Serengeti Advisers Media

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Posts Tagged ‘The Citizen

In the spirit of openness…

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The Tanzania Standard Newspapers (TSN), publishers of Daily News and Habari Leo and their sister publications, Sunday News and Habari Leo Jumapili, has today announced the names of its new incoming board of directors which will be chaired by a former civil servant, Mr. William Mukama.

One wonders whether other media houses will let us know who makes up their board of directors. Will IPP Media, home of The Guardian and Nipashe? Will Mwananchi Communications, owners of The Citizen and Mwananchi? How about Media Solutions, publishers of This Day and Kulikoni?

All these organisations love to harp on about how we need more openness from our government institutions. Well, may be they need to practice a little more transparency themselves.

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Will the Real Opposition Please Stand Up?

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This has been a confusing month in Tanzanian politics. In Zanzibar, the recently dubbed ‘Maridhiano’ deal between CUF and President Karume is barrelling ahead with little consideration for the consternation it has raised in various camps. Elsewhere, opposition party leaders have been proclaiming some rather complimentary things about President Kikwete, if not his government, in the media. All this would seem counter-intuitive, no? After all, aren’t opposition parties supposed to distinguish themselves from the ruling party?

This new conciliatory tone has not gone unnoticed. Recently, The Citizen (link unavailable) picked up on these chameleonic tendencies of the opposition in the aptly titled article “Who Will Oppose JK” (23rd January):

With the clock ticking fast towards the General Election, President Jakaya Kikwete may not be spending sleepless nights at the State House over his second term after all. Actions and utterances by some political heavyweights, including, interestingly, several from the Opposition, give an indication of a rather smooth ride for the incumbent come October…This week he earned a huge milestone from unsolicited endorsements from opposition leaders John Cheyo [of] United Democratic Party and Augustine Mrema of Tanzania Labour Party.

Isn’t it a bit early for political parties to throw in the towel? And what message does that send to the electorate?

Written by serengetiadvisersblog

January 27, 2010 at 18:39

Say that again?

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Civic United Front’s (CUF) Director of Foreign Affairs Jussa Ismail Jussa pushed back against those criticizing his party’s insistence that President Karume’s term be extended beyond October’s elections. He told The Citizen:

“Confidence is the key word in solving Zanzibar problems, but the time left is not enough to capture it…We are talking about institutions and individuals that for close to a half a century have been at the centre of conflicts in Zanzibar’

He goes on to argue that it is important to have President Karume stay in power a little longer than his current term allows so as to consolidate the reconciliation agreement that has been agreed between him CUF’s Seif Shariff Hamad. Then he says this:

We know very well how some of those aspiring for presidency through CCM, are working day and night to frustrate the reconciliation process because they feel that it frustrates their presidential ambitions.

Hang on a minute. Now, there are always going to be folks within CCM with presidential ambitions who may feel threatened by the new reality of togetherness taking shape in Zanzibar. If this is indeed the case, is Mr. Jussa then suggesting that President Karume stay in power until such people cease to exist? If so, how long will this take? And what will CUF be doing during this time?

Written by serengetiadvisersblog

January 22, 2010 at 15:10

Serengeti in the Media: Budget 2009/2010

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Serengeti Advisers’ partner, Mr. Aidan Eyakuze, joined Hon. John Cheyo (DP-Bariadi) and the Leader of the Opposition in Parliament Hon. Hamad Rashid Mohamed (CUF-Wawi) on the Hamza Kassongo Hour on Sunday 14th June to discuss the government’s 2009/2010 budget. For a summary of his comments, go here and here.

Written by serengetiadvisersblog

June 16, 2009 at 15:19

Watching CRDB: an analysis of the effects of the financial crisis

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The leading story on the global economic crisis in The Citizen newspaper on May 6th, 2009 is important for two reasons.

First, it attempted to put some real numbers on the impact of the global economic crisis on Tanzania’s banking system. The East African Central Bank Governors concluded a meeting in Kigali, Rwanda on May 12th. In their joint statement, they: 

‘confirmed that the EAC economies did not experience severe first round effects of the global financial crisis. They however observed that the EAC Partner States are not immune to global events in general, as their economies are currently suffering from second and third round effects, notably decline in export demand, slowdown in FDI and remittances, and decline in foreign aid to government.’

First-round effects refer to the huge, negative impact on the health of global banks of the devastating drop in the value of the financial securities (the ‘toxic’ assets based on sub-prime loans) which initiated the global economic crisis in the first place. Since Tanzania’s banks did not have any such toxic assets, they did not suffer such losses.

But as the global banks panicked and stopped lending, international credit dried up, followed by the demand for exports which is financed by this credit. The result was a huge 20-30% drop in export sales for all of the major sectors and companies, huge job losses across economies, and the evaporation of consumer spending which drives the global economic engine. These are the second- (export demand), third- (drop in foreign investment and remittances) and fourth- (decline in foreign aid) round effects which are beginning to show up in Tanzania’s economy, via the banking system.

