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Business Focus

Kenya Wild about business One of Africa’s most popular tourist destinations, Kenya is now re-emerging as a promising investment location, especially for Chinese investors.


est known for its stunning savannahs and wildlife, Kenya’s growing economic roar comes amid greater political stability since a coalition government was formed in early 2008. As East Africa’s commercial and financial hub, Kenya recorded annual growth of 7% in 2007, a figure expected to reach the double digits by 2010 as it reinforces its role as a key producer and exporter of agricultural goods such as tea, coffee and sugar cane. As part of the government’s ambitious development blueprint Vision 2030, hundreds of millions of dollars of public and private sector investment will be poured into Kenya as it aims to become a “middleincome country providing high quality of life.” The project will see the setting up of several economic zones across the country, with a focus on the key sectors of tourism, agriculture, trade, manufacturing, IT, and financial services. Sino-Kenyan relations have been excellent ever since Kenya became an independent state in 1963, and, with Chinese companies already playing a key role in the modernizing of Kenya’s infrastructure – a Chinese firm is building a new road from Nairobi’s international airport

With a population of 40 million people, Kenya has a large labor pool and one of the continent’s highest literacy rates. Its strategic location on Africa’s east coast means it acts as a vital cargo port and trade hub for the whole region. Raila Odinga, Prime Minister

“The potential of this country is huge, especially as coastal countries like Kenya can become gateways to landlocked countries,” states Professor Njuguna Ndung’u, governor of Kenya’s Central Bank. “The drive we have for investment in Kenya will have huge benefits. The most powerful tool for growth is investment in infrastructure as it lowers the cost of transactions and improves the profitability of the private sector.” Kenya’s Vice President, Kalonzo Musyoka, believes Chinese companies will play a crucial role in the future economic development of the nation. “Relations between Kenya and China are historical, and in the last decade, this relationship has grown in leaps and bounds,” he

“China is a very big source of tourism and we would like to increase flights to Beijing and Shanghai.” Raila Odinga, Prime Minister

to the city’s U.N. headquarters, for example – they are best placed to cash in on the flood of new investment. “We would like to see more Chinese investors in Kenya and also more Chinese imports of Kenyan goods,” says Prime Minister Raila Odinga. “We are trying to create a one-stop shop for investments to make it easier, and are processing applications much faster. There is also more investment in infrastructure which will open up the countryside and less accessible areas for more investment.” While agriculture comprises 75% of Kenya’s gross domestic product (GDP), the tourism sector is a growing source of foreign revenue. More than two million tourists arrived in 2007, up from 1.6 million in 2006, with the number of Chinese visitors rising from 11,640 in 2005 to 18,000 in 2007. Njuguna Ndung’u, Governor, Central Bank

“China is a very big source of tourism for our country,” Odinga notes. “We would like to see more Chinese tourists in particular. We would also like to increase flights to Beijing and Shanghai, and see China Airlines flying to Kenya.”

says. “The Chinese are coming here and investing and generating jobs for local people, as well as wealth.” With the transport sector forming a vital pillar of Vision 2030, the development of the country’s transport network is not only confined to roads, but also the outdated rail network. Operator Kenya Railways Corporation (KRC) plans three new main lines on standard gauge track to provide faster and more efficient railway access to surrounding countries. The firm is also drawing up plans to build an urban transit system for the traffic-choked cities of Nairobi and Mombasa as it looks to build on its vast experience of railway operations. “China has the technology to build and operate rail infrastructure and services here,” says KRC managing director Nduva Muli. “They know the terrain, and there has been interest from the Chinese regarding a feasibility study into such opportunities.”

