MANAGEMENT, OWNERSHIP and PERFORMANCE

A boss with no skin in the game has little incentive to manage a company in shareholders’ best interests. Various CEO’s of some specific companies in Kenya have a certain known amount of controlling interest in the companies they head.

 The bible talks of putting your treasures where your heart is, but they put their money where their mouths are… The chart below shows a list of the six Kenyan CEOs who owned at least $250,000 worth of their own companies’ stock at the end of 2008. Just check this list….

COMPANY	CEO	Value of Stake in Company (Dec 31, 2008	Percent of Company Owned (Dec 31, 2008)
Access Kenya Group	Jonathan Somen	$6,681,063.00	14.96%
Athi River mining	Pradeep Paunrana	$18,829,535.00	18.1%
Co-operative Bank of Kenya	Gideon Muriuki	$6,712,098.00	1.95%
Equity bank	James Mwangi	$3,471,373.00	5.37%
Rea Vipingo Plantations	Neil Cuthbert	$264,100.00	2.29%
Scan Group	Bharat Thakrar	$10,953,845.00	20.63%

As you can see, these aren’t just token amounts. The financial interests of each of the above CEOs were clearly aligned with those of other shareholders.

Taking Care of Business

The average return of these companies should have crushed the market since then. Why? Many listed companies are managed by CEOs who don’t eat their own cooking. Managing Directors without substantial ownership stakes tend to be motivated by a paycheck or prestige, not share performance.

                       

                                Share performance of each stock since 2008.

COMPANY	Return Since December 31, 2008
Access Kenya Group	-73.4%
Athi River Mining	109.7%
Co-operative bank of Kenya	33.5%
Equity Bank	45.0%
REA Vipingo Plantations	38.1%
Scan Group	181.9%
Average Return	55.8%

Apart from AccessKenya Group, the rest show a very solid performance. A portfolio comprised of these six companies would have fared better compared to the return on the entire Kenyan stock market over the same time period. Five out of the six CEO-owned stocks outperformed the market’s return, which was around 26.7%.

Granted, this is a very small sample, but it did not run counter to the theory that CEO-owned companies tend to outperform other companies and the market in whole over the long-term.

What’s your take? Does this theory hold water? Do you know of other African companies with heavy CEO-ownership that we should compare to the overall market?

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$20M A YEAR, AND IS PROBABLY STILL UNDERPAID

Usain Bolt entered the 2008 Summer Olympics as somewhat of a curiosity. Yes, he had recently set the world record in the 100-meter dash, but few people outside the track and field world knew much about the 6-foot-5 Jamaican. He had excelled at the 200-meter distance, but was relatively new to the 100-meter event. His only sponsors before Beijing were Puma, which signed Bolt to a small deal in 2003, and Digicel, a Jamaican mobile phone company.

Three gold medals and three world records later, Bolt left Beijing as one of the most famous athletes on the planet. He set records in the 100 and 200, becoming the first man to capture Olympic gold in both events since Carl Lewis in 1984. He was part of the 4×100 meter Jamaican relay team that shattered the world record on the way to another gold. Life has never been the same for the world’s fastest man.


As Bolt’s fame soared, his paycheck took off as well. Bolt earned an estimated $20.3 million over the last 12-months from prize money, bonuses, appearance fees and sponsors. He ranks No. 63 among the world’s highest-paid athletes. Bolt has a ways to go to challenge Kobe Bryant in terms of earnings, but his income is more than 20 times what other elite sprinters typically make in a year and more than any other athlete in the history of track and field.
Visa signed Bolt to an agreement and splashed Bolt’s image on billboards across Europe, where track and field remains a popular sport. Visa is in position to use Bolt in ads during London as an official sponsor of the Olympic Games.
He added a multimillion dollar pact in June with Nissan Motor, which plans to use Bolt in a global ad campaign. He released his autobiography, “9:58: Being the World’s Fastest Man,” in 2010, and another book is in the works for after London.
Bolt’s biggest paycheck comes courtesy of Puma, where he is the global face of the German sportswear company. Puma re-signed Bolt in 2010 to a deal worth $9 million annually.
While prize money is small, Bolt’s ultimate running payday is often huge thanks to appearance fees. His fee starts at $200,000 and can reach $350,000 for a big meet. Bolt commands the huge sums because he guarantees a sellout when competing.
Bolt is the highest-paid athlete in the history of track and field, but he’s also probably the most underpaid athlete in the history of track and field. His appearance at the Penn Relays in 2010 resulted in the highest single day attendance (54,310) in the event’s 118-year history.
Bolt can command these massive sums of money because he has transcended the world of track and field the way Tiger Woods did in golf during his peak and Michael Jordan did in basketball.
Bolt held off Blake and the field Sunday night to capture the gold in an Olympic record 9.63 seconds. He joins Carl Lewis as the only men to win consecutive gold medals in the 100-meter event. Maintaining his role as the world’s fastest man will allow Bolt to continue to command huge premiums in regards to his race appearance fees and endorsement contracts.

