By Cytonn Research Team, Jul 30, 2017
Fixed Income: T-bill subscriptions improved during the week but remained low for the 3rd week in a row, coming in at 64.6%, compared to 31.3% recorded the previous week, while yields on the 91, 182 and 364-day papers remained unchanged at 8.2%, 10.3% and 10.9%, respectively. We are projecting the inflation rate in the month of July to decline to between 8.5% - 8.9%, from 9.2% in June, mainly driven by a decline in food and fuel prices;
Equities: During the week, the equities market was on an upward trend with NASI, NSE 25 and NSE 20 gaining 3.8%, 3.5% and 2.7%, respectively, taking their YTD performance to 20.9%, 21.0% and 19.2%, respectively. National Bank of Kenya released their H1’2017 results, posting a decline in core earnings per share by 42.2% to Kshs 0.6 from Kshs 1.0 in H1’2016, attributed to a 29.8% decline in operating income, despite a 28.8% decrease in operating expenses;
Private Equity: This week we witnessed activity in the Education and FMCG sectors as (i) Verod Capital Management, a Nigerian based private equity firm, through Oreon Education committed to acquire an undisclosed minority stake in Nigerian based Greensprings Educational Services Ltd (Greensprings), and (ii) Sanlam Private Equity (SPE) acquires a 60.0% majority stake in JAB Dried Fruit Products for an undisclosed amount;
Real Estate: House sales prices and rentals recorded a 3.1% and 2.0% drop, respectively, with land prices recording an increase of 0.7% and 1.0% in Nairobi Suburbs and Nairobi Satellite Towns, respectively, in Q2’2017, according to Hass Property Price Indices Q2’2017. National Land Commission (NLC) revoked title deeds in a massive and unprecedented clean-up of land ownership records across the country;
Focus of the Week: This week, we look at the ten common financial planning mistakes that lead people towards financial difficulty and how to avoid making these mistakes.
During the week, T-bills were undersubscribed for the 3rd week in a row, however the overall subscription rates rose to 64.6% from 31.3% recorded the previous week. The subscription rates for the 91, 182 and 364-day papers came in at 24.1%, 47.5%, and 97.8% compared to 55.6%, 40.0% and 12.9% the previous week, respectively, with the 364-day paper experiencing a significant increase in subscription during the week. Yields on the 91, 182 and 364-day papers remained unchanged at 8.2%, 10.3% and 10.9%, respectively, while the 182-day paper still remains the best risk-return proposition for investors. The overall acceptance rate came in at 94.5% compared to 86.5% the previous week, with the government accepting a total of Kshs 14.6 bn of the Kshs 15.5 bn worth of bids received, against the Kshs 24.0 bn on offer in this auction. There is pressure on rates on the short end of the yield curve, with the market bidding at an average of 9.8%, 160 bps above the acceptance rate, though the Central Bank rejected the more expensive bids, hence maintaining the rates stable.
There was a net liquidity injection of Kshs 7.4 bn this week compared to an injection of Kshs 23.5 bn the previous week, as there was a significant amount of tax payments that removed liquidity from the market. The interbank market was vibrant with the average interbank rate declining slightly to 7.2% from 7.3% the previous week, while the average volumes traded rose to Kshs 21.6 bn, from Kshs 12.9 bn the previous week. The net liquidity injection was mainly due to Term Auction Deposit Maturities, T-Bill redemptions and Government Payments, which in total amounted to Kshs 46.3 bn of the total of Kshs 56.2 bn liquidity injection during the week. CBK was also active in the Repo Market, injecting Kshs 1.7 bn.
