Uganda Rural Community Support USA

Black South African graduates and school leavers can
boost their job prospects by taking courses on financial markets at
school, says senior chartered accountant Xolile Ncame.

Ncame, a partner in the firm KMMT Brey, said the financial sector had
many facets, and people had only recently become part of these facets.

Ncame serves on the advisory board of the Academy of Financial
Markets (AFM) and is one of the first people to study for and obtain a
diploma in financial markets and instruments from the Johannesburg-based
academy.

Ncame said black people with an interest in local and global
financial markets and basic knowledge of interest rates, mathematics and
economics, could enlist at the academy for training.

This would increase the number of black people working in the
financial sector and improve their chances in competing for jobs in the
industry.

“Our economics, statistics and mathematics graduates are not made
aware of the opportunities in the dynamic financial sector, and end up
in the teaching profession,” Ncame said.

Companies including Investec, Rand Merchant Bank Fund Managers and
Ernst &Young also run in-house training programmes.

In addition, the SA Institute of Financial Markets is offering a
registered persons exam for school leavers in an attempt to offer
graduates job opportunities in stockbroking.

It is a big paradox that 75 per cent of all fish caught
from the Kenyan beaches of Lake Victoria land on Suba District, but
there is little to show for it despite the billions of shillings
generated from the industry locally and internationally.

Indeed, fish found in abundance and doubling as the area’s natural
resource, is proving to be more of a curse than a goldmine for the
fishmongers and dealers along the beaches.

Five times as many fish still come out of the lake compared to 20
years ago, but the industry today provides far fewer jobs and less
income for the lakeside communities.

Some 15,000 jobs have been lost in the traditional fishing industry
compared with just 2,400 created in the five Kisumu fish processing
factories, experts say.

The latest Nyanza Provincial Agricultural Board reports indicate that
151,293 tonnes of the commodity were caught last year which fetched
Sh6.4 billion for the entire industry.

The Kenyan share of the lake is six per cent while Uganda has 45 per
cent and Tanzania 49 per cent..

The dusty town of Mbita, Suba District’s interim headquarters, is a
living example of the pathetic state of exploitation of the indigenous
community. Despite the heavy cashflow between fish factory agents and
the local fishermen, the town neither has a bank, nor does it have a
fish processing factory or animal feeds plant.

The few fish co-operative societies there are weak and disorganised

in contrast to their counterparts in the tea and coffee growing areas.

Over 90 per cent of the catch is hauled out of the district by road
in refrigerated trucks to the nearest fish processing factory 40
kilometres away in Homa Bay, and others to Kisumu, another 110 km where
seven such companies are concentrated. Migori District also has one
factory at Muhuru Bay.

Most of those factories specialise in mbuta (Nile Perch) which they
filet and export to the European Union countries, who consume 56.8 per
cent of the total exports. Others are Middle East (16.2 per cent), the
Near East (15.8 per cent), the United States (6.7 per cent), the Far
East (3.4 per cent) and Australia (one per cent).

The left-overs popularly called mgongo wazi (bare back) are usually
recycled and used for local consumption by the public and as animal and
chicken feed by manufacturing companies.

It is noteworthy that neither Suba District nor Nyanza Province as a
whole have a factory to make the latter, forcing transporters to haul
the commodity by road to either Nakuru, some 150 km away in the Rift
Valley Province, or to Meru, in Eastern province, to be made into animal
and chicken feed before being re-exported back to the region as
“finished products.”

Ironically, all that the fishermen can show for their sweat are their
derelict dug-out canoes and worn out fishing nets and other
paraphernalia. Most of the profits from the white meat is not re-
invested in the area but is banked outside the district and province by
the tycoons running the fish processing plants.

A recent report compiled by Mr Eirik Jansen, of the The World
Conservation Union and appropriately titled: “Rich Fisheries - Poor
Fisherfolk,” notes that most fishmongers are losers due to the fish
export trade.

The IUCN report concludes that although the fish catch had increased
by five times in the past 10 to 15 years, there is gradually less fish
to trade in for traditional fishmongers. The Nile Perch they are left to
trade with are the rejects by the factories and the processed skeletons.
If the factories also succeed in selling Tilapia abroad, it is with
rejects.

In another report he compiled with Mr Richard Abila, a researcher
with the Kenya Marine and Fisheries Research Institute, the two
regretted that very little of the massive foreign exchange revenue is
ploughed back in the fishing areas.

In a move to starve off the over-exploitation, the Government in
1985, through the Fisheries Department, decided to put up an ice-cooling
plant in the sleepy town, but 14 years later it is a home for rats and
spiders.

According to the Suba DC, Mr Obondo Kajumbi, the problem is twofold.
There is the problem of bureaucracy as well as a financial one which has
forced the contractors to refuse to hand it over to the Government.

Plant

Initially expected to cost Sh8 million, it is now worth Sh31 million.
And that is not the worst side of the sad story, says the DC. The
project is 90 per cent complete and requires an additional Sh6 Million
before its doors can be opened to the public.

