BBI's Future : court of appeal convenes a case management conference.
7 June 2021
Good Morning,
On Wednesday last week, the President of the Court of Appeal convened a case management conference on the hearing of the BBI appeal. Below are the important things to note from the conference:
The hearings will commence on the 29th of June and end on the 2nd of July 2021.
The appeal will be heard by a seven judge bench, all physically present in court.
Each of the parties will have 2 hours to make oral submissions although the court shall retain discretion as to the timings.
The appellants are to file the appeal within 7 days and the respondents will respond in 14 days.
The written submissions are limited to 40 pages for each party.
CAPITAL MARKETS
1. Nation Media Group Shareholders set to approve company share buyback
Lat week, The Board of directors of Nation Media group made a recommendation to its shareholders to effect a share buyback plan during its annual general meeting on the 25th of this month.
A share buyback is a transaction in which a company repurchases its shares.
Details of the share buyback -
The share buyback will be of 10% of their issued shares (dependent on the shareholders’ decision).
The maximum share buyback price will be Ksh 25 per share and minimum will be the price equivalent of an ordinary share.
The ordinary shares acquired by the company after the buyback will be held as treasury shares hence will no longer get dividends or voting rights.
Why would a company consider a share buyback ?
If the company has too much cash in its books and few opportunities to invest, Cash in the bank often leads to more costs. A share buyback is a way to return the cash to the shareholders.
It is a tax efficient option in the case that the tax levied on dividends is higher than that of capital gains.
To support the share price of the company in the case that the company believes its share is undervalued.
A Major hinderance to the Nation Media group share buyback
In 2020, the Capital Markets Authority developed draft guidelines on share buyback transactions for companies listed on the Nairobi Stock Exchange. The guidelines provide timelines and disclosure requirements for such transactions.
However, the guidelines have not been adopted or effected by the Capital markets Authority. This makes it unclear what steps Nation Media Group should take.
2. Dominance of the ‘Big stocks’ on the Nairobi Stock Exchange
Kenya has increased its weighting on the Morgan Stanley Capital International (MSCI) emerging markets index from 8.02% to 9.49%. This index is used by foreign investors to allocate their resources to emerging markets like Kenya. This means that the market in Kenya is doing pretty well.
However, the concern in the Kenyan market is that about 5 stocks dominate the Nairobi Stock exchange. These five stocks account for about 82% of the entire market and recored a gain of ksh 334 billion as from 1 January compared to the ksh 310 billion appreciation of all shares at the Nairobi Stock exchange.
The big companies include Safaricom, East Africa Breweries limited and BAT Kenya. The major problem with having a few companies dominate the exchange is that the performance of Kenya’s market in any given day is dependent on the performance of their shares.
3. Bitcoin gaining popularity on Kenya?
Few facts about Bitcoin in Kenya:
—>Bitcoin is not illegal in Kenya.
—> By February 2021, the number of active users as per LocalBitcoins was at 17,000 with transactions of upto Ksh 100 million a week.
—> Most users are below 30 years of age.
Tuskys Supermarket seeks to lease its brand through franchise
Tuskys supermarket has sought approval from the Competition Authority of Kenya to lease its brand as a franchise model. This would enable Tuskys to raise funds and keep the supermarket chain afloat amid the looming liquidation. Tuskys was to receive Ksh 1.6 billion in debt from a bank in Mauritius but there has been delay in receiving the funds.
The Competition Authority of Kenya, after receiving the final draft of the franchising agreement from Tuskys, will advise the supermarket chain on the legal steps and requirements to be considered before franchising.
Youtube new terms of Service : what it means for content creators in Kenya
By now, all YouTube users have received an email from Youtube notifying them of the update to its terms of service. The terms of service took effect last week on the 1st of June. The terms of service are as follows;
a. Youtube prohibits collection of data that identifies a person without his/her permission.
b. Youtube has specifically prohibited the use of facial recognition technology to gather information about users.
c Youtube has full rights to monetise all content. This means that as from 1 June, ads may appear on channels not in the Youtube Partner Program and content creators will not get a revenue cut from these ads that appear in their videos.
d. Earnings from Youtube will be considered as royalties from a US tax perspective and content creators outside the United States were required to provide tax information to Adsense to determine the amount of taxes to be deducted.
e. The taxes are to apply to revenue generated from the United States.
State of Kenya’s Real Estate sector
Several property developers in Kenya have decided to freeze investments in construction of residential and commercial spaces.
The main reason for this is that the real estate market has in the past few years suffered from low occupancy rates and low returns. Britam announced that they will halt all property developments till 2025. The reason given was that there is excess levels of supply but low levels of demand. Assent Capital, a private equity firm in Nairobi, has also announced that it will not invest in the real estate market in Kenya.
Other ConversationStarters
President Uhuru Kenyatta appointed only 34 out of the 40 judges that the Judicial Service commission had recommended. Part of the 6 that were not appointed included Justice George Odunga and Justice Joel Ngugi. The two were part of the five judge bench that declared the BBI (Constitution Amendment bill 2020) unconstitutional for flawed processes.
On Thursday last week, Nigeria indefinitely suspended twitter operations in the country. This is after Twitter deleted the president’s tweet which threatened pro-Biafra groups.
Kenya has picked JP Morgan and Citi bank as lead managers for the upcoming 1 billion dollar Eurobond.
A report by Business daily revealed that the inflation rate in Kenya reached 5.87% in May.
Crown paints rights issue of ksh 711 million will begin to trade on the 10th June 2021.
Start up of the week : Kibanda top up
Kibanda top up is a Kenyan Start up that allows restaurant owners to order inventory such as grains, beverages and beef through via app or SMS and receive their orders the next day.
Since its launch, Kibanda Top up has served over 130 restaurants in Nairobi. Last week, it raised US$460,000 in pre-seed funding which will be used to hire critical team members in engineering and supply chain to enable fast growth and development of additional products.