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Recent Topicals

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The Total Cost of Credit Post Rate Cap.

Jan 15, 2018

Following the recent headline on the Business Daily on the total cost of credit at 19% compared to the legislated cap at 14%, we: revisit the topic on interest rate caps by a general overview, have a look at initiatives put in place to make credit cheaper and more accessible, assess the impact on private sector credit growth, and, analyse the true cost of credit and what more can be done (see here for the Business Daily article). Section I: Revisiting the Topic on Interest Rate Caps by a General Overview We have already done four previous focus notes on the topic, namely, Interest Rate Cap is Kenya’s Brexit - Popular But...

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What Real Estate Bubble?

Dec 24, 2017

We first wrote about the commonly discussed topic of a Kenyan real estate bubble in our Focus dated March 2017, and titled ‘Is there a Real Estate Bubble in Kenya?’ It touched on characteristics and conditions precedent for a bubble, and also reviewed the United States and Ireland as case studies, concluding that the Kenyan market is not experiencing a bubble but the normal real estate cycles of rising demand, peaking market, falling market then bottoming out, and the rapid price increments witnessed were a result of low supply and high demand. We revisit the matter this week as we come close to the end of 2017, to evaluate the metrics, consider additional case studies, and review if our previously arrived at conclusion still holds. We start by defining a bubble and look at previous examples of major real estate bubbles globally, in the Baltic States, United States and Spain, focusing on the causes and how t...

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Safaricom’s 44% of NSE Market Capitalization and Portfolio Construction

Dec 18, 2017

Due to the unusual dominance of one counter in the NSE, this week we seek to examine the evolution of Safaricom’s share price and market capitalisation, its effect on the performance of the NSE, its performance in comparison to other listed Telcos in Sub Saharan Africa, how it is likely to affect portfolio construction decisions and conclude by drawing the key takeouts. The Nairobi Securities Exchange (NSE), with 62 listed companies, has a total market capitalisation of USD 23.4 bn (Kshs 2.4 tn). The 62 listed companies are classified into various sectors with the Telecommunication and Technology sector being the largest by market capitalisation, and Safaricom Limited being the only listed company in the sector. The table below indicates the number of companies in each sector and their corresponding market capitalisation.   No.

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Sub Saharan Africa Financial Services Report

Nov 19, 2017

Having established a strong research team and delivery framework in Kenya, we have now launched a Sub Saharan Africa (SSA) research coverage initiative. The initial coverage will be limited to Financial Services, which is one of our strongest research sectors, alongside real estate research. SSA has long been viewed as the next global growth frontier buoyed by improving macro-economic stability, compelling demographic trends, improved governance and ease of doing business across the continent. However, following a decline in commodity prices and slowing demand from China, the region fell behind the world economy in output, growing at 1.4% in 2016, slower than the aggregate global growth of 3.2%. The slowdown was not evenly distributed amongst countries in SSA, being mainly concentrated in commodity exporters, while more diversified economies sustained robust economic growth, with countries in East Africa including Djibouti, Ethiopia, Kenya, Rwanda and Tanzania, all recordi...

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Nairobi Luxury Apartments Market

Nov 13, 2017

Kenya’s real estate and construction market has grown over the last 7-years, with its contribution to GDP increasing from 12.6% in 2010 to 13.6% in 2016.The growth has been fuelled primarily by (i) demand as a result of growing population at 2.7% per annum compared to the global average of 1.2%, (ii) a high rate of urbanization at 4.4%, compared to the global average of 2.1%, (iii) infrastructural development in various parts of the country, which has opened up areas for development, (iv) entrance of multi-national firms such as Wrigleys, who demand institutional grade commercial and residential real estate, (v) and Nairobi’s status as the regional hub for East Africa. The residential real estate market has seen development of housing to meet demand from the high-end, upper middle, lower-middle and the low income market segments. In this sense, opportunities exist for either investment or home-ownership purposes, whichever the user deems fit. Notably, residential units have become o...

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