Kenyans, as witnessed by many second hands markets in all parts of the country. Second hand clothes businesses have also not only absorbed many hitherto jobless Kenyans, but have particularly improved the lot of women and youth due to the low capital nature especially for retail level entry.

As an association, we are apprehensive of some politicians who have sought to paint the sub sector in negative light, as one that is illegitimate, that benefits a few and finally as one solely responsible for the plummeting fortunes of the cotton industry in the country.

We hold that nothing could be further from the truth and particularly find the allegations malicious and a distortion of widely known and documented facts regarding the overall clothing industry in the country.

We would further wish to state the following,

I. We greatly commend the government’s pledge to slash latest duty increases in second hand clothing as outlined in the 2012/2013 budget speech and hope that the matter will be expedited.

This indeed shows sensitivity to thousands of small scale traders who had been driven out of business by the high taxes and more importantly millions of Wananchi who found the second hand clothes no longer affordable soon after the duty hikes

II. The second hand clothes sub sector is among key employers in the informal sector, supporting millions of Kenyans, mainly the youth and women, who would otherwise be jobless and would possibly turn to criminal activities to earn their living. It’s frightening to imagine all these thousands kicked out of their livelihoods and desperate in our streets and villages. The sub-sector has also absorbed many jobless graduates, retirees among other sections of our population.

III. The second hand clothes sub sector continues to provide decent, affordable and quality clothing to millions in our population, who cannot afford new clothing. With monthly minimum wage levels of around Ksh. 7,000 in the country, it is easy to appreciate the tough balancing act, many Kenyans have to daily endure as they struggle to put a meal, clothing and a roof over the heads of their loved ones. It’s extremely cruel to make the burden heavier for these citizens. It would also be wrong to deny our people ‘the right of choice’ which is a key characteristic of a free market. We must ask ourselves, why is it that so many people prefer second hand clothes when we have many new clothing outlets in the country?

IV. The second hand clothes industry is not responsible for the tumbling fortunes of cotton. Well documented mismanagement of the industry, outright diversion of farmers’ payments and incoherent policy are mainly to blame for this. Further, importing second hand clothes doest necessarily mean we can’t have a flourishing cotton industry. Countries like India import second hand clothes but are also able to produce and export new clothes as well.

V. The association fully supports the government agenda of reviving the cotton industry. We however believe this shall not succeed if not based on a well thought out plan that incorporates fair return for cotton farmers in the country, professionally ran ginneries that produce high quality cotton and coordinated support for designers, tailors, marketers and generally all players of clothes made from locally produced cotton. As traders, our main interest in business is a fair return for our investment, be it in new or second hand clothes.

VI. It is our considered opinion that revival of cotton industry will not happen miraculously by a simple ban of second hand clothes. It’s a widely known fact that currently the majority of the new clothes trading in Kenya are principally cheap imports from Asia and other parts of the world and not from locally grown cotton. What sense does it make to replace second hand clothes with poor quality imports from other parts of the world, while killing the livelihood of millions of our small scale entrepreneurs?

VII. The second hand clothes sub sector is a legitimate business and not a ‘cartel’ as espoused by certain partisan politicians who represent other conflicting interests. The sub sector contributes an upward of Ksh. 7 billion shillings in custom duty, business licenses and business tax to the national kitty. We further note that second hand trade is widely spread within various sectors of our economy and not only in clothes. Why haven’t the insensitive politicians taken issue with the widespread second hand importation of motor vehicles in the country for instance?

VIII. There is a widely held misconception by some that the country is producing excess cotton. It’s an open secret that local textile manufacturers such as those in the Export Processing Zones are already struggling to meet their current cotton demand following decades of cotton neglect. An article in the Business Daily on July 4th titled ‘Rivatex Upgrades Machines’ reports that the revived textile maker Rivatex has resorted to importing cotton due to lack of adequate locally grown cotton.

The envisioned transition from second hand clothes to new clothes for the majority must be gradual and wisely navigated, otherwise simply kicking out second hand clothes before the cotton sub sector is fully re-organized can only create a market vacuum.

Finally the association supports and greatly believes in the promise of Kenya’s economic growth print, the Vision 2030 that aims at lifting millions out of poverty and expanding the middle class. This will enable the majority of our people to easily afford new clothing while millions of our small scale traders will access affordable credit to upgrade their businesses to accommodate new and emerging fashion trends and tastes.