Below is a summary of the money market activity during the week:
all values in Kshs bn, unless stated otherwise |
|||
Weekly Liquidity Position – Kenya |
|||
Liquidity Injection |
|
Liquidity Reduction |
|
Term Auction Deposit Maturities |
22.9 |
Transfer from Banks - Taxes |
41.0 |
Government Payments |
7.1 |
T-bill (Primary issues) |
6.5 |
T-bill Redemption |
16.3 |
Reverse Repo Maturities |
1.3 |
T-bond Interest |
5.5 |
||
Reverse Repo Purchases |
1.7 |
||
Repos Maturities |
2.7 |
||
Total Liquidity Injection |
56.2 |
Total Liquidity Withdrawal |
48.8 |
Net Liquidity Injection |
7.4 |
For the month of July, the government issued a 10-year fixed-coupon bond (FXD 1/2017/10), with an effective tenor of 10.0-years and a market-determined coupon, in a bid to raise Kshs 30.0 bn for budgetary support. The bond issue received a 63.5% subscriptions rate, with the market average rate for the bids coming in at 13.3%, 30 bps above the accepted rate of 13.0%. Just like the previous bond auctions held this year, in which the government has only accepted 71.3% of total bids on average, the government did not accept expensive bids, accepting only Kshs 5.2 bn out of the Kshs 19.0 bn worth of bids received, translating to an acceptance rate of 27.3%.
According to Bloomberg, yields on the 5-year and 10-year Eurobonds, with 2-years and 7-years to maturity, declined by 20 bps and 30 bps, respectively, to close at 4.4% and 6.4%, from 4.6% and 6.7% the previous week, respectively. Since the mid-January 2016 peak, yields on the Kenya Eurobonds have declined by 4.4% points and 3.2% points for the 5-year and 10-year Eurobonds, respectively, due to stable macroeconomic conditions in the country. Over the past two weeks, and with only a week left to the Kenyan General Election, yields on both the Eurobonds have declined by 40 bps, while the market has rallied by 5.3% over the same period, highlighting the confidence of investors on the Kenyan economy and a peaceful transition through the elections, which has reflected in positive market performance. The declining Eurobond yields and stable rating (Fitch Ratings having affirmed Kenya’s long-term foreign and local currency issuer default ratings (IDRs) at “B+”), are indications that Kenya remains stable and hence an attractive investment destination.
The Kenya Shilling remained stable during the week, to close at Kshs 103.9, primarily due to subdued dollar demand from oil importers. On a year to date basis, the shilling has depreciated against the dollar by 1.4%. In our view, the shilling should remain relatively stable in the short term, supported by CBK’s activity, with the forex reserve levels currently at USD 7.7 bn (equivalent to 5.1 months of import cover).
We are projecting the inflation rate in the month of July to decline to between 8.5% - 8.9%, from 9.2% in June, mainly driven by a decline in food and fuel prices. Going forward to the end of 2017, we expect inflationary pressures to be subdued given (i) food prices are expected to continue to decline because of the rainfall witnessed during the long rains period, albeit depressed, and (ii) low global oil prices due to rising US oil production, which has suppressed the global recovery of oil prices, countering OPEC’s decision to extend the deal to cut down on oil production. We expect inflationary pressures to ease in the second half of 2017, but average 9.5% over the course of the year, which is above the upper bound of the government target range of 2.5% - 7.5%.
The US Federal Reserve’s Open Market Committee (FOMC) met during the week to assess the state of the US economy and agree on a path for the US monetary policy. The Fed decided to maintain rates at a band of 1.00% - 1.25%, citing low inflation, which came in at 1.6% in June from 1.9% previously, moving further below the set target of 2.0%. The labour market was relatively strong with job creation increasing to 222,000 jobs in June, compared to 138,000 jobs created in May bringing the unemployment rate to 4.4% in June from 4.3% in May. The Fed also stated that it would start unwinding its quantitative easing efforts, by implementing its balance sheet normalization program, which would see it offload junk securities bought during the financial crisis from its balance sheet, currently at USD 4.5 tn. This move could have the effect of strengthening the dollar against other major currencies, with foreign flows into the US debt market and the scarcity in dollars that will arise from the program, though the Fed is widely believed to be willing to let the securities mature without rolling them over as opposed to selling them off in the market, in a bid to promote price stability. Going forward, we expect the Fed to take keen note of inflation, which continued to drop away from the 2.0% target, and which we believe will be key in future monetary policy decisions.
