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Friday, March 28, 2008

Kenya's Largest IPO opens amid protests over Rogue Stockbrokers

By JUSTUS ONDARI (The Daily Nation)
Rogue stockbrokers, not the electronic trading system, are to blame for the financial crisis facing Nyaga Stockbrokers and other ills afflicting the Kenyan stock market.

According to a survey carried out by the Nation, adequate discipline backed by harsh penalties for any transgression would rid the Nairobi Stock Exchange (NSE) of such wayward brokers.

Noting that similar systems have been successfully employed in other markets worldwide, including the London and New York stock exchanges, many of the people interviewed said the NSE had no option but to embrace information technology (IT).

Mr Bob Karina, the Faida Securities Ltd managing director, said failure to move with the times could keep the NSE off the competitive global financial market. “We cannot reverse the clock. It is either we move with time or perish,” said Mr Karina, whose firm is a member of the NSE.

As investors welcome the Safaricom initial public offering (IPO), which is opening today, human error has been singled out as the main challenge facing the market where greedy brokers dip their fingers in clients’ investments cookie jars illegally.

For Fred Mweni, the Tsavo Securities Limited MD, the developments at the NSE are a manifestation of lack of integrity and corporate governance structures in some of the brokerage firms.

“The system is not to blame because, like any other, it does what man commands it to do even if it is illegal (command),” said Mr Mweni.

Describing the NSE trading system as efficient, versatile and robust, Mr Mweni said: “If individual brokers cannot keep their fingers off their clients money, we should not shift the blame to the system.”

In the wake of the NSE placing Nyaga Stockbrokers under statutory management early this month over financial problems — a year after another stockbroker, Francis Thuo & Partners went under, accusing fingers were pointed at the market’s automation programme.

Many commentators, including Mr Kassim Bharadia, the CEO of ApexAfrica Investment Bank, criticised the system, saying it gives brokers an undue advantage over clients’ investments, a situation that enables some of them to illegally sell clients’ stocks.

The NSE established the Central Depository System Corporation (CDSC) in 2004 before introducing the Automated Trading System (ATS) in 2006, which greatly improved the speed with which transactions and settlement of traded securities are effected.

Besides the buying and selling of stocks going electronic, the former system in which investors had to deal in stocks by physically signing share certificates was phased out through immobilisation. And this has been cited as one of the loopholes being exploited by the brokers to illegally trade in their clients’ money.

However, Mr Karina and Mr Mweni said that is not an issue and singled out weak monitoring and supervision by the market regulator, Capital Market Authority.

Drawing a parallel with the banking industry, which faced many collapses in the 1990s but is currently riding on a profit wave, they said stringent Central Bank of Kenya supervision has kept banks in the straight and narrow path.

Mr Mweni said that even if the bankers have unfettered access to all their depositors’ money just like the stockbrokers, they are wary of misusing it for fear of CBK’s action.

“On top of losing the licence, if a broker who steals a client’s shilling were to be made to pay, say, Sh100,000 and Sh100 to pay Sh1 million no one will try to steal,” he added. Echoing the sentiments, Vincent Kimani of Capital World Limited said it is time CMA acted tough on the brokers.

“Banks are more than stockbrokers and yet CBK effectively oversees their operations. Why does CMA not do the same with the brokers?” said Mr Kimani.

Indeed, following the collapse of the Nyaga Stockbrokers with investments of 130,000 clients, there have been calls for investment banks and stockbrokers to start publishing their quarterly financial results as a way of promoting accountability and good governance in the stock market.

Leading the calls is Mr Bharadia of ApexAfrica Investment Bank, who said that brokerage firms are not different from banks and insurance companies that are forced by law to publish their results.

“It is extremely important that we start publishing the results as the first step to transparency,” Mr Bharadia told a media briefing in Nairobi recently.

Mr Bharadia, whose investment bank’s turnover reached Sh22 billion in 2007 up from Sh2 billion in 2003 to emerge the top investment bank at the NSE, said such a move will enable investors to know how firms managing their investments were performing.

Thursday, March 27, 2008

It will be easier to elect a black man president than a woman.

It will be easier to elect a black man president than a woman.

