What Does Mumias, Uchumi, KQ, and Now Safaricom Have In Common?

THE COLLAPSE of Kenya’s government owned and profitable companies has always started with the rumour of an internal report, mostly commissioned by the Board and done by an audit firm.

Uchumi is almost on it’s death bed.  Mumias has died many times over and is now being revived, just like Benson the Protester was, and as for KQ, well – let us just say it is constantly on turbulence.

But these companies were once profitable.  Very profitable in fact. They made so much money, newspaper headlines called the profits ‘embarrassing’.  At the height of their success, their combined profitability was above Kshs. 5Bn.  They were the places anyone wanted to work at and their purchase orders were as good as cash in hand.

Then internal reports started leaking. And what followed were claims and counter claims of boardroom fights, tender wars by unknown and unmentioned persons or unspecified enemies and entities out to destroy the CEOs.

This script is all too familiar.   And this wonted screenplay is now being played out at the parking lot of Safaricom.

The CEO of East & Central Africa’s largest corporation held a press conference on a Saturday afternoon.  That looked odd.  In the briefing, Mr. Collymore insinuated to the fact that there are tenderpreneurs who have migrated from the corridors of government offices to the parking lots of corporate Kenya, and it is these entities that are propagating various tales about Safaricom being a den of corruption.

But why would Safaricom be a prime target?  To understand this, look at Safaricom’s numbers.  The company’s capital expenditure (money invested by a company to acquire or upgrade fixed, physical, non-consumable assets, such as buildings and equipment) was 32.12Bn.

That is 3 times what Safaricom’s parent ministry – Information, Communication and Technology Ministry – was allocated in the 2015/16 budget.  Of this, more than Kshs. 20Bn was spent in Kenya and to Kenyan companies.

The total amount spent in advertising, paying various promotional agencies, digital activations and doing TV commercials is in the north of Kshs. 3Bn.  That is more than the profit of most companies listed at NSE, and even some ministries’ budget!

The company’s free cash flow is Kshs. 30.36Bn.  That is enough money to buy Kenya Airways 5 times over, and have some change to pay the pilots for several months.

Hearing about corruption at Safaricom must therefore worry all of us.  This is because Safaricom is not just another company in Kenya.  It is the organisation that moves Kenya.  They move more cash through MPesa than all banks combined. Every 8 out of 10 phone calls in the country are to or from a Safaricom line and 90% of all SMSs sent are through the network.  Basically, there is an 85% chance that you will tell someone about this article using a Safaricom service.

Because of these, and the fact that Safaricom’s capitalisation accounts for almost 40% of the total value of shares traded at NSE, we must take keen interest in these stories.

And for that reason, Bob must be the Bob we know him to be.  He was the first CEO to declare his wealth and tell us how much he earns.  He set precedence by leading Safaricom to be the one of the first companies to sign a pact to weed out corruption in their companies.   And we know that in the last 2 years, he has fired more than 115 employees on corruption related matters.

His openness in this matters therefore edicts that he must be subjected to a court of public opinion.  I don’t mean the one where we pick a line out of a 300-page draft report and throw as much mud as we can while passing judgement.

In that court, it should not be enough for Bob to point to that court that he personally commissioned the draft KPMG report that is now subject of a parliament process.  He has to unashamedly discuss the existence of corruption at Safaricom, who has been or is involved and what action has been taken, both against the person(s) and towards the development of a system and framework to ensure this is never happens again.  And the discussion should be done with a lot more temerity than that contained in the Sustainability Report that the company prepares every year.

In the court, he must set precedence by being the first in Kenya to name and unmask these people we hear of but have never had the benefit of knowing their identities.

He must explicitly reveal the contracts these people were denied, their values and the machinations that happened.  Doing so will safeguard Safaricom from suffering the same fate as Mumias, KQ and Uchumi, who went through a muddy process of leaked reports, loss of confidence, eroded brand equity, consumer flight, parliamentary committee hearings and finally loss of shareholder value.