The plant may be stillborn given the fact that the government is
likely to divest from it and look for a buyer. But the question will be:
To who, considering how specialised its services will be and the
delicate and expensive equipment involved.

But all is not bleak for Mbita. There is a ray of hope.

Recently there have been several non governmental organisations
operating in the area that have held several educational seminars and
workshops for the residents and their opinion leaders on poverty
alleviation, and the need to inculcate a savings and credit culture
among others.

Last month, a high-powered team of senior managers from Kenya
Commercial Bank Limited led by the Marketing Manager, Mr Anthony
Ondiegi, toured the lakeside town in response to a request by the
fishing and business community and other stakeholders for the purposes
of opening a bank branch there. The requests had been communicated
through the District Development Committee.

Major employers in the town are the Teaches Service Commission,
International Centre for Insect Physiology and Ecology, the DC’s office
and the Kenya Post and Telecommunications Corporation.

Says a confident Mr Kajumbi: “The KCB team expressed an interest in
opening a branch here as purely a business venture and we are waiting
for their decision.”

Uganda’s ministry of Finance, Planning and Economic
Development said last week that the appreciation of the US dollar
against the Uganda shilling over the last two months would raise
Uganda’s revenues from imports.

Officials said that since taxes on imports are based on Cost
Insurance and Flight (CIF) charges of the goods, when there is an
appreciation of the dollar, tax collections also improves.

The dollar has appreciated from a mean rate of USh1,200 two months
ago to the current rate of USh1,240, an appreciation of USh40. Dealers
in foreign exchange shops in Kampala were at the close of last week
posting the dollar at USh1,230 buying and USh1,250 selling. This is one
of the highest rates the dollar has posted against the shilling since
the liberalisation of foreign exchange dealings in 1992.

“The appreciation of the has not affected the level of imports, they
are coming in as usual,” said Mr Patrick Ocailap, Commissioner for Tax
Policy in the ministry adding that they expect revenues to improve as a
result of the appreciation as imports had become dearer.

Coffee is the leading foreign exchange earner for Uganda, accounting
for more than 50 per cent. Inflows from coffee exports are the key
factor in the movement of the dollar and other foreign currencies.

The US dollar accounts for 85 per cent of foreign exchange dealings
in Uganda’s liberalised money market, the Pound Sterling accounts for 10
per cent while the French Franc, Swish Franc and Deutche Mark account
for the remaining five per cent.

Total imports of goods and services amounted to $1,821.3 million in
1997/98. This represented a 10.3 per cent rise compared to previous
year’s figures. The substantial increase occurred despite negative
weather conditions in December last year and January this year that
distorted distribution systems and infrastructure in Uganda and
neighbouring countries. The depreciation of the Uganda shilling has been
blamed on the poor performance of coffee exports for the last six
months.

As a result of the heavy rains experienced in the region which
devastated coffee plantations, production for this season is being
projected at only 2.6 million bags from 4.2 million 60 kgs produced
during the 1996/97 season.

Low production in Uganda has not been helped by prices on the world
market which have remained relatively low.

Importers in Uganda said the appreciation of the dollar had affected
their trade as it had cut into their profits. “We are buying the dollar
at a higher rate than previously. We cannot pass on the appreciation to
customers because the demand is low,” said a dealer.

There was a sharp depreciation of the Uganda shilling against the US
dollar in April forcing the Central Bank to intervene in the market.

Rivalry in the oil industry took a new dimension last week
with the major players ganging up to protest alleged bias in the award
of a lucrative tender from the Kenya Power and Lighting Company to Mobil
Oil Kenya Limited.

Mobil is a relatively new entrant to the market having returned after
a 25 year absence ostensibly to take advantage of opportunities
presented by the liberalisation of the sector.

After two years in operation Mobil has a marked presence after taking

over the network previously managed by Esso Kenya limited.

The other oil companies are unhappy with the tender for the supply of
15,000 tonnes of illuminating kerosene or Jet A1 fuel to the Westmont
power barge at Kipevu in Mombasa. The contract was worth Sh176 million.
Previously, Kenya Oil Company (Kenol) supplied the fuel.

The other oil companies claimed KPLC did not advertise the tender
against expectations.

Westmont is one of the private companies with which KPLC has a Power
Purchase Agreement. It supplies 44.5 megawatts to the national power
grid.

The other one is the Nairobi-based Spanish company Iberafrica with a
supply of 43 megawatts.

Kenya Shell, Kenol and Total have written to the Managing Director of
Kenya Power KPLC, Mr Samuel Gichuru, seeking an explanation on the
‘irregularity’ and advise on how similar tenders would be handled in
future.

However, KPLC management last week denied any impropriety on the part
of the power company. The Chief Communications Officer, Mr Migwi Theuri,
said that there had been no ‘new’ tender award as alleged by the oil
companies.

He said the only tender so far awarded to Mobil was made known to all
oil companies on July 9 and that they were invited to bid.

They had been asked to provide quotations for 1,000 litres of Jet A1
fuel.

The companies that were faxed the invitation to bid, according to Mr
Theuri were Mobil, Kenol, Kobil, Kenya Shell, Total, Caltex and Agip.

