By Mohamed Shabir (Emerging Africa Capital)
There are risks in both long term and short term trading. The latter exposing an investor to greater risk. Generally, volatility and risk diminish over time. The longer you hold on to your investment, the higher the probability of you earning a profit.
With short term trading, you have to speculate which shares are going to be most volatile. In this case you see profits immediately but if you speculate on the wrong stock, you might end up losing part of your investment capital. If the company you are vested in is fundamentally strong with a strong upside potential, you will lose out on big potential gains if you were to cash out too early.
When thinking about long term investment you can take advantage of dividends payout. Many stocks can pay out dividends to their shareholders month after month. This could produce a monthly income for you.
With long term investing, although there is a higher probability of earning a profit, you would need to be particularly patience. Many times, it takes over a year to earn a significant gain.
You do not have to do much with a long term investment. Long term investors are proactive while short term traders are reactive. A long term investment plan requires much less time to set up, manage and evaluate than any other form of investing.
With short term investments you would see more instant returns. In this case, however, you require quick action on information as this is one variable that changes a stock’s price in the short term. If you read into information fast enough, profits would usually not be far behind.
One of the advantages of short term investing is the compound effect. If you need your investment to grow, reinvest what you make in the short term and reap even greater returns in the long term (if you maintain your good speculative run).
Most importantly, when considering short term investing, you need to realize that you will be paying more commissions and hence to make actual gains, your sell and buy prices must reflect profits even on deduction of commissions.
Both short term and long term trading depend on how you trade. The things to consider in deciding which way to go include;
1. What system fits with your personality, are you a risk taker or are you risk averse.
2. What is your level of knowledge on the market?
These questions, once answered will reveal ‘the right way’ for you. Invest, long term or short term. It’s your call.
(Mohamed Shabir is a Financial Adviser with Emerging Africa Capital)
Friday, June 13, 2008
Safaricom Shares: To go Short or Long Term? The Right Way Revealed
Monday, June 9, 2008
Michael Joseph of Safaricom highlights the promise—and peril—of doing business in Africa
The Economist (print edition)
THIS is a vexing time for those looking to invest in Africa. There are prophets of doom, who predict that population growth and climate change will condemn Africa's cities and dry countryside to crisis and collapse. But there are also optimists, such as Michael Joseph, the head of Safaricom, a Kenyan mobile-phone operator. His is a remarkable African success story.
When Mr Joseph arrived at Safaricom in 2000, the company had 20,000 customers. It was controlled (as it still is today) by Vodafone, a giant British group that is one of the world's largest mobile operators. Vodafone's bosses reckoned that the Kenyan market would top out at 400,000 customers. Yet Safaricom alone now has 10.5m. It is the most profitable business in eastern and central Africa, earning profits of $223.7m in the financial year to the end of March, up 16% on the previous year. Despite a political crisis in January in which over 1,200 Kenyans died and 300,000 were displaced, the firm is expected to report even better results this year. And a public offering of 25% of the firm—a stake that belongs to the government—is expected to raise at least $800m, much of it from retail investors who queued up to buy the firm's shares, which will begin trading on June 9th.
Mr Joseph arrived in Kenya in 2000 having spent a freezing winter in Hungary, where he had set up that country's third mobile-phone network. He quickly decided to go after “pay as you go” customers, who pay for mobile airtime in advance, and therefore do not pose a credit risk to the operator, though they spend much less than wealthier (and less numerous) contract customers. He introduced billing by the second—a big deal for those earning just pennies a month. And he revamped the firm's brand, reasoning that the poorest customers are the most price-sensitive, and that a strong brand can help keep them loyal.
Keeping the Safaricom name inherited from Telkom, the state fixed-line monopoly, Mr Joseph and a local advertising firm set out to create an “emotional connection” between Kenyans and Safaricom. He took an “old school” approach, playing on the company's status when it had been established a decade earlier as a symbol of national pride—as the first mobile operators were in many countries at the time. These days only Kenya's national beer, Tusker, with its elephant label, can match Safaricom for national appeal. A typically shameless television advertisement shows Masai herdsmen gathering cattle before a dusky Rift Valley sunset to the backing of the English hymn “I Vow to Thee, My Country”. Some think Safaricom offers a lesson to mobile operators in Europe and the Middle East: take advantage of your affiliation with a multinational brand when it comes to technological know-how and buying equipment, but keep quiet about it to your customers, and dress up your network in national colours.
