• Uganda - 20 YEAR Treasury Bond
  • Issue No:UG12L0111405
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A gauge of business activity in Uganda climbed to its highest level since November, pointing to a return to normal operating conditions as the general elections recede and some service sectors reopen close to a year after restrictions were imposed to contain the coronavirus.

The Stanbic Bank Uganda purchasing managers index , a key measure of business conditions in the private sector, rose to 53.2 in March from 51.2 in February, according to data released by IHS Markit, the global research firm. The PMI reading is the highest since November and the second straight improvement in business conditions.

The rise in the index, the second in as many months, signals “that the economic recovery is gaining momentum as conditions gradually return to normal,” said Ferishka Bharuth, the economist for Africa regions at Stanbic Bank.

“Notably, after five months, March’s PMI reading is supported by increases across all [the] five sub-components of the index,” Ms Bharuth added.

Businesses pointed at an increase in new orders for the second successive month, driven by an increase in customer numbers. In turn, they purchased and hired more. However, IHS Markit said staff costs decreased but did not provide an explanation for why this was the case.

An increase in the prices of electricity, water, cement, and food items drove up purchase costs for private sector entities. But it is customers who paid the price for the higher prices as businesses passed on the burden to them, raising output prices for the third consecutive month.

File image of a Chase Bank branch. PHOTO| COURTESY Chase Bank, technically referred to as Chase Bank Limited in Receivership (CBLIR), will cease to exist after the approval of its liquidation by the Central Bank of Kenya (CBK) on Friday.

The approval of the wind up process is on the recommendation of the Kenya Deposit Insurance Corporation (KDIC), the lender’s statutory/receiver manager since April 2016.

The CBK has agreed with KDIC’s view on the weakened financial and liquidity status of CBLIR which has left liquidation as the only option on the table.

“CBK has assessed the recommendation by KDIC, and considered that liquidation would facilitate the orderly resolution of the residual assets and liabilities of the bank,” the CBK said in a statement issued on Friday.

“Subsequently, CBK has appointed the KDIC as liquidator of CBLIR. KDIC will release information about the liquidation of CBLIR and payment of depositors in due course.”

On April 7, 2016, the CBK named KDIC as the receiver for Chase Bank following after the lender run into financial difficulties.

The placement of the bank under statutory management was on the backdrop of events on April 6, 2016 which saw panic withdrawals from the bank caused by ‘unconfirmed’ rumors largely on social media which ended in a run on the lender.

A bank run is simplify defined as the simultaneous withdrawal of deposits by customers jeopardizing the entities solvency levels.

On April 20, CBK approved KCB as CBLIR manager allowing the lender to resume limited banking operations from which customers got immediate access to deposits to a maximum of Ksh.1 million.

From this process, 97 percent of Chase bank depositors represented in an equivalent 162,970 deposit accounts accessed their funds in full.

Two years later in August 2018, 75 per cent of the value of deposits at CBLIR and an equivalent size of assets were carved out by the State Bank of Mauritius (SBMO which established a local subsidiary in the process.KDIC has managed the remaining 25 per cent of the value of deposits alongside other assets and liabilities in CBLIR.The decision to liquidate the remaining part of CBLIR has followed an independent external audit and the resolution of pending gaps in the lender, a process completed earlier this month according to Friday’s disclosure by the CBK.The liquidation refers to the process of bringing a business to an end by distributing its remnant assets to claimants. This often involves selling off assets as steep discounts.The […]

Jubilee Holdings Chairman Nizar Juma. FILE PHOTO | NMG Jubilee Holdings #ticker:JUB shareholders are set for a Sh579.78 million final dividend payout after the insurer defied a trend of losses and fall in earnings to grow its full year net profits.

The Nairobi Securities Exchange-listed firm yesterday announced a 1.74 per cent growth in net profit for last year to Sh4.087 billion despite the Covid-19 disruptions that slowed businesses.

The regional underwriter’s board has proposed a final dividend payout of Sh8 per share amounting to Sh579.78 million payable by end of July, bringing total payout for the year to Sh652.26 million.