This week, the International Monetary Fund (IMF) released the World Economic Outlook Update for July 2017, raising Sub-Saharan Africa’s growth expectation in 2017 to 2.7%, from 2.6% previously, primarily due to an upgrade on South Africa’s growth prospects from 2.6% previously to 2.7%, attributed to (i) better than expected rainfall, and hence increased agricultural output, and (ii) increased mining activity, brought about by a rebound in commodity prices. The upgraded outlook on Sub-Saharan Africa’s growth prospects is expected to improve investor sentiment and encourage investment in the region. In April, the IMF revised Kenya’s GDP growth downwards, to 5.3%, from 6.0% previously, attributing the cut to negative effects of the drought, the slow-down in private sector credit growth and the anticipated recovery in global oil prices. The update comes at a time when the G20’s Global Infrastructure Hub (GI Hub) released the Global Infrastructure Outlook Report, indicating that Kenya will need to increase infrastructure spending by 41.0% in order to meet its infrastructure needs by 2040, with infrastructural spending expected to be a key driver in the country’s economic growth prospects. Going forward, we expect Kenya’s economic growth to be supported by (i) government’s continued expenditure on infrastructure, (ii) the recovery of the tourism sector, and (iii) the continued growth of the construction sector. However, we expect a slow-down, with growth coming in between 4.7% and 5.2%, from 5.8% in 2016, due to (i) subdued performance in the agriculture sector, brought about by the drought, (ii) the interest rate caps, which will reduce corporate earnings for commercial banks, and (iii) increased political uncertainty, forcing investors to take a wait and see stance.
Fixed Income Conclusions:
Rates in the fixed income market have remained stable, and we expect this to continue in the short-term, supported by:
Some of the factors that could put upward pressure on interest rates are:
Overall, the possible deficit that is likely to result from depressed revenue collection creates uncertainty in the interest rates environment. Any additional borrowing in the domestic market to plug the deficit in revenue collection could lead to upward pressures on interest rates. Our view is that investors should be biased towards short-term fixed income instruments to reduce duration risk.
During the week, the equities market was on an upward trend with NSE 25, NSE 20 and NASI gaining 3.5%, 2.7% and 3.8%, respectively, taking their YTD performance to 21.0%, 19.2% and 20.9%, respectively. This week’s performance was driven by gains in select large cap stocks such as Safaricom, KCB Group and Coop Bank, which gained 5.4%, 3.1% and 3.0%, respectively. Since the February 2015 peak, the market has lost 9.2% and 30.9% for NASI and NSE 20, respectively.
Equities turnover declined by 4.5% to close the week at USD 38.7 mn from USD 40.5 mn the previous week. We expect the market to remain bullish despite the slower corporate earnings growth in 2017 and the forth-coming general elections as the investors take advantage of the low valuations in the market, which is a temporary situation as we expect valuations to pick up after elections, if the elections are peaceful.
The market is currently trading at a price to earnings ratio (P/E) of 12.2x compared to a historical 7-year average of 13.4x, and a dividend yield of 5.1%, compared to a historical average of 3.8%. The current P/E valuation of 12.2x is 26.1% above the most recent trough valuation of 9.7x experienced in the first week of February 2017, and 47.2% above the previous trough valuation of 8.3x experienced in December 2011. The charts below indicate the historical P/E and dividend yields of the market.