Mr Joseph was picked for the Kenyan job because he lacked the finishing-school polish required to be a European boss. In some ways it was a homecoming. A self-described “Bolshevik character” in his South African youth, he fled the country in the 1980s when the strictures of apartheid tightened. He had made his name there as a “network man”, upgrading the coal railway through East Transvaal and setting up electric pylons in the Drakensberg mountains. He pitched up in America just as the mobile-phone revolution was about to start. He then worked on bids to set up networks in Spain, Greece, South Korea and Brazil. His proudest engineering moment was building Argentina's first mobile network, “the fastest-built in the world,” he says.
But his most enduring achievement is likely to be M-PESA, a pioneering service that enables Safaricom's customers to send money to each other by text message. Cheaper and faster than ordinary money transfers, it now moves $1.5m a day across Kenya, in mostly tiny transactions, and is being rolled out in India, Tanzania, Afghanistan and elsewhere. Mr Joseph brazenly calls it the mobile-phone industry's greatest ever innovation. That is an exaggeration—but not a very big one. Mobile banking could be the next stage of mobile-driven economic transformation.
Dial T for trade
Some have criticised Mr Joseph and Safaricom for failing to reveal the owners of a mysterious 5% stake in the company, built into the original deal, which probably enriched people close to the previous government. But by the turbid standards of corporate Africa, the company is clean. Can Safaricom's fairy-tale be matched in other industries? Mr Joseph is bullish. He refused to buckle under immense pressure from Kenyan intelligence to ban text-messaging during the riots and never lost hope during Kenya's political crisis, though he admits the country may have been only two weeks away from collapse. It would be folly, he insists, to bet against a continent as rich and resilient as Africa.
Mr Joseph wants M-PESA to offer new services, such as mortgage payments. He also wants to plough funds into expanding internet access in Kenya using high-speed “third-generation” mobile networks. At 62, Mr Joseph reckons he has three more years left at Safaricom before retiring, perhaps to the house he keeps in northern Kenya, circled by rhino and leopards. Until then he must fend off competition. Not from Celtel, Kenya's second provider, which seems content to earn dividends in Safaricom's shadow, but from France Telecom, which recently bought 51% of Telkom, the state fixed-line monopoly, and Econet, a new Indian-owned network.
Mr Joseph is not shy in weighing in on the perennial question of aid versus trade. The ability to get a phone line without an address or credit for less than $1, he says, “has been hugely more efficient than aid”. Since 70% of the economy is informal and government services are ragged, there is probably some truth in his claim that Safaricom has done more to help Kenya than decades of aid. At the very least, it offers a powerful lesson for would-be investors in Africa: it can pay to bet on the poor.
Tuesday, May 27, 2008
Safaricom sets record for Kenya’s blue chips
Safaricom yesterday reported record profits and announced plans to boost coverage in the rural areas as a strategy of growing its customer base in the face of mounting competition.
Telkom Kenya and Econet Wireless are expected to launch mobile phone services later in the year , adding competitive pressure in a market Safaricom has dominated for nearly a decade.
With earnings before interest, taxes, depreciation and amortization or Ebidta (an accounting measure that is used as a proxy for true earnings and cash generation power of a telecommunication company) of Sh28.1 billion representing a growth of 15 per cent.
Safaricom for the third year running has emerged as the most profitable company in Kenya and among the best in sub-Saharan Africa. This is expected to raise interest in its shares, which are expected to begin trading at the Nairobi Stock Exchange in early June.
Net profit, which represents the money available to shareholders hit Sh13.8 billion, reflecting a 15.3 per cent increase.
The operating profit however grew at a modest rate of 3.8 per cent to Sh18.5 billion, revealing the extent to which the business was unable to reign in costs as its expansion plan gathers pace.
Safaricom’s revenue rose to Sh61.3 billion from Sh47.4 billion a year earlier, representing a 29.3 per cent growth.
The performance, driven by an increase in company’s subscriber base from 6.1 million in 2006 to 10.2 million in 2007, comes as competition intensifies in the cellular phone market with the entry of new players.
Econet Wireless, which is partly owned by India’s Essar, is set to rollout its mobile services in July, while Telkom Kenya, owned 51 per cent by France Telecom, is planning a rollout in September.
