Kenya, Uganda agree on crude oil pipeline route

Kenya, Uganda agree on crude oil pipeline route

Opinion: Orange Kenya adverts unlikely to change perception about Safaricom

The latest campaign by Orange Kenya to compare its off-net and on-net prices against those of market leader Safaricom has elicited a lot of sober conversation in the market but is unlikely to change the market perception and loyalty to Safaricom. In the advertisement that is on newspapers, online as well as audiovisual media the France owned teco puts into assumptions various factors in its attempts to woo customers from Safaricom. Largely the classifieds assume that the majority of the 20 million Safaricom customers are likely to be unaware of the costs discrepancies between their current operator and other market options. The commercial also assumes that Kenyans are largely in Safaricom because of the voice services offered by the telecommunications giant. In this two assumptions Orange Kenya hopes that the advertisement will enlighten customers of which operator is actually ‘the better option’ and that Safaricom has achieved its loyalty purely because of its telecommunications services rather than a culmination of activities including community service, its Kenyan background and its persistent innovation. To discuss the price factor let us first remember that Orange Kenya is not the first telecommunications company to pick up a fight with Safaricom by triggering a price war. In fact almost all battles with competitors have been price related including one fuelled by Airtel in 2011 as well as another by Yu which the most ruthless was pricing free on net calls. In the many wars that have been witnessed in the telecom battlefield Safaricom has always emerged the winner though sometimes scathed such as in 2012 when there was a drop in profits. However during the same period the other three operators made losses leading to concerns being raised on the consequences of such price wars from including the current CEO of Orange Kenya Mickael Ghossein who said that the losses witnessed in the industry could actually lead to low investment in infrastructure. So what has actually changed? To date let us remember that only Safaricom of the four operators is making a profit. The point here is that Safaricom customers have for long known of the cost element in remaining with the green operator. Orange also assumes that voice services alone call lead to large migrations from Safaricom not realizing the huge number of Kenyans using Mpesa and other value added services such as lipa na mpesa, vuma online internet for matatus, m-cow among others. This has for long been the strong hold for Safaricom hence the loyalty the company exerts. Safaricom is also the only telecom that is seemingly investing in apps developments which it also avails to its customers. In the era of smartphones and the increasing local uptake of the devices should shape the direction of products telcos should take. Orange Kenya also hopes that a majority of Kenyans who witnessed its services while it was the market leader could have slowly forgotten its inadequacies to slowly flow back to its platform. Safaricom is without doubt a darling of many Kenyans due to its CSR activities with various local events sponsored by the company many of whom would not risk losing out various benefits to an international company. Above all Safaricom has succeeded in branding itself as a Kenyan success story with roots deeply originating in Kenyan soil and any mind changing commercial will foremost require customers lose their patriotism.

CCK WARNS RIVER ROAD FAKE PHONES PROGRAMMERS

The communication commission of Kenya has sounded a warning to all vendors reprogramming switched off counterfeit phones for reentry into the market. According to CCK director general Francis Wangusi the commission has received information that certain vendors in downtown Nairobi have been revamping the fake phones and is currently tracking them together with the relevant authorities for prosecution. According to the commission communication of Kenya statistics over 1.4 million fake handsets had been turned off by last Friday by various network providers in the country. Among those switched off it has emerged included certain genuine handsets most of which had been issued for testing by network providers as well as a number of handsets offered to users by international phone providers under contract only to enter the country illegally. And with thousands of Kenyans affected by the switch off it is also emerging that a number of crafty Kenyans from downtown Nairobi have started restoring the turned off handsets. The commission is now warning any such individuals risk imprisonment of up to 5 years or a fine of 1 million shillings is caught. Speaking at the same function which was discussing the development of quality of service information PS Bitange Ndemo noted that fake handsets were a major cause for deteriorating quality in the various network. He noted that now the switch of had gone as planned it was time for network providers to improve their service asking parliament for tougher penalties to providers who offer services below par. This comes even as it merges that none of the operators in the country passed the quality of service assessment in 2011. Ndemo has also asked the CCK to enter into a quality level agreement with network providers to ensure that service quality is improved.