The bids were opened on July 10 at KPLC’s Stima Plaza headquarters in
the presence of representatives of all the seven companies.

Mobil was awarded the tender on the basis of having quoted the lowest
price of Sh11,736.10 per 1,000 litres. Other companies quoted prices
that ranged from Sh12,889 to Sh26,838 in respect of the same quantity of
fuel.

“There was nothing done underhand. All our actions were above board
and we can prove it, “Mr Theuri said.

Based on the results of the bidding process, Westmont initially
ordered for the supply of 5,000 tonnes from Mobil.

The power plant operated on this supply from 12th to 28th July.

To continue with operations, Westmont ordered a further 15,000 tonnes
from Mobil. This was adequate supply for approximately nine weeks,
according to sources in the industry.

The placement of this new order seems to be the main point of
contention between the two parties.

While the oil companies are adamant that this was a major purchase
warranting the invitation of new bids from the entire market, KPLC
maintains that it was simply a repeat order based on the results of the
earlier tendering process.

They argue:

That the intervening period between the placement of the two orders
could not have resulted in a ‘material’ increase in the prices of fuel
to validate the invitation of new bids.

That the ‘original’ bid was not for a specific volume or supply
period. The companies had been simply asked to provide quotations for
1,000 litres.

Any invitation to tender announced would have been prejudicial to
Mobil because all the major oil companies with the exception of the

National Oil Corporation of Kenya were present when the bids for the
current operational tender were being opened.

As for it’s involvement in what should ideally be a matter between
Westmont and the oil marketing companies, KP&C says it has a stake
because according to the provisions of the contract it has with Westmont
it refunds the private company the cost of the fuel it uses in the power
generation process. So effectively, KPLC is the buyer of the fuel.

Replying to accusations by the players in the industry that the
tender was administered with ’suspicious’ haste, KPLC said the speed of
execution was totally justified.

“The supply to the power plant was running low and as a company
mandated to serve the public we had to move in fast to find an
alternative source. Westmont is integral to our total output and any
sustained lapses in production would have meant costly interruptions of
electricity supply in the entire economy”, Mr Migwi said.

Industry sources said that it was Kenol that was supplying the power
plant with Jet A1 before Mobil clinched the tender. It is not clear how
Kenol lost the tender.

Some of the oil companies also accused KPLC of deliberately making
the first tender invitation ‘vague’ so as to give it ‘greater room for
manoeuvre’.

They particularly took issue with the fact that the tender invitation
did not indicate the volume to be supplied or even the time period.

“What if the company they contracted was incapable of raising the
volumes required by the power plant”? asked a top executive in one of
the oil companies.

Another contentious issue is how the company intends to handle future
supplies to the Westmont plant. It is not clear when if at all there
will be invitation for bids in the future and how the intervening period
will be determined.

Mr Theuri could not give a definite date but revealed that KPLC would
prefer an arrangement where Westmont deals directly with the oil
marketers without it’s direct involvement.

In a letter dated July 30th and copied to the Ministry of Energy and
chief executive officers of oil companies, Mr Mike Masson, the Finance
Manager of Kenya Shell says: “It would be of major interest to us to
know whether there were overriding reasons for excluding us and all
these other oil marketers in this large volume business in which we have
so ably participated in the past.”

Similar letters have been written by the Managing Director of Kenol
Mr J.I. Segman and Mr Momar Nguer of Total.

Mr Masson was emphatic about the validity of the accusation but
regretted that he had received no response from Mr Gichuru or the
Permanent Secretary in the Ministry of Energy, Mr Crispus Mutitu.

The Public Relations and Advertising Manager of Caltex, Mr George
Murila said he was aware of the contentious issue.

He said there was need for transparency in KPLC’s tendering system so
that there would be competitive bidding and fair play in the industry.

According to Mr Segman, the last tender was issued for a specific
volume of 5,000 tonnes which, he believes, had already been supplied.

Mr Masson also indicated in his letter that the current tender was
for 15,000 tonnes. The above facts tally with KPLC’s except for the use
of the word ‘tender’.

However some industry sources believe the current accusations against
Mobil and KPLC are symptomatic of the cartel-like operations of the
petroleum sector in Kenya.

“Mobil is the new kid on the block and it is already ruffling
feathers with it’s forceful forays into the local market. The old boys
are bound to run scared,” said a marketing lecturer at the University of
Nairobi.

He said Mobil was a market-savvy operator and with its vast
international experience poses a tough proposition for the established
so-called ‘big five’ oil companies.

The observation that Mobil is being ‘fought’ is borne out by three
observations:

The letters written by the oil companies are similar in content and
dates. This suggests a co-ordinated effort.

A managing director of one of the companies seemed to have been
‘mandated’ to speak on behalf of the other on this issue.

At least two of the companies have denied Mobil the use of their
pipeline facilities. This is inspite of the existence of a ‘hospitality’
arrangement in the industry which allows for the sharing of facilities.

The same companies were in the frontline recently when Mobil was
accused of endangering the operations of its competitors and the
environment by using an alleged sub-standard pipe for conveying Jet A1
from the jetty to the Westmont barge at Kipevu in Mombasa. Mobil denied
the charges.