This will allow us see these people for who they are – tenderpreneurs after the more than Kshs. 20Bn local Safaricom contracts.

His previous acts dictate that he has to do a first on this one as well.  Name them!  Let the accolades he has received for fighting corruption count for something.

Twitter:  @ManwaMagoma

Email:  manwamagoma@gmail.com

 

What’s In The Air, Water & Mint Sweets At Chase Bank?

Manwa Magoma

Naysayers, including my good banter friend Anthony, wrote off Chase Bank when it was placed under receivership by CBK.  They affirmed their positions when KCB were appointed receiver managers.

Most foredoomed that the 167,290 account holders who kept Kshs.1 million or less would rush in, get their cash and walk across the street to the ‘bigger banks’.  That logic made paper sense.  I argued against it on twitter on April 20th and some labelled me myopic.

When the bank’s doors opened on April 27th, 20 days after being placed under receivership, there were no sights of winding queues.  Not at their branches.  Not at the ATMs.  Chase Mfukoni didn’t crash and the cheque clearances worked.

In fact, their first day numbers were delightful, in more ways than one!  Out of a possible 167,290 transactions that could have happened to withdraw a possible Kshs. 6 billion, less than 10,000 account holders went to the branches to get their money.  That’s an average of only 23 customers served per hour, and only 12 customers per teller, assuming 2 tellers per branch.

According to Business Daily, Kshs. 70 million had been withdrawn through Chase Mfukoni by midday.  Going by Mpesa estimates of Kshs. 14,000 per transaction per customer per day, less than 4,500 Chase Bank customers moved cash through the mobile app.  That is in sharp contrast with the mad rush on the day the bank experienced a run.

Sources indicate that not only did people not withdraw their cash, most actually banked cheques and cash through the counters, Chase Mfukoni App and ATMs.

The bank’s call centre operated efficiently and almost all calls were answered as was practice before closure.  A scan on social media reveals there were over 200,000 impressions, most of which were positive comments.

It was a normal banking at Chase Bank.

Customers walked in.  Some with flowers, others with cup-cakes while those too broke to buy these extras came in as they were; with smiles, hugs and handshakes.

At the end of the day, the net cash debit at Chase Bank on their first day was approximately Kshs. 380 million, NOT the 6 billion that had been prophesied before the opening.

But what is it about this bank?  What did Zaf and Duncan put in the air, water and mint sweets at Chase that made the customers; those who were helpless 3 weeks earlier, to not walk away when they had an opportunity to?  How could it be possible that against all logical expectations, the bank only handled 5% of expected traffic?

When CBK announced that the bank would be managed by KCB, most people doubted whether KCB would offer same quality of service as Chase Bank did. In many places, the sighs of relief could barely be heard over the anguish of misconceived expectations of loss of customer service. Chasers are a spoilt lot, and they know it!

Some have attributed customer service to Chase Bank’s pretty and curvy girls.  Others have said it is because the bank offers loans at affordable rates coupled with a painless and a fast approval process.  A horde of arm-chair analysts inferred that it is because of it’s SME focus.  All that is total rubbish!  The numbers say so.

Chase is like the modern day Equity Bank.  When the latter rolled out mimi ni member campaign, it gave many the illusion that they they belonged to some sort of club.  However, there was nothing in that statement other than that the bank was open to all.

What Chase managed to do though is add spine and substance to the mimi ni member concept, making it more real.

Zaf and Duncan built a truly Kenyan bank from a forex bureau and license of another fallen bank.  I can’t speak much about their roles in the near disintegration of the same as KCB and a bunch of CBK appointed auditors are still poring through the books.  What I affirm though, is that they built a bank that has a bevy of Chasers so loyal, it is beyond belief.

Whatever it is that those two put in the air, water and mint sweets at Chase Bank, I want to taste and experience it. For that, I will open a Chase Bank account on Tuesday.

And in the event you get to know what it is about the bank that makes it command that level of loyalty, please do tell us.