The insurer, which had paid a Sh72.47 million interim dividend last year, becomes the first listed underwriter to grow profits and pay a dividend.

Jubilee has attributed its stable performance on sound underwriting practices, tightening of controls over claims and expenses, and a diversified investment portfolio.

“We were able to weather this storm through diversification of our product portfolio and our ability to rapidly deploy our business continuity plans to allow the majority of our staff to quickly adapt to the new working needs during the onset of the pandemic and ensuing lock-down,” said Nizar Juma, Jubilee Holdings Chairman.

Most insurers have been hit by reduced returns from real estate and falling share values at the NSE—where they had invested billions.

Sanlam Kenya returned a Sh78.2 million loss— the second in nearly two decades as CIC broke its 13-year profit-making run with a net loss of Sh296.8 million.

Jubilee posted a 3.3 percent growth in net insurance premium revenue to Sh20.14 billion while investment income rose by 12.7 per cent to Sh11.3 billion, pointing to the advantage realised from reduced exposure on NSE.

Jubilee Holdings regional CEO Julius Kipng’etich altered the insurance business environment, making the firm to respond through strengthened agency networks and seamless customer service experience.

“Our first focus was on effectively coordinating the pandemic prevention measures for both our staff and clients, a move that saw us significantly optimise our operations to achieve improved performance,” said Dr Kipng’etich.

Technicians repair power lines. FILE PHOTO | NMG Out of the eight independent directors on the board of the electricity utility, Kenya Power, five are women. They have been sitting on the board of the financially troubled firm for just over eight months.

Thus, in terms of expanding gender representation on boards of listed companies, Kenya Power has done fairly well.

KCB Kenya, with a total of five women out of 11, also ranks well in terms of gender representation on this key policy-making body within companies.

In the case of Kenya Power, even the chair of the board is occupied by a woman: the long-serving CEO of the East Africa Development Bank and one-time director of the Central Bank of Kenya(CBK), Vivenne Yeda.

The rest of the women on that board are Elizabeth Rogo, Caroline Kittony–Waiyaki, Beatrice Gathirwa, and Imelda Bore.

As I look at these trends in gender composition of boards, the results of a study on the phenomenon known as the ‘glass cliff’ published in an article I recently read in the Harvard Business Review quickly came to my mind.

According to that study, women offer better leadership during a crisis. Conducted by researchers from a leading leadership development consultancy, the study found that given a chance to prove themselves in a serious position — when they are handling something which is broken and where the chances of failures are high — women tend to excel.

The study also found that women leaders in the corporate world tend to be leaders who are able to pivot and learn new skills, who will emphasise employee development even when times are bad — and will display sensitivity and understanding to stress, anxiety and frustration which workers go through during crises.

Which brings me back to the financial straits in which Kenya Power finds itself and the challenges facing the board and management. The company made a massive loss of Sh 7.1 billion last year. Finance costs have ballooned, working capital is in the negative and debt to equity ratios have trended towards the unsustainable. Can Ms Yeda and her women- dominant team perform better at managing the crisis at Kenya Power?

It remains to be seen. But from the observations she made while addressing her first annual general meeting as chairman of the company, the impression I get was that Ms Yeda is not the type of corporate leader who will be content with playing the role […]

Kenya Airways risks paying Sh13.9 billion in refunds to customers for unused tickets bought last year, mainly due to cancelled flights in the wake of the Covid-19 pandemic.

This could see the national carrier revise its revenue downwards, according to disclosures made by the company’s external auditor PricewaterhouseCoopers (PwC) for its financial year ended December.

The airline, like its peers across the world, is now asking customers to accept vouchers which allow them to travel in future, while conserving the much-needed cash to remain afloat, instead of making refunds.

Passenger ticket sales are accounted for as current liabilities and later recognised as revenue when customers fly or the ticket expire.

PwC says that the option of letting the tickets expire is largely shut out because of the unique challenges caused by the pandemic.

