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EDITORIAL: Regulate city hawkers – Business Daily

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EDITORIAL: Regulate city hawkers

City Hall. FILE PHOTO | NMG 

A bill that is expected to regulate hawking within the Nairobi Central Business District (CBD) is at an advanced stage at the County Assembly and is a step in the right direction.

The Nairobi City County Trade Licensing Bill, 2018, which has gone through the second reading, will among other things, guide how the micro businesses are licensed, what they can sell, where they will operate from and the fees they will pay annually. While previous attempts at moving hawkers out of the CBD have always failed, it is worth noting that many small traders are attracted to the city centre because of the perceived ready market due to the busy streets and access to people with purchasing power.

However, the lawmakers and City Hall must ensure that the traders are not given free access to the extent of blocking business premises, especially shops and supermarkets, offices, security installations and other sensitive areas of the city. Their licences ought not to be a permit for laissez faire conditions.

The hawkers must be restricted to certain locations and their presence should not make movement within the city a nightmare for everyone else.



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KISERO: What KCB-NBK merger means

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What KCB-NBK merger means

A National Bank of Kenya branch. FILE PHOTO | NMG 

The Press statement by the Kenya Commercial Bank (KCB)announcing its move to acquire the National Bank of Kenya(NBK) through a share swap did not give much detail.

The statement only said that the deal would involve 10 ordinary shares of NBK for every one ordinary share of KCB. If it works, we will have seen the end of one of the most troublesome chapters in the country’s banking sector. Even though NBK has a weak balance sheet, it will bring to the table strong customer-facing assets for the combined entity. It has retained branches in exclusive locations at airports, ports of exit and entry into the country, giving it advantage when it comes to inter-trade business.

Secondly, it has over the years retained exclusive viable public sector clients. In the past, NBK was the designated bank for receiving landing fees for all aircraft landing and taking off from Kenya. It retains a substantial part of the business.

NBK used to be the banker for the largest employer in the country — the Teachers Service Commission. It still retains a substantial portion of the business. It used to be the designated banker for receiving payments to Kenya Revenue Authority and still retains a big chunk of this business.

So, what are the likely outcomes of the proposed merger? First, the government’s stake — now at 17 percent — is bound to increase with consequences for the corporate governance of the largest bank in the country.

The public float, a broad and impressive spectrum currently holding in excess of 80 per cent, may also suffer dilution.

When the details of the transaction are finally put out, it will be interesting to see how the vexing issue of the mainly government-owned preference shares in the books of the bank — which have always been the deal breaker for investors interested in buying the bank — will be treated.

NBK has a peculiar capital structure of having normal ordinary shares and at the same time preference shares with equity-like features that, unlike normal preference shares, allow these securities to share in the profit of the bank.

Indeed, transaction advisers hired in the past to sell the bank have advised that no sale transaction of the NBK is possible unless the preference shares are converted into ordinary shares first, and on a 1:1 basis.

Predictably, the National Social Security Fund (NSSF) has been opposed to the 1:1 conversion formula, arguing that such a move would dilute its current near majority 48 percent stake of ordinary shares of the bank.

This is because, when the 1:1 conversion formula is applied, the Treasury’s stake rises to 70 percent of ordinary shares from the current 23 percent, giving it power to make unilateral decisions on the future of the bank.

It will be interesting to see how the National Treasury and KCB will navigate through this shareholding quagmire.

With the shares of the NBK currently trading at its lowest multiples and at a steep discount on the book value, this transaction could put the government and the NSSF in a position where they can start realising a return on their investments in the bank.

The two investors have not been able to earn a return either by way of capital appreciation or dividends from the billions they invested in the company in nearly two decades. But more significantly, a takeover of NBK will serve as a strong signal that distressed State-owned banks will no longer be artificially kept alive even after they have long outlived their usefulness.

Indeed, many of the State-owned banks have been in poor financial health, only managing to limp along because of support and regulatory forbearance from the Central Bank of Kenya (CBK) .

A good number are currently suffering crippling liquidity problems, forcing them to resort to complete dependence on the CBK discount window for liquidity. In the interbank market, they are unable to access liquidity easily because the large banks are not willing to lend to them, choosing to deal only with their large peers.

How I hope that the proposed merger of NBK and KCB will just be but the beginning of structured changes that will eventually give us a long-lasting solution to widespread distress within the State-owned segment of the banking sector.



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Keter defies GDC board on chief executive new term

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Keter defies GDC board on chief executive new term

Energy Secretary Charles Keter. FILE PHOTO | NMG 

Energy Secretary Charles Keter has defied the board of Geothermal Development Company (GDC) in extending the term of the firm’s CE0.

Mr Keter has offered GDC boss Johnson ole Nchoe a one-year contract despite the board’s verdict to seek a new managing director.

Mr Nchoe, whose three-year term ended on Wednesday, sought a contract renewal. This triggered a board review that gave him a score of poor.

The board gave him a score of 39.6 percent for the six months to December and 39.8 per cent for the year ended June last year with both scores categorised as poor.

“He sought a contract renewal and we said no based on his appraisal,” said a GDC director who sought anonymity fearing reprisals from Mr Keter.

“The board spoke, but the CS had a final word that was contrary to the resolution of the directors.

“This is out of step with good corporate governance.”

Mr Nchoe, who was picked to head GDC in April 2016 on a three-year contract, previously worked at Kenya Power as IT and telecoms chief manager until 2013 when he joined a group of consultants in Liberia on a donor-funded plan tasked with helping the West Africa nation rebuild its electricity network.

He protested the poor review from the board, arguing it was designed to embarrass him.

“He felt strongly that the evaluation was designed to embarrass the person of the CEO and was inconsistent with the good board evaluation results,” said board minutes capturing Mr Nchoe’s protest.

The one-year contract extension is tied to the fact that Mr Nchoe will next April attain the mandatory retirement age of 60.

His predecessor, Dr Silas Simiyu, also fell out with the board, prompting his resignation in March 2015 after he was adversely mentioned in tender irregularities.

Eight months after Dr Simiyu’s exit, the board suspended six GDC managers including acting CEO Godwin Mwawongo, company secretary Praxidis Saisi and tender committee members Mr Abraham Saat, Mr Peter Ayodo, Mr Caleb Mbayi and Mr Nicholas Karume.



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Tea rebounds to Sh203 at weekly auction amid shrinking supply

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By GERALD ANDAE
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The amount of tea withdrawn from sale at the auction fell 24 percent this week as price increase at the Mombasa auction saw buyers sell most of the commodity.

Data by East African Tea Traders Association indicates only tea worth Sh228.8 million was offloaded from the auction against that valued at Sh302.3 million last week. In trading held on Tuesday, a kilogramme of tea on average went up to Sh203, up from Sh193 realised last week.

Tea prices have been falling in the last two months but have rebounded in the last two sales as volumes offered started coming down because of the ongoing drought.

The volumes offered for sale this week dropped from 7.275 million kilos to 7.2 million as adverse effects of droughts hit tea farmers and factories.

Over 40,000 tea factory workers have been forced to go on advance leave as production went down by half.

Kenya Tea Growers Association (KTGA) chief executive officer Apollo Kiarii says the harsh climatic conditions have forced factories to operate three to four days a week, significantly cutting down operations.

He said it will take another six to eight weeks for the crop to recover if the rains come, and additional cost of replanting and infilling the fields for the dried-up bushes means the industry performance for the year 2019 will be poor than any other time. The Tea Directorate had forecast the volumes will this year drop to 416 million kilos from a high of 474 million kilos last year.



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