Kawangware business group that manufacturers Eco friendly carrier bags. Their sales have gone up 2,000 a week after the ban.3/12/2017. [Photo:WILLIS AWANDU/STANDARD]
Year when Kenya banned plastic bags and CEOs who made news
During 2017, business executives had major curve balls swinging their way. The campaigns and the subsequent General Election have been cited as the major concern for the captains of industry but they also had to deal with other factors including internal strife and policy environment, all threatening to ground their companies – while in rare instances playing to their advantage. Here are some of the captains that made major news in the business world and how some navigated the threats, while for others the jury is still out whether they will stay above water.
Plastic bags now being made at night in Kenya Judy Wakhungu, Environment Cabinet Secretary In August 2017, Kenya put in place legislation banning the use of plastic carrier bags. The ban is the most disruptive legislation introduced in the country this year with consumers, particularly those in urban areas, just getting used to carrying re-usable bags for their shopping trips. Against stiff opposition and a legal dispute from the country’s manufacturers, Environment and Natural Resources Cabinet Secretary Judy Wakhungu and the National Environment Management Authority managed what her predecessors tried so hard to do without much success for more than 20 years. In 1996, then-minister in the same docket Henry Kosgei found himself in a spot, defending increased budgetary allocations in the face of the growing plastic bag menace responsible for livestock death across the country. Ten years later, and just before the 2007 General Election, Treasury imposed a 120 per cent tax increase on plastic bags as one of the more drastic measures to curb their supply and hopefully, manufacture. However, John Serut, the assistant minister for planning, challenged the proposal, arguing that manufacturers and traders would just pass the tax difference to the consumers who would have no choice. “If the minister wanted to do away with plastics and really cared about the environment, he would have banned plastics from this country. Let him bring a Bill here and we will do away with plastics, but not through taxation,” Serut told a charged Parliament. ALSO READ: Lawyers abandon Nakumatt Prof Wakhungu did just that this year. In a Gazette Notice on February 28, the ministry announced a ban on the manufacture or sale of plastic bags with exception of those used in industrial packaging and waste liners. The Gazette Notice gave manufacturers and traders a six-month grace period to clear their stock. From September 1, those found selling, producing or using banned plastic bags risk a four-year prison term or a fine of up to Sh4 million or both. Intense lobbying from the Kenya Association of Manufacturers and private sector and a court case seeking to block the implementation of the law both failed to sway the ministry and the ban came into effect, making Kenya the second country in the region after Rwanda to ban plastic bags. The move was hailed globally with Kenya feted for adopting the difficult legislation in line with global sustainable development goals. ? Bob Collymore, Safaricom CEO This year was very challenging for Kenya’s business community. The uncertainty from the months-long election process coupled with a credit crunch and a drought extending from last year meant reduced spending among consumers and little or no investment. For Kenya’s largest telecommunications provider Safaricom, however, the year could go down as one of the busiest and most eventful in recent years. ALSO READ: NEMA: Plastic bags now being manufactured at night despite ban The company began the year on an anxious note, awaiting the findings of a report commissioned by the regulator, Communications Authority of Kenya (CA) looking into claims of dominance in the sector. The report that was completed mid this year found Safaricom to be dominant in several areas including voice, tower and network infrastructure and proposed far reaching recommendations including splitting Safaricom into several entities which, if implemented, would have significantly eroded the firm’s competitive edge. Safaricom, however, won some reprieve when ICT Cabinet Secretary Joe Mucheru said the Government, CA and operators would implement a local solution. In May, Safaricom revealed that the parent company and majority shareholder Vodafone Group was planning to transfer 226.8 million ordinary shares valued at Sh268 billion to South Africa-based subsidiary, Vodacom Group. The deal did not affect the Government’s shareholding but allowed Safaricom to take M-Pesa to the regional market with Safaricom CEO Bob Collymore revealing that the firm was looking at expanding into Africa. Sadly, though, Mr Collymore did not take Safaricom through to the end this year after he stepped down from administrative duties on medical grounds. He took an indefinite leave, almost two years to the end of his second term. The company ended the year on a frosty note when its role in providing technology solutions for the Independent Electoral and Boundaries Commission saw Opposition leaders call for supporters to boycott its products.? Atul Shah, Nakumatt CEO ALSO READ: Uchumi closes Karatina branch “Bigger is not always better” may be what Atul