“In the current year, management have expressed significant judgments in relation to recognition of revenue on unused tickets in view of extensions in ticket expiries and refund options offered to passengers as a result of the Covid-19 disruption to the aviation sector,” PwC said in its report.

The Sh13.9 billion in unused tickets represents 26.3 percent of the Sh52.8 billion revenue that the airline reported in the review period.

Extension of the validity of tickets means that the airline’s revenue could drop if it opts to refund customers who have not flown.

It also means that it will take longer for the revenue to crystalise if KQ, as the carrier is known by its international code, opts to allow customers to fly in the future at a date of their choice.

Most customers were ready to fly on schedule but governments and airlines around the world have taken decisions that have led to an unprecedented cancellation of flights starting last year.

“The Covid-19 crisis has caused airlines to cancel more than one million flights globally,” the International Air Transport Association (IATA) said in a statement.“This changed the way airlines process refunds or offer credit for future flights. IATA has launched several activities to assist the industry efficiently address the customer vouchers and refunds topics.”Cash-strapped KQ is leaning towards settling most of the outstanding tickets using vouchers.Customers will have to weigh the pros and cons of accepting vouchers versus pressing for a cash refund. The vouchers may have expiration dates and conditions such as who can travel using them – the original customer or members of his or her immediate family.Some airlines are luring customers to accept […]

On Friday April 9, Daily Monitor reported that power distributor Umeme lost Shs98b to power theft in Jinja Sub-region between January and March and that such loss is greatly attributed to the outdated Electricity Act 1999.

As much as the Judiciary created a Utilities, Standards and Wildlife Court to prosecute culprits involved in stealing of utilities such as power, the Electricity Act prescribes very weak punishment for culprits.

Power theft, illegal connection and vandalism in Uganda are rampant crimes where wires are left exposed which at times lead to electrocutions.

Section 88(1) of the Electricity Act 1999 imposes a penalty of 30 currency points (Shs600,000) or two years imprisonment or both to anyone who steals power.

The Act does not provide stringent punishments to culprits of power theft or vandalism to equipment from the network, despite the huge losses the habits cause to the company and the country at large.

The Electricity Amendment Bill 2020 to repeal the Electricity Act of 1999 was approved by Cabinet on July 20, 2020, but it is moving at snail’s pace yet the electricity sector is facing a lot of challenges that can only be addressed by amending the Electricity Act.

On top of power theft, the electricity sector is facing other challenges such as high power tariffs: even after commissioning the 183MW hydro power dam, the power tariffs remained the same as in the previous years.

The prices include Shs751.9 per unit for domestic consumers, Shs645.6 for commercial consumers and Shs361 for large industries.

If the service fee and Value Added Tax (VAT) costs are added to the above prices, domestic consumers pay nearly Shs1,000 per unit of power. The cost paid by the commercial and large consumers also increases.

The Ministry of Energy and Mineral Development (MEMD) should work with Electricity Regulatory Authority (ERA) and present the Electricity Bill 2020 to Parliament and the Bill must address the following;

a) Provide for tougher and deterring punishment for power theft and vandalism. b) Distribution companies should be penalised for power outages and compensate the affected users for the loss suffered due to power blackout. c) Make provisions on alternative power supply, specifically off-grid energy sector.d) Provide for compulsory land acquisition in line with Article 26 of the 1995 Constitution to solve issues of deemed power. e) Put a limit on borrowing money to invest in grid power that leads to high return on investment that make power very expensive.f) Complaints filled at […]

AFDB facility will support Equity’s expansion in East and Central Africa and ensure

MSMEs have access to capital to recover and thrive in a Post COVID-19 Environment

The Kshs 11 Billion loan comes on the heels of an additional USD 50 Million (Kshs 5.5 Billion) Loan Facility from the African Guaranty Fund.

Nairobi, Kenya | THE INDEPENDENT | Equity Group Holdings (EGH) has signed a $100 million loan (Ksh 11 Billion, UG Sh3.6 trillion ) facility to support its expansion across Eastern and Central Africa, enhancing its ability to serve small and medium enterprises (SMEs) as it grows.