DIAMOND TRUST: THIRD RIGHTS ISSUE

Diamond Trust Bank is back to shareholders for some fund raising after two rights issues in 2006 and 2007. 

Since venturing into  Uganda and Burundi in  2008, it has become a pan-African bank growing from assets Kshs 45 billion and Kshs 1.6 billion in profits to 2011 assets of  Kshs. 107 billion and profits of Kshs 4.3 billion. The additional  funding will be invested in Tanzanian Uganda and Burundi as well as alternative channel categories.

Like the previous issues, this one closing on Friday August 10, is likely to exceed full subscription. All the large investors - Aga Khan Group (AK fund for economic development fund  (owns 17%), Habib Bank (11%), Jubilee Insurance (10%), and the International Finance Corporation (IFC owns 10%) have committed to take up their rights.

The above commitments are for 51%, and with the minimum target is 60%, there’s a rump option in in case other shares are not taken up but it's expected that most of the 11, 242 shareholders will pay up (there was little trade in rights when it opened).

Contrasting Rights
Year - Nov-06 ; Nov-07 ;  Jul-12
Target (Kshs M) – 735 ; 1,600 ; 1,809
New shares (M) - 15.5 ; 23.3 ; 24.4
Price (Kshs)  - 50 ; 70 ; 74
Ratio  -  1:8 ; 1;6 ; 1;8
Budget (Kshs M) 41.6 ;  54.7 ; 57.6

Others

- IFC has also provided funding of about $65 million for the banks operations.

- All the arms of the company are profitable; Kenya profit after tax of Kshs 2.2 billion in 2011, Tanzania (own 55%) Kshs. 398 million, Uganda (own 54%) Kshs. 315 million and Burundi  (own 67%) Kshs. 31 million

 - Diamond Trust only owns 3 of their branches in Kenya (out of 38) , and none of the 22 in Uganda, 14 in Tanzania or 4 in Burundi.

- There's no indication of interest to venture into Rwanda or South Sudan as with many other Kenyan banks.

CHASING MADOFF...

I happened to have come across this documentary (chasing Madoff) on the internet.

A look at how one investigator spent ten years trying to expose Bernie Madoff's massive Ponzi scheme that scammed an estimated $18 billion from investors.

 

Wow!! i love the figures!! fucking 18 billion US dollars! i said it in public i said it. i honestly love that figure. how can a single person mastermind the stealing of that fucking cash? i love smart minds. In fact i ever salute such financial geniuses. no matter what they have done. simply, amaze me with your skills, either for evil or good n i will salute you.(that"s me, i love blogging my own opinion) How can someone steal more than the GDP of a country like Kenya? The answer is simple..it needs smart minds.

 

A smart mind like Madoff can propel a company to the highest level of maturity (what do we call it from the maturity grid?) in a short while. He has the skills to run  and manage it effectively. the only problem is that some humanity are selfish n use such in-borne skill for self gain.
Business run economies of countries. i personally love doing business. Infact am on a mission to spent the better part of my life in self-employment. there comes a time when we need to do business as usual. it calls for doing it unusually.how others didn't do it.
to finance guys,how can u steal in an organisation for many years without being caught? how can u do it better than madoff?.... in if at all u are to investigate crimes in an organisation, how can u outsmart those madoffs in the organisation. can u get them all before the firm goes in to liquidity?

GOING FOR GOLD: AFRICA'S BEST PERFORMING STOCK MARKETS

If you’re anything like me, you’ve contracted a full-blown case of Olympic fever. So, in the spirit of the week, I’d like to hand out some medals for some outstanding performances delivered by Africa’s stock exchanges. It’s the inaugural InvestingInAfrica.net Olympiad!
Below are the dollar-adjusted returns of African stock indexes over the past month, six months, year, three years, and six years (period ending July 30, 2012). The top three performers in each “event” were awarded medals. (Note: Tanzania and Uganda were disqualified from competition because their primary indexes are dominated by cross-listings from Kenya.)
Let the games begin!

The Dash: One-Month US$ Return

Gold	MSCI Nigeria Index	11.6%
Silver	MSCI Ghana Index	7.6%
Bronze	MSCI Kenya Index	4.2%

Not much of a contest in this event. Nigeria came out strong thanks to a nice currency tailwind. The Naira appreciated nearly 1.0% against the dollar in July. But it probably didn’t make a whole lot of difference in the final analysis as index stalwarts Nigerian Breweries, Dangote Cement, and Nestle Nigeria posted returns well into the double digits.
Ghana snagged the silver medal on the back of an impressive 12.8% local currency return from Fan Milk, and in spite of the sudden death of the country’s president, John Atta Mills.

The Sprint: Six-Month US$ Return

Gold	MSCI Kenya Index	26.7%
Silver	MSCI Nigeria Index	18.4%
Bronze	MSCI Zimbabwe Index	5.8%

The past six months have clearly belonged to Kenya’s Nairobi Securities Exchange. Powerful showings from East African Breweries (35%), Equity Bank (37%), and KCB Bank (35%) in a relatively stable currency environment propelled the MSCI Kenya Index to the gold medal in the six-month sprint – beating Nigeria by a margin of over 800 basis points.
Zimbabwe snuck in for the bronze due to a fine 17% run from Econet Wireless.

