Safaricom’s Upcoming AGM
The firm's resolutions target investment in start-ups and Ethiopia mobile money operations
👋 Welcome to The Mwango Weekly by Mwango Capital, a newsletter that brings you a succinct summary of key capital markets and business news items from East Africa.
This week, we cover Safaricom’s upcoming AGM, deals, mergers, and acquisitions, and Kenya’s Q1 2023 GDP report.
First off, enjoy a dose of our weekly business news in memes.
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Safaricom’s Upcoming AGM
Investment in Startups: Among the special business resolutions in Safaricom PLC’s AGM slated for July 28th 2023 is the incorporation of Spark Fund, an investment fund currently within Safaricom PLC, into a private limited company that will be a wholly owned subsidiary to focus on growth and development of seed-stage startups in Kenya. Further, the Board of Directors has also put forward a proposal to shareholders on the incorporation of a new company or re-purposing of an existing subsidiary, VentureCo, to invest in growth-stage startups.
Ethiopia Mobile Money Plans: Safaricom will be seeking shareholder approval to incorporate Safaricom M-PESA ET which will house and provide mobile financial services in Ethiopia. The subsidiary will be fully owned by Safaricom Ethiopia, while Safaricom PLC is expected to indirectly control more than 50% of Safaricom M-PESA ET. Safaricom M-PESA ET will face competition from Telebirr, a mobile money service by state-owned Ethio Telecom.
M-Pesa Ownership: Further, the Board of Directors will put forward proposals to shareholders to acquire 50K shares or the entire issued share capital of M-PESA Holding. Vodafone Group has been the sole shareholder in M-PESA Holding - the custodial trustee of the M-PESA service. The nominal cash consideration of the transaction will be a $1 payment to Vodafone Group.
“Safaricom will pay Vodafone Holdings a nominal cash consideration of USD 1 for the Transaction as M-PESA Holding is a trust company and the transfer does not bring any financial benefit to either party. Having Safaricom as the shareholder of M-PESA Holding aligns with regulatory requirements under the NPS Regulations by ensuring that Safaricom assumes overall responsibility and oversight for the trust’s operations and the entire M-PESA payment system.”
Board of Directors, Safaricom PLC
M-pesa Super App: According to an operational update for the year to April 2023, customers on the M-PESA Super App exceeded 3M, up 150% year-on-year [2022: 1.2M]. The number of transactions processed on the App grossed 489M with an aggregate value of KES 1.3T. On average, the number of transactions and the transaction value per user in the period stood at 163 and KES 433.3K, respectively.
5G Rollout: Airtel Kenya announced plans to roll out 5G across the country, becoming the second telecoms firm to do so. Safaricom PLC activated its 5G service in March 2021 and launched it in October 2022, and as of the end of FY 2023, active 5G sites totalled 205 [FY 2022: 35] across 23 out of 47 counties. Safaricom is targeting 800 5G sites by FY 2024. Separately, Burundi plans to introduce commercial 5G services in July 2024. As of 2022, data shows that Burundi, with a population of 12.9M people, had 1.82M internet users and an internet penetration rate of 14.6% [Kenya: 42%].
Safaricom Stock Performance: At the Nairobi Securities Exchange, the Safaricom share price was down by 36.7% in 2022, and as of market close last week, Safaricom was down 21% over the last 1 year and down 19.1% year-to-date.
Ethiopia’s RFQ for Telecoms License: The Ethiopian Communication Authority launched a Request for Qualifications (RFQ) for the award of the country’s second private telecom licence (Licence B). Interested operators are to submit a written request before 15th September 2023. This is part of the liberalisation of the country’s telecoms market which began with Safaricom Ethiopia receiving the first private licence. Several international brands including Veon, Orange and Etisalat have expressed interest in entering the market.
Deals, Mergers, and Acquisitions
IBL Group to Seize Control: Mambo Retail, which is controlled by IBL Group, will acquire an additional 11% stake in Naivas for $42M (KES 6B) valuing the supermarket chain at $380M (KES 53.5B). This comes after IBL together with Proparco and DEG jointly acquired a 40% interest previously owned by the International Finance Corporation in Naivas on 27th June 2022. The transaction will see Mambo Retail secure a controlling interest of 51% in Naivas.