A top manager at Mobil who refused to be named called the accusations
a business issue and declined to comment further.

An American transport company in collaboration with a group
of international investors, are set to launch a new transport services
company in Kenya.

Ryder Transportation Services, a leading transport services provider
in the United States will operate in Kenya and by extension to East and
Central Africa through its franchise holder sub-Sahara International.

The company will offer transportation services including transport
logistics to its clients with a view to lessening the transportation
burden that companies have to contend with at the expense of their core
business.

The company, incorporated in the US, has three directors of Kenyan
origin and three Americans.

The Chairman of sub-Sahara International, Mr Timothy Arbuckle, said
the expertise being brought into the Kenyan operation had been tested
and proven in the US.

“We bring into Kenya our combined experience in transport logistics
which includes managing fleets for our clients, selling used but road-
ready trucks which have a history of maintenance and service
guarantees.”

The company intends to go into public transport operations in the
long-term to challenge the existing players.

“Going by the fact that Ryder manages public transport in 27 of the
48 states in the US, we have the necessary experience to manage a
similar service in Kenya.”

“We shall concentrate on selling used vehicles and fleets for our
clients, only branching into public transport in the long term, unless
we are approached to assist,” says Mr John Gachago, who is the director
of planning said.

The company intends to deal with such organisations as Kenya
Breweries, Castle Brewing, East Africa Industries, Bamburi Portland
Cement and Non-Governmental Organisations.

Uganda’s provisional tea output figures for the first six
months of 1998 show a growth of 50 per cent to 14 million kilogrammes
from 9.3 million kgs exported in the same period last year, the state-
run Uganda Tea Authority said in its provisional estimates.

The authority also said that exports over the same period grew by
46.3 per cent to 12.3 million kgs by the end of June from a cumulative
total of 8.36 million kgs over the same period in 1997.

The tea body said 2.05 million kgs were produced in June alone and
2.133 million kgs including old stocks exported during the same month
through the Mombasa auction.

A senior official said the final export figures for this year which
were being projected at 25 million kgs would even be higher.

“At present we are above our targets for the period by 15 per cent,”
said the official.

The good performance was attributed to favourable weather conditions
experienced during the period. In 1998, Uganda forecasts to produce 25
million kgs and export about 21 million kgs.

Last year, Uganda produced 21 million kgs of tea and exported 18.3
million kgs. “If favourable weather continues through out the year, we
may even produce beyond our forecast,” said the official.

Uganda’s tea industry is currently on the road to recovery after
nearly two decades of neglect. Output figures have continually been
rising from below four million kilogrammes in the early 1980s to the
current figures. This recovery has been attributed to the reclamation of
tea estates and new investments in the sector.

The other factor credited for the rise in production include the
return of tea estates to their former owners by President Museveni’s
government and the opening up of new estates.

Uganda tea sector collapsed in the 1970s when dictator Idi Amin Dada
expelled Asians who controlled more than 70 per cent of the sector and
gave their estates to his cronies. They did not have any expertise and
as a result tea estates turned into forests.

Uganda tea exporters said that they expect their production to go up
now that the Kenya Revenue Authority had suspended the bonded warehouses
requirement for Uganda’s tea and coffee exported through Mombasa. They
will be considered as transit goods.

Exporters have been blaming the requirements for the poor prices for
tea. They expect the prices to improve now and compete favourably with
Kenyan tea. The suspension followed a promise by President Moi in May.

Meanwhile, Uganda coffee dealers said last week that coffee prices on
the world market have gone up and this had improved farm gate prices to
farmers.

Officials from the government-run Uganda Coffee Development Authority
said that prices for the crop had gone up especially for the Fair
Average Quality Screen 18, which is now selling at 73 US cents per
pound, from 70 cents a week earlier.

The appreciation in export prices for the grade was due to increased
international demand for the grade.

“Export prices for our coffee are now rising due to increased demand
by international buyers who are struggling to cover their short term
shortfalls,” said one dealer.

Other screens of Ugandan coffee exports have also appreciated,
exporters said. FAQ 15 appreciated to 67 cents per pound from 64 cents
while BHP grade also improved.

Uganda, Africa’s largest coffee producers and the world’s number
produces two types of coffee - Arabica and Robusta. The Robusta type
accounts for more than 85 per cent of the entire coffee plantations
while less than 15 per cent is Arabica. Arabica is only grown in eastern
Uganda on the slopes on mountain Elgon.

Other exporters said that for the second week running, Uganda’s
coffee industry has been under pressure from speculative buyers
resulting from increased demand on the world coffee market.

This has been aggravated by the fact that internal coffee supply is
now low given the fact that the coffee season is coming to an end. The
coffee season runs from October to September.

Increased enthusiasm from exporters who want to fulfil their
contractual obligations has pushed up local farm gate prices for

farmers.

Prices have appreciated from an average of USh600 to USh700. Coffee
dealers said a tonne of fine average fair quality on the world market
had gone up by last week from $1,420 per tonne a week earlier to $1,477.
This is the first serious sign of appreciating prices since they started
plummeting in June due to increased world supply, especially from
Brazil.

