Tuesday, November 03, 2009


You are tired of earning 0.5% interest on your Savings Account,uninterested in all those mutual funds/unit trusts but need a place to keep your money."Treasury Bills !" (Short term paperless Government Borrowing issued through Central Bank for periods up to 1 year)pops into your head.Central Bank of Kenya (CBK) announced that you can buy Treasury Bills from Ksh 100,000 and multiples of Ksh 50,000 thereafter.

How do you start?
The first thing is to open a CDS account with at the CBK.Download the application forms off the CBK site then fill them in and return them to any of the CBK branches- Nairobi,Mombasa,Kisumu and Eldoret.

Before you invest there is the investing jargon that you need to understand such as:
TENOR- Length of time before a bill pays back the principal amount.For instance a Trasury Bill that pays back its principal in 91 days has a 91day tenor.

MATURITY DATE- Date on which the bill pays back the investor the principal invested and interest.

FACE VALUE- Full value of a treasury bill that is issued eg. if a Ksh 1 billion treasury bill is issued.Its face value is Ksh 1 billion.Face value may differ from what you pay in.If a bill is at discount you pay less than face value i.e. less than Ksh 1 million.a bill issued at PAR is paid for at full face value i.e. Ksh 1 million for Ksh 1 million.

Applying for your Treasuries
With your CDS account ready,you can apply for the treasury bills auctions on a weekly basis.
91 day and 182 day treasuries are issued alternately i.e if 91 day is auctioned this week , 182 day is done the following week.

Treasury Bills are sold at a discount- you pay for less than face value and on maturity you get what you put in plus interest .The two are equal to face value.
For example,CBK offers a Ksh 100,000, 364 day Treasury bill at 8% interest per annum at a discount.An investor would pay Ksh 92,593 and receive Ksh 7,408 interst on maturity after 1 year.His total return would be Ksh 100,000= Ksh 92,593+Ksh 7,408. (i have ignored taxes)

The FACE VALUE of the bill is Ksh 100,000, the discount is the interest of Ksh 7,408. All Government of Kenya treasury bills follow a simialr pricing format.

CBK has a bond price calculator on their website. Key in your required return,initial investment and get the expected returns and tax amount.Click on the hyperlink for the CBK treasury pricing Calculator.

Competitive or Non Competitive?
When applying you have an option of bidding competitive or non competitive.Competitive bidding means that you quote a rate to CBK.Unless,you are a financial proffessional-know a lot about interest rates and Yield curves - bid Non competitive(limit for non-competitive is Ksh 10 million).Because you may ask too high a rate an your bid may be rejected.Non-Competitive means that you will accept the average interest rate at that auction.

How it goes

Every week CBK will offer treasuries for auction via notices placed in the media and on their site.You must apply by Thursday 2pm weekly.The auction results come out on the next day -Friday on their site and the Daily Nation.Allocations are to be paid on the following Monday(known as the value date) to CBK by 2p.m.

On Maturity

CBK wires the principal and interest(Face Value) to your bank account unless you have used your CDS account as security for a loan.Then it's wired to the lender.Rollovers are allowed i.e. your proceeds are applied to the next treasury auction.

Small Investors

Small investors may find it easier to go through a money market or bond fund.The process for small amounts of money may be tedious and the interest rates not exciting.e.g. if you invested Ksh 100,000 in in the 182 day Treasury bill auction-1849 of 02/11/2009,payment would be Ksh 96,712.20 and interest Ksh 3,287.80 after tax for the period.

For amounts above Ksh 1 million (US$ 12,987) it makes sense.Because to get an attractive fixed rate at a locally based bank you must have at least Ksh 10 million (US$ 129,870).

I came across some more blog posts on bonds:

hatua.blogspot.com- Good post on bond pricing

Kenyankytoon-A beginner's introduction to bonds but with a US/Canadian flavour

Wednesday, June 17, 2009


Finance Minister has impressive speech delivery. He kept the budget speech short, interesting and communicated with his audience within and outside the Parliament during the speech.
2009/2010 budget anticipates Government borrowing of Ksh 109 billion. Armchair economists have crowed about how the new borrowing will crowd out the private sector and raise interest rates.

