macroafricaintel | [#StopTheKillings] Kenya – Recent banking trends & outlook (1)

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

In July, a court temporarily suspended the implementation of a new 0.05 percent tax on bank transfers above 500,000 shillings ($5,000); a victory for the Kenya Bankers Association (KBA), which took the matter to court. Widely dubbed a “Robin Hood” tax, it was introduced in the 2018-19 budget by treasury secretary Henry Rotich in June 2018. In the first week of its implementation from 1 July, interbank transfer volumes halved to 11.2 million shillings, from 26 million shillings only the week before. Time will tell whether the reprieve would be permanent, perhaps as early as mid-September, when the suit would be formally heard. More pertinent is how this is just one of quite a number of constraints weighing on the Kenyan banking industry at this time.

Stifling regulation, tense labour relations
There remains the vexing issue for Kenyan bankers of the cap on interest rates on commercial loans at 4 percentage points above the central bank rate instituted in September 2016. Indications that the law might be reversed is gratifying but increasingly frustrating with every delay. Even so, Kenyan banks have not been particularly endearing themselves to the government and wider public in some spheres. Ten of them are being investigated in the ongoing corruption probe of the pilfering of the National Youth Service to the tune of about $100 million, for instance. The bad press would certainly make it difficult for them to stop a proposed financial markets conduct authority. Currently a bill in parliament, once passed into law, the central bank’s powers to rein in erring banks would be passed to it. The consequent duality is likely to slow the oversight process, certainly. And even as any central bank or institution would ordinarily resist any emasculation of its powers, Central Bank of Kenya governor Patrick Njoroge’s worry and view that his institution “is under attack” should be taken seriously.

Besides, the financial markets conduct bill was a disappointment for bankers in other ways. After earlier signalling that the bill would include the repeal of the rate cap law, its absence in what was eventually published and the silence of The Treasury afterwards, dashed hopes in the industry. If Reuters’ sources are right, treasury secretary Henry Rotich might not be entirely to blame. There was a worry that including the rate cap repeal in the bill might jeopardize its passing. Why? The rate cap law emanated from the legislature, not the executive. And a lot of lawmakers, those from the ruling Jubilee party at least, remain fervently opposed to any attempt to repeal it. Suggestions about a compromise range from increasing the cap to allowing banks charge differential interest rates depending on the customer segment. Some banks have chosen to play the waiting game. At an investor briefing in March, James Mwangi, chief executive of Equity Group, Kenya’s largest bank by value, says his bank has more than $2 billion available for lending in the event the rate cap is abolished: “There are no trade-offs because it’s not about us, it’s about the market”, he added for good measure. Other banks might be more accommodating if the cap is raised, though.

Labour relations have also been tense lately. Most recently, the sector’s union attempted to block the payment of bonuses to more than 2,000 managers at KCB Group, the largest bank in Kenya by assets. Their argument was that quite testing quarterly reviews, the basis upon which the bonuses are paid, are discriminatory. A court ruled otherwise in about mid-April. Even so, it highlights how global pushback against what are widely considered to be disproportionately high remuneration for bankers despite their many misdemeanours, is closer to home in the Kenyan case. In a country where about 40 percent of its almost 50 million population live below the poverty line and at a time when a multitude of depositors are still scrambling for their money in at least three failed banks, a bank chief executive earning $1.5 million in bonuses alone, is hardly endearing.

An edited version was published in the Q3 2018 issue of African Banker magazine

Also published in my Businessday Nigeria newspaper column (Tuesdays). See link viz. https://www.businessdayonline.com/columnist/rafiq-raji/article/stopthekillingskenya-recent-banking-trends-outlook-1/

macroafricaintel | Africa FX Monthly – Sep 2018

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

Click here for PDF version

Currency   1 month

(28 Sep 2018)

3 month

(30 Nov 2018)

6 month

(28 Feb 2019)

12 month

(30 Aug 2019)

South African Rand (USD:ZAR) 14.3 14.1 13.5 13.3
Nigerian Naira (USD:NGN) 362.0 364.0 367.0 366.0
Ghanaian Cedi (USD:GHS) 4.8 4.6 4.5 4.3
Kenyan Shilling (USD:KES) 100.3 100.5 100.1 100.0
Ugandan Shilling (USD:UGX) 3,770.0 3,750.0 3,780.0 3,786.0
Tanzanian Shilling (USD:TZS) 2,281.0 2,280.0 2,283.0 2,285.0
Ethiopian Birr (USD:ETB) 27.7 28.1 28.3 28.5
Mauritian Rupee (USD:MUR) 34.3 34.5 34.9 35.0
Namibian Dollar (USD:NAD) 14.3 14.1 13.5 13.3
Botswanan Pula (USD:BWP) 10.5 10.3 9.9 10.1
Zambian Kwacha (USD:ZMW) 10.3 10.1 9.8 9.5
US Dollar Index (DXY) 95.0 94.5 94.7 93.5

macroafricaintel Weekly | 27 Aug

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

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Date Data / Event Period Forecast Previous
27 Aug Nigeria GDP, % yy Q2 2018 1.56 1.95
30 Aug South Africa M3, % yy Jul 2018 5.1 5.8
30 Aug South Africa PSCE, % yy Jul 2018 5.7 5.7
30 Aug South Africa PPI, % yy (mm) Jul 2018 5.9 (0.5) 5.9 (0.9)
31 Aug Kenya CPI, % yy (mm) Aug 2018 3.9 (0.2) 4.4 (-0.9)
Zambia CPI, % yy (mm) Aug 2018 8.1 (0.4) 7.8 (0.3)
Uganda CPI, % yy (mm) Aug 2018 3.4 (0.5) 3.1 (0.4)

macroafricaintel | Africa FX Monthly – Aug 2018

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

Click here for PDF version

Currency   1 month

(31 Aug 2018)