“There is renewed interest in the industry, exporters are on a buying
spree to cash on from the relatively good prices,” said Mr Sam Kaliba, a
coffee dealer.

The oil industry is often criticised by the Ministry of
Energy for not passing on benefits of lower world crude oil and a strong
shilling to consumers. It has also been accused of operating in a
cartel. Business Writer, MISHAEL ONDIEKI, discusses these concerns with
the Managing Director of Shell/BP Kenya Limited, Dr STEVE HIRST, in this
recent interview.

Q: What is Shell/BP’s scope in terms of investment and oil
exploration?

A: Shell/BP considers itself the market leader in distribution and
sale of oil products in Kenya. This is because we sell about 750 million
litres each year. We operate 360 service stations, half branded Shell
and another half BP. We have 700 commercial customers who buy oil and
oil products from us directly and operate all the five stations main

airports in the country as well as supplying the main airlines with oil,
including Kenya Airways.

We operate two major depots. We have a a capital employed of about
Sh4.5 billion and continue to invest in the country. In the last few
years, we have invested around Sh160 million. We are also shareholders
in the refinery and give technical advise to the refinery.

We currently are exploring for oil in the country. In early 1990s, we
carried out some explorations, drilling a number of wells in the North
Eastern part of the country. There was a trace of oil but not a
substantial amount was found for commercial purposes and the project did
not develop further.

Q: There are concerns in government that despite the liberalisation
of the sector, local oil companies operate a cartel. As a key player,
what are your group’s views?

A: This is an allegation that is in the oil industry in all countries
worldwide. There are number of reasons for this. One is that oil is
expensive. There also is an issue of tax. So if there is any difference
in pump price, it is likely to be very small. Due to this, people tend
to be suspicious.

Since deregulation, the industry has become very competitive. Each
station wants to attract business. When you turn to corporate customers,
companies want to outdo others. So simply, there is no cartel but the
field is so competitive and requires people to be on the alert all the
time.

Q: How has the prevailing economic situation affected the industry’s
sales?

A: The industry is led by the economic activity. It supports the
economic activity. As the economic state is depressed, the industry also
gets depressed. If we look at the first five months of this year and
compare with the same period last year, the sales are down by about 10
per cent.

Q: What in your opinion are the main bottlenecks in the industry?

A: I think there are two areas I would like to highlight which are
causing trouble in the industry in Kenya. First of all is illegal fuel
trade. The government took a good move last year to reduce illegal fuel
but I am fearing that it is coming up again and is costing the
government of a lot of money and we need action. There needs to be
vigilance to stamp it out. This is likely to help the industry and the
government as it would provide the Exchequer the much needed revenue.

We approximated that the illegal deal is costing the Exchequer around
Sh2 billion a year hence it should be stamped out and in doing so, it
will help the growth in the official oil industry. The second area is
that of purchase and regulation of the oil industry. Oil products are
potentially very harmful and are prone to fire risks and the risk to the
environment. The standards of operations in Kenya are quite good and
many companies have maintained standards.

However, not many new entrants have maintained the standards, a fact
that has posed risk to the population and the environment too. I think
we need character practice from the government which maintains tough
regulations on environment in which we should be maintained to have

health competition.

Q: The Ministry of Energy has quite often complained that oil
companies do not reduce the prices of their products at the same rate
and speed as that of crude oil. What are your views?

A: When we set out prices, we look at all factors that affect pricing
- exchange rates, interest rates, crude price, transport costs and many
other factors and above all, competition. We review prices monthly when
the crude oil prices are announced.

If you look at the history of our pricing, our prices go either up or
down depending on the factors mentioned earlier. In fact last year, we
brought our prices down thrice and up twice. I can assure you that oil
prices use the same factors including the government duties which have
been increased. This is a benefit a customer would have accrued
naturally.

It must be remembered that in March, the government by making major
increases in taxes and duties of oil products eroded the benefits the
customers would have got.

Q: What are the projections for Shell/BP in the next millennium?

A: Shell/BP has been operating in Kenya for about 100 years. We are a
multinational organisation owned by foreign share holders. My vision is
of a growing our market leadership, better customer service and help
building the country by supplying competitive oil products at
competitive prices and I think we will continue to be seen as a
respectable company determined to build the economy of this country.

Q: Does the company have plans for moving into retail stations from
the core business of selling oil products?

A: This is an international trend. If you travel around the world,
this is what is happening. We see ourselves as a company giving
customers service that they need. So we are all the time thinking wide
on how to approach our customers and give them convenient services.

The week-long bankers strike last week forced the business
community to meet and lobby the government to settle the issue to
minimise the loss to the economy.

Counting their losses last week were exporters, manufacturers, the
tourism sector, the stock exchange and foreign currency markets which
have suffered reduced activity.

Key economic indicators reflected the effect on the economy.

At the Nairobi Stock Exchange, the turnover fell by a drastic 91 per
cent from Sh36.6 million on Tuesday to Sh3.1 million on Thursday said by
stockbrokers at Shah Munge and Partners to be the worst performance at
the NSE in 10 years.

