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Britam offloads Sh852m stake in Equity Bank

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Britam offloads Sh852m stake in Equity Bank


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Britam Holdings group managing director Tavaziva Madzinga. PHOTO | DIANA NGILA | NMG

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Summary

  • Britam has been selling the bank’s shares to diversify its portfolio and also to comply with regulatory guidelines.
  • Britam started buying Equity shares in 2004 and holds them directly and through its various insurance subsidiaries.
  • A rally in the lender’s share price means Britam will have to keep cutting its stake to tame the concentration risk.

Insurance group Britam #ticker:BRIT has sold an additional 20.1 million shares of Equity Group #ticker:EQTY with a market value of Sh852 million, cutting its ownership in the country’s most profitable lender to a new low of 6.77 per cent in the year ended December.

Britam, which in 2019 held 275.7 million shares of the lender equivalent to a 7.3 per cent stake, has been reducing the concentration of its investment in the institution which often represents more than 10 per cent of its total assets.

The insurer says it made a loss of Sh134.5 million in the latest trade which came amid the lender’s depressed share price in the bear run that intensified in the wake of the Covid-19 pandemic.

The insurer has disclosed the latest disposal in its annual report.

“Fair value loss relating to the disposal of the Equity Group Holdings shares totalled to Sh134.5 million [compared to a gain of Sh332.5 million in 2019],” Britam said.

“Fair value loss on revaluation of the Equity Group shares totalled to Sh4.2 billion [compared to a gain of Sh5.1 billion] in 2019].”

Britam has been selling the bank’s shares to diversify its portfolio and also to comply with regulatory guidelines, capping investment in a bank at 10 per cent of an insurer’s total assets.

“The concentration on equities in general and on specific counters is closely monitored. As at December 31, 2020, the group held shares in Equity Group Holdings Plc amounting to Sh8.6 billion (2019: Sh14.7 billion) or 12 per cent (2019: 10 per cent) of the total assets,” the insurer said.

Britam has in recent years moved to reduce its exposure to Equity which in 2014 represented 26 per cent of its total assets on the back of the lender’s long-term stock price rally.

The Insurance Regulatory Authority (IRA) in 2015 published investment guidelines that, for instance, capped an insurer’s investment in a bank at 10 per cent of its total assets.

The requirement is meant to promote financial stability of an insurer which can be threatened if an oversize investment goes wrong.

Britam started buying Equity shares in 2004 and holds them directly and through its various insurance subsidiaries.

A rally in the lender’s share price means Britam will have to keep cutting its stake to tame the concentration risk.

Losses in its investment portfolio, including the Equity stake, contributed to the insurer’s record net loss of Sh9.1 billion in the year ended December.

The insurer also suffered investment losses of Sh5.2 billion in its asset management unit Wealth Fund Management Fund LLP.

The insurer had made a net profit of Sh3.5 billion a year earlier. The loss in the review period saw the company suspend dividend payouts, having made a distribution of Sh630.8 million or Sh0.25 per share the year before.

The company did not give details of what went wrong at the asset management unit, only saying there was an “asset-liability mismatch” in the fund.

“The holding company is committed to support the fund to fulfil its obligations as they fall due through management oversight of the fund’s operations and the agreed recovery plan,” Britam said.

Financial institutions

It was not immediately clear how much money the fund was managing. The insurer says the wealth management funds mainly invest in deposits with financial institutions.

Disclosure of the losses at the fund came after the insurer overhauled its executive and board, including the investment committee, giving it an opportunity to look at issues that may have been glossed over in the past.

The company appointed Zimbabwean Tavaziva Madzinga as its chief executive effective February 1, replacing Benson Wairegi who had been with the insurer for 40 years.

The company also replaced Andrew Hollas as chairman on the same day with Mohamed Said Karama on a temporary basis.

Besides the troubles at the fund, Britam also took a hit from a drop in the value of its listed equities and property investments.