Shah has learned of the fall of Nakumatt, which at its height saw the retailer open 64 outlets across East Africa. Named by Financial Times of London as one of the top 50 emerging market business leaders five years ago, Mr Shah has had his toughest year yet as he watched the retail empire he built in 25 years crumble around him. The retailer’s management has had to climb down from the boorish attitude that saw it offer skewed terms to suppliers and even rival their products with their Blue Label brand – rapidly expanding while some small and medium enterprises were closing shop. Nakumatt had increased its credit settlement period from 30 days to 196 days, which meant that suppliers were not paid within a month but after six-and-a-half months. The Nakumatt boss later ate humble pie, apologising to creditors, suppliers and the Kenyan public for the sorry affairs at the retailer. With stores closing in quick succession, Mr Shah desperately pegged the supermarket’s survival on a proposed merger with rival Tuskys. He was even willing to lose his stake at the retailer and walk away from his post as Nakumatt’s boss in a deal that would have seen Tuskys buy 51 per cent of the business for only Sh650 million in capital and a pledge to guarantee Sh3 billion in debt. Shah increasingly lost his stranglehold over Nakumatt in 2017 after initially offering to cede 25 per cent stake for a cool Sh7 billion. ALSO READ: Carrefour: Why we want to lock out rivals from our malls Nakumatt, a tightly-held family affair, had to open up, even adopting a new group and regional management structure featuring chief officers at the Nairobi regional headquarters complemented by in-country management teams in Rwanda, Tanzania and Uganda. When the tempest hit, Shah’s close ally and Nakumatt regional operations and strategy director, Thiagarajan Ramamurthy, left for Bidco. Chief Marketing Officer Andrew Dixon, who had just been appointed, also left the retailer with a tweet declaring he no longer worked at Nakumatt. He has since joined Uchumi Supermarkets. As the crisis persists, even lawyers have abandoned Shah for what they termed “material difference on how to handle matters”. Iseme Kamau and Maema Advocates have been defending Nakumatt against a dissolution case filed by Africa Cotton and Gold Crown Beverages seeking to shut the retailer over unpaid debts. Initially, Nakumatt was said to be in the red for Sh18 billion, its debt having ballooned from Sh4.7 billion in 2012. However, the indebtness is now estimated upwards of Sh40 billion, a black hole that Shah will find difficult to pull the supermarket out of. Peter Munga, Equity Bank founder Billionaire businessman Peter Munga has endured a very litigious year where creditors have lined up for a piece of his billions. The founder of Equity Bank has a stake in British American Investment Company (Britam) estimated at more than Sh10 billion and consequently a substantial piece of Housing Finance, and a litany of other companies. He is a man worth his penny. But he has fought a number of debt storms in his empire arising from a series of deals gone sour. This year, he was forced to settle a loan with Jamii Bora Bank to avert a planned auction of five units of four-bedroom maisonettes in Kasarani’s Stone Groove Estate worth Sh400 million. Apparently, the debt was Sh25 million which the businessman had guaranteed a friend, John Gitogo, the finance director of the billionaire’s Equatorial Nut Processors Limited. African Seed Investment Fund LLC, a Mauritian private equity fund, has also filed a suit accusing Mr Munga of refusing to repay a $590,000 (Sh60.8 million) loan advanced to his company four years ago. The loan was extended to Freshco in five instalments between March and September 2013, secured on all Freshco’s assets, alongside Munga’s personal guarantee as a director of the firm. Munga is still battling the case, saying the Mauritius firm should first exhaust all recovery efforts with Freshco before pursuing him. The businessman is also fighting in court against Joseph Muturi Kamau, who hauled him to court for failing to remit proceeds of a share sale. Munga is said to have instead offered Sh90 million to settle the six-year court battle which Mr Kamau rejected. Kamau wants to be paid Sh150 million for three million TransCentury shares he offered Munga to help the businessman offset an Equity Bank loan. But Munga accuses Kamau of dumping the shares on him with the knowledge that TransCentury was a troubled firm and that the stock would depreciate at the Nairobi bourse. Sebastian Mikosz, Kenya Airways CEO Kenya Airways Chief Executive Sebastian Mikosz has not made grand proclamations in the six months that he has been at the helm of the airline. His actions are rather what appear to be speaking for him. The most visible of them and perhaps the one that sent the loudest message was how he dealt with some 150 engineering and technical staff engaging in industrial action. He has sent them on compulsory leave. The engineers, a critical resource to the airline’s operations, had in November gone on strike demanding a pay increase. According to statements by the airline, the engineers were given three warnings by management and asked to report back to work, calls that they did not heed and ended up getting termination letters by the end of the second day of the strike. The staff took their grievances to