Those are the words of former senator and 1972 Democratic presidential nominee George McGovern. He’s actually a Hillary Clinton supporter, but he says he feels that where this country stands today in its thinking, it’s going to be harder to elect a woman. He also says, “I wish that weren’t true… I’d love to see Hillary as president.”

McGovern says he sometimes hears from men who don’t think a woman is ready to assume the responsibilities of the top office in the land. Some worry it’s “too big a job” for a woman or that she wouldn’t be able to “handle those terrorists.” McGovern says he rarely hears the same concerns about a black man.

Some may question whether McGovern is just saying this stuff to lower the bar for his candidate, but a recent survey suggests he might be on to something. The CBS News poll shows 39% of those surveyed believe a woman candidate faces more obstacles in presidential politics today compared to 33% who feel that way about a black candidate. However, African-Americans disagree, saying by an overwhelming margin that black candidates have a harder time.

When asked if people they know have judged Hillary Clinton or Barack Obama more harshly because of race or gender, 42% say Clinton has had a tougher go of it and just 27 percent say Obama.

That’s despite the fact that polling shows Americans see racism as a much more serious problem for the nation overall than sexism.

Here’s my question to you: George McGovern, who supports Hillary Clinton, says it’ll be easier to elect a black man as president than a woman. Is he right?

Interested to know which ones made it on air?

Dee from Montclair, New Jersey writes:
I don’t agree with that at all. I think because it’s a Clinton it’s so, but another woman may not be the case. Personally I think this is a small-minded, stupid comment. The American people vote for a person who we feel is qualified, not based on gender or race. People like McGovern have small minds!

Ron from Richmond, Virginia writes:
Neither one has happened yet, Jack. Only time will tell, but Obama seems to be losing ground as Hillary gathers more supporters. One thing is for sure: the time of old white men running this country is about to change! McCain? Not a snowball’s chance in…. San Antonio!

J. writes:
George McGovern is a classic bigot, who owes a lot of favors to Bill and Hillary from when the two campaigned for him years ago. McGovern is another Hillary Clinton surrogate injecting the race card and whispering buzzwords to white voters in this already vicious Clinton campaign! Please try and understand what these old coots are trying to do at this stage in this already “lost cause” to further hurt Obama’s chance to win against McCain.

Amy from Woodstock, New York writes:
I am a woman and my answer is this: it is easier to elect a man who is sincere and transparent than it is to elect a woman who is dishonest and not transparent. Jack, this is not about gender and race. It is about who we can trust in this election. The Clintons have proven they can not be trusted. There are no joint tax returns for the past 6 years, there is no accountability, nor transparency. We have had enough of this political game.

Ralph from Long Island, New York writes:
He’s as correct on this as he was in making Thomas Eagleton his first choice as VP. In retrospect, not too shocking, really.

Kathy from Georgia writes:
Jack, I am more concerned that it is easier to elect someone with an IQ lower than their shoe size than I am about an African- American or woman.

Wednesday, March 19, 2008

The Guardian International Development- Journalism Competition

Do you have the ability to be a top-notch journalist? Could you write the sort of articles the Guardian would be happy to publish? Here is the chance for your work to be published alongside some of the best journalism in the UK.

The Guardian, in partnership with eight UK-based international non-government organisations (NGOs), wants to find exciting new voices in journalism. We are looking for anyone who is willing to rise to the challenge of writing about some of the most crucial issues facing the developing world today - issues that are often overlooked or underrepresented by the media.

The competition is backed and principally funded by the UK Department for International Development (Dfid) as part of an initiative to raise public awareness of such issues.

There are two strands of entry into this competition. GSK are also playing a major part in funding the competition.

1. For professional freelance journalists (people who have been published before - excluding student journalists - who are not employees of media organisations)
2. For amateurs - including students. Anyone who is not a professional journalist is welcome to enter

How to enter All you need to do is write a 650-1000 word article on an aspect of global poverty covered by a range of themes, and upload it using the online entry form

About the competition The Guardian in association with Dfid and GSK are launching this competition in partnership with Marie Stopes International, Camfed International, International HIV/Aids Alliance, HelpAge International, Plan UK, the Malaria Consortium, Sightsavers International and WaterAid.

How the competition works - Find out more about the different stages of the competition, who will be judging it and the prizes to be won.

