Old Mutual starts $560m Africa expansion plan

An Old Mutual Kenya employee attends to a client. Old Mutual is setting aside 5 billion rand ($560 million) to fund expansion in fast-growing sub-Saharan Africa. 

Posted  Friday, March 1  2013 at  12:16

In Summary

• Plans acquisitions over next 3-5 years
• 2012 operating profit 1.6 billion stg vs 1.57 billion consensus
• Total dividend 7 pence/share versus 6.5 pence consensus

Anglo-South African insurer Old Mutual is setting aside 5 billion rand ($560 million) to fund expansion in fast-growing sub-Saharan Africa.

Old Mutual, which last year bought the life insurance unit of Nigeria's Oceanic Bank, plans to buy minority and majority stakes in businesses in east and west Africa over the next three to five years, it said on Friday.

The company, which reported higher-than-expected profit, said it wanted to cash in on growing demand for insurance across the region as rapid economic growth, fuelled in part by the natural resources boom, increases consumer spending.

"We believe that the prospects for growth in Africa are underpinned by sustainable, structural factors," Old Mutual said, adding that the continent's economic output is forecast to have quadrupled to $2 trillion between 2000 and 2012.

Old Mutual, which owns insurance, banking and fund management businesses across four continents, said adjusted operating profit for 2012 rose 18 per cent to 1.6 billion pounds ($2.43 billion), narrowly beating the 1.57 billion pounds expected by analysts in a company poll.

The improvement was driven by a strong performance from Nedbank, Old Mutual's majority-owned banking business, where profit rose by nearly a quarter to 828 million pounds, and good growth at its emerging markets businesses.

Old Mutual's asset management unit in the United States took in 900 million pounds of client money during the year compared with an outflow of 3 billion in 2011, its first positive annual inflow since 2007.

The company, which last year deferred plans to float the U.S. asset management business, said the unit was not yet ready to go public.

"It hasn't got to the state where it would be value-enhancing to do an IPO," Chief Executive Julian Roberts told reporters on a conference call.

Old Mutual's London-listed shares have almost doubled over the last three years, beating a 22 percent gain for the FTSE 100 share index, as it sold businesses to repay debt and dispel investor worries that the group lacked focus and would be worth more broken up.

The disposals partly reversed an international acquisition spree Old Mutual began in 1999 to reduce its dependence on its historic home of South Africa.

The stock closed at 202.5 pence on Thursday, valuing Old Mutual at about 10 billion pounds. The company is paying a total dividend of 7 pence per share, an increase of 23 per cent, and ahead of the 6.5 pence expected by analysts.

Diaspora inflows to Kenya up 14pc in January

A woman collects US dollar bills at a money-changer’s stall. Cash remittances from abroad were up in January 2013 by 14.3 per cent compared to the same period in 2012. File 

By CHARLES MWANIKI, cmwaniki@ke.nationmedia.com

Posted  Friday, March 1  2013 at  10:57

Cash remittances from abroad were up in January 2013 by 14.3 per cent compared to the same period in 2012.

Data from Central Bank of Kenya released Friday shows that Kenyans living abroad remitted some Sh8.96 billion ($103 million) in January 2013 compared to Sh9.2 billion ($105.7 million) remitted in December 2012. In the corresponding month of January 2012 the remittances were Sh7.8 billion($89.8 million).

(Read: Diaspora remittances rise on US economic recovery)

Remittances in December have traditionally been the highest in the year due to the December festivities.

According to the CBK, remittances inflow was resilient in 2012, recording an increase of 31.4 per cent compared with 38.8 per cent in 2011.

(Read: Africans in diaspora pay Sh350bn more for money transfers)

Reflecting the strong monthly inflow since January 2012, the 12 month cumulative average remittances inflow increased by 29.2 per cent from Sh6.65 billion ($76.4 million) in January 2012 to Sh8.6 billion ($98.7 million) in January 2013.

Inflows from North America accounted for half of the cash remitted in January 2013, taking 50.2 per cent of the share with Sh4.5 billion ($51.7 million).

Remittances from Europe amounted to 27 per cent of the total remittances at Sh2.4 billion ($27.8 million), while those from the rest of the world were Sh2 billion ($23.5 million) accounting for 23 per cent.

The share from North America recorded an increase of one per cent from that of December 2012 when it accounted for 49.3 per cent of the remittances, while Europe had 27.7 per cent and the rest of the world 23 per cent in the same month of December 2012.

Ignoring TZ going to be EAC’s first challenge

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• By Allan Brian Ssenyonga

Getting together is always simpler than staying together. The simple reason being that getting together is often merely a decision that can be made on impulse. After deciding to get together one is faced with the challenges of bearing with the negatives of that each party has brought into the relationship.

The baby that is East African Community (EAC) is already facing challenges as a community at its infancy. 