To suggest we can hastily command millions to buy what they may not afford is naive and insensitive at best and pitiless and cold hearted at worst. It brings to mind the words of Queen Marie Antoinette during the French revolution who upon learning the peasant were rioting for lack of bread retorted, ‘Let them eat cake instead’

Signed,
Second Hand Clothes Traders Association
‘Affordable, decent and quality clothing for all’



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Targeting Price and Interbank Market Stability - Monetary Policy Committee Meeting, 4th April, 2012 Press Release

CENTRAL BANK OF KENYA

PRESS RELEASE

MONETARY POLICY COMMITTEE MEETING, 4TH APRIL, 2012

TARGETING PRICE AND INTERBANK MARKET STABILITY

The Monetary Policy Committee met on 4th April, 2012 to review the relevant market developments in order to evaluate the outcome of its monetary policy stance.

The Committee observed that the monetary policy measures in place continue to yield the desired results: inflation has declined; exchange rate stability sustained; and private sector credit growth has slowed down gradually.

Detailed information provided to the Committee on recent relevant market developments shows that:
  • Exchange rate stability has been sustained thereby dampening the risks of imported inflation. The exchange rate against the US Dollar ranged between Ksh.82.27 and 83.36 in March 2012 compared with a range of between Ksh.82.65 and 83.93 in February 2012.
  • Overall month-on-month inflation continued to decline, falling from 16.69% in February 2012 to 15.61% in March 2012. In addition, non-food-non-fuel inflation remained stable at about 11.2%.
  • There was, on an annual basis, a further slowdown in private sector credit growth from 27.7% in January 2012 to 25.8% in February 2012. This has dampened demand pressure on inflation.
  • Interest rates on Government securities and certain commercial bank loan products have been declining reflecting the impact of Government fiscal measures as well as the measures announced by the Kenya Bankers Association in December 2011 to reduce any threat of loan defaults.
  • The 2011 published annual accounts of commercial banks show that the banking sector remains sound and stable.
  • Confidence in the economy remains strong as indicated by the increasing diaspora remittances that stood at USD103.98 million in February 2012.
However, the Committee noted that there were still potential risks in the economy attributed to the following drivers:

Non-food-non-fuel inflation, an inflation measure that reflects the impact of the monetary policy stance being pursued, is still above the Government short-term inflation target of 9% for the fiscal year 2011/12.

Although the growth in private sector credit has been declining, it is still above target. In particular, the demand for credit to finance consumer durables increased in February 2012.

The wide current account deficit and rising crude oil prices attributed to a geo-political risk premium remain a threat to both continued exchange rate stability and further easing of inflation pressure.

The forecast of a delay in the onset of the long rains, which may also be depressed in the main water catchment areas, could affect electricity generation and agricultural production thereby exerting pressure on domestic food and energy prices. Food currently accounts for 56.3% of the observed overall inflation up from 54.9% in December 2011.

The interbank rate has been relatively high and volatile.

In view of the above considerations, the Committee maintained its monetary policy stance by retaining the Central Bank Rate (CBR) at 18.0%.

This will ensure that inflation continues to decline towards the Government target while exchange rate stability is maintained.

Furthermore, the CBK will continue its interventions through Open Market Operations more actively to reduce the volatility in the interbank rate and bring it closer to the CBR, while ensuring consistency with the current monetary policy stance.

PROF. NJUGUNA NDUNG’U, CBS
CHAIRMAN, MONETARY POLICY COMMITTEE
41h April, 2012



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Coffee Stakeholders’ Appeal for Streamlining of Nairobi Coffee Exchange Operations

Background

Every Tuesday morning in a calendar year, the Coffee Producers (through their Marketing Agents - who represent over 600,000 coffee producers) meet with Coffee Dealers at the trading floor of the Nairobi Coffee Exchange (NCE) for trading of coffee.

The auction creates a forum where competitive bidding for coffee occurs therefore the real price for each lot of coffee on offer is discovered due to the large number of buyers present in a transparent manner.

The auction system has fully withstood the test of the times and currently stands out as one of the outstanding mechanism of selling coffee without compromising the prices.

In 2010/2011, over 95% of Kenya coffee worth USD 221.4 million (about Ksh 21 billion) was traded here with the balance being sold through the direct sale. Coffee Growers and the Coffee Dealers finance the operations of the NCE at KSh 20.00 per 60kg bag sold translating to KSh 13.4 million in 2010/11.

Suspension of the Weekly coffee Auction

On Tuesday 13th March 2012, the weekly coffee auction that was expected to trade in over 25,000 bags of coffee worth approximately KSh 640 Million was suspended.

This obviously affects the financial cash flow of coffee producers and will have a ripple effect on the financing of farming operations. In addition, the suspension denies the government the much needed revenue.

Issues Leading to the Suspension of the Coffee Auction Scheduled for Tuesday 13th March 2012

Distribution of Coffee Buying Samples to Coffee Dealers

In order for the auction to run efficiently Coffee Buyers must receive coffee samples at least 8 days in advance in order to analyze them on the basis of quality so that they can make informed choices when bidding.