Britam said that its core insurance business was resilient in the review period.

“However operating results were better than 2019. Our gross earned premiums (GEP) and fund management fees were up 4.2 per cent to Sh28.8 billion from Sh27.7 billion,” the insurer said.

“This is attributed to the growth of our insurance revenues especially the international general insurance business which recorded an increase in GEP of 50 per cent, contributing 28 per cent of the group’s GEP and a profit before tax of Sh832 million up from Sh38 million in 2019.”

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KQ resumes Mumbai flights after 4 months

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KQ resumes Mumbai flights after 4 months


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A Kenya Airways aircraft at JKIA. FILE PHOTO | NMG

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Summary

  • Kenya Airways will on Thursday resume flights to Mumbai, ending a four-month hiatus that was occasioned by increased cases of Covid-19 in the Asian state.
  • The airline in a notice to its customers yesterday said it will resume its operations on the route on September 16, 2021 with the first flight departing Jomo Kenyatta International Airport at 7am to arrive in Mumbai at 3:45 pm.

Kenya Airways #ticker:KQ will on Thursday resume flights to Mumbai, ending a four-month hiatus that was occasioned by increased cases of Covid-19 in the Asian state.

The airline in a notice to its customers Monday said it will resume its operations on the route on September 16, 2021 with the first flight departing Jomo Kenyatta International Airport at 7am to arrive in Mumbai at 3:45 pm.

The airline will then resume full operations on the route on September 20, flying three times per week on the Indian route, which is one of the most lucrative destinations on its network.

Passengers on the route will part with Sh46,000 ($419) for one-way air ticket on economy class seats from Nairobi to Mumbai- prices that are relatively the same compared to what it was charging before the Covid-19 pandemic.

“Welcome back onboard! Fly from Nairobi to Mumbai starting Thursday 16th September with normal schedules resuming from Monday 20th September 2021,” said the airline in a notice to its customers yesterday.

KQ Suspended passenger flights to and from Mumbai on April 30 until further notice, following a government directive on travel between India and Kenya due to a Covid-19 crisis in that country.

The airline said on Friday that passengers who had booked tickets after May 1, the date of the last flight from Mumbai to Nairobi, will have to change their plans.

Affected passengers, KQ said, could also take vouchers for the value of their fare for future travel within 12 months.

India has seen soaring infection rates in the recent days, since the discovery of a new virus variant. Last month, India put on lockdown one of the states following a spike in cases of Covid-19.

Other countries that have banned flights to India include France, the UK Bangladesh, Oman and Hong Kong that have banned travel to and from India or asked their nationals coming from the Asian country to isolate themselves in government-approved hotels.

India has so far detected 33,264,175 corona virus cases with the number of deaths hitting 442,874 as at September 13.

A large number of patients from Kenya also travel to India every year for specialised medical treatment, especially cancer care, helping to drive medical tourism in the densely populated country that boasts affordable and easily accessible healthcare.

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Lower import volumes push mitumba prices to new highs

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Lower import volumes push mitumba prices to new highs


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Man pulls a cart loaded with second-hand clothes at Gikomba Market in Nairobi. FILE PHOTO | NMG

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Summary

  • Traders paid Sh100,527 on average per tonne of the used clothes, popularly called mitumba, compared to Sh96,286 the previous year.
  • Kenya Bureau of Standards (Kebs) banned importation of the clothes from late March through mid-August in a bid to contain the spread of the life-threatening coronavirus infections.
  • Findings of the Economic Survey 2021 suggests dealers shipped in 121,778 tonnes of mitumba in 2020, a 34.02 percent fall compared with 2019 and the lowest volumes since 2015.

The average price of a tonne of second-hand clothing items imported into the country crossed the Sh100,000 mark for the first time last year on reduced volumes in the wake of safety protocols and guidelines to curb spread of coronavirus.