National Bank of Kenya (NBK) released H1’2017 results
NBK released H1’2017 results recording a decline in core earnings per share by 42.2% to Kshs 0.6 from Kshs 1.0 in H1’2016, attributed to a 29.8% decline in operating income, despite a 28.8% decline in operating expenses. Key highlights for the performance from H1’2016 to H1’2017 include:
National Bank is currently not sufficiently capitalized with a core capital to risk weighted assets ratio at 11.3%, just 0.8% above the statutory requirement of 10.5%, and total capital to total risk weighted assets falling below statutory requirement of 14.5% by 2.7% to close the period at 11.8%. For a more comprehensive analysis, see our NBK H1’2017 Earnings Note
CIC Group Insurance released H1’2017 results
CIC Group released H1’2017 results recording a decline in core earnings per share by 3.5% to Kshs 0.16 from Kshs 0.17 in H1'2016, against our expectations of a 6.7% increase. The decline in EPS is attributed to a 25.5% increase in total expenses to Kshs 7.1 bn from Kshs 5.7 bn in H1’2016 despite a 24.2% increase in total revenue to Kshs 7.9 bn from Kshs 6.3 bn. Key highlights for the performance from H1’2016 to H1’2017 include:
Going forward, CIC Group’s growth will be driven by (i) adoption of innovation and information technology, in order to drive efficiency, (ii) increase in its equities and property investments portfolio through its asset management subsidiary to grow investment income, and (iii) the strategic plan of settling their regional businesses. For more detailed analysis on CIC Group H1’2017 earnings, see our CIC Group Earnings Note.
Following the proposed debt restructuring by Kenya Airways (KQ), commercial banks that agree to the debt-equity swap will be required to lend the airline an additional Kshs 18.1 bn to revamp aircraft engines, as part of an agreement between the banks and the National Treasury. The National Treasury, KQ’s top shareholder, has stated that is requires the airline’s lenders to set up a dollar-denominated fund that will earn them an annual interest income based on the 3-month USD London Interbank Offer Rate (Libor), which currently stands at 1.3% plus 5.4% points premium; this facility will be fully guaranteed by the National Treasury and shall be initially available for 5-years and renewable every year thereafter for 5-years based on the annual utilisation requirements of KQ. Under this proposal, the banks will be allowed to divest their 35.7% stake over 10-years by selling in the open market or to a strategic investor. As highlighted in our Cytonn Weekly #29/2017, we view the conversion as a positive move for the airline. However, given that the facility is dollar-denominated, KQ risks having its future earnings negatively impacted by foreign exchange losses, alongside fuel hedging.
The Kenya Attorney-General, Githu Muigai, published a new set of rules, the ‘Companies (General) (Amendment) Regulations, 2017, that requires companies listed on the Nairobi Securities Exchange (NSE) to publish in their annual reports a breakdown of directors’ pay, in a bid to increase transparency and strengthen corporate governance. The guidelines also provide that shareholders must approve directors’ pay by way of vote, ushering in a pay-for-performance regime that may see directors of loss-making companies take a pay cut to match the profitability of the firms they lead. Publicly traded firms will also have to disclose details of payments to executive and non-executive directors for the past 5-years. We view this move as beneficial to investors since it will ensure information symmetry amongst shareholders, unlike in the previous regime where only the major shareholders would be privy to such information as they are in charge of hiring and replacing the directors, including the top management. This regulation is expected to result in greater disclosure, which is key to investors for decision-making thus boosting investor sentiment.
The Co-operative Bank of Kenya is set to open 5 new branches across the country, bringing its local branch count to 150 following recent openings at Jomo Kenyatta International Airport (JKIA), Two Rivers Mall and Ridgeway Branch on Kiambu Road. This comes at a time when some of its peers, Standard Chartered Bank and Barclays Bank Kenya, have announced a freeze on expansion as well as closure of branches in a bid to remain competitive in the tough operating environment occasioned by the implementation of the interest rate cap law. The launch of new branches by Co-operative Bank fits to the bank’s Soaring Eagle strategy that is aimed at (i) enhanced client focus, and (ii) reaching new niche markets, In Q1’2017, Co-op recorded a deposit growth of 6.9% to Kshs 279.8 bn from Kshs 261.7 bn in Q1’2016, lower than the industry average of 11.7%. Through this move, the bank will enhance its local presence, thus boosting deposit mobilization. As highlighted in our Cytonn Weekly #29/2017, global ratings agency Moody’s Investors Service, in their report showed that Co-operative Bank will maintain healthy profits and strong capital buffers despite the challenging operating environment characterised by low credit growth and deteriorating asset quality.