To maintain its profit momentum in the face of the competition, Safaricom is planning to widen its footprint in the under-served rural areas to boost its national coverage. The firm currently has a national coverage of about 60 per cent range compared to 84 per cent for its main rival Celtel Kenya.
“Having a national footprint is key to beating competition,” said Michael Joseph, the company’s CEO. “You don’t win this market by simply lowering tariffs and rolling out in a few urban centers.”
Kenya’s mobile phone penetration stands at 34 per cent of the population and is expected to increase to 60 per cent in the next four years as more rural dwellers sign up.
Besides boosting its coverage in the rural zones, Safaricom is counting on lower tariff rates and its new low airtime denomination of Sh20 to penetrate the price sensitive rural consumers.
The firm said it is targeting about two million new subscribers by the end of the year, on the back of renewed investment in infrastructure and a focus on the rural market.
Mr Joseph said that the new entrants would find it hard to eat into Safaricom’s market share, which increased to 84 per cent from 73 per cent in the past 12 months. His optimism is hinged on the fact that it would take the competition time to build a network the size of Safaricom.
“Our coverage and huge subscriber base will give us the much needed competitive edge,” said Joseph.
But competition is not about discouraged by Safaricom’s might.
Celtel, the number two player and who has failed to match the might of Safaricom as it reported a loss of Sh1.5 billion last year has set in motion an ambitious network upgrade plan that should push it’s population coverage from 84 per cent in 2007 to 95 per cent this year.
This will be backed by a multi-million shilling advertising blitz on a name change to Zain, as Celtel races to strike a chord with youthful subscribers, a market that Telkom Kenya is keen to tap into.
Econet Wireless made its intention clear, with the announcement that it has placed Sh9.3 billion order for GSM network followed by the onset of the recruitment drive for key staff.
Telkom Kenya has also placed its order and is set to unveil its network in September targeting major urban centers before spreading to the rest of the countryside, a strategy that Econet is also keen to employ.
This is a clear signal that the twin entrants are targeting the urban clientele that has over the past eight years driven Safaricom’s profits.
But Safaricom is not about to let the entrants eat into its urban market as it pursues the rural dwellers.
The commercial launch of its third generation 3G mobile technology on Monday, enabling roll out of multimedia services such as video and television on mobile and faster internet connection would help the firm capture corporate clients and high end customers.
And through its newly launched money transfer service, Mpesa, the firm hopes to fence in its subscribers and deny other operators getting access to its subscribers who are likely to get reluctant to switch networks easily.
“Mpesa is a not a huge revenue generating business but it makes subscribers stay with Safaricom,” said Les Baille, the company’s Chief Financial Officer.
Wednesday, April 30, 2008
Investors Cheated into buying Kenya's Safaricom shares in IPO
Additional Reporting from The Financial Standard edited by Branded.
It is emerging that many local and international investors were cheated into buying shares in the recently concluded East Africa's largest ever Initial Public offering (Safaricom IPO). The company recently issued a revised Safaricom prospectus raising eyebrows as it borders on reneging on a sworn affidavit that's binding. This comes in the wake of yet another negative issue that the Kenyan regulators failed to clarify regarding a certain briefcase and shadowy firm, Mobitelea that owns 5% of the company Safaricom. The new developments paints a rather negative image that seems to suggest "Deep rooted corruption and underhand dealings only concerned with offloading some 10 Billion shares into the market to raise Ksh 50 billion" without regard to the public. It appears that investments into the company by the public may not be safe after all given the attitude displayed by the regulators. Investors are being taken on a rough ride.
As the curtain falls on Safaricom initial public offering (IPO), there has emerged some glaring regulatory weakness that put to test the credibility of the Capital Markets Authority (CMA).
Market information filtering through indicates that the sponsors of Kenya’s jewel, the Government, had quietly sneaked into the market another prospectus without caring to inform thousands of investors that it has withdrawn the earlier prospectus.
And to make matters worse, the new document that details all about the giant mobile operator, contains new information, distinctly different from the one that was approved by regulatory authorities for its Initial Public Offer (IPO). Though the CMA officials disclosed to the Financial Standard that the changes were minor and a formality that was meant to meet international accounting standards practices, sceptics, however, contend that the action was in contravention of the law and puts further dents into claims the process was above board.