A growing financial sector With more than 150 branches across Kenya and beyond, Kenya Commercial Bank (KCB) is a leading institution in the banking and financial sector, with an asset base of U.S.$2.2 billion. The group is eager to attract foreign direct investment to Kenya, and recently organized a




tour to China for up to 200 business club members to explore exportoriented opportunities. “We have customers who are already doing business with China in the construction, tourism, and manufacturing sectors,” reveals CEO Martin Oduor-Otieno. “There is a lot happening in China and it’s a country where our clients get value. The Chinese view Kenya as a gateway for the rest of the region. They are looking for a long-term sustainable investment. Partnership with China is critical, as they continue to grow very fast. I think we can learn a lot from them.” KCB Group has the widest network of outlets across the region, and more than 100 international correspondent networks with banks all over the world. Award-winning Equity Bank is the region’s largest bank by customer base, with more than 2.8 million accounts that represent 48% of the total domestic market. The firm is credited with taking banking services to the people through its accessible service provision, and has received both local and international recognition for its unique financial model. “We have a very strong relationship and collaboration with Chinese companies, we are in partnership with the Chinese development bank and we have a credit line of U.S.$100 million,” says Equity Bank CEO and managing director, James Mwangi. “We are therefore almost a one-stop shop for Chinese investors. “Chinese companies can see we have the biggest distribution network in the country, and a huge capital base. Chinese companies will be supported by this network. I don’t think there is a better country in Africa than Kenya for the Chinese. We are the entry point to Africa; the gateway to the continent.” With more than 500 branches in 25 different countries across western and central Africa, fast-growing Ecobank is now targeting other parts of the continent, including Kenya. Led by managing director Philip Ikeazor, the group, which was founded in 1985, provides a full range of wholesale, retail, commercial, investment, and transaction banking services and products.

The Kenyatta International Conference Centre, Nairobi, Kenya.

Ikeazor outlines cooperation with Chinese companies as “key” to his group’s “aggressive expansion plans” in Kenya, as his company looks to build on an impressive 2007 when it was crowned African Bank of the Year. “Now is a great opportunity for China and Africa to strengthen their relationships,” he says. “We have what the Chinese want and we want Chinese companies to invest here. This cooperation with the Chinese is key, and Ecobank will be their partner. I believe a lot of Chinese factories will come to Kenya. The financial system in China should be able to support investment in Africa.” Finally, located in the heart of Nairobi’s central business district and within easy walking distance of several five-star hotels, the Kenyatta International Conference Center provides the perfect venue for conferences, meetings, exhibitions, and special events.



RWANDA! KCB is a bank with a vision. And that vision is to be recognised by everyone as the very best bank in the region. Already, we have taken the first steps along the road to realising this dream. In addition to the Kenyan network we also have branches in Tanzania, Uganda, Southern Sudan, and now Kigali, Rwanda. If you want a ‘local’ bank with a regional presence, then you want to be with KCB.

w w w. k c b b a n k g r o u p . c o m




Keeping Kenya moving Kenya Railways Corporation has numerous projects coming on line, including railtrack upgrades, real estate developments, and hi-tech city transport links.


raveling by train has always been one of the easiest, costeffective and most relaxing ways to travel through Kenya while enjoying the country’s breathtaking scenery and magnificent wildlife. Main rail routes in Kenya include those from the capital, Nairobi, to the port city of Mombasa, and to the nation’s third largest city, Kisumu, in the west. Run by government-owned Kenya Railways Corporation, the country’s train services are vitally important for the country’s 35 million people, businesses and tens of thousands of foreign tourists who visit each year. Although the rolling stock has many years of service, trains remain the most popular type of transport in Kenya after buses, with thousands of people using the railways on a daily basis. The 1,920 kilometer long rail network also plays a key role in transporting freight across the country, although cargo levels have dropped from 4.8 million tons per annum in the early 1980s, to 2.3 millon tons per year in recent years. With such significant investment in modern rail infrastructure and new rolling stock needed, Kenya Railways Corporation decided to concession its operations to a private operator for a short period of time. In late 2006, Rift Valley Railways (K) agreed a deal that sees the Kenyan government retaining control of the network and facilities, but handing responsibility for the rolling stock and network maintenance to the South Africa-based company. The deal means Kenya Railways Corporation will regain control of the network’s passenger operations in 2011, and resume responsibility for freight operations in 2031. With a solid commitment to being a world-class provider of rail transport, Kenya Railways Corporation is a key part of the government’s recently-launched Vision 2030—a blueprint for the country’s economic and social development by 2030. The company plans to upgrade the existing rail track from the traditional one meter gauge, to the faster and higher capacity standard gauge system used throughout the world. The aim is to increase passenger numbers and efficiency levels, as well as boost the amount of freight cargo carried on the network, especially cargo that arrives by boat at the main port of Mombasa. Officials hope the new gauge will increase freight transport capacity from the current 10%, to 50%, as well as shorten delivery times. Nduva Muli, Managing Director, Kenya Railways Corp.