Some active coffee dealers who number 29 (those who buy over 1000 bags in a year) out of the 80 licensed by the Coffee Board of Kenya have ended up receiving very little sample material or none at all due to the fact that inactive coffee dealers end up taking most of the sample material drawn from the farmers coffee .

This scenario undoubtedly results in lower bids for the coffees on offer to the detriment of the producers.

Trading in Coffee Samples

Distributing coffee samples of 0.25kgs each for each of the 600 lots on offer per auction for 45 auctions in a year to over 50 inactive dealers translates to 337,500kgs valued at Ksh 180 Million loss to the growers annually (using an average Price USD 6.58 per Kg in 2010/11 season).

This means that each of these inactive dealers is able to make Ksh3.6 Million without participating at the trading floor.

This situation cannot therefore be allowed to continue and must be addressed by the relevant authorities.

Some of the inactive dealers have registered more than one company in order to continue profiting from these free samples.

It is important to note that, Growers are in business, and in the hope of realizing better prices for their coffee provide these samples of 14kgs of clean coffee translating to 112kgs of Cherry for every lot of coffee free of charge to the active dealers.

Growers have no objection to the balance of samples being issued to non-active dealer startups in the hope that these too will become active within reasonable timeframes of a few months to maximum one year, failing which it becomes unreasonable and unrealistic to expect the farmers to continue giving away the product of their sweat to “startups” that are well over 1 year old, to continue enriching themselves at their expense.

Growers do not receive free samples for the inputs they use and have to pay upfront getting heavily indebted and most times procuring loans at high interest rates that sometimes result in loss of property and livelihoods!

Release of Coffee Sample Deposit Refunds to Growers

Coffee Marketing Agents have severally without success requested the NCE manager to issue refund cheques on pro rata (depending on volume of coffee sold in 2010 and 2011) for sample deposits from the dealers that did not meet the threshold of coffee trading as per the Trading Rules.

These refunds amounting to over Ksh 10 million are refundable to growers and have not been processed to date.

The manager of the NCE insists that this is part of his income, a position contradicting the Trading Rules on this matter.

Below is an excerpt;

13.The charges, if any, of availing to dealers the offer samples shall be agreed from time to time between marketing agents and the Management Committee of the Association, and will be informed to dealers in writing in advance. These charges shall be deemed the property of the marketing agent and shall be remitted by the Association to the marketing agent on a lot pro-rata basis.

Conclusion

1) Arising from the above issues the Commercial Millers and Marketing Agents Association (CCMMAA) representing the coffee growers and the Kenya Coffee Traders Association (KCTA) representing the coffee buyers met on the 23rd February 2012 in a meeting attended by the Executive Officer of the Nairobi Coffee Exchange and resolved that only the Active Coffee Dealers will receive coffee samples for sale 16 to be held on 13th March 2012.

This was effected and the Marketing Agents and Traders were ready to proceed with the auction on the 13th March 2012 as scheduled.

2) The CCMMAA representing the growers at the auction and the Kenya Coffee Producers Association (KCPA) representing the owners of the coffee remain committed to ensuring the prosperity of the NCE and will participate fully in any effort aimed at restoring the pride of the NCE and will support the Coffee Board of Kenya in the ongoing structural changes of the NCE towards this end.

Meanwhile we appeal to the relevant government institutions to address this crisis as a matter of urgency.

Signed
  • Commercial Coffee Millers & Marketing Agents Association (CCMMAA)
  • Kenya Coffee Producers Association (KCPA)



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Central Bank of Kenya - Sustaining Price Stability

CENTRAL BANK OF KENYA

PRESS RELEASE

MONETARY POLICY COMMITTEE MEETING, 6TH MARCH, 2012

SUSTAINING PRICE STABILITY

The Monetary Policy Committee met on 6th March, 2012 to review the economic developments since its last meeting in February 2012 and evaluate outcomes of its previous decisions.

The Committee observed that the current monetary policy stance supported by appropriate fiscal policy continued to deliver the desired outcomes on inflation and exchange rate stability.

