17 February 2014

Kenya: Mineral Exports - Kenya Is Open for Business

I was in Mombasa for the official function marking Kenya's first exports of mineral sands [and Ilmenite to be exact]. This Ilmenite shipment to China is a popping over the radar moment for Kenya's mining sector.

As the minister and friend said at the ceremony, its been a journey of 18 long years and I commend the minister [because its always good to have this kind of thing happen on your watch] and Tim Carstens of Base who made the whole thing happen in a record beating 36 months.

And I am so glad differences are being settled and urge both sides now to entertain the following idea; Go round the world, take credit and announce together;

"Look at this. Here we are, open for business" and lets surge the sector.

There is some serious c21st infrastructure both at the mine site and at the jetty but as I sat on the Likoni ferry, deep in the milieu of the overwhelming tide of humanity, I could not help recalling Antonio Gramsci;

"The old is dying and the new cannot be born; in this interregnum there arises a great diversity of morbid symptoms. "

I suppose post Westgate I notice how often in a day I am at a standstill and that the density of humanity around me means I am in fact helpless, whether its the Likoni ferry or crawling at 2mph around the Likoni environs or stuck in a jam on Waiyaki Way.

These are asymmetric sweet spots as it were. I follow trends [the trend is your friend] and whether it was the Ibrahim index which noted:

"At the sub-category level, no region in Africa has improved in rule of law or personal safety since 2000."

or the WEF Report of September 2013 which ranked us 125th with regard to the security situation and characterised it as "worrisome" or a report on Bloomberg this week which said that between January and November 2013, versus a year earlier, violent offenses including murder, robbery and rape surged between 11 per cent and 22 per cent, the security indicators are heading in the wrong direction.

Once the security genie escapes the bottle, it will be practically impossible to bottle him again and call me old-fashioned but I yearn for the certainty of a John Michuki whom I know could look this dead straight in the eye and us as well and say I got this covered.

I can see the birth pangs of the new. The World Economic Forum reports scored us at 50th for our innovative capacity. In terms of international internet bandwidth per internet user, Kenya is now the bandwidth-richest country in Africa after an increase in international internet bandwidth per internet user from 4 500 Mbit/s in 2011 to 24 000 Mbit/s in 2012. That is plain optimal in the new information age.

The mobile, the internet [and the African internet experience is all mobile, by the way] economy is all set for an explosive break out and acceleration.

I met someone who has an online car portal which spans eight African countries who is selling 25 per cent of the company for $20m.

That's an $80m valuation right there. The mobile plus the mobile wallet [M-Pesa to all intents and purposes] plus the mobile internet remains in my view an outstanding silver bullet for 1b Africans and Mckinsey's IGDP [Internet component of GDP] Score of 2.9 for Kenya and second only to Senegal in Africa confirms that. These trends as you can see are all outperforming to the upside.

If I might make two further observations. Last week I spoke about how execution is everything. Therefore, I, for one, would be keener on having a stronger partner implementing my overarching campaign promise than appears to be the case.

I would point at president Obama's recent travails and insist this is a seriously sub optimal trade. And my final observation is around EABL's 1st half results release. These results were having to hurdle an 85% collapse in Senator beer volumes and when you look at the results in totality they were surprisingly muscular.

The flagship brand Tusker was +17%, Uganda was a stand out, reserve spirits followed on a triple digit full year gain with a +50% gain.

My point is arrived at via what has happened because of the excise duty increase. The Government targeted Sh6.2 billion of extra revenue and because of the collapse post the price increase, it's actually a negative return. My final observation is therefore this. Imagine if this is extrapolated across the economy.

I think legitimate tax payers [and its a narrow base] have now been squeezed beyond the limit that it is in danger of cannibalising itself as it cannibalised Senator.

Let Senator be a lesson and someone should calculate the fall-out. The number of outlets closed, the number of jobs lost, the number of work days lost because of the spike in llicits.

Lots to think about.

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