How SA investors are quietly increasing presence in Kenya

A UAP Insurance stand at a past Insurance Expo. Old Mutual has also moved to take over UAP Insurance in a deal awaiting regulatory approval. | MORGAN MBABAZI 

In Summary

• Unlike the failure of SABMiller when it took on Kenya Breweries in the 1990s and flopped, the quiet buyouts give South African frims a Kenyan face.In the last 24 months, South African brands have absorbed several top Kenyan companies.  
• Old Mutual has also moved to take over UAP Insurance in a deal awaiting regulatory approval.
• According to him, this lack of competition which discourages growth is pushing them to buy out companies in the Kenyan market which is very open and competes with the rest of the world.
  Faulu Kenya CEO Charles Kimani said the the buyouts are adding value to Kenyan companies.

By ANDREW TEYIE
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Last year, South Africa was concerned after several of its business brands failed in attempts to invest in Kenya and deployed experts to find out what went wrong and how to fix it.

South Africa Inc was conducted in partnership with Brand Kenya and returned negative results about Kenyans’ perceptions of South Africa businesses and their managers as “imposing, aggressive and ignorant of the local reality.”

The report made public this year concluded that Kenya’s perception of South African business stemmed from “how South Africa managers conduct themselves and treat Kenyans.”

“This perception impacts on the reputation of South Africans, the businesses in the market. The above implies that any company, government, or other institution engaging in business in peer African markets should be very aware of local business culture and etiquette,” concludes the report that was presented to representatives of SA businesses at a roundtable session in Johannesburg.

As Brand South Africa was breaking down the figures for representatives of SA businesses in Kenya, their companies were changing tack and were quietly shaking up the corporate world in Kenya with buyouts.

Unlike the failure of SABMiller when it took on Kenya Breweries in the 1990s and flopped, the quiet buyouts give South African frims a Kenyan face.In the last 24 months, South African brands have absorbed several top Kenyan companies.  

According to the South Africa Inc project, the goal is to access the East African market through Kenya. Some of the companies are Gateway Insurance bought out by Pan African Insurance, Access Kenya bought by Dimension Data, Cannon Assurancebought by Metropolitan , and Haco Industries bought by Tiger Brands.

Old Mutual recently acquired a stake in Faulu Kenya for about Sh3.6 billion. During the purchase, the Sunday Nation learnt that Mr George Adams Maina as chairman of the Faulu Microfinance Bank divestiture committee, negotiated a sweet deal for his company Micsha Capital to acquire eight per cent of Faulu shares. Old Mutual got 67 per cent of the shareholding.

The particulars of the deal contained in emails and documents reveal that Old Mutual will finance him up to Sh300 million. The deal was conditioned on delivery of completion documents relating to the Faulu and Old Mutual transaction. Whereas the deal is structured as a loan, the repayment is based on annual repayment from the receipt of dividends from Faulu Kenya profits, meaning Mr Maina will not have to pay anything.

OLD MUTUAL

Old Mutual has also moved to take over UAP Insurance in a deal awaiting regulatory approval.

Apart from insurance companies and financial institutions, South African brands are competing in shopping malls.

Sunday Nation has learnt that Liberty Group through their asset management arm Stanlib are negotiating the purchase of Greenspan Mall in Nairobi’s Dornholm Estate.

Game, a subsidiary of South African retailer Massmart, opened last week at the new Garden City Mall on Thika Road. The retail giant faces competition from established retailers like Nakumatt, Tuskys, Uchumi and Naivas.

Twelve months ago, Massmart attempted to buy Naivas, but the deal fell through.
Opinion about the impact of the buyouts on the Kenyan economy and Brand Kenya is divided. There is an argument that buyouts are not intended to benefit Kenyans but are a strategy of South African businesses to access the larger East Africa Community markets.

But the National Assembly’s Trade committee vice chairman Nelson Gaichuhie says the buyouts are good for economy.

“However, this is only when they do not repatriate profits and bring in their technology and expertise which is superior,” said the Subukia MP.
Haco Industries chairman Chris Kirubi says that South Africans have found an indirect way to enter the Kenyan market.

“The buyouts are very good. The South Africans found out that starting a business in Kenya has its own challenges. Kenya is totally a different market. And most SA companies were built during apartheid days when they were insulated from competition. Even today, their markets are still very insulated by tariffs and strong trade unions,” he said.

According to him, this lack of competition which discourages growth is pushing them to buy out companies in the Kenyan market which is very open and competes with the rest of the world.
Faulu Kenya CEO Charles Kimani said the the buyouts are adding value to Kenyan companies.

“It is not just a case where they push everything on us. We have to cherry pick what works for Kenya and not just adopt everything. It is a good thing. That is how you are able to create value for your customer,” said Mr Kimani. who expressed confidence that Old Mutual would propel Faulu to next level.