Consider the second-round effects. When export demand falls – due to a combination of fewer buyers with cash and much lower prices – Tanzania’s commodity exporters (cotton, fish, tea, flowers, horticulture), who borrowed from the CRDB and others in mid-2008, find it difficult to raise the cash to repay the loans. Borrowers’ problems pose the most direct risk to Tanzania’s banks and its banking system. The severity will depend on how big these potentially problematic loans are relative to the whole banking system.

That is why The Citizen’s analysis of CRDB’s position is so instructive and is the second reason for the story’s importance.

In December 2008, CRDB was Tanzania’s largest lending bank (TZS 836 billion in loans) and second largest bank by assets (TZS 1.5 trillion) and deposits (TZS 1.27 trillion). So, due its sheer size, CRDB is as good a bellwether of the health of Tanzania’s banking system as you can get. If it has a large number of problem loans, other large lenders may have similar troubles. Also if it holds a large amount of other banks’ cash as inter-bank deposits its ability to return that cash is crucial. Any doubt about CRDB’s financial strength may worry depositors and cause them to withdraw their funds, leading to a devastating, and sometimes contagious, bank run.

A closer look at CRDB’s financial position reveals a less alarming picture. First, it had a very small TZS 3.35 billion of other banks’ money in December 2008, so it has no problem repaying them. Second, its total loan book of TZS 848 billion was just two-thirds of its customer deposits. Indeed in 2008, the growth in loans of TZS 248 billion was just short of the growth in deposits of TZS 259 billion. This combined with its cash pile of TZS 295 billion suggests that CRDB is very unlikely to run into any cash crunch problems anytime soon.

Finally, the TZS 168 billion reported as problem loans to crop buyers amounts to almost 20% of the bank’s loan book. If it was to all go bad simultaneously, a highly improbable event, CRDB’s profits would evaporate and the bank remain in the red for at least the next three years. However like any prudent bank, CRDB is secured, in part by the crops which it financed. As the price of the commodity rises (cotton is up by 10% in April 2009 alone, tea prices are up 15% since November, Arabica coffee is up 12%, but Robusta is down 18%) so too does the value of the bank’s collateral and the borrowers’ ability to sell and repay the loans. It may take longer than normal to fully repay the crop loans, but as things stand, CRDB’s financial strength can probably outlast the economic downturn.

However, there is a sting in the tail of The Citizen’s scrutiny, and this concerns the timing of its publication. The first article appeared just two days before the last day of its initial public offer (IPO) period. This may have affected investors’ appetite for the CRDB share offer. Bad news during one’s IPO cannot be good for investor sentiment.

A value-driven investor looking to buy CRDB shares will have had to consider the implications of the problematic loans on the value of the shares she wants to buy. The shares’ fundamental value will be determined by CRDB’s profit performance in 2009. If the crop loans do sour, profits will be negatively affected by provisions which will in turn have a negative impact on the bank’s earnings per share. But this will not be known until later in 2009 or even early 2010 when CRDB reports its full year results.

The speculative investor is more concerned about price than value because he wants to profit from a rise in CRDB’s share price when it starts trading on June 17. His biggest worry is that the article may have discouraged potential buyers of his shares when trading begins. Recent experience may calm his fears about investor appetite for bank shares.

In September 2008, investors spent almost TZS 100 billion chasing after just TZS 63 billion of NMB shares. A few months earlier, the Dar es Salaam Community Bank found itself attracting TZS 5.2 billion for a small TZS 1.5 billion share issue. In this instance, Danida Investment Fund asked for a very modest TZS 18.8 billion for a five percent share of CRDB. Can one newspaper article stem the flood of cash that is likely to be attracted by one of Tanzania’s banking giants? We shall know on June 3rd when the results of the IPO are announced.

Written by serengetiadvisersblog

May 19, 2009 at 17:11

Feeling the effects of the economic crisis

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Coming at the heels of news that the government has agreed a possible loan deal with the IMF, The Citizen reports today that local banks are starting to feel the strain of the global financial crisis as some creditors may be unable to pay-off their loans. Money quote:

 
The Citizen has reliably learnt that the Sh271 billion the bank lent to buyers of cash crops last season is at risk of not being repaid mostly due to falling prices of traditional exports in the international markets. 

By March, only 38 per cent of the cash borrowed to buy produce from farmers and facilitate export transactions had been repaid.  

The permanent secretary in the ministry of Agriculture, Food Security and Cooperatives, Mr Peniel Lyimo, said recently that CRDB Bank had reported having some Sh168 billion at risk due to traders’ inability to service their loans. 

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May 6, 2009 at 12:12