Monday, March 17, 2008

Rush to sell Safaricom raises moral questions

Source: Business Daily
With all indications showing that a large number of small investors are likely to be locked out of the forthcoming Safaricom sale, the spotlight must turn to Finance minister Amos Kimunya over his timing of this offer that is billed as East Africa’s biggest.

Mr Kimunya has defied all counsel that his ministry should first deal with credibility issues — some of which are of criminal nature — that investors are facing in their interaction with stock brokers to launch the issue.

Last Friday, as he braved the questions hanging over the haste with which he has moved to bring Kenya’s most profitable company to the market, it became clear that the minister, despite the reconciliatory mood the country has embraced since the signing of the peace deal between President Kibaki and ODM leader Raila Odinga, remains hell bent on playing politics with the Safaricom sale.

This he has done since last year when he insisted on selling the firm in the thick of electioneering in December.

Then, he often invoked investors’ name in his pursuit of a very personal and political agenda that became only too clear.

With all the opinion polls showing the opposition ODM in the lead only a few weeks to the December 27 vote, Mr Kimunya and a faction of business politicians around him were getting uneasy over the prospect of someone else presiding over the sale.

Hence the aura of urgency he brought in the matter citing a wide range of fiscal and monetary commitments that would not be met if Safaricom was not sold. These have since come to naught many months after the December sale failed to materialise.

Mr Kimunya’s silence over these commitments while he speeds on with the sale is informed by the reality on the ground.

He can no longer tell Kenyans for certain that programmes or projects will fail to materialize this financial year if Safaricom is not immediately sold because he knows that Treasury cannot have the proceeds in its coffers any time before July when the new fiscal year begins.

Aside from the practicalities of balancing the books at Treasury, bringing Safaricom to the market at this point in time raises a number of important questions.

Ordinarily, privatizations need to pass a number of tests including transparency of processes, legal and moral authority to sell public assets as well as credibility of the sale judged by the vendor — in this case the people of Kenya — getting value from the disposal of their asset.

As things stand, the Safaricom sale cannot be said to have passed any of these tests. First, many questions have been raised over the transparency of the process, including its initiation while a new law on privatization remained frozen in the cooler for more than two years, leading to court battles last year.

Queries were also raised over the scoring of technical and financial bids in the run up to the picking of advisors for the sale and the opening of one of the bids before due date.

Then there is the moral question of the authority of what is basically a transition government under which Mr Kimunya is serving as Finance minister to undertake such an important exercise only a few days before a new government is formed.

Indications that President Kibaki may form a new government before the end of this week after Parliament passes the necessary Bills only leave the grim prospect that the minister’s action is driven by personal and sectarian interests.

The sale must go on at this time just in case the President appoints someone else under the coalition agreement to take charge at Treasury and deny him and his allies the privilege of presiding over Kenya’s biggest IPO ever. Protection of such partisan interests, in our view, should never be the drivers of decisions made by public servants.

Wednesday, March 12, 2008

Africa: The Next Frontier for Investment!

By Don McKinnon, Commonwealth Secretary-General
How many times have you heard speeches beginning with such words, “The trouble with Africa…”? Not only does that give a starting point to any negative conversation, but it is based on assumptions that are factually wrong. It also implies that Africa is the same.

Those who make sweeping generalisations don’t talk of Africa’s rich cultures; its status as the cradle of humankind – the successful examples of democracy and governance, or the dynamic economies.

Yes, there is disease, lack of education, human rights concerns, and increasing climatic insecurity. But these are not unique to the countries in Africa. There is no more reason to lump all Africans into one category than there is to do so about the people in any other continent or country or even city.

Ignorance breeds ignorance and loss of opportunity. My success and that of others like me, in turning public perceptions is the foundation for business and investment success. Bad news always overshadows good news about Africa in the West, where negatives perpetuate their own myth about the continent.

People look at Africa and see tensions between the executive, the judiciary, and the legislature. They see money disappearing into Swiss bank accounts (and incidentally, corruption has both a demand and supply side – money wouldn’t disappear in the way it does offshore unless there were those at the other end willing to take it), rather than staying on the continent. Nearly 40% of the money generated in Africa leaves it which compares with something like 90% of earnings in East Asia which stay there.

The fact that Africa still attracts less than 2% of world trade is scandalous – but I again point out that there is a demand and supply factor in this: Africa can supply but its options are limited if the demand conditions are distorted by trade barriers.