In addition, plans are also being developed for an overhead light railway system serving the residents of Nairobi and surrounding areas in a bid to ease the city’s notorious traffic congestion. Managing director of Kenya Railways Corp., Nduva Muli, says the firm wants to improve local services and establish several long distance routes to neighboring countries along three main corridors. The first will run to Bujumbura in Burundi, the second to Juba in Zambia, and the third to Addis Ababa in Ethiopia. He believes Chinese firms are perfectly positioned to invest in such projects, as they have both the knowledge and funds to perform such operations. It would also add another chapter to the many trade agreements between the two countries over the years. “We need substantial investment in the railway network but infrastructure is expensive and so we are looking into establishing Build, Operate and Transfer (BOT) schemes, or joint ventures for the three different lines to other countries,” he says. “China

obviously has the technology to build and operate such routes. They could supply materials such as rolling stock and other equipment for the railways and metropolitan systems. Chirau Ali Mwakwere, Minister of Transport

“They can build it, operate it for 20 to 30 years, and then transfer it to us when they have reaped their return,” he says. He adds that as a major landowner, Kenya Railways Corporation has many housing and commercial development projects which it wants to share with international partners as it looks to make full use of its substantial assets and help build the economy. The company’s showcase development is Golf City—a huge hotel, golf, shopping, leisure, and entertainment complex to be built over 63 acres of prime real estate on the outskirts of Nairobi. The massive project includes two hotels with state-of-the-art conference facilities, an international standard ninehole golf course, luxury holiday cottages, exclusive shopping mall, and Africa’s first IMAX theater complex. A new metropolitan railway line will connect the new development to the rest of the capital, while a hi-tech monorail system will take guests and visitors directly to and from the city’s airport. International investment partners are currently being sought for the multi-billion dollar project, with construction work expected to get under way within the next couple of years. With the Kenya Investment Authority encouraging foreign investors through a series of lucrative incentive packages such as tax breaks, Muli says now is a great time to invest in Kenya and large projects such as Golf City. Greater political stability and its strategic location on the east coast of Africa means Kenya is becoming an important transit point for freight heading in and out of the region’s landlocked nations. Countries such as Zambia, Congo, and Uganda are increasingly reliant on rail cargo from Kenya, with the continent’s air and road networks and infrastructure not yet fully developed. But it is not just the railway network that the company has responsibility for. It also looks after Kenya’s inland waterways transport services and inland port facilities. These include the historical port of Kisumu, that sits on the banks of Lake Victoria, as well as ports such as Kendu Bay, Mohuro Bay, and Mbita. Kenya’s Minister of Transport, Chirau Ali Mwakwere, says he is confident that Kenya will become a major regional transport hub under the Vision 2030 development project. “Rail transport is crucial to the uplifting on freight cargo from the port of Mombasa,” he states. “The cost of maintaining the road infrastructure could also be cut if much of the import and export cargo was transported by rail. “As a crucial pillar for economic recovery, the transport sector is a catalyst for the growth of other sectors of the economy such as trade, tourism, agriculture, to name but a few.” Such sentiments are echoed by Muli, who sees Kenya Railways Corporation playing a key part in the country’s future through the upgrading of its passenger and freight operations and destinations. “I want the railway system to be able to get anyone, or anything, across the network in 10 hours because the railway system is about speed and capacity,” he adds. “I want to see this railway network making it easier and cheaper to do business. I see a very fast, efficient, and electrified railway network that adds value and is a system that people can rely on.”




Kenya Railways plans to put all of East

We’re putting East Africa on the fast track.

Africa on the fast track to economic growth and prosperity. And it all begins with a Regional Railways Standard Gauge Network encompassing Kenya, Uganda, Tanzania, Rwanda, Burundi, Southern Sudan and Ethiopia to Djibouti. The Standard Gauge of 1435mm is much wider than the existing one metre gauge.