Trading was suspended at the exchange on Friday following the bomb
blast at the American embassy.

The Chief Executive at the NSE, Mr Job Kihumba, said trading had been
depressed for most of the week due to the strike as 50 per cent of the
transactions at the exchange involve banks.

He said the exchange could not survive a prolonged strike as it may
be left with only cash transactions which are too minimal to sustain its
operations and it may close down unless the strike ends.

“The exchange may close down if the strike is prolonged as we cannot
sustain our operations based on cash transactions alone,” he said.

Most share dealing payments are made by cheque and not cash as stock
brokers issue and receive cheques from clients and other stockbrokers
and they require banks to be operational to do so.

Foreign exchange bureaux also experienced a crunch and most reported
a huge slowdown in business with transactions at 30 per cent less than
normal.

Mr Paul Ndungu, treasurer of the Kenya Forex Bureaus Association,
said that more than 40 buries under the association were experiencing
poor business as a result of the strike.

Most forex bureau customers now are tourists and expatriates who are
paid in foreign currency.

The buries, which depend heavily on banks, also face trouble if the
strike is prolonged. Usually people withdraw shillings from banks to buy
foreign currency but cannot now as most banks are offering limited
services putting off prospective dealers.

“If the strike goes on for another two weeks we could be out of
business,” said Mr Ndung’u.

Lack of foreign currency transactions has meant the shilling has
stagnated at the Sh59 rate for most of the week.

Exporters requiring foreign exchange have also complained that the
strike has affected their business as most could not clear their cheques

through the banks.

The banks clearing house had closed for two days during the strike
and was only re-opened on Thursday by the Kenya Bankers Association.

Mr Peter Muthoka, Chief Executive of the Export Promotion Council,
said Kenya’s export operations had been severely affected.

“Business has been restricted as the clearance of foreign remittances
is slow and those travelling for business abroad have also complained to
the EPC,” he said.

The EPC on Wednesday had received a delegation from 30 exporters who
complained that the impact of the loss of business was threatening their
continued operations.

“The export sector is very competitive and the strike is not helping
at all,” said Mr Muthoka.

Among those affected were businessmen intending to travel to South
Africa next week for the “Kenya In South Africa” trade exhibition to be
held from the 13th to 17th August.

A leader of one of the trade associations representing Kenya at the
South African exhibition, Fresh Produce and Exporters Association, said
members were behind in their preparations because of the strike.

Mrs Rebeca Mwicigi, a director at FPEAK, said 24 companies
representing Kenya at the exhibition meant to explore the new market may
be affected by the strike as they cannot access enough finances for the
trip.

“Most of the members expected to travel for the exhibition have been
delayed in their plans as they cannot withdraw funds from the banks,”
she said.

At the same time, the flower and horticultural produce exporters in
needing to prepare for the next season have been hampered by the strike
from accessing finances for fertilisers, pruning and irrigation
equipment from abroad.

The country’s tourism sector has also been affected by the strike
which according to Mr Jim Flannery, the acting chief executive of the
Kenya Tourism Board, has mainly affected payments to hotels and tour
companies from abroad.

Mr Flannery said the strike had hindered payment to hotels and tour
operators by overseas booking offices and was an inconvenience to most
hotels.

“These sector is dependent on the transfer of cash from abroad and is
now feeling the impact of the strike,” he said.

The delay in payments is expected to delay payments to local
suppliers of the hotels if drawn out.

However, independent foreign exchange bureaux have saved the
situation from being a total disaster as tourists can exchange their
currencies at the buries.

A KTB assessment showed there was no immediate indication of a drop
of tourist arrivals attributable to the strike as most tourists abroad
are yet unaware of the strike and are unlikely to change their travels
plans, the board argued.

A meeting between the Kenya Association of Manufacturers, the Kenya
National Chamber of Commerce and other business representatives last
Thursday resolved to lobby the government to steer the strike to an end.

The chairman of the KNCCI, Mr Kassim Owango, said the business
community wants a quick resolution to the crisis citing severe losses.

Mr Chris Kirubi, the chairman of KAM said the threat to industry was

imminent as some manufacturers were facing closure as they lacked cash
to finance daily operations.

Meanwhile, the government has remained tight lipped on the strike.

On Tuesday, the Minister for Finance, Mr Simeon Nyachae, declined to
be drawn into the issue and yesterday, a senior official at the Central
Bank said the bank would also not comment on the strike.

Manufacturers interviewed said the Treasury would also lose out on
import and export duties usually remitted from manufacturers and VAT
payable on imported goods as the strike persists.

Mr Kirubi termed the strike a disaster for the economy saying another
two to three weeks of the strike may mean industries will grind to a
halt.

KAM has assessed that the strike will cost the country more than the
Sh46 million the government would have raised with the new tax to be
introduced at different rates for different grades of workers.

The association said its members have so far recorded a 30 per cent
reduction in manufacturing and have incurred demurrage costs at both the
Mombasa port and at the Jomo Kenyatta International Airport as they
cannot pay to have their imports released. Manufacturers said costs
incurred at the ports could be passed on to consumers in higher prices
if the strike persists.