The information provided to the Committee revealed the following positive developments for the economy:
  • Overall inflation continued to decline, dropping from 18.31 percent in January 2012 to 16.69 percent in February 2012.
  • The exchange rate of the Kenya Shilling to the US Dollar remained stable within the narrow range of 82.65 to 83.93. This is an outcome of the policy of a floating exchange rate.
  • Demand pressures on inflation eased following the slowdown in private sector credit growth that expanded on an annual basis by 28 percent in January 2012 from 30.9 percent in December 2011.
  • The measures taken by the Kenya Bankers Association in December 2011 were noted to have assisted to cushion borrowers from potential effects of high interest rates and that there was no increase in net non-performing loans.
  • Average commercial banks lending interest rates and the average spread between lending and deposit rates have also declined during the month.
  • The MPC Market Perceptions Survey conducted in February 2012 revealed that the private sector expects inflation to continue declining; the exchange rate to remain stable and the economy to remain resilient in 2012.
Nevertheless, the Committee noted that there were still potential risks in the economy:
  • The inflation measure excluding food and fuel (an inflation measure that excludes volatile items that are not subject to monetary policy) had yet to respond dramatically to its measures taken in the recent months.
  • The forecast balance of payments continued to be a matter of concern as the heightened risks around the movement of oil through the Strait of Hormuz are already causing global crude oil prices to rise. Due to the significance of oil in the import bill, this was seen as a threat to both the stability of the exchange rate and continued easing of inflation pressure.
  • Although private sector credit growth was declining, its effect on both the demand for imports and consumer goods had yet to be adequately felt.
  • Uncertainties surrounding the resolution of the Greek debt crisis could cause a downturn in the eurozone growth. This could depress tourism and demand for some of Kenya’s horticultural exports thereby constraining domestic economic activity as well as supply of foreign exchange.
Given the above considerations, and the need to ensure that inflation continues to decline towards the Government target, the Committee maintained the Central Bank Rate at 18.0 percent.

This will ensure that the monetary policy measures in place continue to work through the economy to deliver the desired outcomes of reducing inflation, dampening inflationary expectations and sustaining exchange rate stability.

PROF. NJUGUNA NDUNG’U, CBS
CHAIRMAN, MONETARY POLICY COMMITTEE
6th March, 2012



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Central Bank of Kenya Requests for Designs for the New Kenyan Currency

The Central Bank of Kenya wishes to draw the attention of the public to Article 231 (4) of the New Constitution on the production and issuance of Kenyan currency notes and coins.

The Article provides as follows:

Notes and Coins issued by the Central Bank of Kenya may bear images that depict or symbolize an aspect of Kenya but shall not bear the portrait of an individual

Section 22 (1) of the Central Bank of Kenya Act also provides as follows on the issuance of currency notes and coins:

The Bank shall have the sole right to issue notes and coins in Kenya and, subject to subsection (3), only those notes and coins shall be legal tender in Kenya”.

In exercise of powers conferred by the law as stated above, the Central Bank of Kenya has embarked on the process of designing a new generation of Kenyan currency bank notes and coins that comply with the Constitution.

Accordingly, the Central Bank hereby invites individuals, institutions, organizations, and professional bodies to present, in writing, proposals on elements/features to be considered for incorporation in the design of the proposed new Kenyan currency banknotes and coins.

For general information, the current family of currency banknotes and coins in circulation bear portraits of individuals at the front while the back of the banknotes bear different features for each denomination. The back of the coins bear the Kenyan Coat of Arms.

In the design process of the new currency, the Central bank of Kenya considers the following as guiding themes:

  • ‘Kenya Reborn’ - to reflect the spirit of the new constitution
  • ‘Kenya Prosperity’ - to reflect Kenya development goals as outlined in Vision 2030
The design concepts should also take into account the following broad factors while remaining faithful to the general guidance provided in the stated themes:
  • Dominant physical features that reflect any aspect of Kenya but consistent with requirements of the Constitution;
  • Key aspects in Agriculture, Technology, Sports, Manufacturing, Infrastructure, Tourism, and Environment;
  • The nation’s natural treasures, culture and heritage;
  • Common dominant features/wildlife;
  • Flora and fauna unique to Kenya;
  • Preferred colour schemes for each banknote
  • Preferred sizes for both banknotes and coins
The design elements submitted must be unique to Kenya, attractive, socially acceptable and culturally relevant while creating harmony among Kenyans.

The Central Bank considers citizens’ views and input in the design process to be a fundamental constitutional right and therefore highly encourages public participation in this important exercise.

The public is also reminded that the current family of currency shall continue to concurrently circulate along with the new design currency, once commissioned and released into circulation, as provided for under the Sixth Schedule (Article 262), Section 34 of the Constitution.

The deadline for the submission of design proposals is 13th April, 2012.

The proposals, or any clarifications should be addressed to:

Director,
Currency Operations & Branch Administration Department
Central Bank of Kenya
P.O Box 60000 -00200
Email: comms@centralbank.go.ke
Nairobi



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Response to Recent Media Reports on Commercial Banks Borrowing From Central Bank of Kenya Overnight Discount Window Facility

It has come to the attention of the Kenya Bankers Association that certain sections of the media have carried reports on the Commercial Banks borrowing from the Central Bank of Kenya through the Overnight Discount Window Facility and to which we wish to make some clarifications as follows:

Highlights

1. The CBK Overnight Discount Window is a last resort facility for providing overnight liquidity to stable banks with temporary liquidity shortfall, which is in line with Central Bank operations world over.