Traders paid Sh100,527 on average per tonne of the used clothes, popularly called mitumba, compared to Sh96,286 the previous year.

Kenya Bureau of Standards (Kebs) banned importation of the clothes from late March through mid-August in a bid to contain the spread of the life-threatening coronavirus infections.

Findings of the Economic Survey 2021 suggests dealers shipped in 121,778 tonnes of mitumba in 2020, a 34.02 percent fall compared with 2019 and the lowest volumes since 2015.

Last year’s drop was the first dip since 2011 when 76,533 tonnes were shipped in compared with 80,423 tonnes the previous year, the official data collated by the Kenya National Bureau of Statistics (KNBS) shows.

The import bill for the merchandise amounted to Sh12.24 billion, a drop of 31.11 percent, or Sh5.53 billion, year-on-year.

TIn imposing the temporary ban on used clothes, Kebs had applied a standard which prohibits buying second-hand clothes from countries experiencing epidemics to ensure disease-causing microorganisms are not imported into Kenya.

Higher quality and relatively lower prices for mitumba has continued to drive demand for used clothes at expense of locally-made products amid higher margins enjoyed by traders largely operating in informal markets.

The lucrative second-hand clothing market has seen traders from China —a key source market for the merchandise —open shops in Gikomba, Kenya’s largest informal market for mitumba, in recent years to cash in rising demand.

Earnings from exports of articles of apparel and clothing accessories fell 5.32 percent to Sh32.92 billion last year compared with 2019, data indicates.

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Court backs Atwoli union in horticulture membership feud

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Court backs Atwoli union in horticulture membership feud


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Cotu boss Francis Atwoli. FILE PHOTO | NMG

Summary

  • A trade union that is led by the long-serving Central Organisation of Trade Unions (Cotu) boss Francis Atwoli has survived an attempt to stop it from representing over 60,000 workers in the horticulture industry.
  • Newly registered Kenya Export, Floriculture, Horticulture, and Allied Workers Union (Kefhau) had filed as a case in the Employment and Labour seeking to bar the Atwoli-led Kenya Plantation and Agricultural Workers Union (KPAWU) from representing workers in the industry.

A trade union that is led by the long-serving Central Organisation of Trade Unions (Cotu) boss Francis Atwoli has survived an attempt to stop it from representing over 60,000 workers in the horticulture industry.

Newly registered Kenya Export, Floriculture, Horticulture, and Allied Workers Union (Kefhau) had filed as a case in the Employment and Labour seeking to bar the Atwoli-led Kenya Plantation and Agricultural Workers Union (KPAWU) from representing workers in the industry.

Mr Atwoli is the secretary-general of KPAWU. The rival union claimed KPAWU had encroached on its area of workers’ representation.

Justice James Rika, however, dismissed the claim and ruled that the dispute should have been taken through conciliation, and was therefore presented in court prematurely.

He also stated that Kefhau must go beyond its registration and recruit sufficient members from the employers, to be granted recognition and organisational rights.

“Registration on its own, does not afford the claimant (Kefhau) recognition. Until there is proof that Kefhau has satisfied Section 54 of the Labour Relations Act, the status quo must be maintained,” said the judge.

“Kefhau must recruit at least 50 percent plus one, of the unionisable employees in the floriculture and horticulture industry, members of the Agricultural Employers Association to be considered for recognition,” he stated.

He noted that there is a Recognition Agreement and CBA, binding Mr Atwoli’s union and Agricultural Employers Association, affecting 73 Flower Growers Group of employers, and over 60,000 employees.

“It is objectionable for Kefhau to be allowed organisational rights, and the legitimacy to receive trade union dues and agency fees, from over 60,000 employees, just on the strength of registration as a trade union,” said the judge.

Kefhau wanted the court to declare that it is the sole trade union, which is allowed by its constitution to carry out activities in the export floriculture and vegetable industry, and an order restraining Mr Atwoli’s from representing workers in that area.

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