The Short-Distance Run: One-Year US$ Return

Gold	MSCI Kenya Index	18.2%
Silver	Namibia Local Index	4.7%
Bronze	MSCI Nigeria Index	1.1%

Kenya impressed in more than the sprints. Its track record over the past year left its nearest competitor in the dust. Powerhouse EABL got a fine supporting performance from petroleum retailer, KenolKobil (up 48% in local currency) and a friendly 7.8% push from a resurgent shilling.

The 15K: Three-Year US$ Return

Gold	Namibia Local Index	52.3%
Silver	MSCI South Africa Index	44.7%
Bronze	Lusaka Stock Exchange All Share Index	43.6%

One of the most competitive events turned out to be the middle distance three-year run. Little Namibia took the field by surprise, sneaking past its emerging market neighbor, South Africa for the win. Both Namibia and South Africa fought a 4.5% currency headwind to post their solid marks.

The Marathon: Six-Year US$ Return

Gold	Namibia Local Index	150.1%
Silver	MSCI Mauritius Index	134.7%
Bronze	Lusaka Stock Exchange All Share Index	94.7%

The premiere event also belonged to upstart Namibia. Although Mauritius Commercial Bank and the rest of the Mauritian squad mounted a strong challenge, ultimately no other index could hang with a team led by FNB Namibia, Namibia Breweries, and Bidvest.
Zambia picked up a second bronze by relying on an especially strong performance from Lafarge Zambia.

Medal Count

So there you have it. With two golds and a silver, Namibia leads the medal count, followed closely by Kenya and its two golds and a bronze.

WHAT KENYAS WANT: NTV vs. CITIZEN TV Forums

I was struck by the difference of opinions expressed by Kenyans during NTV’s People’s Voice, which was aired from Nyeri (Central Province), and Citizen TV’s Louis Otieno Live in Narok (Rift Valley). Presenters Judy Gichuru for NTV and Louis Otieno for Citizen TV did great. They let Kenyans set the agenda.

Concerns fielded by both audiences could convince someone that NTV and Citizen TV were reporting from two distant countries, Nyeri being a developed nation and Narok a developing one. Nyeri audiences were concerned with issues like strengthening shilling that was making their exports expensive, Economic Partnership Agreements with EU, farmer exploitation by middlemen, slow pace of road reconstruction, and lack of title deeds in squatter areas among others.

The Maa community in Narok was on the other hand complaining about lack of visionary leadership in the area since independence (an attack on Ole Ntimama), lack of road infrastructure, poor education facilities, male domination in local politics, negligence of the girl-child, inequality in sharing national resources, and corruption in the Narok County Council, probably the richest local government in East and Central Africa.

Calls for a new constitution (read federalism, majimbo, devolution or ugatuzi) rent the air among panelists in Narok. The same calls were high during Louis Otieno Live in Kisumu and Mombasa, where the presenter got tired of Majimbo issue; he silenced anyone who brought it up. Interestingly, the ugatuzi question was virtually non-existent in Nyeri.

Bottom Line: We are one nation of 35 million people with 35 million interests. USIDANGANYWE. No constitution or leader can serve all those interests without hurting the nation. Politicians should leave Kenyans alone. Kenyan are capable of running their economic lives if politicians keep off. But will they? Let your vote decide.

KENYA'S INFLATION RATE

The inflation rate in Kenya was reported at 17.3 percent in September of 2011. it rose to hit around the 20% mark later that year the gradually dropped to around 9% now.
 This chart shows historical data for Kenya's Inflation Rate. Inflation rate refers to a general rise in prices measured against a standard level of purchasing power. The most well known measures of Inflation are the CPI which measures consumer prices, and the GDP deflator, which measures inflation in the whole of the domestic economy.

Inflation Rate Definition
In mainstream economics, the word “inflation” refers to a general rise in prices measured against a standard level of purchasing power. Previously the term was used to refer to an increase in the money supply, which is now referred to as expansionary monetary policy or monetary inflation. Inflation is measured by comparing two sets of goods at two points in time, and computing the increase in cost not reflected by an increase in quality. There are, therefore, many measures of inflation depending on the specific circumstances.
The most well known are the CPI which measures consumer prices, and the GDP deflator, which measures inflation in the whole of the domestic economy.The prevailing view in mainstream economics is that inflation is caused by the interaction of the supply of money with output and interest rates. Mainstream economist views can be broadly divided into two camps: the "monetarists" who believe that monetary effects dominate all others in setting the rate of inflation, and the "Keynesians" who believe that the interaction of money, interest and output dominate over other effects. Other theories, such as those of the Austrian school of economics, believe that an inflation of overall prices is a result from an increase in the supply of money by central banking authorities.
Related concepts include: deflation, a general falling level of prices; disinflation, the reduction of the rate of inflation; hyper-inflation, an out-of-control inflationary spiral; stagflation, a combination of inflation and poor economic growth; and reflation, which is an attempt to raise prices to counteract deflationary pressures.