2. Commercial Banks borrowing from the CBK Discount Window averaged Kshs. 4.4 billion per day in 2011.

3. The total core capital of CBK is only Kshs. 5.0 billion and therefore lending Kshs. 600 billion is beyond the capacity of CBK’s balance sheet

4. The total core capital of all commercial banks in Kenya is Kshs. 259 billion, and so borrowing Kshs. 600 billion would mean that all banks in Kenya are insolvent

5. CBK Overnight Discount Window is for overnight borrowing only, and it is incorrect to add up a succession of overnight loans paid off the next day and show them as outstanding.

6. Commercial Banks in Kenya conduct their business within the guidelines set by the Central Bank of Kenya.

1. Rationale for the CBK Overnight Discount Window

  • Section 36 of the Central Bank of Kenya (CBK) Act provides for a facility whereby the Central Bank can grant loans or advances to banks, secured by Government securities. The CBK Overnight Discount Window is a facility of last resort and is a means of providing overnight liquidity to stable banks that have a temporary shortage of cash. The facility is necessary as circumstances can arise when even fundamentally sound banks cannot raise liquidity on short notice. This facility plays a significant role in ensuring banking sector stability by offering overnight liquidity as a last resort.
  • Liquidity shortfalls in commercial banks can arise out of large and unanticipated payments of taxes, dividends, some depositors calling for deposits without prior adequate notice or generally liquidity tightness occasioned by tight monetary policy stance that may not be fully covered by the traditional sources of liquidity.
  • As a requirement, banks must explore all the available markets for liquidity before coming to the CBK Overnight Discount Window. These include the interbank market, Horizontal Repos, rediscount of Government securities at CBK, and sale of foreign exchange holdings. When these sources cannot fully cover the shortfalls, banks are legally allowed access to the CBK Overnight Discount Window to ensure that their maturing obligations, most of which are for clearing the market, are fully financed. This serves to protect the credibility of the banking system as a custodian of deposits and an appropriate avenue for financial intermediation.
  • Given that the CBK Overnight Discount Window is a facility of last resort, access to funds through the facility is designed to be less attractive through a high penalty interest rate and restrictive guidelines. The higher interest rate and restrictions are meant to send a strong message to banks that funds from CBK can only be accessed under extreme liquidity shortfall conditions.
2. Facts on the Operations of the CBK Overnight Discount Window
  • The CBK Overnight Discount Window constitutes only a small proportion of the total borrowings by commercial banks through the interbank market. Specifically, commercial banks borrowing through the CBK Overnight Discount Window averaged only Kshs 4.4 billion per day in 2011 compared to an average of Kshs 12 billion per day for borrowing through the interbank market.
  • Since borrowing through the CBK Overnight Discount Window is for overnight only, it is incorrect to add up a succession of overnight loans that were paid off the next day and claim that these were still outstanding loans. In addition, given that the total core capital of CBK is only Kshs 5.0 billion lending 600 billion is beyond the capacity of CBK’s balance sheet. Secondly, the total core capital of all commercial banks in Kenya is Kshs 259 billion, and so, borrowing Kshs 600 billion would mean that all banks in Kenya are insolvent. The claim therefore that CBK lent Kshs 600 billion to banks through the Overnight Discount Window facility is without foundation and is grossly misleading.
  • While the CBK Overnight Discount Window is an important tool for central banks dealing with liquidity problems that may threaten financial stability, commercial banks are often reluctant to borrow from it not only because this source of liquidity tends to be expensive but also because of the “stigma” that is associated with Discount Window borrowing. This is because banks fear that the regulator, other banks, or investors would read a negative signal about a bank’s health if that bank is discovered to be a regular borrower at the Discount Window. The assertion therefore that banks frequent the Discount Window to borrow at a free cost is against this principle.
  • The CBK publishes the total amount of borrowing from the Discount Window on a weekly basis, but not the information on individual lending. However, the CBK Overnight Discount Window rate is published on the CBK website on a daily basis.
  • Since the CBK Overnight Discount Window is an overnight facility, banks cannot borrow funds through the facility and invest in longer term assets due to the maturity mismatch as they must repay the funds the next day. Existing guidelines prohibit use of funds borrowed through the facility for on-lending to other commercial banks or investing in Government securities or foreign exchange trading. In this regard, the nature of operation of the CBK Overnight Discount Window does not provide an opportunity for foreign exchange speculation.
  • Access to the CBK Window by commercial banks did not start in 2011. Even during regimes of easing monetary policy stance, there would still be banks accessing funds through the CBK window due to occasional yet unanticipated liquidity shortfalls. As expected, the demand for funds by banks during tight monetary policy regimes is higher.
  • There is no linkage between the increased activity at the CBK Window between June and October 2011 and investment in Government securities and foreign exchange trading due to a mismatch in the maturity structure given that borrowing through the CBK Window is for overnight only.
  • Following the adoption of a tight monetary policy stance in March 2011, interest rates in the interbank market rose rapidly prompting banks to resort to the CBK Overnight Discount Window as they adjusted their portfolio to meet their daily liquidity requirements. Activity at the CBK Overnight Discount Window also reflected increased cost of funds as most depositors moved to divest their deposits from banks to invest in Government securities which were attracting higher yields.
  • The persistent inflationary pressures in 2011 also undermined the mobilization of savings which is the main source of funds for banks. Consequently, banks started liquidating their assets including their holdings of Government securities. The stock of Treasury bills and bonds decreased from Kshs 425.1 billion in March 2011 to Kshs 363.3 billion in September 2011 and further to Kshs 346.5 billion in December 2011. Notably, many banks incurred heavy losses through rediscounting of their holding of Government securities in their bid maintain liquid positions.
  • The rise in the interest rates on Government securities in 2011 following tightening of monetary policy also attracted short term capital inflows as investors sought to take advantage of the higher yields. This explains the build-up of foreign assets of banks during the period.
The Kenya Bankers Association members conduct their business within the Guidelines set by the Central Bank of Kenya.