The journey that is ‘democracy’ goes on, and the Commonwealth walks alongside – mediating tensions, building electoral commissions, helping to introduce new voting systems, even drafting new Constitutions in places like Swaziland. It might be two or three or four steps forward and one back – but overall it’s forward.

The economic situation looks good, too, even if much of it is driven by the resource needs of China and India. Much of Africa’s wealth lies in the ground – and now, they are starting to benefit this continent. Look at places like Nigeria, Botswana, and Ghana. Look at China, and Russia, and India, and Brazil, wanting to invest in Africa. Remittances now come back to Africa to the tune of $8 billion a year. In the last five years, sub-Saharan economies have routinely grown at nearly 7% per annum. Well over $50 billion-worth of debt has been cleared and there has been exponential growth in the numbers of listed companies.

Many good things have happened unnoticed in Africa in the last decade.The positive lies in what former IMF Head Michel Camdessus called the ‘silent revolution’ – the macroeconomic stabilization which has taken place in Africa, alongside a rise in commodity prices. Budget deficits and inflation rates have been cut; debt has been better managed, and in many cases canceled. Countries like Tanzania, Uganda, Mozambique and Ghana have massively improved their investment climate.

How can non-Africans and African alike, help consolidate the gains, and turn around some of those persistent negative perceptions? Let me give a very brief answer – in terms of politics and economics.

2005 was supposed to be the year of Africa: the Gleneagles G8 Summit, the Commission for Africa, and more. In essence, it revolved around a deal: non-African countries – especially the G8 – would re-commit: with more and ‘better’ aid, more debt relief, and a trade deal that allowed African countries to trade as equals, and indeed gave them the time and technical support to become ‘equals.’

Almost three years on, the G8 has met some but not all of its promises. Its aid money is pledged but not totally forthcoming. The Doha Round still has its wheels spinning with little traction, to the eternal shame of those who have had it good for so long: the US and the EU especially. The EU is still seen to be imposing a raw deal on its African, Caribbean and Pacific partners in the Economic Partnership Agreements. They are supposed to open up new opportunities for all and give ACP countries a lift, not just new markets for Europeans.

Meanwhile, Africa has shown how serious it is about its own future in its own hands. The strengthened AU, a lively NEPAD, and the sometimes painful work of the African Peer Review Mechanism are indicators. I’m pleased, by the way, that 27 African countries have now signed up to that self-monitoring APRM – with its focus on political governance, economic governance, corporate governance, and socio-economic development.

Africa is rich in natural resources. It’s in the middle of a technological revolution. Its future can be rosy, if it continues to take ownership of its future. It begs the question which President Museveni of Uganda asked his fellow Commonwealth Heads of Government, when they met in Kampala last year. How, he asked, can we breed African, not just Asian, tigers? The Commonwealth argument is that Africa’s path to transformation and development requires greater inclusiveness and fundamental democratic principles.

A market analyst might look at Democracy in 2008, weigh up its potential returns, management and business risk, and conclude that it is volatile stock. Others might even conclude that it is overvalued for the return on the investment. Yet it remains our greatest aspiration. It remains the blue-chip magnet which draws people – just look at levels of migration towards the most established democracies.

Economic development, too, is best when it’s democratic and inclusive. Hence the need to promote all business activity – small and large, and that accommodates women and youth entrepreneurs. Hence, too, the need for responsible business – accountable socially and environmentally as well as financially. The clearest indication of a society’s commitment to itself is that its citizens invest their hard-earned cash in the country itself, and don’t take their money beyond its borders to keep it ‘safe’. People should have the confidence to live, work, save and invest in their own countries.

I point to Mo Ibrahim, whose life’s work and money is now dedicated to promoting governance in Africa. Many of you will know that the first Mo Ibrahim Award went to Joaquim Chissano, former President of Mozambique. Mozambique is a Commonwealth country which faces many challenges, but it is meeting them. In 15 years, levels of poverty have been cut by a third, and the numbers of children in school have been doubled. That’s what I mean by Africa’s upward trajectory of progress and hope.

My message is quite simple: don’t judge the whole continent by the negative few; look at the parts one by one; think about their history and the challenges others have created for those who live there before criticising the situation today; and develop meaningful long term partnerships.