Business Daily (Nairobi)
Geoffrey Irungu
8 June 2008
As strange as it might seem, Safaricom with well over 866,000 new shareholders is staring at the possibility of holding its next Annual General Meeting in two football stadiums, at Uhuru Park or even at an open field outside Nairobi.
During KenGen's first AGM, 12,000 shareholders turned up, which was a mere five per cent of the shareholder book. But a recent Barclays AGM at KICC was so well-attended that some people had to stand indicating a new degree of investor awareness.
Because of the profile of the phone company, 10 per cent of the local shareholders or about 87,000 could turn up and it is likely to be a nightmare for the organisers.
Vice-chair of the Nairobi Stock Exchange, James Wangunyu, said the challenge of big shareholder numbers had been foreseen and it was being addressed. The industry, he said, had made suggestions after the KenGen IPO on changing the law to allow use of technologically-enabled communication channels with shareholders to hold big meetings of investors.
Push for changes
"We requested the Capital Markets Authority to push for changes to the Companies Act. We are hoping the changes will be implemented," said Mr Wangunyu.
Safaricom CEO, Michael Joseph, acknowledged at a Press conference recently that there was a challenge of holding such meetings, saying it was even bigger than that of facing new rivals in the market place. However, by the time of going to press, Mr Joseph had not responded to a request for an interview on the logistical issues revolving around the huge shareholder register.
Service providers are bracing for a bruising battle for customers as Telkom Kenya and Econet Wireless get set to roll out mobile services.
Safaricom public relations consultant, Gina Din Corporate Communications, told Business Daily they were not leaving anything to chance. Using two stadiums simultaneously and connecting them through electronic screens is a possibility, said Dennis Chebitwey, Safaricom PR account manager.
"We are looking at all the options for holding the next AGM. In fact, we are not discounting holding it at Uhuru Park. The problem here is acoustics since loudspeakers and microphones may not work well in an open ground," Mr Chebitwey said.
He further explained they were considering the possibility of broadcasting the event live around the country rather than calling shareholders to Nairobi.
When KenGen held its first AGM, it spent Sh80 million planning for 20,000 shareholders. But only 12,000 turned up out of the register of 240,000 shareholders. What if 100,000 shareholders attended? Okoth Obado, general manager of Ogilvy PR, which organised the KenGen function, said the cost of organising such big AGMs is "phenomenal."
He said: "Holding AGMs with such big share registers is really a challenge." There is also the cost of printing and sending annual reports to more than 866,000 shareholders scattered around the world. KenGen spent Sh17 million in postage alone. Indeed, KenGen managing director, Eddy Njoroge, found himself in an interesting position. He had to negotiate on the price of postage so that Posta could lower it.
Without negotiation, KenGen was probably going to spend over Sh20 million on postage. This money could be used in other ventures to improve power generation in a country whose electricity consumption was rising by the day.
If Mr Joseph is to send all the annual reports cheaply, he may have to book an appointment with Fred Odhiambo, the CEO of Postal Corporation of Kenya. Once thought to have been almost obliterated by the advent of email and courier firms, Posta has received a lease of life from the huge investor base of newly listed firms.
If KenGen spent Sh17 million on posting alone for its shareholders last year or just an average of Sh71 per shareholder, Safaricom will have to cough up Sh62 million following the same maths. The company must have a million ways it can use that money including sharing it out as dividend.
Finance minister, Amos Kimunya, is expected to propose changes to the Companies Act to allow more technology-efficient communication with shareholders. That could mean use of email and even mobile phone. But how many of the shareholders can use email or have access to one? Worse, it is not possible to send annual reports on phone, meaning that even with the change of law, the firms would not be off the hook.
Mr Kimunya may make legal changes but shareholders will continue to lag behind because most cannot either not afford the requisite technology or are unfamiliar with it.
Clearly if KenGen spent Sh80 million in preparing to host 20,000, it translates into Sh4,000 per person. Applying this to 87,000 shareholders turning up for Safaricom AGM would amount to Sh348 million. For many companies - some of which are listed - making this amount in net profit amounts to a fortune. Even for the Sh13.8 billion post-tax profit company that is Safaricom, Sh348 million is a really tidy sum.
But to put into perspective the issue of space during AGMs, recently Barclays Bank of Kenya had a difficult time registering investors attending such a meeting at KICC. The queues were so long that one investor later complained it took him over 40 minutes to enter the venue. Some investors followed the meeting standing because there were no seats.
Fortunately, the bank had taken care of contingencies in such a situation providing first aid and briefings to shareholders even before they entered the AGM venue.
Such a turnout was unprecedented, BBK reckoned. But investors are more eager to participate in the running of their companies, and this is another challenge for managers and the boards of directors.
Thus, it will not be surprising if 100,000 shareholders attended the Safaricom next AGM, due in the course of this year.
Do away with AGM
It is not only in Kenya that shareholder numbers are increasing and making AGMs and other key meetings a nightmare. There have been suggestions in some companies that AGMs should be done away with as they are a big cost but this has been heavily criticised.
"The stand of the companies in using the argument of wasting money on shareholders is, to say the least, a mean one," said Mr Subramanyan Sundaresan, a former executive director at an Indian financial institution, LIC, warning that small shareholders should not be ignored.
Away from postage cost, seating and registration, the board of directors and the CEO have to contend with concerns about give-aways, transport or about the tribe of a particular manager while profit-and-loss matters remain unattended.
Said Mr Sundaresan: "It also needs to be remembered that the practice of treating the shareholders with high tea and keeping them in good humour by bestowing on them lavish gifts and mementos was started by corporate managements themselves to obtain their precious 'yes' vote."
An easier way out of the challenge is holding meetings through shareholder associations, but this is yet to take root in Kenya.
In Nigeria where the population is roundabout 150 million, shareholders in public firms number over six million. They now have some shareholder associations, although most of them are considered inactive.
The national co-ordinator of Independent Shareholders Association of Nigeria, Sunny Nwosu, has been quoted saying: "Now that the population of shareholders has grown to more than six million people, there is the need for NGOs to cater for them, knowing fully well that in a situation of a company having 50,000 shareholders, the AGM may not have more than 200 shareholders, and it is this 200 people that would have to present a case for the other shareholders."
Mr Wangunyu says shareholder associations were a good idea for Kenya to help reduce costs, ease communication, and create a shared understanding of company developments.
Shareholders of Safaricom, KenGen, Kenya Airways, Mumias Sugar and others can decide that they can do better with representation by associations rather than the strenuous AGMs or the extra general meetings.
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