BANKS TO LOWER LENDING RATES STARTING MONDAY

Investors can rest this weekend with held breath as they await lower interest rates starting coming Monday with most banks having announced lending rates will fall below 20%. Already several banks have indicated that they will be reduce rates among them KCB, Co-operative bank and CFC. On September 5th the central bank cut its base rate by 350 basis points to 13% from 16.5% when it again cut the CBR by 150 basis points. As a result of the second cut a number of banks moved in quick to announce that they would be reducing their base lending rates. CFC announced that it would reduce its lending rate to 19.5%, while Kenya commercial bank announced it would reduce it to 19% from 22%. Standard chartered also announced that it would lower its lending rate from 21.5% to 18.5% one of the most competitive rates in the market. However other banks that have lowered their rates will not take effect until mid October including CFC bank, commercial bank of Africa and diamond trust bank which lowered by 3.5% to 19%. Customers of Barclays bank which has lowered its rate by 1.5% to 19.5% and Housing finance to 18% will also have to wait till 15th October to enjoy the cut. Ecobank which has cut its rate by 3.5% however remains above the 20% mark with its lending rate at 21.5%. Several banks have however yet to cut their rates. Mortgage has however seen a more significant drop following the cut with Stanchart offering the takeover offer interest for a mortgage at 16.9%, while KCB has reduced its mortgage rates to 18%. In the same category I&M bank has fixed its floating rate for new mortgages at 18%. With this statistics the building and construction sector can be said to stand out as among the sectors expected to be the biggest beneficiaries after suffering heavily following the increment with growth having dropped from double digit in 2011 to just above 5% in 2012 as mortgage and the cost of capital simply spiraled out of control. Expansion by the private sector is also expected to take root after months of stagnation with launch of new products also expected to manifest the effect of cheaper credit. With a number of banks yet to reduce their rates however it is expected that they will face new pressure from especially borrowers and the central bank which has expressed it will to have the economy back to a higher growth trajectory. In August a bid by Gem MP Jakoyo Midiwo to have interest rates offered by banks stipulated by the CBR met resistance in parliament before been defeated among accusations of bribery by the financial institutions.

PARLIAMENTARY LABOR COMMITTEE SAYS GOVERNMENT IS FRUSTRATING ITS INVESTIGATIONS INTO KQ RETRENCHMENT

Retrenched Kenya airways workers have taken to the streets protesting their layoff while at the same time calling for the sacking of the chief executive Titus Naikuni. This comes even as the industrial court extended orders issued to the airline to stop retrenchment on 14th September after it emerged that the file had gone missing. Enraged retrenched Kenya airways workers took to the streets to protest their retrenchment that saw over 600 employees laid off. The workers who visited parliament buildings and the prime minister’s office seeking audience complained that the airline has moved ahead and employed over 200 new foreign workers following their layoff. "How many Kenyans are employed at British airways for the last many years it has been around. The motive of the government financing KQ and its rights issue was to earn Kenyans employment not Indians, Cameroonians, Thais and the rest." said a disgruntled retrenched cabin crew member Mr. Oyee. They urged the government which is the main shareholder to intervene. At the same time the employees were enraged by news that the file in the industrial court had gone missing calling it suspicious. "We cant believe the habit is back again. Mr Mutunga (Chief Justice) must produce file no.1616 or open a new file today." Mr Oyee added. Following the missing of the file the court has extended the orders issued on 14th of September compelling Kenya airways to stop the retrenchment . Meanwhile the labor committee probing the Kenya airways retrenchment adjourned after the permanent secretary of transport who was representing the minister could not provide any further information. The permanent secretary said the short notice by the committee has made it hard for the minister or his assistant to attend. A similar hearing meant with the acting CEO of the capital markets did not kick off as the CEO was said to be away. The members of the committee said this were theatrics by the government to slow the committee from presenting the report as scheduled.