I think NOT.Uhuru provided an expansionary budget and an expanded source of funds at the same time. How?

Firstly, he has provided AMMENDMENTS to the
Retirement Benefits Authority (RBA) regulations to allow schemes below Ksh 100 million in size to invest entirely in Government Bonds and bills. New money into statutory schemes such as the new Civil Service Pension scheme, Local Authorities provident schemes and National Social Security Fund (NSSF) will be channeled into Government securities and infrastructure bonds.

Secondly, he maintained the current TAX RATES. In an environment of rising inflation constant tax rates allow Governments to increase their tax revenues without raising tax rates. For instance, if the price of a widget increases from Ksh 116 to Ksh 150.Value Added Tax payable to the Government would rise from Ksh 16 to Ksh 20.69 (assuming a VAT rate of 16% and a VAT inclusive sale price of Ksh 116).
Salaries are likely to be increased to mitigate the effects of higher living expenses. If your Gross pay rises from Ksh 20,000 to Ksh 25,000 your tax payments rise. The effect is more pronounced if your gross is above Ksh 40,000 because your marginal tax rate is 30%.

Thirdly, Kenya has a low CAPACITY to spend. It is unlikely that all the money set aside for the CDF and other Development projects will get spent. Hence, our deficit may be smaller than expected.

Links: 2009 Budget speech and Finance Bill 2009.

Saturday, February 14, 2009


14th February,2009

Pesa tu


Dear editor,

REF: Making the Business Daily a better read

congratulations on launching a new and unique business product. Business Daily provides us with a daily paper that gives us all the business and economic news in one package. It isn’t filled with details of the latest antics or fallouts at ODM or PNU.

Business Daily’s content quality is certainly higher than anything out of the rest of East Africa. Approaching but not next to Financial Mail (South Africa) and probably aiming for Financial Times quality. In order to make it a great paper, I have made the following suggestions and or observations.


The target audience for BD has access to Reuters and Bloomberg terminals. Therefore, any reprints from LA times, Reuters or Bloomberg were read a few hours before it was published in the paper. It is very disappointing to buy a paper and find that 40% of it is available for free on the internet (and on other people’s website)

Yes, I’m aware it is challenging to come up with fresh content daily. This can be solved by using your Africa network to deliver more Pan-African business stories. We can have Tanzanian, Zambian or Nigerian business stories as front-page.

How about a profile of African business titans? Do Kenyans know about Reginald Mengi or Gordon Wavamuno?


It is pointless to reprint Jeremy Clarkson’s motor review that appears on Sunday on The Times website, the following Friday. The target audience read it 5 days before. Plus, Clarkson’s’ cars are hardly on sale here (Kenya).His humor is hard to catch unless; you have an understanding of English snob jokes and sarcasm.

The better alternative would be to get the guys behind the Autozine magazine do a weekly column. Autozine tends to get the balance between auto porn (pictures of Lamborghinis, Ferraris etc) and practicability (reviews of ex Japan used cars that Kenyans buy).They had a review of the used 2001 Toyota Vitz Vs Mazda Demio Vs VW Polo. Cars that your readers can buy. Clarkson had a Ford Kuga review-how accessible is it for your readers?

3. Localise the online forums aka forget Facebook

Facebook may be great for connecting with old pals. I’m on it and love it. I don’t think I or most people would like to argue about a political or business issue on it. For that we go to Stockskenya.

Why not talk to Stockskenya and have a Business Daily tab to discuss the day’s articles. Of course, there are legal issues concerning this arrangement. For example, libel. Nobody will sue stockskenya for libeling them (they don’t seem rich) but you will because people think you have money.

I hope the observations are useful.

Your subscriber

Pesa Tu

Sunday, February 08, 2009


I saw bankelele's post that a Kenyan resident was on the Madoff list.In case you got released from Kamiti yesterday, Bernard Madoff was an American who ran a giant ponzi scheme.Think of it as a complicated DECI-pyramid scheme for the rich and famous.