Below is our Equities Universe of Coverage
all prices in Kshs unless stated otherwise |
||||||||
No. |
Company |
Price as at 21/07/17 |
Price as at 28/07/17 |
w/w Change |
YTD Change |
Target Price* |
Dividend Yield |
Upside/ (Downside)** |
1. |
NIC |
33.8 |
34.8 |
3.0% |
33.7% |
51.2 |
3.7% |
51.0% |
2. |
I&M Holdings |
107.0 |
108.0 |
0.9% |
20.0% |
147.5 |
3.4% |
40.0% |
3. |
KCB Group*** |
39.8 |
41.0 |
3.1% |
42.6% |
54.0 |
7.5% |
39.3% |
4. |
HF Group |
10.4 |
10.5 |
1.0% |
(25.4%) |
13.9 |
3.6% |
36.6% |
5. |
Barclays |
9.7 |
9.8 |
1.6% |
15.6% |
12.1 |
10.4% |
33.8% |
6. |
DTBK |
179.0 |
183.0 |
2.2% |
55.1% |
241.1 |
1.7% |
33.5% |
7. |
Co-op Bank |
15.0 |
15.4 |
3.0% |
16.7% |
18.5 |
5.2% |
25.3% |
8. |
Jubilee Insurance |
417.0 |
420.0 |
0.7% |
(14.3%) |
490.5 |
1.8% |
18.6% |
9. |
Stanbic Holdings |
79.5 |
80.0 |
0.6% |
13.5% |
77.0 |
5.9% |
2.1% |
10. |
Liberty |
12.0 |
13.0 |
7.9% |
(1.9%) |
13.0 |
0.0% |
0.2% |
11. |
StanChart |
217.0 |
221.0 |
1.8% |
16.9% |
209.3 |
4.7% |
(0.5%) |
12. |
Kenya Re |
20.8 |
21.8 |
4.8% |
(3.3%) |
20.5 |
4.4% |
(1.3%) |
13. |
Equity Group |
39.8 |
41.5 |
4.4% |
38.3% |
38.4 |
5.0% |
(2.4%) |
14. |
Britam |
13.8 |
14.5 |
4.7% |
44.5% |
13.0 |
2.0% |
(8.1%) |
15. |
Safaricom |
23.3 |
24.5 |
5.4% |
27.9% |
19.8 |
4.7% |
(14.6%) |
16. |
CIC Group |
5.0 |
4.9 |
(2.0%) |
27.6% |
3.7 |
3.2% |
(20.3%) |
17. |
Sanlam Kenya |
26.5 |
27.0 |
1.9% |
(1.8%) |
21.1 |
0.0% |
(22.0%) |
18. |
NBK |
10.9 |
10.0 |
(8.3%) |
38.9% |
4.0 |
0.0% |
(59.8%) |
*Target Price as per Cytonn Analyst estimates |
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**Upside / (Downside) is adjusted for Dividend Yield |
||||||||
***For full disclosure, Cytonn and/or its affiliates holds a significant stake in KCB Group, ranking as the 5th largest local institutional investor |
We remain "neutral with a bias to positive" for investors with short to medium-term investments horizon and are "positive" for investors with a long-term investment horizon.