It has also emerged that the CMA had approved the initial prospectus dated March 14, which was presented to investors despite the fact that the financial statements contained therein were neither approved by Safaricom’s directors nor the independent auditors, PriceWaterhouseCoopers (PWC).
Also buried within the deck of the revised document’s financial reports may be a kernel of truth about the understandable rush by both the players in the industry and the Government to bring the IPO to the market regardless of whether their action contravened the same laws strive to uphold.
Interestingly, there seems to be a conspiracy of silence within the capital markets, with players, including the Nairobi Stock Exchange (NSE), either keeping quiet or ignoring the issue altogether.
The anomalies have, however, been corrected in the revised prospectus, dated March 28, 2008. The revised document contains the PWC seal of approval and the signatures of Mr Nicholas Nganga and Ms Nancy Macharia, directors who approved the financial statements on behalf of Safaricom.
"The interim financial statements on pages 163 to 185 were approved for issue by the board of directors on March 4, 2008 and signed on its behalf by…" reads a statement on page 165 of the revised prospectus.
The second prospectus contains what experts refer to as "material information changes" or alterations to the original information given, which they insist must get CMA approval before being released to the public.
The wording used in the initial prospectus also varies with those used to introduce financial statements contained in the revised document. While the initial document refers to "financial statements of Safaricom Ltd, the revised version calls it "the condensed interim financial statements."
The rush to bring the IPO to the market has raised several claims, including unproven claims that the Government could have been rushing to finish the IPO within a set deadline for reasons not known to the public.
The anomaly and its potential to poke further holes into the transparency of the Safaricom offer are great. Observers say it might also portray the issue in a decidedly different light.
But the CMA maintains that approval of the initial prospectus was clean and that no laws were broken regardless of the fact that a revised prospectus was issued. It’s also not clear whether it went through the normal vetting process as required by accounting rules.
"All the information was verified by the reporting accountants — Deloitte and Touche —, and forwarded to PWC, which is the independent auditor," says a highly placed source from the CMA who did not want to be named.
Under these circumstances, the external auditor’s brief includes examining whether the financial statements are in conformity to International Financial Reporting Standards (IFRS).
According to this source, the reporting accountants (Deloitte and Touche) verified that PWC complied with the IFRS, then presented a draft financial report, which was used in the initial prospectus.
"If you look at both documents, you’ll realise that the figures have not been altered. The information is about the same and we (the CMA) issued a public notice notifying the public of the addendum (additional information) through the press," he says.
The officer adds that the CMA directed the issuer (Safaricom) to issue notices of addendum equal in number to the number of prospectuses in circulation. FS could not verify whether there was any compliance to the requirement because both the investors and experts contacted said they were not aware.
A highly placed source within the brokerage fraternity, however, says that the initial document did not comply with International Financial Reporting Standards because it lacked what he calls footnotes or notes to the accounts.
"This too has been corrected in the revised document. I believe a lot of material information was overlooked in the initial prospectus and the second one was produced to correct the anomaly," says the broker.
"Availing a different prospectus other than the original one is like reneging on a sworn affidavit and adding extra information to an agreement that is already binding. It is like reversing some understandings the company had with potential investors," he says.
Any company offering shares to the public in Kenya is required by law to issue a prospectus. The prospectus contains information that investors need to know in order to make informed investment decision about the issuer (in this case Safaricom) and its shares. It also gives an indication of the company’s area of business, the key investment risks, how the funds raised would be used, its operating track record and business prospects.
Risks that must be disclosed often include lack of business operating history, past problems with the company or members of its management and adverse economic conditions in the industry in which the company is operating. Others details include competitive disadvantages, the regulatory structure and dangers in the event of non-compliance, lack of assurance that there will be a market and dependence upon key personnel.
The company must also describe in the prospectus its business, properties and competition. It also needs to include certified financial statements audited by an independent certified public accountant.
Despite the differences in material information in the financial statements in the two prospectuses, a number of details have remained intact.
For example, information on principal players, including lead transaction advisor Dyer and Blair and the fact that it bid just 0.05 cents for the job, is still intact. The dreaded word Mobitelea still appears with the rider that it owns five per cent of Safaricom through (12.5 per cent shares in Vodafone (K) Limited’s 40 per cent stake. It is mentioned as a risk factor in the context of a Public Accounts Committees report.
