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Equity sees its DRC business racing to overtake Kenya unit

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Equity sees its DRC business racing to overtake Kenya unit


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Equity Group chief executive officer James Mwangi. FILE PHOTO | NMG

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Summary

  • The Business Daily spoke to its CEO James Mwangi about the place of subsidiaries in growth, the changing phase of the business in Covid-19 environment and the emerging opportunities.

Equity Group #ticker:EQTY closed last year as Kenya’s most profitable lender and has maintained this run in the first quarter of this year with a 64 percent growth in net profit to Sh8.7 billion.

The Business Daily spoke to its CEO James Mwangi about the place of subsidiaries in growth, the changing phase of the business in Covid-19 environment and the emerging opportunities.

THE STAKE OF SUBSIDIARIES IN EQUITY GROUP BUSINESS HAS BEEN RISING. WHERE DO YOU SEE IT IN THE NEXT THREE YEARS?

Kenyan unit’s return on assets reached four percent in 16 years. Uganda has taken 14 and Rwanda 12.

It means we are a learning organisation and we quickly deploy lessons into the business. So in DRC, we are likely to reach this in the next three years.

WHAT IS THE PLACE OF DRC BUSINESS IN EQUITY GROUP?

In DRC, we seem to have really touched a juggler pipe that will change this group forever.

DRC business will fundamentally change Equity Group. DRC at the moment contributes 27 percent of the group balance sheet and is growing at about 60 percent annually and may overtake Kenya between the third and fifth year.

Even in profitability, DRC will start rivalling Kenya and rise above on profits and balance sheet size eventually.

DRC has quickly made us a market leader in financial services both in balance sheet and profitability as well as customer base.

Given the momentum of growth in DRC, the possibility of standing out and becoming more attractive is so near. Equity should now be trading at the same rate as Capitec Bank of South Africa.

YOU MENTIONED THAT 49 PERCENT OF YOUR BALANCE SHEET IS IN DOLLARS. WHAT DOES THIS MEAN TO YOU?

The biggest opportunity is the internal funding of cross-border transactions. The ability to deploy the resources within the group has been made very easy and flexible with this dollar balance sheet.

We have seen huge opportunity in the [Africa] Continental Free Trade Area and the pace at which regional businesses are doing cross-border transactions.

The entire DRC balance sheet is in dollars and the ability to deploy these resources within the group will be very flexible.

EQUITY GROUP BORROWING HAS RISEN BY 63 PERCENT TO SH89.6 BILLION. WHAT IS THE THINKING BEHIND THIS?

The objective of the borrowing is purely to avoid a mismatch of short-term deposits with long-term lending. Deploying short-term deposits on long-term projects would mismatch risks.

The interest rates of the borrowings we have made are much lower and the translation risks are also low because we borrow mostly in dollars.

YOU HAVE CREATED THE POSITION OF GROUP CREDIT OFFICER. WHAT IS THE THINKING BEHIND IT?

We have decided to strengthen our credit management by putting up the group credit function and creating a chief credit officer position.

The chief credit officer role is to lead credit underwriting and credit administration within the group, to intensify credit monitoring and where necessary credit collection.

DO YOU SEE GREEN SHOOTS WITH LIQUIDITY RATIO OF 60.6 PERCENT AGAINST THE REQUIRED MINIMUM OF 20 PERCENT?

We have a liquid balance sheet with Sh500 billion of cash, cash equivalents and government securities.

This reflects the agility to redeploy funding seamlessly as the economies recover from the adverse impact of the Covid-19 multi-crisis.

We believe lessons have been learnt about global supply chains in manufacturing and many will be seeking to set up regional and national supply chains to avoid disruptions. We also see opportunity to tap into the Continental Free Trade Area and the growing pace at which regional businesses are doing cross-border transactions.

EQUITY WAS THE MOST PROFITABLE BANK LAST YEAR AND HAS ALSO LED IN Q1 2021. WHERE ARE THE DIVIDENDS?

I know shareholders can’t be happy with me not paying dividends for two years and so we want to avoid this when shocks such as Covid-19 come.

The board has now enacted a policy. It has made a commitment of paying from 30 to 50 percent of all the profit after tax going forward and institutionalise that.

It has been enacted as a policy that if certain major events like Coivd-19 happen in future, we pay the dividends then go back to shareholders for a rights issue.

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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


Cotu boss Francis Atwoli

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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