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Recent Topicals

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Progress of Kenyan Pension Schemes-2022

Aug 7, 2022

In the face of unprecedented economic occurrences such as the resurgence of COVID-19 infections and the persistent geopolitical pressures, the pensions industry continues to feel the impact in terms of both sustainability and adequacy, with the pension schemes registering lower returns hence a decline in their asset value. The economic uncertainties influence retirement benefit schemes through various ways including: i) Increased individuals exiting the schemes ii) A decline in the disposable income hence lower contributions, and, iii) Regulatory compliance challenges due to fair value losses in some of the asset classes invested in. Closer home, the pensions industry in Kenya has experienced steady growth over time, with the assets under management having grown at a 10-year CAGR of 14.4% to Kshs 1,547.4 bn in 2021 from Kshs 403.2 bn in 2011. However, pensions uptake is still low

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Unit Trust Funds Performance, Q1'2022

Jul 31, 2022

Unit Trust Funds (UTFs) are Collective Investment Schemes that pool funds from different investors and are managed by professional fund managers. The fund managers invest the pooled funds in a portfolio of securities with the aim of generating returns to meet the specific objectives of the fund. Following the release of the Capital Markets Authority (CMA) Quarterly Statistical Bulletin-Q2’2022, we analyze the performance of Unit Trust Funds, as the total Assets Under Management (AUM) have been steadily increasing and they are among the most popular investment options in the Kenyan market. We will further analyze the performance of Money Market Funds, a product under Unit Trust Funds. In our previous focus on Unit Trust Funds, we looked at the

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Kenya’s Public Debt 2022; Debt Service Coverage

Jul 24, 2022

Kenya’s public debt has been on the rise, increasing by a 10-year CAGR of 18.2% to Kshs 8.6 tn in May 2022, from Kshs 1.6 tn in May 2012 owing primarily to the government’s significant borrowing to fund infrastructural projects and bridge the fiscal deficit which has averaged 7.4% of GDP over the last 10 years coupled with the increasing debt servicing costs especially for US Dollar denominated commercial loans given the shilling’s continuous depreciation. Additionally, the continued guaranteeing of state corporations that have been performing poorly has placed a burden on the government to support them. The debt mix, as at May 2022 stood at 50:50 external to domestic debt, compared to 45:55 external to domestic debt in May 2012. Notably, Kenya’s debt stock has increased significantly due to advances from multilateral lenders with the debt to GDP ratio coming in at 69.1% as of May 2022, 19.1% points above the IMF recommended th...

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Nairobi Metropolitan Area (NMA) Land Report 2022

Jul 17, 2022

In July 2021, we released the Nairobi Metropolitan Area Land Report 2021, which highlighted that the NMA land sector recorded an average annual price appreciation of 1.5% in 2020/21, with asking prices averaging at Kshs 125.5 mn, thereby realizing a 10-year capital appreciation CAGR of 10.2% from Kshs 47.5 mn recorded in 2011.  The performance was mainly driven by the increased demand for land in low rise areas which recorded the highest annualized capital appreciation of 4.5% compared to a market average of 1.5%. Land prices in the commercial areas of the NMA registered the highest price correction declining by 3.6%. This was attributed to; i) their unaffordability, with average prices coming in at Kshs 404.4 mn compared to a market average of Kshs 125.5 mn, and, ii) limited development activities in the Real Estate commercial office sector resulting from oversupply of spaces thus some d...

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Sub-Saharan Africa (SSA) Eurobonds Performance 2022

Jul 10, 2022

Eurobonds are fixed income debt instruments denominated in a currency other than the currency in which the bonds are issued. Sub-Saharan Eurobonds, of which most are listed on the London and Irish stock exchanges, allow governments and corporations to raise funds by issuing bonds in a foreign currency. Majority of countries in the region issue Eurobonds to finance maturing debt obligations and heavy infrastructural projects. Africa’s appetite for foreign-denominated debt has slowed down in 2022, with the only issuers being Nigeria and Angola who raised USD 1.3 bn and USD 1.8 bn in March and April 2022, respectively. The reduced issuance of Eurobonds is on the back of increasing yields, as investors demand more compensation due to increasing inflationary pressures across most African countries. Key to note, the region’s continued economic recovery has been dented by surging fuel and food prices that have strained the external and fiscal balances of commodity impor...

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