Education Sector
Verod Capital Management, a Nigerian based private equity firm, through Oreon Education, has committed to acquire an undisclosed minority stake in Greensprings Educational Services Ltd (Greensprings). Greensprings is a Nigerian based educational service provider established 32-years ago and provides pre-primary, elementary, secondary and post-secondary schooling for both day and boarding students. This is Verod’s sixth investment from its second fund, Verod Capital Growth Fund II LP and will assist Verod to diversify its portfolio. The investment is advantageous to Greensprings as it will enable Greensprings to implement its strategy to expand its operations by opening more campuses. The transaction highlights the increasing interest in the education sector by private equity investors. Recently Vumela Enterprise Development Fund, a fund managed by FNB Business Banking and Edge Growth, acquired a stake in Nova Pioneer, an independent school network which offers primary and secondary school education in four Schools, all based in Johannesburg and is affiliated to Nova Pioneer Kenya. Investment in the education sector is being driven by (i) demand for quality education by the growing middle class, (ii) increase in government support for private educational institutions by having favourable regulation in most economies, making them more accommodative of private investors in the education sector, and (iii) increased private sector involvement in the implementation of education especially through innovation and provision of quality and diverse services.
FMCG Sector
South African based Sanlam Private Equity (SPE) has acquired a 60% Stake in JAB Dried Fruit Products for an undisclosed amount. JAB Dried Fruit Products based in South Africa is a processor and distributor of dried fruits and nuts to markets in South Africa and overseas. This acquisition will see SPE implement its expansion strategy into new markets while JAB Dried Fruit Products will benefit by value creation derived from the active participation of SPE into its management in order to achieve its growth strategy. Investment in the FMCG sector remains robust in Sub-Saharan Africa, having witnessed, in February 2017, Amethis Finance, a French based Private Equity (PE) fund and Metier, a South African PE fund, partner to jointly acquire a 40.0% stake in Kenafric one of the largest manufacturers of confectionery, culinary, stationery, and footwear products in Kenya. 45.0% of these products are sold in 10 African countries outside of Kenya through its impressive distribution network. The FMCG sector in Sub-Saharan Africa continues to attract private equity investors as a result of (i) growth in the retail sector, driven by increased consumption expenditure from the growing middle class, and (ii) infrastructural developments, which include the opening up of new roads and bypasses, alongside development in the rail sector. The sector is however facing challenges including (i) counterfeit goods, (ii) low export levels of FMCG products and cheaper imports from the Asian market, and (iii) poor connectivity and high energy costs. Despite these challenges, the FMCG sector can make significant growth by (i) adopting technological innovations, and (ii) targeting the untapped demand from the rural population.
Private equity investments in Africa remains robust as evidenced by the increased deal flow in a number of sectors that support growth. The increasing investor interest is attributed to (i) a resilient and adapting middle class and increased consumerism, (ii) the attractive valuations in Sub Saharan Africa’s private markets compared to its public markets, (iii) the attractive valuations in Sub Saharan Africa’s markets compared to global markets, and (iv) better economic projections in Sub Saharan Africa compared to global markets. We remain bullish on PE as an asset class in Sub-Saharan Africa. Going forward, the increasing investor interest and stable macro-economic environment will continue to boost deal flow into African markets.
In our Focus of the Week dated 19th February 2017, on Effect of the Election on the Real Estate Environment in Kenya, we stated that there is likely to be a slowdown in transaction volumes and prices in the 2nd and 3rd quarter of 2017, especially at the run up to the election date. In line with our analysis, this week Hass Consult released the Hass Property Price Indices Q2’2017 report, covering land and house price indices that indicated a drop-in property prices. The report tracks the property price and rental price movement in the Nairobi Metropolitan Area.
On the house price index, the key take outs are;
In general, the rental market performed better than the sales market recording less declines of 2.0% as compared to the sales market with a decline of 3.1% indicating that there have been increased interest in rental yields by the investors due to the marginal house price increases. Poor performance in Q2’2017 can be attributed to the tough macroeconomic environment that has persisted over the past year. This is illustrated by the table below showing the house price performance over the last 3-years:
House Price Change (%) q/q from 2015 to 2017 |
|||
House Price Index |
Q2’2015 |
Q2’2016 |
Q2’2017 |
Hass Composite Sales Index |
2.2% |
3.6% |
(3.1%) |
Hass Composite Letting Index |
2.4% |
2.0% |
(2.0%) |
*Q'2 2017, has recorded a negative price change, compared to positive price change in Q'2 2015 and Q'2 2016, mainly associated to the upcoming general elections, that has made investors to shy away |
Source: Hass Consult House Price Index
In our opinion, this is a temporary phase and we expect the market to stabilise on back of relatively strong GDP growth, on average 5.4% in the last 5-years, the relatively high returns in real estate, the middle-class growth and urbanisation rate at 4.4%, that have created demand for real estate. However, in the long run there will be price stagnation in selected markets with surplus supply. Investors need to invest in proper market research and trend analysis to identify specific market niches.
