We live in a country where mediocrity is glorified. The gullible media is at the forefront in perpetuating this culture. That is why for all his many evident weaknesses, nobody saw through Mr. Tutus Naikuni's mediocre leadership and questioned his style and strategy for all the years he was the helm of Kenya Airways.
Instead, all we saw was media personalities - actually our pseudo-celebs who media owners have employed so as to attract "customers" - simply resorting to the "great-guy-tell-us-about-your-greatness" demeanour.
Even as he was one foot out, all we are told is that he successfully turned the airline around. Really? If so, why is the airline broke? Poor Mbuvi Ngunze! I wonder whether they will cut him some slack or they will hang him for some other guy's incompetence.
Friday 27 March 2015
Friday 13 March 2015
Central Bank Independence and Johny-come-lately
In April 2014, I made a strong argument on why the Central Bank of Kenya's policy signalling should not be subject to confusion that could arise if you have some political appointee as board Chairman who is not the Governor. This was after I carefully scrutinised from an economist's viewpoint the provisions of the draft CBK Bill that was (is?) meant to overhaul and modernise the central bank.
The media at that time was only willing to listen to self-made "corporate governance experts" such as Carol Musyoka who certainly do not seem to be appreciating the unique nature of a central bank and therefore imagine that its structure - just like that if an ordinary corporate such as a bakery - should have a chairman who is not the CEO.
All or a sudden the media has seen the light (see here). This is welcome, however late it comes!
The media at that time was only willing to listen to self-made "corporate governance experts" such as Carol Musyoka who certainly do not seem to be appreciating the unique nature of a central bank and therefore imagine that its structure - just like that if an ordinary corporate such as a bakery - should have a chairman who is not the CEO.
All or a sudden the media has seen the light (see here). This is welcome, however late it comes!
Uchumi and How the Dog Ate My Homework: A Sequel
Recently, I wrote that the media - particularly the segment that pretends to have a business bias meant to imply specialisation - is so gullible to the extent of trying to link any problem (be it structural or dubious strategy of an enterprise) to high cost of credit.
Before my ink even dries, I see that Uchumi Supermarket Uganda's food segment has been closed because of poor hygienic conditions; yes, you got me right: poor hygienic standards. I am waiting for some "analyst" to argue that Uchumi's food segment is dirty because of high lending rates!
Before my ink even dries, I see that Uchumi Supermarket Uganda's food segment has been closed because of poor hygienic conditions; yes, you got me right: poor hygienic standards. I am waiting for some "analyst" to argue that Uchumi's food segment is dirty because of high lending rates!
Tuesday 10 March 2015
Oil Prices: The Inevitable Bounce Back?
My recent essay on oil prices relied largely on the economics, but insinuated - if only indirectly through the financial markets' trading of oil-linked instruments - on the role of geopolitics. The Financial Times has an interesting piece that solely argues the geopolitics case, highlighting the dominant role of Saudi Arabia in this 'saga'. We however converge on the fact the the oil prices could be on the rise. I am already seeing evidence to that effect (see Figure).
Monday 2 March 2015
Pseudo Analysis Part 2: Banks, Idle Capital and the Game of Calvinball
This is my favourite, for it demonstrates the need for financial literacy for those seeking to do reporting that has a technical bearing. The Business Daily tells all that what to hear that banks are now drowning in capital that they don't know how and where to deploy.
This is a good one coming from a publication that devotes lots of staff resources giving an impression that banks have struggled to meet the regulator's capital requirements.
Typically, a sucessful resort to capital markets either to issue a note or seek additional equity is a mark of financial health given the fact that both forms of resource mobilisation are unsecured; therefore the capital markets regulator must be assured of the financial soundness of the issuer.
But as I have pointed out before, the Business Daily reporting has no time for such niceties - any resort to the market is a signal of desperation, they often implicitly argue. The story now suddenly switches to one where bans are portrayed stranded with idle capital.
This is a pefect example of playing a game called Calvinball - the imaginative game where the rules are not known upfront, so they keep changing as the game goes on.
I am really having fun on this subject! Not because somebody is making sense, but because the Business Daily is falling into the typical media temptation of choosing what to see in any situation.