Twitter: @ManwaMagoma

manwamagoma@gmail.com

 

 

Who Pulled The Trigger On Chase Bank Run?

Manwa Magoma

THE BEST NEWS that came from CBK last week was the announcement that Chase Bank depositors and Chasers will be back in business, albeit not fully, from April 27th 2016 under a management agreement with KCB.  A management agreement that will likely lead to KCB buying out Chase Bank, or what remains of it.

But in spite of this good news, the question still remains.  Who truly caused the run on Chase Bank?

Chase Bank’s true run started on 13th October 2015 with the placement of Imperial Bank under receivership.  Right after Kenyans were made aware that a heist had taken place at Imperial, big institutional bankers at Chase Bank begun moving their money from the bank, in what is referred to as a silent run, similar to the one that brought down Wachovia, USA’s 4th largest bank holding company at the time.

Wachovia was brought down by a silent run on September 26th 2008.  On that day, institutional customers took out USD 5B, only 1% of the total deposits. In spite of its size and place in US banking industry, the bank choked.

Estimates, based on Chase Bank fillings of September 30th 2015, show that customer deposits should have grown to Kshs. 128B by the end of 2015.  However, the bank’s 2015 audited balance sheet shows the bank closing the year with only Kshs. 92.6B in deposits.

Insiders intimate that on some days in the last 2 months of 2015, deposits dropped to as low as Kshs. 82B.

Big institutional and diaspora based depositors withdrew more than Kshs. 35B between October 13th and December 31st 2015.  Someone had whispered something to this group of depositors and with that exposed Chase Bank’s soft underbelly of relying on fixed deposits to grow deposits, a discussion for another day.

In the weeks before the so-called social media induced run, insiders communicated panic as deposits at the bank dropped to below Kshs. 80B.  there are tales in the city how groups of people and investors withdrew billions of deposits.

Faced with what appeared to be a silent run, Chase bank asked for help from other banks.  A couple of them helped. Most declined and cut off credit lines.  Available information also indicates that as the liquidity crisis continued to bite, CBK declined to offer help in spite of passionate appeals from the troubled bank.

As early as mid-March, insider leaks about the liquidity state of the bank of the bank were sweeping across various depositors.  Cancellations of Fixed Deposits went up and withdrawals through RTGS ramped up.

By 1st April, and with news of the impeding re-issue of earlier published 2015 financial statement coming through the market, the bank’s RTGS services slowed down to a near halt. Deposits that had began building up after the end of 2015 erosion were now at an all low of Kshs. 80 Bn.

News of incomplete RTGSs spread fast and reached retail customers.  While a couple of messages may have been pasted on FB and Twitter, those were not any different from what had been said previously about other Tier II banks.

CBK Governor’s morning press conference on April 6th where he declined to comment on individual banks made a bad situation a lot worse.  The public interpreted the ‘no comment’ comment to mean a confirmation of the rumours.  Unbeknown to the press team and the public, the Governor had earlier in the morning asked Zaf Khan and Duncan Kabui to step aside from their roles at Chase Bank.

As the bank was confirming the exit of its Chairman and Group MD, most branches were getting starved off cash.  The younger and more tech savvy customers didn’t bother with queuing at the branches.  They moved cash through Chase Mfukoni, the bank’s efficient mobile banking app.  At close of banking day on April 6th, more than Kshs. 7B, approximately 10% of the deposits on that day, had been withdrawn.

The run at Chase Bank wasn’t triggered by Social Media.  No doubt this ‘new’ media played a role in spreading word about Chase Bank’s situation, but the true trigger was somewhere else.

Imperial Bank closure was the gun that started the run and the insider loans/ re-classification of assets in to loans being the bullet.

However, someone at Chase Bank picked the gun, loaded the bullet in to the chamber.  The same person also pulled the trigger that started the run.

Let us now look for that person(s).  A good place to start would be the insider who whispered to big investors to move their cash.

That person pulled a heist on Chase Bank.

Twitter: @ManwaMagoma

manwamagoma@gmail.com