The oil industry is often criticised by the Ministry of
Energy for not passing on benefits of lower world crude oil and a strong
shilling to consumers. It has also been accused of operating in a
cartel. Business Writer, MISHAEL ONDIEKI, discusses these concerns with
the Managing Director of Shell/BP Kenya Limited, Dr STEVE HIRST, in this
recent interview.

Q: What is Shell/BP’s scope in terms of investment and oil
exploration?

A: Shell/BP considers itself the market leader in distribution and
sale of oil products in Kenya. This is because we sell about 750 million
litres each year. We operate 360 service stations, half branded Shell
and another half BP. We have 700 commercial customers who buy oil and
oil products from us directly and operate all the five stations main

airports in the country as well as supplying the main airlines with oil,
including Kenya Airways.

We operate two major depots. We have a a capital employed of about
Sh4.5 billion and continue to invest in the country. In the last few
years, we have invested around Sh160 million. We are also shareholders
in the refinery and give technical advise to the refinery.

We currently are exploring for oil in the country. In early 1990s, we
carried out some explorations, drilling a number of wells in the North
Eastern part of the country. There was a trace of oil but not a
substantial amount was found for commercial purposes and the project did
not develop further.

Q: There are concerns in government that despite the liberalisation
of the sector, local oil companies operate a cartel. As a key player,
what are your group’s views?

A: This is an allegation that is in the oil industry in all countries
worldwide. There are number of reasons for this. One is that oil is
expensive. There also is an issue of tax. So if there is any difference
in pump price, it is likely to be very small. Due to this, people tend
to be suspicious.

Since deregulation, the industry has become very competitive. Each
station wants to attract business. When you turn to corporate customers,
companies want to outdo others. So simply, there is no cartel but the
field is so competitive and requires people to be on the alert all the
time.

Q: How has the prevailing economic situation affected the industry’s
sales?

A: The industry is led by the economic activity. It supports the
economic activity. As the economic state is depressed, the industry also
gets depressed. If we look at the first five months of this year and
compare with the same period last year, the sales are down by about 10
per cent.

Q: What in your opinion are the main bottlenecks in the industry?

A: I think there are two areas I would like to highlight which are
causing trouble in the industry in Kenya. First of all is illegal fuel
trade. The government took a good move last year to reduce illegal fuel
but I am fearing that it is coming up again and is costing the
government of a lot of money and we need action. There needs to be
vigilance to stamp it out. This is likely to help the industry and the
government as it would provide the Exchequer the much needed revenue.

We approximated that the illegal deal is costing the Exchequer around
Sh2 billion a year hence it should be stamped out and in doing so, it
will help the growth in the official oil industry. The second area is
that of purchase and regulation of the oil industry. Oil products are
potentially very harmful and are prone to fire risks and the risk to the
environment. The standards of operations in Kenya are quite good and
many companies have maintained standards.

However, not many new entrants have maintained the standards, a fact
that has posed risk to the population and the environment too. I think
we need character practice from the government which maintains tough
regulations on environment in which we should be maintained to have

health competition.

Q: The Ministry of Energy has quite often complained that oil
companies do not reduce the prices of their products at the same rate
and speed as that of crude oil. What are your views?

A: When we set out prices, we look at all factors that affect pricing
- exchange rates, interest rates, crude price, transport costs and many
other factors and above all, competition. We review prices monthly when
the crude oil prices are announced.

If you look at the history of our pricing, our prices go either up or
down depending on the factors mentioned earlier. In fact last year, we
brought our prices down thrice and up twice. I can assure you that oil
prices use the same factors including the government duties which have
been increased. This is a benefit a customer would have accrued
naturally.

It must be remembered that in March, the government by making major
increases in taxes and duties of oil products eroded the benefits the
customers would have got.

Q: What are the projections for Shell/BP in the next millennium?

A: Shell/BP has been operating in Kenya for about 100 years. We are a
multinational organisation owned by foreign share holders. My vision is
of a growing our market leadership, better customer service and help
building the country by supplying competitive oil products at
competitive prices and I think we will continue to be seen as a
respectable company determined to build the economy of this country.

Q: Does the company have plans for moving into retail stations from
the core business of selling oil products?

A: This is an international trend. If you travel around the world,
this is what is happening. We see ourselves as a company giving
customers service that they need. So we are all the time thinking wide
on how to approach our customers and give them convenient services.

The week-long bankers strike last week forced the business
community to meet and lobby the government to settle the issue to
minimise the loss to the economy.

Counting their losses last week were exporters, manufacturers, the
tourism sector, the stock exchange and foreign currency markets which
have suffered reduced activity.

Key economic indicators reflected the effect on the economy.

At the Nairobi Stock Exchange, the turnover fell by a drastic 91 per
cent from Sh36.6 million on Tuesday to Sh3.1 million on Thursday said by
stockbrokers at Shah Munge and Partners to be the worst performance at
the NSE in 10 years.