court, which intervened and in mid-December ordered KQ to reinstate the technical staff. The airline said it complied with the court order but has asked the employees to go on leave, adding that the High Court ruling was made before listening to the national carrier’s side of the story. Earlier, Mikosz had in a statement that sought to clear the air on the issue said that management would not be held hostage. A month after he assumed office on June 1, the airline’s pilots staged a go-slow that he appears to have navigated successfully but after a series of delays and cancelled flights. In an interview with The Standard, Mikosz, who has a reputation as a no-nonsense executive, said he had not been appointed to be popular. His previous assignment as an airline executive was at LOT Polish Airline, which he successfully turned around, but his ruthlessness earned him few friends. Other than the industrial action that he had to deal with in the first few months at KQ, Mikosz’s move to bring on board expatriates he worked with at LOT has caused anxiety among employees, with some in management seeing it as a move to kick them out. Rebecca Miano, KenGen CEO Rebecca Miano became the first female CEO of power producer KenGen, a major fete considering the industry and even the firm is male-dominated. Ms Miano said it has not been easy rising to the top of the organisation. And while she does not chastise her male colleagues both in the industry and at KenGen as ones who try and push down their female colleagues, she said women have been held back because of beliefs and not because they do not have capacity. “I don’t think breaking the glass (ceiling) can be easy, but also difficult is breaking the myths… there have been very many myths about what women can do or cannot do,” she told The Standard in a recent interview. “These are myths that women are not interested, they do not have the confidence and they do not have the capability. I would call it a moment of breaking those myths to show that those things that are required are not based on gender.” Miano, who was KenGen’s company secretary before her appointment as CEO, is expected to oversee major investments in putting up power plants, with the producer expecting to increase its electricity generation capacity to 721 megawatts by 2020. Pradeep Paunrana, Athi River Mining MD If anything could turn H J Paunrana in his afterlife, it would be the fact that the company he founded when he bought a plot of limestone in 1974 was slipping away from his family. To know that his company is now headed by long-serving chairman Rick Ashley and not his billionaire son Pradeep Paunrana, or that the value of Paunrana family’s wealth in cement maker Athi River Mining (ARM) had dropped by Sh17.8 billion in three years would be disturbing. In fact, the late Paunrana would be perturbed to find out that his son has sold off Mavuno Fertilizer and ARM Minerals and Chemicals to Swiss industrial firm Omya. Between 1974 and 1996, the small business produced fertiliser, animal feeds and other limestone-dependent products, including glass, ceramics and plastics. The year 2017 may have been the point at which the Paunranas lost grip of their company due to a tactical error that started with heavy capital investment funded by huge loans, in Tanzania. The Sh25 billion clinker plant in Tanga ran into headwinds after power outages made it impossible to achieve capacity, and an import ban on coal imports which could have offered alternative power as well as intense price wars hit its profits. With loans maturing, ARM has been forced to seek strategic investors in exchange for equity which has currently put British development finance firm CDC Group in the driving seat with a 41.6 per cent stake. ARM’s 86 per cent share price erosion in three years was exacerbated by last year’s dilution that came with the sale of the stake to CDC Group for Sh14 billion. Mr Paunrana has, however, maintained his personal holding of 89.6 million shares that is now valued at Sh1.1 billion from Sh8.1 billion in August 2014. And the firm is not out of the doldrums yet; it still needs to raise money in an equity transaction which may arrive in the second half of 2018, and debt restructuring. MaryJane Mwangi, National Oil Corporation CEO Another iron lady that broke the glass ceiling was MaryJane Mwangi who was confirmed as the CEO of National Oil Corporation (NOCK). Ms Mwangi, who held the position in an acting capacity since July 2016, is however not the first female CEO of the State-owned oil company. She was preceded by Sumayya Hassan-Athmani, who had both highs and lows while at NOCK. She claimed to have steered the corporation into profitability but had on many occasions been putting out fires, including assaults from the board trying to push her out. Mwangi, who was previously the general manager of downstream operations at the firm, is expected to steer the corporation into a fully-integrated oil and gas company. One of her key projects will include the mobile gas refill concept that is expected to see Kenyans buy gas for as low as Sh50 in what could eliminate the last barrier to access the product. If successful, National Oil could pull a major coup in the retail gas market which is not affected by the current price controls on fuel that has capped the margins for oil marketers.
Story by Frankline Sunday, Otiato Guguyu and Macharia Kamau