HABIL OLAKA
CHIEF EXECUTIVE OFFICER



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The National Budget for Financial Year 2012/2013 Request for Proposals on Economic Policy Measures

Republic of Kenya

Ministry of Finance

Important Notice

The National Budget for Financial Year 2012/2013

As mandated by the Constitution, the Cabinet Secretary responsible for Finance is required to submit to the National Assembly Estimates of Revenue and Expenditure of the National Government for the next Financial Year to be tabled in the National Assembly.

Towards this end, the Ministry of Finance has started the process of the preparation of the National Budget for the Financial Year 2012/2013.

The Ministry of Finance considers this period as important for consulting various stakeholders on key fiscal policy issues. In this regard, we wish to express our appreciation for the valuable contributions made by stakeholders ¡n the previous Budgets that continue to drive and sustain our economy.

In addition to public submissions and consultations on sector spending plans for MTEF Budget for 2012/13 -2014/15 held last week, we hereby invite the general public, Institutions in the Public and Private Sectors, Non-Governmental Organizations and Development Partners to submit proposals on economic policy measures that the Minister for Finance could consider for implementation during the 2012 Budget.

It is anticipated that your submissions will take into account measures that will enable the Government achieve faster economic growth and development in order to create wealth, employment opportunities and reduce poverty.

In particular, we suggest that your submissions should include:

a) Further measures required to achieve the objectives of the Vision 2030;

b) Additional measures to facilitate and fast track the implementation of a fully fledged EAC
Customs Union, the EAC Common Market and EAC Monetary Union;

c) Measures to deepen and broaden the tax base and simplify the tax system in order to ensure
revenue productivity, tax efficiency and fair tax burden; and

d) Any other measures that, in your opinion, needs to be considered in order deepen private sector development and provide additional impetus to economic growth and development during the Financial Year 2012/13 and beyond.

The submissions should be specific, supported with a brief statement of the issue to be addressed and the rationale for the proposals.

In order to facilitate timely consultations and adequate consideration, your proposals should be forwarded in writing to the undersigned through e-mail (budget2012 @treasury.go.ke) so as to be received not later than Friday 2nd March, 2012.

JOSEPH K. KINYUA, CBS
PERMANENT SECRETARYITREASURY



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CBK: Hiding money in socks a crime - The Star

ARE you among the people fond of hiding their money in their socks or shoes? Well, you may need to think twice as this innocent safety precaution could land you in jail for three months.

The punishment is even severe if you are caught defacing a coin with the intent of reducing its weight as you could be sent to jail for seven years.

According to the Central Bank of Kenya, bad currency handling such as putting notes in socks or shoes or even close to your heart and in those popular dug out savings spots is punishable as it amounts to the notes' mutilation.

Matatu touts should also pray that they are not caught folding notes between their fingers as this is regarded as bad handling of currency and can lead one to jail.

"Any person who willfully and without authority or excuse defaces, tears, cuts or otherwise mutilates any currency note shall be guilty of an offence and shall be liable to imprisonment for a term not exceeding three months or to a fine not exceeding two thousand shillings or both," says CBK in its latest newsletter.

CBK says that folding, crumpling or shoving bank notes into the pocket without care greatly damages them. This shortens the lifespan of the currencies which ends up becoming an expense for the country for their replacement. "Improper handling of currency depreciates the bank notes and coins faster than they ought and a result., the Central Bank will have to replace these currencies with new ones," CBK says.

Liquids, detergents and chemicals are known to have an adverse effect on banknotes when in contact. And even though genuine banknotes in circulation have some security features that distinguishes them from counterfeits, the features are washed away when in contact with some of these liquids which contains detergents.