3 month

(31 Oct 2018)

6 month

(31 Jan 2019)

12 month

(31 Jul 2019)

South African Rand (USD:ZAR) 13.5 13.3 14.0 13.5
Nigerian Naira (USD:NGN) 362.0 364.0 367.0 366.0
Ghanaian Cedi (USD:GHS) 4.9 4.6 4.4 4.5
Kenyan Shilling (USD:KES) 100.3 100.5 100.1 100.0
Ugandan Shilling (USD:UGX) 3,670.0 3,650.0 3,680.0 3,686.0
Tanzanian Shilling (USD:TZS) 2,281.0 2,280.0 2,283.0 2,285.0
Ethiopian Birr (USD:ETB) 27.9 28.3 28.9 29.5
Mauritian Rupee (USD:MUR) 34.3 34.5 34.9 35.0
Namibian Dollar (USD:NAD) 13.5 13.3 14.0 13.5
Botswanan Pula (USD:BWP) 10.1 10.3 9.9 10.5
Zambian Kwacha (USD:ZMW) 9.8 10.0 10.1 10.3
US Dollar Index (DXY) 94.5 95.0 93.7 95.3

macroafricaintel Weekly | 30 Jul

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

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Date Data / Event Period Forecast Previous
30 Jul Kenya Policy Rate, % 9.0 9.5
30 Jul South Africa PSCE, % yy Jun 2018 4.9 4.5
30 Jul South Africa M3, % yy Jun 2018 5.8 5.7
31 Jul Kenya CPI, % yy (mm) Jul 2018 5.5 (0.2) 4.2 (-0.9)
31 Jul Uganda CPI, % yy (mm) Jul 2018 2.5 (-0.1) 2.2 (-0.2)
Seychelles CPI, % yy (mm) Jul 2018 2.9 (0.1) 3.0 (0.1)
Tanzania CPI, % yy (mm) Jul 2018 3.8 (0.1) 3.4 (-0.4)
Botswana CPI, % yy (mm) Jul 2018 3.2 (0.2) 3.1 (0.0)
Namibia CPI, % yy (mm) Jul 2018 4.4 (0.4) 4.0 (0.3)
Nigeria CPI, % yy (mm) Jul 2018 11.0 (1.0) 11.2 (1.1)
Ghana CPI, % yy (mm) Jul 2018 10.3 (1.0) 10.0 (1.0)
South Africa CPI, % yy (mm) Jul 2018 4.7 (0.5) 4.6 (0.4)
Ethiopia CPI, % yy (mm) Jul 2018 14.8 (1.1) 14.7 (2.0)
Mauritius CPI, % yy (mm) Jul 2018 1.9 (0.0) 1.0 (-0.7)

macroafricaintel Weekly | 23 Jul

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

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Date Data / Event Period Forecast Previous
23 Jul Nigeria CPI, % yy (mm) Jun 2018 11.0 (1.0) 11.6 (1.1)
23 Jul Ghana Policy Rate, % 16.0 17.0
24 Jul Nigeria Policy Rate, % 13.0 14.0
26 Jul South Africa PPI, % yy (mm) Jun 2018 5.4 (0.5) 4.6 (0.7)
30 Jul Kenya Policy Rate, % 9.0 9.5

macroafricaintel | Africa FX Monthly – Jul 2018

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

Click here for PDF version

Currency   1 month

(31 Jul 2018)

3 month

(28 Sep 2018)

6 month

(31 Dec 2018)

12 month

(28 Jun 2019)

South African Rand (USD:ZAR) 13.7 13.3 14.0 14.3
Nigerian Naira (USD:NGN) 360.0 364.0 367.0 366.0
Ghanaian Cedi (USD:GHS) 4.9 4.6 4.4 4.5
Kenyan Shilling (USD:KES) 100.3 100.5 100.1 100.0
Ugandan Shilling (USD:UGX) 3,870.0 3,850.0 3,880.0 3,888.0
Tanzanian Shilling (USD:TZS) 2,271.0 2,270.0 2,273.0 2,275.0
Ethiopian Birr (USD:ETB) 27.5 27.6 27.8 28.0
Mauritian Rupee (USD:MUR) 34.7 34.9 34.3 35.0
Namibian Dollar (USD:NAD) 13.7 13.3 14.0 14.3
Botswanan Pula (USD:BWP) 10.1 10.3 9.9 10.5
Zambian Kwacha (USD:ZMW) 9.8 9.7 9.8 10.1
US Dollar Index (DXY) 94.5 95.0 93.7 95.3