The Times has the client list on its site.Looking through it the only african residents are the Kenyan with the Mweiga address and a South African.The fact that we are the only Africans on this list probably indicates our higher level of financial sophistication relative to other African countries.
I wonder how much of the money that some of our country men/women have stashed abroad has been consumed by the recent financial crisis.

CLICK HERE for the madoff list

Wednesday, February 04, 2009


I must confess that when the independence fathers of Kenya said that we would fight poverty,ignorance and disease, it always seemed that those were obvious problems that would be solved. The recent fire disaster at Molo was a volatile mix of petrol,ignorance and poverty.People were ignorant bout their safety and poverty drove them to take the risk of collecting and selling the fuel. Ask yourself if we can take the risk of collecting highly flammable petrol from a accident site,what won't we do for a few coins(i'm thinking unprotected sex in these days of HIV).I found out what we can be done for on this blog.

We Kenyans can do anything and everything for money(blame poverty).We have helped start a new industry-CHARITY PORN.This is how it works.An adult film co. from the West ships in Porn.. sorry adult entertainment actresses in to the country.The actresses have sex with other foreign actors/actresses at local settings.Part of the proceeds from the very explicit films are donated to the local community and charities.

Natural High-Japanese adult entertainment company flew in a couple of its performers and shot a DVD for its Naked Continent series here.The producer has donated 1 million Yen to help a charity.Every 1000 Yen from every DVD sale. Here are more pictures from Sociological Images

Wednesday, January 07, 2009

'MEDIA BILL' AKA Kenya Communication Amendment Bill-2008 -THE FACTS, MYTHS & OPPORTUNISTS

FACT 1- The Kenya Communication Amendment Bill-2008 is an amendment of an earlier Act-The Kenya Communications Act (No. 2 of 1998) that is 10 years old. Hence, some of the 'contentious issues have been the law for since 1998.

FACT 2-Section 88 of the Kenya Communications Act (No. 2 of 1998) has been in existence since 1998.It empowers the Minister(for Information) to seize broadcasting equipment during a state of emergency or in public interest. Almost all Western democracies have similar explicit or implicit laws.

Of course, there is room for abuse but as Parliament showed as during the Kimunya-Grand Regency saga; Parliament can flex its muscles against the executive when it wants to. Under the current dispensation Parliament can prevent such abuse.

By the way why didn't the media complain about this law back in 1998? How come ODM didn't propose an amendment when it was passing through parliament.

FACT 3- The amendment provides a framework for E-commerce. For instance, it creates legal recognition for electronic contracts and signatures. It also, makes hacking a crime. Simply put, prior to the amendment if you bought goods online and had a dispute with the retailer you couldn't seek redress in Kenyan courts.

A more devious example is that if you hacked into a bank and stole money, the prosecution would find most of the evidence inadmissible in court. The hacker would have high chances of going free.

Bankelele has an informative summary on these features of the amendment here.

FACT 4- ANTI-COMPETITIVE BEHAVIOUR. The amendment provides for regulation and prevention of anti-competitive behaviour.Part VI C section 84- Fair Competition and Equal Treatment regulates competition.

I suspect that this is one of the provisions that worries media owners. Since, it may make it harder for large media groups that own broadcasting and publishing interests to use their muscle against smaller competitors. Since, they can't make noise about the anti-competitive regulations in public; section 88 is the trojan horse for raising concerns about other aspects of the amendment.

This amendment has many myths. Read on:

MYTH 1- The law will severely restrict and monitor the broadcast of programmes. -False

Section 46 H of the amendment provides for the regulation of broadcast content where broadcasters don’t adhere to self regulation. In Kenya, via the Media Council and or Media Owners Association- broadcasters can self regulate themselves. Hence, the government won't directly regulate broadcasts.

Other countries have Government regulation. Remember Janet Jackson and her wardrobe malfunction?

