March 2008

The long anticipated flotation of a top Kenyan mobile phone company is expected to proceed today despite calls from some quarters to shelve the plan. Safaricom, billed  as the largest and the most lucrative IPO in East Africa, will be listed on Nairobi Stock Exchange (NSE) beginning Friday March 28 and close on April 23. The flotation is seen as a major test of investor confidence in Kenya after last December election violence.

The Government of Kenya plans to publicly float 25% (or 10 billion shares) of its 60% stake in the company. The remaining 40% company holdings are held by the British telecoms, Vodafone (VOD.L). Local investors, including citizens from East Africa Community (EAC) nations of Tanzania, Uganda, Rwanda and Burundi, are allocated 6.5 million shares. Foreign institutional investors are allocated the remaining 3.5 billion shares.

The company expects to raise 50 billion Kenyan shillings ($767 million) from the listing, at 5 shillings per share. Safaricom’s strength in the Kenyan mobile market has increased significantly over the past 5 years to 80% last year from 57% in 2002. At the time of the launch of its popular “M-Pesa” phone-based money transfer service 11 months ago, Safaricom had 5.8 million subscribers, compared with about 9.5 million now.

Allowing East Africans to directly take part in this IPO is seen as a major step in the intergration of the regional capital markets. Investors from the region, outside of Kenya, will have to open an account with the local Central Depository System Corporation (CDSC) at their local broker in order to participate in the IPO. However, the editorial of the Kenyan daily The Nation was less enthusiastic, questioning “Why can’t these foreign citizens buy shares at the market rate?” It appears old mindsets will die-hard and its going to take time to convince some pundits that capital raising should transcend our so-called “boundaries”.


Tanzania Tourist Board TTB

In case you missed it, there are only a few days left to participate in the “Ultimate Safari Sweepstakes” to Tanzania currently being promoted via CNN and (see or ). Please pay close attention to the rules and terms under which you can participate.

This promotion is part and parcel of the TV tourism campaign launched last October by Tanzania Tourist Board targeting the American market. The TV station has also been airing a separate spot about the sweepstakes for the past few weeks now (alongside the initial TV spot).

For those who have seen this new TV promotion, what are your thoughts?

BOT Bank of Tanzania

In the last few weeks, the Tanzanian government has come under intense pressure from the public, activists and the media to explain why it was quietly recovering money that was misappropriated under the External Payment Arrears (EPA) account operated by Bank of Tanzania (BOT), the country’s central bank (pictured left).

The public demands the release of names of people involved in the scandal and their immediate prosecution. The EPA scandal consists of fraudulent payment of about TSh133 billion ($116 million) made by the Bank of Tanzania to 22 companies in the financial year 2005/06 involving the repayment of the country’s external debt.

As of last week, according to a government pronouncement, nearly half of the money (Tsh 60 billion) had “mysteriously” found its way back into State coffers. The Attorney General and the Inspector General of Police have refused to disclose the names at this stage, pleading for patience because the investigation is still going on.

Speculation has been rife as to why the government would rather recover the loot than prosecute. While others believe the government may be shielding the culprits, the most plausible reason seem to be that the government has figured out that it has a weak case against the culprits in a court of law. It may well be that the EPA contracts the government signed are so weak and with little teeth to enable the prosecution of abusers of the debt servicing vehicle. The worst case scenario will be that the contracts were intentionally weakened by its framers, while eluding the watchful eye of IMF. Therefore, this may yet be another scandal (similar to the mining contracts that later had to be renegotiated), that will expose weaknesses in contract negotiation and contract drafting skills by the country’s State attorneys, and possible corrupt elements within the government who are short-changing public interests.

The scandal has already claimed the Governor of BOT as its first casualty. Daudi Balali was fired by President Kikwete back in January after he was implicated in the investigative reports carried out by Government’s Controller and Auditor General (CAG) and the accounting and audit firm, Ernest & Young. The President has been on an anti-corruption crusade lately. He dissolved his government last month after another multimillion dollar scandal blew up over emergency electricity power supply contract, engulfing his Prime Minister and two cabinet ministers who were subsequently forced to resign.

What are your thoughts? Do you trust the government when it says it is doing the right thing to recover the swindled money and deal with prosecutions down the road?

The projects to be financed under the recently signed Millennium Challenge Corporation (MCC) Compact agreement have been disclosed.

The agreement with Tanzania, approved last September and signed in Dar es Salaam on February 17, 2008 during Presidents George W. Bush’s historic state visit to the country, is valued at $698.1 million covering a 5 year period. This is the largest Compact ever issued by the United States through its MCC agency. The money will help Tanzania “reduce poverty and stimulate economic growth by increasing household incomes through targeted investments in transportation, energy, and water”.

Most of the money will go to transport projects ($373 million), to energy projects ($206 million), to water projects ($66 million) while $53 will be used for program administration.

The identified projects are:

a) Construction of Mainland Trunk roads:

(i) Tanga-Horohoro (68 km)

(ii) Tunduma-Sumbawanga (224 km)

(iii) Songea-Namtumbo (61 km)

(iv) Peramiho-Mbinga (78 km)

b) Improving of up to 35 km in five rural roads in Pemba Island as part of Zanzibar Rural roads component.

c) Improving aviation and public safety facilities at Mafia Island Airport.

d) Laying a new submarine electric transmission cable from the mainland to Unguja island, Zanzibar, to improve and support the existing cable that is reaching its limits in both capacity and lifespan.

e) Construction of a small hydro-power plant on the Malagarasi river and the extension of a mini-grid system in Kigoma Region.

f) Rehabilitation and extension of electricity distribution system to unserved areas in six regions identified as priority areas.

g) Improving water supply infrastructure in two cities of Dar es Salaam and Morogoro. This will involve expanding the Lower Ruvu water treatment plant capacity from 180 million liters to 270 million liters per day; and improving efficiencies in order to reduce physical leakages and commercial losses (biling, collection and theft) that cause about 60% of Dar es Salaam water to be lost before it reaches customers.

Each county signing a Compact is required to establish an entity to coordinate the implementation of the selected projects. In October of 2007 President Kikwete consequently appointed Bernard Mchomvu, a long serving Permanent Secretary and technocrat, to serve as CEO of Millennium Challenge Account-Tanzania (MCA-T). Tanzania qualified for the Compact after two years of implementing the Threshold Program that was valued at $11.15 million.