Too little, too much, too late?

Last week will go down in Kenya's history books – but which part? Unfortunately lives were lost in the midst of protests precipitated by the government's spending plans. The power of information & misinformation were put to the test. In the end, its unclear whether there were any winners. While everyone is talking, is anyone listening? And how do we move past this without deteriorating into chaos? The days ahead will be telling. Meanwhile, our East African counterparts are having a better time with their budgets...and the IMF.

Here are the week's headlines:

• President backs down after deadly protests
• KES 346bn budget cut follows Finance Bill withdrawal
• Competition stiffens in Kenya's internet market

RUNDOWN

Finance Bill withdrawn, what next?

"Listening keenly to the people of Kenya who have said loudly that they want nothing to do with this Finance Bill 2024, I concede and therefore I will not sign the 2024 Finance Bill and shall subsequently be withdrawn."
–William Ruto

What happened

The government’s has conceded to public discontent, withdrawing the controversial Finance Bill 2024 after widespread protests that have left dozens dead and hundreds injured.

The ruling administration had toned down the Bill through amendments knocking down proposals worth KES 200bn. But even after the amendments, the public still took to the streets calling for complete withdrawal of the Bill, a sentiment shared by opposition members of parliament who voted against it.

Between the lines

The President has immediately directed that further austerity measures be put in place to reduce expenditure starting with his office. He also directed the National Treasury to immediately submit to Parliament amendments to the Division of Revenue Act 2024 [download] to reflect the reduced revenues occasioned by the rejected Finance Bill.

Should you care?

“I also propose that within the next 14 days, a multi-sectoral, multi-stakeholder engagement be held with a view to charting the way forward on matters relating to the content of the Bill as well as auxiliary issues raised in recent days on the need for austerity measures and strengthening our fight against corruption,” the President said. The clock is ticking.

HEADLINES

The week's big stories

• President backs down after deadly protests. President Ruto has ordered the withdrawal of the controversial Finance Bill 2024 after widespread protests. Ruto said he would not sign a finance bill including the hikes a day after violent clashes between police and protesters at the assembly and nationwide left at least 23 people dead and scores wounded, according to medics. The IMF said they are closely monitoring the situation & remain committed to help Kenya.
• KES 346bn budget cut follows Finance Bill withdrawal. “I have therefore assented to the Appropriations Bill 2024 and instructed the National Treasury to immediately prepare supplementary estimates to reduce expenditure by the amount of revenue that was expected to be generated by the rejected Finance Bill,” said President Ruto. The Appropriations Bill allows the national government & counties to continue to function pending resolution of the Finance Bill.
• Competition stiffens in Kenya's internet market.  Starlink has unveiled a new cheaper data plan for Kenya introducing a 50 gigabyte (GB) monthly data package at a rate of KES 1,300 (USD 10.16) which translates to about half the price charged by competitors Safaricom & Airtel for equivalent bundles. Starlink customers will however have to pay a KES 45,500 one-off hardware installation fee.  However, a recent outage may play a factor in customer consideration.

EXPLAINED

What is a Rights Issue?

Listed media company, Standard Group, is looking to raise KES 1.5 billion through a rights issue. Whether you own shares in Standard Group or not, here's what you need to know.

Definition

A rights issue is a method by which a company raises additional capital by offering existing shareholders the opportunity to purchase additional shares at a discounted price, before the new shares are offered to the general public. This allows the company to raise funds while giving current shareholders the chance to maintain their proportional ownership in the company.

Key Features of a Rights Issue:

1. Entitlement: Shareholders receive rights based on their existing holdings. For example, a 1-for-5 rights issue means that for every 5 shares a shareholder owns, they have the right to purchase 1 additional share.
2. Discounted price: The new shares are usually offered at a price lower than the current market price to make the offer attractive to existing shareholders.
3. Time-limited offer: Shareholders must decide within a specific period whether to exercise their rights, sell them on the market, or let them expire.

Purpose of a Rights Issue:

1. Raising capital: Companies use rights issues to raise funds for various purposes, such as financing new projects, paying down debt, or improving their balance sheet.
2. Maintaining control: By offering shares to existing shareholders first, the company can raise capital without diluting control excessively to new investors.
3. Strengthening financial position: The additional capital raised can help strengthen the company's financial position, making it more resilient to economic downturns or competitive pressures.

