IMF’s MD Christine Lagarde Visit to Kenya: Dispatches from Mindspeak Forum

Mindspeak Poster

I attended the Mindspeak forum on Monday, January 6 2014 where the key guest was the IMF MD Christine Lagarde. Ms Lagarde was in the country for a three day working visit.

Ms. Christine Lagarde, Managing Director of the International Monetary Fund (IMF), will visit Kenya from January 5–8, 2014, to meet with policymakers and other representatives of Kenyan society. – IMF Press Release No. 14/01 January 2,2014

Notable things picked from this session is despite the look east policy adopted by Kenya plus the perceived thawing of relations brought about by the ICC case the country has been engaging the IMF. To date Kenya has received almost $ 1 B from the time IMF. The monies we necessitated by a rapid decline in the value of Kenya Shilling to the dollar in the year 2012. The country applied for IMF short term lending which was approved and disbursement of these funds was divided into three tranches. The last which was approved by the BoD of IMF just before Lagarde jetted in.

Other insights gain from the MD speech was the health of Kenyan Economy. As pointed out –

‘Indeed, Kenya’s economic gains over the past few years have been nothing short of remarkable. Coming on the heels of a delicate political transition, growth remains robust—at more than 5 percent in 2013. And a set of bold economic reforms have laid the foundations to lift the economy to middle-income status within the next decade—if Kenya maintains the reform momentum.’ - Christine Lagarde

This is essentially important given Kenya will be launching a Eurobond either at the end of this month or in February 2014. The assurances from the IMF will certainly go a long way in making the bond issue a success.

The other aspects which were addressed by the speech were the growth prospects for SSA tagged together with the risks to look out for. In her off the cuff remarks Ms Lagarde mention with the recovery of Western markets capital is expected to flow back from emerging markets to the developed markets as the returns there become more meaningful.

‘Overall, we expect Sub-Saharan Africa to enjoy continued robust growth—which our projections in October place at 5 percent in 2013 and close to 6 percent in 2014. But this outlook is not without risks. Policymakers must remain vigilant to threats from slower demand in emerging market economies, unfavorable changes in commodity prices, or higher financing costs.’ - Christine Lagarde

On the quest of Middle Income Status by Kenya m/s Lagarde offered a roadmap in her three C’s namely;

1. Completing fiscal devolution; 
2. Closing infrastructure gaps; and 
3. Continuing regional

The full speech by m/s Lagarde can be accessed here

[Events in Nairobi] Mindspeak: Aly-Khan Satchu Hosts Belgian Deputy Premier HE Didier Reynders, Aug. 17 2013 @ InterCon Nairobi

HE Didier Reynders – Belgian Deputy Premier and Minister of Foreign Affairs

This event which I first posted in NairobiNow showcases the influence Nairobi is gaining as a regional financial/investment hub;

Date: August 17, 2013
Venue: Inter Continental Hotel
Time: 9 for 10 am

Chief Guest: HE Didier Reynders – Belgian Deputy Premier and Minister of Foreign Affairs

About
Didier J.L. Reynders is a Belgian politician and a member of the Mouvement Réformateur (MR).
Didier is the Belgian Deputy Prime Minister and Minister of Foreign Affairs in the Di Rupo government. Previously he has served as a Finance Minister for 12 years

Aly-Khan Satchu is the CEO of RICH and convenor of mindspeak. Other prominent guests to grace mindspeak sessions in the past include sitting African heads of state [HE Paul Kagame & HE Yoweri Kaguta Museveni] and industry captains

Karim Sadek MD Citadel Capital at #Mindspeak on Sept. 29 2012 @ Intercontinental Hotel

Mr. Karim Sadek gave a very insightful presentation at Mindspeak which touched on Citadel Capital activities in this region.

In his candid presentation ‘the role of private sector in accelerating development’ he opened Citadel Capital up to the public. This is the story of Citadel Capital in figures

• It has $ 9.5 Billion in investments under control as of end year 2011
• $ 940 Million in Principal investments
• Operates in 15 industries: from Agriculture, Financial Services to energy distribution
• Has 19 specific funds as per end year 2011

Sadek also espoused Citadel capital track record and their business model. However, what was most insightful we’re his observations on African investment climate. From his position, managing a capital fund, he was of the view that of late Africa has been attracting substantial interest from the rest of the world. However, writing of Cheques for Sub Saharan Africa outside oil and gas is still lacking.

Egypt before and after the revolution

Since Citadel is head office is in Cairo we got a business 101 on Egypt. Kenya Association of Manufacturers (KAM) has been in the news complaining of imports from Egypt which are substantially cheaper than Kenyan products because of power/energy subsidies. Well the good news for KAM is the regime of subsidies is coming to an end in Egypt.

The other interesting piece of information from Sadek was insights before the Arab spring. Citadel Capital was two weeks to finalizing a deal for a stake in Egyptian Refining Company before lady liberation came calling. Also, the change in attitudes and perceptions in Egypt, this days young people have no respect for authority. The other interesting insight was the East Africa compared to Egypt had better industrial relations. Egypt is now in the initial process of coming up with an independent workers union.