Trading was suspended at the exchange on Friday following the bomb
blast at the American embassy.

The Chief Executive at the NSE, Mr Job Kihumba, said trading had been
depressed for most of the week due to the strike as 50 per cent of the
transactions at the exchange involve banks.

He said the exchange could not survive a prolonged strike as it may
be left with only cash transactions which are too minimal to sustain its
operations and it may close down unless the strike ends.

“The exchange may close down if the strike is prolonged as we cannot
sustain our operations based on cash transactions alone,” he said.

Most share dealing payments are made by cheque and not cash as stock
brokers issue and receive cheques from clients and other stockbrokers
and they require banks to be operational to do so.

Foreign exchange bureaux also experienced a crunch and most reported
a huge slowdown in business with transactions at 30 per cent less than
normal.

Mr Paul Ndungu, treasurer of the Kenya Forex Bureaus Association,
said that more than 40 buries under the association were experiencing
poor business as a result of the strike.

Most forex bureau customers now are tourists and expatriates who are
paid in foreign currency.

The buries, which depend heavily on banks, also face trouble if the
strike is prolonged. Usually people withdraw shillings from banks to buy
foreign currency but cannot now as most banks are offering limited
services putting off prospective dealers.

“If the strike goes on for another two weeks we could be out of
business,” said Mr Ndung’u.

Lack of foreign currency transactions has meant the shilling has
stagnated at the Sh59 rate for most of the week.

Exporters requiring foreign exchange have also complained that the
strike has affected their business as most could not clear their cheques

through the banks.

The banks clearing house had closed for two days during the strike
and was only re-opened on Thursday by the Kenya Bankers Association.

Mr Peter Muthoka, Chief Executive of the Export Promotion Council,
said Kenya’s export operations had been severely affected.

“Business has been restricted as the clearance of foreign remittances
is slow and those travelling for business abroad have also complained to
the EPC,” he said.

The EPC on Wednesday had received a delegation from 30 exporters who
complained that the impact of the loss of business was threatening their
continued operations.

“The export sector is very competitive and the strike is not helping
at all,” said Mr Muthoka.

Among those affected were businessmen intending to travel to South
Africa next week for the “Kenya In South Africa” trade exhibition to be
held from the 13th to 17th August.

A leader of one of the trade associations representing Kenya at the
South African exhibition, Fresh Produce and Exporters Association, said
members were behind in their preparations because of the strike.

Mrs Rebeca Mwicigi, a director at FPEAK, said 24 companies
representing Kenya at the exhibition meant to explore the new market may
be affected by the strike as they cannot access enough finances for the
trip.

“Most of the members expected to travel for the exhibition have been
delayed in their plans as they cannot withdraw funds from the banks,”
she said.

At the same time, the flower and horticultural produce exporters in
needing to prepare for the next season have been hampered by the strike
from accessing finances for fertilisers, pruning and irrigation
equipment from abroad.

The country’s tourism sector has also been affected by the strike
which according to Mr Jim Flannery, the acting chief executive of the
Kenya Tourism Board, has mainly affected payments to hotels and tour
companies from abroad.

Mr Flannery said the strike had hindered payment to hotels and tour
operators by overseas booking offices and was an inconvenience to most
hotels.

“These sector is dependent on the transfer of cash from abroad and is
now feeling the impact of the strike,” he said.

The delay in payments is expected to delay payments to local
suppliers of the hotels if drawn out.

However, independent foreign exchange bureaux have saved the
situation from being a total disaster as tourists can exchange their
currencies at the buries.

A KTB assessment showed there was no immediate indication of a drop
of tourist arrivals attributable to the strike as most tourists abroad
are yet unaware of the strike and are unlikely to change their travels
plans, the board argued.

A meeting between the Kenya Association of Manufacturers, the Kenya
National Chamber of Commerce and other business representatives last
Thursday resolved to lobby the government to steer the strike to an end.

The chairman of the KNCCI, Mr Kassim Owango, said the business
community wants a quick resolution to the crisis citing severe losses.

Mr Chris Kirubi, the chairman of KAM said the threat to industry was

imminent as some manufacturers were facing closure as they lacked cash
to finance daily operations.

Meanwhile, the government has remained tight lipped on the strike.

On Tuesday, the Minister for Finance, Mr Simeon Nyachae, declined to
be drawn into the issue and yesterday, a senior official at the Central
Bank said the bank would also not comment on the strike.

Manufacturers interviewed said the Treasury would also lose out on
import and export duties usually remitted from manufacturers and VAT
payable on imported goods as the strike persists.

Mr Kirubi termed the strike a disaster for the economy saying another
two to three weeks of the strike may mean industries will grind to a
halt.

KAM has assessed that the strike will cost the country more than the
Sh46 million the government would have raised with the new tax to be
introduced at different rates for different grades of workers.

The association said its members have so far recorded a 30 per cent
reduction in manufacturing and have incurred demurrage costs at both the
Mombasa port and at the Jomo Kenyatta International Airport as they
cannot pay to have their imports released. Manufacturers said costs
incurred at the ports could be passed on to consumers in higher prices
if the strike persists.