[kictanet] What should the Investment Policy Be?

[mwananchi at hushmail.com]

Walu, 

Asante for setting the stage for policy discussions on FDI as 
relates to ICT policy. 

First and foremost, it is important to offer views as to some of 
the real causes of local investors failing to meet capital 
requirements. 

The points on this need not be belaboured. I believe we are making 
a scapegoat out of the wrong parties in order to punish other 
legitimate local investors through arbitrary changes in investment 
policies.

In all the mentioned cases of capital issues, it is quite clear it 
was the duty of the regulator to conduct due diligence on the 
bidding consortia financial capacities. Had the regulator conducted 
this duty, we would not have had bidding entities that were near 
bankruptcy or in virtual bankruptcy itself sailing past the pre 
qualification stage and somehow beating industry giants with 
trillions (not billions) of shillings in turnover complete with 
their international experience and expertise in operations 
including in Uganda, Tanzania and tens of other countries, and then 
failing to pay for licence fees for years as they use the licence 
as an "asset" to shop for funding to pay for it. 

It is a rather simple matter to conclude that if one has Ksh 100, 
in the bank that one cannot afford to write a check for Ksh 10000. 
This is why we should stop blaming local investors as a group and 
focus on these repeated failures to conduct due diligence. The 
insolvency of one such member of a consortium that last bid in the 
last major tender points to a complete failure in due diligence.

Secondly inept and poor tendering procedures have led to credible 
international investors ditching Kenya. This results in bidding 
entities that lack the type of financials any major bank would be 
happy to work with. Why would international bidders who have 
succeeded across Africa and in our neighbouring countries keep 
being disqualified on suspect reasons while relatively unknown and 
untested non performers sail through with high marks only to 
disappoint? Why should bidders keep spending anywhere from 
US$500,000 to US$1m or more bidding when its indisputable that they 
are amongst the best in the world only for novices and unknowns in 
the industry to score so highly then fail to deliver to Kenyans for 
years on end?

Even if the local investors had healthy financials, by virtue of 
being co-shareholders with international entities that no bank is 
eager to touch, they are as good as sunk when it comes to obtaining 
funding for capital intensive projects.

We seem to quickly forget that when investment policy demanded 40% 
equity holding by local shareholders, it did not deter Vodafone and 
Vivendi from coming to Kenya with 60% stakes. If the opportunities 
are there, there will always be takers as long as one is assured of 
fair play in the process. Confidence once dented is a difficult 
thing to rebuild. 

The failure by the regulator to conduct due diligence and failures 
in tendering process are scaring away the type of international 
operators whose name recognition alone would be sufficient for 
local investors to walk into banks and obtain funding for their 
capital contributions.

Take the findings for instance from the then named Public 
Procurement Complaints Review and Appeals Board in regards to the 
first SNO tender. 

"Taking into account the critical failure in evaluation by CCK and 
also the interference in the tender process and disclosure of 
information by CCK, we find that the procurement process has been 
seriously flawed and compromised," the board concluded.

or

An article in the Sunday Standard, "How Broke Company Won Tender", 
September 18 2005, citing KACC officials investigating the matter 
of the 3rd mobile licence tender before investigations were 
prematurely and suddenly interrupted by certain interests:

"Initial investigations by the Kenya Anti-Corruption Commission 
into the award of the license in 2003 show that two of the major 
shareholders in consortium were had financial difficulties at the 
time of the award. 
...
With the other partners not being financially stable, the 
consortium fell short of the minimum financial requirements by well 
over $80 million."

Why is it that KACC is able to see what the regulator apparently 
did not see or realise?

For these and other reasons we cannot continue to solely blame the 
vast majority of local investors. We must place blame failure on 
the lack of financial due diligence and failed tendering procedures 
that instead attract the types of international investors that 
banks would not feel comfortable dealing with due to their lack of 
a lengthy track record and weak financials that don't suit capital 
intensive projects. 

