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The East African : January 20th 2014
52 JANUARY 18-24,2014 BUSINESS, MARKETS AND FINANCIAL ANALYSIS THE MARKET WHISPERER EQUITY MARKETS (WEEKLY CHANGE IN BENCHMARK INDEX) NSE 20 Share Index Kenya 5,018.58 -0.81% (CUMULATIVE MOVEMENT) DSE All Share Index Tanzania 1,903.34 -0.70% USE All Share Index Uganda 1,530.00 -2.17% RSE All Share Index Rwanda 138.84 0.07% JSE All Share Index South Africa 46,798.29 2.47% NGSE All Share Index 41,706.68 Nigeria - 1.72% In Af≥ica, ma≥ket leade≥s, incumbents neve≥ lose I s the African market skewed in favour of market leaders and incumbents? We have seen it before. A tel- ecoms company aggressively enters a new African market promising to turn the tables on the incumbent and snatch both customer and market share numbers. Fast forward: five years later and either the company will have changed ownership, strategy or be shouting hoarse about how incumbents are engaging in anti-competitive tendencies. Orange, Airtel and Yu in Ken- ya have over the period been engaged in one of the three. So why do telcos with strong performance and experience elsewhere flop so badly in Africa, and Kenya specifically? Researchers from Citigroup think that it is down to how the sector is structured in many African countries. Market shares across Africa are relatively concentrated with the largest operator dominating the market. In Kenya for example, Safaricom, Airtel, Essar and Orange have 73, 14.3, 7.3 and 5.2 per cent market share respectively. This tends to favour the market leader in a lot of ways. In other Asian countries which are more sparely populated, about 40 per cent of Africans leave in urban areas with Kinshasa, for instance home to 15 per cent of DRC’s population. Accra holds 16 per cent of Ghanaians while 22 per cent Ivory Coast citizens live in Abidjan. India, on the other hand, has a maximum of two per cent of its population in any single urban centre. This makes it easier for first movers in Africa to reach the population and attain market dominance. Overall, market leaders are The telecommunication industry in Africa is usually dominated by the incumbent. Pic: File Kenya, most voice traffic either terminates or is within the Safaricom network. What this does is it makes other operators pay a substantial amount in termination rates to the market leader, a factor that lowers their ability to compete. Citigroup estimates that Air- tel uses 30 per cent of its revenues on interconnection charges, with most of the cash going to Safaricom. Relatively higher on-net calls coupled with low off-net calls make the costs per call for large players smaller. Regulators across many mar- kets have now started to reduce interconnect rates with the aim of increasing competition. However, the tariff gap re- mains and the high proportion of on-net calls hasn’t come down enough for the smaller operators to effectively compete. Unlike say India and Market shares across Africa are relatively concentrated with the largest operator dominating the market also able to increase their dominance by launching new products and getting into collaborations with partners. For example, Safaricom launched M-PESA, the mobile money transfer service, which has enabled it to lock in subscribers as well as become a source of revenue. Currently, mobile money contributes about 18 per cent of Safaricom’s revenues. In Uganda, despite Bharti launching mobile money way before MTN — the market leader — the latter is now the leader with 70 per cent of the mobile money market share. Welcome to Uganda, whe≥e ghosts ea≥n a pension UGANDA IS set to overhaul its public service pension scheme, a move that could end the agony of retirees from chronic delays in payments and massive fraud. Unlike privileged private sector retirees who enjoy reasonable benefits and shorter processing times for monthly payments, many retired civil servants have passed on without receiving a single penny from their benefits while their relatives are similarly subjected to fruitless red tape. The Uganda Retirement Benefits Regulatory Authority (URBRA) will pursue computerisation of the civil service pension system, rollout of electronic user cards and opening of upcountry offices to serve pensioners located outside Kampala. Migration to a digital pension system is likely to minimise cases of “ghost pensioners,” while electronic cards could cut risks of fraudulent people impersonating legitimate beneficiaries. While these initiatives could bear some relief for roughly 400,000 eligible government employees, poor appreciation of digital operating platforms within government could affect these ambitions. Reducing loopholes The government’s desire to decentralise man- agement of employee payrolls might also reduce loopholes for creation of phantom workers by increasing accountability for personnel matters at ministry level. However, the dramatic growth in domestic savings anticipated after the passing of the Retirement Benefits Sector Liberalisation Bill of 2011 is bound to trigger an investment dilemma for the pension industry. Low growth in the pool of investable securities has yielded a market base of Ush5 trillion ($1.9 billion) comprising of Treasury Bills and bonds, listed equities and corporate bonds while gross demand for financial securities is projected to hit Ush9 trillion ($3.6 billion) after liberalisation, according to Keith Kalyegira, Head of Uganda’s Capital Markets Authority. This situation could stimulate a thriving black market for financial products under a regulatory regime that prohibits offshore investments. Published at Nation Centre, Kimathi Street, and Printed at Mombasa Road, Nairobi by Nation Media Group, Box 49010, GPO Nairobi, 00100. Registered at the GPO as a newspaper. Nairobi Office, Tel: 3288000, 211448, 337710, Fax 214531, 213936. Dar es Salaam Office. Tel: 2119657/8. Kampala Office, Tel: 232771, 232772. Fax 232781 Download free QR Readers from the web and scan this QR (Quick Response) code with your smart phone for pictures, videos and more stories Centum stock still on the up HOW FAR up can Centum stock move at the Nairobi Securities Exchange? Not very far, says Old Mutual Securities. Analysts at the stock brokerage expect the share price to snap back in coming days from its current price of around Ksh39.25 ($0.46) to about Ksh35 ($0.41) per share. Centum Investments seems to have reached its short-term maximum upside price, with the broker advising clients to short sell on the counter. The counter has seen in- creased interest as investors follow the cue from city tycoon Chris Kirubi, its largest shareholder, who has over the past few months increased his stake in the firm, a move that has triggered demand for the share. Investors see Kirubi’s decision as a testimony to his long-term faith in the company. Centum is currently trying to spread its investments with the firm being part of a consortium that has made a bid to build a 700MW LNG powered plant in Kenya.
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