Jun 20, 2011 - dollar, Maldives' rufiyaa and the Iranian rial according to. Bloomberg data. ... our economy cratered. Th
12 LOCAL
Hbusiness Can you outsmart the expert?
ALY KHAN’S STAR PORTFOLIO WHICH WAY FOR THE SHILLING? The shilling has weakened 9.8% against the dollar this year, making it the fourth-worst performer worldwide after Suriname’s dollar, Maldives’ rufiyaa and the Iranian rial according to Bloomberg data. The currency is trading at levels not seen for more than 17 Years. Last week, the shilling touched a low quote of 90.85-91.05, before recovering to a whisker below 90.00. The last time, we were close to these Levels was in 1994. In 1994, Goldenberg was hatched and our Economy cratered. This recent and endemic shilling weakness has spilled over into Uganda [which closed at an all time low Friday] and the Tanzanian currency which is a whisker from an all time low. Bear in mind that the dollar has hardly been strong this year. It’s been weak and weighed down by more than 14 trillion dollars worth of debt. There are two schools of thought. One school says let’s leave things be, suck it and see and eventually things will be hunky dory. Let’s call this school the ‘benign neglecters.’ The other school of thought is the activist school. This school is saying the Central Bank can do more and this shilling weakness is going to import a second burst of inflation and that we are losing more than we are gaining. Our fuel bill 12 months to February was a total of Sh251 billion and that is probably the same as our tea and horticulture exports plus our tourism receipts. Given the nature
of the ‘do nothing’ strategy there is actually not very much to discuss except to try and model where this might take the exchange rate. In my piece, on March 14th, I said it would be wise to model potential outcomes where the shilling touched 90.00 and even 100.00 Well we have taken out 90.00 last week. I think a do nothing strategy takes us to 100.00. The market has become disorderly, the bid -offer spread widened from its normal 10 cents to 50 cents last week, at one point. The momentum alone puts 100.00 into view, surely. The activist school would argue that a strong currency is a matter of national pride and interest. The German economy was not built by sinking the currency but by building great product. Food and fuel Prices are at record highs. A weak currency will just make both more expensive for consumers. The activist prescription would be a shock therapy dose of medicine. Find the pain level of these shilling sellers. Lift short term rates. Stop selling the shilling [which is what the Central Bank has been doing since 2009] and do a Robert Rubin. Start repeating like a mantra ‘We believe in a strong shilling.’ Because we are currently playing in the same division as Surinam, the Maldives and Iran and no disrespect to any of them but it’s no premier league.
THE Star
Monday, June 20, 2011
UP TO DATE, ACCURATE BUSINESS INFORMATION NEWS YOU CAN USE, EVERY DAY
Jubilee compensates sorghum farmers BY SHIV CHANDARIA SIX farmers in Kibwezi district have become the first beneficiaries of the Jmavuno sorghum insurance cover by Jubilee that was launched early this year after their crop failed due to drought. The sorghum cover
targets small-scale farmers in arid and semi-arid areas of the country which have been food insecure. It is designed to mitigate against the risks associated with drought and increase food security. “Jubilee is committed to growing its focus on micro insurance, and in so doing
diversifying the products targeted at farmers across different levels,” said Lydia Kibaara, Jubilee Kenya General Manager, Short Term Business. Jubilee started the pilot sorghum project in Kibwezi and intends to expand coverage to other sorghum growing areas in Kenya. If
the rainfall received is less than the minimum required for proper growth, the farmer receives compensation for every lost drop in milliliters. Several insurance firms in the country have recently adopted crop and livestock insurance in a bid to grow their market.
CMA seeks powers to fire rogue brokers
photo/file
BY peter kiragu The Capital Markets Authority will soon have powers to remove from office an employee of a stockbroker or an investment bank. The authority will ‘fire’ an employee of a licensed player if it has cause to believe that he or she has in some ways led to weakening of a player’s financial position or has compromised the interest of investors in any way. Such employees will include directors, chief executives, management and all key personnel. This is part of the radical proposals contained in the draft Capital Markets Authority Bill 2011, which if passed into law will give the authority more teeth and powers to supervise the capital markets industry. “Notwithstanding the provisions of any other written law…the Authority may remove any officer or employee of the licensed person who, in the opinion of the Authority, has caused or contributed to any contravention of any provision of this Act, or of any legislation administered by the Authority, or to any deterioration in the financial stability of the licensed person or has been guilty of conduct detrimental to the interests of investors,” reads part of the draft Bill published on the CMA website for public comments.
cracking whip: CMA chief executive officer Stella Kilonzo speaking at a past function. CMA will also have powers to appoint a competent person familiar with the business of the licensed person to its board of directors. Such a director shall not be capable of being removed from office without the approval of the authority other than by order of the High Court. The move is part of ongoing efforts by the authority to restore investor confidence in the stock market. Following the collapse of various stock brokers in the past years, theft of investors’ funds by rogue brokers and reduced returns from investment in stocks, investor confidence in
the country has sunk to their lowest levels. One of the key objectives under the proposed law will be minimise crime and misconduct in the securities industry and to reduce systemic risk in the securities industry. The Act will also give the authority powers to wind up a licensed player for the protection of clients or investors. “If it appears to the Authority that it is desirable for the protection of clients or investors that a licensed or regulated person should be wound up under the Compa-
nies Act or relevant constituting document, the Authority may present a petition for it to be wound up under that Act,” reads the draft Bill. And for a player guilty of misconduct, the authority has proposed severe financial penalties. For instance, a broker found guilty of any kind of miscount shall be made to pay to the Authority a pecuniary penalty in an amount of upto the higher of Sh10 million or two times the amount of any gain made or loss avoided by the regulated person as a result of the misconduct in question.