ONGC Videsh Considering Tullow Oil’s Kenya Assets: ONGC Videsh and Indian Oil Corp are reportedly in talks to acquire a stake in Tullow Oil’s $3.4B (KES 479B) project in Kenya. The deal’s value could range between $2B (KES 281.8B) and $3B (KES 422.7B). Currently, Tullow holds a 50% stake while TotalEnergiesSE and African Oil Corp each own a 25% stake. Tullow had earlier in July said the success of the project depended on finding a partner.
“A confidential process to secure a strategic partner for the material development project in Kenya continues and Tullow is confident that it will make substantial progress in the second half of the year.”
Tullow CEO, Rahul Dhir
IFC’s Proposed Loan to Zhende: Zhende Medical, a medical supplies manufacturer from China which supplied critical medical supplies during the pandemic globally, intends to construct a manufacturing plant in Nairobi with the International Finance Corporation (IFC) proposing a loan of up to $70M (KES 9.9B) for the project. The IFC also engaged with Zhende through various advisory services including country and location selection, among other variables.
Pesapal-Sokohela Partnership: Pesapal a leading payment gateway in Kenya has partnered with Sokohela a digital credit provider to launch a new credit product for SMEs in Kenya. Benefits of the product include flexible repayment terms of up to 12 months with no collateral or guarantor required, among others.
"SMEs are the engine of our economy, but they often face difficulty accessing credit due to high-interest rates, stringent collateral requirements, lengthy procedures, and lack of financial records. We understand these challenges and have partnered with Sokohela to address them. We're all about our merchants being confident with their financial decisions and becoming world-class at what they do – regardless of their size. We design our tools on the Pesapal platform to help entrepreneurs achieve their business goals without overextending. Finance terms are transparent and easy to understand, supporting comfortable repayment management."
Pesapal Founder, Agosta Liko
MyDawa Raises $20M: Kenya’s health startup MyDAWA has secured $20M (KES 2.8B) from Alter Semper Capital to fuel its expansion. Initially an e-pharmacy, MyDAWA now offers online and in-person consultations, lab services, and branded products. As part of the expansion, MyDawa has acquired Uganda’s Guardian Health which has a presence in key Ugandan cities.
“Alta Semper’s ambition exactly matches that of MyDawa, and it brings the drive, connections and clout to succeed. Three years ago, AAIC, a Japanese-backed African healthcare fund, joined as our first external investor and now the team has been augmented in the strongest manner possible.MyDawa now has both a solid secure base and a great expansion opportunity based on a great offering which improves health outcomes. Guardian is a great first step in fulfilling our ambition.”
MyDAWA Co-founder, Neil O'Leary
ShopZetu Raises $1M: ShopZetu, a fashion technology startup, has raised $1M (KES 140.9M) in pre-seed funding. The funding was led by Chui Ventures with participation from Launch Africa, Roselake Ventures, Logos Ventures and other angel investors. The financing is set to be used to scale customer acquisition, expand the vendor base, venture into beauty and home decor categories, and explore partnerships with international fashion brands.
“We are excited to be leading the charge in online fashion and lifestyle retail.The future of e-commerce in Africa will be driven by content, community, and hyper-personalization through recent advances in artificial intelligence.”
Shopzetu CEO, Mavin Kiguru
Britania Foods in Liquidation: Vide a Gazette notice dated 26th June 2023, PKF Consulting (K) Limited, the administrator of Britania Foods, is set to liquidate the biscuit manufacturer following the registration of the notice to transition the firm from administration to a creditors’ voluntary liquidation under Kenya’s Insolvency Act, 2015.
Yetu MFB Acquired: National Microfinance Bank (NMB) in Tanzania has completed the acquisition of all assets and liabilities of the former Yetu Microfinance Bank from the Bank of Tanzania effective 24th May 2023.
"NMB Bank welcomes former Yetu Microfinance customers effective from 6th July 2023 to access their deposits & service their loans throughout the NMB Branch network."
