For Online E-newspaper
The East African : June 30th 2014
52 JUNE 28 - JULY 4, 2014 BUSINESS, MARKETS AND FINANCIAL ANALYSIS THE MARKET WHISPERER EQUITY MARKETS (WEEKLY CHANGE IN BENCHMARK INDEX) NSE 20 Share Index Kenya 4,825.52 0.23% (CUMULATIVE MOVEMENT) DSE All Share Index 22,155.98 2.82% Tanzania USE All Share Index Uganda 1,657.00 1.66% RSE All Share Index Rwanda 146.07 -0.24% JSE All Share Index South Africa 51,350.93 1.31% NGSE All Share Index Nigeria 41,138.97 -0.91% Flat fo≥ex t≥ansaction fee a mixed blessing T he Bank of Uganda (BoU) has approved new forex fees that will increase the costs of changing currencies within the country. The central bank has allowed forex operators in the country to place a new Ush1,000 ($0.38) charge on every transaction. The levy took effect on June 9. The entry of a flat transaction fee alongside the spread-based commission structure will now offer a new income stream alongside what bureaus charge as commission. The move is expected to offer a reprieve to smaller bureaus that are struggling to remain afloat, weighed down as they are by capital and legal challenges as well the increasingly tough forex business environment that has been heavily affected by the crisis in South Sudan. South Sudan is Uganda’s largest trading partner, with the later exporting goods worth $1.5 billion ever year. The conflict, coupled with the relative slowdown of the Ugandan economy, has affected forex bureau earnings. Overall profits in the forex bureau and money remittance sector dropped by 11.5 per cent from Ush6.7 billion ($2.6 million) in 2012 to Ush5.9 billion ($2.3 million) by end of Decem- Cement is only a small victory, arguing that the BoU needs to change the law to allow them to offer their services through mobile phones. Moreover, the new transaction fee has met stiff resistance from local clients, discouraging some players from enforcing the charge for fear of losing customers. Small operators A random visit by The Eas- tAfrican to forex bureaus near the city centre revealed small operators are more reluctant to enforce the new fee on local clients who transact less than $100. By contrast, foreign clients ber 2013, largely because of increased operating costs, BoU data shows. These exports have been key drivers of forex demand. Previously, forex bureau operators calculated income The move is expected to offer a reprieve to smaller bureaus that are struggling to remain afloat. based on spreads between buying and selling prices of the currencies traded. But intense competition wit- nessed in this market over the past two years has depleted spreads and net revenue margins earned per transaction, with the latter falling to an average of Ush3 ($0.001) this year, compared with around Ush20 ($0.008) recorded in 2012, sources say. The bureaus say the new fee Uganda currency notes. The central bank has allowed forex operators to place a new Ush1,000 charge on every transaction Picture: File originating from Europe and the US are reportedly more receptive to the new transaction fee, mainly because of similar commission systems applied in their home markets. Besides negative reactions from local customers, small operators cite low returns from the transaction fee arising from poor sales patterns. For instance, small forex bu- reaus located outside the Central Business District have seen sales volumes drop to around 12 transactions per day at the beginning of the week, compared with 20 transactions per day recorded during the last three days of the week. If you like the EA ≥egion, C≥own it... Crown Paints plans to build an $8 million factory in Ethiopia next year as the company continues with expansion plans that have seen it build plants across the region. The NSE-listed paint manufac- turer has already commissioned a $1.3 million plant in Arusha and is on course to build a similar $3 million facility in Kisumu. The company is keen to cut dependence on the Kenyan unit, which generates 92 per cent of its sales, as competition increases. The entry into the Ethiopian market would be a strategic win for the company. Ethiopia is among the world’s fastest growing economies, averaging about 8 per cent over the past decade. The growth continues to support a boom in the country’s construction sector, with numerous roads, hotels and residential building coming up across the coun- try. The country’s huge population — twice Kenya’s population of 45 million — is also a key attraction. While high-end premium brands make up 75 per cent of Crown Paints’ sales in Kenya, the firm says economy brands generate 70 per cent of its regional turnover, hence the decision to manufacture this line of paints in Kisumu and Arusha. The Kisumu plant will supply the Great Lakes market. Download free QR Readers from the web and scan this QR (Quick Response) code with your smart phone for pictures, videos and more stories Rakesh Rao, Crown Paints Kenya chief executive. Picture: File 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 fi≥m to issue $290m bond Athi River Mining (ARM) is considering issuing Ksh25 billion ($290 million) bond as it seeks to consolidate its debts in long-term paper. Its debt has tripled in the past five years to Ksh14.7 billion ($168 million), highlighting the NSE-listed company’s undertaking of capital-intensive projects. The cement maker has an- nounced that it has a pipeline of projects expected to cost at least Ksh26.2 billion ($300 million). New Time in which ARM’s debt has tripled 5 yea≥s projects that have been linked to the cement maker include the construction of a Ksh21.9 billion ($250 million) clinker factory in Nairobi. The firm has in the past issued a converted debt to financiers. The GCR Credit Rating Agen- cy has maintained ARM’s A credit rating.
June 23rd 2014
July 7th 2014