So let us look at the root causes, not the symptoms and tackle 
those root causes instead, majority of which lie within our 
institutions to resolve the problems. Foreigners while welcome to 
invest in Kenya should not be thought of as the number one solution 
when the problems that cause local investors problems lie within 
institutions and policies. That said views on FDI per ICT policies 
will be forthcoming separately. 

Peterson


On Thu, 16 Oct 2008 12:37:09 +0000 John Walubengo <jwalu at yahoo.com> 
wrote:
>Hey Folks, 
>
>I have lurked in the background for a while and like Wainaina I 
>got a bit lost in the exchanges.  But I think one fundamental 
>thread in all this - despite the muddy exchanges - is the question 
>of how do want to engage with Foreign Investors?  JM and others 
>may have a point here - despite their strong language.
>
>So maybe to bring benefit out of all these, we could indulge for a 
>day or two on the Policy we want as far as Foreign Direct 
>Investments (FDI) into our ICT industry are concerned.
>
>Correct me if am wrong but I believe the Government 
>position/policy on this has been that the Foreign investor MUST 
>incorporate a local investor at minimum ratio 20%(local) to 
>80%(foreign) ownership/equity.  I think the members who feel that 
>this should be changed have cases/examples where the local 
>equity/investor failed to come up with their 20% capital and so 
>the opportunity for investment disappears. On the other hand, 
>other members feel that local investors are abundantly rich and 
>can come up with even over 50% of any capital/equity required to 
>invest in the industry.
>
>I honestly dont know which side is right and which one is wrong - 
>but what I do know is that there exists cases where the local 
>investors have failed to meet their capital requirements - hence 
>the need to review or interrogate whether this policy is 
>detrimental or indeed beneficial to our industry.
>
>Plse lets have objective comments that are devoid of personal 
>attacks and we shall make progress. Otherwise we begin to sound 
>like a broken record.
>
>walu.
>
>
>
>
>
>
>--- On Thu, 10/16/08, gachuhi anthony <gachuhi.anthony at gmail.com> 
>wrote:
>
>> From: gachuhi anthony <gachuhi.anthony at gmail.com>
>> Subject: Re: [kictanet] PS Ndemo, ECONET Scandal aand Vested 
>Interests
>> To: jwalu at yahoo.com
>> Cc: "KICTAnet ICT Policy Discussions" 
><kictanet at lists.kictanet.or.ke>
>> Date: Thursday, October 16, 2008, 8:16 AM
>> Moderator
>> Is there a way off having an online poll to know where we
>> stand maybe
>> from there we may be able to know who is for or against the
>> policies
>> being discussed.
>> Then we can give reasons as I don't think this a list
>> to decide who is
>> more kenyan than the other its about what will affect us
>> all
>> Tony
>> 
>> 
>> 
>> On 10/16/08, Wainaina Mungai
>> <wainaina at madeinkenya.org> wrote:
>> > Dear all,
>> >
>> > What is the desired outcome of this very energised
>> thread? (Select one)
>> >
>> > A: That the PS (I&C) announce that policies shall
>> be developed in an
>> > open, transparent and consultative manner. He also
>> must organise a
>> > forum to kickstart non-emotive talks by mid-November.
>> >
>> > B: That PS Ndemo resigns and is replaced with a person
>> of your choice.
>> >
>> > C: That the Econet licence, Kencall licence and
>> related MoUs,
>> > contracts signed by PS (I&C) be cancelled.
>> >
>> > D: That all stakeholders Govt., KICTANET, KIF, CA, etc
>> organise an
>> > "ICT Investment" policy forum to be held in
>> Nairobi around mid-
>> > November 2008.
>> >
