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US sanction waiver saves Safaricom Ethiopia deal

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US sanction waiver saves Safaricom Ethiopia deal


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Safaricom chief executive Peter Ndegwa during the company’s launch of 5G. FILE PHOTO | NMG

A consortium led by Safaricom #ticker:SCOM has received a boost after their US financier was granted a special approval to fund the telcos’ entry into Ethiopia amid America’s economic sanctions against Addis Ababa.

The Ethiopia expansion had been complicated by the US International Development Finance Corporation (DFC) pausing of investments in the country despite agreeing to offer the consortium a $500 million loan (Sh53.9 billion).

Safaricom has disclosed that the US State development financier was granted approval to make select investments in Ethiopia, including funding the group that includes UK’s Vodafone and South Africa’s Vodacom Group Ltd.

The Sh53.9 billion financing had been thrown into doubt over US economic sanctions against Ethiopia to end violence in the northern Tigray region, a conflict which has killed thousands of people and displaced many more.

“The DFC announced that they had sought and had gotten approval for funding specific investments across Africa to support Africa,” said Peter Ndegwa, Safaricom chief executive.

“In particular, for Ethiopia, they had indicated that they would be interested in funding consortium lead through the Vodafone Group, which is our consortium.”

Safaricom’s disclosure followed responses to analysts’ conference calls where the telecoms firm was asked how it planned to navigate the US sanctions in reference to the DFC loan. There were fears that DFC looked set to withdraw the loan offer permanently, which could have forced the consortium to source the cash from elsewhere and at a higher cost.

Other partners in the consortium are British development finance agency CDC Group and Japan’s Sumitomo Corporation.

It won the licence with a bid of $850 million (Sh91.6 billion) and aims to start operations in Ethiopia next year.

Part of the licence fee will be paid using debt, which will account for a significant share of the more than $8 billion (Sh862 billion) the consortium will invest in Ethiopia over the next decade. The DFC loan offers the consortium long-term financing on relatively favourable terms.

The international financier says its loans typically mature between five and 25 years, with repayment schedules set on quarterly or semi-annual basis.

A grace period on principal repayment at the beginning of the loan term is also common. The interest rate is a “negotiated spread over the base-cost of funds.” Long-term US government bonds currently have interest rates of below two percent, setting a low base on which to price the DFC loan.

DFC, however, levies a series of special fees on its credit facilities, including upfront retainer (to cover due diligence), origination (payable once on first disbursement), commitment (an annual percentage on undisbursed amount) and maintenance (an annual charge to cover cost of monitoring the loan).

Ethiopia’s award of a new telecoms licence paves the way to open the market of more than 110 million people to international investors for the first time, a key part of Prime Minister Abiy Ahmed’s economic strategy.

The licence has been awarded for an initial period of 15 years. Safaricom, East Africa’s biggest company, owns a majority stake in the consortium.

Another partnership led by MTN Group Ltd, Vodacom’s Johannesburg rival, and the Silk Road Fund, a Chinese State investment group, was turned down after bidding $600 million. Ethiopia still intends to sell two more licences, and said it will invite a new round of offers from international carriers after some policy adjustments.

The government is also looking to sell a minority stake in Ethio Telecom, the State monopoly. The transactions are part of economic liberalisation policies by a country which is seen as presenting major growth opportunities.

Ethio Telecom had revenues of $604 million (Sh64.3 billion) in the six months to end of December 2020. Safaricom’s half-year sales to September stood at Sh118.4 billion.

A telecoms monopoly, Ethio Telecom is seen as the biggest prize due to its huge protected market. Its subscriber base of 50.7 million makes it the biggest single-country customer base of any operator in Africa.

Players like Safaricom are attracted by the growth potential in that market whose 110 million people means the country offers a penetration rate of 46 percent. By contrast, Kenya’s 52.2 million mobile phone subscribers gives it a penetration of 118 percent.

Safaricom is betting that the Ethiopian market will open up further in the coming days to allow for mobile money licence.

Ethiopia has indicated that it will allow mobile money licence in about 12 months time, a development Mr Ndegwa says will excite Safaricom.

“We hope that that can be converted into law so that foreign operators, like ourselves, can operate mobile money. Mobile money was an important part of our business case in thinking about the opportunity in Ethiopia,”said Mr Ndegwa.

Apart from debt capital, Safaricom says all the shareholders involved in the consortium are open to pump in money.

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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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