"Simple checks such as emptying the pockets before a laundering process will ensure that the notes are not subjected to this kind of damage," CBK advises. "We advice the public to invest in wallets, simple as they may be."

CBK advises PSV operators to invest in money pouches "to ensure that the currencies are not only handled well but also for their security."

By Peter Kiragu



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Pheroze Nowrojee: Wanted: Leadership on Economic Issues (Nairobi Star)

Is social inequity our national ideology? Are we committed to perpetuate Kenya as the third most unequal state in the world? Are we committed to social justice? Are we saying that the market will determine the social conditions of all Kenyans? Are we saying we will be a welfare state?

We do not know. Nor do our leaders.

The absence of clear national aims and ideology in our politics is showing. It is having dangerous effects. Our national politics is diffuse. We are not focusing on critical issues. Our politics divides us into small quarrelling groups. It is returning us to the politics of moneyed individuals. It prevents us from being united on national issues and against pressures from outside.

One of these unattended critical issues is the Economic Partnership Agreement that the European Community is presently offering Kenya and other countries. Without the nuances, the EPA is offering that in 25 years time our finished goods will have duty-free and quota-free access to EU markets, and we in return should give EU finished products the same unrestricted access to the Kenya market.

The EU occasionally needs our labour market. But they need our finished goods market more. We need their finished goods market, but we need their labour market more. We should be exchanging. But that is not being done. Kenya labour will not have unrestricted access to the EU labour market.

The issues raised by the initial studies are weighty. Comesa, of which Kenya is a member, concluded that the costs of the EPA would be loss of about 25 per cent of our trade taxes and 6 per cent of the total tax revenue. It identified price and quality competition from EU-based industries, and our lack of economies of scale and competitive access to latest technologies, as further expected negative effects.

As positive effects, it identified exposure to competition and the dynamic effects of the non-reversible policies that would be adopted by our government. But as another UN report found, the Comesa studies "fail to convincingly show whether the negatives will be offset by the positives."

What our farmers produce are already being produced more cheaply in the EU. We do not as yet have alternative wealth-creating sectors to absorb any decline in our agriculture. Nor will be able to absorb its political cost.

Economic agreements must bring about mobility of goods, labour, finance and services both ways. What the EPA is doing is ensuring mobility of what the EU wants - EU's finance, services and goods into Kenya.

But the EPAs do not ensure what Kenya wants - the mobility of Kenyan labour in the EU.

Kenyan labour will remain subject to extremely excluding EU immigration policies. Kenyan nurses, doctors and other categories useful to the EU will still be selectively taken in. But our biggest economic target and necessity, creating jobs for Kenyans, will not be significantly advanced.

The EU wants our economic resources but not our immigrant labour. That would have too many political costs for them. The EPA ensures this. This is unequal exchange.

Our absence of a national ideology or direction is preventing a deep, united and widely-discussed response to these proposed agreements. We need national unity to bargain out of unfavourable and exploitative offers.

Yet, we hear nothing on this key issue from those who are already announcing their 2012 candidatures. The political parties have not jointly and publicly spoken on the EPA, or stated preferred alternatives to its terms. None has urged the government to re-negotiate them, or work more closely with the East African Community to obtain needed terms, or consult more intensively with civil society.

Needed most of all, is a united government consultation with greatly threatened groups, particularly Kenyan farmers, our largest occupation group. Or we should expect our farmers to follow the example of the French farmers and come out on to the streets.

Recently there was a public procession to sensitise Kenyans on the subject. That was important and admirable.

What is not admirable is the silence on this subject from our leaders, too busy with their narcissistic concerns and 2012 machinations. Our 'politicians' have to deliver more. They have to protect the country. There was an old method of dividing and dominating Kenya before 1963. It was tribe. They are aware of that. But, they must also show awareness of the new methods of domination, like EPAs. And lead with adequate responses.

The writer is a lawyer based in Nairobi.



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Nairobi Star: KCB puts brakes on its expansion plans

KENYA Commercial Bank is now slowing down on its breakneck expansion strategy to concentrate on exploiting the expansive footprint it has established in the region.

Only the very new markets such as Rwanda and Uganda will continue seeing new branches at the rate which has seen KCB virtually double the number of branches on its network over the last two years.

The bank has 185 branches, by far the largest in the region, and over Sh 171 billion in assets, making it also the largest bank in Kenya in that category.

KCB has been expanding rapidly with new branches being built in Uganda, Tanzania, Rwanda and Southern Sudan.

According to management, focus will now shift to making the branches profitable by setting targets for the managers.

In a bold statement, the bank now says it is looking to lead in earning, a direct challenge to Barclay's Bank which has been raking in huge profits .