MYTH 2- This is the funniest one. The law prohibits changing your cellphone ringtone.

Section 84G- criminalizes cellphone reprogramming. As i understood (when i read it), reprogramming refers to changing a phone's network ID number or identity. Erasing this number prevents a mobile handset from being tracked or locked on a network (if stolen).I haven't seen anything about changing ringtones, its still legal(my opinion).


I wonder why politicians didn't come clean about the amendment earlier. ODM played the populist card and lost-(Daily Nation 7th January, 2009-editorial cartoon).They came out looking like hypocrites.

PNU played the rational card and formed a committee to liaise with the media.

THE MEDIA whipped up public information with half-baked facts and forced the Government to the table. Their use of erroneous facts to further their ends makes a case for better regulation of the media.

The President came out with the facts today. It was too late; he had lost in the court of public opinion. He needs a new spin doctor. The current one has spun for too long and is giddy. The new one must be a politician or politically savvy i.e. a media practitioner with agwambo's or kalembe's political instincts.


I weep for the poor and ignorant Kenyans who are pawns in a game played by their leaders. I wonder who will save them. Certainly, not the Press or the Church.


-Startup Kenya has an excellent post on this topic here.

-Kenya Communication Amendment Bill-2008- the ammendment that was signed into law last week.
-The Kenya Communications Act (No. 2 of 1998)-The original Act thats been ammended

-Section 88- Contentious clause of the Kenya Communications Act (No.2 of 1998)

NOTE: I am not a lawyer and the opinions expressed are a lay man's understanding of the law.Please don't comment if you haven't read the law.There's enough ignorance going around

Monday, January 05, 2009


Dear fellow bloggers and fans.Thank you for educating/entertaining me during the year.

I am sorry for my intermittent posts(too much work on my desk).

A belated wish of a prosperous 2009 to all of you.

Thank you

Pesa tu

Looking into my new HD 1080p crystal ball i see the following changes in 2009.


I reckon 2009 will go down as the year the politics of the land changed.A keen observer will notice that the populace and the politicians are marching to different tunes.The politicians(ODM,PNU,Kanu,Shiriskisho.......etc) are talking about the 2012 election and the constitution.Wananchi are talking about the cost of food,security and how the global crisis will affect us(the intelligent ones).It seems that the current political class has lost its 'people' touch.Whenever, this happens in any society then change as Mutahi Ngunyi puts it is around the corner.

If you doubt that change is coming-take a look at how the two principals spent their New year's Eve.Number 2 and Number 3 spent it amongst wealthy Kenyans and foreigners at the Coast(at those places where beer is Ksh 200 /bottle).Number 1 vukaed privately.None of them showed solidarity with the average Mwananchi.An astute politician aka MOI would have held an evening party but ensured that the ordinary councillor,teacher and such kind of people that never get invited to similar events are in attendance.In addition, he would have toured the IDP camps and showed solidarity with them.


The past 5 years have been charcterised by the phenomenal growth in personal loans.Remember, when you had people accosting you in the street,promising Kssh 1 million loans with only your payslip as security?

CBK will allow people to buy Treasury bills from as low as Ksh 100,000.This will give money market funds and Fixed deposit accounts in banks competition.Banks will have to come up with new strategies for raising funds.This ought to put downward pressure on interest rates.

The Oga's-Ecobank and UBA are in town.2009 is their year to entrench themselves in the market.

The question for 2009 is; how will banks make money if they reduce lending and Government securities are offering lower returns?

3.Global Economy

2009 will only serve up more bad news.The developed world is suffering from a demographic and over capacity problem.The late Leon Levy predicted the current crash by noting that in his observation there was no product or service that the western world required that was in short supply.

Expect to see the Dow below 7000 at some point in 2009.

Nikolai Kondratieff-(Russian economist who was executed by Stalin) said that the Western economy operates within 60-70 year cycles waves i.e. every 60-70 years we have a severe economic contraction.If the last large contraction was in the 1930s then the...(go figure when the next one is/was due)