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The East African : July 28th 2014
42 Financial se≥vice p≥ovide≥s should gene≥ate solutions unique to EA D espite mixed views on the stability of East Africa’s economic performance, one can objectively say the economies are growing and investors are confident about their performance. The fourfold oversubscrip- tion of Kenya’s debut Eurobond is testimony to this. With such investor appetite for East Africa, financial services providers (FSP) are constantly assessing ways to leverage on this for growth. East Africa is changing fast. Once considered a sleepy backwater, the bloc is attracting investors’ attention from every corner of the globe. Financiers are lured by Kenya, the regional financial hub with the largest GDP in East and Central Africa. Rwanda, one of the world’s 20 fastest growing economies, with average GDP growth of over 7 per cent in the past 10 years; and Tanzania, which is keen to attract foreign investments by easing its processes of doing business. Similarly South Sudan has lucrative oilfields and infra- 2050 structure projects, and Uganda’s fertile land potentially provides cheap raw materials for industries. The bulk of resource-rich East Africa’s GDP comes from agriculture, precious metals and stones. With recent discoveries, oil and gas will soon join the list of vast resources. Ideally, suppliers and buyers of commodities should mitigate adverse price movements through financial instruments and their derivatives, but to date the region only has rudimentary commodity exchanges. Should we then be shocked that derivatives of East African metals are being traded on an exchange in Toronto? The region’s demographics are also shifting. Half of East Africa’s population is expected to be living in cities by 2050. Along with the demand for urbanisation, East Africa’s growing middle class and young population aged between 18 and 35 has become a constant refrain in economic analyses of the region. In 2013, East Africa clinched The year half of East Africa’s population is expected to be living in cities 26 out of 84 private equity deals in sub Saharan Africa , making it the region with the highest PE deals. While many have ventured, adaptation to the nature of local markets remains a challenge. Picking the right approach for each market is critical; so is understanding the practical challenges that global businesses face when it comes to executing their chosen strat- The EastAfrican BUSINESS JULY 26 - AUGUST 1, 2014 A road under construction in Kenya. Roads are being built to facilitate transport along the East African corridors. Picture: File COMMENTARY KANANU IMATHIU “Are some financial institutions holding back as others cash in on the most gainful opportunities?” egies. While financial markets remain attractive, the biggest PE deals were recorded in infrastructure and extractive industries, with opportunities to fund investments in development of other sectors. Investments are being made in energy projects, whereas roads and railways are being built to facilitate transport along the East African corridors. Creative investments are needed to finance development projects; hence FSPs should generate solutions that are unique to EA needs. So investors are targeting high growth investments. Are some financial institutions holding back as others cash in on the most gainful opportunities? I doubt it. Opportunities are ripe for picking; all around are forces that could spur or inhibit your growth as a financial services provider, but what is important is not so much to have data as to use it to your advantage. Per- haps you are a pessimist who looks at the economy and sees innumerable risks that demand impossible premiums. Or, you may be one of those who take a look and see exactly where the gaps are, and how you could be the one who fills them, the fiercest competitor who shakes up the market. Analysing the East African market I must pose this question: half full, or half empty – are we looking at the same glass? Kananu Imathiu is a consult- ant with PwC Kenya’s advisory practice in strategy and operations services Kenyan institutions look to sola≥ to cut on high powe≥ costs By STEVE MBOGO Special Correspondent STRATHMORE University has installed a 600 kilowatt solar power project on its roof top, using 70 per cent of this power to provide for its electricity needs and feeding 30 per cent to the national grid, enabling it to save Ksh2 million ($23,500) in monthly electricity costs. The institution is the latest in the country to opt for solar power to save on rising electricity costs, after Williamson Tea installed a 1MW project to power one of its tea factories in Kericho in June. Others are the United Nations complex in Gigiri which generates 500 kilowatts and Uhuru Flowers in Laikipia County whicht generates 80kw. The Strathmore power project was built at an estimated cost of $1.6 million through concessionary financing from the Co-operative Bank of Kenya. The cost is expected to rise when the project is scaled up to 1MW. The project effectively makes the university the first fully carbon neutral university in sub-Saharan Africa. “The investment is expected to pay for itself in about six years. After that, Strathmore will enjoy large savings on their power bills,” said Raul Figueroa Bio, the executive director of Questworks, the project developers. The project offers additional evidence of how companies and large institutions with limited land but expansive rooftops can mount solar panels and cut power costs. Solar power project developer Guy Lawrence of East AfricanSolar, the company that executed the Williamson Tea and Uhuru Flowers projects said several companies in Nairobi’s Industrial Area have expressed interest in utilising rooftops for solar generation. Management, the company that is developing the mall, received Leadership in Energy and Environmental Design (Leed) certification for the Garden City Retail Mall and its other property. Leed is a certification programme developed by the US Green Building Council, aimed at encouraging environmental responsibility and the efficient use of resources in buildings. “The ingenuity in design of the $23,000 Among the ones likely to come online soon will be a 1MW solar project by the upcoming Garden City Retail Mall on the ThikaSuperhighway. In the past week, Mentor The amount Strathmore University saves per month in power costs commercial ‘green’ buildings will save tenants up to 30 per cent in electricity costs and 40 per cent in water use, as well as leading to long-term savings of over 20 per cent in maintenance and service charges,” said Elizabeth Chege, Leed accredited professional for building design and construction, and CEO of Web Ltd. Garden City Retail is a 32-acre development that will house a 50,000 square metre retail centre, over 420 apartments and town houses, commercial offices and a three acre central park open to all. The Garden City project has been recognised as a flagship project of Kenya’s Vision 2030, a development blueprint that seeks to transform Kenya into a middle income country by 2030. The first phase of development will open for business in late 2014, according to the developers. Garden City will be home to over 100 major local and international retail brands, many of them opening their flagship stores in Kenya for the first time. Stores like Nakumatt and South Africa’s Game have already signed up as the anchor tenants. In this initial phase, the developers will also make 80 residential apartments and houses available for purchase.
July 21st 2014
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