Rich Tanzanians invest billions in Kenyan firms

Billionaire Tanzanian investors Ally Edha Awadh (left) Aunali Rajabali and Sanjeev Kumar. PHOTOS | COURTESY 

In Summary

• New flow of wealth reverses traditional trend where Nairobi has had the upper hand.
• The latest entrant is Village Supermarket, a Tanzanian-owned retail chain.
• Analysts say the foreign investors are attracted by Kenya’s favourable medium-term economic growth prospects.

By BUSINESS DAILY
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Wealthy Tanzanian citizens and firms have invested more than Ksh5 billion ($50 million) in Kenya over the past two years, reversing the predominant one-way flow of capital between Nairobi and Dar es Salaam.

The cross-border investors have made their bets in Kenya’s stock market, consumer goods, petroleum and financial services sectors.

The latest entrant is Village Supermarket, a Tanzanian-owned retail chain that this month set up at Nairobi’s upmarket shopping complex, the Village Market.

Village Supermarket, a family business based in Tanzania’s largest city Dar es Salaam, runs boutique-style stores stocking food, wine, baked goods, kitchenware and home accessories sourced from around the world.

Recent big-ticket acquisitions by Tanzanians include the M Bank takeover of Oriental Commercial Bank, Lake Oil buyout of Hashi Energy and huge stakes in blue chip Kenyan firms snapped up by billionaire investors Aunali and Sajjad Rajabali.

Economic growth

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Analysts say the foreign investors are attracted by Kenya’s favourable medium-term economic growth prospects buttressed by reduced political tension.

The World Bank projects the country’s GDP will expand steadily to highs of 6.1 per cent by 2020.

“Notwithstanding fiscal consolidation, economic activity is poised to rebound over the medium term.

"GDP growth is projected to recover to 5.5 per cent in 2018, and steadily rise to 6.1 per cent by 2020 when output gaps in the economy would have closed,” the World Bank said in a recent report on Kenya’s economic outlook.

Rising oil prices and a sharp reduction in lending to the private sector are, however, seen as the major risks to the upbeat growth forecast.

A Treasury plan to repeal the interest rate caps is expected to reverse the sharp drop in private sector lending in the past one year, the World Bank added.

Tanzania’s Lake Oil, founded by Ally Edha Awadh, last year acquired the petroleum retail division of Kenya’s Hashi Energy for an undisclosed sum.

The deal saw Lake Oil enter a familiar regulatory and competitive market where the control of fuel prices and margins is similar to that in Tanzania.

Petroleum prices

Petroleum prices in Kenya are set by the Energy Regulatory Commission (ERC) while those in the neighbouring country are set by the Energy and Water Utilities Regulatory Authority.

This leaves firms operating in both countries relying on higher volumes to grow profits, with some like Vivo Energy further benefiting from sale of premium fuels like Shell V-Power whose price is not regulated.

Tanzania’s M Bank in 2016 became the first lender from the neighbouring country to take over a local institution when it acquired a 51 per cent stake in Oriental Commercial Bank.

Scores of Kenyan banks have made acquisitions or started operations in Tanzania, including KCB, Equity, NIC and Diamond Trust Bank.

Tanzanian billionaires Aunali and Sajjad Rajabali have in recent months emerged as the biggest new investors in publicly traded firms at the Nairobi Securities Exchange (NSE).

The duo has over the past two years bought shares worth more than Ksh1.8 billion ($18 million), taking significant stakes in Equity Group, Co-op Bank, KenolKobil, Jubilee Holdings and I&M Holdings.

Their latest investment is in Safaricom where they bought 10 million shares worth Ksh275 million ($2.7 million), becoming the third largest individual investors in the telecommunications giant.

Diverse holdings

Their diverse stock holdings amount to a general long-term bet on Kenya’s economy whose growth is tipped to boost companies’ earnings.

This should in turn support higher share prices and incremental dividend payouts to shareholders.

The Rajabalis' investments in Kenya are part of their expansion of their regional interests.

They are ranked as the top individual investors in Tanzania’s largest lender CRDB Bank Plc with a 4.1 per cent stake worth about Ksh1 billion ($10 million) and hold a 5.1 per cent equity in Tanzania's National Microfinance Bank (NMB).

The Tanzanians are among a diverse group of foreign investors that have made major capital outlays in the local market in recent years, a signal of the country’s rising profile as an investment destination.

Foreign direct investment into Kenya rose 71 per cent to Ksh67.2 billion ($672 million) last year, according to data from United Nations Conference on Trade and Development (UNCTAD).

Besides favourable economic prospects, Kenya’s attractiveness to foreign investors has also been aided by tax incentives, including capital deductions.