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Safaricom to retain dividends despite Ethiopia cash demands

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Safaricom to retain dividends despite Ethiopia cash demands


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Safaricom CEO Peter Ndegwa. PHOTO | POOL

Safaricom #ticker:SCOM will maintain a dividend policy of paying out 80 percent of its net profit despite committing billions of shillings to expansion into Ethiopia through a consortium.

A consortium majority controlled by Safaricom pledged to invest Sh909.5 billion ($8.5 billion) in their network over the next decade, including the Sh90.9 billion ($850 million) licence fee.

This has raised analysts’ fears that Safaricom could cut dividends to fund the Ethiopia operations through a mix of debt and internal revenues.

“Our dividend payout which is 80 percent of net income for the year remains unchanged,” said Dilip Pal, Safaricom CEO, at an analysts conference call.

“We have enough balance sheet flexibility to be able to support a dividend policy, which is what we have been paying so far. So, the dividend policy doesn’t change and that will remain in force going forward.”

The telco’s payouts have averaged Sh54.61 billion annually in the last six years on sustained growth in profits, making it the single largest dividend payer in corporate Kenya.

Safaricom’s Sh54.89 billion dividend for the year ended March was higher than the Sh33.82 billion that Kenya’s top banks—KCB #ticker:KCB, Equity #ticker:EQTY, Co-op Bank #ticker:COOP, Standard Chartered Kenya #ticker:SCBK, Stanbic #ticker:SBIC, Absa Kenya #ticker:ABSA, DTB #ticker:DTB, NCBA #ticker:NCBA and I&M #ticker:I&M— paid out last year.

The payout came despite the telco posting a 6.8 percent drop in net profit to Sh68.67 billion — the first drop in full-year profit in nine years— weighed down by reduced voice, messaging and M-Pesa revenues.

The Treasury earned Sh19.2 billion for its 35 percent stake while Vodafone and South Africa’s Vodacom received Sh21.96 billion for their combined 40 percent shareholding.

The latest dividend distribution took the company’s cumulative payouts since its 2008 listing to Sh356.9 billion, underlining the lucrative returns earned by its long-term investors, including the government.

Retained earnings held by the telco rose 16.7 percent to Sh96.57 billion at the end of March, meaning that Safaricom has added Sh32.15 billion in the last five years despite the generous dividend distribution.

The Safaricom led consortium —Global Partnership for Ethiopia — last month won the bid for a telecoms licence to operate in Ethiopia and is expected to enter the market of more than 100 million people next year. The licence has been awarded for an initial 15 years.

The consortium is 56 percent owned by Safaricom, 6.2 percent by Vodacom, 25 percent by Sumitomo, the Japanese conglomerate and 10 percent by the UK sovereign investment fund, CDC.

Safaricom and its partners disclosed last year they signed a Sh53.9 billion ($500 million) loan agreement with the US International Development Finance Corporation (DFC).

The loan will be used to pay for the operating licence and finance the design, development, and operation of a new mobile network firm.

Safaricom CEO Peter Ndegwa says the consortium will rely on debt and shareholders to fund operations in Ethiopia. “Our intention is to consider all sources of funding both related to the shareholders involved but also debt capital that can be sourced from various sources, including the DFC,” said Mr Ndegwa.

Safaricom sees Ethiopia— a market of relatively lower uptake of mobile and broadband services— as presenting significant growth opportunities.

The telco hopes that the Ethiopian market will open up further in the coming days to allow for mobile money licence. The Ethiopian government made a U-turn and allowed foreign telcos to launch mobile phone-based financial services from May next year.



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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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