This is a good one coming from a publication that devotes lots of staff resources giving an impression that banks have struggled to meet the regulator's capital requirements.
Typically, a sucessful resort to capital markets either to issue a note or seek additional equity is a mark of financial health given the fact that both forms of resource mobilisation are unsecured; therefore the capital markets regulator must be assured of the financial soundness of the issuer.
But as I have pointed out before, the Business Daily reporting has no time for such niceties - any resort to the market is a signal of desperation, they often implicitly argue. The story now suddenly switches to one where bans are portrayed stranded with idle capital.
This is a pefect example of playing a game called Calvinball - the imaginative game where the rules are not known upfront, so they keep changing as the game goes on.
I am really having fun on this subject! Not because somebody is making sense, but because the Business Daily is falling into the typical media temptation of choosing what to see in any situation.
Pseudo Analysis Part 1: Uchumi and How the Dog Ate My Homework!
I expect the Business Daily to be a bit more curious than to take what it is told. Am I expecting too much? Well, may be yes.
Take the case of a recent story in its pages regarding Uchumi, the struggling supermarket chain. In that story, all of Uchumi's problems are occaioned by expensive bank borrowing. That will be okay of it were true.
I suspect that even the Business Daily knows that that is not true; but I guess the argument will be that the "ingenuous" boss said so - after-all with a honorary doctorate in "turn-around strategy", he must be knowing stuff!
Some sense of history may help here. When Uchumi was literally run down by some individuals - some of whom the gullible media celebrates as serious entrepreneurs - the government and banks were forced to take painful decisions to ensure that the company does not go under.
A few years later, its CEO tells the media that Uchumi's main problem is that its rights issue was delayed 15 months. Over that time, it had to go for expensive working capital from banks.
One could expect the Business Daily to ask a simple question: why was the rights issue delayed? But again I expect too much! Why ask while the boss has already said that - like the kid whose account for not completing home assignment was the "the dog ate my home work - it is the banks.
The delay in the rights issue most likely had to do with financial status being in a bad state. But still Business Daily and the like wants banks to lend to this company at competitive terms.
The last I checked, Uchumi was still listed in the Nairobi Securities Exchange, meaning that it is legally obliged to publish its financial statements and have its Annual Report at the mart. One needs to have even a casual look at the financial statements to see that cost of finance is not the core problem and therefore could not have been the cause of its woes. I expect that one curious analyst to be the Business Daily! But, again I expect too much because in so doing the sexy caption - 'Uchumi loss reveals the price of expensive bank loans' - could be ruined by any analysis.
Meanwhile, nobody is questioning Uchumi's strategy! Great stuff, isn't it?
Take the case of a recent story in its pages regarding Uchumi, the struggling supermarket chain. In that story, all of Uchumi's problems are occaioned by expensive bank borrowing. That will be okay of it were true.
I suspect that even the Business Daily knows that that is not true; but I guess the argument will be that the "ingenuous" boss said so - after-all with a honorary doctorate in "turn-around strategy", he must be knowing stuff!
Some sense of history may help here. When Uchumi was literally run down by some individuals - some of whom the gullible media celebrates as serious entrepreneurs - the government and banks were forced to take painful decisions to ensure that the company does not go under.
A few years later, its CEO tells the media that Uchumi's main problem is that its rights issue was delayed 15 months. Over that time, it had to go for expensive working capital from banks.
One could expect the Business Daily to ask a simple question: why was the rights issue delayed? But again I expect too much! Why ask while the boss has already said that - like the kid whose account for not completing home assignment was the "the dog ate my home work - it is the banks.
The delay in the rights issue most likely had to do with financial status being in a bad state. But still Business Daily and the like wants banks to lend to this company at competitive terms.
The last I checked, Uchumi was still listed in the Nairobi Securities Exchange, meaning that it is legally obliged to publish its financial statements and have its Annual Report at the mart. One needs to have even a casual look at the financial statements to see that cost of finance is not the core problem and therefore could not have been the cause of its woes. I expect that one curious analyst to be the Business Daily! But, again I expect too much because in so doing the sexy caption - 'Uchumi loss reveals the price of expensive bank loans' - could be ruined by any analysis.
Meanwhile, nobody is questioning Uchumi's strategy! Great stuff, isn't it?
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