Implications for Investors

1. Opportunity to invest more: Existing shareholders can purchase additional shares at a discount, potentially increasing their investment’s value if the company performs well.
2. Maintaining ownership: By participating in the rights issue, shareholders can maintain their proportional ownership and voting rights in the company.
3. Market impact: The announcement of a rights issue can impact the stock price, as the market assesses the reasons for the capital raise and the potential dilution of existing shares.

A rights issue helps companies fund growth or strengthen their finances while providing shareholders with the opportunity to invest further and maintain their ownership stakes. Even if you're not an existing shareholder in these companies, each rights issue offers an opportunity to consider.

PAUSE

ROUNDUP

Other news

• Kapchorua Tea has registered a 27% YoY increase in net earnings to KES 399.4mn vs KES 314.5mn in the financial year ended 31st March 2024. Final dividend per share stalled at KES 25.00. Meanwhile, Williamson Tea Kenya has registered a 7% YoY drop in net earnings of KES 526.9mn vs KES 564.2mn last year. The directors have proposed a final dividend of KSh 15.00 per share. Both companies cited unstable tea prices as a major continuing concern.
• The Supreme Court has decided on a long-running dispute between Stanbic Bank and Santowels Ltd, a sanitary towels maker in a key ruling. Though the case references an agreement entered into in the 1990s, the ruling implies that banks & financial institutions must seek the approval of the CS for National Treasury before increasing interest rates on loans & facilities advanced to customers.
• Treasury bills were undersubscribed for a third week with the under-subscription falling further to 32% from 60% recorded the previous week. The CBK accepted bids worth KSh 6.1 billion out of the KSh 7.7 billion received, reflecting a 79% acceptance rate. Yields increased to 15.97%, 16.76%, and 16.79% for the 91-day, 182- day and 364-day papers respectively.

One liners

• Cost of living drops by 0.5 per cent in June [Standard]
• Mobile money subscriptions rebound after scrapping of Airtel transfer code [Business Daily]
• CBK clears 7 more digital lenders to operate in Kenya [The Star]
• Legal hurdles dampen sale of State-owned firms [People Daily]
• Kenya taps UN to develop one-stop e-investor shop [Business Daily]

REGION

What in the East Africa?

[UG] World Bank projects inflation to rise to 4.5% next year [Daily Monitor]

[UG] What ambitious budget means for Ugandans [Daily Monitor]

[UG] Uganda tops East Africa for Foreign Direct Investment. According to the 2024 World Investment Report [download] by the United Nations Conference on Trade and Development (UNCTAD), Uganda attracted an impressive Shs10 trillion in foreign investments in 2023, significantly outpacing Kenya, which garnered Ksh193 billion (about UGX 5 trillion). UNCTAD attributed Uganda’s attractiveness to its investor-friendly environment, particularly the ease of establishing businesses. [Nile Post]

[TZ] IMF Approves US$ 900 Million for Tanzania [Kenyan Wall Street]

[TZ] Key reforms as Tanzania’s Budget is approved [The Citizen]

[TZ] IMF: Tanzania economy to rebound to 6.5pc. [Daily News]

[RW] Equity Bank Rwanda, RSwitch Launch eKash Platform [Taarifa]

[RW] Government has not issued treasury bills for two weeks in a row. Lyna Muganwa Kadigwa, Investment Research Analyst at BK Capital, said it might be due to the recent disbursement of $164.6 million from the International Monetary Fund (IMF). Rwanda's central bank prefers concessional loans to commercial borrowing, reflecting its desire to borrow from the IMF and the World Bank where it gets funding with low interest rates. [New Times]

CURIOUS

Two good not to share

One: A new friend and fellow entrepreneur shared this tweet with me last week. It's an old clip from Jensen Huang. He started NVIDIA in 1993 with this mindset, and it is now one of the top 5 most valuable companies in the world. These 30 seconds of advice apply to more than just companies.

Two: Martin Luther King III and his wife, Arndrea Waters King happened to be in Kenya last week and shared a video message from the Maasai Mara. In that message, he shared part of this quote by his father:

“Nonviolence is a powerful & just weapon which cuts without wounding and ennobles the man who wields it. It is a sword that heals.”
–Martin Luther King Jr., 1964

As the new week begins, with uncertainty looming over Kenya like a dark cloud, I can only hope that reason prevails & that beyond voices being heard, action is taken to secure the futures of younger generations.

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