Loan Prices soar higher
Good Morning.
Starting today, all cabinet designates will be vetted by Parliament. The vetting process will be undertaken by a 15-member committee, chaired by the National Assembly speaker Moses Wetangula.
High Loan Prices
Data from the Central Bank of Kenya showed that the cost of loans from commercial banks hit 12.38% in August. This is the highest rate since November 2019.
why the increase in the cost of loans?
In May this year, the Monetary Policy Committee raised the CBK interest rate to 7.5% up from 7% to tame inflation. As a result, the cost of loans rose to 12.27% in June and 12.35% in July.
Last month, the Monetary Policy Committee further raised the base lending rate to 8.25% which increased the cost of loans further
Banks have raised the deposit rate to 6.93% and savings rate to 3.46%.
Treasury reintroduces reward for Fraud whistleblowers
Treasury re-introduced the Capital Markets (Whistleblower) Regulations 2022 in parliament. These regulations outline rewards of upto Ksh 5 million for whistleblowers who leak capital market fraud.
The rules enforce the Capital Markets Act which states that the Capital Markets Authority may reward any person who provides new and timely information leading to the recovery of money that is paid into an investor compensation fund.
“where the Capital Markets Authority recovers Penalties and illicit gains in the capital markets, whistleblowers shall be eligible to a reward of 3% of the amount recovered subject to a maximum reward of Ksh 5 million in line with section 18(2A) (b) of the Capital Markets Act.” Under the Capital Markets (Whistleblower) Regulations 2022, the following amount to reportable misconduct:
Capital Markets Fraud
Failure to comply with legal and regulatory obligations
Other offenses in the Capital Markets Act and Regulations
Kenya was fined ksh1.3 billion by China for defaulting on repayment of a Chinese loan
The Chinese banks fined Kenya Sh1.312 billion in the year ended June for loan defaults. The (Sh1.312 billion) relates to the cost of default on interest at one percent of the due amount.
The Repayment of the SGR loan started in January 2020 after the lapse of a five-year grace period that Beijing had given Kenya.
The default came in last year but Kenya asked for an extension of the debt repayment moratorium from bilateral lenders, including China, by another six months to December 2021. This saved Kenya from committing billions to the Beijing lenders.
But the lenders, especially Exim Bank of China, opposed Kenya’s application for a debt repayment holiday.
The loan default underscores Kenya’s financial distress in the face of fast-maturing debts that have eaten deep into tax collections and squeezed funds for development projects.Diageo Plc makes offer to acquire additional shares in East African Breweries Limited
Diageo Plc, the world's largest spirits maker, offered to buy additional shares in Kenya's East African Breweries to boost its stake by a third to 65%.
Diageo is offering to buy 118.39 million shares at 192 shillings ($1.59) each, amounting to a 40% premium over the market price. Diageo stated that the offer would close on March 10, next year.
Diageo disclosed that it would not seek to take over the entire company should it attain its desired level of ownership, and it will keep the company listed.
why the interest in East African Breweries Limited?
Diageo stated that the resilience shown by EABL during the COVID-19 pandemic persuaded it to seek an increase in stake.
East African Breweries PLC (EABL) profit for the full year ended June 2022 rose by 124% to Ksh 15.6 billion. The brewer’s net sales for the period rose by 27% year on year to Ksh 109.4 billion. During the period, the company’s board recommended a final dividend of Kshs 7.25 per share (interim Kshs 3.75 per share), bringing the total dividend for the year to Kshs 11.00 per share.
What next?
Once all the necessary approvals have been obtained from the Capital Markets Authority, the tender offer will open on 30th January 2023 and will be open to holders of ordinary shares on the register of EABL on 16 January 2023.Plan to revitalize the Nairobi Securities Exchange
Last week, the president presented a plan to make the NSE vibrant again. Here is the breakdown of the plan:
To end the current drought of IPOs
The Nairobi Securities Exchange has not registered a new listing since October 2015, when the Stanlib Fahari RREIT was listed. As a result, the president promised to privatize 6 to 10 state-owned corporations in the next six months and asked the private sector to add five more listings.
Ease of trading shares
The president highlighted his dream of Boda Boda riders and “Mama Mboga” trading stocks with their mobile phones as they continue their day-to-day business activities.
This requires fractional ownership of shares to make them easily affordable by anyone and public education on investments so that investors can be equipped with the knowledge to help them succeed in the stock market.
Introduction of a dollar-dominated bond
The president stated that the dollar-dominated bond would assure investors returns on investment in a stronger currency.
WHAT YOU MUST HAVE MISSED
a. Kenya bought half of its sugar from Uganda in August
Kenya bought half of its imported sugar from Uganda in August, making Nairobi a leading destination for Kampala’s exports in August. Data from the Sugar Directorate shows that Uganda exported 9,739 tonnes of sugar worth Ksh1.3 billion, accounting for 56% of the 17,590 tonnes of the commodity that Kenya imported during that month.
b. Kenya to prioritize the development of a gas pipeline from Kenya to Tanzania
President William Ruto stated that Kenya will pursue the construction of a gas pipeline linking Tanzania's main city, Dar es Salaam, to the coastal city of Mombasa and on to the capital Nairobi, in a bid to reduce energy costs. The 600km pipeline has been estimated by local reports to cost around $1.1bn (£990m).
The President spoke to Tanzanian media on Monday, shortly after holding bilateral talks with President Samia Suluhu on his first visit to the neighbouring country since taking office in September.
c. The Nairobi Securities Exchange (NSE) petitioned the Capital Markets Authority (CMA) to amend regulations that impose term limits for its CEO
The Nairobi Securities Exchange (NSE) petitioned the Capital Markets Authority (CMA) to amend regulations that impose term limits for its CEO and allow the NSE to extend the tenure of its current boss, Geoffrey Odundo, beyond March next year.
The NSE chief executive is expected to serve for a maximum of eight years and the chairperson for two years under CMA regulations. Mr. Odundo was hired as CEO of the bourse in March 2015 from Co-operative Bank, meaning the stock exchange cannot extend his term beyond March without an exemption from the regulator.
d. Kenya Commercial Bank seizes English Point Marina
KCB Group seized English Point Marina for a second time after the court lifted a High Court Order blocking the bank from taking hold of the Mombasa luxury property over Ksh5.2 billion debt.
The Court of Appeal has frozen High Court orders by Justice Dora Chepkwony that blocked the lender’s appointed receiver-manager, Kamal Anatroy Bhatt, from taking over the property without disclosing the reasons.