Kenya’s Q1 2023 GDP Report
The Kenya National Bureau of Statistics in the week released the Q1 2023 GDP Report. Here are the key highlights:
Economic Growth: In the first quarter of the year, the economy expanded by 5.3% compared to 6.2% in Q1 2022, driven by a rebound in Agriculture which grew by 5.8%.
Sectoral Growth: Agricultural activities grew by 5.8% driven by sufficient rainfall. Accommodation and Food services were up 21.5%, while Information and Communication Technology expanded by 8.7%. Transport and Storage, Financial and Insurance and Wholesale and Retail trade edged higher.by 6.2%,5.8% and 5.7%, respectively.
Inflation Trajectory: Inflation rose from an average of 5.34% in Q1 2022 to 9.13% in Q1 2023 due to increases in food and fuel prices.
Kenyan Shilling: While the Kenyan Shilling weakened against the US Dollar, Euro and Sterling Pound by 11.1%, 6.1% and 0.5%, respectively, it appreciated against the Japanese Yen, South African Rand, Ugandan and Tanzanian shillings. In the quarter, the CBR rose from 8.75% in February to 9.5% as at March 2023.
Capital Markets: The number of shares traded at the NSE increased by 131.5% from 251M in March 2022 to 581M in March 2023. The NSE 20 share index declined by 225 points to 1622 points in March 2023 from 1847 points in March 2022.
Current Account Deficit: The deficit narrowed by 39% from KES 139.3B in Q1 2022 to KES 84.9B in Q1 2023.
Balance of Trade: Total exports increased by 11.9% to KES 232.6B, while imports declined by a marginal 0.5% to KES 589.8B. This resulted in a narrowing of the trade deficit from KES 384.9B in Q1 2022 to KES 357.2B in Q1 2023.
Foreign Debt: The stock of external public debt rose from KES 4,080.6B at the end of March 2022 to KES 4,713.7B at the end of March 2023, representing a 15.5% increase. As of April 2023, external debt totalled KES 5.1T.
International Merchandise Trade: The volume of trade grew by 2.7% to KES 822.4B in Q1 2023 from KES 800.5B in Q1 2022.
Remittances: Remittances from Kenyans living abroad increased by 10.6% to KES 128.9B in Q1 2023 from KES 116.6B in Q1 2022.
Access a copy of the report here.
Markets Wrap
NSE: In Week 27 of 2023, Olympia was the top-performing stock on the Nairobi Securities Exchange, appreciating by 30.4% to KES 5.1. Umeme was the worst-performing stock, falling 24.4% to KES 9.98. The NSE 20 index rose by 2.7% to 1,618.1 points while the NSE 25 index was down by 4.0% to 2,838.3 points. The NSE All Share Index (NASI) edged higher by 4.1% to close at 111.4 points. Equity turnover was up 171.7% to KES 1.6B while bonds turnover fell by 28.1% to KES 11.9B.
Treasury Bills: FY 2023/24 maiden Treasury Bills auction saw the weighted average interest rate of accepted bids for the 91-day, 182-day, and 364-day close at 12.014%, 12.199% and 12.250% respectively. The total amount on offer was KES 24B with the Central Bank of Kenya (CBK) accepting KES 30.1B of the KES 30.1B bids received, to bring the aggregate performance rate to 125.5%. The 91-day and 364-day instruments recorded 667.69% and 22.66% performance rates, respectively. Notably, the yields on the 91-Day and 182-Day Treasury Bills breached the 12% mark.
Treasury Bonds: In what is the first issuance under the new 2023/2024 fiscal year, the Central Bank of Kenya has issued a prospectus seeking KES 40B, with the issuances being FXD1/2023/5 and re-opened FXD1/2016/10 with a 15.039% coupon rate. The period of sale is between 28th June 2023 to 11th July 2023.
Eurobonds: In the week, the yields rose across the 6 outstanding papers on a week-on-week basis.