Citadel’s interest in Kenya

Citadel interest in Kenya came through an opportunity that presented itself in Rift Valley Railways [RVR] which won a 25 year concession on Kenya-Uganda Railway. After the turbulent times RVR has been through it seems with the entry of citadel capital the century old railway is up to some good times ahead.

The Preposition

Citadel capital together with its partners came up with a $ 300 Million preposition to turn around the railway in the next five years. Under the three point turn around based on;

1. Upgrade of operationn
2. Rehabilitation of existing assets
3. Additional of new assets [2014 onwards

Some of the Partners in this Turn around Endeavour

Prominent names stand out in this deal which means this is a success story in the making. These institutions underwriting the success of our railway are;

• African Development Bank
• KfW Entwicklungsbank (Germany)
• International Finance Corporation
• FMO (Dutch)
• Equity Bank (Kenya)
• ICF Debt Pool
• BIO (Belgium)

This here might be the next success story in Kenya if Citadel Capital can hack it.

Trans-Century at Mind Speak

May’s edition of Mind Speak saw Transcentury parade itself in this monthly forum (which I regularly attend) organised by Aly-Khan Satchu a Financial Analyst who runs rich management

This was coming head over heals of April forum that had President of Uganda H.E. Yoweri Kaguta Museveni as the Guest speaker. What is fascinating about this company is that it is a company founded by 29 prominent personalities. These personalities have been accused of either being too close to the center of power or have used their positions to acquire contracts or use privy info BUT they have defended themselves as people who have acquired their wealth genuinely and in a range of counties in the region.

To pitch for this company Transcentury were; Dr. Gachao Kiuna (CEO) and Yida Kemoli (Head of Finance and Corporate Strategy).

Background of Transcentury

The CEO Dr. Gachao gave us a brief history of this company. It was started by 29 people (all men) who used to meet informally in what in Kenya we call ‘chama’. They all agreed to each contribute Kshs 1 million. So they expect to have an initial capital of Kshs 29 million however they ended raising Kshs 24 Million.

Their initial investment was in South African Breweries which had entered the Kenyan Market in 1998 only to close in 2002 after four-year beer war with Kenya Breweries and failing to secure a 10% of market share.

These investors managed to recoup their investment from SAB due to the fact that SAB pulled of the market by a negotiated settlement with Kenya Breweries Ltd (now East African Breweries Ltd, EABL).

Having learned from this experience the 29 vowed never to go for anything less than controlling stake in a company (51% of the share capital).

Present Day Transcentury

The 29 investors formed Transcentury which is a Holding company with interests in;

• Power Infrastructure: Manufacture of Electrical Cables, Conductors, Transformers and Switchgear. 
• Transport Infrastructure: Operation of the Kenya-Uganda Railway Concession.
• Specialized Engineering: Distribution of Mission-Critical Industrial Equipment and Construction of Electrical Installations.  

The company has pan-African interest in outlook i.e. it wishes to invest in the whole of Africa and that is why as I came to find out it was at the event because it wants to list on the Nairobi Stock Exchange (NSE).

The company has 5 divisions i.e. Power Infrastructure, Transport Infrastructure, Specialized Engineering, Consumer and Affiliated Holdings.

Reservations

The company has raised some eye brows with its Transport Infrastructure division with people questioning the way it got into the concession of Rift Valley Railways (RVR) and the two guest speakers had a hard time convincing us. However, they had their side of the story.

The company seems to hedging on the railway considering it is has entered into partnership with a Brazil Railway company America Latina Logistics (ALL).

The other eye brow is that the company can’t seem to send away the ghosts of the 29 investors who as some would put it could raise the issue of ‘conflict of interest’ given that some of them are CEO’s of some of the divisions the company engages. To this the CEO pointed out that some of their major customers are you and me (ordinary folk) and NOT government parastatals.

The other observable omission in the company which was observed by Gina Din was that the company’s 29 investors are all men!

Going Forward

In the infrastructure sector given that most of the infrastructure building is done by Chinese Companies funded by China gov’t which has shown that it is willing to fund states improve their infrastructure. Does Transcentury know anything that we don’t? (A query raised by one of the participants).

Only time will tell however, should you want to know more about this company the CEO Dr. Gachao Kiuna asked the participants to visit any Dyer & Blair.

Presentation at Mindspeak (Pdf)

U.S. Ambassador Michael Ranneberger at MindSpeak

It came as a pleasant surprise to me to know that Ambassador Michael Ranneberger was to speak at MindSpeak. Being the first sitting diplomat from another country (in this case the USA) invited to speak at the business club meeting. But I came to realize the ambassador is a man of firsts in many fields.

The ambassador started his presentation by shifting our mindset of the fact that by him being the ambassador of US in Kenya he is then by implication the CEO of the mission in Kenya. Giving a few statistics of his portfolio, He has 1500 employees under him, 500 Americans and 1000 Kenyans and that the mission handles about US dollars 1 Billion which flow to Kenya through the various agencies his country has in Kenya. 

Ambassador Ranneberger was not shy to speak about his previous engagements which you can say have influenced him to the ambassador he is today. Surprising is the fact that he had not anticipated a career in the diplomatic corps and that he was going to post a letter in the post office that he saw an advert to do a test to join the corps.