The original community never survived the egos of Field marshal Idi Amin and Mwalimu Julius Nyerere in 1977. Meanwhile Kenya was demanding more seats than Uganda and Tanzania in the decision making organs. Irreconcilable differences must have been what the legal fraternity must have described it then.

In November 1993, the then presidents of East Africa, Moi of Kenya, Mwinyi of Tanzania and Museveni of Uganda signed the Treaty for East African Co-operation in Arusha, Tanzania establishing a Tri-partite Commission for Co-operation.

The East African Community was finally revived on November 30, 1999, when the Treaty for its re-establishment was signed. It came into force on July 7, 2000, twenty-three years after the total collapse of the defunct erstwhile Community and its organs. Mid this year, Rwanda and Burundi were admitted into the community.

The original three East African countries agreed on a process of fast tracking the community towards a federation. To track the progress and perceptions of their people concerning the process, they all simultaneously instituted National Consultative commissions on October 13, 2006 to do a survey on what people in each country thought about the East African federation.

The results from Uganda and Kenya were overwhelmingly positive with over 75 per cent of the respondents responding affirmatively. On the contrary, Tanzanians had a very negative response when over 80 per cent of the respondents showed they were against the fast tracking process.

In brief, Ugandans and Kenyans want the process to move fast while their brothers in Tanzania are saying we should do it at a slower pace.

 This reminds me of the last African Union summit when Libyan leader, Muammar Gadhaffi was telling fellow African rulers to quicken the process of forming a United States of Africa. Museveni and other leaders from the southern part of the continent were agitating for a slower process.

Political analysts argue that Museveni is eyeing the prospect of being the first East African president. The post is seen by some as a pension of sorts or a way out from the ever turbulent African politics. It is also noted that Museveni even recently embarked on a 300km road trip around the three original East African countries in what he called a bid to popularise the East African Community. Others argued that he was simply popularising himself as the prospective EA president.

Press reports now indicate that Museveni was not pleased by the decision taken at the last EAC summit held in Arusha where the leaders decided to respect what the views of the Tanzanians and therefore delay the process of fast tracking.

For a man who some Tanzanians loathe for having called the new EAC his baby sometime last year, matters are not helped by the fact that he even tied his retirement from Ugandan politics to the creation of the East African Political federation.

Tanzanians have given reasons like the fear of Kenyan economic dominance or land grabbing by the other neighbours. Tanzanians, who once accommodated Museveni as a rebel, are sceptical about him leading the Community because some view him as a war monger who strongly believes in violence as an option. 

Uganda’s Sunday monitor (16/09/07) reported that President Museveni has sent a proposal to his Kenyan counterpart that the two countries consider forming a federation while they wait for Tanzania to get ready and the join.

The two countries hope that Rwanda and Burundi will join them to “a coalition of the willing” with headquarters proposed to be in Uganda’s eastern district of Tororo.

This is definitely going to be a threat to fraternity of the infant community putting it almost at the same temperatures of 1977 as it alienates Tanzania and affect long-term regional co-operation. In 1977, the plan was to alienate Uganda and this led to the end of EA relations.

Much as Uganda is bound to benefit politically and Kenya economically, Museveni’s much touted double-track process might prove to be the Achilles’ heel for the born again EAC.

99 % civil servants declare wealth

• By Ignatius Ssuuna

Ombudsman Tito Rutaremara(R) making addressing the media recently as the Minister of Labour and Public Service, Anastase Murekezi looks on (File photo)

KIGALI - Information from the Office of the Ombudsman indicates that 99 percent of government workers declared their wealth on time this year.

According to the Ombudsman, out of 4,929 civil servants, only 13 failed to comply with the 2004 law that requires leaders to declare their wealth.

The Leadership Code requires leaders to clarify and explain how they acquired their assets and incurred their liabilities.

“The high turn-up was because of our massive sensitization campaign. We have also taken tougher measures like calling for the suspension of those who fail to comply,” explained Jeanne Mwiseneza, the Director of Wealth Declarations Department, in an interview with The New Times.

Mwiseneza explained that 99 percent was a great achievement because the figures recorded last year assessed those who failed to declare their wealth at more than 300.

Leaders are required by law to submit their annual declaration of income, assets and liabilities by June 30. Any leader who fails to declare his or her wealth without any reasonable cause breaches the law and the penalty is huge.

The Office of the Ombudsman will report to the respective institutions with regard to the 13 employees who have not complied and seek explanations. Should the latter have no convincing reasons, they shall be disciplined.

Early this year, The New Times published a list of senior government officials in various departments who had failed to declare their assets, leading to the decision to suspend them.

“This has worked in our favour because employees now know that if they don’t declare their wealth, they will be suspended without pay or even lose their jobs,” Mwiseneza said.

The idea to submit leaders’ annual declaration of income, assets and liabilities to the Office of the Ombudsman is meant to strengthen the fight against graft through increased accountability and transparency.