Key to note is that the general decline in property prices is partly attributable to constrained access to credit brought about by the capping of interest rates, with borrowers unable to secure mortgages due to the current regulatory framework in place as banks are unable to factor in ‘high risk borrowers’ within the stipulated margins. Credit to the private sector, which includes those who would borrow to finance real estate transactions, has dropped from a high of 25.8% in June 2014, to 2.1% currently. In our Focus of the Week, Update on Effect of Interest Rate Cap on Credit Growth & Cost, we spoke about the true cost of credit, which can be found here.
From the Land Price Index, the key take outs were;
The land prices retained a positive performance trend, though slower compared to other similar periods such as Q2’2015 and Q2’2016 as shown below.
Land Price Change (%) q/q from 2015 to 2017 |
|||
The Hass Composite Land Index |
Q2’2015 |
Q2’2016 |
Q2’2017 |
Nairobi Suburbs |
1.6% |
2.5% |
0.7% |
Nairobi Satellite Towns |
1.9% |
8.1% |
1.0% |
* Q'2 2017, the land price retained a positive performance trend, though with a slight decrease in prices as compared to other years such as Q’2 2015 and Q’2 2016 |
Source: Hass Consult Land Price Index
Land prices recorded a positive price change despite the current countries political state, because land is a strong asset class that investors use to hedge their investments from the economic instabilities and therefore least affected by the upcoming elections. We thus expect this trend to continue.
On the other hand, Data Fintech, a Consumer Data Broker company founded in 2015, released a real estate market report for the period ended May 2017. The report tracked the effective demand for land, commercial property and residential property in the Nairobi Metropolitan Area between April 2017 and May 2017 based on data collected on Buy Rent Kenya during the same period.
The key take outs from the report were;
During the week, the National Land Commission (NLC) revoked title deeds in a massive and unprecedented clean-up of land ownership records across the country. The key areas affected by this clean-up are Nairobi, Eldoret, Kisii, Kisumu, Kakamega and Kilifi. This exercise was informed by various complaints received from the National Government, County Governments and the public on public land grabbing as well as land ownership disputes.
The key institutions where land had been taken are schools and County Governments as well as public and private institutions such as Kakamega Golf Club, Prisons Department in Eldoret, Kenya Agricultural & Livestock Research Organisation in Kisii, Housing and Urban Development Ministry, all allocations done by Kisumu Municipal Council, the predecessor of the County Government of Kisumu, in Kanyakwar, Mamboleo and Kibos and Kenya Forest Service.
According to the report Gazetted by the NLC, the land had been irregularly allocated to key politicians, former top civil servants, lawyers and businessmen. This move is however expected to trigger a legal battle between the NLC and the affected parties and it also leaves banks, which had taken the title deeds as security for loans, at a risk of loss.
The Constitution provides functions of the NLC as (i) to manage public land on behalf of the National and County Governments, and (ii) to initiate investigations on its own initiative or on a complaint, into present or historical land injustices, and recommend appropriate redress. Therefore, this judgement is, in our view, a step in the right direction as it reinforces the rule of law.
Other Real Estate Highlights
The real estate sector is witnessing a slowdown in the market operations, due to the tough macroeconomic environment that has persisted over the past year. However, this is a temporary phase and we expect the market to stabilise on back of relatively strong GDP growth, on average 5.4% in the last five-years and relatively high returns in real estate, the middle-class growth and urbanisation rate at 4.4% that have created demand for real estate.