He had been studying his PhD in history and was about to do his dissertation and then as he put it become a teacher in one of the colleges.  He also shared with us that when he started his stint in the diplomatic corps he was a shy person and could not fathom talking to a group of people (like the house full MindSpeak).

He also hinted on his style of doing things in that he does not read theological books but relies mostly from his experience and that his style is both positive and confident.

Pointing on the time when the Post Election Violence was occurring. One of the things at his disposal was flying out his staff BUT he didn’t take that option. What he did was to rely on his instinct and experience, assembled his staff or troops if you like and told them that the situation would be over in a couple of months.

He also talked briefly on the role the US played behind the scenes to resolve the crisis. Pointing out on how the principals were a taken by the dailies headline which ran across all spectrum of newspapers in Kenya ‘Save our Country’.

Being an American citizen he did not hesitate to talk about his country and values. Talking about what is going on in the States ‘Tea Party Movement’ and the electoral swings they experience. Also pointing out that American values are always consistent what may change are the tactics or Strategy.

He also talked of how he had met the President during his Chief of Mission Conference last year and how the President is abreast on what is happening in the country.

He also talked on his definitive speech he was to give on 25/01/2011 at the American Camber of Commerce dinner in Kenya.

Ambassador Ranneberger also talked briefly on the three major programmes his government is involved in Kenya.

• PEPFAR US dollars (580 million) Largest amount spent in a single country the whole world
• Democracy and Governance initiatives i.e. Youth Programmes
• Environment and Agriculture i.e Feed the future programme (Signed in 2010 at KARI)

US Interests in Kenya

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One of the things we like the US ambassador is that he is forthright and this was NOT an exception. He candidly pointed out the US interests in Kenya which are;

1. Democracy and Stability (As is the US goal any part of the world)
2. Development
3. Regional Stability (Pointing out Somalia & Sudan). Mind you Sen. John Kerry was in Southern Sudan during the referendum to secede from the North
4. Counter Extremism

However he did not talk much about China which has been making in roads in this region and South Korea which I have noticed is also coming along.

However, during the Q&A he did point out Robert B. Zoellick who brought a new paradigm to Washington of NOT viewing Beijing as a Competitor in the World stage but as an ally during his tenure as the US Trade Representative before joining World Bank.

So he welcomed the positive competition that China is currently giving them. Noting that US ceased from doing infrastructure projects he does not mind China assisting African countries in developing their infrastructure. However, he cautioned in passing that he had observed NOT many African were involved in these projects, so the issue of Kenyans gaining from these cooperations was minimal.

Youth Issue

The ambassador talked about why the state dept is investing in the youth alluding to the fact that the youth are the future.
Hence programs that target interacting with the youth have gained traction in the state dept with the ambassador present on the social networks.

Here are some of the snippets from the ‘Hope for the future speech’ which was delivered on Tuesday 25/01/2011 at the American Chamber of Commerce dinner where the ambassador was the keynote speaker. I consider this speech definitive because it has lots of stats which are credible considering the US sponsors quite a number of Statistical undertakings in the country.

“President Obama has a strong interest in developing the leadership skills of young people, and last year held his first Young Africa Leaders Forum.  He has charged young people to be agents of change and to “stand up for democracy and transparent government.”  Our $45 million “Yes Youth Can” program will empower hundreds of thousands of youth to participate in the development of their country, and expand their peaceful participation in the democratic process. 

Our work with youth supports the initiatives of young people themselves.  Importantly, the National Youth Forum works across ethnic and political lines with a common agenda to promote peaceful reform. We welcome the National Youth Forum’s efforts to establish County Youth Forums in every county.  We are establishing a $10 million youth-led and youth-owned Youth Innovate for Change Fund that will provide youth with opportunities to access capital for economic development”.  

“Over half of Kenya’s population lives in poverty, living on less than $2 per day.  Kenya is ranked in the bottom 20% of countries in the UNDP Human Development Index.  Real unemployment among the two-thirds of the population which are under 35 stands at nearly 50 percent’’

“Support for the empowerment of youth to expand their participation in the democratic system and to assist them to develop businesses to create new jobs”.

Agriculture

"Kenya has recently been designated a focus country for two of President Obama’s global initiatives.  Through the Feed the Future Initiative, working with the Government of Kenya we have affirmed a commitment to achieve significant agricultural development objectives, including alleviating the suffering of the over 2 million Kenyans who are chronically food insecure.  Last September at KARI, I announced an initial USG investment of $29 million to support Kenya’s agricultural strategy through the Feed the Future initiative.  We will also continue to provide humanitarian assistance to combat drought".

"Real success in the agricultural sector, however, will require the GOK’s commitment to the political and economic reform agenda, including land reform, a strengthened fight against corruption, restructuring and/or elimination of the 34 agriculture-related parastatals, including the NCPB, and removing protectionist tariffs and import licenses that increase the price of basic foodstuffs to the poor".

The writer is an intern at Ministry of Agriculture, Planning Department and contributes/one of the admins of NairobiNow.