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Recent Topicals

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The Competition Authority of Kenya approves Kuramo Capital Management’s investment in Trans-Century

Dec 19, 2016

The Competition Authority of Kenya has approved Kuramo Capital Management’s acquisition of a 24.99% stake in Trans-Century Limited through issue of 93.8 mn new ordinary shares and 70,120 cumulative preference shares i.e. 100% of the redeemable preference shares, in TC Mauritius Holdings. This follows Kuramo Capital’s USD 20 mn convertible debt investment into the company to assist in refinancing TC Mauritius Holdings’ Limited Senior Unsecured Convertible Bond of USD 60.3 mn.This is a positive move as (i) it brings on board a key strategic partner that has the same focus as Trans-Century, and this will drive growth and investment in region, thereby maximizing shareholder value, (ii) with the introduction of Kuramo Capital into Trans-Century’s board, there will be an improvement in corporate governance structure, as a number of transactions can’t be carried out without their explicit approval, including limits on issuance of debt, and equity, and entering into any related-party...

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Kenyan Debt Sustainability

Dec 11, 2016

There has been a lot of discussion on whether Kenya as a country is able to sustain the current debt levels and as to whether the economy has the capacity to service the outstanding government debt. This week, we seek to look at the status of the debt level and what this means for the economy.Over the years, we have seen the national budget continue to grow with the total expenditures growing at an average of 15.4% to Kshs 2.0 tn in 2015/16 from 977.0 bn in 2010/11, while revenue growth (KRA Tax collections) has increased by 14.2% to Kshs 1.3 tn in 2015/16 from Kshs 670.0 bn in 2010/11 meaning that the difference has been funded through borrowing. This has led to an increase in the debt level from 40.7% debt to GDP in 2011 to the current level of 50.3%. According to the IMF, the target debt to GDP for developing countries should be at or below 50%, meaning that the current debt level in the country has surpassed the standard set by the global lender, and this may pose fiscal...

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Equator Capital Partners invests in Jamii Bora Bank

Dec 7, 2016

Equator Capital Partners, a US based private equity fund, has invested Kshs 600 mn through its ShoreCap II fund into Jamii Bora Bank, for an equity stake of 15%. The investment is by way of conversion into equity of a convertible debt Equator Capital Partners held of Jamii Bora Bank. As per our Cytonn Weekly #15, total debt was provided by Equator Capital Partners and Progression Capital Africa Limited of Kshs 1.2 bn, which was to be used to grow Jamii Bora Bank’s rural and urban network and also increase its capacity to lend to the SME sector, as part of their Kshs 5.0 bn financing plan. Jamii Bora Bank, a Tier III bank, has a customer base of 400,000 customers and a network of 26 branches, and is ranked 25th out of 41 banks in Kenya with a market share of 0.5%. Earlier in the year, the bank looked to raise Kshs 5.0 bn in a mix...

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Kenya Banking Sector Q3’2016 Report

Dec 4, 2016

Following the release of the Q3’2016 results by banks, we undertook an analysis on the Kenyan Banking sector to point out any material changes from the H1’2016 Banking Report. In our Q3’2016 Banking Report, we analyse the results of the listed banks in the past quarter so as to determine which banks are the most attractive and stable for investment from a franchise value and from a future growth opportunity perspective.The report is themed “Transition continues, to a more stable sector, in an era of increased regulation” as the issues facing the banking sector in Kenya persist. There are some key areas of transition, which will change the banking landscape in Kenya going forward: Consolidation – Consolidation in the banking sector continues to gather pace, with weaker banks being for...

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Impact of the US Elections on the Kenyan Economy

Nov 20, 2016

On 8th November, 2016, Donald J. Trump emerged the victor in the US presidential elections, winning 290 electoral votes, out of the 270 required to emerge victorious. Further to a Republican winning the presidential seat, Republicans additionally won the House and the Senate, restoring the Party to the pinnacle of the US Government.As is the case with any change of administration, the US President-elect will try to make good on his campaign promises to the voting public, which are expected to potentially change the way the US relates with the rest of the world.  In this weekly, we look at the areas in which Kenya partners with the US, highlight the current state and impact of the partnership, then move to analyse how the landscape will most likely change under the Trump administration, and finally give our outlook on the future relations between Kenya and the US.Kenya and the US have maintained a mutually beneficial partnership for years. The US began r...

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