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Recent Topicals

The performance of the Kenya Shilling

Jul 19, 2015

Emerging market currencies have been under pressure during the year because of the US Federal Reserve’s announcement of an intention to raise interest rates. The expectation of a rate hike by the Fed has sent capital flowing out of emerging markets, causing a depreciation of most currencies. Additionally, the possibility of a “Grexit” is exacerbating the need for investors to invest in safer regions, such as the US. As expected, the impact of this on the currencies differs from country to country depending on the strength of the country’s macroeconomic fundamentals, with countries that have weaker fundamentals experiencing higher currency volatility. The Kenya Shilling has witnessed a downward pressure against the dollar since the beginning of the year, losing 13.0% YTD to close at 102.5 as of Friday 17th July from a rate of 90.6 at the start of the year. The depreciation of the shilling can be attributed to a number of factors, namely:...

The effects of the Global Entrepreneurship Summit being held in Kenya

Jul 12, 2015

The Global Entrepreneurship Summit (GES) is a global forum that brings together business owners, young innovators, educationalists, policymakers, thought leaders and investors from across the globe to support developing regions. Since 2010, the U.S has elevated entrepreneurship to the forefront of its engagement with the world and the GES is a formal annual forum for the engagement. The 6th annual gathering is being held in Kenya on 25th - 26th July 2015, and is being co-hosted by U.S. president Barrack Obama and Kenya’s president Uhuru Kenyatta. This will be the first time that the summit is held in Sub-Saharan Africa, and the decision to hold it in Kenya showcases the country’s huge economic potential. Kenya join’s Turkey, UAE, Malaysia and Morocco as previous hosts of GES. The country is blessed in numerous enviable ways – a great geographical location that makes it a regional hub; great weather; an educated, numerate, liter...

Review of Kenya’s debt sustainability in the wake of the 2015/2016 budget

May 1, 2015

The Kenyan economy has done really well over the last few years, and according to the government the picture is even rosier as they project the GDP to grow at 6.9% in this financial year, despite the insecurity challenges facing the country. On the back of this accelerated projected growth rate, the cabinet approved the 2015/2016 budget that will be read in parliament, and passed, in the month of June. Of key note is that the total government expenditure has continued to grow, almost doubling over the last five years. However, revenue growth has not kept pace, growing at 59% over the same period. The only mitigation to expenditure growth far outpacing revenue growth is that a majority of expenditure is allocated towards development, which has more than doubled, while the recurrent expenditure has grown by 15% over the same period. The faster growth in government expenses compared to revenue has led to an increase in total government deb...

Alternative Investments in Kenya

May 10, 2015

Investors typically invest in well-known and liquid asset classes such as money markets, equities and fixed income, collectively referred to as “traditional investments” or “public markets”. As an “alternative” to these traditional investments, there are other investments referred to as “alternative investments” such as private equity, real estate and structured products. While relatively illiquid and more complex, alternative investments offer higher and more stable returns over the long-term. Investor’s focus is gradually shifting towards alternative investments, due to increased investor education and global capital searching for lucrative returns available in the region. Demographic trends, including a young population and a growing middle class, alongside rapid urbanization and government’s sluggish pace in the provision of essential services, has created an opportunity for private capital to drive growth. When analysing returns over the last 5 years, across var...

Structured Products

May 17, 2015

In last week’s report, we showcased alternative investments as an attractive asset class. Alternative investments can be classified as investments in real estate, private equity and structured products. While relatively illiquid and more complex than traditional investments (fixed income and equities), alternative investments offer higher and more stable returns over the long-term as illustrated in our last week’s report.Alternative investments are also referred to as private investments because you cannot access them from the public markets. For example, public / traditional investments are reported on daily in the press. And some like unit trusts are even required by regulation to report their pricing on a daily basis. On the other hand, alternative / private investments can only be accessed by invitation or by inquiry.Having discussed alternative investments last week, we will now delve deeper into each type of alternative investment, starting with st...