It is said that your financial situation is a combination of every financial decision you have made. While making mistakes is a part of life, some mistakes are more painful than others, more so the financial ones, and identifying what went wrong will help you avoid repeating the mistakes. In turn, this will greatly improve your financial situation and set you on the path to financial security. Below we identify the ten common financial planning mistakes that lead people into financial distress, and how to avoid them. We then conclude by identifying the key areas you need to focus on for correct financial planning, which will lead to wealth correction.
If you don’t have a target, it is impossible to know if you have missed it and definitely failure to plan is planning to fail. Whether your budget takes the form of a complex spreadsheet or a piece of paper it does not matter, but it is important to measure actual expenditure against the budget on a regular basis and to adjust the budget according to your needs. This will help you avoid spending more than you have planned.
Consistently raising your expenditure is a good way to accumulate debt and to remain stuck in the ranks of poverty. To stay out of bad debt, you will either need to find a way to earn more or spend less. The first and best option is to find ways to earn more and keep your expenditure constant. Here is our take, if you earn more save more and put more focus on cutting unnecessary expenditure, through a stringent budgeting process, and diversifying your income sources through making investments.
Most people do not grow wealth because their time perspective is focused on short-term goals such as meeting basic lifestyle needs, buying luxury items, and paying rent. Are you one of them? Most of the times lacking a plan to spend is usually key in destroying your financial well-being; make it your duty to see into the future and put your impulse in check. However, it is important to treat yourself once in a while, to enjoy for the hard work created.
The mentality to have a quick fix as your financial breakthrough without hard work and sharp investment will be the worst mistake of your life. Avoid the lure of quick money from avenues such as betting, gaming and get rich quick schemes, and work hard for your money.
Thinking that you can solve everyone’s problems is just one of the worst financial mistakes you can make when handling your financials. Do the best you can to assist when required and always help others out in emergency, but keep in mind that you can’t solve every problem, you have to let go of the little problems and be sharp.
“Life is too expensive”; “It is hopeless; I will never get out of debt”; “I do not earn enough money.” Old habits die hard; however, as long as you do nothing to change but constantly complain then you are on a path to destroying your financial future. Stop complaining and making lame excuses. Instead, take responsibility for your non-productive habits and focus on changing them. Your mind has the power to dictate what you achieve in life, so speak positivity to it.
Avoid putting both eyes on your pay slip and diversify your income by saving it in passive income generating sources such as royalties, interest, value addition and profit. Wise men do it all the time.
Saving early, everyone says it’s a good thing. Do you know why? Saving early is a ritual habit that keeps you in check and disciplined in your spending and also bigger than that, it takes care of your long-term future needs. Start saving early as little as you can and you will be dodging a mistake many have fallen in love with, starting late.
“I want to keep up with the trends, so that I can match the standards of my peers.” This statement sounds and looks really bad on you as you say it. Buying a car because your old high school buddy bought one is just ridiculous, he/she could have been granted an attractive bonus package and just opted to acquire one of the cars he/she has been dreaming about. On the other hand, you drain out all of your savings and invest in a liability that will consume your pay slip income all the way to the end. Think about it.
The rising use of credit cards has proven technology to be enhancing convenience but has not yet proven these avenues to be convenient financial planning tools. Getting a credit card loaded with credit for personal consumption and not geared towards any beneficial plan is a pure mistake and it only adds to your debt. The challenge comes in as you sometimes spend more than you have planned for since it is hard to track expenses on a card. Many like it but it would be smart to ensure strictness in tracking your expense ledger.
In order to avoid these mistakes, and to practice correct financial planning, use the below 2 key points to keep yourself in check from the start:
Overall, you will have made at least a couple, if not all, of these mistakes at some point, but the key is learning from them, and curving the path towards financial stability.