In addition to operating in 7 African countries – Kenya, Rwanda, Uganda, South Sudan, Tanzania, the Democratic Republic of the Congo and Ethiopia – the Group has recently expanded its operations in the DRC by merging its existing operations of Equity Bank Congo with its acquisition of BCDC to form EquityBCDC, now the second largest financial services company in the country.

At the signing, Dr. James Mwangi, Managing Director and CEO of Equity Group Holdings said, "Together with the African Development Bank Group, Equity Group will be strongly positioned to support MSMEs to keep their lights on during the prevailing COVID-19 pandemic that has slowed down the economy impacting on the cashflows of enterprises."

He said by extending credit to enterprises during this period, Equity is demonstrating its commitment to walk with its customers, and to empathize with their social economic situation brought about by the pandemic.

Dr Mwangi added, "We have seen the impact of pumping oxygen to our MSMEs during this period. They have been able to re-imagine, repurpose and retool their enterprises and emerged more resilient thereby protecting jobs and creating more job opportunities through venturing into more innovative initiatives such as manufacturing of internationally certified quality PPEs."

The loan, a tier two facility with a seven-year maturity, is expected to promote EGH’s ability to offer bespoke products to MSMEs, strengthen its balance sheet and optimize its capital structure across the continent with a special focus on women and youth entrepreneurs.

"EGH has a strong track record of designing products suited to the needs of SMEs as well as emerging corporates. The timing of the facility’s disbursement could not have been more appropriate especially as businesses seek to remain operational in the midst of a COVID-19 pandemic that is causing financial havoc," said Stefan Nalletamby, AfDB’s Director for financial sector development. "We are very pleased to collaborate […]

Former Crane bank staff have sued dfcu bank At least 400 former employees of Crane bank Ltd have petitioned the High court in Kampala seeking orders to compel dfcu bank to produce documents that were allegedly withheld by the bank after their dismissal.

The group was employed by Crane bank until October 2016 when Bank of Uganda (BoU) announced its closure and later transferred its assets to dfcu on grounds that it was undercapitalized. BOU governor Emmanuel Tumusiime-Mutebile said then in a statement that Crane bank was incapacitated, and posed a systematic risk to the stability of the country’s financial system.

Following the takeover, dfcu terminated contracts of the 400 staff formerly employed by Crane bank for alleged incompetence that resulted in the collapse of Crane bank. But the former employees, represented by ten of their former workmates went to court demanding reinstatement, an order for payment of their wages and allowances among other benefits.

They argued that their dismissal was characterized by fraud, breach of duty, bad faith and negligence and that the takeover of the bank hitherto owned by business mogul Sudhir Ruparellia was concealed to them and in the process, their employment rights were violated. However, the matter was referred for mediation, which yielded no results after dfcu allegedly insisted that the termination of their contracts was done fairly.

Now they have returned to the Civil Division of the High court in Kampala seeking orders to compel dfcu to produce and permit them to inspect and make copies of 20 documents before the hearing of the matter can commence.

The documents include the purchase of assets and assumption of liabilities agreement between BOU and dfcu, written notices of resignation letters by the staff in question, contracts by employees retained by dfcu that were revised to ensure pay and benefits parity with the bank’s employees and documents to show that dfcu didn’t underpay those picked from Crane bank compared to their pre-existing employees.

The other documents include the list of employees allegedly laid off for incompetence, termination letters, documents to show that they were paid appropriate termination packages including re-allocation allowances among others. Their lawyer Isaac Ssemakadde says that the discovery of the mentioned documents is a process that helps them to prepare properly for the trial.

