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The East African : July 21st 2014
56 JULY 19-25,2014 BUSINESS, MARKETS AND FINANCIAL ANALYSIS THE MARKET WHISPERER EQUITY MARKETS (WEEKLY CHANGE IN BENCHMARK INDEX) NSE 20 Share Index Kenya 4,910.71885.60 01 1..07% (CUMULATIVE MOVEMENT) 2300 2200 2100 2000 1900 1800 1700 1600 1500 1750 1700 1650 1600 1550 1500 1450 1400 1350 152 147 142 137 132 127 54,000 52,000 50,000 48,000 46,000 44,000 42,000 40,000 38,000 43,000 42,000 41,000 40,000 39,000 38,000 37,000 36,000 35,000 DSE All Share Index Tanzania 2,284.20 1.64% 2,238.31 2.97% USE All Share Index Uganda 1,73500 -0.67% 2.78% 1,743.62 RSE All Share Index Rwanda 146.12 - 0.28% 146.64 JSE All Share Index South Africa 51,998.04 2.77% 51,694.18 1.12% NGSE All Share Index Nigeria 42,891.85 43,025.71 0.14%1.99% G≥ounded Ai≥ Uganda ≥etu≥ns ai≥c≥aft A fter a month of unease for the air travel industry around East Africa following the grounding of Air Uganda, the indefinite suspension of operations by the carrier on July 18 is now a bigger worry for travellers across the region as well as the company, its employees and suppliers. In an interview with The Eas- tAfrican, the airline’s chief executive officer Cornwell Muleya said that although Air Uganda immediately started the process of applying for recertification in order to resume operations, the grounding had gone on longer than expected, and recovering from this prolonged period of no business would take a toll on the company and staff given the airline’s fixed cost structure, which runs into millions of dollars per month. The suspension came after the International Civil Aviation Organisation (ICAO) conducted an inspection of Ugandan Civil Aviation Authority policies and procedures, which the international body found wanting. On the grounds that this impacted adversely on CAA’s ability to issue operator licenses, it then suspended the air operator certificates (AOC) for all international commercial airlines reg- The suspension came after the ICAO conducted an inspection of Ugandan Civil Aviation Authority policies and procedures, which it found wanting. Picture: File The airline said the suspension means that it has to return its aircraft to their lessor in line with the lease agreement istered in the country. The airline said the suspension means that it has to return its aircraft to their lessor in line with the lease agreement, since they have not flown for 31 days. “The aircraft are meant to fly; if they don’t, then the suppliers put covenants in the contracts that demand that the aircraft has to be relocated to a facility of their choice for the period of the grounding,” said Mr Muleya. The suspension has had se- rious cost implications for Air Uganda both in incurred expenses, foregone revenue and brand erosion. Apart from being forced to return aircraft to the lessor, not only has Air Uganda had to refund passengers that had pre-booked from the United States, Europe and Asia, but it also has to find airlines that are willing to accommodate them to complete their journeys, despite the increase in ticket prices. The regional carrier that started operations in 2007, flying about 750,000 passengers annually, is currently undergoing a process of recertification but Mr Muleya says that the company will require new investments in aircraft and other assets to recover from the period of inactivity. The airline will still need to keep paying its 231 employees despite no revenues coming in. See Air Uganda’s statement on page 14 Rwanda joins East Af≥ican Payment System KENYAN BANKS have started opening Central Bank clearing accounts for Rwanda francs obtained by local traders, enabling faster settlement of bilateral trade. The move leaves Burundi as the only country without clearing accounts for its currency under the East African Payment System (EAPS). Unless the country secures a bi- lateral agreement with the Central Bank, traders cannot transact with Kenya real-time. Uganda and Tan- zania were already linked up with Kenya in the instantaneous payment system. Commercial banks in Kenya use the real-time gross payment system (RTGS) to transact large values where time is critical, meaning that transmission of the message of the payment and the actual payment takes places within two hours. Banks transacting in Rwanda francs would previously not use the RTGS, but use cheques and elec- tronic funds transfer (EFT) or wire transfer. Under EFT, payments are not continuous but are made in batches at a designated time. Hindrance to trade Convertibility of currency in the region has been a hindrance to trade, especially during conflicts. When violence erupted in South Sudan last year, many Kenyan traders were left holding worthless cash as they fled to Kenya where bankers would not touch the currency, saying it was not recognised locally. A similar convertibility problem has also affected the Chinese yuan, and Kenya is bidding to host a clearing house for the currency. This would mean that there would be no need to convert to the dollar before trading with the Chinese, an exercise that involves commission payment to forex dealers. See related story on page 41 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 F≥ench fi≥m gets 40pc of B≥ookside DANONE HAS acquired a 40 per cent stake in Brookside Dairy for an undisclosed fee, giving the French manufacturer its first footprint in the region. Through the acquisition, the world’s largest yoghurt manufacturer effectively gains a footprint in Kenya, Rwanda, Ethiopia and Tanzania, where Brookside has operations. Brookside bought 20 per cent of Ethiopia’s Elemtu Milk Integrated Industry last year, while in Rwanda the company is in talks to acquire a 51 per cent stake in Inyange, Rwanda’s largest food processor. It is unclear whether the deal has been concluded. In Kenya, Brookside has been on an acquisition spree, snapping up rival dairy companies Molo Dairies and Spinknit. The entry of Danone could add strategic value to Brookside by allowing it to piggyback on the former’s distribution chain to sell more of its high value milk products.
July 14th 2014
July 28th 2014