The pension gap and why Rwandans save less

All throughout the world we are seeing a growing workforce but the pension pot is not growing in line with the growing workforce. A tragic story in Uganda last week saw a man who paid his pension for his entire working life and found he only had $12 to his name.

Even here in Rwanda, pensions are optional, therefore few actually take time to save for their future. It is not like other African countries, though, where there is an inherent aversion to public pension institutions, so there is hope yet.

 In the world of savings and pensions, there are savers and spenders; it is something ingrained into the national character over generations of hardship. The biggest savers are China, Germany, and Japan. These are countries with a harsh history, a strong export market and good infrastructure.

The spenders are also borrowers on a massive scale, USA, Britain, Canada and such. So in the global economy, China bought American debt, Germany bailed out Europe and so on.

In countries that save like Japan and Germany, there is enough housing stock to accommodate people comfortably so the money saved on buying houses is banked. In USA and Britain, there is a home-owning culture that dates back to the post-war era, therefore money is borrowed to build housing.

Rwandans also fall into this category, there is a need to build your own house, the house for rent stock is limited, overpriced and built on debt, so you are better off borrowing to build than renting.

This means that property takes the place of pensions as a retirement investment.
 
This is to counter the risk caused by fluctuating currency exchanges, which often see a currency devalued with time.

Houses are investments that seem guaranteed to rise, but that is assuming that housing stock will always be this scarce. We might have a saturation of the market and see house prices fall. Even if they do, it is still a matter of cultural pride to own your home. While this consumer-debt and repayment cycle continues, it is unlikely that pensions will grow.

Another factor is that few public servants, who are the bedrock of any national pension scheme, see themselves working in the public sector for all their working lives. The public sector is a place to start then you move onto the private sector, therefore the pension will not have time to mature.

Another factor is people just do not see themselves living that long, our life expectancy will jump around 15 years since child mortality has been reduced so we will have a lot more people in their seventies in 10-15 years time.

 Our young growing population is perfect for a viable pension plan, with half of the population under 18 we can have a pension scheme that underwrites our bank debt,that brings down interest rates, and funds the underprivileged.

This can only happen if we reduce spending and increase savings, housing is a good investment but it is not worth being in debt for decades without disposable income to save for a rainy day.

Why Rwandans don’t save

• Sam Rwego

Gacuriro Estate, Kigali. Not many Rwandans can afford to live there.

Editor,

I read Rama Isibo’s article in yesterday’s issue of The New Times with interest. Titled “The pension gap and why Rwandans save less” it was a good read; however, one major problem was that it was a mite too complex.

Very often we, the so-called ‘intellectual class’ overdo things and make matters even more confusing than we found them. I think I can tell you why Rwandans don’t save.

Its because we have nothing to save. We earn ‘peanuts’ and because most of our goods are imported, we have to pay even more than we would have if they were produced locally. Then there is the taxation system. 

I think its ridiculous that someone earning less than two hundred dollars has to pay the same percentage of income tax (30%) as someone who earns thousands of dollars.

Throw in the fact that house prices, and rent is sky high because of the inflationary effect of thousands of expatriates, then one starts to understand why we can’t save. Rwandans don’t have a genetic predisposition that makes us allergic to savings accounts but we merely cannot.

Not with school fees, groceries, fuel costs, rent, wedding contributions and os on, and go forth. I wish I could say that I didn’t save because I chose to buy designer clothes but that is far from the reality.

Sam Rwego
Kimihurura

States should honour agreements

 
 New course to bridge skills gap in mining sectorThe Integrated Polytechnic Regional Centre (IPRC) - Kigali has introduced a new course that is expected to produce skilled technicians in the field of minin

 The long standing Rwanda Burundi pension saga has dragged on for a long time. For more than ten years, Rwandans who used to work in Burundi before returning, have been trying to get their pension, but all their efforts usually hit a snag. Now, if officials are to be believed, the waiting period is over.

The same could not be said for those who used to work in the former Zaire (DR Congo), which agreed in principle to pay the pensions but argues that beneficiaries will have to wait until the internal conflicts of that country are over. That is a very lame excuse.

In 1978, the three countries, all members of the Economic Community of the Great Lakes Countries (CEPGL), signed a memorandum of understanding putting in place mechanisms of streamlining pension benefits.

That agreement was put in place to address the very questions that seem to cause unnecessary friction between the pension bodies.

But this pensions issue is not the only subject that has been a victim of denegation of agreed upon positions by states. This kind of behaviour is very rampant. It is not uncommon for countries to ratify an agreement decades after the signatures were appended.

Some simply go back on their words when they find a particular treaty is not in their favour and the non-adherence to agreements is, in most cases, the source of conflicts.

What is the use of signing agreements if one does not intend to honour them?