"We now have in place the necessary business supporting systems to meet our various needs, all of them state of the art and with immense capability," KCB Group chairman Peter Muthoka said during the bank's re-launch of its mobile banking platform yesterday.

"Our focus is now to make this network deliver results for our shareholders so that KCB can also stake claim to leadership in terms of profitability."

KCB has in the past year overtaken Barclays in virtually all categories including customers' deposits and loan book size.

And while its expansion has outpaced rivals, the new branches, except for Southern Sudan, are yet to begin contributing to profits. Southern Sudan has, however, continued to defy expectations returning huge profits.



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Capital Markets Authority: The State of the Kenyan Capital Markets and the Restructuring of Discount Securities Limited

Capital Markets Authority
Press Statement

The State of the Kenyan Capital Markets and the Restructuring of Discount Securities Limited

October 13, 2008

The Capital Markets Authority and the Nairobi Stock Exchange would like to make the following observations on the current global financial markets crisis.

We would like investors and the general public to note that the crisis is as a result of credit problems (credit market) and is not directly due to stock trading strategies adopted in the equity market as happened in the 1987 crisis.

Basically, the global financial crisis is as a result of subprime mortgage lending; subprime mortgage lending is one given to a borrower with a low credit score. Most of these loans were adjustable rate mortgages with low rates for the first few years, and then a ridiculously high interest rates later on at the reset point. But many of the big subprime lenders had a habit of downplaying the risks when dishing out record numbers of these loans to Americans.

The lessons for Kenya includes the following

1. There is a case for highly capitalized financial institutions in line with the Finance Bill 2008-2009 for investment banks and stockbrokers and the Finance Act 2007-2008 requiring banks to inject higher capital. As a result of the credit boom in the US economy where the crisis began, asset prices were inflated. Likewise, the profits of the various financial institutions were inflated as compared to corporate profits of non-financial industry players.

2. All financial sector regulators should adopt a risk-based supervision approach; Risk management by each financial institution, with the regulator risk profiling and continuously reviewing the risks independently. Currently there is over reliance on the institutions' themselves.

3. On its part the accounting profession must more than ever before act as the beacon of public trust for the capital markets. This is because both the regulator and investors place a lot of premium on the audited accounts when assessing regulatory risks and investment choices respectively. Accountants must be vigilant and never let anything cloud their judgments about the underlying commercial realities of firms. This is crucial because the public places great trust on the stamp of approval provided in the auditors' reports.

We would like to indicate that the fundamentals for our Hsted companies are still intact while our licensees have not been affected by this global problem. So far the contagion effect has not been felt in Kenya. Ironically the low level of development of our market and it minor presence in the global context has ensured that Kenya does not suffer direct contagion effect. What may affect us if the crisis escalates is spiral effect of a depressed world economy.

It is against this background and through our continuing inspection of all licencees that it has come to our attention that Discount Securities Ltd. have been experiencing corporate governance challenges.

The Capital Markets Authority and the Nairobi Stock Exchange shall be intervening with a view to restructuring Discount Securities Limited through strengthening its corporate governance structures to ensure its business continuity in the interest of the capital markets and the investing public in Kenya. According to the Capital Markets Act section 33(A) (1) c and section 33(A) (2) c the restructuring plan is manifest in the following;

1. Appointment of an Independent Executive Managing Director; KPMG will be incorporated as the new Executive Director of Discount Securities Limited, replacing Mr. David Githaiga.

2. The Authority will not suspend or revoke the licence of Discount Securities Limited during the period of the intervention. The firm will remain open and will continue trading at the Exchange under this arrangement until such a time that the authority will determine.

3. Following a successful restructuring of Discount Securities Limited, and with a view to enhance the shareholding structure, the NSE and CMA, together with the principals of Discount Securities Limited will assist in finding viable third parties to invest into the company.

4. During the restructuring process, should the need for additional funds arise, the same will be availed within reasonable limits and in form of additional capital 5. Both the Capital Markets Authority and the Nairobi Stock Exchange wish the investing public to note that this is not statutory management but an intervention under Section 33 A (1) c and (2) c (reproduces herein).

33A. (1) This section shall apply and the powers conferred by subsection (2) may be exercised in the following circumstances;-
1(c) if the Authority discovers (whether on an inspection or otherwise) or becomes aware of any fact or circumstance which, in the. opinion of the Authority, warrants the exercise of the relevant power in the interests of investors:
2(c) Notwithstanding the provisions of any other written law, in any case to which this section applies, the Authority may appoint a competent person familiar with the business of the licensed person to its board of directors to hold office as a director who shall not be capable of being removed from office without the approval of the Authority other than by order of the High Court;

Prof. Chege Waruingi
Chairman
Capital Markets Authority

Mr. James Wangunyu
Chairman
Nairobi Stock Exchange



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