In the aftermath of the takeover, Crane bank chairperson Joseph Briribonwa accused BoU of premeditating the closure and sale of their bank. He said that while the […]

FILE PHOTO: Equity Group Managing Director and CEO Dr James Mwangi. Eyeing expansion across region. Equity Group Holdings plans Trans-Africa expansion with $100 Million (Ksh 11 Billion) loan from the African Development Bank (AfDB) AFDB facility will support Equity’s expansion in East and Central Africa and ensure
MSMEs have access to capital to recover and thrive in a Post COVID-19 Environment

The Kshs 11 Billion loan comes on the heels of an additional USD 50 Million (Kshs 5.5 Billion) Loan Facility from the African Guaranty Fund.

Nairobi, Kenya | THE INDEPENDENT | Equity Group Holdings (EGH) has signed a $100 million loan (Ksh 11 Billion, UG Sh3.6 trillion ) facility to support its expansion across Eastern and Central Africa, enhancing its ability to serve small and medium enterprises (SMEs) as it grows.

In addition to operating in 7 African countries – Kenya, Rwanda, Uganda, South Sudan, Tanzania, the Democratic Republic of the Congo and Ethiopia – the Group has recently expanded its operations in the DRC by merging its existing operations of Equity Bank Congo with its acquisition of BCDC to form EquityBCDC, now the second largest financial services company in the country.

At the signing, Dr. James Mwangi, Managing Director and CEO of Equity Group Holdings said, “Together with the African Development Bank Group, Equity Group will be strongly positioned to support MSMEs to keep their lights on during the prevailing COVID-19 pandemic that has slowed down the economy impacting on the cashflows of enterprises.”

He said by extending credit to enterprises during this period, Equity is demonstrating its commitment to walk with its customers, and to empathize with their social economic situation brought about by the pandemic.

Dr Mwangi added, “We have seen the impact of pumping oxygen to our MSMEs during this period. They have been able to re-imagine, repurpose and retool their enterprises and emerged more resilient thereby protecting jobs and creating more job opportunities through venturing into more innovative initiatives such as manufacturing of internationally certified quality PPEs.”

The loan, a tier two facility with a seven-year maturity, is expected to promote EGH’s ability to offer bespoke products to MSMEs, strengthen its balance sheet and optimize its capital structure across the continent with a special focus on women and youth entrepreneurs.

“EGH has a strong track record of designing products suited to the needs of SMEs as well as emerging corporates. The timing of the facility’s disbursement could not have been […]

Nairobi Securities Exchange (NSE) stocks posted the largest weekly loss since the start of the year as investors reacted to fresh lockdown and longer curfew hours introduced to stem the spread of Covid-19 infections.

The market capitalisation reduced by Sh89.38 billion, closing Thursday trading at Sh2.468 trillion as Safaricom, East Africa Breweries Limited (EABL) and the big banks led in shedding value.

Safaricom, Equity, EABL and Cooperative Bank shares — which account for 77.6 per cent of total NSE wealth — fell by between 4.4 per cent and 12.1 per cent, collectively losing by Sh92.86 billion.

The fall in share prices was in line with analysts’ expectation that investors were going to price in implications of stiff Covid-19 control measures on the outlook of sectors such as banking, manufacturing, hospitality, transport and communication.

NSE was on an upward trend, having hit a 15-month high of Sh2.598 trillion on March 23, but the roll-out of State restrictions hurt prospects of various sectors, dimming appetite for stocks.

Covid-19 controls

Head of research at Genghis Capital Churchill Ogutu last week said the return of strict Covid-19 controls in the absence of any stimulus package such as tax cuts to soften the hit on businesses will see large stocks take a beating as foreign investors exit.

"The open-ended nature of these restrictions raised the layer of uncertainty for investors. We also haven’t seen any fiscal measures accompanying these restrictions to help absorb the shock and this makes the outlook bleaker," Mr Ogutu said.

The market was basking in the excitement of dividend payouts as firms upped their optimism in the economy.

Depress earnings

Safaricom, KCB, Co-op, Stanbic and Stanchart had a combined Sh32.53 billion dividends, with that of banks coming in six trading sessions to the day the State rolled out the tough measures.President Kenyatta on Thursday ruled out tax reliefs for workers and businesses when he enforced new Covid-19 restrictions that will cause to job losses and depress earnings.