PARLIAMENTARY COMMITTEE UNEARTH'S GRAVE DISCRIMANATION AND CORRUPTION PRACTICES AT KENYA AIRWAYS

A hearing by the parliamentary committee on labor has unearthed what could be grave corruption and discrimination at Kenya airways. The committee that was sent up by the national assembly to address the issue of retrenchment by the airline heard that the company might have targeted workers based on gender with pregnant and sick employees. The Sofia Abdi led committee has also heard of cases where the airline bought second hand jets worth billions in pretense they were new. and what was supposed to be a hearing that was meant to address the issue of retrenchment widely thought to be cost cutting measures slowly turned to be a story of breaches of the constitution and unlawful procurement practices. As soon as the committee started it emerged from those affected that the airline could have targeted people based on the gender with among those affected being pregnant employees and those already in maternity. The committee heard in disbelief how the company fired employees withdrawing their services while on duty some whom are said to have been fired midair exposing the passengers to grave harm. Those affected told horrifying stories of how the company withdrew medical insurance with some who were in hospital now unable to clear their bills. Similar questions were asked on KQs hiring of foreigners despite having fired 600 Kenyans.the union told the committee how the company had already gone ahead and employed foreigners mostly from India, Thailand,Ghana, Cameroon, Rwanda and Uganda who were being paid huge salaries almost triple their local colleagues. Aviation and allied workers chairperson Perpetua Mutua shocked the committee with revelations of rampant corruption and impunity at Kenya airways. Mutua told the committee that most of the recently acquired aircraft that were said to be new were in fact second hand with one having been used in Hong Kong for more than six years. She also revealed of an incidence where two new Embraer aero planes have surprisingly had similar serial numbers. The union rejected claims that KQs wage bill was as large as said putting the figure at 8.5b against Naikunis 13.4 billion. The committee is expected to continue with its hearings tomorrow where transport minister Amos Kimunya will be questioned.

IS IT TIME UP FOR NAIKUNI?

Is Titus Naikuni a man under siege? This is the question arising after seeing the Kenya Airways managing director lose touch with the Kenya Aviation and Allied Workers Union and recently the Kenya Airline Pilots Association. He further seems to have lost the confidence of shareholders after surprisingly having lost the race for Africa’s first dreamline to competitor Ethiopian Airlines as well as dismal performance in profitability. Titus Naikuni’s star started rising with his employment into the civil service as part of the World Bank sponsored Kenyan technocrats often referred to as the dream team who were professionals mostly from the private sector expected to inject new blood into the public service. Naikuni left the ministry of transport after serving as permanent secretary for 19 months back to the private sector where he served an extra 2 years at Magadi Soda before he took over at the helm of Kenya airways in 2003. This was after he was awarded the manager of the year in 2002. Since his entry into KQ in 2003 the company’s performance was exemplary with the airline’s profit margin at a record 9.7%. In 2005 the airline embarked on a fleet expansion programme. Since his entry into Kenya Airways, fleet has grown to 34 which include the acquisition of 5 embraer 170s and 4 embrear 190s from Brazil. However, Kenya Airways is now playing second fiddle to Ethiopian Airlines after losing out to its largest competitor on the acquisition of the Boeing 787 dreamliner with KQ still operating the boeing 777-200 ERs. KQ which had ordered 9 dreamliners with an option of 4 more has to wait much longer for its first delivery at a time Ethiopian Airlines will have acquired 5 jets and enjoying up to 20% in fuel cost saves even as KQ’s balance sheet becomes worrying. In the last financial results KQ’s profit dipped by 53% to Kshs.1.7 billion with fuel cost and staff cost blamed. Naikuni has further fallen out with the Kenya Allied and Aviation Workers Union and recently the Kenya Airline Pilots Association for the retrenchment of 578 workers with KALPA calling for his firing. In a paid advertisement, KALPA blamed KQs current woes to years of misadvised decision making adding that time had come for the chickens to come to roost. KALPA has also argued that retrenchment of staff due to increased costs was not clear-headed as operating cost had risen much faster. The management’s decision to hire foreign pilots has also not been received well with members of the public. Lastly, the government is now the largest shareholder at KQ following the recent Rights Issue with the state controlling 29.8 percent stake against KLM’s 26.3%. This is also expected to be reflected in the boardroom management. A Paris-based intelligence magazine, Indian Ocean Newsletter says the move by the Kenyan government to seek greater control was occasioned by the recent retrenchment at the airline, which had the blessing of KLM. For now it will be worth watching how Naikuni plays out his cards with so much pressure on his back.