Being nearly 50% wider it enables trains to


travel much safer, faster and carry far more Addis Adaba

load. As it’s used in 80% of all countries



around the world the equipment is more


affordable and easily accessible. Juba



Once the network is complete, Kenya and

Torit Nimule

UGANDA Kampala

Kasese Mbarara

all our neighbours will have a reliable and



Gulu Pakwach


URC Tororo

efficient interstate and intercity railway


Maralal Eldoret

Archers Post Nyahururu Nanyuki

Butere Nakuru Kisumu

system. The cost of transport will initially Garissa


drop by up to 20%, supporting rapid



industrialization and helping sustain


Kigali Mwanza

Lamu Arusha

Voi Moshi

Bujumbura Kaliua Kigoma

economic growth.

Mom basa

Isaka Tabora

Existing Metre Gauge


Proposed Standard Gauge


Kilo sa

Dodoma Mpanda

Kidatu Makara


Naturally this expanded network will promote equitable social and economic



development throughout the region.

Dar es Salaam 0



And the savings on road maintenance will be






astronomical. Communication expansion will also be encouraged as the railway alignment can be used easily to lay fibre-optic cables to reach the entire region.

KENYA RAILWAYS P.O. Box 30121 - 00100 Nairobi, Kenya E-mail: website:


There is no doubt that Kenya Railways Standard Gauge Railway System will improve the lives of millions upon millions of people in East Africa. Now is the time to move full steam ahead.



Laying foundations for growth Kenya Pipeline Company Ltd. is a pivotal player in Kenya’s future development, with key operations in place to help the energy sector achieve maximum potential.


s Kenya’s energy industry continues to grow to meet surging domestic and regional demand for oil and gas, Kenya Pipeline Company Ltd. (KPC) is playing an increasingly vital role in the East and Central African region’s economic development. Wholly owned by the government of Kenya, KPC operates a hi-tech, multi-product network of pipelines and storage facilities. KPC was established in 1973. Its pipeline system originates from the Port of Mombasa, which is a gateway for oil imports destined for Kenya and the landlocked countries of Uganda, Rwanda, Burundi, and the Eastern Democratic Republic of Congo, plus northern Tanzania and southern Sudan. KPC’s current pipeline system is 896 km long, with a combination of 14-inch, 8-inch and 6-inch diameter pipelines and 14 pumping stations. The storage facilities are around 612,000 cubic meters in capacity and spread across the whole country. Demand for petroleum products has increased significantly over the years in line with economic growth in the region. This has led to a major concern regarding the security of supply and enhancement of product transportation and storage infrastructure for petroleum products among the stakeholders and regional governments. KPC has not been spared, as the increasing demand for petroleum product transportation has overstretched its pumping capacity.

Playing a key role in Kenya’s energy future In a move to address the above challenge and create an efficient, effective and adequate pipeline system to meet future demand, KPC, has, within the last five years, outlined a clear, sound and dynamic growth strategy aimed at maintaining its customers’, shareholders’ and other stakeholders’ confidence. The outcomes of having a clear

Bureau in December 2008 and is expected to be commissioned by early 2011, at an estimated cost of U.S.$190 million. KPC anticipates a brighter future when the Kenya-Uganda Petroleum Products Pipeline George Okungu, Managing Director

Extension is realized, as it will ensure a sustained and larger market segment for the existing pipeline system. The project is being undertaken under a public private partnership arrangement, by both Kenyan and Ugandan governments and private investor Tamoil East Africa Ltd., and is expected to be completed by early 2011. The company also intends to replace the 30-year-old MombasaNairobi pipeline to match the increasing demand for oil products. KPC’s future plans include the construction of storage and loading facilities in some of Kenya’s most active areas, including Boil, Nanyuki, Isebania, Taveta/Namanga, Kitui and Lokichoggio. It is also establishing a presence in the Great Lakes region by building storage facilities at strategic points. The company will support all initiatives aimed at enhancing the petroleum products infrastructure in the region, which includes the proposed Kampala-Kigali-Bunjumbura petroleum products pipeline project. “The economic growth in neighboring countries is increasing dramatically so we need to invest and expand our pipeline network,” says George Okungu, MD, Kenya Pipeline Company Ltd. “We have a head start in terms of experience in all our projects and hope to create more strategic partnerships in the future.”