>> > I hope this shall help us focus on defining and
>> achieving a common
>> > goal so that we desist from personal attacks on
>> integrity, racial
>> > profiling and so on...
>> >
>> > Good day,
>> > Wainaina
>> >
>> > On 10/16/08, Joseph Manthi <jmanthi at gmail.com>
>> wrote:
>> >> Edith,There are some useful lessons - but these
>> lessons do not include:
>> >>
>> >> 1. How to give away your national treasures - like
>> bandwidth - to foreign
>> >> entities just because they say they can not do any
>> business with local
>> >> entrepreneurs. In fact I know this for a fact, you
>> would never get a
>> >> license
>> >> to operate in UAE if this was your argument.
>> Further to this lesson I
>> >> would
>> >> like to point to these additional countries that
>> would laugh you out of
>> >> town
>> >> if you made that argument - US (some businesses
>> like Airline, Military and
>> >> Defense, Telecommunications (not ISP), Radio &
>> TV), India, Singapore,
>> >> Malaysia, Taiwan, Hong Kong, China, the whole of
>> Middle East, South
>> >> Africa,
>> >> Japan (especially Japan)
>> >>
>> >> 2. How not be conned. Kenya seems to heading there
>> with its eyes opened.
>> >> When a man approaches a woman, it would be a very
>> stupid woman, who
>> >> knowing
>> >> what a man is capable of, to accept the BS that
>> the man is feeding her.
>> >> And
>> >> if she does then she deserves what she gets. Kenya
>> will get what it
>> >> deserves
>> >> and very soon. A good example is Russia and its
>> oligarchs - all members of
>> >> the Forbes Richest.
>> >>
>> >> 3. Great leadership is necessary to grow a
>> country. A leadership with
>> >> intestinal fortitude to say no under pressure. Top
>> to bottom,
>> >>
>> >> 4. That the local mwananchi can invest in their
>> own country and manage its
>> >> growth
>> >>
>> >> 5. That a great nation looks upon its diaspora to
>> grow it - a la Israel
>> >> and
>> >> India
>> >>
>> >> 6. That a great nation does not wait to be raped
>> twice - We seem to be
>> >> following a process that will guarantee our raping
>> despite how Kenyan some
>> >> members of this committee think they are. Its just
>> a matter of time before
>> >> they pick up their bags and leave. I really do not
>> think that as a
>> >> national
>> >> planner I should be putting my eggs in that
>> basket.
>> >>
>> >> Joe
>> >>
>> >> On Wed, Oct 15, 2008 at 4:55 PM,
>> <eadera at idrc.or.ke> wrote:
>> >>
>> >>> Anyone has taken the time to thoroughly study
>> the secret behind
>> >>> Dubai's tremendous growth? (U.A.E in
>> general). There are some useful
>> >>> lessons!
>> >>>
>> >>>
>> >>> >
>> >>> >---- Original Message ----
>> >>> >From: j.maina at ymail.com
>> >>> >To: eadera at idrc.or.ke
>> >>> >Subject: Re: [kictanet] Fwd:  PS Ndemo,
>> ECONET Scandal aand Vested
>> >>> >Interests
>> >>> >Date: Wed, 15 Oct 2008 09:03:50 -0700
>> (PDT)
>> >>> >
>> >>> >>Lizette
>> >>> >>
>> >>> >>I think that you have racially
>> inclined your mind.
>> >>> >>
>> >>> >>When did KENCALL directors become
>> Kenyans? After getting good
>> >>> >friends to bribe their way to this
>> country. And let me tell you that
>> >>> >the money the so called investors are
>> using are Kenyan money not
>> >>> >money from foreign banks.
>> >>> >>
>> >>> >>They have come and borrowed from
>> Kenyan banks. How much does the
>> >>> >most profitable telecomms companies leave
>> in this country, very small
>> >>> >amount. We have Telecomms companies which
>> are on their marks. They
>> >>> >have very inferior systems and dont
>> actually deliver in service but
>> >>> >make billions and run away with the
>> billions.
>> >>> >>