KENINT 2024 rose the most, up by 180.2 basis points to 13.754%, while KENINT 2048 rose the least, up by 45.6bps to 11.433%. The average week-on-week change stood at 78.33 bps.
All yields were up on a year-to-date (YTD) basis, with KENINT appreciating the most, up by 115.1 bps, while at the lower end, KENINT 2048 appreciated the least, up by 60.9 bps. The average increase was 94.12 bps.
KENINT 2048 led price gains week-on-week, falling by 3.9% to 73.94. On a YTD basis, KENINT 2034 price dropped the most by 5.7%, followed by KENINT 2048 at 5%. The average price change on a week-on-week and YTD basis was -2.8% and -3.1%, respectively.
Market Gleanings
📈 | Costly Credit | As a result of the 100 bps hike of the Central Bank Rate (CBR) by CBK’s Monetary Policy Committee on 26th June 2023, banks are adjusting lending rates upwards:
Effective 10th July 2023, Equity Group’s reference rate stands adjusted to 14.69% plus a margin based on the customer’s credit risk.
Effective 5th August 2023, the Standard Chartered Bank (SCB) internal base lending rate has been revised from 10.0% to 10.5% to bring the interest rate on the Kenya Shilling loan facility to 16.5% p.a.
For NCBA Bank, effective 7th August 2023, the Kenya Shillings Base Lending Rate is set to increase from 12% to 13%. Fixed-rate loans will be unaffected while for variable-rate loans, the Kenya Shillings base lending rate will increase by 1% p.a.
Access Bank Base Rate adjusted to 14.63% plus a margin based on the customer’s credit risk effective 8th August 2023.
💸 | Kenya Secures $500M Facility | In the week, Citibank, Rand Merchant Bank, Standard Bank, and Standard Chartered Bank announced the successful closure of a $500M (KES 70.5B) 3-year and 5-year Syndicated Medium Term Loan to Kenya. The Africa Export-Import Bank was a Bookrunner and Mandated Lead Arranger in the syndication, and it subscribed to the 5-year instrument. The National Treasury has earmarked the proceeds for development projects in line with the development budget approved by Parliament for FY 2022/2023.
🧾 | FY 22/23 Revenue Collection | As of 30th June 2023, 6.3M Kenyans had filed their returns for the 2022 year of income, up 14.5% year-on-year. 5.4M Kenyans had filed returns by 28th June, meaning 0.9M or 14.3% of Kenyans who filed their returns did so in the last 2 days of the eligible filing period. Separately, across the region, the Tanzania Revenue Authority collected TZS 24.11T ($10.1B) in tax revenue for FY 2022/2023. This is a 97.4% of the TZS 24.76T ($10.4B) target which is an increase of 8.2% year-on-year.
💰 | KDF Gets Special Fund | MPs approved the Public Finance Management (National Peace Support Operations Fund) regulations 2023 which allows the Kenya Defence Forces (KDF) to have its special fund. The kitty's size is at KES 7B ($49.7M), of which, the government will fund KES 1B (14.3%) delinked from the accounts of the Ministry of Defence, with the United Nations Peace Operations Support Mission contributing KES 6B ($42.6M).
🚀 | Price Hikes | The Matatu Owners Association announced an increase of up to 30% in bus fares effective 5th July 2023 on account of higher prices of spare parts, loans, and tyres. Separately, broadways announced new, higher bread prices effective 1st July 2023, while Multichoice, the owner of GOtv and DStv, also announced new package prices effective 1st August 2023, which are KES 50 and KES 212.50 higher, on average, respectively.
👨🏽💼 | CBK Chairperson Shortlist | Abdikadir Aden, John Konchellah, James Wahome, Thomas Mwadeghu, Andrew Musangi, and James Lopoyetum have qualified and been shortlisted by the Public Service Commission for the CBK Chairperson interviews which will be held at PSC offices on Wednesday, July 12, 2023.
حلال | Kuza Shariah Fund | Kuza Asset Management has received regulatory approval from the Capital Markets Authority to offer the Kuza Shariah Momentum Fund, a Shariah Compliant Fund. It joins KCB Investment Bank in having Shariah Compliant investment options.