“The next 18 months are going to be critical for the energy sector in Kenya.” George Okungu, MD, Kenya Pipeline Company Limited and focused strategic direction include the commissioning of various internally funded projects, such as the KOSF-SOT spur pipeline, a capacity enhancement project for Mombasa-Nairobi pipeline, tank gauging systems, an upgrade of control systems and the installation of a fiber-optic terminal equipment, among others. In particular, the construction of four pump stations to augment the pipeline flow rate between Mombasa and Nairobi will be a milestone project for the company. The U.S.$114 million project was commissioned by HE President Mwai Kibaki in November 2008, and will boost the supply of petroleum products in Nairobi by doubling the pumping capacity from flow rates of 440,000 cubic meters per hour, to 880,000. These initiatives are aimed at developing a worldclass pipeline infrastructure for the region that will give KPC a competitive edge as it faces the future. The next 18 months will be critical for KPC. The company has lined up another priority capacity enhancement project that will entail the building of a parallel 14-inch diameter pipeline from Nairobi to Eldoret. This project was awarded to China Petroleum Pipeline

With industry pundits predicting large oil reserves being discovered in the region, KPC is at the heart of government plans to build the nation’s future and increase its appeal to international development partners and investors. As it diversifies, KPC intends to invest in Joint Venture Companies currently being set up for LPG storage and distribution facilities in Mombasa and Nairobi. In future, more LPG plants will be constructed in other major towns in the country. When executed, these projects will ensure the accessibility and availability of LPG at cost-effective prices in furtherance of socioeconomic development and the promotion of LPG as a household fuel. Featuring a strong commitment to environmentally friendly policies, KPC’s range of green initiatives include the planting of trees next to the new power stations. The company also aims to continue to empower communities along its network and seek and provide new and sustainable opportunities through its elaborate corporate social responsibility policy. KPC will continue to invest in its staff, and state-of-the-art technology, so that it continues to provide a firstclass service.

Kenya Pipeline Company Ltd. Kenpipe Plaza. Sekondi Road off Nanyuki Road. Industrial, Nairobi, KENYA Tel: + 254 20 5322 44 / Md’ cell phone. +254 722 855 822 Fax: +254 20 5347 97


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Refreshing Opportunities

Cred it & Co Deb it Ca ns um rds T e


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Ecobank Kenya Limited Head Office: Fedha Towers, Muindi Mbingu Street, Nairobi Tel: 254-20-2883000 Fax: 254-20-2883815

8 REASONS WHY YOU MIGHT WANT TO INVEST IN EQUITY BANK. Best performing Ai 100 Company in Africa 2008 The New York Stock Exchange recognized Equity Bank as the Best Performing Ai 100 Company. The Ai 100 awards recognize the best performing public listed companies in Africa based on market capitalization, value of shares traded as a proportion of market capitalization, and financial performance in terms of size and the ability of the company to create value for investors. Banking Awards 2008: Best Bank in Kenya Equity Bank was voted the Best Bank in Kenya during the 2008 Renaissance Capital Awards in a survey benchmarked against a series of 12 parameters, chief of which included asset quality, capital adequacy, earnings and liquidity. African Banker Awards 2008 - Microfinance Bank of the Year Equity Bank was named the Best Microfinance bank in Africa during the annual African Banker Awards ceremony held in Washington DC, USA. Euromoney Awards for Excellence - Best Bank in Kenya (2007-8) The world's most prestigious financial publication voted Equity Bank as the best bank in Kenya for two years in a row. Global Vision Award 2007 Initiators of the concept of the future that will shape the World economy Awarded Superbrands East Africa 2007 The only superbrand in Banking in East Africa Largest Bank in Kenya In market capitalization, number of depositors and core capital. As at June 2008, Equity controlled 45% of all bank accounts held in Kenya with over 2.5 million customers. Market capitalization stood at US$. 1.8 Billion Global Credit Rating – 2007 A1 (short-term) high quality management and Strategic management A+ (long-term) Good Profitability and Strong Asset base.

Equity Bank. Championing Socio-Economic Tranformation of Africa Head office: Equity Centre Hospital Hill road upperhill, P.O Box 75104-00200 Nairobi. Tel 020-2736620/2744000 Cell: 0711 026000. Fax 020-2737276.


Kenya report 01 2009  

Kenya report

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