>> >>> >>Dada Lizette, we know that there are
>> Kenyans who are white, black
>> >>> >coloured and all but know that I am a
>> mixed race Kenyan and really
>> >>> >sad when our brotehrs have to suffer
>> because of bad policies from
>> >>> >people like PS
>> >>> >>
>> >>> >>JM
>> >>> >>
>> >>> >>
>> >>> >>
>> >>> >>----- Original Message ----
>> >>> >>From: Lizette Kraft
>> <lfkraft at gmail.com>
>> >>> >>To: j.maina at ymail.com
>> >>> >>Cc: KICTAnet ICT Policy Discussions
>> <kictanet at lists.kictanet.or.ke>
>> >>> >>Sent: Tuesday, October 14, 2008
>> 1:52:07 PM
>> >>> >>Subject: [kictanet] Fwd:  PS Ndemo,
>> ECONET Scandal aand Vested
>> >>> >Interests
>> >>> >>
>> >>> >>
>> >>> >>Just my two pennies worth here.
>> >>> >>
>> >>> >>Kenya is not an Island that it can
>> survive on its own even through
>> >>> >local investment. Most times we dont have
>> the funds. I do agree
>> >>> >though about the Government and banks not
>> supporting local investors
>> >>> >with loans etc. They must start giving
>> them the opportunity to setup
>> >>> >local expertise and turn them in money
>> making ventures, if only they
>> >>> >wouldn't fleece their own companies. 
>> Even America, the giant needs
>> >>> >investors!!! You all have a valid point
>> but use it for the best
>> >>> >interests of Kenya and its people first
>> and foremost. Not just self
>> >>> >interest for the few.  And by the way
>> Kenyans come in all shapes,
>> >>> >sizes, COLOURS, and creed. So please
>> don't generalise who is kenyan
>> >>> >and who is not!!!  Kencall directors and
>> owners are Kenyan and not
>> >>> >outsiders if I understand correctly. When
>> we are taxed whether
>> >>> >individually or coorporately, the money is
>> used for Kenya and Kenyans
>> >>> >and not for outsiders who invested! 
>> Forcing local partnership in
>> >>> >foreign owned companies has
>> >>> >> its negative and positive effects.
>> >>> >>This needs to be look at more
>> seriously to make it a win-win
>> >>> >situation. It has been known in the past
>> that foreign investors with
>> >>> >forced local partnership have been
>> subjected to threats and
>> >>> >intimidation by the local partners when
>> they wanted more than their
>> >>> >fare share, (given to them mind you). Thus
>> the weariness o
>> >>> >>of being forced now. This does not
>> attract any investor. But the
>> >>> >foreigners should not fleece the country
>> either!
>> >>> >>
>> >>> >>Let us have some constructive
>> critisism without being racially
>> >>> >inclined. Fight to make things right no
>> matter what but without
>> >>> >pinpointing nationalities or colours of
>> people.
>> >>> >>
>> >>> >>
>> >>> >>
>> >>> >>
>> >>> >>On 10/7/08, John Maina
>> <j.maina at ymail.com> wrote:
>> >>>
>> >>http://www.wananchiforums.com/showthread.php?p=3150#poest3150
>> >>> >>
>> >>>
>> >>_______________________________________________
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>> >>>
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>> >>> >>
>> >>> >>This message was sent to:
>> lfkraft at gmail.com
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>> 
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>il.
>> >>> >com
>> >>> >>
>> >>> >>
>> >>> >>
>> >>> >>
>> >>> >>--
>> >>> >>Lizette Kraft
>> >>> >>P.O. Box 18488, 00500
>> >>> >>Nairobi, Kenya
>> >>> >>Cell: 0722-800362
>> >>> >>
>> >>> >>
>> >>> >>
>> >>>
>> >>>
>> >>>
>> >>>
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>> >>
>> >>
>> >>
>> >> --
>> >> Joseph Manthi
>> >> CEO
>> >> MEO Ltd
>> >> http://www.meoltd.com
>> >>
>> >
>> > --
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