Although the CMA headed by Ms Stella Kilonzo as the acting CEO has insisted that the information is in the public domain, most of the investors we talked to, including industry insiders seemed unaware of the revised prospectus.
The CMA has so far played its role of policing the country’s capital markets with, to a great extent, some level of sluggishness. Two stockbrokers – Francis Thuo and Partners and Nyaga Stockbrokers collapsed under its watch, amid allegations of illegal trading in investors’ shares.
The reluctance by the country’s premier regulatory authority to strictly enforce the regulations in the capital markets has been cited severally with different players calling a review of the laws governing the capital markets.
For example, the CMA, on behalf of the investing public, ought to have questioned a number of things, key among them why PWC did not authenticate the initial prospectus and why the mobile company’s directors did not sign the document.
Our source pointed to a number of other issues he thought should have been dealt with before the proposed listing. He says that Safaricom could have presented an incomplete prospectus in order to comply with CMA, while the later did not do its job well. In order to comply with the requirements of the CMA, the Government, who are the issue sponsors, submitted the initial prospectus. "It’s an abdication of responsibility for the CMA to turn a blind eye on what is clearly a blatant breach of the rules. It cannot abdicate its supervisory role to any arm of the Government," he says.
He says all these demonstrate the extent of CMA’s slackness and the need for "regulatory authorities to take their responsibilities with "utmost seriousness."
But despite the emerging fears, one positive development from this unlawful practice is the fact that if addressed, the anomalies will act as deterrence for such practices in any future IPOs.
As Safaricom prepares to release the final list of how the allocations were done, the company will also seek to put behind it the last few months of persistent questions about the great rush to take the IPO to the market and hopefully, answer the questions.
Tuesday, April 1, 2008
SFO rules out further inquiry into Vodafone's Kenyan partner
From The independent
The Serious Fraud Office (SFO) last night ruled out any further investigation into allegations of corruption involving a Kenyan mobile phone company of which Vodafone holds a 40 per cent stake.
The decision came as thousands of Kenyans lined up to buy shares in the public flotation of the company, Safaricom, after opposition calls to delay the biggest ever state selling of its sort in east Africa were defied.
The Kenyan government owns 60 per cent of Safaricom, the most profitable firm in the region. The other 40 per cent is owned by Vodafone Kenya – which itself is 87.5 per cent owned by the British-based mobile giant, with the remaining 12.5 per cent owned by a mysterious Guernsey-registered firm called Mobitelea.
The owners of Mobitelea remain unknown despite enquiries by Kenya's investment watchdog and the SFO, which said it had sent representatives to Kenya last year to meet with the country's own watchdog, and "examine the matter".
Last night however, the SFO said that it was refusing to investigate the company for reasons of "resources". "[The SFO director Robert Wardle] has the task of allocating resources, taking into account the prospects of success against the demands on resources. It is with some difficulty that he has decided that the SFO will not adopt this enquiry for investigation."
The decision comes despite a number of reports relating to the anonymity of Mobitelea, including claims of a "secret stake" in Safaricom allegedly linked to the family of the reviled former president of Kenya, Daniel arap Moi.
Vodafone has remained tight-lipped about the identity of those behind the off-shore firm. A spokesman said last March: "Mobitelea has never had representation on the board of Vodafone Kenya or the board of Safaricom. We have received guarantees from Mobitelea that no prohibited parties have benefited from this transaction".
Last night, Bobby Leach, the media director of Vodafone UK, emphatically denied any direct link between Mobitelea and Safaricom. "Mobitelea does not own shares in Safaricom," he told The Independent. Asked specifically about the arap Moi family, Mr Leach said he was obliged under confidentiality agreements not to comment on the ownership of Mobitelea.
The state is selling off 10 billion shares, which represents a quarter of the company's equity, and expects to raise 50bn shillings (£390m).
The Kenyan President, Mwai Kibaki, launched the sale yesterday, saying: "I ... wish to take this opportunity to invite all Kenyans ... to take advantage of this investment opportunity and take part in the success story we have created together."
Earlier, the opposition party, the Orange Democratic Movement, had called for a delay in the sale until Mobitelea's ownership was disclosed.
Friday, March 28, 2008
Kenya's Largest IPO opens amid protests over Rogue Stockbrokers
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.
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.
